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Waste Connections Reports Second Quarter 2019 Results And Updates Full Year Outlook

- Revenue of $1.370 billion, up 10.5%
- Reports 6.0% solid waste price + volume growth, exceeding high end of outlook
- Net income attributable to Waste Connections of $148.8 million, or $0.56 per share
- Adjusted net income attributable to Waste Connections* of $181.3 million, or $0.69 per share
- Adjusted EBITDA* of $425.3 million, or 31.1% of revenue
- YTD net cash provided by operating activities of $753.0 million
- YTD adjusted free cash flow* of $503.9 million, or 19.3% of revenue
- YTD acquired annualized revenue of approximately $160 million

TORONTO, July 29, 2019 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the second quarter of 2019. 

Waste Connections logo. (PRNewsFoto/Waste Connections, Inc.) (PRNewsFoto/WASTE CONNECTIONS_ INC_)

"Solid waste pricing growth of over 5%, along with a sequential 200 basis points increase in solid waste volumes, drove underlying solid waste collection, transfer and disposal margin expansion of approximately 70 basis points in the quarter.  This helped offset a portion of the impact from lower than expected contributions from higher margin, commodity-related activities, primarily recycling and renewable fuels, and the dilutive margin impact of acquisitions completed since the prior year period.  Our team delivered on the commitments within their control, but the ongoing erosion in recycled commodity values and a precipitous drop in renewable fuel credits impacted overall results," said Worthing F. Jackman, President and Chief Executive Officer.  "In spite of these commodity-related headwinds, we have already generated adjusted free cash flow* of more than $500 million, putting us on track to meet our original expectation for underlying adjusted free cash flow* for the full year."

Mr. Jackman added, "As anticipated, we have already completed an outsized year of acquisition activity with almost half of the year still ahead of us, as we have closed approximately $160 million in total annualized revenue.  We are particularly pleased with the approximate 65% average reduction in safety-related incidents in the three largest acquisitions completed over the last several months, and we look forward to continued improvement, as we are accelerating the timing to automate the residential fleet in our largest acquired location.  In addition, new contract awards are trending above average.  These wins provide foundations for further growth next year but require incremental capex in the current year, which, along with the accelerated fleet conversion referenced above, totals approximately $35 million, and will impact reported adjusted free cash flow*.  The strength of our financial profile and free cash flow generation keeps us well-positioned for additional acquisitions and organic growth opportunities, while maintaining the flexibility to increase the return of capital to shareholders."

Q2 2019 Results

Revenue in the second quarter totaled $1.370 billion, up from $1.240 billion in the year ago period.  Operating income was $222.1 million; this compares to $210.7 million in the year ago period. 

Net income attributable to Waste Connections in the second quarter was $148.8 million, or $0.56 per share on a diluted basis of 264.5 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $138.7 million, or $0.52 per share on a diluted basis of 264.3 million shares.

Adjusted net income attributable to Waste Connections* in the second quarter was $181.3 million, or $0.69 per share, versus $172.3 million, or $0.65 per share, in the prior year period.  Adjusted EBITDA* in the second quarter was $425.3 million and 31.1% of revenue, as compared to adjusted EBITDA* of $395.5 million and 31.9% of revenue in the prior year period. 

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

Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude acquisition-related items, as reflected in the detailed reconciliations in the attached tables.

Six Months Year to Date 2019 Results

For the six months ended June 30, 2019, revenue was $2.614 billion, as compared to revenue of $2.380 billion in the year ago period.  Operating income was $407.0 million, which included $31.3 million of expenses primarily related to impairments and other items related to the termination of certain contracts and other acquisition-related costs; this compared to operating income of $399.4 million for the same period in 2018, which included $18.3 million of expenses primarily related to impairments and other items related to the termination of certain contracts and other acquisition-related costs.

Net income attributable to Waste Connections for the six months ended June 30, 2019, was $274.5 million, or $1.04 per share on a diluted basis of 264.4 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $263.6 million, or $1.00 per share on a diluted basis of 264.5 million shares. 

