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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO __________
COMMISSION FILE NUMBER 1-7327
WMX TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2660763
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3003 BUTTERFIELD ROAD,
OAK BROOK, ILLINOIS 60521
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 572-8800
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 REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.
YES X NO
--- ---
SHARES OF REGISTRANT'S COMMON STOCK, $1 PAR VALUE, ISSUED AND
OUTSTANDING, AT OCTOBER 31, 1996 -- 485,121,646
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WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
----
PART I. Financial Information:
Consolidated balance sheets as of December 31, 1995, and
September 30, 1996................................................ 3
Consolidated statements of income for the three months and nine months
ended September 30, 1995 and 1996................................. 5
Consolidated statements of stockholders' equity for the nine months
ended September 30, 1995 and 1996................................. 6
Consolidated statements of cash flows for the nine months
ended September 30, 1995 and 1996................................. 8
Notes to consolidated financial statements............................. 9
Management's discussion and analysis of results of operations
and financial condition........................................... 14
PART II. Other Information............................................ 21
******
2
PART I. FINANCIAL INFORMATION
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000's omitted)
ASSETS
December 31, 1995 September 30, 1996
----------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents $ 189,031 $ 270,836
Short-term investments 36,243 24,224
Accounts receivable, less reserve of $66,840 in 1995
and $64,051 in 1996 1,880,934 1,953,985
Employee receivables 8,787 10,768
Parts and supplies 210,864 190,026
Costs and estimated earnings in excess of billings
on uncompleted contracts 334,786 379,875
Prepaid expenses 360,404 352,395
----------- -----------
Total Current Assets $ 3,021,049 $ 3,182,109
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Land, primarily disposal sites $ 4,575,117 $ 4,950,951
Buildings 1,572,821 1,545,297
Vehicles and equipment 7,498,718 7,719,341
Leasehold improvements 87,986 94,362
----------- -----------
$13,734,642 $14,309,951
Less - Accumulated depreciation and amortization (3,968,943) (4,454,389)
----------- -----------
Total Property and Equipment, Net $ 9,765,699 $ 9,855,562
----------- -----------
OTHER ASSETS:
Intangible assets relating to acquired businesses, net $ 4,205,031 $ 4,557,113
Sundry, including other investments 1,572,977 1,747,154
Net assets of discontinued operations 130,552 -
----------- -----------
Total Other Assets $ 5,908,560 $ 6,304,267
----------- -----------
Total Assets $18,695,308 $19,341,938
=========== ===========
The accompanying notes are an integral part of these balance sheets.
3
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000's omitted except per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, 1995 September 30, 1996
----------------- ------------------
CURRENT LIABILITIES:
Portion of long-term debt payable within one year $ 1,094,165 $ 765,957
Accounts payable 1,072,372 877,060
Accrued expenses 991,539 1,115,882
Unearned revenue 263,029 278,788
----------- -----------
Total Current Liabilities $ 3,421,105 $ 3,037,687
----------- -----------
DEFERRED ITEMS:
Income taxes $ 956,525 $ 1,059,362
Environmental liabilities 622,952 553,439
Other 684,452 659,854
----------- -----------
Total Deferred Items $ 2,263,929 $ 2,272,655
----------- -----------
LONG-TERM DEBT, less portion payable within one year $ 6,420,610 $ 7,226,448
----------- -----------
MINORITY INTEREST IN SUBSIDIARIES $ 1,385,366 $ 1,228,001
----------- -----------
COMMITMENTS AND CONTINGENCIES $ $
----------- -----------
PUT OPTIONS $ 261,959 $ 304,139
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $l par value (issuable in series);
50,000,000 shares authorized; none outstanding
during the periods $ - $ -
Common stock, $l par value; 1,500,000,000 shares
authorized; 498,817,093 shares issued in 1995
and 507,101,774 in 1996 498,817 507,102
Additional paid-in capital 422,801 659,388
Cumulative translation adjustment (102,943) (100,345)
Retained earnings 4,486,877 4,904,027
----------- -----------
$ 5,305,552 $ 5,970,172
Less: Treasury stock; 10,287,741 shares, at cost - 331,213
1988 Employee Stock Ownership Plan 13,062 8,062
Employee Stock Benefit Trust (11,769,788
shares in 1995 and 10,886,361 shares
in 1996, at market) 350,151 357,889
----------- -----------
Total Stockholders' Equity $ 4,942,339 $ 5,273,008
----------- -----------
Total Liabilities and Stockholders'
Equity $18,695,308 $19,341,938
=========== ===========
The accompanying notes are an integral part of these balance sheets.
4
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30
(Unaudited)
(000's omitted except per share amounts)
Three Months Nine Months
Ended September 30 Ended September 30
------------------------ ------------------------
1995 1996 1995 1996
---------- ---------- ---------- ----------
REVENUE $2,619,227 $2,690,619 $7,700,077 $7,725,935
---------- ---------- ---------- ----------
Operating expenses $1,794,619 $1,851,478 $5,295,761 $5,346,675
Special charges - - 140,600 -
Goodwill amortization 29,667 34,205 88,721 98,575
Selling and administrative
expenses 291,421 288,429 879,273 864,583
Interest expense 104,733 94,887 323,103 293,805
Interest income (8,262) (5,711) (31,611) (19,410)
Minority interest 38,022 32,620 107,453 92,874
Sundry income, net (23,441) (23,771) (53,705) (62,539)
---------- ---------- ---------- ----------
Income from continuing operations
before income taxes $ 392,468 $ 418,482 $ 950,482 $1,111,372
Provision for income taxes 161,667 173,276 405,927 457,946
---------- ---------- ---------- ----------
Income from continuing operations $ 230,801 $ 245,206 $ 544,555 $ 653,426
Income from operations of
discontinued businesses, less
applicable income taxes and
minority interest of $3,456 and
$9,930 for the three months and
nine months ended September 30,
1995, respectively 3,047 - 9,665 -
---------- ---------- ---------- ----------
NET INCOME $ 233,848 $ 245,206 $ 554,220 $ 653,426
========== ========== ========== ==========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 486,286 490,693 485,495 491,712
========== ========== ========== ==========
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
Continuing operations $ 0.47 $ 0.50 $ 1.12 $ 1.33
Discontinued operations 0.01 - 0.02 -
---------- ---------- ---------- ----------
NET INCOME $ 0.48 $ 0.50 $ 1.14 $ 1.33
========== ========== ========== ==========
DIVIDENDS DECLARED PER SHARE $ 0.15 $ 0.16 $ 0.45 $ 0.47
========== ========== ========== ==========
The accompanying notes are an integral part of these statements.
