Waste Management 2006 Annual Report Download - page 29

Net Cash Provided By
Operating Activities
(in millions)
0
500
1,000
1,500
2,000
2,500
$3,000
Cash Returned to Shareholders
(in millions)
0
200
400
600
800
1,000
1,400
$1,600
1,200
2003 200420052006
2003 200420052006
DividendsShare Repurchase
REVENUE (in millions)
0
10,000
12,000
$14,000
2003 200420052006
11,000
13,000
From a financial standpoint, 2006 stands out as one of the best years in the
history of Waste Management. For the year, the company generated revenue
of $13.4 billion and reported net income of $1.15 billion, or $2.10 per
diluted share. Our continued focus on pricing and operational excellence
led to our improved financial performance. Our internal revenue growth
was 2.7 percent, driven by the greatest increase in pricing yield on our base
business that we’ve seen in six years. We improved our operating costs as a
percent of revenue by 170 basis points during 2006, despite increases in
fuel prices and other cost pressures.
These achievements produced a 19 percent increase in income from operations,
which was $2.03 billion in 2006. We also generated $2.54 billion in net cash
from operations during 2006, a 6 percent gain over 2005.
Our ability to consistently generate strong cash flow from our business enabled
us to continue to return value to our shareholders. Through common stock
repurchases and cash dividend payments, we returned more than $1.5 billion
to shareholders during 2006. Our Board of Directors has authorized the return
of up to $1.2 billion in cash to our shareholders in 2007 through a 9 percent
increase in our dividend per share and continued share repurchases.
As a company committed to continuous improvement, we took important
steps to improve our business processes and operations in 2006.
With nearly 24,000 trucks in our fleet, we pay close attention to the cost
of keeping them running. In 2006, we completed the implementation of a
standardized preventive maintenance system across all our collection and
landfill maintenance shops. This system gathers information on every aspect
of vehicle maintenance, enabling us to better manage our maintenance costs
and continue to drive these costs down year over year.
Our focus on cost containment paid off as we reduced fleet maintenance
costs by more than 2 percent. We achieved this reduction even as the cost
of parts and supplies increased by 5 percent. Increasing productivity in our
routes and labor enabled us to cut nearly one million hours from the time it
takes to serve our customers. We also reduced customer service interruptions,
or breakdowns due to equipment problems, saving the company millions of
dollars in direct costs, lost labor, downtime, and towing.
Delivering value to our customers is foremost and fundamental in our
approach to putting a price on the services we provide. Our analytical
approach does away with average pricing models and instead assesses 27