01—Abstract
Summary
Summary of the 10-Q filed July 27, 2016. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported solid financial results for the second quarter and first half of 2016, demonstrating revenue growth and improved operating income.
Total revenue increased by 3.3% to $3.425 billiona for the quarter and 3.9% to $6.601 billion for the first half, driven by a combination of acquisitions (notably SWS), positive yield from collection and disposal operations, and increased volumes. The company also successfully managed its operating expenses, with operating expenses as a percentage of revenue decreasing, contributing to a significant rise in income from operations. Net income attributable to Waste Management, Inc. grew to $287 million ($0.64 per diluted share) for the second quarter of 2016, up from $274 million ($0.60 per diluted share) in the prior year period.
For the first half of the year, net income was $545 millionb ($1.22 per diluted share), a substantial increase from $145 million in the first half of 2015, though this comparison is significantly influenced by a large debt extinguishment charge in the prior year. The company's strong cash flow generation, evidenced by free cash flow of $849 million for the first half, supported continued investments in acquisitions and share repurchases, signaling a healthy financial position.
02—Key points
Key Highlights
- Total revenue increased by 3.3% to $3.425 billion in Q2 2016 and by 3.9% to $6.601 billion in the first six months of 2016, driven by acquisitions and positive yield.
- Income from operations saw a significant improvement, increasing by 21.7% to $611 million in Q2 2016 and by 18.8% to $1.119 billion in the first six months.
- Net income attributable to Waste Management, Inc. rose to $287 million ($0.64/share) in Q2 2016 and $545 million ($1.22/share) in the first half, up from $274 million ($0.60/share) and $145 million ($0.32/share) respectively in the prior year periods (note: 2015 first half impacted by debt extinguishment loss).
- Free cash flow remained strong, totaling $849 million for the first six months of 2016, supporting capital allocation priorities.
- The company completed a significant acquisition of Southern Waste Systems/Sun Recycling (SWS) in January 2016, contributing to revenue growth.
- Waste Management continued its share repurchase program, returning capital to shareholders.
- Operating expenses as a percentage of revenue improved, decreasing from 65.2% in Q2 2015 to 62.2% in Q2 2016, indicating effective cost management.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Waste Management Inc kept $0.08.
- Revenue$3.42B100.0%
- Cost of revenue−$2.13B62.2%
- Gross profit$1.29B37.8%
- Operating costs−$684.0M20.0%
- Operating income$611.0M17.8%
- Interest, other & tax−$325.0M9.5%
- Net income$286.0M8.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed July 27, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $3.42B$3.31B | +3.3% |
| Cost of Revenue | $2.13B$2.16B | −1.5% |
| Gross Profit | $1.29B$1.15B | +12.4% |
| SG&A Expenses | $340.00M$322.00M | +5.6% |
| Operating Expenses | $2.81B$2.81B | 0.0% |
| Operating Income | $611.00M$502.00M | +21.7% |
| Net Income | $286.00M$273.00M | +4.8% |
| EPS (Basic) | $0.65$0.60 | +8.3% |
| EPS (Diluted) | $0.64$0.60 | +6.7% |
| Shares Outstanding (Basic) | 444.00M455.50M | −2.5% |
| Shares Outstanding (Diluted) | 446.70M458.00M | −2.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the second quarter of 2016?
Revenue growth in Q2 2016 was primarily driven by acquisitions, particularly the purchase of Southern Waste Systems/Sun Recycling (SWS), positive yield from collection and disposal operations, and increased volumes. These factors contributed to a 3.3% increase in total revenue.
How did Waste Management manage its operating expenses, and what was the impact on profitability?
Waste Management improved its operating expense management, with operating expenses as a percentage of revenue decreasing from 65.2% in Q2 2015 to 62.2% in Q2 2016. This efficiency, along with revenue growth, led to a significant increase in income from operations, which rose by 21.7% year-over-year for the quarter.
What is the company's stance on capital allocation, specifically regarding acquisitions and share repurchases?
The company actively pursues growth through acquisitions, as evidenced by the SWS acquisition in early 2016. Waste Management also continued its commitment to returning capital to shareholders through its share repurchase program, demonstrating a balanced approach to capital allocation.
What impact did the acquisition of SWS have on the financial results?
The acquisition of SWS in January 2016 contributed $39 million in revenue for the second quarter and $76 million for the first six months of 2016. It also increased operating expenses and depreciation/amortization, but was a key driver of overall revenue growth.
06—Continue