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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, 1996
[_] 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
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK,$1.00 PAR NEW YORK STOCK EXCHANGE ZURICH STOCK EXCHANGE
VALUE 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
NEW YORK STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2012
CHEMICAL WASTE MANAGEMENT, INC.
LIQUID YIELD OPTION NOTES DUE 2010 NEW YORK STOCK EXCHANGE
CONVERTIBLE SUBORDINATED NOTES DUE NEW YORK STOCK EXCHANGE
2005
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. [_]
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
$17,286,000,000 AT FEBRUARY 3, 1997 (BASED ON THE CLOSING SALE PRICE ON THE
NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1997, AS REPORTED BY THE
WALL STREET JOURNAL (MIDWEST EDITION)). AT MARCH 19, 1997, THE REGISTRANT HAD
ISSUED AND OUTSTANDING AN AGGREGATE OF 483,911,069 SHARES OF ITS COMMON STOCK
OF RECORD (EXCLUDING 10,886,361 SHARES HELD IN THE WMX TECHNOLOGIES, INC.
EMPLOYEE STOCK BENEFIT TRUST).
DOCUMENTS INCORPORATED BY REFERENCE
THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S 1996 ANNUAL REPORT TO
STOCKHOLDERS AND OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 9, 1997 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 waste
management 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 and in removing methane gas from
sanitary landfill facilities for use in electricity generation. In addition,
through Waste Management the Company provides Port-O-Let(R) portable
sanitation services to municipalities and commercial and special event
customers. Waste Management also manages the on-site industrial cleaning
services businesses owned by the Company's Rust International Inc. subsidiary.
The Company also provides hazardous waste management services. The Company's
chemical waste treatment, storage, disposal and related services in North
America 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 wholly owned Chem-Nuclear Systems, L.L.C.
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
outside North America 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 services (or has interests in
projects or companies providing such services) in ten countries in Europe,
seven countries in the Asia-Pacific region and Argentina, Brazil, and Israel.
Until February 1997, when the interest was sold, Waste Management
International also had an approximately 20% interest in Wessex Water Plc, an
English publicly traded company providing water treatment, water distribution,
wastewater treatment and sewage services ("Wessex").
Wheelabrator Technologies Inc., an approximately 65%-owned subsidiary of the
Company (referred to herein, together with its subsidiaries, as "WTI"), is a
leading developer of facilities and systems for, and provider of services to,
the trash-to-energy and waste fuel powered independent power markets. 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
2
electrical or steam energy. WTI is also pursuing the development, ownership and
operation of power plants for industrial customers. In addition, WTI is
involved in the treatment and management of biosolids resulting from the
treatment of wastewater by converting them into useful fertilizers and the
recycling of organic wastes into compost material useable for horticultural and
agricultural purposes. WTI also designs, fabricates and installs
technologically advanced air pollution control systems and equipment. In 1996,
WTI sold its water process, manufacturing and custom engineering business and
is in the process of selling its water contract operations, outsourcing and
privatization business. See "Acquisitions and Dispositions" herein.
Rust International Inc., a subsidiary owned approximately 60% by the Company
and 40% by WTI (referred to herein, together with its subsidiaries, as "Rust"),
provides a variety of on-site industrial cleaning services, a business which is
managed by Waste Management, and provides hazardous, radioactive and mixed
waste program and facilities management services, primarily to the United
States Department of Energy and other federal government agencies. Such
services include waste treatment, storage, characterization and disposal and
privatization services. 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"). Rust also provides environmental and infrastructure
engineering and consulting services, a business which is to be sold or
otherwise disposed of. In 1996, Rust sold its process engineering,
construction, specialty contracting and related services business and its
scaffolding rental and erection business. See "Acquisitions and Dispositions"
herein.
The Company also owns an approximately 20% 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 ("ServiceMaster"). The Company has agreed to sell its
interest to ServiceMaster. See "Acquisitions and Dispositions" herein.
The Company's strategic plans call for the Company to focus on the provision
of waste management services and to sell or discontinue various businesses
which do not fit within that focus. The Company has therefore reported its
continuing operations as being within a single industry segment--waste
management services. The Company's continuing consolidated revenues were
approximately $8.5 billion in 1994, $9.1 billion in 1995 and $9.2 billion in
1996. For information relating to the expenses and assets of the Company's
operations, see the Company's Consolidated Financial Statements filed as an
exhibit to this report and incorporated by reference herein and for information
relating to the Company's operations in different geographic groups, see Note
13 thereto. For interim periods, the revenues and net income of certain of the
Company's operations 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 waste management services and related businesses,
including the Company, to modify, supplement or replace equipment and
facilities at costs which may be substantial. Because the continuing business
in which the Company is engaged is 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 8
to 15 of the Company's 1996 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 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.
3
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 waste management 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 business has benefited from increased
governmental regulation, the business 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 business is
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.
