Second Quarter 2021
Waste Connections Reports Second Quarter 2021 Results And Raises Full Year Outlook
  • Continued momentum from higher solid waste pricing and volumes, along with tailwinds from higher recovered commodity values, drive outsized results and increased full year outlook
  • Revenue of $1.534 billion, up 17.5% year over year
  • Reports 11.4% solid waste price + volume growth, exceeding outlook
  • Net income(a) of $177.0 million, and adjusted EBITDA(b) of $484.9 million, or 31.6% of revenue, exceeding outlook and up 140 basis points year over year
  • Net income and adjusted net income(b) of $0.68 and $0.81 per share, respectively
  • Year to date net cash provided by operating activities of $848.5 million and adjusted free cash flow(b) of $585.8 million, or 20.0% of revenue and up 18.5% year over year
  • Provides full year 2021 outlook for revenue of approximately $5.975 billion, net income of approximately $690 million, adjusted EBITDA(b) of approximately $1.875 billion, net cash provided by operating activities of approximately $1.666 billion, and adjusted free cash flow(b) of approximately $1 billion

 

TORONTO, Aug. 4, 2021 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the second quarter of 2021.    

"Broad-based strength drove an across the board beat in the second quarter, positioning us to raise our outlook for the full year.  Revenue and adjusted EBITDA(b) in Q2 increased 17.5% and 23.0%, respectively, over the prior year primarily as a result of continued improvement in solid waste pricing and volume growth, and strength in recovered commodity values.  These trends drove year to date adjusted EBITDA(b) margin expansion of 110 basis points and adjusted free cash flow(b) of over $585 million, up 18.5% year over year," said Worthing F. Jackman, President and Chief Executive Officer.  "Given the strength of our results in the first half of the year and expected continuing momentum and margin expansion from these trends, we believe we are on track to report approximately $5.975 billion of revenue and $1.875 billion of adjusted EBITDA(b) in 2021, exceeding our initial outlook provided in February.  More importantly, full year adjusted free cash flow(b) is also pacing ahead of initial expectations and is now estimated at approximately $1 billion, or 53% of adjusted EBITDA(b)."

Mr. Jackman continued, "2021 also has the potential to be another outsized year of acquisition activity.  Year to date, we have signed or closed 14 acquisitions with total annualized revenue of approximately $115 million, including $75 million of franchise operations in California, Nevada and Oregon expected to close later this year.  We continue to see record amounts of seller interest driving elevated acquisition dialogue and, as communicated throughout the year, expect closings related to most of this activity to be more weighted to the second half of the year.  Our recently expanded credit facility and continuing balance sheet strength provide the flexibility to fund outsized acquisition activity along with an increasing return of capital to shareholders."

Q2 2021 Results

Revenue in the second quarter totaled $1.534 billion, up from $1.306 billion in the year ago period.  Operating income was $266.8 million, which included $6.4 million in fair value accounting changes to equity awards and $6.1 million of impairments and other operating items.  This compares to operating loss of $232.4 million in the second quarter of 2020, which included $437.3 million in impairments primarily related to a decrease in property, plant and equipment at certain E&P waste landfills.  Net income in the second quarter was $177.0 million, or $0.68 per share on a diluted basis of 261.4 million shares.  In the year ago period, the Company reported net loss of $227.1 million, or $0.86 per share on a diluted basis of 263.0 million shares. 

Adjusted net income(b) in the second quarter was $210.9 million, or $0.81 per diluted share, versus $158.0 million, or $0.60 per diluted share, in the prior year period.  Adjusted EBITDA(b) in the second quarter was $484.9 million and 31.6% of revenue, as compared to $394.3 million and 30.2% of revenue 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.

Six Months Year to Date Results

For the six months ended June 30, 2021, revenue was $2.930 billion, up from $2.658 billion in the year ago period.  Operating income, which included $7.3 million primarily related to fair value accounting changes to equity awards and $6.7 million in impairments and other operating items, was $505.2 million, as compared to operating loss of $15.4 million for the same period in 2020, which included $445.2 million primarily related to impairments and other operating items. 

