Waste Connections Reports Third Quarter 2020 Results

-  Revenue of $1.390 billion, exceeding outlook
-  Net income attributable to Waste Connections of $158.0 million, or $0.60 per share
-  Adjusted net income attributable to Waste Connections* of $188.6 million, or $0.72 per share
-  Adjusted EBITDA* of $432.6 million, or 31.1% of revenue, exceeding outlook
-  YTD net cash provided by operating activities of $1.186 billion
-  YTD adjusted free cash flow* of $778.4 million, or 19.2% of revenue and up year over year
-  Increases regular quarterly cash dividend by 10.8%

 

TORONTO, Oct. 28, 2020 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2020. 

"Sequential improvement in solid waste volumes and increased recovered commodity values drove better than expected results in the third quarter and provide incremental momentum going forward.  Our strong operating results, financial performance and frontline support continue to differentiate Waste Connections during this year's unprecedented health, economic and social challenges," said Worthing F. Jackman, President and Chief Executive Officer.

Mr. Jackman added, "Higher margin flow-through from improving revenue during the quarter provided better than expected adjusted EBITDA* margin and adjusted free cash flow* generation. Adjusted EBITDA* as a percentage of revenue in the period was approximately 40 basis points above our outlook in spite of 30 basis points higher than expected discretionary frontline and incentive compensation costs impacting the quarter, which resulted from our more than $35 million commitment in incremental costs primarily directed to discretionary supplemental pay for frontline employees.  Solid waste margins expanded by almost 200 basis points compared to the year ago period, with collection, transfer and disposal accounting for over 80% of that increase. Moreover, year-to-date adjusted free cash flow* of $778 million, or 19.2% of revenue, increased year over year, putting us firmly on track to exceed the adjusted free cash flow* outlook for the full year that we communicated in August and positioning us for double digit growth in adjusted free cash flow* in 2021." 

Mr. Jackman concluded, "As anticipated last quarter, our strong operating performance, free cash flow generation and balance sheet strength positioned us for a double-digit percentage increase in our quarterly cash dividend, for the tenth consecutive year.  We are also on track for another year of above average acquisition activity, while maintaining optionality for opportunistic share repurchases.  As we look ahead, we expect to emerge from this challenging period better positioned financially, with tremendous flexibility with respect to capital allocation, and operationally, with higher operating leverage in solid waste and both safety-related incidents and voluntary turnover levels already achieving multi-year lows."

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

Financial Impact from COVID-19

During the third quarter of 2020, our business continued to be impacted by COVID-19, albeit to a lesser extent than in the prior period in many markets.  Revenue in solid waste commercial collection and solid waste transfer and disposal continued to reflect the extent to which the slowdown in activity associated with shelter-in-place or other closure restrictions or requirements in effect since the first quarter of 2020 has persisted. 

The impacts to solid waste activity from COVID-19 that we experienced during the third quarter reflected the pace of reopening activity and varied by geography, the size and customer mix in each market.  In some markets, impacts began to abate in the second quarter, when a portion of the lost volumes returned; in other cases, impacts abated more during the third quarter, when reopenings resulted in increased service requirements by commercial customers and higher landfill volumes and roll-off activity.  In markets where reopenings continue to be delayed or where additional restrictions have been imposed, the improvements were less pronounced.  Through the third quarter, about 68% of solid waste commercial customers and 57% of associated revenue in competitive markets we track that had suspended or reduced service due to COVID-19, had since reached out for either a resumption of service or an increase in frequency, up from 53% and 42% respectively through the second quarter.  As a result, solid waste collection, transfer and disposal revenue was down 2.0% year over year on a same store basis in the third quarter, an improvement of 330 basis points from Q2, which was down 5.3% year over year.  

The impact of the COVID-19 outbreak on our business, results of operations, financial condition and cash flows in future periods 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.

Q3 2020 Results

Revenue in the third quarter totaled $1.390 billion, as compared to $1.412 billion in the year ago period.  Operating income was $230.7 million, which included $7.9 million of costs primarily resulting from impairments and other operating items and acquisition-related costs. This compares to operating income of $236.6 million in the third quarter of 2019, which included $13.4 million of costs primarily resulting from impairments and other operating items.

