01—Abstract
Summary
Summary of the 10-K filed February 15, 2018. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported strong revenue growth in 2017, driven by increased volumes in collection and disposal services and higher recycling commodity prices.
The company's "Solid Waste" business remains its core, showing robust performance. WM also highlighted its commitment to shareholder returns, announcing a significant increase in its quarterly dividend for 2018, marking its 15th consecutive year of dividend increases. This reflects a healthy cash flow generation.
Despite headwinds in the recycling market due to new Chinese regulations impacting commodity prices, the company is actively seeking alternative markets and improving recycling processes. Key financial highlights include a substantial increase in net income attributable to Waste Management, Inc. in 2017, partly due to a tax benefit from the Tax Cuts and Jobs Act.
The company's strategic focus on "focused differentiation and continuous improvement" continues to drive operational efficiency and cost control. Management expressed confidence in continued earnings and cash flow growth for 2018.
02—Key points
Key Highlights
- Revenue increased by 6.4% to $14.485 billion in 2017, primarily driven by volume growth, yield improvements in collection and disposal, and higher recycling commodity prices.
- Net income attributable to Waste Management, Inc. rose significantly to $1.949 billion in 2017, compared to $1.182 billion in 2016, boosted by operational performance and a tax benefit from the Tax Cuts and Jobs Act.
- The company announced a projected 9.4% increase in its quarterly dividend for 2018, continuing its 15-year streak of consecutive dividend increases, signaling strong cash flow.
- Operating expenses as a percentage of revenue remained stable at 62.3% in 2017, indicating effective cost management despite increased volumes and higher commodity costs.
- Free cash flow increased to $1.770 billion in 2017 from $1.710 billion in 2016, supporting capital expenditures, dividends, and share repurchases.
- Waste Management continues to invest in fleet modernization, with a significant number of natural gas vehicles, and is focused on improving operational efficiency and customer service.
- The company faced challenges in the recycling segment due to stricter import regulations in China, which affected commodity prices, but is actively managing these impacts and seeking new markets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Waste Management Inc kept $0.13.
- Revenue$14.48B100.0%
- Cost of revenue−$9.02B62.3%
- Gross profit$5.46B37.7%
- Operating costs−$2.83B19.5%
- Operating income$2.64B18.2%
- Interest, other & tax−$687.0M4.7%
- Net income$1.95B13.5%
Where FY2017 revenue went
$14.48B- Cost of revenue: $9.02B, 62% of revenue
- Net income: $1.95B, 13% of revenue
- SG&A: $1.47B, 10% of revenue
- Other operating costs: $1.36B, 9.4% of revenue
- Interest, other & tax: $687.0M, 4.7% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 15, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $14.48B$13.61B | +6.4% |
| Cost of Revenue | $9.02B$8.49B | +6.3% |
| Gross Profit | $5.46B$5.12B | +6.7% |
| SG&A Expenses | $1.47B$1.41B | +4.1% |
| Operating Expenses | $11.85B$11.31B | +4.7% |
| Operating Income | $2.64B$2.30B | +14.8% |
| Net Income | $1.95B$1.18B | +65.2% |
| EPS (Basic) | $4.44$2.66 | +66.9% |
| EPS (Diluted) | $4.41$2.65 | +66.4% |
| Shares Outstanding (Basic) | 438.80M443.50M | −1.1% |
| Shares Outstanding (Diluted) | 441.90M446.50M | −1.0% |
05—Questions
Frequently Asked Questions
What were Waste Management's main drivers of revenue growth in 2017?
Waste Management's revenue growth in 2017 was primarily driven by a 6.4% increase to $14.485 billion. This was fueled by a combination of factors: higher volumes in collection and disposal services contributing $536 million, improved yield from pricing strategies in collection and disposal, higher market prices for recycling commodities leading to a $237 million revenue increase in the recycling segment, and increased fuel surcharges and mandated fees ($73 million).
How did the Tax Cuts and Jobs Act impact Waste Management's financial results?
The Tax Cuts and Jobs Act, enacted in late 2017, provided Waste Management with a significant benefit. The company recognized an income tax benefit of $529 million in 2017, primarily due to the re-measurement of deferred income tax assets and liabilities at the new lower corporate tax rate (21%). This benefit had a favorable impact of $1.20 per diluted share.
What is Waste Management's strategy for handling challenges in the recycling market?
Waste Management is actively addressing the challenges in the recycling market, which have been intensified by new, stricter import regulations in China impacting commodity prices. The company is revising service agreements to manage increased costs, educating the public on proper recycling practices to improve material quality, and investing time and labor to work with customers on quality improvement. They are also actively working to identify alternative markets for recycled commodities, though there is uncertainty regarding sufficient demand and potential price decreases.
How is Waste Management returning value to its shareholders?
Waste Management demonstrates a strong commitment to returning value to shareholders through a combination of consistent dividend payments and share repurchases. In 2017, the company returned $1.5 billion to shareholders through dividends and share repurchases. Notably, the Board of Directors announced expectations to increase the quarterly dividend by 9.4% in 2018, marking the 15th consecutive year of dividend increases, which reflects confidence in the company's ability to generate strong and consistent cash flows.
06—Continue