-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TyAqvLDthsJhwMeSoiQGKz0kZUIkjkU7a2G5skAr1s6FduRxMgGKBiNE/CmtsEfW RVxT6Rp99/LPnd67UUhTTw== 0000950131-96-001323.txt : 19960401 0000950131-96-001323.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950131-96-001323 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WMX TECHNOLOGIES INC CENTRAL INDEX KEY: 0000104938 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 362660763 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07327 FILM NUMBER: 96541025 BUSINESS ADDRESS: STREET 1: 3003 BUTTERFIELD RD CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7085722478 MAIL ADDRESS: STREET 1: 3003 BUTTERFIELD ROAD CITY: OAKBROOK STATE: IL ZIP: 60521 FORMER COMPANY: FORMER CONFORMED NAME: WASTE MANAGEMENT INC DATE OF NAME CHANGE: 19930527 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-7327 ---------------- WMX TECHNOLOGIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-2660763 (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 3003 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60521 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)(ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (708) 572-8800 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE ZURICH STOCK EXCHANGE CHICAGO STOCK EXCHANGE GENEVA STOCK EXCHANGE LONDON STOCK EXCHANGE BASLE STOCK EXCHANGE FRANKFURT STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2001 NEW YORK STOCK EXCHANGE 8 3/4% DEBENTURES DUE 2018 NEW YORK STOCK EXCHANGE LIQUID YIELD OPTION NOTES DUE 2012 NEW YORK STOCK EXCHANGE CHEMICAL WASTE MANAGEMENT, INC. LIQUID YIELD OPTION NOTES DUE 2010 NEW YORK STOCK EXCHANGE CONVERTIBLE SUBORDINATED NOTES DUE 2005 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY $14,457,190,000 AT FEBRUARY 1, 1996 (BASED ON THE CLOSING SALE PRICE ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1996, AS REPORTED BY THE WALL STREET JOURNAL (MIDWEST EDITION)). AT MARCH 20, 1996, THE REGISTRANT HAD ISSUED AND OUTSTANDING AN AGGREGATE OF 494,495,743 SHARES OF ITS COMMON STOCK OF RECORD. DOCUMENTS INCORPORATED BY REFERENCE THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S 1995 ANNUAL REPORT TO STOCKHOLDERS AND OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 1996 DESCRIBED IN PARTS II, III AND IV HEREOF ARE INCORPORATED BY REFERENCE IN THIS REPORT. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. GENERAL WMX Technologies, Inc. is a leading international provider of environmental and related services. Unless the context indicates to the contrary, as used in this report the terms "Company" and "WMX Technologies" refer to WMX Technologies, Inc. and its subsidiaries. The Company provides integrated solid waste management services in North America through Waste Management, Inc., a wholly owned subsidiary of the Company (referred to herein, together with its subsidiaries and certain affiliated companies providing waste management and related services, as "Waste Management"). The Company's solid waste management services are provided to commercial, industrial, municipal and residential customers, as well as to other waste management companies and consist of solid waste collection, transfer, resource recovery and disposal services. As part of these services, the Company is engaged in providing, through its Recycle America(R), Recycle Canada(R) and other programs, paper, glass, plastic and metal recycling services to commercial and industrial operations and curbside collection of such materials from residences; in removing methane gas from sanitary landfill facilities for use in electricity generation; and in providing medical and infectious waste management services to hospitals and other health care and related facilities. In addition, through Waste Management the Company provides street sweeping and parking lot cleaning services and Port-O-Let(R) portable sanitation services to municipalities and commercial and special event customers. Since mid-1995, Waste Management also has managed the scaffolding and other on-site industrial services businesses owned by the Company's Rust International Inc. subsidiary. The Company also provides hazardous waste management services in North America. The Company's chemical waste treatment, storage, disposal and related services are provided through Waste Management and Chemical Waste Management, Inc., a wholly owned subsidiary of the Company (referred to herein, together with its subsidiaries, as "CWM"), and are provided to commercial and industrial customers, as well as to other waste management companies and to governmental entities. Through Advanced Environmental Technical Services, L.L.C., a 60%-owned subsidiary of the Company (referred to herein, together with its subsidiaries as "AETS"), the Company provides on-site integrated hazardous waste management services, including hazardous waste identification, packaging, removal and recycling services to industrial, institutional and governmental customers. Through its Chem-Nuclear Systems, Inc. wholly owned subsidiary (referred to herein, together with its subsidiaries, as "Chem- Nuclear"), the Company also furnishes radioactive waste management services, primarily to electric utilities and governmental entities. The Company provides comprehensive waste management and related services internationally, primarily through Waste Management International plc, a subsidiary owned approximately 56% by the Company and 12% each by the Company's Rust International Inc. and Wheelabrator Technologies Inc. subsidiaries (referred to herein, together with its subsidiaries, as "Waste Management International"). Waste Management International provides a wide range of solid and hazardous waste management and related environmental services (or has interests in projects or companies providing such services) in ten countries in Europe and in Argentina, Australia, Brazil, Brunei, Hong Kong, Indonesia, Israel, Malaysia, New Zealand, Taiwan and Thailand. Waste Management International also has an approximately 20% interest in Wessex Water Plc, an English publicly traded company providing water treatment, water distribution, wastewater treatment and sewerage services ("Wessex"). Wheelabrator Technologies Inc., an approximately 58%-owned subsidiary of the Company (referred to herein, together with its subsidiaries, as "WTI"), provides a wide array of environmental products and services that are primarily utilized in meeting the needs of municipalities and industry for clean energy and clean water. WTI's clean energy group is a leading developer of facilities and systems for, and provider of services to, the trash-to- energy, energy, and independent power markets. Through the clean energy group, WTI develops, arranges financing for, operates and owns facilities that dispose of trash and other waste materials in an environmentally acceptable manner by recycling them into electrical or steam energy. Also within this group are business units which design, fabricate and install technologically advanced air pollution control and systems and 2 equipment. WTI's clean water group is principally involved in the design, manufacture, operation and ownership of facilities and systems used to purify water, to treat municipal and industrial wastewater, to treat and manage biosolids resulting from the treatment of wastewater by converting them into useful fertilizers, and to recycle organic wastes into compost material useable for horticultural and agricultural purposes. The clean water group also designs and manufactures various products used in water and wastewater treatment facilities and industrial processes, precision profile wire screens for use in groundwater wells and other industrial and municipal applications, and certain other industrial equipment. Rust International Inc., a subsidiary owned approximately 60% by the Company and 40% by WTI (referred to herein, together with its subsidiaries, as "Rust"), furnishes environmental and infrastructure engineering and consulting services primarily to clients in federal, state and local government and in the chemical, petrochemical, nuclear, energy, utility, pulp and paper, manufacturing, environmental services and other industries. Rust also provides process engineering, construction, specialty contracting and related services through a business unit which Rust intends to sell or otherwise discontinue. Rust also has an approximately 41% interest in NSC Corporation, a publicly traded provider of asbestos abatement and other specialty contracting services ("NSC"), and an approximately 37% interest in OHM Corporation, a publicly traded provider of environmental remediation services ("OHM"). See "Acquisitions and Dispositions" herein. The Company also owns an approximately 19% interest in ServiceMaster Limited Partnership, a provider of management services, including management of health care, education and commercial facilities, and lawn care, pest control and other consumer services. The following table shows the respective revenues of the Company's major business groups for the last three years, excluding the revenues of Rust's process engineering, construction, specialty contracting and related services business, which is to be sold or otherwise discontinued and is being treated as a discontinued operation, and including the revenues of the asbestos abatement services business of a former subsidiary through the May 1993 sale of that business and the revenues of the Rust remediation services business transferred to OHM through the date of the transfer in May 1995.
YEAR ENDED DECEMBER 31, ----------------------------------- 1993 1994 1995 ---------- ---------- ----------- (000'S OMITTED) Solid Waste Management and Related Services................................ $4,702,166 $5,117,871 $ 5,642,857 Hazardous Waste Management and Related Services................................ 661,860 649,581 613,883 Engineering, Industrial and Related Services................................ 1,035,004 1,140,294 1,027,430 Trash-to-Energy, Water Treatment, Air Quality and Related Services 1,142,219 1,324,567 1,451,675 International Waste Management and Related Services........................ 1,411,211 1,710,862 1,865,081 Elimination of Intercompany Revenue...... (316,344) (388,470) (353,309) ---------- ---------- ----------- Consolidated Revenue..................... $8,636,116 $9,554,705 $10,247,617 ========== ========== ===========
As a result of a strategic review begun in 1994, management and operations of the Company have been largely realigned on the basis of four principal global lines of business--waste services, clean energy, clean water and environmental and infrastructure engineering and consulting. The following table shows the respective revenues of these continuing lines of business (i.e., excluding revenues of Rust's process engineering, construction, specialty contracting and related services business) for the last three years.
YEAR ENDED DECEMBER 31, ----------------------------------- 1993 1994 1995 ---------- ---------- ----------- (000'S OMITTED) Waste Services (including Scaffolding and Other On-Site Industrial Services)....... $7,457,371 $8,140,785 $ 8,634,836 Clean Energy.............................. 804,016 888,037 893,513 Clean Water............................... 392,194 489,295 618,472 Environmental and Infrastructure Engineering and Consulting............... 298,879 425,058 454,105 Elimination of Intercompany Revenue....... (316,344) (388,470) (353,309) ---------- ---------- ----------- Consolidated Revenue...................... $8,636,116 $9,554,705 $10,247,617 ========== ========== ===========
3 For information relating to expenses and identifiable assets attributable to the Company's major business groups, see Note 13 to the Company's Consolidated Financial Statements filed as an exhibit to this report and incorporated by reference herein. For interim periods, the revenues and net income of certain of the Company's businesses may fluctuate for a number of reasons, including there being for some businesses less activity during the winter months. Regulatory or technological developments relating to the environment may require companies engaged in environmental services businesses, including the Company, to modify, supplement or replace equipment and facilities at costs which may be substantial. Because certain of the businesses in which the Company is engaged are intrinsically connected with the protection of the environment and the potential discharge of materials into the environment, a material portion of the Company's capital expenditures is, directly or indirectly, related to such items. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" set forth on pages 16 to 24 of the Company's 1995 Annual Report to Stockholders (which discussion is filed as an exhibit to this report and incorporated by reference herein) for a review of property and equipment expenditures by the Company for the last three years. The Company does not expect such expenditures, which are incurred in the ordinary course of business, to have a materially adverse impact on its and its subsidiaries' combined earnings or its or its subsidiaries' competitive position in the foreseeable future because the Company's businesses are based upon compliance with environmental laws and regulations and its services are priced accordingly. Although the Company strives to conduct its operations in compliance with applicable laws and regulations, the Company believes that in the existing climate of heightened legal, political and citizen awareness and concerns, companies in the environmental services industry, including the Company, will be faced, in the normal course of operating their businesses, with fines and penalties and the need to expend funds for remedial work and related activities with respect to waste treatment, disposal and trash-to-energy facilities. Where the Company concludes that it is probable that a liability has been incurred, a provision is made in the Company's financial statements for the Company's best estimate of the liability based on management's judgment and experience, information available from regulatory agencies and the number, financial resources and relative degree of responsibility of other potentially responsible parties who are jointly and severally liable for remediation of a specific site, as well as the typical allocation of costs among such parties. If a range of possible outcomes is estimated and no amount within the range appears to be a better estimate than any other, then the Company provides for the minimum amount within the range, in accordance with generally accepted accounting principles. Such estimates are subsequently revised, as necessary, as additional information becomes available. While the Company does not anticipate that the amount of any such revision will have a material adverse effect on the Company's operations or financial condition, the measurement of environmental liabilities is inherently difficult and the possibility remains that technological, regulatory or enforcement developments, the results of environmental studies, or other factors could materially alter this expectation at any time. Such matters could have a material adverse impact on earnings for one or more fiscal quarters or years. While in general the Company's environmental services businesses have benefited substantially from increased governmental regulation, the environmental services industry itself is subject to extensive and evolving regulation by federal, state, local and foreign authorities. Due to the complexity of regulation of the industry and to public pressure, implementation of existing and future laws, regulations or initiatives by different levels of government may be inconsistent and difficult to foresee. In addition, the demand for certain of the Company's services may be adversely affected by the amendment or repeal, or reduction in enforcement of, federal, state and foreign laws and regulations on which the Company's businesses engaged in providing such services are dependent. Demand for certain of the Company's services may also be adversely affected by delays or reductions in funding, or failure of legislative bodies to fund, agencies or programs under such laws and regulations. The Company makes a continuing effort to anticipate regulatory, political and legal developments that might affect its operations but is not always able to do so. The Company cannot predict the extent to which any legislation or regulation that may be enacted, amended, repealed or enforced, or any failure or delay in enactment or enforcement of legislation or regulations or funding of agencies or programs, in the future may affect its operations. 4 The Company was incorporated in Delaware in 1968 and subsequently succeeded to certain businesses owned by its organizers and others. The Company's common stock is listed on the New York Stock Exchange under the trading symbol "WMX" and is also listed on the Frankfurt Stock Exchange, the London Stock Exchange, the Chicago Stock Exchange and the Swiss Stock Exchanges in Basle, Zurich and Geneva. Unless the context indicates to the contrary, all statistical and financial information under Item 1 and Item 2 of this report is given as of December 31, 1995. Also, unless the context indicates to the contrary, statistical and financial data appearing under the caption "Waste Services" relate only to the Company's Waste Management, CWM, AETS and Chem-Nuclear groups of subsidiaries and do not include any data relating to Rust, Rust's scaffolding and other on- site industrial services business managed by Waste Management, WTI or Waste Management International. See "International Waste Management and Related Services," "Clean Energy, Clean Water and Related Services" and "Environmental and Infrastructure Engineering and Consulting Services." WASTE SERVICES The Company's solid waste management and recycling services include residential, commercial and industrial collection, transfer and disposal services and related services provided by Waste Management. The Company's hazardous waste management services include chemical waste treatment, storage, disposal and related services provided by Waste Management and CWM, on-site integrated hazardous waste management services provided by AETS and low-level radioactive waste disposal services provided by Chem-Nuclear. For each of the three years in the period ended December 31, 1995, such services accounted for the following percentages of the Company's total North America waste services revenue (excluding scaffolding and other on-site industrial services revenue):
YEAR ENDED DECEMBER 31, ------------------- 1993 1994 1995 ----- ----- ----- Solid Waste and Recycling Collection Services: Residential.............................................. 20.4% 19.8% 19.4% Commercial............................................... 26.3 26.4 26.2 Roll-off and Industrial.................................. 20.8 21.5 21.3 Solid Waste Disposal, Transfer and Related Services....... 20.2 21.0 23.3 Hazardous Waste Services................................... 12.3 11.3 9.8 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== =====
SOLID WASTE MANAGEMENT, RECYCLING AND RELATED SERVICES At December 31, 1995, Waste Management conducted solid waste management, recycling and related services operations in 48 states, the District of Columbia, four Canadian provinces and Mexico. During 1993, 1994 and 1995, operations in California, Florida and Pennsylvania together accounted for approximately 34%, 30% and 28%, respectively, of North America solid waste revenue. No customer accounted for as much as 2% of such revenue in 1993 or 1% in 1994 or 1995. COLLECTION Waste Management provides solid waste collection services to approximately 1,072,500 commercial and industrial customers. Collection services are also provided to approximately 11,982,800 homes and apartment units. These services include collection of recyclable commodities. See "Recycling and Energy Recovery--Recycling" for a description of recycling services. Commercial and Industrial Many of Waste Management's commercial and industrial customers utilize containers to store solid waste, including "roll-offs," which are large containers dropped off at construction or other sites for the deposit of waste and then hoisted when full onto a truck for transport. These containers, ranging from 1 to 45 cubic yards 5 in size, are usually provided to the customer as part of Waste Management's services. Stationary compactors, which compact the volume of the stored waste prior to collection, are frequently installed on the premises of large volume customers and are usually provided to these customers in conjunction with Waste Management's collection services. Containerization enables Waste Management to service most of its commercial and industrial customers with collection vehicles operated by a single employee. Compaction serves to decrease the frequency of collection. Commercial and industrial collection services (which include containerized service to apartment buildings) are generally performed under one- to three- year service agreements. Fees are determined by such considerations as market factors, collection frequency, type of equipment furnished, length of service agreement, type and volume or weight of the waste collected, distance to the disposal facility and cost of disposal. Residential Most of Waste Management's residential solid waste collection services are performed under contracts with, or franchises granted by, municipalities giving Waste Management exclusive rights to service all or a portion of the homes in their respective jurisdictions. Such contracts or franchises usually range in duration from one to five years. The fees received by Waste Management are based primarily on market factors, frequency and type of service, the distance to processing or disposal facilities and cost of processing or disposal. Residential collection fees are either paid by the municipalities out of tax revenues or service charges or are paid directly by the residents receiving the service. TRANSFER Waste Management operates 151 solid waste transfer stations. A transfer station is a facility where solid waste is received from collection vehicles and then transferred to, and in some cases compacted in, large, specially constructed trailers for transportation to disposal or resource recovery facilities. This procedure reduces costs by improving utilization of collection personnel and equipment and improving the efficiency of transporting waste to final disposal facilities. The services of these facilities are provided to municipalities or counties and in most instances are also used by Waste Management and by other collection companies. Fees are generally based upon such considerations as market factors, the type and volume or weight of the waste transferred, the extent of processing of recyclable materials, the transport distance involved and the cost of disposal. RECYCLING AND ENERGY RECOVERY Recycling Waste Management provides recycling services in the United States and Canada through its Recycle America(R), Recycle Canada(R) and other programs. Recycling involves the removal of reusable materials from the waste stream for processing and sale or other disposition for use in various applications. Participating commercial and industrial operations use containers to separate recyclable paper, glass, plastic and metal wastes for collection, processing and sale by Waste Management. Fees are determined by such considerations as market factors, frequency of collection, type and volume or weight of the recyclable material, degree of processing required, distance the recyclable material must be transported and value of the recyclable material. As part of its residential solid waste collection services, Waste Management engages in curbside collection of recyclable materials from residences in the United States and Canada, also through its Recycle America(R), Recycle Canada(R) and other programs. Curbside recycling services generally involve the collection of recyclable paper, glass, plastic and metal waste materials, which may be separated by residents into different waste containers or commingled with other recyclable materials. The recyclable materials are then typically deposited at a local materials recovery facility where they are sorted and processed for resale. 6 The prices received by the Company for recyclable materials fluctuate substantially from quarter to quarter and year to year depending upon domestic and foreign demand for such materials, the quality of such materials, prices for new materials and other factors. In some instances, the Company enters into agreements with the local governments of municipalities in which it provides recycling services whereby the governments share in the gains and losses resulting from fluctuation in prices of recyclable commodities. These agreements mitigate both the Company's gains and losses from such fluctuations. In 1995, Waste Management provided curbside recycling services to approximately 7,200,000 households pursuant to more than 1,000 contracts in the United States and Canada. Waste Management has approximately 188,000 commercial and industrial recycling services customers. Waste Management operates 129 materials recovery facilities for the receipt and processing of recyclable materials. Such processing consists of separating recyclable materials according to type and baling or otherwise preparing the separated materials for sale. Waste Management also participates in joint ventures with Stone Container Corporation and American National Can Corporation to engage, respectively, in the businesses of marketing paper fibre and aluminum, steel, and glass containers for recycling. In each case Waste Management sells to the joint venture, or has the joint venture market, the paper fibre or containers collected by Waste Management to Stone Container, American National Can or other parties who will process them for reuse. The joint venture with American National Can also owns and operates three glass processing facilities. During 1995, the joint ventures processed approximately 4,496,000 tons of recyclable materials. Waste Management also provides tire and demolition and construction debris recycling services. Energy Recovery At 34 Waste Management-owned or -operated sanitary landfill facilities, Waste Management is engaged in methane gas recovery operations. These operations involve the installation of a gas collection system into a sanitary landfill facility. Through the gas collection system, gas generated by decomposing solid waste is collected and transported to a gas-processing facility at the landfill site. Through physical processes methane gas is separated from contaminants. The processed methane gas generally is then either (i) sold directly to industrial users or (ii) sold to an affiliate of the Company which uses it as a fuel to power electricity generators. Electricity generated by these facilities is sold, usually to public utilities under long-term sales contracts, often under terms or conditions which are subject to approval by regulatory authorities. WMX Technologies also engages in other resource recovery activities through WTI's trash-to-energy and independent power operations and Waste Management International's operations. See "Clean Energy, Clean Water and Related Services" and "International Waste Management and Related Services." DISPOSAL Waste Management operates 133 solid waste sanitary landfill facilities. Of this number, 103 are owned by Waste Management and the remainder are leased from, or operated under contract with, others. Additional facilities are in various stages of development. Waste Management also provides yard-waste composting services, bioremediation of petroleum-contaminated soils and solidification of difficult-to-treat liquid wastes at a number of its disposal facilities. All of the sanitary landfill facilities are subject to governmental regulation. See "Regulation--Waste Services--Solid Waste." A sanitary landfill site must have geological and hydrological properties and design features which limit the possibility of water pollution, directly or by leaching. Sanitary landfill operations, which include carefully planned excavation, continuous spreading and compacting of solid waste and covering of the waste, are designed to maintain sanitary conditions, insure optimum utilization of the airspace and prepare the site for ultimate use for other purposes. 7 Suitable sanitary landfill facilities and permission to expand existing facilities may be difficult to obtain in some areas because of land scarcity, local resident opposition and governmental regulation. As its existing facilities become filled in such areas, the solid waste disposal operations of Waste Management are and will continue to be materially dependent on its ability to purchase, lease or obtain operating rights for additional sites or expansion of existing sites and to obtain the necessary permits from regulatory authorities to construct and operate them. In addition, there can be no assurance that additional sites can be obtained or that existing facilities can continue to be expanded or operated. However, management believes that the facilities currently available to Waste Management are sufficient to meet the needs of its operations in most areas for the foreseeable future. To develop a new facility, Waste Management must expend significant time and capital resources without any certainty that the necessary permits will ultimately be issued for such facility or that the Company will be able to achieve and maintain the desired disposal volume at such facility. If the inability to obtain and retain necessary permits, the failure of a facility to achieve the desired disposal volume or other factors cause Waste Management to terminate development efforts for a facility, the capitalized development expenses of the facility may need to be written off. In varying degrees, Waste Management utilizes its own sanitary landfill facilities to accommodate its disposal requirements for collection and transfer operations. In 1993, 1994 and 1995 approximately 52%, 55% and 57%, respectively, of the solid waste collected by Waste Management was disposed of in sanitary landfill facilities operated by it. Usually these facilities are also used by other companies and government agencies on a noncontract basis for fees determined by such considerations as market factors and the type and volume or weight of the waste. RELATED SERVICES Waste Management also provides or manages several types of services which are compatible with its solid waste collection operations. Included in these operations are scaffolding and other on-site industrial services, medical and infectious waste management services, portable sanitation services and street sweeping and parking lot cleaning services. Waste Management manages the business of Rust Industrial Services Inc., a subsidiary of Rust ("RIS"), providing scaffolding and other on-site industrial services. RIS provides scaffolding services primarily to the chemical, petrochemical and utilities industries. In most cases, the scaffolding services are provided in conjunction with periodic, routine cleaning and maintenance of refineries, chemical plants and utilities, although such services are also performed in connection with new construction projects. RIS also performs a variety of types of other industrial services--water blasting, tank cleaning, explosives blasting, chemical cleaning, industrial vacuuming, catalyst handling, specialty chemicals and separation technologies--primarily for clients in the petrochemical, chemical, and pulp and paper industries, utilities and, to a lesser extent, the public sector. RIS also provides on- site plant services, including providing personnel to perform mechanical and electrical services, equipment installation, welding, heating, ventilating and air conditioning ("HVAC"), warehousing and inventory management services and technical support in the area of industrial hygiene and safety training. RIS assists clients in the nuclear and utility industries in solving electrical, mechanical, engineering and related technical services problems. RIS also provides spent fuel storage (rerack) services to the nuclear power industry. Waste Management's medical and infectious waste management services consist of collecting, transporting, treating and disposing of medical and infectious waste generated by hospitals, pharmaceutical manufacturers, medical clinics, physician and dentist offices and other sources. Waste Management also provides portable sanitation services to municipalities and commercial customers. The portable sanitation services, which are marketed under the Port-O-Let(R) trade name, are also used at numerous special events and public gatherings. Certain of these related services are marketed and performed primarily by employees operating out of Waste Management's solid waste operations facilities who also may have responsibility for some phase of solid waste marketing or operations. 8 HAZARDOUS WASTE MANAGEMENT AND RELATED SERVICES CHEMICAL WASTE MANAGEMENT SERVICES The Company operates chemical waste treatment, storage and disposal facilities in 16 states and also owns a majority interest in a subsidiary which operates a resource recovery and storage facility and a disposal facility in Mexico. The chemical wastes handled by the Company include industrial by-products and residues that have been identified as "hazardous" pursuant to the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), as well as other materials contaminated with a wide variety of chemical substances. Chemical waste may be collected from customers and transported by Waste Management or CWM or contractors retained by them or delivered by customers to their facilities. Chemical waste is transported by Waste Management or CWM primarily in specially constructed tankers and semi-trailers, including stainless steel and rubber or epoxy-lined tankers and vacuum trucks, or in containers or drums on trailers designed to comply with applicable regulations and specifications of the U.S. Department of Transportation ("DOT") relating to the transportation of hazardous materials. Waste Management and CWM also operate several facilities at which waste collected from or delivered by customers may be analyzed and consolidated prior to further shipment. The Company's seven secure land disposal facilities either have interim status or have been issued permits under RCRA. See "Regulation--RCRA." In general, the Company's secure land disposal facilities have received the necessary permits and approvals to accept chemical wastes, although some of such sites may accept only certain chemical wastes. Only chemical wastes in a stable, solid form which meet applicable regulatory requirements may be buried in the Company's secure disposal cells. These land disposal facilities are sited, constructed and operated in a manner designed to provide long-term containment of such waste. Chemical wastes may be treated prior to disposal. Physical treatment methods include distillation, evaporation and separation, all of which basically result in the separation or removal of solid materials from liquids. Chemical treatment methods include chemical oxidation and reduction, chemical precipitation of heavy metals, hydrolysis and neutralization of acid and alkaline wastes and essentially involve the transformation of wastes into inert materials through one or more chemical reaction processes. At two of its locations, the Company isolates treated chemical wastes in liquid form by injection into deep wells. Deep well technology involves drilling wells in suitable rock formations far below the base of fresh water and separated from it by other substantial geological confining layers. AETS provides on-site integrated hazardous waste management services, including hazardous waste identification, packaging, removal and recycling services in North America. These services include on-site hazardous waste data management, education and training, inventory control and other administrative services, lab pack services, drum identification services, household hazardous waste programs, less-than-full load waste pickup and consolidation services, and related services. AETS provides these services primarily to industrial, institutional and public sector customers, including laboratories. In the United States, most chemical wastes generated by industrial processes are handled "on-site" at the generators' facilities. Since the mid-1970's, public awareness of the harmful effects of unregulated disposal of chemical wastes on the environment and health has led to extensive and evolving federal, state and local regulation of chemical waste management activities. The major federal statutes regulating the management of chemical wastes include RCRA, the Toxic Substances Control Act ("TSCA") and the Comprehensive Environmental Response, Compensation and Liabilities Act of 1980, as amended ("CERCLA" or "Superfund"), all primarily administered by the United States Environmental Protection Agency ("EPA"). The business is heavily dependent upon the extent to which regulations promulgated under these or similar state statutes and their enforcement over time effectively require wastes to be specially handled or managed and disposed of in facilities of the type owned and operated by the Company. See "Regulation--Waste Services--Hazardous Waste," "--RCRA" and "--Superfund." The chemical waste services industry currently has substantial excess capacity caused by a number of factors, including a decline in environmental remediation projects generating hazardous waste for off-site treatment and disposal, continuing efforts by hazardous waste generators to reduce volume and to manage it on-site, and the uncertain regulatory environment regarding 9 hazardous waste management and remediation requirements. These factors have led to reduced demand and increased pressure on pricing for chemical waste management services, consequences which the Company expects to continue for the foreseeable future. LOW-LEVEL AND OTHER RADIOACTIVE WASTE SERVICES Radioactive wastes with varying degrees of radioactivity are generated by nuclear reactors and by medical, industrial, research and governmental users of radioactive material. Radioactive wastes are generally classified as either high-level or low-level. High-level radioactive waste, such as spent nuclear fuel and waste generated during the reprocessing of spent fuel from nuclear reactors, contains substantial quantities of long-lived radionuclides and is the ultimate responsibility of the federal government. Low-level radioactive waste, which decays more quickly than high-level waste, largely consists of dry compressible wastes (such as contaminated gloves, paper, tools and clothing), resins and filters which have removed radioactive contaminants from nuclear reactor cooling water, solidified wastes from power plants which have become contaminated with radioactive substances and irradiated hardware. Chem-Nuclear provides comprehensive low-level radioactive waste management services in the United States consisting of disposal, processing and various other special services. To a lesser extent, it provides services with respect to radioactive waste that has become mixed with regulated chemical waste. Chem-Nuclear's radioactive disposal operations involve low-level radioactive waste only. Its Barnwell, South Carolina facility is one of two licensed commercial low-level radioactive waste disposal facilities in the United States and has been in operation since 1971. A trust has been established and funded to pay the estimated cost of decommissioning the Barnwell facility. A second fund, for the extended care of the facility, is funded by a surcharge on each cubic foot of waste received. Chem-Nuclear may be liable for additional costs if the extra charges collected to restore and maintain the facility are insufficient to cover the cost of restoring or maintaining the site after its closure (which Chem-Nuclear has no reason to expect). Under state legislation enacted in 1995, the Barnwell, South Carolina facility is authorized to operate until its current permitted disposal capacity is fully utilized, unless such authorization is changed by legislation. However, presently pending in the South Carolina Supreme Court is a suit challenging the 1995 legislation, which repealed earlier legislation that would have closed the Barnwell facility to out-of-state wastes. While Chem-Nuclear believes the suit (to which it is not a party) lacks merit, it is impossible to predict the outcome of the suit and its impact on future operations at Barnwell. Chem-Nuclear also processes low-level radioactive waste at its customers' plants to enable such waste to be shipped in dry rather than liquid form to meet the requirements for receipt at disposal facilities and to reduce the volume of waste that must be transported. Processing operations include solidification, demineralization, dewatering and filtration. Other services offered by Chem-Nuclear include providing electro-chemical, abrasive and chemical removal of radioactive contamination, providing management services for spent nuclear fuel storage pools and storing and incinerating liquid radioactive organic wastes. INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES The Company is a leading provider of comprehensive waste management and related services internationally, primarily through Waste Management International, which conducts essentially all of the waste management operations of the Company located outside North America. Waste Management International's business may broadly be characterized into two areas of activity, collection services and treatment and disposal services. The following table shows the derivation of Waste Management International's revenues for the years indicated and includes revenue from construction of treatment or disposal facilities for third parties under "Treatment and Disposal Services":
YEAR ENDED DECEMBER 31, -------------- 1993 1994 1995 ---- ---- ---- Collection Services........................................ 69% 64% 64% Treatment and Disposal Services............................ 31% 36% 36%
10 The Company has had international operations since the mid-1970's. However, the bulk of the Company's international operations and revenues are derived from the acquisition over the last several years of numerous companies and interests in Europe in various of its service lines. In 1993, major acquisitions included, in the UK, the acquisition by the joint venture described below between Waste Management International and Wessex of a solid waste collection and disposal company; in France, a company engaged primarily in solid waste collection; in The Netherlands, a company engaged in the collection and transportation of solid waste and the sorting of demolition waste; and, in Germany, a group of companies providing waste collection services and recyclables sorting. In 1994, Waste Management International completed 50 acquisitions in 10 countries, most of which were small acquisitions which complemented or expanded existing Waste Management International operations in various markets. With its acquisition goals largely completed, Waste Management International engaged in 25 additional small acquisitions during 1995. In accordance with its objective of maintaining a local identity, Waste Management International, in certain cases, operates through companies or joint ventures in which Waste Management International and its affiliates own less than a 100% interest. For example, Waste Management International is a party to a joint venture with Wessex to provide waste management and related services in the United Kingdom. Because of the size and timing of projects and acquisitions, Waste Management International's revenue mix by country varies from year to year. Countries in which revenue exceeded 10% of Waste Management International's consolidated total were: Italy (32%) and The Netherlands (11%) in 1993, Italy (26%) and Germany (12%) in 1994 and Italy (23%), Germany (14%), The Netherlands (11%) and The United Kingdom (11%) in 1995. While Waste Management International has considerable experience in mobilizing for and managing foreign projects, its operations continue to be subject generally to such risks as currency fluctuations and exchange controls, the need to recruit and retain suitable local labor forces and to control and coordinate operations in different jurisdictions, changes in foreign laws or governmental policies or attitudes concerning their enforcement, political changes, local economic conditions and international tensions. In addition, price adjustment provisions based on certain formulae or indices may not accurately reflect the actual impact of inflation on the cost of performance. COLLECTION SERVICES Collection services include collection and transportation of solid, hazardous and medical wastes and recyclable material from residential, commercial and industrial customers. The residential solid waste collection process, as well as the commercial and industrial solid and hazardous waste collection process, is similar to that utilized by the Company in the United States. Waste Management International provided collection services as of December 31, 1995 to governmental and private customers in ten European countries, Argentina, Australia, New Zealand and Taiwan. Business is obtained through public bids or tenders, negotiated contracts, and, in the case of commercial and industrial customers, direct contracts. Waste Management International operates 318 collection and staging facilities and 76 waste transfer facilities. Residential solid waste collection is normally performed by Waste Management International pursuant to municipal contracts. Waste Management International has approximately 1,500 municipal contracts, serving more than 6,800,000 residential properties. The scope, specifications, services provided and duration of such contracts vary substantially, with some contracts encompassing landfill disposal of collected waste, street-sweeping and other related municipal services. The largest number of municipal contracts held by Waste Management International is in Italy where Waste Management International services approximately 1,850,000 residential properties. Pricing for municipal contracts is generally based on volume of waste, number and 11 frequency of collection pick-ups, and disposal arrangements. Longer-term contracts typically have formulae for periodic price increases or adjustments. Waste Management International also provides curbside recycling services similar to those provided by Waste Management in North America. Street, industrial premises, office and parking lot cleaning services are also performed by Waste Management International, along with portable sanitation/toilet services for such occasions as outdoor concerts and special events. Waste Management International's commercial and industrial solid and hazardous waste collection services are generally contracted for by individual establishments. In addition to solid waste collection customers, Waste Management International provides services to small quantity waste generators, as well as larger petrochemical, pharmaceutical and other industrial customers, including collection of hazardous, chemical or medical wastes or residues. Waste Management International has approximately 285,000 commercial and industrial customers. Contract terms and prices vary substantially between jurisdictions and types of customer. Waste Management International also provides commercial and industrial recycling services. TREATMENT AND DISPOSAL SERVICES Treatment and disposal services include processing of recyclable materials, operation of both solid and hazardous waste landfills, operation of municipal and hazardous waste incinerators, operation of a trash-to-energy facility, operation of water and wastewater treatment facilities, operation of hazardous waste treatment facilities and construction of treatment or disposal facilities for third parties. The operation of solid waste landfills is currently Waste Management International's most significant treatment and disposal service. Treatment and disposal services are provided under contracts which may be obtained through public bid or tender or direct negotiation, and are also provided directly to other waste service companies. At December 31, 1995, Waste Management International owned, operated or maintained 23 waste treatment facilities, 79 recycling and recyclables processing facilities, 9 incinerators and 55 landfills. Once collected, solid wastes may be processed in a recyclables processing facility for sale or other disposition for use in various applications. Unprocessed solid wastes, or the portion of the waste stream remaining after recovery of recyclable materials, require disposal, which may be accomplished through incineration (in connection with which the energy value may be recovered in a trash-to-energy facility) or through disposal in a solid waste landfill. The relative use of landfills versus incinerators differs from country to country and will depend on many factors, including the availability of land, geological and hydrological conditions, the availability and cost of technology and capital, and the regulatory environment. The main determinant of disposal method is generally the disposal cost per cubic meter at local landfills, as incineration is generally more expensive. At present, in most countries in which Waste Management International operates, landfilling is the predominant disposal method employed. Waste Management International owns or operates solid waste landfills in Argentina, Australia, Brazil, Denmark, France, Germany, Hong Kong, Indonesia, Italy, New Zealand, Spain, Sweden and the United Kingdom. Landfill disposal agreements may be separate contracts or an integrated portion of collection or treatment contracts. Demand for solid waste incineration is affected by landfill disposal costs and government regulations. The incineration process for non-hazardous solid waste has also been influenced by two significant factors in recent years: (i) increasingly strict control over air emissions from incinerators; and (ii) increasing emphasis on trash-to-energy incinerators, which utilize heat produced by incinerators to generate electricity and other energy. Incineration generates approximately 30% residue (by weight), which is either landfilled or, if permitted, recycled for use as a road base or in other construction uses. Waste Management International's trash-to-energy incinerator in Hamm is a German-designed plant and the only privately operated trash-to-energy facility in Germany. It is among the first trash-to-energy facilities to fully 12 comply with that country's stringent new air pollution requirements. The facility serves the household and commercial solid waste incineration needs of a population of approximately 600,000 in Hamm and nearby towns. Under its current permits, the facility is able to produce 18 megawatts per hour of steam-generated electricity and sold approximately 74,000 megawatt hours to the local power grid in 1995 (enough power for about 17,000 homes). In 1992, Waste Management International entered into a contract with the County of Gutersloh, Germany to design, construct, own and operate a trash-to-energy facility. The facility is designed to convert 268,000 metric tons per year of municipal waste and sewage sludge into energy. The facility would be capable of producing enough electricity to power more than 35,000 homes. During 1995, Waste Management International's permit application to develop and operate the Gutersloh facility was denied. Waste Management International believes it is entitled to the permit and is appealing the denial. Waste Management International also operates seven small conventional municipal solid and other waste incineration facilities. Waste Management International and WTI have also formed a joint venture to develop trash-to-energy projects outside Germany, Italy and North America. See "Competition" below. Waste Management International owns or operates hazardous waste treatment facilities in Australia, Finland, France, Germany, Hong Kong, Indonesia, Italy, The Netherlands, Spain, Sweden and the United Kingdom and has entered into agreements with respect to the development of hazardous waste treatment facilities in Argentina and Thailand. CLEAN ENERGY, CLEAN WATER AND RELATED SERVICES WHEELABRATOR CLEAN ENERGY WTI, through Wheelabrator Environmental Systems Inc. and its subsidiaries, is a leading developer, operator and owner of trash-to-energy and independent power facilities in the United States. These facilities, either owned or operated, give WTI approximately 850 megawatts of electric generating capacity. WTI's trash-to-energy projects utilize proven boiler and grate technology capable of processing up to 2,250 tons of trash per day per facility. The heat from this combustion process is converted into high- pressure steam, which typically is used to generate electricity for sale to public utility companies under long-term contracts. WTI's trash-to-energy development activities have historically involved a number of contractual arrangements with a variety of private and public entities, including municipalities (which supply trash for combustion), utilities or other power users (which purchase the energy produced by the facility), lenders, public debtholders, joint venture partners and equity investors (which provide financing for the project) and the contractors or subcontractors responsible for building the facility. In addition, WTI's activities have often included identifying and acquiring sites for the facility and for the disposal of residual ash produced by the facility and obtaining necessary permits and licenses from local, state and federal regulatory authorities. WTI also develops, operates and, in some cases, owns independent power projects, which either cogenerate electricity and thermal energy or generate electricity alone for sale to utilities. Cogeneration is a technology which allows the consecutive use of two or more useful forms of energy from a single primary fuel source, thus providing a more efficient use of a fuel's total energy content. During 1995, WTI entered into a joint venture for the purpose of developing small cogeneration projects for district heating applications in a province of The People's Republic of China. WTI also designs, fabricates and installs advanced air pollution control and measurement systems and equipment. WTI offers electrostatic precipitators, flue-gas desulfurization systems (scrubbers), fabric-filter systems (baghouses) and nitrogen oxide ("NOx") control systems, which remove pollutants from the emissions of WTI's trash-to-energy systems, as well as power plants and other industrial facilities. WTI also designs, constructs and maintains tall concrete chimneys and storage silos. WTI offers both custom and pre-engineered systems for emission control. The custom engineering division licenses a patented process for the removal of hydrogen sulfide from gaseous and liquid streams. The process controls hazardous gases and sulfur dioxide emissions, thereby reducing acid rain and odor problems. WTI also provides a full range of technologies and 13 services for destroying or recycling volatile organic compounds ("VOCs") from air and liquid sources and NOx from air sources. Both VOCs and NOx are detrimental to air quality and the environment generally. WTI's VOC and NOx control systems are utilized by customers in a variety of industries, including oil refineries, chemical plants and automobile production facilities. Complementing the emission control divisions is a measurement division which designs and installs continuous emissions monitoring systems for the utility, trash-to-energy, industrial furnace and petrochemical industries, all of which are affected by regulations requiring the continuous monitoring of stack emissions. WHEELABRATOR CLEAN WATER Through Wheelabrator Water Technologies, Inc. and its subsidiaries, WTI develops, operates and owns projects that purify water, treat water and wastewater, compost organic wastes and treat and manage biosolids. WTI also provides products and systems used to treat drinking water as well as industrial and municipal process water and wastewater. WTI is a leading provider of a broad range of water and wastewater treatment services to municipalities and industry throughout the United States, Canada and Mexico, including water and wastewater treatment plant start-up assistance, plant operations and maintenance, planning and management, training of plant supervisors, operators and laboratory and maintenance personnel, refining process systems, management systems for process control, and plant diagnostic evaluations and energy audits. WTI also provides specialty repair and cleaning services for industrial water and wastewater management equipment. In July 1995, WTI became the first company in the United States to acquire a publicly owned wastewater treatment plant pursuant to a federal Executive Order issued in 1992 which was intended to facilitate the privatization of municipal facilities. The agreement provides for a subsidiary of WTI to operate the 4.5 million gallon per day MCD Franklin Wastewater Treatment Plant in Franklin, Ohio for a period of 20 years and to expand the facility as needed to meet future population growth. In August 1995, WTI was selected by the City of Wilmington, Delaware to negotiate a similar public-private partnership, including the acquisition of that City's wastewater treatment plant. WTI also provides a range of biosolids management services, including land application, drying, pelletizing, alkaline stabilization and composting of non-hazardous biosolids to approximately 450 communities, typically pursuant to multi-year contracts under which WTI is paid by the generator to make beneficial use of the biosolids. Land application involves the application of non-hazardous biosolids as a natural fertilizer on farmland pursuant to rigorous site-specific permits issued by applicable state authorities. Biosolids are also used in land- reclamation projects such as strip mines. Regulations issued by the EPA in December 1992 under the Clean Water Act encourage the beneficial use of municipal sewage sludge by recognizing the resource value of biosolids as a fertilizer and soil conditioner, and establish requirements for land application designed to protect human health and the environment. WTI also develops and operates facilities at which biosolids are dried and pelletized and has four facilities currently in operation, and one other facility under construction. WTI has approximately 560 dry-tons-per-day of biosolids drying capacity either in operation or under construction. Biosolids which have been dried are generally used as fertilizer by farmers, commercial landscapers and nurseries and as a bulking agent by fertilizer manufacturers. Development of dryer facilities generally involves various contractual arrangements with a variety of private and public entities, including municipalities (which generate the biosolids), lenders, contractors and subcontractors which build the facilities, and end-users of the fertilizer generated from the treatment process. WTI also engineers and manufactures a variety of environmental products and systems. WTI provides single-source, advanced-systems solutions for the treatment of municipal drinking water, industrial process water and wastewater and for slurry pumping and high solids dewatering. It also provides systems designed to remove solids from liquid streams through the use of self-cleaning bar/filter screens, grinders, macerators, conveyors and 14 compactor systems. WTI also provides high technology water purification and wastewater treatment systems which utilize a variety of technologies including demineralizers, reverse osmosis and vacuum degasification products. In addition, WTI designs and installs process technology systems utilizing evaporators, crystallizers, electrodialysis, dialysis, reverse osmosis and ultrafiltration for treating industrial process wastewater. WTI also produces profile wire screen products for groundwater production, hydrocarbon processing, food processing and coal/mineral processing. WTI also designs and supplies enclosed automated composting systems which recycle organic wastes into beneficial products which are used by commercial landscapers, nurseries and fertilizer manufacturers. WTI provides a number of these products and technologies to industrial customers abroad through its operations in Australia, France, Ireland, Japan, Malaysia, The Netherlands, Singapore, Spain and Taiwan. WTI also manufactures a line of nonpolluting materials cleaning systems for use by a variety of industrial customers, including foundries, steel processors, automobile producers and rubber and plastics producers, in cleaning and finishing metal and other materials. WTI also manufactures high- alloy combustion grates used in the high-temperature furnaces of its trash-to- energy facilities. ENVIRONMENTAL AND INFRASTRUCTURE ENGINEERING AND CONSULTING SERVICES Rust is a leading provider, through its subsidiaries, of environmental and infrastructure engineering and consulting services, primarily to clients in government and in the chemical, petrochemical, nuclear, energy, utility, pulp and paper, manufacturing, environmental services and other industries. Rust's environmental and infrastructure engineering and consulting services provide alternative solutions for client problems relating to removing and disposing of hazardous and toxic substances; managing solid waste, water and wastewater, groundwater and air resources; design and construction oversight of transportation facilities; and photogrammetry. Such services are provided to private industry, as well as federal, state and local governments, including the Department of Defense (the "DOD") and the Department of Energy (the "DOE"). The services include performing remedial investigations for the purpose of characterizing hazardous waste sites, preparing feasibility studies setting forth recommended alternative remedial actions, and providing engineering design and construction oversight services for remediation projects. The services provided also include the siting, permitting, design and construction oversight of solid and hazardous waste landfills and related facilities. Study, design and construction oversight services are also provided, primarily to municipalities, special government agencies and, to some extent, private industry in connection with wastewater collection and treatment, potable water supply treatment and distribution, stormwater management and the building of streets, highways, airports, bridges, waterways and rail services. Rust also provides architectural services in connection with these and other activities. Additional services provided through Rust include environmental assessment services, the design of systems to properly and safely store, convey, treat and dispose of industrial, hazardous and radioactive materials and consulting services regarding disposal, waste minimization methods and techniques, air quality regulation and industrial hygiene and safety. Rust also has an international environmental and infrastructure engineering and consulting, process engineering and construction services and related services business performing projects in 35 countries. In Europe, Rust has offices in the United Kingdom, Germany, Sweden and Turkey, and in the Asia- Pacific region, in Australia, Hong Kong, China, Singapore, Malaysia and Indonesia. In the Middle East and Africa, Rust also has offices in the United Arab Emirates, Saudi Arabia and South Africa. Rust's overseas operations provide such services to the World Bank and associated lending agencies, national, regional and local governments and to clients in the utility and industrial power and general manufacturing industries. In addition, Rust provides such services to Waste Management International worldwide. In May 1995, Rust sold substantially all of its hazardous and radioactive remediation services business to OHM. As a result of that transaction, Rust acquired an approximately 37% interest in OHM. See "Acquisitions and Dispositions." 