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Waste Management, Inc. -
Category Directory
(713)
512-6200
1001
Fannin Street, Suite 4000
Houston, TX 77002
www.wm.com
Sales
$11.6
billion
Business Description
We
are the leading provider of integrated waste services in North America.
Through our subsidiaries we provide collection, transfer, recycling and
resource recovery, and disposal services. We are also a leading developer,
operator and owner of waste-to-energy facilities in the United States. Our
customers include commercial, industrial, municipal and residential
customers, other waste management companies, electric utilities and
governmental entities. During 2003, none of our customers accounted for more
than 1% of our operating revenue. We employed approximately 51,700 people as
of December 31, 2003.
Operations
General
We manage and evaluate our operations through seven operating Groups, five
of which are organized by geographic area and the other two of which are
organized by function. The geographic Groups include our Eastern, Midwest,
Southern, Western and Canadian Groups, and our two functional Groups are the
Recycling and Wheelabrator Groups. In 2002, we reorganized our operations to
form market areas within the geographic Groups that are responsible for the
sales, marketing and delivery of our services. We believe that this
structure, which resulted in the elimination of one layer of field
operations and two layers of administrative and support staff, better aligns
our collection, transport, recycling and disposal resources. Additionally,
we believe that the geographic structure results in a better use of our
resources and more efficient service to our customers. We manage and
evaluate our business through the seven Groups, which represent our
reportable segments.
These reportable segments, when combined with certain other operations not
managed through any of the seven Groups, comprise our North American Solid
Waste, or NASW, operations. NASW, our core business, provides integrated
waste management services consisting of collection, disposal (solid and
hazardous waste landfills), transfer, waste-to-energy facilities and
independent power production plants that are managed by Wheelabrator, and
recycling and other miscellaneous services to commercial, industrial,
municipal and residential customers throughout the United States, Puerto
Rico and Canada. The operations not managed through our seven Groups, which
include methane gas recovery, rentals, in-plant services and other
miscellaneous services, are presented in this report as “Other NASW.”
Until December 31, 2001 our operations included waste management operations
in Mexico and certain countries outside of North America and until March 31,
2002 included non-solid waste operations. These divested operations are
presented in this report as “Other.” Although we no longer hold any revenue
generating assets related to the Other operations, we continue to incur
minimal administrative expenses in connection with these divested
operations.
NASW
The services provided by our NASW segments include collection, landfill
(solid and hazardous waste landfills), transfer, Wheelabrator
(waste-to-energy facilities and independent power production plants), and
recycling and other services, as described below. The following table shows
revenues (in millions) contributed by these services for each of the three
years indicated.
Collection. Our commitment to customers begins with a vast waste collection
network. Collection involves picking up and transporting waste from where it
was generated to a transfer station or disposal site. We generally provide
collection services under two types of arrangements:
• For commercial and industrial collection services, generally we have a one
to three-year service agreement. The fees under the agreements are
influenced by factors such as collection frequency, type of collection
equipment furnished by us, type and volume or weight of the waste collected,
distance to the disposal facility, labor costs, cost of disposal and general
market factors. As part of the service, we provide steel containers to most
of our customers to store their solid waste between pick-up dates.
Containers vary in size and type according to the needs of our customers or
restrictions of their communities and are designed so that they can be
lifted mechanically and either emptied into a truck’s compaction hopper or
directly into a disposal site. By using these containers, we can service
most of our commercial and industrial customers with trucks operated by only
one employee.
• For most residential collection services, we have a contract with, or a
franchise granted by, a municipality or regional authority that gives us the
exclusive right to service all or a portion of the homes in an area. These
contracts or franchises are typically for one to five years, but can
sometimes be longer. We also provide services under individual monthly
subscriptions directly to households. The fees for residential collection
are either paid by the municipality or authority from their tax revenues or
service charges, or are paid directly by the residents receiving the
service.