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,
1996. Also, unless the context indicates to the contrary, statistical and
financial data appearing under the caption "North American Solid and Hazardous
Waste Management 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 on-site industrial cleaning services business managed
by Waste Management, WTI or Waste Management International. See "International
Waste Management and Related Services" and "Trash-to-Energy and Related
Services."
4
NORTH AMERICAN SOLID AND HAZARDOUS WASTE MANAGEMENT SERVICES
The Company's North American 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 North American 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,
1996, the North American solid and hazardous waste revenue amounted to 67.3%,
68.6% and 69.5% respectively, of the Company's total revenues. For each of the
three years in the period ended December 31, 1996, the following table shows
the percentages of the Company's total North American solid and hazardous
waste services revenue (excluding on-site industrial cleaning services
revenue) arising from the Company's principal solid and hazardous waste
services:
YEAR ENDED DECEMBER 31
-------------------------
1994 1995 1996
------- ------- -------
Solid Waste and Recycling
Collection Services:
Residential............. 20.0% 19.6% 20.0%
Commercial.............. 26.7 26.4 26.2
Roll-off and Industrial. 21.8 21.5 21.5
Solid Waste Disposal,
Transfer and Related
Services................. 21.2 23.4 24.1
Hazardous Waste Services.. 10.3 9.1 8.2
------- ------- -------
100.0% 100.0% 100.0%
======= ======= =======
SOLID WASTE MANAGEMENT, RECYCLING AND RELATED SERVICES
At December 31, 1996, Waste Management conducted solid waste management,
recycling and related services operations in 47 states, the District of
Columbia, four Canadian provinces and Mexico. During 1994, 1995 and 1996,
operations in California, Florida and Pennsylvania together accounted for
approximately 30%, 28% and 26%, respectively, of North America solid waste
revenue. No customer accounted for as much as 1% of such revenue in 1994, 1995
or 1996.
COLLECTION
Waste Management provides solid waste collection services to approximately
1.1 million commercial and industrial customers. Collection services are also
provided to approximately 11.8 million 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 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.
5
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 159 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 competition,
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 competition,
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.
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
6
quality of such materials, prices for new materials and other factors. In some
instances, the Company enters into agreements with customers or the local
governments of municipalities in which it provides recycling services whereby
the customers or 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 1996, Waste Management provided curbside recycling services to
approximately 7.9 million households in the United States and Canada. Waste
Management has approximately 197,000 commercial and industrial recycling
services customers.
Waste Management operates 140 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 four glass processing facilities. During
1996, the Stone Container joint venture marketed approximately 4.9 million
tons of paper fiber and the American National Can joint venture processed
approximately 400,000 tons of other recyclable materials. Waste Management
also provides tire and demolition and construction debris recycling services.
Energy Recovery
At 37 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 sold directly to industrial users or 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.
The Company also engages in other resource recovery activities through WTI's
trash-to-energy and related operations and Waste Management International's
operations. See " Trash-to-Energy and Related Services" and "International
Waste Management and Related Services."
DISPOSAL
Waste Management operates 133 solid waste sanitary landfill facilities. Of
this number, 105 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 Management 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
7
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.
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 1994, 1995 and 1996 approximately 55%, 57% and 60%,
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 competition 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 on-site industrial cleaning services and portable sanitation
services.
Waste Management manages the business of Rust Industrial Services Inc., a
subsidiary of Rust ("RIS"), providing on-site industrial services. RIS performs
a variety of types of industrial services --water blasting, tank cleaning,
explosives blasting, chemical cleaning, industrial vacuuming, catalyst handling
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 assists clients in the nuclear and utility industries
in solving electrical, mechanical, engineering and related technical services
problems.
Prior to selling the businesses in 1996 and early 1997, RIS also provided
scaffolding rental and erection services primarily to the chemical,
petrochemical and utilities industries and a variety of other on-site services.
Rust also provides hazardous, radioactive and mixed waste program and
facilities management services, primarily to the United States Department of
Energy and other federal government agencies. Such services include waste
treatment, storage, characterization and disposal and privatization services.
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.
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 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.
All of the Company's seven United States secure land disposal facilities
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
9
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 Management 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
the wastes on-site, and the uncertain regulatory environment regarding
hazardous waste management and remediation requirements. These factors have led
to reduced demand and increased pressure on pricing for chemical waste
management services, conditions 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 three 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.
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 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. International waste management and related
services comprised approximately 20.2%, 20.6% and 20.8% of the Company's
10
total revenue in each of the three years ended December 31, 1996. 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
revenue 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
---------------------------
1994 1995 1996
------- ------- -------
Collection Services............................... 64% 64% 65%
Treatment and Disposal Services................... 36% 36% 35%
While the Company has had international operations since the mid-1970's, the
bulk of the Company's international operations and revenues are derived from
the acquisition from 1990 to 1995 of numerous companies and interests in
Europe. However, with its acquisition goals largely completed, Waste Management
International has engaged in only a few additional small acquisitions since
1995 and has begun to dispose of certain operations which do not fit its long-
term strategy.
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.
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 (26%) and Germany (12%) in 1994,
Italy (23%), Germany (14%), The Netherlands (11%) and the United Kingdom (11%)
in 1995 and Italy (25%), the United Kingdom (12%), Germany (11%) and The
Netherlands (11%) in 1996.
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.
Following a strategic assessment of the European market, Waste Management
International intends to reduce its investment in France, Spain and Austria
during 1997 through joint ventures or the sale of various operations within
those countries. Waste Management International intends to focus its resources
on those markets in which it believes it can attain significant market share.
Waste Management International has also written off the investment in its
hazardous waste disposal facility in Germany because recent regulatory changes
have adversely affected its volumes.
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, 1996
to governmental and private customers in ten European countries, Argentina,
Australia and New Zealand. Business is obtained through public bids or tenders,
negotiated contracts, and, in the case of commercial and industrial
11
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 1,420 municipal contracts, serving more than 6.3 million
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 1.85 million residential properties. Pricing for
municipal contracts is generally based on volume of waste, number and 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 300,000 commercial and
industrial customers. Contract terms and prices vary substantially among
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. 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,
1996, Waste Management International owned, operated or maintained 26 waste
treatment facilities, 85 recycling and recyclables processing facilities, eight
incinerators and 56 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 determinants
of the disposal method are the disposal costs at local landfills, as
incineration is generally more expensive, community preferences and regulatory
provisions.
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, Italy,
12
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 comply
with that country's stringent 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 49,000 megawatt hours to the local power
grid in 1996.
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. 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. During 1996, Waste
Management International and the County discussed the viability of the
project, as well as the County's ability to terminate the operations and lease
agreements for the project site, which Waste Management International opposes
unless there is adequate compensation.
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 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.
TRASH-TO-ENERGY AND RELATED SERVICES
WTI, through its subsidiaries, is a leading developer, operator and owner of
trash-to-energy and waste fuel powered independent power facilities in the
United States. These facilities, either owned or operated, give WTI
approximately 920 megawatts per hour of electric generating capacity. WTI's
trash-to-energy projects utilize proven boiler and grate technology and are
capable of processing up to 23,750 tons of trash per day. 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
13
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 customers, including utilities and private
industry. Cogeneration is a technology which allows the simultaneous
production 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.
These power systems use waste wood, waste tires, waste coal or natural gas as
fuel, and employ state-of-the-art technology, such as fluidized-bed
combustion, to ensure the efficient burning of fuel with reduced emission
levels. WTI acquired two industrial cogeneration plants (so-called "inside-
the-fence" facilities) during the year as part of its strategy to leverage its
energy plant operating capabilities and project financing expertise by owning
or operating power plants for industrial customers. The first facility,
located in Martell, California, was acquired in May 1996 and the second plant,
located in Anderson, California near one of the Company's other facilities,
was purchased in November 1996.
In addition, WTI develops, operates and owns projects that compost organic
wastes and treat and manage biosolids. WTI provides a range of biosolids
management services, including land application, drying, pelletizing, alkaline
stabilization and composting, to more than 400 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 three facilities currently in operation, with one other
facility undergoing start-up activity. WTI has approximately 635 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.
WTI subsidiaries also design and install advanced air pollution control
equipment and design, construct and maintain tall concrete chimneys and
storage silos. WTI's expertise in air pollution control technologies and
chimney design and construction is used in the design and construction of
WTI's trash-to-energy facilities, which WTI believes strengthens its
competitive position.
REGULATION
While, in general, the Company's waste management services business has
benefited from increased governmental regulation, the industry in which the
Company operates 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 industry 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 industry, 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
14
facilities or restriction of operations, which could result in a loss of
earnings from a facility, a write-off of capitalized costs 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 waste management 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 is 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. An effect
of these and similar laws is to reduce the volume of wastes that would
otherwise be disposed in 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.
The demand for certain of the services provided by the Company, particularly
its hazardous waste management services, is dependent in part 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
continues to consider proposals under RCRA to redefine the term "hazardous
waste" for regulatory purposes. Under some such proposals, 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 proposals 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 proposals 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
15
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 waste management services 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 waste management 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 MANAGEMENT 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 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
16
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 a 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. Compliance with the new regulations 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.
All of Waste Management's and CWM's chemical waste treatment or disposal
facilities in the United States have been issued permits under RCRA. 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.
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. 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
17
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.
TRASH-TO-ENERGY 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, within the next several years, the air pollution
control systems at certain trash-to-energy facilities owned or leased by WTI
most likely will be required to be modified to comply with more stringent air
pollution control standards adopted by the EPA in December 1995 for municipal
waste combusters. The compliance dates will vary by facility, but, subject to
the final decision in certain litigation which could result in up to an 18-
month delay in the deadlines, all affected facilities most likely will be
required to be in compliance with the standards by the end of the year 2000.
