Waste Management Announces Fourth Quarter and Full-Year 2017 Earnings



HOUSTON–()–Waste Management, Inc. (NYSE: WM) today announced financial results for
its quarter ended December 31, 2017. Revenues for the fourth quarter of
2017 were $3.65 billion, compared with $3.46 billion for the same 2016
period. Net income for the quarter was $903 million, or $2.06 per
diluted share, compared with net income of $335 million, or $0.75 per
diluted share, for the fourth quarter of 2016.(a) On an
as-adjusted basis, earnings per diluted share were $0.85 for the fourth
quarter of 2017, compared with $0.75 for the fourth quarter of 2016.(b)

The Company’s fourth quarter 2017 results have been adjusted to exclude
a net benefit of $1.21 per diluted share related to the impact of the
Tax Cuts and Jobs Act.(b)

For the full year 2017, the Company reported revenues of $14.5 billion,
compared with $13.6 billion for 2016. Earnings per diluted share were
$4.41 for the full year 2017 compared with $2.65 for the full year 2016.
On an as-adjusted basis, earnings per diluted share were $3.22 for the
full year 2017 versus $2.91 for the full year 2016.(b)

Jim Fish, President and Chief Executive Officer of Waste Management,
commented, “The strong results that we saw through the first nine months
of 2017 continued into the fourth quarter as we saw organic revenue
growth continue to translate into operating EBITDA growth. In the fourth
quarter, we achieved double-digit growth in income from operations,
operating EBITDA, and adjusted earnings per diluted share, and nearly
10% growth in both adjusted income from operations and operating EBITDA.(b)

“Looking at the full year, 2017 was exceptional for Waste Management as
our continued focus on improving core price, adding profitable volume in
a disciplined manner, and controlling costs led to arguably the best
year in the company’s history. Our employees did a great job of
executing our strategy, and we exceeded our expectations for all
financial and operational metrics leading to record cash provided by
operations and adjusted earnings per diluted share.”

KEY HIGHLIGHTS FOR THE FOURTH QUARTER AND THE FULL YEAR 2017

Revenue Growth

  • In the fourth quarter, overall revenue increased by 5.5%, or $192
    million, from the same period in the prior year. The revenue growth
    was driven by strong yield and volume growth in the Company’s
    collection and disposal business, which contributed $172 million of
    the increase. For the full year 2017, overall revenue increased by
    6.4%, or $876 million. Yield and volume growth in the Company’s
    collection and disposal business increased revenue by $536 million.
    Though revenue from the Company’s recycling yield and volume declined
    by $25 million on a year-over-year basis in the fourth quarter of
    2017, full-year recycling yield and volume contributed $231 million of
    revenue growth.
  • Core price, which consists of price increases net of rollbacks and
    fees, excluding the Company’s fuel surcharge, was 4.8%, compared to
    5.1% in the fourth quarter of 2016 and 4.7% in the third quarter of
    2017. For the full year, core price was 4.8%, compared to 5.0% for the
    full year of 2016.(c)
  • Internal revenue growth from yield for collection and disposal
    operations was 2.2% for the fourth quarter and 2.0% for the full year.
  • Traditional solid waste internal revenue growth from volume was 4.2%
    in the fourth quarter of 2017, or 5.0% on a workday adjusted basis.
    Total Company internal revenue growth from volume, which includes our
    recycling and other ancillary businesses, was 2.6% in the fourth
    quarter, or 3.4% on a workday adjusted basis. For the full year 2017,
    traditional solid waste internal revenue growth from volume was 2.7%,
    or 2.9% on a workday adjusted basis. Total Company volume was 2.1% for
    the full year 2017, or 2.3% on a workday adjusted basis.

Recycling

  • Average recycling commodity prices at the Company’s recycling
    facilities were approximately 8.1% lower in the fourth quarter of 2017
    compared with the prior year period. Recycling volumes declined 4.8%
    in the fourth quarter. Results in the Company’s recycling line of
    business declined by $0.03 per diluted share when compared to the
    fourth quarter of 2016. For the full year, average recycling commodity
    prices at the Company’s recycling facilities were approximately 27.0%
    higher and volumes decreased 0.5%. The revenue increase, combined with
    reduced operating costs at the Company’s recycling facilities, drove
    an almost $0.09 increase in the Company’s earnings per diluted share
    for the full year.

