Item 1. Business.
General
Browning-Ferris Industries, Inc. is one of the largest publicly- held companies engaged in providing waste services. Subsidiaries and affiliates collect, transport, treat and/or process, recycle and dispose of commercial, residential and municipal solid waste and industrial wastes. BFI's subsidiaries are also involved in re- source recovery, medical waste services, portable restroom services, and municipal and commercial sweeping operations.
The terms "BFI" and "Company" refer to Browning-Ferris Industries, Inc., a Delaware corporation incorporated on October 26, 1970, and are used herein to include its subsidiaries, affiliates and predecessors, unless the context requires otherwise. BFI's executive offices are located at 757 N. Eldridge, Houston, Texas 77079. The Company's mailing address is P.O. Box 3151, Houston, Texas 77253, and its telephone number is (713) 870-8100.
The Company's subsidiaries and affiliates operate in approximately 400 locations in North America and approximately 250 locations outside North America (including locations of unconsolidated affiliates), and employ approximately 37,000 persons (including employees of unconsolidated affiliates). No single customer or district accounts for a material amount of BFI's revenue or net income.
The Company's solid waste operating subsidiaries in North America are aligned, for management oversight purposes, into six regions. Each region is further divided into a number of divisions and local districts within each division. Each region is headed by a regional vice president responsible for the operating and financial performance of that region. Divisional vice presidents are responsible for managing growth opportunities in their geographic markets, including acquisitions, business development and municipal contracting opportunities. Under this management structure, the regional vice president, divisional vice presidents and staff oversee and assist local district managers within each region. Regional responsibility for local district operations is exercised by assisting with the development and approval of each district's capital budget, the review and implementation of profit, pricing and corporate development goals and the monitoring of performance. Each district's operation is a distinct, localized service business that is managed, on a day-to-day basis, at the local level. The Company's regions and operating locations are responsible, with support and resources provided by the corporate office, for compliance with all applicable rules and regulations. Selective company-wide uniform operating procedures are being implemented when BFI's management believes the procedures will result in improved operating efficiency.
The business strategies currently being implemented by BFI's management are designed to: (i) continue expansion, both domestically and internationally, through an aggressive market development program; (ii) capitalize on opportunities resulting from regulatory, legislative, competitive and economic developments; (iii) expand participation and pursue new business opportunities resulting from the continued segmentation of the municipal and industrial waste streams; (iv) continue to improve both operating efficiencies and management of costs while effectively allocating resources; and (v) continue to selectively implement uniform operating procedures when management believes it will improve operating efficiency.
The Company's business is subject to extensive federal governmental regulation and legislative initiative. Further, in some states and local jurisdictions, its business is also subject to environmental regulation, mandatory recycling laws, medical waste regulation, preclusion of certain waste from landfills and restrictions on the flow of solid waste. Due to continuing public awareness and influence regarding waste and the environment, and uncertainty with respect to the enactment and enforcement of future laws, the Company can not always accurately project the impact any future regulation or legislative initiative may have on its operations. See "Regulation" and "Legal Proceedings - Environmental Proceedings" for additional information.
The table below reflects the total revenues contributed by the Company's principal lines of business for each of the three years ended September 30, 1994.
Contribution to Consolidated Revenues (in millions) Year Ended September 30,(1)
1994 1993 1992 ---- ---- ----- North American Operations
Collection Services - Solid Waste $2,360 $2,138 $2,038
Disposal and Transfer - Solid Waste 885 787 753
Medical Waste Services 161 146 119
Recycling Services 359 240 175
Services Group 83 79 106
Elimination of Affiliated Companies' Revenues (392) (339) (304)
Total North American Operations 3,456 3,051 2,887
International Operations 859 428 391
Total Company $4,315 $3,479 $3,278
_____________ (1)Certain reclassifications have been made in prior years' amounts to conform to the current year presentation.
Total assets at September 30, 1994, 1993 and 1992 were $5,797 million, $4,296 million and $4,068 million, respectively.
Solid Waste Services
Collection
BFI collects solid waste in approximately 430 operating locations in 45 states, Australia, Canada, Finland, Germany, Italy, Kuwait, the Netherlands, New Zealand, Puerto Rico, Spain and the United Kingdom. These operations provide solid waste collection services for numerous commercial establishments, industrial plants and governmental and residential units. BFI uses approximately 1.1 million steel containers and approximately 12,400 specially equipped collection trucks in its waste collection operations.
The Company's commercial and industrial solid waste collection services are typically performed pursuant to service agreements providing for one-year to three-year initial terms and specified successive terms thereafter. Residential collection contracts with individual homeowners, homeowner groups and municipalities are generally for periods of one to five years. Solid waste residen- tial collection contracts with governmental units are usually awarded after competitive bidding.
Operating costs, disposal costs and collection fees vary widely throughout the geographic areas of the Company's operations. Prices for solid waste collection services are determined locally, principally by the volume, weight and type of wastes collected, treatment required, risks involved in handling or disposing of the wastes, collection frequency, disposal costs, distance to final disposal sites, amount and type of equipment furnished to the customer and competitive factors. The Company's ability to pass on cost increases is often influenced by competitive and other factors. Long-term residential solid waste collection contracts often contain a formula, generally based on published price indices, for adjustments of fees to cover increases in certain operating costs.
Solid Waste Transfer and Disposal
BFI operates approximately 110 solid waste transfer stations, approximately 50 of which it owns, where solid wastes are compacted for transfer to final disposal facilities. Transfer stations are used for the purpose of either (i) reducing costs associated with transporting waste to final disposal sites, or (ii) better utilizing the Company's disposal sites.
Landfilling is the primary method employed by the Company for final disposal of the solid waste stream which is not recycled. BFI currently operates 97 landfill sites in North America, 14 of which are operated under contracts with municipalities or others. BFI does not currently own or lease a landfill site in every metropolitan area in which it is engaged in solid waste collection; however, the Company intends to continue to seek, where practicable, ownership, lease or other arrangements to use disposal facilities in all such areas. To date, the Company has not experienced excessive difficulty securing the use of disposal facilities owned or operated by others in those communities in which it does not operate its own landfill sites.
The U.S. Environmental Protection Agency ("EPA") promulgated its Subtitle D landfill regulations in October 1991, with the regulations becoming generally effective on October 9, 1993, for most landfills not closed prior to that date. The impact on the solid waste disposal market was downward pressure on pricing of disposal services for the last several years. However, the longer- term impact on the disposal market is expected to be a reduction in the number of operating landfill sites in the United States and a firming of prices. See "Business - Regulation" and "Business - Waste Disposal Risk Factors."
Medical Waste
The Company is the largest provider of medical waste services in North America. Approximately 100 of the Company's operating locations provide medical waste services involving the collection and disposal of infectious and pathological waste materials from approximately 114,000 customers. In the last five years, most states have enacted laws regulating medical waste. The Company is pursuing new opportunities to provide needed services created by these regulations. The Company owns or operates 28 treatment sites using either incineration or autoclaving (steam sterilization) technology. One additional treatment site is in the construction stage and another site is in the permitting process. The Company is pursuing the development of various healthcare markets, including but not limited to clinical and home healthcare markets, shipboard waste disposal, mail disposal and spill kit and other related markets. The Company believes the implementation of new Clean Air Act guidelines relating to medical waste incinerators could have a positive impact on the Company's medical waste operations.
Recycling
The Company provides recycling services for certain materials streams in approximately 230 of its North American operating locations for approximately 5 million households, including curbside customers, and for approximately 166,000 commercial and industrial customers. Recycling continued as one of the fastest- growing segments of the Company's business in fiscal 1994. The Company's recycling business has 104 recycleries in North America and 32 such facilities outside North America. The Company also engages in the organic materials recycling and/or disposal business, tire recycling and other alternative energy concepts such as biomass fuels. In fiscal 1994, the Company added 17 processing centers to further expand its processing capacity. BFI also acquired a company that is a producer and marketer of decorative bark, mulch, compost and organic soils to secure a market for organic materials collected. In response to public demand, recycling is increasingly required through legislation and regulation at all levels of government. In the case of many recycled materials, these requirements and the public's interest in recycling have resulted in an excess supply of recovered materials in some markets. Recognizing that the recycling momentum would involve necessary markets for recovered materials, the Company has developed relationships with numerous other companies to assure municipalities and other customers of continuous and diversified markets. To improve the marketing of recycled commodities, the Company operates a centralized materials marketing group. This group has enhanced the Company's ability to anticipate changing market conditions and establish longer-term customer relationships and agreements.
Other Services
The Company is also involved in street and parking lot sweeping and the rental and servicing of portable restroom facilities. During fiscal 1993 and the first quarter of fiscal 1994, the Company sold a portion of its portable restroom and sweeping businesses, but has retained most of its operations located on the southern and western coasts of the United States. These locations are operated as part of the solid waste regions. The Company may also participate, to a limited extent, in the end-use development of certain BFI landfills which have reached permitted capacity and other real and personal property in which it has an interest. From time to time, the Company sells or otherwise disposes of surplus land and other real or personal property and reflects any gain or loss from such transactions in the results of operations for the period in which the transactions occur.
International Operations
Subsidiaries or affiliates of the Company are involved in waste collection, processing, disposal and/or recycling operations in approximately 250 locations (including locations of unconsolidated affiliates) in Australia, Finland, Germany, Italy, Hong Kong, Kuwait, the Netherlands, New Zealand, Spain and the United Kingdom. European operations comprise the largest number of operating loca- tions outside of North America, and the Company believes that its operations in the Netherlands constitute the largest waste systems operation in that country.
The Company currently operates 49 landfill sites in its international operations (including those operated through unconsolidated affiliates). The Company also has 32 recycleries in its international operations.
On February 3, 1994, the Company acquired 50% of the stock of Otto Entsorgungsdienstleistung GmbH ("Otto Waste Services"), marking the Company's entry into the German solid waste market. Otto Waste Services is primarily engaged in providing collection and recycling services under long-term contracts with municipalities and Duales System Deutschland GmbH, the non-governmental organization responsible for the collection of recyclable materials in Germany. The purchase price for the 50% interest in Otto Waste Services was approximately $400 million, including approximately 3.9 million shares of Common Stock. See "Business-Financing and Capital Expenditures" and Note (3) of Notes to Consolidated Financial Statements. During fiscal 1994, the Company reported consolidated revenues of $344 million applicable to the Otto Waste Services acquisition.
In addition to being subject to many similar business risks generally encountered in the Company's domestic operations, the Company's operations outside of North America are subject to other risks, such as currency fluctuations, currency control regulations, the recruitment of non-resident labor, changes in foreign laws, social instability, war, invasion, compliance with foreign immigration laws, political changes, international tensions and problems associated with foreign governmental appropriation processes.
The financial performance of the Company's international operations has been lower than that of its North American operations, due primarily to (i) the higher concentration of collection activities (which have lower margins than disposal activities) in international operations, (ii) the inability to pass through certain disposal and other cost increases, particularly in Italy, and (iii) the assets being used in international operations having been recently acquired as compared to the assets being used in North American operations. For information concerning revenues, income from operations and identifiable assets applicable to foreign operations (including those in Canada), see Note (16) of Notes to Consolidated Financial Statements.
Resource Recovery
The Company and Air Products and Chemicals, Inc. ("Air Products"), headquartered in Allentown, Pennsylvania, are each 50% general partners in a partnership which designs, builds, owns and operates facilities that burn solid waste and recover energy and other materials. This partnership markets its capabilities under the name American Ref-Fuel ("American Ref-Fuel"). Three of the facilities owned by American Ref-Fuel partnerships utilize the solid waste mass-burning technology of the German firm, Deutsche Babcock Industrie AG ("DBA"), for which American Ref-Fuel is the exclusive licensee in North America. This technology has been utilized successfully for over 30 years in Europe and elsewhere. American Ref-Fuel pays for the right to utilize this technology. The fourth facility, located in Niagara Falls, New York, utilizes a refuse-derived fuel technology; however, a significant modification and expansion of the plant to employ the DBA mass-burning technology is currently under construction. The estimated construction cost of this project ranges from approximately $150 million to $200 million and the plant's capacity is expected to be approximately 2,250 tons per day. This project will be financed with tax exempt bonds to the extent feasible.
In each American Ref-Fuel project, a partnership is formed by indirect wholly-owned subsidiaries of Air Products and the Company. Separate American Ref-Fuel partnerships are operating resource recovery facilities in Hempstead, New York; Essex County, New Jersey; Niagara Falls, New York; and Preston, Connecticut. In connection with the existing projects, both the Company and Air Products have delivered, and in connection with any future projects may be required to deliver, support agreements for certain project indebtedness of each of the respective subsidiary partners. See Note (9) of Notes to Consolidated Financial Statements for information concerning these obligations.
The Company's equity investment in American Ref-Fuel's resource recovery projects was approximately $160 million at September 30, 1994. American Ref-Fuel's business is very capital intensive and its ability to raise capital is an important factor in its competitiveness in the waste services industry. When feasible, American Ref-Fuel attempts to finance its projects with tax exempt bonds due to the lower interests costs. The Company plans to expand its investment in American Ref-Fuel in fiscal 1995 by undertaking the significant modification and expansion of the Niagara Falls, New York, facility and permitting a new resource recovery project near Albany, New York, as well as pursuing a number of domestic and international acquisition opportunities, especially in Holland and Germany.
