Waste Management Announces Third Quarter 2006 Earnings
Business Editors/Environment Writers
HOUSTON--(BUSINESS WIRE)--Oct. 25, 2006--Waste Management, Inc. (NYSE:WMI) today announced financial results for its third quarter ended September 30, 2006. Revenues for the quarter were $3.44 billion as compared with $3.38 billion in the year ago period, an increase of 2.0%. Net income for the quarter was $300 million, or $0.55 per diluted share, compared with $215 million, or $0.38 per diluted share, in the prior year period, which represents a 45% increase in earnings per diluted share.
The Company noted one-time items that impacted the results in the current and prior years' third quarters. Results in the current quarter included:
-- A $20 million benefit in net income resulting primarily from
favorable income tax audit settlements and adjustments
required for the finalization of our 2005 tax returns; and
-- A $16 million reduction in net income due mainly to asset
impairment charges and losses on sales of operations related
to the previously announced divestiture program.
Results in the prior year's third quarter included a net $40 million reduction in net income due primarily to combined charges of $96 million after-tax in asset impairments and unusual items, restructuring charges and additional landfill amortization expense. Partially offsetting these charges was a $56 million after-tax reduction in income tax expense resulting mainly from favorable tax audit settlements.
Excluding these items, net income would have been $296 million, or $0.55 per diluted share, in the third quarter of 2006 compared with $255 million, or $0.45 per diluted share, in the prior year quarter, which represents a 22% increase in earnings per diluted share.(a)
Income from operations as a percent of revenue was 16.2% in the third quarter of 2006. Income from operations as a percent of revenue, as adjusted for the items noted above, increased 150 basis points to 16.8% in the current year's quarter compared with the prior year's quarter.(a)
"We were very pleased with our results during the quarter as we again exceeded our internal expectations and achieved our primary financial goals of strong earnings growth, margin expansion and strong free cash flow," said David P. Steiner, Chief Executive Officer of Waste Management. "We accomplished these objectives in the third quarter of this year due to the success of our pricing programs combined with a $21 million reduction in our operating expenses compared with the prior year's quarter. As a percent of revenue, we lowered our operating expenses by 180 basis points compared with the third quarter of 2005.
"Our internal revenue growth due to yield on base business of 3.6% indicates that our pricing excellence initiatives continue to generate positive results. This higher yield more than offset the 1.8% volume loss that we experienced during the quarter, about half of which resulted from the combination of nearly one less workday and lower non-core revenues. The remaining volume loss was primarily in our collection lines of business, which is driven mainly by our strategy to price our work in order to achieve acceptable margins and returns. This pricing strategy is the primary factor leading to our robust margin expansion. Also contributing to the margin expansion are our operational excellence programs and the reduction in operating expenses as we flexed down costs due to lower volume. This marks the fifth consecutive quarter in which our year-over-year operating costs as a percent of revenue have declined.
Steiner also highlighted the Company's strong cash position: "We generated $745 million in net cash provided by operating activities and $431 million in free cash flow during this year's third quarter, bringing our free cash flow total to $1.24 billion for the first nine months of 2006.(a) We returned $425 million in cash to our shareholders during the third quarter in the form of share repurchases and our quarterly cash dividend payment and remain on track to return nearly $1.55 billion to our shareholders for the full-year. Although we expect sequential capital expenditures to increase significantly during the fourth quarter, we project that our full-year free cash flow will meet or exceed the range of $1.2 to $1.3 billion."
Key Highlights for the Quarter
-- Internal revenue growth on base business due to yield
increased 3.6%. Including $31 million obtained through our
fuel surcharge program, the base business revenue growth from
yield was 4.6%.
-- Internal revenue growth from volumes decreased 1.8%.
Approximately one-half of this decline resulted from the
impact of nearly one less workday and lower non-core volumes.
-- Divestitures net of acquisitions caused a 1.1% decline in
revenues in the quarter and foreign currency translation
caused a 0.3% increase in revenues.
-- Operating expenses declined by $21 million, or approximately
1%, to $2.18 billion in the third quarter of 2006. As a
percent of revenue, operating expenses fell to 63.4% during
the current year quarter, which is a 180 basis point
improvement compared with the prior year quarter.
