-----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, N3ZfZ4fAXeIWYD89cGOBhNWrc67wDI79WdQ6eVcbQkdnnFgFdS8XhqPXqm/cNoym 9SELSL+s95orSxTeRecJIw== 0000950131-97-002191.txt : 19970329 0000950131-97-002191.hdr.sgml : 19970329 ACCESSION NUMBER: 0000950131-97-002191 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 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: 97567878 BUSINESS ADDRESS: STREET 1: 3003 BUTTERFIELD RD CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 6305728800 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, 1996 [_] 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 INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 3003 BUTTERFIELD ROAD, OAK BROOK, ILLINOIS 60521 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 572-8800 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED COMMON STOCK,$1.00 PAR NEW YORK STOCK EXCHANGE ZURICH STOCK EXCHANGE VALUE CHICAGO STOCK EXCHANGE GENEVA STOCK EXCHANGE LONDON STOCK EXCHANGE BASLE STOCK EXCHANGE FRANKFURT STOCK EXCHANGE LIQUID YIELD OPTION NOTES DUE 2001 NEW YORK STOCK EXCHANGE 8 3/4% DEBENTURES DUE 2018 NEW YORK STOCK EXCHANGE NEW YORK STOCK EXCHANGE LIQUID YIELD OPTION NOTES DUE 2012 CHEMICAL WASTE MANAGEMENT, INC. LIQUID YIELD OPTION NOTES DUE 2010 NEW YORK STOCK EXCHANGE CONVERTIBLE SUBORDINATED NOTES DUE NEW YORK STOCK EXCHANGE 2005 SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY $17,286,000,000 AT FEBRUARY 3, 1997 (BASED ON THE CLOSING SALE PRICE ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1997, AS REPORTED BY THE WALL STREET JOURNAL (MIDWEST EDITION)). AT MARCH 19, 1997, THE REGISTRANT HAD ISSUED AND OUTSTANDING AN AGGREGATE OF 483,911,069 SHARES OF ITS COMMON STOCK OF RECORD (EXCLUDING 10,886,361 SHARES HELD IN THE WMX TECHNOLOGIES, INC. EMPLOYEE STOCK BENEFIT TRUST). DOCUMENTS INCORPORATED BY REFERENCE THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S 1996 ANNUAL REPORT TO STOCKHOLDERS AND OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 9, 1997 DESCRIBED IN PARTS II, III AND IV HEREOF ARE INCORPORATED BY REFERENCE IN THIS REPORT. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. GENERAL WMX Technologies, Inc. is a leading international provider of waste management services. Unless the context indicates to the contrary, as used in this report the terms "Company" and "WMX Technologies" refer to WMX Technologies, Inc. and its subsidiaries. The Company provides integrated solid waste management services in North America through Waste Management, Inc., a wholly owned subsidiary of the Company (referred to herein, together with its subsidiaries and certain affiliated companies providing waste management and related services, as "Waste Management"). The Company's solid waste management services are provided to commercial, industrial, municipal and residential customers, as well as to other waste management companies and consist of solid waste collection, transfer, resource recovery and disposal services. As part of these services, the Company is engaged in providing, through its Recycle America(R), Recycle Canada(R) and other programs, paper, glass, plastic and metal recycling services to commercial and industrial operations and curbside collection of such materials from residences and in removing methane gas from sanitary landfill facilities for use in electricity generation. In addition, through Waste Management the Company provides Port-O-Let(R) portable sanitation services to municipalities and commercial and special event customers. Waste Management also manages the on-site industrial cleaning services businesses owned by the Company's Rust International Inc. subsidiary. The Company also provides hazardous waste management services. The Company's chemical waste treatment, storage, disposal and related services in North America are provided through Waste Management and Chemical Waste Management, Inc., a wholly owned subsidiary of the Company (referred to herein, together with its subsidiaries, as "CWM"), and are provided to commercial and industrial customers, as well as to other waste management companies and to governmental entities. Through Advanced Environmental Technical Services, L.L.C., a 60%-owned subsidiary of the Company (referred to herein, together with its subsidiaries as "AETS"), the Company provides on-site integrated hazardous waste management services, including hazardous waste identification, packaging, removal and recycling services to industrial, institutional and governmental customers. Through its wholly owned Chem-Nuclear Systems, L.L.C. subsidiary (referred to herein, together with its subsidiaries, as "Chem- Nuclear"), the Company also furnishes radioactive waste management services, primarily to electric utilities and governmental entities. The Company provides comprehensive waste management and related services outside North America through Waste Management International plc, a subsidiary owned approximately 56% by the Company and 12% each by the Company's Rust International Inc. and Wheelabrator Technologies Inc. subsidiaries (referred to herein, together with its subsidiaries, as "Waste Management International"). Waste Management International provides a wide range of solid and hazardous waste management and related services (or has interests in projects or companies providing such services) in ten countries in Europe, seven countries in the Asia-Pacific region and Argentina, Brazil, and Israel. Until February 1997, when the interest was sold, Waste Management International also had an approximately 20% interest in Wessex Water Plc, an English publicly traded company providing water treatment, water distribution, wastewater treatment and sewage services ("Wessex"). Wheelabrator Technologies Inc., an approximately 65%-owned subsidiary of the Company (referred to herein, together with its subsidiaries, as "WTI"), is a leading developer of facilities and systems for, and provider of services to, the trash-to-energy and waste fuel powered independent power markets. WTI develops, arranges financing for, operates and owns facilities that dispose of trash and other waste materials in an environmentally acceptable manner by recycling them into 2 electrical or steam energy. WTI is also pursuing the development, ownership and operation of power plants for industrial customers. In addition, WTI is involved in the treatment and management of biosolids resulting from the treatment of wastewater by converting them into useful fertilizers and the recycling of organic wastes into compost material useable for horticultural and agricultural purposes. WTI also designs, fabricates and installs technologically advanced air pollution control systems and equipment. In 1996, WTI sold its water process, manufacturing and custom engineering business and is in the process of selling its water contract operations, outsourcing and privatization business. See "Acquisitions and Dispositions" herein. Rust International Inc., a subsidiary owned approximately 60% by the Company and 40% by WTI (referred to herein, together with its subsidiaries, as "Rust"), provides a variety of on-site industrial cleaning services, a business which is managed by Waste Management, and provides hazardous, radioactive and mixed waste program and facilities management services, primarily to the United States Department of Energy and other federal government agencies. Such services include waste treatment, storage, characterization and disposal and privatization services. Rust also has an approximately 41% interest in NSC Corporation, a publicly traded provider of asbestos abatement and other specialty contracting services ("NSC"), and an approximately 37% interest in OHM Corporation, a publicly traded provider of environmental remediation services ("OHM"). Rust also provides environmental and infrastructure engineering and consulting services, a business which is to be sold or otherwise disposed of. In 1996, Rust sold its process engineering, construction, specialty contracting and related services business and its scaffolding rental and erection business. See "Acquisitions and Dispositions" herein. The Company also owns an approximately 20% interest in ServiceMaster Limited Partnership, a provider of management services, including management of health care, education and commercial facilities, and lawn care, pest control and other consumer services ("ServiceMaster"). The Company has agreed to sell its interest to ServiceMaster. See "Acquisitions and Dispositions" herein. The Company's strategic plans call for the Company to focus on the provision of waste management services and to sell or discontinue various businesses which do not fit within that focus. The Company has therefore reported its continuing operations as being within a single industry segment--waste management services. The Company's continuing consolidated revenues were approximately $8.5 billion in 1994, $9.1 billion in 1995 and $9.2 billion in 1996. For information relating to the expenses and assets of the Company's operations, see the Company's Consolidated Financial Statements filed as an exhibit to this report and incorporated by reference herein and for information relating to the Company's operations in different geographic groups, see Note 13 thereto. For interim periods, the revenues and net income of certain of the Company's operations may fluctuate for a number of reasons, including there being for some businesses less activity during the winter months. Regulatory or technological developments relating to the environment may require companies engaged in waste management services and related businesses, including the Company, to modify, supplement or replace equipment and facilities at costs which may be substantial. Because the continuing business in which the Company is engaged is intrinsically connected with the protection of the environment and the potential discharge of materials into the environment, a material portion of the Company's capital expenditures is, directly or indirectly, related to such items. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" set forth on pages 8 to 15 of the Company's 1996 Annual Report to Stockholders (which discussion is filed as an exhibit to this report and incorporated by reference herein) for a review of property and equipment expenditures by the Company for the last three years. The Company does not expect such expenditures, which are incurred in the ordinary course of business, to have a materially adverse impact on its and its subsidiaries' combined earnings or its subsidiaries' competitive position in the foreseeable future because the Company's businesses are based upon compliance with environmental laws and regulations and its services are priced accordingly. 3 Although the Company strives to conduct its operations in compliance with applicable laws and regulations, the Company believes that in the existing climate of heightened legal, political and citizen awareness and concerns, companies in the waste management services industry, including the Company, will be faced, in the normal course of operating their businesses, with fines and penalties and the need to expend funds for remedial work and related activities with respect to waste treatment, disposal and trash-to-energy facilities. Where the Company concludes that it is probable that a liability has been incurred, a provision is made in the Company's financial statements for the Company's best estimate of the liability based on management's judgment and experience, information available from regulatory agencies and the number, financial resources and relative degree of responsibility of other potentially responsible parties who are jointly and severally liable for remediation of a specific site, as well as the typical allocation of costs among such parties. If a range of possible outcomes is estimated and no amount within the range appears to be a better estimate than any other, then the Company provides for the minimum amount within the range, in accordance with generally accepted accounting principles. Such estimates are subsequently revised, as necessary, as additional information becomes available. While the Company does not anticipate that the amount of any such revision will have a material adverse effect on the Company's operations or financial condition, the measurement of environmental liabilities is inherently difficult and the possibility remains that technological, regulatory or enforcement developments, the results of environmental studies, or other factors could materially alter this expectation at any time. Such matters could have a material adverse impact on earnings for one or more fiscal quarters or years. While in general the Company's business has benefited from increased governmental regulation, the business itself is subject to extensive and evolving regulation by federal, state, local and foreign authorities. Due to the complexity of regulation of the industry and to public pressure, implementation of existing and future laws, regulations or initiatives by different levels of government may be inconsistent and difficult to foresee. In addition, the demand for certain of the Company's services may be adversely affected by the amendment or repeal, or reduction in enforcement of, federal, state and foreign laws and regulations on which the Company's business is dependent. Demand for certain of the Company's services may also be adversely affected by delays or reductions in funding, or failure of legislative bodies to fund, agencies or programs under such laws and regulations. The Company makes a continuing effort to anticipate regulatory, political and legal developments that might affect its operations but is not always able to do so. The Company cannot predict the extent to which any legislation or regulation that may be enacted, amended, repealed or enforced, or any failure or delay in enactment or enforcement of legislation or regulations or funding of agencies or programs, in the future may affect its operations. The Company was incorporated in Delaware in 1968 and subsequently succeeded to certain businesses owned by its organizers and others. The Company's common stock is listed on the New York Stock Exchange under the trading symbol "WMX" and is also listed on the Frankfurt Stock Exchange, the London Stock Exchange, the Chicago Stock Exchange and the Swiss Stock Exchanges in Basle, Zurich and Geneva. Unless the context indicates to the contrary, all statistical and financial information under Item 1 and Item 2 of this report is given as of December 31, 1996. Also, unless the context indicates to the contrary, statistical and financial data appearing under the caption "North American Solid and Hazardous Waste Management Services" relate only to the Company's Waste Management, CWM, AETS and Chem-Nuclear groups of subsidiaries and do not include any data relating to Rust, Rust's on-site industrial cleaning services business managed by Waste Management, WTI or Waste Management International. See "International Waste Management and Related Services" and "Trash-to-Energy and Related Services." 4 NORTH AMERICAN SOLID AND HAZARDOUS WASTE MANAGEMENT SERVICES The Company's North American solid waste management and recycling services include residential, commercial and industrial collection, transfer and disposal services and related services provided by Waste Management. The Company's North American hazardous waste management services include chemical waste treatment, storage, disposal and related services provided by Waste Management and CWM, on-site integrated hazardous waste management services provided by AETS and low-level radioactive waste disposal services provided by Chem-Nuclear. For each of the three years in the period ended December 31, 1996, the North American solid and hazardous waste revenue amounted to 67.3%, 68.6% and 69.5% respectively, of the Company's total revenues. For each of the three years in the period ended December 31, 1996, the following table shows the percentages of the Company's total North American solid and hazardous waste services revenue (excluding on-site industrial cleaning services revenue) arising from the Company's principal solid and hazardous waste services:
YEAR ENDED DECEMBER 31 ------------------------- 1994 1995 1996 ------- ------- ------- Solid Waste and Recycling Collection Services: Residential............. 20.0% 19.6% 20.0% Commercial.............. 26.7 26.4 26.2 Roll-off and Industrial. 21.8 21.5 21.5 Solid Waste Disposal, Transfer and Related Services................. 21.2 23.4 24.1 Hazardous Waste Services.. 10.3 9.1 8.2 ------- ------- ------- 100.0% 100.0% 100.0% ======= ======= =======
SOLID WASTE MANAGEMENT, RECYCLING AND RELATED SERVICES At December 31, 1996, Waste Management conducted solid waste management, recycling and related services operations in 47 states, the District of Columbia, four Canadian provinces and Mexico. During 1994, 1995 and 1996, operations in California, Florida and Pennsylvania together accounted for approximately 30%, 28% and 26%, respectively, of North America solid waste revenue. No customer accounted for as much as 1% of such revenue in 1994, 1995 or 1996. COLLECTION Waste Management provides solid waste collection services to approximately 1.1 million commercial and industrial customers. Collection services are also provided to approximately 11.8 million homes and apartment units. These services include collection of recyclable commodities. See "Recycling and Energy Recovery--Recycling" for a description of recycling services. Commercial and Industrial Many of Waste Management's commercial and industrial customers utilize containers to store solid waste, including "roll-offs," which are large containers dropped off at construction or other sites for the deposit of waste and then hoisted when full onto a truck for transport. These containers, ranging from 1 to 45 cubic yards in size, are usually provided to the customer as part of Waste Management's services. Stationary compactors, which compact the volume of the stored waste prior to collection, are frequently installed on the premises of large volume customers and are usually provided to these customers in conjunction with Waste Management's collection services. Containerization enables Waste Management to service most of its commercial and industrial customers with collection vehicles operated by a single employee. Compaction serves to decrease the frequency of collection. 5 Commercial and industrial collection services (which include containerized service to apartment buildings) are generally performed under one- to three- year service agreements. Fees are determined by such considerations as market factors, collection frequency, type of equipment furnished, length of service agreement, type and volume or weight of the waste collected, distance to the disposal facility and cost of disposal. Residential Most of Waste Management's residential solid waste collection services are performed under contracts with, or franchises granted by, municipalities giving Waste Management exclusive rights to service all or a portion of the homes in their respective jurisdictions. Such contracts or franchises usually range in duration from one to five years. The fees received by Waste Management are based primarily on market factors, frequency and type of service, the distance to processing or disposal facilities and cost of processing or disposal. Residential collection fees are either paid by the municipalities out of tax revenues or service charges or are paid directly by the residents receiving the service. TRANSFER Waste Management operates 159 solid waste transfer stations. A transfer station is a facility where solid waste is received from collection vehicles and then transferred to, and in some cases compacted in, large, specially constructed trailers for transportation to disposal or resource recovery facilities. This procedure reduces costs by improving utilization of collection personnel and equipment and improving the efficiency of transporting waste to final disposal facilities. The services of these facilities are provided to municipalities or counties and in most instances are also used by Waste Management and by other collection companies. Fees are generally based upon such considerations as competition, the type and volume or weight of the waste transferred, the extent of processing of recyclable materials, the transport distance involved and the cost of disposal. RECYCLING AND ENERGY RECOVERY Recycling Waste Management provides recycling services in the United States and Canada through its Recycle America(R), Recycle Canada(R) and other programs. Recycling involves the removal of reusable materials from the waste stream for processing and sale or other disposition for use in various applications. Participating commercial and industrial operations use containers to separate recyclable paper, glass, plastic and metal wastes for collection, processing and sale by Waste Management. Fees are determined by such considerations as competition, frequency of collection, type and volume or weight of the recyclable material, degree of processing required, distance the recyclable material must be transported and value of the recyclable material. As part of its residential solid waste collection services, Waste Management engages in curbside collection of recyclable materials from residences in the United States and Canada, also through its Recycle America(R), Recycle Canada(R) and other programs. Curbside recycling services generally involve the collection of recyclable paper, glass, plastic and metal waste materials, which may be separated by residents into different waste containers or commingled with other recyclable materials. The recyclable materials are then typically deposited at a local materials recovery facility where they are sorted and processed for resale. The prices received by the Company for recyclable materials fluctuate substantially from quarter to quarter and year to year depending upon domestic and foreign demand for such materials, the 6 quality of such materials, prices for new materials and other factors. In some instances, the Company enters into agreements with customers or the local governments of municipalities in which it provides recycling services whereby the customers or the governments share in the gains and losses resulting from fluctuation in prices of recyclable commodities. These agreements mitigate both the Company's gains and losses from such fluctuations. In 1996, Waste Management provided curbside recycling services to approximately 7.9 million households in the United States and Canada. Waste Management has approximately 197,000 commercial and industrial recycling services customers. Waste Management operates 140 materials recovery facilities for the receipt and processing of recyclable materials. Such processing consists of separating recyclable materials according to type and baling or otherwise preparing the separated materials for sale. Waste Management also participates in joint ventures with Stone Container Corporation and American National Can Corporation to engage, respectively, in the businesses of marketing paper fibre and aluminum, steel, and glass containers for recycling. In each case Waste Management sells to the joint venture, or has the joint venture market, the paper fibre or containers collected by Waste Management to Stone Container, American National Can or other parties who will process them for reuse. The joint venture with American National Can also owns and operates four glass processing facilities. During 1996, the Stone Container joint venture marketed approximately 4.9 million tons of paper fiber and the American National Can joint venture processed approximately 400,000 tons of other recyclable materials. Waste Management also provides tire and demolition and construction debris recycling services. Energy Recovery At 37 Waste Management-owned or -operated sanitary landfill facilities, Waste Management is engaged in methane gas recovery operations. These operations involve the installation of a gas collection system into a sanitary landfill facility. Through the gas collection system, gas generated by decomposing solid waste is collected and transported to a gas-processing facility at the landfill site. Through physical processes methane gas is separated from contaminants. The processed methane gas generally is then either sold directly to industrial users or to an affiliate of the Company which uses it as a fuel to power electricity generators. Electricity generated by these facilities is sold, usually to public utilities under long-term sales contracts, often under terms or conditions which are subject to approval by regulatory authorities. The Company also engages in other resource recovery activities through WTI's trash-to-energy and related operations and Waste Management International's operations. See " Trash-to-Energy and Related Services" and "International Waste Management and Related Services." DISPOSAL Waste Management operates 133 solid waste sanitary landfill facilities. Of this number, 105 are owned by Waste Management and the remainder are leased from, or operated under contract with, others. Additional facilities are in various stages of development. Waste Management also provides yard-waste composting services, bioremediation of petroleum-contaminated soils and solidification of difficult-to-treat liquid wastes at a number of its disposal facilities. All of the sanitary landfill facilities are subject to governmental regulation. See "Regulation--Waste Management Services--Solid Waste." A sanitary landfill site must have geological and hydrological properties and design features which limit the possibility of water pollution, directly or by leaching. Sanitary landfill operations, which include carefully planned excavation, continuous spreading and compacting of solid waste and covering 7 of the waste, are designed to maintain sanitary conditions, insure optimum utilization of the airspace and prepare the site for ultimate use for other purposes. Suitable sanitary landfill facilities and permission to expand existing facilities may be difficult to obtain in some areas because of land scarcity, local resident opposition and governmental regulation. As its existing facilities become filled in such areas, the solid waste disposal operations of Waste Management are and will continue to be materially dependent on its ability to purchase, lease or obtain operating rights for additional sites or expansion of existing sites and to obtain the necessary permits from regulatory authorities to construct and operate them. In addition, there can be no assurance that additional sites can be obtained or that existing facilities can continue to be expanded or operated. However, management believes that the facilities currently available to Waste Management are sufficient to meet the needs of its operations in most areas for the foreseeable future. To develop a new facility, Waste Management must expend significant time and capital resources without any certainty that the necessary permits will ultimately be issued for such facility or that the Company will be able to achieve and maintain the desired disposal volume at such facility. If the inability to obtain and retain necessary permits, the failure of a facility to achieve the desired disposal volume or other factors cause Waste Management to terminate development efforts for a facility, the capitalized development expenses of the facility may need to be written off. In varying degrees, Waste Management utilizes its own sanitary landfill facilities to accommodate its disposal requirements for collection and transfer operations. In 1994, 1995 and 1996 approximately 55%, 57% and 60%, respectively, of the solid waste collected by Waste Management was disposed of in sanitary landfill facilities operated by it. Usually these facilities are also used by other companies and government agencies on a noncontract basis for fees determined by such considerations as competition and the type and volume or weight of the waste. RELATED SERVICES Waste Management also provides or manages several types of services which are compatible with its solid waste collection operations. Included in these operations are on-site industrial cleaning services and portable sanitation services. Waste Management manages the business of Rust Industrial Services Inc., a subsidiary of Rust ("RIS"), providing on-site industrial services. RIS performs a variety of types of industrial services --water blasting, tank cleaning, explosives blasting, chemical cleaning, industrial vacuuming, catalyst handling and separation technologies--primarily for clients in the petrochemical, chemical, and pulp and paper industries, utilities and, to a lesser extent, the public sector. RIS also assists clients in the nuclear and utility industries in solving electrical, mechanical, engineering and related technical services problems. Prior to selling the businesses in 1996 and early 1997, RIS also provided scaffolding rental and erection services primarily to the chemical, petrochemical and utilities industries and a variety of other on-site services. Rust also provides hazardous, radioactive and mixed waste program and facilities management services, primarily to the United States Department of Energy and other federal government agencies. Such services include waste treatment, storage, characterization and disposal and privatization services. Waste Management also provides portable sanitation services to municipalities and commercial customers. The portable sanitation services, which are marketed under the Port-O-Let(R) trade name, are also used at numerous special events and public gatherings. 8 HAZARDOUS WASTE MANAGEMENT AND RELATED SERVICES CHEMICAL WASTE MANAGEMENT SERVICES The Company operates chemical waste treatment, storage and disposal facilities in 16 states and also owns a majority interest in a subsidiary which operates a resource recovery and storage facility and a disposal facility in Mexico. The chemical wastes handled by the Company include industrial by-products and residues that have been identified as "hazardous" pursuant to the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), as well as other materials contaminated with a wide variety of chemical substances. Chemical waste may be collected from customers and transported by Waste Management or CWM or contractors retained by them or delivered by customers to their facilities. Chemical waste is transported primarily in specially constructed tankers and semi-trailers, including stainless steel and rubber or epoxy-lined tankers and vacuum trucks, or in containers or drums on trailers designed to comply with applicable regulations and specifications of the U.S. Department of Transportation ("DOT") relating to the transportation of hazardous materials. Waste Management and CWM also operate several facilities at which waste collected from or delivered by customers may be analyzed and consolidated prior to further shipment. All of the Company's seven United States secure land disposal facilities have been issued permits under RCRA. See "Regulation--RCRA." In general, the Company's secure land disposal facilities have received the necessary permits and approvals to accept chemical wastes, although some of such sites may accept only certain chemical wastes. Only chemical wastes in a stable, solid form which meet applicable regulatory requirements may be buried in the Company's secure disposal cells. These land disposal facilities are sited, constructed and operated in a manner designed to provide long-term containment of such waste. Chemical wastes may be treated prior to disposal. Physical treatment methods include distillation, evaporation and separation, all of which basically result in the separation or removal of solid materials from liquids. Chemical treatment methods include chemical oxidation and reduction, chemical precipitation of heavy metals, hydrolysis and neutralization of acid and alkaline wastes and essentially involve the transformation of wastes into inert materials through one or more chemical reaction processes. At two of its locations, the Company isolates treated chemical wastes in liquid form by injection into deep wells. Deep well technology involves drilling wells in suitable rock formations far below the base of fresh water and separated from it by other substantial geological confining layers. AETS provides on-site integrated hazardous waste management services, including hazardous waste identification, packaging, removal and recycling services in North America. These services include on-site hazardous waste data management, education and training, inventory control and other administrative services, lab pack services, drum identification services, household hazardous waste programs, less-than-full load waste pickup and consolidation services, and related services. AETS provides these services primarily to industrial, institutional and public sector customers, including laboratories. In the United States, most chemical wastes generated by industrial processes are handled "on-site" at the generators' facilities. Since the mid-1970's, public awareness of the harmful effects of unregulated disposal of chemical wastes on the environment and health has led to extensive and evolving federal, state and local regulation of chemical waste management activities. The major federal statutes regulating the management of chemical wastes include RCRA, the Toxic Substances Control Act ("TSCA") and the Comprehensive Environmental Response, Compensation and Liabilities Act of 1980, as amended ("CERCLA" or "Superfund"), all primarily administered by the United States Environmental Protection Agency ("EPA"). The business is heavily dependent upon the extent to which regulations promulgated under these or similar state statutes and their enforcement over time 9 effectively require wastes to be specially handled or managed and disposed of in facilities of the type owned and operated by the Company. See "Regulation-- Waste Management Services--Hazardous Waste," "--RCRA" and "--Superfund." The chemical waste services industry currently has substantial excess capacity caused by a number of factors, including a decline in environmental remediation projects generating hazardous waste for off-site treatment and disposal, continuing efforts by hazardous waste generators to reduce volume and to manage the wastes on-site, and the uncertain regulatory environment regarding hazardous waste management and remediation requirements. These factors have led to reduced demand and increased pressure on pricing for chemical waste management services, conditions which the Company expects to continue for the foreseeable future. LOW-LEVEL AND OTHER RADIOACTIVE WASTE SERVICES Radioactive wastes with varying degrees of radioactivity are generated by nuclear reactors and by medical, industrial, research and governmental users of radioactive material. Radioactive wastes are generally classified as either high-level or low-level. High-level radioactive waste, such as spent nuclear fuel and waste generated during the reprocessing of spent fuel from nuclear reactors, contains substantial quantities of long-lived radionuclides and is the ultimate responsibility of the federal government. Low-level radioactive waste, which decays more quickly than high-level waste, largely consists of dry compressible wastes (such as contaminated gloves, paper, tools and clothing), resins and filters which have removed radioactive contaminants from nuclear reactor cooling water, solidified wastes from power plants which have become contaminated with radioactive substances and irradiated hardware. Chem-Nuclear provides comprehensive low-level radioactive waste management services in the United States consisting of disposal, processing and various other special services. To a lesser extent, it provides services with respect to radioactive waste that has become mixed with regulated chemical waste. Chem-Nuclear's radioactive disposal operations involve low-level radioactive waste only. Its Barnwell, South Carolina facility is one of three licensed commercial low-level radioactive waste disposal facilities in the United States and has been in operation since 1971. A trust has been established and funded to pay the estimated cost of decommissioning the Barnwell facility. A second fund, for the extended care of the facility, is funded by a surcharge on each cubic foot of waste received. Chem-Nuclear may be liable for additional costs if the extra charges collected to restore and maintain the facility are insufficient to cover the cost of restoring or maintaining the site after its closure (which Chem-Nuclear has no reason to expect). Under state legislation enacted in 1995, the Barnwell, South Carolina facility is authorized to operate until its current permitted disposal capacity is fully utilized, unless such authorization is changed by legislation. Chem-Nuclear also processes low-level radioactive waste at its customers' plants to enable such waste to be shipped in dry rather than liquid form to meet the requirements for receipt at disposal facilities and to reduce the volume of waste that must be transported. Processing operations include solidification, demineralization, dewatering and filtration. Other services offered by Chem-Nuclear include providing electro-chemical, abrasive and chemical removal of radioactive contamination, providing management services for spent nuclear fuel storage pools and storing and incinerating liquid radioactive organic wastes. INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES The Company is a leading provider of waste management and related services internationally, primarily through Waste Management International, which conducts essentially all of the waste management operations of the Company located outside North America. International waste management and related services comprised approximately 20.2%, 20.6% and 20.8% of the Company's 10 total revenue in each of the three years ended December 31, 1996. Waste Management International's business may broadly be characterized into two areas of activity, collection services and treatment and disposal services. The following table shows the derivation of Waste Management International's revenue for the years indicated and includes revenue from construction of treatment or disposal facilities for third parties under "Treatment and Disposal Services":
YEAR ENDED DECEMBER 31 --------------------------- 1994 1995 1996 ------- ------- ------- Collection Services............................... 64% 64% 65% Treatment and Disposal Services................... 36% 36% 35%
