Waste Management Announces Second Quarter Earnings

Waste Management, Inc. (NYSE:WM) today announced financial results for its quarter ended June 30, 2012. Revenues for the second quarter of 2012 were $3.46 billion compared with $3.35 billion for the same 2011 period. Net income ^(a) for the quarter was $208 million, or $0.45 per diluted share, compared with $237 million, or $0.50 per diluted share, for the second quarter of 2011. Results in the second quarter of 2012 included approximately $32 million of after-tax costs related to a number of items not indicative of the results of operations. Excluding these items, net income would have been $240 million, or $0.52 per diluted share. ^(b) The $32 million of after-tax costs consisted of the following:

• Charges totaling $26 million primarily related to asset impairments and restructuring charges; and
• Approximately $6 million charge related to the partial withdrawal from a Teamsters’ multiemployer pension plan.

David P. Steiner, President and Chief Executive Officer of Waste Management, commented, “We had a very solid second quarter as we grew both our revenue and adjusted net income. Our core solid waste operations continue to perform well, and margins in our core businesses improved by 60 basis points.

“The improvement in our core collection and disposal business partially offset $0.07 per diluted share of headwinds, primarily related to commodities. Our original guidance contemplated only $0.04 of headwinds from those items in the second quarter. Earnings from our recycling and waste-to-energy operations were each $0.03 per diluted share lower in the second quarter compared to the same quarter last year. We also had a negative $0.01 per diluted share effect due to an under-recovery of our fuel surcharge.”

KEY HIGHLIGHTS FOR THE SECOND QUARTER 2012

• Revenue increased by 3.3%, or $112 million.
• Internal revenue growth from yield for collection and disposal operations was 0.6%. Adjusting for contract changes related to the Company’s South Florida waste-to-energy plants, internal revenue growth from yield for collection and disposal operations was 1.0%. Core price increases, which consist of price increases and fees (other than our fuel surcharge), net of rollbacks, were 2.8%.
• Internal revenue growth from volume was 0.6%.
• Average recycling commodity prices were approximately 20% lower in the second quarter of 2012 compared with the prior year period. Recycling operations had a negative $0.03 effect on the current year quarter diluted earnings per share compared to the same quarter last year.
• Electricity prices, which affect the Company’s waste-to-energy plants, were 10% lower in the quarter compared with the prior year period. Waste-to-energy operations had a negative $0.03 effect on the current year quarter diluted earnings per share compared to the same quarter last year.
• Operating expenses increased by $120 million. The majority of the increase relates to subcontractor costs associated with the Company’s Oakleaf operations and increased labor costs.
• SG&A expenses decreased by $8 million compared with the second quarter of 2011. As a percent of revenue, SG&A expenses improved 60 basis points to 10.8%.
• Net cash provided by operating activities was $669 million; capital expenditures were $351 million; and free cash flow was $332 million. ^(b)
• The Company returned $165 million to shareholders in the form of dividends.
• The effective tax rate was 34.3%.

Steiner concluded, “I am pleased that our core solid waste business has grown and margins have continued to improve through the first half of the year. This has helped us grow adjusted diluted earnings per share year-over-year despite the $0.03 of higher than anticipated headwinds.

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