Landfill. Landfills are the main depository for solid waste in North America
and we have the largest network of landfills in North America. Solid waste
landfills are built and operated on land with geological and hydrological
properties that limit the possibility of water pollution, and are operated
under prescribed procedures. A landfill must be maintained to meet federal,
state or provincial and local regulations. The operation and closure of a
solid waste landfill includes excavation, construction of liners, continuous
spreading and compacting of waste, covering of waste with earth or other
inert material and constructing final capping of the landfill. These
operations are carefully planned to maintain sanitary conditions, to
maximize the use of the airspace and to prepare the site so it can
ultimately be used for other purposes.
All solid waste management companies must have access to a disposal
facility, such as a solid waste landfill. We believe it is usually
preferable for our collection operations to use disposal facilities that we
own or operate, which we refer to as internalization, rather than using
third party disposal facilities. Internalization generally allows us to
realize higher consolidated margins and stronger operating cash flows. The
fees charged at disposal facilities, which are referred to as tipping fees,
are based on market factors and the type and weight or volume of solid waste
deposited.
We also operate secure hazardous waste landfills in the United States. Under
federal environmental laws, all hazardous waste landfills must be permitted
by the federal government. All of our hazardous waste landfills have
obtained the required permits although some can accept only certain types of
hazardous waste. These landfills must also comply with specialized operating
standards. Only hazardous waste in a stable, solid form, which meets
regulatory requirements, can be deposited in our secure disposal cells. In
some cases, hazardous waste can be treated before disposal. Generally, these
treatments involve the separation or removal of solid materials from liquids
and chemical treatments that transform wastes into inert materials that are
no longer hazardous. Our hazardous waste landfills are sited, constructed
and operated in a manner designed to provide long-term containment of waste.
We also operate a hazardous waste facility at which we isolate treated
hazardous wastes in liquid form by injection into deep wells that have been
drilled in rock formations far below the base of fresh water to a point that
is separated by other substantial geological confining layers.
We owned or operated 284 solid waste and five hazardous waste landfills at
December 31, 2003 compared with 288 solid waste landfills and five hazardous
waste landfills at December 31, 2002. The landfills that we operate but do
not own are generally operated under a lease agreement or an operating
contract. The differences between the two arrangements usually relate to the
owner of the landfill operating permit. Generally, with a lease agreement,
the permit is in our name and we operate the landfill for its entire life
and make payments to the lessor, who is generally a private landowner, based
either on a percentage of revenue or a rate per ton of waste received. We
are generally responsible for closure and post-closure requirements under
our lease agreements. For operating contracts, the owner of the property,
generally a municipality, usually owns the permit and we operate the
landfill for a contracted term, which may be the life of the landfill. The
property owner is generally responsible for closure and post-closure
obligations under our operating contracts.
Based on remaining permitted capacity as of December 31, 2003 and projected
annual disposal volumes, the weighted average remaining landfill life for
all of our owned or operated landfills is approximately 26 years. Many of
our landfills have the potential for expanded disposal capacity beyond what
is currently permitted. We monitor the availability of permitted disposal
capacity at each of our landfills and evaluate whether to pursue an
expansion at a given landfill based on estimated future waste volumes and
prices, remaining capacity and likelihood of obtaining an expansion. We are
currently seeking expansion permits at 84 of our landfills for which we
consider expansions to be probable. Although no assurances can be made that
all future expansions will be permitted as designed, the weighted average
remaining landfill life for all owned or operated landfills is approximately
36 years when considering remaining permitted capacity, probable expansion
capacity and projected annual disposal volume.
When
a landfill we own or operate (i) reaches its permitted waste capacity, (ii)
is permanently capped and (iii) receives certification of closure from the
applicable regulatory agency, management of the site, including any
remediation activities, is generally transferred to our closed sites
management group. At December 31, 2003, we manage 173 closed landfills, most
of which are managed by our closed sites management group.