All resource recovery facilities must meet rigid environmental laws and regulations. Existing laws and regulations can be changed or administered so as to affect the design, construction, startup or operation of such facilities. Management believes that the DBA mass-burning technology is capable of meeting anticipated future changes in laws and regulations; however, there can be no assurance that required environmental and other permits will be issued for any planned project.
Although the Company believes that each of the existing operating facilities are viable since each facility generates significant cash flows relative to the Company's investment in the facility, the economic viability of certain resource recovery facilities may be adversely affected by (i) the availability of commercially reasonable energy sales contracts; (ii) the availability of landfills for the disposal of ash residue, bypass and nonprocessible waste; (iii) existing and proposed governmental standards applicable to the disposal of ash residue that could limit the number of sites available for such disposal; (iv) air emission standards applicable to the facilities, (v) the possible lower cost of other alternatives for waste disposal and (vi) the recent decision by the U.S. Supreme Court which invalidates local flow control laws. Resource recovery facilities may also be adversely affected by many of the same factors that are currently impacting other waste disposal facilities. See "Business - Regulation" and "Business - Waste Disposal Risk Factors."
Regulation
All of the Company's principal business activities are governed by federal, state and local laws and regulations pertaining to public health and the environment, as well as transportation laws and regulations. These regulatory systems are complex and are subject to change.
The U.S. Congress and certain states have considered legislation, and some states are taking action, to ban or otherwise restrict the interstate transportation of wastes for disposal, to impose discriminatory fees on such transported wastes, to limit the types of wastes that may be disposed of at existing disposal facilities, and to mandate waste minimization initiatives, recycling quotas and composting of yard wastes. The Company's waste collection, transportation, treatment and disposal operations may be adversely affected by these developments.
In recent years, a number of communities have instituted "flow control" requirements, which typically require that waste collected within a particular area be deposited at a designated facility. In May 1994, the U.S. Supreme Court ruled that a flow control ordinance was inconsistent with the Commerce Clause of the Constitution of the United States. A number of lower federal courts have struck down similar measures. Congress recently considered, but did not adopt, legislation that would have partially overturned the Supreme Court's decision. The 1995 Congress may also examine bills that immunize particular governmental actions (for example, flow control that results from franchises or municipal contracts) from Commerce Clause scrutiny. In the absence of federal legislation, certain local laws that seek to direct waste flows to designated facilities may be unenforceable.
Similarly, the U.S. Supreme Court has consistently held that state and local measures that seek to restrict the importation of extraterritorial waste or tax imported waste at a higher rate are unconstitutional. To date, congressional efforts to enable states to, under certain circumstances, impose differential taxes on out- of-state waste or restrict waste importation have not been successful. In the absence of federal legislation, discriminatory taxes and importation restrictions should continue to be subject to judicial invalidation.
Because a major component of the Company's business is the collection and disposal of solid waste in an environmentally sound manner, a material amount of the Company's capital expenditures are related (directly or indirectly) to environmental protection measures, including compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment. There are costs that are associated with facility upgrading, corrective actions, facility closure and post-closure care in addition to other costs normally associated with the Company's waste management activities. The majority of these expenditures are made in the normal course of the Company's business, and do not place the Company at any competitive disadvantage.
In October 1991, the EPA issued its final regulations under Subtitle D of the Resource Conservation and Recovery Act of 1976 ("RCRA"), which set forth minimum federal performance and design criteria for municipal solid waste landfills. These regulations also incorporated provisions under the Clean Air Act relating to landfill operations. All Subtitle D regulations are in effect, except for the ground-water monitoring requirements which are to be phased in over a five-year period and the financial assurance requirements which the EPA has now requested be effective in April 1996. Management of BFI believes that, as described below, these regulations will have a favorable long-term impact on its landfill operations, but meeting these new regulatory requirements is resulting in increased costs.
Under the Clean Air Act, the EPA proposed regulations in May 1991 which would require extensive methane gas collection systems to be installed at many of the Company's landfills. Although these regulations are not expected to be finalized until the Spring of 1995, the Company has proceeded to design, permit and install gas extraction and control systems at many of its facilities. The Company believes these systems substantially comply with the proposed regulations under the Clean Air Act. The Company is also seeking operating and other applicable permits for its activities and is pursuing a strategy of reducing emissions from both mobile and stationary sources. Implementation of certain provisions of the Clean Air Act will result in additional stringent control for those areas of the country that are placed in "nonattainment status".
Increasing regulation of solid waste management activities may also offer the Company expanded opportunities. The federal Subtitle D landfill regulations have resulted in the closure of a number of smaller, older existing landfills, which has increased the demand for solid waste capacity at other landfills that are in compliance with the regulations. Also, the regulations allow for the deposit of certain non-hazardous industrial wastes into solid waste landfills, thus increasing the volume of waste eligible for disposal in solid waste landfills. Medical waste regulations, mining waste regulations, ash regulations, municipal waste combustion regulations, and regulations for other industrial solid wastes (including waste water) will provide new opportunities for waste management facilities. While recycling regulations and procurement requirements for recycled goods will continue to create business opportunities in the recycling area, they will also diminish the volume of waste otherwise available for disposal in landfills.
Financial responsibility regulations, adopted in various forms by many states, require owners or operators of waste disposal facilities and underground storage tanks to demonstrate financial ability to respond to and correct for sudden and accidental pollution occurrences, as well as for non-sudden or gradual pollution occurrences. To meet these requirements, the Company has secured Environmental Impairment Liability ("EIL") insurance coverage in amounts the Company believes are in compliance with federal and state law. Under the current EIL policy, which is collateralized, the Company must reimburse the carrier for any losses. It is possible that the Company's net income could be adversely affected in a specific reporting period in the event of significant environmental impairment claims.
Many state regulations also require owners or operators of waste disposal facilities to provide assurance of their financial ability to cover the estimated costs of proper closure and post-closure monitoring and maintenance of these facilities. The federal Subtitle D regulations require all states to adopt financial assurance regulations that meet the federal standards. The Company has generally relied upon its consolidated financial position to issue corporate guarantees, or has utilized letters of credit or surety bonds to satisfy these requirements. The EPA has proposed a financial test and corporate guarantee for use by private Subtitle D facilities, which, if adopted, would afford the Company a highly cost effective method to satisfy the financial assurance requirements. The Company has also established a captive insurance company that is being used to provide insurance as a recognized means of demonstrating this financial assurance. The Company is continuing its efforts to get this captive insurance company admitted in certain states, after which it can serve as a low-cost alternative to certain other forms of financial assurance, including letters of credit.
Many of the states and local jurisdictions in which the Company operates have enacted "fitness" statutes that allow agencies having jurisdiction over waste service contracts or facility permits to refuse to award such contracts or to revoke or deny such permits on the basis of the applicant's (or permit holder's) environmental or other legal compliance history. The underlying intent of these statutes is to ensure that entities which engage in waste management activities merit and maintain the public confidence and trust. These statutes authorize the agencies to make determinations of an applicant's "fitness" to be awarded the waste service contract or to operate the particular waste facility and to revoke or deny that facility's operating permit, absent a showing that the applicant has been rehabilitated through its adoption of various operating practices, policies and procedures to ensure compliance with all applicable laws of that jurisdiction. Certain of the Company's subsidiaries with past violations of environmental or other laws, or affiliates of such subsidiaries, have to respond to these requirements. In addition, the federal Clean Water Act provides for debarment of contractors for violations of its provisions.
In 1988, the EPA issued regulations under RCRA which require an owner or operator of underground storage tanks that contain or contained petroleum to meet certain design, operating and performance standards for such tanks and to demonstrate financial responsibility for any appropriate corrective action and third- party compensation. The Company has conducted an analysis of its tanks, and the majority of its underground tanks will have been removed by 1998. Tanks that need replacing are being replaced by either above- or below-ground systems that meet the new standards.
With respect to international operations, the profitability and risks associated with these operations can be affected by changes in national business, financial and political policies, war, invasion, social instability, currency fluctuations and other risk factors associated with operations in foreign countries. In its international operations, the Company has noted a trend toward increased environmental regulation, particularly in those countries within the European Economic Community. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters."
Competition
BFI competes with both larger and smaller publicly-held companies and numerous small privately-owned waste services companies that are primarily engaged in offering all or part of the waste services that BFI provides. This competition is intense and has increased in recent years. BFI believes that neither it nor any other waste services company has a significant portion of any major aspect of the solid waste services markets. In some geographic areas, all or part of the solid waste collection, processing and disposal services offered by BFI may also be provided by municipalities or by governmental authorities with regional or multi-county jurisdiction. Generally, however, governmental units do not provide significant commercial or industrial solid waste collection or disposal services. Because solid waste services provided by municipal or regional governmental authorities are generally subsidized by tax revenues and utilize major equipment and facili- ties that are financed with proceeds from the sale of tax-exempt bonds, these authorities may provide such services at lower prices (though not necessarily at lower costs) than those of private companies.
Competition is encountered primarily from publicly-held and numerous locally-owned private solid waste services companies and, to a lesser degree, from municipalities and other governmental units with respect to residential solid waste collection and solid waste sanitary landfills. Intense competition in pricing and type and quality of services offered is encountered. Some competitors in certain markets have increased competitive pressure by their willingness to accept lower profit margins to maintain market share.
Waste Disposal Risk Factors
There are serious, sometimes unforeseeable, business risks and potentially substantial cost exposures associated with the establishment, ownership and operation of solid waste sanitary landfill sites and other types of waste processing and disposal facilities. These risk factors include, but are not limited to: (i) the difficulty of obtaining permits to expand or establish new sites and facilities and public and private opposition to the location, expansion and operation of these facilities, (ii) govern- mental actions at all levels that seek to restrict the interstate movement of waste for disposal, which can result in declining volumes of waste available for disposal at some facilities, (iii) costs associated with liner requirements, groundwater monitoring, leachate and landfill gas control, surface water control, post- closure monitoring, site cleanup, other remedial work and maintenance and long-term care obligations, (iv) the obligation to manage possible adverse effects on the environment, (v) regulations requiring demonstration of financial responsibility (see "Business - - Regulation") and conformance to prescribed or changing standards and methods of operation, (vi) judicial and administrative proceedings regarding alleged possible adverse environmental and health effects of landfills or other treatment and disposal facilities, and (vii) reduction in the volume of solid waste available for direct landfill disposal in certain states because of governmental incentives to reduce the daily volume of waste that may be disposed of, initiatives that require waste recycling, minimization or composting and because of incineration in large waste-to-energy facilities. See also "Business - Resource Recovery", "Business - Regulation" and "Legal Proceedings - Environmental Proceedings."
Some of the issues faced by the Company and the waste industry generally include (i) opposition to the siting and operation of new or expanded waste facilities, (ii) public concern regarding the potential for adverse effects on public health and the environment attributable to the waste managed at such facilities, (iii) the cost of complying with complex and changing regulations, (iv) governmental restraints on interstate shipment of waste or discriminatory taxes on waste imports, (v) differential enforcement of laws and regulations by governmental agencies, and (vi) a desire on the part of many waste generators to maintain or increase control over their wastes by managing their wastes. See also "Legal Proceedings-Environmental Proceedings."
BFI has periodically undertaken or been required, and may in the future undertake or be required, to cease or to alter substantially its operations at existing waste disposal sites, to implement new construction standards at existing facilities and to add additional monitoring, post-closure maintenance or corrective measures at waste disposal sites. The Subtitle D regulations have required costly, additional expenditures by the Company and may in the future require substantial expenditures, which could have a negative impact on operations. See "Business - Regulation" for information concerning capital expenditures relating to environmental and health laws and regulations and Notes (1) and (6) of Notes to Consolidated Financial Statements.
If the Company were unable to continue disposing of planned volumes of wastes at existing solid waste landfills and unable to either expand existing landfills or establish new sites, it would be required to obtain the rights to use other disposal facilities or to suspend or curtail solid waste collection or disposal activities. Any such actions would have an adverse impact on the Company's collection business and could substantially reduce the Company's revenues and income from operations and increase the risk of impairing the value of the Company's investment in existing or proposed facilities. These developments could also result in accelerating the recognition of closure costs and post-closure monitoring cost accruals for those landfills, with a corresponding negative impact on the Company's net income.
Certain geographic regions in the United State have, at times, experienced shortages of suitable solid waste disposal facilities. Without long term planning, many private and governmental solid waste collection companies operating in the affected areas, including BFI, could be required to curtail or even suspend land disposal operations, or seek other, more distant sites. In other cases, collection companies, including those owned by BFI, may be excluded from disposing of solid waste in landfills or waste-to- energy facilities either because of regulation or because of the owners' desire to preserve the remaining capacity for their own disposal needs.
Corporate Development
On September 20, 1994, BFI Acquisitions plc ("BFI (UK)"), a subsidiary of the Company, announced the terms of cash offers to acquire all of the outstanding ordinary shares (including ordinary shares represented by American Depositary Shares) of Attwoods plc ("Attwoods"), a United Kingdom company, and convertible preference shares of Attwoods (Finance) N.V., a Netherlands Antilles company and finance subsidiary of Attwoods. On November 17, 1994, the Company announced its increased and final cash offers ("Final Offers") expiring on December 2, 1994. The Final Offers, denominated in pounds sterling, are 116.75 pence per ordinary share (583.75 pence per ADS) and 92 pence per preference share (an aggregate of approximately U.S. $611 million based on exchange rates prevailing on November 29, 1994). The Final Offers also provide for a recommended final dividend of 3.25 pence per ordinary share payable to Attwoods shareholders.
