Waste Connections Reports Second Quarter 2020 Results and Provides 2020 Outlook - Aug 6, 2020
Waste Connections Reports Second Quarter 2020 Results and Provides 2020 Outlook

-  Revenue of $1.306 billion, exceeding preliminary expectations

-  Incurs $417.4 million non-cash impairment charge for certain E&P waste assets

-  Net loss attributable to Waste Connections of $227.1 million, or $0.86 per share

-  Adjusted net income attributable to Waste Connections* of $158.0 million, or $0.60 per share

-  Adjusted EBITDA* of $394.3 million, or 30.2% of revenue, exceeding preliminary expectations

-  YTD net cash provided by operating activities of $753.2 million

-  YTD adjusted free cash flow* of $494.6 million, or 18.6% of revenue

-  Signs or closes acquisitions YTD with approximately $100 million total annualized revenues

-  Provides full year 2020 outlook above May's preliminary expectations

TORONTO, Aug. 6, 2020 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the second quarter of 2020. 

"Strong operational execution and continued recovery in solid waste volumes drove better than expected results in the second quarter. Adjusted EBITDA* margin for solid waste collection, transfer and disposal expanded year over year in spite of significant COVID-19-related costs incurred during the quarter.  In fact, the reported year-over-year margin decline in the period was entirely attributable to reduced E&P waste activity, as underlying solid waste margin expansion more than offset over $20 million in incremental COVID-related costs, primarily related to frontline supplemental wages, and the margin dilutive impact of acquisitions in the quarter.  These results reflect the resilience of our underlying solid waste business as well as the dedication and commitment of our employees, who have maintained a focus on the health, safety and welfare of their colleagues, service continuity, expense management and community support, all while enduring the many challenges and hardships resulting from the pandemic," said Worthing F. Jackman, President and Chief Executive Officer.

Mr. Jackman added, "At the onset, we believed our preparedness and execution during this pandemic would leave us better positioned when we emerged from it.  Although only in the early stages of a recovery, we already are pleased to provide our outlook for the full year above the preliminary expectations we had communicated in May.  We remain encouraged by the pace of acquisition dialogue and are on track for another solid year of acquisition activity.  Our strong operating performance, free cash flow generation and balance sheet strength keep us well-positioned during this uncertain period for additional acquisitions and incremental opportunistic capital investments, while maintaining our flexibility to increase the return of capital to shareholders." 

Financial Impact from COVID-19

During the second quarter of 2020, our business was impacted by COVID-19 due to a reduction in revenue primarily in solid waste commercial collection and solid waste transfer and disposal resulting from a slowdown in activity associated with shelter-in-place or other closure restrictions or requirements imposed in response to the COVID-19 pandemic.  Commercial collection activity slowed down in certain markets due to service reductions or suspensions by customers whose business activity was curtailed by such measures, with third party transfer and disposal volumes and roll-off activity typically following similar patterns, and some of the declines in E&P waste activity may also be related to COVID-19.  The impacts to solid waste activity that we experienced during the second quarter varied by geography, the size and customer mix in each market, and the timing and extent of shutdown requirements and reopening policies across markets.  In some markets, the impacts abated during the second quarter, as reopenings resulted in increased service requirements by commercial customers and higher landfill volumes and roll-off activity; in other cases, where reopenings were delayed, the improvements were less pronounced.

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

Through the second quarter, about 53% of solid waste commercial customers and 42% of associated revenue in competitive markets we track that had suspended or reduced service had reached out for a resumption in service or increase in frequency, up from 12% and 9%, respectively, in early May.  Volumes in all of our solid waste regions exceeded our preliminary expectations, resulting in solid waste revenue down 5.3% year over year on a same store basis in the second quarter, about 70 basis points better than the preliminary expectations we provided in May.  Moreover, excluding the most impacted markets in the Northeast and Canada, where closures were widespread and volumes were most impacted, solid waste revenues in the quarter were down 1.3% year over year on a same store basis. 

In July, revenue on a reported basis declined approximately 1.9% year-over-year, or approximately 4.7% excluding acquisitions completed since the year ago period, and adjusted EBITDA* margin declined an estimated 70 basis points year over year.  Reduction in E&P waste activity accounted for the entire year over year decline in revenue and exceeded  the estimated adjusted EBITDA* margin decline for the month. Solid waste collection, transfer and disposal revenue was down approximately 2.4% year over year on a same store basis in July, or up 0.5% excluding Canada and the Northeast U.S.  To date, about 60% of solid waste commercial customers and 50% of associated revenue in competitive markets we track that had suspended or reduced service have reached out for a resumption in service or increase in frequency.