Net income attributable to Waste Connections in the third quarter was $158.0 million, or $0.60 per share on a diluted basis of 263.5 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $159.1 million, or $0.60 per share on a diluted basis of 264.6 million shares. 

Adjusted net income attributable to Waste Connections* in the third quarter was $188.6 million, or $0.72 per diluted share, versus $192.9 million, or $0.73 per diluted share, in the prior year period.  Adjusted EBITDA* in the third quarter was $432.6 million, as compared to adjusted EBITDA* of $443.6 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 tables.

Nine Months Year to Date Results

For the nine months ended September 30, 2020, revenue was $4.048 billion, up from $4.027 billion in the year ago period.  Operating income, which included $453.1 million of costs primarily related to the decrease in property, plant and equipment at certain E&P landfills as a result of the Company's impairment testing, was $215.3 million, compared to $643.6 million for the same period in 2019, which included $44.7 million of costs primarily resulting from impairments and other operating items. 

Net income attributable to Waste Connections for the nine months ended September 30, 2020, was $74.0 million, or $0.28 per share on a diluted basis of 263.7 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $433.6 million, or $1.64 per share on a diluted basis of 264.5 million shares. 

Adjusted net income attributable to Waste Connections* for the nine months ended September 30, 2020, was $517.2 million, or $1.96 per diluted share, compared to $538.1 million, or $2.03 per diluted share, in the year ago period. Adjusted EBITDA* for the nine months ended September 30, 2020, was $1.235 billion, as compared to $1.255 billion in the prior year period. 

Q3 2020 Earnings Conference Call

Waste Connections will be hosting a conference call related to third quarter earnings on October 29th at 8:30 A.M. Eastern Time.  To access the call, listeners should dial 800-920-3365 (within North America) or 212-231-2902 (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 November 5, 2020 by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode # 21969551.  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 October 29th, providing the Company's fourth 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 and disposal services, along with recycling and resource recovery, in mostly exclusive and secondary markets across 42 states in the U.S. and six provinces in Canada. The Company serves more than seven million residential, commercial and industrial customers. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as 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 2020 and 2021 financial results, outlook and related assumptions, adjusted free cash flow, capital expenditures, potential acquisition activity and return of capital to shareholders. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada.  You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.  Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

– financial tables attached –

CONTACT:

       
         

Mary Anne Whitney / (832) 442-2253

     

 Joe Box / (281) 873-3205

maryannew@wasteconnections.com 

     

joe.box@wasteconnections.com

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2020

(Unaudited)

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

                           
   

Three months ended
September 30,

 

Nine months ended
September 30,

 
   

2019

 

2020

 

2019

 

2020

 
                   

Revenues

 

$

1,412,444

 

$

1,389,552

 

$

4,026,719

 

$

4,047,739

 

Operating expenses:

                         

Cost of operations

   

835,098

   

828,822

   

2,384,607

   

2,429,957

 

Selling, general and administrative

   

137,883

   

136,003

   

410,132

   

404,213

 

Depreciation

   

157,994

   

157,590

   

461,616

   

459,641

 

Amortization of intangibles

   

31,934

   

32,653

   

93,821

   

96,062

 

Impairments and other operating items

   

12,935

   

3,805

   

32,949

   

442,582

 

Operating income

   

236,600

   

230,679

   

643,594

   

215,284

 
                           

Interest expense

   

(36,780)

   

(40,636)

   

(111,313)

   

(119,562)

 

Interest income

   

2,056

   

903

   

7,186

   

4,396

 

Other income (expense), net

   

(19)

   

702

   

4,562

   

(3,046)

 

Income before income tax provision

   

201,857

   

191,648

   

544,029

   

97,072

 
                           

Income tax provision

   

(42,783)

   

(33,657)

   

(110,539)

   

(23,654)

 

Net income

   

159,074

   

157,991

   

433,490

   

73,418

 

Plus: Net loss attributable to noncontrolling interests

   

35

   

58

   

89

   

594

 

Net income attributable to Waste Connections

 

$

159,109

 

$

158,049

 

$

433,579

 

$

74,012

 
                           

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

                         

