Waste Management Inc. (NYSE:WM)

Current Income Tax Expense

The current income tax expense exhibited a fluctuating trend over the examined period. It started at 493 million US dollars at the end of 2017, then consistently declined over the next three years to reach a low point of 232 million US dollars in 2020. In 2021, however, there was a significant increase to 609 million US dollars, marking the highest value within the five-year span.

Deferred Income Tax Expense

The deferred income tax expense showed notable volatility throughout the period. Initially, in 2017, it was a negative figure of -251 million US dollars, indicating a tax benefit or adjustment. This shifted to a positive 25 million US dollars in 2018 and continued to increase to 100 million in 2019 and further to 165 million in 2020, suggesting rising deferred tax liabilities or decreased tax benefits. In 2021, the deferred tax expense reversed back to a negative value of -77 million US dollars, indicating a return to deferred tax benefits or adjustments favoring the company.

Total Income Tax Expense

The total income tax expense, which is the combination of current and deferred components, demonstrated a generally increasing trend with some fluctuations. It rose from 242 million US dollars in 2017 to 453 million in 2018, slightly decreased to 434 million in 2019, and then continued a mild decline to 397 million in 2020. In 2021, the total income tax expense surged to 532 million US dollars, reaching the highest level in the period examined. This overall increase in the total tax expense corresponds primarily to the sharp rise in the current tax expense in the final year despite the substantial deferred tax benefit in 2021.

U.S. Federal Statutory Income Tax Rate

The U.S. federal statutory income tax rate experienced a significant decline from 35% in 2017 to 21% in 2018, where it remained stable through 2021. This reflects a notable tax policy change impacting the statutory rate baseline for the company.

State and Local Income Taxes, Net of Federal Income Tax Benefit

This rate demonstrated an upward trend from 3.25% in 2017, peaking slightly at 4.46% in 2020, before decreasing marginally to 4.14% in 2021. This indicates an overall incremental impact of state and local taxes on the effective tax burden over the years, with minor fluctuations.

Federal Tax Credits

Federal tax credits showed variability, becoming more negative from -2.31% in 2017 to a nadir of -4.38% in 2019, then moderating back toward -2.69% by 2021. This trend suggests a cyclical nature in the utilization or availability of federal tax credit benefits, with the greatest impact noted in 2019.

Taxing Authority Audit Settlements and Other Tax Adjustments

The impact of audit settlements and other adjustments fluctuated considerably, moving from a minor positive 0.03% in 2017 to a significant negative effect of -3.85% in 2018, before exhibiting a trend toward minimal impact by 2020 and a slight positive adjustment of 0.53% in 2021. This variability reflects irregular tax-related adjustments affecting the effective tax rate each year.

Tax Impact of Equity-Based Compensation Transactions

The tax impact associated with equity-based compensation transactions consistently reduced the tax rate each year, though with varying intensity. It started at -1.45% in 2017, lessened to -0.54% in 2018, then fluctuated around -0.9% to -1.12% before improving to -0.6% in 2021, indicating ongoing but moderated tax benefits from these transactions.

Tax Impact of Impairments

This factor showed limited and variable influence, near zero in 2018 at 0.03%, positive in 2017 and 2019, then turning negative in 2020 and 2021. This pattern suggests occasional recognition of impairments affecting tax liabilities inconsistently over the period.

Tax Rate Differential on Foreign Income

The tax rate differential on foreign income hovered around zero with minor fluctuations. It was slightly negative at -0.55% in 2017, then shifting to small positive values each subsequent year, averaging around 0.36% from 2018 onward, indicating a modest but steady additional tax burden or benefit from foreign operations.

Other

The "Other" category displayed small, fluctuating contributions to the tax rate, ranging roughly between 0.13% and 0.57%, with no clear trend, reflecting minor assorted effects on the overall tax expense.

Effective Income Tax Rate, Before Impacts of Enactment of Tax Reform

Prior to considering tax reform impacts, the effective tax rate showed a marked decline from 35.18% in 2017 to approximately 20.61%-22.62% during 2019-2021. This decrease parallels the federal statutory tax rate reduction and possibly other changes in tax planning or operations.

Impacts of Enactment of Tax Reform

The enactment of tax reform had a substantial one-time impact, reducing the effective tax rate by -24.14% in 2017 and a smaller effect of -0.51% in 2018. No impacts were recorded beyond 2018, indicating the tax reform adjustments were largely realized by then.

Effective Income Tax Rate

The reported effective income tax rate decreased sharply from 11.04% in 2017, reflecting the tax reform's influence, then increased steadily to reach 22.62% by 2021. This trend illustrates a normalization process following tax reform adjustments, with the effective rate aligning more closely with statutory and other tax components over time.