Attwoods is a provider of waste management services operating principally in the United States, the United Kingdom, the Caribbean and mainland Europe, primarily Germany, and also has mineral extraction operations in the United Kingdom.
The Final Offers are subject to the satisfaction of various conditions, including acceptance by the holders of not less than 50% of the ordinary shares and satisfaction of applicable requirements under the Hart-Scott-Rodino Anti-Trust Improvements Act ("HSR Act"). The Company has an agreement in principle with the U.S. Department of Justice ("DOJ") respecting satisfaction of the requirements of the HSR Act and expects to reach a definitive agreement prior to expiration of the Final Offers.
On November 29, 1994, the Company announced that the holders of approximately 42.6% of the ordinary shares (including ADS) had accepted the Final Offers.
The Company's corporate development program will continue to focus on opportunities to expand its customer base by entering into new domestic and international markets, by broadening the type of services offered, by pursuing municipal contracting opportunities, and by acquiring businesses and properties. Developing suitable new solid waste processing and disposal facilities will continue to be an important strategy. When investing in capital-intensive facilities such as landfills, the Company faces the risk that required permits will not be obtained or renewed. If permits are not ultimately obtained and maintained, the value of such facilities can be substantially impaired, which could result in a reduction of future net income. See "Business - Solid Waste Services - Disposal" and "Business - Regulation." The Company will also pursue project opportunities for its services in foreign markets. See "Business - International Operations."
The Company has continued to acquire from unaffiliated persons, in negotiated transactions, businesses and properties engaged primarily in or related to one or more aspects of the solid waste services industry. BFI intends to continue pursuing opportunities to acquire such businesses using BFI Common Stock, cash, agreements for the payment of royalties and indebtedness. There can be no assurance that BFI will be successful in making additional acquisitions. See "Business-Financing and Capital Expenditures."
Financing and Capital Expenditures
Capital Expenditures
Capital expenditures were approximately $1.3 billion in fiscal 1994, which included $611 million for acquired businesses, including the acquisition of 50% of Otto Waste Services. Reflected in the $611 million is the fair market value of common stock issued in connection with four business combinations which met the criteria to be accounted for as poolings-of-interests. Additionally, approximately $218 million was expended in connection with the development of existing operations, municipal contracts and investment in unconsolidated subsidiaries. The remainder of capital expenditures for 1994 related to additions and replacements of capital items for existing operations. See Notes (3) and (5) of Notes to Consolidated Financial Statements.
Subject to Board of Director approval and excluding the proposed Attwoods transaction, the capital appropriations budget will be approximately $1.2 billion for fiscal 1995. This includes amounts for corporate development and the normal replacement of assets and expansion within existing operations. A change in national economic conditions, regulatory or other factors could result in a revised level of capital expenditures. The Company believes that the amounts budgeted to replace assets, if expended, are sufficient to maintain the level of its existing assets through 1995. It is currently anticipated that the funds required for fiscal 1995 capital expenditures will be provided from internally generated sources and from outside sources of capital, including borrowings. See "Business - Resource Recovery", "Business - International Operations" and "Business - Corporate Development". See "Business - - Regulation" for information concerning capital expenditures relating to evolving environmental and health laws and regulations. Management of the Company believes that there are ample provisions in the capital appropriations budget for business opportunities that may arise in the ordinary course of business.
During the next five years, the Company currently expects that internally generated funds will be sufficient to finance most of its anticipated capital expenditures in the ordinary course of business. Any shortfall in funds required for these purposes (including the funds required to meet the Company's share of the several American Ref-Fuel project obligations and commitments; see "Business - Resource Recovery") will have to be obtained from outside sources of capital, including borrowings.
Financings and Credit Facilities
On September 20, 1994, the Company announced the terms of a cash offer (the "Offers") to acquire all the ordinary shares of Attwoods plc, a United Kingdom company, and all of the preferred shares of Attwoods (Finance) N.V., a Netherlands Antilles company. On September 19, 1994, the Company entered into a letter agreement providing for the borrowing by the Company of up to 500 million pounds sterling (or its equivalent) to finance the Offers. The facility is to be used to assist in funding the Offers and to fund the working capital requirements and refinance any existing indebtedness of Attwoods, including any existing obligations of Attwoods that become due and payable as a result of the Offers becoming unconditional. Borrowings under the facility are conditional on the Offers having become (or in certain circumstances, having been declared) unconditional in all respects under United Kingdom law. The payment of dividends or other distributions on the Company's Common Stock will be limited by the provisions of this credit agreement; these provisions will be somewhat more restrictive than the restrictions imposed on the payment of dividends and other distributions pursuant to the Revolving Credit Agreement discussed below and in Note (7) of Notes to Consolidated Financial Statements. See "Market for the Registrant's Common Equity and Related Stockholder Matters" for a discussion of the Company's dividend history.
The Company has a bank credit agreement providing for borrowings of up to $1 billion (the "Revolving Credit Agreement"). The Company had no borrowings under this bank credit agreement at November 29, 1994. The borrowing capacity under this agreement will be available, if needed, to assist the Company in meeting its requirements for outside sources of capital. The payment of dividends or other distributions on the Company's Common Stock is limited by the provisions of the Revolving Credit Agreement. The Company's long-term objective is to maintain most of its indebtedness in fixed interest rate obligations. See "Market for the Registrant's Common Equity and Related Stockholder Matters" and Notes (7), (8) and (17) of Notes to Consolidated Financial Statements for more detailed information concerning these agreements and the Company's other indebtedness.
The Company has a commercial paper program authorizing the issuance of up to $1 billion in commercial paper. At November 29, 1994, the Company had $45.5 million in commercial paper outstanding. Borrowings under the commercial paper program may not exceed the available credit under the Company's Revolving Credit Agreement. The commercial paper program is available to provide the Company with external financing to meet its capital requirements.
In March 1994, the Company completed a public offering of 15,525,000 shares of its Common Stock. The net proceeds of approximately $434.7 million received by the Company were used to redeem the $100 million 8 1/2% Sinking Fund Debentures due 2017 outstanding, to repay indebtedness associated with the acquisition of the Company's 50% interest in Otto Waste Services and other working capital requirements. See "Management's Discussion and Analysis - Liquidity and Capital Resources" for additional information.
Executive Officers of the Company
The executive officers of the Company, their positions (including their principal areas of responsibility with the Company) and their respective ages are as follows:
Name Position Age*
William D. Ruckelshaus Chairman of the Board, 62 Chief Executive Officer and Director (1)
Bruce E. Ranck President, Chief 45 Operating Officer and Director (1)
Norman A. Myers Vice Chairman, Chief 58 Marketing Officer and Director (1)
Jeffrey E. Curtiss Senior Vice President and 46 Chief Financial Officer
Hugh J. Dillingham, III Senior Vice President 45 (Disposal Operations)
J. Gregory Muldoon Senior Vice President 40 (Corporate Development)
Rufus Wallingford Senior Vice President 54 and General Counsel
David R. Hopkins Vice President, Controller 51 and Chief Accounting Officer
Louis A. Waters Chairman and President of 56 BFI International, Inc. and Director (1)(2) ________________
*As of November 30, 1994. (1) Serves on the Executive Committee of the Board of Directors. (2) Serves on the Finance Committee of the Board of Directors.
Mr. Ruckelshaus was elected a director in June 1987 and Chairman of the Board and Chief Executive Officer in September 1988. Mr. Ruckelshaus also serves as a director of Cummins Engine Company, Monsanto Company, Nordstrom, Inc., Texas Commerce Bancshares, Inc. and Weyerhaeuser Company. He also serves as a director or trustee of several educational and charitable organizations.
Mr. Ranck became President and Chief Operating Officer in November 1991, having served as Executive Vice President (Solid Waste Opera- tions-North America) of the Company since October 1989 and a director since March 1990. Prior to that time, he served the Company as a Regional Vice President in one of the Company's regions for a period in excess of five years. He also serves as a director of Furon Co. and Junior Achievement of Southeast Texas, Inc.
Mr. Myers was elected a director in 1978, Chief Marketing Officer in March 1981 and Vice Chairman of the Board in December 1982. He was initially elected a Vice President in December 1970 and became an Executive Vice President in July 1976. Mr. Myers is a director of My Friends, a foundation for children in crisis.
Mr. Curtiss became Senior Vice President and Chief Financial Officer of the Company in January 1992. Before that time, he served from August 1989 to January 1992 as Executive Vice President, Chief Financial Officer and a director of Heritage Media Corporation, an American Stock Exchange-listed company based in Dallas.
Mr. Dillingham was elected Senior Vice President (Disposal Operations) in March 1993, having served as Vice President (Disposal Operations) since December 1991. Prior to his election, he served as Divisional Vice President of Disposal Operations in one of the Company's regions, and has over sixteen years of experience with the Company in landfill operations. Mr. Dillingham serves as a director of the Wildlife Habitat Enhancement Council.
Mr. Muldoon was elected Senior Vice President (Corporate Development) in September 1992, having served as Vice President (Operations) since December 1991. He had joined the Company in 1980 as a market development representative and from 1983 to 1988, he had served as district manager in several locations. From early 1989 until October 1990, he served as President of CECOS International, Inc., a subsidiary of the Company, through the discontinuation of its hazardous waste business. He then served as Regional Vice President of one of the Company's regions from October 1990 to November 1991.
Mr. Wallingford became Senior Vice President and General Counsel of the Company in January 1994. Prior to that time, he was a senior partner with the law firm of Fulbright & Jaworski L.L.P., Houston, Texas, for a period in excess of five years. Mr. Wallingford also serves as a director of St. Luke's Episcopal Hospital and the Children's Museum Foundation in Houston, Texas.
Mr. Hopkins, who was a Divisional Vice President and Assistant Controller prior to becoming Controller of the Company in September 1986, joined the Company in September 1980. He was elected a Vice President and named Chief Accounting Officer in December 1986. From September 1991 to January 1992, he served as acting Chief Financial Officer of the Company.
Mr. Waters has served as Chairman of the Finance Committee since September 1988, has served as Chairman of BFI International, Inc. since May 1991 and has served as President of BFI International, Inc. since March 1993. He also serves as a member of the Executive Committee of the Company's Board of Directors, and served as Chairman of the Executive Committee from September 1980 until 1988. He served as Chairman of the Board of the Company from August 1969 to September 1980. Mr. Waters serves as a director or trustee of several business, educational and charitable organizations.
All officers of the Company (including executive officers) are elected by the Board of Directors, generally at its meeting held the day of the annual meeting of stockholders or as soon thereafter as practicable. Each officer is elected to hold office until his successor shall have been chosen and shall have qualified or until his death or the effective date of his resignation or removal. The annual meeting of stockholders is scheduled to be held March 1, 1995 in Houston, Texas.
Item 2.

Item 2. Properties.
In their operations, subsidiaries and affiliates of the Company use specially-equipped trucks, steel containers and stationary compactors. The Company also owns and/or operates sanitary landfill sites throughout the United States and Canada, and in the United Kingdom, Germany, the Netherlands, Spain, Australia and Italy. See "Business - Solid Waste Services - Collection" and "Business - Solid Waste Services - Solid Waste Transfer and Disposal," and Notes (4) and (6) of Notes to Consolidated Financial Statements.
The Company's executive offices are located at 757 N. Eldridge, Houston, Texas. The Company owns real estate, buildings and other physical properties, which it employs in its daily operations in a large number of its operating locations. The Company also leases a substantial portion of its transfer stations, offices, storage and shop space. See Notes (4) and (9) of Notes to Consolidated Financial Statements.
BFI believes that the property and equipment of its subsidiaries and affiliates are well-maintained and adequate for its current needs, although substantial investments are expected to be made in additional property and equipment for expansion, for replacement of assets as they reach the end of their useful lives and in connection with corporate development activities. See "Business - Corporate Development," "Business - Financing and Capital Appropriations" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Certain of the property and equipment of BFI's subsidiaries and affiliates is subject to mortgages and liens securing payment of portions of their indebtedness. See Notes (7) and (9) of Notes to Consolidated Financial Statements for information with respect to mortgage and lease obligations on these properties.
Item 3.

Item 3. Legal Proceedings.
On November 7, 1990, a lawsuit styled Leonard Eisner Profit Sharing Plan et al. v. Browning-Ferris Industries, Inc. et al. was filed in the United States District Court for the Southern District of Texas. Another purported class action styled Jerry Krim, on behalf of himself and all others similarly situated v. Browning-Ferris Industries, Inc., et. al. was filed on September 9, 1991, in the United States District Court for the Southern District of Texas. It is a purported class action on behalf of those persons who purchased BFI Common Stock during the period from December 17, 1990 through September 9, 1991. Thereafter, several other purported class actions were also filed. These cases were consolidated into a lawsuit styled In Re Browning-Ferris Industries, Inc. Securities Litigation, which is pending in the United States District Court for the Southern District of Texas. The suit generally alleges violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by allegedly prepar- ing, issuing and disseminating materially false and misleading information to plaintiffs and the investing public. The amended consolidated suit seeks unquantified damages and attorneys' and other fees. On June 11, 1993, the trial court certified the class action and two classes of persons who purchased the Company's common stock. The first class period is from August 9, 1990 through November 5, 1990, and the second class period is from November 6, 1990 through September 3, 1991. On June 30, 1994, the plaintiffs filed a motion for leave to file an amended complaint to broaden the allegations in the suit. This motion has been denied. The defendants have filed motions for summary judgment as to both classes, which motions are still pending. The defendants have also filed a motion to dismiss as class action or, in the alternative, to decertify the classes. This motion has not been ruled on by the court. The Company is vigorously defending these cases.
