Quarterly Results

Fourth Quarter 2017
Waste Connections Reports Fourth Quarter Results And Provides 2018 Outlook

Fourth Quarter 2017 Highlights

-          Revenue of $1.157 billion, exceeding outlook

-          Reports 4.3% solid waste price + volume growth, exceeding outlook

-          Net income attributable to Waste Connections of $315.1 million, or $1.19 per share

-          Adjusted net income attributable to Waste Connections* of $137.0 million, or $0.52 per share, up 13.0% per share

-          Adjusted EBITDA* of $360.7 million, or 31.2% of revenue

Full-Year 2017 Highlights

-          Revenue of $4.630 billion

-          Reports 4.4% solid waste price + volume growth

-          Net cash provided by operating activities of $1.187 billion

-          Adjusted free cash flow* of $763.9 million, or 16.5% of revenue

Looking at 2018

-          Expects revenue of approximately $4.825 billion, excluding additional acquisitions

-          Expects adjusted EBITDA* margin expansion of 60 basis points YoY

-          Expects net cash provided by operating activities of approximately $1.350 billion, or 28.0% of revenue

-          Expects adjusted free cash flow* of approximately $850.0 million, or 17.6% of revenue

TORONTO, Feb. 14, 2018 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the fourth quarter of 2017.  Revenue in the fourth quarter totaled $1.157 billion, up from $1.049 billion in the year ago period.  Operating income, which included $15.2 million of impairments, primarily related to the Company's termination of a back-up landfill development project no longer deemed necessary, and $7.0 million of acquisition-related costs, was $175.0 million.  This compares to $139.2 million in the year ago period, which included $23.0 million of impairments and other operating items and $16.0 million of acquisition-related costs.

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

Net income attributable to Waste Connections in the fourth quarter, which included a $209.4 million benefit to the income tax provision primarily resulting from enactment of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), was $315.1 million, or $1.19 per share on a diluted basis of 264.6 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $85.6 million, or $0.32 per share on a diluted basis of 263.9 million shares. Shares and per share numbers reflect a three-for-two share split completed in June 2017.

Adjusted net income attributable to Waste Connections* in the fourth quarter was $137.0 million, or $0.52 per share, versus $120.3 million, or $0.46 per share, in the prior year period.  Adjusted EBITDA* in the fourth quarter was $360.7 million, as compared to adjusted EBITDA* of $325.4 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 impact of the Tax Act, acquisition-related items and impairments and other operating items, as reflected in the detailed reconciliations in the attached tables.

"Q4 capped off another exceptional year for Waste Connections, with better than expected solid waste volume growth and E&P waste activity once again driving financial results in the period above expectations.  Adjusted free cash flow* for the full year of approximately $764 million or 16.5% of revenue and 52.3% of adjusted EBITDA* continues to reflect the results of our differentiated strategy and purposeful focus on both quality of revenue and free cash flow generation," said Ronald J. Mittelstaedt, Chief Executive Officer and Chairman.  "We are extremely pleased that adjusted free cash flow per share increased more than 20% in 2017, while the number of safety-related incidents in the year declined more than 20%."

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

Mr. Mittelstaedt added, "Recently completed acquisitions with total annualized revenue of approximately $70 million provide a strong start to what could be another year of above average acquisition activity.  In early 2018, we acquired Bay Disposal, LLC and Hampton Roads Recovery Center, LLC (collectively, "Bay Disposal & Recycling").  Bay Disposal & Recycling is an integrated provider of solid waste collection, recycling, transfer and disposal services to almost 70,000 customers in southeastern Virginia and northeastern North Carolina through four collection operations, five recycling facilities, one transfer station and a C&D landfill.  We've also completed tuck-in acquisitions in New York and Texas.  Our strong financial profile provides us the flexibility to fund this potential above average amount of acquisition activity while continuing to increase the return of capital to shareholders."

For the year ended December 31, 2017, revenue was $4.630 billion, as compared to revenue of $3.376 billion in 2016.  Operating income, which included $189.2 million of expenses primarily related to both goodwill impairment 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 impairments and other operating items mostly related to the divestiture or expected divestiture of certain assets acquired in the Progressive Waste acquisition, was $627.1 million.  This compares to operating income of $452.3 million in the prior year, which included $146.0 million of expenses primarily related to the Progressive Waste acquisition and the expected divestiture of certain assets acquired in the Progressive Waste acquisition.

