10-QPeriod: Q1 FY2016

WASTE MANAGEMENT INC Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 28, 2016For Securities:WM

Summary

Waste Management Inc. (WM) reported a strong first quarter in 2016, demonstrating significant improvement compared to the same period in the prior year. The company's operating revenues increased by 4.5% year-over-year, reaching $3.176 billion, driven by a combination of strategic acquisitions, positive yield management in its core collection and disposal operations, and increased volumes. This revenue growth, coupled with effective cost management leading to margin expansion, resulted in a substantial increase in income from operations to $508 million. The most notable financial improvement is the shift from a net loss of $129 million in Q1 2015 to a net income of $258 million in Q1 2016. This turnaround was significantly impacted by the absence of a large debt extinguishment loss that occurred in the prior year, but also reflects the company's improved operational performance. The company also generated robust free cash flow of $402 million, supporting its capital allocation strategies, including share repurchases and dividend payments.

Financial Highlights

54 data points
Beta

Revenue

$3.18B

37.2% Gross Margin

Net Income

$256.00M

8.1% Net Margin

EPS (Diluted)

$0.58

Total Assets

$20.78B

Cash & Equivalents

$104.00M

Free Cash Flow

$732.00M

Financial Statements
Beta
Revenue$3.18B
Cost of Revenue$1.99B
Gross Profit$1.18B
SG&A Expenses$362.00M
Operating Expenses$2.67B
Operating Income$508.00M
Net Income$256.00M
EPS (Basic)$0.58
EPS (Diluted)$0.58
Shares Outstanding (Basic)446.10M
Shares Outstanding (Diluted)448.60M

Key Highlights

  • 1Operating revenues increased by 4.5% to $3.176 billion, driven by acquisitions, yield management, and volume growth.
  • 2Net income attributable to Waste Management, Inc. swung from a loss of $129 million in Q1 2015 to a profit of $258 million in Q1 2016.
  • 3Income from operations rose by 15.5% to $508 million, reflecting improved operational efficiency and revenue growth.
  • 4Free cash flow for the quarter was $402 million, up from $285 million in the prior year's comparable period.
  • 5The company completed the acquisition of Southern Waste Systems/Sun Recycling (SWS) for $525 million, funded by borrowings.
  • 6Waste Management repurchased $250 million of its common stock during the quarter.
  • 7The company reported strong liquidity with $104 million in cash and cash equivalents and significant available capacity under its revolving credit facility.

Frequently Asked Questions

Revenue growth was primarily driven by three factors: acquisitions (notably Southern Waste Systems/Sun Recycling and Deffenbaugh), an increase in average yield from collection and disposal operations due to pricing strategies, and higher business volumes. These were partially offset by lower fuel surcharges and a decline in recycling commodity prices.

Waste Management experienced a significant improvement in profitability, swinging from a net loss of $129 million in Q1 2015 to a net income of $258 million in Q1 2016. This substantial turnaround was aided by the absence of a large loss on early debt extinguishment that occurred in the prior year, alongside operational improvements that boosted income from operations by 15.5%.

The company generated strong free cash flow of $402 million in Q1 2016, an increase from $285 million in Q1 2015. This robust cash flow generation supports the company's capital allocation strategy, which included $250 million in share repurchases and the payment of $183 million in dividends during the quarter. The company also used borrowings to fund acquisitions.

The primary acquisition during the quarter was Southern Waste Systems/Sun Recycling (SWS) for $525 million. This acquisition is expected to enhance the company's presence in Southern Florida. There were no significant divestitures mentioned for this specific quarter, though prior period divestitures were noted as impacting year-over-year revenue comparisons.