Transfer. Transfer stations are located near residential and commercial
collection routes where collection trucks take the solid waste that has been
collected. The solid waste is then consolidated and transported by transfer
trucks or by rail to disposal sites. Fees at transfer stations are usually
based on the type and volume or weight of the waste transferred, the
distance to the disposal site and general market factors. At December 31,
2003, we owned or operated 366 transfer stations in North America. There are
two main reasons for using transfer stations:
• Transfer stations reduce the cost of transporting waste to disposal sites
because transfer trucks, railcars or rail containers have larger capacities
than collection trucks, allowing us to deliver more waste to the disposal
facility in each trip. Waste is also often compacted at transfer stations,
which in addition to the consolidation of the waste, increases the
efficiency of our collection personnel and equipment because they are able
to focus on collection activities rather than making trips to the disposal
sites.
• Transfer stations improve internalization by allowing us to retain fees
that we would otherwise pay to third parties to dispose of waste we collect.
A greater percentage of the waste we collect can be disposed of at one of
our own disposal sites because the waste coming into one of our transfer
stations will usually be taken to one of our own disposal facilities.
Additionally, more waste is internalized because the transfer vehicles can
transport waste longer distances to one of our disposal facilities.
The transfer stations that we operate but do not own are generally operated
through lease agreements under which we lease property from third parties.
There are some instances where transfer stations are operated under
contract, generally for municipalities. In most cases we own the permits and
will be responsible for all of the regulatory requirements in accordance
with the lease and operating agreement terms.
Wheelabrator. Through Wheelabrator, we own or operate 17 waste-to-energy
facilities that accept solid waste for disposal. Fees at our waste-to-energy
facilities are influenced by the market rates for electricity, type and
volume of waste received and other general market factors. Our
waste-to-energy facilities are capable of processing up to 24,250 tons of
solid waste each day. In 2003, our waste-to-energy facilities received
approximately 7.7 million total tons, or approximately 21,200 tons per day,
compared to approximately 7.5 million total tons, or approximately 20,700
tons per day, in 2002. The solid waste is burned at high temperatures in
specially designed boilers at these facilities, producing heat that is
converted into high-pressure steam. We use that steam to generate
electricity for sale to electric utilities under long-term contracts. Our
waste-to-energy facilities can generate up to an aggregate of 690 megawatts
(“mW”) of renewable electricity per hour.
Our Wheelabrator operations also include six independent power production
plants that convert various waste and conventional fuels into electricity
and steam. Fees at our independent power production plants are influenced by
the market rates for electricity and steam, type and volume of waste
received and other general market factors. The plants burn wood waste,
anthracite coal waste (culm), tires, landfill gas and natural gas. These
facilities are integral to the solid waste industry, disposing of urban
wood, waste tires, railroad ties and utility poles. Our anthracite culm
facility in Pennsylvania processes the waste materials left over from coal
mining operations from over half a century ago. Ash remaining after burning
the culm piles at the facility is used to reclaim the land damaged by
decades of coal mining. In addition to electricity production, the plants
also produce steam, which is sold to industrial and commercial users. The
plants can produce a total of 246 mW of electricity per hour.
Recycling. Our Recycling Group is comprised of Recycle America Alliance,
L.L.C. (“RAA”). RAA was formed in January 2003 to improve the sustainability
and future growth of recycling programs and includes certain recycling
assets transferred from our geographic operating Groups as well as assets
contributed by the Peltz Group, who maintains approximately nine percent of
the equity interest in RAA. In addition to our Recycling Group, our five
geographic operating Groups provide certain recycling services. The
recycling services provided by other than RAA are generally those which are
embedded within the Groups’ other operations and therefore were not
transferred to RAA.
Recycling involves the separation of reusable materials from the waste
stream for processing and resale or other disposition. Our recycling
operations include the following:
Collection and materials processing — we collect recyclable materials from
residential, commercial and industrial customers and direct these materials
to a material recovery facility (“MRF”) for processing. We operate 138 MRFs
where paper, glass, metals, plastics and compost are recovered for resale.