15 Rust also engages in providing process engineering, construction, specialty contracting and related services, but has announced its intention to sell or otherwise discontinue that business in North America and certain locations outside North America. The process engineering services currently provided by Rust are of two general types: facility process engineering and facility design engineering. Process engineers create the processes by which facilities operate, such as chemical, petrochemical, energy and pulp and paper plants. Design engineering services provided by Rust encompass the following disciplines: architectural, electrical, control systems, process piping, mechanical, structural, HVAC, and civil. The construction services currently provided by Rust are generally performed in connection with projects on which Rust has also provided the design engineering services. Rust also requisitions and procures equipment and construction materials for clients and performs quality assurance and quality control oversight of vendor manufacturing practices. Rust also has scaffolding and other on-site industrial services businesses, which are managed by Waste Management. See "Waste Services--Solid Waste Management, Recycling and Related Services--Related Services" above. REGULATION While in general the Company's environmental services businesses have benefited substantially from increased governmental regulation, the environmental services industry itself has become subject to extensive and evolving regulation by federal, state, local and foreign authorities. In particular, the regulatory process requires firms in the Company's industries to obtain and retain numerous governmental permits to conduct various aspects of their operations, any of which may be subject to revocation, modification or denial. As a result of governmental policies and attitudes relating to the industries, which are subject to reassessment and change, the Company believes that its ability to obtain applicable permits from governmental authorities on a timely basis, and to retain such permits, could be impaired. The Company is not in a position at the present time to assess the extent of the impact of such potential changes in governmental policies and attitudes on the permitting processes, but it could be significant. In particular, adverse decisions by governmental authorities on permit applications submitted by the Company may result in abandonment of projects, premature closure of facilities or restriction of operations, which could result in a loss of earnings from a facility, a write-off of capitalized development expenses or both. Federal, state, local and foreign governments have also from time to time proposed or adopted other types of laws, regulations or initiatives with respect to the environmental services industry. Included among them are laws, regulations and initiatives to ban or restrict the international, interstate or intrastate shipment of wastes, impose higher taxes on out-of-state waste shipments than in-state shipments, reclassify certain categories of hazardous wastes as non-hazardous and regulate disposal facilities as public utilities. Certain state and local governments have promulgated "flow control" regulations, which attempt to require that all waste generated within the state or local jurisdiction must go to certain disposal sites. The United States Congress has from time to time considered legislation that would enable or facilitate such bans, restrictions, taxes and regulations. Due to the complexity of regulation of the industry and to public pressure, implementation of existing or future laws, regulations or initiatives by different levels of government may be inconsistent and difficult to foresee. Many state and local governments have enacted mandatory or voluntary recycling laws and bans on the disposal of yard-waste in landfills. The effect of these and similar laws is to reduce the volume of wastes that would otherwise be disposed in Company landfills. In addition, municipalities and other governmental entities with whom the Company contracts to provide solid waste collection or disposal services, or both, may require the Company as a condition of securing the business to provide recycling services and operate recycling and composting facilities, which may cause the Company to incur substantial costs. The Company makes a continuing effort to anticipate regulatory, political and legal developments that might affect its operations but is not always able to do so. The Company cannot predict the extent to which any legislation or regulation that may be enacted, amended, repealed or enforced, or any failure or delay in enactment or enforcement of legislation or regulations or funding of government agencies or programs, in the future may affect its operations. Such matters could have a material adverse impact on the Company's earnings for one or more fiscal quarters or years. 16 The demand for certain of the services provided by the Company, particularly its hazardous waste management services, is dependent on the existence and enforcement of federal, state and foreign laws and regulations which govern the discharge of hazardous substances into the environment and on the funding of agencies and programs under such laws and regulations. Such businesses will be adversely affected to the extent that such laws or regulations are amended or repealed, with the effect of reducing the regulation of, or liability for, such activity, that the enforcement of such laws and regulations is lessened or that funding of agencies and programs under such laws and regulations is delayed or reduced. In particular, the EPA has recently proposed regulations under RCRA to redefine the term "hazardous waste" for regulatory purposes. Under the proposal, wastes containing minimal concentrations of hazardous substances would no longer be subject to the stringent record-keeping, handling, treatment and disposal rules applied to hazardous wastes under RCRA. Other EPA-proposed regulations would cause certain wastes which presently must be managed in TSCA-approved facilities to be eligible for disposal in facilities not approved under TSCA. These proposed rules would, if adopted, reduce the volume of wastes for which the Company's hazardous waste management services are needed. In addition to environmental laws and regulations, federal government contractors, including the Company, are subject to extensive regulation under the Federal Acquisition Regulation and numerous statutes which deal with the accuracy of cost and pricing information furnished to the government, the allowability of costs charged to the government, the conditions under which contracts may be modified or terminated, and other similar matters. Various aspects of the Company's operations are subject to audit by agencies of the federal government in connection with its performance of work under such contracts as well as its submission of bids or proposals to the government. Failure to comply with contract provisions or other applicable requirements may result in termination of the contract, the imposition of civil and criminal penalties against the Company, or the suspension or debarment of all or a part of the Company from federal government work, which could have a material adverse impact upon the Company's financial condition or earnings for one or more fiscal quarters or years. Among the reasons for debarment are violations of various statutes, including those related to employment practices, the protection of the environment, the accuracy of records and the recording of costs. Some state and local governments have similar suspension and debarment laws or regulations. Because of the high level of public awareness of environmental issues, companies in the environmental service business, including the Company, may in the normal course of their business be expected periodically to become subject to judicial and administrative proceedings. Governmental agencies may seek to impose fines on the Company or revoke, deny renewal of, or modify the Company's operating permits or licenses. The Company is also subject to actions brought by private parties or special interest groups in connection with the permitting or licensing of its operations, alleging violations of such permits and licenses, or other matters. In addition, increasing governmental scrutiny of the environmental compliance records of the Company, CWM, WTI, Rust, Waste Management International or their affiliates could cause a private or public entity seeking environmental services to disqualify the Company from competing for one or more projects, on the grounds that these records display inadequate attention to environmental compliance. WASTE SERVICES SOLID WASTE Operating permits are generally required at the state and local level for landfills, transfer stations and collection vehicles. Operating permits need to be renewed periodically and may be subject to revocation, modification, denial or non-renewal for various reasons, including failure of the Company to satisfy regulatory concerns. With respect to solid waste collection, regulation takes such forms as licensing of collection vehicles, truck safety requirements, vehicular weight limitations and, in certain localities, limitations on rates, area, time and frequency of collection. With respect to solid waste disposal, regulation covers various matters, including landfill location and design, groundwater monitoring, gas control, liquid runoff and rodent, pest, litter and traffic control. Zoning and land use requirements and limitations are encountered in the solid waste collection, transfer, recycling and energy recovery and disposal phases of the Company's business. In almost all cases the Company is required to obtain conditional use permits or zoning law changes in order to develop transfer station, resource 17 recovery or disposal facilities. In addition, the Company's disposal facilities are subject to water and air pollution laws and regulations. Noise pollution laws and regulations may also affect the Company's operations. Governmental authorities have the power to enforce compliance with these various laws and regulations and violators are subject to injunctions, fines and revocation of permits. Private individuals may also have the right to sue to enforce compliance. Safety standards under the Occupational Safety and Health Act ("OSHA") are also applicable to the Company's solid waste and related services operations. The EPA and various states acting pursuant to EPA-delegated authority have promulgated rules pursuant to RCRA which serve as minimum requirements for land disposal of municipal wastes. The rules establish more stringent requirements than previously applied to the siting, construction, operation and closure of all but the smallest municipal waste landfill facilities. In certain cases, the failure of some states to adopt the federal requirements may increase costs to meet inconsistent federal and state laws applicable to the same facility. The Company does not believe that continued compliance with the more stringent minimum requirements will have a material adverse effect on the Company's operations. See also "RCRA" and "Superfund" below for additional regulatory information. In March 1996, the EPA issued regulations that require large, municipal solid waste landfills to install and monitor systems to collect and control landfill gas. The regulations apply to landfills that are designed to accommodate 2.5 million cubic meters or more of municipal solid waste and that accepted waste for disposal after November 8, 1987, regardless of whether the site is active or closed. The date by which each affected landfill must have such gas collection and control system depends on whether the landfill began operation before or after May 30, 1991. Landfills constructed, reconstructed, modified or first accepting waste after May 30, 1991 generally must have systems in place by late 1998. Older landfills generally will be regulated by the states and will be required to have landfill gas systems in place within approximately 30 months of EPA's approval of the state program. Many state solid waste regulations already require collection and control systems. While the Company has not yet completed its study of the new regulations, compliance with them is not expected to have a material adverse effect on the Company. HAZARDOUS WASTE Waste Management and CWM are required to obtain federal, state, local and foreign governmental permits for their chemical waste treatment, storage and disposal facilities. Such permits are difficult to obtain, and in most instances extensive geological studies, tests and public hearings are required before permits may be issued. Waste Management's and CWM's chemical waste treatment, storage and disposal facilities are also subject to siting, zoning and land use restrictions, as well as to regulations (including certain requirements pursuant to federal statutes) which may govern operating procedures and water and air pollution, among other matters. In particular, Waste Management's and CWM's operations in the United States are subject to the Safe Drinking Water Act (which regulates deep well injection), TSCA (pursuant to which the EPA has promulgated regulations concerning the disposal of PCBs), the Clean Water Act (which regulates the discharge of pollutants into surface waters and sewers by municipal, industrial and other sources) and the Clean Air Act (which regulates emissions into the air of certain potentially harmful substances). In their transportation operations, Waste Management and CWM are subject to the jurisdiction of the Interstate Commerce Commission and regulated by the DOT and by regulatory agencies in each state. Employee safety and health standards under OSHA are also applicable. Of Waste Management's and CWM's chemical waste treatment or disposal facilities in the United States, all but one have been issued permits under RCRA. The facility without an RCRA permit continues to have interim status. A final permit is to be issued jointly by the authorized state, subject to EPA oversight, and by the EPA. The regulations governing issuance of permits contain detailed standards for hazardous waste facilities on matters such as waste analysis, security, inspections, training, preparedness and prevention, emergency procedures, reporting and recordkeeping. Once issued, a final permit has a maximum fixed term of 10 years, and such permits for land disposal facilities are required to be reviewed five years from the date of issuance. The issuing agency (either the EPA or an authorized state) may review or modify a permit at any time during its term. 18 The Company believes that Waste Management and CWM maintain each of their operating treatment, storage or disposal facilities in substantial compliance with the applicable requirements promulgated pursuant to RCRA and expects that the facility with interim status ultimately can qualify to be issued a RCRA permit. It is possible, however, that the issuance or renewal of a permit could be made conditional upon the initiation or completion of modifications or corrective actions at facilities, which might involve substantial additional capital expenditures on the part of Waste Management or CWM. Although the Company is informed that Waste Management and CWM anticipate the reauthorization of each permit at the end of its term if the facility's operations are in compliance with applicable requirements, there can be no assurance that such will be the case. The radioactive waste services of Chem-Nuclear are also subject to extensive governmental regulation. Due to the extensive geological and hydrological testing and environmental data required, and the complex political environment, it is difficult to obtain permits for radioactive waste disposal facilities. Various phases of Chem-Nuclear's low-level radioactive waste management services are regulated by various state agencies, the United States Nuclear Regulatory Commission (the "NRC") and the DOT. Regulations applicable to Chem-Nuclear's operations include those dealing with packaging, handling, labeling and routing of radioactive materials, and prescribe detailed safety and equipment standards and requirements for training, quality control and insurance, among other matters. Employee safety and health standards under OSHA are also applicable. See also "RCRA" and "Superfund" below for additional regulatory information. CLEAN ENERGY, CLEAN WATER AND RELATED SERVICES WTI's business activities are subject to environmental regulation under federal, state and local laws and regulations, including the Clean Air Act, the Clean Water Act and RCRA. The Company believes that WTI's business is conducted in an environmentally responsible manner in material compliance with applicable laws and regulations. The Company does not anticipate that WTI's maintaining compliance with current requirements will result in any material decrease in earnings. There can be no assurance, however, that such requirements will not change so as to require significant additional expenditures. In particular, pursuant to the Clean Air Act Amendments of 1990 it is probable that the air pollution control systems at certain trash-to- energy projects owned or operated by WTI's subsidiaries will be required to be modified by the end of the decade to comply with the more stringent regulations promulgated thereunder. Although the expenditures related to such modifications, if required, will likely be significant, they are not expected to have a material adverse effect on WTI's liquidity or results of operations because WTI has the right to pass on to the majority of long-term contract users of its facilities increased capital and operating costs resulting from changes in law. There can be no assurance, however, that in such event WTI would be able to recover, for each project, all such increased costs from its customers. Moreover, it is possible that future developments, such as increasingly strict requirements of environmental laws, and enforcement policies thereunder, could affect the manner in which WTI operates its projects and conducts its business, including the handling, processing or disposal of the wastes, by-products and residues generated thereby. WTI's energy facilities are also subject to the provisions of various energy-related laws and regulations, including the Public Utility Regulatory Policies Act of 1978 ("PURPA"). The ability of WTI's trash-to-energy and small power production facilities to sell power to electric utilities on advantageous terms and conditions and to avoid burdensome public utility regulation has historically depended, in part, upon the continuing applicability of certain provisions of PURPA, which generally exempts WTI from state and federal regulatory control over electricity prices charged by, and the finances of, WTI and its energy-producing subsidiaries. While the recent changes in Congressional leadership may increase the likelihood of a repeal or modification of PURPA, it is unlikely that such action would abrogate the long-term contracts and orders pursuant to which most of WTI's existing projects sell electricity. Furthermore, the operations of WTI's trash-to- energy and other small power facilities business is not expected to be materially and adversely affected if the various benefits of PURPA are repealed or substantially reduced on a prospective basis, due to the passage of the Energy Policy Act of 1992 ("EPACT"). EPACT created an alternative ownership mechanism by which independent power producers can participate in the electricity generation industry without the burdens of traditional public utility regulation. 19 ENVIRONMENTAL AND INFRASTRUCTURE ENGINEERING AND CONSULTING SERVICES The practice of engineering and architecture is regulated by state statutes. All states require engineers and architects to be registered by their respective state registration boards as a condition to offering or rendering professional services. Many states also require companies offering or rendering professional services, such as Rust, to obtain certificates of authority. Rust's businesses are also subject to OSHA regulations and to NRC regulations concerning services provided to nuclear power plants. RCRA Pursuant to RCRA, the EPA has established and administers a comprehensive, "cradle-to-grave" system for the management of a wide range of industrial by- products and residues identified as "hazardous" wastes. States that have adopted hazardous waste management programs with standards at least as stringent as those promulgated by the EPA may be authorized by the EPA to administer their programs in lieu of RCRA. Under RCRA and federal transportation laws, a transporter must deliver hazardous waste in accordance with a manifest prepared by the generator of the waste and only to a treatment, storage or disposal facility having a RCRA permit or interim status under RCRA. Every facility that treats or disposes of hazardous wastes must obtain a RCRA permit from the EPA or an authorized state and must comply with certain operating standards. The RCRA permitting process involves applying for interim status and also for a final permit. Under RCRA and the implementing regulations, facilities which have obtained interim status are allowed to continue operating by complying with certain minimum standards pending issuance of a permit. RCRA also imposes restrictions on land disposal of certain hazardous wastes and prescribes standards for hazardous waste land disposal facilities. Under RCRA, land disposal of certain types of untreated hazardous wastes has been banned except where the EPA has determined that land disposal of such wastes and treatment residuals should be permitted. The disposal of liquids in hazardous waste land disposal facilities is also prohibited. The EPA from time to time considers fundamental changes to its regulations under RCRA that could facilitate exemptions from hazardous waste management requirements, including policies and regulations that could implement the following changes: redefine the criteria for determining whether wastes are hazardous; prescribe treatment levels which, if achieved, could render wastes non-hazardous; encourage further recycling and waste minimization; reduce treatment requirements for certain wastes to encourage alternatives to incineration; establish new operating standards for combustion technologies; and indirectly encourage on-site remediation. To the extent such changes are adopted, they can be expected to adversely affect the demand for the Company's chemical waste management services. In this regard, the EPA has recently proposed regulations which would have the effect of reducing the volume of waste classified as hazardous for RCRA regulatory purposes. See "Regulation" above. In addition to the foregoing provisions, RCRA regulations require the Company to demonstrate financial responsibility for possible bodily injury and property damage to third parties caused by both sudden and nonsudden accidental occurrences. See "Insurance" below. Also, RCRA regulations require the Company to provide financial assurance that funds will be available when needed for closure and post-closure care at its waste treatment, storage and disposal facilities, the costs of which could be substantial. Such regulations allow the financial assurance requirements to be satisfied by various means, including letters of credit, surety bonds, trust funds, a financial (net worth) test and a guarantee by a parent corporation. Under RCRA regulations, a company must pay the closure costs for a waste treatment, storage or disposal facility owned by it upon the closure of the facility and thereafter pay post- closure care costs. If such a facility is closed prior to its originally anticipated time, it is unlikely that sufficient funds will have been accrued over the life of the facility to fund such costs, and the owner of the facility could suffer a material adverse impact as a result. Consequently, it may be difficult to close such facilities to reduce operating costs at times when, as is currently the case in the hazardous waste services industry, excess treatment, storage or disposal capacity exists. 20 SUPERFUND Superfund provides for EPA-coordinated response and removal actions to releases of hazardous substances into the environment, and authorizes the federal government either to clean up facilities at which hazardous substances have created actual or potential environmental hazards or to order persons responsible for the situation to do so. Superfund assigns liability for these response and other related costs to parties involved in the generation, transfer and disposal of such hazardous substances. Superfund has been interpreted as creating strict, joint and several liability for costs of removal and remediation, other necessary response costs and damage to natural resources. Liability extends to owners and operators of waste disposal facilities (and waste transportation vehicles) from which a release occurs, persons who owned or operated such facilities at the time the hazardous substances were disposed, persons who arranged for disposal or treatment of a hazardous substance at or transportation of a hazardous substance to such a facility, and waste transporters who selected such facilities for treatment or disposal of hazardous substances, as well as to generators of such substances. Liability may be trebled if the responsible party fails to perform a removal or remedial action ordered under the law. For additional information concerning potential Superfund liability, see "Legal Proceedings" below. Superfund created a revolving fund to be used by the federal government to pay for the cleanup efforts. In late 1990, federal Superfund spending through the end of the government's 1994 fiscal year was authorized to a maximum of $5.1 billion. For the federal government's 1995 fiscal year, a maximum of $1.4 billion of Superfund spending was authorized. As of the date of this report, the federal government had not approved any 1996 Superfund spending authorization. The U. S. Congress is expected to consider reauthorization and revision of the Superfund statute in 1996. In addition to possible changes in the statute's funding mechanisms and provisions for allocating cleanup responsibility, it is possible that Congress also will fundamentally alter the statute's provisions governing the selection of appropriate site cleanup remedies. For example, Congress may consider whether to continue Superfund's current reliance on stringent technology standards issued under other statutes (such as RCRA) to govern removal and treatment of remediation wastes or to adopt new approaches such as national or site-specific risk based standards. This and other potential policy changes could significantly affect the stringency and extent of site remediation, the types of remediation techniques that will be employed, and the degree to which permitted hazardous waste management facilities will be used for remediation wastes. In addition, Congress may consider revision of the liability imposed by the Superfund law for remediation of contamination caused prior to a party's acquisition of a contaminated site, which could reduce the remediation obligations of the Company and others who currently are jointly and severally liable for remediation obligations under Superfund. INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES Waste Management International's operations are subject to the general business, liability, land-use planning and other environmental laws and regulations of the countries where the services are performed and, in Europe, to European Union ("EU") regulations and directives. The degree of local enforcement of applicable laws and regulations varies substantially between, and even within, the various countries in which Waste Management International operates. In addition to the statutes and regulations imposed by national, state or provincial, and municipal or other local authorities, many of the countries in which Waste Management International operates are members of the EU. The EU has issued and continues to issue environmental Directives and Regulations covering a broad range of environmental matters and has created a European Environmental Agency responsible for monitoring and collating member state environmental data. The Single European Act, passed in 1987, established three fundamental principles to guide the development of future EU environmental law: (i) the need for preventative action; (ii) the correction of environmental problems at the source; and (iii) the polluter's liability for environmental damage. The Treaty on European Union, signed in December 1991, came into force in November 1993. The Treaty applies the principle of "sustainable development" as a key component of EU policy-making and requires that environmental protection be integrated into the definition and application of all EU laws. It also introduced a 21 new procedure for the adoption of waste management legislation (other than for proposals of a primarily fiscal nature) which it is predicted may result in the speedier implementation of EU waste laws. The impact of current and future EU legislation will vary from country to country according to the degree to which existing national requirements already meet or fall short of the new EU standards and, in some jurisdictions, may require extensive public and private sector investment and the development and provision of the necessary technology, expertise, administrative procedures and regulatory structures. These extensive laws and regulations are continually evolving in response to technological advances and heightened public and political concern. Outside Europe, continuing industrialization, population expansion and urbanization have caused increased levels of pollution with all of the resultant social and economic implications. The desire to sustain economic growth and address historical pollution problems is being accompanied by investments in environmental infrastructure, particularly in Southeast Asia, and the introduction of regulatory standards to further control industrial activities. The Company believes that Waste Management International's business is conducted in material compliance with applicable laws and regulations and does not anticipate that maintaining such compliance will adversely affect the Company's financial position. There can be no assurance, however, that such requirements will not change so as to require significant additional expenditures or operating costs. Waste Management International operates facilities in Hong Kong which are owned by the Hong Kong government. Control of the Hong Kong government passes to the People's Republic of China in 1997. Waste Management International is unable to predict what impact, if any, this change will have on its operations in Hong Kong. COMPETITION Waste Management encounters intense competition, primarily in the pricing and rendering of services, from various sources in all phases of its solid waste management and related operations. In the solid waste collection phase, competition is encountered, for the most part, from national, regional and local collection companies as well as from municipalities and counties (which, through use of tax revenues, may be able to provide such services at lower direct charges to the customer than can Waste Management) and some large commercial and industrial companies which handle their own waste collection. In the solid waste transfer, resource recovery and disposal phases of its operations, competition is encountered primarily from municipalities, counties, local governmental agencies, other national or regional waste management companies and certain large corporations not primarily involved in the solid waste management services business. The Company also encounters intense competition in pricing and rendering of services in its medical and infectious waste management, portable sanitation and street sweeping and parking lot cleaning services businesses from numerous large and small competitors. In its hazardous waste management operations, the Company encounters competition from a number of sources, including several national or regional firms specializing primarily in chemical waste management, local waste management concerns and, to a much greater extent, generators of chemical wastes which seek to reduce the volume of or otherwise process and dispose of such wastes themselves. The basis of competition is primarily technical expertise and the price, quality and reliability of service. Waste Management International encounters intense competition from local companies and governmental entities in particular countries, as well as from major international companies. Pricing, quality of service and type of equipment utilized are the primary methods of competition for collection services, and proximity of suitable treatment or disposal facilities, technical expertise, price, quality and reliability of services are the primary methods of competition for treatment and disposal services. 22 WTI experiences substantial competition in all aspects of its business. It competes with a large number of firms, both nationally and internationally, some of which may have substantially greater financial and technical resources than WTI. The principal competitive factors with respect to its project development activities include technological performance, service, technical know-how, price and performance guarantees. Competing for selection as a project developer may require commitment of substantial resources over a long period of time, without any certainty of being ultimately selected. Competition for attractive development opportunities is intense, as there are a number of competitors in the industry interested in such opportunities. The service industries in which Rust competes are highly competitive. Rust encounters intense competition, primarily in pricing, quality and reliability of services from various sources in all aspects of its environmental and infrastructure engineering and consulting services operations. Pursuant to the First Amended and Restated International Business Opportunities Agreement, dated January 1, 1993, by and among CWM, WTI, Waste Management International, Inc., Waste Management International, Rust and the Company (as amended, the "IBOA"), which agreement is also a successor to certain prior agreements among certain of the parties, each of CWM, WTI, Rust and the Company has agreed that, until the later of July 1, 2000 or the date on which the Company ceases to beneficially own a majority of the outstanding voting equity interests of such subsidiary or ceases to beneficially own a majority of the outstanding voting equity interests of Waste Management International, and in each case no longer has an option to obtain such ownership, such subsidiary or the Company will not engage (except through Waste Management International) in waste management services; design, development, construction and operation of trash-to-energy facilities in Italy or Germany; collection, storage, processing, treatment or disposal of hazardous wastes (including hazardous substance remediation services); or design, engineering and construction (where the customer is seeking third- party operation), operation and maintenance of water, wastewater and sewage treatment facilities (including facilities for treating hazardous waste streams whether or not the customer is seeking third-party operation) outside North America (i.e., the United States, its territories and possessions, Canada and Mexico) (the "Waste Management International Allocated Activities"), except with respect to licensing of technology and minor interests of CWM, WTI or Rust in publicly held entities. WTI may engage outside North America in the design, engineering, construction, operation and maintenance of chimneys and air pollution control facilities (the "WTI Allocated Activities"). Rust may engage outside North America in activities relating to (i) architectural services, (ii) engineering and design services and procurement, construction and construction management services (including marine construction and dredging), other than those relating to the Waste Management International Allocated Activities and the WTI Allocated Activities, (iii) scaffolding services, (iv) demolition and dismantling services, (v) environmental consulting services, and (vi) industrial facility and power plant maintenance services (the "Rust Allocated Activities"). Sales by the Company of recyclables, licensing of technology and minor investments by the Company in publicly held entities are also permitted activities of the Company outside North America. Waste Management International has agreed that for the same time periods as are applicable to CWM, WTI, Rust and the Company above in this paragraph, it will not engage in North America in the type of activities included within the Waste Management International Allocated Activities outside North America and will not engage in the WTI Allocated Activities or the Rust Allocated Activities. Businesses or assets acquired by a party to the IBOA which are in the domain of another party thereto (according to the allocations described above) must be offered for sale to the other party at fair market value. In addition, WTI and Waste Management International have entered into an agreement whereby WTI will have primary responsibility for the early-stage development of trash-to-energy projects outside North America (except in Italy and Germany) and Waste Management International will have the right to acquire up to 49% of all equity of any such project available to Waste Management International, WTI and their affiliates, with WTI or other investors owning the balance. This arrangement is non-cancellable by WTI or Waste Management International without the other's consent prior to 2000. If the arrangement is cancelled, the right to develop trash-to-energy projects reverts to being part of the Waste Management International Allocated Activities. By agreement among the parties, the Company is responsible for determining business allocations among CWM, WTI, Rust, the Company and Waste Management International which are not controlled by the 23 allocations set forth in the preceding two paragraphs. In this connection CWM, WTI, Rust, the Company and Waste Management International have agreed that in order to minimize the potential for conflicts of interest among various subsidiaries under the common control of the Company and for so long as the Company shall have beneficial ownership of a majority of the outstanding voting equity interests of such subsidiary (or an option to obtain such ownership), the Company has the right to direct future business opportunities to the Company or the Company-controlled subsidiary which, in the Company's reasonable and good faith judgment, has the most experience and expertise in that line of business, provided that the Company may not allocate a business opportunity to a particular subsidiary if such business opportunity would involve the subsidiary in a breach of its agreement not to compete as described in the immediately preceding paragraphs. Opportunities outside North America relating to the provision of future waste management services are generally to be allocated to Waste Management International, except that opportunities outside North America relating to the WTI Allocated Activities and the Rust Allocated Activities are generally to be allocated to WTI and Rust, as the case may be. Environmental opportunities other than waste management activities are to be allocated in the Company's good faith judgment. No party is liable for consequential damages, except for lost profits, for any breach of the IBOA. In addition, in connection with the transfer by Rust of its hazardous and radioactive substance remediation business (see "Acquisitions and Dispositions" below), the Company, Rust and their respective wholly owned affiliates agreed with OHM not to engage in providing on-site hazardous and radioactive substance remediation services in North America prior to 2002. INSURANCE While the Company believes it operates professionally and prudently, its business exposes it to risks such as the potential for harmful substances escaping into the environment and causing damage or injuries, the cost of which could be substantial. The Company currently maintains liability insurance coverage for occurrences under various environmental impairment, primary casualty and excess liability insurance policies. The Company's insurance program includes coverage for pollution liability resulting from "sudden and accidental" releases of contaminants and pollutants. The Company believes that the coverage terms, available limits of liability, and costs currently offered by the insurance market do not represent sufficient value to warrant the purchase of "non-sudden and accidental" pollution liability insurance coverage. As such, the Company has chosen not to purchase risk transfer "non-sudden and accidental" pollution liability insurance coverage. To satisfy existing government requirements, the Company has secured non-risk transfer pollution liability insurance coverage in amounts believed to be in compliance with federal and state law requirements for "non-sudden and accidental" pollution. The Company must reimburse the insurer for losses incurred and covered by this insurance policy. In the event the Company continues not to purchase risk transfer "non- sudden and accidental" pollution liability insurance coverage, the Company's net income could be adversely affected in the future if "non-sudden and accidental" pollution losses should occur. EMPLOYEES WMX Technologies and its subsidiaries employ a total of approximately 73,200 persons in their worldwide continuing operations. Of this number, the Company employs approximately 38,700 persons in its North American solid and hazardous waste management services operations (excluding employees of the Rust scaffolding and other on-site industrial services business operated by Waste Management). Of this total, 35,900 persons are engaged in its Waste Management solid waste and related services operations, including approximately 27,200 persons employed in solid waste collection, transfer, resource recovery and disposal activities, and approximately 8,700 managerial, executive, sales, clerical, data processing and other solid waste and related activities. Approximately 2,800 employees are employed in the Company's hazardous waste services business, including 100 as managers or executives. Approximately 2,000 are employed in hazardous waste treatment, storage and disposal activities (including approximately 530 performing technical, analytical or engineering services), and approximately 700 are employed in sales, clerical, data processing and other hazardous waste-related activities. 24 As of December 31, 1995, Waste Management International employed approximately 18,500 persons. Of this number, approximately 14,900 persons were employed in its collection services operations, 2,400 in its treatment and disposal services operations and 1,200 in administrative functions. At December 31, 1995, WTI had approximately 4,600 full-time employees. Rust employed approximately 11,400 persons at December 31, 1995 (excluding its process engineering and construction, specialty contracting and related services business which is to be sold or otherwise discontinued, but including the scaffolding and other on-site industrial services business managed by Waste Management), of whom approximately 4,200 provided technical or engineering services (excluding craft personnel hired on a temporary basis). At December 31, 1995, approximately 6,900 of the Company's employees in North America were unionized, primarily in the Company's solid waste and related services operations, under collective bargaining agreements expiring on various dates through 2002. At December 31, 1995, approximately 13,900 Waste Management International employees were represented by labor unions. The Company believes its employee relations are acceptable. ACQUISITIONS AND DISPOSITIONS Since August 1971, the Company has acquired a number of companies, and certain assets of other companies, engaged in various phases of the environmental services industry. See Note 4 to the Company's Consolidated Financial Statements filed as an exhibit to this report and incorporated herein by reference. The amounts and types of consideration generally have been determined by direct negotiations with the owners of the businesses acquired. In most instances, the owners of the acquired businesses were few in number, and often certain key former owners have continued to operate the businesses following acquisition by the Company. During 1995, the Company continued to acquire additional operations in the environmental services industry. Acquisitions have historically contributed significantly to the Company's growth. However, in recent years the Company's acquisition activity relative to the size of its revenue base has decreased. The Company's growth prospects may be affected by the availability of additional business acquisitions at reasonable prices and the Company's ability to finance such acquisitions. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" filed as an exhibit to this report and incorporated herein by reference for a discussion of capital expenditures by the Company, including acquisitions. Other well-capitalized companies also compete intensely for businesses available to be acquired. The Company is continually engaged in the process of considering and negotiating additional acquisitions. Some future acquisitions could be material. The acquisition of businesses also entails certain inherent risks. Although the Company reviews businesses to be acquired, because of the nature of the liabilities involved in these businesses, there can be liabilities which will not become known until after the transactions are consummated. The Company seeks to minimize the impact of these liabilities and expenditures by obtaining indemnities and warranties from the seller which may be supported by deferring payment of a portion of the purchase price. These indemnities and warranties, if obtained, may not, however, fully cover the liabilities due to their limited scope, amount, or duration, the financial limitations of the indemnitor or warrantor, or other reasons. Businesses purchased may require expenditures to make up for deferred maintenance and to improve the quality or quantity of assets acquired. In certain cases, the Company establishes reserves in respect of the anticipated costs of remediation for acquired sites. On January 24, 1995, the Company acquired CWM common stock representing the approximately 21% interest in CWM held at that time by public stockholders. The acquisition occurred pursuant to a merger (the "Merger") in which all publicly held shares of CWM common stock were converted into convertible subordinated notes of the Company due January 24, 2005 and having a principal amount at maturity of $1,000 per note (the "Notes"), subject to the payment of cash in lieu of the issuance of fractional Notes. For a description of the terms of the Notes, see Note 5 to the Company's Consolidated Financial Statements incorporated herein by reference. The Merger was approved by a committee of independent directors of CWM 25 and by a majority of the public stockholders of CWM. As a result of the Merger, CWM became a wholly owned subsidiary of the Company. On March 14, 1995, the Company's Board of Directors approved a plan to reduce the scope of the Company's chemical waste management services business by selling or otherwise eliminating technologies and service locations which were not meeting customer service or performance objectives. See "Management's Discussion and Analysis of Results of Operations and Financial Condition--1995 Operations Compared with 1994--CWM," incorporated by reference in this report, for further information. In May 1995, OHM acquired Rust's hazardous and radioactive substance remediation business in exchange for an approximately 37% interest in OHM. In exchange for warrants to acquire an additional approximately 2.6% of OHM common stock, the Company also agreed in that transaction to guarantee up to $62 million of indebtedness of OHM. In July 1995, the Company acquired the approximately 4% of Rust's shares held by the public for $16.35 per share in cash. The transaction was approved by a special committee of independent directors appointed by the Rust Board of Directors. As a result of that transaction, Rust became owned 60% by the Company and 40% by WTI. Additionally, Rust has announced its intention to sell or otherwise discontinue its process engineering, construction, specialty contracting and related services business. The terms of the sale have not yet been determined. The Company expects the sale of those portions of the business which are to be sold to be completed in 1996. In December 1995, the Company contributed its approximately 28% interest in ServiceMaster Consumer Services L.P. ("SMCS"), a provider of lawn care, pest control and other consumer services, to ServiceMaster L.P. ("SMLP"), the owner of the remaining interest in SMCS, in exchange for an approximately 19% interest in SMLP and an option to purchase up to 1.25 million SMLP limited partnership shares. The Company has also acquired numerous companies and interests in companies internationally through Waste Management International or its predecessors. See "International Waste Management and Related Services." ITEM 2. PROPERTIES. The principal property and equipment of the Company consists of land (primarily disposal sites), buildings and waste treatment or processing facilities (other than disposal sites), and vehicles and equipment, which as of December 31, 1995 represented approximately 18%, 6% and 27%, respectively, of the Company's total consolidated assets. The Company believes that its vehicles, equipment and operating properties are well maintained and suitable for its current operations. