Waste Management Announces Third Quarter 2008 Earnings
Company Posts 16.7% Increase in Earnings Per Share
HOUSTON--(BUSINESS WIRE)--Oct. 30, 2008--Waste Management, Inc. (NYSE:WMI) today announced financial results for its third quarter ended September 30, 2008. Revenue for the third quarter of 2008 was $3.53 billion compared with $3.40 billion in the year ago period, an increase of 3.6%. Net income for the quarter was $310 million, or $0.63 per diluted share, compared with $278 million, or $0.54 per diluted share, in the prior year period, an increase of 16.7% in earnings per diluted share.
The Company noted several items that impacted the results in the 2007 and 2008 third quarters. Results in the third quarter of 2008 included an after-tax benefit of $0.03 per diluted share due to gains from the divestiture of operations offset by a decrease of $0.03 per diluted share related to the cost of a labor disruption in Milwaukee, including more than a $0.02 per diluted share charge related to the local bargaining unit agreeing to our proposal to withdraw the bargaining unit from the Teamsters' under-funded Central States pension fund.
Results in the third quarter of 2007 included a decrease of $0.03 per diluted share related to the cost of a labor disruption in Oakland offset by a $0.03 per diluted share benefit from income tax items.
Excluding those items, earnings would have been $312 million, or $0.63 per diluted share, in the third quarter of 2008 compared with $280 million, or $0.54 per diluted share, in the third quarter of 2007.(a)
Income from operations as a percent of revenue was 18.0% in the third quarter of 2008, a 60 basis point improvement compared with the third quarter of 2007, both periods adjusted for the items noted above.(a)
For the nine months ended September 30, 2008, Waste Management reported operating revenue of $10.28 billion, compared with $9.95 billion for the same period last year. Net income was $869 million, or $1.75 per diluted share, for the nine months ended September 30, 2008, compared with net income of $854 million, or $1.62 per diluted share, for the same period in 2007.
"We have delivered another solid financial performance, and accomplished our primary goals of earnings growth, operating margin expansion and strong free cash flow," said David P. Steiner, Chief Executive Officer of Waste Management. "Our financial performance continues to be driven by the success of our pricing and operational excellence programs. We are very happy with the 16.7% growth in adjusted earnings per share which demonstrates the strength of our business, even in a slowing economy.(a)
"Revenue grew by 3.6% during the third quarter of 2008. Internal revenue growth from yield on base business was 2.7%. Including the positive impact of higher recycling commodity prices and higher fuel surcharge revenue, internal revenue growth from yield was 6.5%. Internal revenue growth at our landfills was at the highest level since the third quarter of 2006 and internal revenue growth from yield in our municipal solid waste disposal line was at the highest level since 2005.
"Our operational excellence and pricing excellence programs continue to improve operating margins. Excluding a 40 basis point impact from higher diesel fuel prices, our as-adjusted income from operations as a percent of revenue increased to 18.4% in the third quarter of this year. This is a 100 basis point improvement when compared with the as-adjusted income from operations as a percent of revenue for the prior year period.(a) We also overcame the impact of a slowing economy and difficult credit markets during the third quarter of 2008, displaying the defensive nature of our business.
"The recycling commodity markets have become very volatile over the last two weeks. During 2008, we have benefited from high recycling commodity prices. We do not expect a year-over-year benefit in the fourth quarter. In fact, we currently estimate that our recycling line of business could negatively impact earnings per share by as much as $0.03 in the fourth quarter. We expect our solid waste business, with its recession resistant qualities and strong cash flows, to perform very well, just as it has all year."
Key Highlights for the Third Quarter of 2008
-- Internal revenue growth from yield on base business was 2.7%.
Including the positive impact of higher recycling commodity
prices and higher fuel surcharge revenue, internal revenue
growth from yield was 6.5%.
-- Internal revenue growth from volumes was a negative 3.2% due
to our pricing excellence program and the economy.
-- Acquisitions contributed 0.8% to higher revenue in the
quarter, while divestitures caused a 0.7% decline in revenue
in the quarter.
