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Waste Management Announces First Quarter Earnings



  Waste Management Announces First Quarter Earnings

  Company Sees Positive Momentum from Yield, Costs, and Cash From Operations

Business Wire

HOUSTON -- April 24, 2013

Waste Management, Inc. (NYSE: WM) today announced financial results for its
quarter ended March 31, 2013. Revenues for the first quarter of 2013 were
$3.34 billion compared with $3.30 billion for the same 2012 period. Net
income^(a) for the quarter was $168 million, or $0.36 per diluted share,
compared with $171 million, or $0.37 per diluted share, for the first quarter
of 2012. Results in the first quarter of 2013 included approximately $18
million of after-tax costs from a combination of restructuring charges and
impairments of investments in unconsolidated entities. Excluding these items,
net income would have been $186 million, or $0.40 per diluted share, compared
to adjusted earnings per diluted share of $0.38 in 2012.^(b)

David P. Steiner, President and Chief Executive Officer of Waste Management,
commented, “We saw strong momentum in both yield and costs in the first
quarter, and have plans in place to accelerate that momentum through 2013. Our
yield of 1.4% is at the highest level since 2011. We achieved SG&A cost
savings of $17 million, which would have been $39 million if not for
approximately $22 million of accruals related to a long-term incentive plan
and an uncollected amount from a single municipal contract in Puerto Rico. We
are on target to achieve the savings that we expected from our 2012
restructuring, and these improvements translated into increases in both
earnings and free cash flow. During the first quarter, our net cash provided
by operations improved $102 million, to $577 million, and our capital
expenditures decreased $113 million, to $266 million, both as compared to the
first quarter of 2012. This resulted in our highest first quarter free cash
flow since 2008 at $348 million.” ^(b)

KEY HIGHLIGHTS FOR THE FIRST QUARTER 2013

  * Revenue increased by 1.2%, or $41 million.
  * Internal revenue growth from yield for collection and disposal operations
    was 1.4%. Adjusting for contract changes related to the Company’s South
    Florida waste-to-energy plants, internal revenue growth from yield for
    collection and disposal operations was 1.6%.
  * Core price, which consists of price increases and fees, other than the
    Company’s fuel surcharge, net of rollbacks, was 3.0%, consistent with the
    first quarter of 2012. Rollbacks were reduced by over 60% without a
    noticeable increase in the Company’s churn rate.
  * Internal revenue growth from volume was negative 0.4%. After adjusting for
    two fewer workdays in the quarter, internal revenue growth from volume
    rose 0.8%.
  * Average recycling commodity prices were approximately 12% lower in the
    first quarter of 2013 compared with the prior year period. In total,
    recycling operations negatively affected earnings by $0.03 per diluted
    share when compared to the prior year period.
  * Operating expenses increased by $43 million. The majority of the increase
    relates to higher operating costs within acquired operations, primarily
    Greenstar, labor costs and transfer and disposal costs.
  * SG&A expenses improved by $17 million compared with the first quarter of
    2012 and improved to 11.7% of revenue from 12.4% in the prior year period.
  * Net cash provided by operating activities was $577 million; capital
    expenditures were $266 million; and free cash flow was $348 million.^(b)
  * The Company returned $170 million to shareholders in the form of
    dividends.
  * The effective tax rate was approximately 32.8%.

Steiner concluded, “We are taking additional steps to increase our yield in
2013. We have initiated a strategy to raise landfill prices by an average of
5% to 7%, when and as allowed by contract. On the collection front, we have
implemented a new regulatory cost recovery fee and we have modified our fuel
surcharge. In our recycling operations, we are implementing new rebate
structures to reflect lower commodity prices. We see good momentum in our
yield improvement programs. At the same time, we remain focused on cost
reductions and capital discipline, and we made good strides on both in the
quarter.

