EXHIBIT 99.2
(WASTE MANAGEMENT LOGO)
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION:
WASTE MANAGEMENT, INC.
ANALYSTS:
CHERIE RICE
713.512.6548
MEDIA:
SARAH SIMPSON
713.394.2154
WMI#03-17
WASTE MANAGEMENT ANNOUNCES SECOND QUARTER 2003 EARNINGS
OPERATING CASH FLOW STRONG AT $644 MILLION
HOUSTON - AUGUST 5, 2003 - Waste Management, Inc. (NYSE: WMI) today announced
financial results for its second quarter ended June 30, 2003. Revenues for the
quarter were $2.92 billion as compared with $2.82 billion in the year ago
period. Net income reported for the quarter was $176 million, or $0.30 per
diluted share, compared with net income of $217 million, or $0.35 per diluted
share, for the second quarter 2002. Results for the second quarter 2003 include
a pre-tax restructuring charge of $23 million, or $0.02 per diluted share,
related to the workforce reduction announced in late June. Without the charge,
earnings per diluted share would have been $0.32.
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 second quarter 2002 period. The increased costs related to SFAS 143
reduced earnings by $0.01 per diluted share.
For the six months ended June 30, 2003 Waste Management reported operating
revenues of $5.63 billion as compared with $5.43 billion for the comparable
period last year. Net
income was $237 million and diluted earnings per share was $0.40 for the six
months ended June 30, 2003 as compared with $355 million and $0.57,
respectively, for the same period in 2002. The 2003 results include the
unfavorable impact of cumulative effect of changes in accounting principles of
$46 million, or $0.08 per diluted share.
"General business conditions in the second quarter remained similar to those
that we have seen for the past several quarters. While sequential quarterly
revenues increased by 7.3 percent, primarily as a result of seasonality, we
don't view that as a sign of an improving economy. Year-over-year, the volume
component of internal revenue growth for the second quarter was a negative 0.4
percent. However, that statistic was much improved for the month of June,
posting a 1.4% gain, " commented A. Maurice Myers, Chairman, President and Chief
Executive Officer of Waste Management.
"We continue to focus on opportunities to lower our cost structure and to add
new, profitable revenue streams to our existing base of business. Both our
recent workforce reduction and the continued implementation of our routing
optimization program should positively impact our cost structure in the second
half of the year. Further, the businesses we acquired at the close of the second
quarter combined with those expected to close in the third quarter are projected
to be immediately accretive to earnings," continued Myers. "While we have made
great improvements to this company in the past three years, now is the time for
us to execute and maximize Waste Management's operations."
The following important highlights for the quarter were reported:
o Operating cash flow of $644 million.
o Free cash flow, defined as operating cash flow less capital
expenditures plus proceeds from sales of assets, of $373
million.(a) Adjusted for a cash tax benefit related to the
anticipated payment of the class action lawsuit settlement, free
cash flow was $307 million in the quarter.
o Internal revenue growth of 0.2%, split 0.6% price and negative 0.4%
volume. The price component excludes combined positive impacts of
0.7% related to higher fuel surcharges, higher recycling commodity
prices, and slightly higher electricity rates at Independent Power
Production facilities.
o Capital expenditures of $289 million.
o Selling, General & Administrative costs were 10.3% of revenue.
The Company noted that for 2003 it continues to expect to produce $900 million
to $1 billion of adjusted free cash flow (before considering the net after-tax
cash outflow to pay the settlement of the shareholder class action lawsuit,
estimated at approximately $220 million and expected to be paid in the third
quarter ), and expressed comfort with the current range of earnings estimates as
reported by Multex and First Call.
(a) The Company included its free cash flow, which is a non-GAAP
financial measure, herein because it believes that investors are
interested in the cash produced by the Company from non-financing
activities that is available for uses such as the Company's acquisition
program, its share repurchase program, its scheduled debt reduction and
the payment of dividends. Free cash flow is defined by the Company as:
o Net cash provided by operating activities
o Less, capital expenditures
o Plus, proceeds from divestitures of businesses, net of cash
divested, and other sales of assets
The Company's definition of free cash flow may not be comparable to
similarly titled measures presented by other companies.
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: 2Q03 Earnings Report." You may also
listen to the conference call by telephone by contacting the conference call
operator at (877) 710-6139, 5-10 minutes prior to the scheduled start time, and
asking for the "Waste Management Conference Call - Call ID 1101575." 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 August 5th through 5:00 p.m.
on August 19th. 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 (800) 642-1687 and enter reservation code 1101575.