-- Operating expenses were 63.0% of revenue in the third quarters
of both 2007 and 2008. Excluding the impacts in 2008 of higher
diesel fuel prices, higher recycling commodity prices on both
operating expenses and revenue, and the impact of the
Milwaukee labor disruption costs, operating expenses were
61.1% of revenue in the third quarter of 2008, or a 120 basis
point improvement compared with the prior year period as
adjusted for the labor disruption costs in Oakland in 2007.(a)
-- Depreciation and amortization expenses were 9.2% of revenue,
down from 9.7% of revenue in the third quarter of 2007.
-- Net cash provided by operating activities was $771 million.
-- Free cash flow was $524 million, compared with $550 million in
the prior year quarter.(a) Capital expenditures were $301
million, or $61 million more than in the 2007 quarter.
Proceeds from divestitures of businesses, net of cash
divested, and from other sales of assets, were $54 million, or
$35 million higher than the prior year quarter.
-- We returned $142 million to shareholders through $133 million
in dividend payments and $9 million in common stock
repurchases.
(a) 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 (ii) financial measures the Company uses in the management of its business. GAAP measures that have been adjusted to exclude the impact of certain unusual, non-recurring or otherwise non-operational items include:
-- Net income;
-- Earnings per diluted share;
-- Earnings per diluted share growth;
-- Income from operations as a percent of revenue; and
-- Operating expenses as a percent of revenue.
The Company also discusses free cash flow, which is a non-GAAP measure, 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, and the payment of dividends. However, free cash flow has material limitations, as it does not represent cash flow available for discretionary expenditures because it excludes certain expenditures that we have committed to such as debt service obligations. 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 quantitative reconciliations of the non-GAAP measures 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 on the conference call. The call will begin at 10:00 a.m. Eastern 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 "Earnings Webcast." You may also listen to the analyst 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 66401070." 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 1:00 p.m. Eastern time on October 30th through 5:00 p.m. Eastern time on November 13th. 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 66401070.
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.
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 2008 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 or raise prices;
-- 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, reducing costs due to our operational improvement
programs, and divesting under-performing assets and purchasing
accretive businesses, any of which could negatively affect our
revenues and margins;
-- weather conditions cause our quarter-to-quarter results to
fluctuate, and harsh weather or natural disasters may cause us
to temporarily shut down operations;
-- continued volatility and further deterioration in the credit
markets, inflation, higher interest rates and other general
and local economic conditions may negatively affect the
volumes of waste generated, our liquidity, our financing costs
and other expenses;
-- economic conditions may negatively affect parties with whom we
do business, which could result in late payments or the
uncollectability of receivables as well as the non-performance
of certain agreements, including expected funding under our
credit agreement, which could negatively impact our liquidity
and results of operations;
-- possible changes in our estimates of costs for 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, restricting our operations, increasing costs of
operations or requiring additional capital expenditures;
-- climate change legislation, including possible limits on
carbon emissions, may negatively impact our results of
operations by increasing expenses related to tracking,
measuring and reporting our greenhouse gas emissions and
increasing operating costs and capital expenditures that may
be required to comply with any such legislation;
-- 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, cross-border, or certain categories of waste, as
well as mandates on the disposal of waste, can increase our
expenses and reduce our revenue;
-- fuel price increases or fuel supply shortages may increase our
expenses or restrict our ability to operate;
-- increased costs or the inability to obtain financial assurance
or the inadequacy of our insurance coverages could negatively
impact our liquidity and increase our liabilities;
-- possible charges as a result of shut-down operations,
uncompleted development or expansion projects or other events
may negatively affect earnings;
-- fluctuations in commodity prices may have negative effects on
our operating results;
-- trends requiring recycling, waste reduction at the source and
prohibiting the disposal of certain types of waste could have
negative effects on volumes of waste going to landfills and
waste-to-energy facilities;
-- efforts by labor unions to organize our employees may increase
operating expenses and we may be unable to negotiate
acceptable collective bargaining agreements with those who
have chosen to be represented by unions, which could lead to
labor disruptions, including strikes and lock-outs, 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;
-- problems with the operation of our current information
technology or the development and deployment of new
information systems could decrease our efficiencies, increase
our costs, or lead to an impairment charge;
-- the adoption of new accounting standards or interpretations
may cause fluctuations in reported quarterly results of
operations or adversely impact our reported results of
operations; and
-- we may reduce or permanently eliminate our dividend or share
repurchase program, reduce capital spending and cease
acquisitions if cash flows are less than we expect and we are
not able to obtain capital needed to refinance our debt
obligations, including near-term maturities, 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, 2007.