Net income attributable to Waste Connections in 2017, which included a $205.6 million benefit to the income tax provision primarily related to the Tax Act, was $576.8 million, or $2.18 per share on a diluted basis of 264.3 million shares.  In 2016, the Company reported net income attributable to Waste Connections of $246.5 million, or $1.07 per share on a diluted basis of 231.1 million shares. 

Adjusted net income attributable to Waste Connections* in 2017 was $570.7 million, or $2.16 per share, compared to $395.2 million, or $1.71 per share, in the prior year. Adjusted EBITDA* in 2017 was $1.461 billion, as compared to $1.071 billion in the prior year.  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 impact of the Tax Act, acquisition-related items and impairments and other operating items, as reflected in the detailed reconciliations in the attached tables. 

2018 OUTLOOK

Waste Connections also announced its outlook for 2018, 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 Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2018 are subject to quarterly fluctuations.  See reconciliations in the attached tables.

  • Revenue is estimated to be approximately $4.825 billion.
  • Net income attributable to Waste Connections is estimated to be approximately $570.0 million.
  • Adjusted EBITDA* is estimated to be approximately $1.550 billion, or about 32.1% of revenue.
  • Net cash provided by operating activities is estimated to be approximately $1.350 billion, or 28.0% of revenue.
  • Adjusted free cash flow* is estimated to be approximately $850.0 million, or about 17.6% of revenue.

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

CONFERENCE CALL

Waste Connections will be hosting a conference call related to fourth quarter earnings and 2018 outlook on February 15th at 8:30 A.M. Eastern Time.  The call will be broadcast live over the Internet at www.streetevents.com or through a link on our website at www.wasteconnections.com.  A playback of the call will be available at both of these websites.

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 six 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 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 2018 financial results, potential acquisition activity and the amount of capital returned 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 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 AND TWELVE MONTHS ENDED DECEMBER 31, 2016 AND 2017

(Unaudited)

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



Three months ended

December 31,


Twelve months ended

December 31,


2016



2017


2016


2017

Revenues

$

1,048,622



$

1,157,175


$

3,375,863


$

4,630,488

Operating expenses:













Cost of operations


617,948




680,373



1,957,712



2,704,775

Selling, general and administrative


124,267




126,038



474,263



509,638

Depreciation


122,612




135,179



393,600



530,187

Amortization of intangibles


21,593




25,411



70,312



102,297

Impairments and other operating items


23,045




15,160



27,678



156,493

Operating income


139,157




175,014



452,298



627,098














Interest expense


(27,418)




(32,534)



(92,709)



(125,297)

Interest income


155




2,042



602



5,173

Other income, net


321




175



53



3,736

Foreign currency transaction gain (loss)


782




1,302



1,121



(2,200)

Income before income tax provision


112,997




145,999



361,365



508,510














Income tax (provision) benefit


(27,294)




169,129



(114,044)



68,910

Net income


85,703




315,128



247,321



577,420

Less: Net income attributable to noncontrolling interests


(111)




(42)



(781)



(603)

Net income attributable to Waste Connections

$

85,592



$

315,086


$

246,540


$

576,817














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













Basic

$

0.33



$

1.19


$

1.07


$

2.19














Diluted

$

0.32



$

1.19


$

1.07


$

2.18














Shares used in the per share calculations:













Basic


263,097,300




263,825,060



230,325,012



263,682,608

Diluted


263,894,715




264,610,894



231,081,496



264,302,411














Cash dividends per common share

$

0.12



$

0.14


$

0.41


$

0.50











































 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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




December 31,
2016


December 31,
2017

ASSETS







Current assets:







Cash and equivalents


$

154,382


$

433,815

Accounts receivable, net of allowance for doubtful accounts of $13,160 and $17,154 at December 31, 2016 and 2017, respectively