While the Company has had international operations since the mid-1970's, the bulk of the Company's international operations and revenues are derived from the acquisition from 1990 to 1995 of numerous companies and interests in Europe. However, with its acquisition goals largely completed, Waste Management International has engaged in only a few additional small acquisitions since 1995 and has begun to dispose of certain operations which do not fit its long- term strategy. In accordance with its objective of maintaining a local identity, Waste Management International, in certain cases, operates through companies or joint ventures in which Waste Management International and its affiliates own less than a 100% interest. For example, Waste Management International is a party to a joint venture with Wessex to provide waste management and related services in the United Kingdom. Waste Management International's revenue mix by country varies from year to year. Countries in which revenue exceeded 10% of Waste Management International's consolidated total were: Italy (26%) and Germany (12%) in 1994, Italy (23%), Germany (14%), The Netherlands (11%) and the United Kingdom (11%) in 1995 and Italy (25%), the United Kingdom (12%), Germany (11%) and The Netherlands (11%) in 1996. While Waste Management International has considerable experience in mobilizing for and managing foreign projects, its operations continue to be subject generally to such risks as currency fluctuations and exchange controls, the need to recruit and retain suitable local labor forces and to control and coordinate operations in different jurisdictions, changes in foreign laws or governmental policies or attitudes concerning their enforcement, political changes, local economic conditions and international tensions. In addition, price adjustment provisions based on certain formulae or indices may not accurately reflect the actual impact of inflation on the cost of performance. Following a strategic assessment of the European market, Waste Management International intends to reduce its investment in France, Spain and Austria during 1997 through joint ventures or the sale of various operations within those countries. Waste Management International intends to focus its resources on those markets in which it believes it can attain significant market share. Waste Management International has also written off the investment in its hazardous waste disposal facility in Germany because recent regulatory changes have adversely affected its volumes. COLLECTION SERVICES Collection services include collection and transportation of solid, hazardous and medical wastes and recyclable material from residential, commercial and industrial customers. The residential solid waste collection process, as well as the commercial and industrial solid and hazardous waste collection process, is similar to that utilized by the Company in the United States. Waste Management International provided collection services as of December 31, 1996 to governmental and private customers in ten European countries, Argentina, Australia and New Zealand. Business is obtained through public bids or tenders, negotiated contracts, and, in the case of commercial and industrial 11 customers, direct contracts. Waste Management International operates 318 collection and staging facilities and 76 waste transfer facilities. Residential solid waste collection is normally performed by Waste Management International pursuant to municipal contracts. Waste Management International has approximately 1,420 municipal contracts, serving more than 6.3 million residential properties. The scope, specifications, services provided and duration of such contracts vary substantially, with some contracts encompassing landfill disposal of collected waste, street sweeping and other related municipal services. The largest number of municipal contracts held by Waste Management International is in Italy where Waste Management International services approximately 1.85 million residential properties. Pricing for municipal contracts is generally based on volume of waste, number and frequency of collection pick-ups, and disposal arrangements. Longer-term contracts typically have formulae for periodic price increases or adjustments. Waste Management International also provides curbside recycling services similar to those provided by Waste Management in North America. Street, industrial premises, office and parking lot cleaning services are also performed by Waste Management International, along with portable sanitation/toilet services for such occasions as outdoor concerts and special events. Waste Management International's commercial and industrial solid and hazardous waste collection services are generally contracted for by individual establishments. In addition to solid waste collection customers, Waste Management International provides services to small quantity waste generators, as well as larger petrochemical, pharmaceutical and other industrial customers, including collection of hazardous, chemical or medical wastes or residues. Waste Management International has approximately 300,000 commercial and industrial customers. Contract terms and prices vary substantially among jurisdictions and types of customer. Waste Management International also provides commercial and industrial recycling services. TREATMENT AND DISPOSAL SERVICES Treatment and disposal services include processing of recyclable materials, operation of both solid and hazardous waste landfills, operation of municipal and hazardous waste incinerators, operation of a trash-to-energy facility, operation of water and wastewater treatment facilities, operation of hazardous waste treatment facilities and construction of treatment or disposal facilities for third parties. Treatment and disposal services are provided under contracts which may be obtained through public bid or tender or direct negotiation, and are also provided directly to other waste service companies. At December 31, 1996, Waste Management International owned, operated or maintained 26 waste treatment facilities, 85 recycling and recyclables processing facilities, eight incinerators and 56 landfills. Once collected, solid wastes may be processed in a recyclables processing facility for sale or other disposition for use in various applications. Unprocessed solid wastes, or the portion of the waste stream remaining after recovery of recyclable materials, require disposal, which may be accomplished through incineration (in connection with which the energy value may be recovered in a trash-to-energy facility) or through disposal in a solid waste landfill. The relative use of landfills versus incinerators differs from country to country and will depend on many factors, including the availability of land, geological and hydrological conditions, the availability and cost of technology and capital, and the regulatory environment. The main determinants of the disposal method are the disposal costs at local landfills, as incineration is generally more expensive, community preferences and regulatory provisions. At present, in most countries in which Waste Management International operates, landfilling is the predominant disposal method employed. Waste Management International owns or operates solid waste landfills in Argentina, Australia, Brazil, Denmark, France, Germany, Hong Kong, Italy, 12 New Zealand, Spain, Sweden and the United Kingdom. Landfill disposal agreements may be separate contracts or an integrated portion of collection or treatment contracts. Demand for solid waste incineration is affected by landfill disposal costs and government regulations. The incineration process for non-hazardous solid waste has also been influenced by two significant factors in recent years: (i) increasingly strict control over air emissions from incinerators; and (ii) increasing emphasis on trash-to-energy incinerators, which utilize heat produced by incinerators to generate electricity and other energy. Incineration generates approximately 30% residue (by weight), which is either landfilled or, if permitted, recycled for use as a road base or in other construction uses. Waste Management International's trash-to-energy incinerator in Hamm is a German-designed plant and the only privately operated trash-to-energy facility in Germany. It is among the first trash-to-energy facilities to fully comply with that country's stringent air pollution requirements. The facility serves the household and commercial solid waste incineration needs of a population of approximately 600,000 in Hamm and nearby towns. Under its current permits, the facility is able to produce 18 megawatts per hour of steam-generated electricity and sold approximately 49,000 megawatt hours to the local power grid in 1996. In 1992, Waste Management International entered into a contract with the County of Gutersloh, Germany to design, construct, own and operate a trash-to- energy facility. The facility is designed to convert 268,000 metric tons per year of municipal waste and sewage sludge into energy. During 1995, Waste Management International's permit application to develop and operate the Gutersloh facility was denied. Waste Management International believes it is entitled to the permit and is appealing the denial. During 1996, Waste Management International and the County discussed the viability of the project, as well as the County's ability to terminate the operations and lease agreements for the project site, which Waste Management International opposes unless there is adequate compensation. Waste Management International also operates seven small conventional municipal solid and other waste incineration facilities. Waste Management International and WTI have also formed a joint venture to develop trash-to- energy projects outside Germany, Italy and North America. See "Competition" below. Waste Management International owns or operates hazardous waste treatment facilities in Finland, France, Germany, Hong Kong, Indonesia, Italy, The Netherlands, Spain, Sweden and the United Kingdom and has entered into agreements with respect to the development of hazardous waste treatment facilities in Argentina and Thailand. TRASH-TO-ENERGY AND RELATED SERVICES WTI, through its subsidiaries, is a leading developer, operator and owner of trash-to-energy and waste fuel powered independent power facilities in the United States. These facilities, either owned or operated, give WTI approximately 920 megawatts per hour of electric generating capacity. WTI's trash-to-energy projects utilize proven boiler and grate technology and are capable of processing up to 23,750 tons of trash per day. The heat from this combustion process is converted into high-pressure steam, which typically is used to generate electricity for sale to public utility companies under long- term contracts. WTI's trash-to-energy development activities have historically involved a number of contractual arrangements with a variety of private and public entities, including municipalities (which supply trash for combustion), utilities or other power users (which purchase the energy produced by the facility), lenders, public debtholders, joint venture partners and equity investors (which provide financing for the project) and the contractors or subcontractors responsible for building the facility. In addition, WTI's activities have often included identifying and acquiring sites for the facility and for the disposal 13 of residual ash produced by the facility and obtaining necessary permits and licenses from local, state and federal regulatory authorities. WTI also develops, operates and, in some cases, owns independent power projects, which either cogenerate electricity and thermal energy or generate electricity alone for sale to customers, including utilities and private industry. Cogeneration is a technology which allows the simultaneous production of two or more useful forms of energy from a single primary fuel source, thus providing a more efficient use of a fuel's total energy content. These power systems use waste wood, waste tires, waste coal or natural gas as fuel, and employ state-of-the-art technology, such as fluidized-bed combustion, to ensure the efficient burning of fuel with reduced emission levels. WTI acquired two industrial cogeneration plants (so-called "inside- the-fence" facilities) during the year as part of its strategy to leverage its energy plant operating capabilities and project financing expertise by owning or operating power plants for industrial customers. The first facility, located in Martell, California, was acquired in May 1996 and the second plant, located in Anderson, California near one of the Company's other facilities, was purchased in November 1996. In addition, WTI develops, operates and owns projects that compost organic wastes and treat and manage biosolids. WTI provides a range of biosolids management services, including land application, drying, pelletizing, alkaline stabilization and composting, to more than 400 communities, typically pursuant to multi-year contracts under which WTI is paid by the generator to make beneficial use of the biosolids. Land application involves the application of non-hazardous biosolids as a natural fertilizer on farmland pursuant to rigorous site-specific permits issued by applicable state authorities. Biosolids are also used in land reclamation projects such as strip mines. Regulations issued by the EPA in December 1992 under the Clean Water Act encourage the beneficial use of municipal sewage sludge by recognizing the resource value of biosolids as a fertilizer and soil conditioner, and establish requirements for land application designed to protect human health and the environment. WTI also develops and operates facilities at which biosolids are dried and pelletized and has three facilities currently in operation, with one other facility undergoing start-up activity. WTI has approximately 635 dry-tons-per- day of biosolids drying capacity either in operation or under construction. Biosolids which have been dried are generally used as fertilizer by farmers, commercial landscapers and nurseries and as a bulking agent by fertilizer manufacturers. WTI subsidiaries also design and install advanced air pollution control equipment and design, construct and maintain tall concrete chimneys and storage silos. WTI's expertise in air pollution control technologies and chimney design and construction is used in the design and construction of WTI's trash-to-energy facilities, which WTI believes strengthens its competitive position. REGULATION While, in general, the Company's waste management services business has benefited from increased governmental regulation, the industry in which the Company operates has become subject to extensive and evolving regulation by federal, state, local and foreign authorities. In particular, the regulatory process requires firms in the Company's industry to obtain and retain numerous governmental permits to conduct various aspects of their operations, any of which may be subject to revocation, modification or denial. As a result of governmental policies and attitudes relating to the industry, which are subject to reassessment and change, the Company believes that its ability to obtain applicable permits from governmental authorities on a timely basis, and to retain such permits, could be impaired. The Company is not in a position at the present time to assess the extent of the impact of such potential changes in governmental policies and attitudes on the permitting processes, but it could be significant. In particular, adverse decisions by governmental authorities on permit applications submitted by the Company may result in abandonment of projects, premature closure of 14 facilities or restriction of operations, which could result in a loss of earnings from a facility, a write-off of capitalized costs or both. Federal, state, local and foreign governments have also from time to time proposed or adopted other types of laws, regulations or initiatives with respect to the waste management services industry. Included among them are laws, regulations and initiatives to ban or restrict the international, interstate or intrastate shipment of wastes, impose higher taxes on out-of- state waste shipments than in-state shipments, reclassify certain categories of hazardous wastes as non-hazardous and regulate disposal facilities as public utilities. Certain state and local governments have promulgated "flow control" regulations, which attempt to require that all waste generated within the state or local jurisdiction must go to certain disposal sites. The United States Congress has from time to time considered legislation that would enable or facilitate such bans, restrictions, taxes and regulations. Due to the complexity of regulation of the industry and to public pressure, implementation of existing or future laws, regulations or initiatives by different levels of government may be inconsistent and is difficult to foresee. Many state and local governments have enacted mandatory or voluntary recycling laws and bans on the disposal of yard-waste in landfills. An effect of these and similar laws is to reduce the volume of wastes that would otherwise be disposed in landfills. In addition, municipalities and other governmental entities with whom the Company contracts to provide solid waste collection or disposal services, or both, may require the Company as a condition of securing the business to provide recycling services and operate recycling and composting facilities, which may cause the Company to incur substantial costs. The Company makes a continuing effort to anticipate regulatory, political and legal developments that might affect its operations but is not always able to do so. The Company cannot predict the extent to which any legislation or regulation that may be enacted, amended, repealed or enforced, or any failure or delay in enactment or enforcement of legislation or regulations or funding of government agencies or programs, in the future may affect its operations. Such matters could have a material adverse impact on the Company's earnings for one or more fiscal quarters or years. The demand for certain of the services provided by the Company, particularly its hazardous waste management services, is dependent in part on the existence and enforcement of federal, state and foreign laws and regulations which govern the discharge of hazardous substances into the environment and on the funding of agencies and programs under such laws and regulations. Such businesses will be adversely affected to the extent that such laws or regulations are amended or repealed, with the effect of reducing the regulation of, or liability for, such activity, that the enforcement of such laws and regulations is lessened or that funding of agencies and programs under such laws and regulations is delayed or reduced. In particular, the EPA continues to consider proposals under RCRA to redefine the term "hazardous waste" for regulatory purposes. Under some such proposals, wastes containing minimal concentrations of hazardous substances would no longer be subject to the stringent record-keeping, handling, treatment and disposal rules applied to hazardous wastes under RCRA. Other EPA proposals would cause certain wastes which presently must be managed in TSCA-approved facilities to be eligible for disposal in facilities not approved under TSCA. These proposals would, if adopted, reduce the volume of wastes for which the Company's hazardous waste management services are needed. In addition to environmental laws and regulations, federal government contractors, including the Company, are subject to extensive regulation under the Federal Acquisition Regulation and numerous statutes which deal with the accuracy of cost and pricing information furnished to the government, the allowability of costs charged to the government, the conditions under which contracts may be modified or terminated, and other similar matters. Various aspects of the Company's operations are subject to audit by agencies of the federal government in connection with its performance of work under such contracts as well as its submission of bids or proposals to the government. Failure to comply with contract provisions or other applicable requirements may result in termination of the 15 contract, the imposition of civil and criminal penalties against the Company, or the suspension or debarment of all or a part of the Company from federal government work, which could have a material adverse impact upon the Company's financial condition or earnings for one or more fiscal quarters or years. Among the reasons for debarment are violations of various statutes, including those related to employment practices, the protection of the environment, the accuracy of records and the recording of costs. Some state and local governments have similar suspension and debarment laws or regulations. Because of the high level of public awareness of environmental issues, companies in the waste management services business, including the Company, may in the normal course of their business be expected periodically to become subject to judicial and administrative proceedings. Governmental agencies may seek to impose fines on the Company or revoke, deny renewal of, or modify the Company's operating permits or licenses. The Company is also subject to actions brought by private parties or special interest groups in connection with the permitting or licensing of its operations, alleging violations of such permits and licenses, or other matters. In addition, increasing governmental scrutiny of the environmental compliance records of the Company, CWM, WTI, Rust, Waste Management International or their affiliates could cause a private or public entity seeking waste management services to disqualify the Company from competing for one or more projects, on the grounds that these records display inadequate attention to environmental compliance. WASTE MANAGEMENT SERVICES SOLID WASTE Operating permits are generally required at the state and local level for landfills, transfer stations and collection vehicles. Operating permits need to be renewed periodically and may be subject to revocation, modification, denial or non-renewal for various reasons, including failure of the Company to satisfy regulatory concerns. With respect to solid waste collection, regulation takes such forms as licensing of collection vehicles, truck safety requirements, vehicular weight limitations and, in certain localities, limitations on rates, area, time and frequency of collection. With respect to solid waste disposal, regulation covers various matters, including landfill location and design, groundwater monitoring, gas control, liquid runoff and rodent, pest, litter and traffic control. Zoning and land use requirements and limitations are encountered in the solid waste collection, transfer, recycling and energy recovery and disposal phases of the Company's business. In almost all cases the Company is required to obtain conditional use permits or zoning law changes in order to develop transfer station, resource recovery or disposal facilities. In addition, the Company's disposal facilities are subject to water and air pollution laws and regulations. Noise pollution laws and regulations may also affect the Company's operations. Governmental authorities have the power to enforce compliance with these various laws and regulations and violators are subject to injunctions, fines and revocation of permits. Private individuals may also have the right to sue to enforce compliance. Safety standards under the Occupational Safety and Health Act ("OSHA") are also applicable to the Company's solid waste and related services operations. The EPA and various states acting pursuant to EPA-delegated authority have promulgated rules pursuant to RCRA which serve as minimum requirements for land disposal of municipal wastes. The rules establish more stringent requirements than previously applied to the siting, construction, operation and closure of all but the smallest municipal waste landfill facilities. In certain cases, the failure of some states to adopt the federal requirements may increase costs to meet inconsistent federal and state laws applicable to the same facility. The Company does not believe that continued compliance with the more stringent minimum requirements will have a material adverse effect on the Company's operations. See also "RCRA" and "Superfund" below for additional regulatory information. In March 1996, the EPA issued regulations that require large, municipal solid waste landfills to install and monitor systems to collect and control landfill gas. The regulations apply to landfills that 16 are designed to accommodate 2.5 million cubic meters or more of municipal solid waste and that accepted waste for disposal after November 8, 1987, regardless of whether the site is active or closed. The date by which each affected landfill must have such a gas collection and control system depends on whether the landfill began operation before or after May 30, 1991. Landfills constructed, reconstructed, modified or first accepting waste after May 30, 1991 generally must have systems in place by late 1998. Older landfills generally will be regulated by the states and will be required to have landfill gas systems in place within approximately 30 months of EPA's approval of the state program. Many state solid waste regulations already require collection and control systems. Compliance with the new regulations is not expected to have a material adverse effect on the Company. HAZARDOUS WASTE Waste Management and CWM are required to obtain federal, state, local and foreign governmental permits for their chemical waste treatment, storage and disposal facilities. Such permits are difficult to obtain, and in most instances extensive geological studies, tests and public hearings are required before permits may be issued. Waste Management's and CWM's chemical waste treatment, storage and disposal facilities are also subject to siting, zoning and land use restrictions, as well as to regulations (including certain requirements pursuant to federal statutes) which may govern operating procedures and water and air pollution, among other matters. In particular, Waste Management's and CWM's operations in the United States are subject to the Safe Drinking Water Act (which regulates deep well injection), TSCA (pursuant to which the EPA has promulgated regulations concerning the disposal of PCBs), the Clean Water Act (which regulates the discharge of pollutants into surface waters and sewers by municipal, industrial and other sources) and the Clean Air Act (which regulates emissions into the air of certain potentially harmful substances). In their transportation operations, Waste Management and CWM are subject to the jurisdiction of the Interstate Commerce Commission and regulated by the DOT and by regulatory agencies in each state. Employee safety and health standards under OSHA are also applicable. All of Waste Management's and CWM's chemical waste treatment or disposal facilities in the United States have been issued permits under RCRA. The regulations governing issuance of permits contain detailed standards for hazardous waste facilities on matters such as waste analysis, security, inspections, training, preparedness and prevention, emergency procedures, reporting and recordkeeping. Once issued, a final permit has a maximum fixed term of 10 years, and such permits for land disposal facilities are required to be reviewed five years from the date of issuance. The issuing agency (either the EPA or an authorized state) may review or modify a permit at any time during its term. The Company believes that Waste Management and CWM maintain each of their operating treatment, storage or disposal facilities in substantial compliance with the applicable requirements promulgated pursuant to RCRA. It is possible, however, that the issuance or renewal of a permit could be made conditional upon the initiation or completion of modifications or corrective actions at facilities, which might involve substantial additional capital expenditures on the part of Waste Management or CWM. Although the Company is informed that Waste Management and CWM anticipate the reauthorization of each permit at the end of its term if the facility's operations are in compliance with applicable requirements, there can be no assurance that such will be the case. The radioactive waste services of Chem-Nuclear are also subject to extensive governmental regulation. Due to the extensive geological and hydrological testing and environmental data required, and the complex political environment, it is difficult to obtain permits for radioactive waste disposal facilities. Various phases of Chem-Nuclear's low-level radioactive waste management services are 17 regulated by various state agencies, the United States Nuclear Regulatory Commission (the "NRC") and the DOT. Regulations applicable to Chem-Nuclear's operations include those dealing with packaging, handling, labeling and routing of radioactive materials, and prescribe detailed safety and equipment standards and requirements for training, quality control and insurance, among other matters. Employee safety and health standards under OSHA are also applicable. See also "RCRA" and "Superfund" below for additional regulatory information. TRASH-TO-ENERGY AND RELATED SERVICES WTI's business activities are subject to environmental regulation under federal, state and local laws and regulations, including the Clean Air Act, the Clean Water Act and RCRA. The Company believes that WTI's business is conducted in an environmentally responsible manner in material compliance with applicable laws and regulations. The Company does not anticipate that WTI's maintaining compliance with current requirements will result in any material decrease in earnings. There can be no assurance, however, that such requirements will not change so as to require significant additional expenditures. In particular, within the next several years, the air pollution control systems at certain trash-to-energy facilities owned or leased by WTI most likely will be required to be modified to comply with more stringent air pollution control standards adopted by the EPA in December 1995 for municipal waste combusters. The compliance dates will vary by facility, but, subject to the final decision in certain litigation which could result in up to an 18- month delay in the deadlines, all affected facilities most likely will be required to be in compliance with the standards by the end of the year 2000. Currently available technologies will be adequate to meet the new standards. Although the total expenditures required for such modifications are estimated to be $190 million to $230 million, they are not expected to have a material adverse effect on WTI's liquidity or results of operations because provisions in the impacted facilities' long-term waste supply agreements generally allow WTI to recover from customers the majority of incremental capital and operating costs. There can be no assurance, however, that in such event WTI would be able to recover, for each project, all such increased costs from its customers. Moreover, it is possible that future developments, such as increasingly strict requirements of environmental laws, and enforcement policies thereunder, could affect the manner in which WTI operates its projects and conducts its business, including the handling, processing or disposal of the wastes, by-products and residues generated thereby. Also, in May 1994, the U.S. Supreme Court ruled that state and local governments may not constitutionally restrict the free movement of trash in interstate commerce through the use of flow control laws. Such laws typically involve a municipality specifying the disposal site for all solid waste generated within its borders. Since the ruling, several decisions of state or federal courts have invalidated regulatory flow control schemes in a number of jurisdictions. Other judicial decisions have upheld non-regulatory means by which municipalities may effectively control the flow of municipal solid waste. There can be no assurance that such alternatives to regulatory flow control will in every case be found lawful. WTI's Gloucester County, New Jersey facility relies on a disposal franchise for substantially all of its supply of municipal solid waste. In July 1996, a Federal District Court permanently enjoined the State of New Jersey from enforcing its solid waste regulatory flow control system, which was held to be unconstitutional, but stayed the injunction for as long as its ruling is on appeal plus an additional period of two years to enable the State to devise an alternative nondiscriminatory approach. The State has indicated that it will continue to enforce flow control during the two-year transition period and has filed an appeal of the Federal District Court's ruling. The New Jersey legislature is now considering a bill to authorize counties and authorities, including the Gloucester County Improvement Authority, which administers WTI's franchise there, to implement a constitutionally permissible system of "economic flow control" designed to recover waste disposal costs incurred in reliance on the state's franchise system. The Supreme Court's 1994 ruling and subsequent court decisions have not to date had a material adverse effect on any of WTI's trash-to-energy 18 operations. Federal legislation has been proposed, but not yet enacted, to effectively grandfather existing flow control mandates. In the event that such legislation is not adopted, WTI believes that affected municipalities will endeavor to implement alternative lawful means to continue controlling the flow of waste. In view of the uncertain state of the law at this time, however, WTI is unable to predict whether such efforts would be successful or what impact, if any, this matter might have on WTI's trash-to-energy facilities. WTI's energy facilities are also subject to the provisions of various energy-related laws and regulations, including the Public Utility Regulatory Policies Act of 1978 ("PURPA"). The ability of WTI's trash-to-energy and small power production facilities to sell power to electric utilities on advantageous terms and conditions and to avoid burdensome public utility regulation has historically depended, in part, upon the applicability of certain provisions of PURPA, which generally exempts WTI from state and federal regulatory control over electricity prices charged by, and the finances of, WTI and its energy-producing subsidiaries. As the states and the United States Congress have accelerated their consideration of the manner in which economic efficiencies can be gained by deregulating the electric generation industry, utilities and others have taken the position that power sales agreements entered into pursuant to PURPA which provide for rates in excess of current market rates should be voidable as "stranded assets." WTI's 25 power production facilities are qualifying facilities under PURPA and depend on the sanctity of their power sales agreements for their economic viability. Although a repeal or modification of PURPA is possible within the next two years, WTI believes it unlikely that such action would retroactively abrogate the long-term contracts and rate orders pursuant to which most of WTI's existing projects sell electricity. Furthermore, the operations of WTI's existing trash-to-energy and other small power production facilities business are not expected to be materially and adversely affected if the various benefits of PURPA are repealed or substantially reduced on a prospective basis. Finally, the passage of the Energy Policy Act of 1992 created an alternative ownership mechanism by which WTI's future independent power projects would be able to participate in the electricity generation industry without the burdens of traditional public utility regulation. However, WTI can give no assurances that future utility restructurings, court decisions or legislative or administrative action in this area will not have a material adverse impact on WTI's financial position or results of operations. RCRA Pursuant to RCRA, the EPA has established and administers a comprehensive, "cradle-to-grave" system for the management of a wide range of industrial by- products and residues identified as "hazardous" wastes. States that have adopted hazardous waste management programs with standards at least as stringent as those promulgated by the EPA may be authorized by the EPA to administer their programs in lieu of RCRA. Under RCRA and federal transportation laws, a transporter must deliver hazardous waste in accordance with a manifest prepared by the generator of the waste and only to a treatment, storage or disposal facility having a RCRA permit or interim status under RCRA. Every facility that treats or disposes of hazardous wastes must obtain a RCRA permit from the EPA or an authorized state and must comply with certain operating standards. The RCRA permitting process involves applying for interim status and also for a final permit. Under RCRA and the implementing regulations, facilities which have obtained interim status are allowed to continue operating by complying with certain minimum standards pending issuance of a permit. RCRA also imposes restrictions on land disposal of certain hazardous wastes and prescribes standards for hazardous waste land disposal facilities. Under RCRA, land disposal of certain types of untreated hazardous wastes has been banned except where the EPA has determined that land disposal of such wastes and treatment residuals should be permitted. The disposal of liquids in hazardous waste land disposal facilities is also prohibited. 