Waste Connections, Inc.
"We continue to be extremely pleased with our results. Core pricing and commodity prices remain strong. Volume growth accelerated in the quarter due to typical seasonality, ramping of new contracts, and a notable increase in disposal volumes," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "We expect these trends to continue into the third quarter, putting us on track to exceed the upper end of our original outlook for the year."
For the six months ended June 30, 2007, revenue was $460.0 million, a 15.8% increase over revenue of $397.1 million in the year ago period. Operating income was $100.2 million, a 25.3% increase over operating income of $80.0 million for the same period in 2006. Net income for the six months ended June 30, 2007, was $47.6 million, or $0.67 per share on a diluted basis of 70.6 million shares. In the year ago period, the Company reported net income of $34.9 million, or $0.49 per share on a diluted basis of 70.9 million shares.
Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 24th at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com and through a link on the Company's web site at www.wasteconnections.com. A playback of the call will be available at both of these sites.
For non-GAAP measures, see accompanying Non-GAAP Reconciliation Schedule.
Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly secondary markets in the Western and Southern U.S. The Company serves more than one million residential, commercial and industrial customers from a network of operations in 23 states. The Company also provides intermodal services for the movement of containers in the Pacific Northwest. Waste Connections, Inc. was founded in September 1997 and is headquartered in Folsom, California.
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 web site or through contacting us directly at (916) 608-8200.
Certain statements contained in this press release are forward-looking in nature. These statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "anticipates," or the negative thereof or comparable terminology, or by discussions of strategy. Waste Connections' business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) Waste Connections may be unable to compete effectively with larger and better capitalized companies and governmental service providers; (2) increases in the price of fuel may adversely affect Waste Connections' business and reduce its operating margins; (3) increases in labor and disposal and related transportation costs could impact Waste Connections' financial results; (4) increases in insurance costs and the amount that Waste Connections self- insures for various risks could reduce its operating margins and reported earnings; (5) Waste Connections' financial results are based upon estimates and assumptions that may differ from actual results; (6) efforts by labor unions could divert management attention and adversely affect operating results; (7) Waste Connections may lose contracts through competitive bidding, early termination or governmental action; (8) Waste Connections' results are vulnerable to economic conditions and seasonal factors affecting the regions in which it operates; (9) Waste Connections may be subject in the normal course of business to judicial and administrative proceedings that could interrupt its operations, require expensive remediation and create negative publicity; (10) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit Waste Connections' ability to grow through acquisitions; (11) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (12) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (13) because Waste Connections depends on railroads for its intermodal operations, its operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (14) Waste Connections' intermodal business could be adversely affected by steamship lines diverting business to ports other than those Waste Connections services, or by heightened security measures or actual or threatened terrorist attacks; (15) Waste Connections depends significantly on the services of the members of its senior and district management team, and the departure of any of those persons could cause its operating results to suffer; (16) Waste Connections' decentralized decision-making structure could allow local managers to make decisions that adversely affect Waste Connections' operating results; (17) Waste Connections may incur additional charges related to capitalized expenditures, which would decrease its earnings; (18) the outcome of audits by the Internal Revenue Service may adversely affect Waste Connections; (19) each business that Waste Connections acquires or has acquired may have liabilities that Waste Connections fails or is unable to discover, including environmental liabilities; (20) liabilities for environmental damage may adversely affect Waste Connections' business and earnings; and (21) the adoption of new accounting standards or interpretations could adversely impact Waste Connections' financial results. These risks and uncertainties, as well as others, are discussed in greater detail in Waste Connections' filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. There may be additional risks of which Waste Connections is not presently aware or that it currently believes are immaterial which could have an adverse impact on its business. Waste Connections makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.
