Fourth Quarter 2020
Waste Connections Reports Fourth Quarter Results and Provides 2021 Outlook

Fourth Quarter Highlights

  • Improving solid waste volumes and increasing values for recycled commodities and renewable fuels drive results above expectations
  • Revenue of $1.398 billion, net income(a) of $130.7 million, and adjusted EBITDA(b) of $426.6 million, or 30.5% of revenue
  • Net income and adjusted net income(b) of $0.50 and $0.68 per share, respectively
  • Completes additional acquisitions to bring total acquired annualized revenue for the full year to approximately $180 million

Looking at 2021

  • Expects 5.0% solid waste price plus volume growth, 50bps margin expansion, and double-digit percentage growth in adjusted free cash flow(b) 
  • Expects revenue to be approximately $5.80 billion, excluding additional acquisitions
  • Expects net income to be approximately $669 million
  • Expects adjusted EBITDA(b) to be approximately $1.80 billion, or about 31.0% of revenue 
  • Expects net cash provided by operating activities to be approximately $1.575 billion
  • Expects adjusted free cash flow(b) to be at least $950 million, or 16.4% of revenue
  • Expects double-digit percentage increase in cash dividends and share repurchases

TORONTO, Feb. 17, 2021 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the fourth quarter of 2020 and outlook for 2021. 

"Q4 capped off a remarkable year for Waste Connections, culminating in a solid beat in the period and providing a higher entry point into 2021.  A more than 250 basis points higher than expected improvement in solid waste volumes and increased values for recycled commodities and renewable fuels drove adjusted EBITDA(b) margins 50 basis points above expectations for the quarter.  Moreover, we converted more than 50% of adjusted EBITDA(b) to adjusted free cash flow(b) in the year, while positioning ourselves for double-digit percentage growth in adjusted free cash flow(b) in 2021," said Worthing F. Jackman, President and Chief Executive Officer.  "Culture and values have guided our response throughout the pandemic, driving improvement in many areas in addition to financial, including safety, employee engagement, retention, and customer connectivity. We spent over $35 million in 2020 primarily directed to discretionary supplemental pay for frontline employees, and, among other initiatives, increased our minimum wage target to $15/hour, expanded benefits and provided scheduling flexibility to accommodate employee needs."

Mr. Jackman added, "2020 was also noteworthy for the pace of acquisition activity, which accelerated in the fourth quarter to drive another outsized year of activity and an incremental 2% rollover revenue growth from such acquisitions in 2021.  Acquisition dialogue remains elevated and given the strength of our balance sheet, we remain well positioned to fund additional acquisitions, while also increasing return of capital to shareholders through opportunistic share repurchases and dividend growth. With expected solid waste pricing plus volume growth of 5% and increasing recycling and renewable fuels values, 2021 is already positioned for continued growth and margin expansion, with upside from any further reopening activity, recovery in the economy, or acquisitions completed during the year."

Mr. Jackman continued, "The strength of our results in 2020 and expectations for 2021 reflect our purposeful culture and differentiated strategy; moreover, they are a testament to the tireless efforts of our dedicated essential workers.  We are extremely grateful for our employees' efforts to drive not only outsized financial performance during this challenging period but operational excellence as well, as they honor commitments to our customers, communities and each other."  

Financial Impact from COVID-19

Throughout the COVID-19 pandemic, revenue from solid waste commercial collection, transfer and disposal has largely reflected the extent to which the slowdown in activity associated with shelter-in-place or other closure restrictions or requirements in effect since Q1 of 2020 have persisted.  Q2 was the first full quarter to reflect the impacts from the COVID-19 pandemic, and activity levels in impacted lines of business have shown improvement in subsequent quarters.  Recoveries in more impacted markets, particularly those where reopenings continue to be delayed or where additional restrictions have been imposed, have generally been less pronounced.