19 The EPA from time to time considers fundamental changes to its regulations under RCRA that could facilitate exemptions from hazardous waste management requirements, including policies and regulations that could implement the following changes: redefine the criteria for determining whether wastes are hazardous; prescribe treatment levels which, if achieved, could render wastes non-hazardous; encourage further recycling and waste minimization; reduce treatment requirements for certain wastes to encourage alternatives to incineration; establish new operating standards for combustion technologies; and indirectly encourage on-site remediation. To the extent such changes are adopted, they can be expected to adversely affect the demand for the Company's chemical waste management services. In this regard, the EPA has recently proposed regulations which would have the effect of reducing the volume of waste classified as hazardous for RCRA regulatory purposes. See "Regulation" above. In addition to the foregoing provisions, RCRA regulations require the Company to demonstrate financial responsibility for possible bodily injury and property damage to third parties caused by both sudden and nonsudden accidental occurrences. See "Insurance" below. Also, RCRA regulations require the Company to provide financial assurance that funds will be available when needed for closure and post-closure care at its waste treatment, storage and disposal facilities, the costs of which could be substantial. Such regulations allow the financial assurance requirements to be satisfied by various means, including letters of credit, surety bonds, trust funds, a financial (net worth) test and a guarantee by a parent corporation. Under RCRA regulations, a company must pay the closure costs for a waste treatment, storage or disposal facility owned by it upon the closure of the facility and thereafter pay post-closure care costs. If such a facility is closed prior to its originally anticipated time, it is unlikely that sufficient funds or reserves will have been accrued over the life of the facility to provide for such costs, and the owner of the facility could suffer a material adverse impact as a result. Consequently, it may be difficult to close such facilities to reduce operating costs at times when, as is currently the case in the hazardous waste services industry, excess treatment, storage or disposal capacity exists. SUPERFUND Superfund provides for EPA-coordinated response and removal actions to releases of hazardous substances into the environment, and authorizes the federal government either to clean up facilities at which hazardous substances have created actual or potential environmental hazards or to order persons responsible for the situation to do so. Superfund assigns liability for these response and other related costs to parties involved in the generation, transfer and disposal of such hazardous substances. Superfund has been interpreted as creating strict, joint and several liability for costs of removal and remediation, other necessary response costs and damage to natural resources. Liability extends to owners and operators of waste disposal facilities (and waste transportation vehicles) from which a release occurs, persons who owned or operated such facilities at the time the hazardous substances were disposed, persons who arranged for disposal or treatment of a hazardous substance at or transportation of a hazardous substance to such a facility, and waste transporters who selected such facilities for treatment or disposal of hazardous substances, as well as to generators of such substances. Liability may be trebled if the responsible party fails to perform a removal or remedial action ordered under the law. For additional information concerning potential Superfund liability, see "Legal Proceedings" below. Superfund created a revolving fund to be used by the federal government to pay for the cleanup efforts. For the federal government's 1996 fiscal year, a maximum of approximately $1.4 billion of Superfund spending was authorized. The federal government has also approved approximately the same amount of 1997 Superfund spending authorization. The U. S. Congress is expected to consider reauthorization and revision of the Superfund statute in 1997. In addition to possible changes in the statute's funding mechanisms and provisions for 20 allocating cleanup responsibility, it is possible that Congress also will fundamentally alter the statute's provisions governing the selection of appropriate site cleanup remedies. For example, Congress may consider whether to continue Superfund's current reliance on stringent technology standards issued under other statutes (such as RCRA) to govern removal and treatment of remediation wastes or to adopt new approaches such as national or site-specific risk based standards. This and other potential policy changes could significantly affect the stringency and extent of site remediation, the types of remediation techniques that will be employed, and the degree to which permitted hazardous waste management facilities will be used for remediation wastes. In addition, Congress may consider revision of the liability imposed by the Superfund law for remediation of contamination caused prior to a party's acquisition of a contaminated site, which could reduce the remediation obligations of the Company and others who currently are jointly and severally liable for remediation obligations under Superfund. INTERNATIONAL WASTE MANAGEMENT AND RELATED SERVICES Waste Management International's operations are subject to the general business, liability, land-use planning and other environmental laws and regulations of the countries where the services are performed and, in Europe, to European Union ("EU") regulations and directives. The degree of local enforcement of applicable laws and regulations varies substantially between, and even within, the various countries in which Waste Management International operates. In addition to the statutes and regulations imposed by national, state or provincial, and municipal or other local authorities, many of the countries in which Waste Management International operates are members of the EU. The EU has issued and continues to issue environmental Directives and Regulations covering a broad range of environmental matters and has created a European Environmental Agency responsible for monitoring and collating member state environmental data. The Single European Act, passed in 1987, established three fundamental principles to guide the development of future EU environmental law: (i) the need for preventative action; (ii) the correction of environmental problems at the source; and (iii) the polluter's liability for environmental damage. The Treaty on European Union, signed in December 1991, came into force in November 1993. The Treaty applies the principle of "sustainable development" as a key component of EU policy-making and requires that environmental protection be integrated into the definition and application of all EU laws. It also introduced a new procedure for the adoption of waste management legislation (other than for proposals of a primarily fiscal nature), which may result in the speedier implementation of EU waste laws. The impact of current and future EU legislation will vary from country to country according to the degree to which existing national requirements already meet or fall short of the new EU standards and, in some jurisdictions, may require extensive public and private sector investment and the development and provision of the necessary technology, expertise, administrative procedures and regulatory structures. These extensive laws and regulations are continually evolving in response to technological advances and heightened public and political concern. Outside Europe, continuing industrialization, population expansion and urbanization have caused increased levels of pollution with all of the resultant social and economic implications. The desire to sustain economic growth and address historical pollution problems is being accompanied by investments in environmental infrastructure, particularly in Southeast Asia, and the introduction of regulatory standards to further control industrial activities. The Company believes that Waste Management International's business is conducted in material compliance with applicable laws and regulations and does not anticipate that maintaining such compliance will adversely affect the Company's financial position. There can be no assurance, however, that such requirements will not change so as to require significant additional expenditures or operating costs. 21 Waste Management International operates facilities in Hong Kong which are owned by the Hong Kong government. Control of the Hong Kong government passes to the People's Republic of China in 1997. Waste Management International is unable to predict what impact, if any, this change will have on its operations in Hong Kong. COMPETITION Waste Management encounters intense competition, primarily in the pricing and rendering of services, from various sources in all phases of its waste management and related operations. In the solid waste collection phase, competition is encountered, for the most part, from national, regional and local collection companies as well as from municipalities and counties (which, through use of tax revenues, may be able to provide such services at lower direct charges to the customer than can Waste Management) and some large commercial and industrial companies which handle their own waste collection. In the solid waste transfer, resource recovery and disposal phases of its operations, competition is encountered primarily from municipalities, counties, local governmental agencies, other national or regional waste management companies and certain large corporations not primarily involved in the solid waste management services business. The Company also encounters intense competition in pricing and rendering of services in its portable sanitation service business, and the on-site industrial cleaning services business of Rust managed by Waste Management, from numerous large and small competitors. In addition, Rust's program and facilities management business encounters intense competition, primarily in pricing, quality and reliability of services, from various sources in all aspects of its business. In its hazardous waste management operations, the Company encounters competition from a number of sources, including several national or regional firms specializing primarily in chemical waste management, local waste management concerns and, to a much greater extent, generators of chemical wastes which seek to reduce the volume of or otherwise process and dispose of such wastes themselves. The basis of competition is primarily technical expertise and the price, quality and reliability of service. Waste Management International encounters intense competition from local companies and governmental entities in particular countries, as well as from major international companies. Pricing, quality of service and type of equipment utilized are the primary methods of competition for collection services, and proximity of suitable treatment or disposal facilities, technical expertise, price, quality and reliability of services are the primary methods of competition for treatment and disposal services. WTI experiences substantial competition in all aspects of its business. It competes with a large number of firms, both nationally and internationally, some of which may have substantially greater financial and technical resources than WTI. The principal competitive factors with respect to its project development activities include technological performance, service, technical know-how, price and performance guarantees. Competing for selection as a project developer may require commitment of substantial resources over a long period of time, without any certainty of being ultimately selected. Competition for attractive development opportunities is intense, as there are a number of competitors in the industry interested in such opportunities. Pursuant to the First Amended and Restated International Business Opportunities Agreement, dated January 1, 1993, by and among CWM, WTI, Waste Management International, Inc., Waste Management International, Rust and the Company (as amended, the "IBOA"), each of CWM, WTI, Rust and the Company has agreed that, until the later of July 1, 2000 or the date on which the Company ceases to beneficially own a majority of the outstanding voting equity interests of such subsidiary or ceases to beneficially own a majority of the outstanding voting equity interests of Waste Management International, and in each case no longer has an option to obtain such ownership, such subsidiary or the Company will not engage (except through Waste Management International) in 22 waste management services; design, development, construction and operation of trash-to-energy facilities in Italy or Germany; collection, storage, processing, treatment or disposal of hazardous wastes (including hazardous substance remediation services); or design, engineering and construction (where the customer is seeking third-party operation), operation and maintenance of water, wastewater and sewage treatment facilities (including facilities for treating hazardous waste streams whether or not the customer is seeking third- party operation) outside North America (i.e., the United States, its territories and possessions, Canada and Mexico) (the "Waste Management International Allocated Activities"), except with respect to licensing of technology and minor interests of CWM, WTI or Rust in publicly held entities. WTI may engage outside North America in the design, engineering, construction, operation and maintenance of chimneys and air pollution control facilities (the "WTI Allocated Activities"). Rust may engage outside North America in activities relating to industrial facility and power plant maintenance services (the "Rust Allocated Activities"). Sales by the Company of recyclables, licensing of technology and minor investments by the Company in publicly held entities are also permitted activities of the Company outside North America. Waste Management International has agreed that for the same time periods as are applicable to CWM, WTI, Rust and the Company above in this paragraph, it will not engage in North America in the type of activities included within the Waste Management International Allocated Activities outside North America and will not engage in the WTI Allocated Activities or the Rust Allocated Activities. Businesses or assets acquired by a party to the IBOA which are in the domain of another party thereto (according to the allocations described above) must be offered for sale to the other party at fair market value. In addition, WTI and Waste Management International have entered into an agreement whereby WTI will have primary responsibility for the early-stage development of trash-to-energy projects outside North America (except in Italy and Germany) and Waste Management International will have the right to acquire up to 49% of all equity of any such project available to Waste Management International, WTI and their affiliates, with WTI or other investors owning the balance. This arrangement is non-cancelable by WTI or Waste Management International without the other's consent prior to 2000. If the arrangement is canceled, the right to develop trash-to-energy projects reverts to being part of the Waste Management International Allocated Activities. By agreement among the parties, the Company is responsible for determining business allocations among CWM, WTI, Rust, the Company and Waste Management International which are not controlled by the allocations set forth in the preceding two paragraphs. In this connection CWM, WTI, Rust, the Company and Waste Management International have agreed that in order to minimize the potential for conflicts of interest among various subsidiaries under the common control of the Company and for so long as the Company shall have beneficial ownership of a majority of the outstanding voting equity interests of such subsidiary (or an option to obtain such ownership), the Company has the right to direct future business opportunities to the Company or the Company- controlled subsidiary which, in the Company's reasonable and good faith judgment, has the most experience and expertise in that line of business, provided that the Company may not allocate a business opportunity to a particular subsidiary if such business opportunity would involve the subsidiary in a breach of its agreement not to compete as described in the immediately preceding paragraphs. Opportunities outside North America relating to the provision of future waste management services are generally to be allocated to Waste Management International, except that opportunities outside North America relating to the WTI Allocated Activities and the Rust Allocated Activities are generally to be allocated to WTI and Rust, as the case may be. No party is liable for consequential damages, except for lost profits, for any breach of the IBOA. In addition, in connection with the transfer by Rust of its hazardous and radioactive substance remediation business in 1995 and its scaffolding rental and erection business in 1996, the Company and Rust agreed with the respective purchasers not to engage in providing those services in North America prior to 2002 (in the case of the remediation business) and 2001 (in the case of the scaffolding business). In connection with WTI's sale of its water process, manufacturing and custom engineering 23 business, WMX and WTI agreed with the purchaser not to engage in such business in the United States or any other country in which WTI conducted such business at the time of sale until 2001. INSURANCE While the Company believes it operates professionally and prudently, its business exposes it to risks such as the potential for harmful substances escaping into the environment and causing damage or injuries, the cost of which could be substantial. The Company currently maintains liability insurance coverage for occurrences under various environmental impairment, primary casualty and excess liability insurance policies. The Company's insurance program includes coverage for pollution liability resulting from "sudden and accidental" releases of contaminants and pollutants. The Company believes that the coverage terms, available limits of liability, and costs currently offered by the insurance market do not represent sufficient value to warrant the purchase of "non-sudden and accidental" pollution liability insurance coverage. As such, the Company has chosen not to purchase risk transfer "non-sudden and accidental" pollution liability insurance coverage. To satisfy existing government requirements, the Company has secured non-risk transfer pollution liability insurance coverage in amounts believed to be in compliance with federal and state law requirements for "non-sudden and accidental" pollution. The Company must reimburse the insurer for losses incurred and covered by this insurance policy. In the event the Company continues not to purchase risk transfer "non-sudden and accidental" pollution liability insurance coverage, the Company's net income could be adversely affected in the future if "non-sudden and accidental" pollution losses should occur. EMPLOYEES WMX Technologies and its subsidiaries employ a total of approximately 59,700 persons in their worldwide continuing operations. Of this number, the Company employs approximately 38,400 persons in its North American solid and hazardous waste management services operations (excluding employees of the Rust on-site industrial cleaning services business operated by Waste Management). Of this total, approximately 29,100 persons (including 2,400 contract workers) are employed in solid and hazardous waste collection, transfer, resource recovery and disposal activities, and approximately 9,300 in managerial, executive, sales, clerical, data processing and other solid waste and related activities. As of December 31, 1996, Waste Management International employed approximately 16,500 persons. Of this number, approximately 12,700 persons were employed in its collection services operations, 2,400 in its treatment and disposal services operations and 1,400 in administrative functions. WTI has approximately 2,100 full-time employees in its continuing operations. Rust employed approximately 2,700 persons at December 31, 1996 in the on-site industrial cleaning services business managed by Waste Management and Rust's program and facilities management services business. ACQUISITIONS AND DISPOSITIONS Since August 1971, the Company has acquired a number of companies, and certain assets of other companies, engaged in various phases of the environmental services industry. See Note 4 to the Company's Consolidated Financial Statements filed as an exhibit to this report and incorporated herein by reference. The amounts and types of consideration generally have been determined by direct negotiations with the owners of the businesses acquired. In most instances, the owners of the acquired businesses were few in number, and often certain key former owners have continued to operate the 24 businesses following acquisition by the Company. During 1996, the Company continued to acquire additional operations in the waste management services industry. Acquisitions have historically contributed significantly to the Company's growth. However, in recent years the Company's acquisition activity relative to the size of its revenue base has significantly decreased, and the Company has disposed of significant amounts of non-waste management services businesses and assets, as well as underperforming or poorly positioned waste management services businesses. As it focuses on its core waste management services business, the Company intends to continue engaging in such dispositions. See below. The Company's growth prospects may be affected by the decision to engage in such dispositions and by the availability of additional business acquisitions at reasonable prices and the Company's ability to finance such acquisitions. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" filed as an exhibit to this report and incorporated herein by reference for a discussion of capital expenditures by the Company, including acquisitions. Other well-capitalized companies also compete intensely for businesses available to be acquired. The acquisition of businesses entails certain inherent risks. Although the Company reviews businesses to be acquired, because of the nature of the liabilities involved in these businesses, there can be liabilities which will not become known until after the transactions are consummated. The Company seeks to minimize the impact of these liabilities and expenditures by attempting to obtain indemnities and warranties from the seller which may be supported by deferring payment of a portion of the purchase price. These indemnities and warranties, if obtained, may not, however, fully cover the liabilities due to their limited scope, amount, or duration, the financial limitations of the indemnitor or warrantor, or other reasons. Businesses purchased may require expenditures to make up for deferred maintenance and to improve the quality or quantity of assets acquired. In certain cases, the Company establishes reserves in respect of the anticipated costs of remediation for acquired sites. In June 1996, Rust sold its process engineering and construction business to Raytheon Engineering Inc. In September 1996, Rust sold its scaffolding rental and erection services business to Brand Scaffold Services, Inc. for approximately $190 million. In December 1996, WTI sold its water process, manufacturing and custom engineering business to United States Filter Corporation ("U.S. Filter") for approximately $370 million. Also in December 1996, Waste Management International announced plans to sell its approximately 20% interest in Wessex. The sale was completed in February 1997. In addition, as part of its program to dispose of approximately $1.5 billion of non-core or underperforming assets over the next 18 to 24 months, the Company has announced the following: . an agreement reached in February 1997 to sell its approximately 20% interest in ServiceMaster to ServiceMaster for approximately $626 million in the second quarter of 1997, subject to ServiceMaster's reaching suitable agreements with its lenders; . the planned sale by WTI of its remaining water services business to U.S. Filter for approximately $77 million; . the planned sale by Rust of its remaining domestic and international engineering and consulting business; . the planned sale of approximately $400 million of non-integrated waste management services businesses in North America; 25 . reduced investment by Waste Management International in all or parts of businesses in France, Spain and Austria by creating joint ventures or selling operations within these countries; and . the planned sale of non-core and non-contributing real estate holdings. ITEM 2. PROPERTIES. The principal property and equipment of the Company consists of land (primarily disposal sites), buildings and waste treatment or processing facilities (other than disposal sites), and vehicles and equipment, which as of December 31, 1996 represented approximately 20%, 6% and 27%, respectively, of the Company's total consolidated assets. The Company believes that its vehicles, equipment and operating properties are well maintained and suitable for its current operations. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" filed as an exhibit to this report and incorporated by reference herein for a discussion of property and equipment expenditures by the Company for the last three years and the capital budget for 1997. The Company's subsidiaries lease numerous office and operating facilities throughout the world. For the year ended December 31, 1996, aggregate annual rental payments on real estate leased by the Company and its subsidiaries approximated $103.8 million. The principal fixed assets of Waste Management consist of vehicles and equipment (which include, among other items, approximately 21,400 collection and transfer vehicles, 1.6 million containers and 25,100 stationary compactors in the United States and Canada). Waste Management owns or leases real property in most states and Canadian provinces in which it is doing business. At December 31, 1996, 105 solid waste disposal facilities, aggregating approximately 66,400 total acres, including approximately 15,950 permitted acres, were owned by Waste Management in the United States and Canada and 28 facilities, aggregating approximately 13,725 total acres, including approximately 5,750 permitted acres, were leased from parties not affiliated with Waste Management under leases expiring from 1997 to 2085. At December 31, 1996, the Company owned or leased in the United States a total of nine treatment, storage or disposal facilities. At such date, the Company's seven United States chemical waste facilities with secure land disposal sites aggregated approximately 7,875 acres, including approximately 1,475 permitted acres. The principal property and equipment of Waste Management International consist of land (primarily disposal sites) and vehicles and equipment, which as of December 31, 1996 represented approximately 8.8% and 19.7%, respectively, of Waste Management International's assets. The principal fixed assets utilized in Waste Management International's collection services operations at December 31, 1996, consisted of vehicles and equipment (which included, among other items, approximately 7,000 collection, transportation, and other route vehicles and approximately 260 pieces of landfill and other heavy equipment), and approximately 307,000 containers, including approximately 3,850 stationary compactors. In addition, Waste Management International owns approximately 730 pieces of hazardous waste equipment, consisting predominately of containers and collection vehicles. The principal fixed assets utilized in Waste Management International's treatment and disposal services operations at December 31, 1996, consisted of 56 landfills, 26 waste treatment facilities, 85 recycling and recyclables processing facilities, eight incinerators and various other manufacturing, office and warehouse facilities owned, leased or operated by Waste Management International. WTI currently owns, operates or leases 16 trash-to-energy facilities, eight cogeneration and small power production facilities, two coal handling facilities, three biosolids drying, pelletizing and composting facilities, one wastewater treatment plant and various other manufacturing, office and warehouse facilities. Facilities leased or operated (but not owned) by WTI are under leases or agreements having terms expiring from the years 1998 to 2020, subject to renewal options in certain cases. 26 ITEM 3. LEGAL PROCEEDINGS. The continuing business in which the Company is engaged is intrinsically connected with the protection of the environment and the potential for the unintended or unpermitted discharge of materials into the environment. In the ordinary course of conducting its business activities, the Company becomes involved in judicial and administrative proceedings involving governmental authorities at the federal, state and local level including, in certain instances, proceedings instituted by citizens or local governmental authorities seeking to overturn governmental action where governmental officials or agencies are named as defendants together with the Company or one or more of its subsidiaries, or both. In the majority of the situations where proceedings are commenced by governmental authorities, the matters involved relate to alleged technical violations of licenses or permits pursuant to which the Company operates or is seeking to operate or laws or regulations to which its operations are subject or are the result of different interpretations of the applicable requirements. From time to time the Company pays fines or penalties in environmental proceedings relating primarily to waste treatment, storage or disposal facilities. In December 1996, a CWM subsidiary paid a civil penalty of $100,000 to settle an administrative proceeding brought by the New York State Department of Environmental Conservation involving alleged violation by the subsidiary of leachate management regulations from 1994 to 1996 at the subsidiary's Model City, New York facility. In settling this matter, the subsidiary did not admit any violation of law. The Company or certain of its subsidiaries have been identified as potentially responsible parties in a number of governmental investigations and actions relating to waste disposal facilities which may be subject to remedial action under Superfund. The majority of these proceedings are based on allegations that certain subsidiaries of the Company (or their predecessors) transported hazardous substances to the facilities in question, often prior to acquisition of such subsidiaries by the Company. Such proceedings arising under Superfund typically involve numerous waste generators and other waste transportation and disposal companies and seek to allocate or recover costs associated with site investigation and cleanup, which costs could be substantial. As of December 31, 1996, the Company or its subsidiaries had been notified that they are potentially responsible parties in connection with 103 locations listed on the Superfund National Priority List ("NPL"). Of the 103 NPL sites at which claims have been made against the Company, 18 are sites which the Company has come to own over time. All of the NPL sites owned by the Company were initially sited by others as land disposal facilities. At each of the 18 owned facilities, the Company is working in conjunction with the government to characterize or to remediate identified site problems. In addition, at these 18 facilities the Company has either agreed with other legally liable parties on an arrangement for sharing the costs of remediation or is pursuing resolution of an allocation formula. The 85 NPL sites at which claims have been made against the Company and which are not owned by the Company are at different procedural stages under Superfund. At some, the Company's liability is well defined as a consequence of a governmental decision as to the appropriate remedy and an agreement among liable parties as to the share each will pay for implementing that remedy. At others, where no remedy has been selected or the liable parties have been unable to agree on an appropriate allocation, the Company's future costs are substantially uncertain. The Company periodically reviews its role, if any, with respect to each such location, giving consideration to the nature of the Company's alleged connection to the location (e.g., owner, operator, transporter or generator), the extent of the Company's alleged connection to the location (e.g., amount and nature of waste hauled to the location, number of years of site operation by the Company or other relevant factors), the accuracy and strength of evidence connecting the Company to the location, the number, connection and financial ability of other named and unnamed potentially responsible parties at the location, and the nature and estimated cost of the likely remedy. Where the Company concludes that it is probable that a liability has been incurred, a provision is made in the Company's financial 27 statements for the Company's best estimate of the liability based on management's judgment and experience, information available from regulatory agencies and the number, financial resources and relative degree of responsibility of other potentially responsible parties who are jointly and severally liable for remediation of a specific site, as well as the typical allocation of costs among such parties. If a range of possible outcomes is estimated and no amount within the range appears to be a better estimate than any other, then the Company provides for the minimum amount within the range, in accordance with generally accepted accounting principles. Sites subject to state action under state laws similar to the federal Superfund statute are treated by the Company in the same way as NPL sites. The Company's estimates are subsequently revised, as deemed necessary, as additional information becomes available. While the Company does not anticipate that the amount of any such revisions will have a material adverse effect on the Company's operations or financial condition, the measurement of environmental liabilities is inherently difficult and the possibility remains that technological, regulatory or enforcement developments, the results of environmental studies, or other factors could materially alter this expectation at any time. Such matters could have a material adverse impact on earnings for one or more fiscal quarters or years. From time to time, the Company and certain of its subsidiaries are named as defendants in personal injury and property damage lawsuits, including purported class actions, on the basis of a Company subsidiary's having owned, operated or transported waste to a disposal facility which is alleged to have contaminated the environment or, in certain cases, conducted environmental remediation activities at sites. Some of such lawsuits may seek to have the Company or its subsidiaries pay the costs of groundwater monitoring and health care examinations of allegedly affected persons for a substantial period of time even where no actual damage is proven. While the Company believes it has meritorious defenses to these lawsuits, their ultimate resolution is often substantially uncertain due to the difficulty of determining the cause, extent and impact of alleged contamination (which may have occurred over a long period of time), the potential for successive groups of complainants to emerge, the diversity of the individual plaintiffs' circumstances, and the potential contribution or indemnification obligations of co-defendants or other third parties, among other factors. Accordingly, it is possible such matters could have a material adverse impact on the Company's earnings for one or more fiscal quarters or years. A subsidiary of the Company has been involved in litigation challenging a municipal zoning ordinance which restricted the height of its New Milford, Connecticut landfill to a level below that allowed by the permit previously issued by the Connecticut Department of Environmental Protection ("DEP"). Although a lower court had declared the zoning ordinance's height limitation unconstitutional, the Connecticut Supreme Court reversed that ruling and remanded the case for further proceedings in the Superior Court in the judicial district of Litchfield. In November 1995, the Superior Court ordered the Company's subsidiary to apply to the DEP for permission to remove all waste above the height allowed by the zoning ordinance. The Connecticut Supreme Court has upheld that ruling. The Company believes that removal of such waste is an inappropriate remedy and is seeking an alternative resolution of the issue. The Company is unable to predict the outcome of the issue or any removal action that may ultimately be required as a result of the permitting process. However, the subsidiary could incur substantial costs, which could vary significantly depending upon the nature of any plan which is eventually approved by applicable regulatory authorities for removing the waste, the actual volume of waste to be moved and other currently unforeseeable factors and which could have a material adverse effect on the Company's financial condition and results of operations in one or more future periods. The Company and certain of its subsidiaries are also currently involved in other civil litigation and governmental proceedings relating to the conduct of their business. While the outcome of any particular lawsuit or governmental investigation cannot be predicted with certainty, the Company 28 believes that these matters will not have a material adverse effect on its results of operations or financial condition. The Company has brought suit against a substantial number of insurance carriers in an action entitled Waste Management, Inc. et al. v. The Admiral Insurance Company, et al. pending in the Superior Court in Hudson County, New Jersey. In this action the Company is seeking a declaratory judgment that environmental liabilities asserted against the Company or its subsidiaries, or that may be asserted in the future, are covered by insurance policies purchased by the Company or its subsidiaries. The Company is also seeking to recover defense costs and other damages incurred as a result of the assertion of environmental liabilities against the Company or its subsidiaries for events occurring over at least the last 25 years at approximately 140 sites and the defendant insurance carriers' denial of coverage of such liabilities. The defendants have denied liability to the Company and have asserted various defenses, including that environmental liabilities of the type for which the Company is seeking relief are not risks covered by the insurance policies in question. The defendants are contesting these claims vigorously. Discovery is nearly complete as to the 12 sites in the first phase of the case and discovery is expected to continue for several years as to the remaining sites. A trial date has been set for October 14, 1997 as to the first phase sites. No trial date has been set as to the remaining sites. The Company is unable at this time to predict the outcome of this proceeding. No amounts have been recognized in the Company's financial statements for potential recoveries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to the Company's security holders during the fourth quarter of 1996. EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names and ages of the Company's executive officers (as defined by regulations of the Securities and Exchange Commission), the positions they hold with the Company and summaries of their business experience. Executive officers are elected by the Board of Directors and serve at the discretion of the Board. Dean L. Buntrock, age 65, has been a director of the Company and has served as Chairman of the Board of the Company since 1968. Since February 1997, he has served as acting Chief Executive Officer. He had previously served as Chief Executive Officer from 1968 to June 1996. From September 1980 to November 1984, he also served as President. Mr. Buntrock is also a director of WTI, Waste Management International and Boston Chicken, Inc. Herbert A. Getz, age 41, has been a Senior Vice President of the Company since May 1995, a Vice President of the Company since May 1990 and General Counsel since August 1992. He has also been Secretary of the Company since January 1988. He also served as Assistant General Counsel of the Company from December 1985 until August 1992. Mr. Getz has also held the offices of Vice President, General Counsel and Secretary at Waste Management from April 1989 until December 1993, and Vice President and Secretary of Rust from January 1993 to May 1994. He has also served as Secretary of WTI from July 1995 to January 1997, a position he previously held, as well as being the General Counsel of WTI, from November 1990 until May 1993. Mr. Getz commenced employment with the Company in 1983. He is a director of NSC and OHM. Thomas C. Hau, age 61, has been a Vice President and the Controller and Principal Accounting Officer of the Company since he commenced employment with the Company in September 1990. From 1971 until his employment by the Company, Mr. Hau was a partner of Arthur Andersen LLP. Joseph M. Holsten, age 44, has been Executive Vice President and Chief Operating Officer of the Company since February 1997. He was Chief Executive Officer of Waste Management International from July 1995 to March 1997. From October 1993 to July 1995, he was Executive Vice President 29 and Chief Financial Officer of Waste Management. Mr. Holsten was Vice President of Acquisitions and Project Development for Waste Management International from April 1992 to August 1993 and Vice President, Chief Financial Officer and Treasurer of Rust from September to October 1993. Mr. Holsten has been employed by the Company since 1981. James E. Koenig, age 49, has been Executive Vice President of the Company since February 1997. He was a Senior Vice President of the Company from May 1992 to February 1997, Treasurer of the Company from 1986 to July 1996 and Chief Financial Officer of the Company from 1989 to February 1997. Mr. Koenig first became a Vice President of the Company in 1986. From 1984 to 1986, Mr. Koenig was Staff Vice President and Assistant to the Chief Financial Officer of the Company. Mr. Koenig has been employed by the Company since 1977. Mr. Koenig also served as Vice President, Chief Financial Officer and Treasurer of WTI from November 1990 to May 1993. He also serves as a director of WTI, Waste Management International and OHM. D. P. Payne, age 54, has been a Senior Vice President of the Company since April 1995, a position he previously held from 1990 to 1993. He also served as President and Chief Executive Officer and a director of CWM from September 1991 to March 1995. Mr. Payne has been employed by the Company since 1990. John D. Sanford, age 43, has been Senior Vice President and Chief Financial Officer of the Company since February 1997. He also has been Treasurer since July 1996. He was Vice President--Project Finance of the Company from March 1996 to February 1997. He was also the Vice President, Chief Financial Officer and Treasurer of WTI from 1993 to February 1997 and Executive Vice President of WTI from 1995 to February 1997. From February to May 1993, Mr. Sanford was Staff Vice President--Finance of WTI. He also served as Vice President and Chief Financial Officer of WTI's Wheelabrator Energy Systems Inc. subsidiary from 1987 to 1993. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock is traded on the New York Stock Exchange and the Chicago Stock Exchange under the symbol "WMX." The following table sets forth by quarter for the last two years the high and low sale prices of the Company's common stock on the New York Stock Exchange Composite Tape as reported by the Dow Jones News Retrieval Service, and the dividends declared by the Board of Directors of the Company on its common stock.
