8-KFinancial Events

WASTE MANAGEMENT INC 8-K Report, Material Impairment (Feb 27, 2009)

Filed February 27, 2009For Securities:WM

Summary

Waste Management, Inc. (WM) has filed a Form 8-K to report a significant non-cash charge related to the impairment of capitalized costs for revenue management software licensed from SAP. The company determined that it will record an approximately $50 million charge due to the failed implementation of SAP's software, which was initially represented as a ready-to-use solution. WM has decided to abandon any future alternatives involving SAP's software, opting instead to enhance its existing revenue management system. This decision follows extensive delays, failed attempts by SAP to implement the software, and a lawsuit previously filed by WM against SAP alleging fraud and breach of contract. This charge impacts the company's financial statements but does not involve any cash outflow in the current period. Investors should note that the impairment reflects a past business decision that did not yield the expected results, and the company is now focusing on an alternative internal solution. The lawsuit against SAP remains a separate matter that could potentially result in future recoveries.

Key Highlights

  • 1Waste Management (WM) to record a non-cash charge of approximately $50 million for the impairment of capitalized costs related to SAP revenue management software.
  • 2The charge stems from the failed implementation of SAP software, which did not meet initial representations regarding its functionality and integration.
  • 3WM has decided to abandon any alternatives that include the SAP software and will instead enhance its existing revenue management system.
  • 4The decision follows protracted delays, failed pilot programs, and significant alterations required by SAP during implementation.
  • 5WM previously filed a lawsuit against SAP in March 2008, alleging fraud and breach of contract concerning the software.
  • 6The impairment charge is non-cash, meaning it does not represent an immediate cash outflow for the company.
  • 7The company is shifting its focus to improving its internal revenue management capabilities.

Frequently Asked Questions

The primary financial impact is a non-cash charge of approximately $50 million recorded for the impairment of capitalized costs related to the SAP revenue management software. This charge will be reflected in the company's financial statements but does not involve any actual cash expenditure in the current reporting period.

Waste Management abandoned the SAP software because SAP failed to deliver a fully integrated, out-of-the-box solution as represented. The implementation required extensive new coding and alterations, faced protracted delays, and ultimately failed in pilot testing. The company determined it was not feasible to proceed with SAP's software.

Waste Management plans to enhance and improve its existing revenue management system. The company has decided to move away from any alternatives that might include the SAP software and will focus on developing its internal capabilities.

No, the lawsuit filed by Waste Management against SAP in March 2008, alleging fraud and breach of contract, is separate from this impairment charge. The impairment reflects the company's decision to cease using the SAP software, while the lawsuit pertains to the alleged damages and misrepresentations made by SAP during the implementation process.