News Releases
FOLSOM, CA, Jul 20, 2010 (MARKETWIRE via COMTEX) -- Waste Connections, Inc. (NYSE: WCN)
-- Revenue of $330.5 million, up 9.1% over prior year period -- Internal growth of 5.6% and operating margins above expectations -- GAAP EPS of $0.39 and adjusted EPS* of $0.48, up 29.7% over prior year period -- YTD net cash provided by operating activities of $140.1 million -- YTD free cash flow* of $98.8 million, or 15.5% of revenue -- Completes acquisitions with total annual revenue of approximately $15 million -- Repurchased approximately 3% of common stock YTD
Waste Connections, Inc. (NYSE: WCN) today announced its results for the second quarter of 2010. Revenue totaled $330.5 million, a 9.1% increase over revenue of $302.8 million in the year ago period. Operating income was $69.4 million, or 21.0% of revenue, versus $59.4 million in the second quarter of 2009. Net income attributable to Waste Connections in the quarter was $30.4 million, or $0.39 per share on a diluted basis of 78.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $30.4 million, or $0.38 per share on a diluted basis of 80.8 million shares.
Adjusted net income attributable to Waste Connections in the quarter was $37.2 million*, or $0.48 per share*, excluding costs primarily associated with the early redemption of the Company's 2026 Notes. Adjusted net income attributable to Waste Connections in the prior year period was $29.6 million*, or $0.37 per share*, adjusted primarily for acquisition-related costs expensed due to the implementation of new accounting guidance for business combinations effective January 1, 2009, a gain on disposal of assets, and the impact of a deferred tax adjustment.
Non-cash costs for equity-based compensation, amortization of acquisition-related intangibles, charge for early redemption of the 2026 Notes (net of make-whole payment), and amortization of debt discount related to convertible debt instruments in connection with the adoption of new accounting guidance on January 1, 2009, were $8.5 million ($5.3 million net of taxes, or approximately $0.07 per share) in the quarter compared to $6.8 million ($4.3 million net of taxes, or approximately $0.05 per share) in the year ago period.
"Year-over-year increases in landfill volumes, roll-off activity, and recycled commodity prices enabled us once again to exceed the upper end of our expectations in the quarter. Strong organic growth and an approximate 150 basis points expansion in adjusted operating income before depreciation and amortization* as a percentage of revenue contributed to an almost 30% increase in adjusted earnings per share compared to the year-ago period," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "We remain on track to repurchase five to six percent of outstanding shares in 2010. Our strong operating results and free cash flow have further strengthened our credit profile despite our active share repurchase program."
Mr. Mittelstaedt added, "Recently completed acquisitions include an integrated new market entry in northern Louisiana, and tuck-ins within existing markets in seven other states. We expect a continuing increase in acquisition activity during the second half of the year."
* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.
For the six months ended June 30, 2010, revenue was $638.0 million, a 12.8% increase over revenue of $565.5 million in the year ago period. Operating income was $129.0 million, versus $107.1 million for the same period in 2009. Net income attributable to Waste Connections for the six months ended June 30, 2010, was $58.0 million, or $0.74 per share on a diluted basis of 78.5 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $52.4 million, or $0.65 on a diluted basis of 80.8 million shares. Adjusted net income attributable to Waste Connections for the six months ended June 30, 2010, was $66.9 million*, or $0.85 per share*, compared to $53.5 million*, or $0.66 per share* in the year ago period.
For the six months ended June 30, 2010, non-cash costs for equity-based compensation, amortization of acquisition-related intangibles, loss on the early redemption of the 2026 Notes (net of make-whole payment), and amortization of debt discount related to convertible debt instruments in connection with the adoption of new accounting guidance on January 1, 2009, were $16.3 million ($10.1 million net of taxes, or approximately $0.13 per share), compared to $12.6 million ($7.8 million net of taxes, or approximately $0.10 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 21st at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com or through a link on our web site at www.wasteconnections.com. A playback of the call will be available at both of these web sites.
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 approximately two million residential, commercial and industrial customers from a network of operations in 27 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.
* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.