Net income for the six months ended June 30, 2021 was $337.4 million, or $1.29 per share on a diluted basis of 262.3 million shares.  In the year ago period, the Company reported net loss of $84.0 million, or $0.32 per share on a diluted basis of 263.4 million shares. 

Adjusted net income(b) for the six months ended June 30, 2021 was $396.3 million, or $1.51 per diluted share, compared to $328.5 million, or $1.25 per diluted share, in the year ago period. Adjusted EBITDA(b) for the six months ended June 30, 2021 was $918.1 million and 31.3% of revenue, up from $802.8 million and 30.2% in the prior year period. 

Updated 2021 Outlook

Waste Connections also updated its outlook for 2021, which assumes no change in the current economic environment or underlying economic trends, including as a result of or related to impacts from the COVID-19 pandemic or the Delta variant of the coronavirus.  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 2021 are subject to quarterly fluctuations.  See reconciliations in the attached tables.

  • Revenue is estimated to be approximately $5.975 billion, as compared to our original revenue outlook of approximately $5.800 billion
  • Net income is estimated to be approximately $690 million, and adjusted EBITDA(b) is estimated to be approximately $1.875 billion, or about 31.4% of revenue, as compared to our original adjusted EBITDA(b) outlook of $1.800 billion or 31.0% of revenue.
  • Capital expenditures are estimated to be approximately $675 million, as compared to our original capital expenditures outlook of approximately $625 million.
  • Net cash provided by operating activities is estimated to be approximately $1.666 billion, as compared to our original outlook of $1.575 billion, and adjusted free cash flow(b) is estimated to be approximately $1 billion, or about 16.7% of revenue, as compared to our original adjusted free cash flow(b) outlook of approximately $950 million or 16.4% of revenue. 

Q2 2021 Earnings Conference Call

Waste Connections will be hosting a conference call related to first quarter earnings on August 5th 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, listeners may access the call by dialing 800-908-8370 (within North America) or 312-281-1211 (international) approximately 10 minutes prior to the scheduled start time; a passcode is not required.  A replay of the conference call will be available until August 12, 2021, by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #21995717.    

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on August 5th, providing the Company's third quarter 2021 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA(b).

 (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.

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 seven 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

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 through reduced incidents and enhancing employee engagement through improved voluntary turnover and Servant Leadership scores.  For more information, visit the Waste Connections website at wasteconnections.com/sustainability.

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 2021 financial results, outlook and related assumptions, potential growth and margin expansion, potential acquisition activity and return of capital to shareholders. 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 (LOSS)

THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(Unaudited)

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

 
   
   

Three months ended
June 30,

 

Six months ended
June 30,

 
   

2020

 

2021

 

2020

 

2021

 
                   

Revenues

 

$

1,305,782

 

$

1,533,931

 

$

2,658,187

 

$

2,929,874

 

Operating expenses:

                         

Cost of operations

   

785,710

   

901,191

   

1,601,134

   

1,727,111

 

Selling, general and administrative

   

132,158

   

157,943

   

268,210

   

299,365

 

Depreciation

   

151,230

   

169,221

   

302,051

   

326,624

 

Amortization of intangibles

   

31,771

   

32,707

   

63,409

   

64,899

 

Impairments and other operating items

   

437,270

   

6,081

   

438,777

   

6,715

 

Operating income (loss)

   

(232,357)

   

266,788

   

(15,394)

   

505,160

 
                           

Interest expense

   

(40,936)

   

(41,328)

   

(78,926)

   

(83,753)

 

Interest income

   

1,317

   

744

   

3,493

   

1,848

 

Other income (expense), net

   

5,772

   

(1,235)

   

(3,749)

   

2,312

 

Income (loss) before income tax provision

   

(266,204)

   