-- Net cash provided by operating activities of $745 million in
the third quarter. For the nine-month period, net cash
provided by operating activities was $1.87 billion.
-- Free cash flow of $431 million. For the nine-month period,
free cash flow was $1.24 billion.(a)
-- Capital expenditures of $357 million in the third quarter. For
the nine-month period, capital expenditures totaled $824
million.
-- $425 million returned to shareholders in the third quarter,
consisting of $118 million in cash dividends and $307 million
in common stock repurchases.
-- The effective tax rate in the third quarter of 2006 was 27.4%.
This is lower than the 39.3% rate projected in the Company's
second quarter 2006 earnings release, primarily due to $20
million in tax items noted above, the reduction in the
estimated phase-out of Section 45K tax credits and the third
quarter resumption of operations of the synthetic fuel
partnerships in which the Company invests. At the end of the
second quarter, the Company estimated the full year phase-out
of its Section 45K tax credits to be 78%. It has now reduced
the estimated full-year phase-out to 35% due to its outlook
for average full-year crude oil prices. Based on an estimated
35% phase-out, the Company recorded a benefit of approximately
$0.05 per diluted share during the third quarter, which
includes $0.02 of additional tax credits attributable to the
first two quarters of the year. At the revised 35% phase-out
estimate, the Company projects a benefit from Section 45K tax
credits of approximately $0.01 per diluted share in the fourth
quarter of 2006. The Company's fourth quarter effective tax
rate is projected to be 36.0%.
Steiner concluded, "Our nearly 50,000 employees produced the best quarter I have seen at Waste Management. As a result of our strong performance through the first nine months of the year and our expectations for the fourth quarter, we are raising our full year earnings guidance. As part of our second quarter 2006 earnings release, we projected our full-year 2006 earnings to be at the upper end of the analysts' then current full-year range of $1.69 to $1.75 per diluted share. Adjusting for the non-recurring items noted in our 2006 quarterly earnings releases, we now expect our full year earnings to be within the range of $1.78 to $1.81 per diluted share."
(a) This earnings release contains net income, earnings per share,
earnings per share growth and forecast, income from operations
as a percentage of revenue and income from operations as a
percentage of revenue growth, each as adjusted to exclude the
impact of certain unusual, non-recurring or otherwise non-
operational items. These are non-GAAP measures as defined in
Regulation G of the Securities Exchange Act of 1934, as
amended, and are not intended to replace the most comparable
GAAP measures that are also presented in this press release.
The Company reports its financial results in compliance with
GAAP, but believes that also providing non-GAAP measures
provides investors additional, meaningful comparisons of
current results to prior periods' results by excluding items
that the Company does not believe reflect its fundamental
business performance. The Company also discloses its free cash
flow and free cash flow forecast, which are non-GAAP measures.
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 not subject to comparison. The Company includes the
non-GAAP financial measure of free cash flow in its disclosures
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 acquisitions, its
share repurchase program, its scheduled debt reduction and the
payment of dividends.
Quantitative reconciliations of each of the non-GAAP measures
presented herein to the most comparable GAAP measures 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 provided 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 "3Q2006 Earnings Report Webcast." You may also listen to the analyst and investor conference call by telephone by contacting the conference call operator 5 to 10 minutes prior to the scheduled start time and asking for the "Waste Management Conference Call - Call ID 7044631." US/Canada Dial-In Number: 877-710-6139. Int'l/Local Dial-In Number: 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. Central time on October 25 through 5:00 p.m. Central time on November 8. 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 7044631.
Waste Management, based in Houston, Texas, is the leading provider of comprehensive waste management services in North America. Our subsidiaries provide collection, transfer, recycling and resource recovery, and disposal services. We are also a leading developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the United States. Our customers include residential, commercial, industrial, and municipal customers throughout North America.
