Waste Management Announces Fourth Quarter and Full-Year 2012 Earnings
Waste Management Announces Fourth Quarter and Full-Year 2012 Earnings
Company Expects Significant Cash Generation in 2013
HOUSTON--(BUSINESS WIRE)--Feb. 14, 2013-- Waste Management, Inc. (NYSE: WM) today announced financial results for the fourth quarter and for the year ended December 31, 2012. Revenues for the fourth quarter of 2012 were $3.43 billion compared with $3.41 billion for the same 2011 period. Net income (a) for the quarter was $224 million, or $0.48 per diluted share, compared with $266 million, or $0.58 per diluted share, for the fourth quarter of 2011. Adjusting for certain items, net income would have been $267 million, or $0.57 per diluted share, in the fourth quarter of 2012 compared with $289 million, or $0.63 per diluted share, in the fourth quarter of 2011.(b)
For the full year 2012, the Company reported revenues of $13.65 billion compared with $13.38 billion for 2011. Earnings per diluted share were $1.76 for the full year 2012 compared with $2.04 for the full year 2011. On an as-adjusted basis taking into account several items that impacted the full year results, earnings per diluted share were $2.08 for the full year 2012 and $2.14 for the full-year 2011.(b)
As-adjusted results in the fourth quarter of 2012 excluded a negative $0.09 per diluted share impact resulting from the following:
A total of $27 million in after-tax impacts from charges for asset impairments, legal reserves and discount rate adjustments; and
A total of $16 million in after-tax impacts from charges for restructuring and Oakleaf integration costs.
David P. Steiner, President and Chief Executive Officer of Waste Management, commented, “Our fourth quarter was in line with our expectations. Our internal revenue growth from yield in the fourth quarter was at its highest level for the year. This should provide a nice tailwind for improved yield in 2013 -- something every manager will be focused on in 2013. In addition, we continued to see the benefit of our second quarter reorganization. These improvements were partially offset by increased costs for operations labor and repair and maintenance.
“During 2012, we continued to produce strong cash flows from operating activities and return cash to our shareholders. We met our goal of $800 million to $850 million of free cash flow, generating $829 million of free cash. We expect to grow free cash flow by 33% to 45% in 2013. We returned $658 million to our shareholders in 2013 through our dividend, which our Board has indicated will increase in 2013 to $1.46 per share annually.”
KEY HIGHLIGHTS FOR THE FOURTH QUARTER 2012 AND THE FULL YEAR 2012
Revenue in the fourth quarter increased by 0.8%, or $28 million. For the full year, revenue increased by 2.0%, or $271 million.
Internal revenue growth from yield for collection and disposal operations was 0.9% for the fourth quarter and 0.8% for the full year. Adjusting for contract changes related to the Company’s South Florida waste-to-energy plants, internal revenue growth from yield for collection and disposal operations was 1.1% in the fourth quarter and 1.0% for the full year.
Core price increases, which consist of price increases and fees (excluding fuel surcharges), net of rollbacks, were 2.5% for the fourth quarter and 2.8% for the full year.
Internal revenue growth from volume was 0.4% for the fourth quarter and 0.5% for the full year.
Recycling and electricity commodities pricing had a negative impact of $0.04 per diluted share in the fourth quarter when compared to the fourth quarter of 2011. For the full year, commodities pricing had a negative impact of $0.25 per diluted share when compared to the full year of 2011.
Operating expenses increased by $79 million in the fourth quarter and $338 million for the full year. Adjusting for the items excluded in calculating the Company’s as-adjusted earnings, operating expenses increased by $71 million in the fourth quarter and $326 million for the full year.(b) In the fourth quarter, the majority of the increases were for costs associated with operating recently acquired businesses, labor, and repair and maintenance.
SG&A expenses in the fourth quarter improved to 10.4% of revenue from 11.9% in the prior year period, and for the full year improved to 10.8% of revenue from 11.6% in the prior year.
In the fourth quarter, net cash provided by operating activities was $577 million; capital expenditures were $378 million; and free cash flow was $215 million.(b) For the full year 2012, net cash provided by operating activities was $2.3 billion; capital expenditures were $1.51 billion; and free cash flow was $829 million.(b)
The Company returned $165 million to shareholders in the fourth quarter in dividends. For the full year, the Company returned $658 million to shareholders in dividends.
The effective tax rate was approximately 32.4% in the fourth quarter and approximately 34.0% for the full year.
The Company announced the following with regard to its financial outlook for 2013:
2013 adjusted earnings per diluted share are expected to be between $2.15 and $2.20.(b)
Internal revenue growth from yield on the collection and disposal business is expected to be between 1.0% and 1.5%. Internal revenue growth from volume is expected to be between 0.5% and 1.0%.
Recycling commodity sales prices are expected to have a negative $0.02 impact on earnings per diluted share in 2013, compared with the prior year.
Results from the Company’s waste-to-energy operations are expected to have a negative $0.02 impact on earnings per diluted share, compared with the prior year.
The tax rate is expected to be approximately 35.0%.
Capital expenditures are expected to be approximately $1.3 to $1.4 billion.
Free cash flow is projected to be approximately $1.1 to $1.2 billion without the benefit of any divestitures.(b) Any divestitures would increase free cash flow.
The Board of Directors has announced its intention to increase the dividend to $1.46 per share on an annual basis, at an approximate annual cost of $680 million. The Board must separately declare each dividend. The Board has authorized up to $500 million in share repurchases. The amount of share repurchases will depend on a number of factors, including changes from expected levels of capital expenditures, business acquisitions, investments and debt repayments.
Steiner concluded, “Based upon all of our assumptions, we forecast full-year adjusted earnings to be in the range of $2.15 to $2.20 per diluted share.(b) Capital expenditures are projected to be about $1.3 to $1.4 billion; and our free cash flow for 2013 is estimated to be approximately $1.1 to $1.2 billion.(b) We expect to continue to use our free cash to pay our dividend, to reduce debt, and to repurchase shares, as well as to make appropriate acquisitions and investments in our business. These acquisitions and investments will be predominantly in our core businesses of solid waste and recycling.
“In 2013 we expect to see increased internal revenue growth from yield and volume, as well as the ongoing benefit from our cost savings programs. We are forecasting modest earnings per share growth in 2013 of between 3% and 6%, but strong free cash flow growth of between 33% and 45%. Our projected earnings growth is being impacted by about $120 million of compensation headwinds from accruals that we expect in 2013 assuming target payout of our annual and long-term incentive plans, compared to significantly lower incentive compensation expense in 2012. Without this accrual, our forecasted earnings would be $0.15 per share higher. We do not expect this same headwind in 2014, so based on current conditions and assumptions, we expect to see more normalized earnings growth of 8% to 12% in 2014.”