SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the Quarterly Period Ended June 30, 2003 | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to | ||
Commission file number 1-12154
Waste Management, Inc.
| Delaware | 73-1309529 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1001 Fannin
(713) 512-6200
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934.) Yes þ No o
The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at August 1, 2003 was 592,213,162 (excluding treasury shares of 38,069,299).
PART I
| Item 1. | Financial Statements |
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
| June 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
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Current assets:
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Cash and cash equivalents
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$ | 753 | $ | 264 | ||||||
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Accounts receivable, net of allowance for
doubtful accounts of $60
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1,447 | 1,379 | ||||||||
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Notes and other receivables
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231 | 265 | ||||||||
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Parts and supplies
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77 | 80 | ||||||||
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Deferred income taxes
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562 | 551 | ||||||||
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Prepaid expenses and other assets
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116 | 161 | ||||||||
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Total current assets
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3,186 | 2,700 | ||||||||
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Property and equipment, net of accumulated
depreciation and amortization
of $9,116 and $8,498, respectively |
10,812 | 10,612 | ||||||||
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Goodwill
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5,212 | 5,079 | ||||||||
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Other intangible assets, net
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119 | 105 | ||||||||
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Other assets
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1,127 | 1,135 | ||||||||
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Total assets
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$ | 20,456 | $ | 19,631 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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Accounts payable
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$ | 552 | $ | 526 | ||||||
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Accrued liabilities
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2,060 | 2,002 | ||||||||
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Deferred revenues
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415 | 414 | ||||||||
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Current portion of long-term debt
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108 | 231 | ||||||||
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Total current liabilities
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3,135 | 3,173 | ||||||||
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Long-term debt, less current portion
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8,350 | 8,062 | ||||||||
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Deferred income taxes
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1,625 | 1,548 | ||||||||
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Landfill and environmental remediation liabilities
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1,146 | 884 | ||||||||
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Other liabilities
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569 | 637 | ||||||||
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Total liabilities
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14,825 | 14,304 | ||||||||
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Minority interest in subsidiaries
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47 | 19 | ||||||||
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Commitments and contingencies
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Stockholders’ equity:
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Common stock, $0.01 par value;
1,500,000,000 shares authorized;
630,282,461 shares issued |
6 | 6 | ||||||||
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Additional paid-in capital
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4,510 | 4,513 | ||||||||
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Retained earnings
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2,110 | 1,873 | ||||||||
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Accumulated other comprehensive loss
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(83 | ) | (179 | ) | ||||||
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Treasury stock at cost, 38,524,621 and
35,682,000 shares, respectively
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(959 | ) | (905 | ) | ||||||
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Total stockholders’ equity
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5,584 | 5,308 | ||||||||
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Total liabilities and stockholders’ equity
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$ | 20,456 | $ | 19,631 | ||||||
See notes to condensed consolidated financial statements.
1
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
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Operating revenues
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$ | 2,915 | $ | 2,825 | $ | 5,631 | $ | 5,434 | ||||||||||
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Costs and expenses:
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Operating (exclusive of depreciation and
amortization shown below)
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1,887 | 1,732 | 3,680 | 3,297 | ||||||||||||||
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Selling, general and administrative
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301 | 316 | 624 | 703 | ||||||||||||||
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Depreciation and amortization
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325 | 313 | 627 | 607 | ||||||||||||||
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Restructuring
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23 | — | 43 | 37 | ||||||||||||||
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Asset impairments and unusual items
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(6 | ) | — | (7 | ) | (6 | ) | |||||||||||
| 2,530 | 2,361 | 4,967 | 4,638 | |||||||||||||||
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Income from operations
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385 | 464 | 664 | 796 | ||||||||||||||
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Other income (expense):
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Interest expense
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(110 | ) | (116 | ) | (219 | ) | (234 | ) | ||||||||||
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Interest income
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4 | 5 | 6 | 9 | ||||||||||||||
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Minority interest
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(2 | ) | (2 | ) | (3 | ) | (3 | ) | ||||||||||
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Other income, net
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5 | 1 | 9 | 3 | ||||||||||||||
| (103 | ) | (112 | ) | (207 | ) | (225 | ) | |||||||||||
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Income before income taxes
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282 | 352 | 457 | 571 | ||||||||||||||
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Provision for income taxes
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106 | 135 | 174 | 218 | ||||||||||||||
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Income before cumulative effect of changes in
accounting principles
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176 | 217 | 283 | 353 | ||||||||||||||
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Cumulative effect of changes in accounting
principles, net of income tax benefit of $31 and $0 for the six
months ended June 30, 2003 and 2002, respectively
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— | — | (46 | ) | 2 | |||||||||||||
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Net income
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$ | 176 | $ | 217 | $ | 237 | $ | 355 | ||||||||||
