Strong Organic Revenue Growth Continues to Drive Increases in Net Income and Cash Flow
HOUSTON — July 26, 2017— Waste Management, Inc. (NYSE: WM) today announced financial results for its quarter ended June 30, 2017. Revenues for the second quarter of 2017 were $3.68 billion compared with $3.43 billion for the same 2016 period. Net income for the quarter was $362 million, or $0.81 per diluted share, compared with net income of $287 million, or $0.64 per diluted share, for the second quarter of 2016.(a) On an as-adjusted basis, excluding certain items, net income was $329 million, or $0.74 per diluted share, in the second quarter of 2016.(b)
Jim Fish, President and Chief Executive Officer of Waste Management, commented, “We are hitting on all cylinders right now with the cash generating strength of our business shining brightly in 2017. We achieved the highest quarterly operating EBITDA in our history, with operating EBITDA growing about 8.0% in the second quarter when compared to the second quarter of 2016.(c) Our strong operational performance led to record free cash flow generation in the first half of 2017.(b) Together, our strong core price results, robust volume growth, and continued cost improvement focus led to earnings per diluted share growth of almost 10%.(b)”
KEY HIGHLIGHTS FOR THE SECOND QUARTER 2017
• Overall revenue increased by 7.4%, or $252 million. The revenue increase was driven by positive yield and volume in the Company’s collection and disposal business, which contributed $158 million to revenue growth, and higher recycling commodity prices and volumes, which contributed $90 million of revenue growth.
• Core price, which consists of price increases net of rollbacks, plus fees other than the Company’s fuel surcharge, was 4.7%.(d)
• Internal revenue growth from yield for collection and disposal operations was 1.9%.
• Internal revenue growth from volume in the Company’s traditional solid waste business was 3.2% in the second quarter of 2017. Total Company internal revenue growth from volume was 3.4% in the second quarter of 2017.
• As a percent of revenue, operating expenses were 62.3% in the second quarter of 2017, as compared to 62.2% in the second quarter of 2016. Operating expenses as a percentage of revenue in the Company’s traditional solid waste business improved about 70 basis points during the quarter, though that margin improvement was offset by growth in the Company’s lower margin recycling brokerage business and higher fuel costs.
• As a percent of revenue, SG&A expenses were 9.6%, a 30 basis point improvement over the prior year quarter.
• Net cash provided by operating activities was $813 million, compared to $762 million in the second quarter of 2016, an increase of 6.7%.
• Capital expenditures were $299 million, compared to $312 million in the second quarter of 2016.
• Free cash flow was $520 million in the second quarter of 2017, compared to $461 million in the second quarter of 2016, an increase of 12.8%.(b)
• The Company returned $437 million to shareholders during the second quarter, paying $187 million in dividends and repurchasing $250 million of its common stock.
• The effective tax rate was approximately 36.6%.
Fish concluded, “Based upon our strong start to 2017, we are on track to meet the upper end of our full-year 2017 guidance of adjusted earnings per diluted share of between $3.14 and $3.18 and free cash flow of between $1.5 and $1.6 billion. (b) In the third quarter, we expect to enter agreements to repurchase $500 million of the Company’s common stock. We’re proud of the performance our employees have delivered and confident that will continue. Accordingly, we expect our earnings will continue to grow throughout the remainder of 2017, which in turn will continue to drive robust cash flow to be deployed for the benefit of our business and shareholders.”
(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, and earnings growth have been presented in certain instances excluding items identified in the reconciliations provided.
The Company’s projected full-year 2017 earnings per diluted share is not based on GAAP net earnings per diluted share and are anticipated to be adjusted to exclude the effects of events or circumstances in 2017 that are not representative or indicative of the Company’s results of operations, including the items excluded from our as-adjusted first quarter results. Projected GAAP earnings per diluted share 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 to a GAAP earnings per diluted share 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 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. 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) Management defines operating EBITDA as GAAP income from operations before depreciation and amortization; this measure may not be comparable to similarly titled measures reported by other companies.
(d) Core price is a performance metric used by management to evaluate the effectiveness of the Company’s pricing strategies; it is not derived from the Company’s financial statements and may not be comparable to measures presented by other companies. Core price is based on certain historical assumptions, which differs 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 second quarter 2017 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 51149867 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, July 26, 2017 through 5:00 PM (Eastern) on Wednesday, August 9, 2017. 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 51149867.
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 2017 earnings per diluted share; 2017 free cash flow; 2017 share repurchases; and all statements regarding future business performance and growth. 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 exposure to
litigation and 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.
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Source: Waste Management, Inc.
Ed Egl, 713.265.1656
Toni Beck, 713.394.5093