Waste Management, Inc. (WM)

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Waste Management, Inc. (WM)

Q4 2012 Earnings Call

February 14, 2013 10:00 am ET


Ed Egl – Director of Investor Relations

David P. Steiner – President and Chief Executive Officer

James E. Trevathan – Executive Vice President and Chief Operating Officer

James C. Fish, Jr. – Executive Vice President and Chief Financial Officer


Hamzah Mazari – Credit Suisse

William H. Fisher – Raymond James & Associates, Inc.

Adam R. Thalhimer – BB&T Capital Markets

Albert Leo Kaschalk – Wedbush Securities Inc.

Michael E. Hoffman – Wunderlich Securities Inc.

David Warner – First Analysis Corporation

Joe Box – KeyBanc Capital Markets Inc.



Good morning. My name is Carmen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Waste Management Fourth Quarter and Full Year 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions)

I would now like to turn the call over to Ed Egl, Director of Investor Relations. Please go ahead sir.

Ed Egl

Thank you, Carmen. Good morning, everyone, and thank you for joining us for our fourth quarter 2012 earnings conference call. With me this morning are David Steiner, President and Chief Executive Officer; Jim Fish, Executive Vice President and Chief Financial Officer; and Jim Trevathan, Executive Vice President and Chief Operating Officer.

David will start things off with a summary of the financial results for the quarter and overview of our plan for 2013. Jim will cover our revenue growth, including price and volume trends, operating costs and the financial statements. We will include with questions and answers. During their statements, any comparisons unless otherwise stated will be with the fourth quarter of 2011.

Before we get started, let me remind you that in addition to our earnings press release that was issued this morning, we have filed a Form 8-K that includes the earnings press release as Exhibit 99.1 and is available on our website at www.wm.com. The Form 8-K, the press release and the schedules to the press release include important information that you should refer to.

During the call, you will hear certain forward-looking statements, including our outlook for 2013, which are based on current expectations, projections, estimates, opinions or beliefs about future periods. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of those risks and uncertainties are detailed in today’s press release and our filings with the Securities and Exchange Commission, including our most recent Form 10-K.

Additionally, during the call, David and Jim will discuss our earnings per diluted share, which they may refer to as EPS or earnings per share, on an “as adjusted” basis. Our EPS and net income, as well as income from operations excluding depreciation and amortization, operating expenses, SG&A expenses, and expenses as a percent of revenue have been adjusted to exclude items detailed in our earnings press release that management believe do not reflect our fundamental business performance or are not indicative of our results of operations. These measures in addition to free cash flow are non-GAAP measures.

Please refer to the earnings press release footnote and schedule attached thereto, together with item 2.02 of the Form 8-K filed today. Both of which can be found on the company’s website at www.wm.com, for reconciliations to the most comparable GAAP measure and additional information about our use of non-GAAP measures.

David and Jim will also discuss our results in the areas of internal revenue growth from yield and internal revenue growth from volume. Unless otherwise stated, please note that any reference to yield or volume results are more specifically referring to internal revenue growth from yield or volume.

This call is being recorded and will be available 24 hours a day beginning approximately 1 pm Eastern Time today until 5 pm Eastern Time on March 1. To hear a replay of the call over the Internet, access the Waste Management website at www.wm.com.

To hear a telephonic replay of the call, dial 855-859-2056 and enter reservation code 88156298. Time-sensitive information provided during today’s call, which is occurring on February 14, 2013, may no longer be accurate at the time of the replay. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Waste Management is prohibited.

Now, I’ll turn the call over to Waste Management’s President and CEO, David Steiner.

David P. Steiner

Thanks, Ed, and good morning from Houston. Before we talk about the specifics of the quarter, we wanted to look back at the full year 2012, and give a short overview of 2013.

When we look at our business performance, we can divide it into three areas; traditional solid waste operations, our recycling operations, and our waste-to-energy business.

Our traditional solid waste business performed about as we expected in 2012 with margins improving, adjusted yield at 1% and volume slightly positive. We expect each of those metrics to further improve in 2013 and we expect to take significant cost out of the business as a result of our restructuring, our productivity initiatives, and our back-office consolidation.

So I’m very optimistic about our traditional business. We expect to see about 7% to 10% growth and earnings in our additional business driven by pricing, cost controls and volume improvements. The expected growth and earnings would have been much higher about 15%, but for the expected increase and accruals for bonuses and long-term incentives in 2013, which was much lower in 2012. So our traditional solid waste business is very well positioned to perform in 2013.

On the recycling front, commodity prices had a dramatic impact on 2012 earnings. 2012 saw significant declines in commodity prices driving $0.17 decline in earnings. Despite these results, we continue to believe that our future depends on diversion technologies, because our customers are increasingly demanding that we provide those services.

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