01—Abstract
Summary
Summary of the 10-K filed February 14, 2019. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) demonstrated resilience in its 2018 performance, with a 3.0% increase in revenue to $14.914 billiona, driven by strong yield and volume growth in its core Traditional Solid Waste business, along with strategic acquisitions.
Despite facing headwinds from lower recycling commodity prices, the company successfully managed operating expenses and saw an increase in income from operations to $2.789 billionb. The company also returned significant value to shareholders through repurchases and dividends, including a planned 10.2% increase in the quarterly dividend for 2019, signaling confidence in its consistent cash flow generation. Looking ahead, WM remains focused on its strategy of focused differentiation and continuous improvement.
The company is navigating evolving market dynamics, including increasing customer demand for sustainable services and adapting to stricter recycling quality standards. WM's robust network of assets, including its extensive landfill and transfer station operations, positions it well to meet future challenges and capitalize on opportunities within the waste management industry.
02—Key points
Key Highlights
- Revenue increased by 3.0% to $14.914 billion in 2018, driven by volume growth and improved yield in the core Solid Waste business.
- Income from operations grew by 5.8% to $2.789 billion, reflecting effective cost management.
- Net income attributable to Waste Management, Inc. was $1.925 billion ($4.45 per diluted share), with a favorable impact from tax reform partially offset by lower recycling commodity prices.
- Free cash flow increased by 17.7% to $2.084 billion, underscoring strong operational cash generation.
- The company announced an expected 10.2% increase in its quarterly dividend for 2019, marking the 16th consecutive year of dividend increases.
- Significant capital allocation was directed towards acquisitions ($466 million) and capital expenditures ($1.694 billion) to support growth and efficiency.
- The company ended the year with a strong liquidity position, including $1.2 billion in unused credit capacity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Waste Management Inc kept $0.13.
- Revenue$14.91B100.0%
- Cost of revenue−$9.25B62.0%
- Gross profit$5.67B38.0%
- Operating costs−$2.88B19.3%
- Operating income$2.79B18.7%
- Interest, other & tax−$864.0M5.8%
- Net income$1.93B12.9%
Where FY2018 revenue went
$14.91B- Cost of revenue: $9.25B, 62% of revenue
- Net income: $1.93B, 13% of revenue
- SG&A: $1.45B, 9.7% of revenue
- Other operating costs: $1.42B, 9.5% of revenue
- Interest, other & tax: $864.0M, 5.8% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 14, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $14.91B$14.48B | +3.0% |
| Cost of Revenue | $9.25B$9.02B | +2.5% |
| Gross Profit | $5.67B$5.46B | +3.7% |
| SG&A Expenses | $1.45B$1.47B | −1.0% |
| Operating Expenses | $12.13B$11.85B | +2.3% |
| Operating Income | $2.79B$2.64B | +5.8% |
| Net Income | $1.93B$1.95B | −1.2% |
| EPS (Basic) | $4.49$4.44 | +1.1% |
| EPS (Diluted) | $4.45$4.41 | +0.9% |
| Shares Outstanding (Basic) | 429.10M438.80M | −2.2% |
| Shares Outstanding (Diluted) | 432.20M441.90M | −2.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of Waste Management's revenue growth in 2018?
The primary driver of Waste Management's revenue growth in 2018 was the strong performance of its Traditional Solid Waste business, fueled by increased volumes from improving market conditions and higher yield in its collection and disposal services. Strategic acquisitions also contributed to this growth.
How did the company address the decline in recycling commodity prices?
Waste Management's recycling operations were impacted by lower market prices for recycling commodities, which caused a revenue decline. The company is adapting by focusing on managing processing costs, developing alternative markets for recycled commodities, and educating customers on proper recycling to reduce contamination.
What is the company's strategy for returning value to shareholders?
Waste Management is committed to returning value to shareholders through a combination of dividend payments and share repurchases. The company announced an expected increase in its quarterly dividend for 2019, continuing its history of consecutive annual dividend increases, and actively engages in share repurchase programs.
What are the key risks identified by Waste Management in its 2018 10-K filing?
Key risks identified include intense competition within the waste industry, the potential for increased regulation that could raise operating costs, fluctuations in commodity prices (particularly for recyclables), the impact of economic conditions on waste volumes, and the need to successfully implement its business strategy, including managing acquisitions and operational efficiencies.
06—Continue