Waste Management 2015 Annual Report Download - page 97

businesses and other assets (net of cash divested). We believe it is indicative of our ability to pay our quarterly
dividends, repurchase common stock, fund acquisitions and other investments and, in the absence of
refinancings, to repay our debt obligations. Free cash flow is not intended to replace “Net cash provided by
operating activities,” which is the most comparable GAAP measure. However, we believe free cash flow gives
investors useful insight into how we view our liquidity. Nevertheless, the use of free cash flow as a liquidity
measure has material limitations because it excludes certain expenditures that are required or that we have
committed to, such as declared dividend payments and debt service requirements.
Our calculation of free cash flow and reconciliation to “Net cash provided by operating activities” is shown
in the table below (in millions), and may not be calculated the same as similarly-titled measures presented by
other companies:
Years Ended December 31,
2015 2014 2013
Net cash provided by operating activities .............. $2,498 $ 2,331 $ 2,455
Capital expenditures ............................... (1,233) (1,151) (1,271)
Proceeds from divestitures of businesses and other assets
(net of cash divested) ............................ 145 2,253 138
Free cash flow ................................... $1,410 $ 3,433 $ 1,322
When comparing our cash flows from operating activities for the year ended December 31, 2015 to the
comparable period in 2014, the increase of $167 million is primarily related to (i) lower income tax payments,
net of excess tax benefits associated with equity-based transactions, of $329 million in the current year; (ii) lower
interest paid of $77 million in the current year and (iii) the settlement of forward-starting swap liabilities of $36
million in 2014. These increases were partially offset by (i) a decrease in cash earnings due to the sale of our
Wheelabrator business in 2014; (ii) multiemployer pension plan settlement payments of approximately $60
million in 2015 and (iii) higher year-over-year annual incentive plan payments of approximately $65 million.
Finally, we experienced unfavorable changes in our assets and liabilities, net of effects of acquisitions and
divestitures, particularly non-trade related items including payroll and incentive accruals. However, we did
experience continued improvement in both trade accounts receivable and accounts payable.
When comparing our cash flows from operating activities for the year ended December 31, 2014 to the
comparable period in 2013, the decrease of $124 million is primarily related to higher income tax payments, net
of excess tax benefits associated with equity-based transactions, of $242 million in 2014 and a payment of $36
million in 2014 to terminate our forward-starting swaps. These decreases were partially offset by higher cash
earnings and favorable working capital changes.
Although capital expenditures were higher in 2015 and 2013 as compared to 2014, the Company continues
to maintain a disciplined focus on capital management. Fluctuations in our capital expenditures are a result of
new business opportunities, growth in our existing business, and the timing of replacement of aging assets.
The significantly higher proceeds from divestitures of businesses and other assets (net of cash divested) for
the year ended December 31, 2014 compared to the years ended December 31, 2015 and 2013 is largely driven
by the 2014 sales of (i) our Wheelabrator business for $1.95 billion; (ii) our investment in Shanghai Environment
Group, which was part of our Wheelabrator business, for $155 million and (iii) our Puerto Rico operations for
proceeds of $80 million, including $65 million in cash.
Acquisitions
Deffenbaugh Disposal, Inc. — On March 26, 2015, we acquired Deffenbaugh, one of the largest privately
owned collection and disposal firms in the Midwest, for total consideration of $416 million ($413 million cash),
34