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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-7327
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WMX TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2660763
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3003 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (708) 572-8800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE ZURICH STOCK EXCHANGE
CHICAGO STOCK EXCHANGE GENEVA STOCK EXCHANGE
LONDON STOCK EXCHANGE BASLE STOCK EXCHANGE
FRANKFURT STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2001 NEW YORK STOCK EXCHANGE
8 3/4% DEBENTURES DUE 2018 NEW YORK STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2012 NEW YORK STOCK EXCHANGE
CHEMICAL WASTE MANAGEMENT, INC.
LIQUID YIELD OPTION NOTES DUE 2010 NEW YORK STOCK EXCHANGE
CONVERTIBLE SUBORDINATED NOTES DUE 2005 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY
$14,457,190,000 AT FEBRUARY 1, 1996 (BASED ON THE CLOSING SALE PRICE ON THE
NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1996, AS REPORTED BY THE
WALL STREET JOURNAL (MIDWEST EDITION)). AT MARCH 20, 1996, THE REGISTRANT HAD
ISSUED AND OUTSTANDING AN AGGREGATE OF 494,495,743 SHARES OF ITS COMMON STOCK
OF RECORD.
DOCUMENTS INCORPORATED BY REFERENCE
THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S 1995 ANNUAL REPORT TO
STOCKHOLDERS AND OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 10, 1996 DESCRIBED IN PARTS II, III AND IV
HEREOF ARE INCORPORATED BY REFERENCE IN THIS REPORT.
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PART I
ITEM 1. BUSINESS.
GENERAL
WMX Technologies, Inc. is a leading international provider of environmental
and related services. Unless the context indicates to the contrary, as used in
this report the terms "Company" and "WMX Technologies" refer to WMX
Technologies, Inc. and its subsidiaries.
The Company provides integrated solid waste management services in North
America through Waste Management, Inc., a wholly owned subsidiary of the
Company (referred to herein, together with its subsidiaries and certain
affiliated companies providing waste management and related services, as
"Waste Management"). The Company's solid waste management services are
provided to commercial, industrial, municipal and residential customers, as
well as to other waste management companies and consist of solid waste
collection, transfer, resource recovery and disposal services. As part of
these services, the Company is engaged in providing, through its Recycle
America(R), Recycle Canada(R) and other programs, paper, glass, plastic and
metal recycling services to commercial and industrial operations and curbside
collection of such materials from residences; in removing methane gas from
sanitary landfill facilities for use in electricity generation; and in
providing medical and infectious waste management services to hospitals and
other health care and related facilities. In addition, through Waste
Management the Company provides street sweeping and parking lot cleaning
services and Port-O-Let(R) portable sanitation services to municipalities and
commercial and special event customers. Since mid-1995, Waste Management also
has managed the scaffolding and other on-site industrial services businesses
owned by the Company's Rust International Inc. subsidiary.
The Company also provides hazardous waste management services in North
America. The Company's chemical waste treatment, storage, disposal and related
services are provided through Waste Management and Chemical Waste Management,
Inc., a wholly owned subsidiary of the Company (referred to herein, together
with its subsidiaries, as "CWM"), and are provided to commercial and
industrial customers, as well as to other waste management companies and to
governmental entities. Through Advanced Environmental Technical Services,
L.L.C., a 60%-owned subsidiary of the Company (referred to herein, together
with its subsidiaries as "AETS"), the Company provides on-site integrated
hazardous waste management services, including hazardous waste identification,
packaging, removal and recycling services to industrial, institutional and
governmental customers. Through its Chem-Nuclear Systems, Inc. wholly owned
subsidiary (referred to herein, together with its subsidiaries, as "Chem-
Nuclear"), the Company also furnishes radioactive waste management services,
primarily to electric utilities and governmental entities.
The Company provides comprehensive waste management and related services
internationally, primarily through Waste Management International plc, a
subsidiary owned approximately 56% by the Company and 12% each by the
Company's Rust International Inc. and Wheelabrator Technologies Inc.
subsidiaries (referred to herein, together with its subsidiaries, as "Waste
Management International"). Waste Management International provides a wide
range of solid and hazardous waste management and related environmental
services (or has interests in projects or companies providing such services)
in ten countries in Europe and in Argentina, Australia, Brazil, Brunei, Hong
Kong, Indonesia, Israel, Malaysia, New Zealand, Taiwan and Thailand. Waste
Management International also has an approximately 20% interest in Wessex
Water Plc, an English publicly traded company providing water treatment, water
distribution, wastewater treatment and sewerage services ("Wessex").
Wheelabrator Technologies Inc., an approximately 58%-owned subsidiary of the
Company (referred to herein, together with its subsidiaries, as "WTI"),
provides a wide array of environmental products and services that are
primarily utilized in meeting the needs of municipalities and industry for
clean energy and clean water. WTI's clean energy group is a leading developer
of facilities and systems for, and provider of services to, the trash-to-
energy, energy, and independent power markets. Through the clean energy group,
WTI develops, arranges financing for, operates and owns facilities that
dispose of trash and other waste materials in an environmentally acceptable
manner by recycling them into electrical or steam energy. Also within this
group are business units which design, fabricate and install technologically
advanced air pollution control and systems and
2
equipment. WTI's clean water group is principally involved in the design,
manufacture, operation and ownership of facilities and systems used to purify
water, to treat municipal and industrial wastewater, to treat and manage
biosolids resulting from the treatment of wastewater by converting them into
useful fertilizers, and to recycle organic wastes into compost material
useable for horticultural and agricultural purposes. The clean water group
also designs and manufactures various products used in water and wastewater
treatment facilities and industrial processes, precision profile wire screens
for use in groundwater wells and other industrial and municipal applications,
and certain other industrial equipment.
Rust International Inc., a subsidiary owned approximately 60% by the Company
and 40% by WTI (referred to herein, together with its subsidiaries, as
"Rust"), furnishes environmental and infrastructure engineering and consulting
services primarily to clients in federal, state and local government and in
the chemical, petrochemical, nuclear, energy, utility, pulp and paper,
manufacturing, environmental services and other industries. Rust also provides
process engineering, construction, specialty contracting and related services
through a business unit which Rust intends to sell or otherwise discontinue.
Rust also has an approximately 41% interest in NSC Corporation, a publicly
traded provider of asbestos abatement and other specialty contracting services
("NSC"), and an approximately 37% interest in OHM Corporation, a publicly
traded provider of environmental remediation services ("OHM"). See
"Acquisitions and Dispositions" herein.
The Company also owns an approximately 19% interest in ServiceMaster Limited
Partnership, a provider of management services, including management of health
care, education and commercial facilities, and lawn care, pest control and
other consumer services.
The following table shows the respective revenues of the Company's major
business groups for the last three years, excluding the revenues of Rust's
process engineering, construction, specialty contracting and related services
business, which is to be sold or otherwise discontinued and is being treated
as a discontinued operation, and including the revenues of the asbestos
abatement services business of a former subsidiary through the May 1993 sale
of that business and the revenues of the Rust remediation services business
transferred to OHM through the date of the transfer in May 1995.
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ---------- -----------
(000'S OMITTED)
Solid Waste Management and Related
Services................................ $4,702,166 $5,117,871 $ 5,642,857
Hazardous Waste Management and Related
Services................................ 661,860 649,581 613,883
Engineering, Industrial and Related
Services................................ 1,035,004 1,140,294 1,027,430
Trash-to-Energy, Water Treatment, Air
Quality and Related Services 1,142,219 1,324,567 1,451,675
International Waste Management and
Related Services........................ 1,411,211 1,710,862 1,865,081
Elimination of Intercompany Revenue...... (316,344) (388,470) (353,309)
---------- ---------- -----------
Consolidated Revenue..................... $8,636,116 $9,554,705 $10,247,617
========== ========== ===========
As a result of a strategic review begun in 1994, management and operations
of the Company have been largely realigned on the basis of four principal
global lines of business--waste services, clean energy, clean water and
environmental and infrastructure engineering and consulting. The following
table shows the respective revenues of these continuing lines of business
(i.e., excluding revenues of Rust's process engineering, construction,
specialty contracting and related services business) for the last three years.
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ---------- -----------
(000'S OMITTED)
Waste Services (including Scaffolding and
Other On-Site Industrial Services)....... $7,457,371 $8,140,785 $ 8,634,836
Clean Energy.............................. 804,016 888,037 893,513
Clean Water............................... 392,194 489,295 618,472
Environmental and Infrastructure
Engineering and Consulting............... 298,879 425,058 454,105
Elimination of Intercompany Revenue....... (316,344) (388,470) (353,309)
---------- ---------- -----------
Consolidated Revenue...................... $8,636,116 $9,554,705 $10,247,617
========== ========== ===========
3
For information relating to expenses and identifiable assets attributable to
the Company's major business groups, see Note 13 to the Company's Consolidated
Financial Statements filed as an exhibit to this report and incorporated by
reference herein. For interim periods, the revenues and net income of certain
of the Company's businesses may fluctuate for a number of reasons, including
there being for some businesses less activity during the winter months.
Regulatory or technological developments relating to the environment may
require companies engaged in environmental services businesses, including the
Company, to modify, supplement or replace equipment and facilities at costs
which may be substantial. Because certain of the businesses in which the
Company is engaged are intrinsically connected with the protection of the
environment and the potential discharge of materials into the environment, a
material portion of the Company's capital expenditures is, directly or
indirectly, related to such items. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition" set forth on pages 16 to 24
of the Company's 1995 Annual Report to Stockholders (which discussion is filed
as an exhibit to this report and incorporated by reference herein) for a
review of property and equipment expenditures by the Company for the last
three years. The Company does not expect such expenditures, which are incurred
in the ordinary course of business, to have a materially adverse impact on its
and its subsidiaries' combined earnings or its or its subsidiaries'
competitive position in the foreseeable future because the Company's
businesses are based upon compliance with environmental laws and regulations
and its services are priced accordingly.
Although the Company strives to conduct its operations in compliance with
applicable laws and regulations, the Company believes that in the existing
climate of heightened legal, political and citizen awareness and concerns,
companies in the environmental services industry, including the Company, will
be faced, in the normal course of operating their businesses, with fines and
penalties and the need to expend funds for remedial work and related
activities with respect to waste treatment, disposal and trash-to-energy
facilities. Where the Company concludes that it is probable that a liability
has been incurred, a provision is made in the Company's financial statements
for the Company's best estimate of the liability based on management's
judgment and experience, information available from regulatory agencies and
the number, financial resources and relative degree of responsibility of other
potentially responsible parties who are jointly and severally liable for
remediation of a specific site, as well as the typical allocation of costs
among such parties. If a range of possible outcomes is estimated and no amount
within the range appears to be a better estimate than any other, then the
Company provides for the minimum amount within the range, in accordance with
generally accepted accounting principles. Such estimates are subsequently
revised, as necessary, as additional information becomes available. While the
Company does not anticipate that the amount of any such revision will have a
material adverse effect on the Company's operations or financial condition,
the measurement of environmental liabilities is inherently difficult and the
possibility remains that technological, regulatory or enforcement
developments, the results of environmental studies, or other factors could
materially alter this expectation at any time. Such matters could have a
material adverse impact on earnings for one or more fiscal quarters or years.
While in general the Company's environmental services businesses have
benefited substantially from increased governmental regulation, the
environmental services industry itself is subject to extensive and evolving
regulation by federal, state, local and foreign authorities. Due to the
complexity of regulation of the industry and to public pressure,
implementation of existing and future laws, regulations or initiatives by
different levels of government may be inconsistent and difficult to foresee.
In addition, the demand for certain of the Company's services may be adversely
affected by the amendment or repeal, or reduction in enforcement of, federal,
state and foreign laws and regulations on which the Company's businesses
engaged in providing such services are dependent. Demand for certain of the
Company's services may also be adversely affected by delays or reductions in
funding, or failure of legislative bodies to fund, agencies or programs under
such laws and regulations. The Company makes a continuing effort to anticipate
regulatory, political and legal developments that might affect its operations
but is not always able to do so. The Company cannot predict the extent to
which any legislation or regulation that may be enacted, amended, repealed or
enforced, or any failure or delay in enactment or enforcement of legislation
or regulations or funding of agencies or programs, in the future may affect
its operations.
4
The Company was incorporated in Delaware in 1968 and subsequently succeeded
to certain businesses owned by its organizers and others. The Company's common
stock is listed on the New York Stock Exchange under the trading symbol "WMX"
and is also listed on the Frankfurt Stock Exchange, the London Stock Exchange,
the Chicago Stock Exchange and the Swiss Stock Exchanges in Basle, Zurich and
Geneva.
Unless the context indicates to the contrary, all statistical and financial
information under Item 1 and Item 2 of this report is given as of December 31,
1995. Also, unless the context indicates to the contrary, statistical and
financial data appearing under the caption "Waste Services" relate only to the
Company's Waste Management, CWM, AETS and Chem-Nuclear groups of subsidiaries
and do not include any data relating to Rust, Rust's scaffolding and other on-
site industrial services business managed by Waste Management, WTI or Waste
Management International. See "International Waste Management and Related
Services," "Clean Energy, Clean Water and Related Services" and "Environmental
and Infrastructure Engineering and Consulting Services."
WASTE SERVICES
The Company's solid waste management and recycling services include
residential, commercial and industrial collection, transfer and disposal
services and related services provided by Waste Management. The Company's
hazardous waste management services include chemical waste treatment, storage,
disposal and related services provided by Waste Management and CWM, on-site
integrated hazardous waste management services provided by AETS and low-level
radioactive waste disposal services provided by Chem-Nuclear. For each of the
three years in the period ended December 31, 1995, such services accounted for
the following percentages of the Company's total North America waste services
revenue (excluding scaffolding and other on-site industrial services revenue):
YEAR ENDED
DECEMBER 31,
-------------------
1993 1994 1995
----- ----- -----
Solid Waste and Recycling
Collection Services:
Residential.............................................. 20.4% 19.8% 19.4%
Commercial............................................... 26.3 26.4 26.2
Roll-off and Industrial.................................. 20.8 21.5 21.3
Solid Waste Disposal, Transfer and Related Services....... 20.2 21.0 23.3
Hazardous Waste Services................................... 12.3 11.3 9.8
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
SOLID WASTE MANAGEMENT, RECYCLING AND RELATED SERVICES
At December 31, 1995, Waste Management conducted solid waste management,
recycling and related services operations in 48 states, the District of
Columbia, four Canadian provinces and Mexico. During 1993, 1994 and 1995,
operations in California, Florida and Pennsylvania together accounted for
approximately 34%, 30% and 28%, respectively, of North America solid waste
revenue. No customer accounted for as much as 2% of such revenue in 1993 or 1%
in 1994 or 1995.
COLLECTION
Waste Management provides solid waste collection services to approximately
1,072,500 commercial and industrial customers. Collection services are also
provided to approximately 11,982,800 homes and apartment units. These services
include collection of recyclable commodities. See "Recycling and Energy
Recovery--Recycling" for a description of recycling services.
Commercial and Industrial
Many of Waste Management's commercial and industrial customers utilize
containers to store solid waste, including "roll-offs," which are large
containers dropped off at construction or other sites for the deposit of waste
and then hoisted when full onto a truck for transport. These containers,
ranging from 1 to 45 cubic yards
5
in size, are usually provided to the customer as part of Waste Management's
services. Stationary compactors, which compact the volume of the stored waste
prior to collection, are frequently installed on the premises of large volume
customers and are usually provided to these customers in conjunction with
Waste Management's collection services. Containerization enables Waste
Management to service most of its commercial and industrial customers with
collection vehicles operated by a single employee. Compaction serves to
decrease the frequency of collection.
Commercial and industrial collection services (which include containerized
service to apartment buildings) are generally performed under one- to three-
year service agreements. Fees are determined by such considerations as market
factors, collection frequency, type of equipment furnished, length of service
agreement, type and volume or weight of the waste collected, distance to the
disposal facility and cost of disposal.
Residential
Most of Waste Management's residential solid waste collection services are
performed under contracts with, or franchises granted by, municipalities
giving Waste Management exclusive rights to service all or a portion of the
homes in their respective jurisdictions. Such contracts or franchises usually
range in duration from one to five years. The fees received by Waste
Management are based primarily on market factors, frequency and type of
service, the distance to processing or disposal facilities and cost of
processing or disposal. Residential collection fees are either paid by the
municipalities out of tax revenues or service charges or are paid directly by
the residents receiving the service.