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" filed as an exhibit to this report and incorporated by reference herein for a discussion of property and equipment expenditures by the Company for the last three years and the capital budget for 1996. The Company's subsidiaries lease numerous office and operating facilities throughout the world. For the year ended December 31, 1995, aggregate annual rental payments on real estate leased by the Company and its subsidiaries approximated $140,367,000. The principal fixed assets of Waste Management consist of vehicles and equipment (which include, among other items, approximately 20,800 collection and transfer vehicles, 1,568,600 containers and 21,000 stationary compactors in the United States and Canada). Waste Management owns or leases real property in most states and Canadian provinces in which it is doing business. At December 31, 1995, 103 solid waste disposal facilities, aggregating approximately 65,740 total acres, including approximately 14,290 permitted acres, were owned by Waste Management in the United States and Canada and 30 facilities, aggregating approximately 13,340 total acres, including approximately 5,860 permitted acres, were leased from parties not affiliated with Waste 26 Management under leases expiring from 1996 to 2085. At December 31, 1995, the Company owned or leased in the United States a total of nine treatment, storage or disposal facilities. At such date, the Company's seven chemical waste facilities with secure land disposal sites aggregated approximately 7,865 acres, including approximately 1,470 permitted acres. The principal property and equipment of Waste Management International consist of land (primarily disposal sites) and vehicles and equipment, which as of December 31, 1995 represented approximately 13.1% and 30.3%, respectively, of Waste Management International's assets. The principal fixed assets utilized in Waste Management International's collection services operations at December 31, 1995 consisted of vehicles and equipment (which included, among other items, approximately 7,000 collection, transportation, and other route vehicles and approximately 300 pieces of landfill and other heavy equipment), and approximately 285,000 containers, including approximately 3,550 stationary compactors. In addition, Waste Management International owns approximately 710 pieces of hazardous waste equipment, consisting predominately of containers and collection vehicles. The principal fixed assets utilized in Waste Management International's treatment and disposal services operations at December 31, 1995 consisted of 55 landfills, 23 waste treatment facilities, 79 recycling and recyclables processing facilities, nine incinerators and various other manufacturing, office and warehouse facilities owned, leased or operated by Waste Management International. WTI currently owns, operates or leases 16 trash-to-energy facilities, seven cogeneration and small power production facilities, two coal handling facilities, five biosolids drying, pelletizing and composting facilities, one wastewater treatment plant and various other manufacturing, office and warehouse facilities. Facilities leased or operated (but not owned) by WTI are under leases or agreements having terms expiring from the years 1996 to 2020, subject to renewal options in certain cases. The principal property and equipment of Rust consist of the vehicles, equipment and scaffolding inventory used in the scaffolding and other on-site industrial services business managed by Waste Management, which as of December 31, 1995 represented approximately 14% of Rust's total continuing consolidated assets. Rust believes that its equipment is well maintained and suitable for its current operations. Rust leases its corporate offices in Greenville, South Carolina and Birmingham, Alabama and numerous office, warehouse and equipment and scaffolding yard facilities in various locations throughout the United States. ITEM 3. LEGAL PROCEEDINGS. Some of the businesses in which the Company is engaged are intrinsically connected with the protection of the environment and the potential for the unintended or unpermitted discharge of materials into the environment. In the ordinary course of conducting its business activities, the Company becomes involved in judicial and administrative proceedings involving governmental authorities at the federal, state and local level including, in certain instances, proceedings instituted by citizens or local governmental authorities seeking to overturn governmental action where governmental officials or agencies are named as defendants together with the Company or one or more of its subsidiaries, or both. In the majority of the situations where proceedings are commenced by governmental authorities, the matters involved relate to alleged technical violations of licenses or permits pursuant to which the Company operates or is seeking to operate or laws or regulations to which its operations are subject or are the result of different interpretations of the applicable requirements. From time to time the Company pays fines or penalties in environmental proceedings relating primarily to waste treatment, storage or disposal facilities. At December 31, 1995, a Company subsidiary engaged in providing hazardous waste management services was involved in one such governmental proceeding and a subsidiary of WTI was involved in one such proceeding where it is believed that sanctions involved in each instance may exceed $100,000. The Company or certain of its subsidiaries have been identified as potentially responsible parties in a number of governmental investigations and actions relating to waste disposal facilities which may be subject to remedial action under Superfund. The majority of these proceedings are based on allegations that certain 27 subsidiaries of the Company (or their predecessors) transported hazardous substances to the facilities in question, often prior to acquisition of such subsidiaries by the Company. Such proceedings arising under Superfund typically involve numerous waste generators and other waste transportation and disposal companies and seek to allocate or recover costs associated with site investigation and cleanup, which costs could be substantial. As of December 31, 1995, the Company or its subsidiaries had been notified that they are potentially responsible parties in connection with 106 locations listed on the Superfund National Priority List ("NPL"). Of the 106 NPL sites at which claims have been made against the Company, 19 are sites which the Company has come to own over time. All of the NPL sites owned by the Company were initially sited by others as land disposal facilities. At each of the 19 owned facilities, the Company is working in conjunction with the government to characterize or to remediate identified site problems. In addition, at these 19 facilities the Company has either agreed with other legally liable parties on an arrangement for sharing the costs of remediation or is pursuing resolution of an allocation formula. The 87 NPL sites at which claims have been made against the Company and which are not owned by the Company are at different procedural stages under Superfund. At some, the Company's liability is well defined as a consequence of a governmental decision as to the appropriate remedy and an agreement among liable parties as to the share each will pay for implementing that remedy. At others, where no remedy has been selected or the liable parties have been unable to agree on an appropriate allocation, the Company's future costs are substantially uncertain. The Company periodically reviews its role, if any, with respect to each such location, giving consideration to the nature of the Company's alleged connection to the location (e.g., owner, operator, transporter or generator), the extent of the Company's alleged connection to the location (e.g., amount and nature of waste hauled to the location, number of years of site operation by the Company or other relevant factors), the accuracy and strength of evidence connecting the Company to the location, the number, connection and financial ability of other named and unnamed potentially responsible parties at the location, and the nature and estimated cost of the likely remedy. Where the Company concludes that it is probable that a liability has been incurred, a provision is made in the Company's financial statements for the Company's best estimate of the liability based on management's judgment and experience, information available from regulatory agencies and the number, financial resources and relative degree of responsibility of other potentially responsible parties who are jointly and severally liable for remediation of a specific site, as well as the typical allocation of costs among such parties. If a range of possible outcomes is estimated and no amount within the range appears to be a better estimate than any other, then the Company provides for the minimum amount within the range, in accordance with generally accepted accounting principles. Sites subject to state action under state laws similar to the federal Superfund statute are treated by the Company in the same way as NPL sites. The Company's estimates are subsequently revised, as deemed necessary, as additional information becomes available. While the Company does not anticipate that the amount of any such revisions will have a material adverse effect on the Company's operations or financial condition, the measurement of environmental liabilities is inherently difficult and the possibility remains that technological, regulatory or enforcement developments, the results of environmental studies, or other factors could materially alter this expectation at any time. Such matters could have a material adverse impact on earnings for one or more fiscal quarters or years. From time to time, the Company and certain of its subsidiaries are named as defendants in personal injury and property damage lawsuits, including purported class actions, on the basis of a Company subsidiary's having owned, operated or transported waste to a disposal facility which is alleged to have contaminated the environment or, in certain cases, conducted environmental remediation activities at sites. Some of such lawsuits may seek to have the Company or its subsidiaries pay the costs of groundwater monitoring and health care examinations of allegedly affected persons for a substantial period of time even where no actual damage is proven. While the Company believes it has meritorious defenses to these lawsuits, their ultimate resolution is often substantially uncertain due to the difficulty of determining the cause, extent and impact of alleged contamination (which may have occurred over a long period of time), the potential for successive groups of complainants to emerge, the diversity of the individual plaintiffs' circumstances, and the potential contribution or indemnification obligations of co-defendants or other third parties, among other factors. Accordingly, it is 28 possible such matters could have a material adverse impact on the Company's earnings for one or more fiscal quarters or years. A subsidiary of the Company has been involved in litigation challenging a municipal zoning ordinance which restricted the height of its New Milford, Connecticut landfill to a level below that allowed by the permit previously issued by the Connecticut Department of Environmental Protection ("DEP"). Although a lower court had declared the zoning ordinance's height limitation unconstitutional, the Connecticut Supreme Court reversed that ruling and remanded the case for further proceedings in the Superior Court in the judicial district of Litchfield. On November 8, 1995, the Superior Court ordered the Company's subsidiary to apply to the DEP for permission to remove all waste above the height allowed by the zoning ordinance. The Company believes that removal of such waste is an inappropriate remedy and its subsidiary has appealed the Superior Court order to the Connecticut Supreme Court. The Company is unable to predict the outcome of the appeal or any removal action that may ultimately be required following further appeals or as a result of the permitting process. However, if the lower court order as to removal of the waste is not modified, the subsidiary could incur substantial costs, which could vary significantly depending upon the nature of any plan which is eventually approved by applicable regulatory authorities for removing the waste, the actual volume of waste to be moved and other currently unforeseeable factors and which could have a material adverse effect on the Company's financial condition and results of operations in one or more future periods. The Company and certain of its subsidiaries are also currently involved in other civil litigation and governmental proceedings relating to the conduct of their business. While the outcome of any particular lawsuit or governmental investigation cannot be predicted with certainty, the Company believes that these matters will not have a material adverse effect on its results of operations or financial condition. The Company has brought suit against a substantial number of insurance carriers in an action entitled Waste Management, Inc. et al. v. The Admiral Insurance Company, et al. pending in the Superior court in Hudson County, New Jersey. In this action the Company is seeking a declaratory judgment that environmental liabilities asserted against the Company or its subsidiaries, or that may be asserted in the future, are covered by insurance policies purchased by the Company or its subsidiaries. The Company is also seeking to recover defense costs and other damages incurred as a result of the assertion of environmental liabilities against the Company or its subsidiaries for events occurring over at least the last 25 years at approximately 130 sites and the defendant insurance carriers' denial of coverage of such liabilities. The defendants have denied liability to the Company and have asserted various defenses, including that environmental liabilities of the type for which the Company is seeking relief are not risks covered by the insurance policies in question. The defendants are contesting these claims vigorously. Discovery is currently underway in this proceeding and is expected to continue for several years. No trial date has been set. The Company is unable at this time to predict the outcome of this proceeding. No amounts have been recognized in the Company's financial statements for any future recoveries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to the Company's security holders during the fourth quarter of 1995. EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names and ages of the Company's executive officers (as defined by regulations of the Securities and Exchange Commission), the positions they hold with the Company and summaries of their business experience. Executive officers are elected by the Board of Directors and serve at the discretion of the Board. Dean L. Buntrock, age 64, has been a director of the Company and has served as Chairman of the Board and Chief Executive Officer of the Company since 1968. From September 1980 to November 1984, he also served as President. Mr. Buntrock is also a director of WTI, Waste Management International and Boston Chicken, Inc. 29 Herbert A. Getz, age 40, has been a Senior Vice President of the Company since May 1995, a Vice President of the Company since May 1990 and General Counsel since August 1992. He has also been Secretary of the Company since January 1988. He also served as Assistant General Counsel of the Company from December 1985 until August 1992. Mr. Getz has also held the offices of Vice President, General Counsel and Secretary at Waste Management from April 1989 until December 1993, and Vice President and Secretary of Rust from January 1993 to May 1994. He has also served as Secretary of WTI since July 1995, a position he previously held, as well as being the General Counsel of WTI, from November 1990 until May 1993. Mr. Getz commenced employment with the Company in 1983. He is Chairman of the Board of Directors of NSC and a director of OHM. Thomas C. Hau, age 60, has been a Vice President and the Controller and Principal Accounting Officer of the Company since he commenced employment with the Company in September 1990. From 1971 until his employment by the Company, Mr. Hau was a partner of Arthur Andersen LLP. William P. Hulligan, age 52, has been Executive Vice President of Waste Management since January 1996, a position he previously held from September 1984 to January 1988. From 1986 to August 1993, he was also a Vice President of the Company. From August 1992 to March 1996, he also served as President of certain Waste Management operating groups. He was President of Waste Management from January 1988 to August 1992. He has been employed by the Company since 1979. Joseph M. Holsten, age 43, has been Chief Executive Officer of Waste Management International since July 1995. From October 1993 to July 1995, he was Executive Vice President and Chief Financial Officer of Waste Management. Mr. Holsten was Vice President of Acquisitions and Project Development for Waste Management International from April 1992 to August 1993 and Vice President, Chief Financial Officer and Treasurer of Rust from September to October 1993. Mr. Holsten has been employed by the Company since 1981. James E. Koenig, age 48, has been a Senior Vice President of the Company since May 1992, Treasurer of the Company since 1986 and its Chief Financial Officer since 1989. Mr. Koenig first became a Vice President of the Company in 1986. From 1984 to 1986, Mr. Koenig was Staff Vice President and Assistant to the Chief Financial Officer of the Company. Mr. Koenig has been employed by the Company since 1977. Mr. Koenig also served as Vice President, Chief Financial Officer and Treasurer of WTI from November 1990 to May 1993. He also serves as a director of WTI, Waste Management International and OHM. D. P. Payne, age 53, has been a Senior Vice President of the Company since April 1995, a position he previously held from 1990 to 1993. He also served as President and Chief Executive Officer and a director of CWM from September 1991 to March 1995. Mr. Payne has been employed by the Company since 1990. Phillip B. Rooney, age 51, has served as a director of the Company since 1981 and as its President and Chief Operating Officer since November 1984. Since January 1994, he has also served as Chairman of the Board and Chief Executive Officer of Waste Management. Mr. Rooney commenced employment with the Company in 1969 and first became an officer of the Company in 1971. Since November 1990, he has served as Chairman of the Board and Chief Executive Officer of WTI. Mr. Rooney is also a director of Waste Management International, WTI, Illinois Tool Works, Inc., Caremark International Inc., Urban Shopping Centers, Inc., and ServiceMaster Management Corporation, the general partner of ServiceMaster Limited Partnership. Donald A. Wallgren, age 54, has been Vice President and Chief Environmental Officer of the Company since 1992 and Vice President of Environmental Management of Waste Management since January 1995. He was Vice President and Chief Environmental Officer at Waste Management from 1989 to May 1990. From 1990 to 1992, he served as Vice President-Recycling, Development and Environmental Management of Waste Management. Mr. Wallgren has been employed by the Company since 1979. 30 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock is traded on the New York Stock Exchange and the Chicago Stock Exchange under the symbol "WMX." The following table sets forth by quarter for the last two years the high and low sale prices of the Company's common stock on the New York Stock Exchange Composite Tape as reported by the Dow Jones News Retrieval Service, and the dividends declared by the Board of Directors of the Company on its common stock. 1994 QUARTERLY SUMMARY
CASH DIVIDENDS HIGH LOW DECLARED PER SHARE ------- ------- ------------------ First.................................. $30 3/4 $23 $.15 Second................................. 29 3/8 22 5/8 .15 Third.................................. 30 3/8 26 3/8 .15 Fourth................................. 30 24 1/2 .15 1995 QUARTERLY SUMMARY CASH DIVIDENDS HIGH LOW DECLARED PER SHARE ------- ------- ------------------ First.................................. $29 5/8 $25 3/4 $.15 Second................................. 28 3/4 26 3/4 .15 Third.................................. 32 1/2 28 1/4 .15 Fourth................................. 30 7/8 26 3/8 .15
At March 20, 1996, the Company had approximately 55,600 stockholders of record. Due in part to the high level of public awareness of the business in which the Company is engaged, regulatory enforcement proceedings or other unfavorable developments involving the Company's operations or facilities, including those in the ordinary course of business, may be expected to engender substantial publicity which could from time to time have an adverse impact upon the market price for the Company's common stock. From September 1990 to December 1995, WMX Technologies maintained a program for the purchase of up to 25,000,000 shares of its common stock from time to time in the open market or in privately negotiated transactions. During 1992 and 1993 the Company purchased approximately 7,600,000 shares and 8,400,000 shares, respectively, of its common stock under this program. No Company shares were repurchased in 1994 or 1995. In December 1995, the Company terminated that program and announced that its Board of Directors had authorized the repurchase by the Company of up to an additional 25,000,000 shares of the Company's common stock from time to time over the following 24- month period in open market or privately negotiated transactions. During 1994 and 1995, the Company sold put options on 31,600,000 shares of its common stock in conjunction with the repurchase program. The put options give the holders the right at maturity to require the Company to repurchase its shares at specified prices. In the event the options are exercised, the Company may elect to pay the holder in cash the difference between the strike price and the market price of the Company's shares, in lieu of repurchasing the stock. Options on 17,900,000 shares expired unexercised in 1994 and 1995, as the price of the Company's stock was in excess of the strike price at maturity. Options on 4,700,000 shares were exercised in February 1995, and the Company elected to settle them for cash in the amount of $12,019,000. The remaining 9,000,000 options expire at various dates in 1996 at strike prices ranging from $27.34 to $31.45 per share. For additional information, see "Management's Discussion and Analysis of Results of Operations and Financial Condition--Capital Structure" incorporated by reference herein. 31 ITEM 6. SELECTED FINANCIAL DATA. The following selected consolidated financial information for each of the five years in the period ended December 31, 1995 is derived from the Company's Consolidated Financial Statements, which have been audited by Arthur Andersen LLP, independent public accountants, whose report thereon is incorporated by reference in this report. The information below should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Financial Condition" and the Company's Consolidated Financial Statements, and the related Notes, and the other financial information which are filed as exhibits to this report and incorporated herein by reference.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 1991(1) 1992(2) 1993(3)(6) 1994(4)(6) 1995(5)(6) ----------- ----------- ----------- ----------- ----------- (000'S OMITTED, EXCEPT PER SHARE AMOUNTS) Revenue from continuing operations............. $ 7,550,914 $ 8,661,027 $ 8,636,116 $ 9,554,705 $10,247,617 Income from continuing operations............. $ 606,323 $ 850,036 $ 442,431 $ 776,491 $ 654,590 Earnings per common and common equivalent share--continuing operations............. $ 1.23 $ 1.72 $ .91 $ 1.60 $ 1.35 Total assets............ $12,572,310 $14,114,180 $16,264,476 $17,423,173 $18,695,308 Long-term debt, less portion payable within one year............... $ 3,782,973 $ 4,312,511 $ 6,145,584 $ 6,044,411 $ 6,420,610 Dividends per share..... $ .42 $ .50 $ .58 $ .60 $ .60
- -------- (1) The results for 1991 include a special charge of $296,000,000 (before tax and minority interest) primarily to reflect then current estimates of the environmental remediation liabilities at waste disposal sites previously used or operated by the Company and its subsidiaries or their predecessors. (2) The results for 1992 include a non-taxable gain of $240,000,000 (before minority interest) resulting from the initial public offering of Waste Management International, special charges of $219,900,000 (before tax and minority interest) primarily related to writedowns of the Company's medical waste business, CWM incinerators in Chicago, Illinois and Tijuana, Mexico and a former subsidiary's investment in its asbestos abatement business and certain restructuring costs incurred by the subsidiary and CWM related to the formation of Rust, and one time after-tax charges aggregating $71,139,000, or $.14 per share, related to the cumulative effect of adopting two new accounting standards. (3) The results for 1993 include a non-taxable gain of $15,109,000 (before minority interest) relating to the issuance of shares by Rust, as well as the Company's share of a special asset revaluation and restructuring charge of $550,000,000 (before tax and minority interest) recorded by CWM related primarily to a revaluation of CWM's thermal treatment business, and a provision of approximately $14,000,000 to adjust deferred income taxes resulting from the 1993 tax law change. See Notes 3 and 14 to the Company's Consolidated Financial Statements. (4) The results for 1994 include a charge of $9,200,000 (before tax and minority interest) recorded by Rust to write off assets and recognize costs of exiting certain of Rust's service lines and closing offices in a consolidation of certain of its operating groups. See Note 14 to the Company's Consolidated Financial Statements. (5) The results for 1995 include a special charge of $140,600,000 (before tax) recorded by CWM, primarily to write off its investment in facilities and technologies that it abandoned because they do not meet customer service or performance objectives, and a special charge of $194,600,000 (before tax and minority interest) recorded by Waste Management International relating to actions it is taking to sell or otherwise dispose of non-core businesses and investments, as well as core businesses and investments in low potential markets, abandon certain hazardous waste treatment and processing technologies, and streamline its country management organization. See Note 14 to the Company's Consolidated Financial Statements. (6) In December 1995, the Rust Board of Directors approved a plan to sell or otherwise discontinue Rust's process engineering, construction, specialty contracting and similar lines of business. Accordingly, these 32 businesses have been segregated as discontinued operations in the financial statements since 1993. It is not practical to restate periods prior to the formation of Rust on January 1, 1993 for the discontinued operations. See Note 15 to the Company's Consolidated Financial Statements. (7) Certain amounts have been restated to conform to 1995 classifications. Reference is made to the ratio of earnings to fixed charges for each of the years in the five-year period ended December 31, 1995, as set forth in Exhibit 12 to this report, which ratios are incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Reference is made to Management's Discussion and Analysis of Results of Operations and Financial Condition set forth on pages 16 to 24 of the Company's 1995 Annual Report to Stockholders (the "Annual Report"), which discussion is filed as an exhibit to this report and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. (a) The Consolidated Balance Sheets as of December 31, 1994 and 1995, Consolidated Statements of Income, Stockholders' Equity and Cash Flows for each of the years in the three-year period ended December 31, 1995 and Notes to Consolidated Financial Statements set forth on pages 25 to 45 of the Annual Report are filed as an exhibit to this report and incorporated herein by reference. (b) Selected Quarterly Financial Data (Unaudited) is set forth in Note 17 to the Consolidated Financial Statements referred to in Item 8(a) above and incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Reference is made to the information set forth in the 15 paragraphs under the caption "Election of Directors" beginning on page 1 of the Company's proxy statement for the annual meeting scheduled for May 10, 1996 (the "Proxy Statement") for a description of the directors of the Company, which paragraphs are incorporated herein by reference. Information concerning the executive officers of the Company is set forth above under "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION. Reference is made to the information set forth under the caption "Compensation" on pages 10 through 16 of the Proxy Statement, which information, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Reference is made to the information, including the tables and the footnotes thereto, set forth under the caption "Securities Ownership of Management" on pages 5 through 9 of the Proxy Statement, for certain information respecting ownership of common stock of the Company, WTI and Waste Management International, which information is incorporated herein by reference. 33 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Reference is made to the paragraph under the caption "Compensation Committee Interlocks and Insider Participation" on page 16 of the Proxy Statement and the information set forth under the caption "Certain Transactions" beginning on page 24 of the Proxy Statement for certain information with respect to certain relationships and related transactions, which paragraphs are incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE AND REPORTS ON FORM 8-K. (a) Financial Statements, Schedule and Exhibits. I. Financial Statements--filed as an exhibit hereto and incorporated herein by reference. (i)Consolidated Statements of Income for the three years ended December 31, 1995; (ii)Consolidated Balance Sheets--December 31, 1994 and 1995; (iii) Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1995; (iv)Consolidated Statements of Cash Flows for the three years ended December 31, 1995; (v)Notes to Consolidated Financial Statements; and (vi)Report of Independent Public Accountants. II. Schedule (i)Schedule II--Valuation and Qualifying Accounts (ii)Report of Independent Public Accountants on Schedule All other schedules have been omitted because the required information is not significant or is included in the financial statements or the notes thereto, or is not applicable. III. Exhibits. The exhibits to this report are listed in the Exhibit Index elsewhere herein. Included in the exhibits listed therein are the following exhibits which constitute management contracts or compensatory plans or arrangements*: (i) 1981 Stock Option Plan for Non-Employee Directors of registrant (Exhibit 19 to registrant's report on Form 10-Q for the quarter ended June 30, 1982) (ii) WMX Technologies, Inc. 1982 Stock Option Plan, as amended to March 11, 1988 (Exhibit 10.3 to registrant's 1988 annual report on Form 10-K) (iii) Deferred Director's Fee Plan, as amended (Exhibit 10.3 to registrant's 1990 annual report on Form 10-K) (iv) Director's Phantom Stock Plan (Exhibit 10.9 to registrant's 1984 annual report on Form 10-K) (v) Employment Agreement, dated as of September 1, 1986, by and between the registrant and Phillip B. Rooney (Exhibit 19.4 to registrant's report on Form 10-Q for the quarter ended September 30, 1986) (vi) WMX Technologies, Inc. Corporate Incentive Bonus Plan (Exhibit B to registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) (vii) WMX Technologies, Inc. Supplemental Executive Retirement Plan, as amended and restated as of January 25, 1995 (filed with this report) 34 (viii) Chemical Waste Management, Inc. 1992 Stock Option Plan (Exhibit 10.19 to Chemical Waste Management, Inc.'s 1991 annual report on Form 10-K) (ix) Supplemental Retirement Benefit Agreement, dated as of January 1, 1989, by and between the registrant and Peter H. Huizenga (Exhibit 10.16 to Post-Effective Amendment No. 2 to registrant's registration statement on Form S-1, Registration No. 33-13839) (x) Chemical Waste Management, Inc. 1986 Stock Option Plan, as amended (Exhibit 10.1 to Chemical Waste Management, Inc.'s 1989 annual report on Form 10-K) (xi) WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus Plan (filed with this report) (xii) Chemical Waste Management, Inc. Deferred Director's Fee Plan (Exhibit 10.5 to Chemical Waste Management, Inc.'s registration statement on Form S-1, Registration No. 33-8509) (xiii) WMX Technologies, Inc. Director's Charitable Endowment Plan (Exhibit 10.20 to registrant's 1989 annual report on Form 10-K) (xiv) Supplemental Retirement Benefit Agreement dated as of January 1, 1991 by and between registrant and Donald F. Flynn (Exhibit 10.17 to registrant's 1990 annual report on Form 10-K) (xv) Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. as amended through June 10, 1991 (Exhibit 19.03 to the report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) (xvi) 1988 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1988 Stock Plan") (Exhibit 28.1 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523) (xvii) Amendments dated as of September 7, 1990 to the WTI 1988 Stock Plan (Exhibit 19.02 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xviii) Amendment dated as of November 1, 1990 to the WTI 1988 Stock Plan (Exhibit 19.04 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xix) 1986 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1986 Stock Plan") (Exhibit 28.2 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523) (xx) Amendment dated as of November 1, 1990 to the WTI 1986 Stock Plan (Exhibit 19.03 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxi) Employment Agreement dated as of April 1, 1995 between the registrant and D. P. Payne (filed with this report) (xxii) WMX Technologies, Inc. 1992 Stock Option Plan (Exhibit 10.31 to registrant's registration statement on Form S-1, Registration No. 33-44849) (xxiii) WMX Technologies, Inc. 1992 Stock Option Plan for Non-Employee Directors (Exhibit 10.32 to registrant's registration statement on Form S-1, Registration No. 33-44849) (xxiv) Wheelabrator Technologies Inc. 1992 Stock Option Plan (Exhibit 10.45 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxv) Deferred Director's Fee Plan of Wheelabrator Technologies Inc. adopted June 10, 1991 (Exhibit 19.02 to the quarterly report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) (xxvi) Waste Management International plc Share Option Plan (Exhibit 10.1 to the registration statement on Form F-1 of Waste Management International plc, Registration No. 33-46511) 35 (xxvii) Amendment dated as of December 6, 1991 to the WTI 1986 Stock Plan (Exhibit 19.01 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxviii) Amendment dated as of December 6, 1991 to the WTI 1988 Stock Plan (Exhibit 19.02 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxix) Amendment dated as of December 6, 1991 to the Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. (Exhibit 19.05 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxx) WMX Technologies, Inc. Long Term Incentive Plan (as amended and restated as of January 27, 1994) (Exhibit A to registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) - -------- *In the case of reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management's file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0-14246. (b) Reports on Form 8-K. During the fourth quarter of 1995, the Company filed reports on Form 8-K as follows: (i) a report dated October 17, 1995 reporting under Item 5 the issuance of a news release concerning the Company's 1995 third quarter results of operations and a possible 1995 fourth quarter charge by Waste Management International; and (ii) a report dated December 12, 1995 reporting under Item 5 the issuance of news releases concerning (A) the authorization by the Company's Board of Directors of a Company common stock repurchase program, (B) an increase by WTI in its program for the repurchase of WTI common stock, (C) a fourth quarter 1995 exceptional charge by Waste Management International, (D) the decision by Rust to sell or otherwise discontinue its process engineering, construction, specialty contracting and similar lines of business and the possibility of a related 1995 fourth quarter charge, (E) announcement of below-expectations 1995 fourth quarter earnings by Waste Management International, and (F) expected 1996 earnings growth by Waste Management International. 36 WMX TECHNOLOGIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENT SCHEDULE ($000'S OMITTED) SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
EFFECT OF BALANCE CHARGED ACCOUNTS FOREIGN BALANCE BEGINNING TO WRITTEN CURRENCY END OF OF YEAR INCOME OFF OTHER(A) TRANSLATION YEAR --------- ------- -------- -------- ----------- ------- 1993--Reserve for doubtful accounts (B) (C).................... $56,475 $33,173 $(33,514) $ 7,120 $(1,970) $61,284 ======= ======= ======== ======= ======= ======= 1994--Reserve for doubtful accounts (B) (C).................... $61,284 $34,072 $(40,866) $10,280 $ 1,760 $66,530 ======= ======= ======== ======= ======= ======= 1995--Reserve for doubtful accounts (B).. $66,530 $39,930 $(42,038) $ 1,314 $ 1,104 $66,840 ======= ======= ======== ======= ======= =======
- -------- (A) Reserves of companies accounted for as purchases. (B) Includes reserves for doubtful long-term notes receivable. (C) Restated to exclude discontinued operations. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 37 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To WMX Technologies, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in the WMX Technologies, Inc. Annual Report to Stockholders for 1995 filed as an exhibit to and incorporated by reference in this Form 10-K, and have issued our report thereon dated February 5, 1996. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule included on page 37 of this Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Arthur Andersen LLP Chicago, Illinois, February 5, 1996 38 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN OAK BROOK, ILLINOIS ON THE 29TH DAY OF MARCH 1996. WMX Technologies, Inc. /s/ Dean L. Buntrock By __________________________________ Dean L. Buntrock, Chairman of the Board and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Dean L. Buntrock Director, Chairman of the ____________________________________ Board and Chief Executive Dean L. Buntrock Officer /s/ Jerry E. Dempsey Director ____________________________________ Jerry E. Dempsey /s/ Phillip B. Rooney Director ____________________________________ Phillip B. Rooney /s/ Donald F. Flynn Director ____________________________________ Donald F. Flynn /s/ Peter H. Huizenga Director ____________________________________ Peter H. Huizenga /s/ Peer Pedersen Director ____________________________________ Peer Pedersen /s/ James R. Peterson Director ____________________________________ James R. Peterson /s/ Alexander B. Trowbridge Director March 29, 1996 ____________________________________ Alexander B. Trowbridge /s/ Howard H. Baker, Jr. Director ____________________________________ Howard H. Baker, Jr. /s/ H. Jesse Arnelle Director ____________________________________ H. Jesse Arnelle /s/ Pastora San Juan Cafferty Director ____________________________________ Pastora San Juan Cafferty /s/ James B. Edwards Director ____________________________________ James B. Edwards /s/ Thomas C. Hau Vice President, Controller ____________________________________ and Principal Accounting Thomas C. Hau Officer /s/ James E. Koenig Senior Vice President, Chief ____________________________________ Financial Officer, James E. Koenig Treasurer and Principal Financial Officer
39 WMX TECHNOLOGIES, INC. EXHIBIT INDEX
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 1. Inapplicable 2. Inapplicable 3.1(a) Restated Certificate of Incorporation of registrant, as amended as of May 24, 1985 (incorporated by reference to Exhibit 4.1 to registrant's report on Form 10-Q for the quarter ended June 30, 1985) 3.1(b) Certificate of Amendment of Restated Certificate of Incorporation of registrant, recorded May 23, 1986 (incorporated by reference to Exhibit 4(c) to registrant's registration statement on Form S-8, Registration No. 33-6265) 3.1(c) Certificate of Designation of Preferred Stock of registrant, filed January 30, 1987 (incorporated by reference to Exhibit 3.1(c) to registrant's 1986 annual report on Form 10-K) 3.1(d) Certificate of Amendment of Restated Certificate of Incorporation of registrant, recorded May 15, 1987 (incorporated by reference to Exhibit 4.5(d) to registrant's registration statement on Form S-4, Registration No. 33-15518) 3.1(e) Certificate of Amendment of Restated Certificate of Incorporation of registrant, filed May 19, 1989 (incorporated by reference to Exhibit 3(e) to registrant's registration statement on Form S-3, Registration No. 33-30190) 3.1(f) Certificate of Amendment of Restated Certificate of Incorporation of registrant, filed May 18, 1990 (incorporated by reference to Exhibit 4(h) to registrant's registration statement on Form S-8, Registration No. 33-35936) 3.1(g) Certificate of Amendment of Restated Certificate of Incorporation of registrant, filed May 14, 1993 (incorporated by reference to Exhibit 4(a) to registrant's report on Form 8-K dated May 14, 1993) 3.1(h) Conformed copy of Restated Certificate of Incorporation of registrant, as amended (incorporated by reference to Exhibit 4(b) to registrant's report on Form 8-K dated May 14, 1993) 3.2 By-laws of registrant, as amended and restated as of January 28, 1995 (incorporated by reference to Exhibit 3.2 to registrant's 1994 annual report on Form 10-K) 4.1(a) Rights Agreement dated as of February 6, 1987, between the registrant and Harris Trust and Savings Bank, which includes as Exhibit A the form of Certificate of Designation of Preferred Stock, as Exhibit B, the form of Rights Certificate and, as Exhibit C, the Summary of Rights (incorporated by reference to Exhibit 4 to registrant's report on Form 8-K dated January 26, 1987) 4.1(b) Certificate of Adjustment relating to April 1987 stock split pursuant to Section 12 of the Rights Agreement (incorporated by reference to Exhibit 4.3(b) to registrant's registration statement on Form S-1, Registration No. 33-13839) 4.1(c) Certificate of Adjustment relating to December 1989 stock split pursuant to Section 12 of the Rights Agreement (incorporated by reference to Exhibit 4.3(c) to registrant's 1989 annual report on Form 10-K) 4.2(a) Trust Indenture dated as of August 1, 1989 (incorporated by reference to Exhibit 4.3(a) to registrant's 1990 annual report on Form 10-K) 4.2(b) First Supplemental Indenture dated as of December 1, 1990 (incorporated by reference to Exhibit 4.3(b) to registrant's 1990 annual report on Form 10-K)
- -------- *In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0-14246. EX-1
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 4.3 Trust Indenture dated as of June 1, 1993 (incorporated by reference to Exhibit 4 to the registrant's current report on Form 8-K dated July 15, 1993) 5. Inapplicable 6. Inapplicable 7. Inapplicable 8. Inapplicable 9. None 10.1 1981 Stock Option Plan for Non-Employee Directors of registrant (incorporated by reference to Exhibit 19 to registrant's report on Form 10-Q for the quarter ended June 30, 1982) 10.2 WMX Technologies, Inc. 1982 Stock Option Plan, as amended to March 11, 1988 (incorporated by reference to Exhibit 10.3 to registrant's 1988 annual report on Form 10-K) 10.3 Deferred Director's Fee Plan, as amended (incorporated by reference to Exhibit 10.3 to registrant's 1990 annual report on Form 10-K) 10.4 Director's Phantom Stock Plan (incorporated by reference to Exhibit 10.9 to registrant's 1984 annual report on Form 10-K) 10.5 Employment Agreement, dated as of September 1, 1986, by and between the registrant and Phillip B. Rooney (incorporated by reference to Exhibit 19.4 to registrant's report on Form 10-Q for the quarter ended September 30, 1986) 10.6 WMX Technologies, Inc. Corporate Incentive Bonus Plan (incorporated by reference to Exhibit B to the registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) 10.7 WMX Technologies, Inc. Supplemental Executive Retirement Plan, as amended and restated as of January 24, 1995 10.8 WMX Technologies, Inc. Long Term Incentive Plan, as amended and restated as of January 27, 1994 (incorporated by reference to Exhibit A to the registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) 10.9 Supplemental Retirement Benefit Agreement, dated as of January 1, 1989, by and between the registrant and Peter H. Huizenga (incorporated by reference to Exhibit 10.16 to Post-Effective Amendment No. 2 to registrant's registration statement on Form S-1, Registration No. 33-13839) 10.10 Chemical Waste Management, Inc. 1986 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 to Chemical Waste Management, Inc.'s 1989 annual report on Form 10-K) 10.11 WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus Plan 10.12 Chemical Waste Management, Inc. Deferred Director's Fee Plan (incorporated by reference to Exhibit 10.5 to Chemical Waste Management, Inc.'s registration statement on Form S-1, Registration No. 33-8509) 10.13 WMX Technologies, Inc. Director's Charitable Endowment Plan (incorporated by reference to Exhibit 10.20 to registrant's 1989 annual report on Form 10-K) 10.14 Supplemental Retirement Benefit Agreement dated as of January 1, 1991 by and between registrant and Donald F. Flynn (incorporated by reference to Exhibit 10.17 to registrant's 1990 annual report on Form 10-K)
- -------- *In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0-14246. EX-2
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 10.15 Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. as amended through June 10, 1991 (incorporated by reference to Exhibit 19.03 to the report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) 10.16 1988 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1988 Stock Plan") (incorporated by reference to Exhibit 28.1 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523) 10.17 Amendments dated as of September 7, 1990 to the WTI 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.18 Amendment dated as of November 1, 1990 to the WTI 1988 Stock Plan (incorporated by reference to Exhibit 19.04 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.19 1986 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1986 Stock Plan") (incorporated by reference to Exhibit 28.2 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523) 10.20 Amendment dated as of November 1, 1990 to the WTI 1986 Stock Plan (incorporated by reference to Exhibit 19.03 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.21 Employment Agreement dated as of April 1, 1995 between the registrant and D. P. Payne 10.22 WMX Technologies, Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit 10.31 to registrant's registration statement on Form S-1, Registration No. 33-44849) 10.23 WMX Technologies, Inc. 1992 Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.32 to registrant's registration statement on Form S-1, Registration No. 33-44849) 10.24 Wheelabrator Technologies Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit 10.45 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.25 Deferred Director's Fee Plan of Wheelabrator Technologies Inc. adopted June 10, 1991 (incorporated by reference to Exhibit 19.02 to the quarterly report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) 10.26 Waste Management International plc Share Option Plan (incorporated by reference to Exhibit 10.1 to the registration statement on Form F-1 of Waste Management International plc, Registration No. 33- 46511) 10.27 Amendment dated as of December 6, 1991 to the WTI 1986 Stock Plan (incorporated by reference to Exhibit 19.01 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.28 Amendment dated as of December 6, 1991 to the WTI 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.29 Amendment dated as of December 6, 1991 to the Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. (incorporated by reference to Exhibit 19.05 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.30 First Amended and Restated International Business Opportunities Agreement by and among registrant, Chemical Waste Management, Inc., Wheelabrator Technologies Inc., Waste Management International, Inc., Waste Management International plc and Rust International Inc., dated as of January 1, 1993 (incorporated by reference to Exhibit 28 to the registration statement on Form S-3 of Wheelabrator Technologies Inc., Registration No. 33-59606)
- -------- *In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0-14246. EX-3
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 10.31 Amendment dated as of January 28, 1994 relating to the International Business Opportunities Agreement (incorporated by reference to Exhibit 10.19 to the 1993 annual report on Form 10-K of Chemical Waste Management, Inc.) 10.32 Chemical Waste Management, Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit 10.19 to the 1991 annual report on Form 10-K of Chemical Waste Management, Inc.) 10.33 Amendment dated as of July 10, 1995 to the International Business Opportunities Agreement (incorporated by reference to Exhibit 10 to the quarterly report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended September 30, 1995) 11. None 12. Computation of ratio of earnings to fixed charges 13.1 Management's Discussion and Analysis of Results of Operations and Financial Condition 13.2 Financial Statements, Supplementary Data and Report of Independent Public Accountants 14. Inapplicable 15. Inapplicable 16. None 17. Inapplicable 18. None 19. Inapplicable 20. Inapplicable 21. List of subsidiaries of registrant 22. Inapplicable 23. Consent of Independent Public Accountants 24. None 25. Inapplicable 26. Inapplicable 27. Financial Data Schedule 28. None
