Strong
Operating and Financial Results Surpass Expectations
Company
Increases 2021 Financial Guidance
Waste Management, Inc. (NYSE: WM) today announced financial
results for the quarter ended March 31, 2021.
Three Months Ended
Three Months Ended
March 31,
2021
March 31,
2020
(in millions, except per share
amounts)
(in millions, except per share
amounts)
As Reported
As Adjusted(a)
As Reported
As Adjusted(a)
Revenue
$4,112
$4,112
$3,729
$3,729
Income from Operations
$650
$689
$573
$611
Operating EBITDA(b)
$1,122
$1,161
$975
$1,013
Operating EBITDA Margin
27.3%
28.2%
26.1%
27.2%
Net Income(c)
$421
$450
$361
$395
Diluted EPS
$0.99
$1.06
$0.85
$0.93
“We had an exceptionally strong start to the year with first
quarter adjusted operating EBITDA growth of more than 14% and
adjusted operating EBITDA margin expansion of 100 basis points,”
said Jim Fish, Waste Management’s President and Chief Executive
Officer. (a) “We achieved these results by generating strong yield,
flexing down our cost structure, and executing on the integration
of Advanced Disposal. With this solid performance and our
confidence in the strength of our business model, we are increasing
our 2021 financial guidance that we provided in February for
revenue, adjusted operating EBITDA and free cash flow.
“In addition to the strong performance of our core business, the
integration of Advanced Disposal is going remarkably well. Based
upon the success of the integration efforts so far, we believe we
will capture synergies above our original expectations. We now
expect to achieve $130 million in annual run-rate synergies from
operating costs and SG&A savings, which is a more than 60%
increase from our initial estimates. The revised estimate includes
between $75 million and $85 million in run-rate synergies captured
during 2021, up from our prior guidance of between $50 million and
$60 million.”
KEY HIGHLIGHTS FOR THE FIRST QUARTER OF 2021
Revenue
- In the first quarter of 2021, revenue declined $5 million in
the Company’s collection and disposal business, when excluding the
impact of acquisitions and divestitures, compared to the first
quarter of 2020, driven by $98 million in volume declines partially
offset by $93 million of growth from yield.
- Core price for the first quarter of 2021 was 3.4% compared to
3.2% in the fourth quarter of 2020 and 4.2% in the first quarter of
2020.(d)
- Collection and disposal yield was 2.8% in the first quarter of
2021 compared to 2.3% in the fourth quarter of 2020 and 2.2% in the
first quarter of 2020.
- Total Company volumes declined 2.7% in the first quarter of
2021, or 2.1% on a workday adjusted basis, compared to a decline of
2.6% on a workday adjusted basis in the fourth quarter of 2020 and
a decline of 0.4% on a workday adjusted basis in the first quarter
of 2020.
- In the first quarter of 2021, acquisitions, net of
divestitures, added $292 million of revenue primarily from the
acquisition of Advanced Disposal.
Cost Management
- Operating expenses as a percentage of revenue improved 130
basis points to 61.1% when compared to the first quarter of 2020,
demonstrating the Company’s ability to operate under a lower cost
structure.
- SG&A expenses were 11.1% of revenue in the first quarter of
2021 compared to 11.4% in the first quarter of 2020. On an adjusted
basis, SG&A expenses were 10.7% of revenue in the first quarter
of 2021 compared to 10.5% in the first quarter of 2020.(a)
Profitability
- Operating EBITDA in the Company’s collection and disposal
business, adjusted on the same basis as total Company operating
EBITDA, was $1.29 billion, or 31.8% of revenue, for the first
quarter of 2021, compared to $1.18 billion, or 31.3% of revenue,
for the first quarter of 2020.
- Operating EBITDA in the Company’s recycling line of business
improved by $34 million compared to the first quarter of 2020. The
improvement was driven by the Company’s efforts to develop a
sustainable business model that also meets customers’ environmental
needs as well as an increase in market prices for recycled
commodities.
- In the first quarter of 2021, the Company realized $12 million
of operating and SG&A cost synergies from the acquisition of
Advanced Disposal.
