Waste Connections, Inc.
"Pricing strength and operational improvements continue to help us offset most of the impact of higher fuel costs and a weakening economy. While that has been the theme for 2008, we now look ahead and are both encouraged by declining fuel costs and extremely pleased with the building blocks now in place for future growth. The LeMay acquisition, our largest single transaction with revenue of approximately $100 million and expected to close in November, will solidly expand our presence in what we believe are the more attractive exclusive markets on the West Coast," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Our recently completed equity and note offerings provide us the strongest balance sheet in our sector and uniquely position us with the available capital necessary to fund additional acquisitions, which may include divestitures resulting from the potential merger between Republic Services and Allied Waste."
For the nine months ended September 30, 2008, revenue was $790.0 million, a 11.1% increase over revenue of $710.8 million in the year ago period. Operating income was $163.1 million versus $157.3 million for the same period in 2007. Net income for the nine months ended September 30, 2008, was $77.6 million, or $1.14 per share on a diluted basis of 68.2 million shares. In the year ago period, the Company reported net income of $76.3 million, or $1.08 per share on a diluted basis of 70.4 million shares. Non-cash costs for equity-based compensation and amortization of acquisition-related intangibles for the nine months ended September 30, 2008, were $10.1 million ($6.1 million net of taxes, or approximately $0.09 per share) compared to $7.8 million ($4.7 million net of taxes, or approximately $0.07 per share) in the year ago period.
Waste Connections will be hosting a conference call related to third quarter earnings and fourth quarter outlook on October 22nd 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. Our 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) we may be unable to compete effectively with larger and better capitalized companies and governmental service providers; (2) downturns in the U.S. economy adversely affect operating results; (3) our results are vulnerable to economic conditions and seasonal factors affecting the regions in which we operate; (4) we may lose contracts through competitive bidding, early termination or governmental action; (5) price increases may not be adequate to offset the impact of increased costs or may cause us to lose volume; (6) increases in the price of fuel may adversely affect our business and reduce our operating margins; (7) increases in labor and disposal and related transportation costs could impact our financial results; (8) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (9) efforts by labor unions could divert management attention and adversely affect operating results; (10) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (11) our growth and future financial performance depend significantly on our ability to integrate acquired businesses into our organization and operations; (12) our acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (13) our indebtedness could adversely affect our financial condition; we may incur substantially more debt in the future; (14) each business that we acquire or have acquired may have liabilities that we fail or are unable to discover, including environmental liabilities; (15) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (16) our accruals for our landfill site closure and post-closure costs may be inadequate; (17) we depend significantly on the services of the members of our senior, regional and district management team, and the departure of any of those persons could cause our operating results to suffer; (18) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (19) we may be subject in the normal course of business to judicial, administrative or other third party proceedings that could interrupt our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity; (20) because we depend on railroads for our intermodal operations, our operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (21) we may incur additional charges related to capitalized expenditures, which would decrease our earnings; (22) our financial results are based upon estimates and assumptions that may differ from actual results; and (23) the adoption of new accounting standards or interpretations could adversely affect our financial results. These risks and uncertainties, as well as others, are discussed in greater detail in our filings with the Securities and Exchange Commission, including our recent Form S-3 Registration Statement and the related Prospectus Supplement and our most recent Annual Report on Form 10-K. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make 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 Nine Months Ended September 30, 2007 And 2008 (Unaudited) (in thousands, except share and per share amounts) Three months ended Nine months ended September 30, September 30, 2007 2008 2007 2008 Revenues $250,775 $272,702 $710,811 $790,035 Operating expenses: Cost of operations 145,790 164,548 416,234 473,542 Selling, general and administrative 25,782 27,009 74,482 81,164 Depreciation and amortization 22,196 24,389 62,716 71,677 Loss (gain) on disposal of assets (97) 61 95 569 Operating income 57,104 56,695 157,284 163,083 Interest expense, net (8,717) (8,742) (24,830) (26,981) Minority interests (4,175) (3,813) (11,145) (10,992) Other income (expense), net (174) (448) 243 (115) Income before income taxes 44,038 43,692 121,552 124,995 Income tax provision (15,356) (15,419) (45,225) (47,370) Net income $28,682 $28,273 $76,327 $77,625 Basic earnings per common share $0.42 $0.42 $1.12 $1.16 Diluted earnings per common share $0.41 $0.41 $1.08 $1.14 Shares used in the per share calculations: Basic 68,022,587 66,897,781 68,358,534 