1995 QUARTERLY SUMMARY --------------- CASH DIVIDENDS HIGH LOW DECLARED PER SHARE ------- ------- ------------------ First........................................ $29 5/8 $25 3/4 $.15 Second....................................... 28 3/4 26 3/4 .15 Third........................................ 32 1/2 28 1/4 .15 Fourth....................................... 30 7/8 26 3/8 .15 1996 QUARTERLY SUMMARY --------------- CASH DIVIDENDS HIGH LOW DECLARED PER SHARE ------- ------- ------------------ First........................................ $32 1/8 $27 3/4 $.15 Second....................................... 36 1/8 31 5/8 .16 Third........................................ 33 1/4 28 5/8 .16 Fourth....................................... 36 5/8 32 1/8 .16
30 At March 19, 1997, the Company had approximately 50,000 stockholders of record. Due in part to the high level of public awareness of the business in which the Company is engaged, regulatory enforcement proceedings or other unfavorable developments involving the Company's operations or facilities, including those in the ordinary course of business, may be expected to engender substantial publicity which could from time to time have an adverse impact upon the market price for the Company's common stock. From September 1990 to December 1995, WMX Technologies maintained a program for the purchase of up to 25,000,000 shares of its common stock from time to time in the open market or in privately negotiated transactions. No Company shares were repurchased under this program in 1995. In December 1995, the Company terminated that program and announced that its Board of Directors had authorized the repurchase by the Company of up to an additional 25,000,000 shares of the Company's common stock from time to time over the following 24- month period in open market or privately negotiated transactions. During 1996, the Company purchased 14,390,000 shares pursuant to this program at a cost of approximately $473,560,000. In February 1997, the Company's Board of Directors approved a new repurchase program to replace the program approved in December 1995. Under the new program, the Company is authorized to purchase during 1997 and 1998 up to 50 million shares of its common stock in the open market, in privately negotiated transactions or through issuer tender offers. During 1994, 1995 and 1996, the Company sold put options on 42.3 million shares of its common stock in conjunction with the repurchase program. The put options give the holders the right at maturity to require the Company to repurchase its shares at specified prices. In the event the options are exercised, the Company may elect to pay the holder in cash the difference between the strike price and the market price of the Company's shares, in lieu of repurchasing the stock. For information concerning the exercise or expiration of these put options and related information, see "Management's Discussion and Analysis of Results of Operations and Financial Condition-- Financial Condition--Capital Structure" incorporated by reference herein. ITEM 6. SELECTED FINANCIAL DATA. The following selected consolidated financial information for each of the five years in the period ended December 31, 1996 is derived from the Company's Consolidated Financial Statements, which have been audited by Arthur Andersen LLP, independent public accountants, whose report thereon is incorporated by reference in this report. The information below should be read in conjunction with "Management's Discussion and Analysis of Results of Operations and Financial Condition" and the Company's Consolidated Financial Statements, and the related Notes, and the other financial information which are filed as exhibits to this report and incorporated herein by reference. 31
YEAR ENDED DECEMBER 31 ----------------------------------------------------------- 1992(1) 1993(2)(3) 1994(3) 1995(3)(4) 1996(3)(5) ----------- ----------- ----------- ----------- ----------- (000'S OMITTED, EXCEPT PER SHARE AMOUNTS) Revenue from continuing operations............. $ 8,661,027 $ 7,827,280 $ 8,482,718 $ 9,053,018 $ 9,186,970 Income from continuing operations............. $ 850,036 $ 418,086 $ 742,306 $ 618,243 $ 477,791 Earnings per common and common equivalent share--continuing operations............. $ 1.72 $ .86 $ 1.53 $ 1.27 $ .97 Total assets............ $14,114,180 $16,080,265 $17,083,042 $18,364,274 $18,366,592 Long-term debt, less portion payable within one year............... $ 4,312,511 $ 6,143,685 $ 6,024,478 $ 6,390,041 $ 6,971,607 Dividends per share..... $ .50 $ .58 $ .60 $ .60 $ .63
- -------- (1) The results for 1992 include a non-taxable gain of $240,000,000 (before minority interest) resulting from the initial public offering of Waste Management International, special charges of $219,900,000 (before tax and minority interest) primarily related to writedowns of the Company's medical waste business, CWM incinerators in Chicago, Illinois and Tijuana, Mexico and a former subsidiary's investment in its asbestos abatement business and certain restructuring costs incurred by the subsidiary and CWM related to the formation of Rust, and one time after-tax charges aggregating $71,139,000, or $.14 per share, related to the cumulative effect of adopting two new accounting standards. (2) The results for 1993 include a non-taxable gain of $15,109,000 (before minority interest) relating to the issuance of shares by Rust, as well as the Company's share of a special asset revaluation and restructuring charge of $550,000,000 (before tax and minority interest) recorded by CWM related primarily to a revaluation of CWM's thermal treatment business, and a provision of approximately $14,000,000 to adjust deferred income taxes resulting from the 1993 tax law change. (3) In 1995, the Rust Board of Directors approved a plan to sell or otherwise discontinue Rust's process engineering, construction, specialty contracting and similar lines of business. During 1996, the sale of the industrial process engineering and construction businesses, based in Birmingham, Alabama, was completed. In 1996, WTI sold its water process systems and equipment manufacturing businesses, and Rust sold its industrial scaffolding business. WTI entered into an agreement to sell its water and wastewater facility operations and privatization business and Rust began implementing plans to exit its remaining domestic and international engineering and consulting business. CWM is also exiting its fuels blending business. Accordingly, these businesses have been segregated as discontinued operations in the financial statements since 1993. It is not practical to restate periods prior to the formation of Rust on January 1, 1993, for the discontinued operations. See Note 15 to the Company's Consolidated Financial Statements. (4) The results for 1995 include a special charge of $140,600,000 (before tax) recorded by CWM, primarily to write off its investment in facilities and technologies that it abandoned because they do not meet customer service or performance objectives, and a special charge of $194,600,000 (before tax and minority interest) recorded by Waste Management International relating to actions it is taking to sell or otherwise dispose of non-core businesses and investments, as well as core businesses and investments in low potential markets, abandon certain hazardous waste treatment and processing technologies, and streamline its country management organization. See Note 14 to the Company's Consolidated Financial Statements. (5) The results for 1996 include special charges of $107,900,000 (before minority interest) related to Waste Management International's sale of its investment in Wessex and a charge of $169,500,000 (before minority interest) to revalue its investments in France, Austria and Spain in contemplation of exiting all or part of these markets or forming joint ventures and to write off an 32 investment in a hazardous waste disposal facility. Also in 1996, the Company and CWM recorded special charges of $255,000,000 (before tax) for reengineering their finance and administrative functions and increasing reserves for certain litigation. See Note 14 to the Company's Consolidated Financial Statements. (6) Certain amounts have been restated to conform to 1996 classifications. Reference is made to the ratio of earnings to fixed charges for each of the years in the five-year period ended December 31, 1996, as set forth in Exhibit 12 to this report, which ratios are incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Reference is made to Management's Discussion and Analysis of Results of Operations and Financial Condition set forth on pages 8 to 15 of the Company's 1996 Annual Report to Stockholders (the "Annual Report"), which discussion is filed as an exhibit to this report and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. (a) The Consolidated Balance Sheets as of December 31, 1995 and 1996, Consolidated Statements of Income, Stockholders' Equity and Cash Flows for each of the years in the three-year period ended December 31, 1996 and Notes to Consolidated Financial Statements set forth on pages 17 to 36 of the Annual Report are filed as an exhibit to this report and incorporated herein by reference. (b) Selected Quarterly Financial Data (Unaudited) is set forth in Note 17 to the Consolidated Financial Statements referred to in Item 8(a) above and incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Reference is made to the information set forth in the 15 paragraphs under the caption "Election of Directors" beginning on page 2 of the Company's proxy statement for the annual meeting scheduled for May 9, 1997 (the "Proxy Statement") for a description of the directors and a director nominee of the Company, which paragraphs are incorporated herein by reference. Information concerning the executive officers of the Company is set forth above under "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION. Reference is made to the information set forth under the caption "Compensation" on pages 11 through 17 of the Proxy Statement, which information, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Reference is made to the information, including the tables and the footnotes thereto, set forth under the caption "Securities Ownership of Management" on pages 5 through 9 of the Proxy 33 Statement, for certain information respecting ownership of common stock of the Company, WTI and Waste Management International, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Reference is made to the paragraph under the caption "Compensation Committee Interlocks and Insider Participation" on page 17 of the Proxy Statement and the information set forth under the caption "Certain Transactions" beginning on page 27 of the Proxy Statement for certain information with respect to certain relationships and related transactions, which paragraphs are incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE AND REPORTS ON FORM 8-K. (a) Financial Statements, Schedule and Exhibits. I. Financial Statements--filed as an exhibit hereto and incorporated herein by reference. (i) Consolidated Statements of Income for the three years ended December 31, 1996; (ii) Consolidated Balance Sheets--December 31, 1995 and 1996; (iii) Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1996; (iv) Consolidated Statements of Cash Flows for the three years ended December 31, 1996; (v) Notes to Consolidated Financial Statements; and (vi) Report of Independent Public Accountants. II. Schedule (i) Schedule II--Valuation and Qualifying Accounts (ii) Report of Independent Public Accountants on Schedule All other schedules have been omitted because the required information is not significant or is included in the financial statements or the notes thereto, or is not applicable. III. Exhibits. The exhibits to this report are listed in the Exhibit Index elsewhere herein. Included in the exhibits listed therein are the following exhibits which constitute management contracts or compensatory plans or arrangements: (i) 1981 Stock Option Plan for Non-Employee Directors of registrant (Exhibit 19 to registrant's report on Form 10-Q for the quarter ended June 30, 1982) (ii) WMX Technologies, Inc. 1982 Stock Option Plan, as amended to March 11, 1988 (Exhibit 10.3 to registrant's 1988 annual report on Form 10-K) (iii) Deferred Director's Fee Plan, as amended (Exhibit 10.3 to registrant's 1990 annual report on Form 10-K) (iv) Director's Phantom Stock Plan (Exhibit 10.9 to registrant's 1984 annual report on Form 10-K) (v) Amended and Restated Employment Agreement, dated as of June 17, 1996, by and between the registrant and Phillip B. Rooney (Exhibit 10.1 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) 34 (vi) WMX Technologies, Inc. Corporate Incentive Bonus Plan (Exhibit B to registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) (vii) WMX Technologies, Inc. Supplemental Executive Retirement Plan, as amended and restated as of January 24, 1995 (Exhibit 10.7 to registrant's 1995 annual report on Form 10-K) (viii) Chemical Waste Management, Inc. 1992 Stock Option Plan (Exhibit 10.19 to Chemical Waste Management, Inc.'s 1991 annual report on Form 10-K) (ix) Supplemental Retirement Benefit Agreement, dated as of January 1, 1989, by and between the registrant and Peter H. Huizenga (Exhibit 10.16 to Post-Effective Amendment No. 2 to registrant's registration statement on Form S-1, Registration No. 33-13839) (x) Chemical Waste Management, Inc. 1986 Stock Option Plan, as amended (Exhibit 10.1 to Chemical Waste Management, Inc.'s 1989 annual report on Form 10-K) (xi) WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus Plan (Exhibit 10.11 to registrant's 1995 annual report on Form 10- K) (xii) Amendment No. 1 to WMX Technologies Inc. Non-Qualified Profit Sharing and Savings Plus Plan (filed with this report) (xiii) WMX Technologies, Inc. Director's Charitable Endowment Plan (Exhibit 10.20 to registrant's 1989 annual report on Form 10-K) (xiv) Supplemental Retirement Benefit Agreement dated as of January 1, 1991 by and between registrant and Donald F. Flynn (Exhibit 10.17 to registrant's 1990 annual report on Form 10-K) (xv) Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. as amended through June 10, 1991 (Exhibit 19.03 to the report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) (xvi) 1988 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1988 Stock Plan") (Exhibit 28.1 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523) (xvii) Amendments dated as of September 7, 1990 to the WTI 1988 Stock Plan (Exhibit 19.02 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xviii) Amendment dated as of November 1, 1990 to the WTI 1988 Stock Plan (Exhibit 19.04 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xix) 1986 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1986 Stock Plan") (Exhibit 28.2 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523) (xx) Amendment dated as of November 1, 1990 to the WTI 1986 Stock Plan (Exhibit 19.03 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxi) Employment Agreement dated as of April 1, 1995 between the registrant and D. P. Payne (Exhibit 10.21 to registrant's 1995 annual report on Form 10-K) (xxii) WMX Technologies, Inc. 1992 Stock Option Plan (Exhibit 10.31 to registrant's registration statement on Form S-1, Registration No. 33-44849) (xxiii) WMX Technologies, Inc. Amended and Restated 1992 Stock Option Plan for Non-Employee Directors (filed with their report) (xxiv) Wheelabrator Technologies Inc. 1992 Stock Option Plan (Exhibit 10.45 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 35 (xxv) Deferred Director's Fee Plan of Wheelabrator Technologies Inc. adopted June 10, 1991 (Exhibit 19.02 to the quarterly report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) (xxvi) Waste Management International plc Share Option Plan (Exhibit 10.1 to the registration statement on Form F-1 of Waste Management International plc, Registration No. 33-46511) (xxvii) Amendment dated as of December 6, 1991 to the WTI 1986 Stock Plan (Exhibit 19.01 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxviii) Amendment dated as of December 6, 1991 to the WTI 1988 Stock Plan (Exhibit 19.02 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxix) Amendment dated as of December 6, 1991 to the Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. (Exhibit 19.05 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) (xxx) WMX Technologies, Inc. Long Term Incentive Plan (as amended and restated as of January 27, 1994) (Exhibit A to registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) (xxxi) Employment Agreement dated as of August 15, 1996 between the registrant and James E. Koeing (Exhibit 10.2 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) (xxxii) Employment Agreement dated as of August 15, 1996 between the registrant and Herbert A. Getz (Exhibit 10.3 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) (xxxiii) Restricted Stock Agreement dated as of August 15, 1996 between the registrant and James E. Koenig (Exhibit 10.4 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) (xxxiv) Restricted Stock Agreement dated as of August 15, 1996 between the registrant and Herbert A. Getz (Exhibit 10.5 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) (xxxv) Letter Agreement dated as of February 17, 1997 between the registrant and Phillip B. Rooney (filed with this report) (xxxvi) WMX Technologies, Inc. 1997 Equity Incentive Plan (Exhibit A to registrant's Proxy Statement for its 1997 Annual Meeting of Stockholders) - -------- * In the case of reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management's file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0-14246. (b) Reports on Form 8-K. During the fourth quarter of 1996, the Company filed reports on Form 8-K as follows: (i) a report dated December 13, 1996 reporting under item 5 the issuance of a news release indicating that CWM would appeal the decision of the United States District Court for the Western District of Tennessee in Memphis, Tennessee, which held CWM liable for approximately $76.5 million in contract damages and $15 million in punitive damages in a dispute with the former owners of CWM's Emelle, Alabama hazardous waste landfill and the possibility that the Company might record a charge in the fourth quarter of 1996 that would have a material adverse effect on the registrant's results of operations; and 36 (ii) a report dated December 18, 1996 reporting under item 5 the issuance of a news release announcing that (a) Waste Management International had reached an agreement with Wessex Water Plc ("Wessex") to sell its 19.5% equity investment in Wessex, (b) the agreement would generate a charge in the fourth quarter of 1996 of approximately $88 million after tax, or $.18 per share, and have a $.04 per share negative impact on the Company's 1997 earnings, (c) upon completion of the Wessex transaction the Company will have generated nearly $1 billion in cash from the disposition of non-core and underperforming assets, the target it established in May 1996, and (d) the registrant expects to monetize additional assets, including other non- core equity investments, real estate and underperforming core businesses. 37 WMX TECHNOLOGIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENT SCHEDULE ($000'S OMITTED) SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
EFFECT OF BALANCE CHARGED ACCOUNTS FOREIGN BALANCE BEGINNING TO WRITTEN CURRENCY END OF OF YEAR INCOME OFF OTHER(A) TRANSLATION YEAR --------- ------- -------- -------- ----------- ------- 1994--Reserve for doubtful accounts (B) (C).................... $57,279 $33,720 $(38,621) $5,072 $1,760 $59,210 ======= ======= ======== ====== ====== ======= 1995--Reserve for doubtful accounts (C).. $59,210 $38,914 $(39,224) $1,814 $1,213 $61,927 ======= ======= ======== ====== ====== ======= 1996--Reserve for doubtful accounts...... $61,927 $39,148 $(57,681) $4,374 $ (245) $47,523 ======= ======= ======== ====== ====== =======
- -------- (A) Reserves of companies accounted for as purchases. (B) Includes reserves for doubtful long-term notes receivable. (C) Restated to exclude discontinued operations. 38 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To WMX Technologies, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in the WMX Technologies, Inc. Annual Report to Stockholders for 1996 filed as an exhibit to and incorporated by reference in this Form 10-K, and have issued our report thereon dated February 3, 1997. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule included on page 38 of this Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Chicago, Illinois, February 3, 1997 39 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN OAK BROOK, ILLINOIS ON THE 26TH DAY OF MARCH 1997. WMX Technologies, Inc. /s/ Dean L. Buntrock By __________________________________ DEAN L. BUNTROCK CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED. SIGNATURE TITLE DATE /s/ Dean L. Buntrock Director, Chairman - ------------------------------------- of the Board and DEAN L. BUNTROCK Chief Executive Officer /s/ Jerry E. Dempsey Director - ------------------------------------- JERRY E. DEMPSEY /s/ Donald F. Flynn Director - ------------------------------------- DONALD F. FLYNN /s/ Peer Pedersen Director - ------------------------------------- PEER PEDERSEN /s/ James R. Peterson Director - ------------------------------------- JAMES R. PETERSON /s/ Alexander B. Trowbridge Director - ------------------------------------- ALEXANDER B. TROWBRIDGE /s/ H. Jesse Arnelle Director - ------------------------------------- H. JESSE ARNELLE /s/ Pastora San Juan Cafferty Director - ------------------------------------- PASTORA SAN JUAN CAFFERTY March 26, 1997 /s/ James B. Edwards Director - ------------------------------------- JAMES B. EDWARDS /s/ Paul M. Montrone Director - ------------------------------------- PAUL M. MONTRONE /s/ Steven G. Rothmeier Director - ------------------------------------- STEVEN G. ROTHMEIER /s/ Peter H. Huizenga Director - ------------------------------------- PETER H. HUIZENGA /s/ Howard H. Baker, Jr. Director - ------------------------------------- HOWARD H. BAKER, JR. /s/ Thomas C. Hau Vice President, - ------------------------------------- Controller and THOMAS C. HAU Principal Accounting Officer /s/ John D. Sanford Senior Vice - ------------------------------------- President, Chief JOHN D. SANFORD Financial Officer, Treasurer and Principal Financial Officer 40 WMX TECHNOLOGIES, INC. EXHIBIT INDEX
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 1. Inapplicable 2. Inapplicable 3.1(a) Restated Certificate of Incorporation of registrant, as amended as of May 24, 1985 (incorporated by reference to Exhibit 4.1 to registrant's report on Form 10-Q for the quarter ended June 30, 1985) 3.1(b) Certificate of Amendment of Restated Certificate of Incorporation of registrant, recorded May 23, 1986 (incorporated by reference to Exhibit 4(c) to registrant's registration statement on Form S-8, Registration No. 33-6265) 3.1(c) Certificate of Designation of Preferred Stock of registrant, filed January 30, 1987 (incorporated by reference to Exhibit 3.1(c) to registrant's 1986 annual report on Form 10-K) 3.1(d) Certificate of Amendment of Restated Certificate of Incorporation of registrant, recorded May 15, 1987 (incorporated by reference to Exhibit 4.5(d) to registrant's registration statement on Form S-4, Registration No. 33-15518) 3.1(e) Certificate of Amendment of Restated Certificate of Incorporation of registrant, filed May 19, 1989 (incorporated by reference to Exhibit 3(e) to registrant's registration statement on Form S-3, Registration No. 33-30190) 3.1(f) Certificate of Amendment of Restated Certificate of Incorporation of registrant, filed May 18, 1990 (incorporated by reference to Exhibit 4(h) to registrant's registration statement on Form S-8, Registration No. 33-35936) 3.1(g) Certificate of Amendment of Restated Certificate of Incorporation of registrant, filed May 14, 1993 (incorporated by reference to Exhibit 4(a) to registrant's report on Form 8-K dated May 14, 1993) 3.1(h) Conformed copy of Restated Certificate of Incorporation of registrant, as amended (incorporated by reference to Exhibit 4(b) to registrant's report on Form 8-K dated May 14, 1993) 3.2 By-laws of registrant, as amended and restated as of January 30, 1997 4.1(a) Trust Indenture dated as of August 1, 1989 (incorporated by reference to Exhibit 4.3(a) to registrant's 1990 annual report on Form 10-K) 4.1(b) First Supplemental Indenture dated as of December 1, 1990 (incorporated by reference to Exhibit 4.3(b) to registrant's 1990 annual report on Form 10-K) 4.2 Trust Indenture dated as of June 1, 1993 (incorporated by reference to Exhibit 4 to the registrant's current report on Form 8-K dated July 15, 1993) 5. Inapplicable 6. Inapplicable 7. Inapplicable 8. Inapplicable
- -------- * In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0- 14246. EX-1
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 9. None 10.1 1981 Stock Option Plan for Non-Employee Directors of registrant (incorporated by reference to Exhibit 19 to registrant's report on Form 10-Q for the quarter ended June 30, 1982) 10.2 WMX Technologies, Inc. 1982 Stock Option Plan, as amended to March 11, 1988 (incorporated by reference to Exhibit 10.3 to registrant's 1988 annual report on Form 10-K) 10.3 Deferred Director's Fee Plan, as amended (incorporated by reference to Exhibit 10.3 to registrant's 1990 annual report on Form 10-K) 10.4 Director's Phantom Stock Plan (incorporated by reference to Exhibit 10.9 to registrant's 1984 annual report on Form 10-K) 10.5 Amended and Restated Employment Agreement, dated as of June 17, 1996, by and between the registrant and Phillip B. Rooney (incorporated by reference to Exhibit 10.1 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) 10.6 WMX Technologies, Inc. Corporate Incentive Bonus Plan (incorporated by reference to Exhibit B to the registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) 10.7 WMX Technologies, Inc. Supplemental Executive Retirement Plan, as amended and restated as of January 24, 1995 (incorporated by reference to Exhibit 10.7 to registrant's 1995 annual report on Form 10-K) 10.8 WMX Technologies, Inc. Long Term Incentive Plan, as amended and restated as of January 27, 1994 (incorporated by reference to Exhibit A to the registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders) 10.9 Supplemental Retirement Benefit Agreement, dated as of January 1, 1989, by and between the registrant and Peter H. Huizenga (incorporated by reference to Exhibit 10.16 to Post-Effective Amendment No. 2 to registrant's registration statement on Form S-1, Registration No. 33- 13839) 10.10 Chemical Waste Management, Inc. 1986 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 to Chemical Waste Management, Inc.'s 1989 annual report on Form 10-K) 10.11 WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus Plan (incorporated by reference to Exhibit 10.11 to registrant's 1995 Annual Report on Form 10-K) 10.12 Amendment No. 1 to the WMX Technologies, Inc. Non-Qualified Profit Sharing and Savings Plus Plan 10.13 WMX Technologies, Inc. Director's Charitable Endowment Plan (incorporated by reference to Exhibit 10.20 to registrant's 1989 annual report on Form 10-K) 10.14 Supplemental Retirement Benefit Agreement dated as of January 1, 1991 by and between registrant and Donald F. Flynn (incorporated by reference to Exhibit 10.17 to registrant's 1990 annual report on Form 10-K) 10.15 Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. as amended through June 10, 1991 (incorporated by reference to Exhibit 19.03 to the report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) 10.16 1988 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1988 Stock Plan") (incorporated by reference to Exhibit 28.1 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523)
- -------- * In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0- 14246. EX-2
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 10.17 Amendments dated as of September 7, 1990 to the WTI 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.18 Amendment dated as of November 1, 1990 to the WTI 1988 Stock Plan (incorporated by reference to Exhibit 19.04 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.19 1986 Stock Plan for Executive Employees of Wheelabrator Technologies Inc. and its subsidiaries (the "WTI 1986 Stock Plan") (incorporated by reference to Exhibit 28.2 to Amendment No. 1 to the registration statement of Wheelabrator Technologies Inc. on Form S-8, Registration No. 33-31523) 10.20 Amendment dated as of November 1, 1990 to the WTI 1986 Stock Plan (incorporated by reference to Exhibit 19.03 to the 1990 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.21 Employment Agreement dated as of April 1, 1995 between the registrant and D. P. Payne (incorporated by reference to Exhibit 10.21 to registrant's 1995 annual report on Form 10-K) 10.22 WMX Technologies, Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit 10.31 to registrant's registration statement on Form S-1, Registration No. 33-44849) 10.23 WMX Technologies, Inc. Amended and Restated 1992 Stock Option Plan for Non-Employee Directors 10.24 Wheelabrator Technologies Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit 10.45 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.25 Deferred Director's Fee Plan of Wheelabrator Technologies Inc. adopted June 10, 1991 (incorporated by reference to Exhibit 19.02 to the quarterly report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended June 30, 1991) 10.26 Waste Management International plc Share Option Plan (incorporated by reference to Exhibit 10.1 to the registration statement on Form F-1 of Waste Management International plc, Registration No. 33-46511) 10.27 Amendment dated as of December 6, 1991 to the WTI 1986 Stock Plan (incorporated by reference to Exhibit 19.01 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.28 Amendment dated as of December 6, 1991 to the WTI 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.29 Amendment dated as of December 6, 1991 to the Restricted Unit Plan for Non-Employee Directors of Wheelabrator Technologies Inc. (incorporated by reference to Exhibit 19.05 to the 1991 annual report on Form 10-K of Wheelabrator Technologies Inc.) 10.30 First Amended and Restated International Business Opportunities Agreement by and among registrant, Chemical Waste Management, Inc., Wheelabrator Technologies Inc., Waste Management International, Inc., Waste Management International plc and Rust International Inc., dated as of January 1, 1993 (incorporated by reference to Exhibit 28 to the registration statement on Form S-3 of Wheelabrator Technologies Inc., Registration No. 33-59606)
- -------- * In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0- 14246. EX-3
NUMBER AND DESCRIPTION OF EXHIBIT* ---------------------------------- 10.31 Amendment dated as of January 28, 1994 relating to the International Business Opportunities Agreement (incorporated by reference to Exhibit 10.19 to the 1993 annual report on Form 10-K of Chemical Waste Management, Inc.) 10.32 Chemical Waste Management, Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit 10.19 to the 1991 annual report on Form 10-K of Chemical Waste Management, Inc.) 10.33 Amendment dated as of July 10, 1995 to the International Business Opportunities Agreement (incorporated by reference to Exhibit 10 to the quarterly report on Form 10-Q of Wheelabrator Technologies Inc. for the quarter ended September 30, 1995) 10.34 Employment Agreement dated as of August 15, 1996 between the registrant and James E. Koenig (incorporated by reference to Exhibit 10.2 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) 10.35 Employment Agreement dated as of August 15, 1996 between the registrant and Herbert A. Getz (incorporated by reference to Exhibit 10.3 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) 10.36 Restricted Stock Agreement dated as of August 15, 1996 between the registrant and James E. Koenig (incorporated by reference to Exhibit 10.4 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) 10.37 Restricted Stock Agreement dated as of August 15, 1996 between the registrant and Herbert A. Getz (incorporated by reference to Exhibit 10.5 to registrant's report on Form 10-Q for the quarter ended September 30, 1996) 10.38 Letter Agreement dated as of February 17, 1997 between the registrant and Phillip B. Rooney 10.39 WMX Technologies, Inc. 1997 Equity Incentive Plan (incorporated by reference to Exhibit A to the registrant's Proxy Statement for its 1997 Annual Meeting of Stockholders) 11. None 12. Computation of ratio of earnings to fixed charges 13.1 Management's Discussion and Analysis of Results of Operations and Financial Condition 13.2 Financial Statements, Footnotes and Report of Independent Public Accountants 14. Inapplicable 15. Inapplicable 16. None 17. Inapplicable 18. None 19. Inapplicable 20. Inapplicable 21. List of subsidiaries of registrant 22. Inapplicable 23. Consent of Independent Public Accountants 24. None 25. Inapplicable 26. Inapplicable 27. Financial Data Schedule 28. None