5
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
($000's omitted except per share amounts)
1988
Employee
Additional Cumulative Stock Employee
Common Paid-In Translation Retained Treasury Ownership Stock
Stock Capital Adjustment Earnings Stock Plan Benefit Trust
-------- -------- ----------- ---------- --------- --------- -------------
Balance, January 1, 1995 $496,387 $357,150 $(150,832) $4,181,606 $ - $19,729 $323,601
Net income for the period - - - 554,220 - - -
Cash dividends ($.45 per share) - - - (218,350) - - -
Dividends paid to Employee
Stock Benefit Trust - 5,439 - (5,439) - - -
Stock issued upon exercise
of stock options 39 (2,705) - - (1,348) - (11,522)
Treasury stock received in
connection with exercise of
stock options - - - - 332 - -
Tax benefit of non-qualified
stock options exercised - 1,422 - - - - -
Contribution to 1988 Employee
Stock Ownership Plan - - - - - (5,000) -
Treasury stock received as
settlement for claims - - - - 1,016 - -
Common stock issued upon
conversion of Liquid Yield
Option Notes 127 2,060 - - - - -
Common stock issued for
acquisitions 1,964 8,984 - - - - -
Temporary equity related to
put options - (1,670) - - - - -
Proceeds from sale of put
options - 14,013 - - - - -
Settlement of expired put
options - (12,019) - - - - -
Adjustment of Employee Stock
Benefit Trust to market value - 29,087 - - - - 29,087
Transfer of equity interests
among controlled subsidiaries - 529 - - - - -
Cumulative translation adjust-
ment of foreign currency
statements - - 54,972 - - - -
-------- -------- --------- ---------- --------- ---------- --------
Balance, September 30, 1995 $498,517 $402,290 $ (95,860) $4,512,037 $ - $ 14,729 $341,166
======== ======== ========= ========== ========= ========== ========
The accompanying notes are an integral part of this statement.
6
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
($000's omitted except per share amounts)
1988
Employee
Additional Cumulative Stock Employee
Common Paid-In Translation Retained Treasury Ownership Stock
Stock Capital Adjustment Earnings Stock Plan Benefit Trust
-------- ---------- ---------- ---------- -------- --------- -------------
Balance, January 1, 1996 $498,817 $422,801 $(102,943) $4,486,877 $ - $13,062 $350,151
Net income for the period - - - 653,426 - - -
Cash dividends ($.47 per share) - - - (231,074) - - -
Dividends paid to Employee
Stock Benefit Trust - 5,202 - (5,202) - - -
Stock repurchase
(11,100,000 shares) - - - - 359,172 - -
Stock issued upon exercise
of stock options 217 (8,323) - - (31,149) - (28,622)
Treasury stock received in
connection with exercise of
stock options - - - - 791 - -
Tax benefit of non-qualified
stock options exercised - 5,378 - - - - -
Contribution to 1988 Employee
Stock Ownership Plan - - - - - (5,000) -
Treasury stock received as
settlement for claims - - - - 2,450 - -
Common stock issued upon conversion
of Liquid Yield Option Notes 111 1,968 - - - - -
Stock issued for acquisitions 7,957 221,820 - - (51) - -
Temporary equity related to
put options - (42,180) - - - - -
Proceeds from sale of
put options - 16,362 - - - - -
Adjustment of Employee Stock
Benefit Trust to market value - 36,360 - - - - 36,360
Cumulative translation adjust-
ment of foreign currency
statements - - 2,598 - - - -
-------- -------- --------- ---------- -------- ------- --------
Balance, September 30, 1996 $507,102 $659,388 $(100,345) $4,904,027 $331,213 $ 8,062 $357,889
======== ======== ========= ========== ======== ======= ========
The accompanying notes are an integral part of this statement.
7
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
Increase (Decrease) in Cash
(Unaudited)
($000's omitted)
1995 1996
----------- -----------
Cash flows from operating activities:
Net income for the period $ 554,220 $ 653,426
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 661,461 694,952
Provision for deferred income taxes 199,806 154,643
Minority interest in subsidiaries 109,604 92,874
Interest on Liquid Yield Option Notes (LYONs)
and WMX Subordinated Notes 20,173 8,422
Contribution to 1988 Employee Stock
Ownership Plan 5,000 5,000
Special charge, net of tax 91,400 -
Changes in assets and liabilities, excluding effects
of acquired companies:
Receivables, net (6,649) (54,980)
Other current assets (55,512) 6,694
Sundry other assets 25,707 (6,668)
Accounts payable (92,689) (205,074)
Accrued expenses and unearned revenue 10,582 89,060
Deferred items (53,053) (142,226)
Other, net (11,125) (8,102)
----------- -----------
Net cash provided by operating activities $ 1,458,925 $ 1,288,021
----------- -----------
Cash flows from investing activities:
Short-term investments $ (41,779) $ 12,046
Capital expenditures (964,826) (855,109)
Proceeds from sale of assets and businesses 132,524 317,997
Cost of acquisitions, net of cash acquired (175,658) (64,561)
Other investments (41,324) (180,000)
Acquisition of minority interests (80,243) (336,431)
----------- -----------
Net cash used for investing activities $(1,171,306) $(1,106,058)
----------- -----------
Cash flows from financing activities:
Cash dividends $ (218,350) $ (231,074)
Proceeds from issuance of indebtedness 1,332,696 2,151,705
Repayments of indebtedness (1,353,789) (1,732,553)
Proceeds from exercise of stock options, net 9,872 50,874
Contributions from minority interests 16,328 3,700
Stock repurchases - (359,172)
Proceeds from sale of put options 14,013 16,362
Settlement of put options (12,019) -
----------- -----------
Net cash used for financing activities $ (211,249) $ (100,158)
----------- -----------
Net increase in cash and cash equivalents $ 76,370 $ 81,805
Cash and cash equivalents at beginning of period 123,348 189,031
----------- -----------
Cash and cash equivalents at end of period $ 199,718 $ 270,836
=========== ===========
The Company considers cash and cash equivalents
to include currency on hand, demand deposits
with banks and short-term investments with
maturities of less than three months when
purchased.
