Waste Management, Inc. (WM)

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Waste Management (WM)

Q3 2012 Earnings Call

October 31, 2012 10:00 am ET

Executives

Edward Egl

David P. Steiner - Chief Executive Officer, President and Director

James C. Fish - Senior Vice President of Eastern Group Operations

James E. Trevathan - Executive Vice President of Growth Innovation and Field Support

Analysts

Hamzah Mazari - Crédit Suisse AG, Research Division

Scott J. Levine - JP Morgan Chase & Co, Research Division

Vance H. Edelson - Morgan Stanley, Research Division

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

Corey Greendale - First Analysis Securities Corporation, Research Division

Joe Box - KeyBanc Capital Markets Inc., Research Division

Alex Ovshey Ovshey - Goldman Sachs Group Inc., Research Division

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Presentation

Operator

Good morning. My name is Nicole, and I will be your conference operator today. At this time, I would like to welcome everyone to the Waste Management Third Quarter 2012 Earnings Release Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ed Egl, Director, Investor Relations. Sir, you may begin.

Edward Egl

Thank you, Nicole. Good morning, everyone, and thank you for joining us for our Third Quarter 2012 Earnings Conference Call. With me this morning are David Steiner, 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 of the quarter. Jim will cover our revenue growth, including price and volume trends, operating costs and the financial statements. We will conclude with questions and answers.

During our statements, any comparisons, unless otherwise stated, will be with the third 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 for the press release include important information that you should refer to.

During the call, you'll hear certain forward-looking statements 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 these risks and uncertainties are detailed in today's press release and in 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 margins, 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 schedules attached thereto, together with the 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 a reconciliation to the most comparable GAAP measures 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 stated otherwise, please note that any references 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 p.m. Eastern Time today until 5 p.m. Eastern Time on November 14th.

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 30012751.

Time sensitive information provided during today's call, which is occurring on October 31, 2012, may no longer be accurate at the time of the replay.

Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Waste Management is prohibited.

Now I'll turn the turn over to Waste Management's CEO, David Steiner.

David P. Steiner

Thanks, Ed. Good morning from Houston. In the third quarter of 2012, we earned $0.61 per share. We're particularly pleased by those results given that the headwinds from commodity prices exceeded our previous expectations. Our income from operations margin grew 30 basis points compared to the third quarter of 2011. And our income from operations margin, excluding depreciation and amortization, grew 90 basis points. Collection and disposal yield was 0.8% and grew sequentially for the first time in 6 quarters, despite the anniversary of our environmental fee in the quarter. And on a work day adjusted basis, our volumes in the core solid waste business were positive for the third consecutive quarter. So as has been the case through the year, our core solid waste business continues to perform well, and we're seeing some positive trends as we approach 2013.

Adjusting for 1 less work day in the third quarter, volumes were positive 0.5%. We saw a positive volume growth in each of our industrial, MSW, C&D, special waste and recycling operations. Year-to-date, volumes through the third quarter are positive and as such, we still expect to achieve our full year volume guidance of flat to slightly positive volumes.

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