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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Waste Management | NYSE:WM | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.72 | 0.35% | 207.88 | 208.60 | 204.91 | 207.16 | 2,237,958 | 01:00:00 |
Revenue Grows 5.6% With Both Strong Price and Volume
Company Again Increases Full-Year 2016 EPS Guidance
Waste Management, Inc. (NYSE: WM) today announced financial results for its quarter ended September 30, 2016. Revenues for the third quarter of 2016 were $3.55 billion compared with $3.36 billion for the same 2015 period. Net income for the quarter was $302 million, or $0.68 per diluted share, compared with net income of $335 million, or $0.74 per diluted share, for the third quarter of 2015.(a) On an as-adjusted basis, excluding certain items, net income was $374 million, or $0.84 per diluted share, in the third quarter of 2016.(b)
The Company’s as-adjusted third quarter 2016 results exclude $0.16 per diluted share of non-cash charges related to the impairment of certain assets and an increase to estimated remediation reserves. The Company incurred pre-tax charges of $43 million related to the impairment of a rural landfill, and $42 million related to estimated environmental remediation at a third-party closed site that was operated by a company in the mid-1960s, prior to our acquisition of that company’s parent in 1998.(b)
David P. Steiner, Chief Executive Officer of Waste Management, commented, “Our focus on improving core price, growing high margin volumes, and containing costs continued our strong performance from the first half of 2016, as we again exceeded our revenue, earnings, and margin targets. In the third quarter, core price was 4.7% and volumes were positive 1.6%, leading to a 5.6% increase in revenue. Overall, the combined positive price, volume growth, and cost management drove increases in adjusted operating income, adjusted operating EBITDA, and margins when compared to the third quarter of 2015.” (b) (c)
KEY HIGHLIGHTS FOR THE THIRD QUARTER 2016
Steiner concluded, “In 2016, we have seen three consecutive quarters of strong price, positive volume, and better than expected earnings performance. As a result, we are again raising our adjusted diluted earnings per share guidance for 2016. Our previous guidance for adjusted earnings per diluted share was between $2.83 and $2.86 for the full year. For the fourth quarter of 2016, we are confident that we can meet or exceed the current Wall Street consensus. Doing so will lead to full year adjusted earnings per diluted share of at least $2.91, which is a more than 5% increase from the mid-point of our initial 2016 guidance, and a more than 11% increase from 2015. We are also confident that we can achieve our free cash flow guidance for 2016 of between $1.6 and $1.7 billion.”(b)
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(a) For purposes of this press release, all references to “Net income” refer to the financial statement line items “Net income attributable to Waste Management, Inc.”.
(b) This press release contains a discussion of non-GAAP measures, as defined in Regulation G of the Securities Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with (i) additional, meaningful comparisons of current results to prior periods’ results by excluding items that the Company does not believe reflect its fundamental business performance and are not representative or indicative of its results of operations and (ii) financial measures the Company uses in the management of its business. Accordingly, net income, earnings per diluted share, operating income and margin, operating EBITDA and margin, and tax rate have been referred to as “adjusted” in certain instances, excluding items identified in the reconciliations provided.
The Company’s projected full year 2016 earnings per diluted share and full year expected adjusted tax rate are not based on GAAP calculations and are anticipated to be adjusted to exclude the effects of events or circumstances in 2016 that are not representative or indicative of the Company’s results of operations, including the items excluded from our as-adjusted second and third quarter 2016 results. Projected GAAP earnings per diluted share and effective tax rate for the full year would require inclusion of the projected impact of future excluded items, including items that are not currently determinable, but may be significant, such as asset impairments and one-time items, charges, gains or losses from divestitures or litigation, or other items. Due to the uncertainty of the likelihood, amount and timing of any such items, the Company does not have information available to provide a quantitative reconciliation of adjusted projected full year earnings per diluted share or expected tax rate to a GAAP projection.
The Company also discusses free cash flow and provides a projection of free cash flow. Free cash flow is a non-GAAP measure. The company discusses free cash flow because the Company believes that it is indicative of its ability to pay its quarterly dividends, repurchase common stock, fund acquisitions and other investments and, in the absence of refinancings, to repay its debt obligations. Free cash flow is not intended to replace “Net cash provided by operating activities,” which is the most comparable U.S. GAAP measure. However, the Company believes free cash flow gives investors useful insight into how the Company views its liquidity. Nevertheless, the use of free cash flow as a liquidity measure has material limitations because it excludes certain expenditures that are required or that the Company has committed to, such as declared dividend payments and debt service requirements. The Company defines free cash flow as net cash provided by operating activities, less capital expenditures, plus proceeds from divestitures of businesses and other assets (net of cash divested); this definition may not be comparable to similarly titled measures reported by other companies.