“We are on target through the first quarter and encouraged by the positive
momentum in our business. At the beginning of the year, we gave guidance that
our 2013 adjusted earnings per diluted share would grow between 4% and 6%, and
would range from $2.15 to $2.20 for the full year. With adjusted earnings
growing by more than 5% in the first quarter, we are right on track to meet
our goals, and our cost and pricing initiatives should help drive that
performance. With $348 million of free cash flow in the first quarter, and our
continuing focus on capital discipline, we are well on our way to achieving
our free cash flow target of between $1.1 billion and $1.2 billion.” ^(b)

            
           ^For purposes of this press release, all references to “Net income”
    ^(a)   refer to the financial statement line item “Net income attributable
           to Waste Management, Inc.”
           ^This earnings release contains a discussion of non-GAAP measures,
           as defined in Regulation G of the Securities Exchange Act of 1934,
           as amended. The Company reports its financial results in compliance
           with GAAP, but believes that also discussing non-GAAP measures
           provides investors with (i) additional, meaningful comparisons of
    ^(b)   current results to prior periods’ results by excluding items that
           the Company does not believe reflect its fundamental business
           performance and are not representative or indicative of our results
           of operations and (ii) financial measures the Company uses in the
           management of its business. Accordingly, net income and earnings
           per diluted share have been presented in certain instances
           excluding special items noted in this press release.
            
           ^The Company’s projected full year 2013 earnings per diluted share
           and earnings growth are not based on GAAP net earnings per diluted
           share and are anticipated to be adjusted to exclude the effects of
           events or circumstances in 2013 that are not representative or
           indicative of the Company’s results of operations. Projected GAAP
           earnings per diluted share for the full year would require
           inclusion of the projected impact of future excluded items,
           including items that are not currently determinable, but may be
           significant, such as asset impairments and one-time items, charges,
           gains or losses from divestitures or litigation, or other items.
           Due to the uncertainty of the likelihood, amount and timing of any
           such items, the Company does not have information available to
           provide a quantitative reconciliation of adjusted projected full
           year earnings per diluted share to a GAAP earnings per diluted
           share projection.
            
           ^The Company also discusses free cash flow and provides a
           projection of free cash flow, which is a non-GAAP measure, because
           it believes that it is indicative of our ability to pay our
           quarterly dividends, repurchase common stock, fund acquisitions and
           other investments and, in the absence of refinancings, to repay our
           debt obligations. Free cash flow is not intended to replace “Net
           cash provided by operating activities,” which is the most
           comparable U.S. GAAP measure. However, the Company believes free
           cash flow gives investors useful insight into how the Company views
           its liquidity. Nevertheless, the use of free cash flow as a
           liquidity measure has material limitations because it excludes
           certain expenditures that are required or that the Company has
           committed to, such as declared dividend payments and debt service
           requirements. The Company defines free cash flow as:
            
           ^-- Net cash provided by operating activities
           ^-- Less, capital expenditures
           ^-- Plus, proceeds from divestitures of businesses (net of cash
           divested), and other sales of assets.
            
           ^The Company's definition of free cash flow may not be comparable
           to similarly titled measures presented by other companies, and
           therefore is not subject to comparison.
            
           ^The quantitative reconciliations of non-GAAP measures used herein,
           other than projected earnings per diluted share, to the most
           comparable GAAP measures are included in the accompanying
           schedules. Non-GAAP measures should not be considered a substitute
           for financial measures presented in accordance with GAAP, and
           investors are urged to take into account GAAP measures as well as
           non-GAAP measures in evaluating the Company.

The Company will host a conference call at 10:00 AM (Eastern) today to discuss
the first quarter 2013 results. Information contained within this press
release will be referenced and should be considered in conjunction with the
call.

The conference call will be webcast live from the Investor Relations section
of Waste Management’s website www.wm.com. To access the conference call by
telephone, please dial (877) 710-6139 approximately 10 minutes prior to the
scheduled start of the call. If you are calling from outside of the United
States or Canada, please dial (706) 643-7398. Please utilize conference ID
number 26989631 when prompted by the conference call operator.

