01—Abstract
Summary
Summary of the 10-K filed February 18, 2014. Cited figures are marked; the original filing is the authoritative source.
Waste Management Inc. (WM) reported a challenging year in 2013, marked by significant goodwill and asset impairments totaling over $1 billiona, primarily impacting its Wheelabrator business and certain landfills.
This led to a substantial decrease in net income attributable to Waste Management, Inc. to $98 millionb from $817 million in 2012, and diluted earnings per share dropped to $0.21 from $1.76. Despite these impairments, the company saw a modest increase in total revenues to $14.0 billion from $13.6 billion, driven by acquisitions like Greenstar and RCI, and positive revenue growth from yield on collection and disposal operations. Free cash flow improved to $1.32 billion from $829 million in 2012, reflecting better capital spending management and pricing discipline.
The company remains focused on its strategic priorities of revenue growth through customer-focused segmentation and pricing, cost control, and investment in emerging technologies. WM announced an increase in its quarterly dividend for 2014, signaling confidence in its ability to generate strong cash flows. However, investors should remain aware of the significant headwinds faced in the Wheelabrator segment due to declining electricity prices and increasing operating costs, which have led to substantial asset writedowns.
02—Key points
Key Highlights
- Total revenue increased by 2.4% to $14.0 billion, driven by acquisitions and yield improvements in collection and disposal services.
- Significant asset and goodwill impairments totaling $1.0 billion negatively impacted net income, which decreased to $98 million ($0.21/share) from $817 million ($1.76/share) in 2012.
- Free cash flow improved to $1.32 billion in 2013, an increase from $829 million in 2012, due to better capital spending management and operational improvements.
- The company completed two key acquisitions in 2013: Greenstar, LLC for $170 million and RCI Environnement, Inc. for $481 million, expanding its recycling and Quebec operations.
- The Wheelabrator segment, which includes waste-to-energy facilities, was significantly impacted by a $483 million goodwill impairment charge, reflecting challenging market conditions.
- Waste Management announced an expected increase in its quarterly dividend for 2014, signaling a commitment to returning value to shareholders.
- The company is transitioning its fleet to Compressed Natural Gas (CNG) vehicles, aiming for improved environmental performance and cost efficiency.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Waste Management Inc kept $0.01.
- Revenue$13.98B100.0%
- Cost of revenue−$9.11B65.2%
- Gross profit$4.87B34.8%
- Operating costs−$3.79B27.1%
- Operating income$1.08B7.7%
- Interest, other & tax−$981.0M7.0%
- Net income$98.0M0.7%
Where FY2013 revenue went
$13.98B- Cost of revenue: $9.11B, 65% of revenue
- Other operating costs: $2.32B, 17% of revenue
- Net income: $98.0M, 0.7% of revenue
- SG&A: $1.47B, 10% of revenue
- Interest, other & tax: $981.0M, 7.0% of revenue
Kept 0.7% as net incomeNet income $98.0M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 18, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $13.98B$13.65B | +2.4% |
| Cost of Revenue | $9.11B$8.88B | +2.6% |
| Gross Profit | $4.87B$4.77B | +2.1% |
| SG&A Expenses | $1.47B$1.47B | −0.3% |
| Operating Expenses | $12.90B$11.80B | +9.4% |
| Operating Income | $1.08B$1.85B | −41.7% |
| Interest Expense | $500.00M$509.00M | −1.8% |
| Net Income | $98.00M$817.00M | −88.0% |
| EPS (Basic) | $0.21$1.76 | −88.1% |
| EPS (Diluted) | $0.21$1.76 | −88.1% |
| Shares Outstanding (Basic) | 467.70M463.60M | +0.9% |
| Shares Outstanding (Diluted) | 469.80M464.40M | +1.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of Waste Management's financial performance in 2013?
In 2013, Waste Management's financial performance was driven by a combination of factors. Revenues saw a modest increase due to strategic acquisitions (Greenstar and RCI) and improved pricing ('yield') in its core collection and disposal services. However, net income was significantly impacted by over $1 billion in goodwill and asset impairments, primarily affecting the Wheelabrator business and certain landfill assets. Despite a decline in net income, the company reported an improvement in free cash flow.
What is the impact of the impairments on the company's outlook?
The substantial impairments, particularly in the Wheelabrator segment and for landfills, reflect significant challenges in those specific business areas. While these impairments do not directly impact future cash flows, they indicate underlying issues such as declining market prices for electricity from waste-to-energy facilities and difficulties in expanding landfill capacity. Investors should monitor the company's ability to manage costs and adapt its strategy in these challenged segments.
How is the company returning value to shareholders?
Waste Management is committed to returning value to shareholders through dividends and share repurchases. In February 2014, the company announced an expected increase in its quarterly dividend for 2014, marking an eleventh consecutive year of dividend increases. Additionally, the company repurchased $239 million of its common stock in 2013 and has an ongoing share repurchase program authorized by its Board of Directors.
What is the company's strategy for growth and operational efficiency?
Waste Management's strategy focuses on three key priorities: pursuing revenue growth through customer segmentation, pricing discipline, and strategic acquisitions; continually emphasizing cost control and investing in technology to enhance operational efficiency; and investing in emerging technologies that offer alternatives to traditional disposal and extract more value from waste streams. The company is also investing in its transition to a larger Compressed Natural Gas (CNG) fleet.
06—Continue