TRANSFER
Waste Management operates 151 solid waste transfer stations. A transfer
station is a facility where solid waste is received from collection vehicles
and then transferred to, and in some cases compacted in, large, specially
constructed trailers for transportation to disposal or resource recovery
facilities. This procedure reduces costs by improving utilization of
collection personnel and equipment and improving the efficiency of
transporting waste to final disposal facilities.
The services of these facilities are provided to municipalities or counties
and in most instances are also used by Waste Management and by other
collection companies. Fees are generally based upon such considerations as
market factors, the type and volume or weight of the waste transferred, the
extent of processing of recyclable materials, the transport distance involved
and the cost of disposal.
RECYCLING AND ENERGY RECOVERY
Recycling
Waste Management provides recycling services in the United States and Canada
through its Recycle America(R), Recycle Canada(R) and other programs.
Recycling involves the removal of reusable materials from the waste stream for
processing and sale or other disposition for use in various applications.
Participating commercial and industrial operations use containers to separate
recyclable paper, glass, plastic and metal wastes for collection, processing
and sale by Waste Management. Fees are determined by such considerations as
market factors, frequency of collection, type and volume or weight of the
recyclable material, degree of processing required, distance the recyclable
material must be transported and value of the recyclable material.
As part of its residential solid waste collection services, Waste Management
engages in curbside collection of recyclable materials from residences in the
United States and Canada, also through its Recycle America(R), Recycle
Canada(R) and other programs. Curbside recycling services generally involve
the collection of recyclable paper, glass, plastic and metal waste materials,
which may be separated by residents into different waste containers or
commingled with other recyclable materials. The recyclable materials are then
typically deposited at a local materials recovery facility where they are
sorted and processed for resale.
6
The prices received by the Company for recyclable materials fluctuate
substantially from quarter to quarter and year to year depending upon domestic
and foreign demand for such materials, the quality of such materials, prices
for new materials and other factors. In some instances, the Company enters
into agreements with the local governments of municipalities in which it
provides recycling services whereby the governments share in the gains and
losses resulting from fluctuation in prices of recyclable commodities. These
agreements mitigate both the Company's gains and losses from such
fluctuations.
In 1995, Waste Management provided curbside recycling services to
approximately 7,200,000 households pursuant to more than 1,000 contracts in
the United States and Canada. Waste Management has approximately 188,000
commercial and industrial recycling services customers.
Waste Management operates 129 materials recovery facilities for the receipt
and processing of recyclable materials. Such processing consists of separating
recyclable materials according to type and baling or otherwise preparing the
separated materials for sale.
Waste Management also participates in joint ventures with Stone Container
Corporation and American National Can Corporation to engage, respectively, in
the businesses of marketing paper fibre and aluminum, steel, and glass
containers for recycling. In each case Waste Management sells to the joint
venture, or has the joint venture market, the paper fibre or containers
collected by Waste Management to Stone Container, American National Can or
other parties who will process them for reuse. The joint venture with American
National Can also owns and operates three glass processing facilities. During
1995, the joint ventures processed approximately 4,496,000 tons of recyclable
materials. Waste Management also provides tire and demolition and construction
debris recycling services.
Energy Recovery
At 34 Waste Management-owned or -operated sanitary landfill facilities,
Waste Management is engaged in methane gas recovery operations. These
operations involve the installation of a gas collection system into a sanitary
landfill facility. Through the gas collection system, gas generated by
decomposing solid waste is collected and transported to a gas-processing
facility at the landfill site. Through physical processes methane gas is
separated from contaminants. The processed methane gas generally is then
either (i) sold directly to industrial users or (ii) sold to an affiliate of
the Company which uses it as a fuel to power electricity generators.
Electricity generated by these facilities is sold, usually to public utilities
under long-term sales contracts, often under terms or conditions which are
subject to approval by regulatory authorities.
WMX Technologies also engages in other resource recovery activities through
WTI's trash-to-energy and independent power operations and Waste Management
International's operations. See "Clean Energy, Clean Water and Related
Services" and "International Waste Management and Related Services."
DISPOSAL
Waste Management operates 133 solid waste sanitary landfill facilities. Of
this number, 103 are owned by Waste Management and the remainder are leased
from, or operated under contract with, others. Additional facilities are in
various stages of development. Waste Management also provides yard-waste
composting services, bioremediation of petroleum-contaminated soils and
solidification of difficult-to-treat liquid wastes at a number of its disposal
facilities. All of the sanitary landfill facilities are subject to
governmental regulation. See "Regulation--Waste Services--Solid Waste."
A sanitary landfill site must have geological and hydrological properties
and design features which limit the possibility of water pollution, directly
or by leaching. Sanitary landfill operations, which include carefully planned
excavation, continuous spreading and compacting of solid waste and covering of
the waste, are designed to maintain sanitary conditions, insure optimum
utilization of the airspace and prepare the site for ultimate use for other
purposes.
7
Suitable sanitary landfill facilities and permission to expand existing
facilities may be difficult to obtain in some areas because of land scarcity,
local resident opposition and governmental regulation. As its existing
facilities become filled in such areas, the solid waste disposal operations of
Waste Management are and will continue to be materially dependent on its
ability to purchase, lease or obtain operating rights for additional sites or
expansion of existing sites and to obtain the necessary permits from
regulatory authorities to construct and operate them. In addition, there can
be no assurance that additional sites can be obtained or that existing
facilities can continue to be expanded or operated. However, management
believes that the facilities currently available to Waste Management are
sufficient to meet the needs of its operations in most areas for the
foreseeable future.
To develop a new facility, Waste Management must expend significant time and
capital resources without any certainty that the necessary permits will
ultimately be issued for such facility or that the Company will be able to
achieve and maintain the desired disposal volume at such facility. If the
inability to obtain and retain necessary permits, the failure of a facility to
achieve the desired disposal volume or other factors cause Waste Management to
terminate development efforts for a facility, the capitalized development
expenses of the facility may need to be written off.
In varying degrees, Waste Management utilizes its own sanitary landfill
facilities to accommodate its disposal requirements for collection and
transfer operations. In 1993, 1994 and 1995 approximately 52%, 55% and 57%,
respectively, of the solid waste collected by Waste Management was disposed of
in sanitary landfill facilities operated by it. Usually these facilities are
also used by other companies and government agencies on a noncontract basis
for fees determined by such considerations as market factors and the type and
volume or weight of the waste.
RELATED SERVICES
Waste Management also provides or manages several types of services which
are compatible with its solid waste collection operations. Included in these
operations are scaffolding and other on-site industrial services, medical and
infectious waste management services, portable sanitation services and street
sweeping and parking lot cleaning services.
Waste Management manages the business of Rust Industrial Services Inc., a
subsidiary of Rust ("RIS"), providing scaffolding and other on-site industrial
services. RIS provides scaffolding services primarily to the chemical,
petrochemical and utilities industries. In most cases, the scaffolding
services are provided in conjunction with periodic, routine cleaning and
maintenance of refineries, chemical plants and utilities, although such
services are also performed in connection with new construction projects. RIS
also performs a variety of types of other industrial services--water blasting,
tank cleaning, explosives blasting, chemical cleaning, industrial vacuuming,
catalyst handling, specialty chemicals and separation technologies--primarily
for clients in the petrochemical, chemical, and pulp and paper industries,
utilities and, to a lesser extent, the public sector. RIS also provides on-
site plant services, including providing personnel to perform mechanical and
electrical services, equipment installation, welding, heating, ventilating and
air conditioning ("HVAC"), warehousing and inventory management services and
technical support in the area of industrial hygiene and safety training. RIS
assists clients in the nuclear and utility industries in solving electrical,
mechanical, engineering and related technical services problems. RIS also
provides spent fuel storage (rerack) services to the nuclear power industry.
Waste Management's medical and infectious waste management services consist
of collecting, transporting, treating and disposing of medical and infectious
waste generated by hospitals, pharmaceutical manufacturers, medical clinics,
physician and dentist offices and other sources.
Waste Management also provides portable sanitation services to
municipalities and commercial customers. The portable sanitation services,
which are marketed under the Port-O-Let(R) trade name, are also used at
numerous special events and public gatherings.
Certain of these related services are marketed and performed primarily by
employees operating out of Waste Management's solid waste operations
facilities who also may have responsibility for some phase of solid waste
marketing or operations.
8
HAZARDOUS WASTE MANAGEMENT AND RELATED SERVICES
CHEMICAL WASTE MANAGEMENT SERVICES
The Company operates chemical waste treatment, storage and disposal
facilities in 16 states and also owns a majority interest in a subsidiary
which operates a resource recovery and storage facility and a disposal
facility in Mexico. The chemical wastes handled by the Company include
industrial by-products and residues that have been identified as "hazardous"
pursuant to the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), as well as other materials contaminated with a wide variety of
chemical substances.
Chemical waste may be collected from customers and transported by Waste
Management or CWM or contractors retained by them or delivered by customers to
their facilities. Chemical waste is transported by Waste Management or CWM
primarily in specially constructed tankers and semi-trailers, including
stainless steel and rubber or epoxy-lined tankers and vacuum trucks, or in
containers or drums on trailers designed to comply with applicable regulations
and specifications of the U.S. Department of Transportation ("DOT") relating
to the transportation of hazardous materials. Waste Management and CWM also
operate several facilities at which waste collected from or delivered by
customers may be analyzed and consolidated prior to further shipment.
The Company's seven secure land disposal facilities either have interim
status or have been issued permits under RCRA. See "Regulation--RCRA." In
general, the Company's secure land disposal facilities have received the
necessary permits and approvals to accept chemical wastes, although some of
such sites may accept only certain chemical wastes. Only chemical wastes in a
stable, solid form which meet applicable regulatory requirements may be buried
in the Company's secure disposal cells. These land disposal facilities are
sited, constructed and operated in a manner designed to provide long-term
containment of such waste. Chemical wastes may be treated prior to disposal.
Physical treatment methods include distillation, evaporation and separation,
all of which basically result in the separation or removal of solid materials
from liquids. Chemical treatment methods include chemical oxidation and
reduction, chemical precipitation of heavy metals, hydrolysis and
neutralization of acid and alkaline wastes and essentially involve the
transformation of wastes into inert materials through one or more chemical
reaction processes. At two of its locations, the Company isolates treated
chemical wastes in liquid form by injection into deep wells. Deep well
technology involves drilling wells in suitable rock formations far below the
base of fresh water and separated from it by other substantial geological
confining layers.
AETS provides on-site integrated hazardous waste management services,
including hazardous waste identification, packaging, removal and recycling
services in North America. These services include on-site hazardous waste data
management, education and training, inventory control and other administrative
services, lab pack services, drum identification services, household hazardous
waste programs, less-than-full load waste pickup and consolidation services,
and related services. AETS provides these services primarily to industrial,
institutional and public sector customers, including laboratories.
In the United States, most chemical wastes generated by industrial processes
are handled "on-site" at the generators' facilities. Since the mid-1970's,
public awareness of the harmful effects of unregulated disposal of chemical
wastes on the environment and health has led to extensive and evolving
federal, state and local regulation of chemical waste management activities.
The major federal statutes regulating the management of chemical wastes
include RCRA, the Toxic Substances Control Act ("TSCA") and the Comprehensive
Environmental Response, Compensation and Liabilities Act of 1980, as amended
("CERCLA" or "Superfund"), all primarily administered by the United States
Environmental Protection Agency ("EPA"). The business is heavily dependent
upon the extent to which regulations promulgated under these or similar state
statutes and their enforcement over time effectively require wastes to be
specially handled or managed and disposed of in facilities of the type owned
and operated by the Company. See "Regulation--Waste Services--Hazardous
Waste," "--RCRA" and "--Superfund." The chemical waste services industry
currently has substantial excess capacity caused by a number of factors,
including a decline in environmental remediation projects generating hazardous
waste for off-site treatment and disposal, continuing efforts by hazardous
waste generators to reduce volume and to manage it on-site, and the uncertain
regulatory environment regarding
9
hazardous waste management and remediation requirements. These factors have
led to reduced demand and increased pressure on pricing for chemical waste
management services, consequences which the Company expects to continue for
the foreseeable future.
LOW-LEVEL AND OTHER RADIOACTIVE WASTE SERVICES
Radioactive wastes with varying degrees of radioactivity are generated by
nuclear reactors and by medical, industrial, research and governmental users
of radioactive material. Radioactive wastes are generally classified as either
high-level or low-level. High-level radioactive waste, such as spent nuclear
fuel and waste generated during the reprocessing of spent fuel from nuclear
reactors, contains substantial quantities of long-lived radionuclides and is
the ultimate responsibility of the federal government. Low-level radioactive
waste, which decays more quickly than high-level waste, largely consists of
dry compressible wastes (such as contaminated gloves, paper, tools and
clothing), resins and filters which have removed radioactive contaminants from
nuclear reactor cooling water, solidified wastes from power plants which have
become contaminated with radioactive substances and irradiated hardware.
Chem-Nuclear provides comprehensive low-level radioactive waste management
services in the United States consisting of disposal, processing and various
other special services. To a lesser extent, it provides services with respect
to radioactive waste that has become mixed with regulated chemical waste.
Chem-Nuclear's radioactive disposal operations involve low-level radioactive
waste only. Its Barnwell, South Carolina facility is one of two licensed
commercial low-level radioactive waste disposal facilities in the United
States and has been in operation since 1971. A trust has been established and
funded to pay the estimated cost of decommissioning the Barnwell facility. A
second fund, for the extended care of the facility, is funded by a surcharge
on each cubic foot of waste received. Chem-Nuclear may be liable for
additional costs if the extra charges collected to restore and maintain the
facility are insufficient to cover the cost of restoring or maintaining the
site after its closure (which Chem-Nuclear has no reason to expect). Under
state legislation enacted in 1995, the Barnwell, South Carolina facility is
authorized to operate until its current permitted disposal capacity is fully
utilized, unless such authorization is changed by legislation. However,
presently pending in the South Carolina Supreme Court is a suit challenging
the 1995 legislation, which repealed earlier legislation that would have
closed the Barnwell facility to out-of-state wastes. While Chem-Nuclear
believes the suit (to which it is not a party) lacks merit, it is impossible
to predict the outcome of the suit and its impact on future operations at
Barnwell.
Chem-Nuclear also processes low-level radioactive waste at its customers'
plants to enable such waste to be shipped in dry rather than liquid form to
meet the requirements for receipt at disposal facilities and to reduce the
volume of waste that must be transported. Processing operations include
solidification, demineralization, dewatering and filtration. Other services
offered by Chem-Nuclear include providing electro-chemical, abrasive and
chemical removal of radioactive contamination, providing management services
for spent nuclear fuel storage pools and storing and incinerating liquid
radioactive organic wastes.
INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES
The Company is a leading provider of comprehensive waste management and
related services internationally, primarily through Waste Management
International, which conducts essentially all of the waste management
operations of the Company located outside North America. Waste Management
International's business may broadly be characterized into two areas of
activity, collection services and treatment and disposal services. The
following table shows the derivation of Waste Management International's
revenues for the years indicated and includes revenue from construction of
treatment or disposal facilities for third parties under "Treatment and
Disposal Services":
YEAR ENDED
DECEMBER 31,
--------------
1993 1994 1995
---- ---- ----
Collection Services........................................ 69% 64% 64%
Treatment and Disposal Services............................ 31% 36% 36%
10
The Company has had international operations since the mid-1970's. However,
the bulk of the Company's international operations and revenues are derived
from the acquisition over the last several years of numerous companies and
interests in Europe in various of its service lines. In 1993, major
acquisitions included, in the UK, the acquisition by the joint venture
described below between Waste Management International and Wessex of a solid
waste collection and disposal company; in France, a company engaged primarily
in solid waste collection; in The Netherlands, a company engaged in the
collection and transportation of solid waste and the sorting of demolition
waste; and, in Germany, a group of companies providing waste collection
services and recyclables sorting. In 1994, Waste Management International
completed 50 acquisitions in 10 countries, most of which were small
acquisitions which complemented or expanded existing Waste Management
International operations in various markets. With its acquisition goals
largely completed, Waste Management International engaged in 25 additional
small acquisitions during 1995.