A replay of the conference call will be available on the Company’s website
www.wm.com and by telephone from approximately 1:00 PM (Eastern) Wednesday,
April 24, 2013 through 5:00 PM (Eastern) on Wednesday, May 8, 2013. To access
the replay telephonically, please dial (855) 859-2056, or from outside of the
United States or Canada dial (404) 537-3406, and use the replay conference ID
number 26989631.

The Company, from time to time, provides estimates of financial and other
data, comments on expectations relating to future periods and makes statements
of opinion, view or belief about current and future events. This press release
contains a number of such forward-looking statements, including but not
limited to statements regarding, 2013 earnings per diluted share and earnings
growth; 2013 free cash flow; future internal revenue growth from yield and
volume; future SG&A cost savings; results from pricing, capital management and
cost control and reduction initiatives; future recycling commodity prices; and
results from recycling operations. You should view these statements with
caution. They are based on the facts and circumstances known to the Company as
of the date the statements are made. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to be
materially different from those set forth in such forward-looking statements,
including but not limited to, increased competition; pricing actions; failure
to implement our optimization, growth, and cost savings initiatives and
overall business strategy; environmental and other regulations; commodity
price fluctuations; disposal alternatives and waste diversion; declining waste
volumes; failure to develop and protect new technology; significant
environmental or other incidents resulting in liabilities and brand damage;
weakness in economic conditions; failure to obtain and maintain necessary
permits; labor disruptions; impairment charges; and negative outcomes of
litigation or governmental proceedings. Please also see the Company’s filings
with the SEC, including Part I, Item 1A of the Company’s most recently filed
Annual Report on Form 10-K, for additional information regarding these and
other risks and uncertainties applicable to our business. The Company assumes
no obligation to update any forward-looking statement, including financial
estimates and forecasts, whether as a result of future events, circumstances
or developments or otherwise.

ABOUT WASTE MANAGEMENT

Waste Management, Inc., based in Houston, Texas, is the leading provider of
comprehensive waste management services in North America. Through its
subsidiaries, the company provides collection, transfer, recycling and
resource recovery, and disposal services. It is also a leading developer,
operator and owner of waste-to-energy and landfill gas-to-energy facilities in
the United States. The company’s customers include residential, commercial,
industrial, and municipal customers throughout North America. To learn more
information about Waste Management visit www.wm.com or www.thinkgreen.com.

                                                     
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
                                                                    
                                                      Quarters Ended March 31,
                                                      2013           2012
                                                                      
Operating revenues                                    $  3,336       $ 3,295
                                                                      
Costs and expenses:
Operating                                                2,209         2,166
Selling, general and administrative                      390           407
Depreciation and amortization                            323           317
Restructuring                                            8             4
(Income) expense from divestitures, asset                4             -      
impairments and unusual items
                                                         2,934         2,894  
Income from operations                                   402           401    
                                                                      
Other income (expense):
Interest expense                                         (122  )       (122  )
Interest income                                          1             1
Equity in net losses of unconsolidated entities          (8    )       (7    )
Other, net                                               (11   )       (1    )
                                                         (140  )       (129  )
                                                                      
Income before income taxes                               262           272
Provision for income taxes                               86            89     
Consolidated net income                                  176           183
Less: Net income attributable to noncontrolling          8             12     
interests
Net income attributable to Waste Management, Inc.     $  168         $ 171    
                                                                      
Basic earnings per common share                       $  0.36        $ 0.37   
                                                                      
Diluted earnings per common share                     $  0.36        $ 0.37   
                                                                      
Basic common shares outstanding                          465.7         462.1  
                                                                      
Diluted common shares outstanding                        466.5         463.4  
                                                                      
Cash dividends declared per common share              $  0.365       $ 0.355  

                                                     
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
                                                                    
                                                      Quarters Ended March 31,
                                                      2013           2012
                                                                      
EPS Calculation:
                                                                      
Net income attributable to Waste Management, Inc.     $  168         $ 171    
                                                                      
                                                                      
                                                                      
