News Releases

Waste Connections Reports Third Quarter 2022 Results And Updates Full Year Outlook

  • Increasing solid waste pricing growth, E&P waste activity and acquisition contribution once again drive better than expected quarterly results
  • Revenue of $1.880 billion, up 17.7%
  • Net income(a) of $236.9 million, and adjusted EBITDA(b) of $588.1 million, up 16.3%
  • Adjusted EBITDA(b) margin of 31.3% of revenue, above outlook and up 20 basis points year over year, excluding acquisitions
  • Net income of $0.92 per share, and adjusted net income(b) of $1.10 per share
  • Year to date net cash provided by operating activities of $1.500 billion and adjusted free cash flow(b) of $929.0 million, or 17.4% of revenue
  • Year to date signed or closed acquisitions with approximately $570 million of total annualized revenue
  • Increases regular quarterly dividend by 10.9%

TORONTO, Nov. 2, 2022 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2022 and updated its outlook for 2022. 

"Strong execution once again provided for better than expected results, driven in the third quarter by continued acceleration of solid waste pricing to 10.1% and higher E&P waste activity, along with acquisitions closed during the period.  Most notably, we overcame 50 basis points in incremental headwinds, primarily from the precipitous decline in recycled commodity values in September, to beat our outlook and expand adjusted EBITDA margin both sequentially and on a year-over-year basis, excluding the dilutive impact from acquisitions completed since the year ago period," said Worthing F. Jackman, President and Chief Executive Officer. 

Mr. Jackman added, "As anticipated, acquisition activity continues to run well above historical levels, with $535 million in annualized revenue closed in 2022 plus an additional $35 million under definitive agreement expected to close by year end or early in 2023.  These transactions include multi-market solid waste franchises in California and Oregon; integrated market expansions in Arizona and Texas; new market entries in Pennsylvania, British Columbia and Quebec; and multiple tuck-ins and market expansions within our recently established footprint in Massachusetts."  

"The strength of our balance sheet, operating performance and free cash flow generation positioned us for another double-digit increase in our quarterly cash dividend, once again demonstrating our capacity for outsized acquisition activity while continuing to fund our differentiated growth strategy and increasing return of capital to shareholders."

Mr. Jackman concluded, "Our outperformance through the third quarter and acquisitions closed year to date enhance our visibility for expected double-digit revenue growth in 2023, led by pricing expected to remain at elevated levels, plus rollover contribution from acquisitions already signed or closed year to date.  In addition, we expect underlying margin expansion to overcome headwinds from recent decreases in recycled commodity values."

Q3 2022 Results

Revenue in the third quarter totaled $1.880 billion, up from $1.597 billion in the year ago period.  Operating income was $326.8 million, which included $25.1 million primarily in impairments and other operating items and transaction expenses.  This compares to operating income of $285.1 million in the third quarter of 2021, which included $9.7 million primarily related to transaction expenses and impairments and other operating items.  Net income in the third quarter was $236.9 million, or $0.92 per share on a diluted basis of 257.9 million shares, including a $15.3 million net of tax benefit, or $0.06 per share, primarily as a result of the impact from changes in foreign currency exchange rates on certain debt in the period.  In the year ago period, the Company reported net income of $114.4 million, or $0.44 per share on a diluted basis of 261.1 million shares, including a net of tax loss on debt extinguishment associated with the prepayment of senior notes of $84.2 million or $0.32 per share.   

Adjusted net income(b) in the third quarter was $284.9 million, or $1.10 per diluted share, versus $233.1 million, or $0.89 per diluted share, in the prior year period.  Adjusted EBITDA(b) in the third quarter was $588.1 million, as compared to $505.6 million in the prior year period.  Adjusted net income, adjusted net income per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and acquisition-related items, as reflected in the detailed reconciliations in the attached tables.

Nine Months Year to Date Results

For the nine months ended September 30, 2022, revenue was $5.343 billion, up from $4.527 billion in the year ago period.  Operating income, which included $38.5 million primarily attributable to impairments and other operating items and transaction-related expenses, was $930.2 million, as compared to operating income of $790.3 million in 2021, which included $23.7 million in impairments, fair value changes in equity awards and transaction expenses.

