10-QPeriod: Q2 FY2012

WASTE MANAGEMENT INC Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 26, 2012For Securities:WM

Summary

Waste Management Inc. (WM) reported its second quarter 2012 results, showing a modest increase in revenue driven by acquisitions, particularly the Oakleaf acquisition, and improved core business performance. However, net income and earnings per diluted share declined year-over-year, impacted by impairment charges related to the medical waste services business and increased restructuring and integration costs. The company highlighted efforts to improve operational efficiency and cost structure, including a significant reorganization announced in July 2012, which is expected to result in a substantial pre-tax charge. Despite challenges such as declining commodity prices and lower electricity prices affecting revenue, WM demonstrated positive volume growth in its core solid waste business, a key positive indicator. The company continues to focus on strategic initiatives to drive long-term value, including customer-focused growth and investment in greener technologies. Management expressed confidence in the ongoing cost savings and pricing initiatives to offset current headwinds.

Financial Statements
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Key Highlights

  • 1Total revenues increased by 3.3% to $3,459 million for the three months ended June 30, 2012, primarily driven by acquisitions, notably Oakleaf, and internal volume growth.
  • 2Net income attributable to Waste Management, Inc. decreased to $208 million ($0.45 per diluted share) from $237 million ($0.50 per diluted share) in the prior year period.
  • 3The company recognized $34 million in impairment charges related to its medical waste services business, negatively impacting earnings per share by $0.04.
  • 4A significant restructuring plan was announced in July 2012, aiming to flatten management structure and reduce costs, with an estimated pre-tax charge of $50-$60 million.
  • 5Free cash flow for the first six months of 2012 was $434 million, an increase from $495 million in the same period of 2011, driven by operational cash flow and strategic capital expenditures.
  • 6Declining commodity prices for recyclables and lower electricity prices negatively impacted revenues by $103 million and $17 million respectively for the six-month period.
  • 7The company's core solid waste business showed positive volume growth (0.6% for Q2 2012), a turnaround from the prior year's decline.

Frequently Asked Questions

The primary drivers of the revenue increase were acquisitions, particularly the Oakleaf acquisition which contributed $199 million in revenue for the quarter, and internal revenue growth from increased volumes and yield in the collection and disposal business.

The decrease in net income was mainly due to $34 million in impairment charges for the medical waste services business, increased restructuring and integration costs related to acquisitions, and the negative impact of declining commodity prices and lower electricity prices.

The company anticipates a pre-tax charge to earnings in the range of $50 million to $60 million, primarily related to employee severance and benefit expenses, which will be recorded mainly in the third quarter of 2012.

Decreasing prices for recycling commodities significantly impacted revenue, leading to a decline of $95 million in the second quarter and $169 million for the first six months of 2012. Lower electricity prices also reduced revenue.