News Releases
FOLSOM, CA, Jul 19, 2011 (MARKETWIRE via COMTEX) -- Waste Connections, Inc. (NYSE: WCN)
-- Revenue of $390.2 million, up 18.1%
-- Internal growth of 5.5% and operating margins above expectations
-- GAAP EPS and adjusted EPS* of $0.39, up 21.9%
-- YTD net cash provided by operating activities of $190 million
-- YTD free cash flow* of $145.5 million, or 20.2% of revenue
-- Completes new $1.2 billion unsecured revolving credit facility
-- Returns $59.4 million YTD to stockholders through share repurchases
and dividends
Waste Connections, Inc. (NYSE: WCN) today announced its results for the second quarter of 2011. Revenue totaled $390.2 million, an 18.1% increase over revenue of $330.5 million in the year ago period. Operating income was $84.8 million, or 21.7% of revenue, up 22.3% over operating income of $69.4 million in the second quarter of 2010. Net income attributable to Waste Connections in the quarter was $44.4 million, or $0.39 per share on a diluted basis of 114.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $30.4 million, or $0.26 per share on a diluted basis of 117.5 million shares.
Adjusted net income attributable to Waste Connections in the quarter was $44.8 million*, or $0.39 per share*, adjusting primarily for acquisition-related costs expensed during the period. Adjusted net income attributable to Waste Connections in the prior year period was $37.2 million*, or $0.32 per share*, adjusting primarily for costs associated with the early redemption of the Company's 2026 Notes.
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 were $8.6 million ($5.4 million net of taxes, or approximately $0.05 per share) in the quarter compared to $8.5 million ($5.3 million net of taxes, or approximately $0.05 per share) in the year ago period.
"2011 continues to play out well for us. Core pricing, increasing disposal volumes and record recycling commodity values once again contributed to solid results in the quarter. These factors, together with better than expected contribution from recent acquisitions, enabled us to exceed the upper end of our outlook. Adjusted operating income before depreciation and amortization* as a percentage of revenue in the second quarter expanded 30 basis points over the prior year period despite a 100 basis point increase in fuel expense as a percentage of revenue, and adjusted EPS* increased more than 20%," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Our strong free cash flow, low leverage and more than $600 million of available capacity under our new credit facility provide tremendous flexibility to fund our growth strategy and return of capital to shareholders."
For the six months ended June 30, 2011, revenue was $721.7 million, a 13.1% increase over revenue of $638.0 million in the year ago period. Operating income was $153.4 million, or 21.3% of revenue, up 18.9% over operating income of $129.0 million for the same period in 2010. Net income attributable to Waste Connections for the six months ended June 30, 2011, was $81.0 million, or $0.71 per share on a diluted basis of 114.4 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $58.0 million, or $0.49 per share on a diluted basis of 117.7 million shares. Adjusted net income attributable to Waste Connections for the six months ended June 30, 2011, was $81.7 million*, or $0.71 per share*, up 22.1% and 24.6%, respectively, compared to $66.9 million*, or $0.57 per share* in the year ago period.
For the six months ended June 30, 2011, 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 were $15.6 million ($9.7 million net of taxes, or approximately $0.08 per share), compared to $16.3 million ($10.1 million net of taxes, or approximately $0.09 per share) in the year ago period.
Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets. The Company serves more than two million residential, commercial and industrial customers from a network of operations in 29 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.
Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 20th 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 website at www.wasteconnections.com. A playback of the call will be available at both of these websites.
