Waste Management Announces Third Quarter 2005 Earnings; Internal Revenue Growth on Base Business From Yield Reaches Five-Year High of 2.7%
HOUSTON--(BUSINESS WIRE)--Oct. 27, 2005--
Operating Expenses and Selling, General and
Administrative Expenses Decline as a Percent of Revenue
Waste Management, Inc. (NYSE:WMI) today announced financial results for its third quarter ended September 30, 2005. Revenues for the quarter were $3.38 billion as compared with $3.27 billion in the year ago period, an increase of 3.1%. Net income for the quarter was $215 million, or $0.38 per diluted share, compared with $302 million, or $0.52 per diluted share, in the prior year period.
The Company noted several items that impacted the results for the current quarter:
-- After-tax asset impairments and unusual items of $61 million
due primarily to the impairment of revenue management software
applications that had previously been under development and
the settlement of legacy litigation relating to former
officers. These two items were previously disclosed in
separate Company current report filings on Form 8-K.
-- After-tax restructuring charges of $19 million due to the
workforce reduction announced in late July.
-- An after-tax non-cash expense of $16 million in additional
amortization cost. Similar to many other publicly traded
companies, Waste Management made an accounting adjustment to
reflect the length of the lease or operating contract at five
landfills. These adjustments were cumulative corrections that
increased expenses in the current quarter. The amounts were
not material for any prior periods.
-- A $43 million reduction in income tax expense primarily
resulting from favorable tax audit settlements.
-- A $13 million benefit from reducing the estimated effective
tax rate for 2005 from 29.5% to 27.75%. The revision to the
effective tax rate results from the impact of lower book
income resulting from the third quarter charges listed above.
Combined, these items decreased third quarter 2005 after-tax earnings by $40 million, or $0.07 per diluted share. Without the impact of these items, net income for the quarter would have been $255 million, or $0.45 per diluted share.
The prior year's third quarter earnings included an after-tax benefit of $71 million, or $0.12 per diluted share, from favorable tax audit settlements and an after-tax benefit of $1 million from restructuring and asset impairments and unusual items. Without the favorable impact of the tax audit settlements and restructuring and asset impairments and unusual items, net income in last year's quarter would have been $230 million, or $0.40 per diluted share.
Excluding the impact of these items in the current and prior year quarters, earnings per share grew 12.5% and income from operations as a percent of revenue grew by approximately 120 basis points(a).
"Our goals at Waste Management are solid earnings growth, margin expansion and increased free cash flow that we can return to shareholders. In the third quarter we delivered on all of those goals, due to strong pricing and operational savings," said David P. Steiner, Chief Executive Officer of Waste Management.
"Our internal revenue growth from yield on base business increased 2.7% in the third quarter compared with the prior year quarter as we continued to produce strong results from our pricing excellence initiatives. This is the highest level we have achieved in years and it marks the third consecutive quarter in which internal revenue growth from yield has exceeded 2%. If we include the $50 million we obtained through our redesigned fuel surcharge program, internal revenue growth from yield was 4.3%. Internal revenue growth from volumes fell 1.6% in our base business due primarily to the absence of significant hurricane related clean-up volumes which existed in the third quarter of 2004. Our pricing excellence programs have also contributed to lower collection volumes, but the 2.7% in revenue growth from yield more than offsets this decline.
"We also improved our cost results as a percent of revenue, which is particularly gratifying given the sharp increase we have seen in diesel fuel prices. Operating expenses as a percent of revenue improved by 50 basis points as compared with the prior year quarter. Selling, general and administrative expenses as a percent of revenue also improved by 50 basis points versus last year's quarter.
"We produced free cash flow(a) of $385 million in the quarter, bringing us to $1.12 billion through the first nine months of the year. We continued our commitment to return cash to our shareholders by purchasing $295 million of shares in the quarter and paying $111 million in cash dividends. In addition, we have announced a 10% increase to our quarterly dividend program for 2006.
"Moreover, we were able to settle our ongoing defense cost obligations to certain former officers of the old Waste Management in connection with their settlement of legacy litigation brought against them by the Securities and Exchange Commission. Our portion of the total settlement fund was $26.8 million and we worked to obtain a court order that $27.5 million of the settlement fund would be distributed to our shareholders. That distribution will be made to our shareholders of record as of August 25, 2005. This settlement is good for our shareholders and good for our company going forward."
