10-QPeriod: Q1 FY2009

WASTE MANAGEMENT INC Quarterly Report for Q1 Ended Mar 31, 2009

Filed April 29, 2009For Securities:WM

Summary

Waste Management, Inc. (WM) reported a challenging first quarter for 2009, heavily impacted by the ongoing economic downturn and a significant decline in recycling commodity prices. Total revenues decreased by 14.0% year-over-year to $2.81 billion, primarily driven by a 70% decline in recycling commodity prices and lower waste volumes across collection and disposal services. Despite these headwinds, the company demonstrated resilience through effective cost management, with operating expenses decreasing by 17.5% due to lower fuel costs, volume-related savings, and the early benefits of a January 2009 restructuring. Net income attributable to Waste Management, Inc. fell to $155 million, or $0.31 per diluted share, from $241 million, or $0.48 per diluted share, in the prior year quarter. The company highlighted a $49 million non-cash impairment charge related to abandoning SAP software and a $38 million restructuring charge, which together impacted earnings per share. Free cash flow for the quarter was $199 million, down from $362 million in the prior year, reflecting the challenging revenue environment and increased capital expenditures.

Financial Highlights

20 data points
Beta

Revenue

$2.81B

Net Income

$155.00M

5.5% Net Margin

EPS (Diluted)

$0.31

Cash & Equivalents

$947.00M

Free Cash Flow

$519.00M

Financial Statements
Beta
Revenue$2.81B
SG&A Expenses$337.00M
Operating Expenses$2.44B
Operating Income$372.00M
Net Income$155.00M
EPS (Basic)$0.31
EPS (Diluted)$0.31

Key Highlights

  • 1Revenue declined by 14.0% to $2.81 billion due to a significant drop in recycling commodity prices (down ~70% YoY) and lower waste volumes impacting collection and disposal services.
  • 2Net income attributable to Waste Management, Inc. decreased to $155 million ($0.31/share) from $241 million ($0.48/share) in Q1 2008.
  • 3The company incurred a $49 million non-cash impairment charge related to abandoning SAP software for its revenue management system.
  • 4A $38 million restructuring charge was recognized in Q1 2009 related to organizational streamlining, impacting profitability.
  • 5Operating expenses decreased by 17.5% driven by lower fuel costs (down 38% YoY), volume-related savings, and early benefits from the January 2009 restructuring.
  • 6Free cash flow for the quarter was $199 million, down from $362 million in Q1 2008, reflecting lower earnings and increased capital expenditures.
  • 7The company initiated a significant restructuring in January 2009, consolidating market areas and integrating recycling operations, expecting over $120 million in annualized cost savings.

Frequently Asked Questions

The primary driver for the decrease in revenue was the significant decline in recycling commodity prices, which fell by approximately 70% year-over-year. Additionally, lower waste volumes across collection and disposal services, largely due to the economic downturn, contributed to the revenue decline.

Waste Management implemented strong cost control measures, resulting in a 17.5% decrease in operating expenses. Key factors included lower fuel costs (down 38% year-over-year), cost savings realized from lower waste volumes, and early benefits from a January 2009 restructuring initiative. Selling, general, and administrative expenses also decreased due to workforce reductions and reduced discretionary spending.

Two significant charges impacted net income: a $49 million non-cash impairment charge related to the abandonment of SAP software for its revenue management system and a $38 million restructuring charge associated with organizational streamlining efforts. These charges collectively reduced earnings per share.

Despite a decline from the prior year, the company generated $199 million in free cash flow during the quarter. Management views this as a testament to the resilience of the solid waste business, even amidst a challenging economic environment. They expect continued cash flow generation to support dividends, debt repayment, and potential acquisitions.