- -------- *In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0-14246. EX-4 EX-10.7 2 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Exhibit 10.7 WMX TECHNOLOGIES, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (As Amended and Restated as of January 24, 1995) WMX Technologies, Inc. (formerly "Waste Management, Inc."), a Delaware corporation, established this Supplemental Executive Retirement Plan effective as of January 1, 1988 and amended and restated the Plan effective as of May 14, 1993. Effective January 24, 1995, the Plan was further amended and restated to merge the Chemical Waste Management, Inc. Supplemental Executive Retirement Plan with and into the Plan and to make other necessary and desirable changes, all as set forth below. 1. Definitions. Wherever used in this Plan, the following terms shall have the following meanings, unless a different meaning is clearly required by the context: (a) Code: The Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code shall include that section and any corresponding provisions of any future legislation that amends, supplements or supersedes that section. (b) Committee: With respect to participation in the Plan by individuals who are executive officers of the Company, the term "Committee" shall mean the Compensation and Stock Option Committee of the Company's Board of Directors. With respect to participation in the Plan by all other individuals, the term "Committee" shall mean a management committee composed of the Company's Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and General Counsel (or one or more persons designated by them). (c) Company: WMX Technologies, Inc., a Delaware corporation. (d) Compensation: A Participant's "compensation" for any year is such Participant's total salary and bonus as accrued in the consolidated financial records of the Company and its subsidiaries for that year (without regard to any reduction thereto under any salary reduction agreement entered into under section 125 or 401(k) of the Code), but excluding any other form of compensation such as bonuses under the Company's or any subsidiary's long-term incentive bonus program, income attributable to stock options or Company contributions under pension, profit sharing or other plans. (e) Disability: A physical or mental disability as defined for purposes of the Pension Plan. (f) Final Average Compensation: The monthly average of a Participant's Compensation with the Company or a Participating Subsidiary for the three consecutive calendar years in which such Participant's aggregate Compensation was the highest out of the last ten calendar years ending on or before such Participant's date of retirement or other termination of employment. (g) Inactive Participant: An individual who became a Participant hereunder and thereafter ceased to be in the class of employees eligible to participate in the Plan and who is designated by the Committee as an Inactive Participant. An Inactive Participant shall continue to be a Participant for purposes of continuing to accrue Eligibility Service hereunder, but not Benefit Service. The benefits of an Inactive Participant shall be determined in accordance with Section 5(c). (h) Normal Retirement Date: The first day of the month coinciding with or next following the Participant's 60th birthday. (i) Participant: Any person who is eligible to participate in this Plan as provided in Section 3 and who is designated as a Participant by the Committee. A Participant shall remain a Participant for such period of time as such person is designated as a Participant by the Committee. Except where the context requires otherwise, the term "Participant" shall also mean an Inactive Participant or a retired or terminated Participant who continues to be entitled to receive retirement benefits under this Plan after retirement or other termination of employment. (j) Participating Subsidiary. Waste Management, Inc., Chemical Waste Management, Inc., any majority-owned subsidiary of either or any other subsidiary of the Company designated by the Committee from time to time. (k) Pension Plan: The WMX Technologies, Inc. Pension Plan, as amended from time to time. (l) Plan: This WMX Technologies, Inc. Supplemental Executive Retirement Plan, as amended from time to time (commonly referred to as the "SERP"). (m) Service: A Participant's service for purposes of eligibility for benefits and amount of benefits, determined as follows: (i) Benefit Service: A Participant's benefit service as determined for purposes of the Pension Plan; provided, however, that the Benefit Service of an Inactive Participant shall be determined on the date immediately preceding the date the Participant became an Inactive Participant. (ii) Eligibility Service: A Participant's period of service from the date the Participant commenced or recommenced participation in the Plan or such earlier date as is approved by the Committee at the time the Participant is designated as such, and ending on the later of the date the Participant ceases to be a Participant hereunder by reason of retirement, death or termination of employment or the date the Participant ceases to be a Transferred Participant or an Inactive Participant. Notwithstanding the foregoing, a Participant's period of participation in the Chemical Waste Management, Inc. Supplemental Executive Retirement Plan prior to its merger into the Plan shall be counted as Eligibility Service hereunder. 2 Notwithstanding any provision contained herein to the contrary, but subject to the break in service rules of the Pension Plan with respect to the determination of Benefit Service, all periods of service shall be aggregated. All other terms used in both this Plan and in the Pension Plan shall have the same meaning as in the Pension Plan, and all actuarial calculations under this Plan shall be made on the same basis as for the similar purpose under the Pension Plan. 2. Purpose. The purpose of this Plan is to provide a retirement income to eligible executives of the Company and its subsidiaries to supplement the pensions payable under the Company's Pension Plan. 3. Eligibility. Any person who is a corporate, group or staff officer of the Company or a Participating Subsidiary and who is a participant in the Pension Plan shall be eligible to be designated as a Participant in this Plan by the Committee. In addition, the Committee may in its discretion from time to time designate other key employees of the Company or any Participating Subsidiary as eligible to participate, or to continue participating, in the Plan. 4. Eligibility for Benefits. Benefits under this Plan shall be payable in respect of a Participant only if the Participant's retirement, death, disability or other termination of employment occurs on or after the date such Participant has completed ten years of Eligibility Service, either as a Participant or an Inactive Participant, as evidenced in the records of the Committee. No benefits shall be payable hereunder with respect to any Participant whose employment termination, death or disability occurs prior to completing ten years of Eligibility Service. 5. Amount of Benefits. (a) Normal Retirement. If a Participant retires after having become eligible for benefits hereunder and on or after such Participant's Normal Retirement Date, the monthly amount of such Participant's benefits under the Plan, commencing on or after Normal Retirement Date, shall be (i) 1-1/2% of Final Average Compensation per year of Benefit Service, reduced by (ii) the amount of such Participant's monthly benefit under the Pension Plan (determined without regard to any qualified domestic relations order to which such Participant's benefit under the Pension Plan is or was subject). (b) Early Retirement. If a Participant retires or terminates employment after having become eligible for benefits hereunder, but before his or her Normal Retirement Date, the monthly amount of such Participant's benefits shall be determined in accordance with Section 5(a), except that if the Participant has completed less than 30 years of Benefit Service such amount shall be reduced at the rate of 2/10 of 1% for each of the first 60 months by which the benefit commencement date precedes the Participant's Normal Retirement Date, and for each additional month at such rate as is determined by the Committee in its discretion. Notwithstanding the foregoing sentence, the Committee in its discretion may determine with respect to any particular Participant that any such reduction shall be at a lower rate or that no such reduction shall apply. 3 (c) Inactive Participants. The benefit of a Participant who is an Inactive Participant at the time of retirement or termination of service with the Company or an affiliated entity shall be determined as of the date immediately preceding the date the Participant became an Inactive Participant, based on Benefit Service, Final Average Compensation and the Participant's accrued benefit under the Pension Plan as of such date. 6. Disability. If a Participant's employment is terminated because of Disability after having become eligible for benefits hereunder, but before Normal Retirement Date, such Participant shall be eligible to receive a benefit under the Plan beginning on his Normal Retirement Date. The amount of benefit under this Plan to such a Participant shall be determined in accordance with Section 5, but shall be reduced for any year by any benefits payable to the Participant for that year under any long-term disability program of maintained or contributed to by the Company or a Participating Subsidiary. In computing the Benefit Service of such a Participant, his Service shall include the period of Disability determined in the same manner as for purposes of the Pension Plan. 7. Payment of Benefits. Payment of a Participant's benefits under this Plan shall begin as of the same date as such Participant's pension commencement date under the Pension Plan, unless an earlier commencement date is specifically approved by the Committee, in which case the Committee shall provide for such adjustment in the amount of benefits as it determines in its discretion to be appropriate. Payment of such benefits shall be in the form of a straight life annuity and shall continue thereafter monthly for the Participant's life. However, if payment of a Participant's pension under the Pension Plan is to be made in the form of a qualified joint and survivor annuity or in any other optional form, the benefits under this Plan shall be paid in that same form, in an amount actuarially equivalent to the straight life annuity otherwise payable hereunder, and with the same contingent annuitant or contingent beneficiary as under the Pension Plan. 8. Surviving Spouse Benefit. (a) If a Participant dies (i) after having become eligible for benefits hereunder and (ii) either (A) before termination of employment or (B) after termination of employment and before the commencement of benefits under the Plan, provided in case (B), the Participant and his or her spouse had not effectively waived the qualified joint and survivor annuity under the Pension Plan, the Participant's surviving spouse shall be eligible to receive a monthly benefit for life. (b) Such surviving spouse benefit shall be in the monthly amount that would have been payable under this Plan to the Participant's surviving spouse under the qualified joint and survivor annuity described in Section 7 if: (i) in the case of a Participant who dies after attaining the "earliest benefit commencement date" (as defined below), the Participant had retired on the day before his or her death and elected to commence receiving benefits under this Plan as of such date, or 4 (ii) in the case of a Participant who dies on or before the earliest benefit commencement date, the Participant had lived and begun to receive benefits under this Plan on the earlier benefit commencement date and had died on the day after that date, calculated in either case on the basis of the Participant's Final Average Compensation and Benefit Service as of the date of death or termination of employment, whichever is earlier, or the date the Participant became an Inactive Participant, if applicable. For purposes of this Section 8(b), a Participant's "earliest benefit commencement date" is the first day of the month coinciding with or next following the later of (A) such Participant's 55th birthday or (B) completion of ten years of participation hereunder. (c) Payment of the surviving spouse benefit hereunder shall begin as of the same date as the spouse's benefit payable to the surviving spouse under the Pension Plan, unless an earlier commencement date is specifically approved by the Committee, in which case the Committee shall provide for such adjustment in the amount of benefit as it determines in its discretion to be appropriate. Payment of such surviving spouse benefit shall continue thereafter monthly for the spouse's life. However, if the payment of the surviving spouse's benefit under the Pension Plan is to be made in some other form, the benefits under this Plan shall be paid in that same form, in an amount actuarially equivalent to the annuity otherwise payable hereunder, as under the Pension Plan. 9. Conditions on Benefits. If a Participant engages in competition with the Company or any affiliated entity (without prior authorization in writing) or is discharged for cause, or performs acts of willful malfeasance or gross negligence in a matter of material importance to the Company or any affiliated entity, benefits payable thereafter to the Participant or such Participant's surviving spouse shall be forfeited at the discretion of the Company's Board of Directors and the Company shall have no further obligation to the Participant or spouse under the Plan. 10. Re-employment. If a retired Participant is re-employed by the Company or a Participating Subsidiary, no benefits shall be payable during the period of re-employment, and the benefits payable following subsequent retirement shall be calculated so as to take into account such Participant's additional period of service and Final Average Compensation, with appropriate actuarial adjustment for any benefits paid under the Plan following such Participant's earlier retirement; provided, however, that the amount of such benefit as recalculated, before taking into account any such actuarial adjustment, shall not be less than such Participant's benefit immediately following such Participant's earlier retirement. 11. Administration and Interpretation. The Committee shall be the Plan administrator. The Committee shall have the authority to control and manage the operation and administration of the Plan, to adopt rules and regulations regarding the administration of the Plan, to interpret the Plan, to determine the conditions subject to which any benefits may be payable, and to make any other determinations which the Committee believes are necessary or advisable for the administration of the Plan. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the 5 Committee with respect to the Plan. Determinations by the Committee shall be final and binding on all parties with respect to all matters relating to the Plan. The Committee may delegate all or any part of its authority to any officer of the Company. 12. Claims Procedure. (a) If a Participant or other person believes that such person is entitled to benefits under the Plan, such person may file a claim for benefits in writing with the Committee. If a claim for benefits is wholly or partially denied, the Committee shall give the claimant written notice of the denial within a reasonable period of time after receipt of the claim by the Committee. Such notice shall set forth: (i) the specific reason or reasons for the denial, (ii) specific reference to pertinent provisions of the Plan on which the denial is based, (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and (iv) an explanation of the claim review procedure. (b) A claimant whose claim is denied, or such claimant's duly authorized representative, may submit a written request for review to the Committee within 60 days after receiving notice of the denial. In connection with such request, the claimant or his authorized representatives may review pertinent documents and may submit issues and comments in writing. If such a request is made, the Committee shall make a full and fair review of the denial of the claim and shall make a decision not later than 60 days after receipt of the request, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request. The decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent provisions of the Plan on which the decision is based. 13. Amendment and Termination. The Plan may be amended or terminated at any time by action of the Company's Board of Directors or the Compensation and Stock Option Committee thereof. However, no such action shall, without the consent of the Participant, reduce or impair the benefits then currently payable to a Participant or surviving spouse, nor divest a Participant of any benefits such Participant would have been entitled to receive had such Participant resigned from the Company's employ immediately before the effective date of the amendment or termination. 6 14. Miscellaneous. (a) Spendthrift provision. No interest of any person or entity in, or right to receive a benefit under the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a benefit be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. (b) No Guarantee of Employment. Nothing in the Plan shall be construed as a contract of employment or be deemed to confer upon any Participant the right to be retained in the service of the Company or any affiliated entity, nor shall it interfere with the right of the Company or any affiliated entity to discharge or otherwise deal with any Participant without regard to the existence of this Plan. (c) No Funding. The Plan shall at all times be entirely unfunded and no provision shall at any time be made with regard to segregating any assets of the Company for payment of any benefits hereunder. All benefits under the Plan are payable, as and when they come due, solely from the general assets of the Company. No Participant, surviving spouse or other person shall have any interest in any particular assets of the Company by reason of the right to receive a benefit under the Plan and any such Participant, surviving spouse or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan. Nothing contained in the Plan shall constitute a guaranty by the Company or any other entity or person that the assets of the Company will be sufficient to pay any benefit hereunder. (d) Facility of Payment. When, in the Committee's opinion, a Participant or surviving spouse is under a legal disability or is incapacitated in any way so as to be unable to manage his or her affairs, the benefits hereunder may be paid to the Participant or spouse, or to a duly appointed guardian or conservator, custodian, adult relative, or directly for the benefit, of the Participant or surviving spouse, as the Committee shall in its discretion determine. Any such payments shall constitute a complete discharge therefor with respect to the Plan, the Committee and the Company. (e) Withholding for Taxes. Notwithstanding any other provisions of this Plan, all payments hereunder shall be subject to any applicable withholding for all federal, state and local taxes. (f) Corporate successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate. 7 (g) Unclaimed benefit. Each Participant shall keep the Company informed of his current address and the current address of his spouse. The Committee shall not be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Company within three years after the date on which payment of the Participant's benefit may first be made, payment may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or, within three years after the actual death of a Participant, the Committee is unable to locate any surviving spouse of the Participant, then the Company shall have no further obligation to pay any benefit hereunder to such Participant or surviving spouse or any other person and such benefit shall be irrevocably forfeited. (h) Limitations on liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any individual acting as an employee or agent of the Company shall be liable to any Participant, former Participant, surviving spouse or any other person for any claim, loss, liability or expense incurred in connection with the Plan. (i) Governing Law. The Plan shall be construed and administered according to the laws of the State of Illinois to the extent that such laws are not preempted by the laws of the United States of America. (j) Gender and Number. In the Plan, wherever the context admits, words in the singular include the plural and words in the plural include the singular, and masculine terms shall be deemed to include the feminine. (k) Headings. The headings of sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of the Plan, the text shall control. * * * The foregoing is the true and complete text of the WMX Technologies, Inc. Supplemental Executive Retirement Plan as amended and restated by the Compensation and Stock Option Committee of the Board of Directors of WMX Technologies, Inc. as of January 24, 1995. /s/ Herbert A. Getz -------------------------------------- Herbert A. Getz, Secretary 8 EX-10.11 3 NON-QUALIFIED PROFIT SHARING & SAVINGS PLUS PLAN Exhibit 10.11 WMX TECHNOLOGIES, INC. NON-QUALIFIED PROFIT SHARING AND SAVINGS PLUS PLAN WMX Technologies, Inc., a Delaware corporation, established this Non- Qualified Profit Sharing and Savings Plus Plan effective as of January 1, 1994, and subsequently amended and restated the Plan effective as of January 1, 1996. ARTICLE I DEFINITIONS Wherever used in this Plan, the following terms shall have the following meanings, unless a different meaning is clearly required by the context: 1.1 Account: The record of a Participant's interest under the Plan. Accounts are kept solely for recordkeeping purposes and shall not require a segregation of any Company assets. Accounts are subdivided into the (i) Profit Sharing Plus Account; (ii) Voluntary Deferral Account; and (iii) Matching Plus Account. 1.2 Before-Tax Account: The record under the Profit Sharing Plan of the before-tax contributions allocated to a participant thereunder, plus any earnings and minus any losses. 1.3 Change in Control: The occurrence of any of the following events: (i) The Company is merged or consolidated or reorganized into or with another corporation or other legal person (an "Acquiror") and as a result of such merger, consolidation or reorganization less than 75% of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization, other than the Acquiror or any corporation or other legal person controlling, controlled by or under common control with the Acquiror; (ii) The Company sells all or substantially all of its business and/or assets to an Acquiror, of which less than 75% of the outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such sale, other than any corporation or other legal person controlling, controlled by or under common control with the Acquiror; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person or group (as the terms "person" and "group" are used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgated thereunder) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 20% or more of the issued and outstanding shares of voting securities of the Company; or (iv) During any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director of the Company was approved by a vote of at least two- thirds of such directors of the Company then still in office who were directors of the Company at the beginning of any such period. 1.4 Code: The Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code shall include that section and any corresponding provisions of any future legislation that amends, supplements or supersedes that section. 1.5 Committee: The Executive Committee of the Company. 1.6 Company: WMX Technologies, Inc., a Delaware corporation. 1.7 Compensation: The amount of a Participant's compensation as defined in the Profit Sharing Plan from time to time; provided, however, that the limitations of Section 401(a)(17) of the Code shall not apply to the determination of Compensation under the Plan. 1.8 Disability: A Participant shall be deemed totally and permanently disabled when he/she is unable to perform the usual duties of his/her employment by reason of a medically determinable physical or mental impairment which in the opinion of a physician selected by or acceptable to the Committee can be expected to result in death or to be of long-continued or indefinite duration. 1.9 Participant: Any person who participates in the Plan pursuant to Section 3.1. 1.10 Plan: This WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus Plan, as amended from time to time. 1.11 Plan Year: The Plan Year shall be each calendar year. 1.12 Profit Sharing Account: The record under the Profit Sharing Plan of the profit sharing contributions allocated to a participant thereunder, plus any earnings and minus any losses. 1.13 Profit Sharing Plan: The WMX Technologies, Inc. Profit Sharing and Savings Plan, as amended from time to time. 2 1.14 Termination of Employment: The termination of a Participant's employment with the Company and all of its majority-owned subsidiaries. Temporary absence from employment because of illness, vacation, approved leaves of absence, and transfers of employment among the Company and its subsidiaries, shall not be considered to terminate employment or to interrupt continuous employment. 1.15 Voluntary Deferral Election: The election made pursuant to Section 4.3 of the Plan to defer receipt of a portion of a Participant's Compensation. ARTICLE II PURPOSE It is anticipated that amounts otherwise allocable under the Profit Sharing Plan to certain Participants may be restricted as a result of the limitations imposed by section 415 of the Code on the amount of annual additions under the Profit Sharing Plan, the limitations imposed by section 401(a)(17) of the Code on the amount of annual compensation taken into account under the Profit Sharing Plan and the limitations imposed by the Plan and Section 402(g) of the Code on the amount of elective salary deferrals under the Profit Sharing Plan. The purpose of this Plan is to supplement the Profit Sharing Plan by the allocation and payment of benefits to those Participants, and their surviving spouses and other beneficiaries, as to whom benefits otherwise allocable under the Profit Sharing Plan are so restricted. ARTICLE III ELIGIBILITY FOR BENEFITS 3.1 Participation. For any given Plan Year, any employee of the Company or any of its majority-owned subsidiaries will be eligible to participate in the Plan if he or she (i) is an active participant in the Profit Sharing Plan and (ii) is either (a) compensated at a level equal to or greater than the annual compensation limit of Section 401(a)(17) of the Code, or (b) subject to the Officer Stock Ownership Policy ("OSOP Officer"). 3.2 Vesting. Except as provided in Section 4.6 below, a Participant shall become vested in his or her Account balances and, therefore, have the right to receipt of such Account balances upon his or her Termination of Employment as follows: (a) A Participant shall become vested in his Profit Sharing Plus Account balance at the same time and in the same manner as he becomes vested in his Profit Sharing Account balance; and (b) A Participant shall always be vested in his Voluntary Deferral Account balance; and (c) A Participant shall become vested in each of the annual credits, if any, to his or her Matching Plus Account after the earliest of: (i) four consecutive years of employment with the Company or any of its 3 majority-owned subsidiaries from the date such credit was made, (ii) the Participant's retirement on or after age 55 with ten years of service (within the meaning of the WMX Technologies, Inc. Pension Plan) or (iii) the Participant's death or Disability while employed by the Company or any of its majority-owned subsidiaries. Years of employment shall be determined by the Committee, in its sole discretion, in accordance with rules uniformly and consistently applied to all Participants in similar circumstances. If a Participant has a Termination of Employment prior to becoming fully vested in his or her Profit Sharing Plus Account or Matching Plus Account, he or she shall forfeit the unvested portion of such Account. Notwithstanding the foregoing provisions of this Section, in the event of a Change in Control, a Participant's Account shall become immediately and fully vested upon the Change in Control. ARTICLE IV BENEFITS 4.1 Allocation to Profit Sharing Plus Accounts. A Participant's Profit Sharing Plus Account shall be credited as of the end of each Plan Year with an amount equal to (a) the profit-sharing contribution that would have been allocated to the Participant's Profit Sharing Account for the Plan Year if (i) the restrictions of sections 401(a)(17) and 415 of the Code did not apply and (ii) a limit on considered compensation equal to $500,000 (as indexed by the Committee in its sole discretion) did apply, minus (b) the profit-sharing contribution that was actually allocated to the Participant's Profit Sharing Account for the Plan Year. 4.2 Allocation to Voluntary Deferral Accounts. Effective January 1, 1996, each Participant shall, if he so elects, have his Compensation reduced for each Plan Year by the amount specified in his Voluntary Deferral Election made in accordance with Section 4.3. A Participant's Voluntary Deferral Account shall be credited, in the case of deferred base salary, as of the end of each payroll period, and, in the case of deferred bonus, as of the date the bonus would otherwise be paid, with an amount equal to such reduction. 4.3 Voluntary Deferral Elections. Prior to the beginning of each Plan Year beginning on or after January 1, 1996, a Participant may elect, on a form provided by the Committee, to have his Compensation reduced in increments of 1% up to a maximum percentage specified from time to time by the Committee in accordance with such rules and other limitations as the Committee may from time to time specify. Notwithstanding the foregoing, a Participant may make a separate election over the portion of his Compensation representing annual bonus payments. 4.4 Allocation to Matching Plus Account. If a Participant who is an OSOP Officer elects to defer a portion of his annual bonus pursuant to Section 4.3 above and elects to have that bonus deferral deemed to be invested in Company common stock pursuant to 4 Section 4.5(c), the Participant's Matching Plus Account shall be credited, as of the date of the annual bonus would otherwise be paid, with an amount equal to 20% of the voluntary bonus deferral amount. 4.5 Deemed Investment. (a) A Participant's Profit Sharing Plus Account shall be deemed to be invested in the same manner over the same periods of time as his Profit Sharing Account, and a Participant shall not have any right to direct otherwise. The Participant's Profit Sharing Plus Account shall be credited with gains and debited with losses in the amounts which would be reflected in such Account were it actually invested in a like manner to such Participant's Profit Sharing Account (other than the investment of any portion of such Profit Sharing Account in a loan to the Participant). (b) A Participant's Voluntary Deferral Account shall be deemed to be invested in the same manner over the same periods of time as his Before-Tax Account, and a Participant shall not have any right to direct otherwise. The Participant's Voluntary Deferral Account shall be credited with gains and debited with losses in the amount which would be reflected in such Account were it actually invested in a like manner to such Participant's Before-Tax Account (other than the investment of any portion of such Before-Tax Account in a loan to the Participant). (c) Notwithstanding paragraph (b) above, a Participant who is an OSOP Officer may elect that any or all of the portion of his Voluntary Deferral Account derived from the deferral of annual bonus be deemed to be invested in Company common stock. If such an election is made, it will remain in effect until the payment of the Participant's Account pursuant to Section 4.6. (d) A Participant's Matching Plus Account shall be deemed to be invested in Company common stock. 4.6 Payment of Benefits. (a) After a Participant's Termination of Employment, the Company shall pay the Participant (or his surviving spouse or other beneficiary in accordance with Section 4.9) his vested Account balances in a lump sum (i) in the event that the Termination of Employment was caused by the Participant's death or Disability, as soon as reasonably practicable following the Participant's Termination of Employment, or (ii) in any other event, as soon as practicable following the one year anniversary of such Participant's Termination of Employment. (b) In the case of Participants who are subject to Section 16(b) of the Securities Exchange Act of 1934, the payment described in paragraph (a) above shall be made in cash. In the case of all other Participants, (A) the payment of any (i) amounts of deferred bonus deemed to be invested in Company stock and the deemed earnings thereon and (ii) Matching Plus Account balances, shall be made in Company common stock, and (B) the payment of any amounts not described in (A) shall be made in cash. In the case of payment in Company common stock, the stock shall be valued at its fair market value as of the applicable date (i.e., Termination of Employment or the one year anniversary of Termination of Employment) which shall, unless the Committee otherwise determines, be the average of the closing sale prices per share of the Company's common stock on the New 5 York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest Edition) (or if the Company's common stock is not then traded on the New York Stock Exchange, reported on the principal market where such common stock is actively traded) on each of the ten trading days immediately preceding the applicable date. (c) Notwithstanding any other provision of this Plan to the contrary, in the event the Committee determines, in its sole discretion, that the Participant violated any agreement not to compete with, or not disclose confidential information of, the Company or its majority-owned subsidiaries, either before or after his or her Termination of Employment, the Participant shall forfeit his or her entire Account balance, whether or not vested. 4.7 Change in Control. Notwithstanding any provision of the Plan to the contrary, any amounts credited to a Participant's Account hereunder shall be immediately payable upon a Change in Control, by the Company, or if the Company is not the survivor of such Change in Control, the Acquiror. The amount payable by the Company or the Acquiror, as the case may be, shall be in cash or by certified check and shall be reduced by any taxes required to be withheld. If any amounts in a Participant's Account are deemed to be invested in Company common stock at the time of a Change in Control, each share of Company common stock in such investment shall be valued at the "fair market value per share". The "fair market value per share" shall be determined by the Committee, as it existed immediately prior to such Change in Control. The "fair market value per share" shall mean, (i) except in the case of a merger, consolidation or reorganization with an Acquiror in which the Company is not the survivor (a "Termination Merger"), the average of the highest sales price per share of the Company's common stock on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest Edition) (or if the Company's common stock is not then traded on the New York Stock Exchange, reported on the principal market where such common stock is actively traded) on each of the five trading days immediately preceding the date of the Change in Control, and (ii) in the case of a Termination Merger, the higher of (A) the fair market value of the consideration receivable per share by holders of common stock of the Company in such Termination Merger, which fair market value as to any securities included in such consideration shall be the average of the highest sales price per unit of such security on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest Edition) (or if such security is not traded on the New York Stock Exchange, reported on the principal market where such security is actively traded) on each of the five trading days immediately preceding the date of the Termination Merger and as to any such security not actively traded in any market and as to all other property included in such consideration, shall be the amount determined by the Committee in its discretion or (B) the amount determined pursuant to clause (i) of this paragraph. 4.8 Special Allocation for Transferred Participants. In the event a Participant (i) is transferred during a Plan Year to any entity that is owned at least 50% by the Company but that has not adopted the Profit Sharing Plan for the benefit of its employees and (ii) remains employed by that entity (or another 50% Company owned entity) through December 31 of that Plan Year, such Participant's Profit Sharing Plus Account shall be 6 credited with an amount equal to the profit-sharing contribution that would have been allocated to the Participant's Profit Sharing Account for such Plan Year if: (a) the requirement that the Participant be an active participant in the Profit Sharing Plan on December 31 of the Plan Year did not apply, (b) the Participant's considered compensation was equal to the compensation he had been earned for the year through the last day he was an active participant in the Profit Sharing Plan, (c) the restrictions of sections 401(a)(17) and 415 of the Code did not apply, and (d) a limit on considered compensation equal to $500,000 (as indexed by the Committee in its sole discretion) did apply. 4.9 Beneficiaries. (a) A deceased Participant's Account shall be distributed to the persons effectively designated by the Participant as his/her beneficiaries under the Profit Sharing Plan. Unless a Participant has effectively elected otherwise in accordance with the Profit Sharing Plan, the Participant's beneficiary shall be his/her surviving spouse. In determining the identity or status of a surviving spouse, the Committee or its designee may rely upon records of the Plan or employer and any action taken in reliance thereon shall relieve the Plan, the Committee and the Company of any further obligation thereto unless the Committee has actual knowledge that said information is not correct. (b) (i) If a Participant dies, and to the knowledge of the Committee after reasonable inquiry leaves no surviving spouse, has not filed an effective beneficiary designation or has revoked all such designations, or has filed an effective designation but the beneficiary or beneficiaries predeceased him, the distributable portion of the Participant's Account shall be paid to the executor or administrator of the Participant's estate. (ii) If the beneficiary, having survived the Participant, shall die prior to the final and complete distribution of the Participant's Account, then the distributable portion of said Account shall be paid: (A) to the contingent or successive beneficiary named in the most recent effective beneficiary designation filed by the Participant in accordance with such designation filed by the Participant in accordance with such designation; or (B) if no such beneficiary has been named, to the executor or administrator of the beneficiary's estate. 7 ARTICLE V ADMINISTRATION 5.1 Administration and Interpretation. The Committee shall be the Plan administrator. The Committee shall have the authority to control and manage the operation and administration of the Plan, to adopt rules and regulations regarding the administration of the Plan, to interpret the Plan, to determine the conditions subject to which any benefits may be credited or payable, and to make any other determinations which the Committee believes are necessary or advisable for the administration of the Plan. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions, and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Committee with respect to the Plan. Determinations by the Committee shall be final and binding on all parties with respect to all matters relating to the Plan. The Committee may delegate all or any part of its authority to any officer of the Company. 5.2 Claims Procedure. (a) If a Participant or other person believes that he is entitled to benefits under the Plan, he may file a claim for benefits in writing with the Committee. If a claim for benefits is wholly or partially denied, the Committee shall give the claimant written notice of the denial within a reasonable period of time after receipt of the claim by the Committee. Such notice shall set forth: (i) the specific reason or reasons for the denial, (ii) specific reference to pertinent provisions of the Plan on which the denial is based, (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and (iv) an explanation of the claim review procedure. (b) A claimant whose claim is denied, or his duly authorized representative, may request a review upon written application to the Committee within 60 days after receiving notice of the denial. In connection with such request, the claimant or his authorized representative may review pertinent documents and may submit issues and comments in writing. If such a request is made, the Committee shall make a full and fair review of the denial of the claim and shall make a decision not later than 60 days after receipt of the application, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request. The decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent provisions of the Plan on which the decision is based. 8 5.3 Amendment and Termination. This Plan may be amended, curtailed or terminated at any time by action of the Company's Board of Directors or the Executive Committee thereof. However, no such action shall reduce the Account of any Participant under this Plan below the amount which as of the date of such action would have been payable under this Plan if the Participant had terminated as of that said date and this Plan had continued in effect without change. ARTICLE VI MISCELLANEOUS 6.1 Anti-alienation Provision. No interest of any person or entity in, or right to receive a benefit under the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a benefit be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 6.2 No Guarantee of Employment. Nothing in the Plan shall confer upon any Participant the right to be retained in the service of the Company or any of its subsidiaries, nor shall it interfere with the right of the Company or any of its subsidiaries to discharge or otherwise deal with any Participant without regard to the existence of this Plan. 6.3 No Funding. The Plan shall at all times be entirely unfunded and no provision shall at any time be made with regard to segregating any assets of the Company for payment of any benefits hereunder. All benefits under the Plan are payable solely from the general assets of the Company. No Participant, surviving spouse or other person shall have any interest in any particular assets of the Company by reason of the right to receive a benefit under the Plan and any such Participant, surviving spouse or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan. Nothing contained in the Plan shall constitute a guaranty by the Company or any other entity or person that the assets of the Company will be sufficient to pay any benefit hereunder. 6.4 General Conditions. Except as otherwise expressly provided herein, all terms and conditions of the Profit Sharing Plan applicable to (i) a Profit Sharing Account shall also be applicable to a Profit Sharing Plus Account hereunder and (ii) a Before-Tax Account shall also be applicable to a Voluntary Deferral Account hereunder. Any benefit payable under the Profit Sharing Plan shall be paid solely in accordance with the terms and conditions of the Profit Sharing Plan and nothing in this Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Profit Sharing Plan. 6.5 Incapacity of Recipient. If any person entitled to a benefit payment under the Plan is deemed by the Committee to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Committee may provide for such payment or any part thereof to be made to any other person or institution 9 then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan therefor. 6.6 Corporate Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate. 6.7 Unclaimed Benefit. Each Participant shall keep the Company informed of his current address and the current address of his spouse. The Committee shall not be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Company within three years after the date on which payment of the Participant's benefit may first be made, payment may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or, within three years after the actual death of a Participant, the Committee is unable to locate any surviving spouse of the Participant, then the Company shall have no further obligation to pay any benefit hereunder to such Participant or surviving spouse or any other person and such benefit shall be irrevocably forfeited. 6.8 Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any individual acting as an employee or agent of the Company shall be liable to any Participant, former Participant, surviving spouse or any other person for any claim, loss, liability or expense incurred in connection with the Plan. 6.9 Governing Law. The Plan shall be construed and administered according to the laws of Illinois to the extent that such laws are not preempted by the laws of the United States of America. 6.10 Gender and Number. Except when the context indicates to the contrary, when used herein, masculine terms shall be deemed to include the feminine, and singular the plural. 6.11 Headings. The headings of paragraphs are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. 6.12 Severability. If all or any part of this Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Plan not declared to be unlawful or invalid. Any section or part of a section so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such section or part of a section to the fullest extent possible while remaining lawful and valid. 10 The foregoing is the true and complete text of the WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus Plan as amended and restated by the Executive Committee of the Board of Directors of WMX Technologies, Inc. on December 29, 1995. /s/ Herbert A. Getz ----------------------------------- Herbert A. Getz Senior Vice President and Secretary 11 EX-10.21 4 EMPLOYMENT AGREEMENT Exhibit 10.21 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), effective as of this 1st day of April, 1995, by and between WMX TECHNOLOGIES, INC., a Delaware corporation (hereinafter referred to as the "Company") and D. P. PAYNE (hereinafter referred to as "Payne"): W I T N E S S E T H: - - - - - - - - - - WHEREAS, Payne was previously appointed as President of the Company's Chemical Waste Management, Inc. subsidiary (hereinafter referred to as "CWM") and the Company desires to retain the skill, management expertise and experience of Payne; and WHEREAS, the Company has re-acquired all of the outstanding publicly held shares of stock of CWM; and WHEREAS, the Company is willing to enter into this Agreement in order to induce Payne to become an officer of the Company; and WHEREAS, Payne is willing to resign his position as President of CWM, and to become an officer of the Company upon the terms and conditions of this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants contained herein, the parties agree as follows: 1. EMPLOYMENT. Upon the execution of this Agreement, Payne shall be employed as an officer of the Company and shall have such duties and responsibilities as to the Company and its subsidiaries as may be designated by the Chairman or the President of the Company. Incident to the performance of such duties, Payne shall be provided by the Company with office space, facilities and secretarial assistance reflecting his position. 2. TERM. The term of Payne's employment hereunder shall be for a period beginning on the date hereof and ending on December 31, 1999 (the "Term"). 3. COMPENSATION. (a) Base Salary. The Company agrees to pay Payne during the Term a minimum annual base salary of $400,000.00. The salary shall be payable at intervals not less often than monthly and otherwise in accordance with the Company's policies. Such salary shall be reviewed annually by the Company's Board of Directors (or a duly constituted and empowered committee thereof) and may be increased in accordance with the Company's policies governing management compensation. (b) Incentive Compensation. Payne shall be entitled to a participate in all incentive compensation programs available to senior management of the Company as may now exist or hereinafter come into existence during the Term. (c) Supplemental Employee Retirement. Payne shall be entitled to participate in the Company's Supplemental Executive Retirement Plan, upon the terms and conditions of such Plan. (d) Other Benefits. During the Term, Payne shall be entitled to participate in all other employee benefits, perquisites, vacation days, benefit plans or programs of the Company which are available generally to officers and employees of the Company in accordance with the terms of such plans, benefits or programs. (e) Expenses. Payne shall be reimbursed for his reasonable expenses related to and for promoting the business of the Company including expenses for entertainment, travel and similar items that arise out of Payne's performance of services under this Agreement, and any such expenses paid by Payne from his own funds shall be promptly reimbursed to him by the Company, in accordance with the policies and procedures of the Company in effect from time to time. 4. EXTENT OF SERVICE. Payne shall devote his entire time, attention and energies to the business of the Company, and shall not during the term of this Agreement be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Payne from (a) investing his personal assets in businesses which do not compete with the Company or any of its "Affiliates" (as hereinafter defined) in such form or manner as will not require any services on the part of Payne in the operation or the affairs of the companies in which such investments are made and in which his participation is solely that of an investor; (b) purchasing securities in any corporation whose securities are publicly traded provided that such investments do not result in a violation of Payne's covenants under Section 5 hereof; or (c) accepting appointments to the boards of directors of other companies provided that the Chairman of the Company approves of such appointments and Payne's performance of his duties on such boards does not result in a violation of his covenants under Section 5 hereof. 5. CONFIDENTIAL INFORMATION AND COVENANT NOT TO COMPETE. All payments and benefits to Payne under the Agreement shall be subject to Payne's compliance with the provisions of this Section 5. (a) Confidential Information. Payne acknowledges that in his employment he is or will be making use of, acquiring or adding to the Company's confidential information which includes, but is not limited to, drawings, memoranda and other materials or records of a proprietary nature; engineering and technical information regarding the operations of the Company; and records, - 2 - policy and strategy matters relating to acquisitions, finance, personnel, management, legal matters, accounting, marketing, and operations (including, insofar as operations are concerned, customer and prospective customer lists, price lists, customer service requirements, costs of providing services, supplies and equipment maintenance costs). Therefore, in order to protect the Company's confidential information and to protect other employees who depend on the Company for regular employment, Payne agrees that he will not in any way utilize any of said confidential information except in connection with his employment by the Company and except in connection with the business of the Company he will not copy, reproduce, or take with him the original or any copies of said confidential information and will not directly or indirectly divulge any of said confidential information to anyone without the prior written consent of the Company. (b) Litigation Support. Payne shall, upon reasonable notice, furnish such information and proper assistance to the Company as may reasonably be required by the Company in connection with any litigation in which the Company or any of its Affiliates is, or may become a party. Payne's reasonable expenses (including travel and reasonable attorneys fees) incurred in complying with this covenant shall be promptly reimbursed. (c) No Solicitation of Employees. Payne agrees that during the Term of this Agreement and continuing for a period of two years after the termination of this Agreement, neither Payne nor any person or enterprise controlled by Payne will solicit for employment any person employed by the Company or any of its Affiliates. (d) Covenant Not to Compete. Payne agrees that during the Term of this Agreement and for a period of two years after the termination of this Agreement he will not (without prior written consent of the Chairman of the Board of Directors) engage directly or indirectly in any business financially as an investor or lender or as an employee, director, officer, partner, independent contractor, consultant or owner or in any other capacity calling for the rendition of personal services or acts of management, operation or control which is in any respect competitive with the business of the Company, or with any business controlling, controlled by or under common control with the Company (an "Affiliate"), in any area of the United States in which the Company or any Affiliate does business during such period. Notwithstanding the foregoing, Payne shall be entitled to own securities of any corporation conducting a business competitive with the business of the Company or any of its Affiliates so long as the securities of such corporation are listed on a national securities exchange and the securities owned directly or indirectly by Payne do not represent more than 2% of any class of the outstanding securities of such company. (e) Non-Solicitation of Customers. Payne agrees that during the Term of this Agreement and continuing for a period of - 3 - two years after the end of the Term, neither he nor any business in which he engages directly or indirectly will (i) directly or indirectly induce any customers of the Company or its Affiliates to patronize any business similar to that of the Company, (ii) canvass, solicit or accept any similar business from any customer of the Company or any Affiliates, (iii) directly or indirectly request or advise any customer of the Company or Affiliates to withdraw, curtail or cancel such customer's business with the Company or Affiliates, (iv) directly or indirectly disclose to any other person, firm or corporation the names or addresses of any of the customers of the Company or Affiliates, or (v) compete with the Company or Affiliates in acquiring or merging with any other business or acquiring the assets of such other business. (f) Remedies for Breach of Covenants. In the event that a covenant included in this Agreement shall be deemed by any court to be unreasonably broad in any respect, it shall be modified in order to make it reasonable and shall be enforced accordingly; provided, however, that in the event that any court shall refuse to enforce any of the covenants contained in subsections 5(a) through (e), then the unenforceable covenant shall be deemed eliminated from the provisions of this Agreement for the purpose of those proceedings to the extent necessary to permit the remaining covenants to be enforced so that the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby. If Payne violates any of the covenants contained in this Section 5, then the Company's obligation to make any payments to Payne otherwise due him under this Agreement shall immediately cease. In addition, Payne acknowledges that any material breach of his covenants contained in this Section 5 will cause irreparable harm to the Company which will be difficult if not impossible to ascertain, and the Company shall be entitled to equitable relief, including injunctive relief, against any actual or threatened breach hereof, without bond and without liability should such relief be denied, modified or vacated. Neither the right to obtain such relief or the obtaining of such relief shall be exclusive of or preclude the Company from any other remedy. 6. TERMINATION. (a) Death or Disability. If Payne should die or become physically or mentally disabled and unable to perform duties hereunder for a continuous period in excess of ninety (90) days (in the reasonable opinion of the Company), which event shall result in the termination of Payne's employment hereunder, the Company shall continue to pay Payne's current base salary (less the amount of any disability benefit payments paid or payable to Payne during such period from disability benefits maintained and paid for by the Company) for the balance of the calendar year in which such death or disability occurs, but in no event for not less than one hundred eighty (180) days, plus any bonus payments which have fully accrued at the date of termination pursuant to this Section 6(a). In addition, in the event of disability, - 4 - Payne's participation in any medical, health, accident, disability, death, life insurance or similar plan in which Payne was participating immediately prior to termination shall continue for the period in which payments are being made under this Section at the Company's expense (subject to any normal employee contributions, if any), although any continuation of health coverage shall count toward the "COBRA" continuation of coverage period. The payments to be made under this Section shall be made to Payne, or in the event of Payne's death, to such beneficiary as Payne may designate in writing for that purpose, or if Payne has not so designated, then the spouse of the Payne, or if none is surviving, then to the personal representative of the estate of Payne. This Section shall not be effective after any Termination pursuant to Section 6(b) or (c). (b) Termination for Cause. The Company shall have the right to terminate this Agreement for Cause upon thirty (30) days prior written notice if, in the reasonable determination of the Company, Payne has engaged in misconduct so as to constitute Cause. For purposes of this Agreement, "Cause" shall mean: (a) the breach by Payne of his covenants under Sections 5(a) through 5(e) hereof; (b) a substantial failure by Payne to perform his duties under this Agreement, and which failure is determined by the Board of Directors of the Company to be injurious to the business or interests of the Company; (c) Conviction (or a plea) of a felony or conviction of a crime (or a plea) involving moral turpitude which adversely affects the ability of Payne to perform his material duties under this Agreement or is materially injurious to the Company's business or reputation; or (d) any act of fraud or defalcation involving the assets or business of the Company. If this Agreement is terminated for Cause pursuant to this Section 6(b), the Company shall have no further obligations to Payne under this Agreement. However, Payne's covenants under Section 5 hereof shall remain in full force and effect. (c) Termination by Company. If the Company terminates the employment of Payne during the Term hereof, for any reason other than as specified in Sections 6(a) or 6(b), Payne shall be entitled to the following liquidated damages: (i) an amount equal to base salary until the end of the Term and (ii) any unpaid but fully accrued annual bonus for the prior calendar year payable under the Company's Corporate Incentive Bonus Plan. (d) Termination by Payne. If Payne voluntarily terminates his employment prior to the expiration of the Term of - 5 - this Agreement, this Agreement shall terminate forthwith and all obligations of each party to the others shall terminate immediately, except for Payne's obligations under Section 5 hereof. 7. WITHHOLDING OF TAXES. The Company may withhold from any benefits payable under the Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 8. FACILITY OF PAYMENT. If the Company shall find that any person to whom any amount is or was payable hereunder is unable to care for his affairs because of illness or accident, or is a minor, or has died, then the Company, if it so elects, may direct that any payment due him or his estate (unless a prior claim therefore has been made by a duly appointed legal representative) or any part thereof, be paid or applied for the benefit of such person or to or for the benefit of his spouse, children or other dependents, an institution maintaining or having custody of such person, any other person deemed by Board of Directors of the Company to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Board may deem proper. Any such payment shall be in complete discharge of the liability of the Company therefor. 9. UNSECURED CREDITOR STATUS. Nothing contained in the Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and Payne, his beneficiaries, legal representative or any other person. To the extent that any person acquires a right to receive payments under the Agreement, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts. 10. NON-ALIENATION OF BENEFITS. Except insofar as applicable law may otherwise require, no amount payable to or in respect of Payne at any time under the Agreement shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to so alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any such amount, whether presently or thereafter payable, shall be void; provided, however, that nothing in this Section 10 shall preclude Payne from designating a beneficiary or beneficiaries to receive any benefit on his death. 11. SEVERABILITY. If any provision of this Agreement, as applied to any party or to any circumstance, shall be found by a court to be void, invalid or unenforceable, the same shall in no way affect any other provision of this Agreement the application - 6 - of any such provision in any other circumstance, or the validity or enforceability of this Agreement. 12. ENTIRE UNDERSTANDING. This Agreement contains the entire understanding of the parties hereto relating to the subject matter contained herein and supersedes all prior and collateral agreements, understandings, statements and negotiations of the parties. Each party acknowledges that no representations, inducements, promises, or agreements, oral or written, with reference to the subject matter hereof have been made other than as expressly set forth herein. This Agreement cannot be changed, rescinded or terminated orally. 13. NOTICES. Any notice required or permitted to be given under this Agreement shall he in writing and shall be deemed to have been given when deposited in the U.S. mail in a registered, postage prepaid envelope addressed: If Payne, at his address set forth below, if to the Company, Attention: General Counsel, 3003 Butterfield Road, Oak Brook, Illinois 60521. 14. ASSIGNMENT. Payne may not assign his obligations hereunder. The rights of Payne and the rights and obligations of the Company hereunder shall inure to the benefit of and shall be binding upon their respective heirs, personal representatives, successors and assigns. 15. MISCELLANEOUS. (a) This Agreement shall be subject to and governed by the laws of the State of Illinois. (b) Failure to insist upon strict compliance with any provisions hereof shall not be deemed a waiver of such provisions or any other provision hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. WMX TECHNOLOGIES, INC. By /s/ Dean L. Buntrock ------------------------------ Dean L. Buntrock, Chairman /s/ D. P. Payne -------------------------------- Name: Address: 358 Hampton Place Hinsdale, IL 60521 - 7 - EX-12 5 RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 WMX TECHNOLOGIES, INC. Ratio of Earnings to Fixed Charges (Unaudited) (millions of dollars, except ratio)
