01—Abstract
Summary
Summary of the 10-Q filed May 6, 2020. Cited figures are marked; the original filing is the authoritative source.
Waste Management, Inc. (WM) reported financial results for the first quarter ended March 31, 2020.
The company generated operating revenues of $3.729 billiona, a slight increase of 0.9% from the prior year, primarily driven by higher yield and volumes in its collection and disposal business, partially offset by lower commodity prices for recycling. Net income attributable to Waste Management, Inc. was $361 million, or $0.85 per diluted share, an increase from $347 million, or $0.81 per diluted share, in the first quarter of 2019. The company highlighted the initial impacts of the COVID-19 pandemic, which began to affect revenues in March 2020.
Despite these headwinds, WM demonstrated resilience with stable operational performance. The company's strong cash flow generation allowed for significant shareholder returns through dividends and share repurchases. However, in response to the pandemic and to preserve liquidity, WM temporarily suspended its share repurchase program.
Looking ahead, WM anticipates continued near-term impacts from COVID-19 on its financial performance, particularly on volumes and customer service levels. The company's long-term strategy remains focused on organic growth, operational efficiency, and disciplined capital allocation, positioning it to navigate the evolving economic landscape.
02—Key points
Key Highlights
- Operating revenues increased by 0.9% to $3.729 billion, driven by higher yield and volume in collection and disposal services.
- Net income attributable to Waste Management, Inc. rose to $361 million ($0.85 per diluted share) from $347 million ($0.81 per diluted share) in the prior year.
- The company experienced initial impacts from the COVID-19 pandemic starting in March 2020, leading to revenue declines and increased costs for residential services.
- Net cash provided by operating activities was $765 million, a decrease from $890 million in the prior year, partly due to working capital changes influenced by COVID-19.
- Free cash flow was $318 million, down from $431 million in the prior year, reflecting lower operating cash flows and consistent capital expenditures.
- The company temporarily suspended its common stock repurchase program to enhance liquidity in response to COVID-19, though $402 million was repurchased in Q1 2020.
- The acquisition of Advanced Disposal Services, Inc. is still anticipated to close by the end of the second quarter of 2020, despite pandemic-related disruptions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Waste Management Inc kept $0.10.
- Revenue$3.73B100.0%
- Cost of revenue−$2.33B62.5%
- Gross profit$1.40B37.5%
- Operating costs−$827.0M22.2%
- Operating income$573.0M15.4%
- Interest, other & tax−$212.0M5.7%
- Net income$361.0M9.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 6, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $3.73B$3.70B | +0.9% |
| Cost of Revenue | $2.33B$2.30B | +1.3% |
| Gross Profit | $1.40B$1.40B | +0.1% |
| SG&A Expenses | $425.00M$409.00M | +3.9% |
| Operating Expenses | $3.16B$3.08B | +2.6% |
| Operating Income | $573.00M$621.00M | −7.7% |
| Net Income | $361.00M$347.00M | +4.0% |
| EPS (Basic) | $0.85$0.82 | +3.7% |
| EPS (Diluted) | $0.85$0.81 | +4.9% |
| Shares Outstanding (Basic) | 424.20M424.50M | −0.1% |
| Shares Outstanding (Diluted) | 426.40M426.90M | −0.1% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic impact Waste Management's Q1 2020 results?
The COVID-19 pandemic began to impact Waste Management's results in March 2020. This led to revenue declines in landfill and industrial/commercial collection services due to business closures and reduced service needs. Conversely, residential customer costs increased due to higher waste volumes from stay-at-home orders. The company incurred additional costs for employee safety and transitioned back-office staff to remote work. While these impacts were not material to the full quarter's financial statements, management expects them to negatively affect financial performance in the near term.
What is the status of the Advanced Disposal acquisition?
Waste Management continues to make progress on its planned acquisition of Advanced Disposal Services, Inc. Despite general business disruptions caused by COVID-19, the company anticipates receiving final antitrust regulatory approval and proceeding toward closing by the end of the second quarter of 2020.
How did Waste Management manage its liquidity and capital resources given the economic uncertainty?
Waste Management generated $765 million in cash from operating activities in Q1 2020. To preserve liquidity in light of the COVID-19 pandemic, the company temporarily suspended its common stock repurchase program. They also focused on cost management, including route optimization, reducing overtime, limiting hiring, and optimizing the workforce. The company believes its investment-grade credit ratings, unencumbered assets, and modest leverage provide adequate financing to meet its ongoing requirements.
What were the key drivers of the change in operating revenues and net income compared to the prior year?
Operating revenues increased slightly by 0.9% to $3.729 billion, driven by higher yield and volume in collection and disposal services, partially offset by lower recycling commodity prices. Net income attributable to Waste Management, Inc. increased to $361 million ($0.85 per diluted share) from $347 million ($0.81 per diluted share) in the prior year. This improvement was supported by higher revenues and a lower effective income tax rate in the current period, despite the emerging impacts of COVID-19 and higher interest expenses from recent debt issuances.
06—Continue