[WASTE MANAGEMENT LOGO]
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION:
WASTE MANAGEMENT, INC.
ANALYSTS:
---------
CHERIE RICE
713.512.6548
MEDIA:
------
BILL PLUNKETT
713.265.1678
WMI#03-10
WASTE MANAGEMENT ANNOUNCES FIRST QUARTER 2003 EARNINGS
HOUSTON - APRIL 29, 2003 - Waste Management, Inc. (NYSE: WMI) today announced
financial results for its first quarter ended March 31, 2003. Revenues for the
quarter were $2.72 billion as compared to $2.61 billion in the year ago period.
Net income before cumulative effect of changes in accounting principles for the
quarter was $107 million, or $0.18 per share. Net income reported for the
quarter after considering the unfavorable cumulative effect of changes in
accounting principles of $46 million was $61 million, or $0.10 per diluted
share. For the first quarter 2002, the Company reported net income of $138
million, or $0.22 per share, after a favorable cumulative effect of change in
accounting principle of $2 million. The cumulative effect of changes in
accounting principles in 2003 was primarily related to the implementation of
Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations ("SFAS 143"), partially offset by accounting policy
changes related to certain maintenance activities and loss contracts.
"Other than the challenges related to several heavy winter storms in many of
our largest and most populated markets and the rising cost of fuel, our
performance in the quarter was on track with our expectations" commented A.
Maurice Myers, Chairman, President and Chief Executive Officer of Waste
Management. "Winter is finally over and oil prices are starting to come off
their highs, so those challenges should be largely behind us for the second
quarter. Additionally, late March and early April volumes are indicating the
seasonal upturn that we look for each spring."
The Company noted certain items totaling $0.06 per diluted share negatively
impacting the current quarter's results:
o A pre-tax charge of $20 million, or $0.02 per diluted share, included
in the restructuring line, related to the workforce reduction
announced in February.
o Negative impact to pre-tax income related to severe winter weather,
primarily in the East and the Midwest, estimated at $20 million, or
$0.02 per diluted share.
o Negative impact to pre-tax income versus prior year related to
increased fuel costs, net of fuel surcharges, of $12 million, or
$0.01 per diluted share.
o A $7 million expense, or $0.01 per diluted share, resulting from the
increase in inflation rate the Company uses for its estimates of
remedial liability reserves; the increased rate is consistent with
the rate used under SFAS 143 as adopted by the Company.
In the first quarter of 2002, a pre-tax charge of $37 million was included in
the restructuring line, related to a workforce reduction announced in March
2002. Partially offsetting the restructuring charge were credits to asset
impairments and unusual items totaling $6 million pre-tax. Combined, these
items negatively impacted first quarter 2002 earnings by $31 million pre-tax,
or $0.03 per diluted share.
In the first quarter of 2003, Waste Management adopted SFAS 143. In accordance
with SFAS 143 the Company has changed the methodology for accounting for the
retirement of its long-lived assets, primarily its landfills. As a result, on a
year-to-year comparative basis, operating costs were $6 million higher and
depreciation and amortization costs were $7 million higher in the current
quarter than they would have been if the accounting standards were the same as
for the first quarter 2002 period. The increased costs related to SFAS 143
reduced earnings by $0.01 per diluted share.
Myers added, "In the first quarter we saw the strongest internal revenue growth
we have seen in over two years. Especially considering the harsh winter weather
in the quarter, we find the internal growth very encouraging. We also continue
to implement our cost reduction programs, such as our route optimization
effort, and expect further progress during the year. Some other items of
importance in the first quarter's results include: effecting the
reclassification of expenses from SG&A to cost of operations, better reflecting
how we view these costs in terms of our current operations; and kicking off the
2003 share buyback program with the repurchase of $71 million of common stock,
or nearly 3.6 million shares."
The Company also reported the following important highlights for the quarter:
o Operating cash flow of $429 million.
o Free cash flow, defined as operating cash flow less capital
expenditures plus proceeds from sales of assets, of $233 million.
o Internal revenue growth of 0.8%, split 0.3% price and 0.5% volume.