Year Ended December 31, -------------------------------------------------------------- 1991(1) 1992(2) 1993(3)(6) 1994(4)(6) 1995(5)(6) ---- ---- ---- ---- ---- Income From Continuing Operations Before Income Taxes, Undistributed Earnings from Affiliated Companies, Minority Interest, Extraordinary Item and Cumulative Effect of Accounting Changes................ $ 1,139.4 $ 1,555.2 $ 841.0 $ 1,461.1 $ 1,267.5 Interest Expense.................... 279.9 311.0 393.6 439.7 506.2 Capitalized Interest... (111.4) (87.9) (100.6) (104.5) (81.5) One-Third of Rents Payable in the Next Year.................. 46.7 44.7 48.5 53.9 56.8 ---------- ---------- ---------- ---------- ---------- Income From Continuing Operations Before Income Taxes, Undistributed Earnings from Affiliated Companies, Minority Interest, Extraordinary Item, Cumulative Effect of Accounting Changes, Interest and One-Third of Rents................ $ 1,354.6 $ 1,823.0 $ 1,182.5 $ 1,850.2 $ 1,749.0 ========== ========== ========== ========== ========== Interest Expense.................... $ 279.9 $ 311.0 $ 393.6 $ 439.7 $ 506.2 One-Third of Rents Payable in the Next Year......................... 46.7 44.7 48.5 53.9 56.8 ---------- ---------- ---------- ---------- ---------- Interest Expense plus One-Third of Rents.......................... $ 326.6 $ 355.7 $ 442.1 $ 493.6 $ 563.0 ========== ========== ========== ========== ========== Ratio of Earnings to Fixed Charges........................... 4.15 to 1 5.13 to 1 2.67 to 1 3.75 to 1 3.11 to 1
- ---------------------- (1) The results for 1991 include a special charge ($296.0 million before tax and minority interest) primarily to reflect then current estimates of the environmental remediation liabilities at waste disposal sites previously used or operated by the Company and its subsidiaries or their predecessors. (2) The results for 1992 include a non-taxable gain ($240.0 million before minority interest) resulting from the initial public offering of 75 million newly issued ordinary shares of Waste Management International plc in April 1992 and special charges ($219.9 million before tax and minority interest). The results for 1992 exclude the cumulative effect of accounting changes ($71.1 million after tax and minority interest) related to the adoption of Statements of Financial Accounting Standards Nos. 106 and 109. (3) The results for 1993 include a non-taxable gain ($15.1 million before minority interest) relating to the issuance of shares by Rust International Inc. as well as a special asset revaluation and restructuring charge ($550.0 million before tax and minority interest) related primarily to a revaluation of Chemical Waste Management, Inc.'s thermal treatment business. (4) The results for 1994 include a charge ($9.2 million before tax and minority interest) recorded by Rust International Inc. to write off assets and recognize costs of exiting certain of Rust's service lines and closing offices in a consolidation of certain of its operating groups. (5) The results for 1995 include a special charge ($140.6 million before tax) recorded by Chemical Waste Management, Inc., 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 ($194.6 million before tax and minority interest) recorded by Waste Management International plc 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. (6) In 1995, the Rust International Inc. Board of Directors approved a plan to sell or otherwise discontinue that company's process engineering, construction, specialty contracting and similar lines of 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 International Inc. on January 1, 1993, for the discontinued operations. The ratio of earnings to fixed charges for 1993 and 1994 have been restated. EX-13.1 6 MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBIT 13.1 WMX Technologies, Inc. and Subsidiaries Management's Discussion and Analysis - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS CONSOLIDATED Consolidated 1995 revenue from continuing operations of WMX Technologies, Inc. and its subsidiaries ("WMX" or the "Company") was $10.25 billion compared with $9.55 billion in 1994 and $8.64 billion in 1993. Consolidated 1995 net income was $603.9 million or $1.24 per share, compared with $784.4 million or $1.62 per share in 1994 and $452.8 million or $0.93 per share in 1993. Net income from continuing operations was $654.6 million or $1.35 per share in 1995, $776.5 million or $1.60 per share in 1994, and $442.4 million or $0.91 per share in 1993. Earnings from continuing operations during the three years were impacted by special charges, gains from stock transactions of subsidiaries, and an increase in U.S. tax rates. The following table reconciles reported earnings per share from continuing operations to earnings excluding such items:
1993 1994 1995 - -------------------------------------------------------------------- Reported amount $ 0.91 $1.60 $1.35 Gains on stock transactions of subsidiaries (0.02) -- -- Special charges (see Note 14 to Consolidated Financial Statements) - Chemical Waste Management, Inc. ("CWM") 0.59 -- 0.19 Waste Management International plc ("WM International") -- -- 0.23 Rust International Inc. ("Rust") -- 0.01 -- Costs related to early extinguishment of debt -- -- 0.01 Adjustment to deferred income taxes resulting from 1993 tax law change 0.03 -- -- ------ ----- ----- Amount excluding above items $ 1.51 $1.61 $1.78 ====== ===== =====
The environmental service business has undergone significant change over the three-year period. Overcapacity in the hazardous waste segment, an emphasis on waste minimization and recycling as opposed to land disposal, increased competition for landfill volume, changes in government regulation, and slow growth in the trash-to-energy market have affected the industry globally. In addition, political uncertainty in Italy and economic conditions in France and Germany have further affected the Company's international operations. The Company has taken a number of steps to realign and restructure its business in response to these changing conditions and to position itself for growth and improved profitability into the 21st century. Hazardous waste operations have been downsized and management of land disposal facilities has been integrated into the Waste Management, Inc. ("WMI") North American solid waste management organization. WMI itself was reorganized during late 1993 to flatten the organization and bring decision-making closer to the customer. During 1994, the Company commenced a major strategic review of its operations, focusing on streamlining business units, enhancing management and planning processes, reducing operating costs and improving profitability, improving customer satisfaction, and increasing returns on capital and cash flow. As an outcome of these efforts, management was realigned on the basis of four principal global lines of business - waste services, clean energy, clean water, and environmental and infrastructure engineering and consulting services. Executives were named to head each of these global lines of business. The shares of CWM and Rust owned by the public were purchased by the Company. The management and sales organizations of Rust Industrial Services were integrated into the waste services line of business to provide a seamless offering to industrial customers. Rust exchanged its remediation business in 1995 for an equity interest in OHM Corporation ("OHM"). Wheelabrator Technologies Inc. ("WTI") and WM International formed a joint venture in 1995 to develop trash-to- energy projects on a worldwide basis outside Germany, Italy and North America. A new management team at WM International completed an extensive review of its operations and management structure to refocus on its core waste services business, and as a result adopted a plan 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. During the fourth quarter of 1995, the Company announced that Rust would sell or discontinue its process engineering, construction, specialty contracting and similar lines of business and focus on the environmental and infrastructure engineering and consulting business. Operating results of the businesses to be discontinued have been segregated from continuing operations in the Consolidated Statements of Income and are not included in the analysis which follows. The analysis of results of continuing operations which follows reflects the Company's traditional management structure of five principal subsidiaries, each of which has operated in a relatively discrete portion of the environmental services industry or geographic area. WMI has provided integrated solid waste services and CWM has provided hazardous waste collection, transportation, treatment and disposal services in North America. WM International has provided these services, as well as trash-to-energy services, outside North America. WTI has been involved in trash-to-energy and independent power projects, water and wastewater treatment, and air quality control, primarily in North America. Rust has served the engineering, construction, environmental and infrastructure consulting, and on-site industrial and related services market in the United States and a number of foreign countries. Beginning in 1996, to conform to its new management structure, the Company will report operating results along the four major business lines discussed above. Note 13 to the Consolidated Financial Statements shows results of continuing operations for 1993, 1994 and 1995 on a line-of-business basis, as well as on the basis of the traditional management structure. 16 - -------------------------------------------------------------------------------- 1994 OPERATIONS COMPARED WITH 1993 WMI WMI's revenue grew 8.8% to $5.12 billion in 1994 compared with $4.70 billion in 1993. Revenue growth occurred in all service lines as shown in the following table:
Residential 4.6% Commercial 8.1 Rolloff and industrial 11.1 Disposal, transfer and other 11.8
Price increases accounted for revenue growth of approximately 1.5%. WMI focused on pricing on a customer-by-customer basis and sought increases when and where appropriate. Pricing in the commercial, rolloff and industrial lines generally continued the positive trend begun in the fourth quarter of 1993. Residential work remained extremely competitive and disposal pricing varied by region, but generally improved during the year. Higher recyclable commodity prices, which can vary significantly from year to year, helped 1994 results. Volume increases accounted for revenue growth of 7.8%, despite the negative impact of the loss of volume from the contract to dispose of debris from Hurricane Andrew in 1993 and the loss of a disposal contract for the City of Philadelphia as of July 1, 1994. The increase in disposal, transfer and other revenue was aided by special waste volume, which increased over 20%, and recycling, which grew 29% (including the impact of higher commodity prices discussed above). Revenue decreases due to businesses sold exceeded revenue from acquisitions by approximately 0.5% in 1994, primarily the result of the sale during the first quarter of that year of WMI's Modulaire(R) mobile office business and certain other under-performing businesses, coupled with reduced acquisition activity. Operating margins strengthened throughout the year following the 1993 reorganization discussed previously, and were 20.8% of revenue compared with 20.4% in 1993. This improvement resulted from productivity increases, particularly in the selling and administrative areas where expenses remained relatively constant in dollars and declined as a percentage of revenue, stronger pricing and increased volume, partially offset by higher costs of operating disposal facilities to comply with more stringent environmental regulations. CWM CWM revenue continued to decline in 1994, to $649.6 million from $661.9 million in 1993. The following table analyzes revenue changes in 1994 compared with 1993:
Percentage Increase/(Decrease) - ------------------------------------------------- Price 2.9% Volume (7.2) Purchased businesses 2.4 ---- Total (1.9)% ====
Price and volume increases for low-level radioactive waste services, which increased revenue by 3.1%, were more than offset by a continuation of industry conditions which negatively impacted the remainder of the hazardous waste industry. The strong results in the low-level radioactive waste services line resulted from the acceleration of volume received at CWM's disposal facility in Barnwell, South Carolina, in anticipation of a state deadline which denied access to that facility to customers outside an eight-state region in the southeastern United States ("Southeast Compact") after June 30, 1994. Event business (revenue from relatively larger, typically non-recurring projects) was 9.0% of revenue in 1994 compared to 10.6% in 1993. The decline in event business revenue was primarily the result of reduced off-site disposal from environmental cleanup projects. During 1993, CWM completed a study of its business and began a strategic reconfiguration of its operations to meet then-current market demand. In connection therewith, CWM recorded a charge of $550 million before tax, including $381 million to write down assets, primarily incinerators, and $169 million for cash expenditures to be made as part of a program to reduce costs and improve efficiency. This restructuring was completed in 1994 and substantially all cash expenditures were made. As a result, overhead, including depreciation and amortization, was reduced in 1994 by approximately $60 million on an annualized basis. Operating expenses declined as a percentage of revenue in 1994 to 70.0% compared to 76.5% in 1993. Benefits from the restructuring were partially offset by severe weather in the northeast portion of the United States during the first quarter, which delayed projects and hampered operations, and a shift of revenue mix toward lower margin services. Selling and administrative expenses declined $22.3 million in 1994 on an absolute basis and were reduced from 19.3% of revenue to 16.3%, primarily as a result of the restructuring. WTI WTI revenue increased 16% to $1.32 billion in 1994. Businesses acquired in 1993 and 1994 contributed approximately 47% of the revenue increase, while incremental operating and construction revenue from new energy and water development projects accounted for the remainder. Revenue from existing businesses was flat in 1994 compared to 1993. Consolidated revenue for the energy business line (which includes WTI's air business) grew $83.1 million, or 11%, in 1994 to $844.7 million. Revenue from trash-to-energy and independent power facility operations grew $98.2 million from the prior year level and generated approximately 82% of the 1994 revenue for this business line compared with 78% in 1993. Air-related businesses were responsible for the balance of the revenue during both periods. Construction revenue on the Lisbon, Connecticut, trash-to-energy facility provided half of the energy business growth. The third quarter 1994 commencement of commercial operations at the Falls Township trash-to-energy facility in Pennsylvania and the wood waste and scrap tire-fueled Ridge Generating Station in Florida provided an additional 25% of the revenue growth. Excellent plant operating performances, coupled with a shift in the mix of waste received at the trash-to- energy plants from lower-priced spot tons to generally higher-priced contract tonnage accounted for the remainder. Air business revenue fell in 1994 primarily because of an expected lull in air pollution control retrofit activity by utilities between Phases I and II of the Clean Air Act Amendments of 1990. In addition, many industrial customers delayed awards for air quality control equipment purchases in response to economic uncertainty and to rule-making delays and limited enforcement activities by the U.S. Environmental Protection Agency. Energy operating income increased to $247.0 million or 29.2% of revenue in 1994, versus $208.7 million, or 27.4% of revenue, in 1993. The addition of the Falls Township and Ridge 17 - -------------------------------------------------------------------------------- facilities, modest improvement in gross margin, and a decline in selling and administrative expense were responsible for this improvement, despite Lisbon construction revenue having no associated margin recognition. Integration of acquired air businesses and a decrease in energy-related project development expenditures in response to limited market opportunities caused selling and administrative costs to decrease in 1994 in both absolute terms and as a percentage of revenue. Water revenue increased $97.1 million to $489.3 million in 1994, a 25% increase from the 1993 level of $392.2 million. Acquisitions contributed approximately $81.5 million or 84% of this revenue growth, and expanded WTI's presence in the industrial water and wastewater treatment markets while increasing the breadth of WTI's technology and process offerings. The full year impact of the New York Organic Fertilizer Company ("NYOFCO") biosolids pelletizer facility, which began commercial operations in the third quarter of 1993, accounted for an additional $35.5 million of incremental 1994 revenue. Increased 1994 revenue from sales of water process systems and equipment to industrial customers was offset by a decline in revenue from water, wastewater, and biosolids contract service operations and curtailed equipment procurement by municipal customers. Operating income from the water business line increased 22% to $41.1 million or 8.4% of revenue in 1994 compared with $33.7 million or 8.6% of revenue in 1993. Gross margin declined to 24.5% of revenue in 1994 versus 24.9% in 1993 because of competitive pricing pressures in the equipment product lines and faster relative growth of the process systems business, which is typically lower margin in nature. Selling and administrative expenses declined slightly in 1994 as a percentage of revenue as a result of consolidation of acquisitions partially offset by increased own/operate development expenditures. WM INTERNATIONAL WM International is a U.K. corporation which prepares its financial statements in pounds sterling under accounting principles prevailing in the United Kingdom. Such accounting principles differ in certain respects from those generally accepted in the United States ("US GAAP"). The discussion and analysis of WM International is based on US GAAP financial statements with pounds sterling translated to U.S. dollars at the rate used to translate WM International financial statements for inclusion in the Company's consolidated financial statements. Stated in U.S. dollars, WM International revenue grew by $299.7 million or 21.2% to $1.71 billion in 1994 compared with $1.41 billion in 1993. Components of revenue change are as follows:
Percentage Increase - --------------------------------------------------- Price 1.7% Volume (including start-ups) 8.9 Purchased businesses 9.4 Foreign currency translation 1.2 ---- Total 21.2% ====
Lower inflation and weak economic conditions in many European countries constrained WM International's ability to increase prices in 1994. In Italy, where a substantial portion of its business is municipal contracts, renewals during much of 1994 were consistently at reduced prices. However, a price increase was obtained on the municipal contract in Buenos Aires, Argentina. The volume increase in 1994 related primarily to construction activity on the solid waste SENT landfill in Hong Kong. Economic and competitive pressures caused volume declines in Italy, France, and Germany, which were more than offset by volume increases in other countries. Revenue increases from acquisitions slowed in 1994 compared to 1993. With WM International well positioned in many of its markets, it focused primarily on "tuck-in" acquisitions (small acquisitions in markets where it already had a support staff) and became more selective with respect to acquisitions. A significant portion of WM International's revenue arises in currencies other than pounds sterling (its reporting currency) or U.S. dollars. As a result, foreign currency movement has had and will continue to have an impact on reported revenue, expenses and net income, stated in both pounds sterling and U.S. dollars. Both the Company and WM International periodically engage in hedging transactions intended to mitigate currency risk. See "Derivatives." Operating expenses increased to 72.7% of revenue in 1994 compared to 71.5% in 1993 due to higher labor costs and pricing pressure in Italy, pricing pressure in Germany and France, and flow control issues and landfill permitting delays in Italy and France. Selling and administrative expenses decreased to 13.4% of revenue in 1994 compared with 14.1% in 1993 as a result of the impact of "tuck- in" acquisitions, a higher revenue base to absorb the cost of corporate and country management and administrative infrastructure, integration of acquired businesses, and a continued focus on improved productivity and administrative cost reduction. RUST Rust's 1994 revenue from continuing operations was $1.14 billion compared with $1.04 billion in 1993, an increase of 10.2%. Revenue growth by line of business is shown in the following table ($000's omitted):
Percentage 1993 1994 Increase - ----------------------------------------------------------- Engineering and consulting services $ 298,879 $ 425,058 42.2% Remediation and industrial services 704,360 715,236 1.5% Asbestos abatement 31,765 -- N/A ---------- ---------- Total $1,035,004 $1,140,294 10.2% ========== ==========
In May 1993, Rust transferred its asbestos abatement business to NSC Corporation ("NSC") in exchange for a 41% equity interest in NSC and NSC's ownership interest in two industrial services businesses. Excluding the effect of the asbestos abatement business, revenue increased 13.7% in 1994 compared with 1993. Engineering and consulting services revenue grew by 42.2% in 1994. The full year impact of 1993 acquisitions and domestic and foreign 1994 acquisitions resulted in revenue growth of 35.5%. The balance came from increases in existing businesses. Remediation and industrial services revenue grew by 1.5% in 1994. Growth was the result of the full year impact of 1993 acquisitions. Revenue in existing businesses declined due to severe weather in the first quarter and delays by scaffolding and industrial customers of scheduled plant maintenance. In addition, the anticipated award of a large Federal remedial contract was delayed. 18 - -------------------------------------------------------------------------------- In December 1994, Rust signed an agreement with OHM to acquire an approximately 37% interest in OHM in exchange for Rust's remediation services business. This transaction was completed in May 1995. For 1994, the business transferred had revenue of $231.1 million and operating income (after operating, selling and administrative expenses) of $6.0 million. Revenue from affiliated companies was $118.3 million in 1994 compared with $112.8 million in 1993. Excluding the charge discussed in the following paragraph, operating expenses were 79.7% of revenue in 1994 compared with 78.1% in 1993, partially the result of severe weather in the first quarter and delayed projects which resulted in less efficient personnel utilization. In addition, 1994 saw a shift in revenue mix in favor of lower margin businesses. Selling and administrative expenses were 13.2% of 1994 revenue compared with 12.7% of 1993 revenue. The increase in 1994 is attributable to the lower revenue base in existing businesses and to acquisition activity, which typically initially increases these costs, although it is anticipated that such expenses will decline as a percentage of revenue as the acquired companies are integrated into existing operations. In 1994, Rust recorded a pretax charge of $9.2 million for the write-off of assets and the recognition of one-time costs incurred in the fourth quarter in connection with the discontinuance of its marine construction and dredging operations, and the closing of offices in a consolidation of its other operations. After tax and minority interest, the charge reduced the Company's net income by $0.01 per share. - -------------------------------------------------------------------------------- 1995 OPERATIONS COMPARED WITH 1994 WMI Revenue for WMI was $5.64 billion in 1995 compared with $5.12 billion in 1994, an increase of 10.3%. 1995 revenue growth by line of business is shown in the following table:
Residential 6.3% Commercial 7.5 Rolloff and industrial 7.5 Disposal, transfer and other 20.3
Revenue growth came from price (2.5 to 3%) and volume (6 to 6.5%) increases, with acquisitions accounting for 1%. Prices of recyclable commodities continued the 1994 upward trend during the first six months of 1995, but then began moving downward and by the fourth quarter were below the levels of the same period in the prior year. Beginning 1996, commodity prices have been significantly below levels which were achieved in 1995 and management does not foresee these prices recovering to 1995 levels during 1996. Volume growth was helped by a relatively mild winter in 1995, whereas severe weather over a large part of the country adversely affected the first quarter of 1994. Volumes in 1995 were adversely impacted by the loss of the disposal contract for the City of Philadelphia as of July 1, 1994. Revenue from recycling increased 71.9% in 1995 compared with 1994 as a result of the favorable pricing discussed above, as well as WMI's marketing efforts and acquisition and construction of additional material recovery facilities. Operating expenses were 67.5% of revenue in 1995 and 68.4% in 1994. Milder weather in 1995, WMI's pricing effectiveness program, improved safety performance, higher recyclable commodity prices, internalization of recycling processing, and continuing productivity enhancements all contributed to the improvement. Selling and administrative expenses were 10.2% of revenue in 1995 compared with 10.8% in 1994. Although such expenses increased in absolute dollars, productivity enhancements have enabled WMI to manage a higher revenue base with relatively modest selling and administrative expense increases, the majority of which result from acquisitions and pay-for-performance compensation plans. CWM CWM revenue again declined in 1995 as waste minimization, recycling, over- capacity and shifting governmental regulation and enforcement continued to adversely affect the hazardous waste industry. Total 1995 revenue was $613.9 million compared with $649.6 million in 1994. Pricing and volume growth were both negative, only partially offset by the 1995 acquisition of a 60% interest in Advanced Environmental Technology Corporation. In addition, unusually high revenue in the second quarter of 1994 at CWM's Barnwell, South Carolina, low- level radioactive waste disposal facility adversely impacted 1995 comparisons. However, during June 1995, South Carolina approved legislation which extended the authorized life of the Barnwell site until its permitted disposal capacity is fully utilized; previously, the site had been required to close at December 31, 1995. The legislation also again permitted acceptance of waste from outside the Southeast Compact. Event business continued to decline in 1995, to 7.7% of revenue versus 9.0% in 1994. Operating expenses increased as a percentage of revenue in 1995 to 75.6% compared to 70.0% in 1994. The increase was a function of pressure on pricing, a lower revenue base, and a shift in revenue mix toward lower margin technical services, which offset the benefit from personnel reductions. Selling and administrative expenses declined in both absolute terms and as a percentage of revenue as a result of personnel reductions. During the first quarter of 1995, CWM recorded a pretax charge of $140.6 million, primarily to write off its investment in facilities and technologies that it abandoned because they did not meet customer service or performance objectives in the current market environment. The percentages above exclude this charge. WTI WTI revenue increased 9.6% to $1.45 billion in 1995. Energy business line revenue was essentially flat as higher revenue from operating energy plants was offset by lower construction revenue on the Lisbon facility and by a further decline in air business revenue. Approximately 85% of the $42.3 million growth in revenue from operating plants was accounted for by the Falls Township and Ridge Generating Station facilities which began operations in 1994. Contractual price escalation on long-term trash disposal and energy sale contracts, partly offset by curtailment of electrical purchases by certain utility customers, accounted for the balance of the operating plant revenue growth. Spot pricing, on the whole, was stable, although there were increases in certain markets offset by declines in others, particularly Florida and the metropolitan New York City area. Air business revenue declined $30.7 million to 15% of total energy revenue, reflecting a continuation of the industry-wide decrease in activity in the face of regulatory uncertainty. Operating income from the energy business line grew $5.4 million to $252.4 million in 1995 and also increased as a percentage of revenue to 30.1% from 29.2%. Selling and administrative costs 19 - ------------------------------------------------------------------------------- were flat compared to 1994 both as a percent of revenue and in absolute dollars, but operating margins improved due to cost containment efforts at operating energy facilities and less revenue on the Lisbon facility where no margin was recognized. Development activity increased slightly because of activities associated with the July 1995 joint venture agreement with WM International. Revenue in the water business line increased $129.2 million from $489.3 million in 1994 to $618.5 million in 1995, a 26% increase. The full year impact of businesses acquired in 1994 provided approximately 64% of this increase. In 1995, WTI successfully completed the privatization of the Miami Conservancy District wastewater treatment plant in Franklin, Ohio, the first privatization of a municipal wastewater treatment plant under Executive Order 12803 issued by President George Bush in 1992. Approximately 4% of the 1995 revenue growth came from the Baltimore I pelletizer facility, which began commercial operations at the start of the year. Existing businesses accounted for the remainder of the revenue growth as WTI increased its biosolids landspreading activities in California and experienced strong worldwide demand for its surface cleaning and screen products. Operating income grew $9.6 million, or 23%, to $50.7 million and represented 8.2% of 1995 water revenue. Faster relative growth of the process systems business, which typically is lower margin in nature, and costs incurred to consolidate office and manufacturing locations were the principal reasons for the slight operating margin decline as a percent of revenue compared with 1994. Margins in the contract services business improved compared with 1994 due to cost reduction efforts, while equipment margins remained relatively stable and process systems margins declined slightly. Selling and administrative costs increased $11.3 million in 1995 because of the full year impact of 1994 acquisitions, but declined as a percent of revenue to 14.5%, a result of a higher revenue base and the integration of acquisitions into existing businesses. WM INTERNATIONAL WM International revenue, in U.S. dollars, grew $154.2 million or 9.0% to $1.87 billion in 1995 compared with $1.71 billion in 1994. Components of revenue change are as follows:
Percentage Increase/(Decrease) - -------------------------------------------------- Price 1.8% Volume (including start-ups) (3.2) Purchased businesses 4.5 Foreign currency translation 5.9 --- Total 9.0% ====
The major cause of the 1995 volume decline was the completion of the construction phase of the SENT landfill in Hong Kong, which opened during the year. A new pricing mechanism introduced by the Hong Kong government in March 1995, which requires generators to absorb a portion of the disposal cost for waste brought to the Hong Kong incinerator, has resulted in volume declines in certain waste streams, but the impact has been offset with other volumes. The future impact of these charges, on the incinerator and on the SENT landfill should they be extended to that facility, is uncertain. Pricing in Europe was negatively impacted in 1995 by relatively low inflation, highly competitive conditions in the solid waste market in France, softness in segments of the hazardous waste market, and a continuation of lower prices on rebids of municipal contracts in Italy. Acquisition activity continued to be below WM International's historical levels and focused particularly on "tuck-in" acquisitions which can complement or expand existing operations in a given market. WM International also increased its emphasis on acquisition and construction of material recovery facilities to take advantage of a continued emphasis on recycling as an alternative to land disposal. Operating expenses (excluding the special charge discussed below) increased to 75.6% of revenue in 1995 compared with 72.7% in 1994, a result of higher labor costs in Italy, continuing pressures on pricing, particularly in Italy and France, and disruption of operations in France during the fourth quarter due to widespread strikes and industrial action against the government. Selling and administrative costs increased 2.5% in absolute terms but declined as a percentage of revenue to 12.6% in 1995 from 13.4% in 1994 due to the higher revenue base, the benefit of "tuck-in" acquisitions, and continued emphasis on productivity improvements. Following a thorough review of its operations and management structure by a new management team, WM International announced a fourth quarter pretax special charge of $194.6 million, related 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 facilities, and streamline its country management organization. Approximately $34.3 million of this charge represents cash costs related to severance of personnel and rents under non-cancelable leases. Approximately $11.2 million of the cash costs were paid prior to December 31, 1995. The majority of the balance will be paid in early 1996, although certain rent payments on leased facilities will continue into the future. WM International expects that upon completion of these actions, overhead will be reduced by approximately $20 million annually, which management plans to invest in new marketing initiatives and operational productivity enhancements. However, the full benefit of these new programs will not be reflected in the short term, and management has cautioned WM International shareholders not to expect more than 5% to 10% growth in 1996 earnings. RUST Rust revenue from continuing operations decreased $112.9 million or 9.9% to $1.03 billion in 1995 compared with $1.14 billion in 1994. Revenue by business line is shown in the following table ($000's omitted):
Percentage 1994 1995 Increase/(Decrease) - -------------------------------------------------------------------- Engineering and consulting services $ 425,058 $ 454,105 6.8% Industrial and other services 484,178 511,102 5.6 Remediation 231,058 62,223 N/A ---------- ---------- Total $1,140,294 $1,027,430 (9.9)% ========== ==========
In May 1995, Rust exchanged its remediation business for an approximately 37% equity interest in OHM. Excluding the effect of the remediation business, revenue increased 6.2% in 1995 compared with 1994. This increase was the result of additional volume across existing businesses as the impact of acquisitions was not significant. Revenue from affiliated companies declined to $89.7 million in 1995 from $118.3 million in 1994. 20 - -------------------------------------------------------------------------------- Backlog in continuing operations at December 31, 1995, was $476 million, down from $671 million at December 31, 1994. Approximately $177 million of the 1994 backlog relating to the remediation business was transferred to OHM. The backlog shown above does not include approximately $349 million at December 31, 1995, for several Department of Defense contracts, including two Total Environmental Restoration Contracts. There is no assurance that specific projects identified and performed under these contracts will generate aggregate revenue of $349 million over their remaining terms; in addition, a portion of any projects performed may be remediation work which would now be performed by OHM. Operating expenses were 79.5% of revenue in 1995 compared with 79.7% in 1994. Selling and administrative expenses also decreased to 13.1% of 1995 revenue from 13.2% of 1994 revenue. These slight improvements were primarily the result of the elimination of the relatively low margin remediation business. - -------------------------------------------------------------------------------- OTHER ITEMS INTEREST The following table sets forth the components of consolidated interest expense, net ($000's omitted):
1993 1994 1995 - --------------------------------------------------------- Interest expense $ 393,631 $ 439,687 $506,207 Interest income (41,198) (34,488) (39,804) Capitalized interest (100,591) (104,512) (81,471) --------- --------- -------- Interest expense, net $ 251,842 $ 300,687 $384,932 ========= ========= ========
Net interest expense has increased during the three-year period, partially the result of an earlier management decision to increase the leverage of the Company. Debt levels increased in 1993 to fund stock repurchase programs, acquisitions and capital expenditures, and approximately $130 million paid to acquire the minority interest in a subsidiary of Rust. Debt levels remained flat during 1994 but interest expense increased as a result of higher U.S. interest rates and the full-year impact of the 1993 borrowings. The increase in debt in 1995 is primarily a result of the acquisition of the public ownership of CWM and Rust. Capitalized interest also declined substantially in 1995 as a number of significant capital projects were completed and became operational near the end of 1994. See "Financial Condition - Capital Structure." MINORITY INTEREST The minority interest in 1993 reflected the lower earnings of the Company's subsidiaries in that year and the minority interest (approximately $78.6 million) in the special charge recorded by CWM. Minority interest in 1995 reflects the repurchase of the public shares of CWM and Rust, as well as the minority interest (approximately $41.3 million) in the special charge recorded by WM International. SUNDRY INCOME, NET Sundry income relates primarily to earnings recorded on the equity method from the Company's investments in less than 50%-owned affiliates. In addition, CWM recognized a gain in the first quarter of 1993 on the sale of shares of common stock of WTI it had held for investment. INCOME TAXES In August 1993, the U.S. Congress passed and the President signed the Omnibus Budget Reconciliation Act of 1993, which, among other things, increased U.S. Federal income taxes for the Company and its domestic subsidiaries, retroactive in certain cases to January 1, 1993. The provision for 1993 income taxes includes approximately $14.0 million to adjust deferred income taxes as a result of this law. The consolidated income tax rate increased slightly in 1995 as a result of shifts in the sources of taxable income and the inability to realize tax benefits on a portion of the special charges. - -------------------------------------------------------------------------------- ACCOUNTING PRINCIPLES Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards ("FAS") No. 112 - Employers' Accounting for Postemployment Benefits - and FAS No. 115 - Accounting for Certain Investments in Debt and Equity Securities. The adoption of FAS No. 112 did not have a material impact on the Company's financial statements as its previous accounting was substantially in compliance with the new standard. Other than for short-term investments which were previously accounted for in accordance with FAS No. 115, the Company does not have significant investments of the type covered by that standard. The Financial Accounting Standards Board ("FASB") has issued FAS No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of - which is effective for fiscal years beginning after December 15, 1995. The Company does not believe the adoption of FAS No. 121 will have a material impact on the financial statements. In October 1995, the FASB issued FAS No. 123 - Accounting for Stock-Based Compensation - which the Company also must adopt in 1996. FAS No. 123 provides an optional new method of accounting for employee stock options and expands required disclosure about stock options. If the new method of accounting is not adopted, the Company will be required to disclose pro forma net income and earnings per share as if it were. The Company is studying FAS No. 123 and is gathering data necessary to calculate compensation in accordance with its provisions, but has not decided whether to adopt the new method or quantified its impact on the financial statements. - -------------------------------------------------------------------------------- DERIVATIVES From time to time the Company and certain of its subsidiaries use derivatives to manage currency, interest rate, and commodity (fuel) risk. Derivatives used are simple agreements which provide for payments based on the notional amount, with no multipliers or leverage. All derivatives are related to actual or anticipated instruments or transactions of the Company. While the Company is exposed to credit risk in the event of non-performance by counterparties to derivatives, in all cases such counterparties are highly rated financial institutions and the Company does not anticipate non-performance. In addition, maximum credit exposure is represented by the fair value of contracts with a positive fair value; at December 31, 1995, such amounts were not material. The impact of derivatives on the Company's financial statements has not been significant. See Note 6 to Consolidated Financial Statements for further discussion of the use and accounting for such instruments. Also see "Financial Condition - Capital Structure" for a discussion of the Company's sale of put options in connection with its authorized stock repurchase program. 21 - -------------------------------------------------------------------------------- ENVIRONMENTAL MATTERS The majority of the businesses in which the Company is engaged are intrinsically connected with the protection of the environment. As such, a significant portion of the Company's operating costs and capital expenditures could be characterized as costs of environmental protection. While the Company is faced, in the normal course of its business, with the need to expend funds for environmental protection and remediation, it does not expect such expenditures to have a material adverse effect on its financial condition or results of operations because its business is based upon compliance with environmental laws and regulations and its services are priced accordingly. Such costs may increase in the future as a result of legislation or regulation; however, the Company believes that in general it benefits from increased governmental regulation, which increases the demand for its services, and that it has the resources and experience to manage environmental risk. As part of its ongoing operations, the Company provides for estimated closure and post-closure monitoring costs over the operating life of disposal sites as airspace is consumed. Such costs include a final cap and cover on the site, methane gas and leachate management, and groundwater monitoring. The Company has also established procedures to evaluate potential remedial liabilities at closed sites which it owns or operated or to which it transported waste, including 106 sites listed on the Superfund National Priority List ("NPL") as of December 31, 1995. In the majority of situations, the Company's connection with NPL sites relates to allegations that its subsidiaries (or their predecessors) transported waste to the facilities in question, often prior to the acquisition of such subsidiaries by the Company. The Company routinely reviews and evaluates sites requiring remediation, including NPL sites, giving consideration to the nature (e.g., owner, operator, transporter, or generator), and the extent (e.g., amount and nature of waste hauled to the location, number of years of site operation by the Company, or other relevant factors) of the Company's alleged connection with the site, 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 ("PRPs"), and the nature and estimated cost of the likely remedy. Where the Company concludes that it is probable that a liability has been incurred, provision is made in the financial statements. Cost estimates are based upon management's judgment and experience in remediating such sites for the Company as well as for unrelated parties, information available from regulatory agencies as to cost of remediation, and the number, financial resources and relative degree of responsibility of other PRPs who are jointly and severally liable for remediation of the specific site, as well as the typical allocation of costs among PRPs. These estimates sometimes involve a range of possible outcomes. In such cases, the Company provides for the amount within the range which constitutes its best estimate. If no amount within the range appears to be a better estimate than any other amount, then the Company provides for the minimum amount within the range in accordance with FAS No. 5. See Note 7 to Consolidated Financial Statements for additional details regarding the Company's environmental liabilities. Estimates of the extent of the Company's degree of responsibility for remediation of a particular site and the method and ultimate cost of remediation require a number of assumptions and are inherently difficult, and the ultimate outcome may differ from current estimates. However, the Company believes that its extensive experience in the environmental services business, as well as its involvement with a large number of sites, provides a reasonable basis for estimating its aggregate liability. As additional information becomes available, estimates are adjusted as necessary. While the Company does not anticipate that any such adjustment would be material to its financial statements, it is reasonably possible that technological, regulatory or enforcement developments, the results of environmental studies, or other factors could alter this expectation and necessitate the recording of additional liabilities which could be material. The impact of such future events cannot be estimated at the current time. The Company spent $34.8 million, $58.8 million and $50.1 million on remedial activities at closed sites in 1993, 1994 and 1995, respectively, and anticipates expenditures of approximately $48.5 million in 1996. The Company has filed suit against numerous insurance carriers seeking reimbursement for past and future remedial, defense and tort costs at a number of sites. The carriers involved have denied coverage and are defending these claims. No amounts have been recognized in the financial statements for any future insurance recoveries. The Company and certain of its subsidiaries are named as defendants in personal injury and property damage lawsuits, including purported class actions, on the basis of a Company subsidiary's having owned, operated or transported waste to a disposal facility which is alleged to have contaminated the environment or, in certain cases, conducted environmental remediation activities at such sites. See "Financial Condition - Risks and Uncertainties." - -------------------------------------------------------------------------------- FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Company had working capital deficits of $400.1 million at December 31, 1995, and $115.6 million at December 31, 1994, the result of emphasis on minimizing working capital requirements. The Company operates in a service industry with neither significant inventory nor seasonal variation in receivables, and accordingly, minimizing working capital typically does not significantly affect operations. Cash flow from operating activities, less net capital expenditures (other than acquisitions) and dividends, which the Company defines as "owners' cash flow," is available to make acquisitions, reduce debt, or repurchase common stock. The Company has increased its emphasis on raising the level of owners' cash flow, which was $518 million in 1995 and, based on budgeted levels of net income, capital expenditures net of dispositions, and working capital, is expected to exceed $600 million in 1996. The Company believes that it has adequate liquidity and resources to meet its current needs for replacement capital and finance anticipated growth. 22 - -------------------------------------------------------------------------------- ACQUISITIONS AND CAPITAL EXPENDITURES Capital expenditures, including $443.5 million, $56.8 million and $154.1 million for property and equipment of purchased businesses in 1993, 1994 and 1995, respectively, are shown in the following table ($000's omitted):
1993 1994 1995 - ------------------------------------------------------------- Land (primarily disposal sites) $ 660,226 $ 582,287 $ 517,162 Buildings and leasehold improvements 195,472 141,164 148,818 Vehicles 373,055 226,005 345,768 Containers 231,586 167,936 181,225 Other equipment 702,374 395,022 348,102 ---------- ---------- ---------- Total $2,162,713 $1,512,414 $1,541,075 ========== ========== ==========
During 1993, the Company and its principal subsidiaries acquired 189 businesses for $715.7 million in cash and debt (including debt assumed), 1,046,801 shares of WMX common stock and 1,635,471 shares of WTI common stock. During 1994, 119 businesses were acquired for $214.5 million in cash and debt (including debt assumed), 73,809 shares of the Company's common stock and 156,124 shares of WTI common stock. 136 businesses were acquired in 1995 for $302.0 million in cash and debt (including debt assumed) and 2,236,354 shares of the Company's common stock. The Board of Directors has approved a capital expenditure budget of $1.2 billion (excluding acquisitions) for 1996. The Company currently expects to finance capital expenditures, as well as any acquisition activity, through cash flow from operations. The Company believes that it has adequate resources to finance any attractive acquisitions that become available. CAPITAL STRUCTURE Through 1993, the Company financed capital expenditures and acquisitions primarily through the use of debt, taking advantage of favorable interest rates. Beginning in 1994, increased emphasis has been placed on cash flow and reducing leverage. The following table reflects the impact of these strategies. However, although the Company generated $518 million of owners' cash flow in 1995, the debt to equity ratios were adversely impacted by the purchase, discussed below, of the public shares of CWM and Rust, as these transactions reduced minority interest and increased debt.