In accordance with its objective of maintaining a local identity, Waste
Management International, in certain cases, operates through companies or
joint ventures in which Waste Management International and its affiliates own
less than a 100% interest. For example, Waste Management International is a
party to a joint venture with Wessex to provide waste management and related
services in the United Kingdom.
Because of the size and timing of projects and acquisitions, Waste
Management International's revenue mix by country varies from year to year.
Countries in which revenue exceeded 10% of Waste Management International's
consolidated total were: Italy (32%) and The Netherlands (11%) in 1993, Italy
(26%) and Germany (12%) in 1994 and Italy (23%), Germany (14%), The
Netherlands (11%) and The United Kingdom (11%) in 1995.
While Waste Management International has considerable experience in
mobilizing for and managing foreign projects, its operations continue to be
subject generally to such risks as currency fluctuations and exchange
controls, the need to recruit and retain suitable local labor forces and to
control and coordinate operations in different jurisdictions, changes in
foreign laws or governmental policies or attitudes concerning their
enforcement, political changes, local economic conditions and international
tensions. In addition, price adjustment provisions based on certain formulae
or indices may not accurately reflect the actual impact of inflation on the
cost of performance.
COLLECTION SERVICES
Collection services include collection and transportation of solid,
hazardous and medical wastes and recyclable material from residential,
commercial and industrial customers. The residential solid waste collection
process, as well as the commercial and industrial solid and hazardous waste
collection process, is similar to that utilized by the Company in the United
States. Waste Management International provided collection services as of
December 31, 1995 to governmental and private customers in ten European
countries, Argentina, Australia, New Zealand and Taiwan. Business is obtained
through public bids or tenders, negotiated contracts, and, in the case of
commercial and industrial customers, direct contracts. Waste Management
International operates 318 collection and staging facilities and 76 waste
transfer facilities.
Residential solid waste collection is normally performed by Waste Management
International pursuant to municipal contracts. Waste Management International
has approximately 1,500 municipal contracts, serving more than 6,800,000
residential properties. The scope, specifications, services provided and
duration of such contracts vary substantially, with some contracts
encompassing landfill disposal of collected waste, street-sweeping and other
related municipal services. The largest number of municipal contracts held by
Waste Management International is in Italy where Waste Management
International services approximately 1,850,000 residential properties. Pricing
for municipal contracts is generally based on volume of waste, number and
11
frequency of collection pick-ups, and disposal arrangements. Longer-term
contracts typically have formulae for periodic price increases or adjustments.
Waste Management International also provides curbside recycling services
similar to those provided by Waste Management in North America.
Street, industrial premises, office and parking lot cleaning services are
also performed by Waste Management International, along with portable
sanitation/toilet services for such occasions as outdoor concerts and special
events.
Waste Management International's commercial and industrial solid and
hazardous waste collection services are generally contracted for by individual
establishments. In addition to solid waste collection customers, Waste
Management International provides services to small quantity waste generators,
as well as larger petrochemical, pharmaceutical and other industrial
customers, including collection of hazardous, chemical or medical wastes or
residues. Waste Management International has approximately 285,000 commercial
and industrial customers. Contract terms and prices vary substantially between
jurisdictions and types of customer. Waste Management International also
provides commercial and industrial recycling services.
TREATMENT AND DISPOSAL SERVICES
Treatment and disposal services include processing of recyclable materials,
operation of both solid and hazardous waste landfills, operation of municipal
and hazardous waste incinerators, operation of a trash-to-energy facility,
operation of water and wastewater treatment facilities, operation of hazardous
waste treatment facilities and construction of treatment or disposal
facilities for third parties. The operation of solid waste landfills is
currently Waste Management International's most significant treatment and
disposal service. Treatment and disposal services are provided under contracts
which may be obtained through public bid or tender or direct negotiation, and
are also provided directly to other waste service companies. At December 31,
1995, Waste Management International owned, operated or maintained 23 waste
treatment facilities, 79 recycling and recyclables processing facilities, 9
incinerators and 55 landfills.
Once collected, solid wastes may be processed in a recyclables processing
facility for sale or other disposition for use in various applications.
Unprocessed solid wastes, or the portion of the waste stream remaining after
recovery of recyclable materials, require disposal, which may be accomplished
through incineration (in connection with which the energy value may be
recovered in a trash-to-energy facility) or through disposal in a solid waste
landfill. The relative use of landfills versus incinerators differs from
country to country and will depend on many factors, including the availability
of land, geological and hydrological conditions, the availability and cost of
technology and capital, and the regulatory environment. The main determinant
of disposal method is generally the disposal cost per cubic meter at local
landfills, as incineration is generally more expensive.
At present, in most countries in which Waste Management International
operates, landfilling is the predominant disposal method employed. Waste
Management International owns or operates solid waste landfills in Argentina,
Australia, Brazil, Denmark, France, Germany, Hong Kong, Indonesia, Italy, New
Zealand, Spain, Sweden and the United Kingdom. Landfill disposal agreements
may be separate contracts or an integrated portion of collection or treatment
contracts.
Demand for solid waste incineration is affected by landfill disposal costs
and government regulations. The incineration process for non-hazardous solid
waste has also been influenced by two significant factors in recent years: (i)
increasingly strict control over air emissions from incinerators; and (ii)
increasing emphasis on trash-to-energy incinerators, which utilize heat
produced by incinerators to generate electricity and other energy.
Incineration generates approximately 30% residue (by weight), which is either
landfilled or, if permitted, recycled for use as a road base or in other
construction uses.
Waste Management International's trash-to-energy incinerator in Hamm is a
German-designed plant and the only privately operated trash-to-energy facility
in Germany. It is among the first trash-to-energy facilities to fully
12
comply with that country's stringent new air pollution requirements. The
facility serves the household and commercial solid waste incineration needs of
a population of approximately 600,000 in Hamm and nearby towns. Under its
current permits, the facility is able to produce 18 megawatts per hour of
steam-generated electricity and sold approximately 74,000 megawatt hours to
the local power grid in 1995 (enough power for about 17,000 homes). In 1992,
Waste Management International entered into a contract with the County of
Gutersloh, Germany to design, construct, own and operate a trash-to-energy
facility. The facility is designed to convert 268,000 metric tons per year of
municipal waste and sewage sludge into energy. The facility would be capable
of producing enough electricity to power more than 35,000 homes. During 1995,
Waste Management International's permit application to develop and operate the
Gutersloh facility was denied. Waste Management International believes it is
entitled to the permit and is appealing the denial. Waste Management
International also operates seven small conventional municipal solid and other
waste incineration facilities. Waste Management International and WTI have
also formed a joint venture to develop trash-to-energy projects outside
Germany, Italy and North America. See "Competition" below.
Waste Management International owns or operates hazardous waste treatment
facilities in Australia, Finland, France, Germany, Hong Kong, Indonesia,
Italy, The Netherlands, Spain, Sweden and the United Kingdom and has entered
into agreements with respect to the development of hazardous waste treatment
facilities in Argentina and Thailand.
CLEAN ENERGY, CLEAN WATER AND RELATED SERVICES
WHEELABRATOR CLEAN ENERGY
WTI, through Wheelabrator Environmental Systems Inc. and its subsidiaries,
is a leading developer, operator and owner of trash-to-energy and independent
power facilities in the United States. These facilities, either owned or
operated, give WTI approximately 850 megawatts of electric generating
capacity. WTI's trash-to-energy projects utilize proven boiler and grate
technology capable of processing up to 2,250 tons of trash per day per
facility. The heat from this combustion process is converted into high-
pressure steam, which typically is used to generate electricity for sale to
public utility companies under long-term contracts.
WTI's trash-to-energy development activities have historically involved a
number of contractual arrangements with a variety of private and public
entities, including municipalities (which supply trash for combustion),
utilities or other power users (which purchase the energy produced by the
facility), lenders, public debtholders, joint venture partners and equity
investors (which provide financing for the project) and the contractors or
subcontractors responsible for building the facility. In addition, WTI's
activities have often included identifying and acquiring sites for the
facility and for the disposal of residual ash produced by the facility and
obtaining necessary permits and licenses from local, state and federal
regulatory authorities.
WTI also develops, operates and, in some cases, owns independent power
projects, which either cogenerate electricity and thermal energy or generate
electricity alone for sale to utilities. Cogeneration is a technology which
allows the consecutive use of two or more useful forms of energy from a single
primary fuel source, thus providing a more efficient use of a fuel's total
energy content. During 1995, WTI entered into a joint venture for the purpose
of developing small cogeneration projects for district heating applications in
a province of The People's Republic of China.
WTI also designs, fabricates and installs advanced air pollution control and
measurement systems and equipment. WTI offers electrostatic precipitators,
flue-gas desulfurization systems (scrubbers), fabric-filter systems
(baghouses) and nitrogen oxide ("NOx") control systems, which remove
pollutants from the emissions of WTI's trash-to-energy systems, as well as
power plants and other industrial facilities. WTI also designs, constructs and
maintains tall concrete chimneys and storage silos. WTI offers both custom and
pre-engineered systems for emission control. The custom engineering division
licenses a patented process for the removal of hydrogen sulfide from gaseous
and liquid streams. The process controls hazardous gases and sulfur dioxide
emissions, thereby reducing acid rain and odor problems. WTI also provides a
full range of technologies and
13
services for destroying or recycling volatile organic compounds ("VOCs") from
air and liquid sources and NOx from air sources. Both VOCs and NOx are
detrimental to air quality and the environment generally. WTI's VOC and NOx
control systems are utilized by customers in a variety of industries,
including oil refineries, chemical plants and automobile production
facilities. Complementing the emission control divisions is a measurement
division which designs and installs continuous emissions monitoring systems
for the utility, trash-to-energy, industrial furnace and petrochemical
industries, all of which are affected by regulations requiring the continuous
monitoring of stack emissions.
WHEELABRATOR CLEAN WATER
Through Wheelabrator Water Technologies, Inc. and its subsidiaries, WTI
develops, operates and owns projects that purify water, treat water and
wastewater, compost organic wastes and treat and manage biosolids. WTI also
provides products and systems used to treat drinking water as well as
industrial and municipal process water and wastewater.
WTI is a leading provider of a broad range of water and wastewater treatment
services to municipalities and industry throughout the United States, Canada
and Mexico, including water and wastewater treatment plant start-up
assistance, plant operations and maintenance, planning and management,
training of plant supervisors, operators and laboratory and maintenance
personnel, refining process systems, management systems for process control,
and plant diagnostic evaluations and energy audits. WTI also provides
specialty repair and cleaning services for industrial water and wastewater
management equipment.
In July 1995, WTI became the first company in the United States to acquire a
publicly owned wastewater treatment plant pursuant to a federal Executive
Order issued in 1992 which was intended to facilitate the privatization of
municipal facilities. The agreement provides for a subsidiary of WTI to
operate the 4.5 million gallon per day MCD Franklin Wastewater Treatment Plant
in Franklin, Ohio for a period of 20 years and to expand the facility as
needed to meet future population growth. In August 1995, WTI was selected by
the City of Wilmington, Delaware to negotiate a similar public-private
partnership, including the acquisition of that City's wastewater treatment
plant.
WTI also provides a range of biosolids management services, including land
application, drying, pelletizing, alkaline stabilization and composting of
non-hazardous biosolids to approximately 450 communities, typically pursuant
to multi-year contracts under which WTI is paid by the generator to make
beneficial use of the biosolids.
Land application involves the application of non-hazardous biosolids as a
natural fertilizer on farmland pursuant to rigorous site-specific permits
issued by applicable state authorities. Biosolids are also used in land-
reclamation projects such as strip mines. Regulations issued by the EPA in
December 1992 under the Clean Water Act encourage the beneficial use of
municipal sewage sludge by recognizing the resource value of biosolids as a
fertilizer and soil conditioner, and establish requirements for land
application designed to protect human health and the environment.
WTI also develops and operates facilities at which biosolids are dried and
pelletized and has four facilities currently in operation, and one other
facility under construction. WTI has approximately 560 dry-tons-per-day of
biosolids drying capacity either in operation or under construction. Biosolids
which have been dried are generally used as fertilizer by farmers, commercial
landscapers and nurseries and as a bulking agent by fertilizer manufacturers.
Development of dryer facilities generally involves various contractual
arrangements with a variety of private and public entities, including
municipalities (which generate the biosolids), lenders, contractors and
subcontractors which build the facilities, and end-users of the fertilizer
generated from the treatment process. WTI also engineers and manufactures a
variety of environmental products and systems. WTI provides single-source,
advanced-systems solutions for the treatment of municipal drinking water,
industrial process water and wastewater and for slurry pumping and high solids
dewatering. It also provides systems designed to remove solids from liquid
streams through the use of self-cleaning bar/filter screens, grinders,
macerators, conveyors and
14
compactor systems. WTI also provides high technology water purification and
wastewater treatment systems which utilize a variety of technologies including
demineralizers, reverse osmosis and vacuum degasification products. In
addition, WTI designs and installs process technology systems utilizing
evaporators, crystallizers, electrodialysis, dialysis, reverse osmosis and
ultrafiltration for treating industrial process wastewater. WTI also produces
profile wire screen products for groundwater production, hydrocarbon
processing, food processing and coal/mineral processing. WTI also designs and
supplies enclosed automated composting systems which recycle organic wastes
into beneficial products which are used by commercial landscapers, nurseries
and fertilizer manufacturers. WTI provides a number of these products and
technologies to industrial customers abroad through its operations in
Australia, France, Ireland, Japan, Malaysia, The Netherlands, Singapore, Spain
and Taiwan.
WTI also manufactures a line of nonpolluting materials cleaning systems for
use by a variety of industrial customers, including foundries, steel
processors, automobile producers and rubber and plastics producers, in
cleaning and finishing metal and other materials. WTI also manufactures high-
alloy combustion grates used in the high-temperature furnaces of its trash-to-
energy facilities.
ENVIRONMENTAL AND INFRASTRUCTURE ENGINEERING AND CONSULTING SERVICES
Rust is a leading provider, through its subsidiaries, of environmental and
infrastructure engineering and consulting services, primarily to clients in
government and in the chemical, petrochemical, nuclear, energy, utility, pulp
and paper, manufacturing, environmental services and other industries.
Rust's environmental and infrastructure engineering and consulting services
provide alternative solutions for client problems relating to removing and
disposing of hazardous and toxic substances; managing solid waste, water and
wastewater, groundwater and air resources; design and construction oversight
of transportation facilities; and photogrammetry. Such services are provided
to private industry, as well as federal, state and local governments,
including the Department of Defense (the "DOD") and the Department of Energy
(the "DOE"). The services include performing remedial investigations for the
purpose of characterizing hazardous waste sites, preparing feasibility studies
setting forth recommended alternative remedial actions, and providing
engineering design and construction oversight services for remediation
projects. The services provided also include the siting, permitting, design
and construction oversight of solid and hazardous waste landfills and related
facilities. Study, design and construction oversight services are also
provided, primarily to municipalities, special government agencies and, to
some extent, private industry in connection with wastewater collection and
treatment, potable water supply treatment and distribution, stormwater
management and the building of streets, highways, airports, bridges, waterways
and rail services. Rust also provides architectural services in connection
with these and other activities. Additional services provided through Rust
include environmental assessment services, the design of systems to properly
and safely store, convey, treat and dispose of industrial, hazardous and
radioactive materials and consulting services regarding disposal, waste
minimization methods and techniques, air quality regulation and industrial
hygiene and safety.
Rust also has an international environmental and infrastructure engineering
and consulting, process engineering and construction services and related
services business performing projects in 35 countries. In Europe, Rust has
offices in the United Kingdom, Germany, Sweden and Turkey, and in the Asia-
Pacific region, in Australia, Hong Kong, China, Singapore, Malaysia and
Indonesia. In the Middle East and Africa, Rust also has offices in the United
Arab Emirates, Saudi Arabia and South Africa. Rust's overseas operations
provide such services to the World Bank and associated lending agencies,
national, regional and local governments and to clients in the utility and
industrial power and general manufacturing industries. In addition, Rust
provides such services to Waste Management International worldwide.
In May 1995, Rust sold substantially all of its hazardous and radioactive
remediation services business to OHM. As a result of that transaction, Rust
acquired an approximately 37% interest in OHM. See "Acquisitions and
Dispositions."