Net income for the nine months ended September 30, 2022 was $641.3 million, or $2.49 per share on a diluted basis of 258.1 million shares, including a $18.9 million net of tax benefit, or $0.07 per share, primarily as a result of the impact from changes in foreign currency exchange rates on certain debt.  In the year ago period, the Company reported net income of $451.7 million, or $1.72 per share on a diluted basis of 261.9 million shares, including a net of tax loss on debt extinguishment associated with the prepayment of senior notes of $84.2 million or $0.32 per share.  

Adjusted net income(b) for the nine months ended September 30, 2022 was $755.5 million, or $2.93 per diluted share, compared to $629.5 million, or $2.39 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2022 was $1.657 billion, as compared to $1.424 billion in the prior year period. 

Updated 2022 Outlook

Waste Connections also updated its outlook for 2022, which assumes no change in the current economic environment or underlying economic trends.  The Company's outlook excludes any impact from additional acquisitions that may close during the year, and expensing of transaction-related items.  The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada.  Certain components of the outlook for 2022 are subject to quarterly fluctuations.  See reconciliations in the attached tables.

  • Revenue is estimated to be approximately $7.190 billion, as compared to our previously revised revenue outlook of approximately $7.125 billion.
  • Net income is estimated to be approximately $836.7 million, and adjusted EBITDA(b) is estimated to be approximately $2.210 billion, or about 30.7% of revenue, as compared to our previously revised adjusted EBITDA(b) outlook of $2.190 billion or 30.7% of revenue.
  • Capital expenditures are estimated to be approximately $850 million, in line with our original outlook.
  • Net cash provided by operating activities is estimated to be approximately $1.963 billion, and adjusted free cash flow(b) is estimated at approximately $1.160 billion, or about 16.1% of revenue, as compared to our previously revised adjusted free cash flow(b) outlook of $1.160 billion or 16.3% of revenue.

Environmental, Social and Governance

Waste Connections views its Environmental, Social and Governance ("ESG") efforts as integral to its business, with initiatives consistent with its objective of long-term value creation.  In 2020, the Company introduced long-term, aspirational ESG targets and committed over $500 million for investments to meet or exceed such sustainability targets. These investments primarily focus on reducing emissions, increasing resource recovery of both recyclable commodities and clean energy fuels, reducing reliance on off-site disposal for landfill leachate, further improving safety and enhancing employee engagement.  The Company's 2022 Sustainability Report provides progress updates on its targets and investments towards their achievement, and introduces new emissions reduction targets.  For more information, visit wasteconnections.com/sustainability.

 (a) 

All references to "Net income" refer to the financial statement line item "Net income attributable to Waste Connections".

 (b)

A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

Q3 2022 Earnings Conference Call

Waste Connections will be hosting a conference call related to third quarter earnings on November 3rd at 8:30 A.M. Eastern Time.  A live audio webcast of the conference call can be accessed by visiting investors.wasteconnections.com and selecting "News & Events" from the website menu. Alternatively, conference call participants can preregister by clicking here.  Registered participants will receive dial-in instructions and a personalized code for entry to the conference call.  A replay of the conference call will be available until November 10, 2022, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #5667024.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on November 3rd, providing the Company's fourth quarter 2022 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA(b).

About Waste Connections

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, along with resource recovery primarily through recycling and renewable fuels generation.  The Company serves more than eight million residential, commercial and industrial customers in mostly exclusive and secondary markets across 43 states in the U.S. and six provinces in Canada.  Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.  For more information, visit Waste Connections at wasteconnections.com

Safe Harbor and Forward-Looking Information

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 ("PSLRA"), including "forward-looking information" within the meaning of applicable Canadian securities laws. These forward-looking statements are neither historical facts nor assurances of future performance and reflect Waste Connections' current beliefs and expectations regarding future events and operating performance. These forward-looking statements are often identified by the words "may," "might," "believes," "thinks," "expects," "estimate," "continue," "intends" or other words of similar meaning. All of the forward-looking statements included in this press release are made pursuant to the safe harbor provisions of the PSLRA and applicable securities laws in Canada. Forward-looking statements involve risks and uncertainties. Forward-looking statements in this press release include, but are not limited to, statements about expected 2022 and 2023 financial results, outlook and related assumptions, and potential acquisition activity. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada.  You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.  Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

