01—Abstract
Summary
Summary of the 10-Q filed April 23, 2018. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported a strong first quarter in 2018, demonstrating year-over-year growth in revenue, income from operations, and net income.
Revenue increased by 2.1% to $3.51 billiona, driven by higher volumes and improved pricing in its core collection and disposal services. Despite headwinds from lower recycling commodity prices, the company's solid waste business performed well, contributing to a 9.0% increase in operating income to $608 million. Net income attributable to Waste Management, Inc. surged by 32.9% to $396 million, or $0.91 per diluted share, significantly boosted by the recently enacted tax reform that lowered the U.S. federal corporate income tax rate from 35% to 21%.
02—Key points
Key Highlights
- Total revenue increased by 2.1% to $3.51 billion in Q1 2018 compared to Q1 2017, driven by yield and volume growth in collection and disposal services.
- Income from operations grew by 9.0% to $608 million, reflecting improved operational efficiency and pricing strategies, with operating margin increasing from 16.2% to 17.3%.
- Net income attributable to Waste Management, Inc. saw a substantial increase of 32.9% to $396 million ($0.91 per diluted share), primarily due to the benefit of the reduced federal corporate tax rate.
- Net cash provided by operating activities increased by 12.0% to $809 million, indicating strong operational cash generation.
- The company returned $456 million to shareholders through common stock repurchases ($250 million accelerated share repurchase) and dividends ($206 million) in Q1 2018.
- Acquisitions remain a focus, with $246 million spent on seven solid waste businesses during the quarter, signaling continued investment in inorganic growth.
- Despite strong operational performance, recycling commodity prices experienced significant downward pressure, leading to a revenue decline in that segment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, Waste Management Inc kept $0.11.
- Revenue$3.51B100.0%
- Cost of revenue−$2.18B62.2%
- Gross profit$1.33B37.8%
- Operating costs−$719.0M20.5%
- Operating income$608.0M17.3%
- Interest, other & tax−$212.0M6.0%
- Net income$396.0M11.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed April 23, 2018Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $3.51B$3.44B | +2.1% |
| Cost of Revenue | $2.18B$2.17B | +0.8% |
| Gross Profit | $1.33B$1.27B | +4.2% |
| SG&A Expenses | $373.00M$390.00M | −4.4% |
| Operating Expenses | $2.90B$2.88B | +0.7% |
| Operating Income | $608.00M$558.00M | +9.0% |
| Net Income | $396.00M$298.00M | +32.9% |
| EPS (Basic) | $0.91$0.68 | +33.8% |
| EPS (Diluted) | $0.91$0.67 | +35.8% |
| Shares Outstanding (Basic) | 433.30M441.30M | −1.8% |
| Shares Outstanding (Diluted) | 435.80M444.10M | −1.9% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in net income for Waste Management in Q1 2018?
The primary driver for the substantial increase in net income was the positive impact of the Tax Cuts and Jobs Act, which reduced the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. This tax reform significantly lowered the company's income tax expense.
How did the company's recycling business perform in Q1 2018?
The recycling business faced significant headwinds in Q1 2018 due to lower market prices for recycling commodities. This resulted in a revenue decline of $73 million for the quarter. The company expects these market conditions, partly due to Chinese import restrictions, to persist throughout 2018.
What is the company's strategy for growth?
Waste Management's strategy focuses on 'focused differentiation' and 'continuous improvement.' This involves leveraging its extensive asset network for profitable growth and maintaining competitive advantages, alongside cost control, process improvement, and operational efficiency. The company also continues to pursue both organic and inorganic growth, as evidenced by $246 million spent on acquisitions in Q1 2018.
How is Waste Management managing its debt?
The company's debt increased to $9.96 billion at the end of Q1 2018, up from $9.49 billion at the end of 2017. While a significant portion matures within the next 12 months, Waste Management has the intent and ability to refinance a substantial amount on a long-term basis, supported by its revolving credit facility. The company also utilized its commercial paper program for borrowings during the quarter.
06—Continue