Net operating loss, capital loss and tax credit carry-forwards

The values remain relatively stable from 2017 to 2018, with a slight decline in 2019, followed by a gradual increase through 2021. This indicates moderate fluctuations without a clear upward or downward trend.

Landfill and environmental remediation liabilities

There is a general upward trend with fluctuations. Liabilities increased from 2017 to 2019, sharply declined in 2020, then surged significantly in 2021, reaching the highest point in the period studied.

Operating lease liabilities

Data is only available from 2019 onward, showing a steady increase over these three years, reflecting rising lease obligations or enhanced lease capitalization.

Miscellaneous and other reserves, net

The reserves peaked in 2018 followed by a decline in 2019 and 2020, with a slight recovery in 2021. This suggests some volatility in this reserve category during the period.

Deferred tax assets, before valuation allowance

There was growth between 2017 and 2018, a slight decrease in 2019 and 2020, then a significant increase in 2021, indicating fluctuating expectations of future tax benefits.

Valuation allowance

This allowance showed a consistent decrease in negativity from 2017 through 2020, indicating reduction in reserved amounts against deferred tax assets, before a minor increase in the negative amount in 2021.

Deferred tax assets

Deferred tax assets steadily increased from 2017 through 2019, declined in 2020, and then rose substantially in 2021, reflecting changes consistent with the trends in the valuation allowance and deferred tax asset estimates.

Property and equipment

There is a clear increasing negative trend across the entire period, with property and equipment values becoming more negative each year, suggesting continued investments or asset write-downs.

Goodwill and other intangibles

Values remained fairly consistent with a slight dip in 2018, then experienced a notable decline in 2020, slightly improving in 2021, indicating possible impairment or changes in intangible asset valuations.

Operating lease right-of-use assets

Reported only from 2019 onwards, these assets show a consistent negative value increase, indicating the recognition and capitalization of right-of-use assets associated with operating leases.

Deferred tax liabilities

Deferred tax liabilities rose steadily and significantly each year from 2017 through 2021, suggesting increased taxable temporary differences or changes in tax rates or assessments.

Net deferred tax assets (liabilities)

The net position was negative throughout the period, with the negative balance deepening especially between 2018 and 2020, followed by a slight improvement in 2021, reflecting the combined movements of deferred tax assets and liabilities.

The analysis of deferred tax liabilities over the five-year period from 2017 to 2021 reveals a general upward trend, with some fluctuations in the final year.

Deferred Tax Liabilities (US$ in millions)

In 2017, deferred tax liabilities were recorded at 1,248 million US dollars.

There was a moderate increase to 1,291 million US dollars in 2018, indicating a slight rise in the company's deferred tax obligations.

This upward movement continued more substantially in 2019, reaching 1,407 million US dollars, suggesting ongoing factors contributing to the growth of these liabilities.

A significant jump occurred in 2020, with deferred tax liabilities increasing sharply to 1,806 million US dollars. This substantial rise may reflect changes in the company's taxable temporary differences or tax regulations impacting the recognition of deferred taxes.

In 2021, the liabilities decreased slightly to 1,694 million US dollars. Although still higher than the figures for the years before 2020, this reduction may indicate partial reversal of temporary differences or adjustments in tax planning.

Overall, the substantial increase in deferred tax liabilities, especially the marked rise in 2020, suggests notable changes in the company's tax-related timing differences or obligations. However, the decrease in 2021 may point to management actions or underlying financial activities affecting deferred tax positions. The trend warrants continued observation to understand the drivers and implications for future tax expenses.

The financial data reveals notable trends in the liabilities, stockholders' equity, and net income of the company over the five-year period ending in 2021. Both reported and adjusted figures are provided, allowing for a comprehensive comparison.

Liabilities

Reported total liabilities increased consistently from 15,787 million US dollars in 2017 to 21,971 million in 2021, indicating a growing level of obligations over the period. Similarly, the adjusted total liabilities followed the same upward trajectory, rising from 14,539 million to 20,277 million. The adjusted liabilities figures remain slightly lower than the reported ones, suggesting that tax adjustments reduce the liabilities base. The growth rate appears sharpest between 2018 and 2019, and moderates somewhat thereafter.

Stockholders’ Equity

Reported stockholders’ equity exhibited growth from 6,019 million US dollars in 2017 to a peak of 7,452 million in 2020, followed by a decrease to 7,124 million in 2021. In contrast, the adjusted equity figures were consistently higher than reported values, starting at 7,267 million in 2017 and growing steadily to 8,818 million in 2021. This divergence suggests that deferred tax adjustments positively impact the equity base. The increase in adjusted equity over the entire period indicates strengthening financial position despite the dip in the reported figure in the final year.