– financial tables attached –

CONTACT:

 

Mary Anne Whitney / (832) 442-2253

Joe Box / (832) 442-2153

maryannew@wasteconnections.com

joe.box@wasteconnections.com

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2022

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

                           
   

Three months ended
September 30,

 

Nine months ended
September 30,

 
   

2021

 

2022

 

2021

 

2022

 
                   

Revenues

 

$

1,597,168

 

$

1,879,868

 

$

4,527,042

 

$

5,342,558

 

Operating expenses:

                         

Cost of operations

   

946,098

   

1,120,629

   

2,673,209

   

3,198,039

 

Selling, general and administrative

   

155,520

   

186,887

   

454,885

   

518,705

 

Depreciation

   

171,965

   

193,287

   

498,588

   

562,174

 

Amortization of intangibles

   

35,337

   

38,859

   

100,237

   

113,956

 

Impairments and other operating items

   

3,104

   

13,438

   

9,819

   

19,467

 

Operating income

   

285,144

   

326,768

   

790,304

   

930,217

 
                           

Interest expense

   

(40,418)

   

(51,161)

   

(124,171)

   

(137,565)

 

Interest income

   

495

   

1,784

   

2,342

   

2,574

 

Other income, net

   

3,140

   

8,487

   

5,452

   

2,373

 

Loss on early extinguishment of debt

   

(115,288)

   

-

   

(115,288)

   

-

 

Income before income tax provision

   

133,073

   

285,878

   

558,639

   

797,599

 
                           

Income tax provision

   

(18,419)

   

(48,753)

   

(106,578)

   

(155,899)

 

Net income

   

114,654

   

237,125

   

452,061

   

641,700

 

Less: Net income attributable to noncontrolling interests

   

(273)

   

(213)

   

(325)

   

(390)

 

Net income attributable to Waste Connections

 

$

114,381

 

$

236,912

 

$

451,736

 

$

641,310

 
                           

Earnings per common share attributable to Waste
Connections' common shareholders:

                         

Basic

 

$

0.44

 

$

0.92

 

$

1.73

 

$

2.49

 
                           

Diluted

 

$

0.44

 

$

0.92

 

$

1.72

 

$

2.49

 
                           

Shares used in the per share calculations:

                         

Basic

   

260,550,774

   

257,197,010

   

261,372,827

   

257,438,756

 

Diluted

   

261,145,220

   

257,891,635

   

261,879,754

   

258,060,751

 
                           
                           

Cash dividends per common share

 

$

0.205

 

$

0.230

 

$

0.615

 

$

0.690

 

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

               
   

December 31,
2021

 

September 30,
2022

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

147,441

 

$

200,179

 

Accounts receivable, net of allowance for credit losses of $18,480 and $20,512 at
     December 31, 2021 and September 30, 2022, respectively

   

709,614

   

810,932

 

Prepaid expenses and other current assets

   

175,722

   

219,203

 

Total current assets

   

1,032,777

   

1,230,314

 

Restricted cash

   

72,174

   

108,194

 

Restricted investments

   

59,014

   

55,922

 

Property and equipment, net

   

5,721,949

   

6,353,367

 

Operating lease right-of-use assets

   

160,567

   

190,860

 

Goodwill

   

6,187,643

   

6,574,860

 

Intangible assets, net

   

1,350,597

   

1,489,242

 

Other assets, net

   

115,203

   

127,909

 

Total assets

 

$

14,699,924

 

$

16,130,668

 

 

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

392,868

 

$

507,899

 

Book overdraft

   

16,721

   

10,734

 

Deferred revenue

   

273,720

   

306,019

 

Accrued liabilities

   

442,596

   

457,904

 

Current portion of operating lease liabilities

   

38,017

   

34,526

 

Current portion of contingent consideration

   

62,804

   

54,867

 

Current portion of long-term debt and notes payable

   

6,020

   

6,718

 

Total current liabilities

   

1,232,746

   

1,378,667

 
               