Cost Management & Profitability

  • Operating expenses as a percentage of revenue in the Company’s
    traditional solid waste business improved about 120 basis points
    during the fourth quarter and 85 basis points for the full year. As a
    percent of revenue, total Company operating expenses were 62.0% in the
    fourth quarter of 2017, as compared to 62.1% in the fourth quarter of
    2016. For the full year, as a percent of revenue, operating expenses
    were 62.3% in 2017, as compared to 62.4% for the full year 2016.
  • As a percent of revenue, SG&A expenses were 10.1% in the fourth
    quarter of 2017, compared to 10.9% in the fourth quarter of 2016. For
    the full year, as a percent of revenue, SG&A expenses were 10.1%,
    compared to 10.4% for the full year 2016.
  • Operating EBITDA was $1.05 billion for the fourth quarter of 2017 and
    $4.01 billion for the full year.  On an as-adjusted basis, operating
    EBITDA was $1.02 billion for the fourth quarter of 2017, an increase
    of $90 million, or 9.7%, from the fourth quarter of 2016. On an
    as-adjusted basis, full-year operating EBITDA was $4.0 billion in
    2017, an increase of 8.1% when compared with 2016.(b)

Free Cash Flow & Capital Allocation

  • Net cash provided by operating activities was $790 million in the
    fourth quarter and $3.18 billion for the full year. Operating cash
    flow increased by $36 million, or 4.8%, for the fourth quarter and
    $174 million, or 5.8%, for the full year as a result of strong
    operating income growth and working capital improvements offset in
    part by a $120 million increase in cash taxes paid.
  • Capital expenditures were $528 million in the fourth quarter, a $151
    million increase from the fourth quarter of 2016, and $1.51 billion
    for the full year, a $170 million increase from 2016. These increases
    were in line with our expectations as the Company increased its
    capital spending to support growth.
  • Free cash flow was $342 million in the fourth quarter of 2017 compared
    to $388 million in the fourth quarter of 2016.(b) Free cash
    flow for the full year was $1.77 billion compared to $1.71 billion in
    2016.(b)
  • The Company paid dividends of $184 million to shareholders in the
    fourth quarter. For the full year, the Company returned $1.5 billion
    to shareholders through $750 million in dividends and $750 million in
    share repurchases.
  • The Company spent $200 million on tuck-in acquisitions of traditional
    solid waste businesses during 2017, $120 million of which was spent in
    the fourth quarter.

2018 OUTLOOK

The Company announced the following regarding its financial outlook for
2018:

Revenue Growth

  • Core price is expected to be 4.0% or greater for 2018.(c) Internal
    revenue growth from yield on the collection and disposal business is
    expected to be 2.0% or greater.
  • Internal revenue growth from volume is expected to be between 2.0% and
    2.2%.

Recycling

  • With continued commodity pricing pressure and expected cost increases
    from efforts to reduce contamination, earnings from the Company’s
    recycling operations are expected to decline from the record-high
    levels it saw in 2017. The Company currently expects earnings from its
    recycling business to decline between $0.08 and $0.10 per diluted
    share in 2018 when compared with the prior year, with much of the
    decline expected in the first half of 2018.

Cost Management & Profitability

  • SG&A expenses are expected to be approximately $1.5 billion in 2018.
    This is a slight increase from 2017 as the Company plans to invest a
    portion of the benefit from lower cash taxes in people and technology.
    The Company continues to target SG&A as a percentage of revenue of
    about 10%.
  • Adjusted operating EBITDA is expected to be $4.2 to $4.25 billion for
    the full year.(b)
  • Adjusted earnings per diluted share for 2018 is expected to be between
    $3.97 and $4.05, including an anticipated $0.62 earnings per diluted
    share benefit from tax reform partially offset by an $0.11 earnings
    per diluted share impact from the previously announced retention bonus
    for approximately 34,000 of the Company’s employees.(b)

Free Cash Flow & Capital Allocation

  • Free cash flow for 2018 is projected to be between $1.95 and $2.05
    billion.(b)
  • Capital expenditures are expected to be in the range of $1.6 to $1.7
    billion.
  • The Board of Directors has indicated its intention to increase the
    dividend by $0.16, or 9.4%, to $1.86 per share on an annual basis, for
    an approximate annual cost of $810 million. The Board must separately
    approve and declare each dividend.
  • The Board of Directors has authorized management to repurchase up to
    $1.25 billion of the Company’s common stock.