- -------- * In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 1-7327, Chemical Waste Management, Inc.'s file number under that Act was 1-9253 and Wheelabrator Technologies Inc.'s file number under that Act is 0- 14246. EX-4 EX-3.2 2 BY-LAWS EXHIBIT 3.2 WMX TECHNOLOGIES, INC. ______________________________ BY-LAWS ______________________________ AMENDED AND RESTATED AS OF: January 30, 1997 ARTICLE I OFFICES SECTION 1. DELAWARE OFFICE. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for the election of directors shall be held in the Village of Oak Brook, State of Illinois, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be held on the second Friday in May if not a legal holiday, and if a legal holiday, then on the next business day following, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which the stockholders shall elect directors as provided in the restated certificate of incorporation, and transact such other business as may properly be brought before the annual meeting (a) in accordance with applicable statutes, (b) by or at the direction of the board of directors or (c) by any stockholder (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the procedures set forth in this Section 2. For business properly to be brought before an annual meeting of stockholders by a stockholder pursuant to this Section 2, the stockholder must have given timely notice thereof in proper written form to the secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event -------- ------- that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public announcement of the date of the annual meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. To be in proper written form, a stockholder's notice to the secretary shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business; (iii) the class and number of shares of capital stock of the Corporation which are owned by the stockholder as of the record date for the annual meeting; (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of the stockholder in such business; and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. The chairman of the annual meeting shall have the sole authority to determine whether business was properly brought before the annual meeting in accordance with the provisions of this Section 2 and, if the chairman should determine that such business was not so properly brought, he or she shall so declare to the annual meeting, and any such business not properly brought before the annual meeting shall not be transacted. For purposes of this Section 2, "public announcement" shall mean disclosure in a press release issued to one or more national financial or general news services, including without limitation the Dow Jones News Service or Associated Press, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 2 SECTION 3. ANNUAL MEETING NOTICE. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than 60 days before the date of the meeting. SECTION 4. STOCKHOLDER MEETING LIST. The secretary of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present for any purpose germane to the meeting. SECTION 5. INSPECTORS. The board of directors shall, in advance of any meeting of stockholders, appoint one or more inspectors of election and may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If any inspector or alternate so appointed shall be unwilling or unable to serve, the chairman of the meeting shall appoint the necessary inspector or inspectors. The inspectors so appointed, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of inspectors with strict impartiality and according to the best of their ability, and the oath so taken shall be subscribed by them. Such inspectors shall: (a) determine the number of shares of capital stock of the Corporation outstanding and the voting power of each; (b) determine the shares represented at the meeting, the existence of a quorum, and the validity of proxies and ballots; (c) count and tabulate all votes and ballots; (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots; and (f) do such acts as are proper to conduct the election or vote with fairness to all stockholders. The date and time of the opening and closing of the polls for each matter upon which stockholders will vote at a meeting shall be announced at the meeting, and no ballots, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of 3 the polls. No director or candidate for the office of director shall act as an inspector of election of directors. Inspectors need not be stockholders. SECTION 6. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the restated certificate of incorporation, may be called by the chairman of the board, the president or the secretary or by resolution of the board of directors, subject to the provisions of Article Sixth of the restated certificate of incorporation, and shall be called by the chairman of the board, president or secretary at the request in writing of a majority of the board of directors, subject to the provisions of Article Sixth of the restated certificate of incorporation. SECTION 7. SPECIAL MEETING NOTICE. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. SECTION 8. SPECIAL MEETING PURPOSE. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. SECTION 9. QUORUM. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the restated certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 4 SECTION 10. VOTING. (a) When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question (other than the election of directors) brought before such meeting, unless the question is one upon which by express provision of the General Corporation Law of the State of Delaware or of the restated certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. (b) Each share of common stock shall entitle the holder thereof to one vote, in person or by proxy, at any and all meetings of the stockholders of the Corporation, on all propositions before the meeting. No proxy shall be voted or acted upon after three years from its date unless the proxy provides for a longer period. SECTION 11. MEETING PROCEDURE. The chairman of any meeting of stockholders shall have full and complete authority over matters of procedure and there shall be no appeal from the ruling of the chairman. If disorder or any other event should arise which prevents continuation of the legitimate business of the meeting, the chairman may announce the adjournment of the meeting; and upon his or her doing so, the meeting is immediately adjourned. The chairman may ask or require anyone who is not a bona fide stockholder or holder of a valid proxy, or who is disrupting or inhibiting the orderly conduct of the meeting, to leave the meeting. ARTICLE III BOARD OF DIRECTORS SECTION 1. NUMBER. The number of directors which shall constitute the whole board shall be thirteen but shall be reduced automatically to twelve immediately prior to the election of directors at the annual meeting of stockholders in 1997. Only directorships with terms expiring in any year (as provided in Article Fifth of the restated certificate of incorporation) shall be filled at the annual meeting of stockholders in that year. Directors shall be at least 21 years of age and need not be stockholders. 5 SECTION 2. ELECTION, TERM AND VACANCIES. At each meeting of stockholders for the election of directors at which a quorum is present, the persons receiving a plurality of the votes cast shall be elected directors. Each director shall serve until the annual meeting of stockholders for the year in which his term expires and until his successor is duly elected and qualified, subject, however, to his prior death, retirement, resignation or removal for cause. Should a vacancy occur or be created, whether arising through death, retirement, resignation or removal of a director for cause, or through an increase in the number of directors of any class, such vacancy shall be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director so elected to fill a vacancy shall serve for the then present term of office of the class of directors to which he was elected. Subject to the provisions of Article IX of these by-laws, if there are no directors in office, then an election may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. SECTION 3. NOMINATIONS. Nominations for any election of a director may be made by the board of directors, a committee appointed by the board or by any stockholder entitled to vote generally in the election of directors (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the procedures set forth in this Section 3. All nominations by stockholders must be made pursuant to timely notice in proper written form to the secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is -------- ------- called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public 6 announcement of the date of the annual meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. To be in proper written form, such stockholder's notice shall set forth in writing (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is or would be required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder and such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder, (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that is or would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Notwithstanding anything in this Section 3 to the contrary, in the event that the number of directors to be elected to the board of directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased board of directors at least seventy (70) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 3 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation. At the request of the board of directors, any person nominated by the board, or a committee appointed by the board, for election as a director shall furnish to the secretary of the Corporation the information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this 7 Section 3, and the defective nomination shall thereupon be disregarded. For purposes of this Section 3, "public announcement" shall mean disclosure in a press release issued to one or more national financial or general news services, including without limitation the Dow Jones News Service or Associated Press, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. SECTION 4. POWERS. The business of the Corporation shall be managed by its board of directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the restated certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. SECTION 5. PLACE OF MEETINGS. The board of directors of the Corporation and committees thereof may hold meetings, both regular and special, either within or without the State of Delaware. SECTION 6. REGULAR MEETINGS. Regular meetings of the board of directors or any committee thereof may be held without notice at such time and at such place as shall from time to time be determined by the board or such committee. SECTION 7. SPECIAL MEETINGS. Special meetings of the board or committees thereof may be called by the chairman of the board or, in the case of a committee meeting, by the committee chairman on one day's notice to each director, either personally or by mail, telegram, telex, or facsimile transmission; special meetings of the board shall be called by the chairman of the board or secretary in like manner and on one day's notice on the written request of two directors. SECTION 8. QUORUM. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the restated certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting 8 from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 9. WRITTEN CONSENT. Unless otherwise restricted by the restated certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. SECTION 10. TELEPHONIC MEETINGS. Unless otherwise restricted by the restated certificate of incorporation, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. SECTION 11. COMMITTEES. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, provided, however, that in the event of the absence or disqualification of any member and alternate member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member or alternate member. Any such committee, to the extent provided in the resolution designating such committee and not limited by the General Corporation Law of the State of Delaware, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. A resolution passed by a majority of the whole board which designates a committee or 9 committees as provided above may be amended or repealed only by a majority of the whole board. Unless its authorizing resolution otherwise specifies, two members of a committee shall be required to constitute a quorum, except that only one member shall be required in the case of any committee having only one member. SECTION 12. COMMITTEE MINUTES. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. SECTION 13. COMPENSATION. The directors may be paid their expenses if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors, a stated salary as director, or any combination thereof. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like expenses and compensation for attending committee meetings. SECTION 14. RESIGNATION. A resignation of a director shall be effective upon receipt by the chairman of the board of a signed written notice of such resignation, or, should such notice contain a specified date of resignation, at such specified date. No acceptance by the board of directors is required for such resignation to be effective. ARTICLE IV NOTICES SECTION 1. FORM AND TIMING. Whenever any notice is required to be given to any director or stockholder pursuant to the provisions of the General Corporation Law of the State of Delaware, the restated certificate of incorporation, these by-laws or the resolutions or other governing provisions of a committee of the board of directors, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given on the second business day next following the day when the same shall be deposited in the United 10 States mail. Notice to a director may also be given by telegram addressed to such director at such address, and such notice shall be deemed to be given on the business day next following the day of the delivery of such notice for transmission to such director. Notice to a director may also be given by telex or facsimile transmission to such number as shall appear on the records of the Corporation as the number of such director and shall be deemed to be given on the day of transmission. SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given under the provisions of the General Corporation Law of the State of Delaware, the restated certificate of incorporation, these by-laws or the resolutions or other governing provisions of a committee of the board of directors, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance by a person at a meeting shall constitute a waiver of the required notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE V OFFICERS SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the Corporation shall be chosen by the board of directors and shall be a chairman of the board, a president, one or more vice presidents (the number and designation thereof to be determined by the board of directors), a secretary, a treasurer, a controller, a general counsel, and such assistant secretaries, assistant treasurers or other officers, including, without limitation, one or more vice chairmen of the board, as may be elected or appointed by the board of directors. Any number of offices may be held by the same person, unless the restated certificate of incorporation or these by-laws otherwise provide. SECTION 2. ANNUAL ELECTION. The board of directors, at its meeting held in conjunction with or after each annual meeting of stockholders, shall choose a chairman of the board, a president, one or more vice presidents, a secretary, a treasurer, a controller, a general counsel and may choose one or more vice chairmen of the board, assistant officers or other officers as it may deem advisable. 11 SECTION 3. APPOINTMENT OF OTHER OFFICERS. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. SECTION 4. COMPENSATION. The salaries and other compensation of all officers (other than assistant officers, unless the board otherwise determines) and agents of the Corporation elected by the board shall be as fixed by the board of directors. SECTION 5. TERM, REMOVAL AND VACANCIES. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer or agent elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board. Any vacancy occurring in any office of the Corporation shall be filled by the board of directors. SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board shall preside at all meetings of the stockholders and the board of directors. He or she may sign certificates for shares of the Corporation and any deeds, mortgages, bonds, contracts or other instruments which the board of directors has authorized to be executed, whether or not under the seal of the Corporation, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these by-laws to some other officer or agent of the Corporation. The chairman of the board shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. SECTION 7. VICE CHAIRMAN (OR VICE CHAIRMEN) OF THE BOARD. In the absence of the chairman of the board or in the event of his or her inability or refusal to act, the vice chairman of the board, if any (or in the event there may be more than one vice chairman of the board, the vice chairman of the board, in the order designated, or in the absence of any designation, then in the order of their election), shall perform the duties of the chairman of the board, and when so acting, shall have all the powers of and be subject to all the restrictions upon the chairman of the board. He or she may sign certificates for shares of the Corporation and any deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, whether or not under the seal 12 of the Corporation, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these by-laws to some other officer or agent of the Corporation. The vice chairmen of the board shall perform such other duties and have such other powers as the board of directors or the chairman of the board may from time to time prescribe. SECTION 8. PRESIDENT. The president shall be the chief executive officer of the Corporation. He or she shall have responsibility for the general and active management of the business of the Corporation and shall see that all orders and resolutions of the board of directors are carried into effect. He or she may sign certificates for shares of the Corporation and any deeds, mortgages, bonds, contracts or other instruments which the board of directors has authorized to be executed, whether or not under the seal of the Corporation, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these by-laws to some other officer or agent of the Corporation. In the absence of the chairman of the board and the vice chairman (or, if there be more than one, the vice chairmen) of the board, or in the event of their inability or refusal to act, the president shall perform the duties of the chairman of the board, and when so acting, shall have all the powers of and be subject to all the restrictions upon the chairman of the board. The president shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. SECTION 9. VICE PRESIDENTS. In the absence of the president or in the event of his or her inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. A vice president who is appointed as such with respect to a particular area of responsibility or function of the Corporation shall, subject to the authority of the chairman and the president, perform all duties and have all authority pertaining to the general and active management of such area or function and shall see that all orders and resolutions of the board of directors pertaining to such area or function are carried into effect. The vice presidents shall perform such other duties and have such other powers as the board of directors, the chairman of the board or the president may from time to time prescribe. 13 SECTION 10. SECRETARY. The secretary shall: (a) keep the minutes of stockholders, board of directors and board of directors committee meetings in one or more books provided for the purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents, the execution of which on behalf of the Corporation under its seal is necessary or desirable; (d) keep or cause to be kept a register of the mailing address of each stockholder which shall be furnished to the secretary or any transfer agent of the Corporation by such stockholder; (e) have authority to sign with the chairman of the board, a vice chairman of the board, the president, or a vice president, certificates for shares of the Corporation, the issue of which shall have been authorized by resolution of the board of directors; (f) have general charge of the stock transfer books of the Corporation; (g) attest to the genuineness of the signature on behalf of the Corporation of any officer or agent of the Corporation on any deeds, mortgages, bonds, contracts or other instruments; (h) certify the authenticity of any instrument or record of the Corporation; and (i) in general perform all duties incident to the office of secretary and such other duties as the board of directors, the chairman of the board or the president may from time to time prescribe. SECTION 11. TREASURER. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the board of directors shall determine. He or she shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation, and the deposit of all moneys in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with resolutions of the board of directors; (b) have authority to sign with the chairman of the board, a vice chairman of the board, the president or a vice president, certificates for shares of the Corporation, the issue of which shall have been authorized by resolution of the board of directors; and (c) in general perform all the duties incident to the office of treasurer and such other duties as the board of directors, the chairman of the board or the president may from time to time prescribe. SECTION 12. CONTROLLER. The controller shall be the principal accounting officer of the Corporation and shall supervise the preparation and maintenance, on a current basis, of such accounting books, records and reports as may be necessary for directors, officers and employees of the Corporation to discharge their duties or as may be required by law. In general he or she shall perform 14 all duties incident to the office of controller and other duties as the board of directors, the chairman of the board or the president may from time to time prescribe. SECTION 13. GENERAL COUNSEL. The general counsel shall be the chief legal adviser of the Corporation as to all matters affecting the Corporation or its business. In general he or she shall perform all the duties incident to the office of general counsel and such other duties as the board of directors, the chairman of the board or the president may from time to time prescribe. Section 14. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries as thereunto authorized by the board of directors may sign with the chairman of the board, a vice chairman of the board, the president, or a vice president certificates for shares of the Corporation, the issue of which shall have been authorized by a resolution of the board of directors, may attest to the genuineness of the signature on behalf of the Corporation of any officer or agent of the Corporation on any deeds, mortgages, bonds, contracts or other instruments and may certify the authenticity of any instrument or record of the Corporation. The assistant treasurers may sign with the chairman of the board, a vice chairman of the board, the president or a vice president, certificates for shares of the Corporation, the issue of which shall have been authorized by resolution of the board of directors. The assistant treasurers shall respectively, if required by the board of directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine. The assistant secretaries and assistant treasurers in general shall perform such duties as from time to time may be prescribed by the secretary or the treasurer, respectively, or by the board of directors, the chairman of the board or the president. ARTICLE VI CAPITAL STOCK SECTION 1. CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the chairman or a vice chairman of the board, the president or a vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation, representing the number of shares owned by him or her in the Corporation. The board of directors may by resolution, subject to applicable provisions of the 15 General Corporation Law of the State of Delaware, determine that some or all of any or all classes or series of stock shall be uncertificated shares. SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. LOST CERTIFICATES. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificates to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation bond in such sum as it may direct as indemnity or otherwise indemnify the Corporation against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, and upon delivery to the Corporation or the transfer agent of the Corporation of proper evidence of succession, assignment or authority to transfer any uncertificated shares of the Corporation, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto and cancel the old certificate, if the shares are represented by a certificate, and record the transaction upon its books. SECTION 5. RECORD DATES. In order that the Corporation may determine the stockholders entitled 16 to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. SECTION 6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to vote as such owner and to receive notices in respect of meetings of stockholders and other matters, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the General Corporation Law of the State of Delaware. ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation, subject to the provisions of the restated certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the restated certificate of incorporation. SECTION 2. RESERVES. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. 17 SECTION 3. CHECKS. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate or as may be designated pursuant to procedures approved by the board of directors. SECTION 4. FISCAL YEAR. The fiscal year of the Corporation begins on the first day of January and ends on the last day of December in each calendar year. SECTION 5. SEAL. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced. SECTION 6. INDEMNIFICATION. Each person who at any time is or shall have been a director, officer or employee of the Corporation, or is or shall have been serving at the request of the Corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise, and his or her heirs, executors and administrators, shall be indemnified by the Corporation in accordance with and to the full extent authorized by the General Corporation Law of the State of Delaware, as may be amended from time to time. The foregoing right of indemnification shall not be deemed exclusive of other rights to which any director, officer, employee, agent or other person may be entitled in any capacity as a matter of law or under any by-law, agreement, vote of stockholders or directors, or otherwise. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against or incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this by-law or the General Corporation Law of the State of Delaware. 18 ARTICLE VIII AMENDMENTS SECTION 1. These by-laws may be altered, amended or repealed, or new by- laws may be adopted, by the stockholders or by the board of directors if such business is properly brought before any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if, in the case of a special meeting, notice of such alteration, amendment, repeal or adoption of new by-laws is contained in the notice of such special meeting. ARTICLE IX EMERGENCY BY-LAWS SECTION 1. EMERGENCY MANAGEMENT COMMITTEE. The board of directors, by resolution, may provide for an Emergency Management Committee and appoint or designate the manner in which membership of the Committee shall be determined. To the extent provided in said resolution, such Committee shall have and may exercise the powers of the board of directors in the management of the business and affairs of the Corporation, and shall thereby be deemed to constitute the board of directors of the Corporation, only during any interval commencing when the board of directors shall be unable to function by reason of vacancies occurring due to death, incapacity or catastrophe or other similar emergency condition and there shall be no member or members of the board remaining and able to fill such vacancies pursuant to Section 2 of Article III hereof and terminating when a board of directors has been elected by the stockholders of the Corporation and shall have been duly qualified. Notwithstanding the foregoing, such Committee shall, during the time it is authorized to function as provided herein, have the power to appoint such temporary officers to fill existing vacancies as the circumstances may require and to authorize the seal of the Corporation to be affixed to all papers which may require it. SECTION 2. MEETINGS, QUORUM AND VACANCIES. The Emergency Management Committee shall meet as promptly as possible after the occurrence of the event herein described which would activate the Committee and at such subsequent time or times as it may designate until a board of directors has been duly elected by the stockholders and qualified. Such Committee shall make its own rules of 19 procedure except to the extent otherwise provided by resolution of the board. A majority of the Committee shall constitute a quorum. Any vacancy occurring in said Committee caused by resignation, death or other incapacity shall be filled by a majority of the remaining members of the Committee and any member so chosen shall serve until a board of directors has been duly elected by the stockholders and qualified. SECTION 3. POWERS OF CHAIRMAN. During such times as the Emergency Management Committee shall be required to function pursuant to the provisions hereof, the chairman of said Committee shall function as and have the powers of the chief executive officer of the Corporation and shall preside at all meetings of the stockholders and the Emergency Management Committee. The chairman of the Emergency Management Committee shall have and exercise, subject to the direction of the Emergency Management Committee, general charge and supervision over the business and affairs of the Corporation. SECTION 4. OTHER BY-LAW PROVISIONS. To the extent not inconsistent with the provisions of this Article IX, all other provisions of these by-laws shall remain in effect during the interval in which the Emergency Management Committee shall be required to function pursuant to the provisions hereof. 20 EX-10.12 3 AMEND NO. 1 NON QUALIFIED PROFIT SHARING & SAVINGS EXHIBIT 10.12 AMENDMENT NO. 1 TO THE WMX TECHNOLOGIES, INC. NON-QUALIFIED PROFIT SHARING AND SAVINGS PLUS PLAN WHEREAS, WMX Technologies, Inc., a Delaware corporation (the "Corporation"), has maintained the Non-Qualified Profit Sharing and Savings Plus Plan (the "Plus Plan") since January 1, 1994, and subsequently amended and restated the Plus Plan as of January 1, 1996; and WHEREAS, pursuant to Subsection 5.3 of Section V of the Plus Plan, the Corporation reserves the right to amend the Plan at any time; and WHEREAS, the Corporation now desires to amend the Plus Plan to allow participants to elect the manner in which their voluntary deferrals are deemed to be invested in the same funds as are available under the WMX Technologies, Inc. Profit Sharing and Savings Plan (the "Qualified Plan"). NOW, THEREFORE, THE PLUS PLAN IS HEREBY AMENDED AS FOLLOWS: I Effective January 1, 1997, the Plus Plan be, and hereby is, amended as follows: (a) Subsection 4.5(a) is amended by substituting the following subparagraph (a); "4.5 Deemed Investment. (a) A Participant's Profit Sharing Plus Account ----------------- shall be deemed to be invested, as the Participant elects, in the same funds as are available with respect to his Profit Sharing Account. 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 such a manner." (b) Subsection 4.5(b) is amended by substituting the following subparagraph (b); "(b) Participant's Voluntary Deferral Account shall be deemed to be invested, as the Participant elects, in the same funds as are available with respect to his Before-Tax Account. 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 such a manner." II Except as set forth herein, the provisions of the Plus Plan shall remain in effect. IN WITNESS WHEREOF, this Amendment has been executed on this 31th day of December 1996, by a duly authorized officer of the Corporation. /s/ Herbert A. Getz --------------------------------------- Herbert A. Getz, Senior Vice President and Secretary EX-10.23 4 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS EXHIBIT 10.23 WMX TECHNOLOGIES, INC. 1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS As Amended and Restated as of January 1, 1997 1. STATEMENT OF PURPOSE. The principal purpose of this Stock Option Plan for Non-Employee Directors (the "Plan") is to benefit WMX TECHNOLOGIES, INC. (the "Company") and its subsidiaries through offering its directors who are not officers or full-time employees of the Company or any of its subsidiaries a favorable opportunity to become holders of stock in the Company, thereby giving them a stake in the growth and prosperity of the Company, in order to enable them to represent the viewpoint of other stockholders of the Company more effectively and to encourage them to continue serving as directors of the Company. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors, whose interpretation of the terms and provisions of the Plan and whose determination of matters pertaining to options granted under the Plan shall be final and conclusive. 3. ELIGIBILITY. Options shall be granted under this Plan only to members of the Board of Directors who are not officers or full-time employees of the Company or any of its subsidiaries (each such director receiving options granted under the Plan and each other person entitled to exercise an option granted under the Plan is referred to herein as an "Optionee," provided that the term "Optionee" shall not include "Option Transferees," as defined in Section 9 hereof). No person who is the holder of an option granted under the Waste Management, Inc. 1981 Stock Option Plan for Non-Employee Directors, the Waste Management, Inc. 1982 Stock Option Plan, the WMX Technologies, Inc. 1992 Stock Option Plan or the WMX Technologies, Inc. 1997 Equity Incentive Plan or who has purchased shares upon the exercise of such an option shall be eligible for a grant of options under this Plan. 4. GRANTING OF OPTIONS. (a) An option under which a total of 3,000 shares of the common stock of the Company may be purchased from the Company shall be automatically granted to each director of the Company who is not a director of the Company as of January 1, 1997 upon his or her initial election or appointment as a director of the Company after January 1, 1997 and again on each of the first four anniversaries of his or her initial election or appointment, provided such director is eligible under the terms of the Plan to be granted such options, and provided further no person shall be granted options to acquire more than 15,000 shares pursuant to this Plan. The aggregate number of shares which shall be available to be so optioned under this Plan shall be 150,000 shares. Such number of shares, and the number of shares subject to options outstanding under the Plan, shall be subject in all cases to adjustment as provided in Paragraph 10 hereof. No option shall be granted under the Plan subsequent to January 1, 2002. (b) Notwithstanding any of the foregoing to the contrary, in the event an option expires or is terminated or canceled unexercised as to any shares, such released shares may again be optioned. Shares subject to options may be made available from unissued or reacquired shares of common stock. (c) Nothing contained in the Plan or in any option granted pursuant thereto shall in itself confer upon any Optionee any right to continue serving as a director of the Company or interfere in any way with any right of the Board of Directors or stockholders of the Company to remove such director pursuant to the restated certificate of incorporation or by-laws of the Company or applicable law. 5. OPTION PRICE. Subject to adjustment under Paragraph 10 hereof, the option price shall be the fair market value, on the date as of which the option is granted, of the stock subject to the option, which shall be, for purposes of this Paragraph, the average of the closing sales prices of the Company's common stock on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest Edition) on each of the five trading days immediately preceding the date as of which the option is granted. 6. DURATION OF OPTIONS. Subject to the provisions of Paragraph 8 hereof, each option shall be for a term of ten years. Each option shall become exercisable on the first anniversary of the date of grant. 7. EXERCISE OF OPTION. (a) An option may be exercised by giving written notice to the Company, attention of the Secretary, specifying the number of shares to be purchased, accompanied by the full purchase price for the shares to be purchased either in cash, by check, by a promissory note in the form specified by the Company and payable to the Company 15 business days after the date of exercise of the option, by shares of the Company's common stock or by a combination of these methods of payment. For this purpose, the per share value of the Company's common stock shall be the fair market value on the date of exercise (or if the date of exercise is not a trading day on the trading day next preceding the date of exercise), which shall be, for purposes of this Paragraph, the average of the highest and lowest sales prices of the Company's common stock on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest Edition) on such date. (b) At the time of any exercise of any option, the Company may, if it shall determine it necessary or desirable for any reason, require the Optionee (or his or her heirs, legatees or legal representatives, as the case may be) as a condition upon the exercise thereof, to deliver to the Company a written representation of present intention to purchase the shares for investment and not for distribution. In the event such representation is required to be delivered, an appropriate legend may be placed upon each certificate delivered to the Optionee upon his or her exercise of part or all of the option and a stop transfer order may be placed with the transfer agent. Each option shall also be subject to the requirement that, if at any time the Company determines, in its discretion, that the listing, registration or qualification of the shares subject to the option upon any securities exchange or under any state, federal or foreign law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares thereunder, the option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 8. TERMINATION--EXERCISE THEREAFTER. (a) In the event an Optionee ceases to be a director of the Company for any reason other than death, permanent disability, resignation or retirement, such Optionee's option, and any options transferred to an Option Transferee by such Optionee, shall expire and all rights to purchase shares pursuant thereto shall terminate immediately. (b) In the event of death or permanent disability (as that term is defined in the Social Security Act, as now in effect or as it shall be subsequently amended), the option may be exercised in full, without regard to any times of exercise established under Paragraph 6 hereof, by the Optionee (or, if the Optionee is not living, by the Optionee's heirs, legatees, or legal representatives, as the case may be,) or the Option Transferee during its specified term. In the event of resignation or retirement, the option may be exercised by the Optionee (or, if the Optionee dies within three years after such termination, by the Optionee's heirs, legatees, or legal representatives, as the case may be,) or the Option Transferee at any time during its specified term prior to three years after the date of such resignation or retirement, but only to the extent the option was exercisable at the date of such resignation or retirement. 9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the Optionee otherwise than by will or the laws of descent and distribution and each option shall be exercisable during an Optionee's lifetime only by the Optionee or the Optionee's legal representative; provided that the Board of Directors or any authorized committee thereof may (i) grant options that are transferable, without payment of consideration, to immediate family members of the Optionee or to trusts or partnerships for 2 such family members or to charitable organizations (each an "Option Transferee"), subject to such procedures as the Company deems appropriate for administration and (ii) amend outstanding options to provide for such transferability. 10. ADJUSTMENT. The number of shares subject to the Plan and to options granted under the Plan shall be adjusted as follows: (a) in the event that the Company's outstanding common stock is changed by any stock dividend, stock split or combination of shares, the number of shares subject to the Plan and to options granted thereunder shall be proportionately adjusted, (b) in the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there shall be substituted on an equitable basis as determined by the Board of Directors, for each share of common stock then subject to the Plan and for each share of common stock then subject to an option granted under the Plan, the number and kind of shares of stock, other securities, cash or other property to which the holders of common stock of the Company will be entitled pursuant to the transaction, and (c) in the event of any other relevant change in the capitalization of the Company, the Board of Directors shall provide for an equitable adjustment in the number of shares of common stock then subject to the Plan and to each share of common stock then subject to an option granted under the Plan. In the event of any such adjustment, the exercise price per share shall be proportionately adjusted. 11. CHANGE IN CONTROL. (a) Any option granted under the Plan prior to the date of a "Change in Control" shall be immediately exercisable in full on such date, without regard to any times of exercise established under Paragraph 6 hereof. The term "Change in Control" shall mean the occurrence, at any time during the specified term of an option granted under the Plan, 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 3 directors of the Company then still in office who were directors of the Company at the beginning of any such period. (b) Notwithstanding any other provisions in the Plan, prior to the passage of one year from and after any Change in Control, each Optionee or Option Transferee shall have the right to require the Company (or, if the Company is not the survivor of a merger, consolidation or reorganization with an Acquiror, the Acquiror) to purchase from him or her any or all unexercised options granted under the Plan at a purchase price equal to (i) the excess of the fair market value per share over the option price multiplied by (ii) the number of option shares specified by the Optionee for purchase in a written notice to the Company (or, if the Company is not the survivor of a merger, consolidation or reorganization with an Acquiror, the Acquiror), attention of the Secretary. (c) For purposes of Paragraph 11(b) above, "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 higher of (A) 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, on the principal market where such common stock is actively traded) on each of the five trading days immediately preceding the date the Optionee so notifies the Company or (B) 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, 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 (C) 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, the principal market where such security is actively traded) on each of the five trading days immediately preceding the date of the Termination Merger or (D) the amount determined pursuant to clause (c)(i)(B) of this Paragraph 11. The amount payable to each Optionee by the Company or Acquiror, as the case may be, shall be in cash or by certified check. 