Waste Management, Inc. (NYSE:WMI) today announced financial
results for its second quarter ended June 30, 2009. Net income(a)
for the quarter was $247 million, or $0.50 per diluted share,
compared with $318 million, or $0.64 per diluted share, for the
second quarter of 2008. Revenues for the second quarter of 2009
were $2.95 billion compared with $3.49 billion for the same 2008
period. Only $186 million of the revenue decline, or 5.3% of
revenue, was related to the impact of lower volumes in the solid
waste collection and disposal business. The majority of the decline
was due to commodity impacts related to recycling materials, fuel
and energy sales, and to foreign currency translation.
The Company noted certain items that impacted results in the
2009 and 2008 second quarters. Results in the second quarter of
2009 included a net decrease of $0.02 per diluted share,
principally from the combined effects of charges related to the
restructuring announced in February 2009 and to the withdrawal from
a Teamsters’ under-funded multi-employer pension plan. Results in
the second quarter of 2008 included a net $0.01 per diluted share
benefit from income tax items.
Excluding those items, earnings would have been $256 million, or
$0.52 per diluted share, in the second quarter of 2009 compared
with $311 million, or $0.63 per diluted share, in the second
quarter of 2008.(b)
David P. Steiner, Chief Executive Officer of Waste Management,
commented, “We performed well in the second quarter, despite
continued weakness in volumes and unexpected weakness in natural
gas markets, which adversely affected the sales price for
electricity from some of our Wheelabrator plants. We also had a
negative impact of $0.01 per diluted share from development costs
incurred in connection with our expansion of our waste-to-energy
business.
“Our pricing remained strong at 3.0%. Recycling commodity prices
increased each month in the second quarter, and by June had
increased over 41% from the lows reached in January. We realized
the expected benefit of the reorganization that we announced in the
first quarter, and are on track to reduce annual costs by over $120
million. We increased our income from operations margin on an
as-adjusted basis by 230 basis points compared to the first quarter
of 2009, and by 50 basis points compared to the prior year
period.(b) In addition, we continued to generate strong free cash
flow.
“Our commercial and residential business lines continued to
demonstrate their recession resistant qualities. Commercial
revenue, excluding revenue from our fuel surcharge, remained solid,
declining only 1.3% compared to the second quarter of 2008.
Residential revenue, excluding revenue from our fuel surcharge,
performed even better, declining only 0.5% compared to the prior
year period. We experienced most of our volume weakness in the more
economically sensitive industrial collection, landfill and transfer
businesses, though the rate of volume decline in these businesses
appears to be stabilizing.
“As we anticipated, we saw a negative impact of $0.07 per
diluted share in the second quarter of 2009, compared with the
prior year period, as a result of the deterioration of the
recycling commodities markets that began in late 2008. Conditions
are improving, and we expect to see more modest negative
year-over-year impacts from recycling operations in the second half
of 2009. For the second half of 2009, we project that the negative
impact on earnings per diluted share compared to the prior year,
from our recycling operations, will be in the range of $0.02 to
$0.04.”
Key Highlights for the Second Quarter 2009
- Internal revenue growth from
yield from our collection and disposal operations was 3.0%.
- Internal revenue growth from
volume was negative 8.6%.
- Revenue declined by $537
million. Of this decline, $207 million was due to lower recycling
revenues and energy prices, $116 million was related to the decline
in fuel surcharge revenue as oil prices declined, and $28 million
was due to foreign currency translation.
- Operating expenses declined by
$395 million, or approximately 18.1%, to $1.79 billion in the
second quarter of 2009. As a percentage of revenue, second quarter
2009 operating expenses decreased to 60.5%, which is a 200 basis
point improvement compared with the same quarter in 2008.
- Cost savings related to the
restructuring the Company announced in February exceeded $30
million in the second quarter of 2009, and annualized savings are
still expected to exceed $120 million. The Company incurred a
charge of $5 million in the second quarter of 2009 for this
restructuring, which brings the total year-to-date charge to $43
million.
- A $10 million benefit to net
income resulted from the accounting impact of an increase in the
10-year risk free interest rate, which is used to calculate the
present value of our environmental remediation liabilities.
