Waste Management Hit by Fin 46

Earnings fall because of the accounting rule. Revenue edges up.
By TSC Staff ,

Waste Management's

(WMI)

fourth-quarter earnings sagged because of a new accounting standard that requires consolidation of off balance sheet entities that don't meet an outside-ownership standard. The rubbish hauler warned business is slow in the current quarter but left its full-year estimates largely intact.

The company earned $183 million, or 31 cents a share, in the latest quarter, compared with earnings of $236 million, or 39 cents a share, last year. The latest quarter included a charge of $43 million, or 8 cents a share, related to the adoption of the so-called Fin 46 accounting rule.

Net income before the accounting switch was 39 cents a share in the latest quarter, reflecting a gain of 4 cents a share related to a litigation settlement and lower-than-expected tax rate. Analysts had been forecasting earnings of 34 cents a share in the quarter.

Revenue was $2.97 billion in the latest quarter, compared with $2.81 billion a year ago. The company produced operating cash flow of $640 million in the quarter, free cash flow of $268 million and adjusted free cash flow of $232 million.

"General economic indicators were largely positive during the course of the fourth quarter," Waste Management noted. "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," it said.

Nevertheless, the company estimated it will earn $1.36 to $1.52 a share in the 2004 full year on revenue of $11.9 billion to $12.0 billion. Analysts surveyed by Thomson One Analytics were forecasting earnings of $1.44 a share on sales of $12.0 billion.

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