Information Regarding Forward-Looking Statements
Certain statements contained in this release are forward-looking in nature, including statements related to expected share repurchases and increases in acquisition activity. 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) our acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (2) a portion of our growth and future financial performance depends on our ability to integrate acquired businesses into our organization and operations; (3) downturns in the worldwide economy adversely affect operating results; (4) our results are vulnerable to economic conditions and seasonal factors affecting the regions in which we operate; (5) we may be subject in the normal course of business to judicial, administrative or other third party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity; (6) we may be unable to compete effectively with larger and better capitalized companies and governmental service providers; (7) we may lose contracts through competitive bidding, early termination or governmental action; (8) price increases may not be adequate to offset the impact of increased costs or may cause us to lose volume; (9) increases in the price of fuel may adversely affect our business and reduce our operating margins; (10) increases in labor and disposal and related transportation costs could impact our financial results; (11) efforts by labor unions could divert management attention and adversely affect operating results; (12) we could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate; (13) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (14) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (15) our indebtedness could adversely affect our financial condition; we may incur substantially more debt in the future; (16) each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, including environmental liabilities; (17) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (18) our accruals for our landfill site closure and post-closure costs may be inadequate; (19) the financial soundness of our customers could affect our business and operating results; (20) 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; (21) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (22) 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; (23) we may incur additional charges related to capitalized expenditures, which would decrease our earnings; (24) our financial results are based upon estimates and assumptions that may differ from actual results; (25) the adoption of new accounting standards or interpretations could adversely affect our financial results; (26) our financial and operating performance may be affected by the inability to renew landfill operating permits, obtain new landfills and expand existing ones; (27) future changes in laws or renewed enforcement of laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results; (28) extensive and evolving environmental and health and safety laws and regulations may restrict our operations and growth and increase our costs; (29) climate change regulations may adversely affect operating results; (30) extensive regulations that govern the design, operation and closure of landfills may restrict our landfill operations or increase our costs of operating landfills; (31) alternatives to landfill disposal may cause our revenues and operating results to decline; (32) fluctuations in prices for recycled commodities that we sell and rebates we offer to customers may cause our revenues and operating results to decline; and (33) unusually adverse weather conditions may interfere with our operations, harming our operating 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 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2010
(Unaudited)
(in thousands, except share and per share amounts)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2009 2010 2009 2010
---------- ---------- ---------- ----------
Revenues $ 302,830 $ 330,477 $ 565,506 $ 638,018
Operating expenses:
Cost of operations 175,687 187,346 330,391 364,336
Selling, general and
administrative 36,142 36,353 68,658 72,011
Depreciation 30,061 33,464 54,900 64,908
Amortization of
intangibles 3,205 3,598 5,681 7,184
Loss (gain) on disposal
of assets (1,683) 365 (1,176) 622
---------- ---------- ---------- ----------
Operating income 59,418 69,351 107,052 128,957
Interest expense (12,307) (9,161) (24,557) (21,423)
Interest income 116 165 1,141 318