- Selling, general and
administrative expenses decreased by $35 million compared with the
second quarter of 2008.
- Free cash flow was $297 million
in the quarter, and was $496 million for the year to date.(b)
- Capital expenditures were $258
million in the quarter, a $15 million decrease from the prior year
period.
- $142 million was returned to
shareholders through dividend payments in the quarter.
- The effective tax rate in the
quarter was approximately 37.9%.
Steiner continued, “The second quarter demonstrated the strength
of our business model and the effectiveness of the pricing programs
and cost controls we have implemented. We had negative impacts of
$0.07 from our recycling operations, $0.03 from lower energy sales
prices earned at some of our Wheelabrator plants, and $0.01 from
foreign currency translation and business development costs.
Excluding those mostly uncontrollable items from our earnings, we
would have earned $0.63 per diluted share, which would equal our
adjusted earnings in the second quarter of 2008.(b) We accomplished
this despite an 8.6% drop in internal revenue growth from volumes.
This demonstrates that our pricing and cost control programs can
offset significant volume losses, and positions us well for when
volumes begin to improve.
“We expect the rate of declines in volumes in the second half of
the year to be consistent with the rate of decline in the second
quarter. We also expect that we will see a year-over-year earnings
decrease of approximately $0.04 in the second half of the year due
to continued weakness in energy prices at certain of our
Wheelabrator plants. Given this outlook, we expect fully diluted
earnings per share on an adjusted basis for the full year to be in
the range of $1.95 to $1.99.” (b)
Steiner concluded, “During the economic downturn we have
maintained our commitment to returning cash to our shareholders. In
the second quarter we paid out over $142 million in dividends. With
credit markets now stabilized and our strong cash flow and balance
sheet, we have decided to resume our share repurchase program, with
authority to spend up to $400 million during the remainder of 2009.
Finally, given our focus on free cash flow generation, we continue
to expect to generate at least $1.3 billion of free cash flow for
the year.” (b)
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(a) As a result of the Company’s adoption of Statement of
Financial Accounting Standard No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51, the
financial statement line item that had been entitled “Net income”
is now entitled “Net income attributable to Waste Management, Inc.”
For purposes of this press release, all references to “Net income”
refers to “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. 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;
- Projected earnings per diluted
share; and
- Income from operations as a
percentage of revenues.
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; and (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. GAAP net earnings per
diluted share for the remaining two quarters 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 16261765.” 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 July 30th
through 5:00 p.m. Eastern time on August 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 16261765.
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:
- 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;
- 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 June
30, 2009 2008 Operating revenues $ 2,952 $
3,489 Costs and expenses: Operating 1,786 2,181 Selling,
general and administrative 323 358 Depreciation and amortization
302 318 Restructuring 5 -
(Income) expense from
divestitures, asset impairments and unusual items
2 - 2,418 2,857
Income from operations 534 632
Other income (expense): Interest expense (107 ) (105 )
Interest income 3 4 Other, net - (1 )
(104 ) (102 ) Income before income taxes 430 530
Provision for income taxes 163 199
Consolidated net income 267 331 Less - Net income attributable to
noncontrolling interests (20 ) (13 ) Net income
attributable to Waste Management, Inc. $ 247 $ 318
Basic earnings per common share $ 0.50 $ 0.65
Diluted earnings per common share $ 0.50 $ 0.64
Basic common shares outstanding 492.4
490.7 Diluted common shares outstanding
493.7 494.6 Cash dividends declared per
common share $ 0.29 $ 0.27 Note: Prior year
information has been reclassified to conform to 2009 presentation.