WASTE CONNECTIONS, INC. CONSOLIDATED STATEMENTS OF INCOME THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2007 (Unaudited) (in thousands, except share and per share amounts) Three months ended Six months ended June 30, June 30, 2006 2007 2006 2007 Revenues $206,970 $241,084 $397,139 $460,035 Operating expenses: Cost of operations 126,574 141,574 239,637 270,443 Selling, general and administrative 20,621 24,790 40,422 48,700 Depreciation and amortization 18,736 20,930 36,968 40,520 Loss on disposal of assets 236 32 154 192 Operating income 40,803 53,758 79,958 100,180 Interest expense (6,619) (8,295) (14,113) (16,113) Minority interests (3,317) (4,130) (6,028) (6,970) Other income (expense), net 11 365 (3,982) 417 Income before income taxes 30,878 41,698 55,835 77,514 Income tax provision (11,678) (16,432) (20,912) (29,868) Net income $19,200 $25,266 $34,923 $47,646 Basic earnings per common share $0.28 $0.37 $0.51 $0.70 Diluted earnings per common share $0.27 $0.36 $0.49 $0.67 Shares used in the per share calculations: Basic 67,761,623 68,592,474 68,130,920 68,529,546 Diluted 70,327,836 70,625,086 70,854,725 70,606,846 WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share and per share amounts) December 31, June 30, 2006 2007 ASSETS Current assets: Cash and equivalents $34,949 $9,971 Accounts receivable, net of allowance for doubtful accounts of $3,489 and $3,811 at December 31, 2006 and June 30, 2007, respectively 100,269 113,442 Deferred income taxes 9,373 11,203 Prepaid expenses and other current assets 15,642 16,275 Total current assets 160,233 150,891 Property and equipment, net 736,428 791,117 Goodwill 750,397 765,557 Intangible assets, net 86,098 85,529 Restricted assets 15,917 16,928 Other assets, net 24,818 23,215 $1,773,891 $1,833,237 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $53,010 $54,412 Book overdraft -- 5,838 Accrued liabilities 57,810 59,339 Deferred revenue 32,161 38,312 Current portion of long-term debt and notes payable 6,884 6,657 Total current liabilities 149,865 164,558 Long-term debt and notes payable 637,308 635,852 Other long-term liabilities 16,712 29,303 Deferred income taxes 205,532 208,425 Total liabilities 1,009,417 1,038,138 Commitments and contingencies Minority interests 27,992 28,690 Stockholders' equity: Preferred stock: $0.01 par value; 7,500,000 shares authorized; none issued and outstanding -- -- Common stock: $0.01 par value; 100,000,000 shares authorized; 68,266,038 and 68,037,249 shares issued and outstanding at December 31, 2006 and June 30, 2007, respectively 455 680 Additional paid-in capital 310,229 289,713 Retained earnings 422,731 473,046 Accumulated other comprehensive income 3,067 2,970 Total stockholders' equity 736,482 766,409 $1,773,891 $1,833,237 WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2006 AND 2007 (Unaudited) (Dollars in thousands) Six months ended June 30, 2006 2007 Cash flows from operating activities: Net income $34,923 $47,646 Adjustments to reconcile net income to net cash provided by operating activities: Loss on disposal of assets 154 192 Depreciation 34,946 38,459 Amortization of intangibles 2,022 2,061 Deferred income taxes, net of acquisitions 6,026 3,741 Minority interests 6,028 6,970 Amortization of debt issuance costs 5,271 961 Stock-based compensation 1,576 3,134 Interest income on restricted assets (288) (261) Closure and post-closure accretion 300 522 Excess tax benefit associated with equity-based compensation (5,501) (8,534) Net change in operating assets and liabilities, net of acquisitions 10,539 12,387 Net cash provided by operating activities 95,996 107,278 Cash flows from investing activities: Payments for acquisitions, net of cash acquired (34,838) (40,591) Capital expenditures for property and equipment (49,038) (64,509) Proceeds from disposal of assets 313 559 Increase in restricted assets, net of interest income (617) (750) Increase in other assets (236) (485) Net cash used in investing activities (84,416) (105,776) Cash flows from financing activities: Proceeds from long-term debt 631,997 42,000 Principal payments on notes payable and long-term debt (569,619) (45,668) Change in book overdraft (5,333) 5,838 Proceeds from option and warrant exercises 24,916 21,082 Excess tax benefit associated with equity-based compensation 5,501 8,534 Distributions to minority interest holders (4,900) (6,272) Payments for repurchase of common stock (87,744) (51,894) Debt issuance costs (6,185) (100) Net cash used in financing activities (11,367) (26,480) Net increase (decrease) in cash and equivalents 213 (24,978) Cash and equivalents at beginning of period 7,514 34,949 Cash and equivalents at end of period $7,727 $9,971 ADDITIONAL STATISTICS THREE MONTHS ENDED JUNE 30, 2007 (Dollars in thousands) Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months: Three Months Ended June 30, 2007 Price 4.7% Volume 5.3% Intermodal, Recycling and Other 1.4% Total 11.4% Uneliminated Revenue Breakdown: Three Months Ended June 30, 2007 Collection $172,401 62.9% Disposal and Transfer 78,569 28.7% Intermodal, Recycling and Other 22,936 8.4% Total $273,906 100.0% Inter-company elimination $32,822 Days Sales Outstanding for the three months ended June 30, 2007: 43 (28 net of deferred revenue) Internalization for the three months ended June 30, 2007: 67% Other Cash Flow Items for the three months ended June 30, 2007: Cash Interest Paid: $10,114 Cash Taxes Paid: $14,265 Debt to Capitalization: 45.6% Share Information for the three months ended June 30, 2007: Basic shares outstanding 68,592,474 Dilutive effect of options and warrants 1,687,348 Dilutive effect of restricted stock 345,264 Diluted shares outstanding 70,625,086 Shares repurchased 1,502,890 NON-GAAP RECONCILIATION SCHEDULE (in thousands) 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. Waste Connections defines free cash flow as net cash provided by operating activities, plus proceeds from disposal of assets and excess tax benefit associated with equity-based compensation, plus or minus change in book overdraft, less capital expenditures for property and equipment and distributions to minority interest holders. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate free cash flow differently. Free cash flow reconciliation: Three Months Ended Six Months Ended June 30, 2007 June 30, 2007 Net cash provided by operating activities $46,364 $107,278 Plus: Change in book overdraft 5,838 5,838 Plus: Proceeds from disposal of assets 344 559 Plus: Excess tax benefit associated with equity-based compensation 6,274 8,534 Less: Capital expenditures for property and equipment (28,362) (64,509) Less: Distributions to minority interest holders (3,920) (6,272) Free cash flow $26,538 $51,428 Free cash flow as % of revenues 11.0% 11.2%
First Call Analyst:
SOURCE: Waste Connections, Inc.
CONTACT: Worthing Jackman of Waste Connections, Inc., +1-916-608-8266,
Web site: http://www.wasteconnections.com/