Waste Connections Reports First Quarter 2012 Results

Marketwired

THE WOODLANDS, TX--(Marketwire -04/25/12)- Waste Connections, Inc. (WCN - News)

  • Revenue of $376.4 million, up 13.6%
  • Price growth of 3.6% and adjusted operating margins above expectations
  • GAAP EPS and adjusted EPS* of $0.27 and $0.32, respectively
  • Net cash provided by operating activities of $100.6 million
  • Free cash flow* of $76.6 million, or 20.4% of revenue
  • Completes acquisition of Alaska Waste on March 1st
  • Positions balance sheet for potential increase in acquisition activity

Waste Connections, Inc. (WCN - News) today announced its results for the first quarter of 2012. Revenue totaled $376.4 million, a 13.6% increase over revenue of $331.5 million in the year ago period. Operating income was $65.1 million compared to $68.6 million in the first quarter of 2011. Operating income in the current year period included approximately $7.1 million ($5.5 million net of taxes) associated with acquisition-related transaction costs, costs incurred in connection with the relocation of our corporate office from California to Texas, and one-time equity compensation expense related to awards made at the time of the modification of our named executive officers' employment contracts. Net income attributable to Waste Connections in the quarter was $31.3 million, or $0.27 per share on a diluted basis of 115.9 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $36.5 million, or $0.32 per share on a diluted basis of 114.4 million shares.

Adjusted net income attributable to Waste Connections in the quarter was $37.2 million*, or $0.32 per share*, adjusting primarily for the items noted above. Adjusted net income attributable to Waste Connections in the prior year period was $36.9 million*, or $0.32 per share*, adjusting primarily for acquisition-related transaction costs.

"We are pleased to kick off our 15th anniversary with first quarter results that once again exceeded the upper end of our revenue and margin expectations. Continuing pricing strength and increased special waste and construction-related disposal volumes helped overcome the negative impact from year-over-year decreases in recycled commodity values, the loss of lower priced disposal volumes at our Chiquita Canyon landfill, and increased fuel costs. More importantly, free cash flow*, the primary driver of value creation, increased over the prior year period and once again exceeded 20% of revenue," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Our recent equity offering further strengthened our sector-leading balance sheet, uniquely positioning us for what we believe could be increased acquisition activity over the next 18 to 24 months."

Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets. The Company serves more than two million residential, commercial and industrial customers from a network of operations in 30 states. The Company also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. Waste Connections, Inc. was founded in September 1997 and is headquartered in The Woodlands, Texas.

* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

Waste Connections will be hosting a conference call related to first quarter earnings and second quarter outlook on April 26th at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com or through a link on our website at www.wasteconnections.com. A playback of the call will be available at both of these websites.

For more information, visit the Waste Connections web site at www.wasteconnections.com. Copies of financial literature, including this release, are available on the Waste Connections website or through contacting us directly at (832) 442-2200.

Information Regarding Forward-Looking Statements

Certain statements contained in this release are forward-looking in nature, including statements related to: expected revenues and cash flow growth; expected pricing growth, waste volumes and recycled commodity prices; expected levels of acquisition activity in the industry and the drivers of such activity; the Company's anticipated acquisition activity and ability to finance such activity; the Company's focus on exclusive and secondary markets; the Company's deployment of capital; and the impact of the relocation of the Company's corporate headquarters from Folsom, California to The Woodlands, Texas. These statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates," or the negative thereof or comparable terminology, or by discussions of strategy. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) our acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (2) a portion of our growth and future financial performance depends on our ability to integrate acquired businesses into our organization and operations; (3) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (4) we may be unable to compete effectively with larger and better capitalized companies, companies with lower return expectations, and governmental service providers; (5) we may lose contracts through competitive bidding, early termination or governmental action; (6) price increases may not be adequate to offset the impact of increased costs or may cause us to lose volume; (7) economic downturns adversely affect operating results; (8) our results are vulnerable to economic conditions and seasonal factors affecting the regions in which we operate; (9) we may be subject in the normal course of business to judicial, administrative or other third party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity; (10) increases in the price of fuel may adversely affect our business and reduce our operating margins; (11) increases in labor and disposal and related transportation costs could impact our financial results; (12) efforts by labor unions could divert management attention and adversely affect operating results; (13) we could face significant withdrawal liability if we withdraw from participation in one or more underfunded multiemployer pension plans in which we participate; (14) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (15) our indebtedness could adversely affect our financial condition; we may incur substantially more debt in the future; (16) each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, including environmental liabilities; (17) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (18) our accruals for our landfill site closure and post-closure costs may be inadequate; (19) the financial soundness of our customers could affect our business and operating results; (20) we depend significantly on the services of the members of our senior, regional and district management team, and the departure of any of those persons could cause our operating results to suffer; (21) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (22) we may incur charges related to capitalized expenditures of landfill development projects, which would decrease our earnings; (23) because we depend on railroads for our intermodal operations, our operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (24) our financial results are based upon estimates and assumptions that may differ from actual results; (25) the adoption of new accounting standards or interpretations could adversely affect our financial results; (26) pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements; and (27) if we are not able to develop and protect intellectual property, or if a competitor develops or obtains exclusive rights to a breakthrough technology, our financial results may suffer. These risks and uncertainties, as well as others, are discussed in greater detail in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.