Waste Management, Inc.Earnings Per Share(In
Millions, Except Per Share Amounts)(Unaudited)
Quarters Ended June 30, 2009 2008
EPS Calculation: Net income attributable to Waste
Management, Inc. $ 247 $ 318 Number of common shares
outstanding at end of period 492.2 490.2 Effect of using weighted
average common shares outstanding 0.2 0.5 Weighted
average basic common shares outstanding 492.4 490.7
Dilutive effect of equity-based
compensation awards and other contingently issuable shares
1.3 3.9 Weighted average diluted common shares
outstanding 493.7 494.6 Basic earnings
per common share $ 0.50 $ 0.65 Diluted earnings per common
share $ 0.50 $ 0.64
Waste Management,
Inc.Condensed Consolidated Statements of
Operations(In Millions, Except Per Share
Amounts)(Unaudited) Six Months Ended
June 30, 2009 2008 Operating revenues $
5,762 $ 6,755 Costs and expenses: Operating 3,511 4,273
Selling, general and administrative 660 726 Depreciation and
amortization 591 615 Restructuring 43 - (Income) expense from
divestitures, asset impairments and unusual items 51
(2 ) 4,856 5,612 Income from
operations 906 1,143 Other
income (expense): Interest expense (212 ) (227 ) Interest income 7
9 Other, net - (3 ) (205 ) (221
) Income before income taxes 701 922 Provision for income
taxes 264 343 Consolidated net income
437 579 Less - Net income attributable to noncontrolling interests
(35 ) (20 ) Net income attributable to Waste
Management, Inc. $ 402 $ 559 Basic earnings
per common share $ 0.82 $ 1.13 Diluted
earnings per common share $ 0.81 $ 1.13 Basic
common shares outstanding 492.1 493.3
Diluted common shares outstanding 493.6
496.6 Cash dividends declared per common share $ 0.58
$ 0.54 Note: Prior year information has been
reclassified to conform to 2009 presentation.
Waste
Management, Inc.Earnings Per Share(In Millions,
Except Per Share Amounts)(Unaudited)
Six Months Ended June 30, 2009 2008 EPS
Calculation: Net income attributable to Waste
Management, Inc. $ 402 $ 559 Number of
common shares outstanding at end of period 492.2 490.2 Effect of
using weighted average common shares outstanding (0.1 )
3.1 Weighted average basic common shares outstanding 492.1
493.3
Dilutive effect of equity-based
compensation awards and other contingently issuable shares
1.5 3.3 Weighted average diluted common shares
outstanding 493.6 496.6 Basic
earnings per common share $ 0.82 $ 1.13 Diluted
earnings per common share $ 0.81 $ 1.13
Waste
Management, Inc.Condensed Consolidated Balance
Sheets(In Millions) June 30,
December 31, 2009 2008 (Unaudited)
Assets Current assets: Cash and cash equivalents $
528 $ 480 Receivables, net 1,565 1,610 Other 324 245
Total current assets 2,417 2,335 Property and equipment, net
11,262 11,402 Goodwill 5,524 5,462 Other intangible assets, net 178
158 Other assets 767 870 Total assets $ 20,148 $
20,227
Liabilities and Equity Current
liabilities:
Accounts payable, accrued
liabilities, and deferred revenues
$ 1,991 $ 2,201 Current portion of long-term debt 244
835 Total current liabilities 2,235 3,036 Long-term debt,
less current portion 7,999 7,491 Other liabilities 3,547
3,515 Total liabilities 13,781 14,042 Equity: Waste
Management, Inc. stockholders' equity 6,068 5,902 Noncontrolling
interests 299 283 Total equity 6,367
6,185 Total liabilities and equity $ 20,148 $ 20,227 Note:
Prior year information has been reclassified to conform to 2009
presentation.
Waste Management, Inc.Condensed
Consolidated Statements of Cash Flows(In
Millions)(Unaudited) Six Months Ended
June 30, 2009 2008 Cash flows from operating
activities: Consolidated net income $ 437 $ 579
Adjustments to reconcile
consolidated net income to net cash provided by operating
activities:
Depreciation and amortization 591 615 Other 59 101
Change in operating assets and
liabilities, net of effects of acquisitions and divestitures
(20 ) (164 ) Net cash provided by operating
activities 1,067 1,131 Cash
flows from investing activities: Acquisitions of businesses, net of
cash acquired (59 ) (127 ) Capital expenditures (583 ) (486 )
Proceeds from divestitures of
businesses (net of cash divested) and other sales of assets
12 38
Net receipts from restricted trust
and escrow accounts, and other
67 76 Net cash used in investing
activities (563 ) (499 ) Cash flows from
financing activities: New borrowings 908 971 Debt repayments (1,014
) (1,001 ) Common stock repurchases - (401 ) Cash dividends (285 )
(266 ) Exercise of common stock options 8 32 Other, net (73
) (106 ) Net cash used in financing activities (456 )
(771 ) Effect of exchange rate changes on cash and
cash equivalents - 1 Increase
(decrease) in cash and cash equivalents 48 (138 ) Cash and cash
equivalents at beginning of period 480 348
Cash and cash equivalents at end of period $ 528 $
210 Note: Prior year information has been
reclassified to conform to 2009 presentation.