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended September 30,
-------------------------------
2008 2007
--------------- ---------------
Operating revenues $ 3,525 $ 3,403
--------------- ---------------
Costs and expenses:
Operating 2,221 2,143
Selling, general and administrative 369 365
Depreciation and amortization 326 331
Restructuring - -
(Income) expense from divestitures,
asset impairments and unusual
items (23) (1)
--------------- ---------------
2,893 2,838
--------------- ---------------
Income from operations 632 565
--------------- ---------------
Other income (expense):
Interest expense (114) (128)
Interest income 5 10
Equity in net earnings (losses) of
unconsolidated entities - 1
Minority interest (13) (12)
Other, net 1 -
--------------- ---------------
(121) (129)
--------------- ---------------
Income before income taxes 511 436
Provision for income taxes 201 158
--------------- ---------------
Net income $ 310 $ 278
=============== ===============
Basic earnings per common share $ 0.63 $ 0.54
=============== ===============
Diluted earnings per common share $ 0.63 $ 0.54
=============== ===============
Basic common shares outstanding 490.8 515.9
=============== ===============
Diluted common shares outstanding 494.1 520.1
=============== ===============
Cash dividends declared per common
share $ 0.27 $ 0.24
=============== ===============
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended September 30,
-------------------------------
2008 2007
--------------- ---------------
EPS Calculation:
Net income $ 310 $ 278
=============== ===============
Number of common shares outstanding at
end of period 490.6 509.8
Effect of using weighted average
common shares outstanding 0.2 6.1
--------------- ---------------
Weighted average basic common shares
outstanding 490.8 515.9
Dilutive effect of equity-based
compensation awards, warrants and
other contingently issuable shares 3.3 4.2
--------------- ---------------
Weighted average diluted common shares
outstanding 494.1 520.1
=============== ===============
Basic earnings per common share $ 0.63 $ 0.54
=============== ===============
Diluted earnings per common share $ 0.63 $ 0.54
=============== ===============
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2008 2007
--------------- ---------------
Operating revenues $ 10,280 $ 9,949
--------------- ---------------
Costs and expenses:
Operating 6,494 6,269
Selling, general and administrative 1,095 1,061
Depreciation and amortization 941 963
Restructuring - 10
(Income) expense from divestitures,
asset impairments and unusual
items (25) (33)
--------------- ---------------
8,505 8,270
--------------- ---------------
Income from operations 1,775 1,679
--------------- ---------------
Other income (expense):
Interest expense (341) (395)
Interest income 14 39
Equity in net earnings (losses) of
unconsolidated entities (4) (45)
Minority interest (33) (33)
Other, net 2 2
--------------- ---------------
(362) (432)
--------------- ---------------
Income before income taxes 1,413 1,247
Provision for income taxes 544 393
--------------- ---------------
Net income $ 869 $ 854
=============== ===============
Basic earnings per common share $ 1.76 $ 1.64
=============== ===============
Diluted earnings per common share $ 1.75 $ 1.62
=============== ===============
Basic common shares outstanding 492.5 521.4
=============== ===============
Diluted common shares outstanding 495.8 526.0
=============== ===============
Cash dividends declared per common
share $ 0.81 $ 0.72
=============== ===============
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2008 2007
--------------- ---------------
EPS Calculation:
Net income $ 869 $ 854
=============== ===============
Number of common shares outstanding at
end of period 490.6 509.8
Effect of using weighted average
common shares outstanding 1.9 11.6
--------------- ---------------
Weighted average basic common shares
outstanding 492.5 521.4
Dilutive effect of equity-based
compensation awards, warrants and
other contingently issuable shares 3.3 4.6
--------------- ---------------
Weighted average diluted common shares
outstanding 495.8 526.0
=============== ===============
Basic earnings per common share $ 1.76 $ 1.64
=============== ===============
Diluted earnings per common share $ 1.75 $ 1.62
=============== ===============
Waste Management, Inc.
