01—Abstract
Summary
Summary of the 10-Q filed October 29, 2014. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported its third-quarter and year-to-date financial results for the period ending September 30, 2014.
Total revenues saw a slight decrease of 0.5% year-over-year for the quarter, primarily due to lower volumes and divestitures, partially offset by increased yield on collection and disposal operations. Net income attributable to Waste Management, Inc. decreased to $270 milliona ($0.58 per diluted share) from $291 million ($0.62 per diluted share) in the prior year's quarter, impacted by restructuring charges and litigation reserves.
The company is actively managing its portfolio, notably through the pending sale of its Wheelabrator business, which has been classified as held-for-sale. Free cash flow remained robust, demonstrating the company's ability to generate cash from operations.
02—Key points
Key Highlights
- Total revenues for the third quarter of 2014 were $3,602 million, a slight decrease of 0.5% compared to $3,621 million in the third quarter of 2013.
- Net income attributable to Waste Management, Inc. decreased to $270 million for the quarter, down from $291 million in the prior year's quarter, with diluted earnings per share at $0.58 compared to $0.62.
- The company recognized $67 million in pre-tax charges related to a corporate restructuring and an additional $20 million in charges for litigation reserves and investment write-downs, negatively impacting quarterly earnings per share.
- The pending sale of the Wheelabrator business, announced in July 2014, is progressing, with the business classified as 'Businesses held-for-sale' on the balance sheet.
- Free cash flow remained strong, totaling $1,349 million for the nine months ended September 30, 2014, compared to $1,147 million in the same period of 2013.
- The company repurchased $600 million of its common stock through accelerated share repurchase agreements during the third quarter of 2014.
- Cash and cash equivalents increased significantly to $183 million from $58 million at the beginning of the year, indicating improved liquidity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2014, Waste Management Inc kept $0.07.
- Revenue$3.60B100.0%
- Cost of revenue−$2.30B63.8%
- Gross profit$1.30B36.2%
- Operating costs−$757.0M21.0%
- Operating income$546.0M15.2%
- Interest, other & tax−$276.0M7.7%
- Net income$270.0M7.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2014filed October 29, 2014Financial Statements
Q3 FY2014 against Q3 FY2013
| Line item | Q3 FY2014Q3 FY2013 | Change |
|---|---|---|
| Revenue | $3.60B$3.62B | −0.5% |
| Cost of Revenue | $2.30B$2.33B | −1.1% |
| Gross Profit | $1.30B$1.30B | +0.5% |
| SG&A Expenses | $377.00M$349.00M | +8.0% |
| Operating Expenses | $3.06B$3.04B | +0.4% |
| Operating Income | $546.00M$577.00M | −5.4% |
| Net Income | $270.00M$291.00M | −7.2% |
| EPS (Basic) | $0.59$0.62 | −4.8% |
| EPS (Diluted) | $0.58$0.62 | −6.5% |
| Shares Outstanding (Basic) | 460.80M469.30M | −1.8% |
| Shares Outstanding (Diluted) | 463.60M471.20M | −1.6% |
05—Questions
Frequently Asked Questions
What were the main drivers for the decrease in revenue during the third quarter of 2014?
The decrease in revenue was primarily driven by lower collection volumes (-$49 million) and divestitures, particularly the sale of Puerto Rico operations and Eastern Canada landfill/collection assets (-$24 million). These were partially offset by positive revenue growth from yield on collection and disposal operations (+$68 million).
How did restructuring charges impact the company's profitability?
The company incurred $67 million in pre-tax charges primarily related to a corporate restructuring announced in August 2014, which negatively impacted diluted earnings per share by $0.09. Additional charges of $20 million for litigation reserves and investment write-downs further impacted EPS by $0.05.
What is the status of the Wheelabrator business sale?
Waste Management signed a definitive agreement in July 2014 to sell substantially all of its Wheelabrator business for $1.94 billion. The business has been classified as 'Businesses held-for-sale' on the balance sheet as of September 30, 2014, with the closing expected by the end of 2014.
How did the company's share repurchase program affect its cash flow?
During the third quarter of 2014, Waste Management initiated accelerated share repurchase agreements totaling $600 million, funded by borrowings under its revolving credit facility. This activity reflects a strategic use of capital to return value to shareholders, though it increased net cash used in financing activities.
06—Continue