Waste
Management, Inc.Summary Data Sheet(Dollar Amounts in
Millions)(Unaudited)
Quarters Ended June 30, March 31, June
30, 2009 2009 2008
Operating Revenues by Lines of
Business
Collection $ 1,999 $ 1,952 $ 2,237 Landfill 663 600 786
Transfer 366 321 424 Wheelabrator 212 201 225 Recycling 165 143 324
Other 57 47 56 Intercompany
(a) (510 ) (454 )
(563 ) Operating revenues $ 2,952 $ 2,810 $
3,489
Analysis of Change in Year Over Year
Revenue
Amount
As a % of change
Recycling
(b) $ (185 ) Electricity (22 ) Fuel
surcharge and mandated fees (116 ) Foreign currency translation
(28 ) Decline from commodity and non-operational items (351
) 65.4 % Collection and disposal yield 85 Volumes (excluding
recycling) (279 ) Acquisition, net of divestitures 8
Collection and disposal (186 ) 34.6 % $ (537 )
100.0 %
Quarters Ended June 30,
March 31, June 30, 2009 2009
2008
Acquisition Summary (c)
Gross annualized revenue acquired $ 34 $ 23 $
39 Total consideration $ 53 $ 22 $ 60
Cash paid for acquisitions $ 35 $ 21 $
55
Quarters Ended June 30, Six
Months Ended June 30, 2009 2008 2009
2008
Free Cash Flow Analysis (d)
Net cash provided by operating activities $ 548 $ 570 $
1,067 $ 1,131 Capital expenditures (258 ) (273 ) (583 ) (486 )
Proceeds from divestitures of
businesses (net of cash divested) and other sales of assets
7 24 12 38
Free cash flow $ 297 $ 321 $ 496 $ 683
(a)
Intercompany revenues between
lines of business are eliminated within the Condensed Consolidated
Financial Statements included herein.
(b) Includes volume related decline of $20 million.
(c) Represents amounts associated with business acquisitions
consummated during the indicated periods. (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
June 30, March 31, June 30, 2009
2009 2008
Balance Sheet Data
Cash, cash equivalents and
short-term investments available for use (a)
$ 528 $ 947 $ 210 Debt-to-total capital
ratio:
Long-term indebtedness, including
current portion
$ 8,243 $ 8,789 $ 8,393 Total equity (b) 6,367
6,193 6,024 Total capital $ 14,610 $
14,982 $ 14,417 Debt-to-total capital
56.4 % 58.7 % 58.2 % Capitalized interest $ 5
$ 3 $ 4
Other Operational Data
Internalization of waste, based on disposal costs
69.3 % 70.0 % 67.6 % Total landfill disposal
volumes (tons in millions) 23.9 21.6 28.4 Total waste-to-energy
disposal volumes (tons in millions) 1.8 1.7
1.7 Total disposal volumes (tons in millions)
25.7 23.3 30.1
Active landfills 274 274 279
Landfills reporting volume 259
260 262
Amortization and SFAS No. 143 Expenses
for
Landfills Included in Operating
Groups
Non - SFAS No. 143 amortization expense $ 86.3 $ 77.0 $ 101.1
Amortization expense related to SFAS No. 143 obligations
14.3 10.6 13.5 Total
amortization expense (c) (d) 100.6 87.6 114.6 Accretion and other
related expense 16.4 16.1 16.1
Landfill amortization, accretion and other related expense $
117.0 $ 103.7 $ 130.7 (a) The quarters
presented include less than $0.1 million of short-term investments
available for use. (b)
As a result of the company's
adoption of SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements- an amendment of ARB No. 51, noncontrolling
interests in a subsidiary are now reported in Total equity. Prior
year information has been reclassified to conform to 2009
presentation.