12. AMENDMENT OF PLAN. The Board of Directors of the Company or any authorized committee thereof may amend or discontinue the Plan at any time, provided, however, that the Plan may not be amended more than once every six months except to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules and regulations under each, and provided further, that no such amendment or discontinuance shall (a) without the consent of the Optionee change or impair any option previously granted, or (b) without the approval of the holders of a majority of the shares of voting common stock of the Company which vote in person or by proxy at a duly held stockholders' meeting, (i) increase the maximum number of shares which may be purchased by all eligible directors pursuant to the Plan, (ii) change the purchase price, or (iii) change the option period or increase the time limitations on the grant of options. 13. EFFECTIVE DATE. The Plan has been adopted and authorized by the Board of Directors for submission to the stockholders of the Company. If the Plan is approved by the affirmative vote of the holders of a majority of the shares of the voting stock of the Company which vote in person or by proxy at a duly held stockholders' meeting it shall be deemed to have become effective as of January 1, 1992. Options may be granted under the Plan prior, but subject, to approval of the Plan by stockholders of the Company and, in each such case, the date of grant shall be determined without reference to the date of approval of the Plan by the stockholders of the Company. 4 EX-10.38 5 EMPLOYMENT AGREEMENT EXHIBIT 10.34 February 17, 1997 Mr. Phillip B. Rooney President and Chief Executive Officer WMX Technologies, Inc. 3003 Butterfield Road Oak Brook, Illinois 60521 Dear Phil: This letter will set forth our understanding with respect to the implementation and application of the Amended and Restated Employment Agreement, dated as of June 7, 1996 (the "Agreement"), between you and WMX Technologies, Inc. (the "Company") in connection with your resignation as President and Chief Executive Officer of the Company. As a result of your resignation as President and Chief Executive Officer of the Company on February 17, 1997, this letter constitutes written notice, pursuant to Section 6(d) of the Agreement, of the Company's decision to terminate the Agreement. As a result of this notice, the "Term" of the Agreement shall be a five-year period ending February 17, 2002, unless earlier terminated in accordance with the terms of the Agreement. Also as provided in Section 6(d), you will immediately begin receiving cash compensation in an annual amount of $2,500,000, which will be paid on the same bi-weekly basis as you are currently being paid, such amounts being in lieu of all salary, bonuses, incentive or other performance based compensation for the remainder of the Term. It is appropriate, under the circumstances, to memorialize several additional points of agreement which we have reached in connection with your resignation as President and Chief Executive Officer of the Company. They are as follows: 1. Your resignation will not affect or impair your rights under the Company's Profit Sharing and Savings Plan or its Non-Qualified Profit Sharing and Savings Plus Plan, and the final date of the Term of the Agreement (as set forth above) will be considered as your Termination of Employment for the purpose of such Plans. 2. It is understood and agreed that your resignation is not, and shall not be construed to be a "voluntary termination" of employment by you as such term is used in Section 6(f) of the Agreement. 3. The Compensation and Stock Option Committee of the Board of Directors has acted to (a) accelerate the vesting of any unvested Company stock Mr. Phillip B. Rooney February 17, 1997 Page 2 options currently held by you and (b) establish that your retirement date, for purposes of the three year continued exerciseability rights provided to option holders who retire from the Company, shall be the final date of the Term of the Agreement, as set forth above. 4. For purposes of calculating the benefit due you under the SERP, as such term is defined in the Agreement, it is understood and agreed that you will be provided with additional participation, vesting and benefit credit for the period of time following the Term (as set forth above) during which you comply with the non-competition covenant set forth in Section 7 of the Agreement. It is understood and agreed, however, that in the event you elect to exercise your rights under the SERP to begin payments prior to the expiration of the Term of the Agreement or the expiration of the term of the non-competition covenant set forth in Section 7 thereof, you will receive no further vesting credit from the date on which you begin receiving SERP benefits. 5. The phrase "employee welfare benefit plans" as used in Section 6(d) of the Agreement is understood and agreed to refer to the Company's (a) medical, dental and vision care benefit plans, (b) life, business travel accident and accidental death and dismemberment insurance programs, and (c) short- term and long-term disability benefit plans, on such terms as such plans may from time to time be generally provided to employees of the Company. The provisions of Section 6(d) of the Agreement to the contrary notwithstanding, the Company will provide you, your current spouse and eligible dependent child with continued benefits under the Company's medical, dental and vision care benefit plans until the latest to occur of (i) the date of your sixty-fifth birthday, (ii) the date of your current spouse's sixty-fifth birthday or (iii) the date on which your dependent child shall no longer be eligible for dependent coverage under such plans, subject to the Company's rights to terminate such benefits for cause under Section 6(b) of the Agreement. 6. It is understood and agreed that during the Term, as set forth above, you will remain eligible to participate in the Company's matching gift programs, on such terms as such programs may from time to time be generally provided to employees of the Company. It is further understood and agreed that you will remain eligible for reimbursement of financial planning, estate planning, tax counseling and return preparation, and club dues expense in an amount not to exceed $50,000 annually (i.e., two percent of the annual cash compensation provided to you under the terms of the Agreement). Reimbursement of such expenses will be made upon submission by you of an expense report in such form as may from time to time be utilized by other corporate office employees of the Company. 7. It is understood and agreed that in order to facilitate your provision of consultative services as contemplated by Section 6(d) of the Agreement, the Company will pay directly, for the Term (as set forth above), for expenses associated with the Mr. Phillip B. Rooney February 17, 1997 Page 2 maintenance of an office for you located outside of any Company facility, such payment not to exceed $50,000 on an annual basis. 8. This will reconfirm our understanding that the phrase "annual bonus" as used in the final sentence of Section 3(c) of the Agreement is not intended to be included in the term "bonuses" as used in the second sentence of the final paragraph of Section 6(d) of the Agreement. I believe the foregoing accurately sets forth the understandings we have reached with respect to the implementation and application of the Agreement following your resignation as President and Chief Executive Officer. If such is the case, would you please so indicate by signing the acknowledgment set forth below. Very truly yours, WMX Technologies, Inc. /s/ Peer Pedersen Peer Pedersen Chairman, Compensation and Stock Option Committee Acknowledged and agreed this 17/th/ day of February, 1997 /s/ Phillip B. Rooney ------------------------------------------------------------ Phillip B. Rooney EX-12 6 COMPUTATION OF 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, ------------------------------------------------------------------------ 1992/(1)/ 1993/(2)(3)/ 1994/(3)/ 1995/(3)(4)/ 1996/(3)(5)/ ---- ---- ---- ---- ---- Income From Continuing Operations Before Income Taxes, Undistributed Earnings from Affiliated Companies, Minority Interest, and Cumulative Effect of Accounting Changes.................. $ 1,555.2 $ 778.4 $ 1,373.7 $ 1,185.3 $ 1,066.2 Interest Expense...................... 311.0 387.1 438.0 503.1 449.1 Capitalized Interest.................. (87.9) (100.6) (104.5) (81.5) (73.4) One-Third of Rents Payable in the Next Year.................... 44.7 48.5 53.9 56.8 51.4 Income From Continuing Operations Before Income Taxes, Undistributed Earnings from Affiliated Companies, Minority Interest, Cumulative Effect of Accounting Changes, Interest and One-Third of Rents.................. $ 1,823.0 $ 1,113.4 $ 1,761.1 $ 1,663.7 $ 1,493.3 =========== ========== =========== ============ =========== Interest Expense...................... $ 311.0 $ 387.1 $ 438.0 $ 503.1 $ 449.1 One-Third of Rents Payable in the Next Year........................... 44.7 48.5 53.9 56.8 51.4 ----------- ---------- ----------- ------------ ----------- Interest Expense plus One-Third of Rents............................ $ 355.7 $ 435.6 $ 491.9 $ 559.9 $ 500.5 =========== ========== =========== ============ =========== Ratio of Earnings to Fixed Charges............................. 5.13 to 1 2.56 to 1 3.58 to 1 2.97 to 1 2.98 to 1
____________ /(1)/ The results for 1992 include a non-taxable gain ($240.0 million before minority interest) resulting from the initial public offering of Waste Management International plc ("WM International") 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. /(2)/ 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. ("Rust") 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 ("CWM") thermal treatment business. /(3)/ In 1995, the Rust Board of Directors approved a plan to sell or otherwise discontinue Rust's process engineering, construction, specialty contracting and similar lines of business. During 1996, the sale of the industrial process engineering and construction business, based in Birmingham, Alabama, was completed. In 1996, Wheelabrator Technologies Inc. ("WTI") sold its water process systems and equipment manufacturing businesses, and Rust sold its industrial scaffolding business. WTI entered into an agreement to sell its water and wastewater facility operations and privatization business and Rust began implementing plans to exit its remaining domestic and international engineering and consulting business. CWM is also exiting its fuel business. /(4)/ The results for 1995 include a special charge ($140.6 million before tax) recorded by CWM, primarily to write off its investment in facilities and technologies that it abandoned because they do not meet customer service or performance objectives, and a special charge ($194.6 million before tax and minority interest) recorded by WM 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. Accordingly, these businesses have been segregated as discontinued operations in the financial statements since 1993. It is not practical to restate periods prior to the formation of Rust on January 1, 1993, for the discontinued operations. /(5)/ The results for 1996 include special charges ($107.9 million before minority interest) related to WM International's sale of its investment in Wessex Water Plc and a charge ($169.5 million before minority interest) to revalue its investments in France, Austria and Spain in contemplation of exiting all or part of these markets or forming joint ventures and to write off an investment in a hazardous waste disposal facility. Also in 1996, Waste Management, Inc. and CWM recorded special charges ($255.0 million before tax) for reengineering their finance and administrative functions and increasing reserves for certain litigation. /(6)/ Certain amounts have been restated to conform to 1996 classifications. EX-13.1 7 MANAGEMENT DISCUSSION AND ANALYSIS EXHIBIT 13.1 WMX Technologies, Inc. and Subsidiaries Management's Discussion and Analysis (Tables in millions except per share amounts) - -------------------------------------------------------------------------------- Results of Operations Consolidated Consolidated 1996 net income from continuing operations of WMX Technologies, Inc. and its subsidiaries ("WMX" or the "Company") was $477.8 million or $0.97 per share, compared with $618.2 million or $1.27 per share in 1995 and $742.3 million or $1.53 per share in 1994. Net income was $192.1 million or $0.39 per share in 1996, $603.9 million or $1.24 per share in 1995 and $784.4 million or $1.62 per share in 1994. Consolidated 1996 revenue from continuing operations was $9.19 billion compared with $9.05 billion in 1995 and $8.48 billion in 1994. Results for all periods were impacted by special charges, and for 1995 by costs related to the early extinguishment of Liquid Yield Option Notes put to the Company by the holders. The following table reconciles reported earnings per share from continuing operations to earnings excluding such items:
1994 1995 1996 - -------------------------------------------------------------------------------- Reported earnings per share from continuing operations $1.53 $1.27 $0.97 Special charges (see Note 14 to Consolidated Financial Statements)-- Waste Management, Inc. ("WMI") and Chemical Waste Management, Inc. ("CWM") -- 0.19 0.34 Waste Management International plc ("WM International") -- 0.23 0.44 Costs related to early extinguishment of debt -- 0.01 -- ----- ----- ----- Earnings per share from continuing operations excluding above items $1.53 $1.70 $1.75 ===== ===== =====
The Company has undergone a number of changes over the three-year period in response to changing conditions in its markets and in the environmental services industry. In January 1997, the Board of Directors approved a package of strategic initiatives designed to enhance shareholder value, the centerpiece of which is a focus solely on waste management services in domestic and selected international markets where the Company holds or can develop a strong competitive position. The Company plans to divest non-core and non-integrated assets valued at approximately $1.5 billion by the end of 1998, will reduce overhead and capital spending as well as streamline its organization, and will return the majority of available cash to shareholders through stock repurchase programs. To fully exploit its brand value and reflect the refocused strategy, the Company will change its name (subject to stockholder approval) to Waste Management, Inc. As a result of this strategy, operations in the water and environmental and infrastructure engineering and consulting services lines of business have been classified as discontinued operations in the accompanying financial statements, along with the process engineering, construction, specialty contracting and similar businesses of Rust International Inc. ("Rust"), which were discontinued in 1995 and sold during 1996, and certain other Company operations. Certain of the discontinued operations have already been sold and the Company contemplates completing the sale of those remaining by the end of 1997. See "Discontinued Operations and Other Asset Dispositions" below. Because the Wheelabrator Technologies Inc. ("WTI") trash-to-energy plants, with capacity to process nearly 24,000 tons of waste per day, represent an important part of the Company's waste disposal services network, the restructured Company will now operate in a single industry segment (waste management services) and will report accordingly. The discussion which follows relates to the Company's continuing operations. - -------------------------------------------------------------------------------- 1995 Operations Compared with 1994 Revenue Consolidated revenue growth from 1994 to 1995 is shown in the table which follows:
Percent 1994 1995 Change - -------------------------------------------------------------------------------- North America (excluding trash-to-energy) $6,147.0 $6,585.1 7.1% North American trash-to-energy 926.9 956.1 3.2 International 1,710.9 1,865.1 9.0 Intercompany revenue (302.1) (353.3) -------- -------- Total $8,482.7 $9,053.0 6.7% ======== ======== ===
The solid waste portion of North American revenue was $5.64 billion in 1995 compared with $5.12 billion in 1994, an increase of 10.3%. North American solid waste 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 (2.5-3.0%) and volume (6.0-6.5%) increases, with acquisitions accounting for 1.0%. Prices of recycled 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. Commodity prices continued downward throughout 1996 as discussed below. Volume growth was helped by a relatively mild winter in 1995, whereas severe weather over a large part of North America adversely affected the first quarter of 1994. However, volumes in 1995 were adversely impacted by 8 - -------------------------------------------------------------------------------- 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 the Company's marketing efforts and the acquisition and construction of additional material recovery facilities. North American hazardous waste revenue continued to decline in 1995 as waste minimization, recycling, industry over-capacity and shifting governmental regulation and enforcement continued to adversely affect the industry. Total 1995 revenue was $564.2 million compared with $587.9 million in 1994. Pricing and volume were both negative, only partially offset by the 1995 acquisition of a 60% interest in Advanced Environmental Technical Services, L.L.C. In addition, unusually high revenue in the second quarter of 1994 at the Company's Barnwell, South Carolina, low-level radioactive waste disposal facility adversely affected 1995 comparisons. North American trash-to-energy (WTI) revenue was essentially flat from 1994 to 1995 as higher revenue from operating plants was largely offset by lower construction revenue on the Lisbon, Connecticut, facility (which commenced operations January 1, 1996). Approximately 78% of the 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 sales 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. WM International revenue, in U.S. dollars, grew $154.2 million or 9.0% in 1995 compared with 1994. Components of the revenue change are as follows: Percent Change - -------------------------------------------------------------------------------- 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 WM International's Hong Kong incinerator, resulted in volume declines in certain waste streams, but the impact was offset with other volumes. 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 acquisition and construction of material recovery facilities to take advantage of an emphasis on recycling as an alternative to land disposal. Operating Expenses, excluding special charges Operating expenses increased $393.2 million in 1995 compared with 1994 but remained constant at 68.7% of consolidated revenue. North American solid waste operating expenses declined as a percentage of revenue as a result of milder weather, pricing effectiveness, higher recyclable commodity prices, internalization of recycling processing, and continuing productivity enhancements. However, North American hazardous waste operating expenses increased as a percentage of revenue in 1995 as continued pressure on prices, a lower revenue base, and a shift in revenue mix toward lower margin services offset the benefit of headcount reductions. North American trash-to-energy operating costs declined slightly but those of WM International increased as a result of higher labor costs in Italy, continued pressure 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 Expenses In absolute dollars, selling and administrative expenses increased $7.7 million from 1994 to 1995, but as a percentage of revenue they declined from 11.8% to 11.1%. The decline as a percentage of revenue crossed all operating groups as productivity enhancements were instituted throughout the Company. The slight increase in absolute dollars resulted primarily from acquisitions and pay-for-performance compensation plans. Special Charges 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 hazardous waste market environment. Following a thorough review of its operations and management structure by a new management team, WM International announced a fourth quarter 1995 pretax charge of $194.6 million, related to actions it had decided to take to sell or otherwise dispose of non-core businesses and investments, as well as core businesses and investments in low potential markets, abandon certain hazardous waste treatment and processing technologies, and streamline its country management organization. Approximately $34.3 million of this charge represented 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, with the majority of the balance paid in 1996, although certain rent payments on leased facilities will continue into the future. 9 1996 Operations Compared with 1995 Revenue The following table sets forth changes in consolidated revenue from 1995 to 1996:
Percent 1995 1996 Change - --------------------------------------------------------------- North America (excluding trash-to-energy) $6,585.1 $6,619.1 0.5% North American trash-to-energy 956.1 952.3 (0.4) International 1,865.1 1,913.8 2.6 Intercompany revenue (353.3) (298.2) -------- -------- Total $9,053.0 $9,187.0 1.5% ======== ======== ====
The solid waste portion of North American revenue grew 3.9% to $5.86 billion in 1996. Revenue growth by line of business is shown in the following table: Residential 5.6% Commercial 2.0 Rolloff and industrial 2.8 Disposal, transfer and other 2.0
Although the Company pursued price increases in 1996, the impact on revenue growth was minimal as a year-long continued decline in commodity prices largely offset the benefit of increases in the commercial and industrial markets. Volume growth added approximately 2% to revenue and acquisitions, net of dispositions, accounted for revenue growth of approximately 1.5%. Recycling revenue declined 13.6% from 1995 to 1996 due to the substantial commodity price decline. The Company responded by reducing its processing of lower grades of paper, adjusting the capacity of its recycling operations and continually striving to reduce processing costs and improve the marketing of commodities. However, despite these efforts, it was unable to replace the profits associated with the stronger 1995 commodity markets. North American hazardous waste revenue declined 7.7% from 1995 as the industry problems continued. The North American trash-to-energy revenue comparison is adversely affected by the loss of the Lisbon construction revenue in 1996. Excluding this factor, 1996 revenue grew $33.8 million, or 3.7%, to $952.3 million. The commercial operations of the Lisbon facility, which began in January 1996, contributed $18.4 million of the increase. WTI acquired two industrial cogeneration plants (so-called "inside-the-fence" facilities) during the year as part of its strategy to leverage its energy plant operating capabilities and project finance expertise by owning and/or operating power plants for industrial customers. Together these acquisitions contributed $7.3 million to 1996 revenue growth. Contractual price escalation at existing facilities, additional processing at several trash-to-energy plants, and lower energy purchase curtailment accounted for most of the remaining revenue growth. Overall spot pricing remained stable during the year. Expressed in U.S. dollars, WM International revenue increased $48.7 million or 2.6% in 1996 compared with 1995. Components of the revenue change are as follows: Percent Change - ----------------------------------------- Price 1.4% Volume (0.6) Purchased businesses 1.2 Foreign currency translation 0.6 --- Total 2.6% === Although WM International was able to implement price increases for its services despite weak economies in many of its markets, the impact of such increases was adversely affected by commodity prices falling substantially from their highs in 1995. Difficult economic conditions in Germany, France and Italy, as well as the closure of a landfill in France, resulted in a volume decline, partially offset by hazardous waste volume growth in The Netherlands and solid waste volume growth in the United Kingdom. The Company was awarded contracts to design, build, and operate for fifteen years, two transfer stations in Hong Kong. Construction revenue on one of these projects contributed to revenue growth in 1996. International acquisition activity continued to be at relatively low levels. Operating Expenses, excluding special charges Operating expenses increased to $6.37 billion or 69.4% of consolidated revenue in 1996 compared with $6.22 billion or 68.7% of revenue in 1995. Higher fuel costs, depressed commodity prices, low margin construction revenue on the Hong Kong transfer station and volume declines in Europe more than offset continuing productivity improvements. Selling and Administrative Expenses Selling and administrative expenses declined in absolute dollars by $25.7 million and as a percentage of consolidated revenue from 11.1% to 10.7% between 1995 and 1996. Improvements were again achieved throughout the Company through a continued focus on administrative productivity, including the WM International fourth quarter 1995 restructuring. 10 Special Charges In the fourth quarter of 1996, WM International recorded a charge of $169.5 million (before and after tax) to revalue its investments in Austria, France and Spain in contemplation of exiting all or part of these markets or forming joint ventures. This decision will allow WM International to focus more resources on markets where it believes it has greater long-term opportunity. In addition, the charge included the write-off of an investment in a hazardous waste disposal facility in Germany because regulatory changes adversely affected its volumes. WM International also recognized a provision for loss related to the sale of its investment in Wessex Water Plc ("Wessex"). See "Discontinued Operations and Other Asset Dispositions." WMI and CWM recorded fourth quarter charges, aggregating $255 million before tax, for reengineering their finance and administrative functions (primarily related to a reduction in the carrying value of software) and increasing reserves for certain litigation, including a dispute involving the computation of royalties on the Emelle, Alabama, hazardous waste landfill. In December 1996, a federal court in Memphis, Tennessee, held CWM liable for approximately $91.5 million in damages to the former owners of the Emelle site. CWM is appealing the decision. Other Items Interest The following table sets forth the components of consolidated interest expense, net:
1994 1995 1996 Interest expense $ 438.0 $503.1 $449.1 Interest income (33.1) (36.9) (27.6) Capitalized interest (104.5) (81.5) (73.4) ------- ------ ------ Interest expense, net $ 300.4 $384.7 $348.1 ======= ====== ======
Net interest expense increased from 1994 to 1995 as a result of an earlier management decision to increase the leverage of the Company. Debt levels increased in 1995, primarily a result of the acquisition of the then public ownership of CWM and Rust. Although the Company repurchased a substantial number of its shares in 1996, the emphasis on cash generation provided sufficient funds that debt levels remained relatively flat, and lower interest rates helped reduce expense. Capitalized interest has declined throughout the period as significant capital projects were completed and the Company reduced capital spending. See "Financial Condition Capital Structure." Minority Interest Minority interest declined from 1994 to 1995 as a result of the repurchase of the public shares of CWM and Rust, as well as the minority interest (approximately $41.3 million) in the WM International special charge. Minority interest declined from 1995 to 1996 as a result of lower earnings by certain subsidiaries and the minority interest (approximately $63.8 million) in the WM International special charges. Sundry Income, Net Sundry income consists primarily of earnings recorded on the equity method from the Company's investments in less than 50%-owned affiliates. Subsequent to December 31, 1996, the Company sold or agreed to sell its investments in ServiceMaster Limited Partnership ("ServiceMaster") and Wessex, and sundry income is expected to decline in 1997. Income Taxes The consolidated income tax rate varies between years as a result of shifts in the source of taxable income. In addition, the inability to realize tax benefits on a portion of the 1995 and 1996 special charges, and the 1996 tax provided on the Subpart F income related to the sale of the investment in Wessex increased the tax provision in those years. Discontinued Operations and Other Asset Dispositions 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. As the Company refined its business strategy to focus on waste management services, other business units were discontinued or sold during 1996. Rust sold the engineering and construction business as well as its industrial scaffolding business, and WTI sold its water process, manufacturing and custom engineered systems businesses. The Company plans to divest an additional $1.5 billion of non-core assets and non-integrated businesses by the end of 1998, including the following: . The sale announced February 19, 1997, by WMX of its investment in ServiceMaster for $626 million cash. . The sale by WTI of its remaining water services business for approximately $77 million. . The sale by Rust of its remaining domestic and international engineering and consulting businesses. . The sale of approximately $400 million of non-integrated waste services businesses in North America. . Sale or joint venturing of the WM International businesses in France, Spain and Austria. The WTI water businesses and the Rust engineering and scaffolding businesses, as well as the CWM high organic waste fuels blending business, have all been classified as discontinued operations in the accompanying financial statements. The Company expects to complete by the end of 1997 the sale of those businesses not previously sold. In addition, WM International entered into an agreement to sell its approximately 20% interest in Wessex. In connection with this disposition, WM International provided for a loss (including income taxes) of $77.0 million. After additional U.S. income taxes (generated by Subpart F income) and minority interest, this transaction reduced the Company's earnings by $88.0 million after tax in 1996. The sale was completed in the first quarter of 1997. 11 - -------------------------------------------------------------------------------- Accounting Principles Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards ("FAS") No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The adoption of FAS 121 did not have a material impact on the financial statements as the Company's previous accounting was substantially in compliance with the new standard. Also in 1996, FAS 123 - Accounting for Stock-Based Compensation - became effective. FAS 123 provides an optional new method of accounting for employee stock options and expands required disclosure about stock options. If the optional method of accounting is not adopted, disclosure is to be made, if material, of pro forma net income and earnings per share as if it were. The impact of the optional new accounting on net income and earnings per share was immaterial and the Company elected not to adopt the optional accounting. In October 1996, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 96-1 - Environmental Remediation Liabilities. The SOP is effective for fiscal years beginning after December 15, 1996, and provides that environmental remediation liabilities should be accrued when the criteria of FAS 5 - Accounting for Contingencies - are met. Included in the SOP are benchmarks to aid in the determination of when such criteria are met and environmental liabilities should be recognized. It also provides that the accrual for such liabilities should include future costs of those employees expected to devote a significant amount of time directly to the remediation effort. The Company does not believe that the adoption of SOP 96-1 will have a material impact on its 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, 1996, such amounts were not material. The impact of derivatives on the Company's financial statements has not been and is not expected to be 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 stock repurchase program. - -------------------------------------------------------------------------------- Environmental Matters The continuing business in which the Company is engaged is 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 tends to benefit when governmental regulation increases, which may increase 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 103 sites listed on the Superfund National Priority List ("NPL") as of December 31, 1996. Where the Company concludes that it is probable that a liability has been incurred, provision is made in the financial statements. See Note 7 to Consolidated Financial Statements for additional information regarding the Company's environmental liabilities. Estimates of the extent of the Company's degree of responsibility for 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 industry, 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 such adjustments 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. 12 - -------------------------------------------------------------------------------- The Company spent $89.0 million, $78.8 million and $68.8 million on remedial activity at closed sites in 1994, 1995 and 1996, respectively, and anticipates expenditures of approximately $78.8 million in 1997. 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 potential future insurance recoveries. 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 disposal facilities which are 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 of $54.5 million at December 31, 1996, compared with a working capital deficit of $584.4 million at December 31, 1995. The Company operates in a capital intensive service industry with neither significant inventory nor seasonal variation in receivables, and generates substantial cash from operating activities. As a result, working capital typically does not significantly affect operations and emphasis is placed on minimizing working capital requirements. The increase in working capital between 1995 and 1996 is a result of extending debt maturities, thus reducing the current portion; strong cash flow, including the proceeds from the sale of a portion of the WTI water business, late in 1996; and the reclassification to current of the investment in Wessex, sold in 1997; partially offset by increased accruals for losses on the sale of certain investments. 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. Management has adopted a cash-driven financial strategy including reduced capital spending and divestiture of non-core assets and non-integrated businesses. Owners' cash flow was approximately $1.2 billion in 1996 and the Company expects to generate an additional $3.0 billion over the next 24 months, including the monetization of $1.5 billion of assets. The Company believes that it has adequate liquidity and resources to meet its needs for replacement capital and finance anticipated growth, and plans to distribute the majority of the owners' cash to shareholders in the form of stock repurchases. See "Capital Structure." Acquisitions and Capital Expenditures Capital expenditures, including $56.8 million, $154.1 million and $91.8 million for property and equipment of purchased businesses in 1994, 1995 and 1996, respectively, are shown in the following table:
1994 1995 1996 - ---------------------------------------------------------------------------- Land (primarily disposal sites) $ 582.3 $ 517.2 $ 467.7 Buildings and leasehold improvements 141.2 148.8 109.3 Vehicles 226.0 345.8 204.9 Containers 167.9 181.2 115.8 Other equipment 395.0 348.1 319.2 -------- -------- -------- Total $1,512.4 $1,541.1 $1,216.9 ======== ======== ========
During 1994, the Company and its principal subsidiaries acquired 119 businesses 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. In 1995, 136 businesses were acquired for $302.0 million in cash and debt (including debt assumed) and 2,236,354 shares of the Company's common stock. During 1996, 83 businesses were acquired for $144.2 million in cash and debt (including debt assumed) and 8,210,568 shares of the Company's common stock. The Board of Directors has approved a capital expenditure budget of $900 million (approximately equal to depreciation and amortization) for 1997. This amount excludes any acquisitions. The Company currently expects to finance capital expenditures, as well as any acquisition activity, through cash flow from operations, and believes that it has adequate resources to finance attractive acquisitions that become available. Capital Structure Although the Company placed increasing emphasis on generating owners' cash during the three-year period, a substantial portion of such cash has been returned to shareholders through stock repurchases, including the purchase of the public shares of Rust during 1995. Debt to equity ratios were also adversely impacted by the subordinated notes discussed below which were issued to repurchase the public shares of CWM in 1995. The following table shows the Company's leverage:
December 31 1994 1995 1996 - --------------------------------------------------------------------------- Long-term debt as a percent of total capital 45.5% 46.3% 50.1% Short-term and long-term debt as a percent of short-term debt and total capital 49.2% 50.6% 52.1%
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. 13 - -------------------------------------------------------------------------------- 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. 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 50 million shares in the case of WMX and 30 million shares in the case of WTI) in the open market, in privately negotiated transactions, or through issuer tender offers. These programs extend into 1998. WTI repurchased 3.3 million, 7.2 million and 19.1 million of its shares in 1994, 1995 and 1996, respectively. WMX repurchased 14.4 million shares in 1996. During 1994, 1995 and 1996, in conjunction with its authorized repurchase program, WMX sold put options on 42.3 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 underlying shares, in lieu of repurchasing the stock. Options on 31.6 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 settled for cash in the amount of $12.0 million, which was charged to paid-in capital. The Company repurchased 3.1 million shares for $107.5 million and 2.9 million options expire in February 1997, at strike prices ranging from $32.04 to $34.13 per share. The Company may sell additional put options in the future. In 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 composed of Company officers, the Trust will use the shares or proceeds from the sale of the 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 from the Swedish Tax Authority of approximately 417 million Krona (approximately $60 million) plus interest from the date of the assessment, relating to a transaction completed in 1990. WM International believes that all appropriate tax returns and disclosures were filed at the time of the transaction and intends to vigorously contest the assessment. A Company subsidiary 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 subsidiary to apply to the DEP for permission to remove all waste above the height allowed by the zoning ordinance, and the Connecticut Supreme Court has upheld that ruling. The Company believes that the removal of such waste is an inappropriate remedy and is seeking an alternative resolution to the issue, but is unable to predict the outcome. Depending upon the nature of any plan eventually approved by applicable regulatory authorities for removing the waste, the actual volume of waste to be moved, and other currently unforeseeable factors, the subsidiary could incur costs which would have a material adverse impact on the Company's financial condition and results of operations in one or more future periods. In May 1994, the U.S. Supreme Court ruled that state and local governments may not constitutionally restrict the free movement of trash in interstate commerce through the use of flow control laws. Such laws typically involve a municipality specifying the disposal site for all solid waste generated within its borders. Since the ruling, several decisions of state or federal courts have invalidated regulatory flow control schemes in a number of jurisdictions. Other judicial decisions have upheld non-regulatory means by which municipalities may effectively control the flow of municipal solid waste. WTI's Gloucester County, New Jersey, facility relies on a disposal franchise for substantially all of its supply of municipal solid waste. In July 1996, a Federal District Court permanently enjoined the State of New Jersey from enforcing its solid waste regulatory flow control system, which was held to be unconstitutional, but stayed the injunction for as long as its ruling is on appeal plus an additional period of two years to enable the State to devise an alternative nondiscriminatory approach. The State has indicated that it will continue to enforce flow control during the two-year transition period and has filed an appeal of the Federal District Court's ruling. The Supreme Court's 1994 ruling and subsequent court decisions have not to date had a material adverse affect on any of the Company's trash-to-energy operations. Federal and state legislation has been proposed, but not yet enacted, to effectively grandfather existing flow control mandates. In the event that such legislation is not adopted, the Company believes that affected municipalities will endeavor to implement alternative lawful means to continue controlling the flow of waste. However, given the uncertainty surrounding the matter, it is not possible to predict what impact, if any, it may have in the future on the Company's disposal facilities, particularly WTI's trash-to-energy facilities. 14 - ------------------------------------------------------------------------------- As the states and U.S. Congress have accelerated their consideration of ways in which economic efficiencies can be gained by deregulating the electric generation industry, some have argued that over-market power sales agreements entered into pursuant to the Public Utilities Regulatory Policies Act of 1978 ("PURPA") should be voidable as "stranded assets." WTI's 25 power production facilities are qualifying facilities under PURPA and depend on the sanctity of their power sales agreements for their economic viability. Recent state and federal agency and court decisions have unanimously upheld the inviolate nature of these contracts. While WTI believes that federal law offers strong protections to its PURPA contracts, there is a risk that future court decisions and/or legislative initiatives in this area will have a material adverse effect on its business. 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 the People's Republic of China. WM International is unable to predict what impact, if any, this change will have on its operations in Hong Kong. At December 31, 1996, WM International had identifiable assets of $245.2 million related to its Hong Kong operations, which generated 1996 pretax income of approximately $15.3 million. 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 these 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 reasonably possible that 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 and commercial disputes. 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 believes it has adequately provided for such matters in its financial statements and does not believe that their outcome, individually or in the aggregate, will have a material adverse impact on its business or financial condition. Outlook The Company believes that its current strategy and the actions it has taken over the past two years position it for long-term growth and improved profitability in a rapidly changing waste services market. However, a number of challenges remain. The current low level of recyclable commodity prices negatively impacts the solid waste business both domestically and internationally. Continued moderate economic growth is expected to result in relatively low levels of solid waste volume and pricing growth. WTI has no new trash-to-energy plants expected to come on stream in the near future and two of its facilities will be negatively impacted by the expiration of existing contracts beginning in 1998. The North American hazardous waste industry remains depressed. The Company is undergoing a major re-engineering of its financial and administrative processes which will require significant cost and effort over the next two to three years. Divestiture of discontinued businesses and monetization of other assets must be completed. The Company is responding to these challenges with increased management focus on its core waste management services business, improved productivity through the use of technology, and greater emphasis on generating owners' cash and controlling capital expenditures. Management has also adopted Economic Value Added ("EVA(R)") as its primary performance measurement to guide its operations management to improve returns on invested capital, and has made EVA(R) a key part of incentive compensation. However, in light of the risk factors highlighted above, the Company anticipates flat revenue and earnings per share from continuing operations of approximately $1.75 in 1997 as it concentrates on future returns. For 1998, earnings per share from continuing operations are expected to grow to approximately $2.05. Forward-Looking Information Except for historical data, the information herein constitutes forward-looking statements. Forward-looking statements are inherently uncertain and subject to risks. Such statements should be viewed with caution. Actual results or experience could differ materially from the forward- looking statements as a result of many factors, including changes in the price of recyclable commodities, severe weather conditions, slowing of the overall economy, higher interest rates, failure of the Company's restructuring and re- engineering plans to produce the cost savings anticipated, the inability to complete the divestiture of discontinued businesses or the monetization of other assets at appropriate prices and terms, and the cost and timing of the stock repurchase programs. The Company makes no commitment to disclose any revisions to forward-looking statements, or any facts, events or circumstances after the date hereof, that may bear upon forward-looking statements. 15 EX-13.2 8 FINANCIAL STATEMENTS Exhibit 13.2 Report of Independent Public Accountants - -------------------------------------------------------------------------------- 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, 1995 and 1996, and the related consolidated statements of income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 1996. 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, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Arthur Andersen LLP Chicago, Illinois, February 3, 1997 16 WMX Technologies, Inc. and Subsidiaries Consolidated Statements of Income
- ------------------------------------------------------------------------------------------------------------------- For the three years ended December 31, 1996 (000's omitted except per share amounts) 1994 1995 1996 - ------------------------------------------------------------------------------------------------------------------- Revenue $8,482,718 $9,053,018 $9,186,970 - ------------------------------------------------------------------------------------------------------------------- Operating Expenses $5,827,626 $6,220,859 $6,372,828 Special Charges -- 335,193 471,635 Selling and Administrative Expenses 997,180 1,004,888 979,209 Interest Expense 333,550 421,572 375,758 Interest Income (33,123) (36,883) (27,637) Minority Interest 126,961 81,938 57,587 Sundry Income, Net (64,388) (76,462) (85,248) - ------------------------------------------------------------------------------------------------------------------- Income From Continuing Operations Before Income Taxes $1,294,912 $1,101,913 $1,042,838 Provision For Income Taxes 552,606 483,670 565,047 - ------------------------------------------------------------------------------------------------------------------- Income From Continuing Operations $ 742,306 $ 618,243 $ 477,791 - ------------------------------------------------------------------------------------------------------------------- Discontinued Operations: Income from operations, less applicable income taxes and minority interest of $64,923 in 1994, $60,835 in 1995 and $13,466 in 1996 $ 42,075 $ 48,305 $ 15,502 Provision for loss on disposal, less applicable income tax benefit and minority interest of $34,151 in 1995 and $58,792 in 1996 -- (62,649) (301,208) - ------------------------------------------------------------------------------------------------------------------- Net Income $ 784,381 $ 603,899 $ 192,085 =================================================================================================================== Average Common and Common Equivalent Shares Outstanding 484,144 485,972 490,263 =================================================================================================================== Earnings (Loss) per Common and Common Equivalent Share: Continuing Operations $1.53 $1.27 $.97 Discontinued Operations-- Income from operations .09 .10 .03 Provision for loss -- (.13) (.61) - ------------------------------------------------------------------------------------------------------------------- Net Income $1.62 $1.24 $.39 ===================================================================================================================
The accompanying notes are an integral part of these statements. 17 WMX Technologies, Inc. and Subsidiaries Consolidated Balance Sheets
- ------------------------------------------------------------------------------------------------------------------- As of December 31, 1995 and 1996 ($000's omitted except per share amounts) 1995 1996 - ------------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents $ 169,541 $ 323,288 Short-term investments 34,156 341,338 Accounts receivable, less reserve of $61,927 in 1995 and $47,523 in 1996 1,655,533 1,681,817 Employee receivables 8,496 10,084 Parts and supplies 150,528 142,417 Costs and estimated earnings in excess of billings on uncompleted contracts 242,675 240,531 Prepaid expenses 347,156 353,749 - ------------------------------------------------------------------------------------------------------------------- Total Current Assets $ 2,608,085 $ 3,093,224 - ------------------------------------------------------------------------------------------------------------------- Property and Equipment, at cost Land, primarily disposal sites $ 4,553,717 $ 5,019,065 Buildings 1,532,305 1,495,252 Vehicles and equipment 7,164,767 7,520,902 Leasehold improvements 84,587 85,998 - ------------------------------------------------------------------------------------------------------------------- $13,335,376 $14,121,217 Less--Accumulated depreciation and amortization (3,829,658) (4,399,508) - ------------------------------------------------------------------------------------------------------------------- Total Property and Equipment, Net $ 9,505,718 $ 9,721,709 - ------------------------------------------------------------------------------------------------------------------- Other Assets Intangible assets relating to acquired businesses, net $ 3,823,323 $ 3,885,293 Sundry, including other investments 1,550,672 1,452,057 Net assets of discontinued operations 876,476 214,309 - ------------------------------------------------------------------------------------------------------------------- Total Other Assets $ 6,250,471 $ 5,551,659 - ------------------------------------------------------------------------------------------------------------------- Total Assets $18,364,274 $18,366,592 =================================================================================================================== Current Liabilities Portion of long-term debt payable within one year $ 1,088,033 $ 553,493 Accounts payable 994,164 948,350 Accrued expenses 906,121 1,324,324 Unearned revenue 204,166 212,541 - ------------------------------------------------------------------------------------------------------------------- Total Current Liabilities $ 3,192,484 $ 3,038,708 - ------------------------------------------------------------------------------------------------------------------- Deferred Items Income taxes $ 922,500 $ 1,011,593 Environmental liabilities 621,186 543,723 Other 648,464 641,918 - ------------------------------------------------------------------------------------------------------------------- Total Deferred Items $ 2,192,150 $ 2,197,234 - ------------------------------------------------------------------------------------------------------------------- Long-Term Debt, less portion payable within one year $ 6,390,041 $ 6,971,607 - ------------------------------------------------------------------------------------------------------------------- Minority Interest in Subsidiaries $ 1,385,301 $ 1,186,955 - ------------------------------------------------------------------------------------------------------------------- Commitments and Contingencies $ $ - ------------------------------------------------------------------------------------------------------------------- Put Options $ 261,959 $ 95,789 - ------------------------------------------------------------------------------------------------------------------- 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; 498,817,093 shares issued in 1995 and 507,101,774 in 1996 498,817 507,102 Additional paid-in capital 422,801 864,730 Cumulative translation adjustment (102,943) (79,213) Retained earnings 4,486,877 4,363,754 - ------------------------------------------------------------------------------------------------------------------- $ 5,305,552 $ 5,656,373 Less--Treasury stock; 12,782,864 shares, at cost -- 419,871 1988 Employee Stock Ownership Plan 13,062 6,396 Employee Stock Benefit Trust (11,769,788 shares in 1995 and 10,886,361 in 1996, at market) 350,151 353,807 - ------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity $ 4,942,339 $ 4,876,299 - ------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $18,364,274 $18,366,592 ===================================================================================================================
The accompanying notes are an integral part of these balance sheets. 18 WMX Technologies, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------------- For the three years ended December 31, 1996 (000's omitted except per share amounts) Additional Cumulative 1988 Common Paid-in Translation Retained Employee Stock Employee Stock Stock Capital Adjustment Earnings Treasury Stock Ownership Plan Benefit Trust - ---------------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1994 $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 - ---------------------------------------------------------------------------------------------------------------------------------- Net income for the year $ -- $ -- $ -- $ 192,085 $ -- $ -- $ -- Cash dividends ($.63 per share) -- -- -- (308,265) -- -- -- Dividends paid to Employee Stock Benefit Trust -- 6,943 -- (6,943) -- -- -- Stock repurchase (14,390,000 shares) -- -- -- -- 473,560 -- -- Stock issued upon exercise of stock options and grant of restricted stock 217 (10,938) -- -- (53,323) -- (28,622) Treasury stock received in connection with exercise of stock options -- -- -- -- 5,458 -- -- Tax benefit of non-qualified stock options exercised -- 6,859 -- -- -- -- -- Contribution to 1988 ESOP (307,041 shares) -- -- -- -- -- (6,666) -- Treasury stock received as settlement for claims -- -- -- -- 2,513 -- -- Common stock issued upon conversion of LYONs 111 1,905 -- -- (160) -- -- Stock issued for acquisitions 7,957 219,867 -- -- (8,177) -- -- Temporary equity related to put options -- 166,170 -- -- -- -- -- Proceeds from sale of put options -- 18,845 -- -- -- -- -- Adjustment of Employee Stock Benefit Trust to market value -- 32,278 -- -- -- -- 32,278 Cumulative translation adjustment of foreign currency statements -- -- 23,730 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 $507,102 $ 864,730 $ (79,213) $4,363,754 $ 419,871 $ 6,396 $353,807 ==================================================================================================================================
The accompanying notes are an integral part of these statements. 19 WMX Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------------------------------- For the three years ended December 31, 1996 Increase (Decrease) in cash ($000's omitted) 1994 1995 1996 - -------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income for the year $ 784,381 $ 603,899 $ 192,085 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 880,466 885,384 920,685 Provision for deferred income taxes 298,564 250,828 289,027 Minority interest in subsidiaries 149,703 138,162 121,169 Interest on Liquid Yield Option Notes (LYONs) and WMX Subordinated Notes 33,551 23,021 11,157 Contribution to 1988 Employee Stock Ownership Plan (ESOP) 7,930 6,667 6,666 Special charges, net of tax and minority interest -- 202,492 379,415 Provision for loss on disposal of discontinued operations, net of tax and minority interest -- 62,649 301,208 Changes in assets and liabilities, excluding effects of acquired companies: Receivables, net (133,506) 45,232 (845) Other current assets (109,174) 28,724 (1,709) Sundry other assets (42,195) (72,282) (122,777) Accounts payable 155,254 39,669 (59,410) Accrued expenses and unearned revenue 43,121 (227,700) 20,830 Deferred items (259,020) 61,557 (167,702) Other, net (838) (13,044) 17,074 - -------------------------------------------------------------------------------------------------------- Net cash provided by operating activities $ 1,808,237 $ 2,035,258 $ 1,906,873 - -------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Short-term investments $ 2,755 $ (4,196) $ 1,170 Capital expenditures (1,455,628) (1,386,932) (1,125,161) Proceeds from sale of assets and businesses 276,822 141,774 712,359 Cost of acquisitions, net of cash acquired (197,201) (224,304) (104,778) Other investments (74,446) (44,193) (192,808) Acquisition of minority interests (57,865) (170,854) (342,034) - -------------------------------------------------------------------------------------------------------- Net cash used for investing activities $(1,505,563) $(1,688,705) $(1,051,252) - --------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. 20
1994 1995 1996 - -------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Cash dividends $ (290,266) $ (291,421) $ (308,265) Proceeds from issuance of indebtedness 1,710,586 1,803,383 2,918,730 Repayments of indebtedness (1,752,552) (1,860,451) (2,933,632) Proceeds from exercise of stock options, net 7,970 14,132 65,766 Contributions from minority interests 22,169 24,394 10,242 Stock repurchases -- -- (473,560) Proceeds from sale of put options 29,965 21,622 18,845 Settlement of put options -- (12,019) -- - -------------------------------------------------------------------------------------------------------- Net cash used for financing activities $ (272,128) $ (300,360) $ (701,874) - -------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents $ 30,546 $ 46,193 $ 153,747 Cash and cash equivalents at beginning of year 92,802 123,348 169,541 - -------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 123,348 $ 169,541 $ 323,288 ======================================================================================================== 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 $ 307,257 $ 401,715 $ 364,601 Income taxes, net of refunds received $ 241,657 $ 283,165 $ 326,679 Supplemental schedule of noncash investing and financing activities: LYONs converted into common stock of the Company $ 1,594 $ 2,598 $ 2,176 Liabilities assumed in acquisitions of businesses $ 244,560 $ 245,918 $ 128,297 Fair market value of Company and subsidiary stock issued for acquired businesses $ 4,773 $ 66,172 $ 236,001 WMX Subordinated Notes issued for acquisition of CWM minority interest $ -- $ 436,830 $ -- 21
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 waste management services to governmental, residential, commercial, and industrial customers in the United States and in select international markets. The Company previously provided process engineering and construction, specialty contracting, infrastructure and environmental engineering and consulting, and industrial scaffolding services through its Rust International Inc. ("Rust") subsidiary, water process systems, equipment manufacturing and water and wastewater facility operations and privatization services through its Wheelabrator Technologies Inc. ("WTI") subsidiary, and high organic waste fuels blending services through its Chemical Waste Management, Inc. ("CWM") subsidiary. As of December 31, 1996, the Company has sold or plans to exit all of these businesses, and accordingly they have been classified as discontinued operations in the accompanying financial statements. In the future, the Company will operate only in the waste management services industry segment. 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 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 $3,321,000, $2,231,000 and $345,000 are included in the Consolidated Statements of Income for 1994, 1995 and 1996, 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, have historically been carried at cost. Such investments include tax-exempt securities, certificates of deposit and Euro- dollar time deposits. At December 31, 1996, such investments include the shares of Wessex Water Plc ("Wessex") (see Note 14) which are carried at market value. 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 103 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, 1995 and 1996, is as follows:
1995 1996 - ------------------------------------------------------------------------------------------------------------------------------ Costs and estimated earnings on uncompleted contracts $1,176,601 $1,192,215 Less: Billing on uncompleted contracts (952,818) (979,918) ---------- ---------- Total contracts in process $ 223,783 $ 212,297 ========== ========== 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 $242,675 $240,531 Billings in excess of costs and estimated earnings on uncompleted contracts (included in unearned revenue) (18,892) (28,234) ---------- ---------- Total contracts in process $223,783 $212,297 ========== ==========
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, 1996, is $8,008,000, including $1,300,000 that is expected to be collected after one year. At December 31, 1995, retainage was $12,846,000. 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, 1995 and 1996, was $187,689,000 and $190,276,000, respectively. 22 - ------------------------------------------------------------------------------- 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 $539,849,000 and $659,226,000 as of December 31, 1995 and 1996, 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. Capitalized Interest Interest has been capitalized on significant landfills, trash-to-energy plants and other projects under construction in accordance with Statement of Financial Accounting Standards ("FAS") No. 34. Amounts capitalized and netted against Interest Expense in the Consolidated Statements of Income were $104,512,000 in 1994, $81,471,000 in 1995 and $73,347,000 in 1996. Accounting Principles Effective January 1, 1996, the Company adopted FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The change did not have a material impact on the Company's financial statements. Also in 1996, FAS No. 123, "Accounting for Stock-Based Compensation" became effective. FAS 123 provides an optional new method of accounting for employee stock options and expands required disclosure about stock options. If the optional method of accounting is not adopted, disclosure is to be made, if material, of pro forma net income and earnings per share as if it were. The impact of the optional new accounting on net income and earnings per share was immaterial and the Company elected not to adopt the optional accounting. In October 1996, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 96-1, "Environmental Remediation Liabilities." The SOP is effective for fiscal years beginning after December 15, 1996, and provides that environmental remediation liabilities should be accrued when the criteria of FAS 5, "Accounting for Contingencies," are met. Included in the SOP are benchmarks to aid in the determination of when such criteria are met and environmental liabilities should be recognized. It also provides that the accrual for such liabilities should include future costs of those employees expected to devote a significant amount of time directly to the remediation effort. The Company does not believe that the adoption of SOP 96-1 will have a material impact on its financial statements. Restatement Certain amounts in previously issued financial statements have been restated to conform to 1996 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 1994 through 1996: Income From Continuing Operations Before Income Taxes 1994 1995 1996 - ------------------------------------------------------------------------------------------------------------------- Domestic $1,133,281 $1,112,409 $1,037,191 International 161,631 (10,496) 5,647 ---------- ---------- ---------- $1,294,912 $1,101,913 $1,042,838 ========== ========== ========== Income Tax Provision (Benefit) - ------------------------------------------------------------------------------------------------------------------- Current tax expense U.S. federal $ 206,247 $ 210,367 $ 265,067 State and local 47,573 46,511 63,161 Foreign 25,650 35,905 17,086 ---------- ---------- ---------- Total current $ 279,470 $ 292,783 $ 345,314 ---------- ---------- ---------- Deferred tax expense U.S. federal $ 202,785 $ 175,688 $ 129,630 State and local 30,841 34,784 14,857 Foreign 42,105 (18,501) 76,025 ---------- ---------- ---------- Total deferred $ 275,731 $ 191,971 $ 220,512 ---------- ---------- ---------- U.S. federal benefit from amortization of deferred investment credit $ (2,595) $ (1,084) $ (779) ---------- ---------- ---------- Total provision $ 552,606 $ 483,670 $ 565,047 ========== ========== ==========
23
- ------------------------------------------------------------------------------------------------------------------------- The federal statutory tax rate in 1994, 1995 and 1996 is reconciled to the effective tax rate as follows: 1994 1995 1996 - ------------------------------------------------------------------------------------------------------------------------- U.S. Federal statutory rate 35.0% 35.0% 35.0% State and local taxes, net of federal benefit 3.9 4.8 4.9 Amortization of deferred investment credit (0.2) (0.1) (0.1) Amortization of intangible assets relating to acquired businesses 2.1 2.6 3.8 U.S. taxes on foreign income 1.2 -- 3.0 Write-down of investment in subsidiary -- -- 5.7 Federal tax credits (1.0) (1.3) (1.4) Minority interest 3.8 3.0 2.8 Other, net (2.1) (0.1) 0.5 ---- ---- ---- Effective tax rate 42.7% 43.9% 54.2% ==== ==== ====
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 1995 and 1996 deferred tax (assets) liabilities are as follows:
1995 1996 - -------------------------------------------------------------------------------- Deferred tax assets Reserves not deductible until paid $ (503,074) $ (495,940) Deferred revenue (37,284) (16,158) Net operating losses and tax credit carryforwards (266,916) (233,008) Other (78,474) (73,229) ---------- ---------- Subtotal $ (885,748) $ (818,335) ---------- ---------- Deferred tax liabilities Depreciation and amortization $1,335,559 $1,384,164 Other 374,084 359,035 ---------- ---------- Subtotal $1,709,643 $1,743,199 ---------- ---------- Valuation allowance 98,605 86,729 ---------- ---------- Net deferred tax liabilities $ 922,500 $1,011,593 ========== ==========
The Company's subsidiaries have approximately $11.8 million of alternative minimum tax credit carryforwards that may be used indefinitely and capital loss carryforwards of approximately $13.7 million with an expiration date of 1998. Various subsidiaries have U.S. federal and foreign operating loss carryforwards of approximately $545 million and state operating loss carryforwards of approximately $482 million. Foreign operating losses of $286 million may be carried forward indefinitely; the remaining loss carryforwards have expiration dates through the year 2011. 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. During 1994 and 1995, the valuation allowance increased primarily for the uncertainty of foreign operating loss carryforwards. The valuation allowance decreased in 1996 by approximately $11.9 million due primarily to the realization of capital loss carryforwards and adjustments for certain operating loss carryforwards determined to be unrealizable. The Company has concluded that 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 1994, the Company and its principal subsidiaries acquired 119 businesses for $197,201,000 in cash 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. During 1995, 136 businesses were acquired for $224,304,000 in cash and notes, $77,689,000 of debt assumed, and 2,236,354 shares of the Company's common stock. Three of the 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. Eighty-three businesses were acquired in 1996 for $104,778,000 in cash and notes, $39,446,000 of debt assumed, and 8,210,568 shares of the Company's common stock. These acquisitions were accounted for as purchases. The pro forma effect of the acquisitions made during 1994, 1995 and 1996 is not material. In January 1995, the Company acquired all of the approximately 21.4% of the outstanding shares of CWM that it did not already own for $436.8 million of convertible subordinated notes. See Note 5 for additional information. In July 1995, the Company acquired all of the approximately 3.1 million shares of Rust held by the public, for $16.35 per share in cash. 24 - -------------------------------------------------------------------------------- NOTE 5 DEBT The details relating to debt (including capitalized leases, which are not material) as of December 31, 1995 and 1996, are as follows:
1995 1996 - -------------------------------------------------------------------------------- Commercial Paper, weighted average interest 5.7% in 1995 and 5.8% in 1996 $1,119,356 $ 645,869 Tailored Rate ESOP Notes, weighted average interest 4.74% in 1995 and 4.58% in 1996 20,000 20,000 Debentures, interest 8 3/4%, due 2018 249,085 249,085 Notes, interest 6% to 8 1/4%, due 1997-2026 3,334,170 3,834,170 Solid waste disposal revenue bonds, interest 4.63% to 7.15%, due 1998-2013 251,085 239,980 Installment loans and notes payable, interest 5.34% to 10.6%, due 1997-2020 1,197,848 1,137,130 Project Debt, interest 3.95% to 10.64%, due 1997-2016 735,646 833,740 Other long-term borrowings 31,532 30,187 Liquid Yield Option Notes, zero coupon - subordinated, interest 9%, due 2001 8,945 7,439 Liquid Yield Option Notes, zero coupon - subordinated, interest 6%, due 2012 ("Exchangeable LYONs") 53,996 53,457 Liquid Yield Option Notes, zero coupon - subordinated, interest 6%, due 2010 ("CWM LYONs") 36,840 29,307 WMX Subordinated Notes, interest 5.75%, due 2005 439,571 444,736 ---------- ---------- Total debt $7,478,074 $7,525,100 Less - current portion 1,088,033 553,493 ---------- ---------- Long-term portion $6,390,041 $6,971,607 ========== ==========
The long-term debt as of December 31, 1996, is due as follows: Second year $1,088,836 Third year 1,371,779 Fourth year 1,116,061 Fifth year 556,750 Sixth year and thereafter 2,838,181 ---------- $6,971,607 ==========
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 $989,238,000 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 18.75 basis points and commitment fees of 5 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 the Company's acquisition of the outstanding CWM shares it did not already own, the CWM public stockholders received 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 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. 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. 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 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, 1996, there were 549,538 such notes outstanding with a maturity value amounting to $549,538,000. In connection with the transaction, CWM LYONs and Exchangeable LYONs which had been convertible into or exchangeable for CWM shares 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. 25 - -------------------------------------------------------------------------------- NOTE 6 DERIVATIVE FINANCIAL INSTRUMENTS From time to time, the Company uses derivatives to manage interest rate, currency and commodity risk. The amount of such instruments outstanding at any one point in time and gains or losses from their use have not been and are not expected to be material to the Company's financial statements. Interest Rate Agreements Certain of the Company's subsidiaries have entered into interest rate swap agreements to balance fixed and floating rate debt in accordance with management's criteria. The agreements are contracts to exchange fixed and floating interest rate payments periodically over the term without the exchange of the underlying notional amounts. The agreements provide only for the exchange of interest on the notional amounts at the stated rates, with no multipliers or leverage. Differences paid or received are recognized as a part of interest expense on the underlying debt over the life of the agreements. At December 31, 1996, Waste Management International plc ("WM International") had outstanding interest rate swaps, all of which entitle it to receive floating rate and pay fixed rate, in the following notional amounts: Hong Kong dollars -- 600 million; Italian Lire -- 122 billion; and German Marks -- 100 million. Currency Agreements From time to time, the Company and certain of its subsidiaries use foreign currency derivatives to seek to mitigate the impact of translation on foreign earnings and income from foreign investees. Typically these have taken the form of purchased put options or offsetting put and call options with different strike prices. The Company receives or pays, based on the notional amount of the option, the difference between the average exchange rate of the hedged currency against the base currency and the average (strike price) contained in the option. Complex instruments involving multipliers or leverage are not used. Although the purpose for using such derivatives is to mitigate currency risk, they do not qualify for hedge accounting under generally accepted accounting principles and accordingly, must be adjusted to market value at the end of each accounting period. There were no currency derivatives outstanding at December 31, 1996. Commodity Agreements The Company utilizes collars, calls and swaps to seek 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 position in crude oil derivatives as of December 31, 1996.