224,969

   

(94,576)

   

425,567

 
                           

Income tax (provision) benefit

   

38,737

   

(47,868)

   

10,003

   

(88,159)

 

Net income (loss)

   

(227,467)

   

177,101

   

(84,573)

   

337,408

 

Plus (less): Net loss (income) attributable to noncontrolling interests

   

395

   

(54)

   

536

   

(52)

 

Net income (loss) attributable to Waste Connections

 

$

(227,072)

 

$

177,047

 

$

(84,037)

 

$

337,356

 
                           

Earnings (loss) per common share attributable to Waste Connections' common shareholders:

                         

Basic

 

$

(0.86)

 

$

0.68

 

$

(0.32)

 

$

1.29

 
                           

Diluted

 

$

(0.86)

 

$

0.68

 

$

(0.32)

 

$

1.29

 
                           

Shares used in the per share calculations:

                         

Basic

   

262,994,275

   

260,951,405

   

263,390,685

   

261,791,088

 

Diluted

   

262,994,275

   

261,418,573

   

263,390,685

   

262,269,600

 
                           
                           

Cash dividends per common share

 

$

0.185

 

$

0.205

 

$

0.37

 

$

0.41

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

               
   

December 31,
2020

 

June 30,
2021

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

617,294

 

$

727,395

 

Accounts receivable, net of allowance for credit losses of $19,380 and $19,527 at December 31, 2020 and June 30, 2021, respectively

   

630,264

   

649,561

 

Prepaid expenses and other current assets

   

160,714

   

129,487

 

Total current assets

   

1,408,272

   

1,506,443

 

Restricted cash

   

97,095

   

110,367

 

Restricted investments

   

57,516

   

59,825

 

Property and equipment, net

   

5,284,506

   

5,249,904

 

Operating lease right-of-use assets

   

170,923

   

169,523

 

Goodwill

   

5,726,650

   

5,818,749

 

Intangible assets, net

   

1,155,079

   

1,102,516

 

Other assets, net

   

92,323

   

88,880

 

Total assets

 

$

13,992,364

 

$

14,106,207

 

 

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

290,820

 

$

326,085

 

Book overdraft

   

17,079

   

16,902

 

Deferred revenue

   

233,596

   

250,254

 

Accrued liabilities

   

404,923

   

411,333

 

Current portion of operating lease liabilities

   

30,671

   

37,352

 

Current portion of contingent consideration

   

43,297

   

43,359

 

Current portion of long-term debt and notes payable

   

8,268

   

6,997

 

Total current liabilities

   

1,028,654

   

1,092,282

 
               

Long-term portion of debt and notes payable

   

4,708,678

   

4,762,857

 

Long-term portion of operating lease liabilities

   

147,223

   

139,329

 

Long-term portion of contingent consideration

   

28,439

   

24,670

 

Deferred income taxes

   

760,044

   

772,867

 

Other long-term liabilities

   

455,888

   

445,602

 

Total liabilities

   

7,128,926

   

7,237,607

 

Commitments and contingencies

             

Equity:

             

Common shares: 262,899,174 shares issued and 262,824,990 shares outstanding at December 31, 2020;  260,506,316 shares issued and 260,433,450 shares outstanding at June 30, 2021

   

4,030,368

   

3,724,859

 

Additional paid-in capital

   

170,555

   

172,232

 

Accumulated other comprehensive income (loss)

   

(651)

   

78,265

 

Treasury shares: 74,184 and 72,866 shares at December 31, 2020 and June 30, 2021, respectively

   

-

   

-

 

Retained earnings

   

2,659,001

   

2,889,027

 

Total Waste Connections' equity

   

6,859,273

   

6,864,383

 

Noncontrolling interest in subsidiaries

   

4,165

   

4,217

 

Total equity

   

6,863,438

   

6,868,600

 
   

$

13,992,364

 

$

14,106,207

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(Unaudited)

(in thousands of U.S. dollars)