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. Statements relating to future events and performance are "forward-looking statements." The forward-looking statements that the Company makes are the Company's expectations, opinion, view or belief at the point in time of issuance but may change at some future point in time. By issuing estimates or making statements based on current expectations, opinions, views or beliefs, the Company has no obligation, and is not undertaking any obligation, to update such estimates or statements or to provide any other information relating to such estimates or statements. Outlined below are some of the risks that the Company faces and that could affect our financial statements for 2006 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 any forward-looking statements, which speak only as of their dates. The following are some of the risks that we face:
-- competition may negatively affect our profitability or cash
flows, our price increases may have negative effects on
volumes and price roll-backs and lower than average pricing to
retain and attract customers may negatively affect our yield
on base business;
-- we may be unable to maintain or expand margins if we are
unable to control costs;
-- we may be unable to attract or retain qualified personnel,
including licensed commercial drivers and truck maintenance
professionals;
-- we may not be able to successfully execute or continue our
operational or other margin improvement plans and programs,
including pricing increases, passing on increased costs to our
customers, divesting under-performing assets and purchasing
accretive businesses, any of which could negatively affect our
revenues and margins;
-- fuel price increases or fuel supply shortages may increase our
expenses, including our tax expense if Section 45K credits are
phased out due to continued high crude oil prices;
-- fluctuating commodity prices may have negative effects on our
operating revenues and expenses;
-- inflation and resulting higher interest rates may have
negative effects on the economy, which could result in
decreases in volumes of waste generated and increases in our
financing costs and other expenses;
-- the possible inability of our insurers to meet their
obligations may cause our expenses to increase;
-- weather conditions cause our quarter-to-quarter results to
fluctuate, and extremely harsh weather or natural disasters
may cause us to temporarily shut down operations;
-- possible changes in our estimates of site remediation
requirements, final capping, closure and post-closure
obligations, compliance and regulatory developments may
increase our expenses;
-- regulations may negatively impact our business by, among other
things, increasing compliance costs and potential liabilities;
-- if we are unable to obtain and maintain permits needed to
open, operate, and/or expand our facilities, our results of
operations will be negatively impacted;
-- limitations or bans on disposal or transportation of
out-of-state or cross-border waste or certain categories of
waste can increase our expenses and reduce our revenues;
-- possible charges as a result of shut-down operations,
uncompleted development or expansion projects or other events
may negatively affect earnings;
-- trends requiring recycling, waste reduction at the source and
prohibiting the disposal of certain types of wastes could have
negative effects on volumes of waste going to landfills and
waste-to-energy facilities, which are higher margin businesses
than recycling;
-- efforts by labor unions to organize our employees may divert
management's attention and increase operating expenses and we
may be unable to negotiate acceptable collective bargaining
agreements with those who have been chosen to be represented
by unions, which could lead to union-initiated work stoppages,
including strikes, which could adversely affect our results of
operations and cash flows;
-- negative outcomes of litigation or threatened litigation or
governmental proceedings may increase our costs, limit our
ability to conduct or expand our operations, or limit our
ability to execute our business plans and strategies ;
-- possible errors or problems with implementing and deploying
new information technology systems may decrease our
efficiencies and increase our costs to operate;
-- the adoption of new accounting standards or interpretations
may cause fluctuations in quarterly results of operations or
adversely impact our results of operations; and
-- we may reduce or eliminate our dividend or share repurchase
program or we may need additional capital if cash flows are
less than we expect or capital expenditures are more than we
expect, and we may not be able to obtain any needed capital on
acceptable terms.
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, 2005.