- financial tables attached -

 

                          WASTE CONNECTIONS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                 THREE MONTHS ENDED MARCH 31, 2011 AND 2012
                                (Unaudited)
             (in thousands, except share and per share amounts)


                                                    Three months ended
                                                         March 31,
                                               ----------------------------
                                                    2011           2012
                                               -------------  -------------

Revenues                                       $     331,468  $     376,430
Operating expenses:
  Cost of operations                                 187,066        216,681
  Selling, general and administrative                 38,838         51,174
  Depreciation                                        33,037         37,173
  Amortization of intangibles                          3,977          5,631
  Loss (gain) on disposal of assets                      (25)           715
                                               -------------  -------------
Operating income                                      68,575         65,056

Interest expense                                      (8,833)       (12,285)
Interest income                                          134            133
Other income, net                                        394            686
                                               -------------  -------------
Income before income tax provision                    60,270         53,590

Income tax provision                                 (23,477)       (22,151)
                                               -------------  -------------
Net income                                            36,793         31,439
Less: net income attributable to
 noncontrolling interests                               (254)          (136)
                                               -------------  -------------
Net income attributable to Waste Connections   $      36,539  $      31,303
                                               =============  =============

Earnings per common share attributable to
 Waste Connections' common stockholders:
  Basic                                        $        0.32  $        0.27
                                               =============  =============
  Diluted                                      $        0.32  $        0.27
                                               =============  =============

Shares used in the per share calculations:
  Basic                                          113,519,266    115,188,134
                                               =============  =============
  Diluted                                        114,401,304    115,876,461
                                               =============  =============

Cash dividends per common share                $       0.075  $        0.09
                                               =============  =============



                          WASTE CONNECTIONS, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited)
             (in thousands, except share and per share amounts)


                                                December 31,    March 31,
                                                    2011           2012
                                               -------------  -------------
ASSETS
Current assets:
  Cash and equivalents                         $      12,643  $       8,169
  Accounts receivable, net of allowance for
   doubtful accounts of $6,617 and $6,893 at
   December 31, 2011 and March 31, 2012,
   respectively                                      176,277        173,088
  Deferred income taxes                               20,630         12,408
  Prepaid expenses and other current assets           39,708         34,762
                                               -------------  -------------
    Total current assets                             249,258        228,427

Property and equipment, net                        1,450,469      1,456,851
Goodwill                                           1,116,888      1,176,029
Intangible assets, net                               449,581        503,597
Restricted assets                                     30,544         30,656
Other assets, net                                     31,265         31,084
                                               -------------  -------------
                                               $   3,328,005  $   3,426,644
                                               =============  =============

LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable                             $      95,097  $      76,980
  Book overdraft                                      12,169         12,489
  Accrued liabilities                                106,243        102,749
  Deferred revenue                                    64,694         68,375
  Current portion of long-term debt and notes
   payable                                             5,899          4,618
                                               -------------  -------------
    Total current liabilities                        284,102        265,211

Long-term debt and notes payable                   1,172,758        883,174
Other long-term liabilities                           74,324         81,057
Deferred income taxes                                397,134        401,196
                                               -------------  -------------
    Total liabilities                              1,928,318      1,630,638

Commitments and contingencies

Equity:
Preferred stock: $0.01 par value; 7,500,000
 shares authorized; none issued and
 outstanding                                               -              -
Common stock: $0.01 par value; 250,000,000
 shares authorized; 110,907,782 and
 123,355,415 shares issued and outstanding at
 December 31, 2011 and March 31, 2012,
 respectively                                          1,109          1,234
Additional paid-in capital                           408,721        783,283
Retained earnings                                    988,560      1,009,853
Accumulated other comprehensive loss                  (3,480)        (3,182)
                                               -------------  -------------
  Total Waste Connections' equity                  1,394,910      1,791,188
Noncontrolling interest in subsidiaries                4,777          4,818
                                               -------------  -------------
  Total equity                                     1,399,687      1,796,006
                                               -------------  -------------
                                               $   3,328,005  $   3,426,644
                                               =============  =============