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 307,047 $ 285,383
Income taxes, net of refunds received $ 221,457 $ 250,420
Supplemental schedule of noncash investing and
financing activities:
LYONs converted into common stock of the Company $ 2,187 $ 2,079
Liabilities assumed in acquisitions of
businesses $ 200,026 $ 102,982
Fair market value of Company stock issued for
acquired businesses $ 58,267 $ 229,828
WMX Subordinated Notes issued for acquisition of
CWM minority interest $ 436,830 $ -
The accompanying notes are an integral part of these statements.
8
WMX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
($000's omitted in all tables)
The financial statements included herein have been prepared by WMX Technologies,
Inc. ("WMX" or the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The financial information
included herein reflects, in the opinion of the Company, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position and results of operations for the periods presented. The
results for interim periods are not necessarily indicative of results for the
entire year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets, liabilities, income and expenses and
disclosures of contingencies. Further events could alter such estimates in the
near term.
Certain amounts in previously issued financial statements have been restated to
conform to 1996 classifications.
Income Taxes -
The following table sets forth the provision for income taxes for continuing
operations for the three months and nine months ended September 30, 1995, and
1996:
Three Months Nine Months
Ended September 30 Ended September 30
------------------- --------------------
1995 1996 1995 1996
-------- -------- --------- --------
Currently payable $ 78,707 $135,552 $208,587 $303,885
Deferred 83,230 37,918 198,152 154,643
Amortization of deferred
investment credit (270) (194) (812) (582)
-------- -------- -------- --------
$161,667 $173,276 $405,927 $457,946
======== ======== ======== ========
Business Combinations -
During 1995, the Company and its principal subsidiaries acquired 136 businesses
for $224,304,000 in cash (net of cash acquired) and notes, $77,689,000 of debt
assumed, and 2,236,354 shares of the Company's common stock. Three of the
aforementioned 1995 acquisitions, which otherwise met pooling of interests
criteria, were not significant in the aggregate and, consequently, prior period
financial statements were not restated. The remaining acquisitions were
accounted for as purchases.
In January 1995, the Company acquired all of the approximately 21.4% of the
outstanding shares of Chemical Waste Managment, Inc. ("CWM") that it did not
already own, for $436.8 million of convertible subordinated notes. In July 1995,
the Company acquired all of the approximately 3.1 million shares of Rust
International Inc. ("Rust") held by the public, for $16.35 per share in cash.
9
During the nine months ended September 30, 1996, the Company and its principal
subsidiaries acquired 74 businesses for $64,561,000 in cash (net of cash
acquired) and notes, $38,185,000 of debt assumed, and 7,958,163 shares of the
Company's stock. These acquisitions were accounted for as purchases. The pro
forma effect of the acquisitions made during 1995 and 1996 is not material.
During the third quarter, Wheelabrator Technologies Inc. ("WTI") announced an
agreement to sell its industrial water process and manufacturing businesses to
United States Filter Corporation ("U.S. Filter") for $370 million cash. Revenue
and operating income of the units to be sold were approximately $330 million and
$20 million, respectively, in the first nine months of 1996 and approximately
$338 million and $15 million in the comparable 1995 period. Separately, WTI and
U.S. Filter announced their intention to form a new, equally-owned joint venture
to develop, finance, own and operate water and wastewater infrastructure in
North America. Both transactions are expected to be completed during the fourth
quarter.
As of September 30, 1996, Rust sold its industrial scaffolding business for
approximately $190 million. Revenue and operating income from the scaffolding
business were not material to the consolidated financial statements.
Discontinued Operations -
In the fourth quarter of 1995, the Rust Board of Directors approved a plan to
sell or otherwise discontinue Rust's process engineering, construction,
specialty contracting and similar lines of business and have Rust focus on its
environmental and infrastructure consulting businesses. During the second
quarter of 1996, the sale of the industrial process engineering and construction
business, based in Birmingham, Alabama, was completed.
Revenue from the discontinued businesses was $206.8 million for the three-month
and $586.9 million for the nine-month periods in 1995 and $209.8 million for
1996 through the date of sale. Results of operations in 1996 were not material
and were included in the reserve for loss on disposition provided previously.
Accounting Principles -
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("FAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." The change did not have a material
impact on the Company's financial statements.
In October 1995, the Financial Accounting Standards Board issued FAS No. 123,
"Accounting for Stock-Based Compensation," which the Company also must adopt in
1996. FAS 123 provides an optional new method of accounting for employee stock
options and expands required disclosure about stock options. If the new method
of accounting is not adopted, the Company will be required to disclose pro forma
net income and earnings per share as if it were. The Company is studying FAS No.
123 and is gathering data necessary to calculate compensation in accordance with
its provisions, but has not decided whether to adopt the new method or
quantified its impact on the financial statements.
Derivative Financial Instruments -
From time to time, the Company uses derivatives to manage interest rate,
currency and commodity risk. The amount of such instruments outstanding at any
point in time and gains or losses from their use have not been and are not
expected to be material to the Company's financial statements.