485,138



554,458

Current assets held for sale



6,339



1,596

Prepaid expenses and other current assets



97,533



186,999

Total current assets



743,392



1,176,868








Restricted cash and investments



63,406



167,012

Property and equipment, net



4,738,055



4,820,934

Goodwill



4,390,261



4,681,774

Intangible assets, net



1,067,158



1,087,436

Long-term assets held for sale



33,989



12,625

Other assets, net



67,664



68,032



$

11,103,925


$

12,014,681

LIABILITIES AND EQUITY







Current liabilities:







Accounts payable


$

251,253


$

330,523

Book overdraft



10,955



19,223

Accrued liabilities



269,402



278,039

Deferred revenue



134,081



145,197

Current portion of contingent consideration



21,453



15,803

Current liabilities held for sale



3,383



2,155

Current portion of long-term debt and notes payable



1,650



11,659

      Total current liabilities



692,177



802,599








Long-term debt and notes payable



3,616,760



3,899,572

Long-term portion of contingent consideration



30,373



31,482

Other long-term liabilities



331,074



316,191

Deferred income taxes



778,664



690,767

      Total liabilities



5,449,048



5,740,611








Commitments and contingencies







Equity:







Common shares: 263,140,668 shares issued and 262,803,271 shares outstanding at December 31, 2016; 263,660,803 shares issued and 263,494,670 shares outstanding at December 31, 2017



4,174,808



4,187,568

Additional paid-in capital



102,220



115,743

Accumulated other comprehensive income (loss)



(43,001)



108,413

Treasury shares: 337,397 and 166,133 shares at December 31, 2016 and 2017, respectively



-



-

Retained earnings



1,413,488



1,856,946

      Total Waste Connections' equity



5,647,515



6,268,670

Noncontrolling interest in subsidiaries



7,362



5,400

      Total equity



5,654,877



6,274,070



$

11,103,925


$

12,014,681

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

TWELVE MONTHS ENDED DECEMBER 31, 2016 AND 2017

(Unaudited)

(in thousands of U.S. dollars)





Twelve months ended December 31,





2016



2017

Cash flows from operating activities:







Net income


$

247,321


$

577,420

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







Loss on disposal of assets and impairments



26,741



134,491

Depreciation



393,600



530,187

Amortization of intangibles



70,312



102,297

Foreign currency transaction loss (gain)



(1,121)



2,200

Deferred income taxes, net of acquisitions



42,298



(153,283)

Amortization of debt issuance costs



4,847



4,341

Share-based compensation



44,772



39,361

Interest income on restricted cash and investments



(477)



(589)

Interest accretion



10,505



13,822

Excess tax benefit associated with equity-based compensation



(5,196)



-

Payment of contingent consideration recorded in earnings



(493)



(10,012)

Adjustments to contingent consideration



(2,623)



17,754

Net change in operating assets and liabilities, net of acquisitions



(35,174)



(70,729)

Net cash provided by operating activities



795,312



1,187,260








Cash flows from investing activities:







Payments for acquisitions, net of cash acquired



(17,131)



(410,695)

Cash acquired in the Progressive Waste acquisition



65,768



-

Capital expenditures for property and equipment



(344,723)



(479,287)

Proceeds from disposal of assets



4,604



28,432

Change in restricted cash and investments, net of interest income



(428)



(102,218)

Other



(4,485)



(2,464)

Net cash used in investing activities



(296,395)



(966,232)








Cash flows from financing activities:







Proceeds from long-term debt



3,469,289



973,754

Principal payments on notes payable and long-term debt



(3,714,044)



(770,106)

Payment of contingent consideration recorded at acquisition date



(16,322)



(17,158)

Change in book overdraft



(1,305)



8,241

Proceeds from option and warrant exercises



-



1,946

Excess tax benefit associated with equity-based compensation



5,196



-

Payments for cash dividends



(92,547)



(131,975)

Tax withholdings related to net share settlements of restricted share units



(11,497)



(13,994)

Debt issuance costs



(13,506)



(3,667)

Proceeds from sale of common shares held in trust



19,870



10,814

Other



(3)



(1,095)

Net cash provided by (used in) financing activities



(354,869)



56,760

Effect of exchange rates changes on cash and equivalents



(598)



1,795

Net increase in cash and equivalents



143,450



279,583

Cash and equivalents at beginning of period



10,974



154,382

Less: change in cash held for sale



(42)



(150)

Cash and equivalents at end of period


$

154,382


$

433,815










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 December 31, 2017:                  



U.S.