Currently available technologies will be adequate to meet the new standards.
Although the total expenditures required for such modifications are estimated
to be $190 million to $230 million, they are not expected to have a material
adverse effect on WTI's liquidity or results of operations because provisions
in the impacted facilities' long-term waste supply agreements generally allow
WTI to recover from customers the majority of incremental capital and
operating costs. 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.
Also, in May 1994, the U.S. Supreme Court ruled that state and local
governments may not constitutionally restrict the free movement of trash in
interstate commerce through the use of flow control laws. Such laws typically
involve a municipality specifying the disposal site for all solid waste
generated within its borders. Since the ruling, several decisions of state or
federal courts have invalidated regulatory flow control schemes in a number of
jurisdictions. Other judicial decisions have upheld non-regulatory means by
which municipalities may effectively control the flow of municipal solid
waste. There can be no assurance that such alternatives to regulatory flow
control will in every case be found lawful. WTI's Gloucester County, New
Jersey facility relies on a disposal franchise for substantially all of its
supply of municipal solid waste. In July 1996, a Federal District Court
permanently enjoined the State of New Jersey from enforcing its solid waste
regulatory flow control system, which was held to be unconstitutional, but
stayed the injunction for as 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 indicated that it will continue to
enforce flow control during the two-year transition period and has filed an
appeal of the Federal District Court's ruling. The New Jersey legislature is
now considering a bill to authorize counties and authorities, including the
Gloucester County Improvement Authority, which administers WTI's franchise
there, to implement a constitutionally permissible system of "economic flow
control" designed to recover waste disposal costs incurred in reliance on the
state's franchise system. The Supreme Court's 1994 ruling and subsequent court
decisions have not to date had a material adverse effect on any of WTI's
trash-to-energy
18
operations. Federal legislation has been proposed, but not yet enacted, to
effectively grandfather existing flow control mandates. In the event that such
legislation is not adopted, WTI believes that affected municipalities will
endeavor to implement alternative lawful means to continue controlling the
flow of waste. In view of the uncertain state of the law at this time,
however, WTI is unable to predict whether such efforts would be successful or
what impact, if any, this matter might have on WTI's trash-to-energy
facilities.
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 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. As the states and the
United States Congress have accelerated their consideration of the manner in
which economic efficiencies can be gained by deregulating the electric
generation industry, utilities and others have taken the position that power
sales agreements entered into pursuant to PURPA which provide for rates in
excess of current market rates should be voidable as "stranded assets." WTI's
25 power production facilities are qualifying facilities under PURPA and
depend on the sanctity of their power sales agreements for their economic
viability. Although a repeal or modification of PURPA is possible within the
next two years, WTI believes it unlikely that such action would retroactively
abrogate the long-term contracts and rate orders pursuant to which most of
WTI's existing projects sell electricity. Furthermore, the operations of WTI's
existing trash-to-energy and other small power production facilities business
are not expected to be materially and adversely affected if the various
benefits of PURPA are repealed or substantially reduced on a prospective
basis. Finally, the passage of the Energy Policy Act of 1992 created an
alternative ownership mechanism by which WTI's future independent power
projects would be able to participate in the electricity generation industry
without the burdens of traditional public utility regulation. However, WTI can
give no assurances that future utility restructurings, court decisions or
legislative or administrative action in this area will not have a material
adverse impact on WTI's financial position or results of operations.
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.
19
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 or reserves will have been accrued over the life
of the facility to provide for 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.
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. For the federal government's 1996 fiscal year, a
maximum of approximately $1.4 billion of Superfund spending was authorized. The
federal government has also approved approximately the same amount of 1997
Superfund spending authorization.
The U. S. Congress is expected to consider reauthorization and revision of
the Superfund statute in 1997. In addition to possible changes in the statute's
funding mechanisms and provisions for
20
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 new procedure for the adoption of waste management legislation
(other than for proposals of a primarily fiscal nature), which 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.
21
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 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 portable sanitation
service business, and the on-site industrial cleaning services business of Rust
managed by Waste Management, from numerous large and small competitors. In
addition, Rust's program and facilities management business encounters intense
competition, primarily in pricing, quality and reliability of services, from
various sources in all aspects of its business.
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.
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.
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"), 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
22
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 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-cancelable by WTI or Waste Management
International without the other's consent prior to 2000. If the arrangement is
canceled, 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 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. 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 in 1995 and its scaffolding rental
and erection business in 1996, the Company and Rust agreed with the respective
purchasers not to engage in providing those services in North America prior to
2002 (in the case of the remediation business) and 2001 (in the case of the
scaffolding business). In connection with WTI's sale of its water process,
manufacturing and custom engineering
23
business, WMX and WTI agreed with the purchaser not to engage in such business
in the United States or any other country in which WTI conducted such business
at the time of sale until 2001.