The case of Gary David Harding, et al. v. Browning-Ferris Industries, Inc., et al. was filed in the 229th Judicial District Court of Duval County, Texas, on February 28, 1994. The approximately 356 plaintiffs allege that they reside in the vicinity of a landfill in San Patricio County, Texas, and they allege that they have sustained personal injuries and other damages from allegedly contaminated groundwater and other alleged pathways of exposure. Although the complaint does not specify the amount of damages sought in the case, the plaintiffs' attorneys have informally notified the Company that they will "seek damages greatly exceeding ten percent of BFI's current consolidated assets." This lawsuit was first filed in the 105th Judicial District Court of Nueces County, Texas on September 23, 1992, with respect to approximately 171 plaintiffs. The plaintiffs moved to have the Nueces County lawsuit dismissed by the trial court without prejudice. This motion was granted by the trial court. The plaintiffs from the Nueces Court case along with numerous new plaintiffs refiled the litigation in Duval County. The Company has filed a motion that seeks to transfer venue in the litigation back to Nueces County, Texas. This motion has not been ruled on by the court in Duval County. The Company is vigorously defending against the allegations in the litigation.
On May 18, 1994, a lawsuit styled Ogden Projects, Inc., et al. v. New Morgan Landfill Company, Inc. ("New Morgan") was filed in the United States District Court for the Eastern District of Pennsylvania. The suit alleges that a subsidiary of the Company did not obtain a permit to construct and operate a landfill under provisions of the Clean Air Act. The plaintiffs, who are private parties without regulatory authority, seek a declaratory judgment, an order enjoining the subsidiary from continuing the construction and/or operation of the landfill without a permit, and civil penalties of $25,000 for each day New Morgan has constructed and/or operated the landfill without a permit under the provisions of the Clean Air Act. The Company believes the suit is without merit and is vigorously defending the case.
In addition to the above-described litigation, the Company and certain subsidiaries are involved in various other administrative matters or litigation, including original or renewal permit application proceedings in connection with the establishment, operation, expansion, closure and post-closure activities of certain landfill disposal facilities, environmental proceedings relating to governmental actions resulting from the involvement of various subsidiaries of the Company with certain waste sites (including Superfund sites) (see "Environmental Proceedings"), personal injury and other civil actions, as well as other claims and disputes that could result in additional litigation or other adversary proceedings.
While the final resolution of any such litigation or such other matters may have an impact on the Company's consolidated financial results for a particular reporting period, management believes that the ultimate disposition of such litigation or such other matters will not have a materially adverse effect upon the consolidated financial position of the Company.
Environmental Proceedings
The Company strives to conduct its operations in compliance with applicable laws and regulations, including environmental rules and regulations, and has as its goal 100% compliance. However, management believes that in the normal course of doing business, companies in the waste disposal industry, including the Company, are faced with governmental enforcement proceedings and resulting fines or other sanctions and will likely be required to pay civil penalties or to expend funds for remedial work on waste disposal sites. The possibility always exists that such expenditures could be substantial, which would have a negative impact on earnings for a particular reporting period. Management of BFI believes that the existence of these proceedings does not provide an accurate reflection of the Company's operating policies, procedures and capabilities, although the Company will have to respond to those issues in filings required to be made in jurisdictions which have enacted "fitness" statutes. See "Business - Regulation." In any event, management of the Company believes that the ultimate resolution of such proceedings will neither individually nor in the aggregate have a materially adverse effect upon the consolidated financial position of the Company.
Subsidiaries of the Company are continuously engaged in various original or renewal permit application proceedings in connection with the establishment, operation, expansion, closure and post- closure activities relating to waste treatment and disposal facilities, properties and activities. These proceedings, which are a necessary and routine part of waste disposal activities, are held before a variety of regulatory and judicial agencies at the federal, state and local level. In these proceedings, legal challenges are routinely raised by private parties and by the regulatory agencies, alleging a variety of adverse consequences (including adverse effects on the environment, in some instances with particular reference to the inequitable distribution of environmental burdens among various social groups and classes) if the proposed permits are granted or renewed. Opposition is also routinely encountered in connection with proposed changes in zoning designations, operating procedures, remedial or upgrading actions and post-closure activities at waste processing and disposal facilities. See "Business - Regulation."
Various subsidiaries of the Company are participating in potentially responsible party ("PRP") groups at 84 sites listed on the EPA's National Priority List, which sites may be subject to remedial action under the Comprehensive Environmental Response, Compensation and Liability Act (also known as "Superfund"). Complete settlements with other members of the PRP groups and/or the EPA have been negotiated with respect to 61 of these sites. Partial settlements have been negotiated with regard to ten of the sites. These settlements had no material effect on the Company's results of operations or consolidated financial position. Further, various subsidiaries of the Company have received information requests relating to 64 additional sites on the EPA's National Priority List. For 35 of these sites, the Company has determined that it is not a PRP. The Company's PRP status at the remaining 29 sites has not yet been determined. The number of Superfund sites with which the Company's subsidiaries are involved may increase or decrease depending upon the EPA's findings from responses to these information requests and any future information requests which may be received. Superfund legislation permits strict joint and several liability to be imposed without regard to fault, and as a result, one company might be required to bear significantly more than its proportional share of the cleanup costs if it is unable to obtain appropriate contributions from other responsible parties.
Management routinely reviews each site requiring corrective action (including Superfund sites) in which the Company's subsidiaries are involved, considers each subsidiary's role with respect to each site and the relationship to the involvement of other parties at the site, the quantity and content of the waste with which it was associated, and the number and financial capabilities of the other parties at the various sites. Based on reviews of the various sites, currently available information and management's judgment and significant prior experience related to similarly situated facilities, expense accruals are provided by the Company for its share of estimated future costs associated with corrective actions to be implemented at certain of these sites and existing accruals are revised as deemed necessary. The final negotiated settlement relating to the large majority of Superfund sites occurs several years after a party's identification as a potentially responsible party, due to the many complex issues that must be addressed in determining the magnitude of the contamination at the site. The process for addressing contamination at a site usually includes technical investigations, selection of a remedy and implementation of the remedy selected. In many cases, the expenditures related to actual corrective action may be incurred over a number of years. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters."
Management believes that the ultimate disposition of these environmental matters will not have a materially adverse effect upon the liquidity, capital resources or consolidated financial position of the Company, although the resolution of one or more of these matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. It can be reasonably expected that various subsidiaries of the Company will become involved in additional remedial actions and Superfund sites in the future.
A subsidiary of a Company, CECOS International, Inc. ("CECOS"), is a party to a consent order with the U.S. Environmental Protection Agency, one aspect of which concerns a leachate pretreatment system that CECOS agreed to construct at one of its closed facilities. By letter dated March 16, 1994, the USEPA has demanded $528,500 in stipulated penalties due to CECOS's alleged failure to commence timely start-up of the leachate pretreatment system that is presently operating. CECOS is vigorously defending the imposition of this proposed penalty. Management of the Company is unable to conclude whether the ultimate monetary sanction in this matter, if any, will be more than $100,000.
On March 6, 1991, Region VI of the EPA filed an administrative proceeding entitled In the Matter of Chemical Reclamation Services, Avalon, Texas. The complaint alleges that Chemical Reclamation Services ("CRS"), a former subsidiary of the Company, failed to comply with certain notification requirements under RCRA and under regulations established under the Texas hazardous waste management program. The complaint seeks a proposed monetary sanction against CRS in the amount of $229,500. A claim for indemnity has been made against the Company. Management of the Company is currently unable to determine whether the ultimate monetary sanction, if any, will be more than $100,000, and whether the Company will be obligated for any part of the monetary sanction, if any, that may ultimately be imposed upon CRS.
On March 9, 1991, CECOS was named in a civil administrative complaint, entitled In the Matter of CECOS International, Inc., initiated by Region II of the EPA. This complaint alleges that CECOS landfilled certain waste generated by General Motors Corporation, that by definition contained polychlorinated biphenyls in excess of the regulatory limit, rather than incinerating such waste, and that CECOS failed to test the waste in accordance with the requirements of its permits. The complaint seeks a monetary sanction against CECOS in the amount of $14,150,000. CECOS is vigorously contesting the allegations in the complaint. Management of the Company is currently unable to determine whether the ultimate monetary sanction, if any, will be more than $100,000.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of security holders.
PART II.
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.
BFI's Common Stock is traded on the New York Stock Exchange, the Chicago Stock Exchange, the Pacific Stock Exchange and The International Stock Exchange of the United Kingdom and Republic of Ireland Ltd. The table below sets forth by fiscal quarter, for the fiscal years ended September 30, 1993 and 1994, the high and low sales prices of BFI's Common Stock on the New York Stock Exchange - Composite Transactions, as reported in The Wall Street Journal.
Fiscal Year 1993 Fiscal Year 1994 High Low High Low
First Quarter $ 27-1/8 $ 21-5/8 27-1/2 20-7/8 Second Quarter 28-5/8 25-3/4 30-1/4 24-1/4 Third Quarter 28 24 32-1/4 24-5/8 Fourth Quarter 27-7/8 22-3/8 32-7/8 29
As of November 29, 1994, there were approximately 20,000 holders of record of BFI Common Stock.
In June 1988, the Company's Board of Directors adopted a Preferred Stock Purchase Rights Plan and in connection therewith declared a dividend of one Preferred Stock Purchase Right (a "Right") on each outstanding share of the Company's Common Stock and on each share subsequently issued until separate Rights certificates are distributed or the Rights expire or are redeemed. See Note (11) of Notes to Consolidated Financial Statements for more detailed information concerning these Rights.
BFI has paid cash dividends on its Common Stock each year since 1950. Cash dividends are paid quarterly. During each of fiscal 1993 and 1994, 68 cents was paid in dividends on each share of Common Stock. The most recently declared quarterly cash dividend on the Common Stock was 17 cents per share. The payment of dividends or other distributions on, or with respect to, the Common Stock is limited by provisions of the Company's Revolving Credit Agreement. See Note (7) of Notes to Consolidated Financial Statements. The amount available for payment of dividends or distributions on or with respect to Common Stock pursuant to such limitation was approximately $1.3 billion on September 30, 1994, after giving effect to cash dividends paid or declared through September 30, 1994. The provisions of the credit agreement for 500 million pounds sterling to finance the acquisition of Attwoods will be somewhat more restrictive with respect to the payment of dividends. See "Financing and Capital Expenditures -Financings and Credit Facilities" for a description of this credit agreement. BFI currently expects to continue the payment of dividends, although future dividend payments will depend on BFI's earnings, financial needs and other factors.
Due to the nature of the Company's business, the Company or its competitors receives unfavorable publicity from time to time, which can result in aberrational market conditions for the Company's securities.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III.
Items 10, 11, 12 and 13 of Part III (except for information required with respect to executive officers of the Company which is set forth under "Business - Executive Officers of the Company" in Part I of this report) have been omitted from this report, since the Company will file with the Securities and Exchange Commission, not later than 120 days after the close of its fiscal year, a definitive proxy statement, pursuant to Regulation 14A, which involves the election of directors. The information required by Items 10, 11, 12 and 13 of this report, which will appear in the definitive proxy statement, is incorporated by reference into Part III of this report.
Item 6.

Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The fiscal 1994 results reflected significant improvement over the prior year as the Company capitalized on opportunities for growth in North America and expanded its international operations. Revenues compared with fiscal 1993 increased 24% to $4.3 billion while net income increased to $279 million from $197 million or 41% over the prior year. Fiscal 1994 results included an extraordinary charge of $5.3 million, net of tax, related to the early retirement of debt, and fiscal 1993 net income included a pre-tax reorganization charge of $27 million ($16.5 million, net of tax). Current year net income before considering the extraordinary item was $284 million, an increase of 33% over prior year net income of $214 million excluding the reorganization charge. The increase in net income before charges was largely the result of increased profitability in the Company's domestic disposal and transfer services and recycling operations, and improved earnings from international operations.
International results have been favorably affected by improved overall performance in Europe, and include the recent acquisition of a 50% interest in one of the largest waste services companies in Germany. In February 1994, the Company paid approximately $400 million, consisting of 3.9 million shares of the Company's common stock and the remainder in Deutsche Mark, to acquire a 50% interest in Otto Waste Services. This purchase represents the single largest acquisition in the history of the Company. Otto Waste Services is an integrated waste services company operating throughout Germany that is principally engaged in providing collection and recycling services under long-term contracts to municipalities. The Otto Waste Services' group of companies includes in excess of 50 wholly owned and partially owned subsidiaries. The revenues and earnings of these companies and partially owned subsidiaries have been included in the Company's results for the year ended September 30, 1994 from the date of acquisition in February 1994.
The Company reported consolidated revenues of $344 million during fiscal year 1994 applicable to the Otto Waste Services acquisition, representing over 40% of the growth in year-to-year revenues. Fiscal 1994's higher revenues were also due in part to the success of the Company's North American acquisition activities. Further, revenue growth from additional volume was significant during the year, particularly in the collection, landfill and recycling businesses. Excluding the Otto Waste Services acquisition, international revenue growth was primarily the result of market development activities in Germany and the Netherlands and the reconsolidation of certain operations in Spain in May 1993.