10
INTEREST RATE AGREEMENTS Certain of the Company's subsidiaries have entered into
interest rate swap agreements to balance fixed and floating rate debt in
accordance with management's criteria. The agreements are contracts to exchange
fixed and floating interest rate payments periodically over the term without the
exchange of the underlying notional amounts. The agreements provide only for the
exchange of interest on the notional amounts at the stated rates, with no
multipliers or leverage. Differences paid or received are recognized as a part
of interest expense on the underlying debt over the life of the agreements.
CURRENCY AGREEMENTS From time to time, the Company and certain of its
subsidiaries use foreign currency derivatives to mitigate the impact of
translation on foreign earnings and income from foreign investees. Typically
these have taken the form of purchased put options or offsetting put and call
options with different strike prices. The Company receives or pays, based on the
notional amount of the option, the difference between the average exchange rate
of the hedged currency against the base currency and the average (strike price)
contained in the option. Complex instruments involving multipliers or leverage
are not used. Although the purpose for using such derivatives is to mitigate
currency risk, they do not qualify for hedge accounting under generally accepted
accounting principles and accordingly, must be adjusted to market value at the
end of each accounting period.
COMMODITY AGREEMENTS The Company utilizes collars, calls and swaps to mitigate
the risk of price fluctuations on the fuel used by its vehicles. Quantities
hedged equate to committed fuel purchases or anticipated usage and accordingly,
gains and losses are deferred and recognized as fuel is purchased.
The Company is exposed to credit loss in the event of non-performance by
counterparties on interest rate, currency and commodity derivatives, but in all
cases such counterparties are highly rated financial institutions and the
Company does not anticipate non-performance. Maximum credit exposure is
represented by the fair value of contracts with a positive fair value at
September 30, 1996, which is not material.
Environmental Liabilities -
The majority of the businesses in which the Company is engaged are intrinsically
connected with the protection of the environment. As such, a significant portion
of the Company's operating costs and capital expenditures could be characterized
as costs of environmental protection. While the Company is faced, in the normal
course of business, with the need to expend funds for environmental protection
and remediation, it does not expect such expenditures to have a material adverse
effect on its financial condition or results of operations because its business
is based upon compliance with environmental laws and regulations and its
services are priced accordingly. Such costs may increase in the future as a
result of legislation or regulation; however, the Company believes that in
general it benefits from increased government regulation, which increases the
demand for its services, and that it has the resources and experience to manage
environmental risk.
As part of its ongoing operations, the Company provides for estimated closure
and post-closure monitoring costs over the operating life of disposal sites as
airspace is consumed. The Company has also established procedures to evaluate
its potential remedial liabilities at closed sites which it owns or operated or
to which it transported waste, including 105 sites listed on the Superfund
National Priority List ("NPL"). The majority of the situations involving NPL
sites relate to allegations that subsidiaries of the Company (or their
predecessors) transported waste to the facilities in question, often prior to
the acquisition of such subsidiaries by the Company. Where the Company concludes
that it is probable that a liability has been incurred, provision is made in the
financial statements.
11
Estimates of the extent of the Company's degree of responsibility for
remediation of a particular site and the method and ultimate cost of remediation
require a number of assumptions and are inherently difficult, and the ultimate
outcome may differ from current estimates. However, the Company believes that
its extensive experience in the environmental services business, as well as its
involvement with a large number of sites, provides a reasonable basis for
estimating its aggregate liability. As additional information becomes available,
estimates are adjusted as necessary. While the Company does not anticipate that
any such adjustment would be material to its financial statements, it is
reasonably possible that technological, regulatory or enforcement developments,
the results of environmental studies or other factors could necessitate the
recording of additional liabilities which could be material.
The Company and certain of its subsidiaries are named as defendants in personal
injury and property damage lawsuits, including purported class actions, on the
basis of a Company subsidiary's having owned, operated or transported waste to a
disposal facility which is alleged to have contaminated the environment or, in
certain cases, conducted environmental remediation activities at such sites.
While the Company believes it has meritorious defenses to these lawsuits, their
ultimate resolution is often substantially uncertain due to a number of factors,
and it is possible such matters could have a material adverse impact on the
Company's earnings for one or more quarters or years.
Stockholders' Equity -
The Boards of Directors of WMX and WTI have authorized their respective
companies to repurchase shares of their own common stock in the open market or
in privately negotiated transactions. The WMX authorization covers 25 million
shares and extends into 1997. WMX has repurchased 11.1 million shares during the
first nine months of 1996, including 6.1 million shares during the third
quarter. In August 1996, the WTI Board authorized a repurchase of 10 million
shares, replacing an existing 20 million share authorization under which WTI had
repurchased 19.7 million shares, including 0.5 million in the third quarter and
18.9 million in the first nine months of 1996. The new authorization extends to
August 1998.
In conjunction with its authorized repurchase program, WMX periodically sells
put options on its common stock. The put options give the holders the right at
maturity to require the Company to repurchase its shares at specified prices.
Proceeds from the sale of the options are credited to additional paid-in
capital. In the event the options are exercised, the Company may elect to pay
the holder in cash the difference between the strike price and the market price
of the Company's shares in lieu of repurchasing the stock. At September 30,
1996, put options were outstanding for 8.9 million shares. Subsequent to
September 30, 1996, options on 2.5 million shares were exercised and the Company
elected to repurchase the stock at a cost of $86.5 million. Additionally, 5.3
million options expired unexercised. The remaining outstanding options
(including 1.8 million sold in October 1996) expire in February 1997 with strike
prices of $32.04 to $34.125 per share.
Commitments and Contingencies -
Waste Management International plc ("WM International") has received an
assessment of approximately 417 million Krona (approximately $63 million) from
the Swedish Tax Authority, relating to a transaction completed in 1990. WM
International believes that all appropriate tax returns and disclosures were
filed at the time of the transaction and intends to vigorously contest the
assessment.