Long-term portion of debt and notes payable

   

5,040,500

   

6,211,971

 

Long-term portion of operating lease liabilities

   

129,628

   

163,848

 

Long-term portion of contingent consideration

   

31,504

   

30,896

 

Deferred income taxes

   

850,921

   

986,252

 

Other long-term liabilities

   

421,080

   

415,664

 

Total liabilities

   

7,706,379

   

9,187,298

 

Commitments and contingencies

             

Equity:

             

Common shares: 260,283,158 shares issued and 260,212,496 shares outstanding at
     December 31, 2021; 257,183,663 shares issued and 257,118,204 shares outstanding at
     September 30, 2022

   

3,693,027

   

3,271,958

 

Additional paid-in capital

   

199,482

   

229,445

 

Accumulated other comprehensive income

   

39,584

   

(83,476)

 

Treasury shares: 70,662 and 65,459 shares at December 31, 2021 and September 30, 2022,
     respectively

   

-

   

-

 

Retained earnings

   

3,056,845

   

3,520,446

 

Total Waste Connections' equity

   

6,988,938

   

6,938,373

 

Noncontrolling interest in subsidiaries

   

4,607

   

4,997

 

Total equity

   

6,993,545

   

6,943,370

 
   

$

14,699,924

 

$

16,130,668

 

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2022

(Unaudited)

(in thousands of U.S. dollars)

               
   

Nine months ended September 30,

 
   

2021

 

2022

 

Cash flows from operating activities:

             

Net income

 

$

452,061

 

$

641,700

 

Adjustments to reconcile net income to net cash provided by operating activities:

             

Loss on disposal of assets and impairments

   

9,302

   

11,503

 

Depreciation

   

498,588

   

562,174

 

Amortization of intangibles

   

100,237

   

113,956

 

Loss on early extinguishment of debt

   

115,288

   

-

 

Deferred income taxes, net of acquisitions

   

(24,282)

   

91,098

 

Current period provision for expected credit losses

   

9,239

   

11,097

 

Amortization of debt issuance costs

   

3,887

   

3,879

 

Share-based compensation

   

42,694

   

48,395

 

Interest accretion

   

12,068

   

13,218

 

Payment of contingent consideration recorded in earnings

   

(520)

   

(2,982)

 

Adjustments to contingent consideration

   

89

   

(1,030)

 

Other

   

(1,286)

   

(8,412)

 

Net change in operating assets and liabilities, net of acquisitions

   

52,596

   

15,541

 

Net cash provided by operating activities

   

1,269,961

   

1,500,137

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(561,276)

   

(1,272,910)

 

Capital expenditures for property and equipment

   

(479,480)

   

(618,313)

 

Proceeds from disposal of assets

   

10,109

   

23,341

 

Other

   

(4,193)

   

9,296

 

Net cash used in investing activities

   

(1,034,840)

   

(1,858,586)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

1,943,192

   

3,148,624

 

Principal payments on notes payable and long-term debt

   

(1,814,034)

   

(2,052,412)

 

Premiums paid on early extinguishment of debt

   

(110,617)

   

-

 

Payment of contingent consideration recorded at acquisition date

   

(7,998)

   

(12,114)

 

Change in book overdraft

   

(563)

   

(5,983)

 

Payments for repurchase of common shares

   

(305,640)

   

(424,999)

 

Payments for cash dividends

   

(160,754)

   

(177,710)

 

Tax withholdings related to net share settlements of equity-based compensation

   

(18,576)

   

(17,466)

 

Debt issuance costs

   

(17,997)

   

(11,454)

 

Proceeds from issuance of shares under employee share purchase plan

   

1,275

   

3,271

 

Proceeds from sale of common shares held in trust

   

131

   

660

 

Net cash provided by (used in) financing activities

   

(491,581)

   

450,417

 
               

Effect of exchange rate changes on cash, cash equivalents and restricted cash

   

443

   

(3,210)

 
               

Net increase (decrease) in cash, cash equivalents and restricted cash

   

(256,017)

   

88,758

 

Cash, cash equivalents and restricted cash at beginning of period

   

714,389

   

219,615

 

