Exhibit 12
WASTE MANAGEMENT, INC.
Ratio of Earnings to Fixed Charges
For the six years ended December 31, 1997
(Unaudited)
(millions of dollars, except ratio)
Restated/(1)/
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1992/(2)/ 1993/(3)/ 1994 1995/(4)(5)/ 1996/(6)/ 1997/(7)/
--------- --------- ------- ------------ --------- ------------
Income (Loss) From Continuing Operations
Before Income Taxes,
Undistributed Earnings from
Affiliated Companies, Minority
Interest, and Cumulative Effect of
Accounting Changes................. $1,409.8 $ 587.1 $ 1,192.0 $ 954.5 $ 667.6 $ (1,000.2)
Interest Expense....................... 315.8 388.3 456.1 507.8 498.0 472.9
Capitalized Interest................... (86.5) (100.6) (105.9) (43.9) (35.6) (26.0)
One-Third of Rents Payable
in the Next Year................... 44.7 48.5 53.9 56.8 51.4 46.8
-------- --------- --------- --------- --------- ----------
Income (Loss) From Continuing Operations
Before Income Taxes,
Undistributed Earnings from
Affiliated Companies, Minority
Interest, and Cumulative Effect of
Accounting Changes, Plus Interest and
One-Third of Rents.................. $1,683.8 $ 923.3 $ 1,596.1 $ 1,475.2 $ 1,181.4 $ (506.5)
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Interest Expense........................ $ 315.8 $ 388.3 $ 456.1 $ 507.8 $ 498.0 $ 472.8
One-Third of Rents Payable in the
Next Year........................... 44.7 48.5 53.9 56.8 51.4 46.8
-------- --------- --------- --------- --------- ----------
Interest Expenses plus One-Third
of Rents............................ $ 360.5 $ 436.8 $ 510.0 $ 564.6 $ 549.4 $ 519.6
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Ratio of Earnings to
Fixed Charges....................... 4.67 to 1 2.11 to 1 3.13 to 1 2.61 to 1 2.15 to 1 N/A
Coverage Deficiency(8).................. - - - - - $ 1,026.1
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Notes:
(1) As a result of a comprehensive review, begun in the third quarter of 1997
the Company determined that certain items of expense were incorrectly
reported in previously issued financial statements. The Company has
accordingly restated its financial results for the years 1992 through 1996.
Stockholders' equity, at December 31, 1991, was restated from $4,133.1
million to 3,934.5 million. (See Note 2 to Consolidated Financial
Statements).
(2) The results for 1992 include a non-taxable gain of $351.1 million (before
minority interest) resulting from the initial public offering of WM
International, less $80.6 million of related exit costs, primarily to write
down international assets not included in WM International, as well as
special charges of $219.9 million (before tax and minority interest)
primarily related to writedowns of the Company's medical waste business,
CWM incinerators in Chicago, Illinois, and Tijuana, Mexico, a former
subsidiary's investment in its asbestos abatement business, and certain
costs incurred by the former subsidiary and CWM related to the formation of
Rust.
(3) The results for 1993 include a non-taxable gain of $15.1 million (before
minority interest), relating to the issuance of shares by Rust, as well as
a special asset revaluation and restructuring charge of $524.8 million
(before tax and minority interest) recorded by CWM related primarily to a
revaluation of its thermal treatment business, and a provision of
approximately $14 million to adjust deferred income taxes resulting from
the 1993 tax law change.
(4) The results for 1995 include a special charge of $140.6 million (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 $194.6 million
(before tax and minority interest) recorded by WM International relating to
actions it had decided to take 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.
(5) 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 business, 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. These businesses were classified as
discontinued operations in the financial statements. The Rust disposition
was not completed within one year, and accordingly in 1997 this business
has been reclassified back into continuing operations, as operations held
for sale, in accordance with generally accepted accounting principles. The
unused portion ($87.0 million) of the previously recorded provision for
loss on disposal was reversed in discontinued operations, and an impairment
loss provision of $122.2 million was recognized in continuing operations.
(6) The results for 1996 include special charges of $47.1 million (before tax
and minority interest) related to WM International's sale of its investment
in Wessex and a charge of $169.5 million (before tax and minority interest)
to revalue its investments in France, Austria and Spain in contemplation of
exiting these markets and to write off an investment in a hazardous waste
disposal facility. Also in 1996, WMNA and CWM recorded special charges of
$154.1 million (before tax) for reengineering their finance and
administration functions and increasing reserves for certain litigation.
(7) In 1997, the Company recorded a special charge of $41.6 million (pretax)
for severance related to WMNA and WM International recorded a charge of
$104.4 million (before tax and minority interest) to reflect costs of
demobilization following the loss of the contract renewal for Buenos Aires,
Argentina, divestiture or closure of underperforming businesses, and the
writeoff of projects it decided to no longer pursue. Also in 1997, the
Company recorded an asset impairment loss and restated prior year financial
statements to retroactively recognize impairment losses in earlier years.
See Note 16 to Consolidated Financial Statements.
(8) Earnings are inadequate to cover fixed charges in 1997. Coverage deficiency
represents the amount that earnings would have to increase ($1,026.1
million) to cover fixed charges and bring the ratio of earnings to fixed
charges to one-to-one.