A subsidiary of WMI 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
12
Connecticut Department of Environmental Protection ("DEP"). WMI is presently
under an order of the Superior Court to apply to the DEP for permission to
remove all waste above the height allowed by the zoning ordinance. The Company
believes that the removal of such waste is an inappropriate remedy and has
appealed the Superior Court order to the state Supreme Court. The Company is
unable to predict the outcome of this appeal or the nature and extent of any
removal action that may ultimately be required. However, if the Superior Court
order is not modified, the subsidiary could incur substantial costs, which could
vary significantly depending upon the nature of any plan eventually approved by
the applicable regulatory authorities, the actual volume of waste to be moved,
and other factors, and which could have a material adverse effect on the
Company's financial condition and results of operations in the near term.
In July 1996, a Federal District Court permanently enjoined the State of New
Jersey from enforcing its comprehensive solid waste flow control system. Flow
control typically involves a governmental authority specifying the disposal site
for all solid waste generated within its borders. The New Jersey ruling is one
of a number of similar court rulings since a 1994 U.S. Supreme Court decision
that state and local governments may not constitutionally restrict the free
movement of trash in interstate commerce through the use of flow control laws.
Other subsequent court decisions have upheld nonregulatory means by which
municipalities may effectively control the flow of solid waste. Federal
legislation has been proposed, but not enacted, to essentially grandfather
existing flow control mandates.
WTI's Gloucester County, New Jersey, trash-to-energy facility relies on a
disposal franchise for substantially all of its supply of municipal solid waste.
The Federal District Court stayed its injunction for so long as its ruling is on
appeal plus an additional period of two years to enable the State to devise an
alternative nondiscriminatory approach. The State has filed an appeal of the
Federal District Court ruling and has indicated that it will continue to enforce
flow control during the transition period.
To date, court decisions with regard to flow control have not had a material
adverse effect on the Company's operations. However, given the uncertainty
surrounding the matter, it is not possible to predict what impact, if any, it
may have in the future on the Company's disposal facilities, particularly WTI's
trash-to-energy facilities.
In the ordinary course of conducting its business, the Company becomes involved
in lawsuits, administrative proceedings and governmental investigations,
including antitrust and environmental matters. Some of these proceedings may
result in fines, penalties or judgments being assessed against the Company
which, from time to time, may have an impact on earnings for a particular
quarter or year. The Company does not believe that these proceedings,
individually or in the aggregate, are material to its business or financial
condition.
Legal Matters -
See Part II of this Form 10-Q for a discussion of legal matters.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(all tables in millions)
RESULTS OF OPERATIONS:
- ----------------------
CONSOLIDATED -
- --------------
For the three months ended September 30, 1996, WMX Technologies, Inc. and
its subsidiaries ("WMX" or the "Company") had net income from continuing
operations of $245.2 million or $.50 per share, compared with $230.8 million or
$.47 per share in the same period in 1995. Net income was $.50 per share for the
1996 quarter compared with $.48 per share in 1995. Revenue was $2.69 billion for
the three months ended September 30, 1996, versus $2.62 billion (restated to
eliminate discontinued operations) in the year-earlier period.
For the nine months ended September 30, 1996, income from continuing
operations was $653.4 million or $1.33 per share, versus $544.6 million or $1.12
per share for the corresponding period in 1995. The 1995 results include charges
by the Company's Chemical Waste Management, Inc. ("CWM") subsidiary related to a
revaluation of investments in certain hazardous waste treatment and processing
technologies and facilities, which reduced consolidated earnings in the nine
months by $.19 per share, and $.01 per share for the write-off of deferred costs
related to debt securities which were put to the Company by the debtholders
prior to maturity. Excluding these charges, earnings per share from continuing
operations for the nine months ended September 30, 1995, were $1.32. Net income
per share was $1.33 for the first nine months of 1996 compared with $1.14 ($1.34
excluding the charges discussed above) for the first nine months of 1995.
Revenue for the periods was $7.73 billion in 1996 and $7.70 billion in 1995.
The Company provides environmental services internationally through five
principal operating subsidiaries: Waste Management, Inc. ("WMI"), CWM,
Wheelabrator Technologies Inc. ("WTI"), Waste Management International plc ("WM
International") and Rust International Inc. ("Rust"). However, operations are
managed on the basis of four global lines of business - waste services, clean
energy, clean water, and environmental and infrastructure
14
consulting. The analysis which follows is presented on the basis of these four
lines of business.
Waste Services -
- -----------------
Operating results for the three months and nine months ended September 30
were as follows:
Three Months Nine Months
------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenue $2,269.6 $2,209.2 $6,511.9 $6,459.0
Operating expenses 1,601.4 1,547.5 4,626.4 4,545.7
Selling and
admin. expenses 236.8 242.9 715.8 728.7
-------- -------- -------- --------
Margin $ 431.4 $ 418.8 $1,169.7 $1,184.6
======== ======== ======== ========
Revenue by source for the three months and nine months ended September 30
is shown in the following table:
Three Months Nine Months
-------------------------------- ------------------------------
Percentage Percentage
Increase/ Increase/
1996 1995 (Decrease) 1996 1995 (Decrease)
-------- --------- ----------- --------- ------- ----------
North America
Residential $ 325.2 $ 308.7 5.3% $ 957.1 $ 906.1 5.6%
Commercial 430.4 415.1 3.7 1,254.6 1,217.6 3.0
Rolloff and
industrial 365.7 348.9 4.8 1,041.5 997.3 4.4
Disposal, transfer
and other* 558.1 555.0 0.6 1,542.8 1,543.9 (0.1)
Industrial services 119.9 122.3 (2.0) 341.3 443.6 (23.1)
International 470.3 459.2 2.4 1,374.6 1,350.5 1.8
-------- -------- -------- --------
Total $2,269.6 $2,209.2 2.7% $6,511.9 $6,459.0 0.8%
======== ======== === ======== ======== ===
* Includes hazardous waste revenue of $145.4 million and $398.4 million,
respectively, for the three-month and nine-month periods of 1996 and $154.1
million and $446.1 million for the comparable 1995 periods.