Basic

 

$

0.60

 

$

0.60

 

$

1.64

 

$

0.28

 
                           

Diluted

 

$

0.60

 

$

0.60

 

$

1.64

 

$

0.28

 
                           

Shares used in the per share calculations:

                         

Basic

   

263,853,681

   

262,998,317

   

263,768,258

   

263,253,087

 

Diluted

   

264,587,456

   

263,507,486

   

264,473,345

   

263,718,001

 
                           
                           

Cash dividends per common share

 

$

0.160

 

$

0.185

 

$

0.480

 

$

0.555

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

               
   

December 31,
2019

 

September 30,
2020

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

326,738

 

$

859,096

 

Accounts receivable, net of allowance for credit losses of $16,432 and $20,657 at December 31,
2019 and September 30, 2020, respectively

   

662,808

   

616,630

 

Prepaid expenses and other current assets

   

141,052

   

115,690

 

Total current assets

   

1,130,598

   

1,591,416

 

Restricted cash

   

96,483

   

96,519

 

Restricted investments

   

51,179

   

47,161

 

Property and equipment, net

   

5,516,347

   

5,193,378

 

Operating lease right-of-use assets

   

183,220

   

168,974

 

Goodwill

   

5,510,851

   

5,534,567

 

Intangible assets, net

   

1,163,063

   

1,127,279

 

Other assets, net

   

85,954

   

90,153

 

Total assets

 

$

13,737,695

 

$

13,849,447

 

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

436,970

 

$

403,946

 

Book overdraft

   

15,954

   

15,092

 

Accrued liabilities

   

280,808

   

400,293

 

Current portion of operating lease liabilities

   

29,929

   

30,196

 

Current portion of contingent consideration

   

26,659

   

62,492

 

Deferred revenue

   

216,443

   

216,675

 

Current portion of long-term debt and notes payable

   

465

   

6,772

 

Total current liabilities

   

1,007,228

   

1,135,466

 
               

Long-term portion of debt and notes payable

   

4,353,782

   

4,680,219

 

Long-term portion of operating lease liabilities

   

160,033

   

145,642

 

Long-term portion of contingent consideration

   

42,825

   

26,030

 

Deferred income taxes

   

818,622

   

725,343

 

Other long-term liabilities

   

416,851

   

470,558

 

Total liabilities

   

6,799,341

   

7,183,258

 

Commitments and contingencies

             

Equity:

             

Common shares: 263,699,675 shares issued and 263,618,161 shares outstanding at December 31,
2019; 262,897,009 shares issued and 262,822,825 shares outstanding at September 30, 2020

   

4,135,343

   

4,030,368

 

Additional paid-in capital

   

154,917

   

162,606

 

Accumulated other comprehensive loss

   

(10,963)

   

(113,338)

 

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

   

-

   

-

 

Retained earnings

   

2,654,207

   

2,582,298

 

Total Waste Connections' equity

   

6,933,504

   

6,661,934

 

Noncontrolling interest in subsidiaries

   

4,850

   

4,255

 

Total equity

   

6,938,354

   

6,666,189

 
   

$

13,737,695

 

$

13,849,447

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2020

(Unaudited)

(in thousands of U.S. dollars)

               
   

Nine months ended September 30,

 
   

2019

 

2020

 

Cash flows from operating activities:

             

Net income

 

$

433,490

 

$

73,418

 

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

             

Loss on disposal of assets and impairments

   

31,852

   

423,832

 

Depreciation

   

461,616

   

459,641

 

Amortization of intangibles

   

93,821

   

96,062

 

Amortization of leases

   

17,661

   

14,281

 

Deferred income taxes, net of acquisitions

   

41,481

   

(77,613)

 

Amortization of debt issuance costs

   

3,708

   

6,146

 

Share-based compensation

   

35,510

   

38,316

 

Interest accretion

   

12,283

   

12,843

 

Adjustments to contingent consideration

   

1,466

   

16,852

 

Other

   

(1,316)

   

936

 

Net change in operating assets and liabilities, net of acquisitions

   

53,858

   

120,859

 

Net cash provided by operating activities

   

1,185,430

   

1,185,573

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(420,392)