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 or threatened 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 possible errors or problems upon implementation of new information
technology systems; and
o possible disruptions due to the implementation of our workforce
reductions.
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)
<Table>
<Caption>
QUARTERS ENDED JUNE 30,
------------------------------
2003 2002
---------- ----------
Operating revenues $ 2,915 $ 2,825
---------- ----------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below) 1,887 1,732
Selling, general and administrative 301 316
Depreciation and amortization 325 313
Restructuring 23 --
Asset impairments and unusual items (6) --
---------- ----------
2,530 2,361
---------- ----------
Income from operations 385 464
---------- ----------
Other income (expense):
Interest expense (110) (116)
Minority interest (2) (2)
Interest income and other, net 9 6
---------- ----------
(103) (112)
---------- ----------
Income before income taxes 282 352
Provision for income taxes 106 135
---------- ----------
Net income $ 176 $ 217
========== ==========
Basic earnings per common share $ 0.30 $ 0.35
========== ==========
Diluted earnings per common share $ 0.30 $ 0.35
========== ==========
Basic common shares outstanding 591.5 615.3
========== ==========
Diluted common shares outstanding 594.8 619.2
========== ==========
Pro forma income and earnings per common share assuming changes
in accounting principles are applied retroactively:
Net income $ 176 $ 210
Basic earnings per common share $ 0.30 $ 0.34
Diluted earnings per common share $ 0.30 $ 0.34
</Table>
Note: Effective April 1, 2002, certain costs and expenses that were previously
included in selling, general and administrative expenses were
reclassified to operating expenses as a result of the March 2002
reorganization and to conform with the 2003 presentation. For the three
months ended June 30, 2002, $43 million was reclassified.
(1)
WASTE MANAGEMENT, INC.
EARNINGS PER SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
QUARTERS ENDED JUNE 30,
------------------------
2003 2002
--------- ---------
EPS CALCULATION:
Diluted net income $ 176 $ 217
========= =========
Shares outstanding 591.8 611.4
Effect of weighting (0.3) 3.9
--------- ---------
Basic common shares outstanding 591.5 615.3
Adjustments:
Dilutive effect of common stock options, stock warrants
and other contingently issuable shares 3.3 3.9
--------- ---------
Diluted common shares outstanding 594.8 619.2
========= =========
Basic earnings per common share $ 0.30 $ 0.35
========= =========
Diluted earnings per common share $ 0.30 $ 0.35
========= =========
</Table>
(2)
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
-------------------------
2003 2002
--------- ---------
Operating revenues $ 5,631 $ 5,434
--------- ---------
Costs and expenses:
Operating (exclusive of depreciation
and amortization shown below) 3,680 3,297
Selling, general and administrative 624 703
Depreciation and amortization 627 607
Restructuring 43 37
Asset impairments and unusual items (7) (6)
--------- ---------
4,967 4,638
--------- ---------
Income from operations 664 796
--------- ---------
Other income (expense):
Interest expense (219) (234)
Minority interest (3) (3)
Interest income and other, net 15 12
--------- ---------
(207) (225)
--------- ---------
Income before income taxes 457 571
Provision for income taxes 174 218
--------- ---------
Income before cumulative effect of changes in accounting principles 283 353
Cumulative effect of changes in accounting principles,
net of income tax benefit of $31 in 2003 and $0 in 2002 (46) 2
--------- ---------
Net income $ 237 $ 355
========= =========
Basic earnings per common share:
Income before cumulative effect of changes in accounting principles $ 0.48 $ 0.57
Cumulative effect of changes in accounting principles (0.08) --
--------- ---------
Net income $ 0.40 $ 0.57
========= =========
Diluted earnings per common share:
Income before cumulative effect of changes in accounting principles $ 0.48 $ 0.57
Cumulative effect of changes in accounting principles (0.08) --
--------- ---------
Net income $ 0.40 $ 0.57
========= =========
Basic common shares outstanding 592.6 620.6
========= =========
Diluted common shares outstanding 595.2 626.4
========= =========
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 $ 283 $ 329
Basic earnings per common share before cumulative
effect of changes in accounting principles $ 0.48 $ 0.53
Diluted earnings per common share before cumulative
effect of changes in accounting principles $ 0.48 $ 0.53
</Table>
Note: Effective April 1, 2002, certain costs and expenses that were
previously included in selling, general and administrative expenses
were reclassified to operating expenses as a result of the March 2002
reorganization and to conform with the 2003 presentation. For the six
months ended June 30, 2002, $43 million related to the second quarter
of 2002 was reclassified.