Impacts of the Tax Cuts and Jobs Act

  • The Company’s effective tax rate is expected to be approximately 26%.
  • The Company plans to utilize a portion of its cash tax savings to pay
    approximately $65 million in bonuses to approximately 34,000 of its
    employees.

Fish concluded, “2017 was a very successful year for Waste Management,
and we expect that 2018 will be just as successful. With the anticipated
reduction in our cash taxes, we are proactively investing in our
front-line employees, technology, and capital equipment to grow our
business and improve customer service. Our employees are hard at work on
executing our 2018 plans, which should position us to continue to grow
our earnings and cash flow in 2018 and beyond.”

————————————————————————————————————–

(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, earnings per diluted share, income from
operations, and operating EBITDA have been presented in certain
instances excluding items identified in the reconciliations
provided. 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.

 

The Company’s projected full year 2018 earnings per diluted
share and operating EBITDA are anticipated to be adjusted to
exclude the effects of events or circumstances in 2018 that are
not representative or indicative of the Company’s results of
operations. Projected GAAP earnings per diluted share and
operating EBITDA for the full year would require information about
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 adjusted projected operating
EBITDA, to the comparable GAAP measure.

 

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 and projected operating EBITDA. 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 fourth quarter and full year 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 8488065 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) Thursday, February
15, 2018 through 5:00 PM (Eastern) on Thursday, March 1, 2018. 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 8488065.

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 all statements under the
heading “2018 Outlook” and statements regarding 2018 earnings per
diluted share and earnings growth; 2018 free cash flow and growth;
future operating EBITDA and growth; future operational performance /
success; future capital expenditures and investments; future tax rates
and use of cash tax savings; and future dividend rates and shares
repurchases. 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 December 31,
2017     2016
 
Operating revenues $ 3,652 $ 3,460
 
Costs and expenses:
Operating 2,263 2,147
Selling, general and administrative 369 378
Depreciation and amortization 342 313
(Income) expense from divestitures, asset impairments and unusual
items
  (26 )   5  
  2,948     2,843  
Income from operations   704     617  
 
Other income (expense):
Interest expense, net (91 ) (94 )
Loss on early extinguishment of debt (6 )
Equity in net losses of unconsolidated entities (15 ) (12 )
Other, net   (8 )   (1 )
  (120 )   (107 )
 
Income before income taxes 584 510
Income tax expense (benefit)   (319 )   176  
Consolidated net income 903 334
Less: Net income (loss) attributable to noncontrolling interests       (1 )
Net income attributable to Waste Management, Inc. $ 903   $ 335  
 
Basic earnings per common share $ 2.08   $ 0.76  
 
Diluted earnings per common share $ 2.06   $ 0.75  
 
Basic common shares outstanding   434.4     441.1  
 
Diluted common shares outstanding   437.7     444.2  
 
Cash dividends declared per common share $ 0.425   $ 0.41  
 
 
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
 
          Quarters Ended December 31,
2017     2016
 
EPS Calculation:
 
Net income attributable to Waste Management, Inc. $ 903 $ 335
 
 
 
Number of common shares outstanding at end of period 433.3 439.3
Effect of using weighted average common shares outstanding   1.1   1.8
Weighted average basic common shares outstanding 434.4 441.1
Dilutive effect of equity-based compensation awards and
other contingently issuable shares   3.3   3.1
Weighted average diluted common shares outstanding   437.7   444.2
 
 
 
Basic earnings per common share $ 2.08 $ 0.76
 
Diluted earnings per common share $ 2.06 $ 0.75
 
 
Waste Management, Inc.
Condensed Consolidated Statements of Operations
(In Millions, Except Per Share Amounts)
(Unaudited)
 