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended
September 30,
-------------------
2006 2005
--------- ---------
Operating revenues $3,441 $3,375
--------- ---------
Costs and expenses:
Operating 2,181 2,202
Selling, general and administrative 344 309
Depreciation and amortization 340 369
Restructuring - 27
Expense from divestitures, asset impairments and
unusual items 19 86
--------- ---------
2,884 2,993
--------- ---------
Income from operations 557 382
--------- ---------
Other income (expense):
Interest expense (138) (125)
Interest income 24 8
Equity in net losses of unconsolidated entities (20) (27)
Minority interest (11) (12)
Other, net 1 -
--------- ---------
(144) (156)
--------- ---------
Income before income taxes 413 226
Provision for income taxes 113 11
--------- ---------
Net income $300 $215
========= =========
Basic earnings per common share $0.56 $0.39
========= =========
Diluted earnings per common share $0.55 $0.38
========= =========
Basic common shares outstanding 537.0 558.9
========= =========
Diluted common shares outstanding 541.5 561.8
========= =========
Cash dividends per common share $0.22 $0.20
========= =========
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended
September 30,
-------------------
2006 2005
--------- ---------
EPS Calculation:
Net income $300 $215
========= =========
Number of common shares outstanding at end of
period 534.5 553.6
Effect of using weighted average common shares
outstanding 2.5 5.3
--------- ---------
Weighted average basic common shares outstanding 537.0 558.9
Dilutive effect of equity-based compensation
awards and warrants 4.5 2.9
--------- ---------
Weighted average diluted common shares
outstanding 541.5 561.8
========= =========
Basic earnings per common share $0.56 $0.39
========= =========
Diluted earnings per common share $0.55 $0.38
========= =========
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended
September 30,
-------------------
2006 2005
--------- ---------
Operating revenues $10,080 $9,702
--------- ---------
Costs and expenses:
Operating 6,480 6,419
Selling, general and administrative 1,040 952
Depreciation and amortization 1,013 1,036
Restructuring - 27
(Income) expense from divestitures, asset
impairments and unusual items (10) 57
--------- ---------
8,523 8,491
--------- ---------
Income from operations 1,557 1,211
--------- ---------
Other income (expense):
Interest expense (412) (369)
Interest income 53 20
Equity in net losses of unconsolidated entities (18) (79)
Minority interest (33) (33)
Other, net 2 1
--------- ---------
(408) (460)
--------- ---------
Income before income taxes 1,149 751
Provision for (benefit from) income taxes 246 (141)
--------- ---------
Net income $903 $892
========= =========
Basic earnings per common share $1.66 $1.58
========= =========
Diluted earnings per common share $1.65 $1.57
========= =========
Basic common shares outstanding 542.5 564.7
========= =========
Diluted common shares outstanding 547.8 568.0
========= =========
Cash dividends declared per common share (1st
quarter 2006 dividend of $0.22 per share
declared in December 2005, paid in March 2006) $0.44 $0.60
========= =========
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended
September 30,
-------------------
2006 2005
--------- ---------
EPS Calculation:
Net income $903 $892
========= =========
Number of common shares outstanding at end of
period 534.5 553.6
Effect of using weighted average common shares
outstanding 8.0 11.1
--------- ---------
Weighted average basic common shares outstanding 542.5 564.7
Dilutive effect of equity-based compensation
awards and warrants 5.3 3.3
--------- ---------
Weighted average diluted common shares
outstanding 547.8 568.0
========= =========
Basic earnings per common share $1.66 $1.58
========= =========
Diluted earnings per common share $1.65 $1.57
========= =========
Waste Management, Inc.
Condensed Consolidated Balance Sheets
(In Millions)
September 30, December 31,
2006 2005
-------------- --------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $746 $666
Receivables, net 1,963 2,004
Other 891 781
-------------- --------------
Total current assets 3,600 3,451
Property and equipment, net 10,985 11,221
Goodwill 5,312 5,364
Other intangible assets, net 127 150
Other assets 895 949
-------------- --------------
Total assets $20,919 $21,135
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, accrued liabilities,
and deferred revenues $2,496 $2,735
Current portion of long-term debt 862 522
-------------- --------------
Total current liabilities 3,358 3,257
Long-term debt, less current portion 7,780 8,165
Other liabilities 3,333 3,311
-------------- --------------
Total liabilities 14,471 14,733
Minority interest in subsidiaries and
variable interest entities 288 281
Stockholders' equity 6,160 6,121
-------------- --------------
Total liabilities and stockholders'
equity $20,919 $21,135
============== ==============
Waste Management, Inc.