15
Rust also engages in providing process engineering, construction, specialty
contracting and related services, but has announced its intention to sell or
otherwise discontinue that business in North America and certain locations
outside North America. The process engineering services currently provided by
Rust are of two general types: facility process engineering and facility
design engineering. Process engineers create the processes by which facilities
operate, such as chemical, petrochemical, energy and pulp and paper plants.
Design engineering services provided by Rust encompass the following
disciplines: architectural, electrical, control systems, process piping,
mechanical, structural, HVAC, and civil. The construction services currently
provided by Rust are generally performed in connection with projects on which
Rust has also provided the design engineering services. Rust also requisitions
and procures equipment and construction materials for clients and performs
quality assurance and quality control oversight of vendor manufacturing
practices.
Rust also has scaffolding and other on-site industrial services businesses,
which are managed by Waste Management. See "Waste Services--Solid Waste
Management, Recycling and Related Services--Related Services" above.
REGULATION
While in general the Company's environmental services businesses have
benefited substantially from increased governmental regulation, the
environmental services industry itself has become subject to extensive and
evolving regulation by federal, state, local and foreign authorities. In
particular, the regulatory process requires firms in the Company's industries
to obtain and retain numerous governmental permits to conduct various aspects
of their operations, any of which may be subject to revocation, modification
or denial. As a result of governmental policies and attitudes relating to the
industries, which are subject to reassessment and change, the Company believes
that its ability to obtain applicable permits from governmental authorities on
a timely basis, and to retain such permits, could be impaired. The Company is
not in a position at the present time to assess the extent of the impact of
such potential changes in governmental policies and attitudes on the
permitting processes, but it could be significant. In particular, adverse
decisions by governmental authorities on permit applications submitted by the
Company may result in abandonment of projects, premature closure of facilities
or restriction of operations, which could result in a loss of earnings from a
facility, a write-off of capitalized development expenses or both.
Federal, state, local and foreign governments have also from time to time
proposed or adopted other types of laws, regulations or initiatives with
respect to the environmental services industry. Included among them are laws,
regulations and initiatives to ban or restrict the international, interstate
or intrastate shipment of wastes, impose higher taxes on out-of-state waste
shipments than in-state shipments, reclassify certain categories of hazardous
wastes as non-hazardous and regulate disposal facilities as public utilities.
Certain state and local governments have promulgated "flow control"
regulations, which attempt to require that all waste generated within the
state or local jurisdiction must go to certain disposal sites. The United
States Congress has from time to time considered legislation that would enable
or facilitate such bans, restrictions, taxes and regulations. Due to the
complexity of regulation of the industry and to public pressure,
implementation of existing or future laws, regulations or initiatives by
different levels of government may be inconsistent and difficult to foresee.
Many state and local governments have enacted mandatory or voluntary recycling
laws and bans on the disposal of yard-waste in landfills. The effect of these
and similar laws is to reduce the volume of wastes that would otherwise be
disposed in Company landfills. In addition, municipalities and other
governmental entities with whom the Company contracts to provide solid waste
collection or disposal services, or both, may require the Company as a
condition of securing the business to provide recycling services and operate
recycling and composting facilities, which may cause the Company to incur
substantial costs. The Company makes a continuing effort to anticipate
regulatory, political and legal developments that might affect its operations
but is not always able to do so. The Company cannot predict the extent to
which any legislation or regulation that may be enacted, amended, repealed or
enforced, or any failure or delay in enactment or enforcement of legislation
or regulations or funding of government agencies or programs, in the future
may affect its operations. Such matters could have a material adverse impact
on the Company's earnings for one or more fiscal quarters or years.
16
The demand for certain of the services provided by the Company, particularly
its hazardous waste management services, is dependent on the existence and
enforcement of federal, state and foreign laws and regulations which govern
the discharge of hazardous substances into the environment and on the funding
of agencies and programs under such laws and regulations. Such businesses will
be adversely affected to the extent that such laws or regulations are amended
or repealed, with the effect of reducing the regulation of, or liability for,
such activity, that the enforcement of such laws and regulations is lessened
or that funding of agencies and programs under such laws and regulations is
delayed or reduced. In particular, the EPA has recently proposed regulations
under RCRA to redefine the term "hazardous waste" for regulatory purposes.
Under the proposal, wastes containing minimal concentrations of hazardous
substances would no longer be subject to the stringent record-keeping,
handling, treatment and disposal rules applied to hazardous wastes under RCRA.
Other EPA-proposed regulations would cause certain wastes which presently must
be managed in TSCA-approved facilities to be eligible for disposal in
facilities not approved under TSCA. These proposed rules would, if adopted,
reduce the volume of wastes for which the Company's hazardous waste management
services are needed.
In addition to environmental laws and regulations, federal government
contractors, including the Company, are subject to extensive regulation under
the Federal Acquisition Regulation and numerous statutes which deal with the
accuracy of cost and pricing information furnished to the government, the
allowability of costs charged to the government, the conditions under which
contracts may be modified or terminated, and other similar matters. Various
aspects of the Company's operations are subject to audit by agencies of the
federal government in connection with its performance of work under such
contracts as well as its submission of bids or proposals to the government.
Failure to comply with contract provisions or other applicable requirements
may result in termination of the contract, the imposition of civil and
criminal penalties against the Company, or the suspension or debarment of all
or a part of the Company from federal government work, which could have a
material adverse impact upon the Company's financial condition or earnings for
one or more fiscal quarters or years. Among the reasons for debarment are
violations of various statutes, including those related to employment
practices, the protection of the environment, the accuracy of records and the
recording of costs. Some state and local governments have similar suspension
and debarment laws or regulations.
Because of the high level of public awareness of environmental issues,
companies in the environmental service business, including the Company, may in
the normal course of their business be expected periodically to become subject
to judicial and administrative proceedings. Governmental agencies may seek to
impose fines on the Company or revoke, deny renewal of, or modify the
Company's operating permits or licenses. The Company is also subject to
actions brought by private parties or special interest groups in connection
with the permitting or licensing of its operations, alleging violations of
such permits and licenses, or other matters. In addition, increasing
governmental scrutiny of the environmental compliance records of the Company,
CWM, WTI, Rust, Waste Management International or their affiliates could cause
a private or public entity seeking environmental services to disqualify the
Company from competing for one or more projects, on the grounds that these
records display inadequate attention to environmental compliance.
WASTE SERVICES
SOLID WASTE
Operating permits are generally required at the state and local level for
landfills, transfer stations and collection vehicles. Operating permits need
to be renewed periodically and may be subject to revocation, modification,
denial or non-renewal for various reasons, including failure of the Company to
satisfy regulatory concerns. With respect to solid waste collection,
regulation takes such forms as licensing of collection vehicles, truck safety
requirements, vehicular weight limitations and, in certain localities,
limitations on rates, area, time and frequency of collection. With respect to
solid waste disposal, regulation covers various matters, including landfill
location and design, groundwater monitoring, gas control, liquid runoff and
rodent, pest, litter and traffic control. Zoning and land use requirements and
limitations are encountered in the solid waste collection, transfer, recycling
and energy recovery and disposal phases of the Company's business. In almost
all cases the Company is required to obtain conditional use permits or zoning
law changes in order to develop transfer station, resource
17
recovery or disposal facilities. In addition, the Company's disposal
facilities are subject to water and air pollution laws and regulations. Noise
pollution laws and regulations may also affect the Company's operations.
Governmental authorities have the power to enforce compliance with these
various laws and regulations and violators are subject to injunctions, fines
and revocation of permits. Private individuals may also have the right to sue
to enforce compliance. Safety standards under the Occupational Safety and
Health Act ("OSHA") are also applicable to the Company's solid waste and
related services operations.
The EPA and various states acting pursuant to EPA-delegated authority have
promulgated rules pursuant to RCRA which serve as minimum requirements for
land disposal of municipal wastes. The rules establish more stringent
requirements than previously applied to the siting, construction, operation
and closure of all but the smallest municipal waste landfill facilities. In
certain cases, the failure of some states to adopt the federal requirements
may increase costs to meet inconsistent federal and state laws applicable to
the same facility. The Company does not believe that continued compliance with
the more stringent minimum requirements will have a material adverse effect on
the Company's operations. See also "RCRA" and "Superfund" below for additional
regulatory information.
In March 1996, the EPA issued regulations that require large, municipal
solid waste landfills to install and monitor systems to collect and control
landfill gas. The regulations apply to landfills that are designed to
accommodate 2.5 million cubic meters or more of municipal solid waste and that
accepted waste for disposal after November 8, 1987, regardless of whether the
site is active or closed. The date by which each affected landfill must have
such gas collection and control system depends on whether the landfill began
operation before or after May 30, 1991. Landfills constructed, reconstructed,
modified or first accepting waste after May 30, 1991 generally must have
systems in place by late 1998. Older landfills generally will be regulated by
the states and will be required to have landfill gas systems in place within
approximately 30 months of EPA's approval of the state program. Many state
solid waste regulations already require collection and control systems. While
the Company has not yet completed its study of the new regulations, compliance
with them is not expected to have a material adverse effect on the Company.
HAZARDOUS WASTE
Waste Management and CWM are required to obtain federal, state, local and
foreign governmental permits for their chemical waste treatment, storage and
disposal facilities. Such permits are difficult to obtain, and in most
instances extensive geological studies, tests and public hearings are required
before permits may be issued. Waste Management's and CWM's chemical waste
treatment, storage and disposal facilities are also subject to siting, zoning
and land use restrictions, as well as to regulations (including certain
requirements pursuant to federal statutes) which may govern operating
procedures and water and air pollution, among other matters. In particular,
Waste Management's and CWM's operations in the United States are subject to
the Safe Drinking Water Act (which regulates deep well injection), TSCA
(pursuant to which the EPA has promulgated regulations concerning the disposal
of PCBs), the Clean Water Act (which regulates the discharge of pollutants
into surface waters and sewers by municipal, industrial and other sources) and
the Clean Air Act (which regulates emissions into the air of certain
potentially harmful substances). In their transportation operations, Waste
Management and CWM are subject to the jurisdiction of the Interstate Commerce
Commission and regulated by the DOT and by regulatory agencies in each state.
Employee safety and health standards under OSHA are also applicable.
Of Waste Management's and CWM's chemical waste treatment or disposal
facilities in the United States, all but one have been issued permits under
RCRA. The facility without an RCRA permit continues to have interim status. A
final permit is to be issued jointly by the authorized state, subject to EPA
oversight, and by the EPA. The regulations governing issuance of permits
contain detailed standards for hazardous waste facilities on matters such as
waste analysis, security, inspections, training, preparedness and prevention,
emergency procedures, reporting and recordkeeping. Once issued, a final permit
has a maximum fixed term of 10 years, and such permits for land disposal
facilities are required to be reviewed five years from the date of issuance.
The issuing agency (either the EPA or an authorized state) may review or
modify a permit at any time during its term.
18
The Company believes that Waste Management and CWM maintain each of their
operating treatment, storage or disposal facilities in substantial compliance
with the applicable requirements promulgated pursuant to RCRA and expects that
the facility with interim status ultimately can qualify to be issued a RCRA
permit. It is possible, however, that the issuance or renewal of a permit
could be made conditional upon the initiation or completion of modifications
or corrective actions at facilities, which might involve substantial
additional capital expenditures on the part of Waste Management or CWM.
Although the Company is informed that Waste Management and CWM anticipate the
reauthorization of each permit at the end of its term if the facility's
operations are in compliance with applicable requirements, there can be no
assurance that such will be the case.
The radioactive waste services of Chem-Nuclear are also subject to extensive
governmental regulation. Due to the extensive geological and hydrological
testing and environmental data required, and the complex political
environment, it is difficult to obtain permits for radioactive waste disposal
facilities. Various phases of Chem-Nuclear's low-level radioactive waste
management services are regulated by various state agencies, the United States
Nuclear Regulatory Commission (the "NRC") and the DOT. Regulations applicable
to Chem-Nuclear's operations include those dealing with packaging, handling,
labeling and routing of radioactive materials, and prescribe detailed safety
and equipment standards and requirements for training, quality control and
insurance, among other matters. Employee safety and health standards under
OSHA are also applicable.
See also "RCRA" and "Superfund" below for additional regulatory information.
CLEAN ENERGY, CLEAN WATER AND RELATED SERVICES
WTI's business activities are subject to environmental regulation under
federal, state and local laws and regulations, including the Clean Air Act,
the Clean Water Act and RCRA. The Company believes that WTI's business is
conducted in an environmentally responsible manner in material compliance with
applicable laws and regulations. The Company does not anticipate that WTI's
maintaining compliance with current requirements will result in any material
decrease in earnings. There can be no assurance, however, that such
requirements will not change so as to require significant additional
expenditures. In particular, pursuant to the Clean Air Act Amendments of 1990
it is probable that the air pollution control systems at certain trash-to-
energy projects owned or operated by WTI's subsidiaries will be required to be
modified by the end of the decade to comply with the more stringent
regulations promulgated thereunder. Although the expenditures related to such
modifications, if required, will likely be significant, they are not expected
to have a material adverse effect on WTI's liquidity or results of operations
because WTI has the right to pass on to the majority of long-term contract
users of its facilities increased capital and operating costs resulting from
changes in law. There can be no assurance, however, that in such event WTI
would be able to recover, for each project, all such increased costs from its
customers. Moreover, it is possible that future developments, such as
increasingly strict requirements of environmental laws, and enforcement
policies thereunder, could affect the manner in which WTI operates its
projects and conducts its business, including the handling, processing or
disposal of the wastes, by-products and residues generated thereby.
WTI's energy facilities are also subject to the provisions of various
energy-related laws and regulations, including the Public Utility Regulatory
Policies Act of 1978 ("PURPA"). The ability of WTI's trash-to-energy and small
power production facilities to sell power to electric utilities on
advantageous terms and conditions and to avoid burdensome public utility
regulation has historically depended, in part, upon the continuing
applicability of certain provisions of PURPA, which generally exempts WTI from
state and federal regulatory control over electricity prices charged by, and
the finances of, WTI and its energy-producing subsidiaries. While the recent
changes in Congressional leadership may increase the likelihood of a repeal or
modification of PURPA, it is unlikely that such action would abrogate the
long-term contracts and orders pursuant to which most of WTI's existing
projects sell electricity. Furthermore, the operations of WTI's trash-to-
energy and other small power facilities business is not expected to be
materially and adversely affected if the various benefits of PURPA are
repealed or substantially reduced on a prospective basis, due to the passage
of the Energy Policy Act of 1992 ("EPACT"). EPACT created an alternative
ownership mechanism by which independent power producers can participate in
the electricity generation industry without the burdens of traditional public
utility regulation.
19
ENVIRONMENTAL AND INFRASTRUCTURE ENGINEERING AND CONSULTING SERVICES
The practice of engineering and architecture is regulated by state statutes.
All states require engineers and architects to be registered by their
respective state registration boards as a condition to offering or rendering
professional services. Many states also require companies offering or
rendering professional services, such as Rust, to obtain certificates of
authority. Rust's businesses are also subject to OSHA regulations and to NRC
regulations concerning services provided to nuclear power plants.
RCRA
Pursuant to RCRA, the EPA has established and administers a comprehensive,
"cradle-to-grave" system for the management of a wide range of industrial by-
products and residues identified as "hazardous" wastes. States that have
adopted hazardous waste management programs with standards at least as
stringent as those promulgated by the EPA may be authorized by the EPA to
administer their programs in lieu of RCRA.
Under RCRA and federal transportation laws, a transporter must deliver
hazardous waste in accordance with a manifest prepared by the generator of the
waste and only to a treatment, storage or disposal facility having a RCRA
permit or interim status under RCRA. Every facility that treats or disposes of
hazardous wastes must obtain a RCRA permit from the EPA or an authorized state
and must comply with certain operating standards. The RCRA permitting process
involves applying for interim status and also for a final permit. Under RCRA
and the implementing regulations, facilities which have obtained interim
status are allowed to continue operating by complying with certain minimum
standards pending issuance of a permit.
RCRA also imposes restrictions on land disposal of certain hazardous wastes
and prescribes standards for hazardous waste land disposal facilities. Under
RCRA, land disposal of certain types of untreated hazardous wastes has been
banned except where the EPA has determined that land disposal of such wastes
and treatment residuals should be permitted. The disposal of liquids in
hazardous waste land disposal facilities is also prohibited.