North American solid waste revenue grew 4.1% for the third quarter of 1996
compared with the third quarter of 1995, and 4.2% for the 1996 nine months
compared with the same period in 1995. Revenue growth was inhibited by a
substantial decline in prices for recyclable commodities in 1996. Recycling
revenue declined 23.5% for the quarter and 14.8% for the nine months of 1996
compared with the same periods in 1995. The Company has responded by reducing
its processing of lower grades of paper, adjusting the capacity of its recycling
operations, and continually striving to reduce processing costs and improve the
marketing of commodities. Despite these efforts, the Company has been unable to
replace profits associated with the stronger 1995 commodity market.
For both the third quarter and nine months of 1996, volume caused revenue
growth of 2 to 2.5% and acquisitions 1.5 to 2%. Pricing was
15
essentially flat as a revenue increase of 2.0 to 2.5% from price increases in
solid waste collection and disposal was offset by reduced commodity prices.
Industrial services revenue for the first nine months of 1995 included the
Rust environmental remediation business, which was exchanged in May 1995 for an
approximately 37% equity interest in OHM Corporation. The remediation business
had 1995 revenue of $62.2 million through the date of its sale.
Revenue from waste services outside North America increased 2.4% in the
third quarter of 1996 and 1.8% for the first nine months compared with the same
periods in 1995. Revenue growth in approximately equal proportions from price
increases and acquisitions was partially offset by volume declines of 0.6% for
the third quarter and 2.1% for the first nine months of 1996, primarily in
France and Germany. International operations were also negatively impacted by
lower commodity prices, although to a lesser extent than in North America,
because of higher disposal fees and taxes in Europe. Currency translation
resulted in revenue increases of approximately 1.0% for both the quarter and the
nine months.
Operating expenses were 70.6% of revenue for the 1996 quarter compared with
70.0% for the third quarter of 1995, and 71.3% for the second quarter of 1996.
Depressed commodity prices, higher fuel costs, low margin construction revenue
on the West Kowloon transfer station in Hong Kong, and volume declines in Europe
have increased 1996 operating expenses as a percentage of revenue compared with
1995. However, continuing productivity improvements have mitigated this impact
and have resulted in sequential reductions in operating expense percentages in
each 1996 quarter. Selling and administrative expenses declined from 11.0% in
the third quarter of 1995 and 11.0% in the second quarter of 1996 to 10.4% for
the quarter ended September 30, 1996. The improvement resulted from a
streamlining of the international organization and continuing productivity
enhancements on a global basis.
As of September 30, 1996, Rust sold its industrial scaffolding business for
approximately $190 million. Revenue and operating income from the scaffolding
business were not material to the consolidated financial statements.
Clean Energy -
- --------------
Operating results for the three months and nine months ended September 30
are set forth below:
Three Months Nine Months
---------------- ---------------
1996 1995 1996 1995
------ ------ ------ ------
Revenue $212.3 $210.9 $631.2 $683.2
Operating expenses 135.0 134.3 404.7 447.9
Selling and admin.
expenses 9.1 10.9 28.9 32.9
------ ------ ------ ------
Margin $ 68.2 $ 65.7 $197.6 $202.4
====== ====== ====== ======
Revenue for this business line increased slightly to $212.3 million in the
third quarter of 1996 compared with $210.9 million in the comparable 1995
period. Operating revenue from the Lisbon, Connecticut trash-to-energy facility,
which began commercial operations in January 1996, the acquisition of a
cogeneration facility in California, higher trash deliveries at certain plants,
and less curtailment of electrical purchases from the Company's California
independent power facilities offset a continuing decline in air
16
business revenue, which is included in this business line. The decline in air
business revenue reflects a continuing weakness in the industry in the face of
regulatory uncertainty. The revenue decline for the first nine months of 1996
compared with 1995 reflects the absence of construction revenue on the Lisbon
facility, which was $37.5 million in the prior year, as well as the air business
revenue decline. Operating expenses for the three months remained virtually flat
from the comparable period in 1995, and for the nine months declined in both
real terms and as a percentage of revenue in 1996 as a result of the absence of
Lisbon construction revenue, which had no margin, actions taken in 1995 to
downsize the air business to reflect existing market conditions, and lower
maintenance expenses. Selling and administrative expenses declined in both the
three-month and nine-month periods of 1996 compared with 1995 because of the air
business downsizing and reduced project development spending.
Clean Water -
- --------------
Operating results for the three months and nine months ended September 30
were as follows:
Three Months Nine Months
-------------- --------------
1996 1995 1996 1995
------ ------ ------ ------
Revenue $158.6 $158.8 $471.9 $460.0
Operating expenses 124.9 124.1 372.8 363.2
Selling and
admin.expenses 22.3 21.4 67.5 65.8
------ ------ ------ ------
Margin $ 11.4 $ 13.3 $ 31.6 $ 31.0
====== ====== ====== ======
Revenue for the third quarter of 1996 was flat compared with the prior year
as lower revenue from North American and European water process businesses
offset growth of $5.1 million from acquisitions. The decline in North American
water process revenue was a function of a large project being completed in 1995.
European revenue was negatively impacted by the weak German economy, contract
timing and the stronger dollar. Nine-month revenue grew $11.9 million or 2.6%,
in 1996 compared with 1995. Acquisitions accounted for $14.1 million of revenue
growth, while growth in existing biosolids and contract operations and in the
Asian market provided an additional $20.0 million. These increases were
partially offset by lower water process revenue in Europe and North America.
Operating income declined $1.9 million from the third quarter of 1995 to
$11.4 million in the three months ended September 30, 1996, as a result of lower
gross margins and higher selling and administrative expenses. The margin decline
resulted from acquisitions with lower margins than existing businesses, and wet
weather affecting land application of biosolids in certain regions of the United
States. Selling and administrative expenses increased slightly in both the
three-month and nine-month periods of 1996 as a result of acquisitions and the
growth of Asian operations.
