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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

(Date of Report) Date of earliest event reported: February 12, 2004

WASTE MANAGEMENT, INC.

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Item 7. Financial Statements and Exhibits.
Item 9. Regulation FD Disclosure
Item 12. Results of Operations and Financial Condition
SIGNATURES
Press Release dated February 12, 2004

Item 7. Financial Statements and Exhibits.

     (c) Exhibits.

99.1

Press Release of Waste Management, Inc. dated February 12, 2004 announcing results of operations for the year ended December 31, 2003.

Item 9. Regulation FD Disclosure

     The Company held an analyst conference call on February 12, 2004 to discuss its fourth quarter 2003 financial results and 2004 guidance. On that call, A. Maurice Myers, Chairman, President and Chief Executive Officer of the Company, announced that he would adopt a trading plan in accordance with guidelines specified under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and the Company’s policies with respect to insider trades. This means the plan would be adopted as soon as the Company’s trading window opens, which is expected to occur on February 16th. The plan will be used by Mr. Myers to diversify his Waste Management holdings as a part of estate and tax planning activities.

     Under Mr. Myers’ 10b5-1 plan, he will sell up to 187,000 shares he received as a restricted stock grant in 1999. The sales will be made over the next nine months pursuant to a predetermined formula. Additionally, Mr. Myers announced his intention to exercise options he owns in Waste Management common stock, holding the shares acquired in accordance with the Company’s stock ownership guidelines.

     Mr. Myers has previously announced that he will be retiring from Waste Management at the end of the term of his employment contract, which is in November of this year. He has stated that he intends to move from Houston, Texas, where the Company is headquartered. Texas has no state income tax and therefore, Mr. Myers’ tax planning includes recognizing income from stock sales and options exercises while still a resident of Texas.

     Rule 10b5-1 allows corporate insiders to establish prearranged stock trading plans when they are not in possession of material non-public information, and allows such prearranged trades to be made pursuant to the plan regardless of any subsequent material information that the insider may receive. 10b5-1 plans allow insiders to gradually change their investment portfolio to minimize the market effect of stock trades by spreading them out over a period of time and at the same time avoiding concerns about initiating trades while in possession of material nonpublic information.

Item 12. Results of Operations and Financial Condition

     The Company issued a press release on February 12, 2004 announcing its results of operations for the year ended December 31, 2003. A copy of that release is furnished herewith as Exhibit 99.1.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WASTE MANAGEMENT, INC.
Date: February 12, 2004	By:	/s/ RICK L. WITTENBRAKER
		Rick L. Wittenbraker
		Senior Vice President, General Counsel and Assistant Secretary

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EXHIBIT INDEX

-4-

 

FOR IMMEDIATE RELEASE

For Further Information:
Waste Management, Inc.
Analysts:
Cherie Rice
713.512.6548
Media:
Sarah Simpson
713.394.2154
WMI #04-07

Waste Management Announces 4th Quarter and Full Year 2003 Earnings

Income from Operations as a Percent of Revenue Continues Trend of Sequential Improvement

HOUSTON — February 12, 2004 — Waste Management, Inc. (NYSE: WMI) today announced financial results for its fourth quarter and for the year ended December 31, 2003. Revenues for the quarter were $2.97 billion as compared with $2.81 billion in the year ago period. Net income before cumulative effect of change in accounting principle reported for the quarter was $226 million, or $0.39 per diluted share, compared with $236 million, or $0.39 per diluted share, for the fourth quarter 2002. The 2002 quarter included three significant items worth noting: a $43 million pre-tax gain on the sale of an investment, a $31 million tax expense reduction, and $26 million in pre-tax costs related to the settlement of a legal dispute. Combined, these three items improved fourth quarter 2002 diluted earnings per share by $0.07. The 2003 quarter included $17 million of pre-tax income related to a litigation settlement and a lower than previously anticipated effective tax rate, improving fourth quarter 2003 diluted earnings per share by approximately $0.04. Net income reported for the 2003 quarter was $183 million, or $0.31 per diluted share, after considering a $43 million unfavorable cumulative effect of change in accounting principle related to the application of Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”) to special purpose type variable interest entities.

For the full year 2003, Waste Management reported operating revenues of $11.57 billion, compared with $11.14 billion in 2002. Net income before cumulative effect of change in accounting principles for the year was $719 million, or $1.21 per diluted share, compared with $820 million and $1.33 for the year 2002. Net income after considering cumulative effect of change in accounting principles was $630 million for 2003 and $822 million for 2002.

In the first quarter of 2003, Waste Management adopted SFAS No.143 — Accounting for Asset Retirement Obligations, and also changed its accounting for loss contracts and for certain repair

 

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and maintenance activities at its waste-to-energy and Independent Power Production plants. If the accounting changes implemented during 2003 had been effective in 2002, diluted earnings per share in 2002 would have been lower than reported amounts by $0.02 for the fourth quarter of 2002 and $0.08 for the full year.

“2003 was a year of great progress at Waste Management,” commented A. Maurice Myers, Chairman, President and Chief Executive Officer. “I believe we have terrific momentum heading into 2004, and we are focused on leveraging that momentum in the coming year. There were a number of significant accomplishments during the year. While revenues increased by $432 million, Selling, General and Administrative costs were reduced by $176 million, to 10.5% of revenue. We generated over $1 billion in adjusted free cash flow (a). And, through our pricing program we implemented and retained $13 million of monthly price increases, or $156 million of annualized increases, on our commercial and industrial open-market collection customer base.”