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 website 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 performance of our base business, expected share repurchases and dividend payments, expected contribution from closed acquisitions, and future acquisition activity and growth strategy. 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 underfunded 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) we may incur charges related to capitalized expenditures of landfill development projects, which would decrease our earnings; (23) 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; (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) fluctuations in prices for recycled commodities that we sell and rebates we offer to customers may cause our revenues and operating results to decline; (29) extensive and evolving environmental, health, safety and employment laws and regulations may restrict our operations and growth and increase our costs; (30) climate change regulations may adversely affect operating results; (31) extensive regulations that govern the design, operation and closure of landfills may restrict our landfill operations or increase our costs of operating landfills; (32) alternatives to landfill disposal 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, 2010 AND 2011
(Unaudited)
(in thousands, except share and per share amounts)
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2010 2011 2010 2011
----------- ----------- ----------- -----------
Revenues $ 330,477 $ 390,184 $ 638,018 $ 721,652
Operating expenses:
Cost of operations 187,346 221,872 364,336 408,938
Selling, general and
administrative 36,353 41,169 72,011 80,007
Depreciation 33,464 36,939 64,908 69,975
Amortization of
intangibles 3,598 5,673 7,184 9,650
Loss (gain) on
disposal of assets 365 (267) 622 (292)
----------- ----------- ----------- -----------
Operating income 69,351 84,798 128,957 153,374
Interest expense (9,161) (11,087) (21,423) (19,920)
Interest income 165 143 318 276
Loss on extinguishment
of debt (9,734) - (10,193) -
Other income (expense),
net (169) (245) 469 149
----------- ----------- ----------- -----------
Income before income
tax provision 50,452 73,609 98,128 133,879
Income tax provision (19,815) (29,004) (39,678) (52,481)
----------- ----------- ----------- -----------
Net income 30,637 44,605 58,450 81,398
Less: net income
attributable to
noncontrolling
interests (237) (192) (477) (446)
----------- ----------- ----------- -----------
Net income attributable
to Waste Connections $ 30,400 $ 44,413 $ 57,973 $ 80,952
=========== =========== =========== ===========
Earnings per common
share attributable to
Waste Connections'
common stockholders:
Basic $ 0.26 $ 0.39 $ 0.50 $ 0.71
=========== =========== =========== ===========
Diluted $ 0.26 $ 0.39 $ 0.49 $ 0.71
=========== =========== =========== ===========
Shares used in the per
share calculations:
Basic 116,243,700 113,509,668 116,401,140 113,514,439
=========== =========== =========== ===========
Diluted 117,482,751 114,308,710 117,747,552 114,354,979
=========== =========== =========== ===========
Cash dividends per
common share $ - $ 0.075 $ - $ 0.15
=========== =========== =========== ===========
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
December 31, June 30,
2010 2011
----------- -----------
ASSETS
Current assets:
Cash and equivalents $ 9,873 $ 16,951
Accounts receivable, net of allowance for
doubtful accounts of $5,084 and $4,728 at
December 31, 2010 and June 30, 2011,
respectively 152,156 174,974
Deferred income taxes 20,130 16,231
Prepaid expenses and other current assets 33,402 28,449
----------- -----------
Total current assets 215,561 236,605
Property and equipment, net 1,337,476 1,361,804
Goodwill 927,852 1,104,823
Intangible assets, net 381,475 455,841
Restricted assets 30,441 28,185
Other assets, net 23,179 26,630
----------- -----------
$ 2,915,984 $ 3,213,888
=========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 85,252 $ 82,293
Book overdraft 12,396 10,478
Accrued liabilities 99,075 105,920
Deferred revenue 54,157 61,720
Current portion of long-term debt and notes
payable 2,657 2,693