(c)
The quarter ended June 30, 2009 as
compared with the quarter ended March 31, 2009 reflects an increase
in amortization expense of $13 million of which $9.8 million was
primarily due to the seasonal increase in landfill volumes.
Additionally, there was a sequential rate increase of $3.3 million
primarily due to one-time increases taken in Q2 2009 related to
changes in closure estimates.
(d)
The quarter ended June 30, 2009,
as compared with the quarter ended June 30, 2008 reflects a
reduction in amortization expense of $14 million, of which $18.6
million is primarily due to lower landfill volumes resulting from
the weakened economy. This reduction was partially offset by $3.8
million primarily as a result of one-time adjustments taken in Q2
2009 for revisions in estimates of closure/post-closure costs.
Waste Management, Inc.
Internal Growth of Operating Revenues from Comparable Prior
Periods (Dollar Amounts in Millions) This exhibit
provides details associated with the period-to-period change in
revenues and includes internal revenue growth as a percent of
revenues on a total company basis as well as a percent of revenues
on related business. We believe providing this information will
help our investors better understand the Company's Internal Revenue
Growth information. To explain how the following percent
changes are calculated, provided below are the calculations for
"Collection, Landfill and Transfer" as a percentage of Related
Business and as a percentage of Total Company: (i)
"Collection, landfill and transfer" as a percentage of related
business revenues of 3.2% is calculated by dividing the $87 million
average yield by the denominator of $2,735 million. The denominator
includes prior year "Collection, landfill and transfer" revenues
($2,747 million) less the impact of divestitures related to
"Collection, landfill and transfer" ($12 million). (ii)
"Collection, landfill and transfer" as a percentage of total
company revenues of 2.5% is calculated by dividing the $87 million
average yield by the denominator of $3,476 million. The denominator
includes prior year total company revenues ($3,489 million) less
the impact of divestitures ($13 million).
Quarters
Ended June 30, 2009 June 30, 2008 Amount
As a % ofRelatedBusiness (a)
As a % of Total Company (b) Amount As a % of Related Business (a)
As a % of Total Company (b)
Average Yield: Collection,
landfill and transfer $ 87 3.2 % 2.5 % $ 96 3.5 % 2.9 %
Waste-to-energy disposal (2 ) -1.8 % -0.1 % 3
2.7 % 0.0 %
Collection and disposal 85 3.0 % 2.4 % 99
3.5 % 2.9 %
Recycling commodity (165 ) -48.7 % -4.8 % 56
19.4 % 1.7 %
Electricity (22 ) -25.0 % -0.6 % 6 7.3 % 0.2 %
Fuel surcharges and mandated fees (116 ) -57.1 % -3.3
% 75 58.6 % 2.2 %
Total (218 ) -6.3 % -6.3 %
236 7.0 % 7.0 %
Volume (299 ) -8.6 % (128 )
-3.8 %
Internal revenue growth (517 ) -14.9 % 108 3.2 %
Acquisition 21 0.6 % 32 1.0 %
Divestitures (13 ) -0.3
% (25 ) -0.8 %
Foreign currency translation (28 )
-0.8 % 16 0.5 % $ (537 ) -15.4 % $ 131 3.9 %
Note: The revenue information below represents the
denominator used to calculate the percentages of related business
and is defined as prior year revenue less the impact of
divestitures.
Denominator for the Quarters Ended
June 30, 2009 June 30, 2008 Related business
revenues: Collection, landfill and transfer $ 2,735 $ 2,723
Waste-to-energy disposal 111 112
Collection and disposal 2,846 2,835 Recycling commodity 339 288
Electricity 88 82 Fuel surcharges and mandated fees 203
128 Total Company $ 3,476 $ 3,333
(a) These percentages are calculated using the
related business revenue as the denominator.