December 31 1993 1994 1995 - ------------------------------------------------------- Long-term debt as a percent of total capital 49.4% 45.6% 46.5% Short-term and long-term debt as a percent of short-term debt and total capital 52.5% 49.4% 50.7%
The above ratios include minority interest in subsidiaries and put options as part of total capital, and exclude project debt of WTI. A significant portion of WTI's debt is project debt, the interest and principal of which is expected to be paid by cash generated from operations of specific projects. In January 1995, the Company acquired all of the approximately 21.4% of the outstanding shares of CWM that it did not already own, in return for convertible subordinated debt (see Note 5 to Consolidated Financial Statements). In July 1995, WMX acquired the approximately 3.1 million Rust shares held by the public for $16.35 per share in cash. The Boards of Directors of WMX and WTI have authorized their respective companies to repurchase shares of their own common stock (up to 25 million shares in the case of WMX and 20 million shares in the case of WTI) in the open market or in privately negotiated transactions. These programs extend into 1997. WTI repurchased approximately 3.3 million shares in 1994 and approximately 7.2 million shares in 1995. WMX has not repurchased any of its shares in the last two years. During 1994 and 1995, in conjunction with its authorized repurchase program, WMX sold put options on 31.6 million shares of its common stock. The put options give the holders the right at maturity to require the Company to repurchase its shares at specified prices. Proceeds from the sale of put options are credited to additional paid-in capital. In the event the options are exercised, the Company may elect to pay the holder in cash the difference between the strike price and the market price of the Company's shares, in lieu of repurchasing the stock. Options on 17.9 million shares expired unexercised, as the price of the Company's stock was in excess of the strike price at maturity. Options on 4.7 million shares were exercised in February 1995, and the Company elected to settle them for cash in the amount of $12.0 million, which was charged to paid- in capital. The remaining 9.0 million options expire at various dates in 1996, at strike prices ranging from $27.34 to $31.45 per share. The Company may sell additional put options in 1996. During 1994, the Company formed an Employee Stock Benefit Trust and sold 12.6 million shares of treasury stock to the Trust in return for a 30-year, 7.33% note with interest payable quarterly and principal due at maturity. The Company has agreed to contribute to the Trust each quarter funds sufficient, when added to dividends on the shares held by the Trust, to pay interest on the note as well as principal outstanding at maturity. At the direction of an administrative committee comprised of Company officers, the Trustee will use the shares or proceeds from the sale of shares to pay employee benefits, and to the extent of such payments by the Trust, the Company will forgive principal and interest on the note. RISKS AND UNCERTAINTIES During the first quarter of 1995, WM International received an assessment of approximately 417 million Krona (approximately $62 million) from the Swedish Tax Authority, relating to a transaction completed in 1990. WM International believes that all appropriate tax returns and disclosures were filed at the time of transaction and intends to vigorously contest the assessment. A subsidiary of WMI has been involved in litigation challenging a municipal zoning ordinance which restricted the height of its New Milford, Connecticut landfill to a level below that allowed by the permit previously issued by the Connecticut Department of Environmental Protection ("DEP"). Although a lower Court had declared the zoning ordinance's height limitation unconstitutional, during 1995 the Connecticut Supreme Court reversed this ruling and remanded the case for further proceedings in the Superior Court. In November 1995, the Superior Court ordered the WMI subsidiary to apply to the DEP for permission to remove all waste above the height allowed by the zoning ordinance. The Company believes that removal of such waste is an inappropriate remedy and has appealed the Superior Court order to the state Supreme Court. The Company is unable to predict the outcome of the 23 - -------------------------------------------------------------------------------- appeal or the nature and extent of the removal action that may ultimately be required following further appeals or as a result of the permitting process. However, if the Superior Court order as to removal of the waste is not modified, the subsidiary could incur substantial costs, which could vary significantly, depending upon the nature of any plan which is eventually approved by applicable regulatory authorities for removing the waste, the actual volume of waste to be moved, and other currently unforeseeable factors, and which could have a material adverse effect on the Company's financial condition and results of operations in one or more future periods. Since 1994, WTI had been involved in litigation concerning permits for the construction and operation of the Lisbon, Connecticut, trash-to-energy plant. These matters were resolved during 1995 and the plant began commercial operations in January 1996. 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 such sites. Some of such lawsuits may seek to have the Company or its subsidiaries pay the cost 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 that 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 things. 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. In the ordinary course of conducting its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, including antitrust and environmental matters. Some of these proceedings may result in fines, penalties or judgments being assessed against the Company which, from time to time, may have an impact on earnings for a particular quarter or year. The Company does not believe that these proceedings, individually or in the aggregate, are material to its business or financial condition. OUTLOOK Although the Company believes that the actions taken over the past three years position it for long-term growth and improved profitability in a rapidly changing environmental services market, a number of challenges remain. The current low level of recyclable commodity prices and severe weather in many portions of the United States at the beginning of 1996 have adversely impacted WMI. As a result of slow growth in the domestic trash-to-energy business, WTI's revenue mix has been shifting to the lower margin water business. Consequently WTI management does not anticipate 1996 earnings growth in excess of 10%. WM International continues to confront political and economic uncertainty in some of its largest markets. To the extent they are within its control, the Company is responding to these challenges with increased management focus on core businesses, higher productivity through use of technology, and greater coordination among business units. Increased emphasis is also being placed on cash flow and control of capital expenditures. However, in light of the risk factors highlighted above, the Company anticipates that 1996 earnings per share growth (on continuing operations before special charges) will be in the range of 5% to 10% ($1.87 to $1.96). EX-13.2 7 REPORT OF INDEPENDENT ACCOUNTANTS Report of Independent Public Accountants EXHIBIT 13.2 - -------------------------------------------------------------------------------- TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF WMX TECHNOLOGIES, INC.: We have audited the accompanying consolidated balance sheets of WMX Technologies, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 1994 and 1995, and the related consolidated statements of income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WMX Technologies, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP - --------------------------- Arthur Andersen LLP Chicago, Illinois February 5, 1996 24 WMX Technologies, Inc. and Subsidiaries Consolidated Statements of Income
- ---------------------------------------------------------------------------------------------------------------------- For the three years ended December 31, 1995 (000's omitted except per share amounts) 1993 1994 1995 - ---------------------------------------------------------------------------------------------------------------------- REVENUE $8,636,116 $9,554,705 $10,247,617 - ---------------------------------------------------------------------------------------------------------------------- Operating Expenses $5,907,097 $6,543,687 $ 7,045,070 Special Charges 550,000 -- 335,193 Goodwill Amortization 92,994 108,093 117,482 Selling and Administrative Expenses 1,104,024 1,159,500 1,174,636 Gains from Stock Transactions of Subsidiaries (15,109) -- -- Interest Expense 293,040 335,175 424,736 Interest Income (41,198) (34,488) (39,804) Minority Interest 52,749 145,760 94,359 Sundry Income, Net (95,779) (66,487) (75,688) - ---------------------------------------------------------------------------------------------------------------------- Income From Continuing Operations Before Income Taxes $ 788,298 $1,363,465 $ 1,171,633 Provision For Income Taxes 345,867 586,974 517,043 - ---------------------------------------------------------------------------------------------------------------------- Income From Continuing Operations $ 442,431 $ 776,491 $ 654,590 - ---------------------------------------------------------------------------------------------------------------------- Discontinued Operations: Income from operations, less applicable income taxes and minority interest of $15,765 in 1993, $11,757 in 1994 and $15,040 in 1995 $ 10,345 $ 7,890 $ 11,958 Provision for loss on disposal, less applicable income tax benefit and minority interest of $34,151 -- -- (62,649) - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $ 452,776 $ 784,381 $ 603,899 ====================================================================================================================== AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 485,374 484,144 485,972 ====================================================================================================================== Earnings per Common and Common Equivalent Share: Continuing Operations $.91 $1.60 $1.35 Discontinued Operations-- Income from operations .02 .02 .02 Provision for loss -- -- (.13) - ---------------------------------------------------------------------------------------------------------------------- NET INCOME $.93 $1.62 $1.24 ======================================================================================================================
The accompanying notes are an integral part of these statements. 25 WMX Technologies, Inc. and Subsidiaries Consolidated Balance Sheets
- ------------------------------------------------------------------------------------------------------------ As of December 31, 1994 and 1995 ($000's omitted except per share amounts) 1994 1995 - ------------------------------------------------------------------------------------------------------------ CURRENT ASSETS Cash and cash equivalents $ 123,348 $ 189,031 Short-term investments 19,704 36,243 Accounts receivable, less reserve of $64,361 in 1994 and $66,840 in 1995 1,878,064 1,880,934 Employee receivables 9,859 8,787 Parts and supplies 194,445 210,864 Costs and estimated earnings in excess of billings on uncompleted contracts 347,064 334,786 Prepaid expenses 379,895 360,404 - ------------------------------------------------------------------------------------------------------------ Total Current Assets $ 2,952,379 $ 3,021,049 - ------------------------------------------------------------------------------------------------------------ PROPERTY AND EQUIPMENT, at cost Land, primarily disposal sites $ 4,158,612 $ 4,575,117 Buildings 1,332,568 1,572,821 Vehicles and equipment 7,118,714 7,498,718 Leasehold improvements 91,180 87,986 - ------------------------------------------------------------------------------------------------------------ $12,701,074 $13,734,642 Less--Accumulated depreciation and amortization (3,477,317) (3,968,943) - ------------------------------------------------------------------------------------------------------------ Total Property and Equipment, Net $ 9,223,757 $ 9,765,699 - ------------------------------------------------------------------------------------------------------------ OTHER ASSETS Intangible assets relating to acquired businesses, net $ 3,718,282 $ 4,205,031 Sundry, including other investments 1,345,104 1,572,977 Net assets of discontinued operations 183,651 130,552 - ------------------------------------------------------------------------------------------------------------ Total Other Assets $ 5,247,037 $ 5,908,560 - ------------------------------------------------------------------------------------------------------------ Total Assets $17,423,173 $18,695,308 ============================================================================================================ CURRENT LIABILITIES Portion of long-term debt payable within one year $ 890,686 $ 1,094,165 Accounts payable 971,796 1,072,372 Accrued expenses 940,507 991,539 Unearned revenue 265,024 263,029 - ------------------------------------------------------------------------------------------------------------ Total Current Liabilities $ 3,068,013 $ 3,421,105 - ------------------------------------------------------------------------------------------------------------ DEFERRED ITEMS Income taxes $ 669,566 $ 956,525 Environmental liabilities 704,015 622,952 Other 607,694 684,452 - ------------------------------------------------------------------------------------------------------------ Total Deferred Items $ 1,981,275 $ 2,263,929 - ------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT, less portion payable within one year $ 6,044,411 $ 6,420,610 - ------------------------------------------------------------------------------------------------------------ MINORITY INTEREST IN SUBSIDIARIES $ 1,536,165 $ 1,385,366 - ------------------------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES $ $ - ------------------------------------------------------------------------------------------------------------ PUT OPTIONS $ 252,328 $ 261,959 - ------------------------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY Preferred stock, $1 par value (issuable in series); 50,000,000 shares authorized; none outstanding during the years $ -- $ -- Common stock, $1 par value; 1,500,000,000 shares authorized; 496,386,758 shares issued in 1994 and 498,817,093 in 1995 496,387 498,817 Additional paid-in capital 357,150 422,801 Cumulative translation adjustment (150,832) (102,943) Retained earnings 4,181,606 4,486,877 - ------------------------------------------------------------------------------------------------------------ $ 4,884,311 $ 5,305,552 Less--1988 Employee Stock Ownership Plan 19,729 13,062 Employee Stock Benefit Trust (12,386,629 shares in 1994 and 11,769,788 in 1995, at market) 323,601 350,151 - ------------------------------------------------------------------------------------------------------------ Total Stockholders' Equity $ 4,540,981 $ 4,942,339 - ------------------------------------------------------------------------------------------------------------ Total Liabilities and Stockholders' Equity $17,423,173 $18,695,308 ============================================================================================================
The accompanying notes are an integral part of these balance sheets. 26 WMX Technologies, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity
- -------------------------------------------------------------------------------- For the three years ended December 31, 1995 ($000's omitted except per share amounts) 1988 Employee Employee Additional Cumulative Stock Stock Common Paid-in Translation Retained Treasury Ownership Benefit Stock Capital Adjustment Earnings Stock Plan Trust - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 1, 1993 $496,203 $ 708,296 $(166,566) $3,521,190 $ 204,490 $34,988 $ -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income for the year $ -- $ -- $ -- $ 452,776 $ -- $ -- $ -- Cash dividends ($.58 per share) -- -- -- (280,858) -- -- -- Stock repurchase (8,443,400 shares) -- -- -- -- 278,363 -- -- Stock issued upon exercise of stock options 14 (8,749) -- -- (18,285) -- -- Treasury stock received in connection with exercise of stock options -- -- -- -- 357 -- -- Tax benefit of non-qualified stock options exercised -- 2,825 -- -- -- -- -- Contribution to 1988 ESOP (362,036 shares) -- -- -- -- -- (7,329) -- Treasury stock received as settlement for claims -- -- -- -- 3,429 -- -- Stock issued upon conversion of LYONs -- (4,553) -- -- (7,882) -- -- Stock issued for acquisitions -- (4,655) -- -- (35,375) -- -- Transfer of equity interests among controlled subsidiaries -- (24,694) -- -- -- -- -- Cumulative translation adjustment of foreign currency statements -- -- (79,021) -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1993 $496,217 $ 668,470 $(245,587) $3,693,108 $ 425,097 $27,659 $ -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income for the year $ -- $ -- $ -- $ 784,381 $ -- $ -- $ -- Cash dividends ($.60 per share) -- -- -- (290,266) -- -- -- Dividends paid to Employee Stock Benefit Trust -- 5,617 -- (5,617) -- -- -- Stock issued upon exercise of stock options -- (5,948) -- -- (8,250) -- (5,928) Treasury stock received in connection with exercise of stock options -- -- -- -- 260 -- -- Tax benefit of non-qualified stock options exercised -- 1,527 -- -- -- -- -- Contribution to 1988 ESOP (375,312 shares) -- -- -- -- -- (7,930) -- Treasury stock received as settlement for claims -- -- -- -- 2,741 -- -- Stock issued upon conversion of LYONs 96 1,442 -- -- (56) -- -- Common stock issued for acquisitions 74 1,471 -- -- -- -- -- Temporary equity related to put options -- (252,328) -- -- -- -- -- Proceeds from sale of put options -- 29,965 -- -- -- -- -- Sale of shares to Employee Stock Benefit Trust (12,601,609 shares) -- (106,327) -- -- (419,792) -- 313,465 Adjustment of Employee Stock Benefit Trust to market value -- 16,064 -- -- -- -- 16,064 Transfer of equity interests among controlled subsidiaries -- (2,803) -- -- -- -- -- Cumulative translation adjustment of foreign currency statements -- -- 94,755 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1994 $496,387 $ 357,150 $(150,832) $4,181,606 $ -- $19,729 $323,601 - ----------------------------------------------------------------------------------------------------------------------------------- Net income for the year $ -- $ -- $ -- $ 603,899 $ -- $ -- $ -- Cash dividends ($.60 per share) -- -- -- (291,421) -- -- -- Dividends paid to Employee Stock Benefit Trust -- 7,207 -- (7,207) -- -- -- Stock issued upon exercise of stock options 44 (4,405) -- -- (1,763) -- (17,393) Treasury stock received in connection with exercise of stock options -- -- -- -- 663 -- -- Tax benefit of non-qualified stock options exercised -- 2,049 -- -- -- -- -- Contribution to 1988 ESOP (322,508 shares) -- -- -- -- -- (6,667) -- Treasury stock received as settlement for claims -- -- -- -- 1,100 -- -- Common stock issued upon conversion of LYONs 150 2,448 -- -- -- -- -- Common stock issued for acquisitions 2,236 13,908 -- -- -- -- -- Temporary equity related to put options -- (9,631) -- -- -- -- -- Proceeds from sale of put options -- 21,622 -- -- -- -- -- Settlement of put options -- (12,019) -- -- -- -- -- Adjustment of Employee Stock Benefit Trust to market value -- 43,943 -- -- -- -- 43,943 Transfer of equity interests among controlled subsidiaries -- 529 -- -- -- -- -- Cumulative translation adjustment of foreign currency statements -- -- 47,889 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1995 $498,817 $ 422,801 $(102,943) $4,486,877 $ -- $13,062 $350,151 ===================================================================================================================================
The accompanying notes are an integral part of these statements. 27 WMX Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------------------------------- For the three years ended December 31, 1995 Increase (Decrease) in cash ($000's omitted) 1993 1994 1995 - -------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income for the year $ 452,776 $ 784,381 $ 603,899 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 796,691 880,466 885,384 Provision for deferred income taxes 154,782 298,564 250,828 Minority interest in subsidiaries 57,986 149,703 138,162 Interest on Liquid Yield Option Notes (LYONs) and WMX Subordinated Notes 37,162 33,551 23,021 Gain on sale of property and equipment, and of investments by subsidiary (14,061) (14,876) (9,190) Contribution to 1988 Employee Stock Ownership Plan 7,329 7,930 6,667 Gains from stock transactions of subsidiaries (15,109) -- -- Special charges, net of tax and minority interest 285,300 -- 202,492 Provision for loss on disposal of discontinued operations, net of tax and minority interest -- -- 62,649 Changes in assets and liabilities, excluding effects of acquired companies: Receivables, net (112,489) (133,506) 45,232 Other current assets 41,038 (109,174) 48,214 Sundry other assets (29,445) (42,195) (72,282) Accounts payable 33,328 155,254 39,669 Accrued expenses and unearned revenue (298,214) 43,121 (227,700) Deferred items (24,015) (259,020) 61,557 Minority interest in subsidiaries (2,021) 14,038 (3,854) - -------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,371,038 $ 1,808,237 $ 2,054,748 - -------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Short-term investments $ 35,911 $ 2,755 $ (4,196) Capital expenditures (1,719,178) (1,455,628) (1,386,932) Proceeds from sale of property and equipment, and of investments by subsidiary 134,169 276,822 141,774 Cost of acquisitions, net of cash acquired (581,745) (197,201) (224,304) Other investments (185,256) (74,446) (44,193) Acquisition of minority interests (129,524) (8,200) (68,370) - -------------------------------------------------------------------------------------------------------- NET CASH USED FOR INVESTING ACTIVITIES $(2,445,623) $(1,455,898) $(1,586,221) - --------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. 28
- ---------------------------------------------------------------------------------------------------------- 1993 1994 1995 - ---------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Cash dividends $ (280,858) $ (290,266) $ (291,421) Proceeds from issuance of indebtedness 3,407,759 1,710,586 1,803,383 Repayments of indebtedness (1,682,950) (1,752,552) (1,860,451) Proceeds from exercise of stock options, net 9,193 7,970 14,132 Contributions from minority interests 28,072 22,169 24,394 Stock repurchases by Company and subsidiaries (315,302) (49,665) (102,484) Preferred stock redemption by subsidiary (5,000) -- -- Proceeds from sale of put options -- 29,965 21,622 Settlement of put options -- -- (12,019) - ---------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES $ 1,160,914 $ (321,793) $ (402,844) - ---------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents $ 86,329 $ 30,546 $ 65,683 Cash and cash equivalents at beginning of year 6,473 92,802 123,348 - ---------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 92,802 $ 123,348 $ 189,031 ========================================================================================================== The Company considers cash and cash equivalents to include currency on hand, demand deposits with banks and short-term investments with maturities of less than three months when purchased. Supplemental disclosures of cash flow information: Cash paid during the year for: Interest, net of amounts capitalized $ 263,716 $ 307,257 $ 401,715 Income taxes, net of refunds received $ 331,803 $ 241,657 $ 283,165 Supplemental schedule of noncash investing and financing activities: LYONs converted into common stock of the Company $ 3,329 $ 1,594 $ 2,598 Liabilities assumed in acquisitions of businesses $ 673,129 $ 244,560 $ 245,918 Fair market value of Company and subsidiary stock issued for acquired businesses $ 64,500 $ 4,773 $ 66,172 WMX Subordinated Notes issued for acquisition of CWM minority interest $ -- $ -- $ 436,830
29 WMX Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements (000's omitted in all tables except per share amounts) - -------------------------------------------------------------------------------- NOTE 1 BUSINESS AND FINANCIAL STATEMENTS WMX Technologies, Inc. and its subsidiaries ("WMX" or the "Company") provide environmental, engineering and consulting, and industrial services to governmental, residential, commercial, and industrial customers on a worldwide basis in four core lines of business: waste services, clean energy, clean water, and environmental and infrastructure engineering and consulting. Through 1995, process engineering, construction, specialty contracting and similar services were also provided through businesses the Company intends to exit (see Note 15). These businesses have been classified as discontinued operations and are segregated from continuing operations in the accompanying financial statements and notes thereto. The accompanying financial statements are prepared on a consolidated basis and include the Company and its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. See Note 13 for details of certain financial information by subsidiary, line of business and geographic area. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, income and expenses and disclosures of contingencies. Future events could alter such estimates in the near term. - -------------------------------------------------------------------------------- NOTE 2 SUMMARY OF ACCOUNTING POLICIES REVENUE RECOGNITION The Company recognizes revenue from long-term contracts on the percentage-of-completion basis with losses recognized in full when identified. Changes in project performance and conditions, estimated profitability and final contract settlements may result in future revisions to costs and income. Other revenues are recognized when the services are performed. FOREIGN CURRENCY Certain foreign subsidiaries' assets and liabilities are translated at the rates of exchange at the balance sheet date while income statement accounts are translated at the average exchange rates in effect during the period. The resulting translation adjustments are charged or credited directly to stockholders' equity. Foreign exchange losses (net of related income taxes and minority interest) of $529,000, $3,610,000 and $1,226,000 are included in the Consolidated Statements of Income for 1993, 1994 and 1995, respectively. SHORT-TERM INVESTMENTS The Company's short-term investments primarily consist of securities having an investment grade of not less than A and a term to maturity generally of less than one year, and because the investments have always been held to maturity, are carried at cost. Such investments include tax- exempt securities, certificates of deposit and Eurodollar time deposits. Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards ("FAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The adoption of FAS 115 did not have a significant effect on earnings for 1994, since the Company's accounting prior to adoption was substantially in compliance with the new standard. ENVIRONMENTAL LIABILITIES The Company provides for estimated closure and post- closure monitoring costs over the operating life of disposal sites as airspace is consumed. The Company has also established procedures to evaluate potential remedial liabilities at closed sites which it owns or operated, or to which it transported waste, including 106 sites listed on the Superfund National Priority List ("NPL"). Where the Company concludes that it is probable that a liability has been incurred, provision is made in the financial statements, based upon management's judgment and prior experience, for the Company's best estimate of the liability. Such estimates are subsequently revised as deemed necessary as additional information becomes available. See Note 7 for additional information. CONTRACTS IN PROCESS Information with respect to contracts in process at December 31, 1994 and 1995 is as follows:
1994 1995 - -------------------------------------------------------------------------------- Costs and estimated earnings on uncompleted contracts $ 2,618,921 $ 2,510,898 Less: Billings on uncompleted contracts (2,365,334) (2,253,867) ----------- ----------- Total contracts in process $ 253,587 $ 257,031 =========== ===========
Contracts in process are included in the Consolidated Balance Sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts $ 347,064 $ 334,786 Billings in excess of costs and estimated earnings on uncompleted contracts (included in unearned revenue) (93,477) (77,755) ----------- ----------- Total contracts in process $ 253,587 $ 257,031 =========== ===========
All contracts in process are expected to be billed and collected within five years. Accounts receivable includes retainage which has been billed, but which is not due pursuant to contract provisions until completion. Such retainage at December 31, 1995, is $23,095,000, including $6,724,000 that is expected to be collected after one year. At December 31, 1994, retainage was $33,743,000. PROPERTY AND EQUIPMENT Property and equipment (including major repairs and improvements) are capitalized and stated at cost. Items of an ordinary maintenance or repair nature are charged directly to operations. Disposal sites are carried at cost and to the extent this exceeds end use realizable value, such excess is amortized over the estimated life of the disposal site. Disposal site improvement costs are capitalized and charged to operations over the shorter of the estimated usable life of the site or the improvement. Preparation costs for individual secure land disposal cells are recorded as prepaid expenses and amortized as the airspace is filled. Significant costs capitalized for such cells include excavation and grading costs, costs relating to the design and construction of liner systems, and gas collection and leachate collection systems. Unamortized cell construction cost at December 31, 1994 and 1995 was $154,100,000 and $187,689,000, respectively. 30 - -------------------------------------------------------------------------------- DEPRECIATION AND AMORTIZATION The cost, less estimated salvage value, of property and equipment is depreciated over the estimated useful lives on the straight-line method as follows: buildings - 10 to 40 years; vehicles and equipment - 3 to 20 years; leasehold improvements - over the life of the applicable lease. INTANGIBLE ASSETS Intangible assets relating to acquired businesses consist primarily of the cost of purchased businesses in excess of market value of net assets acquired ("goodwill"). Such goodwill is being amortized on a straight- line basis over a period of not more than forty years. The accumulated amortization of intangible assets amounted to $458,167,000 and $572,587,000 as of December 31, 1994 and 1995, respectively. On an ongoing basis, the Company measures realizability of goodwill by the ability of the acquired business to generate current and expected future operating income in excess of annual amortization. If such realizability is in doubt, an adjustment is made to reduce the carrying value of the goodwill. Such adjustments have historically not been material to the Company's financial statements. CAPITALIZED INTEREST Interest has been capitalized on significant landfills, trash-to-energy plants and other projects under construction in accordance with FAS No. 34. Amounts capitalized and netted against Interest Expense in the Consolidated Statements of Income were $100,591,000 in 1993, $104,512,000 in 1994 and $81,471,000 in 1995. GAIN RECOGNITION ON SALE OF SUBSIDIARIES' STOCK It is the Company's policy to record in income gains from the sale or other issuance of previously unissued stock by its subsidiaries. No such gains were recorded in 1994 or 1995. ACCOUNTING PRINCIPLES The Financial Accounting Standards Board ("FASB") has issued FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is effective for fiscal years beginning after December 15, 1995. The Company does not believe the adoption of FAS 121 will have a material impact on the financial statements. In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based Compensation," which the Company also must adopt in 1996. FAS 123 provides an optional new method of accounting for employee stock options and expands required disclosure about stock options. If the new method of accounting is not adopted, the Company will be required to disclose pro forma net income and earnings per share as if it were. The Company is studying FAS 123 and is gathering data necessary to calculate compensation in accordance with its provisions, but has not decided whether to adopt the new method or quantified its impact on the financial statements. RESTATEMENT Certain amounts in previously issued financial statements have been restated to conform to 1995 classifications. - -------------------------------------------------------------------------------- NOTE 3 INCOME TAXES The following tables set forth income from continuing operations before income taxes, showing domestic and international sources, and the income tax provision, showing the components by governmental taxing authority, for the years 1993 through 1995:
Income From Continuing Operations Before Income Taxes 1993 1994 1995 - ------------------------------------------------------------------------------------------ Domestic $616,805 $1,187,938 $1,167,120 International 171,493 175,527 4,513 -------- ---------- ---------- $788,298 $1,363,465 $1,171,633 ======== ========== ========== Income Tax Provision (Benefit) - ------------------------------------------------------------------------------------------ Current tax expense U.S. Federal $133,581 $ 215,569 $ 224,924 State and local 29,893 49,549 48,957 Foreign 36,410 30,611 42,810 -------- ---------- ---------- Total current $199,884 $ 295,729 $ 316,691 -------- ---------- ---------- Deferred tax expense U.S. Federal $ 87,792 $ 215,644 $ 181,873 State and local 29,464 33,689 36,101 Foreign 32,327 44,507 (16,538) -------- ---------- ---------- Total deferred $149,583 $ 293,840 $ 201,436 -------- ---------- ---------- U.S. Federal benefit from amortization of deferred investment credit $ (3,600) $ (2,595) $ (1,084) -------- ---------- ---------- Total provision $345,867 $ 586,974 $ 517,043 ======== ========== ==========
The Federal statutory tax rate in 1993, 1994 and 1995 is reconciled to the effective tax rate as follows: - --------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0% State and local taxes, net of Federal benefit 4.9 4.0 4.7 Amortization of deferred investment credit (0.4) (0.2) (0.1) Amortization of intangible assets relating to acquired businesses 4.2 2.2 2.8 Federal tax credits (1.4) (1.0) (1.2) Non-taxable gains on issuance of stock by subsidiaries (0.7) -- -- Minority interest 2.8 4.2 3.3 Adjustment of deferred income taxes due to Omnibus Budget Reconciliation Act 1.8 -- -- Other, net (2.3) (1.1) (0.4) ----- ----- ---- Effective tax rate 43.9% 43.1% 44.1% ===== ===== ====
31 - -------------------------------------------------------------------------------- The Company uses the deferral method of accounting for investment credit, whereby the credit is recorded in income over the composite life of the related equipment. Deferred income taxes result from the recognition, in different periods, of revenue and expense for tax and financial statement purposes. The primary components that comprise the 1994 and 1995 deferred tax (assets) liabilities are as follows:
1994 1995 - -------------------------------------------------------------- Deferred tax assets Reserves not deductible until paid $ (491,061) $ (526,202) Deferred revenue (25,708) (24,472) Net operating losses and tax credit carryforwards (159,269) (266,898) Other (69,812) (73,834) ---------- ---------- Subtotal $ (745,850) $ (891,406) ---------- ---------- Deferred tax liabilities Depreciation and amortization $1,103,194 $1,368,258 Other 233,600 381,068 ---------- ---------- Subtotal $1,336,794 $1,749,326 ---------- ---------- Valuation allowance ($29,890,000 at December 31, 1993) 78,622 98,605 ---------- ---------- Net deferred tax liabilities $ 669,566 $ 956,525 ========== ==========
The Company's subsidiaries have approximately $37 million of alternative minimum tax credit carryforwards that may be used indefinitely. Various subsidiaries have U.S. Federal and foreign operating loss carryforwards of approximately $530 million and state operating loss carryforwards of approximately $513 million. Foreign operating losses of $253 million may be carried forward indefinitely; the remaining loss carryforwards have expiration dates through the year 2010. Valuation allowances have been established for uncertainties in realizing the tax benefits of loss carryforwards and for the basis difference in certain assets. While the Company expects to realize the deferred tax assets in excess of the valuation allowances, changes in estimates of future taxable income or in tax laws could alter this expectation. The increase in the valuation allowance since 1993 is primarily attributable to uncertainty in realizing the tax benefit of certain foreign operating loss carryforwards. The Company has concluded that development and expansion of its foreign business requires that the undistributed earnings of its foreign subsidiaries be reinvested indefinitely outside the United States. If the reinvested earnings were to be remitted, the U.S. income taxes due under current tax law would not be material. - -------------------------------------------------------------------------------- NOTE 4 BUSINESS COMBINATIONS During 1993, the Company and its principal subsidiaries acquired 189 businesses for $581,745,000 in cash (net of cash acquired) and notes, $133,941,000 of debt assumed, 1,046,801 shares of the Company's common stock and 1,635,471 shares of common stock of Wheelabrator Technologies Inc. ("WTI"). These acquisitions were accounted for as purchases. During 1994, 119 businesses were acquired for $197,201,000 in cash (net of cash acquired) and notes, $17,305,000 of debt assumed, 73,809 shares of the Company's common stock and 156,124 shares of common stock of WTI. These acquisitions were accounted for as purchases. One hundred thirty-six businesses were acquired in 1995 for $224,304,000 in cash (net of cash acquired) and notes, $77,689,000 of debt assumed, and 2,236,354 shares of the Company's common stock. Three of the aforementioned 1995 acquisitions, which otherwise met pooling of interests criteria, were not significant in the aggregate and, consequently, prior period financial statements were not restated. The remaining acquisitions were accounted for as purchases. The following summarizes the pro forma effect on continuing operations of businesses acquired and accounted for as purchases (including those which otherwise met pooling of interests criteria but were not significant in the aggregate) in 1993, 1994 and 1995 as if they had been acquired as of January 1 of the preceding year (unaudited):
1993 1994 1995 - ------------------------------------------------------------------------------------------- Revenue as reported $8,636,116 $ 9,554,705 $10,247,617 Revenue of purchased businesses for period prior to acquisition as stated above 555,218 477,040 161,868 ---------- ----------- ----------- Pro forma revenue $9,191,334 $10,031,745 $10,409,485 ========== =========== =========== Net income as reported $ 442,431 $ 776,491 $ 654,590 Net income of purchased businesses for period prior to acquisition as stated above 9,753 32,408 7,237 Adjustment for interest and goodwill amortization (18,532) (29,066) (7,649) ---------- ----------- ----------- Pro forma net income $ 433,652 $ 779,833 $ 654,178 ========== =========== =========== Earnings per share as reported $ .91 $ 1.60 $ 1.35 Effect of purchased businesses prior to acquisition as stated above (.02) .01 -- ---------- ----------- ----------- Pro forma earnings per share $ .89 $ 1.61 $ 1.35 ========== =========== ===========
In January 1995, the Company acquired all of the approximately 21.4% of the outstanding shares of Chemical Waste Management, Inc. ("CWM") that it did not already own. The transaction provided for the CWM public shareholders to receive a convertible subordinated WMX note for every 81.1 CWM shares held. See Note 5 for additional information. In July 1995, the Company acquired all of the approximately 3.1 million shares of Rust International Inc. ("Rust") held by the public, for $16.35 per share in cash. 32 - -------------------------------------------------------------------------------- NOTE 5 DEBT The details relating to debt (including capitalized leases, which are not material) as of December 31, 1994 and 1995, are as follows:
1994 1995 - ----------------------------------------------------------------------------------------------------------------------------- Commercial Paper, weighted average interest 5.8% in 1994 and 5.7% in 1995 $ 946,702 $1,119,356 Tailored Rate ESOP Notes, weighted average interest 4.81% in 1994 and 4.74% in 1995 50,000 20,000 Debentures, interest 8-3/4%, due 2018 249,085 249,085 Notes, interest 4-5/8% to 8-1/4%, due 1996-2011 2,684,170 3,184,170 Step-Up Notes, interest 6.22% through April 29, 1997 and 8% thereafter, due 2004 150,000 150,000 Solid waste disposal revenue bonds, interest 6% to 7.75%, due 1996-2013 252,385 251,085 Installment loans and notes payable, interest 5.34% to 10.6%, due 1996-2020 1,298,436 1,233,871 Project Debt, interest 4% to 10.64%, due 1996-2010 764,859 735,646 Other long-term borrowings 34,320 32,210 Liquid Yield Option Notes, zero coupon-subordinated, interest 9%, due 2001 10,721 8,945 Liquid Yield Option Notes, zero coupon-subordinated, interest 6%, due 2012 ("Exchangeable LYONs") 361,438 53,996 Liquid Yield Option Notes, zero coupon-subordinated, interest 6%, due 2010 ("CWM LYONs") 132,981 36,840 WMX Subordinated Notes, interest 5.75%, due 2005 -- 439,571 ---------- ---------- Total debt $6,935,097 $7,514,775 Less--current portion 890,686 1,094,165 ---------- ---------- Long-term portion $6,044,411 $6,420,610 ========== ==========
The long-term debt as of December 31, 1995, is due as follows:
Second year $ 761,091 Third year 2,158,232 Fourth year 261,103 Fifth year 1,132,816 Sixth year and thereafter 2,107,368 ---------- $6,420,610 ==========
Certain of the Company's borrowings are redeemable at the option of the holders prior to maturity. Such amounts and certain other borrowings which would otherwise be classified as current liabilities have been classified as long-term debt because the Company intends to refinance such borrowings on a long-term basis with $1,503,000,000 of committed long-term borrowing facilities which it has available. The committed facilities provide for unsecured long-term loans at interest rates of prime or LIBOR plus 30 basis points and commitment fees of 6 to 8 basis points per annum. There are no compensating balance requirements or any informal arrangements in connection with loans which would be made under these facilities. In January 1995, the Company acquired the outstanding CWM shares it did not already own. The transaction provided for the CWM public shareholders to receive a convertible subordinated WMX note due 2005, with a principal amount at maturity of $1,000, for every 81.1 CWM shares held, with cash paid in lieu of issuance of fractional notes. The notes are subordinated to all existing and future senior indebtedness of WMX. Each note bears cash interest from January 24, 1995 at the rate of two percent per annum of the $1,000 principal amount at maturity, payable semi-annually. The difference between the principal amount at maturity of $1,000 and the $717.80 stated issue price of each note represents the stated discount which, together with the cash interest payable on the notes, will accrue at a rate of 5.75 percent per annum (determined on a semi-annual bond equivalent basis) for purposes of determining the prices at which WMX may purchase or redeem notes, as described below. At the option of the holder, each note will be purchased for cash by WMX on March 15, 1998, and March 15, 2000, at prices of $789.95 and $843.03, respectively, which represent the stated issue price plus accrued stated discount to those dates. Accrued unpaid interest to those dates will also be paid. The notes will be redeemable by WMX on and after March 15, 2000, for cash, at the stated issue price plus accrued stated discount and accrued but unpaid interest through the date of redemption. In addition, each note is convertible at any time prior to maturity, unless previously purchased or redeemed by WMX, into 26.078 shares of WMX common stock, subject to adjustment upon the occurrence of certain events. Upon any such conversion, WMX will have the option of paying cash equal to the market value of the WMX shares which would otherwise be issuable. As of December 31, 1995, there were 549,810 such notes outstanding with a maturity value amounting to $549,810,000. As of December 31, 1994, CWM LYONs and the Exchangeable LYONs (together with the CWM LYONs, the "LYONs") were convertible into or exchangeable for CWM shares. On January 24, 1995, the LYONs became convertible into the number of notes discussed in the preceding paragraph to which the holders would have been entitled had they converted or exchanged the LYONs immediately prior to the merger approval. In May 1994, the Company issued, at par, $150,000,000 of ten-year Step-Up Notes due April 30, 2004. The holders may elect to have the Step-Up Notes or any portion thereof repaid on April 30, 1997, at 100% of their principal amount together with accrued interest. The interest rate on the Step-Up Notes is 6.22% through April 29, 1997, and 8% thereafter. In November 1994, the Company issued $200,000,000 of 8 1/4% Notes due November 15, 1999, at a price of 99.925%. Neither of these issues is redeemable at the option of the Company prior to maturity. 33 - -------------------------------------------------------------------------------- In January 1995, the Company issued $250,000,000 of 8-1/8% Notes due February 1, 1998, at a price of 99.671%. In March 1995, the Company issued $200,000,000 of 7-1/8% Notes due March 22, 1997, at a price of 99.98%. In May 1995, the Company issued $200,000,000 of 6.65% Notes due May 15, 2005, at par. The holder of each 6.65% Note may elect to have such Note, or any portion thereof which is a multiple of $1,000, repaid on May 15, 2000 at 100% of its principal amount, together with accrued interest. The Company also issued in May 1995, $100,000,000 of 7% Notes due May 15, 2005, at a price of 99.293%. In June 1995, the Company issued $100,000,000 of 5.84% Notes due July 3, 1996, at par. In October 1995, the Company issued $250,000,000 of 6-1/4% Notes due October 15, 2000, at a price of 99.85%. None of these issues is redeemable at the option of the Company prior to maturity. - -------------------------------------------------------------------------------- NOTE 6 DERIVATIVE FINANCIAL INSTRUMENTS From time to time, the Company uses derivatives to manage interest rate, currency and commodity risk. The portfolio of such instruments (which are held for purposes other than trading) at December 31, 1995, is set forth in the paragraphs which follow. Where deemed advantageous, management will use derivatives in the future. INTEREST RATE AGREEMENTS Certain of the Company's subsidiaries have entered into interest rate swap agreements to reduce the impact of changes in interest rates on underlying borrowings. The agreements are contracts to exchange fixed and floating interest rate payments periodically over the term without the exchange of the underlying notional amounts. The notional amounts of such agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The agreements provide only for the exchange of interest on the notional amounts at the stated rates, with no multipliers or leverage. While the subsidiaries are exposed to market risk to the extent that receipts and payments under interest rate agreements are affected by market interest rates, such agreements are entered into as a hedge against interest rate exposure on existing debt. Accordingly, differences paid or received under the agreements are recognized as part of interest expense over the life of the agreements. The impact of swap agreements on consolidated interest expense and on the effective interest rate on consolidated debt was immaterial. As of December 31, 1995, interest rate agreements in notional amounts and with terms as set forth in the following table were outstanding:
Notional Currency Amount Pay Receive Duration of Agreement - --------------------------------------------------------------------------- Sterling 20,000 Fixed Floating Feb. 1995 - Feb. 1999 Hong Kong dollar 250,000 Fixed Floating Feb. 1995 - Feb. 1997
CURRENCY AGREEMENTS From time to time, the Company and certain of its subsidiaries use foreign currency derivatives to mitigate the impact of translation on foreign earnings and income from foreign investees. Typically these have taken the form of purchased put options or offsetting put and call options with different strike prices. The Company receives or pays, based on the notional amount of the option, the difference between the average exchange rate of the hedged currency against the base currency and the average (strike price) contained in the option. Complex instruments involving multipliers or leverage are not used. While the Company may be required to make a payment in connection with these agreements, it will recognize an offsetting increase in the translation of foreign earnings or income from foreign investees. Although the purpose for using such derivatives is to mitigate currency risk, they do not qualify for hedge accounting under generally accepted accounting principles, and accordingly must be adjusted to market value at the end of each accounting period. Gains and losses on currency derivatives to date have not been material. As of December 31, 1995, the Company was party to the following average rate currency option (settles at expiration):
Currency ------------------------------- Notional Amount Hedged Against - ------------------------------------------------------------------------------------------------------ Collar, structured as offsetting put and call with different strike prices, covering the period January 1 to December 31, 1996 100,000 Swedish Krona Sterling
34 - -------------------------------------------------------------------------------- Significant foreign currency contracts outstanding during 1993, 1994 and 1995 were as follows:
Currency ---------------------------------------- Average Amount Hedged Against - -------------------------------------------------------------------------------- 1993 150,000 Sterling Dollar 9,300 Deutschemark Dollar 6,000 Finland Markka Sterling 1994 85,000 Deutschemark Sterling 132,000 French Franc Sterling 184,000 Swedish Krona Sterling 20,000,000 Italian Lire Sterling 10,000,000 Italian Lire Deutschemark 23,000 Deutschemark Dollar 141,000 Sterling Dollar 1995 46,600 Deutschemark Sterling 82,000 French Franc Sterling 13,500 Netherlands Guilder Sterling 180,000 Swedish Krona Sterling 1,500 Dollar Sterling 15,267,000 Italian Lire Sterling 11,820 Deutschemark Dollar 669 Sterling Swedish Krona 35,800 Sterling Dollar
COMMODITY AGREEMENTS The Company utilizes collars, calls and swaps to mitigate the risk of price fluctuations on the fuel used by its vehicles. Quantities hedged equate to committed fuel purchases or anticipated usage, and accordingly, gains and losses are deferred and recognized as fuel is purchased. The following table summarizes the Company's positions in commodity derivatives as of December 31, 1995:
Type Commodity Quantity Expiration - -------------------------------------------------------------------------------- Swaps Crude oil 3,000 bbls. 1996 Collars Crude oil 300 bbls. 1996 Swaps Crude oil 3,000 bbls. 1997 Collars Crude oil 350 bbls. 1997 Swaps Crude oil 2,000 bbls. 1998 Collars Crude oil 200 bbls. 1998 Collars Crude oil 100 bbls. 1999
The Company is exposed to credit loss in the event of non-performance by counterparties on interest rate, currency and commodity derivatives, but in all cases such counterparties are highly rated financial institutions and the Company does not anticipate non-performance. Maximum credit exposure is represented by the fair value of contracts with a positive fair value; at December 31, 1995, such amounts were not material. - -------------------------------------------------------------------------------- NOTE 7 ENVIRONMENTAL COSTS AND LIABILITIES The majority of the businesses in which the Company is engaged are intrinsically connected with the protection of the environment. As such, a significant portion of the Company's operating costs and capital expenditures could be characterized as costs of environmental protection. While the Company is faced, in the normal course of business, with the need to expend funds for environmental protection and remediation, it does not expect such expenditures to have a material adverse effect on its financial condition or results of operations because its business is based upon compliance with environmental laws and regulations and its services are priced accordingly. The Company provides for estimated closure and post-closure monitoring costs over the operating life of disposal sites as airspace is consumed. Such costs for U.S. landfills are estimated based on the technical requirements of the Subtitle C and D Regulations of the U.S. Environmental Protection Agency or the applicable state requirements, whichever are stricter, and include such items as final cap and cover on the site, methane gas and leachate management, and groundwater monitoring. Substantially the same standards are applied to estimate costs for foreign sites, even though current regulations in some foreign jurisdictions are less strict. 35 - -------------------------------------------------------------------------------- The Company has also established procedures to evaluate potential remedial liablilities at closed sites which it owns or operated, or to which it transported waste, including 106 sites on the NPL. In the majority of situations, the Company's connection with NPL sites relates to allegations that its subsidiaries (or their predecessors) transported waste to the facilities in question, often prior to the acquisition of such subsidiaries by the Company. The Company routinely reviews and evaluates sites requiring remediation, including NPL sites, giving consideration to the nature (e.g., owner, operator, transporter, or generator), and the extent (e.g., amount and nature of waste hauled to the location, number of years of site operation by the Company, or other relevant factors) of the Company's alleged connection with the site, 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 ("PRPs"), and the nature and estimated cost of the likely remedy. Cost estimates are based on management's judgment and experience in remediating such sites for the Company as well as for unrelated parties, information available from regulatory agencies as to costs of remediation, and the number, financial resources and relative degree of responsibility of other PRPs who are jointly and severably liable for remediation of a specific site, as well as the typical allocation of costs among PRPs. These estimates are sometimes a range of possible outcomes. In such cases, the Company provides for the amount within the range which constitutes its best estimate. If no amount within the range appears to be a better estimate than any other amount, then the Company provides for the minimum amount within the range in accordance with FAS No. 5. The Company believes that it is "reasonably possible," as that term is defined in FAS 5 ("more than remote but less than likely"), that its potential liability could be at the high end of such ranges, which would be approximately $150 million higher in the aggregate than the estimate that has been recorded in the financial statements as of December 31, 1995. Estimates of the extent of the Company's degree of responsibility for remediation of a particular site and the method and ultimate cost of remediation require a number of assumptions and are inherently difficult, and the ultimate outcome may differ from current estimates. However, the Company believes that its extensive experience in the environmental services business, as well as its involvement with a large number of sites, provides a reasonable basis for estimating its aggregate liability. As additional information becomes available, estimates are adjusted as necessary. While the Company does not anticipate that any such adjustment would be material to its financial statements, it is reasonably possible that technological, regulatory or enforcement developments, the results of environmental studies or other factors could necessitate the recording of additional liabilities which could be material. The impact of such future events cannot be estimated at the current time. Where the Company believes that both the amount of a particular environmental liability and the timing of the payments are reliably determinable, the cost in current dollars is inflated at 3% until expected time of payment and then discounted to present value at 7%. Had the Company not discounted any portion of its liability, the amount recorded would have been increased by approximately $171 million at December 31, 1995. The Company's active landfill sites have estimated remaining lives ranging from one to over 100 years based upon current site plans and annual volumes of waste. During this remaining site life, the Company will provide for an additional $1.12 billion of closure and post-closure costs, including accretion for the discount recognized to date. As of December 31, the Company's liabilities for closure, post-closure monitoring and environmental remediation costs were as follows:
1994 1995 - ----------------------------------------------------------- Current portion, included in Accrued Expenses $ 108,750 $ 138,603 Non-current portion 704,015 622,952 ---------- ---------- Total recorded $ 812,765 $ 761,555 Amount to be provided over remaining life of active sites, including discount of $169 million in 1994 and $171 million in 1995 1,149,617 1,118,739 ---------- ---------- Expected aggregate undiscounted environmental liabilities $1,962,382 $1,880,294 ========== ==========
Anticipated payments of environmental liabilities at December 31, 1995, are as follows:
1996 $ 138,603 1997 97,621 1998 49,416 1999 40,586 2000 32,115 Thereafter 1,521,953 ---------- $1,880,294 ==========
The change in the expected aggregate undiscounted amount results primarily from changes in available airspace. 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. While the Company believes it has meritorious defenses to these lawsuits, their ultimate resolution is often substantially uncertain due to a number of factors, and it is possible such matters could have a material adverse impact on the Company's earnings for one or more quarters or years. The Company has filed suit against numerous insurance carriers seeking reimbursement for past and future remedial, defense and tort claim costs at a number of sites. The carriers involved have denied coverage and are defending these claims. No amounts have been recognized in the financial statements for any future insurance recoveries. 36 - -------------------------------------------------------------------------------- NOTE 8 STOCK OPTIONS The Company has two stock option plans currently in effect under which future grants may be issued: the 1992 Stock Option Plan (the "1992 Plan") and the 1992 Stock Option Plan for Non-Employee Directors (the "Directors' Plan"). Options granted under the 1992 Plan are generally exercisable in equal cumulative installments over a three- to five-year period beginning one year after the date of grant. Options granted under the Directors' Plan become exercisable in five equal annual installments beginning six months after the date of grant. Under the 1992 Plan, non-qualified stock options may be granted at a price equal to 100% of the market value on the date of grant, for a term of not less than five years nor more than ten years. Twelve million five hundred thousand shares of the Company's common stock were initially reserved for issuance under this plan. Pursuant to the Directors' Plan, 150,000 shares of the Company's common stock were initially reserved. Options for 15,000 shares are to be granted, at the time of election to the Board, to each person who is not an officer or full-time employee of the Company or any of its subsidiaries. As part of the acquisitions of the CWM and Rust shares not previously owned by the Company, as discussed in Note 4, outstanding CWM stock options were converted into options to acquire approximately 2,873,000 Company shares at prices of $21.97 to $63.33 per share and outstanding Rust stock options were converted into options to acquire approximately 1,976,000 Company shares at prices of $21.39 to $40.10 per share. The status of the plans, including predecessor plans and replacement plans (together "Prior Plans") under which options remain outstanding, during the three years ended December 31, 1995, was as follows:
Shares Option Price - ----------------------------------------------------------------------- JANUARY 1, 1993-- Outstanding 9,783 $ 3.46 -- $41.80 Available for future grant 14,822 -- ------ 1993-- Granted 2,957 $30.90 -- $38.45 Exercised 551 $ 3.46 -- $35.44 Cancelled-- Prior Plans 179 $18.84 -- $41.80 Current plans 328 $30.69 -- $41.80 ------ December 31, 1993-- Outstanding 11,682 $ 4.33 -- $41.80 Available for future grant 12,193 -- ------ 1994-- Granted 3,729 $24.33 -- $29.03 Exercised 462 $ 4.33 -- $25.72 Cancelled-- Prior Plans 312 $14.72 -- $41.80 Current plans 826 $ 8.57 -- $41.80 Additional shares available for future grant 6,000 -- ------ December 31, 1994-- Outstanding 13,811 $ 7.20 -- $41.80 Available for future grant 15,290 -- ------ 1995-- Granted 3,117 $23.21 -- $28.90 Exercised 721 $ 7.20 -- $30.69 Cancelled-- Prior Plans 1,111 $21.39 -- $63.33 Current plans 316 $26.48 -- $41.80 Converted CWM and Rust stock options 4,849 $21.39 -- $63.33 Shares no longer available for future grant 2,914 -- ------ December 31, 1995-- Outstanding 19,629 $ 8.57 -- $63.33 Available for future grant 4,726 -- ======
Options were exercisable with respect to 9,859,656 shares at December 31, 1995. 37 - -------------------------------------------------------------------------------- NOTE 9 CAPITAL STOCK The Board of Directors has the authority to create and issue up to 50,000,000 shares of $1 par preferred stock at such time or times, in such series, with such designations, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof as it may determine. No shares of the preferred stock have been issued. Pursuant to a plan adopted by the Company in January 1987, each share of the Company's common stock carries the right (referred to herein as a "Right") to purchase one four-hundredth (subject to adjustment) of a share of Series A Preferred Stock, $1.00 par value ("Preferred Stock"), at a price of $68.75 (subject to adjustment). The Rights are tradeable only with the Company's common stock until they become exercisable. The Rights become exercisable ten days after the earlier of a public announcement that a person has acquired 20% or more of the Company's outstanding voting stock or a person's commencement or announcement of a tender or exchange offer that would result in his owning 30% or more of the Company's outstanding voting stock. The Rights are subject to redemption by the Company at a price of $.0125 per Right, subject to certain limitations, and will expire on February 6, 1997. The Preferred Stock carries certain preferential dividend and liquidation rights and certain voting and other rights. If the Company or its assets are acquired in certain merger or other transactions after a person acquires Company voting stock or commences or announces an offer as provided above, each holder of a Right may purchase at the exercise price of the Right, shares of common stock of the acquiring company having a market value of two times the exercise price of the Right. If the Company is the survivor in certain merger transactions or in the event of certain other "self-dealing" transactions, each holder of a Right may purchase at the exercise price of the Right, shares of Preferred Stock having a market value of twice the exercise price of the Right. Rights held by an acquiring person become void upon the occurrence of such events. On December 8, 1995, the Board of Directors of the Company authorized the repurchase by the Company of up to 25 million shares of its comon stock from time to time in the open market or in privately negotiated transactions over a 24-month period. On the same date, the Board of Directors of WTI authorized WTI to repurchase up to 20 million shares of its common stock over a 24-month period. Both authorizations replaced existing common stock repurchase programs. - -------------------------------------------------------------------------------- NOTE 10 EARNINGS PER SHARE Earnings per share are computed on the basis of the weighted average number of common and common equivalent shares outstanding during each year. Common stock equivalents relate primarily to the impact of options outstanding under the Company's stock option plans. The following table reconciles the number of common shares shown as outstanding in the Consolidated Balance Sheets with the number of common shares used in computing earnings per share:
1994 1995 - -------------------------------------------------------- Common shares issued, net of Employee Stock Benefit Trust shares per Consolidated Balance Sheets 484,000 487,047 Effect of shares issuable under stock options after applying the "treasury stock" method 396 627 Effect of using weighted average common shares outstanding during the year (252) (1,702) ------- ------- Common shares used in computing earnings per share 484,144 485,972 ======= =======
- -------------------------------------------------------- NOTE 11 COMMITMENTS AND CONTINGENCIES The Company leases several of its operating and office facilities for various terms. Rents charged to costs and expenses in the Consolidated Statements of Income amounted to $178,039,000 in 1993, $197,969,000 in 1994 and $186,248,000 in 1995. These amounts include rents under long-term leases, short-term cancellable leases and rents charged as a percentage of revenue, but are exclusive of financing leases capitalized for accounting purposes. The long-term rental obligations as of December 31, 1995, are due as follows:
First year $ 170,311 Second year 152,711 Third year 140,162 Fourth year 132,892 Fifth year 126,872 Sixth through tenth years 545,675 Eleventh year and thereafter 329,046 ---------- $1,597,669 ==========
During 1994 and 1995, the Company sold put options on 31.6 million shares of its common stock. The put options give the holders the right at maturity to require the Company to repurchase shares of its common stock at specified prices. Proceeds from the sale of put options were credited to additional paid- in capital. The amount the Company would be obligated to pay to repurchase shares of its common stock if all outstanding put options were exercised has been reclassified to a temporary equity account. In the event the options are exercised, the Company may elect to pay the holder in cash the difference between the strike price and the market price of the Company's shares, in lieu of repurchasing the stock. Options on 17.9 million shares expired unexercised in 1994 and 1995, as the price of the Company's stock was in excess of the strike price at maturity. Options on 4.7 million shares were exercised in February 1995, and the Company elected to settle them for cash at a total cost of $12,019,000. The remaining 9.0 million options expire at various dates in 1996, at strike prices ranging from $27.34 to $31.45 per share. The Company's insurance program includes coverage for pollution liability resulting from "sudden and accidental" releases of contaminants and pollutants. Management believes that the coverage terms, available limits of liability, and costs currently offered by 38 - -------------------------------------------------------------------------------- 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. The Company has issued or is a party to approximately 3,120 bank letters of credit, performance bonds and other guarantees. Such financial instruments (averaging approximately $639,000 each), including those provided for affiliates and not otherwise recorded, are given in the ordinary course of business. Because virtually no claims have been made against these financial instruments in the past, management does not expect these instruments will have a material adverse effect on the consolidated financial position or results of operations of the Company. Since 1994, WTI has been involved in litigation involving permits for the construction and operation of the Lisbon, Connecticut, trash-to-energy plant. These matters were resolved during 1995 and the plant began commercial operations in January 1996. During the first quarter of 1995, Waste Management International plc ("WM International") received an assessment of approximately 417 million Krona (approximately $62 million) from the Swedish Tax Authority, relating to a transaction completed in 1990. WM International believes that all appropriate tax returns and disclosures were properly filed at the time of the transaction and intends to vigorously contest the assessment. A subsidiary of Waste Management, Inc. ("WMI") has been involved in litigation challenging a municipal zoning ordinance which restricted the height of its New Milford, Connecticut landfill to a level below that allowed by the permit previously issued by the Connecticut Department of Environmental Protection ("DEP"). Although a lower court 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 November 1995, the Superior Court ordered the WMI subsidiary to apply to the DEP for permission to remove all waste above the height allowed by the zoning ordinance. The Company believes that removal of such waste is an inappropriate remedy and has appealed the Superior Court order to the state Supreme Court. The Company is unable to predict the outcome of the appeal or the nature and extent of the removal action that may ultimately be required following further appeals or as a result of the permitting process. However, if the Superior Court order as to removal of the waste is not modified, the subsidiary could incur substantial costs, which could vary significantly depending upon the nature of any plan which is eventually approved by applicable regulatory authorities for removing the waste, the actual volume of waste to be moved and other currently unforeseeable factors, and which could have a material adverse effect on the Company's financial condition and results of operations in one or more future periods. In the ordinary course of conducting its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, including antitrust and environmental matters. Some of these proceedings may result in fines, penalties or judgments being assessed against the Company which, from time to time, may have an impact on earnings for a particular quarter or year. The Company does not believe that these proceedings, individually or in the aggregate, are material to its business or financial condition. - -------------------------------------------------------------------------------- NOTE 12 BENEFIT PLANS The Company has a defined benefit pension plan for all eligible non-union domestic employees of WMX, CWM and WMI. The benefits are based on the employee's years of service and compensation during the highest five consecutive years out of the last ten years of employment. The Company's funding policy is to contribute annually the minimum required amount determined by its actuaries. Net periodic pension expense for 1993, 1994 and 1995, based on discount rates of 8.50% for all three years, included the following components:
1993 1994 1995 - -------------------------------------------------------------------------------------------- Service cost - benefits earned during the year $ 10,785 $ 11,075 $ 11,752 Interest cost on projected benefit obligation 9,507 11,532 13,228 Expected return on plan assets (11,055) (12,335) (13,237) Net amortization and deferral (1,451) (1,310) 33 -------- -------- -------- Net periodic pension expense $ 7,786 $ 8,962 $ 11,776 ======== ======== ========
Assumptions, used to determine the plan's funded status as of December 31, are as follows:
1994 1995 - ---------------------------------------------------------------------------------- Discount rate 8.5% 7.75% Rate of increase in compensation levels 4.0% 4.0% Expected long-term rate of return on assets 9.0% 9.0%
The following table sets forth the plan's funded status and the amount recognized in the Company's Consolidated Balance Sheets at December 31, 1994 and 1995 for its pension plan:
1994 1995 - ---------------------------------------------------------------- Actuarial present value of benefit obligations: Accumulated benefit obligations, including vested benefits of $120,881 and $152,031 at December 31, 1994 and 1995, respectively $(136,713) $(167,287) ========= ========= Projected benefit obligation $(156,609) $(191,059) Plan assets at fair value, primarily common stocks, bonds and real estate 136,740 167,068 --------- --------- Plan assets less than projected benefit obligation $ (19,869) $ (23,991) Unrecognized net loss 39,304 29,801 Unrecognized overfunding at date of adoption (January 1, 1985) of FAS No. 87, net of amortization, being recognized over 15 years (8,727) (6,422) --------- --------- Pension cost included in prepaid (accrued) expenses $ 10,708 $ (612) ========= =========
39 - -------------------------------------------------------------------------------- The Company also has a non-qualified defined benefit plan for officers of WMX, CWM and WMI who have served in such capacities for at least 10 years at the time of retirement. The benefits are based on the officer's years of service and compensation during the highest three consecutive years out of the last ten years of employment. The benefits are reduced by such officer's benefits under the pension plan. This plan is not funded. Expense for 1993, 1994 and 1995 for this plan was $2,551,000, $3,418,000 and $4,202,000, respectively. WM International participates in both defined benefit and defined contribution retirement plans for its employees in various countries. The projected benefit obligation and the plan assets of the WM International defined benefit plans are not material. Other subsidiaries participate in various multi-employer pension plans covering certain employees not covered under the Company's pension plan, pursuant to agreements with collective bargaining units who are members of such plans. These plans are generally defined benefit plans; however, in many cases, specific benefit levels are not negotiated with or known by the employer- contributors. Contributions of $15,242,000, $16,194,000 and $18,369,000 for subsidiaries' defined contribution plans were made and charged to income in 1993, 1994 and 1995, respectively. The following table analyzes the obligation for postretirement benefits other than pensions (primarily health care costs), which is included in other deferred items on the Consolidated Balance Sheets, as of December 31, 1994 and 1995:
1994 1995 - ------------------------------------------------------- Accumulated Postretirement Benefit Obligations: Retirees $57,216 $52,255 Other fully eligible participants 10,960 9,682 Other active participants 9,478 10,695 ------- ------- $77,654 $72,632 Unrecognized: Prior service cost 627 566 Gain 9,501 7,911 ------- ------- $87,782 $81,109 ======= =======
For measurement purposes, an 8.5% annual rate of increase in the per capita cost of covered health care claims was assumed for 1996; the rate was assumed to decrease by 0.5% per year to 6.0% in 2001 and remain at that level thereafter. Increasing the assumed health care cost trend by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by approximately $4,341,000, and the aggregate of the service and interest cost components of net postretirement health care cost for 1995 by approximately $403,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 8.5% in 1994 and 7.75% in 1995. The expense for postretirement health care benefits was $7,300,000 in 1993, $4,668,000 in 1994 and $5,359,000 in 1995. The service and interest components of the expense were $3,000,000 and $4,300,000, respectively, in 1993, $1,049,000 and $3,619,000, respectively, in 1994, and $1,094,000 and $4,265,000, respectively, in 1995. The Company has an Employee Stock Ownership Plan ("1988 ESOP") for all eligible non-union United States and Canadian employees of WMX, CWM and WMI. The benefits are based on the employee's years of service and compensation. The Company contributes each year an amount, if any, determined by the Board of Directors of the Company. Information concerning the 1988 ESOP is as follows:
1993 1994 1995 - ------------------------------------------------------------ Expense recorded (contribution) $7,329 $7,930 $6,667 ====== ====== ====== Interest expense on 1988 ESOP debt $1,510 $1,965 $1,147 ====== ====== ====== Dividends on unallocated 1988 ESOP shares used by the 1988 ESOP $ 964 $ 780 $ 555 ====== ====== ======
The Company has a Profit Sharing and Savings Plan ("PSSP") available to certain employees of WMX, CWM and WMI. The terms of the PSSP allow for annual contributions by the Company as determined by the Board of Directors as well as a match of employee contributions up to $500 per employee ($750 effective January 1, 1996). Charges to operations for the PSSP were $11,589,000 in 1993, $27,334,000 in 1994 and $24,882,000 in 1995. Rust, WTI and WM International also sponsor non-contributory and contributory defined contribution plans covering both salaried and hourly employees. Employer contributions are generally based upon fixed amounts of eligible compensation and amounted to $18,614,000, $23,431,000 and $23,017,000 during 1993, 1994 and 1995, respectively. Effective January 1, 1994, the Company and its principal subsidiaries adopted FAS No. 112, "Employers' Accounting for Postemployment Benefits." This new statement established accounting standards for employers who provide benefits to former or inactive employees after employment but before retirement. The adoption of FAS 112 did not have a significant effect on earnings, because the Company's accounting prior to adoption was substantially in compliance with the new standard. During 1994, the Company established an Employee Stock Benefit Trust and sold 12.6 million shares of treasury stock to the Trust in return for a 30-year, 7.33% note with interest payable quarterly and principal due at maturity. The Company has agreed to contribute to the Trust each quarter funds sufficient, when added to dividends on the shares held by the Trust, to pay interest on the note as well as principal outstanding at maturity. At the direction of an administrative committee comprised of Company officers, the trustee will use the shares or proceeds from the sale of shares to pay employee benefits, and to the extent of such payments by the Trust, the Company will forgive principal and interest on the note. The shares of common stock issued to the Trust are not considered to be outstanding in the computation of earnings per share until the shares are utilized to fund obligations for which the trust was established. 40 - -------------------------------------------------------------------------------- NOTE 13 COMPANY'S OPERATIONS IN DIFFERENT INDUSTRIES AND GEOGRAPHICAL AREAS The analysis of operations by industry segment which follows reflects the Company's traditional management structure of five principal subsidiaries, each of which has operated in a relatively discrete portion of the environmental services industry or geographic area. WMI has provided integrated solid waste services and CWM has provided hazardous waste collection, transportation, treatment and disposal services in North America. WM International has provided these services, as well as trash-to-energy services, outside North America. WTI has been involved in trash-to-energy and independent power projects, water and wastewater treatment (including biosolids management) and air quality control, primarily in North America. Rust has served the environmental and infrastructure engineering and consulting, and on-site industrial and related services markets in the United States and a number of foreign countries. Whereas solid waste, hazardous waste and trash-to-energy operations have been performed by three distinct organizations in North America, these services have been provided internationally by a single management organization. Because of the different business environment for international operations, the Company has managed these as a discrete segment. Following is an analysis of the Company's continuing operations by these historical segments.