(3)
WASTE MANAGEMENT, INC.
EARNINGS PER SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
-------------------------
2003 2002
--------- ---------
EPS CALCULATION:
Income before cumulative effect of changes in accounting principles $ 283 $ 353
Adjustments:
Interest on convertible securities, net of income taxes -- 1
--------- ---------
Diluted income before cumulative effect of changes in accounting principles 283 354
Cumulative effect of changes in accounting principles (46) 2
--------- ---------
Diluted net income $ 237 $ 356
========= =========
Shares outstanding 591.8 611.4
Effect of weighting 0.8 9.2
--------- ---------
Basic common shares outstanding 592.6 620.6
Adjustments:
Dilutive effect of common stock options, stock warrants and
other contingently issuable shares 2.6 4.1
Dilutive effect of convertible subordinated notes -- 1.7
--------- ---------
Diluted common shares outstanding 595.2 626.4
========= =========
Basic earnings per common share:
Income before cumulative effect of changes in accounting principles $ 0.48 $ 0.57
Cumulative effect of changes in accounting principles (0.08) --
--------- ---------
Net income $ 0.40 $ 0.57
========= =========
Diluted earnings per common share:
Income before cumulative effect of changes in accounting principles $ 0.48 $ 0.57
Cumulative effect of changes in accounting principles (0.08) --
--------- ---------
Net income $ 0.40 $ 0.57
========= =========
</Table>
(4)
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
--------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 753 $ 264
Receivables, net 1,678 1,644
Other 755 792
--------- ---------
Total current assets 3,186 2,700
Property and equipment, net 10,812 10,612
Goodwill 5,212 5,079
Other intangible assets, net 119 105
Other assets 1,127 1,135
--------- ---------
Total assets $ 20,456 $ 19,631
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued liabilities, and
deferred revenues $ 3,027 $ 2,942
Current portion of long-term debt 108 231
--------- ---------
Total current liabilities 3,135 3,173
Long-term debt, less current portion 8,350 8,062
Other liabilities 3,340 3,069
--------- ---------
Total liabilities 14,825 14,304
Minority interest in subsidiaries 47 19
Stockholders' equity 5,584 5,308
--------- ---------
Total liabilities and stockholders' equity $ 20,456 $ 19,631
========= =========
</Table>
(5)
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
---------------------------
2003 2002
---------- ----------
Cash flows from operating activities:
Net income $ 237 $ 355
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of changes in accounting principles 46 (2)
Depreciation and amortization 627 607
Other 84 121
Change in operating assets and liabilities, net of effects of
acquisitions and divestitures 79 (197)
---------- ----------
Net cash provided by operating activities 1,073 884
---------- ----------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (172) (64)
Capital expenditures (501) (552)
Net proceeds from restricted funds, business divestitures,
asset sales and other 161 167
---------- ----------
Net cash used in investing activities (512) (449)
---------- ----------
Cash flows from financing activities:
New borrowings 67 498
Debt repayments (68) (468)
Common stock repurchases (71) (500)
Exercise of common stock options and warrants 9 23
Other (9) --
---------- ----------
Net cash used in financing activities (72) (447)
---------- ----------
Effect of exchange rate changes on cash and cash equivalents -- 2
---------- ----------
Increase (decrease) in cash and cash equivalents 489 (10)
Cash and cash equivalents at beginning of period 264 730
---------- ----------
Cash and cash equivalents at end of period $ 753 $ 720
========== ==========
</Table>
(6)
WASTE MANAGEMENT, INC.