In addition to reviewing its financial results by geographic area (region, division, district), the Company analyzes its results by reported line of business: collection, disposal and transfer, recycling, medical waste and international. As the various lines of business become integrated within numerous markets, separate business line analysis becomes less meaningful than aggregate marketplace profitability relative to the investment deployed in the market. Despite this shortcoming, analyzing financial results by line of business remains the most feasible method of explaining business performance for the Company.
North American collection services revenues increased 10% primarily due to acquisition activities and volume growth from sales efforts and increases in service provided to existing customers. Total revenue change in North American collection due to pricing was slightly negative, a clear reflection of the continued industry competitive climate. Average unit price was negatively impacted to an extent by price reductions in markets where landfill tip fees declined, faster growth in lower than average priced markets and certain acquisitions and municipal contracts which had a lower unit price than that of the average unit price of the collection business as a whole. Pricing of new business appeared to improve somewhat in the latter part of the fiscal year as the Company initiated higher overall pricing levels on new business sold during the third and fourth quarters of fiscal year 1994. The ability to increase pricing in the collection business continues to represent a significant challenge and opportunity for the Company. In addition, during the current fiscal year the Company concluded an extensive study which identified opportunities for profit improvement of the Company. The Company has recently begun to implement a number of these profit improvement initiatives. The goal of these initiatives, which will be implemented over the next two to three years, is to increase per unit revenues and decrease per unit costs, with a principal focus on the collection services line of business.
North American landfills were a principal driver of improved domestic operating results. Increased earnings in the landfill business were generally attributable to increased disposal volumes. Total landfill volume increased by 13% in fiscal 1994. Volume growth was due principally to increased flow to existing and new sites, internalization of volumes at the Company's landfills, general volume growth from the closing of landfill facilities by municipalities and other companies as a result of Subtitle D landfill regulations and the improving economy in general. Total non-special waste volumes (generally municipal solid waste) were 12% over the prior year and special waste volumes (such as sludges, ash volumes, nonhazardous chemical wastes and contaminated soils) increased 22%. The Company intends to make special waste opportunities an area of emphasis in fiscal 1995. Average landfill pricing to unaffiliated customers was almost flat compared with the prior year, despite the negative impact of (i) a shift in mix of waste disposed from contaminated soils at higher tipping fees to other types of special and municipal wastes which carry a lower tipping fee and (ii) a shift in the mix of waste disposed from landfills in the northern section of the United States to landfills in the southern and southeastern sections of the United States which receive lower tipping fees. In fiscal 1994, the Company internalized approximately 42% of collection services volumes, similar to the 44% internalized in fiscal 1993. Short-term fluctuations in the percent of waste disposed at Company landfills were primarily timing issues related to the opening and closing of sections or cells of individual facilities. The Company's current goal is to internalize 50% of collected volumes, a strategy which both conserves cash and lessens exposure to, and dependency on, outside disposal sites. In fiscal 1995, the Company will continue to focus on increasing volumes, controlling operating costs and managing capital expenditures in order to increase cash flow and earnings. Improved profitability is also dependent in part on increased tip fee flexibility.
Recycling initiatives within the Company were launched in earnest several years ago when the Company recognized that legislation was segmenting and prioritizing the treatment of waste streams, customers were demanding changes in the way waste was serviced, and consumers of recyclable materials were planning capital projects. The Company's investment in recycling reflected improved results this year as the recycling business continued to contribute a significant percentage of the growth in total Company revenues in fiscal 1994. Revenues from recycling services grew 50% during fiscal 1994 to $359 million. Operating margins in this business improved over the prior year due in large part to an increase in commodity prices paid for the products sold and volume throughput at the Company's processing centers. Increased commodity prices were most notable for corrugated cardboard and newspaper. Prices for these commodities climbed in the early months of calendar 1994 and reached their highest levels in the fourth quarter. Total revenues increased from the sale of commodities and increased volumes of material processed over fiscal 1993. The Company also added a number of processing centers during the year to further expand processing capacity. Recycling collection services continued to grow as the number of residential customers serviced grew 36% and the number of commercial accounts grew 25% over fiscal 1993. The Company has recently begun to enter into long-term contracts with floor prices to minimize its exposure to any future downturn in commodity pricing that may occur. The Company expects to pursue new waste segmentation opportunities in recycling during 1995, with emphasis on organics processing and further segmentation of waste paper streams.
The Company's medical waste services line of business enjoyed double-digit growth in revenues (up 10% to $161 million). Margins declined slightly from the prior year due to continued price pressure and higher operating costs. However, the Company is well positioned to benefit from the upcoming implementation of certain provisions of the Clean Air Act as hospitals across the United States assess their medical waste treatment technology and determine whether to invest significant capital in improving technology or contract for the treatment and disposal of medical waste streams. Areas of focus in the coming year include providing for more efficient transportation of waste flows, centralization of certain purchasing functions, and continued revenue growth through acquisitions and marketing initiatives.
The Company's international business experienced the most significant revenue growth of any business type in fiscal 1994, due primarily to the acquisition of the 50% interest in Otto Waste Services discussed previously, and other market development activity. Otto Waste Services contributed 80% of the total international revenue growth and over 40% of total Company revenue growth in the current year. Operating results in the Netherlands improved as revenue grew 10% to $237 million, due largely to acquisition activity, and operating margins improved over the prior fiscal year. Some profit improvement was also noted in the Company's United Kingdom operations. Revenues in Spain increased approximately 138% over the prior year due to the reconsolidation of Spanish operations in May 1993 when the Company increased its investment in its Spanish affiliate. Margins in Spain were negatively affected by the competitive environment and a weak economy in the Barcelona area. International operating results continue to be negatively affected by operating losses of the Company's wholly-owned solid waste Italian operations. Results from these Italian operations improved slightly over the course of the year, but significant improvement in these operations will depend on greater stability in the country's political climate and the Company's ability to rebid business at improved margins. Results of the Company's Italian joint venture industrial waste operations improved significantly over the previous year.
The Company plans to continue to focus on acquisition and other market development opportunities, improving pricing and controlling operating and SG&A costs in order to achieve improved performance in fiscal year 1995. The Company believes that continued segmentation of waste streams, industry consolidation due in part to increasing capital intensity and regulation, and the bundling of various integrated waste services are industry trends which will benefit the Company in the years to come. Over the past several years, the Company has geographically diversified its business by investing in select foreign countries, such as Germany, Spain and the Netherlands, and investing within North America in many southern markets, including market areas in Georgia, Alabama, Arizona and Texas. The Company has also pursued vigorously municipal contract business in the United States and acquired companies with significant contractual waste arrangements, such as Otto Waste Services. Municipal contract waste service tends to be counter cyclical as revenues are usually set on a per home basis while costs vary with the amount of waste collected and many of such contracts remain in effect for five or more years. Further, during the past two years, the Company has experienced significant asset expansion coupled with improved returns on its average assets employed (on a pre-tax, pre-interest basis and excluding reorganization charge) in both its North American and international business areas as it has focused on growth in its business and emphasized controlling operating and SG&A costs.
The proposed Attwoods acquisition, if consummated, will further diversify the Company as Attwoods' domestic business is principally in southern states, its United Kingdom business would expand the Company's operations in Europe and much of its business is of a municipal contract nature. See "Liquidity and Capital Resources" and Note (9) of Notes to Consolidated Financial Statements.
Results of Operations - --------------------- Revenues - --------
Revenues for fiscal 1994 were $4.3 billion, a 24% increase over fiscal 1993 revenues of $3.5 billion. The following table reflects the contribution to total revenues of the Company's principal lines of business for the last three fiscal years (in millions):
Year Ended September 30, ------------------------------- 1994 1993 (1) 1992 (1) -------- -------- -------- North American Operations - ------------------------- Collection Services - Solid Waste $2,360 $2,138 $2,038 Disposal and Transfer - Solid Waste Unaffiliated customers 493 448 449 Affiliated companies 392 339 304 ------ ------ ------ 885 787 753 Medical Waste Services 161 146 119 Recycling Services 359 240 175 Services Group and other 83 79 106 Elimination of affiliated companies' revenues (392) (339) (304) ------ ------ ------ Total North American Operations 3,456 3,051 2,887
International Operations (2) 859 428 391 - ------------------------ ------ ------ ------ Total Company $4,315 $3,479 $3,278 ====== ====== ======
Percentage Increase from Prior Year 24% 6% 3%
- --------------- (1) Certain reclassifications have been made in prior year amounts to conform to the current year presentation.
(2) Revenues from Canadian operations are excluded from international revenues and are combined with North American revenues.
For the first time since 1989, the Company exceeded 20% top-line growth as revenues increased 24% versus the prior year. Growth was primarily caused by an aggressive acquisition and market development program highlighted most notably by the purchase of 50% of Otto Waste Services, one of the largest waste services companies in Germany. Increased volumes from existing customers, primarily in the collection, disposal and transfer, and recycling businesses also contributed a significant portion of revenue growth. Revenue growth due to increased pricing was limited in most lines of business due to the continued industry competitive climate and resistance to price increases.
In fiscal 1993, the Company's revenue growth rate exceeded the revenue growth rate of the prior year for the first time since fiscal 1987. Revenue growth was due almost exclusively to acquisitions and increased volumes in the collection, recycling and medical waste lines of business. The impact of pricing on revenue growth was negligible for the second straight year in fiscal 1993 due to economic weakness and competitive pressures in many of the markets in which the Company competes, both domestically and globally.
As the table below reflects, revenue growth in fiscal year 1994 was due primarily to acquisitions and volume increases. Consistent with fiscal years 1993 and 1992, pricing impact on total revenue growth was minimal. Change in Revenues -------------------------------- 1994 1993 1992 ------ ------ ------ Price 1% --% --% Volume (1) 7 2 1 Acquisitions (2) 16 4 2 ---- ---- ---- Total Percentage Increase 24% 6% 3% ==== ==== ==== - -----------------
(1) Includes the negative impact of foreign currency exchange rates.
(2) Includes purchased companies and the impact of the reconsolidation of Spanish operations in fiscal 1993, and the fiscal 1992 deconsolidation of certain Italian operations.
Weighted average per unit pricing edged upward in fiscal 1994 due to positive price movement which occurred in the recycling business as the commodity price of newspapers and cardboard sold by the Company's recycling processing centers increased during 1994. Collection systems (such as solid waste collection, medical waste collection and recyclables collection) and the unaffiliated disposal and transfer business line continued to experience negative or only slightly positive pricing versus prior periods. Although the solid waste collection line of business reflected a negative change in pricing versus the prior year, indications in the commercial systems late in the fiscal year appeared to suggest that the ability to increase pricing was improving. Given the sizeable increases in collection volumes over the past few years due to acquisition and volume growth, any significant improvement in per unit pricing would likely have a favorable impact on earnings.
Every line of business enjoyed strong volume growth in fiscal 1994. Total revenue growth due to increased volume was 7%; the largest dollar contributions came from the collection, disposal and transfer, and recycling lines of business. Both the medical waste and disposal and transfer lines approached double digit percentage revenue growth due to volume in the current year while recycling revenues grew 26% due to volume improvement. Collection revenues expanded by 5% due to volume growth with increases most evident in the rear load residential and rolloff systems. The rolloff system services the large containers used, for example, at construction sites and large businesses.
Revenue growth from acquisitions was 16% with approximately two-thirds of the increase coming from the purchase of a 50% interest in Otto Waste Services, one of the largest waste services companies in Germany. The majority of North America acquisition activity occurred in the collection and, to a lesser extent, recycling lines of business. Internationally, absent the Otto Waste Services transaction, acquisition activity was centered in the Netherlands and Germany.
Cost of Operations - ------------------
Cost of operations increased $598 million (24%) in fiscal 1994, $152 million (6%) in fiscal 1993, and $161 million (7%) in fiscal 1992 over the prior year. Fiscal 1994 cost of operations was 72.4% of revenues, down slightly from the fiscal 1993 level and flat when compared with fiscal 1992. Disposal costs (which are the single largest component of operating expenses) increased international operating expenses (primarily due to the Otto Waste Services transaction), and increased collection business activity contributed to the increase in operating expenses in fiscal 1994. Disposal costs, which include landfill and transfer station operating expenses, increased 23%, 4% and 10% over the prior year in fiscal years 1994, 1993, and 1992, respectively. More than half of the fiscal 1994 increase in disposal cost originated internationally, due principally to the Otto Waste Services consolidation. Domestically, increased volumes in the collection, landfill and recycling businesses were the main factors in the higher disposal cost results.
Non-disposal operating expenses increased 24%, 9% and 5% over the prior year in fiscal years 1994, 1993 and 1992, respectively. The majority of the increase in these costs during 1994, comprised primarily of employee, equipment and facility-related costs, occurred in the international segment, as well as the collection and recycling businesses. The primary cause of the increase in the international expense was the impact of the consolidation of the Otto Waste Services operations beginning in February 1994. In North America, non-disposal operating expense increases in the collection and recycling lines of business were chiefly the result of volume and acquisition growth. Similarly, in 1993, the principal businesses responsible for the non-disposal operating expense increase were the collection and recycling businesses, again due to volume gains and acquisitions.
