Waste Management Announces First Quarter Earnings
Company Sees Positive Momentum from Yield, Costs, and Cash From Operations
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
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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.” |
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(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 and earnings per diluted share have been presented in certain instances excluding special items noted in this press release. |
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| 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: | ||||
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-- Net cash provided by operating activities |
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-- Less, capital expenditures |
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-- Plus, proceeds from divestitures of businesses (net of cash divested), and other sales of assets. |
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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. |
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| 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
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
A replay of the conference call will be available on the Company’s
website www.wm.com
and by telephone from approximately
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
ABOUT WASTE MANAGEMENT
| 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 impairments and unusual items | 4 | - | ||||||||
| 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 interests | 8 | 12 | ||||||||
| 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 period | 466.5 | 462.7 | ||||||||
| Effect of using weighted average common shares outstanding | (0.8 | ) | (0.6 | ) | ||||||
| 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 outstanding | 466.5 | 463.4 | ||||||||
| 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 | ||||||
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Adjustments to reconcile consolidated net income to net cash provided by operating activities: |
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| Depreciation and amortization | 323 | 317 | ||||||||
| Other | 53 | 48 | ||||||||
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Change in operating assets and liabilities, net of effects of acquisitions and divestitures |
25 | (73 | ) | |||||||
| 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 | ) | ||||||
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Proceeds from divestitures of businesses (net of cash divested) and other sales of assets |
37 | 6 | ||||||||
| Investments in unconsolidated entities | (12 | ) | (13 | ) | ||||||
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Net receipts from restricted trust and escrow accounts, and other |
- | 12 | ||||||||
| 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 equivalents | (2 | ) | 1 | |||||||
| 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 | ||||||||||||||
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Operating Revenues by Lines of Business |
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| 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 | |||||||||||||||
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Analysis of Change in Year Over Year Revenues |
Amount |
As a % of |
Amount |
As a % of |
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| 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 translation | (2 | ) | -0.1 | % | (3 | ) | -0.1 | % | ||||||||
| $ | 41 | 1.2 | % | $ | 192 | 6.2 | % | |||||||||
| Amount |
As a % of |
Amount |
As a % of |
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(i) Average yield |
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| Collection, landfill and transfer | $ | 42 | 1.6 | % | $ | 26 | 1.1 | % | ||||||||
| 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 mandated fees | 11 | 7.2 | % | 18 | 13.3 | % | ||||||||||
| Total | $ | 14 | 0.4 | % | $ | (40 | ) | -1.3 | % | |||||||
| Quarters Ended March 31, | ||||||||||||||||
| 2013 | 2012 | |||||||||||||||
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Free Cash Flow Analysis (c) |
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| Net cash provided by operating activities | $ | 577 | $ | 475 | ||||||||||||
| Capital expenditures | (266 | ) | (379 | ) | ||||||||||||
| Proceeds from divestitures of businesses (net of | ||||||||||||||||
| cash divested) and other sales of assets | 37 | 6 | ||||||||||||||
| Free cash flow | $ | 348 | $ | 102 | ||||||||||||
| (a) |
Revenues subsequent to the first quarter of 2012 resulting from subcontracting work for our National Accounts customers has been reclassified from our Commercial Collection line of business to our Other line of business. |
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| (b) |
Intercompany revenues between lines of business are eliminated within the Condensed Consolidated Financial Statements included herein. |
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| (c) |
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. |