The price component excludes combined positive impacts of 1.4%
related to higher recycling commodity prices, higher fuel surcharges,
and slightly lower electricity rates at Independent Power Production
facilities.
o Capital expenditures of $212 million.
o Approximately $4 million in savings in the quarter related to the
2003 workforce reduction.
o Businesses with annual revenues of approximately $256 million
acquired during the quarter for approximately $83 million in cash
consideration, including the
previously announced acquisition of the Peltz Group in conjunction
with the formation of the Recycle America Alliance.
The Company has scheduled an investor and analyst conference call for later
today 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, 9:00 a.m.
central 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 "Live Webcast: First Quarter 2003
Earnings Report." You may also listen to the conference call by telephone by
contacting the conference call operator at (913) 981-5532, 5-10 minutes prior
to the scheduled start time, and asking for the "Waste Management Conference
Call." 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. central time April 29th
through 5:00 p.m. on May 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 719-457-0820 and enter reservation code 454873.
Waste Management, Inc. is its industry's leading provider of comprehensive
waste management services. Based in Houston, the Company serves municipal,
commercial, industrial, and residential customers throughout North America.
Certain statements contained in this press release include statements that are
"forward-looking statements." Outlined below are some of the risks that the
Company faces and that could affect our financial statements for 2003 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.
However, they are not the only risks that the Company faces. There may be
additional risks that we do not presently know or that we currently believe are
immaterial which could also impair our business. We caution you not to place
undue reliance on these forward-looking statements, which speak only as of
their dates. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In addition, the Company, from time to time, provides
estimates of financial and other data relating to future periods. Such
estimates and other information are the Company's expectations at the point in
time of issuance but may change at some future point in time. By issuing such
estimates the Company has no obligation, and is not undertaking any obligation,
to update such estimates or provide any other information relating to such
estimates.
o possible changes in our estimates of site remediation requirements,
final closure and post-closure obligations, compliance and regulatory
developments;
o the possible impact of regulations on our business, including the
cost to comply with regulatory requirements and the potential
liabilities associated with disposal operations, as well as our
ability to obtain and maintain permits needed to operate our
facilities;
o the effect of limitations or bans on disposal or transportation of
out-of-state waste or certain categories of waste;
o possible charges against earnings as a result of shut-down
operations, uncompleted acquisitions, development or expansion
projects or other events;
o the effects that trends toward requiring recycling, waste reduction
at the source and prohibiting the disposal of certain types of wastes
could have on volumes of waste going to landfills and waste-to-energy
facilities;
o the effect the weather has on our quarter to quarter results, as well
as the effect of extremely harsh weather on our operations;
o the effect that price fluctuations on commodity prices may have on
our operating revenues;
o the outcome of litigation;
o the effect competition in our industry could have on our
profitability;
o possible diversions of management's attention and increases in
operating expenses due to efforts by labor unions to organize our
employees;
o possible increases in operating expenses due to fuel price increases
or fuel supply shortages;
o the effects of general economic conditions, including the ability of
insurers to fully or timely meet their contractual commitments and of
surety companies to continue to issue surety bonds;
o the need for additional capital if cash flows are less than we expect
or capital expenditures are more than we expect, and the possibility
that we cannot obtain additional capital on acceptable terms if
needed;
o the effects of the implementation of Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement
Obligations, on the Company's landfill accounting methods, which in
turn may affect the Company's earnings, balance sheet and compliance
with debt covenants; and
o possible errors or problems upon implementation of our new revenue
management system.
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, 2002.