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 59,700
persons in their worldwide continuing operations. Of this number, the Company
employs approximately 38,400 persons in its North American solid and hazardous
waste management services operations (excluding employees of the Rust on-site
industrial cleaning services business operated by Waste Management). Of this
total, approximately 29,100 persons (including 2,400 contract workers) are
employed in solid and hazardous waste collection, transfer, resource recovery
and disposal activities, and approximately 9,300 in managerial, executive,
sales, clerical, data processing and other solid waste and related activities.
As of December 31, 1996, Waste Management International employed
approximately 16,500 persons. Of this number, approximately 12,700 persons were
employed in its collection services operations, 2,400 in its treatment and
disposal services operations and 1,400 in administrative functions.
WTI has approximately 2,100 full-time employees in its continuing operations.
Rust employed approximately 2,700 persons at December 31, 1996 in the on-site
industrial cleaning services business managed by Waste Management and Rust's
program and facilities management services business.
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
24
businesses following acquisition by the Company. During 1996, the Company
continued to acquire additional operations in the waste management 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 significantly decreased, and the Company has
disposed of significant amounts of non-waste management services businesses and
assets, as well as underperforming or poorly positioned waste management
services businesses. As it focuses on its core waste management services
business, the Company intends to continue engaging in such dispositions. See
below. The Company's growth prospects may be affected by the decision to engage
in such dispositions and 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 acquisition of businesses 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
attempting to obtain 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.
In June 1996, Rust sold its process engineering and construction business to
Raytheon Engineering Inc.
In September 1996, Rust sold its scaffolding rental and erection services
business to Brand Scaffold Services, Inc. for approximately $190 million.
In December 1996, WTI sold its water process, manufacturing and custom
engineering business to United States Filter Corporation ("U.S. Filter") for
approximately $370 million.
Also in December 1996, Waste Management International announced plans to sell
its approximately 20% interest in Wessex. The sale was completed in February
1997.
In addition, as part of its program to dispose of approximately $1.5 billion
of non-core or underperforming assets over the next 18 to 24 months, the
Company has announced the following:
. an agreement reached in February 1997 to sell its approximately 20%
interest in ServiceMaster to ServiceMaster for approximately $626
million in the second quarter of 1997, subject to ServiceMaster's
reaching suitable agreements with its lenders;
. the planned sale by WTI of its remaining water services business to U.S.
Filter for approximately $77 million;
. the planned sale by Rust of its remaining domestic and international
engineering and consulting business;
. the planned sale of approximately $400 million of non-integrated waste
management services businesses in North America;
25
. reduced investment by Waste Management International in all or parts of
businesses in France, Spain and Austria by creating joint ventures or
selling operations within these countries; and
. the planned sale of non-core and non-contributing real estate holdings.
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, 1996 represented approximately 20%, 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 1997. The Company's subsidiaries lease numerous office and operating
facilities throughout the world. For the year ended December 31, 1996,
aggregate annual rental payments on real estate leased by the Company and its
subsidiaries approximated $103.8 million.
The principal fixed assets of Waste Management consist of vehicles and
equipment (which include, among other items, approximately 21,400 collection
and transfer vehicles, 1.6 million containers and 25,100 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, 1996, 105 solid waste disposal facilities, aggregating
approximately 66,400 total acres, including approximately 15,950 permitted
acres, were owned by Waste Management in the United States and Canada and 28
facilities, aggregating approximately 13,725 total acres, including
approximately 5,750 permitted acres, were leased from parties not affiliated
with Waste Management under leases expiring from 1997 to 2085. At December 31,
1996, 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
United States chemical waste facilities with secure land disposal sites
aggregated approximately 7,875 acres, including approximately 1,475 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, 1996 represented approximately 8.8% and 19.7%, respectively, of
Waste Management International's assets. The principal fixed assets utilized in
Waste Management International's collection services operations at December 31,
1996, consisted of vehicles and equipment (which included, among other items,
approximately 7,000 collection, transportation, and other route vehicles and
approximately 260 pieces of landfill and other heavy equipment), and
approximately 307,000 containers, including approximately 3,850 stationary
compactors. In addition, Waste Management International owns approximately 730
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,
1996, consisted of 56 landfills, 26 waste treatment facilities, 85 recycling
and recyclables processing facilities, eight 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, eight
cogeneration and small power production facilities, two coal handling
facilities, three 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 1998 to 2020,
subject to renewal options in certain cases.
26
ITEM 3. LEGAL PROCEEDINGS.
The continuing business in which the Company is engaged is 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.
In December 1996, a CWM subsidiary paid a civil penalty of $100,000 to settle
an administrative proceeding brought by the New York State Department of
Environmental Conservation involving alleged violation by the subsidiary of
leachate management regulations from 1994 to 1996 at the subsidiary's Model
City, New York facility. In settling this matter, the subsidiary did not admit
any violation of law.