The ultimate impact of the COVID-19 outbreak on our business, results of operations, financial condition and cash flows will depend largely on future developments, including the duration and spread of the outbreak in the U.S. and Canada, its severity, the actions to contain the novel coronavirus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. 

2020 Outlook

Waste Connections also provided its outlook for 2020, which assumes no significant change in underlying economic trends.  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 2020 are subject to quarterly fluctuations.  See reconciliations in the attached schedules.

  • Revenue is estimated to be approximately $5.325 billion.
  • Net income attributable to Waste Connections is estimated to be approximately $184 million, and adjusted EBITDA* is estimated to be approximately $1.610 billion, or about 30.2% of revenue.
  • Capital expenditures are estimated to be approximately $550 million.
  • Net cash provided by operating activities is estimated to range between $1.344 billion and $1.374 billion, and adjusted free cash flow* is estimated to range between $805 million and $835 million, or between approximately 50.0% and 52.0% of adjusted EBITDA*.

Q2 2020 Results

Revenue in the second quarter totaled $1.306 billion, as compared to $1.370 billion in the year ago period.  Operating loss was $232.4 million, which included: $437.3 million in impairments and other operating items, due primarily to $417.4 million related to a decrease in property, plant and equipment at certain E&P landfills in the Bakken, Eagle Ford and Powder River basins as a result of the Company's impairment testing and $16.8 million in adjustments to contingent liabilities associated with acquisitions closed in prior years.  This operating loss compares to operating income of $222.1 million in the second quarter of 2019, which included $11.3 million primarily related to transaction-related expenses.   

Net loss attributable to Waste Connections in the second quarter was $227.1 million, or $0.86 per share on a diluted basis of 263.0 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $148.8 million, or $0.56 per share on a diluted basis of 264.5 million shares. 

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

Adjusted net income attributable to Waste Connections* in the second quarter was $158.0 million, or $0.60 per diluted share on an adjusted diluted basis of 263.3 million shares, versus $181.3 million, or $0.69 per diluted share, in the prior year period.  Adjusted EBITDA* in the second quarter was $394.3 million, as compared to adjusted EBITDA* of $425.3 million in the prior year period. 

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 impairments and other operating items and acquisition-related items.  For detailed reconciliations, please refer to the attached schedules.

Six Months Year to Date Results

For the six months ended June 30, 2020, revenue was $2.658 billion, as compared to revenue of $2.614 billion in the year ago period.  Operating loss, which included $445.2 million primarily related to impairments and other operating items, was $15.4 million, compared to operating income of $407.0 million for the same period in 2019, which included $31.3 million primarily related to impairments and other operating items. 

Net loss attributable to Waste Connections for the six months ended June 30, 2020, was $84.0 million, or $0.32 per share on a diluted basis of 263.4 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $274.5 million, or $1.04 per share on a diluted basis of 264.4 million shares. 

Adjusted net income attributable to Waste Connections* for the six months ended June 30, 2020, was $328.5 million, or $1.25 per diluted share on an adjusted diluted share basis of 263.8 million shares, compared to $345.2 million, or $1.31 per diluted share, in the year ago period. Adjusted EBITDA* for the six months ended June 30, 2020, was $802.8 million, as compared to $811.0 million in the prior year period. 

Q2 2020 Earnings Conference Call

Waste Connections will be hosting a conference call related to second quarter earnings on August 7th at 8:30 A.M. Eastern Time.  To access the call, listeners should dial 800-747-0367 (within North America) or 212-231-2915 (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 14, 2020 by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode # 21964629.  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 August 7th, providing the Company's third quarter 2020 outlook for revenue, core price plus volume growth for solid waste and adjusted EBITDA*.