Adjusted net income attributable to Waste Connections* for the six months ended June 30, 2019, was $345.2 million, or $1.31 per share, compared to $320.9 million, or $1.21 per share, in the year ago period. Adjusted EBITDA* for the six months ended June 30, 2019, was $811.0 million and 31.0% of revenue, as compared to $752.4 million and 31.6% of revenue in the prior year period. 

Updated 2019 Outlook

Waste Connections also updated its outlook for 2019, which assumes no change in the current economic environment.  The Company's outlook excludes any impact from additional acquisitions that may close during the year, and expensing of transaction-related items.  The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2019 are subject to quarterly fluctuations.  See reconciliation in the attached tables.

  • Revenue is estimated to be approximately $5.375 billion, as compared to our original revenue outlook of approximately $5.310 billion.
  • Net income attributable to Waste Connections is estimated to be approximately $573 million, and adjusted EBITDA* is estimated to be approximately $1.675 billion, or about 31.2% of revenue, as compared to our original adjusted EBITDA* outlook of $1.705 billion.
  • Capital expenditures are estimated to be approximately $600 million, as compared to our original capital expenditures outlook of approximately $575 million, due primarily to $35 million of incremental capital expenditures primarily related to contracts awarded during 2019.
  • Net cash provided by operating activities is estimated to be approximately $1.510 billion, as compared to our original outlook of $1.525 billion, and adjusted free cash flow*, including the incremental $35 million in capital expenditures noted above, is estimated to be approximately $915 million, or about 17.0% of revenue, as compared to our original adjusted free cash flow* outlook of approximately $950 million.

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

Q2 2019 Conference Call

Waste Connections will be hosting a conference call related to second quarter earnings on July 30th at 8:30 A.M. Eastern Time.  To access the call, listeners should dial 800-768-9711 (within North America) or 212-231-2912 (international) approximately 10 minutes prior to the scheduled start time and ask the operator for the Waste Connections conference call (a passcode is not required).  A replay of the conference call will be available until August 6, 2019 by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #21925963.  The call will be broadcast live over the Internet through a link on the Company's website at www.wasteconnections.com.  A playback of the call will be available on the Company's website.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on July 30th, providing the Company's third quarter 2019 outlook for revenue, price plus volume growth for solid waste and adjusted EBITDA*.

*A non-GAAP measure.

About Waste Connections

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the United States and Canada.  Through its R360 Environmental Solutions subsidiary, Waste Connections is also a leading provider of non-hazardous oilfield waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the United States, including the Permian, Bakken and Eagle Ford Basins.  Waste Connections serves more than seven million residential, commercial, industrial, and exploration and production customers in 42 states in the U.S., and six provinces in Canada.  The Company also provides intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest.

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 (905) 532-7510.  Investors can also obtain these materials and other documents filed with the U.S. Securities and Exchange Commission ("SEC") and the Canadian securities regulators free of charge at the SEC's website, www.sec.gov, and at the System for Electronic Document Analysis and Retrieval maintained by the Canadian Securities Administrators at www.sedar.com.

Safe Harbor and Forward-Looking Information

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 ("PSLRA"), including "forward-looking information" within the meaning of applicable Canadian securities laws. These forward-looking statements are neither historical facts nor assurances of future performance and reflect Waste Connections' current beliefs and expectations regarding future events and operating performance. These forward-looking statements are often identified by the words "may," "might," "believes," "thinks," "expects," "estimate," "continue," "intends" or other words of similar meaning. All of the forward-looking statements included in this press release are made pursuant to the safe harbor provisions of the PSLRA and applicable securities laws in Canada. Forward-looking statements involve risks and uncertainties. Forward-looking statements in this press release include, but are not limited to, statements about expected 2019 financial results, outlook and related assumptions, adjusted free cash flow, capital expenditures, potential acquisition activity and return of capital to shareholders. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada.  You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.  Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

– financial tables attached –

CONTACT:

Mary Anne Whitney / (832) 442-2253

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2019

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)



Three months ended

June 30,


Six months ended

June 30,


2018


2019


2018


2019









Revenues

$ 1,239,968


$ 1,369,639


$ 2,380,099


$ 2,614,275

Operating expenses:








Cost of operations

725,022


815,819


1,384,825


1,549,508

Selling, general and administrative

128,261


139,664


259,568


272,249

Depreciation

142,450


156,776


275,634


303,623

Amortization of intangibles

26,474


31,344


52,573


61,886

Impairments and other operating items

7,073


3,902


8,104


20,014

Operating income

210,688


222,134


399,395


406,995









Interest expense

(32,426)


(37,245)


(64,796)


(74,533)

Interest income

1,056


1,818


2,210


5,129

Other income, net

2,031


805


1,644


3,363

Foreign currency transaction gain (loss)

30


1,115


(190)


1,218

Income before income tax provision

181,379


188,627


338,263


342,172









Income tax provision

(42,565)


(39,788)


(74,417)


(67,756)

Net income

138,814


148,839


263,846


274,416

Plus (less): net loss (income) attributable to noncontrolling interests

 

(132)


 

9


 

(295)


 

54

Net income attributable to Waste Connections

$     138,682


$     148,848


$     263,551


$     274,470









Earnings per common share attributable to Waste Connections' common shareholders:








Basic

$          0.53


$          0.56


$          1.00


$          1.04

Diluted

$          0.52


$          0.56


$           1.00


$           1.04









Shares used in the per share calculations:








Basic

263,691,172


263,846,970


263,757,179


263,725,867

Diluted

264,332,029


264,494,943


264,452,785


264,416,610

Cash dividends per common share

$       0.14


$       0.16


$          0.28


$          0.32


 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)




December 31,
2018


June 30,
2019

ASSETS







Current assets:







Cash and equivalents


$

319,305


$

209,209

Accounts receivable, net of allowance for doubtful accounts of $16,760 and $14,029 at December 31, 2018 and June 30, 2019, respectively



609,545



663,931

Prepaid expenses and other current assets



164,053



117,454

Total current assets



1,092,903



990,594

Restricted cash



84,661



84,527

Restricted investments



47,486



54,515

Property and equipment, net



5,168,996



5,318,196

Operating lease right-of-use assets



-



194,361

Goodwill



5,031,685



5,316,670

Intangible assets, net



1,128,628



1,124,107

Other assets, net



72,970



62,802

      Total assets


$

12,627,329


$

13,145,772

LIABILITIES AND EQUITY







Current liabilities:







Accounts payable


$

359,967


$

408,229

Book overdraft



18,518



17,984

Accrued liabilities



289,544



274,478

Current portion of operating lease liabilities



-



30,255

Current portion of contingent consideration



11,612



11,773

Deferred revenue



179,282



199,401

Current portion of long-term debt and notes payable



1,786



798

      Total current liabilities



860,709



942,918








Long-term debt and notes payable



4,153,465



4,082,876

Long-term portion of operating lease liabilities



-



170,829

Long-term portion of contingent consideration



43,003



45,227

Deferred income taxes



760,033



783,609

Other long-term liabilities



349,931



412,508

      Total liabilities



6,167,141



6,437,967

Commitments and contingencies







Equity:







Common shares: 263,271,302 shares issued and 263,141,413 shares outstanding at December 31, 2018; 263,686,518 shares issued and 263,601,239 shares outstanding at June 30, 2019



4,131,307



4,135,002

Additional paid-in capital



133,577



138,194

Accumulated other comprehensive loss



(74,786)



(23,487)

Treasury shares: 129,889 and 85,279 shares at December 31, 2018 and June 30, 2019, respectively



-



-

Retained earnings



2,264,510



2,452,687

      Total Waste Connections' equity



6,454,608



6,702,396

Noncontrolling interest in subsidiaries



5,580



5,409

      Total equity



6,460,188



6,707,805



$

12,627,329


$

13,145,772

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2018 AND 2019

(Unaudited)

(in thousands of U.S. dollars)





Six months ended June 30,





2018



2019

Cash flows from operating activities:







Net income


$

263,846


$

274,416

Adjustments to reconcile net income to net cash provided by operating activities:







Loss on disposal of assets and impairments



10,090



18,924

Depreciation



275,634



303,623

Amortization of intangibles



52,573



61,886

Amortization of leases



-



13,183

Deferred income taxes, net of acquisitions



26,399



18,911

Amortization of debt issuance costs



2,081



2,414

Share-based compensation



20,262



26,763

Interest accretion



7,403



8,143

Payment of contingent consideration recorded in earnings



(11)