 
               
   

Six months ended June 30,

 
   

2020

 

2021

 

Cash flows from operating activities:

             

Net income (loss)

 

$

(84,573)

 

$

337,408

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

             

Loss on disposal of assets and impairments

   

420,169

   

6,229

 

Depreciation

   

302,051

   

326,624

 

Amortization of intangibles

   

63,409

   

64,899

 

Deferred income taxes, net of acquisitions

   

(66,821)

   

3,520

 

Amortization of debt issuance costs

   

4,783

   

2,689

 

Share-based compensation

   

24,643

   

28,724

 

Interest accretion

   

8,512

   

8,199

 

Payment of contingent consideration recorded in earnings

   

-

   

(520)

 

Adjustments to contingent consideration

   

16,794

   

89

 

Other

   

1,596

   

(1,118)

 

Net change in operating assets and liabilities, net of acquisitions

   

62,622

   

71,735

 

Net cash provided by operating activities

   

753,185

   

848,478

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(86,325)

   

(67,493)

 

Capital expenditures for property and equipment

   

(268,711)

   

(271,392)

 

Capital expenditure for undeveloped landfill property

   

(16,450)

   

-

 

Proceeds from disposal of assets

   

10,642

   

7,906

 

Other

   

888

   

(1,815)

 

Net cash used in investing activities

   

(359,956)

   

(332,794)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

1,790,625

   

311,000

 

Principal payments on notes payable and long-term debt

   

(1,484,118)

   

(267,050)

 

Payment of contingent consideration recorded at acquisition date

   

(2,251)

   

(5,595)

 

Change in book overdraft

   

(606)

   

(190)

 

Payments for repurchase of common shares

   

(105,654)

   

(305,640)

 

Payments for cash dividends

   

(96,912)

   

(107,330)

 

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

   

(23,291)

   

(18,510)

 

Debt issuance costs

   

(10,957)

   

-

 

Proceeds from sale of common shares held in trust

   

679

   

131

 

Net cash provided by (used in) financing activities

   

67,515

   

(393,184)

 

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

   

(541)

   

873

 

Net increase in cash, cash equivalents and restricted cash

   

460,203

   

123,373

 

Cash, cash equivalents and restricted cash at beginning of period

   

423,221

   

714,389

 

Cash, cash equivalents and restricted cash at end of period

 

$

883,424

 

$

837,762

 

 

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 six month periods ended June 30, 2021:

   

Three months ended
June 30, 2021

 

Six months ended
June 30, 2021

Core Price

 

4.7

%

 

4.6

%

Surcharges

 

0.2

%

 

0.0

%

Volume

 

6.5

%

 

1.6

%

Recycling

 

1.5

%

 

1.2

%

Foreign Exchange Impact

 

1.5

%

 

1.1

%

Total

 

14.4

%

 

8.5

%

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2020 and 2021:

   

 Three months ended June 30, 2020

   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

948,072

 

$

(3,432)

 

$

944,640

 

72.4

%

Solid Waste Disposal and Transfer

   

469,704

   

(191,301)

   

278,403

 

21.3

%

Solid Waste Recycling

   

20,217

   

(660)

   

19,557

 

1.5

%

E&P Waste Treatment, Recovery and Disposal

   

40,152

   

(4,644)

   

35,508

 

2.7

%

Intermodal and Other

   

27,811

   

(137)

   

27,674

 

2.1

%

Total

 

$

1,505,956

 

$

(200,174)

 

$

1,305,782

 

100.0

%

 
   

 Three months ended June 30, 2021

   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

1,098,319

 

$

(3,232)

 

$

1,095,087

 

71.4

%

Solid Waste Disposal and Transfer

   

544,257

   

(215,481)

   

328,776

 

21.4

%

Solid Waste Recycling

   

41,539

   

(1,113)

   

40,426

 

2.7

%

E&P Waste Treatment, Recovery and Disposal

   

34,607

   