                          WASTE CONNECTIONS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 THREE MONTHS ENDED MARCH 31, 2011 AND 2012
                                (Unaudited)
                           (Dollars in thousands)


                                                    Three months ended
                                                         March 31,
                                               ----------------------------
                                                    2011           2012
                                               -------------  -------------


Cash flows from operating activities:
Net income                                     $      36,793  $      31,439
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Loss (gain) on disposal of assets                      (25)           715
  Depreciation                                        33,037         37,173
  Amortization of intangibles                          3,977          5,631
  Deferred income taxes, net of acquisitions          20,068         12,101
  Amortization of debt issuance costs                    242            415
  Equity-based compensation                            2,996          7,596
  Interest income on restricted assets                  (121)          (112)
  Closure and post-closure accretion                     484            612
  Excess tax benefit associated with equity-
   based compensation                                 (1,838)        (3,005)
  Net change in operating assets and
   liabilities, net of acquisitions                   (7,235)         8,016
                                               -------------  -------------
Net cash provided by operating activities             88,378        100,581
                                               -------------  -------------

Cash flows from investing activities:
  Payments for acquisitions, net of cash
   acquired                                             (814)      (138,908)
  Capital expenditures for property and
   equipment                                         (19,528)       (27,953)
  Proceeds from disposal of assets                       789            753
  Decrease in restricted assets, net of
   interest income                                     2,846              -
  Decrease (increase) in other assets                     36         (1,861)
                                               -------------  -------------
Net cash used in investing activities                (16,671)      (167,969)
                                               -------------  -------------

Cash flows from financing activities:
  Proceeds from long-term debt                        54,000        184,000
  Principal payments on notes payable and
   long-term debt                                    (91,674)      (474,865)
  Payment of contingent consideration                   (100)        (3,528)
  Change in book overdraft                               (16)           321
  Proceeds from option and warrant exercises             437            530
    Excess tax benefit associated with equity-
     based compensation                                1,838          3,005
  Payments for repurchase of common stock            (20,613)             -
  Payments for cash dividends                         (8,515)       (10,010)
  Tax withholdings related to net share
   settlements of restricted stock units              (5,169)        (5,904)
  Distributions to noncontrolling interests             (675)           (95)
  Proceeds from common stock offering, net                 -        369,460
                                               -------------  -------------
Net cash provided by (used in) financing
 activities                                          (70,487)        62,914
                                               -------------  -------------

Net increase (decrease) in cash and
 equivalents                                           1,220         (4,474)
Cash and equivalents at beginning of period            9,873         12,643
                                               -------------  -------------
Cash and equivalents at end of period          $      11,093  $       8,169
                                               =============  =============



                            ADDITIONAL STATISTICS
                      THREE MONTHS ENDED MARCH 31, 2012
                           (Dollars in thousands)

Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:

 

                                                        Three Months Ended
                                                          March 31, 2012
                                                        ------------------
Core Price                                                             3.2%
Surcharges                                                             0.4%
Volume                                                                 0.0%
Intermodal, Recycling and Other                                       (0.7%)
                                                        ------------------
Total                                                                  2.9%

Uneliminated Revenue Breakdown:

 

                                                     Three Months Ended
                                                       March 31, 2012
                                                 --------------------------
Collection                                       $     277,088         64.2%
Disposal and Transfer                                  121,995         28.3%
Intermodal, Recycling and Other                         32,573          7.5%
                                                 ------------- ------------
Total before inter-company elimination           $     431,656        100.0%

Inter-company elimination                        $      55,226
                                                 -------------
  Reported Revenue                               $     376,430
                                                 -------------

Days Sales Outstanding for the three months ended March 31, 2012: 42 (25 net of deferred revenue)

Internalization for the three months ended March 31, 2012: 59%

Other Cash Flow Items:

 

                                                          Three Months Ended
                                                            March 31, 2012
                                                         -------------------
Cash Interest Paid                                       $             4,462
Cash Taxes Paid                                          $               335

Debt to Book Capitalization as of March 31, 2012: 33%

Share Information for the three months ended March 31, 2012:

 

Basic shares outstanding                                         115,188,134
Dilutive effect of options and warrants                              339,747
Dilutive effect of restricted stock                                  348,580
                                                  --------------------------
Diluted shares outstanding                                       115,876,461



 
                      NON-GAAP RECONCILIATION SCHEDULE
                               (in thousands)

Reconciliation of Adjusted Operating Income before Depreciation and Amortization:

Adjusted operating income before depreciation and amortization, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a performance and valuation measure in the solid waste industry. Waste Connections defines adjusted operating income before depreciation and amortization as operating income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any gain or loss on disposal of assets. The Company further adjusts this calculation to exclude the effects of items management believes impact the ability to assess the operating performance of its business. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses adjusted operating income before depreciation and amortization as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company's operations. Other companies may calculate adjusted operating income before depreciation and amortization differently.