Improving trends since Q2 include as follows:  solid waste collection, transfer and disposal revenue improved from down 5.3% in Q2 to up 0.7% year over year on a same store basis in Q4, with reported solid waste volumes improving from down 9.6% in Q2 to down 3.1% in Q4.  On a same store basis, year-over-year landfill tons, which were down approximately 10% in Q2, improved to down about 5% in Q4, and roll-off pulls improved from down approximately 11% in Q2 to down about 4% in Q4.  Additionally, service resumptions or increases in frequency in solid waste commercial collection in competitive markets we track that had previously suspended or reduced service due to the COVID-19 pandemic improved from recovery levels of 42% of such impacted revenue through Q2 to 56% at year end 2020.

Since the onset of the COVID-19 pandemic, protecting the health, welfare and safety of our employees has been our top priority.  Recognizing the potential for financial hardship and other challenges, we looked to provide a safety net for our employees on issues of income and family health.  To that end in 2020, we incurred over $35 million in incremental COVID-19-related costs, primarily supplemental pay for frontline employees, including pre-holiday "Thank you" bonuses paid out in the fourth quarter.

The impact of the COVID-19 pandemic 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 pandemic 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.

Q4 2020 Results

Revenue in the fourth quarter totaled $1.398 billion, up from $1.362 billion in the year ago period.  Operating income was $197.1 million, which included $24.1 million of impairments and other operating items primarily related to an adjustment to the carrying values of certain acquired long-lived assets and $5.3 million of acquisition-related costs.  This compares to operating income of $194.2 million in the fourth quarter of 2019, which included $32.7 million of costs primarily resulting from impairments and other operating items.  Net income in the fourth quarter was $130.7 million, or $0.50 per share on a diluted basis of 263.6 million shares.  In the year ago period, the Company reported net income of $133.3 million, or $0.50 per share on a diluted basis of 264.6 million shares. 

Adjusted net income(b) in the fourth quarter was $178.6 million, or $0.68 per diluted share, versus $181.4 million, or $0.69 per diluted share, in the prior year period.  Adjusted EBITDA(b) in the fourth quarter was $426.6 million, as compared to $419.0 million in the prior year period.  Adjusted net income, adjusted net income per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and acquisition-related items, as reflected in the detailed reconciliations in the attached tables.

Full Year 2020 Results

For the year ended December 31, 2020, revenue was $5.446 billion, as compared to $5.389 billion in the year ago period.  Operating income, which included $482.1 million in costs primarily related to the decrease in property and equipment at certain E&P landfills as a result of the Company's impairment testing, was $412.4 million, as compared to $837.8 million in the prior year, which included $77.4 million of costs primarily resulting from impairments and other operating items.

Net income in 2020 was $204.7 million, or $0.78 per share on a diluted basis of 263.7 million shares.  In the year ago period, the Company reported net income of $566.8 million, or $2.14 per share on a diluted basis of 264.5 million shares. 

Adjusted net income(b) in 2020 was $695.8 million, or $2.64 per diluted share, compared to $719.6 million, or $2.72 per diluted share, in the year ago period. Adjusted EBITDA(b) in 2020 was $1.662 billion, as compared to $1.674 billion in the prior year period. 

2021 Outlook

Waste Connections also announced its outlook for 2021, 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 U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2021 are subject to quarterly fluctuations.  See reconciliations in the attached tables.

  • Revenue is estimated to be approximately $5.80 billion;
  • Net income is estimated to be approximately $669 million;
  • Adjusted EBITDA(b) is estimated to be approximately $1.80 billion, or about 31.0% of revenue;
  • Net cash provided by operating activities is estimated to be approximately $1.575 billion;
  • Capital expenditures are estimated to be approximately $625 million; and
  • Adjusted free cash flow(b) is estimated to be at least $950 million, or 16.4% of revenue.

Environmental, Social and Governance

Waste Connections views its Environmental, Social and Governance ("ESG") efforts as integral to its business, with initiatives consistent with its objective of long-term value creation.  In 2020, the Company introduced long-term, aspirational ESG targets and committed over $500 million for investments to meet or exceed such sustainability targets. These investments primarily focus on reducing emissions, increasing resource recovery of both recyclable commodities and clean energy fuels, reducing reliance on off-site disposal for landfill leachate, further improving safety through reduced incidents and enhancing employee engagement through improved voluntary turnover and Servant Leadership scores.  For more information, visit the Waste Connections website at www.wasteconnections.com/sustainability.