          Years Ended December 31,
2017     2016
 
Operating revenues $ 14,485 $ 13,609
 
Costs and expenses:
Operating 9,021 8,486
Selling, general and administrative 1,468 1,410
Depreciation and amortization 1,376 1,301
Restructuring 4
(Income) expense from divestitures, asset impairments and unusual
items
  (16 )   112  
  11,849     11,313  
Income from operations   2,636     2,296  
 
Other income (expense):
Interest expense, net (363 ) (376 )
Loss on early extinguishment of debt (6 ) (4 )
Equity in net losses of unconsolidated entities (68 ) (44 )
Other, net   (8 )   (50 )
  (445 )   (474 )
 
Income before income taxes 2,191 1,822
Income tax expense   242     642  
Consolidated net income 1,949 1,180
Less: Net income (loss) attributable to noncontrolling interests       (2 )
Net income attributable to Waste Management, Inc. $ 1,949   $ 1,182  
 
Basic earnings per common share $ 4.44   $ 2.66  
 
Diluted earnings per common share $ 4.41   $ 2.65  
 
Basic common shares outstanding   438.8     443.5  
 
Diluted common shares outstanding   441.9     446.5  
 
Cash dividends declared per common share $ 1.70   $ 1.64  
 
 
Waste Management, Inc.
Earnings Per Share
(In Millions, Except Per Share Amounts)
(Unaudited)
 
          Years Ended December 31,
2017     2016
 
EPS Calculation:
 
Net income attributable to Waste Management, Inc. $ 1,949 $ 1,182
 
 
 
Number of common shares outstanding at end of period 433.3 439.3
Effect of using weighted average common shares outstanding   5.5   4.2
Weighted average basic common shares outstanding 438.8 443.5
Dilutive effect of equity-based compensation awards and
other contingently issuable shares   3.1   3.0
Weighted average diluted common shares outstanding   441.9   446.5
 
 
 
Basic earnings per common share $ 4.44 $ 2.66
 
Diluted earnings per common share $ 4.41 $ 2.65
 
 
Waste Management, Inc.
Condensed Consolidated Balance Sheets
(In Millions)

(Unaudited)

           
December 31, December 31,
2017 2016

 

Assets
 
Current assets:
Cash and cash equivalents $ 22 $ 32
Receivables, net 2,374 2,132
Other   228   212
Total current assets 2,624 2,376
 
Property and equipment, net 11,559 10,950
Goodwill 6,247 6,215
Other intangible assets, net 547 591
Other assets   852   727
Total assets $ 21,829 $ 20,859
 
 
Liabilities and Equity
 
Current liabilities:
Accounts payable, accrued liabilities, and
deferred revenues $ 2,523 $ 2,377
Current portion of long-term debt   739   417
Total current liabilities 3,262 2,794
 
Long-term debt, less current portion 8,752 8,893
Other liabilities   3,773   3,852
Total liabilities   15,787   15,539
 
Equity:
Waste Management, Inc. stockholders’ equity 6,019 5,297
Noncontrolling interests   23   23
Total equity   6,042   5,320
Total liabilities and equity $ 21,829 $ 20,859
 
 
Waste Management, Inc.
Condensed Consolidated Statements of Cash Flows
(In Millions)
(Unaudited)
 
 
        Years Ended December 31,
2017     2016
 
Cash flows from operating activities:
Consolidated net income $ 1,949 $ 1,180
Adjustments to reconcile consolidated net income to net cash
provided by operating activities:
Depreciation and amortization 1,376 1,301
Other 56 430
Change in operating assets and liabilities, net of effects of
acquisitions and divestitures   (201 )   95  
Net cash provided by operating activities   3,180     3,006  
 
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (200 ) (611 )
Capital expenditures (1,509 ) (1,339 )
Proceeds from divestitures of businesses
and other assets (net of cash divested) 99 43
Net receipts from restricted trust and escrow accounts 243
Other, net   (12 )   (25 )
Net cash used in investing activities   (1,379 )   (1,932 )
 
