01—Abstract
Summary
Summary of the 10-Q filed July 26, 2017. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported solid financial results for the quarter ending June 30, 2017.
The company demonstrated revenue growth driven by increases in both volume and pricing across its collection and disposal services, alongside a significant contribution from higher recycling commodity prices. Operating income saw a healthy increase, reflecting effective cost management and operational efficiencies, despite rising fuel and commodity costs impacting operating expenses. Net income attributable to Waste Management, Inc. increased year-over-year, leading to improved earnings per diluted share.
The company also maintained a strong free cash flow, enabling continued return of capital to shareholders through dividends and share repurchases, while also managing its debt levels prudently. WM's strategic focus on yield management and continuous improvement appears to be yielding positive financial outcomes.
02—Key points
Key Highlights
- Total operating revenues increased by 7.4% to $3.68 billion compared to the prior year period.
- Income from operations increased by 10.1% to $673 million.
- Net income attributable to Waste Management, Inc. rose to $362 million, or $0.81 per diluted share, up from $287 million, or $0.64 per diluted share, in the prior year.
- Free cash flow for the quarter was $520 million, an increase from $461 million in the prior year.
- The company repurchased approximately 2.7 million shares of common stock during the quarter, with an ongoing authorization for $500 million in future repurchases.
- Debt levels decreased, with total debt standing at $9.06 billion as of June 30, 2017, down from $9.31 billion at the end of 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Waste Management Inc kept $0.10.
- Revenue$3.68B100.0%
- Cost of revenue−$2.29B62.3%
- Gross profit$1.39B37.7%
- Operating costs−$714.0M19.4%
- Operating income$673.0M18.3%
- Interest, other & tax−$311.0M8.5%
- Net income$362.0M9.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed July 26, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $3.68B$3.42B | +7.4% |
| Cost of Revenue | $2.29B$2.13B | +7.5% |
| Gross Profit | $1.39B$1.29B | +7.1% |
| SG&A Expenses | $353.00M$340.00M | +3.8% |
| Operating Expenses | $3.00B$2.81B | +6.8% |
| Operating Income | $673.00M$611.00M | +10.1% |
| Net Income | $362.00M$286.00M | +26.6% |
| EPS (Basic) | $0.82$0.65 | +26.2% |
| EPS (Diluted) | $0.81$0.64 | +26.6% |
| Shares Outstanding (Basic) | 441.90M444.00M | −0.5% |
| Shares Outstanding (Diluted) | 444.40M446.70M | −0.5% |
05—Questions
Frequently Asked Questions
What drove the increase in Waste Management's revenue in Q2 2017?
Revenue increased primarily due to higher volumes in collection and disposal services, improved pricing ('yield') across these lines of business, and significantly higher market prices for recycling commodities. Additionally, higher fuel surcharge revenues, linked to increased diesel prices, and revenues from recent acquisitions contributed to the growth.
How did Waste Management manage its expenses despite revenue growth?
While operating expenses increased by 7.5% to $2.29 billion, they remained relatively stable as a percentage of revenue (62.3% vs. 62.2% in the prior year). The increase was largely driven by higher costs related to increased volumes, higher recycling commodity costs, increased maintenance, and higher fuel prices. Selling, general, and administrative expenses also increased, mainly due to higher incentive compensation and other variable costs tied to revenue growth, but as a percentage of revenue, they slightly decreased.
What is the company's outlook on its financial health and shareholder returns?
The company demonstrated strong operational performance leading to increased income from operations and net income. It generated robust free cash flow of $520 million, which supports its ability to pay dividends and repurchase stock. Waste Management continues to return capital to shareholders and has substantial capacity for future repurchases, indicating confidence in its ongoing financial stability and ability to generate cash.
Are there any significant environmental or legal liabilities impacting the company?
The company disclosed ongoing legal proceedings related to environmental matters, including Superfund sites and potential civil penalties in Pennsylvania. However, management stated that they do not currently believe the eventual outcome of these matters, individually or in the aggregate, will have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. Recorded liabilities for environmental remediation are in place, and the company actively manages these.
06—Continue