Canada


Total

Core Price

3.3%


4.3%


3.5%

Surcharges

0.1%


0.1%


0.1%

Volume

1.7%


(4.3%)


0.7%

Recycling

(0.3%)


(0.5%)


(0.3%)

Foreign Exchange Impact

-


4.9%


0.8%

Total

4.8%


4.5%


4.8%








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


Three Months Ended December 31, 2016



Revenue



Inter-
company
Elimination



Reported

Revenue


%

Solid Waste Collection

$

739,986


$

(2,195)


$

737,791


70.3%

Solid Waste Disposal and Transfer


350,482



(135,713)



214,769


20.5%

Solid Waste Recycling


31,580



(2,387)



29,193


2.8%

E&P Waste Treatment, Recovery and Disposal


35,027



(2,859)



32,168


3.1%

Intermodal and Other


34,962



(261)



34,701


3.3%

Total

$

1,192,037


$

(143,415)


$

1,048,622


100.0%















Three Months Ended December 31, 2017



Revenue



Inter-
company
Elimination



Reported

Revenue


%

Solid Waste Collection

$

800,625


$

(2,396)


$

798,229


69.0%

Solid Waste Disposal and Transfer


388,010



(149,909)



238,101


20.6%

Solid Waste Recycling


30,285



(1,730)



28,555


2.4%

E&P Waste Treatment, Recovery and Disposal


55,812



(2,547)



53,265


4.6%

Intermodal and Other


39,331



(306)



39,025


3.4%

Total

$

1,314,063


$

(156,888)


$

1,157,175


100.0%












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


Three months ended
December 31,



Twelve months ended
December 31,


2016


2017



2016


2017

Acquisitions, net  

$

507,332


$

37,615



$

1,266,395


$

1,002,979














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 twelve-month periods ended December 31, 2016 and 2017:


Three months ended
December 31,



Twelve months ended

December 31,


2016


2017



2016


2017

Cash Interest Paid

$

31,416


$

39,145



$

87,654


$

115,645

Cash Taxes Paid


33,084



74,101




69,589



155,532

Debt to Book Capitalization as of December 31, 2017:  38%

Internalization for the three months ended December 31, 2017:  55%

Days Sales Outstanding for the three months ended December 31, 2017:  44 (33 net of deferred revenue)

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

Basic shares outstanding

263,825,060

Dilutive effect of equity-based awards

785,834

Diluted shares outstanding

264,610,894

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, 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
December 31,


Twelve months ended
December 31,


2016


2017


2016


2017

Net income attributable to Waste Connections

$

85,592


$

315,086


$

246,540


$

576,817

Plus: Net income attributable to noncontrolling interests


111



42



781



603

Plus (less): Income tax provision (benefit)


27,294



(169,129)



114,044



(68,910)

Plus: Interest expense


27,418



32,534



92,709



125,297

Less: interest income


(155)



(2,042)



(602)



(5,173)

Plus: Depreciation and amortization


144,205



160,590



463,912



632,484

Plus: Closure and post-closure accretion


3,027



2,976



8,936



11,781

Plus: Impairments and other operating items


23,045



15,160



27,678



156,493

Less: Other income, net


(321)



(175)



(53)



(3,736)

Plus/less: Foreign currency transaction loss (gain)


(782)



(1,302)



(1,121)



2,200

Adjustments:












Plus: Transaction-related expenses (a)


1,015



1,282



47,842



5,700

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


4,466



3,033



14,289



16,357

Plus: Integration-related and other expenses (c)


4,036



2,645



44,336



10,612

Plus: Synergy bonus (d)


6,498



-



11,798



-

Adjusted EBITDA

$

325,449


$

360,700


$

1,071,089


$

1,460,525













As % of revenues


31.0%



31.2%



31.7%



31.5%














____________________________________________


(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 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 rebranding costs and other integration-related items associated with the Progressive Waste acquisition.