Trash-To-Energy, International Engineering, Water Treatment, Waste Corporate Solid Hazardous Industrial and Air Quality and Management and Waste Waste Related Services Related Services Services Eliminations(1) Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ 1993 Revenue $4,702,166 $ 661,860 $1,035,004 $1,142,219 $1,411,211 $(316,344) $ 8,636,116 Operating expenses including goodwill amortization 3,193,183 506,264 808,694 792,719 1,009,145 (309,914) 6,000,091 Special charge -- 550,000 -- -- -- -- 550,000 Selling and administrative expenses 547,413 128,058 131,575 107,276 198,969 (9,267) 1,104,024 ---------- ---------- ---------- ---------- ---------- --------- ----------- Income from operations $ 961,570 $ (522,462) $ 94,735 $ 242,224 $ 203,097 $ 2,837 $ 982,001 ========== ========== ========== ========== ========== ========= =========== Identifiable assets $6,912,271 $1,498,631 $1,360,703 $3,081,709 $3,315,621 $(169,169) $15,999,766 ========== ========== ========== ========== ========== ========= =========== Depreciation and amortization expense $ 461,963 $ 63,971 $ 43,971 $ 75,323 $ 121,050 $ 22,084 $ 788,362 ========== ========== ========== ========== ========== ========= =========== Capital expenditures(2) $1,139,004 $ 157,786 $ 124,754 $ 303,905 $ 403,326 $ 26,009 $ 2,154,784 ========== ========== ========== ========== ========== ========= =========== 1994 Revenue $5,117,871 $ 649,581 $1,140,294 $1,324,567 $1,710,862 $(388,470) $ 9,554,705 Operating expenses including goodwill amortization 3,502,445 454,765 915,129 915,237 1,244,597 (380,393) 6,651,780 Selling and administrative expenses 549,608 105,736 153,230 119,380 230,014 1,532 1,159,500 ---------- ---------- ---------- ---------- ---------- --------- ----------- Income from operations $1,065,818 $ 89,080 $ 71,935 $ 289,950 $ 236,251 $ (9,609) $ 1,743,425 ========== ========== ========== ========== ========== ========= =========== Identifiable assets $7,388,766 $1,375,341 $1,472,263 $3,276,611 $4,037,922 $(311,381) $17,239,522 ========== ========== ========== ========== ========== ========= =========== Depreciation and amortization expense $ 479,333 $ 59,381 $ 57,542 $ 95,254 $ 154,575 $ 24,514 $ 870,599 ========== ========== ========== ========== ========== ========= =========== Capital expenditures(2) $ 950,383 $ 57,983 $ 57,242 $ 115,082 $ 304,999 $ 20,397 $ 1,506,086 ========== ========== ========== ========== ========== ========= =========== 1995 Revenue $5,642,857 $ 613,883 $1,027,430 $1,451,675 $1,865,081 $(353,309) $10,247,617 Operating expenses including goodwill amortization 3,806,798 463,984 816,528 1,015,269 1,410,282 (350,309) 7,162,552 Special charges -- 140,600 -- -- 194,593 -- 335,193 Selling and administrative expenses 578,290 94,551 135,012 130,976 235,807 -- 1,174,636 ---------- ---------- ---------- ---------- ---------- --------- ----------- Income from operations $1,257,769 $ (85,252) $ 75,890 $ 305,430 $ 24,399 $ (3,000) $ 1,575,236 ========== ========== ========== ========== ========== ========= =========== Identifiable assets $8,506,954 $1,159,467 $1,387,565 $3,220,193 $4,235,589 $ 54,988 $18,564,756 ========== ========== ========== ========== ========== ========= =========== Depreciation and amortization expense $ 457,820 $ 48,860 $ 49,796 $ 107,814 $ 181,341 $ 32,041 $ 877,672 ========== ========== ========== ========== ========== ========= =========== Capital expenditures(2) $1,101,312 $ 65,080 $ 34,606 $ 45,101 $ 263,352 $ 31,624 $ 1,541,075 ========== ========== ========== ========== ========== ========= ===========
(1) Includes corporate office and elimination of intercompany transactions. (2) Includes property and equipment of purchased businesses. 41 - -------------------------------------------------------------------------------- As a result of a strategic review begun in 1994, management and operations of the Company have been realigned on the basis of four principal global lines of business -- waste services, clean energy, clean water, and environmental and infrastructure engineering and consulting. The following table analyzes continuing operations on a line-of-business basis.
Environmental and Infrastructure Waste Clean Clean Engineering and Corporate and Services Energy Water Consulting Eliminations(2) Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- 1993 Revenue $ 7,457,371 $ 804,016 $392,194 $298,879 $(316,344) $ 8,636,116 Operating expenses including goodwill amortization 5,259,571 532,619 294,525 223,290 (309,914) 6,000,091 Special charge 550,000 -- -- -- -- 550,000 Selling and administrative expenses 956,588 46,899 63,937 45,867 (9,267) 1,104,024 ----------- ---------- -------- -------- --------- ----------- Income from operations $ 691,212 $ 224,498 $ 33,732 $ 29,722 $ 2,837 $ 982,001 =========== ========== ======== ======== ========= =========== Identifiable assets $12,356,320 $2,196,145 $485,349 $297,258 $ 664,694 $15,999,766 =========== ========== ======== ======== ========= =========== Depreciation and amortization expense $ 693,819 $ 62,777 $ 21,446 $ 10,320 $ -- $ 788,362 =========== ========== ======== ======== ========= =========== Capital expenditures(1) $ 1,802,781 $ 209,091 $112,965 $ 26,718 $ 3,229 $ 2,154,784 =========== ========== ======== ======== ========= =========== 1994 Revenue $ 8,140,785 $ 888,037 $489,295 $425,058 $(388,470) $ 9,554,705 Operating expenses including goodwill amortization 5,738,990 589,610 369,592 333,981 (380,393) 6,651,780 Selling and administrative expenses 971,075 44,032 78,615 64,246 1,532 1,159,500 ----------- ---------- -------- -------- --------- ----------- Income from operations $ 1,430,720 $ 254,395 $ 41,088 $ 26,831 $ (9,609) $ 1,743,425 =========== ========== ======== ======== ========= =========== Identifiable assets $13,470,901 $2,152,458 $587,480 $402,053 $ 626,630 $17,239,522 =========== ========== ======== ======== ========= =========== Depreciation and amortization expense $ 751,251 $ 62,460 $ 40,813 $ 16,075 $ -- $ 870,599 =========== ========== ======== ======== ========= =========== Capital expenditures(1) $ 1,374,893 $ 76,392 $ 35,725 $ 14,576 $ 4,500 $ 1,506,086 =========== ========== ======== ======== ========= =========== 1995 Revenue $ 8,634,836 $ 893,513 $618,472 $454,105 $(353,309) $10,247,617 Operating expenses including goodwill amortization 6,099,597 574,865 477,842 360,557 (350,309) 7,162,552 Special charges 325,336 9,857 -- -- -- 335,193 Selling and administrative expenses 972,018 44,751 89,922 67,945 -- 1,174,636 ----------- ---------- -------- -------- --------- ----------- Income from operations $ 1,237,885 $ 264,040 $ 50,708 $ 25,603 $ (3,000) $ 1,575,236 =========== ========== ======== ======== ========= =========== Identifiable assets $14,535,905 $2,025,491 $612,824 $392,486 $ 998,050 $18,564,756 =========== ========== ======== ======== ========= =========== Depreciation and amortization expense $ 742,148 $ 73,098 $ 44,744 $ 17,682 $ -- $ 877,672 =========== ========== ======== ======== ========= =========== Capital expenditures(1) $ 1,485,958 $ 12,404 $ 33,415 $ 9,288 $ 10 $ 1,541,075 =========== ========== ======== ======== ========= ===========
(1) Includes property and equipment of purchased businesses. (2) Includes corporate office and elimination of intersegment transactions. 42 - -------------------------------------------------------------------------------- Foreign operations in 1995 were conducted in 10 countries in Europe, eight countries in the Asia Pacific region, and Canada, Brazil, Mexico, Israel, and Argentina. The information relating to the Company's foreign operations is set forth in the following tables:
United Other States Europe Foreign Consolidated - -------------------------------------------------------------------------------- 1993 Revenue $ 6,994,757 $1,241,811 $399,548 $ 8,636,116 =========== ========== ======== =========== Income from operations $ 754,502 $ 184,412 $ 43,087 $ 982,001 =========== ========== ======== =========== Identifiable assets $12,444,968 $2,955,078 $599,720 $15,999,766 =========== ========== ======== =========== 1994 Revenue $ 7,427,611 $1,504,154 $622,940 $ 9,554,705 =========== ========== ======== =========== Income from operations $ 1,476,067 $ 198,251 $ 69,107 $ 1,743,425 =========== ========== ======== =========== Identifiable assets $12,628,264 $3,725,393 $885,865 $17,239,522 =========== ========== ======== =========== 1995 Revenue $ 7,837,050 $1,800,768 $609,799 $10,247,617 =========== ========== ======== =========== Income from operations $ 1,515,729 $ 17,951 $ 41,556 $ 1,575,236 =========== ========== ======== =========== Identifiable assets $13,769,141 $3,920,962 $874,653 $18,564,756 =========== ========== ======== ===========
No single customer accounted for as much as 3% of consolidated revenue in 1993, 1994 and 1995. WM International operates facilities in Hong Kong which are owned by the Hong Kong government. On July 1, 1997, control of the Hong Kong government transfers to mainland China. WM International is unable to predict what impact, if any, this change will have on its operations in Hong Kong. At December 31, 1995, WM International had identifiable assets of $242.5 million related to its Hong Kong operations, which generated 1995 pretax income of approximately $16.5 million. - -------------------------------------------------------------------------------- NOTE 14 SPECIAL GAINS AND CHARGES During the third quarter of 1993, the Company recorded a special charge of $550.0 million (before tax and minority interest) as a result of CWM recording a special asset revaluation and restructuring charge. The charge consisted of $381.0 million to write down assets, primarily incinerators, and $169.0 million for cash expenditures. Substantially all of the cash expenditures were made as of December 31, 1994. As a result of this program, overhead, including depreciation and amortization, was reduced in 1994 by approximately $60 million on an annualized basis. Results for 1993 include a non-taxable gain of $15.1 million (before minority interest) relating to the second quarter issuance of shares by Rust in connection with the acquisition of the minority interest in a subsidiary. In 1994, Rust recorded a charge of $9.2 million (before tax and minority interest) for the writeoff of assets and the recognition of one-time costs incurred during the fourth quarter in connection with the discontinuance of its marine construction and dredging operations, and the closing of offices in a consolidation of its other operations. This charge is included in Operating Expenses ($6.6 million) and Selling and Administrative Expenses ($2.6 million) in the Consolidated Statement of Income. In the first quarter of 1995, in response to the continuing deterioration of the chemical waste services market, CWM took additional steps to realign its organization, and in connection therewith, recorded a special charge of $140.6 million before tax ($91.4 million after tax or $.19 per WMX share). The charge related primarily to a write-off of the investment in facilities and technologies that CWM abandoned because they do not meet customer service or performance objectives, but also includes $22.0 million of future cash payments for rents under non-cancellable leases, guaranteed bank obligations of a joint venture, and employee severance. The majority of the cash expenditures were paid in 1995, although certain of the non-cancellable leases extend through the year 2002. In the fourth quarter of 1995, WM International recorded an exceptional charge of $194.6 million ($152.4 million after tax) primarily related to the 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. The charge reduced the Company's income by approximately $153.3 million before tax ($111.0 million after tax). The charge included $34.3 million of cash payments for employee severance and rents under non-cancellable leases. Approximately $11.2 million of the cash costs were paid prior to December 31, 1995. The majority of the balance will be paid in early 1996, although certain rent payments on leased facilities will continue into the future. WM International expects that upon completion of these actions, overhead will be reduced by approximately $20 million annually, which management plans to invest in new marketing initiatives and operational productivity enhancements. 43 - -------------------------------------------------------------------------------- NOTE 15 DISCONTINUED OPERATIONS In December 1995, the Rust Board of Directors approved a plan to sell or otherwise discontinue Rust's process engineering, construction, specialty contracting and similar lines of business and have Rust focus on its environmental and infrastructure engineering and consulting businesses. The discontinued businesses have been segregated and the accompanying consolidated balance sheets, statements of income and related footnote information have been restated. Rust has engaged investment bankers to assist it in valuing and identifying potential buyers for the major business units to be sold, and expects to complete the sales in 1996. Provision has been made for estimated loss on disposal of the discontinued operations, net of related tax benefits and minority interest, and is included in the 1995 consolidated statement of income. The provision for loss includes management's best estimate of the amounts to be realized on the sale of businesses and assets. The amounts Rust will ultimately realize could differ materially in the near term from these estimates. Revenues of the discontinued businesses were $499,461,000 in 1993, $542,613,000 in 1994, and $731,731,000 in 1995. Following is a summary of the assets and liabilities as of December 31, 1994 and 1995, which are reflected on the consolidated balance sheets as net assets of discontinued operations:
1994 1995 - -------------------------------------------------------------------------------- Current assets $ 136,466 $ 163,662 Property and equipment and other noncurrent assets 162,926 94,251 Current liabilities (111,718) (122,529) Noncurrent liabilities (4,023) (4,832) --------- --------- Net assets of discontinued operations $ 183,651 $ 130,552 ========= =========
- -------------------------------------------------------------------------------- NOTE 16 FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of FAS No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company, using available market information and commonly accepted valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company or holders of the instruments could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on information available to management as of December 31, 1994, and December 31, 1995. Such amounts have not been revalued since those dates, and current estimates of fair value may differ significantly from the amounts presented herein.
December 31, 1994 December 31, 1995 - -------------------------------------------------------------------------------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - -------------------------------------------------------------------------------------------------------- Nonderivatives-- Assets-- Cash and cash equivalents $ 123,348 $ 123,348 $ 189,031 $ 189,031 Receivables 1,887,923 1,887,923 1,889,721 1,889,721 Short-term investments 19,704 19,704 36,243 36,243 Liabilities-- Commercial paper 946,702 944,837 1,119,356 1,120,209 Project debt 764,859 828,320 735,646 880,619 Liquid Yield Option Notes and WMX Subordinated Notes 505,140 500,410 539,352 576,024 Other borrowings 4,718,396 4,586,522 5,120,421 5,319,414 Derivatives relating to debt -- 1,653 -- (74) Other derivatives carried as-- Assets (in Other Assets) 307 307 -- -- Liabilities (in Accrued Expenses) (1,105) (16,245) (65) (16,647) Letters of credit, performance bonds and guarantees -- -- -- --
44 - -------------------------------------------------------------------------------- CASH, RECEIVABLES AND SHORT-TERM INVESTMENTS The carrying amounts of these items are a reasonable estimate of their fair value. LIABILITIES For debt issues that are publicly traded, fair values are based on quoted market prices or dealer quotes. Due to the short-term nature of the ESOP notes, their carrying value approximates fair value. Interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities are used to estimate fair value for debt issues that are not quoted on an exchange. DERIVATIVES The fair value of derivatives generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at December 31, thereby taking into account unrealized gains and losses. Dealer quotes are available for most of the Company's derivatives. Deferred gains and losses are shown as assets and liabilities, as offsetting such amounts against the related nonderivative instrument is permitted only pursuant to a right of setoff or master netting agreement. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk, such as bank letters of credit, performance bonds and other guarantees, which are not reflected in the accompanying balance sheets. Such financial instruments are to be valued based on the amount of exposure under the instrument and the likelihood of performance being required. In the Company's experience, virtually no claims have been made against these financial instruments. Management does not expect any material losses to result from these off-balance-sheet instruments and, therefore, is of the opinion that the fair value of these instruments is zero. - ------------------------------------------------------------------------------------------------------------------------------------ NOTE 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is an analysis of certain items in the Consolidated Statements of Income by quarter for 1994 and 1995. First Second Third Fourth Quarter Quarter Quarter Quarter Year - ------------------------------------------------------------------------------------------------------------------------------------ 1994 Revenue $2,170,661 $2,420,106 $2,459,336 $2,504,602 $ 9,554,705 Gross profit 649,818 747,041 749,669 756,397 2,902,925 Income from continuing operations 161,777 202,155 207,093 205,466 776,491 Net income 162,612 203,117 212,885 205,767 784,381 Income from continuing operations per common and common equivalent share .33 .42 .43 .42 1.60 Net income per common and common equivalent share .34 .42 .44 .42 1.62 1995 Revenue $2,445,185 $2,635,665 $2,619,227 $2,547,540 $10,247,617 Gross profit 591,125 788,929 794,941 574,877 2,749,872 Income from continuing operations 101,292 212,462 230,801 110,035 654,590 Net income 101,245 219,127 233,848 49,679 603,899 Income from continuing operations per common and common equivalent share .21 .44 .47 .23 1.35 Net income per common and common equivalent share .21 .45 .48 .10 1.24
See Note 14 to Consolidated Financial Statements for a discussion of the special charges affecting the 1994 fourth quarter and full year results and the 1995 first quarter, fourth quarter and full year results. See Note 15 to Consolidated Financial Statements for a discussion of the decision to discontinue certain operations, announced during the fourth quarter of 1995. 45 EX-21 8 SUBSIDIARIES OF WMX TECHNOLOGIES, INC Exhibit 21 SUBSIDIARIES OF WMX TECHNOLOGIES, INC. The following is a list of all direct and indirect subsidiaries of the registrant as of March 1, 1996. The state or other jurisdiction of incorporation or organization is indicated in parentheses following each subsidiary's name. The names of the divisions or other business units of each subsidiary are indented and listed below the relevant subsidiary's name. A & B Builders, Inc. (Texas) AB Frakttjanst (Sweden) AB Gosta M. Skoglund (Sweden) Advanced Environmental Technical Services, L.L.C. (Delaware) Aero-Metric, Inc. (Wisconsin) Allegheny Industrial Electrical Company, Inc. (Delaware) Am.Eco S.r.l. (Italy) American Refuse Systems, Inc. (North Carolina) Applied Environmental Consulting, Inc. (California) Applied Environmental, Inc. (California) Arabian Cleaning Enterprise, Ltd. (Saudi Arabia) Arkansas Valley Waste Limited Partnership (Illinois) Ark BV (Netherlands) ARS - Waste Management, Ltd. (Illinois) Aseo S.A. (Argentina) Aspica s.r.l. (Italy) Aurec (Germany) Automated Disposal Systems, Inc. (Delaware) Automotive Industrial Recyclers Holding Company (Florida) Automative Industrial Recovery Systems, Inc. (Florida) Auxiwaste SA (France) Avica S.r.l. (Italy) Bajamaja OY (Finland) Belpar Chemical Services, Inc. (West Virginia) Benfur Engineering Company (Delaware) Bensalem Power Company (Pennsylvania) BICS of Tennessee, Inc. (Tennessee) Bio-Energy Partners (Illinois) Bio Gro Acquisition Sub, Inc. (Delaware) Bio Gro Florida, Inc. (Florida) Brand Air, Inc. (Delaware) Brand Construction Services, Inc. (Delaware) Brand Demolition Services, Inc. (Delaware) Brand Insulations, Inc. (Illinois) Brand Marine Services, Inc. (Delaware) Brand Remediation Services, Inc. (Delaware) Brand Services, Inc. (Delaware) BRINI of North America, Inc. (Connecticut) Bristol Contract Services Limited (United Kingdom) Brundidge Waste Disposal Center, Inc. (Alabama) Burton, Adams, Kemp & King, Inc. (North Carolina) Bury House Limited (United Kingdom) California Acquisition Sub, Inc. (Delaware) Canada Crinc, Ltd. (New Brunswick) C. A. van Vliet Containertransport (Netherlands) C. A. van Vliet Techneik B.V. (Netherlands) Cedar Hammock Refuse Disposal Corporation (Florida) Waste Management of Manatee County Waste Management of Sarasota County Cemtech L.P. (Delaware) Cemtech Management, Inc. (Delaware) Central Service Corporation (Florida) Ceriani Cave (Italy) Chamberlain Resources, Inc. (Arizona) Charlotte Landscaping and Sanitation Services, Inc. (Florida) Chemical Waste Management, Inc. (Delaware) Controlled Waste CWM Remedial Services CWM Transportation Technical Services Trade Waste Incineration Waste Reduction Services Waste Separation Technologies Chemical Waste Management Clemson Technical Center, Inc. (South Carolina) Chemical Waste Management de Mexico, S.A. de C.V. (Mexico) Chemical Waste Management of Indiana, L.L.C. (Delaware) Chemical Waste Management of Kansas, Inc. (Kansas) Chemical Waste Management of New Jersey, Inc. (New Jersey) Chemical Waste Management of Pennsylvania, Inc. (Delaware) Chemical Waste Management of the Northwest, Inc. (Washington) Chem-Nuclear Systems, Inc. (Delaware) CID MRRF, Inc. (Delaware) CNSI Sub, Inc. (Delaware) Community Refuse, Limited (Pennsylvania) Compania Schreiber de Servicios (Spain) Container Recycling Alliance, L.P. (Delaware) Controlled Waste Materials, Inc. (Illinois) Cord Industrienster Spykerisse BV (Netherlands) 2 Cote D'Azur Assainissement (France) Cote D'Azur Entretien (France) County Wide Sanitation Partners, L.P. (Illinois) CWM Cement, Inc. (Delaware) CWM Chemical Services, Inc. (Delaware) Chicago Incinerator Facility Model City Facility Memphis Service Facility CWM Holdings, Inc. (Delaware) CWM Resource Management, Inc. (Georgia) CWM Resource Recovery, Inc. (Ohio) Dan-Clean DK A/S (Denmark) Dankompost APS (Denmark) Dansk Miljotoilet A/S (Denmark) Davies Bros (Waste) Ltd & Greenwood (DB) Containers Ltd. (England) Debris Processors, Inc. (Virginia) Indian Trail Disposal Facility Decker Disposal, Inc. (Florida) Waste Management of Sarasota County Deconditionnement, Maintenance Et Securite SA ("DMS") Demart Sarl (France) Deponie Bentheim Entsorgung Verwaltungsgeskellschaft mbH (Germany) Derichebourg Est (France) Derichebourg Hygiene (France) Derichebourg Ile De France (France) Derichebourg Midi Pyrenees (France) Derichebourg Nord (France) Derichebourg Quest (France) Derichebourg Sap Sarl (France) Derichebourg Sas SA (France) Derichebourg Services Sarl (France) Derichebourg Seta SA (France) Derichebourg Sud Quest Sarl (France) Derichebourg Var Sarl (France) Diversified Scientific Services, Inc. (Tennessee) Dynastar, Inc. (Ohio) Ecocentro s.p.a. (Italy) Eco-Consult s.r.l. (Italy) Ecol Italiana S.p.A. (Italy) Ecol S.A. (Argentina) Ecoservizi S.p.A. (Italy) Ekenas Sopservice OB (Finland) Eksjo Renhallning AB (Sweden) EMICA S.r.l. (Italy) 3 Enviro-Gro Technologies, Inc. (New York) Enviro-Gro Technologies II, Inc. (New York) Enviroland, Incorporated (Michigan) Environmental Development Associates of North Carolina, Inc. (North Carolina) Environmental Development Associates of New Jersey, Inc. (New Jersey) Environmental Waste Concepts, Ltd. (Illinois) Enviropace Limited (Hong Kong) Envirotech Operating Services, Inc. (Delaware) Envirotech Operating Services (Petaluma), Inc. (Delaware) Eureco s.r.l. (Italy) EUV Entsorgungs-u. Verwertungs-GmbH (Germany) Fempack Limited (United Kingdom) Fineco Italiana S.r.l. (Italy) FJBCC Sarl (France) France Metal Recyclage (France) Franchi E Caserio S.r.l. (Italy) Fratelli Visconti S.r.l. (Italy) Gateway Waste Partners, L.P. (Illinois) Gebr. Van Vliet B.V. (Netherlands) General Nuclear Systems, Inc. (Delaware) General Sanitation Corporation (Florida) Geological Reclamation Operations and Waste Systems, Inc. (Pennsylvania) Burlington County Resource Recovery Facilities Complex G.R.O.W.S. Landfill Meadowlands Baler Facility Meadowland Recycling and Disposal Facility Geopol S.A.R.L. (France) Georgia Waste Systems, Inc. (Georgia) B. J. Recycling and Disposal Facility Chapman Waste Disposal Georgia Waste Systems North Rolling Hills Recycling and Disposal Facility Waste Management of Augusta - Aiken Waste Management of Atlanta Waste Management of Cobb County Waste Management of Macon Gesam Gestione Servizi Ambientali S.p.A. (Italy) GES Gesellschaft zur Entsorgung von Sekundaerrohstoffen mbH (Germany) Gestion Des Rebuts D.M.P. Inc. (Quebec) WMI Mauricie Bois - Franc WMI Parc Hirondelles Gestioni Ambientali (Italy) Grand Disposal Partners, L.P. (Illinois) Green Valley Landfill Limited (Hong Kong) 4 Gruning GmbH Wertstoffaufbereitung und Containerdienst (Germany) G.T.I. - Generale Trasporti Immondizie s.r.l. (Italy) Gulf Disposal, Inc. (Florida) Gulf Coast Recycling and Disposal Facility Hall-ing Refuse Partners, L.P. (Illinois) Harris Disposal Service, Inc. (Florida) Harris Sanitation, Inc. (Florida) Hedco Landfill Limited (United Kingdom) Holiday Moss (Landfill) Limited (United Kingdom) Hollander Industriediensten Amsterdam BV (Netherlands) Ib Jorgensen Handelaktiesglskab (Denmark) Ibka Industriservice A/S (Denmark) Ichochema B.V. (Netherlands) Icopower B.V. (Netherlands) Icotech (Netherlands) Icova B.V. (Netherlands) Icova/Maltha Glascollecting B.V. (Netherlands) ICRC Company (Delaware) IGM International S.p.A. (Italy) IGM S.p.A. (Italy) Infectious Waste Management Limited Partnership (Illinois) Ingenieria Urbana S.A. (Spain) International Coal Refinery Company (Delaware) IPS Quinte Inc. (Ontario) IRA S.r.l. (Italy) I.R.E. Pennsylvania, Inc. (Pennsylvania) Italrifiuti S.p.A. (Italy) Jaartsveld Groen En Milieu B.V. (Netherlands) Jarsno Equipment Inc. (Ontario) Jarsno International, Inc. (New York) Jate-eero Oy (Finland) Jatekyyti Oy (Finland) Jinyuan Power Limited Partnership (Delaware) Johnson Filtration Systems Inc. (Delaware) Johnson Filtration Systems Limited (Ireland) Just-Altpapier-Verwertung GmbH (Germany) Just GmbH Rohstoffe fur die Papierindustrie (Germany) Jydsk Miljoservice A/S (Denmark) Kahle Landfill, Inc. (Missouri) K & J Karppasen Kuljetus OY (Finland) Karlstad Renhallnings AB (Sweden) K. D. Scott Limited (United Kingdom) Keene Road Landfill, Inc. (Florida) Kennedy & Donkin Africa (Botswana) Partnership (Botswana) 5 Kennedy & Donkin Africa (Malawi) Partnership (Malawi) Kennedy & Donkin Building Services Limited (United Kingdom) Kennedy & Donkin Generation & Industrial Limited (United Kingdom) Kennedy & Donkin Information Systems Ltd. (United Kingdom) Kennedy & Donkin International Ltd. (Hong Kong) Kennedy & Donkin Ltd. (United Kingdom) Kennedy & Donkin Malaysia Ltd. (Delaware) Kennedy & Donkin (Middle East) Limited (Cyprus) Kennedy & Donkin Overseas Ltd. (United Kingdom) Kennedy & Donkin Power Ltd. (United Kingdom) Kennedy & Donkin Quality Engineering Limited (United Kingdom) Kennedy & Donkin Quality Inc. (Delaware) Kennedy & Donkin Systems Control Ltd. (United Kingdom) Kennedy & Donkin Transportation Ltd. (United Kingdom) Keravan Hyotykaytto Oy (Finland) Kiinteisto Oy Vaasan Kairatie 9 (Finland) Klok Containers BV (Netherlands) KNAB GmbH (Germany) KNAB Zwischenlager Verwaltungs- ung Betriebsgesellschaft mbH (Germany) Lake Disposal Partners, Ltd. (Illinois) Landskrona-Svalovs Renhallnigs AB (Sweden) Ljungby Renhallning & Transport AB (Sweden) Ljusne Renhallnings AB (Sweden) Loristan Services Limited (United Kingdom) LSS & Associates, Inc. (Arizona) Malardalens Tankservice AB (Sweden) Manchester Tankers Limited (United Kingdom) Mantank Cleaning Services Limited (United Kingdom) M & O Waste Management Limited Partnership (Illinois) Massachusetts Refusetech, Inc. (Delaware) Materials Recovery, Inc. (Massachusetts) Matrix Construction, Incorporated (Texas) Matrix Engineering, Inc. (Texas) Mellanaktoren AB (Sweden) Mesne Lea Estates Limited (United Kingdom) Meurthe Et Moselle Service Sarl (France) Miami Valley Pressure Cleaning, Inc. (Ohio) Middlemass Holdings Pty Limited (Australia) Middlemass Industrial Services Pty Limited (Australia) Mid-Ontario Equipment Ltd. (Ontario) Midwest Transport, Inc. (Wisconsin) Milieu Express B.V. (Netherlands) Miljotjanst: Malardalan AB (Sweden) Miljotjanst: Nykoping AB (Sweden) 6 Miljotjanst: Sodermanland AB (Sweden) Miljotjanst: Vastmanland AB (Sweden) Miller Waste Partners, L.P. (Illinois) Missouri Disposal Partners, L.P. (Illinois) Modern Trash Removal of York, Inc. (Pennsylvania) Modern Landfill Mountain Indemnity Insurance Company (Vermont) MPF Engineered Filtered Products Inc. (Ontario) MRI Holding Company (Delaware) M.S.T.S., Inc. (Delaware) Mull Entsorgung West GmbH & Co. KG (Germany) National Guaranty Insurance Company (Vermont) National Industrial Constructors Inc. (Delaware) National Seal Company (Illinois) Nelanco, Ltd. (Missouri) Neptune Microfloc, Incorporated (Oregon) New England CR Inc. (Massachusetts) New York Acquisition Sub, Inc. (Delaware) NH/VT Energy Recovery Corporation (New Hampshire) Nice Nettooyage Sarl (France) Nichols Sanitation, Inc. (Florida) Lake Placid Sanitation North Broward County Resource Recovery Project, Inc. (Florida) North Broward Holdings Inc. (Delaware) Norwaste Limited (United Kingdom) Nova Spurghi (Italy) NSC Sales Corp. (Virgin Islands) Ocean Combustion Service, B.V. (Netherlands) Ocean Combustion Service GmbH (West Germany) Ocean Combustion Service, N.V. (Belgium) Ocmulgee Disposal, Inc. (Georgia) Oil & Solvent Process Company (California) Oljy-Karelia KY (Finland) Olshan Demolishing Company, Inc. (Texas) Ostjydsk Industrirenovation A/S (Denmark) O.V.E.R. s.r.l. (Italy) Pacific Waste Management Holdings Pty. Limited. (Australia) Pacific Waste Manaagement Pte. Ltd. (Singapore) Pacific Waste Management Pty Limited (Australia) Pacific Waste Management Limited (Hong Kong) Pacific Waste Management Ltd. (New Zealand) Paega (Italy) Papierabfallentsorgung Gellschaft mbH (Austria) Park Services, Inc. (Delaware) 7 Pecol S.r.l. (Italy) Penn-Warner Club, Inc. (Delaware) Peterson-KNAB GmbH (Germany) Phoenix Systems, Inc. (Maryland) Piacentii Srl (Italy) Piacenza AMB (Italy) Pilmuir Waste Disposal Limited (United Kingdom) Pingliang Power Limited Partnership (Delaware) P.I.T.E.F. S.r.l. (Italy) Plant Control Services, Inc. (Texas) Progesam Ecosistenmi S.r.l. (Italy) PT Waste Management Indonesia (Indonesia) Pullman-Hoffman, Inc. (Ohio) Pullman Plumbing, Pipefitting & Mechanical, Inc. (West Virginia) Pullman Power Products Corporation (Delaware) Pullman Power Products International Corporation (Delaware) Pullman Power Products of Canada Limited (Canada) Pullman Torkelson Utility Fuels Company (Delaware) PWM Affiliates Superannuation Fund Pty Limited (Australia) Questquill Limited (United Kingdom) R A Johnson (Haulage) Ltd. (England) Rancho Estates Properties, Inc. (Delaware) RCCD Inc. (Delaware) RCC Fiber Company, Inc. (Delaware) Recovery I, Inc. (Louisiana) Recycle First North Andover Inc. (Delaware) Refuse Services, Inc. (Florida) Clay County Recycling and Disposal Facility Jacksonville Waste Control Lake City Waste Control Sunbeam Recycling and Disposal Facility Trinity Recycling and Disposal Facility Waste Management of Clay County Waste Management of Jacksonville Waste Management of Putnam County Renovadan Miljoservice A/S (Denmark) Resco Holdings Inc. (Delaware) Residuos Industriales Multiquim, S.A. de C.V. (Mexico) Reuter Recycling of Florida, Inc. (Florida) Reym B.V. (Netherlands) Reym GmbH (Netherlands) RGH Recycling GmbH (Germany) Richmond Waste Partners, Ltd. (Illinois) RIH Inc. (Delaware) 8 Riimaki OY (Finland) Riley Energy Systems of Lisbon Corporation (Delaware) Riley Energy Systems of Lisbon Connecticut Corp. (Connecticut) Rose Disposal Services, Inc. (Indiana) RRT Design & Construction Corp. (Delaware) RRT Empire of Mid-Connecticut, Inc. (Connecticut) RRT Empire of Monroe County, Inc. (New York) RRT Empire Returns Corporation (New York) RRT Equipment Corp. (New York) RRT Land Corp. (New York) RRT of Lake County, Illinois, Inc. (Delaware) RRT of New Jersey, Inc. (New Jersey) RRT of Pennsylvania, Inc. (Pennsylvania) RRT of Philadelphia, Inc. (Delaware) RRT of Springfield, Massachusetts, Inc. (Massachusetts) RRT of Syracuse, New York, Inc. (New York) RRT Plastics Corp. (Delaware) RRT Plastics of N.J., Inc. (New Jersey) RRT-Recycle America, Inc. (Delaware) Rudolf Beck & Sohne Aktiengesellschaft (Austria) Rupke & Associates Ltd. (Ontario) Rust Architecture Inc. (Wisconsin) Rust Architecture & Geology of North Carolina, P.C. (North Carolina) Rust Associates Ltd. (Canada) Rust Capital Corporation (Delaware) Rust China Ltd. (Delaware) Rust Engineering & Construction Inc. (Delaware) Rust Engineering do Brasil Construcoes Ltda. (Brasil) Rust Environment & Infrastructure Inc. (Wisconsin) Rust Environment & Infrastructure of Canada Inc. (Alberta) Rust Environment & Infrastructure of Michigan Inc. (Michigan) Rust Environment & Infrastructure of New York Inc. (New York) Rust Environment & Infrastructure of North Carolina Inc. (North Carolina) Rust Environment & Infrastructure of Ohio Inc. (Ohio) Rust Environment & Infrastructure, P.E., ARCH. L.S., P.C. (New York) Rust Federal Environmental Services Inc. (Delaware) Rust Federal Services Inc. (Delaware) Rust Federal Services of Colorado Inc. (Delaware) Rust Federal Services of Hanford Inc. (Delaware) Rust Federal Services of Idaho Inc. (Delaware) Rust Field Services, Inc. (Delaware) Rust Geotech Inc. (Delaware) Rust Germany GmbH (Germany) Rust Industrial Cleaning Inc. (Delaware) 9 Rust Industrial Cleaning Services Inc. (Delaware) Rust Industrial Services Inc. (Delaware) Rust International Holdings Inc. (Delaware) Rust International Inc. (Delaware) Rust International of North Carolina, P.C. (North Carolina) Rust JRP Ltd (Hong Kong) Rust JRP Pte Ltd (Singapore) Rust Limited (United Kingdom) Rust Middle East Ltd. (Delaware) Rust MRM Limited (United Kingdom) Rust North America Holdings Inc. (Delaware) Rust Overseas B.V. (Netherlands) Rust Overseas Inc. (Delaware) Rust Plant Services Inc. (South Carolina) Rust PPK Pty Ltd. (New South Wales, Australia) Rust Precision Blasting Inc. (Delaware) Rust Precision Cleaning Services (Delaware) Rust Remedial Services Holding Company Inc. (Delaware) Rust Remedial Services Inc. (Delaware) Rust Scaffold Builders Inc. (Delaware) Rust Scaffold Rental & Erection Inc. (Delaware) Rust Scaffold Services Inc. (Delaware) Rust Scaffold Services of Canada Ltd. (Ontario) Rust Servicios Ambientales e Infraestructura, S.A. de C.V. (Mexico) Rust Specialty Chemicals Inc. (Delaware) Rust Sweden Holdings A B (Sweden) Rust Utility Services Inc. (Delaware) Rust VA Projekt AB (Sweden) Rust Waste Treatment Services Inc. (Delaware) Sacagica s.r.l. (Italy) Saframa S.A. (Argentina) Sakab Batteri B (Sweden) Sakab MFA-Forvaltning AB (Sweden) Salem Waste Disposal Center, Inc. (Alabama) Salutec, S.A. (Argentina) Saneanientos Sellberg S.A. (Spain) S.A.P. s.p.a. (Italy) S.A.R.I. S.p.A. (Italy) S.A.S.P.I S.p.A. (Italy) S.E.P. s.r.l. (Italy) SCA Services, Inc. (Delaware) Mohawk Valley Sanitary Landfill S.C.E.A. Du Bosnier (France) SC Holdings, Inc. (Pennsylvania) 10 L & D Landfill Sanitary Landfill SCS Construction Limited (United Kingdom) Sengelose Kompost A/S (Denmark) SERPOL (France) Service de Rehabilitation des Dechets (S.R.D.) (France) Servicios Especiales de Recoleccion de Basura, S.A. de C.V. (Mexico) Servicios Integrales de Protection Ambiental, S.A. de C.V. (Mexico) Servizi Piemonte S.r.l. (Italy) SES Bridgeport Inc. (Delaware) SES Brooklyn Inc. (Delaware) SES Brooklyn Navy Yard Inc. (Delaware) SES Connecticut Inc. (Delaware) SES North Andover Inc. (Delaware) SES Seattle Inc. (Delaware) Shell Seekers Limited (United Kingdom) Shereg Schleswig Holsteinische Entsorgung u. Recycling GmbH (Germany) Skaraborgs Engergi - Och Mijo AB (Sweden) Sidel (France) Signal Capital Sherman Station Inc. (Delaware) Signal Clean Water Corporation (Delaware) Signal Own-And-Operate Inc. (Delaware) Signal Overseas Capital Corporation N.V. (Netherlands) Signal RESCO, Inc. (Delaware) S.I.R.T.I.S. s.r.l. (Italy) Sir-Mas (Italy) Sistemas Para Control de Desechos Solidos, S.A. de C.V. (Mexico) SMC Smaltimenti Controllati S.p.a. (Italy) SNC Rust Canada Limited (Canada) S.N.U. Di Esposito Carlo & C. (Italy) Soaring Vista Properties, Inc. (Maryland) Societ A. Grenet SARL (France) Societe Civile Immobiliere Les Amandiers (France) Societe D'Amenagement Et D'Exploitation De Terrains Agricoles (France) Societe D'Economie Mixte De Cabourg Et De Sa Region (SEMCAR)(France) Societe D'Etudes et de realisation D'Amenagements De Terrains (France) Societe Europeenne de Ferrailles et de Machefers (France) Societe Parisienne D'Amenagement De Terrains (SPAT) (France) Sogea S.r.l. (Italy) Solaria Fornaci Laterizi s.r.l. (Italy) Solna Transport AB (Sweden) Solna Transport & Renhallning AB (Sweden) South Broward County Resource Recovery Project, Inc. (Florida) South Broward Holdings Inc. (Delaware) 11 S.P.E.M. S.p.A. (Italy) Sunny Farms, Ltd. (Pennsylvania) Svensk Avfallskonvertering AB (Sweden) S. V. Farming Corp. (New Jersey) Swindell-Dressler Energy Supply Company (Delaware) Swindell-Dressler Leasing Company (Delaware) Swindell Rust Associates Inc. (Delaware) Swindell Rust Iran Inc. (Delaware) Sydostkemi AB (Sweden) Sylvans Kemiteknik AB (Sweden) Sylvan & Qvibelius AB (Sweden) TC, Inc. (Indiana) Techim S.r.l. (Italy) Terra Quest - Mohave, Inc. (Arizona) The Rust Engineering Company Limited (Canada) The Rust Engineering Company of Michigan (Michigan) The Rust Engineering Company of New York Inc. (New York) The Standard Bridge Corporation (New York) The Swindell-Dressler Corporation of Canada Limited (Canada) The Wheelabrator Corporation (Delaware) The Woodlands of Van Buren, Inc. (Delaware) Tijuana Equilibrio Ecologico, S.A. de C.V. (Mexico) Tomoka Refuse, Inc. (Florida) Town and Country Refuse, Inc. (Florida) Port-O-Let Trail Ridge Landfill, Inc. (Delaware) Transportbedrijf Van Bliet B.V. (Nederlands) Transwaste (N.W.) Limited (United Kingdom) Tra.S.E. s.p.a. (Italy) TRECO Construction Services Inc. (Delaware) TWI Transportation, Inc. (Delaware) UK Waste Management Holdings Limited (United Kingdom) UK Waste Management Limited (United Kingdom) United Waste Partners, L.P. (Illinois) Valdenza S.r.l. (Italy) Vanerborgs Stadbudsbyra AB (Sweden) Vanersborgs Renhallning AB (Sweden) Van Vliet Recycling B.V. (Netherlands) Van Vliet Speciaal Afval B.V. (Netherlands) VE-Part S.r.l. (Italy) Verwaltungsgesellschaft Neuhaus Entsorgung GmbH (Germany) Vliko B.V. (Netherlands) Warner Company (Delaware) Warner East 12 Warner West Washington Waste Hauling & Recycling, Inc. (Delaware) Port-O-Let Recycle America Valley Topsoil Waste Management - Northwest Waste Management of Ellensburg Waste Management of Greater Wenatchee Waste Management of Kennewick Waste Management of Seattle Waste Management of Spokane Waste Management of Yakima Waste Management - SnoKing Waste Management - Rainier West Group - Northwest Region Office WMI Services Washington Waste Systems, Inc. (Washington) Wass Entreprenad AB (Sweden) Waste Away Group, Inc. (Alabama) Environmental Waste Systems LaGrange Transfer Station Montgomery Transfer Station Phenix City Transfer Springhill Landfill Waste Management of Alabama - Central Waste Management of Alabama - East Waste Management of Alabama - North Waste Management of Alabama - South Waste Clearance (Holdings) Limited (United Kingdom) Waste Clearance Limited (United Kingdom) Waste Disposal, Inc. (New Jersey) Howell Landfill Waste Handling Company (W.H.C.) B.V. (Holland) Waste Management Asia B.V. (Netherlands) Waste Management Czechoslovakia s.r.o. (Czechoslovakia) Waste Management Collection and Recycling, Inc. (California) American Waste Systems C & H Disposal Empire Waste Management Great Western Reclamation Griffith Disposal Horizon Rubbish Service Recycle America SAWDCO Collection 13 Sunset Environmental Valley Waste Management Waste Management of Inland Valley Waste Management of Sacramento Waste Management of San Gabriel/Pomona Valley Waste Management of Santa Cruz County Waste Management of Stockton Waste Management of the Central Valley Waste Management of Woodland Waste Management de Mexico, S.A. de C.V. (Mexico) Waste Management Disposal Services of Arizona, Inc. (Delaware) Waste Management Disposal Services of Colorado, Inc. (Colorado) Central Weld Sanitary Landfill North Weld Sanitary Landfill Waste Management Disposal Services of Maine, Inc. (Maine) Waste Management Disposal Services of Maine - Crossroads Waste Management Disposal Services of Maryland, Inc. (Maryland) Sandy Hill Waste Management Disposal Services of Massachusetts, Inc. (Massachusetts) Waste Management Disposal Services of Montana, Inc. (Montana) Waste Management Disposal Services of New York, Inc. (Delaware) Waste Management Disposal Services of Oregon, Inc. (Delaware) Columbia Ridge Landfill and Recycling Center Oregon Waste Systems Waste Management Disposal Services of Pennsylvania, Inc. (Pennsylvania) Pottstown Landfill and Recycling Center Waste Management Disposal Services of Tennessee, Inc. (Delaware) Waste Management Disposal Services of Virginia, Inc. (Delaware) Middle Peninsula Landfill and Recycling Facility Waste Management Disposal Services of Washington, Inc. (Delaware) Greater Wenatchee Regional Landfill and Recycling Center Waste Management of Washington Waste Management Do Brasil, Ltda Empreendimentos Ambientals (Brazil) Waste Management Espana S.A. (Spain) Waste Management Finland OY (Finland) Waste Management France (Holdings) (France) Waste Management France S.A. (France) Waste Management France S.A.R.L. (France) Waste Management Gewerbemullentsorgung GmbH (Austria) Waste Management GmbH & DO MVA Hamm OHG (Germany) Waste Management Greece Anonymous Commercial Company (Greece) Waste Management Hausmullentsorgung GmbH (Austria) Waste Management Holding Gesellschaft mbH (Austria) Waste Management, Inc. (Illinois) 14 Waste Management Inc. of Florida (Florida) Atlantic Waste Management Broward Disposal Central Disposal Environmental Waste Systems Florida Environmental Waste Florida Disposal Florida Resource Management Gulf Coast Recycling and Disposal Facility Hillsborough Heights Recycling and Disposal Facility Medley Landfill & Recycling Center Rubbish Gobbler Southeast Recycling and Disposal Facility Southern Sanitation Service South Florida Service Center United Sanitation Recycling and Disposal Facility Waste Management of Bay County Waste Management of Collier County Waste Management of Dade County Waste Management of Monroe County Waste Management of Pasco County Waste Management of Tampa Waste Management, Inc. of Tennessee (Tennessee) Chestnut Ridge Landfill and Recycling Center Waste Management of Tennessee - Clarksville Waste Management of Tennessee - Jackson Waste Management of Tennessee - Knoxville Waste Management of Tennessee- Memphis Waste Management of Tennessee - Nashville Waste Management International, Inc. (Delaware) Waste Management International, Ltd. (Bermuda) Waste Management International plc (United Kingdom) Waste Management International Services Limited (United Kingdom) Waste Management International Services Pension Scheme (Trustees) Limited (United Kingdom) Waste Management International Y CIA (Chile) Waste Management Italia S.r.l. (Italy) Waste Management (Land) Limited (United Kingdom) Waste Management Limited (United Kingdom) Waste Management Nederland B.V. (Netherlands) Waste Management N.Z. Ltd. (New Zealand) Waste Management of Alabama, Inc. (Alabama) Dixie Waste Valley View Sanitary Landfill 15 Waste Management of Alabama - Lynn Waste Management of Alabama - Mobile Waste Management of Alabama - The Shoals Waste Management of Birmingham - Recycle America Waste Management of Mississippi - Gulf Coast Waste Management of North Mississippi - Tupelo Waste Management of West Alabama WMI Services of Birmingham Waste Management of Alameda County, Inc. 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(Delaware) Brushy Island Recycling and Disposal Facility Jefferson County Landfill and Recycling Center Shannon Road Recycling and Disposal Facility Union County Recycling and Disposal Facility Waste Management of Arkansas North Waste Management of Arkansas South Waste Management of California, Inc. (California) Kirby Canyon Recycling and Disposal Facility Lancaster Recycling and Disposal Facility 16 Modulaire of California Simi Valley Recycling and Disposal Facility Universal Refuse Removal of El Cajon Waste Management of Fresno County Waste Management of Lancaster Waste Management of Los Angeles Waste Management of Los Angeles - South Waste Management of North County Waste Management of San Diego Waste Management of San Fernando Valley Waste Management of Santa Clara County Waste Management of the Desert Waste Management of Cambridge, Inc. (Delaware) Adho Disposal Hunting Ridge Landfill Waste Management of Carolinas, Inc. (North Carolina) Piedmont Landfill and Recycling Center Waste Management of Asheville Waste Management of Carolinas Waste Management of Central Carolina Waste Management of Eastern Carolina Waste Management of the Piedmont Waste Management of Raleigh/Durham Waste Management of Wilmington Waste Management of the Triad Waste Management of Central Florida, Inc. (Florida) Alachua Waste Management Waste Management of Central Jersey, Inc. (New Jersey) Parklands Recycling and Disposal Facility Waste Management of Colorado, Inc. (Colorado) Canon City Disposal and Recycling Colorado Springs Recycling and Disposal Facility Colorado Springs Transfer Station County Line Recycling and Disposal Facility Denver/Arapahoe Disposal Site Englewood Transfer Station Modulaire of Colorado Port-O-Let Waste Management of Aurora Waste Management of Colorado - Aurora Facility Waste Management of Colorado - Landfill Division Waste Management of Colorado - North Facility Waste Management of Colorado - Recycle Facility Waste Management of Colorado - South Facility 17 Waste Management of Colorado Springs Waste Management of Colorado Springs - Recycle America Processing Facility Waste Management of Denver Waste Management of Denver - Recycle America Processing Facility Waste Management of Northern Colorado Waste Management of Pueblo Waste Management of the Rockies Waste Management of Columbus, Inc. (Ohio) Waste Management of Connecticut, Inc. (Connecticut) New Milford Recycling and Disposal Facility Waste Management of Connecticut - Cheshire Waste Management of Connecticut - Norwalk Waste Management of Connecticut - Wallingford Waste Management of Delaware, Inc. (Delaware) Waste Management of Delaware - Wilmington Waste Management of Delmarva Waste Management of Eastern Shore, Inc. (Delaware) Waste Management of Five Oaks Recycling and Disposal Facility, Inc. (Delaware) Waste Management of Florida Holding Company, Inc. (Delaware) Waste Management of Florida, Inc. (Delaware) Waste Management of Georgia, Inc. (Georgia) Live Oak Landfill Waste Management of Chattanooga Waste Management of Northeast Alabama Waste Management of Savannah Waste Management of the Tennessee Valley Waste Management of Grass Valley, Inc. (Delaware) Waste Management of Greater Washington, Inc. (Delaware) Universal Recycling Waste Management of Hampton Roads, Inc. (Virginia) Waste Management of Hawaii, Inc. (Hawaii) Waimanalo Gulch Recycling and Disposal Facility West Hawaii Landfill Waste Management of Idaho, Inc. (Idaho) Waste Management of Illinois, Inc. (Delaware) Banner/Western Disposal Service Chain of Rocks Recycling and Disposal Facility CID Durbin Paper Stock Company Five Oaks Recycling and Disposal Facility Greene Valley Recycling and Disposal Facility Kankakee Recycling and Disposal Facility Laraway Recycling and Disposal Facility McLean County Disposal and Recycling Services 18 Milam Recycling and Disposal Facility Prairie Hill Recycling and Disposal Facility Settler's Hill Recycling and Disposal Facility Tazewell Recycling and Disposal Facility TCD Services United Waste Systems Waste Management - Northwest Waste Management - West Waste Management of Metro East Waste Management of Peoria Waste Management of the South Suburbs Wheatland Prairie Recycling and Disposal Facility Woodland Recycling and Disposal Facility Waste Management of Indiana Holdings One, Inc. (Delaware) Waste Management of Indiana Holdings Two, Inc. (Delaware) Waste Management of Indiana, L.L.C. (Delaware) Deercroft Recycling and Disposal Facility Glenwood Ridge Recycling and Disposal Facility Oak Ridge Recycling and Disposal Facility Prairie View Recycling and Disposal Facility Superior Waste Systems Twin Bridges Recycling and Disposal Facility Waste Management of Central Indiana Waste Management of Evansville Waste Management of Fort Wayne Waste Management of Indianapolis Waste Management of Indianapolis - Hamilton County Transfer Waste Management of Lafayette Waste Management of Muncie Waste Management of Northwest Indiana Waste Management of Warsaw Wheeler Recycling and Disposal Facility Waste Management of Iowa, Inc. (Iowa) Solid Waste Systems Waste Management of Kansas, Inc. (Kansas) Forest View Recycling and Disposal Facility Rolling Meadows Recycling & Disposal Facility Solid Waste Systems Topeka Waste Systems Waste Management of Wichita Waste Management - Refuse Control Waste Management of Kentucky Holdings, Inc. (Delaware) Waste Management of Kentucky, L.L.C. (Delaware) Blue Ridge Recycling and Disposal Facility 19 Kramer Lane Recycling and Disposal Facility Lexington Recycling and Disposal Facility Outer Loop Recycling and Disposal Facility Waste Management of Kentucky - Gray Disposal Waste Management of Kentucky - Lexington Waste Management of Kentucky - Louisville Waste Management of Kentucky - Madison Disposal Waste Management of Kentucky - Stevens Dispos-All Service Waste Management of LaGrange, Inc. (Delaware) Waste Management of Leon County, Inc. (Florida) Springhill Regional Sanitary Landfill Waste Management of Louisiana, Inc. (Louisiana) Acadiana Recycling and Disposal Facility Acadia Parish Sanitary Landfill Alexandria Recycling and Disposal Facility American Waste and Pollution Control-Algiers Residential American Waste and Pollution Control-Eastern New Orleans Residential American Waste and Pollution Control-Kelvin Recycling and Disposal Facility American Waste and Pollution Control-St. Bernard Parish Residential American Waste and Pollution Control-Slidell Residential American Waste and Pollution Control-West Jefferson Residential Jefferson Davis Recycling and Disposal Facility Kelvin Recycling and Disposal Facility Magnolia Recycling and Disposal Facility Pelican Recycling and Disposal Facility Pelican State Environmental Services Waste Management of Acadiana Waste Management of Baton Rouge Waste Management of the Bayous Waste Management of Central Louisiana Waste Management of Lake Charles Waste Management of New Orleans Waste Management of Northeast Louisiana Waste Management of Northwest Louisiana Waste Management of the Pines Waste Management of St. Landry Waste Management of St. Tammany Waste Management of South Louisiana Waste Management Services of Louisiana Woodside Recycling and Disposal Facility Waste Management of Maine, Inc. (Maine) Waste Management of Maine - Portland Waste Management of Maryland, Inc. (Maryland) Mobile Offices of Maryland 20 Waste Management of Cambridge Waste Management of Greater Washington Waste Management of Maryland - Baltimore Waste Management of Southern Maryland WMI Medical Services WMI Services of Maryland Waste Management of Massachusetts, Inc. (Massachusetts) Waste Management of Boston - North Waste Management of Central Massachusetts Waste Management of Massachusetts - Gloucester Waste Management of Massachusetts - South Shore Waste Systems Waste Management of Michigan, Inc. (Michigan) Autumn Hills Recycling and Disposal Facility Cedar Ridge Recycling and Disposal Facility Eagle Valley Recycling and Disposal Facility Efficient Sanitation Northern Oaks Recycling and Disposal Facility Recycle America - Metro Detroit Tri-City Recycling and Disposal Facility Valley Rubbish Venice Park Recycling and Disposal Facility Waste Management of Michigan - Alma Transfer and Recycling Facility Waste Management of Michigan - Area Disposal Waste Management of Michigan - Burr Oak Waste Management of Michigan - Central Waste Management of Michigan - Detroit North Waste Management of Michigan - Detroit Transfer and Recycling Facility Waste Management of Michigan - Detroit West Waste Management of Michigan - Dowagiac Transfer and Recycling Facility Waste Management of Michigan - Holland Waste Management of Michigan - Holland Transfer and Recycling Facility Waste Management of Michigan - Mideast Waste Management of Michigan - Mideast/Port Huron Waste Management of Michigan - Midwest Waste Management of Michigan - Northern Waste Management of Michigan - Recycle America/Grand Rapids Waste Management of Michigan - Southwest Waste Management of Michigan - Western Westside Recycling and Disposal Facility WMI Services - Eastern Michigan/Northwest Ohio Woodland Meadows Recycling and Disposal Facility Waste Management of Minnesota, Inc. (Minnesota) Anoka Recycling and Disposal Facility 21 Dietman Sanitation & Recycling Recycle America of Minnesota Sun Prairie Recycling and Disposal Facility Waste Management - Blaine Waste Management - LeSueur Waste Management - Rochester Waste Management - Savage Waste Management - St. Cloud Waste Management of Hastings WMI Services of Minnesota Waste Management of Mississippi, Inc. (Mississippi) Pecan Grove Landfill Pine Ridge Landfill Plantation Oaks Landfill Prairie Bluff Landfill Waste Management of Central Mississippi - Jackson Waste Management of Central Mississippi - Kosciusko Waste Management of Central Mississippi - Meridian Waste Management of Central Mississippi - Vicksburg Waste Management of North Mississippi - Clarksdale Waste Management of North Mississippi - Columbus Waste Management of North Mississippi - Corinth Waste Management of North Mississippi - Greenville Waste Management of North Mississippi - Grenada Waste Management of North Mississippi - Tupelo Waste Management of South Mississippi - Gulfport Waste Management of South Mississippi - McComb Waste Management of South Mississippi - Natchez Waste Management of South Mississippi - Pine Belt Waste Management of Missouri, Inc. (Delaware) Black Oak Recycling and Disposal Facility Environmental Industries Kahle Recycling and Disposal Facility Meramec Hauling Pezold Hauling Rumble Recycling and Disposal Facility Waste Management of Kansas City Waste Management of Springfield Waste Management of St. Louis Waste Management of the Ozarks Waste Management of Montana, Inc. (Delaware) High Plains Sanitary Landfill and Recycling Center Waste Management of Great Falls Waste Management of Nebraska, Inc. (Delaware) 22 Douglas County Recycling and Disposal Facility Waste Management of New Hampshire, Inc. (Connecticut) Turnkey Recycling and Environmental Enterprises Waste Management of New Hampshire - Laconia Waste Management of New Hampshire - Londonderry Waste Management of New Hampshire - Rochester Waste Management of New Hampshire - Peterborough Waste Management of New Jersey, Inc. (New Jersey) Avenue A Transfer & Recycling Center Recycle America Waste Management of New Mexico, Inc. (New Mexico) Hobbs Recycling and Disposal Facility Modulaire of New Mexico Otero County Recycling and Disposal Facility Recycle America Processing Facility Rio Rancho Recycling and Disposal Facility San Juan County Recycling and Disposal Facility Sunshine Recycling and Disposal Facility Waste Management of Albuquerque - Recycle America Processing Facility Waste Management of Four Corners Waste Management of Southeast New Mexico Waste Management of the Southwest Waste Management of New York City, Inc. (Delaware) Waste Management of New York, Inc. (New York) High Acres Landfill and Recycling Facility Waste Management of Eastern New York Waste Management of New York - Buffalo Waste Management of New York - Rochester Waste Management of New York - Syracuse Waste Management of New York - Utica Waste Management of Southwestern New York Waymor Recycling and Disposal Facility WMI Services of New York Waste Management of New York City, L.P. (Delaware) Waste Management of North Dakota, Inc. (Delaware) Northern Waste Systems Waste Management of North Jersey, Inc. (Delaware) Waste Management of NYC, Inc. (Delaware) Waste Management of Ohio, Inc. (Delaware) Countywide Recycling and Disposal Facility ELDA Recycling and Disposal Facility Evergreen Recycling and Disposal Facility Herrick Valley Recycling and Disposal Facility Lake County Recycling and Disposal Facility 23 Pinnacle Road Recycling and Disposal Facility Seneca East Recycling and Disposal Facility Stony Hollow Recycling and Disposal Facility Suburban Recycling and Disposal Facility Waste Management of Ohio - Akron Waste Management of Ohio - Blaylock Waste Management of Ohio - Cleveland Transfer and Recycling Facility Waste Management of Ohio - Cleveland West Waste Management of Ohio - Columbus Waste Management of Ohio - Columbus Transfer and Recycling Facility Waste Management of Ohio - Findlay Waste Management of Ohio - IWD Waste Management of Ohio - Koogler Waste Management of Ohio - Lima Waste Management of Ohio - Lima Transfer and Recycling Facility Waste Management of Ohio - M & M Sanitation Waste Management of Ohio - Newark Waste Management of Ohio - Northwest Waste Management of Ohio - Recycle America/Toledo Waste Management of Ohio - S.E.M. Waste Management of Ohio - Shelby County Transfer Waste Management of Ohio - Suburban Sanitation Service Waste Management of Ohio - Youngstown WMI Services - Ohio Waste Management of Oklahoma, Inc. (Oklahoma) East Oak Recycling and Disposal Facility Muskogee Recycling and Disposal Facility Quarry Recycling and Disposal Facility Waste Management of Oklahoma City Waste Management of Tulsa Waste Management of Orange County, Inc. (California) Waste Management of Oregon, Inc. (Oregon) Waste Management of Vancouver U.S.A. Waste Management of Orlando, Inc. (Florida) Waste Management of Pennsylvania, Inc. (Pennsylvania) Lake View Landfill (Northern) Mid-Atlantic Recycling and Distribution Center Milton Grove Demolition and Tire Recycling Philadelphia Transfer and Recycling Station Pottsville Transfer Station Recycle America River Road Landfill Steel Valley Transfer Station The Forge Recycling and Resource Recovery Center 24 Tully Town Resource Recovery Facility Waste Automation Waste Management - Allentown Waste Management - Dixon Recycling Waste Management of Camp Hill Waste Management of Delaware Valley - North Waste Management of Delaware Valley - South Waste Management of Erie Waste Management of Greater Lancaster Waste Management of Greencastle Waste Management of Greenville Waste Management of Indian Valley Waste Management of Laurel Valley Waste Management of Northeast Pennsylvania Waste Management of Pennsylvania - Hauling Waste Management of Pittsburgh Waste Management of Pottstown WMI Medical Services of New Jersey WMI Medical Services of New York WMI Medical Services of Pennsylvania WMI Medical Services of West Virginia Waste Management of Pinellas County, Inc. (Florida) Suncoast Recycle America Center Waste Management of Rhode Island, Inc. (Delaware) Waste Management of Rhode Island - Newport Waste Management of South Carolina, Inc. (South Carolina) Charleston Landfill Hickory Hill Sanitary Landfill Palmetto Landfill Sandy Pines Landfill Waste Management of Coastal Disposal Service Waste Management of the Low Country Waste Management of South Dakota, Inc. (South Dakota) Waste Management of Sioux Falls Waste Management of the Black Hills Waste Management of South Jersey, Inc. (New Jersey) Middle Martee Landfill Waste Management of Camden Waste Management of Texas, Inc. (Texas) All Waste Paper Recycling Austin Community Disposal co. Bluebonnet Recycling and Disposal Facility Centex Waste Management Coastal Plains Recycling and Disposal Facility 25 Comal County Recycling and Disposal Facility Covell Gardens Landfill DFW Recycling and Disposal Facility Eastside Recycling and Disposal Facility Fabit Waste Management Garbage Gobbler Hillside Recycling and Disposal Facility Lacy Lakeview Recycling and Disposal Facility Longhorn Disposal Northwest Transfer Station Oak Hill Recycling and Disposal Facility Pecan Prairie Recycling and Disposal Facility Permian Basin Waste Management Recycle America - Dallas Bulk Grade Division Recycle America - Dallas High Grade Division S & B Trucking & Sanitation Texas Waste Management Waste Management of Fort Worth Recycling and Disposal Facility Waste Management - Golden Triangle Waste Management of Dallas - East Waste Management of Dallas Recycle America Processing Facility Waste Management of Dallas - West Waste Management of East Texas Waste Management of Houston Waste Management of Northeast Texas Waste Management of Southeast Texas - Angleton Waste Management of Southeast Texas - Dickinson Waste Management of South Texas Westside Recycling and Disposal Facility Williamson County Recycling and Disposal Facility WMI Services of Dallas WMI Services of North Texas WMI Services of Texas Waste Management of Tri-Cities, Inc. (Delaware) Waste Management of Troutdale, Inc. (Delaware) Waste Management of Utah, Inc. (Utah) Modulaire of Utah Reliable Waste Systems Waste Management of Salt Lake Waste Management of Virginia, Inc. (Virginia) Manassas Transfer Station Waste Management of Hampton Roads Waste Management of Northern Virginia Waste Management of Northern Virginia - Crown Disposal 26 Waste Management of the Outer Banks Waste Management of Richmond/Fiber Fuels Waste Management of Richmond Port-O-let Waste Management of Richmond Recycle America Waste Management of Virginia - Blue Ridge WMI Services of Hampton Roads WMI Services of Virginia Waste Management of West Virginia, Inc. (Delaware) Waste Management of Shenandoah Valley Waste Management of Wheaton, Inc. (Delaware) Waste Management of Wilmington, Inc. (Delaware) Waste Management of Wisconsin, Inc. (Wisconsin) Best Disposal Metro/Stone Ridge Recycling and Disposal Facility Orchard Ridge Recycling and Disposal Facility Parkview Recycling and Disposal Facility Pheasant Run Recycling and Disposal Facility Ridgeview Recycling and Disposal Facility Timberline Trail Recycling and Disposal Facility Turtle Creek Recycling and Disposal Facility UWS Transportation Valley Trail Recycling and Disposal Facility Waste Management - Northeast Wisconsin Waste Management of Fox Valley Waste Management of La Crosse Waste Management of Madison Waste Management of Milwaukee Waste Management of Muskego Waste Management of Rockford Waste Management of Wisconsin - East Waste Management Southwest Waste Management - Tri County WMI Services of Wisconsin Waste Management of Wyoming, Inc. (Delaware) Waste Management Paper Stock Company, Inc. (Delaware) Southern Sanitation Southeast - Recycle America Waste Management of Florida - Recycle America Waste Management of Sarasota - Recycle America Waste Management of Tampa - Recycle America Waste Management Pepierentsorgung Gesellschaft mbH (Austria) Waste Management Partners, Inc. (Delaware) Waste Management Partners of Bozeman, Ltd. (Illinois) Waste Management Partners of Midland/Odessa (Illinois) Waste Management Partners of Paris, Ltd. (Illinois) 27 Waste Management Partners of Southeast North Dakota, L.P. (Illinois) Waste Management Plastic Products, Inc. (Delaware) Waste Management Projektierungsgesellschaft mbH (Austria) Waste Management Queensland Pty. Limited (Queensland) Waste Management Recycling and Disposal Services of California, Inc. (California) Bradley Landfill and Recycling Center Waste Management of Northern California Waste Management of Southern California Waste Management Recycling and Disposal Services of Illinois, Inc. (Illinois) Waste Management Remediation Services B.V. (Netherlands) Waste Management Remediation Services B.V. (Netherlands) Waste Management Republic of China (China) Waste Management (Rock Common) Limited (United Kingdom) Waste Management (Roxby) Limited (United Kingdom) Waste Management Services, C.A. (Venezuela) Waste Management Services S A (Switzerland) Waste Management South America B.V. (Netherlands) Waste Management Thailand B.V. (Netherlands) Waste Relief Partners, L.P. (Illinois) Waste Resources Ltd (New Zealand) Waste Resources of Tampa Bay, Inc. (Florida) Waste Resources of Tennessee, Inc. (Tennessee) Waste Services Company Partnership (Colorado) Waterblast Ltd. (United Kingdom) Wessex Waste Management Limited (United Kingdom) WESI Baltimore Inc. (Delaware) WESI Capital Inc. (Delaware) WESI Peabody Inc. (Delaware) WESI Peekskill Inc. (Delaware) WESI Westchester Inc. (Delaware) WESI Saugus Inc. (Delaware) WESI Westchester Inc. (Delaware) WES Medical Services of Florida Inc. (Delaware) WES Medical Services of North Carolina Inc. (Delaware) WES Medical Services of Ohio Inc. (Delaware) WES Medical Services of Texas Inc. (Delaware) WES Medical Services of Wisconsin Inc. (Delaware) Westates Carbon-Arizona, Inc. (Arizona) Western Compliance Services, Inc. (Oregon) Wheelabrator Air Pollution Control Inc. (Delaware) Wheelabrator Albion Inc. (Delaware) Wheelabrator Albion Power Inc. (Delaware) Wheelabrator Baltimore Inc. (Delaware) Wheelabrator-Berger (Maschinenfabriken) GmbH (West Germany) 28 Wheelabrator-Berger Stiftung GmbH (West Germany) Wheelabrator Bridgeport Inc. (Delaware) Wheelabrator Broward Inc. (Delaware) Wheelabrator Canada Inc. (Ontario) Wheelabrator Cedar Creek Inc. (Delaware) Wheelabrator Clean Air Holdings Inc. (Delaware) Wheelabrator Clean Air Systems Inc. (Illinois) Wheelabrator Cleanfuel Corporation (Delaware) Wheelabrator Clean Water Holdings Inc. (Delaware) Wheelabrator Clean Water Systems Inc. (Maryland) Wheelabrator Coal Refinery Inc. (Delaware) Wheelabrator Coal Services Company (Delaware) Wheelabrator Cobb Inc. (Delaware) Wheelabrator Concord Inc. (Delaware) Wheelabrator Concord Operating Inc. (Delaware) Wheelabrator Connecticut Inc. (Delaware) Wheelabrator Culm Services Inc. (Delaware) Wheelabrator do Brasil Limitada (Brazil) Wheelabrator Energy Company Inc. (Delaware) Wheelabrator Energy Leasing Company (Delaware) Wheelabrator Energy Systems Inc. (Delaware) Wheelabrator Engineered Systems Inc. (Delaware) Wheelabrator Environmental Systems Inc. (Delaware) Wheelabrator Environmental Systems of New York, Inc. (Delaware) Wheelabrator EOS Canada Inc. (Ontario) Wheelabrator EOS Inc. (Delaware) Wheelabrator EOS Puerto Rico Inc. (Delaware) Wheelabrator Epping Inc. (Delaware) Wheelabrator Falls Inc. (Delaware) Wheelabrator Frackville Energy Company Inc. (Delaware) Wheelabrator Frackville Properties Inc. (Delaware) Wheelabrator Fuel Services Inc. (Delaware) Wheelabrator Fuels Service Corporation (Delaware) Wheelabrator Genesee Inc. (Delaware) Wheelabrator Gloucester Inc. (Delaware) Wheelabrator Hagerstown Inc. (Delaware) Wheelabrator HPD Inc. (Illinois) Wheelabrator Hudson Energy Company Inc. (Delaware) Wheelabrator Incineration, Inc. (Delaware) Wheelabrator Land Resources Inc. (Delaware) Wheelabrator McKay Bay Inc. (Florida) Wheelabrator Mecklenburg Inc. (Delaware) Wheelabrator Millbury Inc. (Delaware) Wheelabrator New Hampshire Inc. (Delaware) 29 Wheelabrator New Jersey Inc. (Delaware) Wheelabrator NHC Inc. (Delaware) Wheelabrator Northampton Energy Company Inc. (Delaware) Wheelabrator Northampton Inc. (Delaware) Wheelabrator Northampton Linerboard Company Inc. (Delaware) Wheelabrator North Broward Inc. (Delaware) Wheelabrator North Shore Inc. (Delaware) Wheelabrator Norwalk Energy Company Inc. (Delaware) Wheelabrator Peekskill Inc. (Delaware) Wheelabrator Penacook Inc. (Delaware) Wheelabrator Pinellas Inc. (Delaware) Wheelabrator Plant Services Inc. (Delaware) Wheelabrator Polk Inc. (Delaware) Wheelabrator Pottstown Inc. (Delaware) Wheelabrator Putnam Inc. (Delaware) Wheelabrator Ridge Energy Inc. (Delaware) Wheelabrator-Rust Maintenance Services, Inc. (Delaware) Wheelabrator San Diego Inc. (Delaware) Wheelabrator Saugus Inc. (Delaware) Wheelabrator Shasta Energy Company Inc. (Delaware) Wheelabrator Sherman Station One Inc. (Delaware) Wheelabrator Sherman Station Two Inc. (Delaware Wheelabrator Shrewsbury Inc. (Delaware) Wheelabrator South Broward Inc. (Delaware) Wheelabrator Spokane Inc. (Delaware) Wheelabrator Technologies Germany Holding GmbH (Germany) Wheelabrator Technologies Inc. (Delaware) Wheelabrator Technologies International Limited (United Kingdom) Wheelabrator Technologies (UK) Limited (United Kingdom) Wheelabrator Tidewater Inc. (Delaware) Wheelabrator Trucking Corporation (Delaware) Wheelabrator Utility Services Inc. (Delaware) Williams Disposal Service, Inc. (Florida) Winnipeg Waste Disposal Limited Partnership (Manitoba) WMD Boeckmann Ohlig (Germany) WMD Fuchs GmbH (Germany) WMD Knoess & Anthes GmbH (Germany) WMD Milojoservice A/S (Denmark) WMD Schreiber GmbH (Germany) WMD Waste Management Deutschland Holding GmbH (Germany) WMMMM Ekopalvelu OY (Finland) WMI Medical Services of Arizona, Inc. (Delaware) WMI Medical Services of California, Inc. (Delaware) WMI Medical Services of Florida, Inc. (Delaware) 30 WMI Medical Services of Indiana, Inc. (Indiana) WMI Medical Services of the Midwest, Inc. (Delaware) WMI Medical Services of Wisconsin WMI Medical Waste Services of Illinois WMI Medical Services of New England, Inc. (Delaware) WMI Medical Services of Ohio, Inc. (Ohio) WMI Medical Services - Dayton WMI Medical Services - Toledo WMI Medical Services - Youngstown WMI Medical Services of the South, Inc. (Delaware) WMI Medical Services of Texas, Inc. (Delaware) WMI Medical Waste Services of North Carolina, Inc. (North Carolina) WMI Mexico Holdings, Inc. (Delaware) WMI Ohio Acquisition Sub, Inc. (Delaware) WMI Properties, Inc. (Pennsylvania) Warner Company Slag Operation WMI Quebec Inc. (Quebec) WMI Sellbergs AB (Sweden) WMI Services of Nevada, Inc. (Nevada) WMI Urban Services, Inc. (Delaware) WMI Waste Management of Canada Inc. (Canada) TCL Waste Systems Waste Management Big Bear Services Waste Management Essex/Kent Waste Management Fraser Valley Waste Management Halton/Hamilton Waste Management Materials Processing - Recycle Canada Waste Management Materials Processing - Toronto Transfer Waste Management McLellan Disposal Waste Management of Oxford/Perth Waste Management of Calgary Waste Management of Edmonton Waste Management of Greater Toronto Waste Management of Greater Vancouver Waste Management of Southwestern Ontario Waste Management of the Okanagan Waste Management York/Simcoe West Edmonton Recycling and Disposal Facility WMI du Quebec WMI - Hull/Ottawa WMI Recyclage - Quebec WMI Services - Ontario WMI Services - Quebec WM Jatchuolto OY (Finland) 31 WM Kiinteistojen Jatepoisto OY (Finland) WMNA Container Recycling, Inc. (Delaware) WMNA Rail-Cycle Sub, Inc. (Delaware) WM Paper Recycling, Inc. (Delaware) WM Partnership Holdings, Inc. (Delaware) WM Portugal (Gestao De Residuos) LDA (Portugal) WM Reipas OY (Finland) WM Umwelttechnik Gmbh (Germany) WMX Environmental Monitoring Laboratories, Inc. (Delaware) WMX of Alabama, Inc. (Delaware) WTI International Holdings Inc. (Delaware) WTI Jinyuan Limited Inc. (Delaware) WTI Jinyuan Power Inc. (Delaware) WTI Pingliang Limited Inc. (Delaware) WTI Pingliang Power Inc. (Delaware) WTI Rust Holdings Inc. (Delaware) Wuper Recycling Container-Dienst GmbH (Germany) Y & S Maintenance, Inc. (Pennsylvania) Ymparistoykkoset OY (Finland) 32 EX-23 9 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included or incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (registration nos. 33-7201, 33-17447, 33-26733, 33-35936, 33-63702, 33-64266, 33-62285, 33- 64427, 33-64431 and 333-01325), previously filed Registration Statement on Form S-3 (registration no. 33-60109) and previously filed Registration Statement on Form S-4 (registration no. 33-56891). /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Chicago, Illinois March 29, 1996 EX-27 10 CONSOLIDATED FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the December 31, 1995 consolidated balance sheet and the consolidated statement of income for the twelve-month period ended December 31, 1995 and is qualified in its entirety by reference to such financial statements and the footnotes thereto. 1,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 189,031 36,243 1,947,774 66,840 0 3,021,049 13,734,642 3,968,943 18,695,308 3,421,105 6,420,610 498,817 0 0 4,443,522 18,695,308 0 10,247,617 0 7,497,745 0 39,930 424,736 1,171,633 517,043 654,590 (50,691) 0 0 603,899 1.24 0.00
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