-

Adjustments to contingent consideration



349



1,466

Other



64



(1,514)

Net change in operating assets and liabilities, net of acquisitions



6,241



24,833

Net cash provided by operating activities



664,931



753,048








Cash flows from investing activities:







Payments for acquisitions, net of cash acquired



(485,519)



(381,422)

Capital expenditures for property and equipment



(201,712)



(253,790)

Proceeds from disposal of assets



2,074



1,198

Change in restricted investments, net of interest income



-



(6,206)

Other



(77)



(70)

Net cash used in investing activities



(685,234)



(640,290)








Cash flows from financing activities:







Proceeds from long-term debt



165,736



1,016,154

Principal payments on notes payable and long-term debt



(338,137)



(1,134,589)

Payment of contingent consideration recorded at acquisition date



(4,976)



(550)

Change in book overdraft



(1,132)



(534)

Payments for repurchase of common shares



(42,040)



-

Payments for cash dividends



(73,584)



(84,215)

Tax withholdings related to net share settlements of equity-based compensation



(14,589)



(17,264)

Debt issuance costs



(2,757)



(5,838)

Proceeds from sale of common shares held in trust



2,146



3,695

Other



(103)



(117)

Net cash used in financing activities



(309,436)



(223,258)

Effect of exchange rates changes on cash, cash equivalents and restricted cash



(915)



270

Net decrease in cash, cash equivalents and restricted cash



(330,654)



(110,230)

Cash, cash equivalents and restricted cash at beginning of period



556,467



403,966

Plus: change in cash held for sale



33



-

Cash, cash equivalents and restricted cash at end of period


$

225,846


$

293,736


ADDITIONAL STATISTICS
(in thousands of U.S. dollars, except where noted)

Solid Waste Internal Growth: The following table reflects a breakdown of the components of our solid waste internal growth for the three months ended June 30, 2019: 



U.S.


Canada


Total

Core Price

4.8%


6.0%


5.0%

Surcharges

0.2%


0.4%


0.2%

Volume

1.0%


0.1%


0.8%

Recycling

(0.6%)


(1.0%)


(0.7%)

Foreign Exchange Impact

-


(3.6%)


(0.5%)

Total

5.4%


1.9%


4.8%

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2018 and 2019:


Three Months Ended June 30, 2018



Revenue



Inter-
company
Elimination



Reported
Revenue


%

Solid Waste Collection

$

854,719


$

(2,440)


$

852,279


68.7%

Solid Waste Disposal and Transfer


440,537



(171,583)



268,954


21.7%

Solid Waste Recycling


22,703



(698)



22,005


1.8%

E&P Waste Treatment, Recovery and Disposal


62,663



(2,431)



60,232


4.9%

Intermodal and Other


37,324



(826)



36,498


2.9%

Total

$

1,417,946


$

(177,978)


$

1,239,968


100.0%






















Three Months Ended June 30, 2019




Revenue



Inter-
company
Elimination



Reported
Revenue


%

Solid Waste Collection

$

958,124


$

(2,733)


$

955,391


69.8%

Solid Waste Disposal and Transfer


501,401



(198,008)



303,393


22.1%

Solid Waste Recycling


16,730



(405)



16,325


1.2%

E&P Waste Treatment, Recovery and Disposal


68,039



(4,021)



64,018


4.7%

Intermodal and Other


31,134



(622)



30,512


2.2%

Total

$

1,575,428


$

(205,789)


$

1,369,639


100.0%


Contribution from Acquisitions: The following table reflects revenues from solid waste acquisitions, net of divestitures, for the three month periods ended June 30, 2018 and 2019:


Three months ended
June 30,


2018


2019

Acquisitions, net  

$

32,763


$

77,396

ADDITIONAL STATISTICS (continued)
(in thousands of U.S. dollars, except where noted)

Other Cash Flow Items: The following table reflects cash interest and cash taxes for the three and six month periods ended June 30, 2018 and 2019:


Three months ended
June 30,



Six months ended
June 30,


2018


2019



2018


2019

Cash Interest Paid

$

40,046


$

46,084



$

62,486


$

68,258

Cash Taxes Paid


16,183



14,121




22,853



20,532

Debt to Book Capitalization as of June 30, 2019:  38%

Internalization for the three months ended June 30, 2019:  55%

Days Sales Outstanding for the three months ended June 30, 2019:  44 (31 net of deferred revenue)

Share Information for the three months ended June 30, 2019:

Basic shares outstanding

263,846,970

Dilutive effect of equity-based awards

647,973

Diluted shares outstanding

264,494,943

NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

Adjusted EBITDA, 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.  Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections defines adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus income tax provision, plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income, plus foreign currency transaction loss, less foreign currency transaction gain.  Waste Connections further adjusts this calculation to exclude the effects of other 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.  Other companies may calculate adjusted EBITDA differently. 


Three months ended
June 30,


Six months ended
June 30,


2018


2019


2018


2019

Net Income attributable to Waste Connections

$

138,682


$

148,848


$

263,551


$

274,470

Plus/less: Net income/(loss) attributable to noncontrolling interests


132



(9)



295



(54)

Plus: Income tax provision


42,565



39,788



74,417



67,756

Plus: Interest expense


32,426



37,245



64,796



74,533

Less: Interest income


(1,056)



(1,818)



(2,210)



(5,129)

Plus: Depreciation and amortization


168,924



188,120



328,207



365,509

Plus: Closure and post-closure accretion


3,258



3,682



6,496



7,172

Plus: Impairments and other operating items


7,073



3,902



8,104



20,014

Less: Other income, net


(2,031)



(805)



(1,644)



(3,363)

Plus/less: Foreign currency transaction loss/(gain)


(30)



(1,115)



190



(1,218)

Adjustments:












Plus: Transaction-related expenses (a)


2,199



6,184



4,584



7,021

Plus: Pre-existing Progressive Waste share-based grants (b)


2,058



1,262



3,221



4,283

Plus: Integration-related and other expenses (c)


1,306



-



2,416



-

Adjusted EBITDA

$

395,506


$

425,284


$

752,423


$

810,994













As % of revenues


31.9%



31.1%



31.6%



31.0%







(a)

Reflects the addback of acquisition-related transaction costs.

(b)

Reflects share-based compensation costs, including changes in fair value and related expenses, associated with share-based awards granted by Progressive Waste outstanding at the time of the Progressive Waste acquisition.

(c)

Reflects the addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted Free Cash Flow:

Adjusted 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.  Management uses adjusted free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections defines adjusted free cash flow as net cash provided by operating activities, plus or minus change in book overdraft, plus proceeds from disposal of assets, less capital expenditures for property and equipment and distributions to noncontrolling interests.  Waste Connections 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 liquidity or financial measures.  Other companies may calculate adjusted free cash flow differently. 



Three months ended
June 30,


Six months ended
June 30,



2018


2019


2018


2019

Net cash provided by operating activities


$

357,684


$

389,276


$

664,931


$

753,048

Plus/(Less): Change in book overdraft



(837)



2,250



(1,132)



(534)

Plus: Proceeds from disposal of assets



1,072



559



2,074



1,198

Less: Capital expenditures for property and equipment



(110,496)



(139,552)



(201,712)



(253,790)

Less: Distributions to noncontrolling interests



-



(117)



(103)



(117)

Adjustments:













  Payment of contingent consideration recorded in earnings (a)



-



-



11



-

  Cash received for divestitures (b)



-



-



-



(2,376)

  Transaction-related expenses (c)



2,199



6,184



4,584



7,021

  Integration-related and other expenses (d)



1,306



-



2,416



-

  Pre-existing Progressive Waste share-based grants (e)



2,990



189



4,909



2,371

  Tax effect (f)



(1,373)



(1,213)



(3,279)



(2,910)

Adjusted free cash flow


$

252,545


$

257,576


$

472,699


$

503,911














As % of revenues



20.4%



18.8%



19.9%



19.3%







(a)

Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and as a component of cash flows from operating activities as the amounts paid exceeded the fair value of the contingent consideration recorded at the acquisition date.