Type Quantity Expiration - -------------------------------------------------------------------------------- Swaps 750 bbls 1997 Collars 700 bbls 1998 Swaps 2,000 bbls 1998 Collars 2,100 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, 1996, which is not material. - -------------------------------------------------------------------------------- NOTE 7 ENVIRONMENTAL COSTS AND LIABILITIES The continuing business in which the Company is engaged is intrinsically connected with the protection of the environment. As such, a significant portion of the Company's operating costs and capital expenditures could be characterized as costs of environmental protection. While the Company is faced, in the normal course of business, with the need to expend funds for environmental protection and remediation, it does not expect such expenditures to have a material adverse effect on its financial condition or results of operations because its business is based upon compliance with environmental laws and regulations and its services are priced accordingly. Such costs may increase in the future as a result of legislation or regulation; however, the Company believes that in general it tends to benefit when governmental regulation increases, which may increase 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 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. The Company has also established procedures to evaluate its potential remedial liabilities at closed sites which it owns or operated, or to which it transported waste, including 103 sites listed on the NPL. The majority of situations involving NPL sites relate to allegations that subsidiaries of the Company (or their predecessors) transported waste to the facilities in question, often prior to the acquisition of such subsidiaries by the Company. The Company routinely reviews and evaluates sites requiring remediation, including NPL sites, giving consideration to the nature 26 (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 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 $180 million higher in the aggregate than the estimate that has been recorded in the financial statements as of December 31, 1996. 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. 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 $160 million at December 31, 1996. 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 $1.03 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:
1995 1996 - -------------------------------------------------------------------------------- Current portion, included in Accrued Expenses $ 138,533 $ 122,209 Non-current portion 621,186 543,723 ---------- ---------- Total recorded $ 759,719 $ 665,932 Amount to be provided over remaining life of active sites, including discount of $171 million in 1995 and $160 million in 1996 1,118,739 1,028,437 ---------- ---------- Expected aggregate undiscounted environmental liabilities $1,878,458 $1,694,369 ========== ==========
Anticipated payments of environmental liabilities at December 31, 1996, are as follows: 1997 $ 122,209 1998 56,000 1999 47,450 2000 33,571 2001 38,429 Thereafter 1,396,710 ---------- $1,694,369 ==========
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. 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 potential future insurance recoveries. 27 - -------------------------------------------------------------------------------- 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 a total of 15,000 shares are to be granted, in five equal annual installments commencing with 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 a weighted-average price of $34.90 per share and outstanding Rust stock options were converted into options to acquire approximately 1,976,000 Company shares at a weighted-average price of $30.26 per share. The status of the plans, including predecessor plans, replacement plans and similar plans for employees generally (together "Prior Plans") under which options remain outstanding, during the three years ended December 31, 1996, was as follows:
1994 1995 1996 - ------------------------------------------------------------------------------------------------------------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price - ------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 11,682 $ 33.63 13,811 $32.24 19,629 $32.04 Granted 3,729 26.49 3,117 27.29 4,106 31.90 Exercised 462 17.77 721 20.47 2,614 25.96 Cancelled: Prior plans 312 36.74 1,111 33.22 1,042 34.76 Current plans 826 32.33 316 31.14 424 30.84 Additional shares available for future grant 6,000 -- -- -- 515 -- Converted CWM, Rust and other stock options -- -- 4,849 33.01 515 18.07 Shares no longer available for future grant -- -- 2,914 -- -- -- Outstanding at end of year 13,811 32.24 19,629 32.04 20,170 32.33 Options exercisable at end of year 7,210 33.77 9,860 33.57 12,577 33.87 Options available for future grant 15,290 -- 4,726 -- 1,044 --
The following table summarizes information about stock options outstanding as of December 31, 1996:
Options Outstanding Options Exercisable -------------------------------- ------------------- Weighted- Average Weighted- Weighted- Range of Remaining Average Average Exercise Contractual Exercise Exercise Prices Shares Life Price Shares Price - ------------------------------------------------------------------------------------------------------------------------- $ 8.57-$17.16 133 5.9 years $15.16 119 $15.09 21.39- 29.87 6,930 6.9 years 26.68 3,539 26.52 30.64- 39.27 10,850 6.4 years 33.37 6,682 34.14 40.10- 61.03 2,257 4.0 years 45.68 2,237 45.66 ------ ------ 20,170 6.3 years $32.33 12,577 $33.87 ====== ======
28 - -------------------------------------------------------------------------------- The Company accounts for these plans under Accounting Principles Board Opinion 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined based on the fair value at the grant date under the optional method in FAS 123, the impact on the Company's net income and earnings per share would have been immaterial. Based on current and anticipated use of stock options, it is not expected that the impact of the accounting provisions of FAS 123 will be material in future years. - -------------------------------------------------------------------------------- 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. The Boards of Directors of WMX and WTI have authorized their respective companies to repurchase shares of their own common stock (up to 50 million shares in the case of WMX and 30 million shares in the case of WTI) in the open market, in privately negotiated transactions, or through issuer tender offers. These programs extend into 1998. Both authorizations replaced existing common stock repurchase programs. During 1994, 1995 and 1996, the Company sold put options on 42.3 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 31.6 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 settled for cash at a total cost of $12,019,000. The Company repurchased 3.1 million shares of stock at a cost of $107.5 million, and 2.9 million options expire in February 1997, at strike prices ranging from $32.04 to $34.13 per share. - -------------------------------------------------------------------------------- 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:
1995 1996 - -------------------------------------------------------------------------------- Common shares issued, net of Treasury Stock and Employee Stock Benefit Trust shares per Consolidated Balance Sheets 487,047 483,433 Effect of shares issuable under stock options after applying the "treasury stock" method 627 1,260 Effect of using weighted-average common shares outstanding during the year (1,702) 5,570 ------- ------- Common shares used in computing earnings per share 485,972 490,263 ======= =======
29 - -------------------------------------------------------------------------------- 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 $177,182,000 in 1994, $170,274,000 in 1995 and $164,539,000 in 1996. 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, 1996, are due as follows: First year $ 154,102 Second year 139,030 Third year 128,832 Fourth year 120,918 Fifth year 110,792 Sixth through tenth years 487,927 Eleventh year and thereafter 225,757 ---------- $1,367,358 ==========
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 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 3,690 bank letters of credit, performance bonds and other guarantees. Such financial instruments (averaging approximately $565,000 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. During the first quarter of 1995, WM International received an assessment from the Swedish Tax Authority of approximately 417 million Krona (approximately $60 million) plus interest from the date of the assessment, 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 Company subsidiary 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 subsidiary to apply to the DEP for permission to remove all waste above the height allowed by the zoning ordinance, and the Connecticut Supreme Court has upheld that ruling. The Company believes that the removal of such waste is an inappropriate remedy and is seeking an alternative resolution to the issue, but is unable to predict the outcome. Depending upon the nature of any plan eventually approved by applicable regulatory authorities for removing the waste, the actual volume of waste to be moved, and other currently unforseeable factors, the subsidiary could incur costs which would have a material adverse impact on the Company's financial condition and results of operations in one or more future periods. In May 1994, the U.S. Supreme Court ruled that state and local governments may not constitutionally restrict the free movement of trash in interstate commerce through the use of flow control laws. Such laws typically involve a municipality specifying the disposal site for all solid waste generated within its borders. Since the ruling, several decisions of state or federal courts have invalidated regulatory flow control schemes in a number of jurisdictions. Other judicial decisions have upheld non-regulatory means by which municipalities may effectively control the flow of municipal solid waste. WTI's Gloucester County, New Jersey, facility relies on a disposal franchise for substantially all of its supply of municipal solid waste. In July 1996, a Federal District Court permanently enjoined the State of New Jersey from enforcing its solid waste regulatory flow control system, which was held to be unconstitutional, but stayed the injunction for as long as its ruling is on appeal plus an additional period of two years to enable the State to devise an alternative nondiscriminatory approach. The State has indicated that it will continue to enforce flow control during the two-year transition period and has filed an appeal of the Federal District Court's ruling. The Supreme Court's 1994 ruling and subsequent court decisions have not to date had a material adverse effect on any of the Company's trash-to-energy operations. Federal and state legislation has been proposed, but not yet enacted, to effectively grandfather existing flow control mandates. In the event that such legislation is not adopted, the Company believes that affected municipalities will endeavor to implement alternative lawful means to continue controlling the flow of waste. However, given the uncertainty surrounding the matter, it is not possible to predict what impact, if any, it may have in the future on the Company's disposal facilities, particularly WTI's trash-to-energy facilities. 30 - -------------------------------------------------------------------------------- As the states and the U.S. Congress have accelerated their consideration of ways in which economic efficiencies can be gained by deregulating the electric generation industry, some have argued that over-market power sales agreements entered into pursuant to the Public Utilities Regulatory Policies Act of 1978 ("PURPA") should be voidable as "stranded assets." WTI's 25 power production facilities are qualifying facilities under PURPA and depend on the sanctity of their power sales agreements for their economic viability. Recent state and federal agency and court decisions have unanimously upheld the inviolate nature of these contracts. While WTI believes that federal law offers strong protections to its PURPA contracts, there is a risk that future court decisions and/or legislative initiatives in this area will have a material adverse effect on its business. In the ordinary course of conducting its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, including antitrust and environmental matters and commercial disputes. 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 believes it has adequately provided for such matters in its financial statements and does not believe that their outcome, individually or in the aggregate, will have a material adverse impact on 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 Waste Management, Inc. ("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 1994, 1995 and 1996, based on discount rates of 8.5%, 8.5% and 7.75%, respectively, included the following components:
1994 1995 1996 - ------------------------------------------------------------------ Service cost -- benefits earned during the year $ 11,075 $ 11,752 $ 14,047 Interest cost on projected benefit obligation 11,532 13,228 14,390 Expected return on plan assets (12,335) (13,237) (13,818) Net amortization and deferral (1,310) 33 1,751 -------- -------- -------- Net periodic pension expense $ 8,962 $ 11,776 $ 16,370 ======== ======== ========
Assumptions used to determine the plan's funded status as of December 31 are as follows:
1995 1996 - --------------------------------------------------------------- Discount rate 7.75% 7.75% Rate of increase in compensation levels 4.0% 3.5% 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, 1995 and 1996, for its pension plan:
1995 1996 - ----------------------------------------------------------- Actuarial present value of benefit obligations: Accumulated benefit obligations, including vested benefits of $152,031 and $182,482 at December 31, 1995 and 1996, respectively $(167,287) $(199,561) ========= ========= Projected benefit obligation $(191,059) $(223,729) Plan assets at fair value, primarily common stocks, bonds and real estate 167,068 199,722 --------- --------- Plan assets less than projected benefit obligation $ (23,991) $ (24,007) Unrecognized net loss 29,801 46,618 Unrecognized overfunding at date of adoption (January 1, 1985) of FAS No. 87, net of amortization, being recognized over 15 years (6,422) (4,855) --------- --------- Pension cost included in prepaid (accrued) expenses $ (612) $ 17,756 ========= =========
31 - -------------------------------------------------------------------------------- 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 1994, 1995 and 1996 for this plan was $3,418,000, $4,202,000 and $4,247,000, 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 $16,129,000, $18,308,000 and $16,519,000 for subsidiaries' defined benefit plans were made and charged to income in 1994, 1995 and 1996, 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, 1995 and 1996:
1995 1996 - ------------------------------------------------------- Accumulated Postretirement Benefit Obligations: Retirees $52,255 $46,453 Other fully eligible participants 9,682 10,459 Other active participants 10,695 17,114 ------- ------- $72,632 $74,026 Unrecognized: Prior service cost 566 239 Gain 7,911 8,496 ------- ------- $81,109 $82,761 ======= =======
For measurement purposes, a 7.5% annual rate of increase in the per capita cost of covered health care claims was assumed for 1997; the rate was assumed to decrease by 0.5% per year to 6.0% in 2000 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, 1996 by approximately $6,812,000, and the aggregate of the service and interest cost components of net postretirement health care cost for 1996 by approximately $401,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.75% in 1995 and 1996. The expense for postretirement health care benefits was $4,668,000 in 1994, $5,359,000 in 1995 and $4,174,000 in 1996. The service and interest components of the expense were $1,049,000 and $3,619,000, respectively, in 1994, $1,094,000 and $4,265,000, respectively, in 1995, and $723,000 and $3,451,000, respectively, in 1996. 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:
1994 1995 1996 - -------------------------------------------------- Expense recorded (contribution) $7,930 $6,667 $6,666 ====== ====== ====== Interest expense on 1988 ESOP debt $1,965 $1,147 $ 981 ====== ====== ====== Dividends on unallocated 1988 ESOP shares used by the 1988 ESOP $ 780 $ 555 $ 379 ====== ====== ======
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 $750 per employee ($500 prior to January 1, 1996). Charges to operations for the PSSP were $27,334,000 in 1994, $24,882,000 in 1995 and $16,030,000 in 1996. 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 $12,050,000, $13,603,000 and $12,362,000 during 1994, 1995 and 1996, respectively. 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. 32 NOTE 13 COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHICAL AREAS Through the third quarter of 1996, management and operations of the Company were based on four principal global lines of business--waste services, clean energy, clean water, and environmental and infrastructure consulting. In the fourth quarter of 1996, Rust began implementing plans to exit its remaining engineering and consulting businesses. In addition, WTI sold its water process, manufacturing and custom engineered systems businesses and has entered into an agreement to sell its water and wastewater facility operations and privatization services. These businesses have been classified as discontinued operations and, as a result, the Company now operates in only the waste management services line of business. Foreign operations in 1996 were conducted in 10 countries in Europe, seven countries in the Asia Pacific region, and Canada, Mexico, Brazil, Israel, and Argentina. The information relating to the Company's continuing foreign operations is set forth in the following tables:
United Other States Europe Foreign Consolidated - -------------------------------------------------------------------------------- 1994 Revenue $ 6,599,478 $1,322,670 $560,570 $ 8,482,718 =========== ========== ======== =========== Income from operations $ 1,410,477 $ 184,230 $ 63,205 $ 1,657,912 =========== ========== ======== =========== Identifiable assets $12,030,261 $3,471,012 $748,270 $16,249,543 =========== ========== ======== =========== 1995 Revenue $ 7,012,982 $1,527,291 $512,745 $ 9,053,018 =========== ========== ======== =========== Income from operations $ 1,456,895 $ 2,415 $ 32,768 $ 1,492,078 =========== ========== ======== =========== Identifiable assets $13,032,695 $3,682,432 $772,671 $17,487,798 =========== ========== ======== =========== 1996 Revenue $ 7,064,516 $1,539,183 $583,271 $ 9,186,970 =========== ========== ======== =========== Income from operations $ 1,301,579 $ (12,800) $ 74,519 $ 1,363,298 =========== ========== ======== =========== Identifiable assets $13,821,086 $3,503,014 $828,183 $18,152,283 =========== ========== ======== ===========
No single customer accounted for as much as 3% of consolidated revenue in 1994, 1995 and 1996. 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 the People's Republic of China. WM International is unable to predict what impact, if any, this change will have on its operations in Hong Kong. At December 31, 1996, WM International had identifiable assets of $245.2 million related to its Hong Kong operations, which generated 1996 pretax income of approximately $15.3 million. 33 NOTE 14 SPECIAL CHARGES In the first quarter of 1995, in response to the continuing deterioration of the chemical waste services market, CWM realigned its organization, and in connection therewith, recorded a special charge of $140.6 million before tax ($91.4 million after tax). The charge related primarily to a write-off of the investment in facilities and technologies that CWM abandoned because they did 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 a special charge of $194.6 million ($152.4 million after tax) primarily related to the actions it had decided to take to sell or otherwise dispose of non-core businesses and investments, as well as core businesses and investments in low potential markets, abandon certain hazardous waste treatment and processing technologies, and streamline its country management organization. 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 in 1995. The majority of the balance was paid in 1996, although certain rent payments on leased facilities will continue into the future. In the fourth quarter of 1996, WM International recognized a provision of $77.0 million after tax related to the sale of its investment in Wessex and a charge of $169.5 million after tax to revalue its investments in France, Austria and Spain in contemplation of exiting all or part of these markets or forming joint ventures. The charge also included the write-off of an investment in a hazardous waste disposal facility in Germany because regulatory changes adversely affected its volumes. These charges reduced the Company's income by $213.6 million after tax. Also, in the fourth quarter of 1996, WMI and CWM recorded pretax charges of $255.0 million ($166.4 million after tax) for reengineering their finance and administrative functions (primarily related to a reduction in the carrying value of software) and increasing reserves for certain litigation, including a dispute involving the computation of royalties on the Emelle, Alabama hazardous waste landfill. In December 1996, a federal court in Memphis, Tennessee, held CWM liable for approximately $91.5 million in damages to the former owners of the Emelle site. CWM is appealing the decision. - -------------------------------------------------------------------------------- NOTE 15 DISCONTINUED OPERATIONS In the fourth quarter of 1995, the Rust Board of Directors approved a plan to sell or otherwise discontinue Rust's process engineering, construction, specialty contracting and similar lines of business. During the second quarter of 1996, the sale of the industrial process engineering and construction businesses, based in Birmingham, Alabama, was completed. During the fourth quarter of 1996, WTI sold its water process systems and equipment manufacturing businesses. WTI has also entered into an agreement to sell its water and wastewater facility operations and privatization business. As of September 30, 1996, Rust sold its industrial scaffolding business. In the fourth quarter of 1996, Rust began implementing plans to exit its remaining domestic and international engineering and consulting business. CWM is discontinuing its high organic waste fuel blending services. WMX recorded a fourth quarter provision for loss of $360.0 million before tax and minority interest in connection with the planned divestiture of these businesses. The discontinued businesses have been segregated and the accompanying consolidated balance sheets, statements of income and related footnote information have been restated. Revenues from the discontinued businesses were $1,614,600,000 in 1994, $1,926,330,000 in 1995 and $1,134,666,000 for 1996. Following is a summary of the assets and liabilities as of December 31, 1995 and 1996, which are reflected on the consolidated balance sheets as net assets of discontinued operations:
1995 1996 - ------------------------------------------------------------------------------- Current assets $576,627 $228,109 Property and equipment and other noncurrent assets 758,244 358,116 Current liabilities (351,150) (287,852) Noncurrent liabilities (107,245) (84,064) -------- -------- Net assets of discontinued operations $876,476 $214,309 ======== ========
The Company expects to complete by the end of 1997 the sale of those businesses not previously sold. 34 - -------------------------------------------------------------------------------- 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, 1995, and December 31, 1996. 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, 1995 December 31, 1996 - -------------------------------------------------------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - -------------------------------------------------------------------------------- Nonderivatives-- Assets-- Cash and cash equivalents $ 169,541 $ 169,541 $ 323,288 $ 323,288 Receivables 1,664,029 1,664,029 1,691,901 1,691,901 Short-term investments 34,156 34,156 341,338 341,338 Liabilities-- Commercial paper 1,119,356 1,120,209 645,869 646,179 Project debt 735,646 880,619 833,740 896,711 Liquid Yield Option Notes and WMX Subordinated Notes 539,352 576,024 534,939 602,746 Other borrowings 5,083,720 5,284,472 5,510,552 5,609,979 Derivatives relating to debt -- (74) -- (4,761) Other derivatives carried as-- Assets (in Sundry Assets) -- -- -- 2,768 Liabilities (in Accrued Expenses) (65) (16,647) -- (82) Letters of credit, performance bonds and guarantees -- -- -- --
Cash, Receivables and 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. 35
- --------------------------------------------------------------------------------------------------------- NOTE 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is an analysis of certain items in the Consolidated Statements of Income by quarter for 1995 and 1996. First Second Third Fourth Quarter Quarter Quarter Quarter Year - --------------------------------------------------------------------------------------------------------- 1995 Revenue $2,151,774 $2,326,334 $2,322,330 $2,252,580 $9,053,018 Gross profit 525,936 722,871 732,424 515,735 2,496,966 Income from continuing operations 91,191 203,090 220,816 103,146 618,243 Net income 101,245 219,127 233,848 49,679 603,899 Income from continuing operations per common and common equivalent share .19 .42 .45 .21 1.27 Net income per common and common equivalent share .21 .45 .48 .10 1.24 1996 Revenue $2,144,479 $2,330,994 $2,372,746 $2,338,751 $9,186,970 Gross profit 649,630 711,739 742,228 238,910 2,342,507 Income (loss) from continuing operations 180,179 217,734 240,164 (160,286) 477,791 Net income (loss) 185,178 223,042 245,206 (461,341) 192,085 Income (loss) from continuing operations per common and common equivalent share .37 .44 .49 (.33) .97 Net income (loss) per common and common equivalent share /(1)/ .38 .45 .50 (.95) .39
(1) Sum of quarters does not equal total for year. See Note 14 to Consolidated Financial Statements for a discussion of the special charges affecting the 1995 and 1996 quarters and full year results. See Note 15 to Consolidated Financial Statements for a discussion of the decisions to discontinue certain operations announced during 1995 and 1996. 36 EX-21 9 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 ---------- SUBSIDIARIES OF WMX TECHNOLOGIES, INC. -------------------------------------- The following is a list of all direct and indirect subsidiaries of the registrant as of March 3, 1997. 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) ARS - Waste Management of Central North Carolina ARS - Waste Management of Eastern North Carolina ARS - Waste Management of South Carolina Arabian Cleaning Enterprise, Ltd. (Saudi Arabia) Arkansas Valley Waste Limited Partnership (Illinois) Ark BV (Netherlands) 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) Belpar Chemical Services, Inc. (West Virginia) Bensalem Power Company (Pennsylvania) B. Holmes (Graded Paper) Ltd. (United Kingdom) Bio-Energy Partners (Illinois) 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) 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) Trade Waste Incineration 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, L.L.C. (Delaware) CID MRRF, Inc. (Delaware) Clarfield Recycling Ltd. (United Kingdom) CNS Holdings, Inc. (Delaware) CNSI Sub, Inc. (Delaware) Community Refuse, Limited (Pennsylvania) Mountain View Reclamation Compania Schreiber de Servicios (Spain) Container Recycling Alliance, L.P. (Delaware) Controlled Waste Materials, Inc. (Illinois) Cord Industrienster Spykerisse BV (Netherlands) 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) CWM Holdings, Inc. (Delaware) CWM Resource Management, Inc. (Georgia) CWM Resource Recovery, Inc. (Ohio) Dan-Clean DK A/S (Denmark) Dankompost APS (Denmark) 2 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) 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) Downfield Services Ltd (United Kingdom) Drakesmore Development Ltd (United Kingdom) Durachem Limited Partnership (Maryland) 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) Edward Bros (Waste Paper) Ltd (United Kingdom) Eksjo Renhallning AB (Sweden) EMICA S.r.l. (Italy) 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) 3 Fempack Limited (United Kingdom) Fineco Italiana S.r.l. (Italy) First Waste Limited (United Kingdom) 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 Rolling Hills Recycling and Disposal Facility Waste Management of Augusta - Aiken Waste Management of Atlanta 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) Gruning GmbH Wertstoffaufbereitung und Containerdienst (Germany) G.T.I. - Generale Trasporti Immondizie s.r.l. (Italy) Gulf Disposal, Inc. (Florida) 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) 4 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) Interport Paper Company Limited (United Kingdom) 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) 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) Karlstad Renhallnings AB (Sweden) K. D. Scott Limited (United Kingdom) Keene Road Landfill, Inc. (Florida) Kennedy & Donkin Africa (Botswana) Partnership (Botswana) 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) Klok Containers BV (Netherlands) KNAB GmbH (Germany) 5 KNAB Zwischenlager Verwaltungs- ung Betriebsgesellschaft mbH (Germany) Lake Disposal Partners, Ltd. (Illinois) Landskrona-Svalovs Renhallnigs AB (Sweden) LJA Land Development Engineering & Surveying Inc. (Delaware) 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) Megastock Ltd. (United Kingdom) 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) 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 Seal Company (Illinois) Neptune Microfloc, Incorporated (Oregon) New England CR Inc. (Massachusetts) NH/VT Energy Recovery Corporation (New Hampshire) 6 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) 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) Pecol S.r.l. (Italy) Penn-Warner Club, Inc. (Delaware) Peterson-KNAB GmbH (Germany) Phoenix Systems, Inc. (Maryland) Photodigit Ltd. (United Kingdom) 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) Practical Recycling Systems Ltd. (United Kingdom) 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) 7 PWM Affiliates Superannuation Fund Pty Limited (Australia) Questquill Limited (United Kingdom) R A Johnson (Haulage) Ltd. (England) Rancho Estates Properties, Inc. (Delaware) RCC Fiber Company, Inc. (Delaware) 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 REI/CQA Inc. (Delaware) REI Holdings, Inc. (Delaware) Renovadan Miljoservice A/S (Denmark) Rent-a-Weld (Wirral) Ltd. (United Kingdom) 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) Riley Energy Systems of Lisbon Corporation (Delaware) Riley Energy Systems of Lisbon Connecticut Corp. (Connecticut) 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 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 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) 8 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 of Colorado Inc. (Delaware) Rust Federal Services of Hanford Inc. (Delaware) Rust Federal Services of Idaho Inc. (Delaware) Rust Geotech Inc. (Delaware) Rust Germany GmbH (Germany) Rust Industrial Cleaning Inc. (Delaware) 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 MRM Limited (United Kingdom) Rust North America Holdings Inc. (Delaware) Rust Overseas B.V. (Netherlands) 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 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) 9 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) 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) 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) 10 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) S.P.E.M. S.p.A. (Italy) Svensk Avfallskonvertering AB (Sweden) S. V. Farming Corp. (New Jersey) Swindell-Dressler Energy Supply Company (Delaware) Swindell-Dressler Leasing Company (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 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) Tyneside Waste Paper Co Ltd. (United Kingdom) UK Waste Management Holdings (United Kingdom) UK Waste Management Limited (United Kingdom) United Waste Partners, L.P. (Illinois) Valdenza S.r.l. (Italy) 11 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 Warner West Washington Waste Hauling & Recycling, Inc. (Delaware) Mountain Group - Northwest Office 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 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) 12 Waste Management Collection and Recycling, Inc. (California) American Waste Systems Empire Waste Management Great Western Reclamation Recycle America SAWDCO Collection 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 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 Colorado Springs Recycling and Disposal Facility County Line Recylcing and Disposal Facility Denver/Arapahoe Disposal Site East Weld Sanitary Landfill North Weld Sanitary Landfill Waste Management of Colorado - Landfill Division 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) High Plains Sanitary Landfill and Recycling Center 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) Northwest Sanitary Landfill Pottstown Landfill and Recycling Center 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) 13 Waste Management Espana S.A. (Spain) 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) 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 West Camden Sanitary Landfill Waste Management International, Inc. (Delaware) Waste Management International, Ltd. (Bermuda) Waste Management International plc (United Kingdom) Waste Management International Services Limited (United Kingdom) 14 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 Mexico Services, S.A. de C.V. (Mexico) Waste Management Nederland B.V. (Netherlands) Waste Management N.Z. Ltd. (New Zealand) Waste Management of Alabama, Inc. (Alabama) Recycle America - Birmingham Valley View Sanitary Landfill Waste Management of Alabama - Central Waste Management of Alabama - East Waste Management of Alabama - Mobile Waste Management of Alabama - North Waste Management of Alabama - Northwest Waste Management of Alabama - South Waste Management of Alameda County, Inc. (California) Altamont Landfill and Resource Recovery Facility Central Division Davis Street Station for Material Recovery and Transfer East Bay Disposal Co. Livermore Dublin Disposal Northern Division Recycle America of Northern California Southern Division Sunnyvale Recycling and Disposal Facility Tri-Cities Recycling and Disposal Facility Waste Management of Arizona, Inc. (California) Asset Recovery Group Butterfield Station Recycling and Disposal Facility Industrial Services Division Sky Harbor Regional Transfer & Recycling Center 27th Avenue Recycling and Disposal Facility Waste Management of Northern Arizona Waste Management of Phoenix - North Waste Management of Phoenix - Recycle America Waste Management of Phoenix - South Waste Management of Tucson Waste Management of Tucson - Recycle America Waste Management of Verde Valley WMI Services - Phoenix Waste Management of Arkansas, Inc. (Delaware) Brushy Island Recycling and Disposal Facility Jefferson County Recylcing and Disposal Facility 15 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 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 WMI Services 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 Transfer Station Englewood Transfer Station Port-O-Let Waste Management of Aurora Waste Management of Colorado - Aurora Facility Waste Management of Colorado - North Facility 16 Waste Management of Colorado - Recycle Facility Waste Management of Colorado - South Facility Waste Management of Colorado Springs - Recycle America 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 WMI Medical Services Waste Management of Columbus, Inc. (Ohio) Waste Management of Connecticut, Inc. (Connecticut) New Milford Recycling and Disposal Facility Waste Management of Connecticut - New Milford 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 Superior Sanitation Landfill 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 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 DeKalb County Recycling and Disposal Facility 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 17 McLean County Disposal and Recycling Services 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 - Metro Waste Management - North 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 18 Waste Management of Kentucky Holdings, Inc. (Delaware) Waste Management of Kentucky, L.L.C. (Delaware) Blue Ridge Recycling and Disposal Facility 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 Holdings One, Inc. (Delaware) Waste Management of Louisiana Holdings Two, Inc. (Delaware) Waste Management of Louisiana, L.L.C. (Delaware) 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 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 19 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 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) Somerville Transfer Station Waste Management - Container Services Waste Management of Boston - North Waste Management of Central Massachusetts Waste Management of Massachusetts - Gloucester Waste Management of Massachusetts - South Shore 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 Detroit - Residential Waste Management - Metro Detroit 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 East Recycling Transfer Facility Waste Management of Michigan - Detroit Transfer and Recycling Facility Waste Management of Michigan - Detroit MRF/Transfer 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 20 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 Dietman Sanitation & Recycling Northern Waste Systems 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 21 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) Waste Management of Great Falls Waste Management of Nebraska, Inc. (Delaware) Douglas County Recycling and Disposal Facility Waste Management of New Hampshire, Inc. (Connecticut) Turnkey Recycling and Environmental Enterprises Waste Management of New Hampshire - Londonderry Waste Management of New Hampshire - New Hampton 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 Rio Rancho Recycling and Disposal Facility San Juan County 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 Hudson Valley Waste Management of New York - Albion 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 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) 22 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 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 - Western Reserve 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) Metro South Transfer Station Port-O-Let Waste Management of Vancouver U.S.A. Zero Garbage Waste Management of Orlando, Inc. (Florida) Waste Management of Pennsylvania, Inc. (Pennsylvania) 23 Alderfer & Frank 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 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 Waste Management of Wilkinsburg 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 South Carolina Waste Management of the Low Country Waste Management of South Dakota, Inc. (South Dakota) 24 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 Atascocita Recycling and Disposal Facility Austin Community Disposal Co. Bluebonnet Recycling and Disposal Facility Centex Waste Management Coastal Plains Recycling and Disposal Facility Comal County Recycling and Disposal Facility Covell Gardens Landfill DFW Recycling and Disposal Facility Eastside Recycling and Disposal Facility Fogle Garbage Service Garbage Gobbler Hillside Recycling and Disposal Facility Kingwood Garbage Service Lacy Lakeview Recycling and Disposal Facility Longhorn Disposal Northwest Transfer Station Oak Hill Recycling and Disposal Facility Pecan Prairie Recycling and Disposal Facility Recycle America - Dallas Bulk Grade Division Recycle America - Dallas High Grade Division S & B Trucking & Sanitation Security Landfill Skyline Recycling and Disposal Facility 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 Fort Worth Waste Management of Fort Worth Recylcing and Disposal Facility Waste Management of Houston Waste Management of Northeast Texas Waste Management of Southeast Texas Waste Management of Southeast Texas - Angleton Waste Management of Southeast Texas - Dickinson 25 Waste Management of South Texas Waste Management of West 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) Waste Management of Northern 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 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 Wisconsin, Inc. (Wisconsin) Best Disposal Mallard Ridge Recycling and Disposal Facility 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 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 26 Waste Management of Rockford Waste Management of Wisconsin - East Waste Management Southwest Waste Management of St. Croix Valley 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) American Refuse Systems, Inc. Ocmulgee Disposal, Inc. Waste Management Partners of Bozeman, Ltd. (Illinois) Waste Management Partners of Midland/Odessa (Illinois) Waste Management Partners of Paris, Ltd. (Illinois) 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 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) 27 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) Westley Trading Ltd (United Kingdom) 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) 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) 28 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 Land Resources Inc. (Delaware) Wheelabrator McKay Bay Inc. (Florida) Wheelabrator Mecklenburg Inc. (Delaware) Wheelabrator Millbury Inc. (Delaware) Wheelabrator New Hampshire Inc. (Delaware) 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 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) 29 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 Kutzner GmbH Rohstoffvertung - Containerdienst (Germany) WMD Milojoservice A/S (Denmark) WMD Schreiber GmbH (Germany) WMD Waste Management Deutschland Holding GmbH (Germany) WMI Canada Divesture Sub, Inc. (Canada) WMI Medical Services of Arizona, Inc. (Delaware) WMI Medical Services of Indiana, Inc. (Indiana) 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 Texas, Inc. (Delaware) WMI Medical Waste Services of North Carolina, Inc. (North Carolina) WMI Mexico Holdings, 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 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 30 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 Rive - Sud WMI Waste Management DuCanada WMNA Container Recycling, Inc. (Delaware) WMNA Rail-Cycle Sub, Inc. (Delaware) WM of New York, Inc. (Delaware) WM Paper Recycling, Inc. (Delaware) WM Partnership Holdings, Inc. (Delaware) WM Portugal (Gestao De Residuos) LDA (Portugal) WM Umwelttechnik Gmbh (Germany) WMX Federal Services, Inc. (Delaware) WMX Technology Center, Inc. (Delaware) WM Ymparistopalvelut OY (Finland) W R Pollard and Son Limited (United Kingdom) 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) 31 EX-23 10 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT 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. 333-6879) and previously filed Registration Statement on Form S-4 (registration no. 33-56891). /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Chicago, Illinois March 26, 1997 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1996 CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE FOOTNOTES THERETO. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 323,288 341,338 1,729,340 47,523 0 3,093,224 14,121,217 4,399,508 18,366,592 3,038,708 6,971,607 0 0 507,102 4,369,197 18,366,592 0 9,186,970 0 6,844,463 0 39,148 375,758 1,042,838 565,047 477,791 (285,706) 0 0 192,085 0.39 0.00
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