The Company defines operating EBITDA as income from operations before depreciation and amortization; this measure may not be comparable to similarly titled measures reported by other companies. Management uses this measure as an indicator of the Company’s operating performance and ability to pay dividends, fund acquisitions, capital expenditures and other investments and, in the absence of refinancing, to repay debt obligations. Adjusted operating EBITDA is a non-GAAP measure and is not intended to replace net income, income from operations or net cash provided by operating activities.
The quantitative reconciliations of non-GAAP measures used herein to the most comparable GAAP measures are included in the accompanying schedules, with the exception of projected earnings per diluted share and expected tax rate. Non-GAAP measures should not be considered a substitute for financial measures presented in accordance with GAAP, and investors are urged to take into account GAAP measures as well as non-GAAP measures in evaluating the Company.
(c) Core price is a performance metric used by management to evaluate the effectiveness of our pricing strategies; it is not derived from our financial statements and may not be comparable to measures presented by other companies. Core price is based on certain historical assumptions, which may differ from actual results, to allow for comparability between reporting periods and to reveal trends in results over time.
The Company will host a conference call at 10:00 AM (Eastern) today to discuss the third quarter 2016 results. Information contained within this press release will be referenced and should be considered in conjunction with the call.
The conference call will be webcast live from the Investor Relations section of Waste Management’s website www.wm.com. To access the conference call by telephone, please dial (877) 710-6139 approximately 10 minutes prior to the scheduled start of the call. If you are calling from outside of the United States or Canada, please dial (706) 643-7398. Please utilize conference ID number 90149575 when prompted by the conference call operator.
A replay of the conference call will be available on the Company’s website www.wm.com and by telephone from approximately 1:00 PM (Eastern) Wednesday, October 26, 2016 through 5:00 PM (Eastern) on Wednesday, November 9, 2016. To access the replay telephonically, please dial (855) 859-2056, or from outside of the United States or Canada dial (404) 537-3406, and use the replay conference ID number 90149575.
The Company, from time to time, provides estimates of financial and other data, comments on expectations relating to future periods and makes statements of opinion, view or belief about current and future events. This press release contains a number of such forward-looking statements, including but not limited to statements regarding 2016 earnings per diluted share; 2016 free cash flow; 2016 adjusted tax rate; and future Company performance, including earnings improvement, cash flow and volume trends. You should view these statements with caution. They are based on the facts and circumstances known to the Company as of the date the statements are made. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those set forth in such forward-looking statements, including but not limited to, increased competition; pricing actions; failure to implement our optimization, growth, and cost savings initiatives and overall business strategy; failure to identify acquisition targets and negotiate attractive terms; failure to consummate or integrate such acquisitions; failure to obtain the results anticipated from acquisitions; environmental and other regulations; commodity price fluctuations; disposal alternatives and waste diversion; declining waste volumes; failure to develop and protect new technology; significant environmental or other incidents resulting in liabilities and brand damage; weakness in economic conditions; failure to obtain and maintain necessary permits; labor disruptions; impairment charges; and negative outcomes of litigation or governmental proceedings. Please also see the Company’s filings with the SEC, including Part I, Item 1A of the Company’s most recently filed Annual Report on Form 10-K, for additional information regarding these and other risks and uncertainties applicable to our business. The Company assumes no obligation to update any forward-looking statement, including financial estimates and forecasts, whether as a result of future events, circumstances or developments or otherwise.
ABOUT WASTE MANAGEMENT
Waste Management, based in Houston, Texas, is the leading provider of comprehensive waste management services in North America. Through its subsidiaries, the company provides collection, transfer, recycling and resource recovery, and disposal services. It is also a leading developer, operator and owner of landfill gas-to-energy facilities in the United States. The company’s customers include residential, commercial, industrial, and municipal customers throughout North America. To learn more information about Waste Management, visit www.wm.com or www.thinkgreen.com.
