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).
The company's total debt carrying amount exhibited a significant upward trajectory between 2017 and 2020, followed by a slight contraction in 2021. Total debt grew from $9,491 million in 2017 to a peak of $13,810 million in 2020, before moderating to $13,405 million at the end of 2021.
- Long-Term Debt Trends
- The long-term debt, excluding the current portion, served as the primary driver of the overall debt increase. This figure rose from $8,752 million in 2017 to $13,280 million in 2019, marking the most substantial growth period. Following a period of relative stability in 2020, the amount declined to $12,697 million by the end of 2021.
- Current Debt Obligations
- The current portion of long-term debt displayed notable volatility relative to long-term obligations. A downward trend was observed from 2017 to 2019, with obligations decreasing from $739 million to a period low of $218 million. Subsequently, these short-term obligations increased over the following two years, rising to $708 million by December 31, 2021, which indicates a shift in the maturity schedule of the debt portfolio.
- Overall Debt Composition and Movement
- Throughout the analyzed period, the debt structure remained heavily weighted toward long-term obligations. While the total debt load expanded by approximately 45% from 2017 to its peak in 2020, the reduction observed in 2021 suggests a shift toward debt reduction or a deceleration in new borrowing activities.
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Total Debt (Fair Value)
| Dec 31, 2021 | |
|---|---|
| Selected Financial Data (US$ 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).
Total interest costs exhibited a non-linear trajectory between 2017 and 2021, characterized by a period of growth peaking in 2019 followed by a contraction. The total expenditure rose from US$ 383 million in 2017 to a peak of US$ 485 million in 2019, before declining to US$ 388 million by the end of 2021, effectively returning to baseline levels.
- Interest Expense Trends
- Interest expense experienced a significant upward trend between 2017 and 2019, increasing from US$ 368 million to US$ 464 million. This was followed by a slight decrease to US$ 457 million in 2020 and a more pronounced reduction to US$ 375 million in 2021. This indicates a substantial reduction in the cost of servicing debt in the final year of the period analyzed.
- Capitalized Interest Analysis
- Capitalized interest represented a minor portion of total interest costs throughout the period. The amount peaked at US$ 21 million in 2019 and subsequently decreased to US$ 13 million by 2021. The decline in capitalized interest suggests a reduction in the scale of qualifying capital projects funded by debt during the latter part of the period.
- Aggregate Cost Correlation
- A consistent correlation is observed between interest expense and capitalized interest, with both metrics peaking in 2019. The total interest cost for 2021 reflects a decrease of approximately 20% from the 2019 peak, suggesting either a reduction in the total debt principal, a decrease in average interest rates, or a change in the company's financing structure.
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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
The analysis of debt service capacity from 2017 to 2021 reveals a fluctuating trend characterized by a mid-period decline followed by a strong recovery. Both the standard and adjusted interest coverage ratios moved in tandem, indicating a consistent relationship between earnings and interest obligations throughout the five-year period.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- This metric exhibited an initial increase from 6.68 in 2017 to 6.90 in 2018. A downward trend followed over the next two years, with the ratio decreasing to 5.30 in 2019 and reaching a period low of 4.97 in 2020. A significant recovery was recorded in 2021, as the ratio ascended to 7.02, marking the highest level of adjusted coverage in the observed timeframe.
- Interest Coverage Ratio (without capitalized interest)
- The non-adjusted ratio followed a nearly identical trajectory, rising from 6.95 in 2017 to 7.19 in 2018. A contraction occurred between 2019 and 2020, with values dropping to 5.54 and 5.14, respectively. The ratio rebounded sharply in 2021 to 7.26, reflecting a robust restoration of the capacity to cover interest expenses from operating profits.
- Comparative Analysis and Correlation
- A consistent gap is observed between the two ratios, with the adjusted ratio remaining lower than the non-adjusted ratio in every reporting year. This indicates that the capitalization of interest consistently reduces the reported coverage capacity. The correlation between the two metrics suggests that the fluctuations were driven by broader operational or financial shifts rather than changes in interest capitalization policy. By the end of 2021, both ratios exceeded their 2017 starting points, signaling an overall improvement in the company's ability to service its debt.
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