The EPA from time to time considers fundamental changes to its regulations
under RCRA that could facilitate exemptions from hazardous waste management
requirements, including policies and regulations that could implement the
following changes: redefine the criteria for determining whether wastes are
hazardous; prescribe treatment levels which, if achieved, could render wastes
non-hazardous; encourage further recycling and waste minimization; reduce
treatment requirements for certain wastes to encourage alternatives to
incineration; establish new operating standards for combustion technologies;
and indirectly encourage on-site remediation. To the extent such changes are
adopted, they can be expected to adversely affect the demand for the Company's
chemical waste management services. In this regard, the EPA has recently
proposed regulations which would have the effect of reducing the volume of
waste classified as hazardous for RCRA regulatory purposes. See "Regulation"
above.
In addition to the foregoing provisions, RCRA regulations require the
Company to demonstrate financial responsibility for possible bodily injury and
property damage to third parties caused by both sudden and nonsudden
accidental occurrences. See "Insurance" below. Also, RCRA regulations require
the Company to provide financial assurance that funds will be available when
needed for closure and post-closure care at its waste treatment, storage and
disposal facilities, the costs of which could be substantial. Such regulations
allow the financial assurance requirements to be satisfied by various means,
including letters of credit, surety bonds, trust funds, a financial (net
worth) test and a guarantee by a parent corporation. Under RCRA regulations, a
company must pay the closure costs for a waste treatment, storage or disposal
facility owned by it upon the closure of the facility and thereafter pay post-
closure care costs. If such a facility is closed prior to its originally
anticipated time, it is unlikely that sufficient funds will have been accrued
over the life of the facility to fund such costs, and the owner of the
facility could suffer a material adverse impact as a result. Consequently, it
may be difficult to close such facilities to reduce operating costs at times
when, as is currently the case in the hazardous waste services industry,
excess treatment, storage or disposal capacity exists.
20
SUPERFUND
Superfund provides for EPA-coordinated response and removal actions to
releases of hazardous substances into the environment, and authorizes the
federal government either to clean up facilities at which hazardous substances
have created actual or potential environmental hazards or to order persons
responsible for the situation to do so. Superfund assigns liability for these
response and other related costs to parties involved in the generation,
transfer and disposal of such hazardous substances. Superfund has been
interpreted as creating strict, joint and several liability for costs of
removal and remediation, other necessary response costs and damage to natural
resources. Liability extends to owners and operators of waste disposal
facilities (and waste transportation vehicles) from which a release occurs,
persons who owned or operated such facilities at the time the hazardous
substances were disposed, persons who arranged for disposal or treatment of a
hazardous substance at or transportation of a hazardous substance to such a
facility, and waste transporters who selected such facilities for treatment or
disposal of hazardous substances, as well as to generators of such substances.
Liability may be trebled if the responsible party fails to perform a removal
or remedial action ordered under the law. For additional information
concerning potential Superfund liability, see "Legal Proceedings" below.
Superfund created a revolving fund to be used by the federal government to
pay for the cleanup efforts. In late 1990, federal Superfund spending through
the end of the government's 1994 fiscal year was authorized to a maximum of
$5.1 billion. For the federal government's 1995 fiscal year, a maximum of $1.4
billion of Superfund spending was authorized. As of the date of this report,
the federal government had not approved any 1996 Superfund spending
authorization.
The U. S. Congress is expected to consider reauthorization and revision of
the Superfund statute in 1996. In addition to possible changes in the
statute's funding mechanisms and provisions for allocating cleanup
responsibility, it is possible that Congress also will fundamentally alter the
statute's provisions governing the selection of appropriate site cleanup
remedies. For example, Congress may consider whether to continue Superfund's
current reliance on stringent technology standards issued under other statutes
(such as RCRA) to govern removal and treatment of remediation wastes or to
adopt new approaches such as national or site-specific risk based standards.
This and other potential policy changes could significantly affect the
stringency and extent of site remediation, the types of remediation techniques
that will be employed, and the degree to which permitted hazardous waste
management facilities will be used for remediation wastes. In addition,
Congress may consider revision of the liability imposed by the Superfund law
for remediation of contamination caused prior to a party's acquisition of a
contaminated site, which could reduce the remediation obligations of the
Company and others who currently are jointly and severally liable for
remediation obligations under Superfund.
INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES
Waste Management International's operations are subject to the general
business, liability, land-use planning and other environmental laws and
regulations of the countries where the services are performed and, in Europe,
to European Union ("EU") regulations and directives. The degree of local
enforcement of applicable laws and regulations varies substantially between,
and even within, the various countries in which Waste Management International
operates. In addition to the statutes and regulations imposed by national,
state or provincial, and municipal or other local authorities, many of the
countries in which Waste Management International operates are members of the
EU. The EU has issued and continues to issue environmental Directives and
Regulations covering a broad range of environmental matters and has created a
European Environmental Agency responsible for monitoring and collating member
state environmental data. The Single European Act, passed in 1987, established
three fundamental principles to guide the development of future EU
environmental law: (i) the need for preventative action; (ii) the correction
of environmental problems at the source; and (iii) the polluter's liability
for environmental damage.
The Treaty on European Union, signed in December 1991, came into force in
November 1993. The Treaty applies the principle of "sustainable development"
as a key component of EU policy-making and requires that environmental
protection be integrated into the definition and application of all EU laws.
It also introduced a
21
new procedure for the adoption of waste management legislation (other than for
proposals of a primarily fiscal nature) which it is predicted may result in
the speedier implementation of EU waste laws.
The impact of current and future EU legislation will vary from country to
country according to the degree to which existing national requirements
already meet or fall short of the new EU standards and, in some jurisdictions,
may require extensive public and private sector investment and the development
and provision of the necessary technology, expertise, administrative
procedures and regulatory structures. These extensive laws and regulations are
continually evolving in response to technological advances and heightened
public and political concern.
Outside Europe, continuing industrialization, population expansion and
urbanization have caused increased levels of pollution with all of the
resultant social and economic implications. The desire to sustain economic
growth and address historical pollution problems is being accompanied by
investments in environmental infrastructure, particularly in Southeast Asia,
and the introduction of regulatory standards to further control industrial
activities.
The Company believes that Waste Management International's business is
conducted in material compliance with applicable laws and regulations and does
not anticipate that maintaining such compliance will adversely affect the
Company's financial position. There can be no assurance, however, that such
requirements will not change so as to require significant additional
expenditures or operating costs.
Waste Management International operates facilities in Hong Kong which are
owned by the Hong Kong government. Control of the Hong Kong government passes
to the People's Republic of China in 1997. Waste Management International is
unable to predict what impact, if any, this change will have on its operations
in Hong Kong.
COMPETITION
Waste Management encounters intense competition, primarily in the pricing
and rendering of services, from various sources in all phases of its solid
waste management and related operations. In the solid waste collection phase,
competition is encountered, for the most part, from national, regional and
local collection companies as well as from municipalities and counties (which,
through use of tax revenues, may be able to provide such services at lower
direct charges to the customer than can Waste Management) and some large
commercial and industrial companies which handle their own waste collection.
In the solid waste transfer, resource recovery and disposal phases of its
operations, competition is encountered primarily from municipalities,
counties, local governmental agencies, other national or regional waste
management companies and certain large corporations not primarily involved in
the solid waste management services business. The Company also encounters
intense competition in pricing and rendering of services in its medical and
infectious waste management, portable sanitation and street sweeping and
parking lot cleaning services businesses from numerous large and small
competitors.
In its hazardous waste management operations, the Company encounters
competition from a number of sources, including several national or regional
firms specializing primarily in chemical waste management, local waste
management concerns and, to a much greater extent, generators of chemical
wastes which seek to reduce the volume of or otherwise process and dispose of
such wastes themselves. The basis of competition is primarily technical
expertise and the price, quality and reliability of service.
Waste Management International encounters intense competition from local
companies and governmental entities in particular countries, as well as from
major international companies. Pricing, quality of service and type of
equipment utilized are the primary methods of competition for collection
services, and proximity of suitable treatment or disposal facilities,
technical expertise, price, quality and reliability of services are the
primary methods of competition for treatment and disposal services.
22
WTI experiences substantial competition in all aspects of its business. It
competes with a large number of firms, both nationally and internationally,
some of which may have substantially greater financial and technical resources
than WTI. The principal competitive factors with respect to its project
development activities include technological performance, service, technical
know-how, price and performance guarantees. Competing for selection as a
project developer may require commitment of substantial resources over a long
period of time, without any certainty of being ultimately selected.
Competition for attractive development opportunities is intense, as there are
a number of competitors in the industry interested in such opportunities.
The service industries in which Rust competes are highly competitive. Rust
encounters intense competition, primarily in pricing, quality and reliability
of services from various sources in all aspects of its environmental and
infrastructure engineering and consulting services operations.
Pursuant to the First Amended and Restated International Business
Opportunities Agreement, dated January 1, 1993, by and among CWM, WTI, Waste
Management International, Inc., Waste Management International, Rust and the
Company (as amended, the "IBOA"), which agreement is also a successor to
certain prior agreements among certain of the parties, each of CWM, WTI, Rust
and the Company has agreed that, until the later of July 1, 2000 or the date
on which the Company ceases to beneficially own a majority of the outstanding
voting equity interests of such subsidiary or ceases to beneficially own a
majority of the outstanding voting equity interests of Waste Management
International, and in each case no longer has an option to obtain such
ownership, such subsidiary or the Company will not engage (except through
Waste Management International) in waste management services; design,
development, construction and operation of trash-to-energy facilities in Italy
or Germany; collection, storage, processing, treatment or disposal of
hazardous wastes (including hazardous substance remediation services); or
design, engineering and construction (where the customer is seeking third-
party operation), operation and maintenance of water, wastewater and sewage
treatment facilities (including facilities for treating hazardous waste
streams whether or not the customer is seeking third-party operation) outside
North America (i.e., the United States, its territories and possessions,
Canada and Mexico) (the "Waste Management International Allocated
Activities"), except with respect to licensing of technology and minor
interests of CWM, WTI or Rust in publicly held entities. WTI may engage
outside North America in the design, engineering, construction, operation and
maintenance of chimneys and air pollution control facilities (the "WTI
Allocated Activities"). Rust may engage outside North America in activities
relating to (i) architectural services, (ii) engineering and design services
and procurement, construction and construction management services (including
marine construction and dredging), other than those relating to the Waste
Management International Allocated Activities and the WTI Allocated
Activities, (iii) scaffolding services, (iv) demolition and dismantling
services, (v) environmental consulting services, and (vi) industrial facility
and power plant maintenance services (the "Rust Allocated Activities"). Sales
by the Company of recyclables, licensing of technology and minor investments
by the Company in publicly held entities are also permitted activities of the
Company outside North America. Waste Management International has agreed that
for the same time periods as are applicable to CWM, WTI, Rust and the Company
above in this paragraph, it will not engage in North America in the type of
activities included within the Waste Management International Allocated
Activities outside North America and will not engage in the WTI Allocated
Activities or the Rust Allocated Activities. Businesses or assets acquired by
a party to the IBOA which are in the domain of another party thereto
(according to the allocations described above) must be offered for sale to the
other party at fair market value.
In addition, WTI and Waste Management International have entered into an
agreement whereby WTI will have primary responsibility for the early-stage
development of trash-to-energy projects outside North America (except in Italy
and Germany) and Waste Management International will have the right to acquire
up to 49% of all equity of any such project available to Waste Management
International, WTI and their affiliates, with WTI or other investors owning
the balance. This arrangement is non-cancellable by WTI or Waste Management
International without the other's consent prior to 2000. If the arrangement is
cancelled, the right to develop trash-to-energy projects reverts to being part
of the Waste Management International Allocated Activities.
By agreement among the parties, the Company is responsible for determining
business allocations among CWM, WTI, Rust, the Company and Waste Management
International which are not controlled by the
23
allocations set forth in the preceding two paragraphs. In this connection CWM,
WTI, Rust, the Company and Waste Management International have agreed that in
order to minimize the potential for conflicts of interest among various
subsidiaries under the common control of the Company and for so long as the
Company shall have beneficial ownership of a majority of the outstanding
voting equity interests of such subsidiary (or an option to obtain such
ownership), the Company has the right to direct future business opportunities
to the Company or the Company-controlled subsidiary which, in the Company's
reasonable and good faith judgment, has the most experience and expertise in
that line of business, provided that the Company may not allocate a business
opportunity to a particular subsidiary if such business opportunity would
involve the subsidiary in a breach of its agreement not to compete as
described in the immediately preceding paragraphs. Opportunities outside North
America relating to the provision of future waste management services are
generally to be allocated to Waste Management International, except that
opportunities outside North America relating to the WTI Allocated Activities
and the Rust Allocated Activities are generally to be allocated to WTI and
Rust, as the case may be. Environmental opportunities other than waste
management activities are to be allocated in the Company's good faith
judgment. No party is liable for consequential damages, except for lost
profits, for any breach of the IBOA.
In addition, in connection with the transfer by Rust of its hazardous and
radioactive substance remediation business (see "Acquisitions and
Dispositions" below), the Company, Rust and their respective wholly owned
affiliates agreed with OHM not to engage in providing on-site hazardous and
radioactive substance remediation services in North America prior to 2002.
INSURANCE
While the Company believes it operates professionally and prudently, its
business exposes it to risks such as the potential for harmful substances
escaping into the environment and causing damage or injuries, the cost of
which could be substantial. The Company currently maintains liability
insurance coverage for occurrences under various environmental impairment,
primary casualty and excess liability insurance policies.
The Company's insurance program includes coverage for pollution liability
resulting from "sudden and accidental" releases of contaminants and
pollutants. The Company believes that the coverage terms, available limits of
liability, and costs currently offered by the insurance market do not
represent sufficient value to warrant the purchase of "non-sudden and
accidental" pollution liability insurance coverage. As such, the Company has
chosen not to purchase risk transfer "non-sudden and accidental" pollution
liability insurance coverage. To satisfy existing government requirements, the
Company has secured non-risk transfer pollution liability insurance coverage
in amounts believed to be in compliance with federal and state law
requirements for "non-sudden and accidental" pollution. The Company must
reimburse the insurer for losses incurred and covered by this insurance
policy. In the event the Company continues not to purchase risk transfer "non-
sudden and accidental" pollution liability insurance coverage, the Company's
net income could be adversely affected in the future if "non-sudden and
accidental" pollution losses should occur.
EMPLOYEES
WMX Technologies and its subsidiaries employ a total of approximately 73,200
persons in their worldwide continuing operations. Of this number, the Company
employs approximately 38,700 persons in its North American solid and hazardous
waste management services operations (excluding employees of the Rust
scaffolding and other on-site industrial services business operated by Waste
Management). Of this total, 35,900 persons are engaged in its Waste Management
solid waste and related services operations, including approximately 27,200
persons employed in solid waste collection, transfer, resource recovery and
disposal activities, and approximately 8,700 managerial, executive, sales,
clerical, data processing and other solid waste and related activities.
Approximately 2,800 employees are employed in the Company's hazardous waste
services business, including 100 as managers or executives. Approximately
2,000 are employed in hazardous waste treatment, storage and disposal
activities (including approximately 530 performing technical, analytical or
engineering services), and approximately 700 are employed in sales, clerical,
data processing and other hazardous waste-related activities.
24
As of December 31, 1995, Waste Management International employed
approximately 18,500 persons. Of this number, approximately 14,900 persons
were employed in its collection services operations, 2,400 in its treatment
and disposal services operations and 1,200 in administrative functions.
At December 31, 1995, WTI had approximately 4,600 full-time employees.
Rust employed approximately 11,400 persons at December 31, 1995 (excluding
its process engineering and construction, specialty contracting and related
services business which is to be sold or otherwise discontinued, but including
the scaffolding and other on-site industrial services business managed by
Waste Management), of whom approximately 4,200 provided technical or
engineering services (excluding craft personnel hired on a temporary basis).
At December 31, 1995, approximately 6,900 of the Company's employees in
North America were unionized, primarily in the Company's solid waste and
related services operations, under collective bargaining agreements expiring
on various dates through 2002. At December 31, 1995, approximately 13,900
Waste Management International employees were represented by labor unions. The
Company believes its employee relations are acceptable.