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Basic earnings per common share:
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Income before cumulative effect of changes in
accounting principles
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$ | 0.30 | $ | 0.35 | $ | 0.48 | $ | 0.57 | ||||||||||
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Cumulative effect of changes in accounting
principles
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— | — | (0.08 | ) | — | |||||||||||||
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Net income
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$ | 0.30 | $ | 0.35 | $ | 0.40 | $ | 0.57 | ||||||||||
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Diluted earnings per common share:
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Income before cumulative effect of changes in
accounting principles
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$ | 0.30 | $ | 0.35 | $ | 0.48 | $ | 0.57 | ||||||||||
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Cumulative effect of changes in accounting
principles
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— | — | (0.08 | ) | — | |||||||||||||
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Net income
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$ | 0.30 | $ | 0.35 | $ | 0.40 | $ | 0.57 | ||||||||||
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Pro forma income and earnings per common share
assuming changes in accounting principles described in
Note 1 are applied retroactively:
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Income before cumulative effect of changes in
accounting principles
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$ | 176 | $ | 210 | $ | 283 | 329 | |||||||||||
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Basic earnings per common share before cumulative
effect of changes in accounting principles
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$ | 0.30 | $ | 0.34 | $ | 0.48 | 0.53 | |||||||||||
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Diluted earnings per common share before
cumulative effect of changes in accounting principles
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$ | 0.30 | $ | 0.34 | $ | 0.48 | 0.53 | |||||||||||
See notes to condensed consolidated financial statements.
2
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended | |||||||||||
| June 30, | |||||||||||
| 2003 | 2002 | ||||||||||
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Cash flows from operating activities:
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Net income
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$ | 237 | $ | 355 | |||||||
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Adjustments to reconcile net income to net cash
provided
by operating activities: |
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Cumulative effect of changes in accounting
principles
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46 | (2) | |||||||||
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Provision for bad debts
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24 | 17 | |||||||||
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Depreciation and amortization
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627 | 607 | |||||||||
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Deferred income tax provision
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69 | 110 | |||||||||
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Minority interest
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3 | 3 | |||||||||
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Net gain on disposal of assets
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(5 | ) | (3) | ||||||||
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Effect of asset impairments and unusual items
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(7 | ) | (6) | ||||||||
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Change in operating assets and liabilities, net
of effects of
acquisitions and divestitures: |
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Receivables
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(24 | ) | (39) | ||||||||
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Prepaid expenses and other current assets
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17 | (7) | |||||||||
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Other assets
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100 | (29) | |||||||||
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Accounts payable and accrued liabilities
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(37 | ) | (152) | ||||||||
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Deferred revenues and other liabilities
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23 | 30 | |||||||||
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Net cash provided by operating activities
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1,073 | 884 | |||||||||
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Cash flows from investing activities:
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Acquisitions of businesses, net of cash acquired
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(172 | ) | (64) | ||||||||
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Capital expenditures
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(501 | ) | (552) | ||||||||
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Proceeds from divestitures of businesses, net of
cash divested,
and other sales of assets |
34 | 71 | |||||||||
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Net receipts from restricted funds
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109 | 103 | |||||||||
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Other
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18 | (7) | |||||||||
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Net cash used in investing activities
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(512 | ) | (449) | ||||||||
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Cash flows from financing activities:
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New borrowings
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67 | 498 | |||||||||
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Debt repayments
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(68 | ) | (468) | ||||||||
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Common stock repurchases
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(71 | ) | (500) | ||||||||
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Exercise of common stock options and warrants
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9 | 23 | |||||||||
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Other
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(9 | ) | — | ||||||||
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Net cash used in financing activities
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(72 | ) | (447) | ||||||||
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Effect of exchange rate changes on cash and cash
equivalents
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— | 2 | |||||||||
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Increase (decrease) in cash and cash equivalents
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489 | (10) | |||||||||
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Cash and cash equivalents at beginning of period
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264 | 730 | |||||||||
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Cash and cash equivalents at end of period
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$ | 753 | $ | 720 | |||||||
See notes to condensed consolidated financial statements.
3
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
| Accumulated | |||||||||||||||||||||||||||
| Common Stock | Additional | Other | Treasury Stock | ||||||||||||||||||||||||
| Paid-in | Retained | Comprehensive | |||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Shares | Amount | |||||||||||||||||||||
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Balance, December 31, 2002
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630,282 | $ | 6 | $ | 4,513 | $ | 1,873 | $ | (179) | (35,682) | $ | (905) | |||||||||||||||
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Net income
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— | — | — | 237 | — | — | — | ||||||||||||||||||||
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Common stock issued upon exercise of stock
options and warrants and grants of restricted stock, net of tax
benefit of $1
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— | — | (2) | — | — | 542 | 12 | ||||||||||||||||||||
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Common stock repurchases, net of settlements
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