10-KPeriod: FY2013

WASTE MANAGEMENT INC Annual Report, Year Ended Dec 31, 2013

Filed February 18, 2014For Securities:WM

Summary

Waste Management Inc. (WM) reported a challenging year in 2013, marked by significant goodwill and asset impairments totaling over $1 billion, primarily impacting its Wheelabrator business and certain landfills. This led to a substantial decrease in net income attributable to Waste Management, Inc. to $98 million 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.

Financial Highlights

57 data points
Beta

Revenue

$13.98B

34.8% Gross Margin

Net Income

$98.00M

0.7% Net Margin

EPS (Diluted)

$0.21

Total Assets

$22.49B

Cash & Equivalents

$58.00M

Free Cash Flow

$1.19B

Financial Statements
Beta
Revenue$13.98B
Cost of Revenue$9.11B
Gross Profit$4.87B
SG&A Expenses$1.47B
Operating Expenses$12.90B
Operating Income$1.08B
Interest Expense$500.00M
Net Income$98.00M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)467.70M
Shares Outstanding (Diluted)469.80M

Key Highlights

  • 1Total revenue increased by 2.4% to $14.0 billion, driven by acquisitions and yield improvements in collection and disposal services.
  • 2Significant 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.
  • 3Free 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.
  • 4The 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.
  • 5The Wheelabrator segment, which includes waste-to-energy facilities, was significantly impacted by a $483 million goodwill impairment charge, reflecting challenging market conditions.
  • 6Waste Management announced an expected increase in its quarterly dividend for 2014, signaling a commitment to returning value to shareholders.
  • 7The company is transitioning its fleet to Compressed Natural Gas (CNG) vehicles, aiming for improved environmental performance and cost efficiency.

Frequently Asked Questions

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.

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.

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.

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.