Loss on extinguishment of
debt - (9,734) - (10,193)
Other income (expense), net 171 (169) 177 469
---------- ---------- ---------- ----------
Income before income tax
provision 47,398 50,452 83,813 98,128
Income tax provision (16,716) (19,815) (30,819) (39,678)
---------- ---------- ---------- ----------
Net income $ 30,682 $ 30,637 $ 52,994 $ 58,450
Less: net income
attributable to
noncontrolling interests (244) (237) (578) (477)
---------- ---------- ---------- ----------
Net income attributable to
Waste Connections $ 30,438 $ 30,400 $ 52,416 $ 57,973
========== ========== ========== ==========
Earnings per common share
attributable to Waste
Connections' common
stockholders:
Basic $ 0.38 $ 0.39 $ 0.66 $ 0.75
========== ========== ========== ==========
Diluted $ 0.38 $ 0.39 $ 0.65 $ 0.74
========== ========== ========== ==========
Shares used in the per
share calculations:
Basic 80,066,643 77,495,800 80,015,325 77,600,760
========== ========== ========== ==========
Diluted 80,833,350 78,321,834 80,796,431 78,498,368
========== ========== ========== ==========
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
December 31, June 30,
2009 2010
----------- -----------
ASSETS
Current assets:
Cash and equivalents $ 9,639 $ 10,070
Accounts receivable, net of allowance for
doubtful accounts of $4,058 and $4,025 at
December 31, 2009 and June 30, 2010,
respectively 138,972 153,639
Deferred income taxes 17,748 18,082
Prepaid expenses and other current assets 33,495 25,923
----------- -----------
Total current assets 199,854 207,714
Property and equipment, net 1,308,392 1,279,569
Goodwill 906,710 907,789
Intangible assets, net 354,303 347,765
Restricted assets 27,377 28,461
Other assets, net 23,812 19,630
----------- -----------
$ 2,820,448 $ 2,790,928
=========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 86,669 $ 75,296
Book overdraft 12,117 9,945
Accrued liabilities 93,380 91,774
Deferred revenue 50,138 54,244
Current portion of long-term debt and notes
payable 2,609 1,922
----------- -----------
Total current liabilities 244,913 233,181
Long-term debt and notes payable 867,554 846,908
Other long-term liabilities 45,013 47,429
Deferred income taxes 305,932 310,706
----------- -----------
Total liabilities 1,463,412 1,438,224
Commitments and contingencies
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; 78,599,083 and 77,293,353 shares
issued and outstanding at December 31, 2009 and
June 30, 2010, respectively 786 773
Additional paid-in capital 625,173 565,448
Retained earnings 732,738 790,711
Accumulated other comprehensive loss (4,892) (7,936)
----------- -----------
Total Waste Connections' equity 1,353,805 1,348,996
Noncontrolling interests 3,231 3,708
----------- -----------
Total equity 1,357,036 1,352,704
----------- -----------
$ 2,820,448 $ 2,790,928
=========== ===========
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2009 AND 2010
(Unaudited)
(Dollars in thousands)
Six months ended
June 30,
------------------------
2009 2010
----------- -----------
Cash flows from operating activities:
Net income $ 52,994 $ 58,450
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (gain) on disposal of assets (1,176) 622
Depreciation 54,900 64,908
Amortization of intangibles 5,681 7,184
Deferred income taxes, net of acquisitions 22,858 7,737
Loss on redemption of 2026 Notes, net of
make-whole payment - 2,255
Amortization of debt issuance costs 970 1,090
Amortization of debt discount 2,342 1,245
Equity-based compensation 4,630 5,625
Interest income on restricted assets (241) (271)
Closure and post-closure accretion 912 880
Excess tax benefit associated with equity-based
compensation (97) (6,423)
Net change in operating assets and liabilities,
net of acquisitions 7,275 (3,178)
----------- -----------
Net cash provided by operating activities 151,048 140,124
----------- -----------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired (387,112) (3,849)
Capital expenditures for property and equipment (52,693) (50,495)
Proceeds from disposal of assets 4,129 4,925
Increase in restricted assets, net of interest
income (2,021) (813)
Decrease in other assets 268 39
----------- -----------
Net cash used in investing activities (437,429) (50,193)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 142,000 281,000
Principal payments on notes payable and long-term
debt (107,787) (308,860)
Change in book overdraft 2,237 (2,172)
Proceeds from option and warrant exercises 1,611 17,774
