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Waste Management Announces Third Quarter Earnings

The following excerpt is from the company's SEC filing.

Company Sees More Than 27% Growth in Diluted Earnings Per Share;

Expects to Exceed the Upper End of its Guidance

FOR MORE INFORMATION

Waste Management

Web site

www.wm.com

Analysts

Ed Egl

713.265.1656

eegl@wm.com

Toni Beck

713.394.5093

tbeck3@wm.com

HOUSTON October 27, 2015

Waste Management, Inc. (NYSE: WM) today announced financial results for its quarter ended September 30, 2015. Revenues for the third quarter of 2015 were $3.36 billion compared with $3.60 billion for the same 2014 period. Net income for the quart er was $335 million, or $0.74 per diluted share, compared with net income of $270 million, or $0.58 per diluted share, for the third quarter of 2014. On an as-adjusted basis, excluding certain items, net income in the third quarter of 2014 was $311 million, or $0.67 per diluted share.

The Companys third quarter 2014 results have been adjusted to exclude approximately $0.14 per diluted share of after-tax net charges primarily related to the restructuring of several corporate functions and legal reserves, and the earnings from businesses and assets divested in 2014, which contributed $0.05 per diluted share to earnings in the third quarter of 2014.

David P. Steiner, President and Chief Executive Officer of Waste Management, commented, Our third quarter results reflect the impact of our continued commitment to core price, disciplined growth, and cost controls, all of which are driving improvement in our key operating metrics. Each of our net income, operating income and margin, operating EBITDA and margin, and earnings per diluted share improved when compared to the third quarter of 2014.

We made good progress on improving volumes in the third quarter, as internal revenue growth from our traditional solid waste volumes improved 180 basis points compared to the third quarter of 2014, and we saw positive volume growth in our very profitable industrial line of business. Internal revenue growth from volumes has improved each quarter since the first quarter of 2015, and we expect them to continue to strengthen into 2016 with our continued focus on adding higher margin volumes, and avoiding volume growth at below market rates. In addition, we generated strong free cash flow in the third quarter, allowing us to return $472 million to our shareholders.

KEY HIGHLIGHTS FOR THE THIRD QUARTER 2015

The Company saw a $48 million increase in internal revenue growth from its traditional solid waste business and a $53 million increase in revenues from acquisitions. However, overall revenue declined by 6.7%, or $242 million, compared to the third quarter of 2014. That revenue decline stemmed from a $186 million decline from divestitures, $49 million in lower recycling revenues, $47 million in lower fuel surcharge revenues and $41 million in foreign currency fluctuations.

Core price, which consists of price increases and fees, other than the Companys fuel surcharge, net of rollbacks, was 4.0%.

The Companys continued focus on generating price improvement in traditional solid waste operations was the primary contributor to revenue growth during the current quarter. Internal revenue growth from yield for collection and disposal operations was 1.8%.

Internal revenue growth from volume in the Companys traditional solid waste business declined 0.1% in the third quarter of 2015, an improvement of 180 basis points versus a decline of 1.9% in the third quarter of 2014. Sequentially, this was a 50 basis point improvement from the 0.6% decline in the second quarter of 2015. Overall internal revenue growth from volume declined 1.4% in the third quarter.

Average recycling commodity prices were approximately 15.0% lower in the third quarter of 2015 compared with the prior year period. Recycling volumes declined 6.4% in the third quarter. Despite these declines, earnings per diluted share from the Companys recycling operations were flat when compared to the prior year period as a result of operational improvements in our recycling business.

Operating expenses improved by $204 million compared to the prior year period. Excluding divestitures, operating expenses improved $91 million.

Lower fuel and subcontractor costs, lower commodity rebates, continued route optimization, and foreign currency fluctuations drove the improvement. As a percent of revenue, operating expenses were 62.4% in the third quarter of 2015, as compared to 63.8% in the third quarter of 2014 after excluding divestitures, an improvement of 140 basis points.

SG&A expenses were 9.8% of revenue and improved by $47 million, or 70 basis points, compared with the third quarter of 2014. Excluding divestitures and expenses related to legal reserve adjustments from the third quarter of 2014, SG&A expenses improved by $8 million and 10 basis points as a percent of revenue compared with the third quarter of 2014.

Net cash provided by operating activities was $657 million in the third quarter. Results were benefited by operating EBITDA improvement and a $60 million reduction in cash taxes paid, and partially offset by a $40 million payment to complete our withdrawal from the Central States Pension Plan. Capital expenditures were $335 million.

Free cash flow was $358 million in the third quarter of 2015 despite higher capital expenditures and the loss of $41 million of free cash flow from businesses divested in 2014.

The Company had $36 million of divestiture proceeds in the quarter.

The Company returned $472 million to shareholders, including $300 million in share repurchases and $172 million in dividends.

The effective tax rate was approximately 32.3% in the third quarter of 2015, compared to the as-adjusted rate of 30.6% in the third quarter of 2014.

Steiner concluded, We have now produced three consecutive quarters of strong results, and we expect that to continue as we conclude the year and look forward to 2016. Our employees continue to execute well on our pricing, disciplined growth, and cost control strategies. Based upon our results through September, we are confident that we can meet the analysts fourth quarter consensus of $0.67 of adjusted earnings per diluted share, which would allow us to exceed the upper end of our 2015 adjusted earnings per diluted share guidance of $2.55. We also expect to exceed the upper end of our full year free cash flow guidance of $1.5 billion.

_______________

(a) For purposes of this press release, all references to Net loss and Net income refer to the financial statement line items Net income (loss) attributable to Waste Management, Inc. and Net income attributable to Waste Management, Inc., respectively.

(b) This press release contains a discussion of non-GAAP measures, as defined in Regulation G of the Securities Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with (i) additional, meaningful comparisons of current results to prior periods results by excluding items that the Company does not believe reflect its fundamental business performance and are not representative or indicative of its results of operations and (ii) financial measures the Company uses in the management of its business. Accordingly, 2014 net income, earnings per diluted share and effective tax rate, and comparisons to 2014 operating expenses and SG&A expenses, have been presented in certain instances excluding items identified in the reconciliations provided.

The Companys projected full year 2015 earnings per diluted share is not based on GAAP net earnings per diluted share and are anticipated to be adjusted to exclude the effects of events or circumstances in 2015 that are not representative or indicative of the Companys results of operations including the items excluded from our as-adjusted first and third quarter results. Projected GAAP earnings per diluted share for the full year would require inclusion of the projected impact of future excluded items, including items that are not currently determinable, but may be significant, such as asset impairments and one-time items, charges, gains or losses from divestitures or litigation, or other items. Due to the uncertainty of the likelihood, amount and timing of any such items, the...


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