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Waste Management Inc. Reports Operating Results (10-Q)

October 31, 2012 | About:
Magic Diligence

10qk

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Waste Management Inc. (WM) filed Quarterly Report for the period ended 2012-09-30.

Waste Management Inc has a market cap of $15.08 billion; its shares were traded at around $33.045 with a P/E ratio of 15.1 and P/S ratio of 1.1. The dividend yield of Waste Management Inc stocks is 4.4%. Waste Management Inc had an annual average earning growth of 4.7% over the past 10 years. GuruFocus rated Waste Management Inc the business predictability rank of 2.5-star.

Highlight of Business Operations:

For the three and nine months ended September 30, 2012, our total collection and disposal revenue growth from yield was negatively affected by $7 million and $24 million, respectively, as a result of the expiration and renegotiation of a long-term disposal contract in August 2011 at one of our waste-to-energy facilities in South Florida. Certain of the franchise agreements serviced by our collection companies in South Florida contain specific language that ties a portion of their total rate to the disposal rate charged by this waste-to-energy facility to our collection companies. The expiration and renegotiation of this contract decreased revenues both in our waste-to-energy disposal line of business, by approximately $5 million and $17 million for the three and nine months ended September 30, 2012, and in our collection line of business, by approximately $2 million and $7 million for the three and nine months ended September 30, 2012, respectively. Additionally, for the three and nine months ended September 30, 2012, we experienced further downward pressure on our revenue growth from yield in our waste-to-energy disposal line of business of approximately $2 million and $4 million, respectively, resulting from the expiration and renegotiation of a second similar long-term waste-to-energy disposal contract in South Florida at the end of March 2012.

Revenues from our environmental fee, which are included in average revenue growth from yield on collection and disposal, increased $8 million and $40 million for the three and nine months ended September 30, 2012, respectively. These revenues were $90 million and $257 million for the three and nine months ended September 30, 2012 as compared with $82 million and $217 million for the three and nine months ended September 30, 2011, respectively.

Recycling commodities Decreases in the prices of recyclable commodities resulted in a decline in revenues of $176 million and $345 million, with an estimated negative impact on income from operations of approximately $60 million and $100 million, for the three and nine months ended September 30, 2012, respectively. During the fourth quarter of 2011, we saw commodity prices decline 4% as compared with the prior year. During the first nine months of 2012, we saw the downward trend continue as year-over-year commodity prices declined almost 30%, driven by the continued increase in supply and lower demand.

Our operating expenses decreased by $32 million, or 1.4%, and increased by $259 million, or 4.0% for the three and nine months ended September 30, 2012 as compared with the three and nine months ended September 30, 2011, respectively. Our operating expenses as a percentage of revenues increased from 64.2% in the third quarter of 2011 to 64.4% in the current quarter, and increased from 64.1% for the nine months ended September 30, 2011 to 65.1% for the nine months ended September 30, 2012. The changes in our operating expenses during the three and nine months ended September 30, 2012 can largely be attributed to the following:

Our selling, general and administrative expenses decreased by $45 million, or 11.8%, and $28 million, or 2.4%, when comparing the three and nine months ended September 30, 2012 with the comparable prior year periods, respectively. As a percentage of revenue, our selling, general and administrative expenses decreased from 10.8% for the third quarter of 2011 to 9.7% for the third quarter of 2012, and decreased from 11.5% for the nine months ended September 30, 2011 to 10.9% for the nine months ended September 30, 2012. The most significant items affecting the year-over-year comparison of selling, general and administrative costs for the three and nine months ended September 30, 2012 include the following:

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