During the third quarter of 1996, WTI announced an agreement to sell its
industrial water process and manufacturing businesses to United States Filter
Corporation ("U.S. Filter") for approximately $370 million cash. Revenue and
operating income of the units to be sold were approximately $330 million and $20
million in the first nine months of 1996 and $338 million and $15 million in the
comparable 1995 period. Separately, WTI and U.S. Filter announced their
intention to form a new, equally-owned joint venture to develop, finance, own
and operate water and wastewater infrastructure in North America. Both
transactions are expected to be completed in the fourth quarter.
17
Environmental and Infrastructure Consulting -
- ---------------------------------------------
Operating results for the three months and nine months ended
September 30 are set forth in the following table:
Three Months Nine Months
----------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
Revenue $124.8 $121.3 $358.1 $346.9
Operating expenses 99.1 97.5 288.5 273.7
Selling and
admin. expenses 20.3 16.2 52.4 51.9
------ ------ ------ ------
Margin $ 5.4 $ 7.6 $ 17.2 $ 21.3
====== ====== ====== ======
Revenues grew 2.9% in the third quarter and 3.2% for the nine months of
1996 compared with the same periods in 1995. Operating expenses increased in
real terms but for the third quarter of 1996 declined slightly as a percentage
of revenue. For the nine months, such expenses increased to 80.6% of revenue
from 78.9% in 1995. Operating expense percentages are largely a function of the
revenue breakdown between labor-based revenue and subcontract and other pass-
through revenues which have little or no mark-up. For the first nine months of
1996, labor-based revenue declined compared with 1995. Selling and
administrative expenses had been declining for the first six months of 1996 as a
result of cost control programs and the consolidation of certain operating
units. However, during the third quarter, this business line absorbed certain
costs as a result of assuming responsibility for certain Rust corporate
functions previously handled by the discontinued operations discussed below.
Discontinued Operations -
- -------------------------
In the fourth quarter of 1995, the Rust Board of Directors approved a plan
to sell or otherwise discontinue Rust's process engineering, construction,
specialty contracting and similar lines of business, and have Rust focus on its
environmental and infrastructure consulting businesses. During the second
quarter of 1996, the sale of the industrial process engineering and construction
businesses, based in Birmingham, Alabama, was completed. The remaining
businesses are not material to the consolidated financial statements.
Revenue from the discontinued businesses was $206.8 million for the third
quarter and $586.9 million for the nine months of 1995 and $209.8 million for
1996 through the date of sale. Results of operations in 1996 were not material
and were included in the reserve for loss on disposition previously provided.
Interest -
- ----------
The following table sets forth the components of consolidated interest,
net, for the three months and nine months ended September 30, 1996 and 1995:
Three Months Nine Months
--------------- ---------------
1996 1995 1996 1995
------ ------ ------- ------
Interest expense $113.4 $125.5 $347.0 $382.8
18
Interest income (5.7) (8.3) (19.4) (31.6)
Capitalized interest (18.5) (20.7) (53.2) (59.7)
----- ----- ----- ------
Interest expense, net $89.2 $96.5 $274.4 $291.5
===== ===== ====== ======
Net interest expense has declined in 1996 compared with 1995 as a result of
lower rates, including the benefit of refinancing certain debt, offsetting a
reduction in capitalized interest and the impact of the buy-back of the public
ownership of CWM and Rust during 1995 and shares of WMX and WTI in 1996.
Capitalized interest has declined due to continuing management effort to reduce
capital expenditures.
Minority Interest -
- -------------------
Minority interest declined in the third quarter and first nine months of
1996 compared with the same periods in 1995 as a result of the purchase of the
public shares of CWM and Rust, and stock repurchases by WTI which have increased
the WMX ownership of WTI to approximately 65% at September 30, 1996.
Accounting Principles -
- -----------------------
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("FAS") No. 121 - Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of. The adoption of this
Standard did not have a material impact on the financial statements. The
Financial Accounting Standards Board has also issued FAS No. 123 - Accounting
for Stock-Based Compensation - which the Company must adopt in 1996. This
Statement provides an optional new method of accounting for employee stock
options and expands required disclosure about stock options. If the new method
of accounting is not adopted, the Company will be required to disclose pro forma
net income and earnings per share as if it were. The Company is studying FAS No.
123 and is gathering the data necessary to calculate compensation in accordance
with its provisions, but has not decided whether to adopt the new method or
quantified its impact on the financial statements.
Derivatives -
- -------------
From time to time, the Company and certain of its subsidiaries use
derivatives to manage currency, interest rate, and commodity (fuel) risk.
Derivatives used are simple agreements which provide for payments based on the
notional amount, with no multipliers or leverage. The Company's use of
derivatives has not been and is not expected to be material with respect to
financial condition or results of operations.
Environmental Liabilities -
- ---------------------------
The majority of the businesses in which the Company is engaged are
intrinsically connected with the protection of the environment. As such, a
significant portion of the Company's operating costs and capital expenditures
could be characterized as costs of environmental protection.
As part of its ongoing operations, the Company is required to provide
for closure and post-closure monitoring costs of its sites and has also
19
established procedures to evaluate potential remedial liabilities at closed
sites which it owned or operated or to which it transported waste. 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 having owned, operated or transported waste
to a disposal facility which is alleged to have contaminated the environment,
or, in certain cases, conducted environmental remediation activities at such
sites.
The Company believes that it has adequately provided for its environmental
liabilities. However, because of the uncertainties surrounding this area, it is
reasonably possible that technological, regulatory or enforcement developments,
the result of environmental studies, the outcome of litigation or other factors
could require the Company to record additional liabilities which could be
material.