(d)

Reflects the addback of bonuses accrued pursuant to the Company's Synergy Bonus Program in conjunction 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
December 31,


Twelve months ended
December 31,



2016


2017


2016


2017

Net cash provided by operating activities


$

256,481


$

298,885


$

795,312


$

1,187,260

Plus/(less): Change in book overdraft



(7,355)



(5,573)



(1,305)



8,241

Plus: Proceeds from disposal of assets



1,578



2,606



4,604



28,432

Plus: Excess tax benefit associated with equity-based compensation



45



-



5,196



-

Less: Capital expenditures for property and equipment



(139,789)



(161,902)



(344,723)



(479,287)

Less: Distributions to noncontrolling interests



-



-



(3)



-

Adjustments:













     Payment of contingent consideration recorded in earnings (a)



80



10,012



493



10,012

     Cash received for divestitures (b)



-



-



-



(21,100)

     Transaction-related expenses (c)



3,480



1,282



45,228



5,700

     Integration-related and other expenses (d)



4,005



2,633



82,526



10,602

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



-



5,297



-



17,037

     Synergy bonus (f)



-



-



-



11,798

     Tax effect (g)



(7,846)



(3,378)



(36,384)



(14,804)

Adjusted free cash flow


$

110,679


$

149,862


$

550,944


$

763,891














As % of revenues



10.6%



13.0%



16.3%



16.5%

____________________________________________


(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 and other integration-related items 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)

Reflects the addback of cash bonuses paid pursuant to the Company's Synergy Bonus Program 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
December 31,


Twelve months ended
December 31,



2016


2017


2016


2017

Reported net income attributable to Waste Connections


$

85,592


$

315,086


$

246,540


$

576,817

Adjustments:













Amortization of intangibles (a)



21,593



25,411



70,312



102,297

Impairments and other operating items (b)



23,045



15,160



27,678



156,493

Transaction-related expenses (c)



1,015



1,282



47,842



5,700

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



4,466



3,033



14,289



16,357

Integration-related and other expenses (e)



4,036



2,645



44,336



10,612

Synergy bonus (f)



6,498



-



11,798



-

Tax effect (g)



(25,951)



(16,151)



(69,581)



(91,979)

Tax items (h)



-



(209,418)



1,964



(205,631)

Adjusted net income attributable to Waste Connections


$

120,294


$

137,048


$

395,178


$

570,666














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













Reported net income


$

0.32


$

1.19


$

1.07


$

2.18

Adjusted net income


$

0.46


$

0.52


$

1.71


$

2.16














____________________________________________

(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 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 rebranding costs and other integration-related items associated with the Progressive Waste acquisition.

(f)

Reflects the addback of bonuses accrued pursuant to the Company's Synergy Bonus Program in connection with the Progressive Waste acquisition.

(g)

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

(h)

Reflects in 2016 a change in the geographical apportionment of our deferred tax liabilities resulting from the Progressive Waste acquisition.  In 2017, reflects income tax benefit primarily resulting from a reduction of deferred tax liabilities due to enactment of the Tax Act on December 22, 2017, partially offset by deferred income tax expense due to a portion of the Company's U.S. earnings no longer deemed to be permanently reinvested, also related to the Tax Act.

 

2018 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

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


Reconciliation of Adjusted EBITDA:





2018 Outlook




Estimate



Observation

Net income attributable to Waste Connections



$

570,000




    Plus: Net income attributable to noncontrolling interests




1,000




    Plus: Income tax provision




171,000



Approximate 23.0% effective rate

    Plus: Interest expense, net




125,000




    Plus: Depreciation and Depletion




569,000



Approximately 11.8% of revenue

    Plus: Amortization




102,000



Approximately 2.1% of revenue

    Plus: Closure and post-closure accretion




12,000



Approximately 0.25% of revenue

Adjusted EBITDA



$

1,550,000



Approximately 32.1% of revenue


Reconciliation of Adjusted Free Cash Flow:




2018 Outlook



Estimate


Observation

Net cash provided by operating activities 


$

1,350,000


Approximately 28.0% of revenue

    Less: Capital expenditures



(500,000)



Adjusted free cash flow


$

850,000


Approximately 17.6% of revenue




















 

SOURCE Waste Connections, Inc.