Free Cash Flow & Capital Allocation
- In the first quarter of 2021, net cash provided by operating
activities was $1.12 billion compared to $765 million in the first
quarter of 2020, an increase of $355 million. The improvement in
net cash provided by operating activities was primarily driven by
the increase in operating EBITDA, lower incentive compensation
payments, and improvements in working capital.
- In the first quarter of 2021, capital expenditures were $270
million compared to $459 million in the first quarter of 2020. The
decrease in capital spending was primarily driven by differences in
the timing of fleet purchases and the Company’s acceleration of
certain capital expenditures into the fourth quarter of 2020.
- In the first quarter of 2021, free cash flow was $865 million
compared to $318 million in the first quarter of 2020.(a)
- During the first quarter of 2021, $497 million was returned to
shareholders, including $247 million of cash dividends and $250
million allocated to share repurchases.
OUTLOOK
- Total Company revenue growth is expected to be 12.5% to 13%.
Combined internal revenue growth from yield and volume in the
collection and disposal business is expected to be 4.5% or greater,
driven by the Company’s disciplined pricing programs and strong
outlook for continued volume recovery.
- Adjusted operating EBITDA is expected to be between $4.875
billion and $4.975 billion in 2021.
- Free cash flow is projected to be between $2.325 billion and
$2.425 billion in 2021.
- Synergies from the acquisition of Advanced Disposal are
expected to total $150 million, with $130 million coming from
operating costs and SG&A savings and $20 million coming from
capital expenditure savings. This is an increase from the Company’s
original expectation of $80 million in operating costs and SG&A
savings and $20 million in capital expenditure savings. In 2021,
the Company expects to capture between $75 million and $85 million
of cost synergies, bringing annual run-rate synergies to about $100
million at the end of the year.
Fish concluded, “We’ve previously discussed that Waste
Management is well positioned to benefit as states and provinces
emerge from the pandemic. We expect strong results as our
commercial, industrial and landfill businesses—our three most
profitable lines of business—continue to recover over the remainder
of the year.”
(a)
The information labeled as adjusted in
this press release, as well as free cash flow, are non-GAAP
measures. Please see "Non-GAAP Financial Measures" below and the
reconciliations in the accompanying schedules for more
information.
(b)
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.
(c)
For purposes of this press release, all
references to "Net income" refer to the financial statement line
item "Net income attributable to Waste Management, Inc."
(d)
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 a.m. ET today to
discuss the first quarter 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 Investors
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
1299110 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
p.m. ET today through 5 p.m. ET on Tuesday, May 11, 2021. 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 1299110.
ABOUT WASTE MANAGEMENT
Waste Management, based in Houston, Texas, is the leading
provider of comprehensive waste management environmental services
in North America, providing services throughout the United States
and Canada. Through its subsidiaries, the Company provides
collection, transfer, disposal services, and recycling and resource
recovery. 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.
FORWARD-LOOKING STATEMENTS
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 “Outlook” and all statements regarding
2021 financial guidance; future performance or financial results of
our business; responses to, impacts of, and recovery from the
COVID-19 pandemic; benefits and synergies from the acquisition of
Advanced Disposal Services, Inc. (“Advanced Disposal”); future
strength of our business model and our future cost structure,
efficiencies and volumes. 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, 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 acquisitions; failure to obtain
the results anticipated from acquisitions; failure to successfully
integrate the acquisition of Advanced Disposal, realize anticipated
synergies or obtain the results anticipated from such acquisition;
environmental and other regulations, including developments related
to emerging contaminants, gas emissions and renewable fuel;
significant environmental, safety or other incidents resulting in
liabilities or brand damage; failure to obtain and maintain
necessary permits; failure to attract, hire and retain key team
members and a high quality workforce; labor disruptions and
wage-related regulations; significant storms and destructive
climate events; public health risk and other impacts of COVID-19 or
similar pandemic conditions, including increased costs, social and
commercial disruption and service reductions; increased
competition; pricing actions; commodity price fluctuations;
international trade restrictions; disposal alternatives and waste
diversion; declining waste volumes; weakness in general economic
conditions and capital markets; adoption of new tax legislation;
fuel shortages; failure to develop and protect new technology;
failure of technology to perform as expected, including
implementation of a new enterprise resource planning system;
failure to prevent, detect and address cybersecurity incidents or
comply with privacy regulations; negative outcomes of litigation or
governmental proceedings; and decisions or developments that result
in impairment charges. 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 its
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.