(3,454)

   

31,153

 

2.0

%

Intermodal and Other

   

38,590

   

(101)

   

38,489

 

2.5

%

Total

 

$

1,757,312

 

$

(223,381)

 

$

1,533,931

 

100.0

%

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and six month periods ended June 30, 2020 and 2021:

   

Three months ended
June 30,

 

Six months ended
June 30,

   

2020

 

2021

 

2020

 

2021

Acquisitions, net

 

$

40,727

 

$

44,125

 

$

100,296

 

$

84,666

 

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 six month periods ended June 30, 2020 and 2021:

                         
   

Three months ended
June 30,

 

Six months ended
June 30,

   

2020

 

2021

 

2020

 

2021

Cash Interest Paid

 

$

45,782

 

$

56,516

 

$

62,828

 

$

81,962

Cash Taxes Paid

   

8,440

   

32,072

   

13,050

   

60,693

Debt to Book Capitalization as of June 30, 2021:  41%

Internalization for the three months ended June 30, 2021:  56%

Days Sales Outstanding for the three months ended June 30, 2021:  39 (24 net of deferred revenue)

Share Information for the three months ended June 30, 2021:

     

Basic shares outstanding

 

260,951,405

Dilutive effect of equity-based awards 

 

467,168

Diluted shares outstanding

 

261,418,573

 

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 (loss) attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus or minus income tax provision (benefit), 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
June 30,

 

Six months ended
June 30,

   

2020

 

2021

 

2020

 

2021

Net income (loss) attributable to Waste Connections

 

$

(227,072)

 

$

177,047

 

$

(84,037)

 

$

337,356

Plus/(less): Net income (loss) attributable to noncontrolling interests

   

(395)

   

54

   

(536)

   

52

Plus/(less): Income tax provision (benefit)

   

(38,737)

   

47,868

   

(10,003)

   

88,159

Plus: Interest expense

   

40,936

   

41,328

   

78,926

   

83,753

Less: Interest income

   

(1,317)

   

(744)

   

(3,493)

   

(1,848)

Plus: Depreciation and amortization

   

183,001

   

201,928

   

365,460

   

391,523

Plus: Closure and post-closure accretion

   

3,709

   

3,666

   

7,617

   

7,375

Plus: Impairments and other operating items

   

437,270

   

6,081

   

438,777

   

6,715

Plus/(Less): Other expense (income), net

   

(5,772)

   

1,235

   

3,749

   

(2,312)

Adjustments:

                       

Plus: Transaction-related expenses(a)

   

1,016

   

57

   

2,162

   

583

Plus: Fair value changes to equity awards(b)

   

1,683

   

6,385

   

4,223

   

6,723

Adjusted EBITDA

 

$

394,322

 

$

484,905

 

$

802,845

 

$

918,079

                         

As % of revenues

   

30.2%

   

31.6%

   

30.2%

   

31.3%

____________________________

(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
June 30,

 

Six months ended
June 30,

   

2020

 

2021

 

2020

 

2021

Net cash provided by operating activities

 

$

383,599

 

$

448,081

 

$

753,185

 

$

848,478

Plus/(Less): Change in book overdraft

   

3,243

   

16,659

   

(606)

   

(190)

Plus: Proceeds from disposal of assets

   

7,143

   

5,826

   

10,642

   

7,906

Less: Capital expenditures for property and equipment

   

(130,930)

   

(174,599)

   

(268,711)

   

(271,392)

Adjustments:

                       

   Payment of contingent consideration recorded in earnings(a)

   

-

   

-

   

-

   

520

Cash received for divestitures(b)

   

(4,974)

   

-

   

(4,974)

   

-

Transaction-related expenses(c)

   

1,016

   

57

   

2,162

   

583

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

   

-

   

47

   

6,440

   

144

Tax effect(e)

   

(251)

   

(26)

   

(3,569)

   

(214)

Adjusted free cash flow

 

$

258,846

 

$

296,045

 

$

494,569

 

$

585,835

                         

As % of revenues

   

19.8%

   

19.3%

   

18.6%

   

20.0%

___________________________

(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.