Selling, General and Administrative Expense (SG&A) - --------------------------------------------------
Selling, general and administrative expense increased by $88 million (16%) in fiscal 1994 versus fiscal 1993. SG&A decreased $5 million (-1%) in fiscal 1993 versus fiscal 1992 and increased $26 million (5%) in fiscal 1992 versus the prior year. The SG&A increase in fiscal 1994 was due principally to the consolidation of Otto Waste Services in February 1994 as well as additional acquisition and market development activity domestically, principally in the collection and recycling lines of business. The decrease in SG&A in fiscal 1993 was a result of a concerted effort at all levels of the Company to control general and administrative expenses in particular. That effort continued during fiscal 1994 as well, as SG&A expenses as a percent of revenue declined to 15% from 16% in fiscal 1993 and 17% in fiscal 1992. The Company continues to address consolidation of administrative support functions and other cost control measures to successfully manage SG&A costs.
Reorganization Charge - ---------------------
A reorganization charge of $27 million (an after-tax charge of approximately $.10 per share), which was announced in June 1993, was recorded in the third quarter of fiscal year 1993 to cover the estimated expense of reorganizing the Company's regional structure in the United States to better plan and coordinate its business operations, capitalize on new growth opportunities and more efficiently serve its customers in the Company's major market areas. The reorganization included the designation of a divisional vice president with responsibility for each market area, the closing of three regional offices, the opening of one new regional office and the relocation of one regional office, which reduced the number of United States regional offices from seven to five. The reorganization charge included employee severance and relocation costs and other employee, organization and transition related costs.
Interest Expense and Income - ---------------------------
Interest expense for the last three fiscal years was as follows (in thousands): 1994 1993 1992 -------- -------- -------- Gross interest expense $104,759 $ 89,563 $ 86,908 Interest capitalized (11,600) (18,669) (15,812) -------- -------- -------- Interest expense $ 93,159 $ 70,894 $ 71,096 ======== ======== ========
Fiscal year 1994 interest expense increased to $93 million compared with $71 million for the prior year, principally a result of the acquisition of 50% of Otto Waste Services. The Company also experienced a reduction in interest capitalized due to the completion of construction of a number of significant market development projects late in the prior year and early in the current fiscal year. Fiscal year 1993 interest expense varied only slightly from fiscal year 1992. Increased interest expense due to foreign acquisitions and new domestic revenue bonds was largely offset by an increase in capitalized interest associated principally with the Company's landfill market development projects in 1993.
Fiscal year 1994 interest income of $11 million declined $3 million from the prior year due to lower weighted average investment balances outstanding during the year, offset partially by increased interest income associated with the consolidation of Otto Waste Services. Fiscal year 1993 interest income increased to $15 million from $9 million in fiscal year 1992, principally due to the higher weighted average balance of short-term investments outstanding over the prior year.
Equity in Earnings of Unconsolidated Affiliates - -----------------------------------------------
Equity in earnings of unconsolidated affiliates increased $21 million from fiscal year 1993 due principally to improvement in earnings of American Ref-Fuel and certain international affiliates and as a result of the Company's acquisition of a 50% interest in Otto Waste Services in February 1994. During 1993, American Ref-Fuel acquired a resource recovery facility in Niagara Falls, New York, which contributed significantly to this improvement. In fiscal year 1993, equity in earnings of unconsolidated affiliates increased $6 million from the prior year, also principally a result of improved earnings of American Ref-Fuel and certain international affiliates. For further information, see Note (5) of Notes to Consolidated Financial Statements.
Minority Interest in Income of Consolidated Subsidiaries - --------------------------------------------------------
The increase in minority interest in income of consolidated subsidiaries in fiscal year 1994 over the prior year of $15 million is the result of the Company's acquisition of a 50% interest in Otto Waste Services in February 1994.
Income Taxes - ------------
The Company's effective income tax rates for fiscal years 1994, 1993, and 1992 were 40.0%, 39.6%, and 39.0%, respectively. The increases in the income tax rate in fiscal years 1994 and 1993 are the result of an increase in the U.S. income tax rate effective January 1, 1993. Additionally, in November 1994, the Company reached an agreement with the Internal Revenue Service, settling all material issues raised in the May 1993 Revenue Agent's Report, principally related to the deductibility of intangible assets. For further information concerning income taxes, see Note (14) of Notes to Consolidated Financial Statements.
Profitability Ratios - --------------------
These ratios (shown as a percent of revenues, except for the return on assets ratio) reflect certain profitability trends for the Company's operations. The effect of general inflation, as measured by the average consumer price index, did not have a material effect on the Company's overall financial position or results of operations.
Year Ended September 30, ------------------------- 1994 1993 1992 ------ ------ ------ Gross profit margin 27.6% 27.4% 27.6% Income from operations before reorganization charge 12.6% 11.3% 10.4% Income from operations 12.6% 10.6% 10.4% Income before income taxes, minority interest and extraordinary item 11.6% 9.4% 8.8% Net income before reorganization charge and extraordinary item 6.6% 6.1% 5.4% Net income 6.5% 5.7% 5.4% Pre-tax, pre-interest return on average total assets, excluding reorganization charge 11.5% 9.8% 9.1%
Profitability ratios improved in fiscal year 1994 due principally to increased earnings in the landfill and recycling businesses, higher operating margins associated with the Otto Waste Services operations and the Company's ability to control the growth in SG&A. Profitability ratios improved in fiscal year 1993 due principally to lower SG&A. Increases in profitability in fiscal year 1993 were due to lower landfill operating expenses and increased recycling processing center capacity utilization, offset by continued price compression as a result of the economy, competitive pressure, and waste minimization efforts. In many markets, disposal cost increases (due primarily to increased container utilization by customers) were not fully recoverable due to the competitive nature of the market.
During fiscal 1994, total assets of the Company increased by approximately $1.5 billion, principally a result of acquiring 50% of Otto Waste Services, foreign currency translation, the adoption of the new standard related to accounting for income taxes and capital expenditures. Despite the significant increase in total assets, pre-tax, pre-interest return on average total assets (excluding the reorganization charge) increased over 17% to 11.5% for fiscal 1994 compared with 9.8% for the prior year.
During fiscal 1995, management will focus on acquisition and other market development opportunities, operating and SG&A cost controls and improvements in pricing. These efforts are intended to favorably impact margins in fiscal 1995.
Environmental Matters - ---------------------
As of September 30, 1994 and 1993, included in the Company's balance sheet were accrued environmental costs of $688 million and $729 million associated with its obligations for closure and post-closure of its operating and closed landfills and for remediation and corrective actions at Superfund sites and other facilities which are discussed in the following paragraphs. See Notes (1) and (6) of Notes to Consolidated Financial Statements for a discussion of the Company's environmental and landfill accounting policies and other financial information related to environmental and landfill accruals.
The Company's landfills are subject to specific operating permit requirements and the applicable existing regulatory requirements of the national, state and local jurisdictions in which they are operated. On an ongoing basis, the Company, based on input from its engineers, estimates its future cost requirements for closure and post-closure management of its landfills based on its interpretations of these regulations and standards. Accruals for these costs are typically provided as the remaining permitted airspace of these facilities is consumed. Engineering reviews of the future cost requirements for closure and post-closure monitoring and maintenance for the Company's operating landfills are performed at least annually and are the basis upon which the Company's estimates of these future costs and the related accruals are revised. In its foreign operations, the Company has noted a trend toward increased landfill regulation, particularly in those countries within the European Economic Community. While increasing regulation often presents new business opportunities to the Company, it likewise often results in increased operating costs in those jurisdictions in which such regulatory changes occur and could potentially have a negative impact on operations.
The Company is also responsible for a significant number of closed solid waste landfills, principally in North America, which require varying levels of inspection, maintenance, environmental monitoring and from time to time corrective action. An overall program of management has been implemented to provide a systematic and routine standard of care and maintenance and to ensure environmental compliance at these closed facilities.
In fiscal year 1990, the Company announced its withdrawal from the hazardous waste collection, treatment and disposal business principally because the Company believed its resources would be better utilized if they were directed toward developing opportunities in the solid waste business. Anticipated cash expenditures related principally to remediation and post- closure monitoring at certain closed sites are expected to be required over a long period of time with no significant amounts anticipated to be paid in any single year. In addition, these future cash expenditures will be offset in part by the realization of related income tax benefits.
Various subsidiaries of the Company are participating in potentially responsible party ("PRP") groups at 84 waste disposal sites listed on the U.S. Environmental Protection Agency's National Priority List, which may be subject to remedial action under Superfund. Certain of these subsidiaries have negotiated settlements with other members of the PRP groups and the EPA with respect to 61 of these 84 Superfund sites. Partial settlements have been negotiated with regard to ten of the remaining sites. These settlements had no material effect on the Company's liquidity, results of operations or financial position. Further, various subsidiaries have received information requests relating to 64 additional sites on the EPA's National Priority List. For 35 of these sites, the Company has determined it is not a PRP; the Company's PRP status at the remaining 29 sites has not yet been determined. The number of Superfund sites with which the Company's subsidiaries are involved may increase or decrease depending upon the EPA's findings from responses to these information requests and any future information requests which may be received. Superfund legislation permits strict joint and several liability to be imposed without regard to fault, and as a result, one company may be required to bear significantly more than its proportional share of the cleanup costs if it is unable to obtain appropriate contributions from other responsible parties. The final negotiated settlement relating to the large majority of Superfund sites occurs several years after a company has been identified as a PRP due to the many complex issues that must be addressed in determining the magnitude of contamination present, the cause of the contamination and the recommended remedial action to be taken. In many cases, the expenditures related to actual remediation may also occur over a number of years.
The Company has implemented programs to promote compliance with the laws, regulations and permit requirements governing its landfills and has as its goal 100% compliance. Even with these programs, management believes that in the normal course of doing business, companies in the waste disposal industry are faced with governmental enforcement proceedings resulting in fines or other sanctions and will likely be required to pay civil penalties or to expend funds for remedial work on waste disposal sites. These programs include systematic site reviews and evaluations of each site requiring corrective action (including Superfund sites) in which the Company's subsidiaries are involved, considering each subsidiary's role with respect to each site and the relationship to the involvement of other parties at the site, the quantity and content of the waste with which the subsidiary was associated, and the number and financial capabilities of the other parties at the various sites. Based on reviews of the various sites, currently available information, and management's judgment and significant prior experience related to similarly situated facilities, expense accruals are provided by the Company for its share of estimated future costs associated with corrective actions to be implemented at certain of these sites and existing accruals are revised as deemed necessary. Management also routinely reviews the realization of its investments in operating landfills and the adequacy of its accruals for the future costs of closure and post-closure monitoring and maintenance at its operating and closed landfills and adjusts its asset values and accruals as deemed appropriate.
Management believes that the ultimate disposition of these environmental matters will not have a materially adverse effect upon the liquidity, capital resources, business or consolidated financial position of the Company, though resolution of one or more of these matters could have a significant negative impact on the Company's consolidated financial results for a particular reporting period. Due to the nature of the Company's business and the increasing emphasis of government in all jurisdictions and the public on environmental issues relating to the waste disposal industry, it can be reasonably expected that various subsidiaries of the Company will become involved in additional remediation actions and Superfund sites in the future. Management attempts to anticipate future changes in laws, regulations and operating permit requirements which may affect its operations; however, there is no assurance that such future changes will not significantly affect its operations.
LIQUIDITY AND CAPITAL RESOURCES - -------------------------------
The Company's working capital and related ratios at the end of the last three years were as follows:
As of September 30, ---------------------------- 1994 1993 1992 ------- ------- --------
Working capital (in thousands) $ 7,104 $ 1,042 $250,833 Working capital ratios 1.0:1 1.0:1 1.3:1
Working capital was affected favorably in the current fiscal year by the adoption of SFAS No. 109, "Accounting for Income Taxes" (see Note (14) of Notes to Consolidated Financial Statements) and increased profitability, offset largely by current year acquisitions and the use of cash for capital expenditures during fiscal 1994. The Company's unusually high level of working capital at September 30, 1992 resulted principally from investing the net proceeds of $283 million from the sale of 14,000,000 shares of the Company's common stock in June 1992 which were not utilized during fiscal year 1992. The Company's long-term strategy in managing working capital is to maintain substantial available commitments under bank credit agreements or other financial agreements to finance short-term capital requirements in excess of internally generated cash while minimizing working capital.
In January 1994, the Company filed a universal shelf registration statement with the Securities and Exchange Commission to provide for the registration of up to $700 million of unsecured debt securities, preferred stock, common stock or warrants to purchase unsecured debt securities, preferred stock or common stock. In March 1994, the Company issued 15,525,000 shares of its common stock under this universal shelf registration statement in concurrent public offerings in the United States and outside the United States. The Company used approximately $106 million of the net proceeds of approximately $434 million during April 1994 to redeem its $100 million 8 1/2% Sinking Fund Debentures due 2017 (see Note (7) of Notes to Consolidated Financial Statements). The balance of the proceeds was used to repay indebtedness associated with the February 1994 acquisition of the 50% interest in Otto Waste Services and other working capital requirements.
In July 1994, the Company closed a $100 million master equipment leasing program. A portion of the commitments under this program was drawn at closing and the proceeds were used to pay indebtedness and for working capital purposes. The balance of the commitments will be drawn on or before March 31, 1995.