Net Income

The reported net income attributable to the company showed a downward trend from 1,949 million US dollars in 2017 to 1,496 million in 2020, before recovering to 1,816 million in 2021. On the other hand, adjusted net income fluctuated differently, peaking at 1,950 million in 2018, slightly declining in subsequent years, and ending at 1,739 million in 2021. The adjusted figures are generally higher than reported in most years except 2017, reflecting the influence of deferred income tax adjustments on profitability measurements. Overall, net income demonstrates some volatility but stabilizes towards the end of the period examined.

Net Profit Margin

The reported net profit margin shows a declining trend from 13.46% in 2017 to a low of 9.83% in 2020, followed by a slight recovery to 10.13% in 2021. Adjusted net profit margin fluctuates somewhat differently, starting at 11.72% in 2017, peaking at 13.07% in 2018, and then generally declining to 9.7% by 2021. This indicates that while reported margins have decreased steadily, adjusted margins experienced some volatility with an earlier peak before a consistent decline.

Financial Leverage

Reported financial leverage remains relatively stable from 2017 to 2018 around 3.6, then rises steadily through 2019 to 2021, reaching 4.08. Adjusted financial leverage is lower throughout, starting at 3.0 in 2017 and increasing gradually to 3.3 by 2021. Both measures show an increasing trend over the period, implying a gradual rise in the use of debt or financial obligations in the capital structure.

Return on Equity (ROE)

The reported ROE declines significantly from 32.38% in 2017 to 20.08% in 2020, before improving somewhat to 25.49% in 2021. Adjusted ROE follows a similar trajectory but at lower levels, dropping from 23.37% in 2017 to 17.94% in 2020 and then partially recovering to 19.72% in 2021. This suggests reduced profitability relative to shareholders' equity over the period, with a slight rebound in the final year.

Return on Assets (ROA)

Reported ROA declines from 8.93% in 2017 to a low of 5.1% in 2020, then improves to 6.24% in 2021. Adjusted ROA follows a somewhat similar pattern but with less volatility, starting at 7.78% in 2017, increasing slightly to 8.61% in 2018, then declining steadily to 5.98% in 2021. The overall trend signals decreasing efficiency in asset utilization over the period, with a modest recovery in the latter year.

Reported Net Income

The reported net income attributable to Waste Management, Inc. declined from $1,949 million in 2017 to $1,496 million in 2020. This represents a downward trend over four consecutive years. However, in 2021, the reported net income rebounded to $1,816 million, indicating partial recovery but still below the 2017 level.

Adjusted Net Income

Adjusted net income exhibited a somewhat different pattern. Starting at $1,698 million in 2017, it rose sharply to $1,950 million in 2018, surpassing the reported figure for that year. There was a subsequent decline in 2019 and 2020 to $1,770 million and $1,661 million respectively, followed by a slight increase to $1,739 million in 2021. Overall, adjusted net income remained within a relatively narrower range compared to reported net income.

Reported Net Profit Margin

The reported net profit margin showed a consistent decline from 13.46% in 2017 to 9.83% in 2020. There was a modest recovery in 2021 to 10.13%, but the margin remained significantly lower than in 2017. This trend indicates a decrease in profitability relative to revenues over the period, with slight improvement at the end.

Adjusted Net Profit Margin

Adjusted net profit margin fluctuated differently, rising from 11.72% in 2017 to a peak of 13.07% in 2018. Afterwards, it declined steadily each year to 9.7% in 2021. Unlike the reported margin, the adjusted margin did not show recovery in 2021. The margin trend suggests that when excluding certain tax effects, profitability as a percentage of revenue diminished more consistently over the five-year span.

Overall Analysis

The data reveals that while both reported and adjusted net income and profit margins declined over the period, the reported figures showed some recovery in 2021, which is not reflected in the adjusted results. This divergence may indicate the impact of deferred income tax adjustments affecting reported profitability measures. The steady decrease in adjusted margins suggests underlying pressure on the company’s core profitability excluding tax-related items. The trends highlight the importance of analyzing both reported and adjusted results to obtain a complete view of financial performance.

Stockholders’ Equity Trends

The reported total stockholders’ equity showed an overall increasing trend from 2017 through 2020, rising from 6,019 million US dollars to 7,452 million US dollars. However, in 2021, there was a decline to 7,124 million US dollars. The adjusted total stockholders’ equity followed a similar upward trajectory, increasing each year from 7,267 million US dollars in 2017 to a peak of 9,258 million US dollars in 2020. This adjustment reflects consistently higher equity values compared to the reported figures. In 2021, the adjusted equity also decreased, dropping to 8,818 million US dollars.