FINANCIAL CONDITION:
Liquidity and Capital Resources -
- ---------------------------------
The Company operates in a service industry with neither significant
inventory nor seasonal variation in receivables. Its primary source of liquidity
is cash flow from operations, and accordingly, minimizing working capital
typically does not adversely affect operations. The Company had working capital
of $144.4 million at September 30, 1996, compared with a working capital deficit
of $400.1 million at December 31, 1995. Cash and cash equivalents increased
$81.8 million, net receivables increased $75.0 million and costs and estimated
earnings in excess of billings on uncompleted contracts increased $45.1 million
during the first nine months of 1996. Other current assets declined an aggregate
of $40.8 million during the period. Accounts payable, accrued expenses and
unearned revenue decreased $55.2 million, while current debt declined $328.2
million as a result of refinancing, on a long-term basis, commercial paper and
debt maturing during 1996.
The Company has adopted a strategy of raising the level of "owners' cash
flow", which it defines as cash flow from operating activities less net capital
expenditures (other than acquisitions) and dividends. Such amounts are available
to make acquisitions, reduce debt, or repurchase common stock. Although behind
plan for nine months, owners' cash flow is still expected to approximate $700
million for 1996. In the second quarter of 1996, management also established a
goal of converting approximately $1 billion of non-core or under-performing
assets into cash by mid-1998.
Acquisitions and Capital Expenditures -
- ---------------------------------------
Capital expenditures, excluding property and equipment of purchased
businesses, were $855.1 million for the nine months ended September 30, 1996,
and $964.8 million for the comparable period in 1995. In addition, the Company
and its principal subsidiaries acquired 74 businesses for $102.7 million in cash
and debt (including debt assumed)and 8.0 million shares of WMX common stock
during the first nine months of 1996. For the comparable period in 1995, 103
businesses were acquired for $248.7 million in cash and debt (including debt
assumed) and 2.0 million shares of WMX common stock. The pro forma effect of
acquisitions during 1995 and 1996 is not material.
20
Capital Structure -
- -------------------
The Boards of Directors of WMX and WTI have authorized their respective
companies to repurchase shares of their own common stock in the open market or
in privately negotiated transactions. The WMX authorization covers 25 million
shares (of which 11.1 million had been repurchased as of September 30) and
extends into 1997. In August 1996, the WTI Board authorized a repurchase of 10
million shares, replacing an existing 20 million share authorization under which
WTI had repurchased 19.7 million shares, including 18.9 million during the first
nine months of 1996. The new authorization extends to August 1998.
In conjunction with its authorized repurchase program, WMX periodically
sells put options on its own common stock. The put options give the holders the
right at maturity to require the Company to repurchase its shares at specified
prices. Proceeds from the sale of the options are credited to additional paid-in
capital. In the event the options are exercised, the Company may elect to pay
the holder in cash the difference between the strike price and the market price
of the Company's shares in lieu of repurchasing the stock. During September and
October of 1996, the Company sold put options on 2.9 million shares at strike
prices of $32.04 to $34.125 per share. Options on 7.8 million shares which were
outstanding at September 30, 1996, expired subsequently. The Company repurchased
2.5 million shares and the balance expired unexercised.
Excluding debt of acquired companies and the impact of currency
translation, net debt decreased $40.7 million in the third quarter of 1996 but
increased $395.5 million during the first nine months. The nine-month increase
was primarily a result of the share repurchases by the Company and WTI.
Contingencies -
- ---------------
The Company and its subsidiaries are involved in various matters which
involve contingent liabilities not currently reflected in the financial
statements. See "Notes to Consolidated Financial Statements." There were no
significant changes in any of these matters during the third quarter of 1996.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
-----------------
The majority 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
21
the Company pays fines or penalties in environmental proceedings relating
primarily to waste treatment, storage or disposal or trash-to-energy facilities.
As of September 30, 1996, neither the Company nor any of its subsidiaries was
involved in any such proceeding where it is believed that sanctions involved may
exceed $100,000. Subject to the discussion below concerning the Company's New
Milford, Connecticut landfill, the Company believes that these matters will not
have a material adverse effect on its results of operation or financial
condition. However, the outcome of any particular proceeding cannot be predicted
with certainty, 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.
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.
ITEM 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
The exhibits to this report are listed in the Exhibit Index elsewhere
herein.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated August 13, 1996 reporting (i)
that the Company's majority-owned subsidiary Wheelabrator Technologies Inc.
("WTI") and United States Filter Corporation ("U.S. Filter") had announced (A)
an agreement in principle to form a joint venture to pursue opportunities in the
municipal and industrial water and wastewater treatment operations,
privatization and outsourcing marketplace, and (B) a definitive agreement for
WTI to sell to U.S. Filter all of WTI's industrial water process, manufacturing
and custom-engineered systems business, and (ii) the amendment of the Company's
By-laws to change certain time periods applicable to stockholder nominations for
directors and proposals and otherwise to clarify certain related matters with
respect to stockholder meetings.
22
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WMX TECHNOLOGIES, INC.
/s/ JAMES E. KOENIG
---------------------------------------
James E. Koenig - Senior Vice President
and Chief Financial Officer
November 8, 1996
23
WMX TECHNOLOGIES, INC.
EXHIBIT INDEX
Number and Description of Exhibit*
---------------------------------
2 None
3 None
4 None
10.1 Amended and Restated Employment Agreement dated as of
June 17, 1996 with Phillip B. Rooney
10.2 Employment Agreement dated as of August 15, 1996 with
James E. Koenig
10.3 Employment Agreement dated as of August 15, 1996 with
Herbert A. Getz
10.4 Restricted Stock Agreement dated as of August 15, 1996
with James E. Koenig
10.5 Restricted Stock Agreement dated as of August 15, 1996
with Herbert A. Getz
11 None
12 Computation of Ratios of Earnings to Fixed
Charges
15 None
18 None
19 None
22 None
23 None
24 None
27 Financial Data Schedule
99 None
- -----------------------
* Exhibits not listed are inapplicable.
24