####
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended March 31,
-------------------------------------
2003 2002
----------- ----------
Operating revenues $2,716 $2,609
----------- ----------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below) 1,793 1,565
Selling, general and administrative 323 387
Depreciation and amortization 302 294
Restructuring 20 37
Asset impairments and unusual items (1) (6)
----------- ----------
2,437 2,277
----------- ----------
Income from operations 279 332
----------- ----------
Other income (expense):
Interest expense (109) (118)
Minority interest (1) (1)
Interest income and other, net 6 6
----------- ----------
(104) (113)
----------- ----------
Income before income taxes 175 219
Provision for income taxes 68 83
----------- ----------
Income before cumulative effect of changes in accounting principles 107 136
Cumulative effect of changes in accounting principles,
net of income tax benefit of $31 in 2003 and $0 in 2002 (46) 2
----------- ----------
Net income $61 $138
=========== ==========
Basic earnings per common share:
Income before cumulative effect of changes in accounting principles $0.18 $0.22
Cumulative effect of changes in accounting principles (0.08) -
----------- ----------
Net income $0.10 $0.22
=========== ==========
Diluted earnings per common share:
Income before cumulative effect of changes in accounting principles $0.18 $0.22
Cumulative effect of changes in accounting principles (0.08) -
----------- ----------
Net income $0.10 $0.22
=========== ==========
Basic common shares outstanding 593.7 625.9
=========== ==========
Diluted common shares outstanding 595.8 630.3
=========== ==========
Pro forma income and earnings per common share assuming changes in
accounting principles are applied retroactively:
Income before cumulative effect of changes in accounting principles $107 $119
Basic earnings per common share before cumulative
effect of changes in accounting principles $0.18 $0.19
Diluted earnings per common share before cumulative
effect of changes in accounting principles $0.18 $0.19
(1)
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
Quarters Ended March 31,
------------------------
2003 2002
---------- ---------
EPS Calculation:
Income before cumulative effect of changes in accounting principles $107 $136
Cumulative effect of changes in accounting principles (46) 2
---------- ---------
Diluted net income $61 $138
========== =========
Shares outstanding 591.4 617.8
Effect of weighting 2.3 8.1
---------- ---------
Basic common shares outstanding 593.7 625.9
Adjustments:
Dilutive effect of common stock options and warrants 1.9 4.4
Dilutive effect of contingently issuable shares 0.2 -
---------- ---------
Diluted common shares outstanding 595.8 630.3
========== =========
Basic earnings per common share:
Income before cumulative effect of changes in accounting principles $0.18 $0.22
Cumulative effect of changes in accounting principles (0.08) -
---------- ---------
Net income $0.10 $0.22
========== =========
Diluted earnings per common share:
Income before cumulative effect of changes in accounting principles $0.18 $0.22
Cumulative effect of changes in accounting principles (0.08) -
---------- ---------
Net income $0.10 $0.22
========== =========
(2)
Waste Management, Inc.
Condensed Consolidated Balance Sheets
(In Millions)
March 31, December 31,
2003 2002
------------- ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $381 $264
Receivables, net 1,623 1,644
Other 827 792
------------- ------------
Total current assets 2,831 2,700
Property and equipment, net 10,707 10,612
Goodwill 5,151 5,079
Other intangible assets, net 115 105
Other assets 1,112 1,135
------------- ------------
Total assets $19,916 $19,631
============= ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, accrued liabilities, and
deferred revenues $2,940 $2,942
Current portion of long-term debt 166 231
------------- ------------
Total current liabilities 3,106 3,173
Long-term debt, less current portion 8,164 8,062
Other liabilities 3,256 3,069
------------- ------------
Total liabilities 14,526 14,304
Minority interest in subsidiaries 46 19
Stockholders' equity 5,344 5,308
------------- ------------
Total liabilities and stockholders' equity $19,916 $19,631
============= ============
(3)
Waste Management, Inc.
Condensed Consolidated Statements of Cash Flows
(In Millions)
(Unaudited)
Quarters Ended March 31,
--------------------------
2003 2002
------- -------
Cash flows from operating activities:
Net income $61 $138
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of changes in accounting principles 46 (2)
Depreciation and amortization 302 294
Other 53 37
Change in operating assets and liabilities, net of effects of
acquisitions and divestitures (33) (31)
------- -------
Net cash provided by operating activities 429 436
------- -------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (85) (48)
Capital expenditures (212) (180)
Proceeds from business divestitures, asset sales, and other 70 97
------- -------
Net cash used in investing activities (227) (131)
------- -------
Cash flows from financing activities:
New borrowings 6 -
Debt repayments (21) (439)
Common stock repurchases (68) (300)
Exercise of common stock options and warrants 2 10
Other (4) -
------- -------
Net cash used in financing activities (85) (729)
------- -------
Effect of exchange rate changes on cash and cash equivalents - -
------- -------
Increase (decrease) in cash and cash equivalents 117 (424)
Cash and cash equivalents at beginning of period 264 730
------- -------
Cash and cash equivalents at end of period $381 $306
======== =======
(4)
Waste Management, Inc.