Number of common shares outstanding at end of            466.5         462.7
period
Effect of using weighted average common shares           (0.8  )       (0.6  )
outstanding
Weighted average basic common shares outstanding         465.7         462.1
Dilutive effect of equity-based compensation
awards and
other contingently issuable shares                       0.8           1.3    
Weighted average diluted common shares                   466.5         463.4  
outstanding
                                                                      
                                                                      
                                                                      
Basic earnings per common share                       $  0.36        $ 0.37   
                                                                      
Diluted earnings per common share                     $  0.36        $ 0.37   

 
Waste Management, Inc.
Condensed Consolidated Balance Sheets
(In Millions)
                                                               
                                                March 31,       December 31,
                                                2013            2012
                                                (Unaudited)
Assets
                                                                 
Current assets:
Cash and cash equivalents                       $   307         $   194
Receivables, net                                    1,779           1,839
Other                                               411             390
Total current assets                                2,497           2,423
                                                                 
Property and equipment, net                         12,512          12,651
Goodwill                                            6,399           6,291
Other intangible assets, net                        424             397
Other assets                                        1,323           1,335
Total assets                                    $   23,155      $   23,097
                                                                 
                                                                 
Liabilities and Equity
                                                                 
Current liabilities:
Accounts payable, accrued liabilities, and
deferred revenues                               $   2,224       $   2,293
Current portion of long-term debt                   964             743
Total current liabilities                           3,188           3,036
                                                                 
Long-term debt, less current portion                9,045           9,173
Other liabilities                                   4,206           4,213
Total liabilities                                   16,439          16,422
                                                                 
Equity:
Waste Management, Inc. stockholders' equity         6,395           6,354
Noncontrolling interests                            321             321
Total equity                                        6,716           6,675
Total liabilities and equity                    $   23,155      $   23,097

                                                                     
Waste Management, Inc.
Condensed Consolidated Statements of Cash Flows
(In Millions)
(Unaudited)
                                                                       
                                                      Quarters Ended March 31,
                                                      2013            2012
                                                                       
Cash flows from operating activities:
Consolidated net income                               $  176          $ 183
Adjustments to reconcile consolidated net income
to net cash provided by operating activities:
Depreciation and amortization                            323            317
Other                                                    53             48
Change in operating assets and liabilities, net          25             (73  )
of effects of acquisitions and divestitures
Net cash provided by operating activities                577            475   
                                                                       
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired         (180  )        (129 )
Capital expenditures                                     (266  )        (379 )
Proceeds from divestitures of businesses (net of         37             6
cash divested) and other sales of assets
Investments in unconsolidated entities                   (12   )        (13  )
Net receipts from restricted trust and escrow            -              12    
accounts, and other
Net cash used in investing activities                    (421  )        (503 )
                                                                       
Cash flows from financing activities:
New borrowings                                           119            287
Debt repayments                                          (26   )        (205 )
Cash dividends                                           (170  )        (164 )
Exercise of common stock options                         38             24
Other, net                                               (2    )        16    
Net cash used in financing activities                    (41   )        (42  )
                                                                       
Effect of exchange rate changes on cash and cash         (2    )        1     
equivalents
                                                                       
Increase (decrease) in cash and cash equivalents         113            (69  )
Cash and cash equivalents at beginning of period         194            258   
Cash and cash equivalents at end of period            $  307          $ 189   

                                                                    
Waste Management, Inc.
Summary Data Sheet
(Dollar Amounts in Millions)
(Unaudited)
                                                                      
                             Quarters Ended
                             March 31,   December 31,    March 31,
                             2013        2012            2012
Operating Revenues by
Lines of Business
                                                                      
Collection
Commercial (a)               $ 840       $   846         $ 865
Residential                    645           652           638
Industrial                     512           538           502
Other                          58            70            68     
Total Collection               2,055         2,106         2,073
Landfill                       628           689           615
Transfer                       300           335           298
Wheelabrator                   205           215           207
Recycling                      358           330           345
Other                          378           385           275
Intercompany (b)               (588  )       (626   )      (518  )
Operating revenues           $ 3,336     $   3,434       $ 3,295  
                                                                      