   

(173,810)

 

Capital expenditures for property and equipment

   

(433,526)

   

(420,694)

 

Capital expenditure for undeveloped landfill property

   

(31,683)

   

(66,809)

 

Proceeds from disposal of assets

   

2,626

   

11,564

 

Other

   

(2,697)

   

(317)

 

Net cash used in investing activities

   

(885,672)

   

(650,066)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

1,021,795

   

1,790,625

 

Principal payments on notes payable and long-term debt

   

(1,184,165)

   

(1,505,641)

 

Payment of contingent consideration recorded at acquisition date

   

(1,621)

   

(2,812)

 

Change in book overdraft

   

1,911

   

(862)

 

Payments for repurchase of common shares

   

-

   

(105,654)

 

Payments for cash dividends

   

(126,348)

   

(145,921)

 

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

   

(17,592)

   

(23,390)

 

Debt issuance costs

   

(5,938)

   

(11,117)

 

Proceeds from sale of common shares held in trust

   

4,036

   

679

 

Distributions to noncontrolling interests

   

(117)

   

-

 

Net cash used in financing activities

   

(308,039)

   

(4,093)

 

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

   

143

   

980

 

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

   

(8,138)

   

532,394

 

Cash, cash equivalents and restricted cash at beginning of period

   

403,966

   

423,221

 

Cash, cash equivalents and restricted cash at end of period

 

$

395,828

 

$

955,615

 

 

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 September 30, 2020:

                     
   

U.S.

     

Canada

   

Total

 

Core Price

 

3.9

 

%

 

5.2

%

 

4.1

%

Surcharges

 

(0.3)

 

%

 

(0.6)

%

 

(0.4)

%

Volume

 

(5.2)

 

%

 

(8.9)

%

 

(5.7)

%

Recycling

 

0.2

 

%

 

0.3

%

 

0.2

%

Foreign Exchange Impact

 

-

     

(0.8)

%

 

(0.1)

%

Total

 

(1.4)

 

%

 

(4.8)

%

 

(1.9)

%

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

                       
   

Three months ended September 30, 2019

   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

990,790

 

$

(2,532)

 

$

988,258

 

70.0%

Solid Waste Disposal and Transfer

   

520,218

   

(202,554)

   

317,664

 

22.5%

Solid Waste Recycling

   

14,142

   

(394)

   

13,748

 

1.0%

E&P Waste Treatment, Recovery and Disposal

   

70,874

   

(4,466)

   

66,408

 

4.7%

Intermodal and Other

   

26,520

   

(154)

   

26,366

 

1.8%

Total

 

$

1,622,544

 

$

(210,100)

 

$

1,412,444

 

100.0%

 
   

Three months ended September 30, 2020

   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

1,010,497

 

$

(3,940)

 

$

1,006,557

 

72.4%

Solid Waste Disposal and Transfer

   

514,705

   

(203,136)

   

311,569

 

22.4%

Solid Waste Recycling

   

21,377

   

(656)

   

20,721

 

1.5%

E&P Waste Treatment, Recovery and Disposal

   

26,218

   

(2,575)

   

23,643

 

1.7%

Intermodal and Other

   

27,141

   

(79)

   

27,062

 

2.0%

Total

 

$

1,599,938

 

$

(210,386)

 

$

1,389,552

 

100.0%

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

             
   

Three months ended
September 30,

   

2019

 

2020

Acquisitions, net

 

$

77,092

 

$

44,214

 

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 nine month periods ended September 30, 2019 and 2020:

                         
   

Three months ended
September 30,

 

Nine months ended
September 30,

   

2019

 

2020

 

2019

 

2020

Cash Interest Paid

 

$

17,358

 

$

23,572

 

$

85,616

 

$

86,400

Cash Taxes Paid

   

21,428

   

47,965

   

41,960

   

61,015

Debt to Book Capitalization as of September 30, 2020:  41%

Internalization for the three months ended September 30, 2020:  55%

Days Sales Outstanding for the three months ended September 30, 2020:  41 (26 net of deferred revenue)

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

     

Basic shares outstanding

 

262,998,317

Dilutive effect of equity-based awards 

 