Summary Data Sheet
(In Millions, Except As Noted)
(Unaudited)
Quarters Ended
-----------------------------------------------------
March 31, December 31, March 31,
2003 2002 2002
---------- ------------ ----------
Operating Revenues by Lines of Business
NASW:
Collection $1,869 $1,909 $1,823
Landfill 589 663 595
Transfer 339 372 316
Wheelabrator 199 213 182
Recycling and other 204 164 134
Intercompany (484) (509) (449)
---------- ------------ ----------
Total NASW 2,716 2,812 2,601
OTHER - - 8
---------- ------------ ----------
Total operating revenues $2,716 $2,812 $2,609
========== ============ ==========
Internal Growth of Operating Revenues to Comparable Prior Periods
Internal growth - NASW operations 2.2% 1.2% -3.6%
========== ============ ==========
Acquisition Summary (a)
Gross annualized revenue acquired $256 $23 $35
========== ============ ==========
Total consideration $89 $37 $66
========== ============ ==========
Cash paid for acquisitions $83 $34 $38
========== ============ ==========
Quarters Ended March 31,
---------------------------------
2003 2002
---------- ------------
Free Cash Flow Analysis (b)
Net cash provided by operating activities $429 $436
Capital expenditures (212) (180)
Proceeds from divestitures of businesses, net of
cash divested, and other sales of assets 16 37
---------- ------------
Free cash flow $233 $293
========== ============
(a) Represents cash paid and total consideration associated with business
acquisitions consummated during the indicated periods.
(b) The summary of free cash flows has been prepared to highlight and
facilitate understanding of the principal cash flow elements. It is not
intended to replace the consolidated statement of cash flows, which was
prepared in accordance with generally accepted accounting principles.
(5)
Waste Management, Inc.
Summary Data Sheet
(In Millions, Except Landfill Count)
(Unaudited)
Quarters Ended
-----------------------------------------------------
March 31, December 31, March 31,
2003 2002 2002
----------- ------------ -----------
Balance Sheet Data
Cash and cash equivalents $381 $264 $306
=========== ============ ===========
Debt-to-total capital ratio:
Long-term indebtedness, including current
maturities $8,330 $8,293 $7,836
Total equity 5,344 5,308 5,245
----------- ------------ -----------
Total capital $13,674 $13,601 $13,081
=========== ============ ===========
Debt-to-total capital 60.9% 61.0% 59.9%
=========== ============ ===========
Capitalized interest $5 $6 $3
=========== ============ ===========
Other Operational Data
Internalization of waste, based on disposal costs 64.6% 65.1% 64.9%
=========== ============ ===========
Total landfill disposal volumes (tons) 25.9 29.1 26.0
Total Waste to Energy disposal volumes (tons) 1.8 1.8 1.7
----------- ------------ -----------
Total disposal volumes (tons) 27.7 30.9 27.7
=========== ============ ===========
Active landfills 290 293 301
=========== ============ ===========
Landfills reporting volume 266 271 270
=========== ============ ===========
Landfills Included in Operating Groups:
Expense Under Current Method (SFAS No. 143) -
Non - SFAS No. 143 amortization expense $83.8
Amortization expense related to SFAS No. 143 obligations 13.4
-----------
Total amortization expense 97.2
Accretion expense 11.9
-----------
Landfill amortization and final closure and post closure $109.1
===========
Expense Under Historical Method -
Landfill amortization expense $103.0 $94.6
Landfill final closure and post closure expense 8.3 8.6
------------ -----------
Landfill amortization and final closure and post closure $111.3 $103.2
============ ===========
(6)