NON-GAAP FINANCIAL MEASURES
To supplement its financial information, the Company has
presented, and/or may discuss on the conference call, adjusted
earnings per diluted share, adjusted net income, adjusted income
from operations, adjusted SG&A expenses, adjusted operating
EBITDA, adjusted operating EBITDA margin, and free cash flow, as
well as projections of adjusted operating EBITDA and free cash flow
for 2021. All of these items are non-GAAP financial 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) financial measures the Company uses in
the management of its business and (ii) 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.
In addition, the Company’s projected full year 2021 adjusted
operating EBITDA is anticipated to exclude the effects of other
events or circumstances in 2021 that are not representative or
indicative of the Company’s results of operations. Such excluded
items are not currently determinable, but may be significant, such
as asset impairments and one-time items, charges, gains or losses
from divestitures or litigation, and 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 such projection to the comparable
GAAP measure.
The Company discusses free cash flow and provides a projection
of 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 GAAP measure.
The Company believes free cash flow gives investors useful insight
into how the Company views its liquidity, but 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 to the
most comparable GAAP measures are included in the accompanying
schedules, with the exception of projected adjusted operating
EBITDA. Non-GAAP measures should not be considered a substitute for
financial measures presented in accordance with GAAP.
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In Millions, Except per Share
Amounts)
(Unaudited)
Three Months Ended
March 31,
2021
2020
Operating revenues
$
4,112
$
3,729
Costs and expenses:
Operating
2,514
2,329
Selling, general and administrative
458
425
Depreciation and amortization
472
402
Restructuring
1
—
(Gain) loss from divestitures, asset
impairments and unusual items, net
17
—
3,462
3,156
Income from operations
650
573
Other income (expense):
Interest expense, net
(97
)
(112
)
Equity in net losses of unconsolidated
entities
(9
)
(26
)
Other, net
1
—
(105
)
(138
)
Income before income taxes
545
435
Income tax expense
124
74
Consolidated net income
421
361
Less: Net loss attributable to
noncontrolling interests
—
—
Net income attributable to Waste
Management, Inc.
$
421
$
361
Basic earnings per common share
$
1.00
$
0.85
Diluted earnings per common share
$
0.99
$
0.85
Weighted average basic common shares
outstanding
422.9
424.2
Weighted average diluted common shares
outstanding
424.3
426.4
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Millions)
(Unaudited)
March 31,
December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
476
$
553
Receivables, net
2,427
2,624
Other
424
363
Total current assets
3,327
3,540
Property and equipment, net
14,038
14,148
Goodwill
8,980
8,994
Other intangible assets, net
990
1,024
Other
1,735
1,639
Total assets
$
29,070
$
29,345
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, accrued liabilities and
deferred revenues
$
3,041
$
3,002
Current portion of long-term debt
244
551
Total current liabilities
3,285
3,553
Long-term debt, less current portion
13,244
13,259
Other
5,112
5,079
Total liabilities
21,641
21,891
Equity:
Waste Management, Inc. stockholders’
equity
7,427
7,452
Noncontrolling interests
2
2
Total equity
7,429
7,454
Total liabilities and equity
$
29,070
$
29,345
WASTE MANAGEMENT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Three Months Ended
March 31,
2021
2020
Cash flows from operating activities:
Consolidated net income
$
421
$
361
Adjustments to reconcile consolidated net
income to net cash provided by operating activities:
Depreciation and amortization
472
402
Other
63
70
Change in operating assets and
liabilities, net of effects of acquisitions and divestitures
164
(68
)
Net cash provided by operating
activities
1,120
765
Cash flows from investing activities:
Acquisitions of businesses, net
of cash acquired
(7
)
(1
)
Capital expenditures
(270
)
(459
)
Proceeds from divestitures of
businesses and other assets (net of cash divested)
15
12
Other, net
(72
)
(55
)
Net cash used in investing activities
(334
)
(503
)
Cash flows from financing activities:
New borrowings
—
—
Debt repayments
(49
)
(25
)
Commercial paper repayments
(280
)
—
Common stock repurchase
program
(250
)
(402
)
Cash dividends
(247
)
(236
)
Exercise of common stock
options
17
31
Tax payments associated with
equity-based compensation transactions
(28
)
(33
)
Other, net
7
(3
)
Net cash used in financing activities
(830
)
(668
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash and cash equivalents
2
(4
)
Decrease in cash, cash equivalents and
restricted cash and cash equivalents
(42
)
(410
)
Cash, cash equivalents and restricted cash
and cash equivalents at beginning of period
648
3,647
Cash, cash equivalents and restricted cash
and cash equivalents at end of period
$
606
$
3,237
WASTE MANAGEMENT, INC.
