Analysis of Debt
Total Debt (Carrying Amount)
Waste Management Inc., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Current Portion of Long-Term Debt
- The current portion of long-term debt exhibited a declining trend from 739 million USD at the end of 2017 to a low of 218 million USD in 2019. Following this period, the value increased to 551 million USD in 2020 and further to 708 million USD by the end of 2021. This indicates a reduction in short-term debt obligations during 2018 and 2019, with a subsequent rise in short-term liabilities over the last two years analyzed.
- Long-Term Debt, Less Current Portion
- The long-term debt, excluding the current portion, showed an overall upward trajectory from 8,752 million USD in 2017 to a peak of 13,280 million USD in 2019. After reaching this peak, the figure remained relatively stable in 2020 at 13,259 million USD before slightly decreasing to 12,697 million USD in 2021. This suggests the company increased its long-term borrowing significantly up to 2019 and then maintained or marginally reduced the outstanding long-term debt subsequently.
- Total Debt (Carrying Amount)
- Total debt mirrored the patterns observed in its components, starting at 9,491 million USD in 2017 and increasing steadily to a maximum of 13,810 million USD in 2020. The total then slightly decreased to 13,405 million USD in 2021. This confirms a general increase in the company’s indebtedness over the five-year span, with the largest increases occurring prior to 2020 and a mild reduction afterward.
- Summary of Debt Trends
- Overall, the data reveals a significant build-up in long-term debt up to 2019, which contributed to a marked increase in total debt during the period. The fluctuation in the current portion of debt indicates changes in short-term financing or refinancing strategies, with a notable reduction in 2019 followed by increases through 2021. The slight decline in total and long-term debt after 2020 may reflect active management of debt levels or repayment efforts, although the company remains at a higher debt level compared to the start of the analyzed period.
Total Debt (Fair Value)
| Dec 31, 2021 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Total debt (fair value) | 14,100) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.05 |
Based on: 10-K (reporting date: 2021-12-31).
Weighted-average Interest Rate on Debt
Weighted average interest rate on debt: 2.46%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 0.40% | 1,778) | 7) | |
| 3.10% | 8,126) | 252) | |
| 2.60% | 395) | 10) | |
| 1.40% | 2,619) | 37) | |
| 4.50% | 567) | 26) | |
| Total | 13,485) | 331) | |
| 2.46% | |||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × 331 ÷ 13,485 = 2.46%
Interest Costs Incurred
Waste Management Inc., interest costs incurred
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Interest Expense
- The interest expense showed a moderate increase from 368 million US dollars at the end of 2017 to 384 million US dollars in 2018. This upward trend continued more markedly into 2019, reaching 464 million US dollars. In 2020, there was a slight decrease to 457 million, followed by a more significant reduction to 375 million in 2021, nearly returning to the initial 2017 level.
- Capitalized Interest
- Capitalized interest demonstrated a gradual increase from 15 million US dollars in 2017 to a peak of 21 million in 2019. However, this figure subsequently declined to 16 million in 2020 and further to 13 million in 2021, indicating a trend of decreasing capitalized interest in the latter years of the period.
- Total Interest Costs
- Total interest costs, combining both interest expense and capitalized interest, followed a trajectory similar to the individual components. Starting at 383 million US dollars in 2017, costs climbed steadily to a peak of 485 million in 2019, before reverting downward to 473 million in 2020 and then more sharply dropping to 388 million in 2021.
- Overall Trends and Insights
- The data reveals a general increase in interest-related costs until 2019, after which there is a declining trend through 2021. The peak in 2019 suggests that financing costs or borrowing levels might have been higher during that year. The decrease from 2020 onwards could be due to reduced borrowing, lower interest rates, or strategic financial management aimed at minimizing interest expenses. The decline in capitalized interest particularly indicates a possible reduction in capital projects or a change in capitalization policy over recent years.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 2,724 ÷ 375 = 7.26
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Total interest costs
= 2,724 ÷ 388 = 7.02
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio demonstrates a varying trend over the five-year period. Beginning at 6.95 in 2017, it increased slightly to 7.19 in 2018, indicating marginally improved ability to cover interest expenses. However, this coverage ratio declined over the next two years, reaching its lowest point of 5.14 in 2020, suggesting reduced capacity to meet interest obligations during this period. Notably, in 2021, the ratio rebounded sharply to 7.26, exceeding values observed in the initial years and signaling a strong recovery in financial strength related to interest coverage.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio exhibits a pattern closely mirroring the unadjusted ratio, with generally lower values due to the inclusion of capitalized interest in the calculation. Starting at 6.68 in 2017, it rose slightly to 6.90 in 2018, followed by a decline to its lowest level of 4.97 in 2020. Similar to the unadjusted ratio, a marked rebound occurs in 2021, reaching 7.02. This recovery suggests that the company's capacity to cover interest payments, when accounting for capitalized interest, has strengthened significantly after the dip during 2019 and 2020.
- Overall Insights
- Both ratios indicate a generally strong ability to cover interest expenses throughout the observed period, despite a notable weakening in 2019 and 2020. The decline in these years may reflect increased interest expenses or lowered earnings before interest and taxes, potentially tied to operational challenges or market conditions. The pronounced recovery in 2021 points to improved operational performance or financial management, enhancing the firm's capacity to meet its interest obligations. The close alignment between adjusted and unadjusted ratios suggests that capitalized interest has a consistent, but not distorting, impact on interest coverage assessment.