Cash, cash equivalents and restricted cash at end of period

 

$

458,372

 

$

308,373

 

 

ADDITIONAL STATISTICS
(in thousands of U.S. dollars, except where noted)

Solid Waste Internal Growth:  The following table reflects a breakdown of the components of our solid waste internal growth for the three and nine month periods ended September 30, 2022:

 

   

Three months ended

September 30, 2022

 

Nine months ended

September 30, 2022

Core Price

   

8.3 %

   

7.3 %

Surcharges

   

1.8 %

   

1.4 %

Volume

   

(1.5 %)

   

(0.6 %)

Recycling

   

(1.3 %)

   

0.0 %

Foreign Exchange Impact

   

(0.5 %)

   

(0.3 %)

Total

   

6.8 %

   

7.8 %

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended September 30, 2021 and 2022:

 

   

 Three months ended September 30, 2021

 
   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

1,137,206

 

$

(3,091)

 

$

1,134,115

 

71.0

%

Solid Waste Disposal and Transfer

   

553,974

   

(217,899)

   

336,075

 

21.0

%

Solid Waste Recycling

   

55,772

   

(1,354)

   

54,418

 

3.4

%

E&P Waste Treatment, Recovery and Disposal

   

38,519

   

(3,560)

   

34,959

 

2.2

%

Intermodal and Other

   

38,377

   

(776)

   

37,601

 

2.4

%

Total

 

$

1,823,848

 

$

(226,680)

 

$

1,597,168

 

100.0

%

 

   

 Three months ended September 30, 2022

 
   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

1,368,491

 

$

(4,296)

 

$

1,364,195

 

72.6

%

Solid Waste Disposal and Transfer

   

616,900

   

(245,687)

   

371,213

 

19.8

%

Solid Waste Recycling

   

48,246

   

(2,332)

   

45,914

 

2.4

%

E&P Waste Treatment, Recovery and Disposal

   

56,995

   

(3,978)

   

53,017

 

2.8

%

Intermodal and Other

   

47,604

   

(2,075)

   

45,529

 

2.4

%

Total

 

$

2,138,236

 

$

(258,368)

 

$

1,879,868

 

100.0

%

 

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and nine month periods ended September 30, 2021 and 2022:

 

   

Three months ended
September 30,

 

Nine months ended
September 30,

   

2021

 

2022

 

2021

 

2022

Acquisitions, net

 

$

51,368

 

$

150,644

 

$

136,035

 

$

402,007

 

ADDITIONAL STATISTICS (continued)
(in thousands of U.S. dollars, except where noted)

Other Cash Flow Items: The following table reflects cash interest and cash taxes for the three and nine month periods ended September 30, 2021 and 2022:

 

   

Three months ended
September 30,

 

Nine months ended
September 30,

   

2021

 

2022

 

2021

 

2022

Cash Interest Paid

 

$

38,685

 

$

42,528

 

$

120,647

 

$

118,541

Cash Taxes Paid

   

29,411

   

15,787

   

90,104

   

53,599

 

Debt to Book Capitalization as of September 30, 2022:  47%

Internalization for the three months ended September 30, 2022:  54%

Days Sales Outstanding for the three months ended September 30, 2022:  40 (25 net of deferred revenue)

Share Information for the three months ended September 30, 2022:

 

Basic shares outstanding

 

257,197,010

Dilutive effect of equity-based awards 

 

694,625

Diluted shares outstanding

 

257,891,635

 

NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

Adjusted EBITDA, 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.  Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections defines adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus income tax provision, plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income.  Waste Connections further adjusts this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of its business.  This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures.  Other companies may calculate adjusted EBITDA differently. 

