Waste Management Inc. (WM), Houston, has announced financial results for its quarter ended Sept. 30, 2016. Revenues for the third quarter of 2016 were $3.55 billion compared with $3.36 billion for the same 2015 period. Net income for the quarter was $302 million, or $0.68 per diluted share, compared with net income of $335 million, or $0.74 per diluted share, for the third quarter of 2015. On an as-adjusted basis, excluding certain items, net income was $374 million, or $0.84 per diluted share, in the third quarter of 2016.

The company’s as-adjusted third quarter 2016 results exclude $0.16 per diluted share of non-cash charges related to the impairment of certain assets and an increase to estimated remediation reserves. The company incurred pre-tax charges of $43 million related to the impairment of a rural landfill, and $42 million related to estimated environmental remediation at a third-party closed site that was operated by a company in the mid-1960s, prior to our acquisition of that company’s parent in 1998.

David P. Steiner, CEO of WM, says, “Our focus on improving core price, growing high margin volumes, and containing costs continued our strong performance from the first half of 2016, as we again exceeded our revenue, earnings, and margin targets. In the third quarter, core price was 4.7 percent and volumes were positive 1.6 percent, leading to a 5.6 percent increase in revenue.”

Overall, he says the combined positive price, volume growth, and cost management drove increases in adjusted operating income, adjusted operating EBITDA (earnings before interest, taxes, depreciation and amortization), and margins when compared to the third quarter of 2015.

Steiner states, “In 2016, we have seen three consecutive quarters of strong price, positive volume, and better than expected earnings performance. As a result, we are again raising our adjusted diluted earnings per share guidance for 2016.”

He adds, “Our previous guidance for adjusted earnings per diluted share was between $2.83 and $2.86 for the full year. For the fourth quarter of 2016, we are confident that we can meet or exceed the current Wall Street consensus.”

Doing so, Steiner says, will lead to full year adjusted earnings per diluted share of at least $2.91, which is a more than 5 percent increase from the mid-point of the company’s initial 2016 guidance, and a more than 11 percent increase from 2015.

“We are also confident that we can achieve our free cash flow guidance for 2016 of between $1.6 and $1.7 billion,” he adds.

Key highlights for the third quarter 2016, include:

• Overall revenue increased by 5.6 percent, or $188 million. The revenue increase was driven by positive yield and volume in the company’s collection and disposal business of $110 million. Acquisitions, net of divestitures, contributed $60 million of revenue growth to the current quarter. Recycling yield and volume also increased $27 million. These increases were partially offset by $11 million in lower fuel surcharge revenue. The impact of foreign currency was immaterial in the third quarter.
• Core price, which consists of price increases net of rollbacks and fees, other than the company’s fuel surcharge, was 4.7 percent, up from 4.0 percent in the third quarter of 2015.
• Internal revenue growth from yield for collection and disposal operations was 2.1 percent.
• Traditional solid waste business internal revenue growth from volume was a positive 1.6 percent in the third quarter of 2016, an increase of 80 basis points from the second quarter of 2016, and 170 basis points from the third quarter of 2015. Total company internal revenue growth from volume was also a positive 1.6 percent in the third quarter of 2016, an increase of 120 basis points from the second quarter of 2016, and 300 basis points from the third quarter of 2015.
• Average recycling commodity prices at the company’s recycling facilities increased 13.6 percent in the third quarter of 2016 from the prior year period. Recycling volumes improved 0.9 percent in the third quarter. Results in the company’s recycling line of business improved by almost $0.03 per diluted share when compared to the prior year period.
• As a percent of revenue, operating expenses were 62.5 percent in the third quarter of 2016, as compared to 62.4 percent in the third quarter of 2015, driven primarily by increased leachate disposal costs, which were about $0.03 per diluted share in the quarter.
• As a percent of revenue, SG&A; expenses were 9.3 percent in the third quarter of 2016, compared to 9.8 percent in the third quarter of 2015, an improvement of 50 basis points.
• Net cash provided by operating activities was $753 million, compared to $657 million in the third quarter of 2015.
• Capital expenditures for the quarter were $333 million, compared to $335 million in the third quarter of 2015.
• The company had $8 million of proceeds from the sale of assets and businesses in the quarter, $28 million less than in the third quarter of 2015.
• Free cash flow was $428 million in the third quarter of 2016 as compared to $358 million in the third quarter of 2015.
• The company returned $182 million to shareholders through dividends during the third quarter.
• The effective tax rate was 33.7 percent. Adjusting for the items excluded from the company’s as-reported results, the tax rate was 33.5 percent. The company still expects its full year as-adjusted tax rate to be approximately 35 percent.