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 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, 1996, the Company or its subsidiaries had been notified
that they are potentially responsible parties in connection with 103 locations
listed on the Superfund National Priority List ("NPL"). Of the 103 NPL sites at
which claims have been made against the Company, 18 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 18 owned
facilities, the Company is working in conjunction with the government to
characterize or to remediate identified site problems. In addition, at these 18
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 85 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
27
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 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. In November 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 Connecticut Supreme Court
has upheld that ruling. The Company believes that removal of such waste is an
inappropriate remedy and is seeking an alternative resolution of the issue. The
Company is unable to predict the outcome of the issue or any removal action
that may ultimately be required as a result of the permitting process. However,
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
28
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 140 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
nearly complete as to the 12 sites in the first phase of the case and discovery
is expected to continue for several years as to the remaining sites. A trial
date has been set for October 14, 1997 as to the first phase sites. No trial
date has been set as to the remaining sites. 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 potential 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 1996.
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 65, has been a director of the Company and has served
as Chairman of the Board of the Company since 1968. Since February 1997, he has
served as acting Chief Executive Officer. He had previously served as Chief
Executive Officer from 1968 to June 1996. 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.
Herbert A. Getz, age 41, 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 from July 1995 to January
1997, 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 a director of NSC and OHM.
Thomas C. Hau, age 61, 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.
Joseph M. Holsten, age 44, has been Executive Vice President and Chief
Operating Officer of the Company since February 1997. He was Chief Executive
Officer of Waste Management International from July 1995 to March 1997. From
October 1993 to July 1995, he was Executive Vice President
29
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 49, has been Executive Vice President of the Company
since February 1997. He was a Senior Vice President of the Company from May
1992 to February 1997, Treasurer of the Company from 1986 to July 1996 and
Chief Financial Officer of the Company from 1989 to February 1997. 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 54, 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.
John D. Sanford, age 43, has been Senior Vice President and Chief Financial
Officer of the Company since February 1997. He also has been Treasurer since
July 1996. He was Vice President--Project Finance of the Company from March
1996 to February 1997. He was also the Vice President, Chief Financial Officer
and Treasurer of WTI from 1993 to February 1997 and Executive Vice President of
WTI from 1995 to February 1997. From February to May 1993, Mr. Sanford was
Staff Vice President--Finance of WTI. He also served as Vice President and
Chief Financial Officer of WTI's Wheelabrator Energy Systems Inc. subsidiary
from 1987 to 1993.
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.
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
1996 QUARTERLY
SUMMARY
--------------- CASH DIVIDENDS
HIGH LOW DECLARED PER SHARE
------- ------- ------------------
First........................................ $32 1/8 $27 3/4 $.15
Second....................................... 36 1/8 31 5/8 .16
Third........................................ 33 1/4 28 5/8 .16
Fourth....................................... 36 5/8 32 1/8 .16
30
At March 19, 1997, the Company had approximately 50,000 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. No Company
shares were repurchased under this program in 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 1996,
the Company purchased 14,390,000 shares pursuant to this program at a cost of
approximately $473,560,000. In February 1997, the Company's Board of Directors
approved a new repurchase program to replace the program approved in December
1995. Under the new program, the Company is authorized to purchase during 1997
and 1998 up to 50 million shares of its common stock in the open market, in
privately negotiated transactions or through issuer tender offers.
During 1994, 1995 and 1996, the Company sold put options on 42.3 million
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. For information concerning the exercise or
expiration of these put options and related information, see "Management's
Discussion and Analysis of Results of Operations and Financial Condition--
Financial Condition--Capital Structure" incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information for each of the
five years in the period ended December 31, 1996 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.
31
YEAR ENDED DECEMBER 31
-----------------------------------------------------------
1992(1) 1993(2)(3) 1994(3) 1995(3)(4) 1996(3)(5)
----------- ----------- ----------- ----------- -----------
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
Revenue from continuing
operations............. $ 8,661,027 $ 7,827,280 $ 8,482,718 $ 9,053,018 $ 9,186,970
Income from continuing
operations............. $ 850,036 $ 418,086 $ 742,306 $ 618,243 $ 477,791
Earnings per common and
common equivalent
share--continuing
operations............. $ 1.72 $ .86 $ 1.53 $ 1.27 $ .97
Total assets............ $14,114,180 $16,080,265 $17,083,042 $18,364,274 $18,366,592
Long-term debt, less
portion payable within
one year............... $ 4,312,511 $ 6,143,685 $ 6,024,478 $ 6,390,041 $ 6,971,607
Dividends per share..... $ .50 $ .58 $ .60 $ .60 $ .63
- --------
(1) 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.
(2) 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.
(3) In 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. During 1996, the sale of the industrial
process engineering and construction businesses, based in Birmingham,
Alabama, was completed. In 1996, WTI sold its water process systems and
equipment manufacturing businesses, and Rust sold its industrial
scaffolding business. WTI entered into an agreement to sell its water and
wastewater facility operations and privatization business and Rust began
implementing plans to exit its remaining domestic and international
engineering and consulting business. CWM is also exiting its fuels blending
business. Accordingly, these 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.