On September 20, 1994, the Company announced the terms of a cash offer ("Attwoods Offers") to acquire all the ordinary shares of Attwoods plc, a UK company, and all of the preferred shares of Attwoods (Finance) N.V., a Netherlands Antilles company. On September 19, 1994, the Company entered into a letter agreement providing for the borrowing by the Company, under a credit agreement to be entered into pursuant to the letter agreement, of up to 500 million pounds sterling (or its equivalent) to finance the Attwoods Offers. The facility is to be used to assist in funding the Attwoods Offers and to fund the working capital requirements and refinance any existing indebtedness of Attwoods including any existing obligations of Attwoods that become due and payable as a result of the Attwoods Offers becoming unconditional. Borrowings under the facility are conditional on the Attwoods Offers having become (or in certain circumstances, having been declared) unconditional in all respects under United Kingdom law. The payment of dividends or other distributions on the Company's Common Stock will be limited by the provisions of this credit agreement which will be somewhat more restrictive than the most restrictive provisions at September 30, 1994. See Note (9) of Notes to Consolidated Financial Statements.
The Company's bank credit agreement provides total committed credit capacity of $1 billion. The available credit capacity under this facility, which matures in August 1996, is used principally to support the Company's commercial paper program, established in January 1990, authorizing the issuance of up to $1 billion in commercial paper. Borrowings under the commercial paper program may not exceed the available credit under the Company's existing bank credit agreement. There were approximately $43 million of commercial paper borrowings outstanding as of September 30, 1994.
In February 1990, the Company initiated a program for the issuance of up to $100 million principal amount of medium-term notes, but has not yet utilized this program. In March 1991, the Company filed a shelf registration statement with the Securities and Exchange Commission to provide for the future issuance of up to $300 million of additional debt securities, $200 million of which was unutilized at September 30, 1994.
As of September 30, 1994, the Company's unused committed borrowing capacity under its primary bank credit agreement was $957 million. Such capacity may be used to refinance amounts outstanding under short-term facilities, for financing requirements in connection with foreign exchange contracts or for other capital requirements. Of the $1.5 billion of the Company's long-term indebtedness outstanding (including the $745 million of Convertible Subordinated Debentures) at September 30, 1994, 89% was at fixed interest rates for a period of at least 12 months. Management's long-term objective is to maintain most of its indebtedness in fixed interest rate obligations, although variable rate debt has been and will likely continue to be used to meet short-term and certain longer term financing needs. The Company's weighted average cost of indebtedness increased slightly to approximately 7.9% for fiscal 1994 from 7.7% for fiscal year 1993.
Long-term indebtedness (including $428 million of Otto Waste Services debt, which has not been guaranteed by the Company, and $745 million of Convertible Subordinated Debentures) as a percentage of total capitalization declined from 41% at September 30, 1993 to 38% at September 30, 1994, principally a result of the March 1994 common stock offering.
Subject to the Board of Director approval and excluding the proposed Attwoods transaction, the capital appropriations budget for fiscal year 1995 will be established at $1.2 billion, of which $579 million is intended to provide for normal replacement requirements and to provide new assets to support planned revenue growth within all consolidated businesses. The remaining $590 million is designated for corporate market development activities which principally include new or expanded solid waste transfer and disposal facilities, recycling processing centers, acquisitions of solid waste businesses and other investments in both North American and international operations. Over $50 million of the Company's capital requirements in fiscal 1995 are expected to be financed through master leasing programs. Further, the Company has announced the terms of its Attwoods Offers discussed above. See Note (9) of Notes to Consolidated Financial Statements.
Excluding the specific financing arrangements associated with the Attwoods Offers, the Company believes that its cash flows from operations and its access to cash from banks and other external sources, including the public markets, are more than sufficient for its financing needs.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Browning-Ferris Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Browning-Ferris Industries, Inc. (a Delaware corporation) and subsidiaries as of September 30, 1994 and 1993, and the related consolidated statements of income, common stockholders' equity, and cash flows for each of the three years in the period ended September 30, 1994. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules 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 Browning-Ferris Industries, Inc. and subsidiaries as of September 30, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1994, in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 14 to the consolidated financial statements, effective October 1, 1993, the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedules II, V, VI and VIII listed in the index of financial statements are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas November 30, 1994
Item 8.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Financial Statements
Browning-Ferris Industries, Inc. and Subsidiaries:
Report of independent public accountants.
Consolidated statement of income for the three years ended September 30, 1994.
Consolidated balance sheet--September 30, 1994 and 1993.
Consolidated statement of common stockholders' equity for the three years ended September 30, 1994.
Consolidated statement of cash flows for the three years ended September 30, 1994.
Notes to consolidated financial statements.
Schedules
II Amounts receivable from directors, officers and employees for the three years ended September 30, 1994.
V Property and equipment for the three years ended September 30, 1994.
VI Accumulated depreciation and amortization of property and equipment for the three years ended September 30, 1994.
VIII Allowance for doubtful accounts for the three years ended September 30, 1994.
Schedules, other than those listed above, are omitted because of the absence of conditions under which they are required, or because the information is included in the financial statements or notes thereto.
Exhibits
3(a) Restated Certificate of Incorporation of BFI, dated October 7, 1991. (Exhibit 3(a) of Form 10-K for the fiscal year ended September 30, 1993, is hereby incorporated by reference.)
3(b) By-laws of BFI, as amended through March 3, 1993. (Exhibit 3(b) of Form 10-K for the fiscal year ended September 30, 1993, is hereby incorporated by reference.)
4.1 Rights Agreement, dated June 1, 1988, between BFI and Texas Commerce Bank National Association. (Exhibit 3.3 of Form 10-K for the fiscal year ended September 30, 1988, is hereby incorporated by reference.)
4.2 First Amendment, dated March 1, 1989, to Rights Agree- ment, dated as of June 1, 1988, between BFI and Texas Commerce Bank National Association. (Exhibit 10.1 of Form 10-Q for the quarter ended June 30, 1989, is hereby incorporated by reference.)
4.3 Second Amendment, dated March 7, 1990, to Rights Agree- ment, dated as of June 1, 1988, between the Registrant and First Chicago Trust Company of New York as successor Rights Agent. (Exhibit 4.1 of Form 10-Q for the quarter ended March 31, 1990, is hereby incorporated by reference.)
4.4 Amended and Restated Revolving Credit Agreement, dated as of September 10, 1992, among BFI and Texas Commerce Bank National Association, as Administrative Agent, and the other banks named therein. (Exhibit 4.4 of Form 10-K for the fiscal year ended September 30, 1992, is hereby incorporated by reference.)
4.5 Restated Indenture, dated as of September 1, 1991, between First City, Texas-Houston, National Association, Trustee, and BFI. (Exhibit 4.8 of Form 10-K for the fiscal year ended September 30, 1991, is hereby incorporated by reference.)
4.6 Indenture, dated as of August 1, 1987, between First RepublicBank Houston, National Association, Trustee, and BFI. (Exhibit 4.1 to Registration Statement on Form S-3 No. 33-16537 is hereby incorporated by reference.)
4.7 First Supplemental Indenture, dated as of January 11, 1994, between Nations Bank of Texas, National Association, Trustee, and BFI. (Exhibit 4(f) to Registration Statement on Form S-3 No. 33-58790 is hereby incorporated by reference.)
4.8 Indenture, dated as of July 16, 1990, between BFI and Morgan Guaranty Trust Company of New York, as Trustee. (Exhibit 4.1 of Form 10-Q for the quarter ended June 30, 1990, is hereby incorporated by reference.)
4.9 First Supplemental Indenture, dated as of December 26, 1990, to Indenture, dated as of July 16, 1990, between BFI and Morgan Guaranty Trust Company of New York, as Trustee. (Exhibit 4.1 of Form 10-Q for the quarter ended December 31, 1990, is hereby incorporated by reference.)
*4.10 Agreement dated September 20, 1994, between BFI Acquisition plc and Laidlaw Inc. and each of the subsidiaries of Laidlaw Inc. listed on Schedule I thereto.
*4.11 Agreement dated September 20, 1994, between BFI and Laidlaw Inc.
*4.12 Agreement dated September 20, 1994, among BFI Acquisitions plc, Laidlaw Inc. and Laidlaw International Investments B.V.
4.13 Commitment Letter dated September 19, 1994, between Credit Suisse and BFI.
10.1 Employment Agreement, dated July 10, 1989, between BFI and William D. Ruckelshaus. (Exhibit 10.3 of Form 10-K for the fiscal year ended September 30, 1989, is hereby incorporated by reference.)
10.2 First Amendment, dated September 1, 1993, to the Employment Agreement, dated as of July 10, 1989, between BFI and William D. Ruckelshaus. (Exhibit 10 of Form 10-Q for the quarter ended December 31, 1993, is hereby incorporated by reference.)
*10.3 Second Amendment, dated September 7, 1994, to the Employment Agreement, dated as of July 10, 1989, between BFI and William D. Ruckelshaus.
10.4 Deferral Agreement, dated December 28, 1988, between BFI and William D. Ruckelshaus. (Exhibit 10.2 of the Form 10-Q for the quarter ended December 31, 1988, is hereby incorporated by reference.)
10.5 Employment Agreement, dated July 10, 1989, between BFI and Harry J. Phillips, Sr. (Exhibit 10.5 of Form 10-K for the fiscal year ended September 30, 1989, is hereby incorporated by reference.)
10.6 First Amendment, dated January 21, 1992, to the Employment Agreement, dated as of July 10, 1989, between BFI and Harry J. Phillips, Sr. (Exhibit 10.6 to Registration Statement on Form S-4 No. 33-52240 is hereby incorporated by reference.)
10.7 Second Amendment, dated December 7, 1993, to the Employment Agreement, dated as of July 10, 1989, between BFI and Harry J. Phillips, Sr. (Exhibit 10 of the Form 10-Q for the quarter ended December 31, 1993, is hereby incorporated by reference.)
10.8 Form of Employment Agreement between BFI and each of Norman A. Myers, Bruce E. Ranck and certain other officers and former officers (Exhibit 10.6 of Form 10-K for the fiscal year ended September 30, 1989, is hereby incorporated by reference.)
10.9 Employment Agreement, dated as of November 1, 1991 be- tween BFI and Louis A. Waters. (Exhibit 10.7 of Form 10-K for the fiscal year ended September 30, 1991, is hereby incorporated by reference.)
10.10 First Amendment, dated December 7, 1993, to the Employment Agreement, dated as of November 1, 1991, between BFI and Louis A. Waters. (Exhibit 10 of the Form 10-Q for the quarter ended December 31, 1993, is hereby incorporated by reference.)
10.11 Executive Officer Form of Employment Agreement between BFI and certain executive officers, beginning in January 1993. (Exhibit 10.9 of Post-Effective Amendment No. 1 to Registration Statement on Form S-4 No. 33-52240 is hereby incorporated by reference.)
10.12 Trust Agreement, dated September 7, 1988, between BFI and Texas Commerce Bank, National Association with Louis A. Waters as Beneficiary. (Exhibit 10.9 of Form 10-K for the fiscal year ended September 30, 1988, is hereby incorporated by reference.)
10.13 Browning-Ferris Industries, Inc. 1993 Stock Incentive Plan. (Exhibit 4(d) to Registration Statement on Form S- 8 No. 33-53393 is hereby incorporated by reference.)
10.14 Browning-Ferris Industries, Inc. 1993 Non-Employee Director Stock Plan (Exhibit 4(e) to Registration Statement on Form S-8 No. 33-53393 is hereby incorporated by reference.)
10.15 Browning-Ferris Industries, Inc. 1990 Stock Option Plan. (Exhibit 10.9 of Form 10-K for the fiscal year ended September 30, 1991, is hereby incorporated by reference.)
10.16 Browning-Ferris Industries, Inc. 1987 Stock Option Plan. (Exhibit 10.11 of Form 10-K for the fiscal year ended September 30, 1988, is hereby incorporated by refer- ence.)
10.17 Browning-Ferris Industries, Inc. 1983 Stock Option Plan, as amended on December 2, 1986. (Exhibit 10.7 of Form 10-K for the fiscal year ended September 30, 1986, is hereby incorporated by reference.)
*10.18 Browning-Ferris Industries, Inc.'s Cash Balance and Retirement Plan, as amended and restated pursuant to an indenture dated September 15, 1994.
10.19 BFI Employee Stock Ownership and Savings Plan, as amend- ed through December 1, 1986. (Exhibit 10.10 of Form 10- K for the fiscal year ended September 30, 1986, is hereby incorporated by reference.)
10.20 Fifth Amendment dated June 8, 1988, to the BFI Employee Stock Ownership and Savings Plan. (Exhibit 10.16 of Form 10-K for the fiscal year ended September 30, 1988, is hereby incorporated by reference.)
10.21 Sixth Amendment, dated December 23, 1988, to the BFI Employee Stock Ownership and Savings Plan. (Exhibit 10.4 of the Form 10-Q for the quarter ended December 31, 1988, is hereby incorporated by reference.)
10.22 Seventh, Eighth and Ninth Amendments, dated as of May 31, 1989, June 7, 1989 and October 31, 1991, respectively, to the BFI Employee Stock Ownership and Savings Plan. (Exhibit 10.20 of Form 10-K for the fiscal year ended September 30, 1991, is hereby incorporated by reference.)
10.23 Tenth Amendment, dated September 7, 1993, to the BFI Employee Stock Ownership and Savings Plan. (Exhibit 10.22 of Form 10-K for the fiscal year ended September 30, 1993, is hereby incorporated by reference.)