Cash flows from financing activities:
New borrowings 1,027 3,057
Debt repayments (1,907 ) (2,682 )
Net commercial paper borrowings 513
Common stock repurchase program (750 ) (725 )
Cash dividends (750 ) (726 )
Exercise of common stock options 95 63
Tax payments associated with equity-based compensation transactions (47 ) (30 )
Other, net   8     (38 )
Net cash used in financing activities   (1,811 )   (1,081 )
 
Decrease in cash and cash equivalents (10 ) (7 )
Cash and cash equivalents at beginning of period   32     39  
Cash and cash equivalents at end of period $ 22   $ 32  

 

Prior year information has been revised to reflect the adoption of ASU
2016-09 and conform to our current year presentation.

 
Waste Management, Inc.
Summary Data Sheet
(Dollar Amounts in Millions)
(Unaudited)
 
        Quarters Ended    
December 31,     September 30,     December 31,
2017 2017 2016

Operating Revenues by Lines of Business

 
Collection
Commercial $ 950 $ 936 $ 888
Residential 640 635 625
Industrial 653 673 605
Other   109     107     106  
Total Collection 2,352 2,351 2,224
Landfill 883 884 780
Transfer 399 412 378
Recycling 310 375 338
Other 433 443 414
Intercompany (a)   (725 )   (749 )   (674 )
Operating revenues $ 3,652   $ 3,716   $ 3,460  
 
Quarters Ended
December 31, 2017 December 31, 2016

 

Analysis of Change in Year Over Year
Revenues

Amount

As a % of

Total Company

  Amount

As a % of

Total Company

Average yield (i) $ 78 2.3 % $ 105 3.2 %
Volume   91     2.6 %   64     2.0 %
Internal revenue growth 169 4.9 % 169 5.2 %
Acquisition 15 0.4 % 47 1.5 %
Divestitures (1 ) 0.0 % (2 ) -0.1 %
Foreign currency translation   9     0.2 %       0.0 %
$ 192     5.5 % $ 214     6.6 %
 
Amount

As a % of

Related

Business

  Amount

As a % of

Related

Business

(i)Average yield
Collection and disposal $ 66 2.2 % $ 61 2.1 %
Recycling commodities (10 ) -3.0 % 44 16.1 %
Fuel surcharges and mandated fees   22   18.6 %     0.0 %
Total $ 78   2.3 % $ 105   3.2 %
 
Quarters Ended December 31, Years Ended December 31,
2017 2016 2017 2016

Free Cash Flow Analysis (b)

 
Net cash provided by operating activities $ 790 $ 754 $ 3,180 $ 3,006
Capital expenditures (528 ) (377 ) (1,509 ) (1,339 )
Proceeds from divestitures of businesses
and other assets (net of cash divested)   80     11     99     43  
Free cash flow $ 342   $ 388   $ 1,770   $ 1,710  

 

 

(a) Intercompany revenues between lines of business are eliminated
within the Condensed Consolidated Financial Statements included
herein.
 
(b) The summary of free cash flow 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
December 31,     September 30,     December 31,
2017 2017 2016

Balance Sheet Data

 
Cash and cash equivalents $ 22   $ 35   $ 32  
 
Debt-to-total capital ratio:
Long-term indebtedness, including current
portion $ 9,491 $ 9,345 $ 9,310
Total equity   6,042     5,300     5,320  
Total capital $ 15,533   $ 14,645   $ 14,630  
 
Debt-to-total capital   61.1 %   63.8 %   63.6 %
 
Capitalized interest $ 5   $ 5   $ 2  
 

Acquisition Summary (a)

 
Gross annualized revenue acquired $ 19   $ 16   $ 3  
 
Total consideration $ 116   $ 31   $ 3  
 
Cash paid for acquisitions $ 120   $ 29   $ 11  
 

Other Operational Data

 
Internalization of waste, based on disposal costs   65.7 %   65.6 %   66.1 %
 
Total landfill disposal volumes (tons in millions)   28.8     28.7     26.2  
 
Active landfills   249     247     248  
 
Sites accepting waste at the end of each period presented   234     233     233  
 
 