Q4 2020 Earnings and 2021 Outlook Conference Call

Waste Connections will be hosting a conference call related to fourth quarter earnings and 2021 outlook on February 18th at 8:30 A.M. Eastern Time.  To access the call, listeners should dial 800-763-6049 (within North America) or 212-231-2936 (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 February 25, 2021 by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #21989487.  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 February 18th, providing the Company's first quarter 2021 outlook for revenue, core price plus volume growth for solid waste, and adjusted EBITDA(b).

(a)

All references to "Net income" refer to the financial statement line item "Net income attributable to Waste Connections"

(b)

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 resource recovery primarily through recycling and renewable fuels generation.  The Company serves more than seven million residential, commercial and industrial customers in mostly exclusive and secondary markets across 43 states in the U.S. and six provinces in Canada.  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 Waste Connections at www.wasteconnections.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 2021 financial results, outlook and related assumptions, potential growth and margin expansion, 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 / (832) 442-2153

maryannew@wasteconnections.com                      

joe.box@wasteconnections.com                                                    

 

 

WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2020
(Unaudited)
(in thousands of U.S. dollars, except share and per share amounts)

                           
   

Three months ended

December 31,

 

Twelve months ended

December 31,

 
   

2019

 

2020

 

2019

 

2020

 
                   

Revenues

 

$

1,361,960

 

$

1,398,251

 

$

5,388,679

 

$

5,445,990

 

Operating expenses:

                         

Cost of operations

   

814,151

   

846,851

   

3,198,757

   

3,276,808

 

Selling, general and administrative

   

136,146

   

133,419

   

546,278

   

537,632

 

Depreciation

   

156,779

   

161,462

   

618,396

   

621,102

 

Amortization of intangibles

   

31,701

   

35,239

   

125,522

   

131,302

 

Impairments and other operating items

   

28,999

   

24,136

   

61,948

   

466,718

 

Operating income

   

194,184

   

197,144

   

837,778

   

412,428

 
                           

Interest expense

   

(36,056)

   

(42,813)

   

(147,368)

   

(162,375)

 

Interest income

   

2,592

   

857

   

9,777

   

5,253

 

Other income (expense), net

   

1,142

   

1,654

   

5,704

   

(1,392)

 

Income before income tax provision

   

161,862

   

156,842

   

705,891

   

253,914

 
                           

Income tax provision

   

(28,671)

   

(26,268)

   

(139,210)

   

(49,922)

 

Net income

   

133,191

   

130,574

   

566,681

   

203,992

 

Plus: Net loss attributable to noncontrolling interests

   

71

   

90

   

160

   

685

 

Net income attributable to Waste Connections

 

$

133,262

 

$

130,664

 

$

566,841

 

$

204,677

 
                           

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

                         

Basic

 

$

0.51

 

$

0.50

 

$

2.15

 

$

0.78

 
                           

Diluted

 

$

0.50

 

$

0.50

 

$

2.14

 

$

0.78

 
                           

Shares used in the per share calculations:

                         

Basic

   

263,865,203

   

263,001,985

   

263,792,693

   

263,189,699

 

Diluted

   

264,636,883

   

263,598,602

   

264,526,561

   

263,687,539

 
                           
                           

Cash dividends per common share

 

$

0.185

 

$

0.205

 

$

0.665

 

$

0.760

 

 

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

               
   

December 31,

2019

 

December 31,

2020

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

326,738

 

$

617,294

 

Accounts receivable, net of allowance for credit losses of $16,432 and $19,380 at
December 31, 2019 and 2020, respectively

   

662,808

   

630,264

 

Prepaid expenses and other current assets

   

141,052

   

160,714

 

Total current assets

   

1,130,598

   

1,408,272

 

Restricted cash

   

96,483

   

97,095

 

Restricted investments

   

51,179

   

57,516

 

Property and equipment, net

   

5,516,347

   

5,284,506

 

Operating lease right-of-use assets

   

183,220

   

170,923

 

Goodwill

   

5,510,851

   

5,726,650

 

Intangible assets, net

   