ACQUISITIONS AND DISPOSITIONS
Since August 1971, the Company has acquired a number of companies, and
certain assets of other companies, engaged in various phases of the
environmental services industry. See Note 4 to the Company's Consolidated
Financial Statements filed as an exhibit to this report and incorporated
herein by reference. The amounts and types of consideration generally have
been determined by direct negotiations with the owners of the businesses
acquired. In most instances, the owners of the acquired businesses were few in
number, and often certain key former owners have continued to operate the
businesses following acquisition by the Company. During 1995, the Company
continued to acquire additional operations in the environmental services
industry.
Acquisitions have historically contributed significantly to the Company's
growth. However, in recent years the Company's acquisition activity relative
to the size of its revenue base has decreased. The Company's growth prospects
may be affected by the availability of additional business acquisitions at
reasonable prices and the Company's ability to finance such acquisitions. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" filed as an exhibit to this report and incorporated herein by
reference for a discussion of capital expenditures by the Company, including
acquisitions. Other well-capitalized companies also compete intensely for
businesses available to be acquired. The Company is continually engaged in the
process of considering and negotiating additional acquisitions. Some future
acquisitions could be material. The acquisition of businesses also entails
certain inherent risks. Although the Company reviews businesses to be
acquired, because of the nature of the liabilities involved in these
businesses, there can be liabilities which will not become known until after
the transactions are consummated. The Company seeks to minimize the impact of
these liabilities and expenditures by obtaining indemnities and warranties
from the seller which may be supported by deferring payment of a portion of
the purchase price. These indemnities and warranties, if obtained, may not,
however, fully cover the liabilities due to their limited scope, amount, or
duration, the financial limitations of the indemnitor or warrantor, or other
reasons. Businesses purchased may require expenditures to make up for deferred
maintenance and to improve the quality or quantity of assets acquired. In
certain cases, the Company establishes reserves in respect of the anticipated
costs of remediation for acquired sites.
On January 24, 1995, the Company acquired CWM common stock representing the
approximately 21% interest in CWM held at that time by public stockholders.
The acquisition occurred pursuant to a merger (the "Merger") in which all
publicly held shares of CWM common stock were converted into convertible
subordinated notes of the Company due January 24, 2005 and having a principal
amount at maturity of $1,000 per note (the "Notes"), subject to the payment of
cash in lieu of the issuance of fractional Notes. For a description of the
terms of the Notes, see Note 5 to the Company's Consolidated Financial
Statements incorporated herein by reference. The Merger was approved by a
committee of independent directors of CWM
25
and by a majority of the public stockholders of CWM. As a result of the
Merger, CWM became a wholly owned subsidiary of the Company.
On March 14, 1995, the Company's Board of Directors approved a plan to
reduce the scope of the Company's chemical waste management services business
by selling or otherwise eliminating technologies and service locations which
were not meeting customer service or performance objectives. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition--1995
Operations Compared with 1994--CWM," incorporated by reference in this report,
for further information.
In May 1995, OHM acquired Rust's hazardous and radioactive substance
remediation business in exchange for an approximately 37% interest in OHM. In
exchange for warrants to acquire an additional approximately 2.6% of OHM
common stock, the Company also agreed in that transaction to guarantee up to
$62 million of indebtedness of OHM.
In July 1995, the Company acquired the approximately 4% of Rust's shares
held by the public for $16.35 per share in cash. The transaction was approved
by a special committee of independent directors appointed by the Rust Board of
Directors. As a result of that transaction, Rust became owned 60% by the
Company and 40% by WTI.
Additionally, Rust has announced its intention to sell or otherwise
discontinue its process engineering, construction, specialty contracting and
related services business. The terms of the sale have not yet been determined.
The Company expects the sale of those portions of the business which are to be
sold to be completed in 1996.
In December 1995, the Company contributed its approximately 28% interest in
ServiceMaster Consumer Services L.P. ("SMCS"), a provider of lawn care, pest
control and other consumer services, to ServiceMaster L.P. ("SMLP"), the owner
of the remaining interest in SMCS, in exchange for an approximately 19%
interest in SMLP and an option to purchase up to 1.25 million SMLP limited
partnership shares.
The Company has also acquired numerous companies and interests in companies
internationally through Waste Management International or its predecessors.
See "International Waste Management and Related Services."
ITEM 2. PROPERTIES.
The principal property and equipment of the Company consists of land
(primarily disposal sites), buildings and waste treatment or processing
facilities (other than disposal sites), and vehicles and equipment, which as
of December 31, 1995 represented approximately 18%, 6% and 27%, respectively,
of the Company's total consolidated assets. The Company believes that its
vehicles, equipment and operating properties are well maintained and suitable
for its current operations. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition" filed as an exhibit to this
report and incorporated by reference herein for a discussion of property and
equipment expenditures by the Company for the last three years and the capital
budget for 1996. The Company's subsidiaries lease numerous office and
operating facilities throughout the world. For the year ended December 31,
1995, aggregate annual rental payments on real estate leased by the Company
and its subsidiaries approximated $140,367,000.
The principal fixed assets of Waste Management consist of vehicles and
equipment (which include, among other items, approximately 20,800 collection
and transfer vehicles, 1,568,600 containers and 21,000 stationary compactors
in the United States and Canada). Waste Management owns or leases real
property in most states and Canadian provinces in which it is doing business.
At December 31, 1995, 103 solid waste disposal facilities, aggregating
approximately 65,740 total acres, including approximately 14,290 permitted
acres, were owned by Waste Management in the United States and Canada and 30
facilities, aggregating approximately 13,340 total acres, including
approximately 5,860 permitted acres, were leased from parties not affiliated
with Waste
26
Management under leases expiring from 1996 to 2085. At December 31, 1995, the
Company owned or leased in the United States a total of nine treatment,
storage or disposal facilities. At such date, the Company's seven chemical
waste facilities with secure land disposal sites aggregated approximately
7,865 acres, including approximately 1,470 permitted acres.
The principal property and equipment of Waste Management International
consist of land (primarily disposal sites) and vehicles and equipment, which
as of December 31, 1995 represented approximately 13.1% and 30.3%,
respectively, of Waste Management International's assets. The principal fixed
assets utilized in Waste Management International's collection services
operations at December 31, 1995 consisted of vehicles and equipment (which
included, among other items, approximately 7,000 collection, transportation,
and other route vehicles and approximately 300 pieces of landfill and other
heavy equipment), and approximately 285,000 containers, including
approximately 3,550 stationary compactors. In addition, Waste Management
International owns approximately 710 pieces of hazardous waste equipment,
consisting predominately of containers and collection vehicles. The principal
fixed assets utilized in Waste Management International's treatment and
disposal services operations at December 31, 1995 consisted of 55 landfills,
23 waste treatment facilities, 79 recycling and recyclables processing
facilities, nine incinerators and various other manufacturing, office and
warehouse facilities owned, leased or operated by Waste Management
International.
WTI currently owns, operates or leases 16 trash-to-energy facilities, seven
cogeneration and small power production facilities, two coal handling
facilities, five biosolids drying, pelletizing and composting facilities, one
wastewater treatment plant and various other manufacturing, office and
warehouse facilities. Facilities leased or operated (but not owned) by WTI are
under leases or agreements having terms expiring from the years 1996 to 2020,
subject to renewal options in certain cases.
The principal property and equipment of Rust consist of the vehicles,
equipment and scaffolding inventory used in the scaffolding and other on-site
industrial services business managed by Waste Management, which as of December
31, 1995 represented approximately 14% of Rust's total continuing consolidated
assets. Rust believes that its equipment is well maintained and suitable for
its current operations. Rust leases its corporate offices in Greenville, South
Carolina and Birmingham, Alabama and numerous office, warehouse and equipment
and scaffolding yard facilities in various locations throughout the United
States.
ITEM 3. LEGAL PROCEEDINGS.
Some of the businesses in which the Company is engaged are intrinsically
connected with the protection of the environment and the potential for the
unintended or unpermitted discharge of materials into the environment. In the
ordinary course of conducting its business activities, the Company becomes
involved in judicial and administrative proceedings involving governmental
authorities at the federal, state and local level including, in certain
instances, proceedings instituted by citizens or local governmental
authorities seeking to overturn governmental action where governmental
officials or agencies are named as defendants together with the Company or one
or more of its subsidiaries, or both. In the majority of the situations where
proceedings are commenced by governmental authorities, the matters involved
relate to alleged technical violations of licenses or permits pursuant to
which the Company operates or is seeking to operate or laws or regulations to
which its operations are subject or are the result of different
interpretations of the applicable requirements. From time to time the Company
pays fines or penalties in environmental proceedings relating primarily to
waste treatment, storage or disposal facilities. At December 31, 1995, a
Company subsidiary engaged in providing hazardous waste management services
was involved in one such governmental proceeding and a subsidiary of WTI was
involved in one such proceeding where it is believed that sanctions involved
in each instance may exceed $100,000.
The Company or certain of its subsidiaries have been identified as
potentially responsible parties in a number of governmental investigations and
actions relating to waste disposal facilities which may be subject to remedial
action under Superfund. The majority of these proceedings are based on
allegations that certain
27
subsidiaries of the Company (or their predecessors) transported hazardous
substances to the facilities in question, often prior to acquisition of such
subsidiaries by the Company. Such proceedings arising under Superfund
typically involve numerous waste generators and other waste transportation and
disposal companies and seek to allocate or recover costs associated with site
investigation and cleanup, which costs could be substantial.
As of December 31, 1995, the Company or its subsidiaries had been notified
that they are potentially responsible parties in connection with 106 locations
listed on the Superfund National Priority List ("NPL"). Of the 106 NPL sites
at which claims have been made against the Company, 19 are sites which the
Company has come to own over time. All of the NPL sites owned by the Company
were initially sited by others as land disposal facilities. At each of the 19
owned facilities, the Company is working in conjunction with the government to
characterize or to remediate identified site problems. In addition, at these
19 facilities the Company has either agreed with other legally liable parties
on an arrangement for sharing the costs of remediation or is pursuing
resolution of an allocation formula. The 87 NPL sites at which claims have
been made against the Company and which are not owned by the Company are at
different procedural stages under Superfund. At some, the Company's liability
is well defined as a consequence of a governmental decision as to the
appropriate remedy and an agreement among liable parties as to the share each
will pay for implementing that remedy. At others, where no remedy has been
selected or the liable parties have been unable to agree on an appropriate
allocation, the Company's future costs are substantially uncertain.
The Company periodically reviews its role, if any, with respect to each such
location, giving consideration to the nature of the Company's alleged
connection to the location (e.g., owner, operator, transporter or generator),
the extent of the Company's alleged connection to the location (e.g., amount
and nature of waste hauled to the location, number of years of site operation
by the Company or other relevant factors), the accuracy and strength of
evidence connecting the Company to the location, the number, connection and
financial ability of other named and unnamed potentially responsible parties
at the location, and the nature and estimated cost of the likely remedy. Where
the Company concludes that it is probable that a liability has been incurred,
a provision is made in the Company's financial statements for the Company's
best estimate of the liability based on management's judgment and experience,
information available from regulatory agencies and the number, financial
resources and relative degree of responsibility of other potentially
responsible parties who are jointly and severally liable for remediation of a
specific site, as well as the typical allocation of costs among such parties.
If a range of possible outcomes is estimated and no amount within the range
appears to be a better estimate than any other, then the Company provides for
the minimum amount within the range, in accordance with generally accepted
accounting principles. Sites subject to state action under state laws similar
to the federal Superfund statute are treated by the Company in the same way as
NPL sites.
The Company's estimates are subsequently revised, as deemed necessary, as
additional information becomes available. While the Company does not
anticipate that the amount of any such revisions will have a material adverse
effect on the Company's operations or financial condition, the measurement of
environmental liabilities is inherently difficult and the possibility remains
that technological, regulatory or enforcement developments, the results of
environmental studies, or other factors could materially alter this
expectation at any time. Such matters could have a material adverse impact on
earnings for one or more fiscal quarters or years.
From time to time, the Company and certain of its subsidiaries are named as
defendants in personal injury and property damage lawsuits, including
purported class actions, on the basis of a Company subsidiary's having owned,
operated or transported waste to a disposal facility which is alleged to have
contaminated the environment or, in certain cases, conducted environmental
remediation activities at sites. Some of such lawsuits may seek to have the
Company or its subsidiaries pay the costs of groundwater monitoring and health
care examinations of allegedly affected persons for a substantial period of
time even where no actual damage is proven. While the Company believes it has
meritorious defenses to these lawsuits, their ultimate resolution is often
substantially uncertain due to the difficulty of determining the cause, extent
and impact of alleged contamination (which may have occurred over a long
period of time), the potential for successive groups of complainants to
emerge, the diversity of the individual plaintiffs' circumstances, and the
potential contribution or indemnification obligations of co-defendants or
other third parties, among other factors. Accordingly, it is
28
possible such matters could have a material adverse impact on the Company's
earnings for one or more fiscal quarters or years.
A subsidiary of the Company has been involved in litigation challenging a
municipal zoning ordinance which restricted the height of its New Milford,
Connecticut landfill to a level below that allowed by the permit previously
issued by the Connecticut Department of Environmental Protection ("DEP").
Although a lower court had declared the zoning ordinance's height limitation
unconstitutional, the Connecticut Supreme Court reversed that ruling and
remanded the case for further proceedings in the Superior Court in the
judicial district of Litchfield. On November 8, 1995, the Superior Court
ordered the Company's subsidiary to apply to the DEP for permission to remove
all waste above the height allowed by the zoning ordinance. The Company
believes that removal of such waste is an inappropriate remedy and its
subsidiary has appealed the Superior Court order to the Connecticut Supreme
Court. The Company is unable to predict the outcome of the appeal or any
removal action that may ultimately be required following further appeals or as
a result of the permitting process. However, if the lower court order as to
removal of the waste is not modified, the subsidiary could incur substantial
costs, which could vary significantly depending upon the nature of any plan
which is eventually approved by applicable regulatory authorities for removing
the waste, the actual volume of waste to be moved and other currently
unforeseeable factors and which could have a material adverse effect on the
Company's financial condition and results of operations in one or more future
periods.
The Company and certain of its subsidiaries are also currently involved in
other civil litigation and governmental proceedings relating to the conduct of
their business. While the outcome of any particular lawsuit or governmental
investigation cannot be predicted with certainty, the Company believes that
these matters will not have a material adverse effect on its results of
operations or financial condition.
The Company has brought suit against a substantial number of insurance
carriers in an action entitled Waste Management, Inc. et al. v. The Admiral
Insurance Company, et al. pending in the Superior court in Hudson County, New
Jersey. In this action the Company is seeking a declaratory judgment that
environmental liabilities asserted against the Company or its subsidiaries, or
that may be asserted in the future, are covered by insurance policies
purchased by the Company or its subsidiaries. The Company is also seeking to
recover defense costs and other damages incurred as a result of the assertion
of environmental liabilities against the Company or its subsidiaries for
events occurring over at least the last 25 years at approximately 130 sites
and the defendant insurance carriers' denial of coverage of such liabilities.
The defendants have denied liability to the Company and have asserted various
defenses, including that environmental liabilities of the type for which the
Company is seeking relief are not risks covered by the insurance policies in
question. The defendants are contesting these claims vigorously. Discovery is
currently underway in this proceeding and is expected to continue for several
years. No trial date has been set. The Company is unable at this time to
predict the outcome of this proceeding. No amounts have been recognized in the
Company's financial statements for any future recoveries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the Company's security holders during the
fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of the Company's executive officers
(as defined by regulations of the Securities and Exchange Commission), the
positions they hold with the Company and summaries of their business
experience. Executive officers are elected by the Board of Directors and serve
at the discretion of the Board.
Dean L. Buntrock, age 64, has been a director of the Company and has served
as Chairman of the Board and Chief Executive Officer of the Company since
1968. From September 1980 to November 1984, he also served as President. Mr.
Buntrock is also a director of WTI, Waste Management International and Boston
Chicken, Inc.
29
Herbert A. Getz, age 40, has been a Senior Vice President of the Company
since May 1995, a Vice President of the Company since May 1990 and General
Counsel since August 1992. He has also been Secretary of the Company since
January 1988. He also served as Assistant General Counsel of the Company from
December 1985 until August 1992. Mr. Getz has also held the offices of Vice
President, General Counsel and Secretary at Waste Management from April 1989
until December 1993, and Vice President and Secretary of Rust from January
1993 to May 1994. He has also served as Secretary of WTI since July 1995, a
position he previously held, as well as being the General Counsel of WTI, from
November 1990 until May 1993. Mr. Getz commenced employment with the Company
in 1983. He is Chairman of the Board of Directors of NSC and a director of
OHM.