Waste Management, Inc. Condensed Consolidated Statements of Operations (In Millions, Except Per Share Amounts) (Unaudited) Quarters Ended September 30, 2016 2015 Operating revenues $ 3,548 $ 3,360 Costs and expenses: Operating 2,216 2,095 Selling, general and administrative 330 330 Depreciation and amortization 336 330 Restructuring - 2 Expense from divestitures, asset impairments and unusual items 106 2 2,988 2,759 Income from operations 560 601 Other income (expense): Interest expense, net (94 ) (95 ) Equity in net losses of unconsolidated entities (9 ) (9 ) Other, net - (1 ) (103 ) (105 ) Income before income taxes 457 496 Provision for income taxes 153 159 Consolidated net income 304 337 Less: Net income attributable to noncontrolling interests 2 2 Net income attributable to Waste Management, Inc. $ 302 $ 335 Basic earnings per common share $ 0.68 $ 0.75 Diluted earnings per common share $ 0.68 $ 0.74 Basic common shares outstanding 442.9 449.6 Diluted common shares outstanding 445.7 452.7 Cash dividends declared per common share $ 0.41 $ 0.385 Waste Management, Inc. Earnings Per Share (In Millions, Except Per Share Amounts) (Unaudited) Quarters Ended September 30, 2016 2015 EPS Calculation: Net income attributable to Waste Management, Inc. $ 302 $ 335 Number of common shares outstanding at end of period 442.0 446.5 Effect of using weighted average common shares outstanding 0.9 3.1 Weighted average basic common shares outstanding 442.9 449.6 Dilutive effect of equity-based compensation awards and other contingently issuable shares 2.8 3.1 Weighted average diluted common shares outstanding 445.7 452.7 Basic earnings per common share $ 0.68 $ 0.75 Diluted earnings per common share $ 0.68 $ 0.74 Waste Management, Inc. Condensed Consolidated Statements of Operations (In Millions, Except Per Share Amounts) (Unaudited) Nine Months Ended September 30, 2016 2015 Operating revenues $ 10,149 $ 9,715 Costs and expenses: Operating 6,339 6,204 Selling, general and administrative 1,032 1,000 Depreciation and amortization 988 944 Restructuring 4 7 Expense from divestitures, asset impairments and unusual items 107 17 8,470 8,172 Income from operations 1,679 1,543 Other income (expense): Interest expense, net (282 ) (294 ) Loss on early extinguishment of debt (4 ) (552 ) Equity in net losses of unconsolidated entities (32 ) (32 ) Other, net (49 ) (2 ) (367 ) (880 ) Income before income taxes 1,312 663 Provision for income taxes 466 184 Consolidated net income 846 479 Less: Net loss attributable to noncontrolling interests (1 ) (1 ) Net income attributable to Waste Management, Inc. $ 847 $ 480 Basic earnings per common share $ 1.91 $ 1.06 Diluted earnings per common share $ 1.89 $ 1.05 Basic common shares outstanding 444.3 454.5 Diluted common shares outstanding 447.1 457.5 Cash dividends declared per common share $ 1.23 $ 1.155 Waste Management, Inc. Earnings Per Share (In Millions, Except Per Share Amounts) (Unaudited) Nine Months Ended September 30, 2016 2015 EPS Calculation: Net income attributable to Waste Management, Inc. $ 847 $ 480 Number of common shares outstanding at end of period 442.0 446.5 Effect of using weighted average common shares outstanding 2.3 8.0 Weighted average basic common shares outstanding 444.3 454.5 Dilutive effect of equity-based compensation awards and other contingently issuable shares 2.8 3.0 Weighted average diluted common shares outstanding 447.1 457.5 Basic earnings per common share $ 1.91 $ 1.06 Diluted earnings per common share $ 1.89 $ 1.05 Waste Management, Inc. Condensed Consolidated Balance Sheets (In Millions) September 30, December 31, 2016 2015 (Unaudited) Assets Current assets: Cash and cash equivalents $ 30 $ 39 Receivables, net 2,040 2,094 Other 223 212 Total current assets 2,293 2,345 Property and equipment, net 10,842 10,665 Goodwill 6,227 5,984 Other intangible assets, net 617 477 Other assets 777 896 Total assets $ 20,756 $ 20,367 Liabilities and Equity Current liabilities: Accounts payable, accrued liabilities, anddeferred revenues