1,163,063

   

1,155,079

 

Other assets, net

   

85,954

   

92,323

 

Total assets

 

$

13,737,695

 

$

13,992,364

 

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

436,970

 

$

290,820

 

Book overdraft

   

15,954

   

17,079

 

Accrued liabilities

   

280,808

   

404,923

 

Current portion of operating lease liabilities

   

29,929

   

30,671

 

Current portion of contingent consideration

   

26,659

   

43,297

 

Deferred revenue

   

216,443

   

233,596

 

Current portion of long-term debt and notes payable

   

465

   

8,268

 

Total current liabilities

   

1,007,228

   

1,028,654

 
               

Long-term portion of debt and notes payable

   

4,353,782

   

4,708,678

 

Long-term portion of operating lease liabilities

   

160,033

   

147,223

 

Long-term portion of contingent consideration

   

42,825

   

28,439

 

Deferred income taxes

   

818,622

   

760,044

 

Other long-term liabilities

   

416,851

   

455,888

 

Total liabilities

   

6,799,341

   

7,128,926

 

Commitments and contingencies

             

Equity:

             

Common shares: 263,699,675 shares issued and 263,618,161 shares outstanding
at December 31, 2019; 262,899,174 shares issued and 262,824,990 shares outstanding at
December 31, 2020

   

4,135,343

   

4,030,368

 

Additional paid-in capital

   

154,917

   

170,555

 

Accumulated other comprehensive loss

   

(10,963)

   

(651)

 

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

   

-

   

-

 

Retained earnings

   

2,654,207

   

2,659,001

 

Total Waste Connections' equity

   

6,933,504

   

6,859,273

 

Noncontrolling interest in subsidiaries

   

4,850

   

4,165

 

Total equity

   

6,938,354

   

6,863,438

 
   

$

13,737,695

 

$

13,992,364

 

 

WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2020
(Unaudited)
(in thousands of U.S. dollars)

               
   

Twelve months ended December 31,

 
   

2019

 

2020

 

Cash flows from operating activities:

             

Net income

 

$

566,681

 

$

203,992

 

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

             

Loss on disposal of assets and impairments

   

60,592

   

445,647

 

Depreciation

   

618,396

   

621,102

 

Amortization of intangibles

   

125,522

   

131,302

 

Deferred income taxes, net of acquisitions

   

54,637

   

(50,487)

 

Amortization of debt issuance costs

   

5,001

   

7,509

 

Share-based compensation

   

42,671

   

45,751

 

Interest accretion

   

16,426

   

17,205

 

Payment of contingent consideration recorded in earnings

   

-

   

(10,371)

 

Adjustments to contingent consideration

   

1,498

   

18,418

 

Other

   

(2,240)

   

2,426

 

Net change in operating assets and liabilities, net of acquisitions

   

51,363

   

(23,973)

 

Net cash provided by operating activities

   

1,540,547

   

1,408,521

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(736,610)

   

(388,789)

 

Capital expenditures for property and equipment

   

(634,406)

   

(597,053)

 

Capital expenditure for undeveloped landfill property

   

(31,683)

   

(67,508)

 

Investment in noncontrolling interest

   

(25,000)

   

-

 

Proceeds from disposal of assets

   

3,566

   

19,084

 

Other

   

(1,873)

   

(11,777)

 

Net cash used in investing activities

   

(1,426,006)

   

(1,046,043)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

1,575,795

   

1,815,625

 

Principal payments on notes payable and long-term debt

   

(1,470,711)

   

(1,542,958)

 

Payment of contingent consideration recorded at acquisition date

   

(3,200)

   

(12,566)

 

Change in book overdraft

   

(2,564)

   

1,096

 

Payments for repurchase of common shares

   

-

   

(105,654)

 

Payments for cash dividends

   

(175,067)

   

(199,883)

 

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

   

(17,660)

   

(23,446)

 

Debt issuance costs

   

(5,953)

   

(11,117)

 

Proceeds from sale of common shares held in trust

   

4,036

   

679

 

Distributions to noncontrolling interests

   

(570)

   

-

 

Net cash used in financing activities

   

(95,894)

   

(78,224)

 

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

   

608

   

6,914

 

Net increase in cash, cash equivalents and restricted cash

   

19,255

   

291,168

 

Cash, cash equivalents and restricted cash at beginning of year

   

403,966

   

423,221

 

Cash, cash equivalents and restricted cash at end of year

 

$

423,221

 

$

714,389

 

 

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, 2020:

                   
   

U.S.

