(Source: Business Wire)
Waste Management, Inc. (NYSE:WM) today announced financial results for
its third quarter ended September 30, 2009. Net income(a) for
the quarter was $277 million, or $0.56 per diluted share, compared with
$310 million, or $0.63 per diluted share, for the third quarter of 2008.
Revenues for the third quarter of 2009 were $3.02 billion compared with
$3.53 billion for the same 2008 period. Results in the 2009 third
quarter included a net benefit of $0.02 per diluted share from the
combined effects of certain favorable income tax adjustments and charges
related to our restructuring announced in February 2009. Excluding those
items, earnings would have been $265 million, or $0.54 per diluted share.(b)
David P. Steiner, Chief Executive Officer of Waste Management,
commented, "The third quarter once again shows the strength of our
strategy to maintain pricing while reducing costs. Our collection and
disposal pricing remained strong, with internal revenue growth from
yield of 2.9%. Recycling commodity prices increased each month in the
third quarter, and have increased over 80% from the lows reached in
January of 2009. On the cost side, the company-wide restructuring we
announced in February produced savings consistent with the prior
quarter, and we expect to exceed our original forecast of annualized
savings of $120 million.
"Our commercial and residential business lines continued to demonstrate
their recession-resistant qualities. Commercial revenue, excluding
revenue from our fuel surcharge, remained solid, declining just 0.7%
compared with the third quarter of 2008. Residential revenue, excluding
revenue from our fuel surcharge, performed even better, declining only
0.4% compared with the prior year period."
Key Highlights for the Third Quarter 2009
Internal revenue growth from yield from our collection and disposal
operations was 2.9%.
Internal revenue growth from volume was negative 8.9%.
Revenue declined by $502 million. Of this decline, $189 million was
due to lower recycling revenues and electricity sales prices, $108
million was related to the decline in fuel surcharge revenue as crude
oil prices declined, and $10 million was due to foreign currency
translation.
Operating expenses declined by $365 million, or approximately 16.4%,
to $1.86 billion in the third quarter of 2009. Operating expenses,
adjusted for labor disruption costs of $26 million that occurred in
the third quarter of 2008, declined $339 million, or approximately
15.4%. As a percentage of revenue, third quarter 2009 operating
expenses decreased to 61.4%, which is a 90 basis point improvement
compared with the same quarter in 2008, as adjusted.(b)
Selling, general and administrative expenses decreased by $30 million
compared with the third quarter of 2008.
Average recycling commodity prices were down 40% in the third quarter
of 2009 compared with the prior year period. This decline caused a
negative year-over-year impact to earnings of $0.05 per diluted share
in the third quarter, compared with the prior year period.
Natural gas markets adversely affected electricity sales prices at
some of our waste-to-energy plants in the third quarter of 2009,
causing a decline in earnings per diluted share of $0.04 compared with
the prior year period.
Free cash flow was $343 million in the quarter, and is $839 million
for the first three quarters.(b)
Capital expenditures were $240 million in the quarter.
$208 million was returned to shareholders in the third quarter,
consisting of $143 million in cash dividends and $65 million in common
stock repurchases.
The effective tax rate in the quarter was approximately 31.2%. The
reduction in the effective tax rate for the quarter is due principally
to the favorable impacts of finalizing our 2008 tax returns, tax audit
settlements, currently recognizing the benefit of state net operating
loss carry forwards, and updating our 2009 effective tax rate.
Steiner continued, "Economic conditions and our volumes have stabilized.
