Waste Management's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Waste Management (WM)

Q1 2012 Earnings Call

April 26, 2012 10:00 am ET

Executives

Ed Egl -

David P. Steiner - Chief Executive Officer, President and Director

Steven C. Preston - Principal Financial Officer and Executive Vice President of Finance, Recycling & Energy Services

Analysts

Scott J. Levine - JP Morgan Chase & Co, Research Division

Vance Edelson - Morgan Stanley, Research Division

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

William H. Fisher - Raymond James & Associates, Inc., Research Division

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

Christopher S. Parkinson - Crédit Suisse AG, Research Division

David Warner - First Analysis Corporation

Tatiana Vasilyev

Unknown Analyst

Presentation

Operator

Good morning. My name is Ashley, and I will be your conference operator today. At this time, I would like to welcome everyone to the Waste Management First Quarter 2012 Earnings Release Conference Call. [Operator Instructions] I would now like to turn the call over to Ed Egl, Director, Investor Relations. Thank you. Mr. Ed Egl, you may begin your conference.

Ed Egl

Thank you, Ashley. Good morning, everyone, and thank you for joining us for the First Quarter 2012 Earnings Conference Call. With me this morning are David Steiner, Chief Executive Officer; and Steve Preston, Executive Vice President of Finance, Recycling and Energy Services. David will start things off with a summary of the financial results of the quarter. Steve will cover our revenue growth, including price and volume trends, operating costs and financial statements. We will conclude with questions and answers. During their statements, any comparisons made by David and Steve, unless otherwise stated, will be with the first quarter of 2011.

Before we get started, let me remind you that in addition to our earnings press release that was issued this morning, we have filed a Form 8-K that includes the earnings press release as Exhibit 99.1 and is available on our website at www.wm.com. The Form 8-K, the press release and the schedule for the release include important information that you should refer to.

During the call, you will hear certain forward-looking statements based on current expectations, projections, estimates, opinions or beliefs about future periods. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our most recent Form 10-K.

Additionally, during the call, David and Steve will discuss our earnings per diluted share, which they may refer to as EPS or earnings per share, on an "as adjusted" basis. Our EPS has been adjusted to exclude items detailed in our earnings press release that management believes do not reflect our fundamental business performance or not indicative of our results of operations. Adjusted EPS, projected 2012 EPS and free cash flow are non-GAAP measures.

Please refer to the earnings press release footnote and schedule attached thereto, which can be found on the company's website at www.wm.com, for reconciliation to the most comparable GAAP measures and additional information about the use of non-GAAP measures.

David and Steve will also discuss our results in the areas of internal revenue growth from yield and internal revenue growth from volume. Unless stated otherwise, please note that any references to yield of volume results are more specifically referring to internal revenue growth from yield or volume.

This call is being recorded and will be available 24 hours a day beginning approximately 1 p.m. Eastern Time today until 5:00 p.m. Eastern Time on May 10. To hear a replay of the call over the Internet, access the Waste Management website at www.wm.com. To hear a telephonic replay of the call, dial (855) 859-2056 and enter reservation code 61793696. Time-sensitive information provided during today's call, which is occurring on April 26, 2012, may no longer be accurate at the time of the replay. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Waste Management is prohibited.

Now I will turn the call over to Waste Management CEO, David Steiner.

David P. Steiner

Thanks, Ed. Good morning from Houston. The first quarter of 2012 showed encouraging signs that our core solid waste business continues to do well and to improve, and our cost reduction efforts are beginning to take hold. We did have some big challenges in the quarter that we had to overcome, and we did so.

During our fourth quarter earnings call, we discussed $0.05 to $0.06 of headwinds that would negatively impact our earnings per share when compared to the first quarter of 2011. These headwinds occurred as expected, and we had an additional $0.01 of headwind from higher fuel costs, but our core solid waste operations helped to offset those headwinds. We saw our procurement and other savings programs continue to take hold, and we saw improving volumes due to our customer-focused growth initiatives. All of this allowed us to overcome the significant headwinds to earn $0.38 per share, which was slightly down as we said it would be in our full year guidance earlier this year. So the decrease was expected and $0.38 per share gives us a good start toward achieving our full year target.

Looking at our volumes, our customer-focused growth initiatives are beginning to gain traction with customers, and in the quarter, we signed a contract with one of the largest national big box retailers. Our public sector team also showed good progress in the quarter. We won a number of municipal bids by offering differentiated services like single-stream recycling, recycling rewards and household hazardous waste removal, which the municipalities increasingly require as part of their sustainability efforts. Our manufacturing and industrial segment grew our oilfield environmental services revenue dramatically in the quarter. And in our health care segment, we added a number of new hospital accounts, including one of the premier hospitals in the country. So our customer-focused growth initiative is gaining traction with customers, and we expect it to continue to pick up steam.

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