We also operate 16 secondary processing facilities where materials received
from MRFs can be further processed into raw products used in the
manufacturing of consumer goods. Specifically, material processing services
include data destruction, shredding, automated color sorting, composting,
and construction and demolition processing.
Glass recycling — using state-of-the-art sorting and processing technology,
we remove contaminants from color-separated glass to produce and market
furnace-ready cullet (crushed and cleaned post-consumer glass used to make
new glass products). Our innovative glass processing capabilities increase
material recovery and overall product quality.
Plastics and rubber materials recycling — using state-of-the-art sorting and
processing technology, we process, inventory and sell plastic and rubber
commodities making the recycling of such items more cost effective and
convenient.
Electronics recycling services — we provide an innovative, customized
approach to recycling discarded computers, communications equipment, and
other electronic equipment. Services include the collection, sorting and
disassembling of electronics in an effort to reuse or recycle all collected
materials.
Commodities recycling — we market and resell recyclable commodities to
customers world-wide. We manage the marketing of recyclable commodities for
our own facilities and for third parties by maintaining comprehensive
service centers that continuously analyze market prices, logistics, market
demands and product quality.
Recycling fees are influenced by frequency of collection, type and volume or
weight of the recyclable material, degree of processing required, the market
value of the recovered material and other market factors.
Other NASW. We develop, operate and promote projects for the beneficial use
of landfill gas through our Waste Management Renewable Energy Program. The
natural breakdown of waste deposited in a landfill produces landfill gas.
The methane component of the landfill gas is a readily available, renewable
energy source that can be gathered and used beneficially as an alternative
to fossil fuel for a number of industrial and commercial applications. We
actively pursue landfill gas beneficial use projects and at December 31,
2003 are producing commercial quantities of methane gas at 85 of our solid
waste landfills. For 54 of these landfills, the processed gas is delivered
to electricity generators. The electricity is then sold to public utilities,
municipal utilities or power cooperatives. For 29 landfills, the gas is
delivered by pipeline to industrial customers as a direct substitute for
fossil fuels in industrial processes such as steam boilers, cement kilns and
utility plants. At the remaining two landfills, we further process the gas
to pipeline-quality natural gas, and then we sell it to natural gas
suppliers.
In addition, as part of our other operations, we rent and service portable
restroom facilities to municipalities and commercial customers under the
name Port-O-Let®, and provide street and parking lot sweeping services. We
also provide in-plant services, in which we outsource our employees to
provide full service waste management to customers at their plants. Our
vertically integrated waste management operations allow us to provide these
customers with full management of their waste, including finding recycling
opportunities, minimizing their waste, determining the most efficient means
available for waste collection and transporting and disposing of their
waste.
Competition
The solid waste industry is very competitive. Competition comes from a
number of publicly-held solid waste companies, private solid waste
companies, and large commercial and industrial companies handling their own
waste collection or disposal operations. We also have competition from
municipalities and regional government authorities with respect to
residential and commercial solid waste collection and solid waste landfills.
The municipalities and regional governmental authorities can subsidize the
cost of service through the use of tax revenues and tax-exempt financing and
therefore have a competitive advantage.
Operating costs, disposal costs and collection fees vary widely throughout
the geographic areas in which we operate. The prices that we charge are
determined locally, and typically vary by the volume and weight, type of
waste collected, treatment requirements, risk of handling or disposal,
frequency of collections, distance to final disposal sites, labor costs and
amount and type of equipment furnished to the customer. We face intense
competition based on quality of service and pricing. Under certain customer
service contracts, our ability to pass on cost increases to our customers
may be limited. From time to time, competitors may reduce the price of their
services and accept lower margins in an effort to expand or maintain market
share or to successfully obtain competitively bid contracts.
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