Excess tax benefit associated with equity-based
compensation 97 6,423
Payments for repurchase of common stock - (83,665)
Debt issuance costs (42) -
----------- -----------
Net cash provided by (used in) financing
activities 38,116 (89,500)
----------- -----------
Net increase (decrease) in cash and equivalents (248,265) 431
Cash and equivalents at beginning of period 265,264 9,639
----------- -----------
Cash and equivalents at end of period $ 16,999 $ 10,070
=========== ===========
ADDITIONAL STATISTICS
THREE MONTHS ENDED JUNE 30, 2009 AND 2010
(Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations
owned for at least 12 months:
Three
Months Ended
June 30, 2010
-----------
Core Price 2.8%
Surcharges 0.3%
Volume (0.6%)
Intermodal, Recycling and
Other 3.1%
-----------
Total 5.6%
-----------
Uneliminated Revenue Breakdown:
Three Months Ended Three Months Ended
June 30, 2009 June 30, 2010
-------------------- --------------------
Collection $ 226,512 65.2% $ 238,108 62.6%
Disposal and Transfer 105,316 30.3% 116,186 30.5%
Intermodal, Recycling
and Other 15,783 4.5% 26,321 6.9%
--------- --------- --------- ---------
Total before
inter-company
elimination $ 347,611 100.0% $ 380,615 100.0%
Inter-company
elimination $ 44,781 $ 50,138
--------- ---------
Reported Revenue $ 302,830 $ 330,477
--------- ---------
Days Sales Outstanding for the three months ended June 30, 2010: 42
(27 net of deferred revenue)
Internalization for the three months ended June 30, 2010: 65%
Other Cash Flow Items:
Three Three
Months Months
Ended Ended
June 30, June 30,
2009 2010
--------- ---------
Cash Interest Paid $ 15,136 $ 17,725
Cash Taxes Paid $ 5,482 $ 20,871
Debt to Book Capitalization as of June 30, 2010: 39%
Share Information for the three months ended June 30, 2010:
Basic shares outstanding 77,495,800
Dilutive effect of options and warrants 616,361
Dilutive effect of restricted stock 209,673
----------
Diluted shares outstanding 78,321,834
NON-GAAP RECONCILIATION SCHEDULE
(in thousands)
Reconciliation of Adjusted Operating Income before Depreciation and
Amortization:
Adjusted operating income before depreciation and amortization, 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. Waste Connections defines adjusted operating income before
depreciation and amortization as operating income, plus depreciation and
amortization expense, plus closure and post-closure accretion expense, plus
or minus any gain or loss on disposal of assets. The Company further
adjusts this calculation to exclude the effects of items management
believes impact the ability to assess the operating performance of our
business. This measure is not a substitute for, and should be used in
conjunction with, GAAP financial measures. Management uses adjusted
operating income before depreciation and amortization as one of the
principal measures to evaluate and monitor the ongoing financial
performance of the Company's operations. Other companies may calculate
adjusted operating income before depreciation and amortization differently.
Three Three
Months Months
Ended Ended
June 30, June 30,
2009 2010
----------- -----------
Operating income $ 59,418 $ 69,351
Plus: Depreciation and amortization 33,266 37,062
Plus: Closure and post-closure accretion 560 439
Plus/less: Loss (gain) on disposal of assets (1,683) 365
Adjustments:
Plus: Acquisition-related transaction costs (a) 2,019 244
Plus: Loss on prior corporate office lease (b) 373 -
----------- -----------
Adjusted operating income before depreciation and
amortization $ 93,953 $ 107,461
----------- -----------
As % of revenues 31.0% 32.5%
Six Six
Months Months
Ended Ended
June 30, June 30,
2009 2010
----------- -----------
Operating income $ 107,052 $ 128,957
Plus: Depreciation and amortization 60,581 72,092
Plus: Closure and post-closure accretion 912 880
Plus/less: Loss (gain) on disposal of assets (1,176) 622
Adjustments:
Plus: Acquisition-related transaction costs (a) 3,282 395
Plus: Loss on prior corporate office lease (b) 1,621 -
----------- -----------
Adjusted operating income before depreciation and
amortization $ 172,272 $ 202,946
----------- -----------
As % of revenues 30.5% 31.8%
(a) Reflects the addback of acquisition-related costs expensed due to the
implementation of new accounting guidance for business combinations
effective January 1, 2009.
(b) Reflects the addback of a loss on the Company's prior corporate office
lease due to the relocation of the Company's corporate offices.
NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands, except per share amounts)
Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income
per diluted share:
Adjusted net income and adjusted net income per diluted share, both
non-GAAP financial measures, are provided supplementally because they are
widely used by investors as a valuation measure in the solid waste
industry. The Company provides adjusted net income to exclude the effects
of items management believes impact the comparability of operating results
between periods. Adjusted net income has limitations due to the fact that
it may exclude items that have an impact on the Company's financial
condition and results of operations. Adjusted net income and adjusted net
income per diluted share are not a substitute for, and should be used in
conjunction with, GAAP financial measures. Management uses adjusted net
income and adjusted net income per diluted share as one of the principal
measures to evaluate and monitor ongoing financial performance of the
Company's operations. Other companies may calculate adjusted net income
and adjusted net income per diluted share differently.
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2009 2010 2009 2010
-------- --------- -------- ---------
Reported net income attributable to
Waste Connections $ 30,438 $ 30,400 $ 52,416 $ 57,973
Adjustments:
Loss on extinguishment of debt,
net of taxes (a) - 6,035 - 6,320
Acquisition-related transaction
costs, net of taxes (b) 1,256 151 2,041 245
Loss on prior corporate office
lease, net of taxes (c) 232 - 1,008 -
Loss (gain) on disposal of assets,
net of taxes (d) (1,047) 648 (731) 808
Impact of deferred tax
adjustment (e) (1,270) - (1,270) 1,547
-------- --------- -------- ---------
Adjusted net income attributable to
Waste Connections $ 29,609 $ 37,234 $ 53,464 $ 66,893
======== ========= ======== =========
Diluted earnings per common share
attributable to Waste Connections
common stockholders:
Reported net income $ 0.38 $ 0.39 $ 0.65 $ 0.74
======== ========= ======== =========
Adjusted net income $ 0.37 $ 0.48 $ 0.66 $ 0.85
======== ========= ======== =========
(a) Reflects the elimination of costs associated with the early redemption
of outstanding debt.
(b) Reflects the elimination of acquisition-related costs due to the
implementation of new accounting guidance for business combinations
effective January 1, 2009.
(c) Reflects the elimination of a loss on the Company's prior corporate
office lease due to the relocation of the Company's corporate offices.
(d) Reflects the elimination of a loss (gain) on disposal of assets.
(e) Reflects (1) the elimination in 2009 of a benefit to the income tax
provision primarily from a reduction in the Company's deferred tax
liabilities, and (2) the elimination in 2010 of an increase to the
income tax provision associated with an adjustment in the Company's
deferred tax liabilities primarily resulting from a voter-approved
increase in Oregon state income tax rates.
NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands)
Reconciliation of Free Cash Flow:
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, plus or minus change in book overdraft, plus excess tax
benefit associated with equity-based compensation, less capital
expenditures for property and equipment and distributions to noncontrolling
interests. This measure is not a substitute for, and should be used in
conjunction with, GAAP liquidity or financial measures. Management uses
free cash flow as one of the principal measures to evaluate and monitor the
ongoing financial performance of the Company's operations. Other companies
may calculate free cash flow differently.
Three Three
Months Months
Ended Ended
June 30, June 30,
2009 2010
--------- ---------
Net cash provided by operating activities $ 80,397 $ 59,957
Less: Change in book overdraft (1,879) (1,191)
Plus: Proceeds from disposal of assets 3,968 4,123
Plus: Excess tax benefit associated with
equity-based compensation (18) 3,945
Less: Capital expenditures for property and
equipment (23,281) (23,742)
--------- ---------
Free cash flow $ 59,187 $ 43,092
--------- ---------
As % of revenues 19.5% 13.0%
Six Six
Months Months
Ended Ended
June 30, June 30,
2009 2010
--------- ---------
Net cash provided by operating activities $ 151,048 $ 140,124
Plus/less: Change in book overdraft 2,237 (2,172)
Plus: Proceeds from disposal of assets 4,129 4,925
Plus: Excess tax benefit associated with
equity-based compensation 97 6,423
Less: Capital expenditures for property and
equipment (52,693) (50,495)
--------- ---------
Free cash flow $ 104,818 $ 98,805
--------- ---------
As % of revenues 18.5% 15.5%
CONTACT:
Worthing Jackman
(916) 608-8266
Email Contact
SOURCE: Waste Connections, Inc.