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

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 can be identified by use of forward-looking terminology, such as "believes," "expects," "intends," "may," "might," "will," "could," "should," or "anticipates," or the negative thereof or comparable terminology, or by the discussions of strategy. 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 the expected impacts of the novel coronavirus pandemic and the COVID-19 outbreak, 2020 financial results, outlook and related assumptions, capital expenditures, the return of capital to shareholders and potential acquisition activity. 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

Joe Box / (281) 873-3205

maryannew@wasteconnections.com

joe.box@wasteconnections.com

 

 

WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)
THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2020
(Unaudited)
(in thousands of U.S. dollars, except share and per share amounts)

                           
   

Three months ended
June 30,

 

Six months ended
June 30,

 
   

2019

 

2020

 

2019

 

2020

 
                   

Revenues

 

$

1,369,639

 

$

1,305,782

 

$

2,614,275

 

$

2,658,187

 

Operating expenses:

                         

Cost of operations

   

815,819

   

785,710

   

1,549,508

   

1,601,134

 

Selling, general and administrative

   

139,664

   

132,158

   

272,249

   

268,210

 

Depreciation

   

156,776

   

151,230

   

303,623

   

302,051

 

Amortization of intangibles

   

31,344

   

31,771

   

61,886

   

63,409

 

Impairments and other operating items

   

3,902

   

437,270

   

20,014

   

438,777

 

Operating income (loss)

   

222,134

   

(232,357)

   

406,995

   

(15,394)

 
                           

Interest expense

   

(37,245)

   

(40,936)

   

(74,533)

   

(78,926)

 

Interest income

   

1,818

   

1,317

   

5,129

   

3,493

 

Other income (expense), net

   

1,920

   

5,772

   

4,581

   

(3,749)

 

Income (loss) before income tax provision

   

188,627

   

(266,204)

   

342,172

   

(94,576)

 
                           

Income tax (provision) benefit

   

(39,788)

   

38,737

   

(67,756)

   

10,003

 

Net income (loss)

   

148,839

   

(227,467)

   

274,416

   

(84,573)

 

Plus: Net loss attributable to noncontrolling interests

   

9

   

395

   

54

   

536

 

Net income (loss) attributable to Waste Connections

 

$

148,848

 

$

(227,072)

 

$

274,470

 

$

(84,037)

 
                           

Earnings (loss) per common share attributable to Waste Connections' common shareholders:

                         

Basic

 

$

0.56

 

$

(0.86)

 

$

1.04

 

$

(0.32)

 
                           

Diluted

 

$

0.56

 

$

(0.86)

 

$

1.04

 

$

(0.32)

 
                           

Shares used in the per share calculations:

                         

Basic

   

263,846,970

   

262,994,275

   

263,725,867

   

263,390,685

 

Diluted

   

264,494,943

   

262,994,275

   

264,416,610

   

263,390,685

 
                           
                           

Cash dividends per common share

 

$

0.160

 

$

0.185

 

$

0.320

 

$

0.370

 

 

 

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

 
               
   

December 31,
2019

 

June 30,
2020

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

326,738

 

$

790,551

 

Accounts receivable, net of allowance for credit losses of $16,432 and $19,965 at December 31, 2019 and June 30, 2020, respectively

   

662,808

   

608,801

 

Prepaid expenses and other current assets

   

141,052

   

105,574

 

Total current assets

   

1,130,598

   

1,504,926

 

Restricted cash

   

96,483

   

92,873

 

Restricted investments

   

51,179

   

46,391

 

Property and equipment, net

   

5,516,347

   

5,045,872

 

Operating lease right-of-use assets

   

183,220

   

173,905

 

Goodwill

   

5,510,851

   

5,488,305

 

Intangible assets, net

   

1,163,063

   

1,152,303

 

Other assets, net

   

85,954

   

89,430

 

Total assets

 

$

13,737,695

 

$

13,594,005

 
               

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

436,970

 

$

367,355

 

Book overdraft

   

15,954

   

15,348

 

Accrued liabilities

   

280,808

   

341,333

 

Current portion of operating lease liabilities

   

29,929

   

30,933

 

Current portion of contingent consideration

   

26,659

   

62,213

 

Deferred revenue

   

216,443

   

214,478

 

Current portion of long-term debt and notes payable

   

465

   

7,658

 

Total current liabilities

   

1,007,228

   

1,039,318

 
               

Long-term portion of debt and notes payable

   

4,353,782

   

4,694,736

 

Long-term portion of operating lease liabilities

   

160,033

   

149,763

 

Long-term portion of contingent consideration

   

42,825

   