Condensed Consolidated Balance Sheets
(In Millions)
September 30, December 31,
2008 2007
--------------- ---------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 504 $ 348
Receivables, net 1,816 1,892
Other 273 240
--------------- ---------------
Total current assets 2,593 2,480
Property and equipment, net 11,291 11,351
Goodwill 5,493 5,406
Other intangible assets, net 147 124
Other assets 819 814
--------------- ---------------
Total assets $ 20,343 $ 20,175
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, accrued
liabilities, and deferred revenues $ 2,190 $ 2,269
Current portion of long-term debt 816 329
--------------- ---------------
Total current liabilities 3,006 2,598
Long-term debt, less current portion 7,613 8,008
Other liabilities 3,524 3,467
--------------- ---------------
Total liabilities 14,143 14,073
Minority interest in subsidiaries and
variable interest entities 304 310
Stockholders' equity 5,896 5,792
--------------- ---------------
Total liabilities and
stockholders' equity $ 20,343 $ 20,175
=============== ===============
Waste Management, Inc.
Condensed Consolidated Statements of Cash Flows
(In Millions)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2008 2007
--------------- ---------------
Cash flows from operating activities:
Net income $ 869 $ 854
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 941 963
Other 92 64
Change in operating assets and
liabilities, net of effects of
acquisitions and divestitures - (35)
--------------- ---------------
Net cash provided by operating
activities 1,902 1,846
--------------- ---------------
Cash flows from investing activities:
Acquisitions of businesses, net of
cash acquired (230) (86)
Capital expenditures (787) (721)
Proceeds from divestitures of
businesses (net of cash divested)
and other sales of assets 92 235
Purchases of short-term investments - (1,221)
Proceeds from sales of short-term
investments - 1,288
Net receipts from restricted trust
and escrow accounts, and other 149 98
--------------- ---------------
Net cash used in investing activities (776) (407)
--------------- ---------------
Cash flows from financing activities:
New borrowings 1,091 439
Debt repayments (1,206) (658)
Common stock repurchases (410) (1,059)
Cash dividends (399) (374)
Exercise of common stock options and
warrants 36 137
Other, net (82) (4)
--------------- ---------------
Net cash used in financing activities (970) (1,519)
--------------- ---------------
Effect of exchange rate changes on
cash and cash equivalents - 3
--------------- ---------------
Increase (decrease) in cash and cash
equivalents 156 (77)
Cash and cash equivalents at beginning
of period 348 614
--------------- ---------------
Cash and cash equivalents at end of
period $ 504 $ 537
=============== ===============
Waste Management, Inc.
Summary Data Sheet
(Dollar Amounts in Millions)
(Unaudited)
Quarters Ended
------------------------------------
September 30, June 30, September 30,
2008 2008 2007
------------- -------- -------------
Operating Revenues by
Lines of Business
-------------------------
Collection $2,233 $2,237 $2,210
Landfill 787 786 789
Transfer 417 424 426
Wheelabrator 245 225 222
Recycling 344 324 294
Other 55 56 45
Intercompany (a) (556) (563) (583)
------------- -------- -------------
Operating revenues $3,525 $3,489 $3,403
============= ======== =============
Internal Growth of
Operating Revenues from
Comparable Prior Periods
-------------------------
Internal growth 3.5% 3.2% 0.5%
Less: Yield changes due
to recycling
commodities,
electricity (IPP),
fuel surcharge and
mandated fees 4.0% 3.9% 2.2%
------------- -------- -------------
Adjusted internal
growth -0.5% -0.7% -1.7%
============= ======== =============
Acquisition Summary (b)
-------------------------
Gross annualized
revenue acquired $ 94 $ 39 $ 39
============= ======== =============
Total consideration $ 109 $ 60 $ 44
============= ======== =============
Cash paid for
acquisitions $ 100 $ 55 $ 38
============= ======== =============
WMRA Segment Supplemental
Data (c)
-------------------------
Operating revenues $ 292 $ 270 $ 243
============= ======== =============
Operating expenses $ 247 $ 226 $ 207
============= ======== =============
Quarters Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
2008 2007 2008 2007
------------- -------- ------------- -------
Free Cash Flow Analysis
(d)
-------------------------
Net cash provided by
operating activities $ 771 $ 771 $1,902 $1,846
Capital expenditures (301) (240) (787) (721)
Proceeds from
divestitures of
businesses (net of cash
divested) and other
sales of assets 54 19 92 235
------------- -------- ------------- -------
Free cash flow $ 524 $ 550 $1,207 $1,360
============= ======== ============= =======
(a) Intercompany revenues between lines of business are eliminated
within the Condensed Consolidated Financial Statements included
herein.