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Waste Management, Inc. Summary Data Sheet (Dollar Amounts in Millions) (Unaudited) |
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| Quarters Ended | ||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||
| 2013 | 2012 | 2012 | ||||||||||||||||
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Balance Sheet Data |
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| 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 | ||||||||||||
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Acquisition Summary (a) |
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| Gross annualized revenue acquired | $ | 226 | $ | 55 | $ | 50 | ||||||||||||
| Total consideration | $ | 217 | $ | 76 | $ | 124 | ||||||||||||
| Cash paid for acquisitions | $ | 180 | $ | 72 | $ | 129 | ||||||||||||
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Other Operational Data |
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| Internalization of waste, based on disposal costs | 67.2 | % | 67.0 | % | 68.0 | % | ||||||||||||
| Total landfill disposal volumes (tons in millions) | 21.1 | 23.6 | 21.4 | |||||||||||||||
| Total waste-to-energy disposal volumes (tons in millions) | 1.9 | 2.0 | 2.0 | |||||||||||||||
| Total disposal volumes (tons in millions) | 23.0 | 25.6 | 23.4 | |||||||||||||||
| Active landfills | 269 | 269 | 270 | |||||||||||||||
| Landfills reporting volume | 253 | 254 | 256 | |||||||||||||||
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Amortization, Accretion and Other Expenses for |
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Landfills Included in Operating Groups: |
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| Landfill amortization expense - | ||||||||||||||||||
| Cost basis of landfill assets | $ | 80.9 | $ | 86.2 | $ | 76.3 | ||||||||||||
| Asset retirement costs | 14.6 | 5.0 | 13.8 | |||||||||||||||
| Total landfill amortization expense (b)(c) | 95.5 | 91.2 | 90.1 | |||||||||||||||
| Accretion and other related expense | 19.6 | 17.9 | 16.4 | |||||||||||||||
| Landfill amortization, accretion and other related expense | $ | 115.1 | $ | 109.1 | $ | 106.5 | ||||||||||||
| (a) |
Represents amounts associated with business acquisitions consummated during the indicated periods. Note that cash paid for acquisitions may include cash payments for business acquisitions consummated in prior quarters. |
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| (b) |
The quarter ended March 31, 2013 as compared to the quarter ended December 31, 2012 reflects an increase in amortization expense of 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. |
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| (c) |
The quarter ended March 31, 2013 as compared to the quarter ended March 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. |
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Waste Management, Inc. Reconciliation of Certain Non-GAAP Measures (Dollars In Millions, Except Per Share Amounts) (Unaudited) |
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Quarter Ended
March 31, 2013 |
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| Adjusted Net Income and Earnings Per Diluted Share |
After-tax |
Tax |
Per Share |
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| Net Income and Diluted EPS, as reported | $ | 168 | $ | 0.36 | (b) | ||||||||||||
| Adjustments to Net Income and Diluted EPS: | |||||||||||||||||
| Asset impairments and unusual items (a) | 13 | 2 | |||||||||||||||
| Restructuring charges | 5 | 3 | |||||||||||||||
| 18 | 0.04 | ||||||||||||||||
| Net Income and Diluted EPS, as adjusted | $ | 186 | $ | 0.40 | (b) | ||||||||||||
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Quarter Ended
March 31, 2012 |
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| Adjusted Net Income and Earnings Per Diluted Share |
After-tax |
Tax |
Per Share |
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| Net Income and Diluted EPS, as reported | $ | 171 | $ | 0.37 | (b) | ||||||||||||
| Adjustments to Net Income and Diluted EPS: | |||||||||||||||||
| Restructuring charges | 2 | 2 | |||||||||||||||
| Integration costs associated with the acquired Oakleaf operations | 1 | - | |||||||||||||||
| 3 | 0.01 | ||||||||||||||||
| Net Income and Diluted EPS, as adjusted | $ | 174 | $ | 0.38 | (b) | ||||||||||||
| Full Year 2013 Free Cash Flow Reconciliation (c) | Scenario 1 | Scenario 2 | |||||||||||||||
| Net cash provided by operating activities | $ | 2,500 | $ | 2,500 | |||||||||||||
| Capital expenditures | (1,400 | ) | (1,300 | ) | |||||||||||||
| Proceeds from divestitures of businesses (net of | |||||||||||||||||
| cash divested) and other sales of assets | - | - | |||||||||||||||
| $ | 1,100 | $ | 1,200 | ||||||||||||||
| (a) | Includes impairment charges associated with certain of our investments 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. | |
| (b) | As reported, earnings per diluted share declined 2.7% in the first 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. | |
| (c) | The reconciliation illustrates two scenarios that show our projected 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. |
Source:
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