Thomas C. Hau, age 60, has been a Vice President and the Controller and
Principal Accounting Officer of the Company since he commenced employment with
the Company in September 1990. From 1971 until his employment by the Company,
Mr. Hau was a partner of Arthur Andersen LLP.
William P. Hulligan, age 52, has been Executive Vice President of Waste
Management since January 1996, a position he previously held from September
1984 to January 1988. From 1986 to August 1993, he was also a Vice President
of the Company. From August 1992 to March 1996, he also served as President of
certain Waste Management operating groups. He was President of Waste
Management from January 1988 to August 1992. He has been employed by the
Company since 1979.
Joseph M. Holsten, age 43, has been Chief Executive Officer of Waste
Management International since July 1995. From October 1993 to July 1995, he
was Executive Vice President and Chief Financial Officer of Waste Management.
Mr. Holsten was Vice President of Acquisitions and Project Development for
Waste Management International from April 1992 to August 1993 and Vice
President, Chief Financial Officer and Treasurer of Rust from September to
October 1993. Mr. Holsten has been employed by the Company since 1981.
James E. Koenig, age 48, has been a Senior Vice President of the Company
since May 1992, Treasurer of the Company since 1986 and its Chief Financial
Officer since 1989. Mr. Koenig first became a Vice President of the Company in
1986. From 1984 to 1986, Mr. Koenig was Staff Vice President and Assistant to
the Chief Financial Officer of the Company. Mr. Koenig has been employed by
the Company since 1977. Mr. Koenig also served as Vice President, Chief
Financial Officer and Treasurer of WTI from November 1990 to May 1993. He also
serves as a director of WTI, Waste Management International and OHM.
D. P. Payne, age 53, has been a Senior Vice President of the Company since
April 1995, a position he previously held from 1990 to 1993. He also served as
President and Chief Executive Officer and a director of CWM from September
1991 to March 1995. Mr. Payne has been employed by the Company since 1990.
Phillip B. Rooney, age 51, has served as a director of the Company since
1981 and as its President and Chief Operating Officer since November 1984.
Since January 1994, he has also served as Chairman of the Board and Chief
Executive Officer of Waste Management. Mr. Rooney commenced employment with
the Company in 1969 and first became an officer of the Company in 1971. Since
November 1990, he has served as Chairman of the Board and Chief Executive
Officer of WTI. Mr. Rooney is also a director of Waste Management
International, WTI, Illinois Tool Works, Inc., Caremark International Inc.,
Urban Shopping Centers, Inc., and ServiceMaster Management Corporation, the
general partner of ServiceMaster Limited Partnership.
Donald A. Wallgren, age 54, has been Vice President and Chief Environmental
Officer of the Company since 1992 and Vice President of Environmental
Management of Waste Management since January 1995. He was Vice President and
Chief Environmental Officer at Waste Management from 1989 to May 1990. From
1990 to 1992, he served as Vice President-Recycling, Development and
Environmental Management of Waste Management. Mr. Wallgren has been employed
by the Company since 1979.
30
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol "WMX." The following table sets forth
by quarter for the last two years the high and low sale prices of the
Company's common stock on the New York Stock Exchange Composite Tape as
reported by the Dow Jones News Retrieval Service, and the dividends declared
by the Board of Directors of the Company on its common stock.
1994 QUARTERLY SUMMARY
CASH DIVIDENDS
HIGH LOW DECLARED PER SHARE
------- ------- ------------------
First.................................. $30 3/4 $23 $.15
Second................................. 29 3/8 22 5/8 .15
Third.................................. 30 3/8 26 3/8 .15
Fourth................................. 30 24 1/2 .15
1995 QUARTERLY SUMMARY
CASH DIVIDENDS
HIGH LOW DECLARED PER SHARE
------- ------- ------------------
First.................................. $29 5/8 $25 3/4 $.15
Second................................. 28 3/4 26 3/4 .15
Third.................................. 32 1/2 28 1/4 .15
Fourth................................. 30 7/8 26 3/8 .15
At March 20, 1996, the Company had approximately 55,600 stockholders of
record.
Due in part to the high level of public awareness of the business in which
the Company is engaged, regulatory enforcement proceedings or other
unfavorable developments involving the Company's operations or facilities,
including those in the ordinary course of business, may be expected to
engender substantial publicity which could from time to time have an adverse
impact upon the market price for the Company's common stock.
From September 1990 to December 1995, WMX Technologies maintained a program
for the purchase of up to 25,000,000 shares of its common stock from time to
time in the open market or in privately negotiated transactions. During 1992
and 1993 the Company purchased approximately 7,600,000 shares and 8,400,000
shares, respectively, of its common stock under this program. No Company
shares were repurchased in 1994 or 1995. In December 1995, the Company
terminated that program and announced that its Board of Directors had
authorized the repurchase by the Company of up to an additional 25,000,000
shares of the Company's common stock from time to time over the following 24-
month period in open market or privately negotiated transactions.
During 1994 and 1995, the Company sold put options on 31,600,000 shares of
its common stock in conjunction with the repurchase program. The put options
give the holders the right at maturity to require the Company to repurchase
its shares at specified prices. In the event the options are exercised, the
Company may elect to pay the holder in cash the difference between the strike
price and the market price of the Company's shares, in lieu of repurchasing
the stock. Options on 17,900,000 shares expired unexercised in 1994 and 1995,
as the price of the Company's stock was in excess of the strike price at
maturity. Options on 4,700,000 shares were exercised in February 1995, and the
Company elected to settle them for cash in the amount of $12,019,000. The
remaining 9,000,000 options expire at various dates in 1996 at strike prices
ranging from $27.34 to $31.45 per share. For additional information, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Capital Structure" incorporated by reference herein.
31
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information for each of the
five years in the period ended December 31, 1995 is derived from the Company's
Consolidated Financial Statements, which have been audited by Arthur Andersen
LLP, independent public accountants, whose report thereon is incorporated by
reference in this report. The information below should be read in conjunction
with "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and the Company's Consolidated Financial Statements, and
the related Notes, and the other financial information which are filed as
exhibits to this report and incorporated herein by reference.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1991(1) 1992(2) 1993(3)(6) 1994(4)(6) 1995(5)(6)
----------- ----------- ----------- ----------- -----------
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
Revenue from continuing
operations............. $ 7,550,914 $ 8,661,027 $ 8,636,116 $ 9,554,705 $10,247,617
Income from continuing
operations............. $ 606,323 $ 850,036 $ 442,431 $ 776,491 $ 654,590
Earnings per common and
common equivalent
share--continuing
operations............. $ 1.23 $ 1.72 $ .91 $ 1.60 $ 1.35
Total assets............ $12,572,310 $14,114,180 $16,264,476 $17,423,173 $18,695,308
Long-term debt, less
portion payable within
one year............... $ 3,782,973 $ 4,312,511 $ 6,145,584 $ 6,044,411 $ 6,420,610
Dividends per share..... $ .42 $ .50 $ .58 $ .60 $ .60
- --------
(1) The results for 1991 include a special charge of $296,000,000 (before tax
and minority interest) primarily to reflect then current estimates of the
environmental remediation liabilities at waste disposal sites previously
used or operated by the Company and its subsidiaries or their
predecessors.
(2) The results for 1992 include a non-taxable gain of $240,000,000 (before
minority interest) resulting from the initial public offering of Waste
Management International, special charges of $219,900,000 (before tax and
minority interest) primarily related to writedowns of the Company's
medical waste business, CWM incinerators in Chicago, Illinois and Tijuana,
Mexico and a former subsidiary's investment in its asbestos abatement
business and certain restructuring costs incurred by the subsidiary and
CWM related to the formation of Rust, and one time after-tax charges
aggregating $71,139,000, or $.14 per share, related to the cumulative
effect of adopting two new accounting standards.
(3) The results for 1993 include a non-taxable gain of $15,109,000 (before
minority interest) relating to the issuance of shares by Rust, as well as
the Company's share of a special asset revaluation and restructuring
charge of $550,000,000 (before tax and minority interest) recorded by CWM
related primarily to a revaluation of CWM's thermal treatment business,
and a provision of approximately $14,000,000 to adjust deferred income
taxes resulting from the 1993 tax law change. See Notes 3 and 14 to the
Company's Consolidated Financial Statements.
(4) The results for 1994 include a charge of $9,200,000 (before tax and
minority interest) recorded by Rust to write off assets and recognize
costs of exiting certain of Rust's service lines and closing offices in a
consolidation of certain of its operating groups. See Note 14 to the
Company's Consolidated Financial Statements.
(5) The results for 1995 include a special charge of $140,600,000 (before tax)
recorded by CWM, primarily to write off its investment in facilities and
technologies that it abandoned because they do not meet customer service
or performance objectives, and a special charge of $194,600,000 (before
tax and minority interest) recorded by Waste Management International
relating to actions it is taking to sell or otherwise dispose of non-core
businesses and investments, as well as core businesses and investments in
low potential markets, abandon certain hazardous waste treatment and
processing technologies, and streamline its country management
organization. See Note 14 to the Company's Consolidated Financial
Statements.
(6) In December 1995, the Rust Board of Directors approved a plan to sell or
otherwise discontinue Rust's process engineering, construction, specialty
contracting and similar lines of business. Accordingly, these
32
businesses have been segregated as discontinued operations in the financial
statements since 1993. It is not practical to restate periods prior to the
formation of Rust on January 1, 1993 for the discontinued operations. See
Note 15 to the Company's Consolidated Financial Statements.
(7) Certain amounts have been restated to conform to 1995 classifications.
Reference is made to the ratio of earnings to fixed charges for each of the
years in the five-year period ended December 31, 1995, as set forth in Exhibit
12 to this report, which ratios are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Reference is made to Management's Discussion and Analysis of Results of
Operations and Financial Condition set forth on pages 16 to 24 of the
Company's 1995 Annual Report to Stockholders (the "Annual Report"), which
discussion is filed as an exhibit to this report and incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
(a) The Consolidated Balance Sheets as of December 31, 1994 and 1995,
Consolidated Statements of Income, Stockholders' Equity and Cash Flows for
each of the years in the three-year period ended December 31, 1995 and Notes
to Consolidated Financial Statements set forth on pages 25 to 45 of the Annual
Report are filed as an exhibit to this report and incorporated herein by
reference.
(b) Selected Quarterly Financial Data (Unaudited) is set forth in Note 17 to
the Consolidated Financial Statements referred to in Item 8(a) above and
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the information set forth in the 15 paragraphs under
the caption "Election of Directors" beginning on page 1 of the Company's proxy
statement for the annual meeting scheduled for May 10, 1996 (the "Proxy
Statement") for a description of the directors of the Company, which
paragraphs are incorporated herein by reference. Information concerning the
executive officers of the Company is set forth above under "Executive Officers
of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the information set forth under the caption
"Compensation" on pages 10 through 16 of the Proxy Statement, which
information, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the information, including the tables and the footnotes
thereto, set forth under the caption "Securities Ownership of Management" on
pages 5 through 9 of the Proxy Statement, for certain information respecting
ownership of common stock of the Company, WTI and Waste Management
International, which information is incorporated herein by reference.
33
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the paragraph under the caption "Compensation Committee
Interlocks and Insider Participation" on page 16 of the Proxy Statement and
the information set forth under the caption "Certain Transactions" beginning
on page 24 of the Proxy Statement for certain information with respect to
certain relationships and related transactions, which paragraphs are
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE AND REPORTS ON FORM 8-K.
(a) Financial Statements, Schedule and Exhibits.
I. Financial Statements--filed as an exhibit hereto and incorporated
herein by reference.
(i)Consolidated Statements of Income for the three years ended
December 31, 1995;
(ii)Consolidated Balance Sheets--December 31, 1994 and 1995;
(iii) Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1995;
(iv)Consolidated Statements of Cash Flows for the three years ended
December 31, 1995;
(v)Notes to Consolidated Financial Statements; and
(vi)Report of Independent Public Accountants.
II. Schedule
(i)Schedule II--Valuation and Qualifying Accounts
(ii)Report of Independent Public Accountants on Schedule
All other schedules have been omitted because the required information is
not significant or is included in the financial statements or the notes
thereto, or is not applicable.
III. Exhibits.
The exhibits to this report are listed in the Exhibit Index elsewhere
herein. Included in the exhibits listed therein are the following exhibits
which constitute management contracts or compensatory plans or
arrangements*:
(i) 1981 Stock Option Plan for Non-Employee Directors of registrant
(Exhibit 19 to registrant's report on Form 10-Q for the quarter
ended June 30, 1982)
(ii) WMX Technologies, Inc. 1982 Stock Option Plan, as amended to
March 11, 1988 (Exhibit 10.3 to registrant's 1988 annual report
on Form 10-K)
(iii) Deferred Director's Fee Plan, as amended (Exhibit 10.3 to
registrant's 1990 annual report on Form 10-K)
(iv) Director's Phantom Stock Plan (Exhibit 10.9 to registrant's 1984
annual report on Form 10-K)
(v) Employment Agreement, dated as of September 1, 1986, by and
between the registrant and Phillip B. Rooney (Exhibit 19.4 to
registrant's report on Form 10-Q for the quarter ended September
30, 1986)
(vi) WMX Technologies, Inc. Corporate Incentive Bonus Plan (Exhibit B
to registrant's Proxy Statement for its 1995 Annual Meeting of
Stockholders)
(vii) WMX Technologies, Inc. Supplemental Executive Retirement Plan,
as amended and restated as of January 25, 1995 (filed with this
report)
34
(viii) Chemical Waste Management, Inc. 1992 Stock Option Plan (Exhibit
10.19 to Chemical Waste Management, Inc.'s 1991 annual report on
Form 10-K)
(ix) Supplemental Retirement Benefit Agreement, dated as of January
1, 1989, by and between the registrant and Peter H. Huizenga
(Exhibit 10.16 to Post-Effective Amendment No. 2 to registrant's
registration statement on Form S-1, Registration No. 33-13839)
(x) Chemical Waste Management, Inc. 1986 Stock Option Plan, as
amended (Exhibit 10.1 to Chemical Waste Management, Inc.'s 1989
annual report on Form 10-K)
(xi) WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings
Plus Plan (filed with this report)
(xii) Chemical Waste Management, Inc. Deferred Director's Fee Plan
(Exhibit 10.5 to Chemical Waste Management, Inc.'s registration
statement on Form S-1, Registration No. 33-8509)
(xiii) WMX Technologies, Inc. Director's Charitable Endowment Plan
(Exhibit 10.20 to registrant's 1989 annual report on Form 10-K)
(xiv) Supplemental Retirement Benefit Agreement dated as of January 1,
1991 by and between registrant and Donald F. Flynn (Exhibit
10.17 to registrant's 1990 annual report on Form 10-K)
(xv) Restricted Unit Plan for Non-Employee Directors of Wheelabrator
Technologies Inc. as amended through June 10, 1991 (Exhibit
19.03 to the report on Form 10-Q of Wheelabrator Technologies
Inc. for the quarter ended June 30, 1991)
(xvi) 1988 Stock Plan for Executive Employees of Wheelabrator
Technologies Inc. and its subsidiaries (the "WTI 1988 Stock
Plan") (Exhibit 28.1 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
(xvii) Amendments dated as of September 7, 1990 to the WTI 1988 Stock
Plan (Exhibit 19.02 to the 1990 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xviii) Amendment dated as of November 1, 1990 to the WTI 1988 Stock
Plan (Exhibit 19.04 to the 1990 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xix) 1986 Stock Plan for Executive Employees of Wheelabrator
Technologies Inc. and its subsidiaries (the "WTI 1986 Stock
Plan") (Exhibit 28.2 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
(xx) Amendment dated as of November 1, 1990 to the WTI 1986 Stock
Plan (Exhibit 19.03 to the 1990 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxi) Employment Agreement dated as of April 1, 1995 between the
registrant and D. P. Payne (filed with this report)
(xxii) WMX Technologies, Inc. 1992 Stock Option Plan (Exhibit 10.31 to
registrant's registration statement on Form S-1, Registration
No. 33-44849)
(xxiii) WMX Technologies, Inc. 1992 Stock Option Plan for Non-Employee
Directors (Exhibit 10.32 to registrant's registration statement
on Form S-1, Registration No. 33-44849)
(xxiv) Wheelabrator Technologies Inc. 1992 Stock Option Plan (Exhibit
10.45 to the 1991 annual report on Form 10-K of Wheelabrator
Technologies Inc.)