Amortization, Accretion and Other
Expenses for

Landfills Included in Operating Groups:

Landfill amortization expense –
Cost basis of landfill assets $ 106.4 $ 104.7 $ 93.5
Asset retirement costs   8.1     23.4     (1.7 )
Total landfill amortization expense (b) (c) 114.5 128.1 91.8
Accretion and other related expense   20.4     20.0     20.1  
Landfill amortization, accretion and other related expense $ 134.9   $ 148.1   $ 111.9  
 
 
(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 December 31, 2017 as compared to the quarter ended
September 30, 2017 reflects a decrease in amortization expense of
approximately $13.6 million, primarily due to changes in landfill
estimates identified in current quarter.
 
(c) The quarter ended December 31, 2017 as compared to the quarter ended
December 31, 2016 reflects an increase in amortization expense of
approximately $22.7 million primarily due to increased volumes and
the relative impact of changes in estimate recorded each quarter.
 
   
Waste Management, Inc.
Reconciliation of Certain
Non-GAAP Measures

(Dollars In Millions, Except Per Share
Amounts)

(Unaudited)
 
 
Quarter Ended

December 31, 2017

Adjusted Net Income and Diluted Earnings Per Share

Pre-tax
Income

Tax
Expense

After-tax
Amount

Per Share
Amount

 
Net Income and Diluted EPS, as reported $ 584 $ (319 ) $ 903 $ 2.06
Adjustments:
Impact of Tax Cuts and Jobs Act 529 (529 )
Income from divestitures, asset impairments and unusual items, net (14 ) (a) (10 ) (4 )
Loss on early extinguishment of debt   6     2     4  
  (8 )   521     (529 )   (1.21 )
Adjusted Net Income and Diluted EPS $ 576   $ 202   $ 374   $ 0.85   (b)
 
 
Year Ended

December 31, 2017

Year Ended

December 31, 2016

Adjusted Net Income and Diluted Earnings Per Share

After-tax
Amount

Per Share
Amount

After-tax
Amount

Per Share
Amount

 
Net Income and Diluted EPS, as reported $ 1,949 $ 4.41 $ 1,182 $ 2.65
Adjustments:
Impact of Tax Cuts and Jobs Act (529 )

Expense from divestitures, asset impairments and unusual items and
restructuring, net (c)

26 114
Tax benefits related to equity-based compensation (d) (32 )

Withdrawal from a multiemployer pension plan

7
Loss on early extinguishment of debt   4      
  (524 )   (1.19 )   114     0.26  
Adjusted Net Income and Diluted EPS (e) $ 1,425   $ 3.22   $ 1,296   $ 2.91  
 
 
Year Ended

December 31, 2017

Year Ended

December 31, 2016

Adjusted Tax Expense Reconciliation

Pre-tax
Income

Tax
Expense

Pre-tax
Income

Tax
Expense

 
As-reported amounts $ 2,191 $ 242 $ 1,822 $ 642
Adjustments:
Impact of Tax Cuts and Jobs Act 529
Tax benefits related to equity-based compensation (d) 32
Expense from divestitures, asset impairments and unusual items and
restructuring, net (c)
20 (6 ) 151 37
Withdrawal from a multiemployer pension plan 11 4
Loss on early extinguishment of debt   6     2          
  37     561     151     37  
As-adjusted amounts $ 2,228   $ 803   (f) $ 1,973   $ 679  
 
