01—Abstract
Summary
Summary of the 10-Q filed April 28, 2016. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 millionb, supporting its capital allocation strategies, including share repurchases and dividend payments.
02—Key points
Key Highlights
- Operating revenues increased by 4.5% to $3.176 billion, driven by acquisitions, yield management, and volume growth.
- Net 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.
- Income from operations rose by 15.5% to $508 million, reflecting improved operational efficiency and revenue growth.
- Free cash flow for the quarter was $402 million, up from $285 million in the prior year's comparable period.
- The company completed the acquisition of Southern Waste Systems/Sun Recycling (SWS) for $525 million, funded by borrowings.
- Waste Management repurchased $250 million of its common stock during the quarter.
- The company reported strong liquidity with $104 million in cash and cash equivalents and significant available capacity under its revolving credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2016, Waste Management Inc kept $0.08.
- Revenue$3.18B100.0%
- Cost of revenue−$1.99B62.8%
- Gross profit$1.18B37.2%
- Operating costs−$675.0M21.3%
- Operating income$508.0M16.0%
- Interest, other & tax−$252.0M7.9%
- Net income$256.0M8.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2016filed April 28, 2016Financial Statements
Q1 FY2016 against Q1 FY2015
| Line item | Q1 FY2016Q1 FY2015 | Change |
|---|---|---|
| Revenue | $3.18B$3.04B | +4.5% |
| Cost of Revenue | $1.99B$1.95B | +2.4% |
| Gross Profit | $1.18B$1.09B | +8.1% |
| SG&A Expenses | $362.00M$348.00M | +4.0% |
| Operating Expenses | $2.67B$2.60B | +2.6% |
| Operating Income | $508.00M$440.00M | +15.5% |
| Net Income | $256.00M-$131.00M | +295.4% |
| EPS (Basic) | $0.58$-0.28 | +307.1% |
| EPS (Diluted) | $0.58$-0.28 | +307.1% |
| Shares Outstanding (Basic) | 446.10M458.50M | −2.7% |
| Shares Outstanding (Diluted) | 448.60M458.50M | −2.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of Waste Management's revenue growth in Q1 2016?
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.
How did the company's profitability change compared to the prior year?
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%.
What is the company's cash flow situation, and how is it being utilized?
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.
What significant acquisitions or divestitures occurred during the quarter?
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.
06—Continue