The Company also noted that the impact of hurricanes Katrina and Rita reduced earnings per diluted share by approximately $0.01 in the third quarter of 2005 due to lost revenue and increased operating expenses. During the third quarter of 2004, the Company attributed $59 million of revenues and $5 million in before tax earnings to the clean-up efforts resulting from the 4 hurricanes that struck Florida during that quarter.
Key Highlights for the Quarter
-- Operating expenses were 65.2% of revenue, down from 65.7% of
revenue in the same period in 2004.
-- Selling, General and Administrative expenses declined $7
million to $309 million. These costs stood at 9.2% of revenue,
down from 9.7% of revenue in the same period in 2004.
-- Net cash provided by operating activities of $623 million.
-- Free cash flow(a) of $385 million. For the nine-month period,
free cash flow was $1.12 billion.
-- Capital expenditures of $272 million.
-- Internal revenue growth on base business of 1.1%, with a
positive average growth from yield of 2.7% and a negative
average growth from volume of 1.6%. The yield component
excludes a 1.3% increase from the combined impact of higher
revenues from fuel surcharges, lower recycling commodity
prices and slight decreases in electricity rates at
Independent Power Production facilities.
-- The decline in growth from volumes is largely attributable to
the absence of significant hurricane related revenues, which
added 2.0% in revenue growth from volume during the third
quarter of 2004. Acquisitions net of divestitures contributed
0.3% to higher revenues in the quarter and foreign currency
translation contributed an additional 0.4%.
-- Generated $50 million in additional revenue from our
redesigned fuel surcharge program, which recovered nearly all
of the increase in direct and indirect fuel costs. Including
the effect of our fuel surcharge, revenue growth from yield
would have been 4.3% for the quarter.
-- $406 million returned to shareholders, consisting of $111
million in cash dividends and $295 million in common stock
repurchases. Our share repurchases are on pace to reach the
upper end or to slightly exceed our full year objective of
$600 to $700 million.
(a) This earnings release contains the Company's (i) earnings per
share growth and income from operations as a percentage of
revenue (or EBIT margin), both as adjusted to exclude the
impact of the restructuring charges, asset impairments and
unusual items, adjustments in amortization costs related to
landfill leases and contracts, and tax related items described
herein, and (ii) "free cash flow", all of which are non-GAAP
financial measures as defined in Regulation G of the
Securities Exchange Act of 1934, as amended. The Company's
calculation of EBIT, or earnings before interest and tax, is
the same measure as income from operations as presented on the
Company's income statement. EBIT margin represents total
operating income as a percentage of revenue. 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 EBIT and free cash flow may not be
comparable to similarly titled measures presented by other
companies.
The Company believes that providing investors with the
non-GAAP financial measures of adjusted earnings per share
growth and adjusted EBIT margins gives investors additional
information to enable them to assess, in the way management
assesses, the Company's current and continuing operations. The
Company included the non-GAAP financial measure of free cash
flow because it uses that measure in the management of its
business and because it believes that investors are interested
in the cash produced by the Company from non-financing
activities that is available for uses such as the Company's
acquisition program, its share repurchase program, its
scheduled debt reduction and the payment of dividends. A
reconciliation of (x) free cash flow to the Company's GAAP
reported cash flows from operating activities, which is the
most comparable GAAP measure, (y) adjusted earnings per share
to the Company's GAAP reported earnings per share, and (z)
adjusted income from operations to the Company's GAAP reported
income from operations, and corresponding income from
operations as a percentage of revenue (or EBIT margin)
calculations are included in the accompanying schedules.
Investors are urged to take into account GAAP measures as well
as non-GAAP measures in evaluating the Company.
The Company has scheduled an investor and analyst conference call for later this morning to discuss the results of today's earnings announcement. The information in this press release should be read in conjunction with the information on the conference call. The call will begin at 10:00 a.m. eastern time, 9:00 a.m. central time, and is open to the public. To listen to the conference call, which will be broadcast live over the Internet, go to the Waste Management Website at http://www.wm.com, and select "3Q2005 Earnings Report Webcast." You may also listen to the analyst conference call by telephone by contacting the conference call operator 5-10 minutes prior to the scheduled start time and asking for the "Waste Management Conference Call - Call ID 9843424." US/Canada Dial-In #: (877) 710-6139. Int'l/Local Dial-In #: (706) 643-7398. For those unable to listen to the live call, a replay will be available 24 hours a day beginning at approximately 11:00 a.m. CT October 27th through 5:00 p.m. CT on November 10th. To hear a replay of the call over the Internet, access the Waste Management Website at http://www.wm.com. To hear a telephonic replay of the call, dial (800) 642-1687 or (706) 645-9291 and enter reservation code 9843424.