25,801

 

Deferred income taxes

   

818,622

   

728,730

 

Other long-term liabilities

   

416,851

   

459,276

 

Total liabilities

   

6,799,341

   

7,097,624

 

Commitments and contingencies

             

Equity:

             

Common shares: 263,699,675 shares issued and 263,618,161 shares outstanding at December 31, 2019; 262,885,349 shares issued and 262,811,165 shares outstanding at June 30, 2020

   

4,135,343

   

4,030,368

 

Additional paid-in capital

   

154,917

   

151,149

 

Accumulated other comprehensive loss

   

(10,963)

   

(162,707)

 

Treasury shares: 81,514 and 74,184 shares at December 31, 2019 and June 30, 2020, respectively

   

-

   

-

 

Retained earnings

   

2,654,207

   

2,473,258

 

Total Waste Connections' equity

   

6,933,504

   

6,492,068

 

Noncontrolling interest in subsidiaries

   

4,850

   

4,313

 

Total equity

   

6,938,354

   

6,496,381

 
   

$

13,737,695

 

$

13,594,005

 

 

 

WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2019 AND 2020
(Unaudited)
(in thousands of U.S. dollars)

               
   

Six months ended June 30,

 
   

2019

 

2020

 

Cash flows from operating activities:

             

Net income (loss)

 

$

274,416

 

$

(84,573)

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

             

Loss on disposal of assets and impairments

   

18,924

   

420,169

 

Depreciation

   

303,623

   

302,051

 

Amortization of intangibles

   

61,886

   

63,409

 

Amortization of leases

   

13,183

   

9,863

 

Deferred income taxes, net of acquisitions

   

18,911

   

(66,821)

 

Amortization of debt issuance costs

   

2,414

   

4,783

 

Share-based compensation

   

26,763

   

24,643

 

Interest accretion

   

8,143

   

8,512

 

Adjustments to contingent consideration

   

1,466

   

16,794

 

Other

   

(1,514)

   

1,596

 

Net change in operating assets and liabilities, net of acquisitions

   

24,833

   

52,759

 

Net cash provided by operating activities

   

753,048

   

753,185

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(381,422)

   

(86,325)

 

Capital expenditures for property and equipment

   

(253,790)

   

(268,711)

 

Capital expenditures for undeveloped landfill property

   

-

   

(16,450)

 

Proceeds from disposal of assets

   

1,198

   

10,642

 

Change in restricted investments, net of interest income

   

(6,206)

   

4,532

 

Other

   

(70)

   

(3,644)

 

Net cash used in investing activities

   

(640,290)

   

(359,956)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

1,016,154

   

1,790,625

 

Principal payments on notes payable and long-term debt

   

(1,134,589)

   

(1,484,118)

 

Payment of contingent consideration recorded at acquisition date

   

(550)

   

(2,251)

 

Change in book overdraft

   

(534)

   

(606)

 

Payments for repurchase of common shares

   

-

   

(105,654)

 

Payments for cash dividends

   

(84,215)

   

(96,912)

 

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

   

(17,264)

   

(23,291)

 

Debt issuance costs

   

(5,838)

   

(10,957)

 

Proceeds from sale of common shares held in trust

   

3,695

   

679

 

Other

   

(117)

   

-

 

Net cash provided by (used in) financing activities

   

(223,258)

   

67,515

 

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

   

270

   

(541)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

   

(110,230)

   

460,203

 

Cash, cash equivalents and restricted cash at beginning of period

   

403,966

   

423,221

 

Cash, cash equivalents and restricted cash at end of period

 

$

293,736

 

$

883,424

 

 

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, 2020:

                         
       

U.S.

     

Canada

   

Total

 

Core Price

     

4.4

 

%

 

5.0

%

 

4.5

%

Surcharges

     

(0.1)

 

%

 

(0.9)

%

 

(0.2)

%

Volume

     

(8.5)

 

%

 

(16.4)

%

 

(9.6)

%

Recycling

     

(0.1)

 

%

 

0.6

%

 

(0.0)

%

Foreign Exchange Impact

     

-

     

(3.3)

%

 

(0.5)

%

Total

     

(4.3)

 

%

 

(15.0)

%

 

(5.8)

%

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2019 and 2020:

                       
   

 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%

 
 
   

Three months ended June 30, 2020

   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

948,072

 