So, as we look to the fourth quarter of this year, we expect the rate of
decline in volumes to be slightly better than the rate of decline in the
third quarter of 2009. In addition, our recycling business has shown
consistent improvement since the lows in commodity prices reached during
January 2009, and we expect a positive $0.02 to $0.04 impact on earnings
per diluted share from our recycling operations in the fourth quarter of
2009, compared with the prior year period. On the other hand, we expect
lower year-over-year natural gas prices to cause lower electricity sales
prices in the fourth quarter of 2009, which would cause earnings per
diluted share to decline $0.02 to $0.04 compared with the prior year
period. So, we expect the negative effect from lower electricity sales
prices to be offset by the positive effect from recycled commodities
prices. Given these factors, we are comfortable we can achieve our
previously issued full year 2009 earnings guidance of $1.95 to $1.99 per
diluted share on an as adjusted basis. This is consistent with the
current Wall Street earnings consensus of $0.48 per share for the fourth
quarter of 2009. We continue to target full-year free cash flow of
approximately $1.3 billion."(b)
Steiner concluded, "During the economic downturn we have maintained our
commitment to returning cash to our shareholders. In the third quarter
we paid out $143 million in dividends and repurchased $65 million of
common stock. We also closed $82 million of acquisitions in the quarter.
The recession-resistant qualities and strong cash flows of our solid
waste business, combined with our focus on pricing and cost reduction,
give us confidence that we will continue to generate strong cash returns
for our shareholders and emerge from this economic downturn as a
stronger, leaner company that is positioned to grow."
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(a) For purposes of this press release, all references to "Net
income" refers to the financial statement line item "Net income
attributable to Waste Management, Inc."
(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 (ii) financial measures the Company uses in the management of its
business. The Company has adjusted net income, earnings per diluted
share, projected earnings per diluted share and operating expense as a
percent of revenue in this press release to exclude the impact of
certain unusual, non-recurring or otherwise non-operational items.
The Company also discusses free cash flow and projected free cash
flow, each of 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 full year adjusted earnings projection of $1.95 to $1.99 per
diluted share announced by the Company excludes (i) the first quarter
impact of (A) a $23 million after-tax restructuring charge and (B) a $30
million after-tax asset impairment related to our revenue management
software; (ii) the second quarter impact of (A) a restructuring charge
of $3 million after-tax and (B) a $6 million after-tax charge related to
our withdrawal from an underfunded multi-employer pension plan; and
(iii) the third quarter impact of (A) a restructuring charge of $2
million after tax and, (B) a $14 million benefit related to tax items.
GAAP net earnings per diluted share for the fourth quarter of 2009 may
include other items that are not currently determinable, but may be
significant, such as asset impairment and unusual items, charges, gains
or losses from divestitures, or resolution of income tax items. The full
year 2009 adjusted projected earnings announced today excludes the
impact of any such items that may occur. GAAP net earnings per diluted
share projected for the full year would require inclusion of the
projected impact of these items. Due to the uncertainty of the
likelihood, amount and timing of any such items, we do not believe we
have the information available to provide projected full year GAAP net
earnings per diluted share and the quantitative reconciliation to our
current adjusted earning per diluted share projection.
The quantitative reconciliations of each of the other 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 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 30064951." 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
29th through 5:00 p.m. Eastern time on November 12th. 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 30064951.
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 2009 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. 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:
volatility and 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;
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 average yield on collection and
disposal 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; and divesting under-performing assets and purchasing
accretive businesses, any failures 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;
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 and increase our costs;
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 or 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,
2008.
Waste Management, Inc.Condensed Consolidated Statements of Operations(In Millions, Except Per Share Amounts)(Unaudited)
Quarters Ended September 30,
2009 2008
Operating revenues $ 3,023 $ 3,525
Costs and expenses:
Operating 1,856 2,221
Selling, general and administrative 339 369
Depreciation and amortization 301 326
Restructuring 3 -
(Income) expense from divestitures, asset impairments and unusual items (1 ) (23 )
2,498 2,893
Income from operations 525 632
Other income (expense):
Interest expense (104 ) (114 )
Interest income 3 5
Other, net 1 1
(100 ) (108 )
Income before income taxes 425 524
Provision for income taxes 133 201
Consolidated net income 292 323
Less : Net income attributable to noncontrolling interests (15 ) (13 )
Net income attributable to Waste Management, Inc.