Waste Management, Inc. is its industry's leading provider of comprehensive waste management and environmental services. Based in Houston, the Company serves municipal, commercial, industrial, and residential customers throughout North America.
Certain statements contained in this press release include statements that are "forward-looking statements." Outlined below are some of the risks that the Company faces and that could affect our financial statements for 2005 and beyond and that could cause actual results to be materially different from those that may be set forth in forward-looking statements made by the Company. However, they are not the only risks that the Company faces. There may be additional risks that we do not presently know or that we currently believe are immaterial which could also impair our business. We caution you not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the Company, from time to time, provides estimates of financial and other data relating to future periods. Such estimates and other information are the Company's expectations at the point in time of issuance but may change at some future point in time. By issuing such estimates the Company has no obligation, and is not undertaking any obligation, to update such estimates or provide any other information relating to such estimates. The following are some of the risks we face:
-- the effects competition may have on our profitability or cash
flows, including the negative impact our price increases may
have on volumes or the negative impact to our yield on base
business resulting from price roll-backs and lower than
average pricing to retain and attract customers;
-- our inability to maintain or expand margins as volumes
increase if we are unable to control variable costs or fixed
cost base increases;
-- our inability to attract or retain qualified personnel,
including licensed commercial drivers and truck maintenance
professionals, due to any number of factors including
qualified workforce shortages;
-- increases in expenses due to fuel price increases or fuel
supply shortages;
-- the effect that fluctuating commodity prices may have on our
operating revenues and expenses;
-- the impact that inflation and resulting higher interest rates
may have on the economy, such as decreases in volumes of waste
generated and increases in financing and operating costs;
-- the possible inability of our insurers to meet their
obligations, which may cause increased expenses;
-- the effect the weather has on our quarter to quarter results,
as well as the effect of extremely harsh weather or natural
disasters on our operations;
-- possible changes in our estimates of site remediation
requirements, final capping, closure and post-closure
obligations, compliance and regulatory developments;
-- the possible impact of regulations on our business, including
the cost to comply with regulatory requirements and the
potential liabilities associated with disposal operations;
-- our ability to obtain and maintain permits needed to operate
our facilities;
-- the effect of limitations or bans on disposal or
transportation of out-of-state or cross-border waste or
certain categories of waste;
-- possible charges against earnings as a result of shut-down
operations, uncompleted development or expansion projects or
other events;
-- the effects that trends toward requiring recycling, waste
reduction at the source and prohibiting the disposal of
certain types of wastes could have on volumes of waste going
to landfills and waste-to-energy facilities;
-- possible diversions of management's attention and increases in
operating expenses due to efforts by labor unions to organize
our employees;
-- the outcome of litigation or threatened litigation;
-- the reduction or elimination of our dividend or share
repurchase program or the need for additional capital if cash
flows are less than we expect or capital expenditures are more
than we expect, and the possibility that we cannot obtain
additional capital on acceptable terms if needed;
-- possible errors or problems in connection with the
implementation and deployment of new information technology
systems;
-- possible fluctuations in quarterly results of operations or
adverse impacts on our results of operations as a result of
the adoption of new accounting standards or interpretations;
and
-- our ability to sell under-performing assets or other assets
identified for divestiture and upon such sale to realize the
full carrying value of such assets.