 

                         
   

Three months ended
September 30,

 

Nine months ended
September 30,

   

2021

 

2022

 

2021

 

2022

Net income attributable to Waste Connections

 

$

114,381

 

$

236,912

 

$

451,736

 

$

641,310

Plus: Net income attributable to noncontrolling interests

   

273

   

213

   

325

   

390

Plus: Income tax provision

   

18,419

   

48,753

   

106,578

   

155,899

Plus: Interest expense

   

40,418

   

51,161

   

124,171

   

137,565

Less: Interest income

   

(495)

   

(1,784)

   

(2,342)

   

(2,574)

Plus: Depreciation and amortization

   

207,302

   

232,146

   

598,825

   

676,130

Plus: Closure and post-closure accretion

   

3,544

   

4,061

   

10,919

   

12,148

Plus: Impairments and other operating items

   

3,104

   

13,438

   

9,819

   

19,467

Less: Other income, net

   

(3,140)

   

(8,487)

   

(5,452)

   

(2,373)

Plus:  Loss on early extinguishment of debt

   

115,288

   

-

   

115,288

   

-

Adjustments:

                       

Plus: Transaction-related expenses(a)

   

5,637

   

10,461

   

6,220

   

18,694

Plus: Fair value changes to equity awards(b)

   

914

   

1,196

   

7,638

   

349

Adjusted EBITDA

 

$

505,645

 

$

588,070

 

$

1,423,725

 

$

1,657,005

                         

As % of revenues

   

31.7 %

   

31.3 %

   

31.4 %

   

31.0 %

(a)

Reflects the addback of acquisition-related transaction costs.

(b)

Reflects fair value accounting changes associated with certain equity awards.

 

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted Free Cash Flow:

Adjusted 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.  Management uses adjusted free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections defines adjusted free cash flow as net cash provided by operating activities, plus or minus change in book overdraft, plus proceeds from disposal of assets, less capital expenditures for property and equipment and distributions to noncontrolling interests.  Waste Connections further adjusts this calculation to exclude the effects of items management believes impact the ability to assess the operating performance of its business.  This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures.  Other companies may calculate adjusted free cash flow differently. 

 

                         
   

Three months ended
September 30,

 

Nine months ended
September 30,

   

2021

 

2022

 

2021

 

2022

Net cash provided by operating activities

 

$

421,482

 

$

526,459

 

$

1,269,961

 

$

1,500,137

Less: Change in book overdraft

   

(373)

   

(5,929)

   

(563)

   

(5,983)

Plus: Proceeds from disposal of assets

   

2,204

   

6,447

   

10,109

   

23,341

Less: Capital expenditures for property and equipment

   

(208,089)

   

(246,885)

   

(479,480)

   

(618,313)

Adjustments:

                       

   Payment of contingent consideration recorded in earnings(a)

   

-

   

2,982

   

520

   

2,982

Cash received for divestitures(b)

   

-

   

-

   

-

   

(5,671)

Transaction-related expenses(c)

   

25,090

   

10,461

   

25,673

   

37,558

Pre-existing Progressive Waste share-based grants(d)

   

173

   

274

   

317

   

286

Tax effect(e)

   

(485)

   

(3,212)

   

(699)

   

(5,377)

Adjusted free cash flow

 

$

240,002

 

$

290,597

 

$

825,838

 

$

928,960

                         

As % of revenues

   

15.0 %

   

15.5 %

   

18.2 %

   

17.4 %

(a)

Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and as a component of cash flows from operating activities as the amounts paid exceeded the fair value of the contingent consideration recorded at the acquisition date.

(b)

Reflects the elimination of cash received in conjunction with the divestiture of certain operations.

(c)

Reflects the addback of acquisition-related transaction costs and the settlement of an acquired tax liability.

(d)

Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.

(e)

The aggregate tax effect of footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods.

 

NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except per share amounts)

Reconciliation of Adjusted Net Income attributable to Waste Connections and Adjusted Net Income per Diluted Share attributable to Waste Connections:

Adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections, both non-GAAP financial measures, are provided supplementally because they are widely used by investors as a valuation measure in the solid waste industry.  Management uses adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations.  Waste Connections provides adjusted net income attributable to Waste Connections to exclude the effects of items management believes impact the comparability of operating results between periods.  Adjusted net income attributable to Waste Connections has limitations due to the fact that it excludes items that have an impact on the Company's financial condition and results of operations.  Adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections are not a substitute for, and should be used in conjunction with, GAAP financial measures.  Other companies may calculate these non-GAAP financial measures differently. 