$

(3,432)

 

$

944,640

 

72.4%

Solid Waste Disposal and Transfer

   

469,704

   

(191,301)

   

278,403

 

21.3%

Solid Waste Recycling

   

20,217

   

(660)

   

19,557

 

1.5%

E&P Waste Treatment, Recovery and Disposal

   

40,152

   

(4,644)

   

35,508

 

2.7%

Intermodal and Other

   

27,811

   

(137)

   

27,674

 

2.1%

Total

 

$

1,505,956

 

$

(200,174)

 

$

1,305,782

 

100.0%

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three month periods ended June 30, 2019 and 2020:

               
   

Three months ended
June 30,

   

2019

 

2020

Acquisitions, net

 

$

77,396

 

$

40,727

 

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, 2019 and 2020:

   

Three months ended
June 30,

 

Six months ended
June 30,

   

2019

 

2020

 

2019

 

2020

Cash Interest Paid

 

$

46,084

 

$

45,782

 

$

68,258

 

$

62,828

Cash Taxes Paid

   

14,121

   

8,440

   

20,532

   

13,050

Debt to Book Capitalization as of June 30, 2020:  42%

Internalization for the three months ended June 30, 2020:  56%

Days Sales Outstanding for the three months ended June 30, 2020:  42 (27 net of deferred revenue)

Share Information for the three months ended June 30, 2020:

     

Basic shares outstanding

 

262,994,275

Dilutive effect of equity-based awards (a) 

 

-

Diluted shares outstanding

 

262,994,275

 

 

__________________________________________________

(a)

For the three months ended June 30, 2020, equity-based awards to purchase 322,779 of common shares were excluded from the computation of diluted loss per share as they were anti-dilutive.

 

 

 

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 (loss) attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus or minus income tax provision (benefit), 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.  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,

   

2019

 

2020

 

2019

 

2020

Net income (loss) attributable to Waste Connections

 

$

148,848

 

$

(227,072)

 

$

274,470

 

$

(84,037)

Less: Net loss attributable to noncontrolling interests

   

(9)

   

(395)

   

(54)

   

(536)

Plus/(Less): Income tax provision (benefit)

   

39,788

   

(38,737)

   

67,756

   

(10,003)

Plus: Interest expense

   

37,245

   

40,936

   

74,533

   

78,926

Less: Interest income

   

(1,818)

   

(1,317)

   

(5,129)

   

(3,493)

Plus: Depreciation and amortization

   

188,120

   

183,001

   

365,509

   

365,460

Plus: Closure and post-closure accretion

   

3,682

   

3,709

   

7,172

   

7,617

Plus: Impairments and other operating items

   

3,902

   

437,270

   

20,014

   

438,777

Plus/(Less): Other expense (income), net

   

(1,920)

   

(5,772)

   

(4,581)

   

3,749

Adjustments:

                       

Plus: Transaction-related expenses (a)

   

6,184

   

1,016

   

7,021

   

2,162

Plus: Fair value changes to certain equity awards (b)

   

1,262

   

1,683

   

4,283

   

4,223

Adjusted EBITDA

 

$

425,284

 

$

394,322

 

$

810,994

 

$

802,845

                         

As % of revenues

   

31.1%

   

30.2%

   

31.0%

   

30.2%

 

 

__________________________________________________

(a)

Reflects the addback of acquisition-related transaction costs.

(b)

Reflects fair value accounting changes associated with certain equity awards. 

 

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,

   

2019

 

2020

 

2019

 

2020

Net cash provided by operating activities

 

$

389,276

 

$

383,599

 

$

753,048

 

$

753,185

Plus/(Less): Change in book overdraft

   

2,250

   

3,243

   

(534)

   

(606)

Plus: Proceeds from disposal of assets

   

559

   

7,143

   

1,198

   

10,642

Less: Capital expenditures for property and equipment

   

(139,552)

   

(130,930)

   

(253,790)

   

(268,711)

Less: Distributions to noncontrolling interests

   

(117)

   

-

   

(117)

   

-

Adjustments:

                       

Cash received for divestitures (a)

   

-

   

(4,974)

   

(2,376)

   

(4,974)

Transaction-related expenses (b)

   

6,184

   

1,016

   

7,021

   

2,162

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

   

189

   

-

   

2,371

   

6,440

Tax effect (d)

   

(1,213)

   

(251)

   

(2,910)

   

(3,569)

Adjusted free cash flow

 

$

257,576

 

$

258,846

 

$

503,911

 

$

494,569

                         

As % of revenues

   

18.8%

   

19.8%

   

19.3%

   

18.6%

 

 

__________________________________________________

(a)

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

(b)

Reflects the addback of acquisition-related transaction costs.