Key Highlights for the Fourth Quarter and Full Year

•		Operating cash flow of $640 million in the quarter and $1,926 million for the full year. The quarter and full year amounts include a favorable impact of $36 million and a net negative impact of $223 million, respectively, related to the payment of a class action settlement.
•		Free cash flow (a) of $268 million in the quarter and $800 million for the full year. Adjusted free cash flow (a), excluding the net cash impact of the payments related to the class action lawsuit settlement, was $232 million in the quarter and $1,023 million for the full year.
•		Capital expenditures of $402 million and $1,200 million for the quarter and the year, respectively.
•		Internal revenue growth on base business for the quarter of 0.7%, with all of that growth coming from price and a flat volume component. The price component excludes combined net positive impact of 0.2% related to higher fuel surcharges, higher recycling commodity prices, and lower electricity rates at Independent Power Production facilities.
•		In connection with the WasteRoute program, the Company exceeded its goal of reducing 750 routes during 2003. Estimated gross savings from the program were $18 million in 2003.
•		Income from operations as a percent of revenue was 14.9% for the quarter, marking the third straight quarter of sequentially improving margins in 2003.
•		During the fourth quarter $298 million of common stock was repurchased, for a total of $574 million, or about 22 million shares, for the full year.
•		Acquired $561 million of annualized revenues, for $344 million total consideration.

Myers added, “General economic indicators were largely positive during the course of the fourth quarter. Similarly, the volume component of our internal revenue growth was improved as compared to the negative trends we have seen in the prior quarters. The first quarter, our seasonally slowest quarter in terms of business volumes, is not looking very robust so far, with harsh winter storms in certain of our key markets. Our focus at this time remains on improving the performance of our bottom quartile performers, as measured by key performance metrics. As a team, we can and will continue our efforts to improve our efficiencies and reduce our costs while at the same time raising prices. However, it is generally believed that volumes in this industry lag broad economic results by six to nine months. An economic-related rebound to our volumes in 2004 would be an unplanned positive occurrence.”

 

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2004 Outlook

The Company also announced the following in regard to its financial outlook for 2004:

•		Free cash flow (a) estimated in the range of $900 million to $1.0 billion.
•		Capital expenditures expected to be in the range of $1.15 to $1.25 billion.
•		Total revenue projected to be in a range from $11.9 to $12.0 billion. Internal revenue growth on base business expected to be 1.0%, substantially all price.
•		Diluted earnings per share projected to be within the current analysts’ range ($1.36 to $1.52).
•		Approximately $250 million expected to be spent on acquisitions.
•		Projected share repurchases in the range of $400 to $500 million.
•		Payment of $0.75 per share in dividends over the course of the year, at an approximate cash cost of $430 million.

(a)

The Company included its free cash flow, which is a non-GAAP financial measure, herein because the amount of 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 is important to the Company’s capital allocation process and its goal of providing returns to its shareholders. The Company believes that this measure, which is used internally by management, is important to its investors. Free cash flow is defined by the Company 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

Adjusted free cash flow excludes the net cash impact of the payments related to the class action settlement. The Company’s definition of free cash flow and adjusted free cash flow may not be comparable to similarly titled measures presented by other companies.

The Company has scheduled an investor and analyst conference call for later today to discuss the results of today’s earnings announcement and the 2004 guidance. 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 “Live Webcast: 4Q03 Earnings Report.” You may also listen to the conference call by telephone by contacting the conference call operator at (877) 710-6139, 5-10 minutes prior to the scheduled start time, and asking for the “Waste Management Conference Call — Call ID 4861246.” 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. central time February 12th through 1:00 p.m. on February 26th. 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 and enter reservation code 4861246.

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 2004 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

 

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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.

•		potential liability for environmental damages resulting from 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, as well as 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 waste or certain categories of waste;
•		possible charges against earnings as a result of shut-down operations, development or expansion projects, uncompleted acquisitions 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;
•		the effect the weather has on our quarter to quarter results, as well as the effect of extremely harsh weather on our operations;
•		the effect that price fluctuations on commodity prices may have on our operating revenues;
•		the outcome of litigation or threatened litigation;
•		the effect competition in our industry could have on our profitability;
•		possible diversions of management’s attention and increases in operating expenses due to efforts by labor unions to organize our employees;
•		possible increases in operating expenses due to fuel price increases or fuel supply shortages;
•		the effects of general economic conditions, including the impact of potential interest rate fluctuations and the ability of insurers to fully or timely meet their contractual commitments and of surety companies to continue to issue surety bonds;
•		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 upon implementation of new information technology systems; and
•		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.

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, 2002, and in Item 2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

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Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)

(1)

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Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)

(2)

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Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)

(3)

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Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)

(4)

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Waste Management, Inc.
Condensed Consolidated Balance Sheets
(In Millions)

Note: Prior year information has been restated to conform to 2003 presentation.

(5)

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Waste Management, Inc.
Condensed Consolidated Statements of Cash Flows
(In Millions)
(Unaudited)

(6)

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Waste Management, Inc.
Summary Data Sheet
(Dollar amounts in Millions)
(Unaudited)

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(a)		Represents amounts associated with business acquisitions consummated during the indicated periods.
(b)		Information provided is after the elimination of intercompany revenues and related expenses.
(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.

(7)

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Waste Management, Inc.
Summary Data Sheet
(Dollar amounts in Millions)
(Unaudited)

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(a)

The ($7.7) million includes a reduction in expense associated with the review of the estimated future closure and post-closure requirements of the Company’s landfills.

(8)