$ 2,232 $ 2,257 Current portion of long-term debt 432 253 Total current liabilities 2,664 2,510 Long-term debt, less current portion 8,829 8,676 Other liabilities 3,880 3,814 Total liabilities 15,373 15,000 Equity: Waste Management, Inc. stockholders' equity 5,359 5,345 Noncontrolling interests 24 22 Total equity 5,383 5,367 Total liabilities and equity $ 20,756 $ 20,367 Note: Prior year information has been reclassified to conform to 2016 presentation. Waste Management, Inc. Condensed Consolidated Statements of Cash Flows (In Millions) (Unaudited) Nine Months Ended September 30, 2016 2015 Cash flows from operating activities: Consolidated net income $ 846 $ 479 Adjustments to reconcile consolidated net income to net cash provided by operating activities: Depreciation and amortization 988 944 Loss on early extinguishment of debt 4 552 Other 282 223 Change in operating assets and liabilities, net of effects of acquisitions and divestitures 87 (226 ) Net cash provided by operating activities 2,207 1,972 Cash flows from investing activities: Acquisitions of businesses, net of cash acquired (600 ) (473 ) Capital expenditures (962 ) (864 ) Proceeds from divestitures of businesses and other assets (net of cash divested) 32 114 Net receipts from restricted trust and escrow accounts, and other (20 ) 42 Net cash used in investing activities (1,550 ) (1,181 ) Cash flows from financing activities: New borrowings 2,536 2,060 Debt repayments (2,210 ) (2,421 ) Premiums paid on early extinguishment of debt (2 ) (555 ) Common stock repurchase program (500 ) (600 ) Cash dividends (546 ) (523 ) Exercise of common stock options 57 53 Other, net (1 ) 3 Net cash used in financing activities (666 ) (1,983 ) Effect of exchange rate changes on cash and cash equivalents - (2 ) Decrease in cash and cash equivalents (9 ) (1,194 ) Cash and cash equivalents at beginning of period 39 1,307 Cash and cash equivalents at end of period $ 30 $ 113 Waste Management, Inc.Summary Data Sheet(Dollar Amounts in Millions)(Unaudited) Quarters Ended September 30, June 30, September 30, 2016 2016 2015Operating Revenues by Lines of Business
Collection Commercial $ 881 $ 865 $ 841 Residential 630 622 630 Industrial 633 613 594 Other 110 111 92 Total Collection 2,254 2,211 2,157 Landfill 831 792 781 Transfer 397 391 359 Recycling 325 290 297 Other 432 407 387 Intercompany (a) (691 ) (666 ) (621 ) Operating revenues $ 3,548 $ 3,425 $ 3,360 Quarters Ended September 30, 2016 September 30,2015
Analysis of Change in Year Over Year Revenues
AmountAs a % ofTotal Company
AmountAs a % ofTotal Company
Average yield (i) $ 74 2.2 % $ (22 ) -0.6 % Volume 53 1.6 % (46 ) -1.4 % Internal revenue growth 127 3.8 % (68 ) -2.0 % Acquisition 65 1.9 % 53 1.6 % Divestitures (5 ) -0.1 % (186 ) * Foreign currency translation 1 0.0 % (41 ) -1.2 % $ 188 5.6 % $ (242 ) -6.7 % AmountAs a % ofRelatedBusiness
AmountAs a % ofRelatedBusiness
(i) Average yield
Collection and disposal $ 60 2.1 % $ 52 1.8 % Recycling commodities 25 8.7 % (27 ) -8.1 % Fuel surcharges and mandated fees (11 ) -8.5 % (47 ) -26.3 % Total $ 74 2.2 % $ (22 ) -0.6 % Quarters Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015Free Cash Flow Analysis (b)
Net cash provided by operating activities $ 753 $ 657 $ 2,207 $ 1,972 Capital expenditures (333 ) (335 ) (962 ) (864 ) Proceeds from divestitures of businessesand other assets (net of cash divested)
8 36 32 114 Free cash flow $ 428 $ 358 $ 1,277 $ 1,222 * Percentage change does not provide a meaningful comparison. (a)Intercompany revenues between lines of business are eliminated within the Condensed Consolidated Financial Statements included herein.
(b)The summary of free cash flows has been prepared to highlight and facilitate understanding of the principal cash flow elements. Free cash flow is not a measure of financial performance under generally accepted accounting principles and is not intended to replace the consolidated statement of cash flows that was prepared in accordance with generally accepted accounting principles.