(4) 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.
(5) The results for 1996 include special charges of $107,900,000 (before
minority interest) related to Waste Management International's sale of its
investment in Wessex and a charge of $169,500,000 (before minority
interest) to revalue its investments in France, Austria and Spain in
contemplation of exiting all or part of these markets or forming joint
ventures and to write off an
32
investment in a hazardous waste disposal facility. Also in 1996, the Company
and CWM recorded special charges of $255,000,000 (before tax) for
reengineering their finance and administrative functions and increasing
reserves for certain litigation. See Note 14 to the Company's Consolidated
Financial Statements.
(6) Certain amounts have been restated to conform to 1996 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, 1996, 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 8 to 15 of the Company's
1996 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, 1995 and 1996,
Consolidated Statements of Income, Stockholders' Equity and Cash Flows for each
of the years in the three-year period ended December 31, 1996 and Notes to
Consolidated Financial Statements set forth on pages 17 to 36 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 2 of the Company's proxy
statement for the annual meeting scheduled for May 9, 1997 (the "Proxy
Statement") for a description of the directors and a director nominee 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 11 through 17 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
33
Statement, for certain information respecting ownership of common stock of the
Company, WTI and Waste Management International, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the paragraph under the caption "Compensation Committee
Interlocks and Insider Participation" on page 17 of the Proxy Statement and the
information set forth under the caption "Certain Transactions" beginning on
page 27 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, 1996;
(ii) Consolidated Balance Sheets--December 31, 1995 and 1996;
(iii) Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1996;
(iv) Consolidated Statements of Cash Flows for the three years ended
December 31, 1996;
(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) Amended and Restated Employment Agreement, dated as of June 17,
1996, by and between the registrant and Phillip B. Rooney (Exhibit 10.1
to registrant's report on Form 10-Q for the quarter ended September 30,
1996)
34
(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 24, 1995 (Exhibit 10.7 to
registrant's 1995 annual report on Form 10-K)
(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 (Exhibit 10.11 to registrant's 1995 annual report on Form 10-
K)
(xii) Amendment No. 1 to WMX Technologies Inc. Non-Qualified Profit
Sharing and Savings Plus Plan (filed with this report)
(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 (Exhibit 10.21 to registrant's 1995 annual
report on Form 10-K)
(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. Amended and Restated 1992 Stock Option
Plan for Non-Employee Directors (filed with their report)
(xxiv) Wheelabrator Technologies Inc. 1992 Stock Option Plan (Exhibit
10.45 to the 1991 annual report on Form 10-K of Wheelabrator
Technologies Inc.)
35
(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)
(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)
(xxxi) Employment Agreement dated as of August 15, 1996 between the
registrant and James E. Koeing (Exhibit 10.2 to registrant's report on
Form 10-Q for the quarter ended September 30, 1996)
(xxxii) Employment Agreement dated as of August 15, 1996 between the
registrant and Herbert A. Getz (Exhibit 10.3 to registrant's report on
Form 10-Q for the quarter ended September 30, 1996)
(xxxiii) Restricted Stock Agreement dated as of August 15, 1996
between the registrant and James E. Koenig (Exhibit 10.4 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
(xxxiv) Restricted Stock Agreement dated as of August 15, 1996
between the registrant and Herbert A. Getz (Exhibit 10.5 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
(xxxv) Letter Agreement dated as of February 17, 1997 between the
registrant and Phillip B. Rooney (filed with this report)
(xxxvi) WMX Technologies, Inc. 1997 Equity Incentive Plan (Exhibit A
to registrant's Proxy Statement for its 1997 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 1996, the Company filed reports on Form 8-K as
follows:
(i) a report dated December 13, 1996 reporting under item 5 the issuance
of a news release indicating that CWM would appeal the decision of the
United States District Court for the Western District of Tennessee in
Memphis, Tennessee, which held CWM liable for approximately $76.5 million
in contract damages and $15 million in punitive damages in a dispute with
the former owners of CWM's Emelle, Alabama hazardous waste landfill and the
possibility that the Company might record a charge in the fourth quarter of
1996 that would have a material adverse effect on the registrant's results
of operations; and
36
(ii) a report dated December 18, 1996 reporting under item 5 the issuance
of a news release announcing that (a) Waste Management International had
reached an agreement with Wessex Water Plc ("Wessex") to sell its 19.5%
equity investment in Wessex, (b) the agreement would generate a charge in
the fourth quarter of 1996 of approximately $88 million after tax, or $.18
per share, and have a $.04 per share negative impact on the Company's 1997
earnings, (c) upon completion of the Wessex transaction the Company will
have generated nearly $1 billion in cash from the disposition of non-core
and underperforming assets, the target it established in May 1996, and (d)
the registrant expects to monetize additional assets, including other non-
core equity investments, real estate and underperforming core businesses.