(b)

Reflects the elimination of cash received in conjunction with the divestiture of certain Progressive Waste operations.

(c)

Reflects the addback of acquisition-related items, including transaction costs.

(d)

Reflects the addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.

(e)

Reflects the cash settlement of pre-existing Progressive Waste share-based awards and related payments during the period.

(f)

The aggregate tax effect of footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except per share amounts)

Reconciliation of Adjusted Net Income attributable to Waste Connections and Adjusted Net Income per Diluted Share attributable to Waste Connections:

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



Three months ended
June 30,


Six months ended
June 30,



2018


2019


2018


2019

Reported net income attributable to Waste Connections

$

138,682


$

148,848


$

263,551


$

274,470

Adjustments:












Amortization of intangibles (a)


26,474



31,344



52,573



61,886

Impairments and other operating items (b)


7,073



3,902



8,104



20,014

Transaction-related expenses (c)


2,199



6,184



4,584



7,021

Pre-existing Progressive Waste share-based grants (d)


2,058



1,262



3,221



4,283

Integration-related and other expenses (e)


1,306



-



2,416



-

Tax effect (f)


(7,971)



(10,272)



(16,016)



(22,469)

Tax items (g)


2,515



-



2,515



-

Adjusted net income attributable to Waste Connections     

$

172,336


$

181,268


$

320,948


$

345,205

 

Diluted earnings per common share attributable to Waste Connections' common shareholders:












     Reported net income

$

0.52


$

0.56


$

1.00


$

1.04

Adjusted net income

$

0.65


$

0.69


$

1.21


$

1.31







(a)

Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.

(b)

Reflects the addback of impairments and other operating items.

(c)

Reflects the addback of acquisition-related transaction costs.

(d)

Reflects share-based compensation costs, including changes in fair value and related expenses, associated with share-based awards granted by Progressive Waste outstanding at the time of the Progressive Waste acquisition

(e)

Reflects the addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.

(f)

The aggregate tax effect of the adjustments in footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.

(g)

Reflects items primarily associated with internal financing restructuring in conjunction with the Tax Act enacted on December 22, 2017, as well as a reduction in deferred tax liabilities resulting from state legislation enacted during the quarter and changes in the Company's geographical apportionment due to acquisition activity.

 

UPDATED 2019 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

(in thousands of U.S. dollars, except where noted)


Reconciliation of Adjusted EBITDA:



Updated

2019 Outlook


Net Income attributable to Waste Connections

$

573,263

Plus: Income tax provision*


181,000

Plus: Interest expense, net


139,000

Plus: Depreciation and depletion


616,000

Plus: Amortization


125,000

Plus: Closure and post-closure accretion


14,000

Plus: Impairments and other operating items (a)


20,014

Less: Other income, net (a)


(3,363)

Less: Foreign currency transaction gain (a)


(1,218)

Adjustments: (a)



Plus: Transaction-related expenses


7,021

Plus: Pre-existing Progressive Waste share-based grants


4,283

Adjusted EBITDA

$

1,675,000




As % of revenues


31.2%







(a)

Approximately 24%; reflects the midpoint of the estimated 21.5% to 26.5% potential range resulting from IRS proposed regulations released in late December 2018 related to the Tax Act which, if finalized and implemented in 2019, could impact 2019's effective tax rate.

(b)

Reflects amounts reported for the six month period ended June 30, 2019, as shown on page 9.

 

Reconciliation of Adjusted Free Cash Flow:





Updated

2019 Outlook

Net cash provided by operating activities


$

1,509,813

Plus: Proceeds from disposal of assets (a)



1,198

Less: Distributions to noncontrolling interests (a)



(117)

Less: Capital expenditures for property and equipment         



(565,000)

Less: Capital expenditures primarily related to new contract awards



(35,000)

Adjustments: (a)




    Cash received from divestitures



(2,376)

    Transaction-related expenses



7,021

    Pre-existing Progressive Waste share-based grants



2,371

    Tax effect



(2,910)

Adjusted free cash flow


$

915,000





As % of revenues



17.0%







(a)

Reflects amounts reported for the six month period ended June 30, 2019, as shown on page 10.

 

Cision

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