                             Quarters Ended
                             March 31, 2013              March 31, 2012
                                                                      
Analysis of Change in                    As a % of                   As a % of
Year Over Year Revenues      Amount      Total Company   Amount      Total
                                                                     Company
Average yield (i)            $ 14            0.4    %    $ (40   )   -1.3   %
Volume                         (14   )       -0.4   %      39        1.3    %
Internal revenue growth        -             0.0    %      (1    )   0.0    %
Acquisition                    44            1.3    %      196       6.3    %
Divestitures                   (1    )       0.0    %      -         -
Foreign currency               (2    )       -0.1   %      (3    )   -0.1   %
translation
                             $ 41            1.2    %    $ 192       6.2    %
                                                                      
                                         As a % of                   As a % of
                             Amount      Related         Amount      Related
                                         Business                    Business
(i) Average yield
Collection, landfill and     $ 42            1.6    %    $ 26        1.1    %
transfer
Waste-to-energy disposal       (5    )       -4.6   %      (4    )   -3.7   %
Collection and disposal        37            1.4    %      22        0.9    %
Recycling commodities          (40   )       -11.5  %      (74   )   -19.6  %
Electricity                    6             9.7    %      (6    )   -9.1   %
Fuel surcharges and            11            7.2    %      18        13.3   %
mandated fees
Total                        $ 14            0.4    %    $ (40   )   -1.3   %
                                                                      
                             Quarters Ended March 31,
                             2013        2012
Free Cash Flow Analysis
(c)
                                                                      
Net cash provided by         $ 577       $   475
operating activities
Capital expenditures           (266  )       (379   )
Proceeds from
divestitures of
businesses (net of
cash divested) and other       37            6       
sales of assets
Free cash flow               $ 348       $   102     

      Revenues subsequent to the first quarter of 2012 resulting from
(a)   subcontracting work for our National Accounts customers has been
      reclassified from our Commercial Collection line of business to our
      Other line of business.
       
(b)   Intercompany revenues between lines of business are eliminated within
      the Condensed Consolidated Financial Statements included herein.
       
      The summary of free cash flows has been prepared to highlight and
      facilitate understanding of the principal cash flow elements. Free cash
(c)   flow is not a measure of financial performance under generally accepted
      accounting principles and is not intended to replace the consolidated
      statement of cash flows that was prepared in accordance with generally
      accepted accounting principles.

                                                                   
Waste Management, Inc.
Summary Data Sheet
(Dollar Amounts in Millions)
(Unaudited)
                                                                     
                                Quarters Ended
                                March 31,        December 31,       March 31,
                                2013             2012               2012
Balance Sheet Data
                                                                     
Cash and cash equivalents       $ 307            $  194             $ 189     
                                                                     
Debt-to-total capital
ratio:
Long-term indebtedness,
including current
portion                         $ 10,009         $  9,916           $ 9,849
Total equity                      6,716             6,675             6,481   
Total capital                   $ 16,725         $  16,591          $ 16,330  
                                                                     
Debt-to-total capital             59.8   %          59.8    %         60.3   %
                                                                     
Capitalized interest            $ 5              $  6               $ 5       
                                                                     
Acquisition Summary (a)
                                                                     
Gross annualized revenue        $ 226            $  55              $ 50      
acquired
                                                                     
Total consideration             $ 217            $  76              $ 124     
                                                                     
Cash paid for                   $ 180            $  72              $ 129     
acquisitions
                                                                     
Other Operational Data
                                                                     
Internalization of waste,         67.2   %          67.0    %         68.0   %
based on disposal costs
                                                                     
Total landfill disposal
volumes (tons in                  21.1              23.6              21.4
millions)
Total waste-to-energy
disposal volumes (tons in         1.9               2.0               2.0     
millions)
Total disposal volumes            23.0              25.6              23.4    
(tons in millions)
                                                                     