(a) Fourth quarter 2017 pre-tax amount in “Income from divestitures,
asset impairments and unusual items, net” primarily consists of: (i)
gains of $31 million from the sale of certain oil and gas producing
properties; (ii) $34 million of goodwill impairment charges for
certain ancillary services business; (iii) a $30 million reduction
in post-closing, performance-based contingent consideration
obligations associated with an acquired business in our EES
organization; and (iv) $12 million of impairment charges primarily
in our “Other, net” financial caption related to
other-than-temporary declines in the value of minority-owned
investments in waste diversion technology companies.
(b) Fourth quarter 2017 adjusted earnings per diluted share increased
$0.10, or 13.3%, compared to fourth quarter 2016 as-reported
earnings per diluted share of $0.75. There were no adjustments made
to our fourth quarter 2016 results.
(c) Adjustments in 2017 and 2016 include impairment charges associated
with assets in the “(Income) expense from divestitures, asset
impairments and unusual items” and “Other, net” financial captions.
Additionally, adjustments in 2017 include impairment charges
associated with certain of our investments in unconsolidated
entities that are included in the “Equity in earnings (loss) of
unconsolidated entities” financial caption, and adjustments in 2016
include restructuring charges.
(d) Effective January 1, 2017, the Company adopted ASU 2016-09 and any
excess tax impacts related to the vesting or exercise of
equity-based transactions are now recorded as a discrete item as an
adjustment to income tax expense or benefit.
(e) Full year 2017 adjusted earnings per diluted share improved 10.7% as
compared with prior year.
(f) Full year 2017 adjusted effective tax rate was 36.0%.
 
Waste Management, Inc.
Reconciliation of Certain
Non-GAAP Measures

(Dollars In Millions)
(Unaudited)
 
 
Quarter Ended

December 31, 2017

Quarter Ended

December 31, 2016

Adjusted Income from Operations Amount

As a %
of
Revenues

Amount

As a %
of
Revenues

 
Operating Revenues, as reported $ 3,652 $ 3,460
Income from Operations, as reported $ 704 19.3 % $ 617 17.8 %
Adjustment:
Income from divestitures, asset impairments and unusual items   (26 )  
Adjusted Income from Operations $ 678   18.6 % (a) $ 617 17.8 % (a)
 
 
Quarter Ended

December 31, 2017

Quarter Ended

December 31, 2016

Adjusted Operating EBITDA Amount

As a %
of
Revenues

Amount

As a %
of
Revenues

 
Operating Revenues, as reported $ 3,652 $ 3,460
Income from Operations, as reported $ 704 $ 617
Depreciation and amortization   342     313
Operating EBITDA, as reported $ 1,046 28.6 % $ 930 26.9 %
Adjustment:
Income from divestitures, asset impairments and unusual items   (26 )  
Adjusted Operating EBITDA $ 1,020   27.9 % (b) $ 930 26.9 % (b)
 
 
Year Ended

December 31, 2017

Year Ended

December 31, 2016

Adjusted Operating EBITDA Amount

As a %
of
Revenues

Amount

As a %
of
Revenues

 
 
Operating Revenues, as reported $ 14,485 $ 13,609
Income from Operations, as reported $ 2,636 $ 2,296
Depreciation and amortization   1,376     1,301
Operating EBITDA, as reported $ 4,012 27.7 % $ 3,597 26.4 %
Adjustments:
(Income) expense from divestitures, asset impairments and unusual
items
(17 ) 110
Withdrawal from a multiemployer pension plan   11    
Adjusted Operating EBITDA $ 4,006   (c) 27.7 % $ 3,707 (c) 27.2 %
 
 
2018 Projected Free Cash Flow Reconciliation (d)
Scenario 1 Scenario 2
Net cash provided by operating activities $ 3,500 $ 3,600
Capital expenditures (1,650 ) (1,650 )
Proceeds from divestitures of businesses and
other assets (net of cash divested)   100     100  
Free Cash Flow $ 1,950   $ 2,050  
 
(a) Fourth quarter 2017 adjusted income from operations increased $61
million, or 9.9%, as compared with as-reported results for the same
prior year period. Adjusted income from operations margin increased
80 basis points to 18.6% of revenues in the fourth quarter 2017.
There were no adjustments made to our fourth quarter 2016 results.
(b) Fourth quarter 2017 adjusted operating EBITDA increased $90 million,
or 9.7%, as compared with as-reported results for the same prior
year period. Adjusted operating EBITDA margin increased 100 basis
points to 27.9% of revenues in the fourth quarter 2017. There were
no adjustments made to our fourth quarter 2016 results.
(c) Full year 2017 adjusted operating EBITDA increased 8.1% as compared
with adjusted results for the same prior year period.
(d) The reconciliation includes two scenarios that illustrate our
projected free cash flow range for 2018. 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.



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