Additional information regarding these and/or other factors that could materially affect results and the accuracy of the forward-looking statements contained herein may be found in Part I, Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2004 and Part II of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended September 30,
-----------------------------
2005 2004
-------------- --------------
Operating revenues $3,375 $3,274
-------------- --------------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below) 2,202 2,151
Selling, general and administrative 309 316
Depreciation and amortization 369 345
Restructuring 27 (1)
Asset impairments and unusual items 86 (2)
-------------- --------------
2,993 2,809
-------------- --------------
Income from operations 382 465
-------------- --------------
Other income (expense):
Interest expense (125) (112)
Interest income 8 21
Equity in net losses of
unconsolidated entities (27) (27)
Minority interest (12) (10)
Other, net - -
-------------- --------------
(156) (128)
-------------- --------------
Income before income taxes 226 337
Provision for income taxes 11 35
-------------- --------------
Net income $215 $302
============== ==============
Basic earnings per common share $0.39 $0.52
============== ==============
Diluted earnings per common share $0.38 $0.52
============== ==============
Basic common shares outstanding 558.9 576.7
============== ==============
Diluted common shares outstanding 561.8 581.2
============== ==============
Cash dividends per common share $0.20 $0.19
============== ==============
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended September 30,
-----------------------------
2005 2004
-------------- --------------
EPS Calculation:
Net income $215 $302
Interest on convertible subordinated
notes, net of taxes - -
-------------- --------------
Diluted net income $215 $302
============== ==============
Number of common shares outstanding at
end of period 553.6 572.8
Effect of using weighted average
common shares outstanding 5.3 3.9
-------------- --------------
Weighted average basic common shares
outstanding 558.9 576.7
Dilutive effect of equity-based
compensation awards, warrants,
convertible subordinated notes and
other contingently issuable shares 2.9 4.5
-------------- --------------
Weighted average diluted common shares
outstanding 561.8 581.2
============== ==============
Basic earnings per common share $0.39 $0.52
============== ==============
Diluted earnings per common share $0.38 $0.52
============== ==============
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended
September 30,
-----------------------------
2005 2004
-------------- --------------
Operating revenues $9,702 $9,308
-------------- --------------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below) 6,419 6,111
Selling, general and administrative 952 949
Depreciation and amortization 1,036 1,018
Restructuring 27 (1)
Asset impairments and unusual items 57 (20)
-------------- --------------
8,491 8,057
-------------- --------------
Income from operations 1,211 1,251
-------------- --------------
Other income (expense):
Interest expense (369) (344)
Interest income 20 31
Equity in net losses of
unconsolidated entities (79) (70)
Minority interest (33) (26)
Other, net 1 (2)
-------------- --------------
(460) (411)
-------------- --------------
Income before income taxes and
cumulative effect of change
in accounting principle 751 840
Provision for (benefit from) income
taxes (141) 178
-------------- --------------
Income before cumulative effect of
change in accounting principle 892 662
Cumulative effect of change in
accounting principle, net of
income tax expense of $5 in 2004 - 8
-------------- --------------
Net income $892 $670
============== ==============
Basic earnings per common share:
Income before cumulative effect of
change in accounting principle $1.58 $1.15
Cumulative effect of change in
accounting principle - 0.01
-------------- --------------
Net income $1.58 $1.16
============== ==============
Diluted earnings per common share:
Income before cumulative effect of
change in accounting principle $1.57 $1.14
Cumulative effect of change in
accounting principle - 0.01
-------------- --------------
Net income $1.57 $1.15
============== ==============
Basic common shares outstanding 564.7 578.0
============== ==============
Diluted common shares outstanding 568.0 582.8
============== ==============
Cash dividends per common share $0.60 $0.56
============== ==============
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended
September 30,
-----------------------------
2005 2004
-------------- --------------
EPS Calculation:
Income before cumulative effect of
change in accounting principle $892 $662
Cumulative effect of change in
accounting principle - 8
-------------- --------------
Net income $892 $670
============== ==============
Number of common shares outstanding at
end of period 553.6 572.8
Effect of using weighted average
common shares outstanding 11.1 5.2
-------------- --------------
Weighted average basic common shares
outstanding 564.7 578.0
Dilutive effect of equity-based
compensation awards, warrants
and other contingently issuable
shares 3.3 4.8
-------------- --------------
Weighted average diluted common shares
outstanding 568.0 582.8
============== ==============
Basic earnings per common share:
Income before cumulative effect of
change in accounting principle $1.58 $1.15
Cumulative effect of change in
accounting principle - 0.01
-------------- --------------
Net income $1.58 $1.16
============== ==============
Diluted earnings per common share:
Income before cumulative effect of
change in accounting principle $1.57 $1.14
Cumulative effect of change in
accounting principle - 0.01
-------------- --------------
Net income $1.57 $1.15
============== ==============
Waste Management, Inc.
Condensed Consolidated Balance Sheets
(In Millions)
September 30, December 31,
2005 2004
-------------- --------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $300 $424
Receivables, net 1,971 1,949
Other 634 446
-------------- --------------
Total current assets 2,905 2,819
Property and equipment, net 11,160 11,476
Goodwill 5,369 5,301
Other intangible assets, net 150 152
Other assets 985 1,157
-------------- --------------
Total assets $20,569 $20,905
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, accrued
liabilities, and deferred
revenues $2,504 $2,821
Current portion of long-term debt 174 384
-------------- --------------
Total current liabilities 2,678 3,205
Long-term debt, less current portion 8,168 8,182
Other liabilities 3,337 3,265
-------------- --------------
Total liabilities 14,183 14,652
Minority interest in subsidiaries and
variable interest entities 279 282
Stockholders' equity 6,107 5,971
-------------- --------------
Total liabilities and stockholders'
equity $20,569 $20,905
============== ==============
Note: Prior year information has been reclassified to conform to 2005
presentation.
