01—Abstract
Summary
Summary of the 10-Q filed April 26, 2017. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported solid financial results for the first quarter of 2017, demonstrating growth in both revenue and net income compared to the prior year period.
Total operating revenues increased by 8.3% to $3.44 billiona, driven by strong performance in collection and disposal, higher recycling commodity prices, and a favorable yield. Net income attributable to Waste Management, Inc. grew to $298 million, or $0.67 per diluted share, up from $258 million, or $0.58 per diluted share, in the first quarter of 2016. The company also benefited from a significant reduction in income tax expense due to excess tax benefits from equity-based compensation, a change in accounting standard adoption.
The company maintained a disciplined approach to capital expenditures and cash flow generation, with free cash flow at $396 millionb for the quarter. While facing increased operating expenses due to higher recycling commodity costs, fuel prices, and labor, WM effectively managed these pressures through strategic pricing and operational efficiencies. The company's solid operational performance and prudent financial management position it for continued value creation for shareholders.
02—Key points
Key Highlights
- Operating revenues increased by 8.3% to $3.44 billion, primarily driven by higher recycling commodity prices and yield/volume growth in collection and disposal.
- Net income attributable to Waste Management, Inc. rose to $298 million ($0.67/share) from $258 million ($0.58/share) in the prior year.
- Free cash flow was $396 million, a decrease from $428 million in the prior year, impacted by lower operating cash flows and higher capital expenditures.
- Operating expenses increased by 8.7% to $2.17 billion, largely due to higher costs for recycling commodities, fuel, and labor.
- The company benefited from a $32 million reduction in income tax expense due to excess tax benefits related to equity-based compensation under new accounting standards.
- Debt levels decreased to $9.04 billion from $9.31 billion at the end of 2016.
- The company made a $25 million write-down on an equity method investment in a waste diversion technology company.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2017, Waste Management Inc kept $0.09.
- Revenue$3.44B100.0%
- Cost of revenue−$2.17B63.0%
- Gross profit$1.27B37.0%
- Operating costs−$716.0M20.8%
- Operating income$558.0M16.2%
- Interest, other & tax−$260.0M7.6%
- Net income$298.0M8.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed April 26, 2017Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Revenue | $3.44B$3.18B | +8.3% |
| Cost of Revenue | $2.17B$1.99B | +8.7% |
| Gross Profit | $1.27B$1.18B | +7.7% |
| SG&A Expenses | $390.00M$362.00M | +7.7% |
| Operating Expenses | $2.88B$2.67B | +8.0% |
| Operating Income | $558.00M$508.00M | +9.8% |
| Net Income | $298.00M$256.00M | +16.4% |
| EPS (Basic) | $0.68$0.58 | +17.2% |
| EPS (Diluted) | $0.67$0.58 | +15.5% |
| Shares Outstanding (Basic) | 441.30M446.10M | −1.1% |
| Shares Outstanding (Diluted) | 444.10M448.60M | −1.0% |
05—Questions
Frequently Asked Questions
How did Waste Management's revenue perform in the first quarter of 2017?
Waste Management's operating revenues increased by 8.3% to $3.44 billion for the first quarter of 2017 compared to the same period in 2016. This growth was attributed to higher recycling commodity prices and increased volume and yield in its collection and disposal services.
What drove the change in net income?
Net income attributable to Waste Management, Inc. increased to $298 million ($0.67 per diluted share) in the first quarter of 2017, up from $258 million ($0.58 per diluted share) in the prior year. A significant factor contributing to this increase was a $32 million reduction in income tax expense due to excess tax benefits from equity-based compensation, resulting from the adoption of new accounting standards.
How is the company managing its debt and cash flow?
The company's total debt decreased to $9.04 billion from $9.31 billion at the end of 2016. Free cash flow for the quarter was $396 million. While this is a decrease from the prior year, it reflects the company's ability to generate cash after capital expenditures. The company also reported net debt repayments of $487 million under its credit facilities, offset by net commercial paper borrowings.
Were there any significant charges or impairments during the quarter?
Yes, Waste Management recorded a $25 million charge to write down an equity method investment in a waste diversion technology company to its fair value during the first quarter of 2017.
06—Continue