Revenue and Cash Flow Show Strong Improvement

HOUSTON--(BUSINESS WIRE)--Feb. 16, 2012-- Waste Management, Inc. (NYSE:WM) today announced financial results for its fourth quarter and for the year ended December 31, 2011. Revenues for the fourth quarter of 2011 were $3.41 billion compared with $3.19 billion for the same 2010 period. Net income ^(a) for the quarter was $266 million, or $0.58 per diluted share, compared with $281 million, or $0.59 per diluted share, for the fourth quarter of 2010. Several items impacted results in the 2011 and 2010 fourth quarters. Excluding these items, net income would have been $289 million, or $0.63 per diluted share, in the fourth quarter of 2011 compared with $287 million, or $0.60 per diluted share, in the fourth quarter of 2010, an increase in earnings per diluted share of 5% on an adjusted basis.^(b)

For the full year 2011, the Company reported revenues of $13.38 billion compared with $12.52 billion for 2010. Earnings per diluted share were $2.04 for the full year 2011 compared with $1.98 for the full year 2010. During fiscal years 2011 and 2010, several items impacted the full year results. On an as-adjusted basis taking those items into account, earnings per diluted share were $2.14 for the full year 2011 and $2.09 for the full year 2010.^(b)

As adjusted, results in the fourth quarter of 2011 excluded a negative $0.05 per diluted share consisting of the following:

• A $16 million after-tax charge for a litigation loss.
• A total of $7 million in after-tax impacts from charges for asset impairments, restructuring charges related to the Company’s cost improvement programs, and the results of the acquired Oakleaf operations and related integration costs.

David P. Steiner, President and Chief Executive Officer of Waste Management, commented, “We had a very good fourth quarter. Our core collection, landfill, and transfer station businesses performed well. We continued to see volumes improve sequentially and we had internal revenue growth from yield of 1.4%. We also saw accelerated improvement in our cost reduction initiatives.

“During 2011, we continued to produce strong cash flow and return cash to our shareholders. For the full year, our net cash provided by operating activities was $2.47 billion, we generated over $1.22 billion of adjusted free cash flow and we returned $1.21 billion to our shareholders.”^(b)

KEY HIGHLIGHTS FOR THE FOURTH QUARTER 2011 AND THE FULL YEAR 2011

• Revenue in the fourth quarter increased by 6.9%, or $219 million, with $145 million of the growth coming from acquired Oakleaf operations. For the full year, revenue increased by 6.9%, or $863 million, with $251 million of the growth coming from acquired Oakleaf operations.
• Internal revenue growth from yield for collection and disposal operations was 1.4% for the fourth quarter and 1.8% for the full year.
• Internal revenue growth from volume was negative 0.6% for the fourth quarter and negative 1.5% for the full year.
• Operating expenses increased by $204 million in the fourth quarter and $717 million for the full year. Adjusting for the items excluded in calculating the Company’s as-adjusted earnings, operating expenses increased by $70 million in the fourth quarter and $570 million for the full year.^(b) The majority of the increase was related to fuel expense and costs of good sold for rebates to our recycling customers.
• SG&A expenses in the fourth quarter improved to 11.9% of revenue from 12.4% in the prior year period.SG&A expenses increased by $11 million compared with the fourth quarter of 2010, but adjusted for the items excluded in calculating the Company’s as-adjusted earnings, SG&A expenses were flat in the fourth quarter when compared with the fourth quarter 2010.^(b)
• In the fourth quarter, net cash provided by operating activities was $732 million; capital expenditures were $415 million; and free cash flow was $331 million.^(b) For the full year 2011, net cash provided by operating activities was $2.47 billion; capital expenditures were $1.32 billion; and free cash flow was over $1.22 billion^(b), adjusted for the cash effect from the litigation loss excluded from as-adjusted earnings.
• The Company returned $203 million to shareholders in the fourth quarter of 2011, consisting of $156 million in dividends and $47 million in common stock repurchases. For the full year, the Company returned $1.21 billion to shareholders, consisting of $637 million in dividends and $575 million in common stock repurchases.
• The effective tax rate was approximately 32.5% in the fourth quarter and approximately 33.6% for the full year.

2012 OUTLOOK

The Company announced the following with regard to its financial outlook for 2012:

• 2012 adjusted earnings per diluted share are expected to be between $2.22 and $2.30.^(b)
• Internal revenue growth from yield on the collection and disposal business is expected to average 1.0% to 1.5%, with yield improving in the second half over the first-half levels. Internal revenue growth from volume is expected to be flat to slightly positive.
• Recycling commodity sales prices are expected to have a negative $0.03 to $0.05 impact on earnings per diluted share in 2012, compared with the prior year, with a negative $0.02 to $0.03 expected in the first quarter.
• Results from the Company’s waste-to-energy operations are expected to have a negative $0.04 to negative $0.06 impact on earnings per diluted share, compared with the prior year, with about a negative $0.03 impact occurring in the first quarter.
• The tax rate is expected to be approximately 35.5%.
• Interest expense is expected to increase approximately $15 million, principally because of higher debt balances.
• Capital expenditures are expected to be approximately $1.4 billion.
• Free cash flow is projected to be between $1.1 billion and $1.2 billion.^(b)
• The Board of Directors has announced its intention to increase the dividend to $1.42 per share on an annual basis, at an approximate cost of $665 million. The Board must separately declare each dividend. The Board has authorized up to $500 million in share repurchases. The amount of share repurchases will depend on a number of items, including changes from expected levels of capital expenditures, business acquisitions, investments, and debt repayments.

Steiner concluded, “Based on our various assumptions for 2012, we forecast full-year adjusted earnings to be in the range of $2.22 to $2.30 per diluted share. With virtually all of our 2012 headwinds expected to occur in the first half of the year, earnings should be down year-over-year in the first quarter of 2012 but the rest of the year should show steadily increasing improvement. Capital expenditures are projected to be about $1.4 billion, and we expect the impact of bonus depreciation to be approximately a negative $200 million on free cash flow when compared to 2011. Consequently, our free cash flow for 2012 is estimated to be between $1.1 billion and $1.2 billion.^(b) We expect to continue to use our free cash to pay our dividend and to repurchase shares, as well as to make appropriate investments in our business.”

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^{(a) For purposes of this press release, all references to “Net income” refer to the financial statement line item “Net income attributable to Waste Management, Inc.”}

^{(b) 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 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, earnings per diluted share, operating expenses, and SG&A expenses, have been presented in certain instances excluding special items noted in this press release including acquisition of the Oakleaf operations.}

^{The Company’s projected full year 2012 earnings of $2.22 to $2.30 per diluted share are not GAAP net earnings per diluted share and are anticipated to be adjusted to exclude the effects of events or circumstances in 2012 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 adjusted 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. Nonetheless, 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 each of the non-GAAP measures presented 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 fourth quarter 2011 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 38143289 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) Thursday, February 16, 2012 through 5:00 PM (Eastern) on Thursday, March 01, 2012. 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 38143289.

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, all of the statements under the heading “2012 Outlook” (which includes 2012 earnings per diluted share; 2012 free cash flow; 2012 capital expenditures; future internal revenue growth from yield and volume; future recycling commodity prices; results from waste-to-energy operations; future interest expense and debt balances; expected tax rate; and future dividends and share repurchases), as well as statements regarding the impact of bonus depreciation; future earnings growth; and general market and industry conditions. 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 and growth 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.

Source: Waste Management, Inc.

Waste Management, Inc.
Analysts
Ed Egl, 713-265-1656
eegl@wm.com
Media
Lynn Brown, 713-394-5093
lynnbrown@wm.com
Web site
www.wm.com