Financial Leverage Patterns

Reported financial leverage remained relatively stable between 2017 and 2018, around 3.61 to 3.63, but exhibited an upward trend thereafter, increasing to 3.93 in 2019 and slightly rising to 4.08 by 2021. This suggests a gradual increase in the company's debt relative to its equity over the period. In contrast, adjusted financial leverage started at 3.00 in 2017, slightly decreased to 2.99 in 2018, then climbed to 3.27 in 2019. It decreased again to 3.17 in 2020 before rising to 3.30 in 2021. The adjusted leverage figures are lower than the reported ones throughout the period, indicating that the adjustments to equity impact the leverage ratios, generally depicting a lower leverage level after adjustment.

Insights and Observations

The data indicate that both reported and adjusted equity peaked in 2020 followed by a decline in 2021, which may reflect changes in the company's financial position or market conditions affecting equity valuations. The increase in reported financial leverage over the years suggests a rising reliance on debt financing relative to reported equity. However, the adjusted leverage presents a less pronounced increase and remains consistently lower, highlighting the importance of considering adjustments in evaluating financial leverage. The divergence between reported and adjusted figures underscores the potential impact of deferred income tax adjustments on equity and leverage metrics.

Net Income Trends

The reported net income attributable to Waste Management, Inc. exhibits a general decline from 2017 to 2020, decreasing from $1,949 million to $1,496 million. However, there is a noticeable recovery in 2021, with net income rising to $1,816 million. The adjusted net income, which accounts for deferred income tax adjustments, shows a somewhat different pattern. It starts lower than reported net income in 2017 at $1,698 million but increases in 2018 to $1,950 million before declining gradually through 2020 and 2021, ending at $1,739 million. This indicates that tax adjustments have a significant impact on measured profitability and highlight variation in earnings when normalized for such factors.

Stockholders’ Equity Trends

Reported stockholders’ equity shows consistent growth from 2017 to 2020, increasing from $6,019 million to $7,452 million, followed by a slight decrease in 2021 to $7,124 million. When adjusted for deferred income tax effects, total stockholders’ equity is higher across all periods, starting at $7,267 million in 2017 and climbing steadily to $9,258 million in 2020, then declining to $8,818 million in 2021. The adjusted figures suggest that accounting for deferred tax liabilities/assets results in a stronger equity base, although both measures suggest some equity contraction in the most recent year.

Return on Equity (ROE) Trends

Reported ROE shows a steady downward trajectory from 32.38% in 2017 to a low of 20.08% in 2020, before rebounding to 25.49% in 2021. This mirrors the pattern observed in reported net income and indicates a reduction in profitability relative to equity over the period, with partial recovery in the final year. Adjusted ROE values are consistently lower than reported ROE, starting at 23.37% in 2017 and decreasing to 17.94% in 2020, then slightly increasing to 19.72% in 2021. The adjusted ROE reflects the impact of deferred tax adjustments and provides a more conservative measure of profitability.

Overall Insights

The data reveals that while reported financial results show a decline in earnings and profitability through 2020 with some recovery in 2021, the adjusted metrics provide a more tempered view of performance and equity strength. The divergence between reported and adjusted figures underscores the significance of deferred income tax impacts on financial outcomes. Despite fluctuations, the overall trend points to challenges in maintaining high profitability and equity growth in recent years, with signs of improvement emerging most recently but not fully restoring earlier performance levels.

Net Income Trends

The reported net income attributable to the company experienced a decline from 2017 through 2020, decreasing from 1,949 million US dollars in 2017 to 1,496 million US dollars in 2020. However, this trend reversed in 2021 with an increase to 1,816 million US dollars. In contrast, the adjusted net income showed a different pattern: it increased from 1,698 million US dollars in 2017 to 1,950 million US dollars in 2018, followed by a decrease over the next two years, reaching 1,661 million US dollars in 2020, and then a marginal rise to 1,739 million US dollars in 2021.

Return on Assets (ROA) Trends

The reported ROA mirrored the net income pattern, with a decline from 8.93% in 2017 to 5.1% in 2020, followed by a recovery to 6.24% in 2021. The adjusted ROA values showed a similar trajectory but started out lower and exhibited less volatility, moving from 7.78% in 2017 to a peak of 8.61% in 2018, then decreasing to 5.66% in 2020, and slightly rising to 5.98% in 2021.

Comparative Insights

The reported figures generally show higher values than the adjusted ones in terms of net income up to 2019, while in 2018 the adjusted net income surpassed the reported figure. From 2019 onwards, the reported net income is higher than the adjusted net income. The adjusted ROA consistently remains below the reported ROA, except in 2018, where it exceeded the reported figure. These differences suggest the adjustments, possibly related to reported and deferred income taxes, impact the profitability measures and may smooth out some fluctuations observed in the reported data.

Overall Observations

Both reported and adjusted measures indicate a general downward trend in profitability and returns from 2017 through 2020, followed by a partial recovery in 2021. The divergence between reported and adjusted data underlines the significance of income tax adjustments on the financial performance indicators. The company showed resilience in 2021, managing to improve profitability metrics after a period of decline.