Waste Management, Inc.Summary Data Sheet(Dollar Amounts in Millions)(Unaudited) Quarters Ended September 30,June 30,
September 30, 2016 2016 2015Balance Sheet Data
Cash and cash equivalents $ 30 $ 39 $ 113 Debt-to-total capital ratio: Long-term indebtedness, including current portion $ 9,261 $ 9,530 $ 8,996 Total equity 5,383 $ 5,228 5,257 Total capital $ 14,644 $ 14,758 $ 14,253 Debt-to-total capital 63.2 % 64.6 % 63.1 % Capitalized interest $ 2 $ 3 $ 4Acquisition Summary (a)
Gross annualized revenue acquired $ 23 $ 21 $ 36 Total consideration $ 32 $ 37 $ 56 Cash paid for acquisitions $ 28 $ 35 $ 19Other Operational Data
Internalization of waste, based on disposal costs 65.8 % 65.6 % 65.7 % Total landfill disposal volumes (tons in millions) 28.0 26.7 26.1 Active landfills 248 248 252 Sites accepting waste at the end of each period presented 233 234 238Amortization, Accretion and Other Expenses for
Landfills Included in Operating Groups:
Landfill amortization expense - Cost basis of landfill assets $ 98.3 $ 96.7 $ 94.0 Asset retirement costs 18.7 18.4 24.8 Total landfill amortization expense (b) 117.0 115.1 118.8 Accretion and other related expense 19.6 19.2 19.3 Landfill amortization, accretion and other related expense $ 136.6 $ 134.3 $ 138.1 (a) Represents amounts associated with business acquisitions consummated during the indicated periods except for Cash paid for acquisitions, which may include cash payments for business acquisitions consummated in prior quarters. (b)The quarter ended September 30, 2016 as compared to the quarter ended September 30, 2015 reflects a decrease in amortization expense of approximately $1.8 million primarily due to changes in landfill estimates identified in both quarters, offset in part due to an increase in volume.
Waste Management, Inc.Reconciliation of Certain Non-GAAP Measures(Dollars In Millions, Except Per Share Amounts)(Unaudited)Quarter Ended September 30, 2016
Adjusted Net Income and Earnings Per Diluted ShareAfter-Tax Amount
Per Share Amount
Net income and diluted EPS, as-reported $ 302 $ 0.68 Adjustment to net income and diluted EPS: Expense from divestitures, asset impairments and unusual items 72 0.16 Adjusted net income and diluted EPS (a) $ 374 $ 0.84 Quarter Ended September 30, 2016 Adjusted Tax Expense Reconciliation and Effective Tax RatePre-tax Income
Tax
Expense
Effective Tax Rate (b)
As reported amounts $ 457 $ 153 33.7 % Adjustment: Expense from divestitures, asset impairments and unusual items (c) 106 34 As adjusted amounts $ 563 $ 187 33.5 % 2016 Projected Free Cash Flow Reconciliation (d) Scenario 1 Scenario 2 Net cash provided by operating activities $ 2,950 $ 3,100 Capital expenditures (1,400 ) (1,450 ) Proceeds from divestitures of businesses and other assets (net of cash divested) 50 50 Free Cash Flow $ 1,600 $ 1,700 (a) Third quarter 2016 adjusted earnings per diluted share increased $0.10, or 13.5%, as compared with $0.74 per diluted share as-reported results for the same period prior year. (b)The Company calculates its Effective Tax Rate based on actual dollars. Rounding differences occurred when the Effective Tax Rate was calculated using Pre-tax Income and Tax Expense amounts included in the table above, as these items have been rounded in millions.
(c) Primarily includes pre-tax charges of i) $43 million related to the impairment of a rural landfill and ii) $42 million related to estimated environmental remediation at a closed site. (d) The reconciliation includes two scenarios that illustrate our projected free cash flow range for 2016. The amounts used in the reconciliation are subject to many variables, some of which are not under our control and, therefore, are not necessarily indicative of actual results. Waste Management, Inc.Reconciliation of Certain Non-GAAP Measures(Dollars In Millions)(Unaudited)Quarter Ended September 30, 2016
Adjusted Income from Operations, Adjusted Operating EBITDA and both as a Percent of Revenues AmountAs a % of Revenues
Operating revenues, as-reported $ 3,548 Income from operations, as-reported 560 Adjustment to income from operations: Expenses from divestitures, asset impairments and unusual items 106 Adjusted income from operations 666 (a) 18.8 % (a) Depreciation and amortization 336 Adjusted operating EBITDA $ 1,002 (b) 28.2 % (b)Quarter Ended September 30, 2015
Income from Operations, Operating EBITDA and both as a Percent of Revenues
AmountAs a % of Revenues
Operating revenues, as-reported $ 3,360 Income from operations, as-reported 601 (a) 17.9 % (a) Depreciation and amortization 330 Operating EBITDA 931 (b) 27.7 % (b) (a) Adjusted income from operations increased $65 million, or 90 basis points as a percent of revenues, as compared with as-reported results for the same period prior year. (b) Adjusted operating EBITDA increased $71 million, or 50 basis points as a percent of revenues, as compared with as-reported results for the same period prior year.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161026005848/en/
Waste ManagementAnalystsEd Egl, 713.265.1656eegl@wm.comorMediaToni Beck, 713.394.5093tbeck3@wm.comwww.wm.com
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