10-QPeriod: Q3 FY2015

WASTE MANAGEMENT INC Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 27, 2015For Securities:WM

Summary

Waste Management, Inc. (WM) reported its third-quarter and year-to-date results for the period ending September 30, 2015. Revenue for the quarter decreased by 6.7% to $3.36 billion, compared to $3.60 billion in the prior year, primarily due to the divestiture of the Wheelabrator business and lower volumes. Despite the revenue decline, income from operations improved to $601 million from $546 million, driven by lower operating and SG&A expenses, and a significant reduction in interest expense due to debt refinancing. Net income attributable to Waste Management, Inc. increased to $335 million ($0.74 per diluted share) from $270 million ($0.58 per diluted share) in the prior year quarter. For the nine-month period, revenue decreased by 8.0% to $9.72 billion. The company recorded a significant "Loss on early extinguishment of debt" of $552 million related to its debt refinancing activities. Despite this, net income attributable to Waste Management, Inc. for the nine months was $480 million ($1.05 per diluted share), down from $708 million ($1.53 per diluted share) in the prior year, largely due to the debt extinguishment charges and other divestitures. The company also completed the acquisition of Deffenbaugh Disposal, Inc. for $416 million, which is expected to contribute to future growth.

Financial Highlights

54 data points
Beta

Revenue

$3.36B

37.6% Gross Margin

Net Income

$337.00M

10.0% Net Margin

EPS (Diluted)

$0.74

Total Assets

$20.40B

Cash & Equivalents

$113.00M

Free Cash Flow

$657.00M

Financial Statements
Beta
Revenue$3.36B
Cost of Revenue$2.10B
Gross Profit$1.26B
SG&A Expenses$330.00M
Operating Expenses$2.76B
Operating Income$601.00M
Net Income$337.00M
EPS (Basic)$0.75
EPS (Diluted)$0.74
Shares Outstanding (Basic)449.60M
Shares Outstanding (Diluted)452.70M

Key Highlights

  • 1Revenue for the third quarter of 2015 decreased by 6.7% to $3.36 billion, impacted by divestitures and lower volumes.
  • 2Income from operations increased to $601 million for the quarter, benefiting from cost reductions in operating expenses and SG&A.
  • 3Net income attributable to Waste Management, Inc. rose to $335 million ($0.74 per diluted share) in Q3 2015 from $270 million ($0.58 per diluted share) in Q3 2014.
  • 4The company incurred a significant 'Loss on early extinguishment of debt' of $552 million in the first nine months of 2015 due to debt refinancing activities.
  • 5Cash flow from operations increased to $1.97 billion for the nine months ended September 30, 2015, from $1.81 billion in the prior year.
  • 6Waste Management acquired Deffenbaugh Disposal, Inc. for $416 million in March 2015.
  • 7The company repurchased $600 million of its common stock in both the nine-month periods of 2015 and 2014.

Frequently Asked Questions

The primary drivers for the revenue decline in the third quarter of 2015 were divestitures, most notably the sale of the Wheelabrator business in December 2014, which reduced revenue by $186 million. Additionally, lower volumes and a decrease in fuel surcharges and mandated fees also contributed to the revenue decrease.

Income from operations improved due to a significant reduction in operating expenses and selling, general, and administrative (SG&A) expenses. Operating expenses decreased by $204 million, partly due to costs associated with divestitures and lower fuel costs. SG&A expenses decreased by $47 million, driven by the August 2014 reorganization and lower litigation reserves compared to the prior year.

The company recorded a substantial loss of $552 million in the first nine months of 2015 related to the early extinguishment of debt. This was part of a strategic refinancing effort to reduce its high-coupon senior notes, lower its weighted average interest rate, and extend the duration of its debt. While this resulted in a significant one-time charge, it is expected to lead to lower interest expenses in the future.

Waste Management acquired Deffenbaugh Disposal, Inc. for $416 million in March 2015. This acquisition contributed $44 million in revenue and less than $1 million in net income for the third quarter of 2015. The company expects synergies and future growth from this acquisition, with $152 million in goodwill recorded.