Waste Management(US:WM)2024-07-25 18:31Part I Item 1. Financial Statements This section presents Waste Management, Inc.'s unaudited Condensed Consolidated Financial Statements, including Balance Sheets, Statements of Operations, Cash Flows, and Equity, for periods ended June 30, 2024 Condensed Consolidated Balance Sheet Highlights (in Millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $33,999 | $32,823 | | Total current assets | $4,439 | $3,804 | | Property and equipment, net | $17,420 | $16,968 | | Goodwill | $9,363 | $9,254 | | Total Liabilities | $26,548 | $25,927 | | Total current liabilities | $4,136 | $4,226 | | Long-term debt, less current portion | $16,501 | $15,895 | | Total Equity | $7,451 | $6,896 | Condensed Consolidated Statements of Operations Highlights (in Millions, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $5,402 | $5,119 | $10,561 | $10,011 | | Income from operations | $1,009 | $944 | $2,025 | $1,769 | | Net income attributable to Waste Management, Inc. | $680 | $615 | $1,388 | $1,148 | | Diluted earnings per common share | $1.69 | $1.51 | $3.44 | $2.81 | Condensed Consolidated Statements of Cash Flows Highlights (in Millions) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,521 | $2,074 | | Net cash used in investing activities | $(2,359) | $(1,339) | | Net cash used in financing activities | $(464) | $(919) | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures for financial statement amounts, covering basis of presentation, accounting policies, liabilities, debt, income taxes, segment performance, and acquisitions Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, condition, and strategy, analyzing Q2 and H1 2024 results, liquidity, and capital resources, with focus on revenue growth, inflation management, and strategic investments - The company's strategy focuses on leveraging its asset network, investing in automation and technology to improve efficiency, and growing its sustainability-related segments like Renewable Energy and Recycling230 - On June 3, 2024, the company entered into an agreement to acquire Stericycle, Inc. for a total enterprise value of approximately $7.2 billion, aiming to expand its environmental solutions in the healthcare market211 - Macroeconomic pressures, including inflation and high interest rates, continue to affect the business. The company is mitigating these through pricing efforts, operating efficiencies, and cost controls221234 Results of Operations This section details operational performance, analyzing revenue changes by yield and volume, operating expenses, and segment profitability, noting Q2 2024 revenue growth of 5.5% to $5.4 billion and increased income from operations Period-to-Period Change in Revenues (Q2 2024 vs. Q2 2023) | Component | Amount (in millions) | % Change | | :--- | :--- | :--- | | Average Yield | $264 | 5.2% | | Collection and Disposal | $205 | 4.6% | | Recycling, Renewable Energy & Other | $59 | 12.1% | | Volume | $5 | 0.1% | | Acquisitions | $18 | 0.3% | | Foreign currency translation | $(4) | (0.1)% | | Total Revenue Change | $283 | 5.5% | Operating Expenses as a Percentage of Revenues | Period | Operating Expenses (in millions) | % of Revenues | | :--- | :--- | :--- | | Q2 2024 | $3,291 | 60.9% | | Q2 2023 | $3,186 | 62.2% | - Operating expenses as a percentage of revenue improved to 60.9% in Q2 2024 from 62.2% in Q2 2023, driven by efficiency gains, improved employee retention, and lower diesel fuel prices, which offset higher recycling rebates and subcontractor costs224244 - Income from operations for the Collection and Disposal segment increased by 15.9% in Q2 2024, driven by strong pricing and gains on asset sales. Corporate and Other operating income decreased significantly, primarily due to a $54 million charge related to a waste diversion technology investment270 Liquidity and Capital Resources The company maintains strong liquidity with net cash from operating activities at $2.52 billion and capital expenditures at $1.34 billion, while total debt reached $16.7 billion as of June 30, 2024, with share repurchases temporarily suspended Free Cash Flow Reconciliation (Non-GAAP, in Millions) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,521 | $2,074 | | Capital expenditures | $(1,335) | $(1,180) | | Proceeds from divestitures | $58 | $46 | | Free cash flow | $1,244 | $940 | - As of June 30, 2024, the company had approximately $3.8 billion of debt maturing within the next 12 months, but has classified $3.6 billion as long-term due to its intent and ability to refinance, supported by its revolving credit facility and a July 2024 senior notes issuance2904 - During the first six months of 2024, the company used $262 million for share repurchases and paid $608 million in cash dividends. Share repurchases have been temporarily suspended due to the planned Stericycle acquisition190 Part II Item 1. Legal Proceedings This section refers to detailed disclosures on legal proceedings, including environmental matters, litigation, and other contingencies, as outlined in Note 6 of the Condensed Consolidated Financial Statements - Information regarding the company's legal proceedings is located in the Environmental Matters and Litigation sections of Note 6 to the Condensed Consolidated Financial Statements204 Item 1A. Risk Factors This section updates the company's risk factors, primarily focusing on the planned Stericycle acquisition, including completion uncertainty, integration challenges, and increased post-acquisition indebtedness - The consummation of the Stericycle acquisition is not assured and is subject to customary closing conditions, including regulatory and Stericycle stockholder approvals294 - There is a risk that the company may not realize the anticipated strategic benefits and cost synergies from the Stericycle acquisition due to integration challenges and potential underperformance of the acquired business301302 - The company intends to incur additional debt to finance the acquisition, which will increase its overall indebtedness and could make it more difficult to service or refinance its debts307303 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases during Q2 2024, noting 0.3 million shares repurchased and the temporary suspension of the program due to the pending Stericycle acquisition Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 – 30 | 0.3 | $207.33 | | May 1 – 31 | — | — | | June 1 – 30 | — | — | | Total | 0.3 | — | - As of June 30, 2024, the company had authorization for $1,238 million of future share repurchases but has suspended the program due to the planned Stericycle acquisition30953 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting identified during the quarter - Based on their evaluation, the principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2024201 - There were no changes in the company's internal control over financial reporting during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls202