Quarterly Results

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2017

(Unaudited)

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

Six months ended

June 30,

2016

2017

2016

2017

Revenues

$    727,639

$ 1,175,569

$ 1,242,319

$ 2,266,835

Operating expenses:

Cost of operations

416,262

685,900

703,453

1,329,281

Selling, general and administrative

152,737

126,350

220,419

255,400

Depreciation

84,348

132,827

145,245

258,067

Amortization of intangibles

14,081

24,762

21,775

50,272

Impairments and other operating items

(3,284)

(1,180)

(3,048)

140,501

Operating income

63,495

206,910

154,475

233,314

Interest expense

(20,485)

(31,160)

(37,670)

(60,291)

Other income (expense), net

(714)

1,860

(492)

3,326

Foreign currency transaction gain (loss)

689

(1,048)

689

(1,638)

Income before income tax provision

42,985

176,562

117,002

174,711

Income tax provision

(15,265)

(52,675)

(44,265)

(35,804)

Net income

27,720

123,887

72,737

138,907

Less: net income attributable to noncontrolling   interests

(231)

(231)

(406)

(377)

Net income attributable to Waste Connections

$      27,489

$     123,656

$     72,331

$     138,530

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

Basic

$          0.13

$          0.47

$          0.37

$          0.53

Diluted

$          0.13

$          0.47

$           0.37

$           0.52

Shares used in the per share calculations:

Basic

210,305,335

263,387,338

197,244,873

263,225,541

Diluted

210,880,732

264,109,594

198,036,792

264,007,307

$       0.12

$          0.193

$          0.24

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

December 31,
2016

June 30,
2017

ASSETS

Current assets:

Cash and equivalents

$

154,382

$

399,741

Accounts receivable, net of allowance for doubtful accounts of $13,160 and $14,947 at December 31, 2016 and June 30, 2017, respectively

485,138

547,671

Current assets held for sale

6,339

8,731

Prepaid expenses and other current assets

97,533

93,053

Total current assets

743,392

1,049,196

Property and equipment, net

4,738,055

4,729,335

Goodwill

4,390,261

4,589,573

Intangible assets, net

1,067,158

1,083,787

Restricted assets

63,406

60,393

Long-term assets held for sale

33,989

79,448

Other assets, net

67,664

63,631

$

11,103,925

$

11,655,363

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

251,253

$

239,150

Book overdraft

10,955

30,585

Accrued liabilities

269,402

270,621

Deferred revenue

134,081

140,070

Current portion of contingent consideration

21,453

27,097

Current liabilities held for sale

3,383

6,365

Current portion of long-term debt and notes payable

1,650

11,511

      Total current liabilities

692,177

725,399

Long-term debt and notes payable

3,616,760

3,963,909

Long-term portion of contingent consideration

30,373

31,218

Long-term liabilities held for sale

-

463

Other long-term liabilities

331,074

304,179

Deferred income taxes

778,664

822,209

      Total liabilities

5,449,048

5,847,377

Equity:

Common shares: 263,140,777 shares issued and 262,803,380 shares outstanding at December 31, 2016; 263,637,093 shares issued and 263,425,440 shares outstanding at June 30, 2017

4,174,808

4,184,489

Additional paid-in capital

102,220

102,479

Accumulated other comprehensive income (loss)

(43,001)

26,108

Treasury shares: 337,397 and 211,653 shares at December 31, 2016 and June 30, 2017, respectively

-

-

Retained earnings

1,413,488

1,487,171

      Total Waste Connections' equity

5,647,515

5,800,247

Noncontrolling interest in subsidiaries

7,362

7,739

      Total equity

5,654,877

5,807,986

$

11,103,925

$

11,655,363

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2016 AND 2017

(Unaudited)

(in thousands of U.S. dollars)

Six months ended June 30,

2016

2017

Cash flows from operating activities:

Net income

$

72,737

$

138,907

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

Loss on disposal of assets and impairments

509

128,608

Depreciation

145,245

258,067

Amortization of intangibles

21,775

50,272

Foreign currency transaction (gain) loss

(689)

1,638

Deferred income taxes, net of acquisitions

25,363

(10,378)

Amortization of debt issuance costs

2,842

2,101

Share-based compensation

26,405

23,364

Interest income on restricted assets

(246)

(283)

Interest accretion

3,629

6,887

Excess tax benefit associated with equity-based compensation

(5,015)

-

Adjustments to contingent consideration

(2,495)

11,013

Payment of contingent consideration recorded in earnings

(132)

-

Net change in operating assets and liabilities, net of acquisitions

(30,282)

(58,290)

Net cash provided by operating activities

259,646

551,906

Cash flows from investing activities:

Payments for acquisitions, net of cash acquired

(12,541)

(347,936)

Cash acquired in the Progressive Waste acquisition

65,745

-

Capital expenditures for property and equipment

(112,087)

(202,617)

Proceeds from disposal of assets

1,560

20,617

Change in restricted assets, net of interest income

113

3,689

Other

(696)

(1,732)

Net cash used in investing activities

(57,906)

(527,979)

Cash flows from financing activities:

Proceeds from long-term debt

3,352,676

864,952

Principal payments on notes payable and long-term debt

(3,461,005)

(585,762)

Payment of contingent consideration recorded at acquisition date

(4,109)

(5,565)

Change in book overdraft

1,998

19,479

Proceeds from option and warrant exercises

-

1,946

Excess tax benefit associated with equity-based compensation

5,015

-

Payments for cash dividends

(35,585)

(63,463)

Tax withholdings related to net share settlements of restricted share units

(11,349)

(13,621)

Distributions to noncontrolling interests

(3)

Debt issuance costs

(12,941)

(3,519)

Proceeds from sale of common shares held in trust

8,436

7,735

Other

-

(1,094)

Net cash provided by (used in) financing activities

(156,867)

221,088

Effect of exchange rate changes on cash and equivalents

(223)

649

Net increase in cash and equivalents

44,650

245,664

Cash and equivalents at beginning of period

10,974

154,382

Less: change in cash held for sale

-

(305)

Cash and equivalents at end of period

$

55,624

$

399,741

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
June 30,

Six months ended
June 30,

2016

2017

2016

2017

Net Income attributable to Waste Connections

$

27,489

$

123,656

$

72,331

$

138,530

Plus: Net income attributable to noncontrolling interests

231

231

406

377

Plus: Income tax provision

15,265

52,675

44,265

35,804

Plus: Interest expense

20,485

31,160

37,670

60,291

Plus: Depreciation and amortization

98,429

157,589

167,020

308,339

Plus: Closure and post-closure accretion

1,758

2,917

2,874

5,835

Plus/less: Impairments and other operating items

(3,284)

(1,180)

(3,048)

140,501

Plus/less: Other expense (income), net

714

(1,860)

492

(3,326)

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

(689)

1,048

(689)

1,638

Adjustments:

Plus: Transaction-related expenses (a)

37,702

715

46,516

2,459

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

5,357

4,103

5,357

10,578

Plus: Integration-related and other expenses (c)

30,122

2,594

30,122

5,422

Adjusted EBITDA

$

233,579

$

373,648

$

403,316

$

706,448

As % of revenues

32.1%

31.8%

32.5%

31.2%

_______________________________________________

(a) Reflects the addback of acquisition-related transaction costs, which for 2016 primarily related to the Progressive Waste acquisition.

(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 rebranding costs and other integration-related items, including professional fees and severance 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, 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
June 30,

Six months ended
June 30,

2016

2017

2016

2017

Net cash provided by operating activities

$

94,930

$

264,429

$

259,646

$

551,906

Plus/(Less): Change in book overdraft

2,149

(568)

1,998

19,479

Plus: Proceeds from disposal of assets

879

1,801

1,560

20,617

Plus: Excess tax benefit associated with equity-based compensation

581

-

5,015

-

Less: Capital expenditures for property and equipment

(55,512)

(111,412)

(112,087)

(202,617)

Less: Distributions to noncontrolling interests

-

-

(3)

-

Adjustments:

  Payment of contingent consideration recorded in earnings (a)

99

-

132

-

  Cash received for divestitures (b)

-

-

-

(17,400)

  Transaction-related expenses (c)

71,067

715

72,042

2,459

  Integration-related and other expenses (d)

24,529

2,282

24,529

5,110

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

-

1,570

-

11,915

  Synergy bonus (f)

-

-

-

11,798

  Tax effect (g)

(18,038)

(2,689)

(18,410)

(9,648)

Adjusted free cash flow

$

120,684

$

156,128

$

234,422

$

393,619

As % of revenues

16.6%

13.3%

18.9%

17.4%

____________________________________________

(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, which for 2016 primarily related to the Progressive Waste acquisition.

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

(e) Reflects the cash settlement of pre-existing Progressive Waste share-based awards 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
June 30,

Six months ended
June 30,

2016

2017

2016

2017

Reported net income attributable to Waste Connections

$

27,489

$

123,656

$

72,331

$

138,530

Adjustments:

Amortization of intangibles (a)

14,081

24,762

21,775

50,272

Impairments and other operating items (b)

(3,284)

(1,180)

(3,048)

140,501

Transaction-related expenses (c)

37,702

715

46,516

2,459

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

5,357

4,103

5,357

10,578

Integration-related and other expenses (e)

30,122

2,594

30,122

5,422

Tax effect (f)

(18,257)

(9,188)

(24,629)

(72,253)

Adjusted net income attributable to Waste Connections     

$

93,210

$

145,462

$

148,424

$

275,509

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

     Reported net income

$

0.13

$

0.47

$

0.37

$

0.52

Adjusted net income

$

0.44

$

0.55

$

0.75

$

1.04

_____________________________________________________

(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, which for 2016 primarily related to the Progressive Waste acquisition.

(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 rebranding costs and other integration-related items, including professional fees and severance 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.

UPDATED 2017 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

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

Reconciliation of Adjusted EBITDA:

Updated

2017 Outlook

Net Income attributable to Waste Connections

$

390,000

Plus: Net income attributable to noncontrolling interests

1,000

Plus: Income tax provision

141,000

Plus: Interest expense

125,000

Plus: Depreciation and amortization

624,000

Plus: Closure and post-closure accretion

12,000

Plus: Impairments and other operating items (a)

140,501

Less: Other income, net (a)

(3,326)

Plus: Foreign currency transaction loss (a)

1,638

Adjustments: (a)

Plus: Transaction-related expenses

2,459

Plus: Pre-existing Progressive Waste share-based grants

10,578

Plus: Integration-related and other expenses

5,422

Adjusted EBITDA

$

1,450,272

As % of revenues

31.7%

__________________________________________________

(a) Reflects amounts reported for the six month period ending on June 30, 2017, as shown on page 9.

Reconciliation of Adjusted Free Cash Flow:

Net cash provided by operating activities

$

1,185,500

Plus: Proceeds from disposal of assets (a)

20,617

Less: Capital expenditures for property and equipment

(460,000)

Adjustments: (a)

    Cash received for divestitures

(17,400)

    Integration-related and other expenses

5,110

    Transaction-related expenses

2,459

    Pre-existing Progressive Waste share-based grants

11,915

    Synergy Bonus

11,798

    Tax effect

(9,648)

Adjusted free cash flow

750,351

As % of revenues

_________________________________________________

(a) Reflects amounts reported for the six month period ending on June 30, 2017, as shown on page 10.