SUMMARY DATA SHEET
(In Millions)
(Unaudited)
Operating Revenues by Line of
Business
Three Months Ended
March 31,
2021
2020
Commercial
$
1,131
$
1,063
Residential
782
650
Industrial
743
693
Other collection
116
112
Total collection
2,772
2,518
Landfill
915
887
Transfer
465
441
Recycling
342
254
Other
477
430
Intercompany (a)
(859
)
(801
)
Total
$
4,112
$
3,729
Internal Revenue Growth
Period-to-Period Change for
the
Three Months Ended
March 31, 2021 vs.
2020
As a % of
As a % of
Related
Total
Amount
Business(b)
Amount
Company(c)
Collection and disposal
$
93
2.8
%
Recycling commodities (d)
97
42.5
Fuel surcharges and mandated fees
(9
)
(7.2
)
Total average yield (e)
$
181
4.9
%
Volume
(101
)
(2.7
)
Internal revenue growth
80
2.2
Acquisitions
302
8.1
Divestitures
(10
)
(0.3
)
Foreign currency translation
11
0.3
Total
$
383
10.3
%
Period-to-Period Change for
the
Three Months Ended
March 31, 2021 vs.
2020
As a % of Related
Business(b)
Yield
Volume(f)
Commercial
3.1
%
(3.9
)%
Industrial
3.4
(4.7
)
Residential
4.2
(1.6
)
Total collection
3.4
(3.0
)
MSW
2.6
(1.5
)
Transfer
2.7
(6.7
)
Total collection and disposal
2.8
%
(2.3
)%
(a)
Intercompany revenues between lines of
business are eliminated in the Condensed Consolidated Financial
Statements included herein.
(b)
Calculated by dividing the increase or
decrease for the current year period by the prior year period’s
related business revenue adjusted to exclude the impacts of
divestitures for the current year period.
(c)
Calculated by dividing the increase or
decrease for the current year period by the prior year period’s
total Company revenue adjusted to exclude the impacts of
divestitures for the current year period.
(d)
Includes combined impact of commodity
price variability and changes in fees.
(e)
The amounts reported herein represent the
changes in our revenue attributable to average yield for the total
Company.
(f)
Workday adjusted volume impact.
WASTE MANAGEMENT, INC.
