10-KPeriod: FY2017

WASTE MANAGEMENT INC Annual Report, Year Ended Dec 31, 2017

Filed February 15, 2018For Securities:WM

Summary

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.

Financial Highlights

54 data points
Beta

Revenue

$14.48B

37.7% Gross Margin

Net Income

$1.95B

13.5% Net Margin

EPS (Diluted)

$4.41

Total Assets

$21.83B

Cash & Equivalents

$22.00M

Free Cash Flow

$1.61B

Financial Statements
Beta
Revenue$14.48B
Cost of Revenue$9.02B
Gross Profit$5.46B
SG&A Expenses$1.47B
Operating Expenses$11.85B
Operating Income$2.64B
Net Income$1.95B
EPS (Basic)$4.44
EPS (Diluted)$4.41
Shares Outstanding (Basic)438.80M
Shares Outstanding (Diluted)441.90M

Key Highlights

  • 1Revenue 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.
  • 2Net 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.
  • 3The 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.
  • 4Operating expenses as a percentage of revenue remained stable at 62.3% in 2017, indicating effective cost management despite increased volumes and higher commodity costs.
  • 5Free cash flow increased to $1.770 billion in 2017 from $1.710 billion in 2016, supporting capital expenditures, dividends, and share repurchases.
  • 6Waste 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.
  • 7The 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.

Frequently Asked Questions

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).

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.

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.

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.