37
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
--------- ------- -------- -------- ----------- -------
1994--Reserve for
doubtful accounts (B)
(C).................... $57,279 $33,720 $(38,621) $5,072 $1,760 $59,210
======= ======= ======== ====== ====== =======
1995--Reserve for
doubtful accounts (C).. $59,210 $38,914 $(39,224) $1,814 $1,213 $61,927
======= ======= ======== ====== ====== =======
1996--Reserve for
doubtful accounts...... $61,927 $39,148 $(57,681) $4,374 $ (245) $47,523
======= ======= ======== ====== ====== =======
- --------
(A) Reserves of companies accounted for as purchases.
(B) Includes reserves for doubtful long-term notes receivable.
(C) Restated to exclude discontinued operations.
38
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 1996 filed as an exhibit to and incorporated
by reference in this Form 10-K, and have issued our report thereon dated
February 3, 1997. Our audit was made for the purpose of forming an opinion on
those statements taken as a whole. The schedule included on page 38 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 3, 1997
39
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 26TH DAY OF MARCH 1997.
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
DEAN L. BUNTROCK Chief Executive
Officer
/s/ Jerry E. Dempsey Director
- -------------------------------------
JERRY E. DEMPSEY
/s/ Donald F. Flynn Director
- -------------------------------------
DONALD F. FLYNN
/s/ Peer Pedersen Director
- -------------------------------------
PEER PEDERSEN
/s/ James R. Peterson Director
- -------------------------------------
JAMES R. PETERSON
/s/ Alexander B. Trowbridge Director
- -------------------------------------
ALEXANDER B. TROWBRIDGE
/s/ H. Jesse Arnelle Director
- -------------------------------------
H. JESSE ARNELLE
/s/ Pastora San Juan Cafferty Director
- -------------------------------------
PASTORA SAN JUAN CAFFERTY March 26, 1997
/s/ James B. Edwards Director
- -------------------------------------
JAMES B. EDWARDS
/s/ Paul M. Montrone Director
- -------------------------------------
PAUL M. MONTRONE
/s/ Steven G. Rothmeier Director
- -------------------------------------
STEVEN G. ROTHMEIER
/s/ Peter H. Huizenga Director
- -------------------------------------
PETER H. HUIZENGA
/s/ Howard H. Baker, Jr. Director
- -------------------------------------
HOWARD H. BAKER, JR.
/s/ Thomas C. Hau Vice President,
- ------------------------------------- Controller and
THOMAS C. HAU Principal
Accounting Officer
/s/ John D. Sanford Senior Vice
- ------------------------------------- President, Chief
JOHN D. SANFORD Financial Officer,
Treasurer and
Principal Financial
Officer
40
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 30, 1997
4.1(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)
4.1(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)
4.2 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
- --------
* 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*
----------------------------------
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 Amended and Restated Employment Agreement, dated as of June 17, 1996, by
and between the registrant and Phillip B. Rooney (incorporated by
reference to Exhibit 10.1 to registrant's report on Form 10-Q for the
quarter ended September 30, 1996)
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 (incorporated by reference
to Exhibit 10.7 to registrant's 1995 annual report on Form 10-K)
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 (incorporated by reference to Exhibit 10.11 to registrant's 1995
Annual Report on Form 10-K)
10.12 Amendment No. 1 to the WMX Technologies, Inc. Non-Qualified Profit
Sharing and Savings Plus Plan
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)
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)
- --------
* 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*
----------------------------------
10.17 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 (incorporated by reference to Exhibit 10.21 to
registrant's 1995 annual report on Form 10-K)
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. Amended and Restated 1992 Stock Option Plan for
Non-Employee Directors
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)
10.34 Employment Agreement dated as of August 15, 1996 between the registrant
and James E. Koenig (incorporated by reference to Exhibit 10.2 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
10.35 Employment Agreement dated as of August 15, 1996 between the registrant
and Herbert A. Getz (incorporated by reference to Exhibit 10.3 to
registrant's report on Form 10-Q for the quarter ended September 30,
1996)
10.36 Restricted Stock Agreement dated as of August 15, 1996 between the
registrant and James E. Koenig (incorporated by reference to Exhibit
10.4 to registrant's report on Form 10-Q for the quarter ended September
30, 1996)
10.37 Restricted Stock Agreement dated as of August 15, 1996 between the
registrant and Herbert A. Getz (incorporated by reference to Exhibit
10.5 to registrant's report on Form 10-Q for the quarter ended September
30, 1996)
10.38 Letter Agreement dated as of February 17, 1997 between the registrant
and Phillip B. Rooney
10.39 WMX Technologies, Inc. 1997 Equity Incentive Plan (incorporated by
reference to Exhibit A to the registrant's Proxy Statement for its 1997
Annual Meeting of Stockholders)
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, Footnotes 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