   

Canada

   

Total

 

Core Price

 

4.1% 

   

5.3% 

   

4.3% 

 

Surcharges

 

(0.4%) 

   

(1.0%) 

   

(0.5%) 

 

Volume

 

(2.9%) 

   

(4.5%) 

   

(3.1%) 

 

Recycling

 

0.5% 

   

1.0% 

   

0.5% 

 

Foreign Exchange Impact

 

   

1.3% 

   

0.2% 

 

Total

 

1.3% 

   

2.1% 

   

1.4% 

 

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended December 31,
2019 and 2020:

                       
   

 Three months ended December 31, 2019

   

Revenue

 

Inter-
company

Elimination

 

Reported

Revenue

 

%

Solid Waste Collection

 

$

974,886

 

$

(2,499)

 

$

972,387

 

71.4%

Solid Waste Disposal and Transfer

   

476,840

   

(193,474)

   

283,366

 

20.8%

Solid Waste Recycling

   

13,569

   

(365)

   

13,204

 

1.0%

E&P Waste Treatment, Recovery and Disposal

   

66,144

   

(3,661)

   

62,483

 

4.6%

Intermodal and Other

   

30,646

   

(126)

   

30,520

 

2.2%

Total

 

$

1,562,085

 

$

(200,125)

 

$

1,361,960

 

100.0%

 

 

                       
   

Three months ended December 31, 2020

   

Revenue

 

Inter-
company

Elimination

 

Reported

Revenue

 

%

Solid Waste Collection

 

$

1,024,099

 

$

(3,341)

 

$

1,020,758

 

73.0%

Solid Waste Disposal and Transfer

   

493,093

   

(200,272)

   

292,821

 

20.9%

Solid Waste Recycling

   

26,688

   

(909)

   

25,779

 

1.9%

E&P Waste Treatment, Recovery and Disposal

   

27,690

   

(2,163)

   

25,527

 

1.8%

Intermodal and Other

   

33,427

   

(61)

   

33,366

 

2.4%

Total

 

$

1,604,997

 

$

(206,746)

 

$

1,398,251

 

100.0%

 

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and
twelve month periods ended December 31, 2019 and 2020:

                         
   

Three months ended

December 31,

 

Twelve months ended

December 31,

   

2019

 

2020

 

2019

 

2020

Acquisitions, net

 

$

68,465

 

$

52,721

 

$

291,938

 

$

197,231

                         

 

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, 2019 and 2020:

                         
   

Three months ended

December 31,

 

Twelve months ended

December 31,

   

2019

 

2020

 

2019

 

2020

Cash Interest Paid

 

$

54,078

 

$

55,910

 

$

139,694

 

$

142,310

Cash Taxes Paid

   

39,089

   

43,603

   

81,049

   

104,618

 

Debt to Book Capitalization as of December 31, 2020:  41%

 

Internalization for the three months ended December 31, 2020:  55%

 

Days Sales Outstanding for the three months ended December 31, 2020:  41 (26 net of deferred revenue)

 

Share Information for the three months ended December 31, 2020:

     

Basic shares outstanding

 

263,001,985

Dilutive effect of equity-based awards 

 

596,617

Diluted shares outstanding

 

263,598,602

 

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 or minus net income (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

December 31,

 

Twelve months ended

December 31,

   

2019

 

2020

 

2019

 

2020

Net income attributable to Waste Connections

 

$

133,262

 

$

130,664

 

$

566,841

 

$

204,677

Less: Net loss attributable to noncontrolling interests

   

(71)

   

(91)

   

(160)

   

(685)

Plus: Income tax provision

   

28,671

   

26,269

   

139,210

   

49,922

Plus: Interest expense

   

36,056

   

42,813

   