(c)

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

(d)

The aggregate tax effect of footnotes (a) through (c) 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,

   

2019

 

2020

 

2019

 

2020

Reported net income (loss) attributable to Waste Connections

 

$

148,848

 

$

(227,072)

 

$

274,470

 

$

(84,037)

Adjustments:

                       

Amortization of intangibles (a)

   

31,344

   

31,771

   

61,886

   

63,409

Impairments and other operating items (b)

   

3,902

   

437,270

   

20,014

   

438,777

Transaction-related expenses (c) 

   

6,184

   

1,016

   

7,021

   

2,162

Fair value changes to equity awards (d)

   

1,262

   

1,683

   

4,283

   

4,223

Tax effect (e)

   

(10,272)

   

(118,220)

   

(22,469)

   

(127,523)

Tax items (f)

   

-

   

31,508

   

-

   

31,508

Adjusted net income attributable to Waste Connections

 

$

181,268

 

$

157,956

 

$

345,205

 

$

328,519

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

                       

Reported net income (loss)

 

$

0.56

 

$

(0.86)

 

$

1.04

 

$

(0.32)

Adjusted net income

 

$

0.69

 

$

0.60

 

$

1.31

 

$

1.25

                         

Shares used in the per share calculations:

                       

Reported diluted shares

   

264,494,943

   

262,994,275

   

264,416,610

   

263,390,685

Adjusted diluted shares (g)

   

264,494,943

   

263,317,054

   

264,416,610

   

263,833,471

 

 

__________________________________________________

(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 fair value accounting changes associated with certain equity awards.

(e)

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

(f)

Reflects the impact of a portion of the Company's 2019 related-party payments no longer being deductible for tax purposes due to the finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and an increase in deferred tax liabilities resulting from the E&P impairment.   

(g)

Reflects reported diluted shares adjusted for shares that were excluded from the reported diluted shares calculation due to our reporting a net loss during the three and six months ended June 30, 2020.

 

2020 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULES
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

         
     
   

 

2020 Outlook

 

Net income attributable to Waste Connections

 

$

184,089

 

Plus: Income tax provision (a)

   

64,000

 

Plus: Interest expense, net

   

155,000

 

Plus: Depreciation and depletion

   

615,000

 

Plus: Amortization

   

128,000

 

Plus: Closure and post-closure accretion

   

15,000

 

Plus: Impairments and other operating items (b)

   

438,777

 

Plus: Other income, net

   

3,749

 

Adjustments:

       

Plus: Transaction-related expenses (b)

   

2,162

 

Plus: Fair value changes to equity awards (b)

   

4,223

 

Adjusted EBITDA

 

$

1,610,000

 
         

As % of revenues

   

30.2%

 
         

__________________________________________________

(a)

Reflects amounts reported for the six-month period ended June 30, 2020 and 21.5% effective rate for 2H '20.

(b)

Reflects amounts reported for the six-month period ended June 30, 2020, as shown on page 10.

Reconciliation of Adjusted Free Cash Flow:

     

 

2020 Outlook

Net cash provided by operating activities

 

$

1,344,299

$

1,374,299

Plus: Proceeds from disposal of assets (a)

   

10,642

 

10,642

Less: Capital expenditures for property and equipment         

   

(550,000)

 

(550,000)

Adjustments: (a)

         

    Cash received from divestitures

   

(4,974)

 

(4,974)

    Transaction-related expenses

   

2,162

 

2,162

    Pre-existing Progressive Waste share-based grants

   

6,440

 

6,440

    Tax effect

   

(3,569)

 

(3,569)

Adjusted free cash flow

 

$

805,000

$

835,000

           

As % of Adjusted EBITDA

   

50.0%

 

51.9%

           

 

__________________________________________________

(a)

Reflects amounts reported for the six-month period ended June 30, 2020, as shown on page 11.

 

 

SOURCE Waste Connections, Inc.

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