(b) Represents amounts associated with business acquisitions
consummated during the indicated periods.
(c) Information provided is after the elimination of intercompany
revenues and related expenses.
(d) 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,
2008 2008 2007
------------- ------------- -------------
Balance Sheet Data
----------------------------
Cash, cash equivalents and
short-term investments
available for use (a) $ 504 $ 210 $ 654
============= ============= =============
Debt-to-total capital ratio:
Long-term indebtedness,
including current
portion $ 8,429 $ 8,393 $ 8,278
Total equity 5,896 5,722 5,932
------------- ------------- -------------
Total capital $ 14,325 $ 14,115 $ 14,210
============= ============= =============
Debt-to-total capital 58.8% 59.5% 58.3%
============= ============= =============
Capitalized interest $ 5 $ 4 $ 6
============= ============= =============
Other Operational Data
----------------------------
Internalization of waste,
based on disposal costs 67.5% 67.6% 66.5%
============= ============= =============
Total landfill disposal
volumes (tons in millions) 28.5 28.4 29.5
Total waste-to-energy
disposal volumes (tons in
millions) 1.8 1.7 1.7
------------- ------------- -------------
Total disposal volumes
(tons in millions) 30.3 30.1 31.2
============= ============= =============
Active landfills 277 279 279
============= ============= =============
Landfills reporting volume 262 262 261
============= ============= =============
Amortization and SFAS No.
143 Expenses for Landfills
Included in Operating
Groups
----------------------------
Non - SFAS No. 143
amortization expense $ 99.9 $ 101.1 $ 102.1
Amortization expense related
to SFAS No. 143 obligations 22.5 13.5 21.1
------------- ------------- -------------
Total amortization expense
(b) 122.4 114.6 123.2
Accretion and other related
expense 16.2 16.1 15.8
------------- ------------- -------------
Landfill amortization,
accretion and other
related expense $ 138.6 $ 130.7 $ 139.0
============= ============= =============
(a) The quarters ended September 30, 2008, June 30, 2008, and
September 30, 2007 include short-term investments available for
use of $0 million, $0 million, and $117 million, respectively.
(b) The quarter ended September 30, 2008, as compared with the quarter
ended June 30, 2008 reflects a $7.8 million increase in
amortization expense, of which $7.2 million is due to a charge to
landfill amortization expense for revisions in estimates of
closure and post-closure cost estimates. The quarter ended
September 30, 2008, as compared with the quarter ended September
30, 2007 reflects a $0.8 million decline in amortization expense,
as the $7.2 million amortization charge discussed above was
offset by the impacts of reduced landfill amortization expense
primarily due to lower volumes.
Waste Management, Inc.