SUMMARY DATA SHEET
(DOLLAR AMOUNTS IN MILLIONS)
(UNAUDITED)
<Table>
<Caption>
QUARTERS ENDED
---------------------------------------------
JUNE 30, MARCH 31, JUNE 30,
2003 2003 2002
--------- --------- ---------
OPERATING REVENUES BY LINES OF BUSINESS
NASW:
Collection $ 1,953 $ 1,869 $ 1,916
Landfill 690 589 694
Transfer 407 339 375
Wheelabrator 203 199 193
Recycling and other 220 204 161
Intercompany (558) (484) (514)
--------- --------- ---------
Total NASW 2,915 2,716 2,825
OTHER -- -- --
--------- --------- ---------
Total operating revenues $ 2,915 $ 2,716 $ 2,825
========= ========= =========
INTERNAL GROWTH OF OPERATING REVENUES TO COMPARABLE PRIOR PERIODS
Internal growth - NASW operations 0.9% 2.2% -2.0%
========= ========= =========
ACQUISITION SUMMARY (a)
Gross annualized revenue acquired $ 73 $ 256 $ 23
========= ========= =========
Total consideration $ 89 $ 89 $ 16
========= ========= =========
Cash paid for acquisitions $ 85 $ 83 $ 13
========= ========= =========
RECYCLING SEGMENT SUPPLEMENTAL DATA (b)
Operating revenues $ 136 $ 130 $ 72
========= ========= =========
Operating expenses (exclusive of depreciation and amortization) $ 116 $ 112 $ 55
========= ========= =========
</Table>
<Table>
<Caption>
QUARTERS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
FREE CASH FLOW ANALYSIS (c)
Net cash provided by operating activities $ 644 $ 448 $ 1,073 $ 884
Capital expenditures (289) (372) (501) (552)
Proceeds from divestitures of businesses, net of
cash divested, and other sales of assets 18 34 34 71
--------- --------- --------- ---------
Free cash flow 373 $ 110 606 $ 403
========= =========
Pro forma adjustments:
Income tax benefit associated with anticipated 2003 payments
relating to shareholder litigation (66) (66)
--------- ---------
Adjusted free cash flow $ 307 $ 540
========= =========
</Table>
(a) Represents cash paid and total consideration associated with business
acquisitions consummated during the indicated periods.
(b) Information provided is after the elimination of intercompany revenues
and related expenses.
(c) The summary of free cash flows has been prepared to highlight and
facilitate understanding of the principal cash flow elements. Free cash
flow is not a measure of financial performance under generally accepted
accounting principles and is not intended to replace the consolidated
statement of cash flows that was prepared in accordance with generally
accepted accounting principles.
(7)
WASTE MANAGEMENT, INC.
SUMMARY DATA SHEET
(DOLLAR AMOUNTS IN MILLIONS)
(UNAUDITED)
<Table>
<Caption>
QUARTERS ENDED
----------------------------------------------
JUNE 30, MARCH 31, JUNE 30,
2003 2003 2002
---------- ---------- ----------
BALANCE SHEET DATA
Cash and cash equivalents $ 753 $ 381 $ 720
========== ========== ==========
Debt-to-total capital ratio:
Long-term indebtedness, including current
maturities $ 8,458 $ 8,330 $ 8,619
Total equity 5,584 5,344 5,290
---------- ---------- ----------
Total capital $ 14,042 $ 13,674 $ 13,909
========== ========== ==========
Debt-to-total capital 60.2% 60.9% 62.0%
========== ========== ==========
Capitalized interest $ 5 $ 5 $ 6
========== ========== ==========
OTHER OPERATIONAL DATA
Internalization of waste, based on disposal costs 64.2% 64.6% 64.5%
========== ========== ==========
Total landfill disposal volumes (tons) 30.1 25.9 30.1
Total Waste to Energy disposal volumes (tons) 1.9 1.8 1.9
---------- ---------- ----------
Total disposal volumes (tons) 32.0 27.7 32.0
========== ========== ==========
Active landfills 289 290 300
========== ========== ==========
Landfills reporting volume 266 266 273
========== ========== ==========
LANDFILLS INCLUDED IN OPERATING GROUPS:
EXPENSE UNDER CURRENT METHOD (SFAS NO. 143) -
Non - SFAS No. 143 amortization expense $ 98.0 $ 83.8
Amortization expense related to SFAS No. 143 obligations 14.9 13.4
---------- ----------
Total amortization expense 112.9 97.2
Accretion expense 12.5 11.9
---------- ----------
Landfill amortization and final closure and post closure $ 125.4 $ 109.1
========== ==========
EXPENSE UNDER HISTORICAL METHOD -
Landfill amortization expense $ 108.3
Landfill final closure and post closure expense 10.3
----------
Landfill amortization and final closure and post closure $ 118.6
==========
</Table>
(8)