10-KPeriod: FY2016

WASTE MANAGEMENT INC Annual Report, Year Ended Dec 31, 2016

Filed February 16, 2017For Securities:WM

Summary

Waste Management Inc. (WM) demonstrated robust performance in 2016, with revenues increasing by 5.0% to $13.6 billion, driven by a combination of volume growth, yield improvements in collection and disposal services, and strategic acquisitions, notably Southern Waste Systems/Sun Recycling (SWS). The company also reported a significant increase in income from operations, reaching $2.3 billion, a 12.3% rise year-over-year, reflecting strong execution of its strategies. This financial strength allowed WM to return substantial value to shareholders through dividends, with a planned increase in the quarterly dividend for 2017, and share repurchases totaling $725 million in 2016. The company is strategically focused on continuous improvement and differentiation, investing in existing diversion technologies like recycling and expanding its service offerings to meet evolving customer needs. Despite facing a competitive landscape and the ongoing impact of regulations, WM's diversified business model, extensive asset network, and commitment to operational efficiency position it well for sustained growth and shareholder value creation. The company's continued investment in natural gas fleet technology and sustainable solutions further underscores its forward-looking approach.

Financial Highlights

54 data points
Beta

Revenue

$13.61B

37.6% Gross Margin

Net Income

$1.18B

8.7% Net Margin

EPS (Diluted)

$2.65

Total Assets

$20.86B

Cash & Equivalents

$32.00M

Free Cash Flow

$1.61B

Financial Statements
Beta
Revenue$13.61B
Cost of Revenue$8.49B
Gross Profit$5.12B
SG&A Expenses$1.41B
Operating Expenses$11.31B
Operating Income$2.30B
Net Income$1.18B
EPS (Basic)$2.66
EPS (Diluted)$2.65
Shares Outstanding (Basic)443.50M
Shares Outstanding (Diluted)446.50M

Key Highlights

  • 1Total revenues increased by 5.0% to $13.6 billion in 2016, driven by yield, volume, and acquisitions.
  • 2Income from operations grew by 12.3% to $2.3 billion, demonstrating improved profitability and operational efficiency.
  • 3Net income attributable to Waste Management, Inc. rose significantly to $1.18 billion, or $2.65 per diluted share.
  • 4The company returned $1.45 billion to shareholders in 2016 through dividends and share repurchases.
  • 5A planned 3.7% increase in the quarterly dividend for 2017 signals confidence in sustained cash flow generation.
  • 6Strategic acquisitions, including the notable SWS acquisition, contributed positively to revenue and expanded market presence.
  • 7Commitment to sustainable practices and investment in technologies like natural gas fleet and renewable energy projects.
  • 8Successfully managed a competitive market and complex regulatory environment, maintaining strong operational performance.

Frequently Asked Questions

Revenue growth in 2016 was primarily driven by a 5.0% increase in total revenues to $13.6 billion. This growth was fueled by a combination of yield and volume improvements in core collection and disposal operations, which contributed $437 million in additional revenue. Strategic acquisitions, particularly the SWS acquisition in January 2016, added $238 million in revenue. Higher market prices for recycling commodities also contributed positively.

Waste Management focused on cost control and operational efficiency, which helped improve profitability. Operating expenses as a percentage of revenue decreased from 63.5% in 2015 to 62.4% in 2016. This improvement was achieved despite increased costs related to acquisitions and higher landfill operating costs, by offsetting factors such as lower fuel costs and efficiency gains in labor and other operating areas.

Waste Management is committed to returning value to shareholders through dividends and share repurchases. In 2016, the company returned $1.45 billion to shareholders. The Board of Directors expects to increase the quarterly dividend by 3.7% in 2017, marking the 14th consecutive year of dividend increases. Additionally, the company repurchased $725 million of its common stock in 2016 and has an ongoing authorization for future repurchases.

Key risks include intense competition in the waste management industry, potential impacts of changing government regulations (including environmental and climate change legislation), fluctuations in commodity prices (affecting recycling operations and landfill gas-to-energy revenue), and the increasing customer preference for waste diversion alternatives to landfill disposal. Additionally, the company faces risks related to cybersecurity incidents and the integration of acquisitions.