 

                                     Three Months Ended  Three Months Ended
                                       March 31, 2011      March 31, 2012
                                     ------------------  ------------------
Operating income                     $           68,575  $           65,056
Plus: Depreciation and amortization              37,014              42,804
Plus: Closure and post-closure
 accretion                                          484                 612
Plus/less: Loss (gain) on disposal
 of assets                                          (25)                715
Adjustments:
  Plus: Acquisition-related
   transaction costs (a)                            671               1,777
  Plus: Relocation expenses (b)                       -               1,727
  Plus: NEO one-time equity grants
   (c)                                                -               3,585
                                     ------------------  ------------------
Adjusted operating income before
 depreciation and amortization       $          106,719  $          116,276
                                     ------------------  ------------------

As % of revenues                                   32.2%               30.9%

(a) Reflects the addback of acquisition-related transaction costs.
(b) Reflects the addback of costs associated with the relocation of the
    Company's corporate office from California to Texas.
(c) Reflects the addback of one-time equity compensation expense incurred at
    the time our NEOs' employment contracts were modified.

Reconciliation of Free Cash Flow:

Free cash flow, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a valuation and liquidity measure in the solid waste industry. Waste Connections defines free cash flow as net cash provided by operating activities, plus proceeds from disposal of assets, plus or minus change in book overdraft, plus excess tax benefit associated with equity-based compensation, less capital expenditures for property and equipment and distributions to noncontrolling interests. This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures. Management uses free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company's operations. Other companies may calculate free cash flow differently.

 

                                     Three Months Ended  Three Months Ended
                                       March 31, 2011      March 31, 2012
                                     ------------------  ------------------
Net cash provided by operating
 activities                          $           88,378  $          100,581
Plus/less: Change in book overdraft                 (16)                321
Plus: Proceeds from disposal of
 assets                                             789                 753
Plus: Excess tax benefit associated
 with equity-based compensation                   1,838               3,005
Less: Capital expenditures for
 property and equipment                         (19,528)            (27,953)
Less: Distributions to
 noncontrolling interests                          (675)                (95)
                                     ------------------  ------------------
Free cash flow                       $           70,786  $           76,612
                                     ------------------  ------------------

As % of revenues                                   21.4%               20.4%



                NON-GAAP RECONCILIATION SCHEDULE (continued)
                   (in thousands, except per share amounts)

Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income per diluted share:

Adjusted net income and adjusted net income per diluted share, both non-GAAP financial measures, are provided supplementally because they are widely used by investors as a valuation measure in the solid waste industry. The Company provides adjusted net income to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income has limitations due to the fact that it may exclude items that have an impact on the Company's financial condition and results of operations. Adjusted net income and adjusted net income per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses adjusted net income and adjusted net income per diluted share as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company's operations. Other companies may calculate adjusted net income and adjusted net income per diluted share differently.

 

                                                       Three months ended
                                                            March 31,
                                                    ------------------------
                                                        2011         2012
                                                    -----------  -----------

Reported net income attributable to Waste
 Connections                                        $    36,539  $    31,303
Adjustments:
  Acquisition-related transaction costs, net of
   taxes (a)                                                416        1,101
  Loss (gain) on disposal of assets, net of taxes
   (b)                                                      (15)         443
  Corporate relocation expenses, net of taxes (c)             -        1,071
  NEO one-time equity grants, net of taxes (d)                -        3,315
                                                    -----------  -----------
Adjusted net income attributable to Waste
 Connections                                        $    36,940  $    37,233
                                                    ===========  ===========

Diluted earnings per common share attributable to
 Waste Connections common stockholders:
  Reported net income                               $      0.32  $      0.27
                                                    ===========  ===========
  Adjusted net income                               $      0.32  $      0.32
                                                    ===========  ===========

(a) Reflects the elimination of acquisition-related costs.
(b) Reflects the elimination of a loss (gain) on disposal of assets.
(c) Reflects the elimination of costs associated with the relocation of the
    Company's corporate office from California to Texas.
(d) Reflects the elimination of one-time equity compensation expense
    incurred at the time our NEOs' employment contracts were modified.

Contact:
CONTACT:
Worthing Jackman
(832) 442-2266
Email Contact
Mary Anne Whitney
(916) 608-8253
Email Contact

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