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First Quarter 2017

Waste Connections Reports First Quarter 2017 Results

Apr 26, 2017
4:05pm

- Revenue of $1.091 billion, exceeding outlook

- Reports 4.7% solid waste price + volume growth

- Net income attributable to Waste Connections of $14.9 million, or $0.08 per share

- Adjusted net income attributable to Waste Connections* of $130.3 million, or $0.74 per share, up 64.4% per share

- Adjusted EBITDA* of $332.8 million, or 30.5% of revenue, exceeding outlook

- Net cash provided by operating activities of $287.5 million

- Adjusted free cash flow* of $237.5 million, or 21.8% of revenue

- Proposes three-for-two stock split

TORONTO, April 26, 2017 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the first quarter of 2017. 

"2017 is off to a great start, with 15% same store landfill tonnage increases, better than expected contribution from recent acquisitions, increased E&P waste activity, and higher recycled commodity prices all driving results above our outlook for the first quarter.  Adjusted EBITDA margin was 50 basis points above our expectations, and most importantly, adjusted free cash flow was $237.5 million, putting us well on our way to our full year adjusted free cash flow outlook of $725 million," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. 

Mr. Mittelstaedt added, "We are extremely pleased with our first quarter performance and encouraged by both continuing strong solid waste fundamentals and the notable ramping of E&P waste activity and related margins.  In addition, we are proud of our proposed three-for-two stock split also announced today, which, if approved by our shareholders, will be the fourth such split in our almost twenty year history."

Revenue in the first quarter, which included $490.3 million from the Progressive Waste acquisition completed on June 1, 2016, totaled $1.091 billion, up from $514.7 million in the year ago period.  Operating income, which included $141.7 million in non-cash impairments and other charges, was $26.4 million compared to $91.0 million in the first quarter of 2016. 

Net income attributable to Waste Connections in the first quarter was $14.9 million, or $0.08 per share on a diluted basis of 175.9 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $44.8 million, or $0.36 per share on a diluted basis of 123.5 million shares.

Adjusted net income attributable to Waste Connections* in the first quarter was $130.3 million, or $0.74 per share, versus $55.2 million, or $0.45 per share, in the prior year period.  Adjusted EBITDA* in the first quarter was $332.8 million, as compared to adjusted EBITDA* of $169.7 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 the following two impairment charges: $77.3 million against the Company's E&P segment resulting from the early adoption of FASB's recent accounting pronouncement simplifying the test for goodwill impairment and $53.5 million related to the expected divestiture of certain assets acquired in the Progressive Waste acquisition, as reflected in the detailed reconciliation in the attached tables.

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

CONFERENCE CALL

Waste Connections will be hosting a conference call related to first quarter earnings on April 27th at 8:30 A.M. Eastern Time.  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.

About Waste Connections
Waste Connections is an integrated solid waste services company that provides 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 six million residential, commercial, industrial, and exploration and production customers in 39 states in the U.S., and five provinces in Canada.  The Company also provides intermodal services for the 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 (SEDAR) 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) and "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," "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, our ability to obtain the required shareholder and regulatory approvals to complete the share split, statements about expected 2017 financial results, adjusted free cash flow, outlook and related assumptions, and potential operating trends. 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 filings that have been made by the Company with the U.S. Securities and Exchange Commission 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:


Worthing Jackman / (832) 442-2266 

Mary Anne Whitney / (832) 442-2253

worthingj@wasteconnections.com  

maryannew@wasteconnections.com

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

THREE MONTHS ENDED MARCH 31, 2016 AND 2017

(Unaudited)

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




Three months ended
March 31,



2016



2017


Revenues

$

514,680



$

1,091,266


Operating expenses:








Cost of operations


287,192




643,380


Selling, general and administrative


67,682




129,051


Depreciation


60,897




125,240


Amortization of intangibles


7,694




25,510


Impairments and other operating items


236




141,681


Operating income


90,979




26,404










Interest expense


(17,184)




(29,131)


Other income, net


222




1,466


Foreign currency transaction loss


-




(590)


Income (loss) before income tax provision


74,017




(1,851)










Income tax (provision) benefit


(29,000)




16,871


Net income


45,017




15,020


Less: Net income attributable to noncontrolling interests


(175)




(146)


Net income attributable to Waste Connections

$

44,842



$

14,874










Earnings per common share attributable to Waste Connections'

common shareholders:








Basic

$

0.37



$

0.08










Diluted

$

0.36



$

0.08










Shares used in the per share calculations:








Basic


122,778,290




175,374,630


Diluted


123,450,584




175,935,482










Cash dividends per common share

$

0.145



$

0.18











 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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





December 31,
2016


March 31,
2017

ASSETS







Current assets:







Cash and equivalents


$

154,382


$

268,469

Accounts receivable, net of allowance for doubtful accounts of $13,160 and $12,007 at December 31, 2016 and March 31, 2017, respectively



485,138



486,413

Current assets held for sale



6,339



14,585

Prepaid expenses and other current assets



97,533



107,876

Total current assets



743,392



877,343








Property and equipment, net



4,738,055



4,721,669

Goodwill



4,390,261



4,529,645

Intangible assets, net



1,067,158



1,097,962

Restricted assets



63,406



59,193

Long-term assets held for sale



33,989



119,002

Other assets, net



67,664



64,618



$

11,103,925


$

11,469,432

LIABILITIES AND EQUITY







Current liabilities:







Accounts payable


$

251,253


$

247,676

Book overdraft



10,955



31,027

Accrued liabilities



269,402



260,603

Deferred revenue



134,081



139,017

Current portion of contingent consideration



21,453



27,562

Current liabilities held for sale



3,383



7,798

Current portion of long-term debt and notes payable



1,650



11,439

      Total current liabilities



692,177



725,122








Long-term debt and notes payable



3,616,760



3,946,178

Long-term portion of contingent consideration



30,373



30,765

Long-term liabilities held for sale



-



449

Other long-term liabilities



331,074



301,038

Deferred income taxes



778,664



812,648

      Total liabilities



5,449,048



5,816,200








Equity:







Common shares: 175,426,824 shares issued and 175,201,895 shares outstanding at December  31, 2016; 175,753,513 shares issued and 175,556,828 shares outstanding at March 31, 2017



4,174,808



4,179,123

Additional paid-in capital



102,220



96,745

Accumulated other comprehensive loss



(43,001)



(25,415)

Treasury shares: 224,929 and 196,685 shares at December 31, 2016 and March 31, 2017, respectively



-



-

Retained earnings



1,413,488



1,395,271

      Total Waste Connections' equity



5,647,515



5,645,724

Noncontrolling interest in subsidiaries



7,362



7,508

      Total equity



5,654,877



5,653,232




$

11,103,925


$

11,469,432









 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2016 AND 2017

(Unaudited)

(in thousands of U.S. dollars)





Three months ended March 31,





2016



2017

Cash flows from operating activities:







Net income


$

45,017


$

15,020

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







Loss on disposal of assets and impairments



231



129,887

Depreciation



60,897



125,240

Amortization of intangibles



7,694



25,510

Foreign currency transaction loss



-



590

Deferred income taxes, net of acquisitions



17,473



(26,528)

Amortization of debt issuance costs



670



1,013

Share-based compensation



5,299



12,989

Interest income on restricted assets



(129)



(137)

Interest accretion



1,465



3,424

Excess tax benefit associated with equity-based compensation



(4,434)



-

Adjustments to contingent consideration



(75)



11,313

Payment of contingent consideration recorded in earnings



(33)



-

Net change in operating assets and liabilities, net of acquisitions



30,641



(10,844)

Net cash provided by operating activities



164,716



287,477








Cash flows from investing activities:







Payments for acquisitions, net of cash acquired



(3,555)



(344,265)

Capital expenditures for property and equipment



(56,575)



(91,205)

Proceeds from disposal of assets



681



18,815

Change in restricted assets, net of interest income



260



4,446

Other



147



(650)

Net cash used in investing activities



(59,042)



(412,859)








Cash flows from financing activities:







Proceeds from long-term debt



115,000



436,086

Principal payments on notes payable and long-term debt



(197,024)



(170,374)

Payment of contingent consideration recorded at acquisition date



(2,217)



(5,290)

Change in book overdraft



(151)



20,047

Proceeds from option and warrant exercises



-



1,946

Excess tax benefit associated with equity-based compensation



4,434



-

Payments for cash dividends



(17,791)



(31,707)

Tax withholdings related to net share settlements of restricted share units



(9,632)



(13,030)

Distributions to noncontrolling interests



(4)



-

Debt issuance costs



-



(633)

Proceeds from sale of common shares held in trust



-



2,369

Net cash provided by (used in) financing activities



(107,385)



239,414

Effect of exchange rates changes on cash and equivalents



-



82

Net increase (decrease) in cash and equivalents



(1,711)



114,114

Cash and equivalents at beginning of period



10,974



154,382

Less: change in cash held for sale



-



(27)

Cash and equivalents at end of period


$

9,263


$

268,469










 

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 March 31, 2017:


Three months ended
March 31, 2017


Solid Waste Internal Growth:

  Core Price

2.6%


  Surcharges

(0.0%)


  Volume

2.1%


  Recycling

1.5%


Total Solid Waste Internal Growth

6.2%


Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended March 31, 2016 and 2017:


Three Months Ended March 31, 2016



Revenue


Inter-company
Elimination



Reported

Revenue


%

Solid Waste Collection

$

356,598


$

(1,321)


$

355,277


69.0%

Solid Waste Disposal and Transfer


170,083



(66,034)



104,049


20.2%

Solid Waste Recycling


10,619



(639)



9,980


2.0%

E&P Waste Treatment, Recovery and Disposal


32,851



(2,366)



30,485


5.9%

Intermodal and Other


14,889



-



14,889


2.9%

Total

$

585,040


$

(70,360)


$

514,680


100.0%















Three Months Ended March 31, 2017



Revenue


Inter-company
Elimination



Reported

Revenue


%

Solid Waste Collection

$

768,346


$

(2,200)


$

766,146


70.2%

Solid Waste Disposal and Transfer


357,025



(143,441)



213,584


19.6%

Solid Waste Recycling


43,889



(2,584)



41,305


3.8%

E&P Waste Treatment, Recovery and Disposal


39,821



(2,968)



36,853


3.4%

Intermodal and Other


33,765



(387)



33,378


3.0%

Total

$

1,242,846


$

(151,580)


$

1,091,266


100.0%



 

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three month periods ended March 31, 2016 and 2017:


Three months ended

March 31,


2016


2017

Solid waste, net 

$

21,496


$

538,900

E&P waste, net


-



-

Acquisitions, net  

$

21,496


$

538,900








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 month periods ended March 31, 2016 and 2017:


Three months ended
March 31,



2016


2017


Cash Interest Paid

$

16,257


$

22,302


Cash Taxes Paid


901



14,017


Debt to Book Capitalization as of March 31, 2017:  41%

Internalization for the three months ended March 31, 2017:  54%

Days Sales Outstanding for the three months ended March 31, 2017:  40 (29 net of deferred revenue)

Share Information for the three months ended March 31, 2017:

Basic shares outstanding

175,374,630

Dilutive effect of warrants

42,218

Dilutive effect of restricted share units

518,634

Diluted shares outstanding

175,935,482

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 net income attributable to noncontrolling interests, plus or minus income tax provision (benefit), plus interest expense, 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

March 31,



2016


2017


Net income attributable to Waste Connections

$

44,842


$

14,874


Plus: Net income attributable to noncontrolling interests


175



146


Plus (less): Income tax provision (benefit)


29,000



(16,871)


Plus: Interest expense


17,184



29,131


Plus: Depreciation and amortization


68,591



150,750


Plus: Closure and post-closure accretion


1,116



2,917


Plus: Impairments and other operating items


236



141,681


Less: Other income, net


(222)



(1,466)


Plus: Foreign currency transaction loss


-



590


Adjustments:







Plus: Transaction-related expenses (a)


8,815



1,744


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


-



6,475


Plus: Integration-related and other expenses (c)


-



2,828


Adjusted EBITDA

$

169,737


$

332,799









As % of revenues


33.0%



30.5%









____________________________________________

(a) 

Reflects the addback of acquisition-related transaction costs.

(b) 

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

(c) 

Reflects the addback of professional fees and other integration-related items, including severance and 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 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.  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

March 31,




2016


2017


Net cash provided by operating activities


$

164,716


$

287,477


Plus/(Less): Change in book overdraft



(151)



20,047


Plus: Proceeds from disposal of assets



681



18,815


Plus: Excess tax benefit associated with equity-based compensation



4,434



-


Less: Capital expenditures for property and equipment



(56,575)



(91,205)


Less: Distributions to noncontrolling interests



(4)



-


Adjustments:








     Payment of contingent consideration recorded in earnings (a)



33



-


     Cash received for divestitures (b)



-



(17,400)


     Transaction-related expenses (c)



685



1,744


     Integration-related and other expenses (d)



-



459


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



-



12,714


     Synergy bonus (f)



-



11,798


     Tax effect (g)



(261)



(6,959)


Adjusted free cash flow


$

113,558


$

237,490










As % of revenues



22.1%



21.8%










____________________________________________

(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 Progressive Waste operations.

(c) 

Reflects the addback of acquisition-related transaction costs.

(d) 

Reflects the addback of professional fees and other integration-related items, including severance and rebranding costs, associated with the Progressive Waste acquisition.

(e) 

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

(f) 

Reflects the addback of cash bonuses paid pursuant to the Company's Synergy Bonus Program adopted on July 19, 2016 in conjunction with the Progressive Waste acquisition.

(g) 

The aggregate tax effect of footnotes (a) through (f) 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 Net Income attributable to Waste Connections to 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

March 31,




2016


2017


Reported net income attributable to Waste Connections


$

44,842


$

14,874


Adjustments:








Amortization of intangibles (a)



7,694



25,510


Impairments and other operating items (b)



236



141,681


Transaction-related expenses (c)



8,815



1,744


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



-



6,475


Integration-related and other expenses (e)



-



2,828


Tax effect (f)



(6,371)



(62,763)


Adjusted net income attributable to Waste Connections


$

55,216


$

130,349










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








Reported net income


$

0.36


$

0.08


Adjusted net income


$

0.45


$

0.74


















_____________________________________________________

(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, associated with share-based awards granted by Progressive Waste outstanding at the time of the Progressive Waste acquisition.

(e) 

Reflects the addback of professional fees and other integration-related items, including severance and 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.

 

SOURCE Waste Connections, Inc.


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