147,368

   

162,375

Less: Interest income

   

(2,592)

   

(857)

   

(9,777)

   

(5,253)

Plus: Depreciation and amortization

   

188,480

   

196,701

   

743,918

   

752,404

Plus: Closure and post-closure accretion

   

3,649

   

3,755

   

14,471

   

15,095

Plus: Impairments and other operating items

   

28,999

   

24,136

   

61,948

   

466,718

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

   

(1,142)

   

(1,654)

   

(5,704)

   

1,392

Adjustments:

                       

Plus: Transaction-related expenses(a)

   

4,278

   

5,306

   

12,335

   

9,803

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

   

(589)

   

(485)

   

3,104

   

5,536

Adjusted EBITDA

 

$

419,001

 

$

426,557

 

$

1,673,554

 

$

1,661,984

                         

As % of revenues

   

30.8%

   

30.5%

   

31.1%

   

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. 

             
   

Twelve months ended

December 31,

   

2019

 

2020

Net cash provided by operating activities

 

$

1,540,547

 

$

1,408,521

Plus/(Less): Change in book overdraft

   

(2,564)

   

1,096

Plus: Proceeds from disposal of assets

   

3,566

   

19,084

Less: Capital expenditures for property and equipment

   

(634,406)

   

(597,053)

Less: Distributions to noncontrolling interests

   

(570)

   

-

Adjustments:

           

Payment of contingent consideration recorded in earnings(a)

   

-

   

10,371

Cash received for divestitures(b)

   

(2,376)

   

(10,673)

Transaction-related expenses(c)

   

12,335

   

9,803

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

   

4,810

   

5,770

Tax effect(e)

   

(4,565)

   

(5,021)

Adjusted free cash flow

 

$

916,777

 

$

841,898

             

As % of revenues

   

17.0%

   

15.5%

____________________________

(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 certain operations.

(c)

Reflects the addback of acquisition-related transaction costs.

(d) 

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

(e) 

The aggregate tax effect of footnotes (a) through (d) 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

December 31,

 

Twelve months ended

December 31,

   

2019

 

2020

 

2019

 

2020

Reported net income attributable to Waste Connections

 

$

133,262

 

$

130,664

 

$

566,841

 

$

204,677

Adjustments:

                       

Amortization of intangibles(a)

   

31,701

   

35,239

   

125,522

   

131,302

Impairments and other operating items(b)

   

28,999

   

24,136

   

61,948

   

466,718

Transaction-related expenses(c) 

   

4,278

   

5,306

   

12,335

   

9,803

Fair value changes to equity awards(d)

   

(589)

   

(485)

   

3,104

   

5,536

Tax effect(e)

   

(16,234)

   

(16,235)

   

(50,189)

   

(153,758)

Tax items(f)

   

-

   

-

   

-

   

31,508

Adjusted net income attributable to Waste Connections

 

$

181,417

 

$

178,625

 

$

719,561

 

$

695,786

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

                       

Reported net income

 

$

0.50

 

$

0.50

 

$

2.14

 

$

0.78

Adjusted net income

 

$

0.69

 

$

0.68

 

$

2.72

 

$

2.64

____________________________

(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 inter-entity 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.

 

2021 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

 

Reconciliation of Adjusted EBITDA:

           
     

2021 Outlook

     

Estimates

 

Observation

Net income attributable to Waste Connections

 

$

669,000

   

    Plus: Income tax provision

   

167,400

 

Approximate 20.0% effective rate

    Plus: Interest expense, net

   

162,000

   

    Plus: Depreciation and Depletion

   

660,000

 

Approximately 11.3% of revenue

    Plus: Amortization

   

126,600

   

    Plus: Closure and post-closure accretion

   

15,000

   

Adjusted EBITDA

 

$

1,800,000

 

Approximately 31.0% of revenue

 

Reconciliation of Adjusted Free Cash Flow:

     
 

2021 Outlook

 

Estimates

Net cash provided by operating activities

$

1,575,000

    Less: Capital expenditures

 

(625,000)

Adjusted free cash flow

$

950,000

 

SOURCE Waste Connections, Inc.