10.24 Amended and Restated Partnership Agreement, dated as of January 25, 1991, between Air Products Ref-Fuel, Inc. and BFI Ref-Fuel, Inc. (Exhibit 10.23 of Form 10-K for the fiscal year ended September 30, 1993, is hereby incorporated by reference.)
*10.25 BFI Management Incentive Compensation Plan.
10.26 Purchase and Transfer Agreement between Otto Holding International B.V., the Registrant and BFI Atlantic GmbH, dated September 27, 1993. (Exhibit 10.25 of Form 10-K for the fiscal year ended September 30, 1993, is hereby incorporated by reference.)
*10.27 BFI Deferred Compensation Agreement.
*10.28 BFI Convertible Annual Incentive Award Plan.
*12 Computation of Ratio of Earnings to Fixed Charges of Browning-Ferris Industries, Inc. and Subsidiaries.
*21 Subsidiaries of the Registrant.
*23.1 Consent of Arthur Andersen LLP.
*27 Financial Data Schedule.
________________ *Filed herewith.
Reports on Form 8-K
During the quarter ended September 30, 1994, the Company did not file a Current Report on Form 8-K.
_________________
NOTE: Upon the request of a holder of the Company's securities directed to Browning-Ferris Industries, Inc., P.O. Box 3151, Houston, Texas 77253, Attn: Secretary, the Company will furnish a copy of any exhibit for ten cents per page to cover the cost of copying and mailing. _________________
SCHEDULE II
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS AND EMPLOYEES
For the Three Years Ended September 30, 1994 (Table Amounts In Thousands) - ----------------------------------------------------------------------------- Balance Balance Deductions End of Year Beginning Amounts Amounts ----------------- Interest of Coll- Written Not Rate Year Additions ected Off Current Current - ----------------------------------------------------------------------------- 1994 - W. Bestreich -- $ 256 $ -- $ 66 $ -- $ 190 (1) $ -- B. Blaisdell 12% 49 -- 49 -- -- (2) -- R. Daniels -- 115 -- -- 115 -- (3) -- D. Neukam -- 227 -- 37 -- 41 (4) 149 R. Pfeifer -- 179 -- 54 -- 60 (5) 65 M. Saleski -- 227 -- 37 -- 41 (4) 149 D. Sutherland- Yoest 6% 276 (10) 138 128 -- (6) -- ------ ------ ----- ----- ----- ---- $1,329 $ (10) $ 381 $ 243 $ 332 $363 ====== ====== ===== ===== ===== ==== 1993 - L. Appleton 8% $ 84 $ -- $ 84 $ -- $ -- (7) $ -- W. Bestreich -- -- 256 -- -- 66 (1) 190 B. Blaisdell 12% 49 -- -- -- 49 (2) -- R. Daniels -- -- 115 -- -- 41 (3) 74 D. Neukam -- -- 227 -- -- 37 (4) 190 R. Pfeifer -- -- 179 -- -- 54 (5) 125 M. Saleski -- -- 227 -- -- 37 (4) 190 D. Sutherland- Yoest 6% 295 (19) -- -- 276 (6) -- ------ ------ ----- ----- ----- ---- $ 428 $ 985 $ 84 $ -- $ 560 $769 ====== ====== ===== ===== ===== ==== 1992 - L. Appleton 8% $ 105 $ (9) $ 12 $ -- $ 84 (7) $ -- R. Berres 12% 100 -- 100 -- -- (8) -- B. Blaisdell 12% 115 -- 66 -- -- (2) 49 G. Lawrence 12% -- 165 165 -- -- (8) -- D. Sutherland- Yoest 6% 354 (33) 26 -- 295 (6) -- ------ ------ ----- ----- ------ ---- $ 674 $ 123 $ 369 $ -- $ 379 $ 49 ====== ====== ===== ===== ====== ==== ------------------ (1) Contingent on future performance of the individual, a $300,000 non- interest bearing note related to employee relocation is due in annual installments of $60,000, half of the amount to be deducted from the employee's annual incentive award and half to be forgiven by the Company. For reporting purposes, interest is imputed on these notes at 10%. These notes are secured by a lien on the employee's residence. The remaining principal balance was collected in October 1994.
(Continued on Following Page)
SCHEDULE II (Continued)
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS AND EMPLOYEES
For the Three Years Ended September 30, 1994
(2) This note was secured by a lien on the employee's residence. The remaining principal balance was collected in October 1993.
(3) This note, held by a majority owned subsidiary formed to pursue a market development project, was secured by a lien on the employee's residence or other property. During fiscal year 1994, this note and other amounts associated with this subsidiary were removed from the Company's books when the Company withdrew from the project.
(4) Contingent on satisfactory future performance of the respective individual, the non-interest bearing notes related to employees' relocation are due in annual installments of $60,000, half of the amount to be deducted from the employee's annual incentive award and half to be forgiven by the Company. For reporting purposes, interest is imputed on these notes at 10%. Each note is secured by a lien on the employee's residence.
(5) Contingent on satisfactory future performance of the respective individual, the non-interest bearing note related to employee relocation is due in annual installments of $72,091, half of the amount to be deducted from the employee's annual incentive award and half to be forgiven by the Company. For reporting purposes, interest is imputed on this note at 10%. The note is secured by a lien on the employee's residence.
(6) A settlement agreement and mutual release between Mr. Sutherland-Yoest and the Company was entered into in January 1994. A payment was received in April 1994 and the remaining balance was written-off at that time. The foreign exchange gain/(loss) on this note, which is denominated in Canadian dollars, has been reflected in current period additions.
(7) This note initially in the amount of 200,000 Canadian dollars, was replaced by a note in the amount of 150,000 Canadian dollars after receipt of the first annual installment of 50,000 Canadian dollars. The foreign exchange gain/(loss) has been reflected in 1992 additions. The remaining principal balance was collected in October 1992.
(8) These notes were secured by liens on employees' residences or other property.
SCHEDULE V
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
For the Three Years Ended September 30, 1994 (In Thousands)
---------------------------------------------------------------------------- Effect Additions Sales, of of Pooled Retire- Foreign Balance Addi- Companies ments Currency Balance Beginning tions Not or Trans- End of of Year at Cost Restated Transfers lation Year ---------------------------------------------------------------------------- 1994 - Land and im- provements $ 188,414 $ 41,733 $ 971 $ (1,119) $ 2,733 $ 232,732
Buildings 328,173 93,471 274 (2,960) 6,817 425,775
Landfills 1,313,366 192,902 -- (37,945) 4,242 1,472,565
Vehicles and equipment 2,331,094 623,370 12,688 (152,065) 32,815 2,847,902
Construction -in-progress 97,024 18,314(1) -- -- 2,059 117,397 ---------- -------- ------- --------- -------- ---------- $4,258,071 $969,790 $13,933 $(194,089) $ 48,666 $5,096,371 ========== ======== ======= ========= ======== ==========
1993 - Land and im- provements $ 169,948 $ 25,477 $ 1,673 $ (5,153) $ (3,531) $ 188,414
Buildings 298,616 35,169 4,744 (3,750) (6,606) 328,173
Landfills 1,167,915 239,025 -- (71,111) (22,463) 1,313,366
Vehicles and equipment 2,071,946 328,643 24,718 (51,182) (43,031) 2,331,094
Construction -in-progress 89,976 5,825(1) -- 1,696 (473) 97,024 ---------- -------- ------- --------- -------- ---------- $3,798,401 $634,139 $31,135 $(129,500) $(76,104) $4,258,071 ========== ======== ======= ========= ======== ==========
(Continued on Following Page)
SCHEDULE V (Continued)
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
For the Three Years Ended September 30, 1994 (In Thousands)
----------------------------------------------------------------------------- Effect Additions Sales, of of Pooled Retire- Foreign Balance Addi- Companies ments Currency Balance Beginning tions Not or Trans- End of of Year at Cost Restated Transfers lation Year ----------------------------------------------------------------------------- 1992 - Land and im- provements $ 149,497 $ 27,495 $ -- $ (8,072) $ 1,028 $ 169,948
Buildings 338,149 45,073 -- (88,255) 3,649 298,616
Landfills 987,791 182,761 -- (2,806) 169 1,167,915
Vehicles and equipment 1,862,791 266,448 -- (62,406) 5,113 2,071,946
Construction -in-progress 97,453 (7,634)(1) -- (27) 184 89,976 ---------- -------- ------ --------- ------- ---------- $3,435,681 $514,143 $ -- $(161,566) $10,143 $3,798,401 ========== ======== ====== ========= ======= ==========
- ---------------------
(1) Represents net change during the period.
SCHEDULE VI
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
For the Three Years Ended September 30, 1994 (In Thousands)
- ------------------------------------------------------------------------------ Effect Additions Sales, of Additions of Pooled Retire- Foreign Balance Charged Companies ments Currency Balance Beginning to Not or Trans- End of of Year Income Restated Transfers lation Year - ------------------------------------------------------------------------------ 1994 -
Land and im- provements $ 17,934 $ 4,390 $ -- $ (355) $ 64 $ 22,033
Buildings 80,989 17,668 175 (1,447) 467 97,852
Landfills 360,247 118,101 189 (21,303) 832 458,066
Vehicles and equipment 1,283,192 256,269 9,381 (87,685) 7,496 1,468,653 ----------- -------- ------- --------- -------- ---------- $1,742,362 $396,428 $ 9,745 $(110,790) $ 8,859 $2,046,604 ========== ======== ======= ========= ======== ==========
Land and im- provements $ 15,263 $ 3,309 $ -- $ (527) $ (111) $ 17,934
Buildings 68,517 14,948 1,459 (2,807) (1,128) 80,989
Landfills 314,809 87,129 -- (37,900) (3,791) 360,247
Vehicles and equipment 1,136,159 212,628 13,429 (62,696) (16,328) 1,283,192 ---------- -------- ------- --------- -------- ---------- $1,534,748 $318,014 $14,888 $(103,930) $(21,358) $1,742,362 ========== ======== ======= ========= ======== ==========
(Continued on Following Page)
SCHEDULE VI (Continued)
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
For the Three Years Ended September 30, 1994 (In Thousands)
- ------------------------------------------------------------------------------ Effect Additions Sales, of Additions of Pooled Retire- Foreign Balance Charged Companies ments Currency Balance Beginning to Not or Trans- End of of Year Income Restated Transfers lation Year - ------------------------------------------------------------------------------ 1992 -
Land and im- provements $ 12,815 $ 2,914 $ -- $ (460) $ (6) $ 15,263
Buildings 66,926 15,304 -- (14,063) 350 68,517
Landfills 244,899 82,099 -- (12,340) 151 314,809
Vehicles and equipment 970,838 217,424 -- (52,366) 263 1,136,159 ---------- -------- ------- --------- -------- ---------- $1,295,478 $317,741 $ -- $ (79,229) $ 758 $1,534,748 ========== ======== ======= ========= ======== ==========
- ----------------- For financial reporting purposes, depreciation is computed on the straight-line method based upon the estimated useful lives of the assets as follows: buildings, 20 to 40 years, and vehicles and equipment, 3 to 12 years. Landfill costs include expenditures for land and related airspace, permitting costs and preparation costs. These landfill costs, excluding the estimated residual value of land, are typically amortized as permitted airspace of the landfill is consumed.
SCHEDULE VIII
BROWNING-FERRIS INDUSTRIES, INC. AND SUBSIDIARIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
For the Three Years Ended September 30, 1994 (In Thousands)
------------------------------------------------------------------------ Additions Balance Charged Deductions Balance Beginning to from End of of Year Income Reserves Year ------------------------------------------------------------------------ 1994 $21,870 $31,346 $(19,932) $33,284
1993 $16,172 $18,657 $(12,959) $21,870
1992 $17,858 $17,944 $(19,630) $16,172
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.
BROWNING-FERRIS INDUSTRIES, INC. (Registrant)
DATE: November 30, 1994 By: /s/ William D. Ruckelshaus William D. Ruckelshaus Chairman of the Board, Chief Executive Officer and Director
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.
/s/ William D. Ruckelshaus William D. Ruckelshaus Chairman of the Board, Chief Executive Officer and Director
/s/ Norman A. Myers Norman A. Myers, Vice Chairman, Chief Marketing Officer and Director
/s/ Bruce E. Ranck Bruce E. Ranck, President, Chief Operating Officer and Director
/s/ Jeffrey E. Curtiss Jeffrey E. Curtiss, Senior Vice President and Chief Financial Officer
/s/ David R. Hopkins David R. Hopkins, Vice President, Controller and Chief Accounting Officer
/s/ William T. Butler William T. Butler, Director
/s/ C. Jackson Grayson, Jr. C. Jackson Grayson, Jr., Director
/s/ Gerald Grinstein Gerald Grinstein, Director
/s/ Ulrich Otto Ulrich Otto, Director
/s/ Harry J. Phillips, Sr. Harry J. Phillips, Sr., Director
/s/ Joseph L. Roberts, Jr. Joseph L. Roberts, Jr., Director
/s/ Marc J. Shapiro Marc J. Shapiro, Director
/s/ Robert M. Teeter Robert M. Teeter, Director
/s/ Louis A. Waters Louis A. Waters, Director
/s/ Marina v.N. Whitman Marina v.N. Whitman, Director
/s/ Peter S. Willmott Peter S. Willmott, Director
November 30, 1994.