01—Abstract
Summary
Summary of the 10-K filed February 18, 2016. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported revenues of $12.96 billiona for the year ended December 31, 2015, a decrease from the previous year primarily driven by the divestiture of its Wheelabrator business, lower volumes, and decreased fuel surcharges and commodity prices.
Despite the revenue decline, the company emphasized strong core pricing in its collection and disposal operations, contributing to a positive yield. The company returned $1.3 billionb to shareholders through dividends and share repurchases in 2015 and announced an expected dividend increase for 2016, signaling confidence in its free cash flow generation capabilities. Key financial events for 2015 included a significant pre-tax loss of $555 million related to the early extinguishment of senior notes, aimed at reducing future interest expenses.
The company also managed various asset impairments and restructuring charges impacting net income. Despite these one-time items, WM's operational focus remained on cost control, customer service, and strategic growth through acquisitions, highlighted by the purchase of Deffenbaugh Disposal, Inc. The company continued to manage its extensive landfill network, which underpins its operations and future capacity.
02—Key points
Key Highlights
- Total operating revenues for 2015 were $12.96 billion, a decrease of 7.4% from $13.99 billion in 2014, largely due to divestitures and lower volumes.
- Income from operations decreased to $2.045 billion in 2015 from $2.299 billion in 2014, impacted by various charges and the sale of the Wheelabrator business.
- Net income attributable to Waste Management, Inc. was $753 million ($1.65 per diluted share) in 2015, down from $1.30 billion ($2.79 per diluted share) in 2014, significantly impacted by a $555 million loss on early debt extinguishment.
- Free cash flow was $1.41 billion in 2015, a substantial decrease from $3.43 billion in 2014, primarily due to the proceeds from the Wheelabrator divestiture in the prior year.
- The company returned $1.3 billion to shareholders in 2015 through dividends ($695 million) and share repurchases ($600 million).
- Acquisition activity included Deffenbaugh Disposal, Inc. for $416 million in March 2015, strengthening its Midwest presence.
- The company's extensive landfill network remained a core asset, with approximately 46 years of remaining weighted average landfill life based on remaining permitted airspace.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Waste Management Inc kept $0.06.
- Revenue$12.96B100.0%
- Cost of revenue−$8.23B63.5%
- Gross profit$4.73B36.5%
- Operating costs−$2.69B20.7%
- Operating income$2.04B15.8%
- Interest, other & tax−$1.29B10.0%
- Net income$752.0M5.8%
Where FY2015 revenue went
$12.96B- Cost of revenue: $8.23B, 64% of revenue
- Net income: $752.0M, 5.8% of revenue
- SG&A: $1.34B, 10% of revenue
- Other operating costs: $1.34B, 10% of revenue
- Interest, other & tax: $1.29B, 10.0% of revenue
Kept 5.8% as net incomeNet income $752.0M · 5.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 18, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $12.96B$14.00B | −7.4% |
| Cost of Revenue | $8.23B$9.00B | −8.6% |
| Gross Profit | $4.73B$4.99B | −5.3% |
| SG&A Expenses | $1.34B$1.48B | −9.3% |
| Operating Expenses | $10.92B$11.70B | −6.7% |
| Operating Income | $2.04B$2.30B | −11.0% |
| Net Income | $752.00M$1.30B | −42.1% |
| EPS (Basic) | $1.66$2.80 | −40.7% |
| EPS (Diluted) | $1.65$2.79 | −40.9% |
| Shares Outstanding (Basic) | 452.70M462.60M | −2.1% |
| Shares Outstanding (Diluted) | 455.90M465.60M | −2.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of Waste Management's revenue change in 2015?
Waste Management's operating revenues decreased by 7.4% to $12.96 billion in 2015 compared to 2014. This was primarily due to divestitures, notably the sale of the Wheelabrator business, which reduced revenues by $762 million. Other contributing factors included lower volumes ($215 million decrease), reduced fuel surcharges and mandated fees ($171 million decrease) due to lower fuel prices, and a decline in recyclable commodity prices ($138 million decrease). These were partially offset by positive revenue growth from yield on collection and disposal operations ($203 million increase) and revenues from acquisitions ($174 million increase).
How did the early extinguishment of debt impact Waste Management's financial results in 2015?
In 2015, Waste Management incurred a significant pre-tax loss of $555 million related to the early extinguishment of nearly $2 billion of high-coupon senior notes. This was achieved through a make-whole redemption and cash tender offer, aimed at reducing future interest expenses and extending debt maturity. This loss negatively impacted diluted earnings per share by $0.75.
What is the company's outlook on returning capital to shareholders?
Waste Management returned $1.3 billion to shareholders in 2015 through dividends and share repurchases. The company announced that its Board of Directors expects to increase the quarterly dividend from $0.385 to $0.41 per share for dividends declared in 2016, reflecting confidence in its ability to generate strong and consistent cash flows. Future dividend declarations remain at the discretion of the Board.
How is Waste Management managing its landfill assets and capacity?
Waste Management operates North America's largest network of landfills, owning or operating 249 sites as of December 31, 2015. The company has a weighted average remaining landfill life of approximately 46 years based on permitted airspace, with potential for further expansion at many sites. They are actively pursuing expansion permits at 21 landfills, demonstrating a strategy to maintain long-term disposal capacity.
06—Continue