----------- -----------
Total current liabilities 253,537 263,104
Long-term debt and notes payable 909,978 1,135,976
Other long-term liabilities 47,637 50,018
Deferred income taxes 334,414 364,900
----------- -----------
Total liabilities 1,545,566 1,813,998
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; 250,000,000 shares
authorized; 113,950,081 and 113,034,132 shares
issued and outstanding at December 31, 2010 and
June 30, 2011, respectively 1,139 1,130
Additional paid-in capital 509,218 473,142
Retained earnings 858,887 922,798
Accumulated other comprehensive loss (3,095) (1,428)
----------- -----------
Total Waste Connections' equity 1,366,149 1,395,642
Noncontrolling interest in subsidiaries 4,269 4,248
----------- -----------
Total equity 1,370,418 1,399,890
----------- -----------
$ 2,915,984 $ 3,213,888
=========== ===========
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2010 AND 2011
(Unaudited)
(Dollars in thousands)
Six months ended
June 30,
------------------
2010 2011
-------- --------
Cash flows from operating activities:
Net income $ 58,450 $ 81,398
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (gain) on disposal of assets 622 (292)
Depreciation 64,908 69,975
Amortization of intangibles 7,184 9,650
Deferred income taxes, net of acquisitions 7,737 23,106
Loss on redemption of 2026 Notes, net of make-whole
payment 2,255 -
Amortization of debt issuance costs 1,090 540
Amortization of debt discount 1,245 -
Equity-based compensation 5,625 5,962
Interest income on restricted assets (271) (245)
Closure and post-closure accretion 880 967
Excess tax benefit associated with equity-based
compensation (6,423) (2,829)
Net change in operating assets and liabilities, net
of acquisitions 422 1,744
-------- --------
Net cash provided by operating activities 143,724 189,976
-------- --------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired (3,849) (216,062)
Capital expenditures for property and equipment (50,495) (46,562)
Proceeds from disposal of assets 4,925 1,862
Decrease (increase) in restricted assets, net of
interest income (813) 2,501
Decrease (increase) in other assets 39 (2,764)
-------- --------
Net cash used in investing activities (50,193) (261,025)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt 281,000 427,500
Principal payments on notes payable and long-term
debt (308,860) (286,202)
Change in book overdraft (2,172) (1,918)
Proceeds from option and warrant exercises 17,774 2,776
Excess tax benefit associated with equity-based
compensation 6,423 2,829
Payments for repurchase of common stock (83,665) (42,381)
Payments for cash dividends - (17,041)
Tax withholdings related to net share settlements
of restricted stock units (3,600) (5,271)
Distributions to noncontrolling interests - (675)
Debt issuance costs - (1,490)
-------- --------
Net cash provided by (used in) financing activities (93,100) 78,127
-------- --------
Net increase in cash and equivalents 431 7,078
Cash and equivalents at beginning of period 9,639 9,873
-------- --------
Cash and equivalents at end of period $ 10,070 $ 16,951
======== ========
ADDITIONAL STATISTICS
THREE AND SIX MONTHS ENDED JUNE 30, 2011
(Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations
owned for at least 12 months:
Three months ended
June 30, 2011
------------------
Core Price 2.8%
Surcharges 0.8%
Volume 0.5%
Intermodal, Recycling and Other 1.4%
------------------
Total 5.5%
------------------
Revenue Breakdown:
Three months ended Six months ended
June 30, 2011 June 30, 2011
------------------ ------------------
Collection $ 275,170 61.5% $ 514,607 62.3%
Disposal and Transfer 133,722 29.9% 243,282 29.4%
Intermodal, Recycling and Other 38,328 8.6% 68,471 8.3%
---------- ------ ---------- ------
Total before inter-company
elimination $ 447,220 100.0% $ 826,360 100.0%
Inter-company elimination $ (57,036) $ (104,708)
---------- ----------
Reported Revenue $ 390,184 $ 721,652
---------- ----------
Days Sales Outstanding for the three months ended June 30, 2011: 41 (26
net of deferred revenue)
Internalization for the three months ended June 30, 2011: 61%
Other Cash Flow Items:
Three months ended Six months ended