509,169

Diluted shares outstanding

 

263,507,486

 

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, minus net loss attributable to noncontrolling interests, plus income tax provision, plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income.  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
September 30,

 

Nine months ended
September 30,

   

2019

 

2020

 

2019

 

2020

Net income attributable to Waste Connections

 

$

159,109

 

$

158,049

 

$

433,579

 

$

74,012

Less: Net loss attributable to noncontrolling interests

   

(35)

   

(58)

   

(89)

   

(594)

Plus: Income tax provision

   

42,783

   

33,657

   

110,539

   

23,654

Plus: Interest expense

   

36,780

   

40,636

   

111,313

   

119,562

Less: Interest income

   

(2,056)

   

(903)

   

(7,186)

   

(4,396)

Plus: Depreciation and amortization

   

189,928

   

190,243

   

555,437

   

555,703

Plus: Closure and post-closure accretion

   

3,649

   

3,723

   

10,821

   

11,340

Plus: Impairments and other operating items

   

12,935

   

3,805

   

32,949

   

442,582

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

   

19

   

(702)

   

(4,562)

   

3,046

Adjustments:

                       

Plus: Transaction-related expenses (a)

   

1,036

   

2,335

   

8,057

   

4,497

Plus/(Less): Fair value changes to equity awards (b)

   

(589)

   

1,798

   

3,693

   

6,021

Adjusted EBITDA

 

$

443,559

 

$

432,583

 

$

1,254,551

 

$

1,235,427

                         

As % of revenues

   

31.4%

   

31.1%

   

31.2%

   

30.5%

   
     

(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
September 30,

 

Nine months ended
September 30,

   

2019

 

2020

 

2019

 

2020

Net cash provided by operating activities

 

$

432,383

 

$

432,388

 

$

1,185,430

 

$

1,185,573

Plus/(Less): Change in book overdraft

   

2,445

   

(256)

   

1,911

   

(862)

Plus: Proceeds from disposal of assets

   

1,428

   

922

   

2,626

   

11,564

Less: Capital expenditures for property and equipment

   

(179,736)

   

(151,983)

   

(433,526)

   

(420,694)

Less: Distributions to noncontrolling interests

   

-

   

-

   

(117)

   

-

Adjustments:

                       

Cash received for divestitures (a)

   

-

   

-

   

(2,376)

   

(4,974)

Transaction-related expenses (b)

   

1,036

   

2,335

   

8,057

   

4,497

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

   

1,935

   

1,015

   

4,306

   

7,455

Tax effect (d)

   

(464)

   

(599)

   

(3,375)

   

(4,168)

Adjusted free cash flow

 

$

259,027

 

$

283,822

 

$

762,936

 

$

778,391

                         

As % of revenues

   

18.3%

   

20.4%

   

18.9%

   

19.2%

   
       

(a)

Reflects the elimination of cash received in conjunction with the divestiture of certain 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
September 30,

 

Nine months ended
September 30,

   

2019

 

2020

 

2019

 

2020

Reported net income attributable to Waste Connections

 

$

159,109

 

$

158,049

 

$

433,579

 

$

74,012

Adjustments:

                       

Amortization of intangibles (a)

   

31,934

   

32,653

   

93,821

   

96,062

Impairments and other operating items (b)

   

12,935

   

3,805

   

32,949

   

442,582

Transaction-related expenses (c) 

   

1,036

   

2,335

   

8,057

   

4,497

Fair value changes to equity awards (d)

   

(589)

   

1,798

   

3,693

   

6,021

Tax effect (e)

   

(11,486)

   

(10,000)

   

(33,955)

   

(137,523)

Tax items (f)

   

-

   

-

   

-

   

31,508

Adjusted net income attributable to Waste Connections

 

$

192,939

 

$

188,640

 

$

538,144

 

$

517,159

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

                       

Reported net income

 

$

0.60

 

$

0.60

 

$

1.64

 

$

0.28

Adjusted net income

 

$

0.73

 

$

0.72

 

$

2.03

 

$

1.96

   
       

(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 267A and an increase in deferred tax liabilities resulting from the E&P impairment.

 

 

SOURCE Waste Connections, Inc.