Condensed Consolidated Statements of Cash Flows
(In Millions)
(Unaudited)
Nine Months Ended
September 30,
-------------------
2006 2005
--------- ---------
Cash flows from operating activities:
Net income $903 $892
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,013 1,036
Other (6) 148
Change in operating assets and liabilities,
net of effects of acquisitions and
divestitures (45) (350)
--------- ---------
Net cash provided by operating activities 1,865 1,726
--------- ---------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (32) (130)
Capital expenditures (824) (765)
Proceeds from divestitures of businesses, net of
cash divested, and other sales of assets 198 158
Purchases of short-term investments (2,381) (604)
Proceeds from sales of short-term investments 2,355 434
Net receipts from restricted trust and escrow
accounts, and other 115 269
--------- ---------
Net cash used in investing activities (569) (638)
--------- ---------
Cash flows from financing activities:
New borrowings 118 25
Debt repayments (236) (285)
Common stock repurchases (934) (573)
Cash dividends (358) (339)
Exercise of common stock options and warrants 219 68
Other, net (25) (111)
--------- ---------
Net cash used in financing activities (1,216) (1,215)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents - 3
--------- ---------
Increase (decrease) in cash and cash equivalents 80 (124)
Cash and cash equivalents at beginning of period 666 424
--------- ---------
Cash and cash equivalents at end of period $746 $300
========= =========
Waste Management, Inc.
Summary Data Sheet
(Dollar Amounts in Millions)
(Unaudited)
Quarters Ended
-----------------------------------------
September 30, June 30, September 30,
2006 2006 2005
------------- ------------- -------------
Operating Revenues by Lines
of Business
----------------------------
Collection $2,251 $2,251 $2,199
Landfill 838 834 816
Transfer 469 479 462
Wheelabrator 233 226 231
Recycling and other 278 265 306
Intercompany (a) (628) (645) (639)
------------- ------------- -------------
Operating revenues $3,441 $3,410 $3,375
============= ============= =============
Internal Growth of Operating
Revenues from Comparable
Prior Periods (b)
----------------------------
Internal growth 2.8% 3.6% 2.4%
Less: Yield changes due to
recycling commodities,
electricity (IPP), fuel
surcharge and mandated
fees 1.0% 0.8% 1.3%
------------- ------------- -------------
Adjusted internal growth 1.8% 2.8% 1.1%
============= ============= =============
Acquisition Summary (c)
----------------------------
Gross annualized revenue
acquired $4 $22 $23
============= ============= =============
Total consideration $3 $18 $54
============= ============= =============
Cash paid for acquisitions $2 $17 $36
============= ============= =============
Recycling Segment
Supplemental Data (d)
----------------------------
Operating revenues $194 $181 $207
============= ============= =============
Operating expenses $168 $154 $180
============= ============= =============
Quarters Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Free Cash Flow Analysis (e)
----------------------------------
Net cash provided by operating
activities $745 $623 $1,865 $1,726
Capital expenditures (357) (272) (824) (765)
Proceeds from divestitures of
businesses, net of cash divested,
and other sales of assets 43 34 198 158
-------- -------- -------- --------
Free cash flow $431 $385 $1,239 $1,119
======== ======== ======== ========
(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 quarter ended September 30, 2005 is estimated to
be 3.0%.
(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,
2006 2006 2005
------------- ------------- -------------
Balance Sheet Data
----------------------------
Cash, cash equivalents and
short-term investments
available for use (a) $1,078 $1,082 $478
============= ============= =============
Debt-to-total capital ratio:
Long-term indebtedness,
including current portion $8,642 $8,600 $8,342
Total equity 6,160 6,232 6,107
------------- ------------- -------------
Total capital $14,802 $14,832 $14,449
============= ============= =============
Debt-to-total capital 58.4% 58.0% 57.7%
============= ============= =============
Capitalized interest $5 $4 $2
============= ============= =============
Other Operational Data
----------------------------
Internalization of waste,
based on disposal costs 67.0% 66.8% 66.3%
============= ============= =============
Total landfill disposal
volumes (tons in millions) 32.8 33.4 32.9
Total waste-to-energy
disposal volumes (tons in
millions) 2.1 2.0 2.1
------------- ------------- -------------
Total disposal volumes
(tons in millions) 34.9 35.4 35.0
============= ============= =============
Active landfills 286 286 286
============= ============= =============
Landfills reporting volume 267 266 265
============= ============= =============
Amortization and SFAS No.
