KEY HIGHLIGHTS FOR THE THIRD QUARTER 2012
- Revenue from solid waste collection and disposal operations increased $115 million or 3.3%, excluding the impact of commodity prices. That revenue increase, however, was more than offset by a $176 million revenue decline from commodities prices, resulting in total revenue being down by 1.7%, or $61 million.
- Internal revenue growth from yield for collection and disposal operations was 0.8%. 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 the Company’s fuel surcharge), net of rollbacks, were 2.6%, consistent with the first half of 2012.
- Work-day adjusted volumes were positive 0.5% for the quarter. Non-work-day adjusted volumes were negative 0.1%. There was one less work day in the quarter.
- Average recycling commodity prices were approximately 40% lower in the third quarter of 2012 compared with the prior year period. Recycling operations had a negative $0.08 effect on the current year quarter diluted earnings per share compared with the same quarter last year.
- Electricity prices, which affect the Company’s waste-to-energy plants, averaged 12% lower in the quarter compared with the prior year period. Waste-to-energy operations had a negative $0.02 effect on the current year quarter diluted earnings per share compared with the same quarter last year.
- Operating expenses improved by $32 million. Higher expenses for third party haulers and maintenance were more than offset by reductions in commodity rebates and landfill operating costs.
- SG&A expenses decreased by $45 million compared with the third quarter of 2011 primarily from incentive compensation accrual reversals and reorganization savings. As a percent of revenue, SG&A expenses improved 110 basis points to 9.7%.
- Net cash provided by operating activities was $574 million; capital expenditures were $402 million; and free cash flow was $180 million. (c)
- The Company returned $164 million to shareholders in the form of dividends.
- The effective tax rate was 36.1%, compared to 32.3% in the same quarter last year, which had a negative $0.01 effect on diluted earnings per share.
Steiner added, “Our 2012 full-year earnings guidance of $2.15 to $2.20 per share was based upon commodity prices causing a second half reduction in earnings of $0.07 per share. We now expect a second half reduction in earnings of $0.14 per share, which is $0.07 more than our previous prediction. The additional $0.07 impact from lower commodity prices would adjust our guidance to a range of $2.08 to $2.13 per diluted share. (b) Our solid waste collection and disposal business continues to operate as expected, and we are seeing some favorable trends moving into 2013 on both pricing and SG&A costs.
“Our full year cash flow guidance of $1.1 to $1.2 billion has three parts: cash from operations, capital expenditures, and sales of assets. We are on track to meet or exceed the cash from operations and capital expenditure components of our 2012 free cash flow, which would generate between $800 million and $850 million of cash for the full year. As discussed after the second quarter, our full-year free cash flow range assumed the sale of selected assets. We are in the process of evaluating opportunities to sell these assets. If we decide not to sell these assets at this time, or we do not complete the sales before year end, it will reduce the proceeds from divestitures component of our free cash flow, but will not affect cash flow from operations.” (c)
Steiner concluded, “Recycling commodity prices and natural gas prices have stabilized recently, with recycling commodity prices actually up modestly in the last few weeks. Given our current outlook for relatively stable commodity prices for full-year 2013, we do not expect significant headwinds from commodity prices for the full year 2013. With our recent restructuring anticipated to reduce costs by $130 million in 2013, our other cost programs picking up steam, and our focus on pricing to improve yield over our 2012 results, we expect to see earnings and cash flows strengthen in 2013. We will give further guidance with respect to 2013 when we release our fourth quarter 2012 results.”