Waste Management, Inc.
Condensed Consolidated Statements of Cash Flows
(In Millions)
(Unaudited)
Nine Months Ended
September 30,
-----------------------------
2005 2004
-------------- --------------
Cash flows from operating activities:
Net income $892 $670
Adjustments to reconcile net income to
net cash provided by operating
activities:
Cumulative effect of change in
accounting principle - (8)
Depreciation and amortization 1,036 1,018
Other 148 189
Change in operating assets and
liabilities, net of effects of
acquisitions and divestitures (350) (251)
-------------- --------------
Net cash provided by operating
activities 1,726 1,618
-------------- --------------
Cash flows from investing activities:
Acquisitions of businesses, net of
cash acquired (130) (110)
Capital expenditures (765) (837)
Purchases of short-term investments (604) (1,284)
Proceeds from sales of short-term
investments 434 1,275
Net receipts from restricted trust and
escrow accounts, business
divestitures, asset sales and other 427 373
-------------- --------------
Net cash used in investing activities (638) (583)
-------------- --------------
Cash flows from financing activities:
New borrowings 25 348
Debt repayments (285) (434)
Common stock repurchases (573) (353)
Cash dividends (339) (326)
Exercise of common stock options and
warrants 68 150
Other, net (111) (18)
-------------- --------------
Net cash used in financing activities (1,215) (633)
-------------- --------------
Effect of exchange rate changes on cash
and cash equivalents 3 -
-------------- --------------
Increase (decrease) in cash and cash
equivalents (124) 402
Cash and cash equivalents at beginning
of period 424 217
-------------- --------------
Cash and cash equivalents at end of
period $300 $619
============== ==============
Note: Prior year information has been reclassified to conform to 2005
presentation.
Waste Management, Inc.
Summary Data Sheet
(Dollar amounts in Millions)
(Unaudited)
Quarters Ended
---------------------------
Sept. 30, June 30, Sept. 30,
2005 2005 2004
-------- ------- --------
Operating Revenues by Lines of Business
---------------------------------------
NASW:
Collection $2,199 $2,168 $2,154
Landfill 816 791 805
Transfer 462 463 448
Wheelabrator 231 214 218
Recycling and other 306 301 282
Intercompany (a) (639) (648) (633)
------- ------- -------
Operating revenues $3,375 $3,289 $3,274
======= ======= =======
Internal Growth of Operating Revenues from Comparable
Prior Periods (b)
------------------------------------------------------
Internal growth 2.4% 4.0% 7.3%
Less: Yield changes due to recycling
commodities, electricity (IPP)
and fuel surcharge 1.3% 0.7% 2.0%
------- ------- -------
Adjusted internal growth 1.1% 3.3% 5.3%
======= ======= =======
Acquisition Summary (c)
---------------------------------------
Gross annualized revenue acquired $23 $11 $16
======= ======= =======
Total consideration $54 $10 $20
======= ======= =======
Cash paid for acquisitions $36 $2 $9
======= ======= =======
Recycling Segment Supplemental Data (d)
---------------------------------------
Operating revenues $207 $203 $192
======= ======= =======
Operating expenses (exclusive of
depreciation and amortization) $180 $173 $163
======= ======= =======
Quarters Ended Nine Months
Sept. 30, Ended Sept. 30,
--------------- ---------------
2005 2004 2005 2004
------- ------- ------- -------
Free Cash Flow Analysis (e)
---------------------------------------
Net cash provided by operating
activities $623 $599 $1,726 $1,618
Capital expenditures (272) (311) (765) (837)
Proceeds from divestitures of
businesses, net of cash divested, and
other sales of assets 34 17 158 73
------- ------- ------- -------
Free cash flow $385 $305 $1,119 $854
======= ======= ======= =======
(a) Intercompany revenues between lines of business are eliminated
within the Condensed Consolidated Financial Statements included
herein.
(b) Excluding the impacts of hurricane revenue, adjusted internal
growth for the quarters ended September 30, 2005 and September 30,
2004 is estimated to be 3.0% and 3.3%, respectively.
(c) Represents amounts associated with business acquisitions
consummated during the indicated periods.
(d) Information provided is after the elimination of intercompany
revenues and related expenses.