SUMMARY DATA SHEET
(In Millions)
(Unaudited)
Free Cash Flow (a) Three Months Ended March
31,
2021
2020
Net cash provided by operating activities
$
1,120
$
765
Capital expenditures
(270
)
(459
)
Proceeds from divestitures of businesses and other assets (net of
cash divested)
15
12
Free cash flow
$
865
$
318
Three Months Ended March 31,
2021
2020
Supplemental Data Internalization of waste, based on
disposal costs
68.0
%
68.3
%
Landfill amortizable tons (in millions)
27.6
27.2
Acquisition Summary (b) Gross annualized
revenue acquired
6
2
Total consideration, net of cash acquired
9
1
Cash paid for acquisitions consummated during the period,
net of cash acquired
7
1
Cash paid for acquisitions including contingent
consideration and other items from prior periods, net of cash
acquired
8
2
Amortization, Accretion and Other Expenses for
Landfills: Three Months Ended March 31,
2021
2020
Landfill amortization expense: Cost basis of landfill assets
$
123
$
114
Asset retirement costs
34
24
Total landfill amortization expense (c)
157
138
Accretion and other related expense
26
25
Landfill amortization, accretion and other related expense
$
183
$
163
(a) 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. (b)
Represents amounts associated with business acquisitions
consummated during the applicable period except where noted. (c)
The quarter ended March 31, 2021 as compared to the quarter ended
March 31, 2020 reflects an increase in amortization expense
primarily due to our acquisition of Advanced Disposal and changes
in landfill estimates identified in both quarters.
WASTE
MANAGEMENT, INC. RECONCILIATION OF CERTAIN NON-GAAP
MEASURES (In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31, 2021
Diluted
Income from
Pre-tax
Tax
Net
Per Share
Operations Income Expense
Income (a)
Amount As reported amounts
$
650
$
545
$
124
$
421
$
0.99
Adjustments: (Gain) loss from divestitures, asset
impairments and unusual items, net
17
17
4
13
Advanced Disposal integration related costs
16
16
4
12
Enterprise resource planning system related costs
6
6
2
4
39
39
10
29
0.07
As adjusted amounts
$
689
$
584
$
134
(b)
$
450
$
1.06
Depreciation and amortization
472
As adjusted operating EBITDA
$
1,161
Three Months Ended
March 31, 2020
Diluted
Income from
Pre-tax
Tax
Net
Per Share
Operations Income Expense
Income (a)
Amount As reported amounts
$
573
$
435
$
74
$
361
$
0.85
Adjustments: Advanced Disposal acquisition-related costs
28
28
7
21
Enterprise resource planning system related costs
7
7
2
5
Impairment of an investment and other
3
10
2
8
38
45
11
34
0.08
As adjusted amounts
$
611
$
480
$
85
(b)
$
395
$
0.93
Depreciation and amortization
402
As adjusted operating EBITDA
$
1,013
(a)
For purposes of this press release table, all references to "Net
income" refer to the financial statement line item "Net income
attributable to Waste Management, Inc."
(b)
The Company calculates its effective tax rate based on actual
dollars. When the effective tax rate is calculated by dividing the
Tax Expense amount in the table above by the Pre-tax Income amount,
differences occur due to rounding, as these items have been rounded
in millions. The first quarter 2021 and 2020 adjusted effective tax
rates were 22.8% and 17.6%, respectively.
WASTE MANAGEMENT,
INC. RECONCILIATION OF CERTAIN NON-GAAP MEASURES
(In Millions) (Unaudited) Three
Months Ended March 31, 2021 March 31, 2020
Adjusted SG&A Expenses and Adjusted SG&A Expenses
Margin
As a %
As a %
Amount
of Revenues
Amount
of Revenues
Operating revenues, as reported
$
4,112
$
3,729
SG&A expenses, as reported
$
458
11.1
%
$
425
11.4
%
Adjustments: Advanced Disposal integration related costs
(14
)
(28
)
Enterprise resource planning system related costs
(6
)
(7
)
Adjusted SG&A expenses
$
438
10.7
%
$
390
10.5
%
2021 Projected Free Cash Flow
Reconciliation (a) Scenario 1 Scenario 2
Net cash provided by operating activities
$
4,055
$
4,205
Capital expenditures
(1,780
)
(1,880
)
Proceeds from divestitures of businesses and other assets (net of
cash divested)
50
100
Free cash flow
$
2,325
$
2,425
(a)
The reconciliation includes two scenarios that illustrate our
projected free cash flow range for 2021. 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210427005614/en/
Waste Management
Website www.wm.com
Analysts & Media Ed Egl 713.265.1656 eegl@wm.com
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