June 30, 2011 June 30, 2011
------------------- -------------------
Cash Interest Paid $ 13,386 $ 16,732
Cash Taxes Paid $ 12,210 $ 12,821
Debt to Book Capitalization as of June 30, 2011: 45%
Share Information for the three months ended June 30, 2011:
Basic shares outstanding 113,509,668
Dilutive effect of options and
warrants 451,173
Dilutive effect of restricted
stock 347,869
-------------------
Diluted shares outstanding 114,308,710
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 months ended Three months ended
June 30, 2010 June 30, 2011
------------------ ------------------
Operating income $ 69,351 $ 84,798
Plus: Depreciation and amortization 37,062 42,612
Plus: Closure and post-closure
accretion 439 484
Plus/less: Loss (gain) on disposal
of assets 365 (267)
Adjustments:
Plus: Acquisition-related
transaction costs (a) 244 423
------------------ ------------------
Adjusted operating income before
depreciation and amortization $ 107,461 $ 128,050
------------------ ------------------
As % of revenues 32.5% 32.8%
Six months ended Six months ended
June 30, 2010 June 30, 2011
------------------ ------------------
Operating income $ 128,957 $ 153,374
Plus: Depreciation and amortization 72,092 79,625
Plus: Closure and post-closure
accretion 880 967
Plus/less: Loss (gain) on disposal
of assets 622 (292)
Adjustments:
Plus: Acquisition-related
transaction costs (a) 395 1,094
------------------ ------------------
Adjusted operating income before
depreciation and amortization $ 202,946 $ 234,768
------------------ ------------------
As % of revenues 31.8% 32.5%
(a) Reflects the addback of acquisition-related costs.
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,
------------------ ------------------
2010 2011 2010 2011
--------- -------- --------- --------
Reported net income attributable to
Waste Connections $ 30,400 $ 44,413 $ 57,973 $ 80,952
Adjustments:
Loss on extinguishment of debt,
net of taxes (a) 6,035 - 6,320 -
Acquisition-related
transaction costs, net of
taxes (b) 151 507 245 923
Loss (gain) on disposal of
assets, net of taxes (c) 648 (166) 808 (181)
Impact of deferred tax
adjustment (d) - - 1,547 -
--------- -------- --------- --------
Adjusted net income attributable to
Waste Connections $ 37,234 $ 44,754 $ 66,893 $ 81,694
========= ======== ========= ========
Diluted earnings per common share
attributable to Waste Connections
common stockholders:
Reported net income $ 0.26 $ 0.39 $ 0.49 $ 0.71
========= ======== ========= ========
Adjusted net income $ 0.32 $ 0.39 $ 0.57 $ 0.71
========= ======== ========= ========
(a) Reflects the elimination of costs associated with the early redemption
of outstanding debt.
(b) Reflects the elimination of acquisition-related costs.
(c) Reflects the elimination of a loss (gain) on disposal of assets.
(d) Reflects the elimination 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 months ended Three months ended
June 30, 2010 June 30, 2011
------------------ ------------------
Net cash provided by operating
activities $ 60,044 $ 101,597
Plus/less: Change in book overdraft (1,191) (1,903)
Plus: Proceeds from disposal of
assets 4,123 1,074
Plus: Excess tax benefit associated
with equity-based compensation 3,945 991
Less: Capital expenditures for
property and equipment (23,742) (27,034)
Less: Distributions to
noncontrolling interests - -
------------------ ------------------
Free cash flow $ 43,179 $ 74,725
------------------ ------------------
As % of revenues 13.1% 19.2%
Six months ended Six months ended
June 30, 2010 June 30, 2011
------------------ ------------------
Net cash provided by operating
activities $ 143,724 $ 189,976
Plus: Change in book overdraft (2,172) (1,918)
Plus: Proceeds from disposal of
assets 4,925 1,862
Plus: Excess tax benefit associated
with equity-based compensation 6,423 2,829
Less: Capital expenditures for
property and equipment (50,495) (46,562)
Less: Distributions to
noncontrolling interests - (675)
------------------ ------------------
Free cash flow $ 102,405 $ 145,512
------------------ ------------------
As % of revenues 16.1% 20.2%
CONTACT:
Worthing Jackman
(916) 608-8266
SOURCE: Waste Connections, Inc.