(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
June 30,

 

Six months ended
June 30,

   

2020

 

2021

 

2020

 

2021

Reported net income (loss) attributable to Waste Connections

 

$

(227,072)

 

$

177,047

 

$

(84,037)

 

$

337,356

Adjustments:

                       

Amortization of intangibles(a)

   

31,771

   

32,707

   

63,409

   

64,899

Impairments and other operating items(b)

   

437,270

   

6,081

   

438,777

   

6,715

Transaction-related expenses(c) 

   

1,016

   

57

   

2,162

   

583

Fair value changes to equity awards(d)

   

1,683

   

6,385

   

4,223

   

6,723

Tax effect(e)

   

(118,220)

   

(11,393)

   

(127,523)

   

(19,935)

Tax items(f)

   

31,508

   

-

   

31,508

   

-

Adjusted net income attributable to Waste Connections

 

$

157,956

 

$

210,884

 

$

328,519

 

$

396,341

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

                       

Reported net income (loss)

 

$

(0.86)

 

$

0.68

 

$

(0.32)

 

$

1.29

Adjusted net income

 

$

0.60

 

$

0.81

 

$

1.25

 

$

1.51

                         

Shares used in the per share calculations:

                       

Reported diluted shares

   

262,994,275

   

261,418,573

   

263,390,685

   

262,269,600

Adjusted diluted shares(g)

   

263,317,054

   

261,418,573

   

263,833,471

   

262,269,600

____________________________

(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)

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

(f)

Reflects the impact of a portion of the Company's 2019 inter-entity payments no longer being deductible for tax purposes due to the finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and an increase in deferred tax liabilities resulting from the E&P impairment.

(g)

Reflects reported diluted shares adjusted for shares that were excluded from the reported diluted shares calculation due to our reporting a net loss during the three and six months ended June 30, 2020.

 

UPDATED 2021 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

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

 

Reconciliation of Adjusted EBITDA:

         
   

Updated 2021 Outlook

   

Estimates

 

Observation

Net income attributable to Waste Connections

$

690,000

   

    Plus: Income tax provision (a)

 

184,294

 

Approximate 21.0% effective rate

    Plus: Interest expense, net

 

162,000

   

    Plus: Depreciation and Depletion

 

680,000

 

Approximately 11.4% of revenue

    Plus: Amortization

 

132,000

   

    Plus: Closure and post-closure accretion

 

15,000

   

    Plus: Impairments and other operating items (b)

 

6,712

   

    Plus: Other income, net (b)

 

(2,312)

   

    Adjustments: (b)

       

        Plus: Transaction-related expenses

 

583

   

        Plus: Fair value changes to equity awards

 

6,723

   

Adjusted EBITDA

$

1,875,000

 

Approximately 31.4% of revenue

____________________________

(a)

Approximately 21% full year effective tax rate, including amounts reported for the six month period ended June 30, 2021.

(b)

Reflects amounts reported for the six month period ended June 30, 2021, as shown on page 9.

 
 

Reconciliation of Adjusted Free Cash Flow:

 
     

Updated

2021 Outlook

Net cash provided by operating activities

 

$

1,666,061

Plus: Proceeds from disposal of assets (a)

   

7,906

Less: Capital expenditures for property and equipment         

   

(675,000)

Adjustments: (a)

     

    Payment of contingent consideration recorded in earnings

   

520

    Transaction-related expenses

   

583

    Pre-existing Progressive Waste share-based grants

   

144

    Tax effect

   

(214)

Adjusted free cash flow

 

$

1,000,000

     

As % of revenues

   

16.7%

____________________________

(a)

Reflects amounts reported for the six month period ended June 30, 2021, as shown on page 10.

 

 

SOURCE Waste Connections, Inc.