(e) The summary of free cash flows has been prepared to highlight and
facilitate understanding of the principal cash flow elements. Free
cash 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
-------------------------------------
September 30, June 30, September 30,
2005 2005 2004
------------- --------- -------------
Balance Sheet Data
---------------------------------
Cash and cash equivalents $300 $481 $619
============= ========= =============
Debt-to-total capital ratio:
Long-term indebtedness,
including current portion $8,342 $8,431 $8,787
Total equity 6,107 6,197 5,846
------------- --------- -------------
Total capital $14,449 $14,628 $14,633
============= ========= =============
Debt-to-total capital 57.7% 57.6% 60.0%
============= ========= =============
Capitalized interest (b) $2 ($1) $7
============= ========= =============
Other Operational Data
---------------------------------
Internalization of waste, based
on disposal costs 66.3% 65.3% 64.8%
============= ========= =============
Total landfill disposal volumes
(tons in millions) (a) 32.9 32.3 32.7
Total waste-to-energy disposal
volumes (tons in millions) (a) 2.1 2.0 2.0
------------- --------- -------------
Total disposal volumes (tons
in millions) 35.0 34.3 34.7
============= ========= =============
Active landfills 286 286 289
============= ========= =============
Landfills reporting volume 265 265 265
============= ========= =============
Amortization and SFAS No. 143
Expenses for Landfills Included
in Operating Groups
---------------------------------
Non - SFAS No. 143 amortization
expense $123.2 $102.3 $106.0
Amortization expense related to
SFAS No. 143 obligations 21.2 19.7 18.2
------------- --------- -------------
Total amortization expense (c) 144.4 122.0 124.2
Accretion and other related
expense 13.2 12.8 14.3
------------- --------- -------------
Landfill amortization,
accretion and other related
expense $157.6 $134.8 $138.5
============= ========= =============
(a) Prior period information has been reclassified to conform to 2005
presentation.
(b) The quarter ended June 30, 2005 includes the reversal of $5
million of previously recorded capitalized interest associated
with certain projects that did not qualify for the capitalization
of interest.
(c) The quarter ended September 30, 2005 includes a cumulative
correction to increase Non-SFAS No.143 Amortization Expense in the
amount of $20.6 million and SFAS No.143 Amortization Expense in
the amount of $1.5 million resulting from reducing amortization
periods at five of our landfills.
Waste Management, Inc.
Reconciliation of Certain Non-GAAP Measures
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarter Ended Quarter Ended
September 30, 2005 September 30, 2004
-------------------- -------------------
After-tax Per Share After-tax Per Share
Adjusted Earnings per Share Amount Amount Amount Amount
---------- --------- --------- ---------
Net income and EPS, as
reported $215 $0.38 $302 $0.52
Adjustments to Net income and
EPS:
Asset impairments and
unusual items 61 0.11 (1) -
Restructuring 19 0.03 - -
Additional landfill
amortization expense 16 0.03 - -
Income tax settlements (43) (0.08) (71) (0.12)
Benefit from reduction of
estimated effective tax
rate for 2005 (13) (0.02) - -
---------- --------- --------- --------
Net income and EPS, as
adjusted $255 $0.45 $230 $0.40
========== ========= ========= ========
Quarters Ended
September 30,
--------------------
Adjusted Income from
Operations as a percent of
Revenue (EBIT Margin) 2005 2004
---------- ---------
As reported:
Operating revenues $3,375 $3,274
Income from operations $382 $465
Income from Operations as a
percent of Revenue 11.3% 14.2%
Adjustments to Income from
Operations:
Asset impairments and
unusual items $86 ($2)
Restructuring $27 ($1)
Additional landfill
amortization expense $22 $-
As adjusted:
Operating revenues $3,375 $3,274
Adjusted income from
operations $517 $462
Adjusted Income from
Operations as a percent of
Revenue 15.3% 14.1%
Earnings per share and income from operations as a percent of revenue
(or EBIT margin), as adjusted to exclude the impact of the items
listed above, have been prepared to highlight and facilitate the users
of the Company's financial statements understanding of how management
evaluates the results of its operations. It is not intended to replace
reported earnings per share and income from operations as prepared in
accordance with generally accepted accounting principles ("GAAP").
CONTACT: Waste Management, Inc., Houston
Analysts:
Greg Nikkel, 713-265-1358
or
Media:
Lynn Brown, 713-394-5093
Web site: http://www.WM.com
SOURCE: Waste Management, Inc.