Waste Management’s collection and disposal business increases quarterly revenue

Waste Management Inc. (WM), Houston, has announced financial results for its quarter Sept. 30. Revenues for 3Q were $3.72 billion compared with $3.55 billion for the same 2016 period. Net income for the quarter was $386 million, or $0.87 per diluted share, compared with net income of $302 million, or $0.68 per diluted share, for the third quarter of 2016. On an as-adjusted basis, net income was $398 million, or $0.90 per diluted share, in the third quarter of 2017, compared with $374 million, or $0.84 per diluted share, in the third quarter of 2016.

The company’s as-adjusted third quarter 2017 results exclude pre-tax charges of $11 million related to the withdrawal from an underfunded multiemployer pension plan and $9 million related to an increase in environmental remediation reserves.

“An impressive year-over-year improvement in our traditional solid waste business powered a strong third quarter, continuing the positive momentum we have seen all year,” Jim Fish, president and CEO, says. “Operating EBITDA (earnings before interest, tax, depreciation and amortization) grew more than 17 percent when compared to the third quarter of 2016, or almost 7 percent on an as-adjusted basis. This is the second consecutive quarter of record high adjusted operating EBITDA. More importantly, that operating EBITDA performance converted into strong cash flow growth. Our net cash provided by operating activities was also the highest that we have seen in our history. The combination of our strong core price results, higher volumes and continued cost improvement focus led to adjusted earnings per diluted share growth of more than 7 percent, despite an estimated negative $0.01 per diluted share impact from hurricanes Harvey and Irma.”

Key highlights from 3Q include:

• Overall revenue increased by 4.7 percent, or $168 million. The revenue increase was primarily driven by positive yield and volume in the company’s collection and disposal business, which contributed $93 million to revenue growth, and higher recycling commodity prices, which contributed $60 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 percent.
• Internal revenue growth from yield for collection and disposal operations was 2 percent.
• Internal revenue growth from volume in the company’s traditional solid waste business was 1.6 percent and 2 percent on a workday adjusted basis. Total company internal revenue growth from volume was 0.7 percent and 1.1 percent on a workday adjusted basis.
• As a percent of revenue, operating expenses were 61.9 percent in 3Q 2017, as compared to 62.5 percent in 3Q 2016. Adjusting for the withdrawal from a multiemployer pension plan, operating expenses as a percent of revenue were 61.7 percent in 3Q 2017. Operating expenses as a percentage of revenue in the company’s traditional solid waste business improved about 125 basis points during the quarter, despite the impact of hurricane related expenses and higher fuel costs.

• As a percent of revenue, selling, general and administrative (SG&A) expenses were 9.6 percent, compared to 9.3 percent in 3Q 2016. The increase is largely attributable to a prior year favorable insurance recovery.

• Net cash provided by operating activities was $856 million, compared to $758 million in 3Q 2016, an increase of 12.9 percent. The increase was driven by the company’s strong operating income growth and working capital improvements.
• Capital expenditures were $350 million, compared to $333 million in 3Q 2016.
• Free cash flow was $512 million, compared to $433 million in 3Q 2016, an increase of 18.2 percent.
• The company returned $685 million to shareholders during the quarter, paying $185 million in dividends and repurchasing $500 million of its common stock.
• The effective tax rate was approximately 35.7 percent, or 35.8 percent on an as-adjusted basis.

“Based on our results through the first nine months of the year, we are raising our full year 2017 guidance of adjusted earnings per diluted share to between $3.19 and $3.21 and free cash flow to between $1.7 and $1.75 billion, despite an anticipated negative $0.03 per diluted share impact from our recycling operations in the fourth quarter,” Fish says. “The strength of our business is evident in the growth of our operating EBITDA and our cash conversion rate, and we expect our strong performance to continue into 4Q and 2018.