(xxv) Deferred Director's Fee Plan of Wheelabrator Technologies Inc.
adopted June 10, 1991 (Exhibit 19.02 to the quarterly report on
Form 10-Q of Wheelabrator Technologies Inc. for the quarter
ended June 30, 1991)
(xxvi) Waste Management International plc Share Option Plan (Exhibit
10.1 to the registration statement on Form F-1 of Waste
Management International plc, Registration No. 33-46511)
35
(xxvii) Amendment dated as of December 6, 1991 to the WTI 1986 Stock
Plan (Exhibit 19.01 to the 1991 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxviii) Amendment dated as of December 6, 1991 to the WTI 1988 Stock
Plan (Exhibit 19.02 to the 1991 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxix) Amendment dated as of December 6, 1991 to the Restricted Unit
Plan for Non-Employee Directors of Wheelabrator Technologies
Inc. (Exhibit 19.05 to the 1991 annual report on Form 10-K of
Wheelabrator Technologies Inc.)
(xxx) WMX Technologies, Inc. Long Term Incentive Plan (as amended and
restated as of January 27, 1994) (Exhibit A to registrant's
Proxy Statement for its 1995 Annual Meeting of Stockholders)
- --------
*In the case of reference to documents filed under the Securities Exchange Act
of 1934, the registrant's file number under that Act is 1-7327, Chemical
Waste Management's file number under that Act was 1-9253 and Wheelabrator
Technologies Inc.'s file number under that Act is 0-14246.
(b) Reports on Form 8-K.
During the fourth quarter of 1995, the Company filed reports on Form 8-K
as follows:
(i) a report dated October 17, 1995 reporting under Item 5 the issuance
of a news release concerning the Company's 1995 third quarter results of
operations and a possible 1995 fourth quarter charge by Waste Management
International; and
(ii) a report dated December 12, 1995 reporting under Item 5 the issuance
of news releases concerning (A) the authorization by the Company's Board of
Directors of a Company common stock repurchase program, (B) an increase by
WTI in its program for the repurchase of WTI common stock, (C) a fourth
quarter 1995 exceptional charge by Waste Management International, (D) the
decision by Rust to sell or otherwise discontinue its process engineering,
construction, specialty contracting and similar lines of business and the
possibility of a related 1995 fourth quarter charge, (E) announcement of
below-expectations 1995 fourth quarter earnings by Waste Management
International, and (F) expected 1996 earnings growth by Waste Management
International.
36
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE
($000'S OMITTED)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EFFECT OF
BALANCE CHARGED ACCOUNTS FOREIGN BALANCE
BEGINNING TO WRITTEN CURRENCY END OF
OF YEAR INCOME OFF OTHER(A) TRANSLATION YEAR
--------- ------- -------- -------- ----------- -------
1993--Reserve for
doubtful accounts (B)
(C).................... $56,475 $33,173 $(33,514) $ 7,120 $(1,970) $61,284
======= ======= ======== ======= ======= =======
1994--Reserve for
doubtful accounts (B)
(C).................... $61,284 $34,072 $(40,866) $10,280 $ 1,760 $66,530
======= ======= ======== ======= ======= =======
1995--Reserve for
doubtful accounts (B).. $66,530 $39,930 $(42,038) $ 1,314 $ 1,104 $66,840
======= ======= ======== ======= ======= =======
- --------
(A) Reserves of companies accounted for as purchases.
(B) Includes reserves for doubtful long-term notes receivable.
(C) Restated to exclude discontinued operations.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To WMX Technologies, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the WMX Technologies, Inc.
Annual Report to Stockholders for 1995 filed as an exhibit to and incorporated
by reference in this Form 10-K, and have issued our report thereon dated
February 5, 1996. Our audit was made for the purpose of forming an opinion on
those statements taken as a whole. The schedule included on page 37 of this
Form 10-K is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not a part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois,
February 5, 1996
38
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN OAK BROOK,
ILLINOIS ON THE 29TH DAY OF MARCH 1996.
WMX Technologies, Inc.
/s/ Dean L. Buntrock
By __________________________________
Dean L. Buntrock,
Chairman of the Board and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Dean L. Buntrock Director, Chairman of the
____________________________________ Board and Chief Executive
Dean L. Buntrock Officer
/s/ Jerry E. Dempsey Director
____________________________________
Jerry E. Dempsey
/s/ Phillip B. Rooney Director
____________________________________
Phillip B. Rooney
/s/ Donald F. Flynn Director
____________________________________
Donald F. Flynn
/s/ Peter H. Huizenga Director
____________________________________
Peter H. Huizenga
/s/ Peer Pedersen Director
____________________________________
Peer Pedersen
/s/ James R. Peterson Director
____________________________________
James R. Peterson
/s/ Alexander B. Trowbridge Director March 29, 1996
____________________________________
Alexander B. Trowbridge
/s/ Howard H. Baker, Jr. Director
____________________________________
Howard H. Baker, Jr.
/s/ H. Jesse Arnelle Director
____________________________________
H. Jesse Arnelle
/s/ Pastora San Juan Cafferty Director
____________________________________
Pastora San Juan Cafferty
/s/ James B. Edwards Director
____________________________________
James B. Edwards
/s/ Thomas C. Hau Vice President, Controller
____________________________________ and Principal Accounting
Thomas C. Hau Officer
/s/ James E. Koenig Senior Vice President, Chief
____________________________________ Financial Officer,
James E. Koenig Treasurer and Principal
Financial Officer
39
WMX TECHNOLOGIES, INC.
EXHIBIT INDEX
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
1. Inapplicable
2. Inapplicable
3.1(a) Restated Certificate of Incorporation of registrant, as amended as
of May 24, 1985 (incorporated by reference to Exhibit 4.1 to
registrant's report on Form 10-Q for the quarter ended June 30,
1985)
3.1(b) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, recorded May 23, 1986 (incorporated by reference to
Exhibit 4(c) to registrant's registration statement on Form S-8,
Registration No. 33-6265)
3.1(c) Certificate of Designation of Preferred Stock of registrant, filed
January 30, 1987 (incorporated by reference to Exhibit 3.1(c) to
registrant's 1986 annual report on Form 10-K)
3.1(d) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, recorded May 15, 1987 (incorporated by reference to
Exhibit 4.5(d) to registrant's registration statement on Form S-4,
Registration No. 33-15518)
3.1(e) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, filed May 19, 1989 (incorporated by reference to Exhibit
3(e) to registrant's registration statement on Form S-3,
Registration No. 33-30190)
3.1(f) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, filed May 18, 1990 (incorporated by reference to Exhibit
4(h) to registrant's registration statement on Form S-8,
Registration No. 33-35936)
3.1(g) Certificate of Amendment of Restated Certificate of Incorporation of
registrant, filed May 14, 1993 (incorporated by reference to Exhibit
4(a) to registrant's report on Form 8-K dated May 14, 1993)
3.1(h) Conformed copy of Restated Certificate of Incorporation of
registrant, as amended (incorporated by reference to Exhibit 4(b) to
registrant's report on Form 8-K dated May 14, 1993)
3.2 By-laws of registrant, as amended and restated as of January 28,
1995 (incorporated by reference to Exhibit 3.2 to registrant's 1994
annual report on Form 10-K)
4.1(a) Rights Agreement dated as of February 6, 1987, between the
registrant and Harris Trust and Savings Bank, which includes as
Exhibit A the form of Certificate of Designation of Preferred Stock,
as Exhibit B, the form of Rights Certificate and, as Exhibit C, the
Summary of Rights (incorporated by reference to Exhibit 4 to
registrant's report on Form 8-K dated January 26, 1987)
4.1(b) Certificate of Adjustment relating to April 1987 stock split
pursuant to Section 12 of the Rights Agreement (incorporated by
reference to Exhibit 4.3(b) to registrant's registration statement
on Form S-1, Registration No. 33-13839)
4.1(c) Certificate of Adjustment relating to December 1989 stock split
pursuant to Section 12 of the Rights Agreement (incorporated by
reference to Exhibit 4.3(c) to registrant's 1989 annual report on
Form 10-K)
4.2(a) Trust Indenture dated as of August 1, 1989 (incorporated by
reference to Exhibit 4.3(a) to registrant's 1990 annual report on
Form 10-K)
4.2(b) First Supplemental Indenture dated as of December 1, 1990
(incorporated by reference to Exhibit 4.3(b) to registrant's 1990
annual report on Form 10-K)
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-1
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
4.3 Trust Indenture dated as of June 1, 1993 (incorporated by reference
to Exhibit 4 to the registrant's current report on Form 8-K dated
July 15, 1993)
5. Inapplicable
6. Inapplicable
7. Inapplicable
8. Inapplicable
9. None
10.1 1981 Stock Option Plan for Non-Employee Directors of registrant
(incorporated by reference to Exhibit 19 to registrant's report on
Form 10-Q for the quarter ended June 30, 1982)
10.2 WMX Technologies, Inc. 1982 Stock Option Plan, as amended to March
11, 1988 (incorporated by reference to Exhibit 10.3 to registrant's
1988 annual report on Form 10-K)
10.3 Deferred Director's Fee Plan, as amended (incorporated by reference
to Exhibit 10.3 to registrant's 1990 annual report on Form 10-K)
10.4 Director's Phantom Stock Plan (incorporated by reference to Exhibit
10.9 to registrant's 1984 annual report on Form 10-K)
10.5 Employment Agreement, dated as of September 1, 1986, by and between
the registrant and Phillip B. Rooney (incorporated by reference to
Exhibit 19.4 to registrant's report on Form 10-Q for the quarter
ended September 30, 1986)
10.6 WMX Technologies, Inc. Corporate Incentive Bonus Plan (incorporated
by reference to Exhibit B to the registrant's Proxy Statement for
its 1995 Annual Meeting of Stockholders)
10.7 WMX Technologies, Inc. Supplemental Executive Retirement Plan, as
amended and restated as of January 24, 1995
10.8 WMX Technologies, Inc. Long Term Incentive Plan, as amended and
restated as of January 27, 1994 (incorporated by reference to
Exhibit A to the registrant's Proxy Statement for its 1995 Annual
Meeting of Stockholders)
10.9 Supplemental Retirement Benefit Agreement, dated as of January 1,
1989, by and between the registrant and Peter H. Huizenga
(incorporated by reference to Exhibit 10.16 to Post-Effective
Amendment No. 2 to registrant's registration statement on Form S-1,
Registration No. 33-13839)
10.10 Chemical Waste Management, Inc. 1986 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.1 to Chemical Waste
Management, Inc.'s 1989 annual report on Form 10-K)
10.11 WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus
Plan
10.12 Chemical Waste Management, Inc. Deferred Director's Fee Plan
(incorporated by reference to Exhibit 10.5 to Chemical Waste
Management, Inc.'s registration statement on Form S-1, Registration
No. 33-8509)
10.13 WMX Technologies, Inc. Director's Charitable Endowment Plan
(incorporated by reference to Exhibit 10.20 to registrant's 1989
annual report on Form 10-K)
10.14 Supplemental Retirement Benefit Agreement dated as of January 1,
1991 by and between registrant and Donald F. Flynn (incorporated by
reference to Exhibit 10.17 to registrant's 1990 annual report on
Form 10-K)
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-2
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
10.15 Restricted Unit Plan for Non-Employee Directors of Wheelabrator
Technologies Inc. as amended through June 10, 1991 (incorporated by
reference to Exhibit 19.03 to the report on Form 10-Q of
Wheelabrator Technologies Inc. for the quarter ended June 30, 1991)
10.16 1988 Stock Plan for Executive Employees of Wheelabrator Technologies
Inc. and its subsidiaries (the "WTI 1988 Stock Plan") (incorporated
by reference to Exhibit 28.1 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
10.17 Amendments dated as of September 7, 1990 to the WTI 1988 Stock Plan
(incorporated by reference to Exhibit 19.02 to the 1990 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.18 Amendment dated as of November 1, 1990 to the WTI 1988 Stock Plan
(incorporated by reference to Exhibit 19.04 to the 1990 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.19 1986 Stock Plan for Executive Employees of Wheelabrator Technologies
Inc. and its subsidiaries (the "WTI 1986 Stock Plan") (incorporated
by reference to Exhibit 28.2 to Amendment No. 1 to the registration
statement of Wheelabrator Technologies Inc. on Form S-8,
Registration No. 33-31523)
10.20 Amendment dated as of November 1, 1990 to the WTI 1986 Stock Plan
(incorporated by reference to Exhibit 19.03 to the 1990 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.21 Employment Agreement dated as of April 1, 1995 between the
registrant and D. P. Payne
10.22 WMX Technologies, Inc. 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.31 to registrant's registration statement on
Form S-1, Registration No. 33-44849)
10.23 WMX Technologies, Inc. 1992 Stock Option Plan for Non-Employee
Directors (incorporated by reference to Exhibit 10.32 to
registrant's registration statement on Form S-1, Registration No.
33-44849)
10.24 Wheelabrator Technologies Inc. 1992 Stock Option Plan (incorporated
by reference to Exhibit 10.45 to the 1991 annual report on Form 10-K
of Wheelabrator Technologies Inc.)
10.25 Deferred Director's Fee Plan of Wheelabrator Technologies Inc.
adopted June 10, 1991 (incorporated by reference to Exhibit 19.02 to
the quarterly report on Form 10-Q of Wheelabrator Technologies Inc.
for the quarter ended June 30, 1991)
10.26 Waste Management International plc Share Option Plan (incorporated
by reference to Exhibit 10.1 to the registration statement on Form
F-1 of Waste Management International plc, Registration No. 33-
46511)
10.27 Amendment dated as of December 6, 1991 to the WTI 1986 Stock Plan
(incorporated by reference to Exhibit 19.01 to the 1991 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.28 Amendment dated as of December 6, 1991 to the WTI 1988 Stock Plan
(incorporated by reference to Exhibit 19.02 to the 1991 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.29 Amendment dated as of December 6, 1991 to the Restricted Unit Plan
for Non-Employee Directors of Wheelabrator Technologies Inc.
(incorporated by reference to Exhibit 19.05 to the 1991 annual
report on Form 10-K of Wheelabrator Technologies Inc.)
10.30 First Amended and Restated International Business Opportunities
Agreement by and among registrant, Chemical Waste Management, Inc.,
Wheelabrator Technologies Inc., Waste Management International,
Inc., Waste Management International plc and Rust International
Inc., dated as of January 1, 1993 (incorporated by reference to
Exhibit 28 to the registration statement on Form S-3 of Wheelabrator
Technologies Inc., Registration No. 33-59606)
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-3
NUMBER AND DESCRIPTION OF EXHIBIT*
----------------------------------
10.31 Amendment dated as of January 28, 1994 relating to the International
Business Opportunities Agreement (incorporated by reference to
Exhibit 10.19 to the 1993 annual report on Form 10-K of Chemical
Waste Management, Inc.)
10.32 Chemical Waste Management, Inc. 1992 Stock Option Plan (incorporated
by reference to Exhibit 10.19 to the 1991 annual report on Form 10-K
of Chemical Waste Management, Inc.)
10.33 Amendment dated as of July 10, 1995 to the International Business
Opportunities Agreement (incorporated by reference to Exhibit 10 to
the quarterly report on Form 10-Q of Wheelabrator Technologies Inc.
for the quarter ended September 30, 1995)
11. None
12. Computation of ratio of earnings to fixed charges
13.1 Management's Discussion and Analysis of Results of Operations and
Financial Condition
13.2 Financial Statements, Supplementary Data and Report of Independent
Public Accountants
14. Inapplicable
15. Inapplicable
16. None
17. Inapplicable
18. None
19. Inapplicable
20. Inapplicable
21. List of subsidiaries of registrant
22. Inapplicable
23. Consent of Independent Public Accountants
24. None
25. Inapplicable
26. Inapplicable
27. Financial Data Schedule
28. None
- --------
*In the case of incorporation by reference to documents filed under the
Securities Exchange Act of 1934, the registrant's file number under that
Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act
was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act
is 0-14246.
EX-4