 

                           
   

Three months ended
September 30,

 

Nine months ended
September 30,

 
   

2021

 

2022

 

2021

 

2022

 

Reported net income attributable to Waste Connections

 

$

114,381

 

$

236,912

 

$

451,736

 

$

641,310

 

Adjustments:

                         

Amortization of intangibles(a)

   

35,337

   

38,859

   

100,237

   

113,956

 

Impairments and other operating items(b)

   

3,104

   

13,438

   

9,819

   

19,467

 

Transaction-related expenses(c) 

   

5,637

   

10,461

   

6,220

   

18,694

 

Fair value changes to equity awards(d)

   

914

   

1,196

   

7,638

   

349

 

Loss on early extinguishment of debt(e)

   

115,288

   

-

   

115,288

   

-

 

Tax effect(f)

   

(41,531)

   

(15,944)

   

(61,466)

   

(38,260)

 

Adjusted net income attributable to Waste Connections

 

$

233,130

 

$

284,922

 

$

629,472

 

$

755,516

 

Diluted earnings per common share attributable to Waste Connections' common shareholders:

                         

Reported net income

 

$

0.44

 

$

0.92

 

$

1.72

 

$

2.49

 

Adjusted net income

 

$

0.89

 

$

1.10

 

$

2.39

 

$

2.93

 
                           
                           

(a)

Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.

(b)

Reflects the addback of impairments and other operating items.

(c)

Reflects the addback of acquisition-related transaction costs.

(d)

Reflects fair value accounting changes associated with certain equity awards.

(e)

Reflects the make-whole premium and related fees associated with the early termination of $1.5 billion in senior notes. 

(f)

The aggregate tax effect of the adjustments in footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.

 

UPDATED 2022 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)

 

Reconciliation of Adjusted EBITDA:

   
                 
 

Updated 2022 Outlook

   

August
Estimates

 

 

Current 
Estimates

 

   Observation

Net income attributable to Waste Connections

$

837,500

 

$

836,700

       

    Plus: Income tax provision (a)

 

232,973

   

209,763

   

Approximate 20% effective rate

 

    Plus: Interest expense, net

 

180,000

   

197,000

       

    Plus: Depreciation and Depletion

 

752,000

   

758,000

   

Approximately 10.5% of revenue

 

    Plus: Amortization

 

152,000

   

156,000

       

    Plus: Closure and post-closure accretion

 

16,000

   

16,400

       

    Plus: Impairments and other operating items (b)

 

6,028

   

19,467

       

    Plus: Other income, net (b)

 

6,114

   

(2,373)

       

    Adjustments: (b)

                 

        Plus: Transaction-related expenses

 

8,232

   

18,694

       

        Plus: Fair value changes to equity awards

 

(847)

   

349

       

Adjusted EBITDA

$

2,190,000

 

$

2,210,000

   

Approximately 30.7% of revenue

 
                   
                           

(a)

Approximately 20.0% full year effective tax rate, including amounts reported for the nine-month period ended September 30, 2022.

(b)

Reflects amounts reported for the nine-month period ended September 30, 2022, as shown on page 9.

 

Reconciliation of Adjusted Free Cash Flow:

 

   

Updated 2022 Outlook

   

August
Estimates

 

Current
Estimates

Net cash provided by operating activities

 

$

1,973,888

 

$

1,962,864

Less: Change in book overdraft (a)

   

(54)

   

(5,983)

Plus: Proceeds from disposal of assets (a)

   

16,894

   

23,341

Less: Capital expenditures for property and equipment         

   

(850,000)

   

(850,000)

Adjustments: (a)

           

Payment of contingent consideration recorded in earnings

   

-

   

2,982

Cash received for divestitures

   

(5,671)

   

(5,671)

    Transaction-related expenses

   

27,096

   

37,558

    Pre-existing Progressive Waste share-based grants

   

12

   

286

    Tax effect

   

(2,165)

   

(5,377)

Adjusted free cash flow

 

$

1,160,000

 

$

1,160,000

             

As % of revenues

   

16.3 %

   

16.1 %

________________________________

(a)

Reflects amounts reported for the nine-month period ended September 30, 2022, as shown on page 10.

 

 

SOURCE Waste Connections, Inc.