Reconciliation of Certain Non-GAAP Measures
(Dollars In Millions, Except Per Share Amounts)
(Unaudited)
Quarter Ended Quarter Ended
September 30, 2008 September 30, 2007
------------------------ ------------------------
Adjusted Net income
and Diluted After-tax Per Share After-tax Per Share
Earnings Per Share Amount Amount Amount Amount
------------------------ ------------------------
Net income and
Diluted EPS, as
reported $ 310 $ 0.63 $ 278 $ 0.54
Adjustments to Net
income and Diluted
EPS:
Tax items - - (14) (0.03)
(Income) expense
from
divestitures,
asset impairments
and unusual items (14) (0.03) - -
Labor disruptions 16 0.03 16 0.03
------------ ----------- ----------- ------------
Net income and
Diluted EPS, as
adjusted (a) $ 312 $ 0.63 $ 280 $ 0.54
============ =========== =========== ============
Quarters Ended
September 30,
------------------------
Adjusted Income from
Operations as a
percent of Revenues 2008 2007
------------ -----------
As reported:
Operating revenues $ 3,525 $ 3,403
Income from
operations $ 632 $ 565
Income from
Operations as a
percent of Revenues 17.9% 16.6%
Adjustments to
Operating Revenues:
(Income) expense
from
divestitures,
asset impairments
and unusual items $ - $ -
Labor disruptions $ - $ 1
Adjustments to
Income from
Operations:
(Income) expense
from
divestitures,
asset impairments
and unusual items $ (23) $ -
Labor disruptions $ 26 $ 26
As adjusted:
Operating revenues $ 3,525 $ 3,404
Income from
operations $ 635 $ 591
Adjusted Income from
Operations as a
percent of Revenues
(b) 18.0% 17.4%
Additional
Adjustment for Fuel
Impact:
Operating revenues $ (83) $ -
Income from
operations $ - $ -
As further adjusted:
Operating revenues $ 3,442 $ 3,404
Income from
operations $ 635 $ 591
Further Adjusted
Income from
Operations as a
percent of Revenues
(c) 18.4% 17.4%
(a) Increase in Diluted EPS, as adjusted, of 16.7%.
(b) Increase in Income from Operations as a percent of revenues, as
adjusted, of 60 basis points.
(c) Increase in Income from Operations as a percent of revenues, as
adjusted for fuel impact, of 100 basis points.
Waste Management, Inc.
Reconciliation of Certain Non-GAAP Measures
(Dollars In Millions)
(Unaudited)
Quarters Ended September 30,
-------------------------------
Impacts of Labor Disruption Costs,
Rising Diesel Fuel Prices, and Higher
Recycling Commodity Prices on
Operating Expenses as a percent of
Revenues 2008 2007
--------------- ---------------
Adjusted Operating Expenses as a
percent of Revenues
As reported:
Operating revenues $ 3,525 $ 3,403
Operating expenses $ 2,221 $ 2,143
Operating Expenses as a percent of
Revenues 63.0% 63.0%
Adjustment for Labor Disruption Costs:
Operating Revenues $ - $ 1
Operating Expenses $ (26) $ (24)
As adjusted:
Operating revenues $ 3,525 $ 3,404
Operating expenses $ 2,195 $ 2,119
Adjusted Operating Expenses as a
percent of Revenues 62.3% 62.3%
Additional adjustments:
Adjustments to Operating Revenues:
Fuel surcharges (a) $ (83) $ -
Recycling commodity prices (b) $ (51) $ -
Adjustments to Operating Expenses:
Fuel (c) $ (83) $ -
Cost of goods sold due to
recycling commodity prices (d) $ (39) $ -
As further adjusted:
Operating revenues $ 3,391 $ 3,404
Operating expenses $ 2,073 $ 2,119
Further Adjusted Operating Expenses as
a percent of Revenues (e) 61.1% 62.3%
(a) Increase in fuel surcharge revenue due to higher diesel fuel
prices. Excludes changes in fuel surcharge revenue caused by
volume fluctuations.
(b) Increase in revenues due to increase in recycling commodity
prices. Excludes changes in recycling commodity revenues caused
by volume fluctuations.
(c) Increase in fuel costs due to higher diesel fuel prices. Excludes
changes in fuel costs caused by volume fluctuations.
(d) Increase in cost of goods sold due to increase in recycling
commodity prices. Excludes changes in cost of goods sold caused
by recycling commodity volume fluctuations.
(e) Increase in Operating Expenses as a percent of revenues, as
adjusted for fuel, recycling commodity prices, and cost of labor
disruptions of 120 basis points.
CONTACT: Waste Management, Inc.
Jim Alderson, 713-394-2281 (Analysts)
Lynn Brown, 713-394-5093 (Media)
http://www.wm.com
SOURCE: Waste Management, Inc.