Waste Connections, Inc.
"We remain extremely pleased with our performance in the year considering the rapid escalation in fuel costs and weakening economic environment. A 55% year-over-year increase in average fuel prices drove an approximate $8 million increase in fuel expense in the quarter and resulted in fuel costs as a percentage of revenue increasing approximately 285 basis points, or 50 basis points ($1.3 million) above expectations for the quarter. Fortunately, continuing pricing strength and operating improvements enabled us to recover most of the dollar impact of this unprecedented increase," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Our strong free cash flow, expansion of our credit facility and recently executed private note placement agreement position us to fund a potential increase in acquisition activity later in the year, with access to additional capital if necessary."
For the six months ended June 30, 2008, revenue was $517.3 million, a 12.5% increase over revenue of $460.0 million in the year ago period. Operating income was $106.4 million versus $100.2 million for the same period in 2007. Net income for the six months ended June 30, 2008, was $49.4 million, or $0.73 per share on a diluted basis of 68.0 million shares. In the year ago period, the Company reported net income of $47.6 million, or $0.67 per share on a diluted basis of 70.6 million shares. Non-cash costs for equity-based compensation and amortization of acquisition-related intangibles for the six months ended June 30, 2008, were $6.8 million ($4.1 million net of taxes, or approximately $0.06 per share) compared to $5.2 million ($3.2 million net of taxes, or approximately $0.04 per share) in the year ago period.
Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 23rd at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at http://www.streetevents.com/ and through a link on the Company's web site at http://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 http://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," or "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 depends significantly on the services of the members of its senior, regional and district management team, and the departure of any of those persons could cause its operating results to suffer; (6) Waste Connections' financial results are based upon estimates and assumptions that may differ from actual results; (7) efforts by labor unions could divert management attention and adversely affect operating results; (8) Waste Connections' results are vulnerable to economic conditions and seasonal factors affecting the regions in which it operates; (9) Waste Connections may lose contracts through competitive bidding, early termination or governmental action; (10) Waste Connections may be subject in the normal course of business to judicial and administrative proceedings that could interrupt its operations, require expensive remediation, result in adverse judgments or settlements and create negative publicity; (11) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit Waste Connections' ability to grow through acquisitions; (12) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (13) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (14) 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; (15) Waste Connections' decentralized decision-making structure could allow local managers to make decisions that adversely affect Waste Connections' operating results; (16) Waste Connections may incur additional charges related to capitalized expenditures, which would decrease its earnings; (17) each business that Waste Connections acquires or has acquired may have liabilities that Waste Connections fails or is unable to discover, including environmental liabilities; (18) liabilities for environmental damage may adversely affect Waste Connections' business and earnings; and (19) the adoption of new accounting standards or interpretations could adversely affect 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.
- financial tables attached - WASTE CONNECTIONS, INC. CONSOLIDATED STATEMENTS OF INCOME THREE AND SIX months ENDED JUNE 30, 2007 And 2008 (Unaudited) (in thousands, except share and per share amounts) Three months ended Six months ended June 30, June 30, 2007 2008 2007 2008 Revenues $241,084 $267,033 $460,035 $517,333 Operating expenses: Cost of operations 141,574 159,862 270,443 308,994 Selling, general and administrative 24,790 27,065 48,700 54,155 Depreciation and amortization 20,930 24,065 40,520 47,288 Loss on disposal of assets 32 451 192 508 Operating income 53,758 55,590 100,180 106,388 Interest expense, net (8,295) (8,920) (16,113) (18,240) Minority interests (4,130) (3,807) (6,970) (7,179) Other income, net 365 345 417 333 Income before income taxes 41,698 43,208 77,514 81,302 Income tax provision (16,432) (16,974) (29,868) (31,950) Net income $25,266 $26,234 $47,646 $49,352 Basic earnings per common share $0.37 $0.39 $0.70 $0.74 Diluted earnings per common share $0.36 $0.39 $0.67 $0.73 Shares used in the per share calculations: Basic 68,592,474 66,468,457 68,529,546 66,628,927 Diluted 70,625,086 