Active landfills                  269               269               270     
                                                                     
Landfills reporting               253               254               256     
volume
                                                                     
                                                                     
Amortization, Accretion
and Other Expenses for
Landfills Included in
Operating Groups:
Landfill amortization
expense -
Cost basis of landfill          $ 80.9           $  86.2            $ 76.3
assets
Asset retirement costs            14.6              5.0               13.8    
Total landfill
amortization expense              95.5              91.2              90.1
(b)(c)
Accretion and other               19.6              17.9              16.4    
related expense
Landfill amortization,
accretion and other             $ 115.1          $  109.1           $ 106.5   
related expense

     
      Represents amounts associated with business acquisitions consummated
(a)   during the indicated periods. Note that cash paid for acquisitions may
      include cash payments for business acquisitions consummated in prior
      quarters.
       
      The quarter ended March 31, 2013 as compared to the quarter ended
      December 31, 2012 reflects an increase in amortization expense of
(b)   approximately $4.3 million due to changes in landfill estimates
      identified in both quarters partially offset by a decline in volumes
      primarily due to seasonality.
       
      The quarter ended March 31, 2013 as compared to the quarter ended March
(c)   31, 2012 reflects an increase in amortization expense of approximately
      $5.4 million driven by an increase in landfill volumes and changes in
      landfill estimates identified in both quarters.

 
Waste Management, Inc.
Reconciliation of Certain Non-GAAP Measures
(Dollars In Millions, Except Per Share Amounts)
(Unaudited)
                                                                          
                                Quarter Ended

                                March 31, 2013
Adjusted Net Income and         After-tax      Tax             Per Share
Earnings Per Diluted            Amount         (Expense) /     Amount
Share                                          Benefit
Net Income and Diluted          $ 168                          $   0.36    (b)
EPS, as reported
                                                                            
Adjustments to Net Income
and Diluted EPS:
Asset impairments and             13              2
unusual items (a)
Restructuring charges             5               3             
                                  18                               0.04
Net Income and Diluted          $ 186                          $   0.40    (b)
EPS, as adjusted
                                                                            
                                                                            
                                Quarter Ended

                                March 31, 2012
Adjusted Net Income and         After-tax      Tax             Per Share
Earnings Per Diluted            Amount         (Expense) /     Amount
Share                                          Benefit
Net Income and Diluted          $ 171                          $   0.37    (b)
EPS, as reported
                                                                            
Adjustments to Net Income
and Diluted EPS:
Restructuring charges             2               2
Integration costs
associated with the               1               -             
acquired Oakleaf
operations
                                  3                                0.01
Net Income and Diluted          $ 174                          $   0.38    (b)
EPS, as adjusted
                                                                            
                                                                            
                                                                            
Full Year 2013 Free Cash        Scenario 1     Scenario 2
Flow Reconciliation (c)
                                                                            
Net cash provided by            $ 2,500        $  2,500
operating activities
Capital expenditures              (1,400 )        (1,300 )
Proceeds from
divestitures of
businesses (net of
cash divested) and other          -               -       
sales of assets
                                $ 1,100        $  1,200   

     
      Includes impairment charges associated with certain of our investments
(a)   in unconsolidated entities that are included in the "Other, net"
      financial caption, as well as net charges in the "Asset Impairments and
      Unusual Items" financial caption.
       
      As reported, earnings per diluted share declined 2.7% in the first
(b)   quarter of 2013 as compared with the first quarter of 2012; whereas,
      adjusted earnings per diluted share grew 5.3% in the first quarter of
      2013 as compared with the first quarter of 2012.
       
      The reconciliation illustrates two scenarios that show our projected
(c)   free cash flow for 2013. The amounts used in the reconciliation are
      subject to many variables, some of which are not under our control and,
      therefore, are not necessarily indicative of actual results.

Contact:

Waste Management
Web site: www.wm.com
Analysts
Ed Egl, 713.265.1656
eegl@wm.com
or
Media
Lynn Brown, 713.394.5093
lynnbrown@wm.com
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