(b)
These percentages are calculated using the total company revenue as
the denominator.
Note: Starting with the quarter
ended March 31, 2009, we have made the following changes to our
Internal Revenue Growth table: Average yield from
"Collection and Disposal" excludes any electricity related
revenues. These electricity revenues are now included within
Average Yield in the "Electricity" caption. Note that the "Waste to
Energy" component of "Collection and Disposal" is primarily
disposal related revenues. We have reclassified prior periods to
conform to the 2009 presentation.
Waste Management,
Inc. Reconciliation of Certain Non-GAAP Measures
(Dollars In Millions, Except Per Share Amounts)
(Unaudited)
Quarter Ended
June 30, 2009
Quarter Ended
June 30, 2008
Adjusted Net income
attributable to WMI and Diluted Earnings Per Share
After-taxAmount
Per ShareAmount
After-taxAmount
Per ShareAmount
Net income attributable to WMI and Diluted EPS, as
reported $ 247 $ 0.50 $
318 $ 0.64 Adjustments (a):
Multi-employer pension withdrawal costs 6 0.01 - - Restructuring 3
0.01 - - Income tax audit settlements and adjustments to deferred
taxes - - (7 )
(0.01 )
Net income attributable to WMI and Diluted EPS, as
adjusted $ 256 $ 0.52 $
311 $ 0.63 Adjustments for effects
of negative market conditions (b): Decline in price and demand
of recycling commodities 35 0.07 - - Decline in energy prices 13
0.03 - - Foreign currency exchange and waste-to-energy expansion
6 0.01 - -
Net income attributable to WMI and Diluted EPS, as
further adjusted $ 310 $
0.63 $ 311 $
0.63 (a) Adjustments include
unusual, nonrecurring or non-operational items, the exclusion of
which allows investors to have the same information management uses
in evaluating the Company's results of operations. The exclusion of
these items also allows investors to compare results of operations
in the current period to prior period's results based on the
Company's fundamental business performance. (b) In addition to
volume losses, as a result of the current economic climate, the
Company was negatively impacted by items that are mostly
uncontrollable by the Company, as they generally are the result of
market-based rates for commodities and currencies. The Company has
excluded these items, as well as development costs incurred in
connection with the expansion of its waste-to-energy business,
because of the significant impact from the year-over-year change in
these items. The Company believes that the exclusion of these items
provides a more meaningful year-over-year comparison of its
financial results.
Waste Management, Inc. Reconciliation
of Certain Non-GAAP Measures (Dollars In Millions, Except
Per Share Amounts) (Unaudited)
Quarter Ended June 30,
Quarter Ended March 31, Adjusted Income from Operations
as a percent of Revenues 2009 2008 2009
As reported: Operating revenues $ 2,952 $ 3,489 $
2,810 Income from operations $ 534 $ 632 $ 372
Income
from Operations as a percent of Revenues 18.1 %
18.1 % 13.2 % Adjustments to
Income from Operations: Multi-employer pension withdrawal costs
$ 9 $ - $ - Restructuring $ 5 $ - $ 38 Expense from divestitures,
asset impairments and unusual items $ - $ - $ 49
As
adjusted: Operating revenues $ 2,952 $ 3,489 $ 2,810 Income
from operations $ 548 $ 632 $ 459
Adjusted Income from
Operations as a percent of Revenues (a) 18.6 %
18.1 % 16.3 %
Full Year 2009 Free Cash Flow Reconciliation
(b) Net cash provided by operating activities $ 2,355
Capital expenditures (1,080 )
Proceeds from divestitures of
businesses (net of cash divested) and other sales of assets
25
Free cash flow $ 1,300
(a) Increase in income from operations as a
percent of revenues, as adjusted, of 50 basis points as compared
with Q2 2008. Increase in income from operations as a percent of
revenues, as adjusted, of 230 basis points as compared with Q1
2009. (b) The reconciliation illustrates a scenario that
shows our projected Free Cash Flow to be $1.3 billion for the year.
The amounts used in the reconciliation are subject to many
variables, some of which are not in our control and therefore are
not necessarily indicative of what actual results will be.
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