67,842,845 70,606,846 67,982,399 WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share and per share amounts) December 31, June 30, 2007 2008 ASSETS Current assets: Cash and equivalents $10,298 $10,645 Accounts receivable, net of allowance for doubtful accounts of $4,387 and $3,603 at December 31, 2007 and June 30, 2008, respectively 123,882 127,112 Deferred income taxes 14,732 16,591 Prepaid expenses and other current assets 21,953 18,285 Total current assets 170,865 172,633 Property and equipment, net 865,330 873,035 Goodwill 811,049 824,969 Intangible assets, net 93,957 108,096 Restricted assets 19,300 20,486 Other assets, net 21,457 21,380 $1,981,958 $2,020,599 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $59,912 $63,311 Book overdraft 8,835 9,157 Accrued liabilities 69,578 76,734 Deferred revenue 44,074 46,764 Current portion of long-term debt and notes payable 13,315 13,481 Total current liabilities 195,714 209,447 Long-term debt and notes payable 719,518 701,100 Other long-term liabilities 38,053 36,817 Deferred income taxes 223,308 238,649 Total liabilities 1,176,593 1,186,013 Commitments and contingencies Minority interests 30,220 31,372 Stockholders' equity: Preferred stock: $0.01 par value; 7,500,000 shares authorized; none issued and outstanding - - Common stock: $0.01 par value; 150,000,000 shares authorized; 67,052,135 and 66,540,160 shares issued and outstanding at December 31, 2007 and June 30, 2008, respectively 670 665 Additional paid-in capital 254,284 234,218 Retained earnings 524,481 573,833 Accumulated other comprehensive income (4,290) (5,502) Total stockholders' equity 775,145 803,214 $1,981,958 $2,020,599 WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2007 AND 2008 (Unaudited) (Dollars in thousands) Six months ended June 30, 2007 2008 Cash flows from operating activities: Net income $47,646 $49,352 Adjustments to reconcile net income to net cash provided by operating activities: Loss on disposal of assets 192 508 Depreciation 38,459 44,474 Amortization of intangibles 2,061 2,814 Deferred income taxes, net of acquisitions 3,741 13,769 Minority interests 6,970 7,179 Amortization of debt issuance costs 961 970 Stock-based compensation 3,134 3,956 Interest income on restricted assets (261) (287) Closure and post-closure accretion 522 729 Excess tax benefit associated with equity-based compensation (8,534) (1,928) Net change in operating assets and liabilities, net of acquisitions 12,387 8,391 Net cash provided by operating activities 107,278 129,927 Cash flows from investing activities: Payments for acquisitions, net of cash acquired (40,591) (33,437) Capital expenditures for property and equipment (64,509) (48,323) Proceeds from disposal of assets 559 1,366 Increase in restricted assets, net of interest income (750) (900) Decrease (increase) in other assets (485) 112 Net cash used in investing activities (105,776) (81,182) Cash flows from financing activities: Proceeds from long-term debt 42,000 90,500 Principal payments on notes payable and long-term debt (45,668) (111,046) Change in book overdraft 5,838 322 Proceeds from option and warrant exercises 21,082 7,543 Excess tax benefit associated with equity-based compensation 8,534 1,928 Distributions to minority interest holders (6,272) (6,027) Payments for repurchase of common stock (51,894) (31,527) Debt issuance costs (100) (91) Net cash used in financing activities (26,480) (48,398) Net increase (decrease) in cash and equivalents (24,978) 347 Cash and equivalents at beginning of period 34,949 10,298 Cash and equivalents at end of period $9,971 $10,645 ADDITIONAL STATISTICS THREE MONTHS ENDED JUNE 30, 2008 (Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:
Three Months Ended June 30, 2008 Price 5.4% Volume (1.5%) Intermodal, Recycling and Other 0.7% Total 4.6% Uneliminated Revenue Breakdown: Three Months Ended June 30, 2008 Collection $196,047 65.1% Disposal and Transfer 79,913 26.5% Intermodal, Recycling and Other 25,327 8.4% Total $301,287 100.0% Inter-company elimination $34,254 Days Sales Outstanding for the three months ended June 30, 2008: 43 (27 net of deferred revenue) Internalization for the three months ended June 30, 2008: 66% Other Cash Flow Items for the three months ended June 30, 2008: Cash Interest Paid: $10,088 Cash Taxes Paid: $12,319 Debt to Capitalization: 47.1% Share Information for the three months ended June 30, 2008: Basic shares outstanding 66,468,457 Dilutive effect of options and warrants 1,214,259 Dilutive effect of restricted stock 160,129 Diluted shares outstanding 67,842,845 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, 2008 June 30, 2008 Net cash provided by operating activities $65,334 $129,927 Plus: Change in book overdraft 3,918 322 Plus: Proceeds from disposal of assets 1,065 1,366 Plus: Excess tax benefit associated with equity-based compensation 827 1,928 Less: Capital expenditures for property and equipment (24,215) (48,323) Less: Distributions to minority interest holders (3,185) (6,027) Free cash flow $43,744 $79,193 Free cash flow as % of revenues 16.4% 15.3% 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/