143 Expenses for Landfills
Included in Operating
Groups
----------------------------
Non - SFAS No. 143
amortization expense $108.7 $108.2 $123.2
Amortization expense related
to SFAS No. 143 obligations 19.6 19.0 21.2
------------- ------------- -------------
Total amortization expense
(b) 128.3 127.2 144.4
Accretion and other related
expense 17.7 14.2 13.2
------------- ------------- -------------
Landfill amortization,
accretion and other
related expense $146.0 $141.4 $157.6
============= ============= =============
(a) The quarters ended September 30, 2006, June 30, 2006 and September
30, 2005 include short-term investments available for use of $332
million, $513 million, and $178 million, respectively.
(b) 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
(Dollars In Millions, Except Per Share Amounts)
(Unaudited)
Quarter Ended Quarter Ended
September 30, 2006 September 30, 2005
------------------- -------------------
Adjusted Net income and After-tax Per Share After-tax Per Share
Diluted Earnings Per Share Amount Amount Amount Amount
--------- --------- --------- ---------
Net income and Diluted EPS, as
reported (a) $300 $0.55 $215 $0.38
Adjustments to Net income and
Diluted EPS:
Expense from divestitures,
asset impairments and
unusual items 16 0.03 61 0.11
Restructuring - - 19 0.03
Additional landfill
amortization expense - - 16 0.03
Tax audit settlements and
other tax items (20) (0.03) (43) (0.08)
Benefit from reduction of
estimated effective tax rate
for 2005 - - (13) (0.02)
--------- --------- --------- ---------
Net income and Diluted EPS, as
adjusted (b) $296 $0.55 $255 $0.45
========= ========= ========= =========
Quarters Ended
September 30,
-------------------
Adjusted Income from Operations as a percent of
Revenue 2006 2005
--------- ---------
As reported:
Operating revenues $3,441 $3,375
Income from operations $557 $382
Income from Operations as a percent of Revenue 16.2% 11.3%
Adjustments to Income from Operations:
Expense from divestitures, asset impairments and
unusual items $19 $86
Restructuring $- $27
Additional landfill amortization expense $- $22
Selling, general and administrative costs
incurred related to income tax settlements $1 $-
As adjusted:
Operating revenues $3,441 $3,375
Income from operations $577 $517
Adjusted Income from Operations as a percent of
Revenue (c) 16.8% 15.3%
Year Ending
December 31, 2006
-------------------
Lower Upper
Adjusted 2006 Projected Diluted Earnings Per Share End End
--------- ---------
Currently Projected Diluted EPS, as reported (d) $2.08 $2.11
Adjustments to Diluted EPS as of September 30,
2006 (d):
(Income) expense from divestitures, asset
impairments and unusual items (e) - -
Unclaimed property charge (f) 0.02 0.02
Tax audit settlements and other tax items (f) (0.32) (0.32)
--------- ---------
Currently Projected Diluted EPS, as adjusted $1.78 $1.81
========= =========
(a) Increase in Net income and Diluted EPS, as reported, of 39.5% and
44.7%, respectively.
(b) Increase in Net income and Diluted EPS, as adjusted, of 16.1% and
22.2%, respectively.
(c) Increase in Income from Operations as a percent of Revenue, as
adjusted, of 150 basis points.
(d) Does not include the impact of any adjustments in the fourth
quarter.
(e) Includes (Income) expense from divestitures, asset impairments and
unusual items of ($0.03) and $0.03 recorded in the second and
third quarters, respectively. These items net to approximately
$0.00.
(f) Included in our actual results for the nine months ended September
30, 2006.
Waste Management, Inc.
Actual/Estimated Diluted Earnings Per Share Impact from Section 45K
Credits from Landfill Gas and Synthetic Fuel Production Facilities
(Unaudited)
2006
---------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Estimated earnings impact as of
June 30, 2006 -
Estimated phase-out of 78%
and shut-down of Facilities $0.01 $0.01 $0.01 (a) $- (a)
Updated estimated earnings impact
as of September 30, 2006 -
Estimated phase-out of 35%
and resumption of operations
at Facilities $0.01 $0.01 $0.05 (b) $0.01 (a)
(a) Forecasted as of the date indicated.
(b) Includes $0.02 per share benefit due to lowering phase-out
estimate for prior quarters consisting of $0.01 per share benefit
attributable to the quarter ended March 31, 2006 and $0.01 per
share benefit attributable to the quarter ended June 30, 2006.
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.