66,745,119 Diluted 69,868,793 68,532,005 70,350,770 68,192,175 Waste Connections, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share and per share amounts) December 31, September 30, 2007 2008 ASSETS Current assets: Cash and equivalents $10,298 $366,124 Accounts receivable, net of allowance for doubtful accounts of $4,387 and $3,605 at December 31, 2007 and September 30, 2008, respectively 123,882 125,729 Deferred income taxes 14,732 17,006 Prepaid expenses and other current assets 21,953 24,787 Total current assets 170,865 533,646 Property and equipment, net 865,330 882,877 Goodwill 811,049 825,370 Intangible assets, net 93,957 106,694 Restricted assets 19,300 20,591 Other assets, net 21,457 21,595 $1,981,958 $2,390,773 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $59,912 $65,405 Book overdraft 8,835 - Accrued liabilities 69,578 81,299 Deferred revenue 44,074 44,012 Current portion of long-term debt and notes payable 13,315 7,390 Total current liabilities 195,714 198,106 Long-term debt and notes payable 719,518 635,226 Other long-term liabilities 38,053 34,116 Deferred income taxes 223,308 250,527 Total liabilities 1,176,593 1,117,975 Commitments and contingencies Minority interests 30,220 32,980 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 79,716,100 shares issued and outstanding at December 31, 2007 and September 30, 2008, respectively 670 797 Additional paid-in capital 254,284 643,194 Retained earnings 524,481 602,106 Accumulated other comprehensive loss (4,290) (6,279) Total stockholders' equity 775,145 1,239,818 $1,981,958 $2,390,773 Waste Connections, Inc. Condensed Consolidated Statements of Cash Flows Nine months ended September 30, 2007 and 2008 (Unaudited) (Dollars in thousands) Nine months ended September 30, 2007 2008 Cash flows from operating activities: Net income $76,327 $77,625 Adjustments to reconcile net income to net cash provided by operating activities: Loss on disposal of assets 95 569 Depreciation 59,553 67,459 Amortization of intangibles 3,163 4,218 Deferred income taxes, net of acquisitions 7,984 25,550 Minority interests 11,145 10,992 Amortization of debt issuance costs 1,695 1,450 Stock-based compensation 4,636 5,903 Interest income on restricted assets (332) (392) Closure and post-closure accretion 769 1,066 Excess tax benefit associated with equity-based compensation (10,190) (5,647) Net change in operating assets and liabilities, net of acquisitions 15,220 5,868 Net cash provided by operating activities 170,065 194,661 Cash flows from investing activities: Payments for acquisitions, net of cash acquired (85,652) (35,177) Capital expenditures for property and equipment (96,106) (79,536) Proceeds from disposal of assets 955 1,499 Increase in restricted assets, net of interest income (750) (900) Increase in other assets (512) (49) Net cash used in investing activities (182,065) (114,163) Cash flows from financing activities: Proceeds from long-term debt 574,000 127,000 Principal payments on notes payable and long-term debt (549,748) (219,510) Change in book overdraft 6,495 (8,835) Proceeds from option and warrant exercises 24,829 17,204 Excess tax benefit associated with equity-based compensation 10,190 5,647 Distributions to minority interest holders (10,437) (8,232) Payments for repurchase of common stock (64,038) (31,527) Proceeds from secondary stock offering, net - 393,930 Debt issuance costs (1,151) (349) Net cash provided by (used in) financing activities (9,860) 275,328 Net increase (decrease) in cash and equivalents (21,860) 355,826 Cash and equivalents at beginning of period 34,949 10,298 Cash and equivalents at end of period $13,089 $366,124 Additional Statistics Three Months Ended September 30, 2008 (Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:
Three Months Ended September 30, 2008 Price 5.9% Volume (2.1%) Intermodal, Recycling and Other 0.1% Total 3.9% Uneliminated Revenue Breakdown: Three Months Ended September 30, 2008 Collection $200,423 65.3% Disposal and Transfer 80,895 26.4% Intermodal, Recycling and Other 25,506 8.3% Total $306,824 100.0% Inter-company elimination $34,122 Days Sales Outstanding for the three months ended September 30, 2008: 42 (28 net of deferred revenue) Internalization for the three months ended September 30, 2008: 65% Other Cash Flow Items for the three months ended September 30, 2008: Cash Interest Paid: $5,793 Cash Taxes Paid: $9,546 Debt to Capitalization: 34.1% Share Information for the three months ended September 30, 2008: Basic shares outstanding 66,897,781 Dilutive effect of options and warrants 1,242,770 Dilutive effect of convertible notes 165,081 Dilutive effect of restricted stock 226,373 Diluted shares outstanding 68,532,005 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 Nine Months Ended September 30, 2008 September 30, 2008 Net cash provided by operating activities $64,733 $194,661 Less: Change in book overdraft (9,157) (8,835) Plus: Proceeds from disposal of assets 133 1,499 Plus: Excess tax benefit associated with equity-based compensation 3,719 5,647 Less: Capital expenditures for property and equipment (31,213) (79,536) Less: Distributions to minority interest holders (2,205) (8,232) Free cash flow $26,010 $105,204 Free cash flow as % of revenues 9.5% 13.3% Three Months Ended Nine Months Ended September 30, 2007 September 30, 2007 Net cash provided by operating activities $62,787 $170,065 Plus: Change in book overdraft 657 6,495 Plus: Proceeds from disposal of assets 397 955 Plus: Excess tax benefit associated with equity-based compensation 1,655 10,190 Less: Capital expenditures for property and equipment (31,597) (96,106) Less: Distributions to minority interest holders (4,165) (10,437) Free cash flow $29,734 $81,162 Free cash flow as % of revenues 11.9% 11.4%
First Call Analyst:
SOURCE: Waste Connections, Inc.
CONTACT: Worthing Jackman of Waste Connections, Inc., +1-916-608-8266,
Web site: http://www.wasteconnections.com/