Quarterly Results

Third Quarter 2021
Waste Connections Reports Third Quarter 2021 Results And Raises Full Year Outlook
  • Strong execution, accelerating solid waste pricing growth and continued strength in both resource recovery values and acquisition activity again drive outsized results and increased full year outlook
  • Revenue of $1.597 billion, up 14.9% year over year, exceeding outlook
  • Reports organic growth of 11.3%, including 7.3% solid waste price + volume growth, exceeding outlook
  • Net income(a) of $114.4 million, and adjusted EBITDA(b) of $505.6 million, or 31.7% of revenue, up sequentially from Q2 and up 60 basis points year over year
  • Net income and adjusted net income(b) of $0.44 and $0.89 per share, respectively
  • Year to date net cash provided by operating activities of $1.270 billion and adjusted free cash flow(b) of $825.8 million, or 18.2% of revenue
  • Year to date closed acquisitions of approximately $240 million in annualized revenues
  • Increases regularly quarterly dividend by 12.2%
  • Provides full year 2021 revenue outlook of approximately $6.110 billion, net income of approximately $633 million, adjusted EBITDA(b) of approximately $1.910 billion, net cash from operating activities of approximately $1.689 billion and adjusted free cash flow of approximately $1.025 billion

 

TORONTO, Oct. 27, 2021 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2021.    

"We delivered another top to bottom beat in the period on continued strength in solid waste pricing, higher recycled commodity values, and improving E&P waste activity, along with acquisitions closed during the period.  More importantly, quality of revenue drove 60 basis points year-over-year adjusted EBITDA(b) margin expansion in the quarter, overcoming an estimated 40 basis points impact from margin dilutive acquisitions and hurricanes, putting us firmly on track to exceed the updated full year 2021 outlook we provided in August," said Worthing F. Jackman, President and Chief Executive Officer.  

"Strong execution, proactive acceleration of solid waste pricing to address inflationary pressures, and outsized contribution from acquisitions completed in 2021, already position us for double-digit growth, underlying solid waste margin expansion and strong free cash flow conversion in 2022.  Additional acquisitions expected to be completed later this year, and any continuation of trends in E&P waste activity or commodity-driven revenues, would provide incremental benefit."

Mr. Jackman continued, "As anticipated, the strength of our operating performance, free cash flow generation and balance sheet positioned us for another double-digit increase in our quarterly cash dividend, our eleventh straight year, demonstrating once again our ability to fund our differentiated growth strategy and outsized acquisition activity, along with an increasing return of capital to shareholders."

Q3 2021 Results

Revenue in the third quarter totaled $1.597 billion, up from $1.390 billion in the year ago period.  Operating income was $285.1 million, which included $5.6 million in acquisition-related costs, $3.1 million of impairments and other operating items, and $0.9 million in fair value accounting changes to equity awards.  This compares to operating income of $230.7 million in the third quarter of 2020, which included $7.9 million of costs primarily resulting from impairments and other operating items and acquisition-related costs.  Net income in the third quarter was $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.  In the year ago period, the Company reported net income of $158.0 million, or $0.60 per share on a diluted basis of 263.5 million shares. 

Adjusted net income(b) in the third quarter was $233.1 million, or $0.89 per diluted share, versus $188.6 million, or $0.72 per diluted share, in the prior year period.  Adjusted EBITDA(b) in the third quarter was $505.6 million and 31.7% of revenue, as compared to $432.6 million and 31.1% 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.

Nine Months Year to Date Results

For the nine months ended September 30, 2021, revenue was $4.527 billion, up from $4.048 billion in the year ago period.  Operating income, which included $9.8 million in impairments and other operating items, $7.6 million in fair value accounting changes to equity awards and $6.2 million in acquisition-related costs, was $790.3 million, as compared to operating income of $215.3 million for the same period in 2020, which included $453.1 million primarily related to impairments and other operating items. 

Net income for the nine months ended September 30, 2021 was $451.7 million, or $1.72 per share on a diluted basis of 261.9 million shares.  In the year ago period, the Company reported net income of $74.0 million, or $0.28 per share on a diluted basis of 263.7 million shares. 

Adjusted net income(b) for the nine months ended September 30, 2021 was $629.5 million, or $2.39 per diluted share, compared to $517.2 million, or $1.96 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2021 was $1.424 billion and 31.4% of revenue, up from $1.235 billion and 30.5% of revenue 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.  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 at approximately $6.110 billion, as compared to our revised revenue outlook of $5.975 billion provided in August.
  • Net income is estimated at approximately $633 million, and adjusted EBITDA(b) is estimated at approximately $1.910 billion, or about 31.3% of revenue, as compared to our revised adjusted EBITDA(b) outlook of $1.875 billion provided in August.
  • Capital expenditures are estimated at approximately $700 million, as compared to our revised capital expenditures outlook of approximately $675 million provided in August.
  • Net cash provided by operating activities is estimated at $1.689 billion, as compared to our revised outlook of $1.666 billion provided in August; adjusted free cash flow(b) is estimated at approximately $1.025 billion, or about 16.8% of revenue, as compared to our adjusted free cash flow outlook of $1.0 billion provided in August.

Q3 2021 Earnings Conference Call

Waste Connections will be hosting a conference call related to third quarter earnings on October 28th 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 800-915-4731 (within North America) or 212-231-2911 (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 November 4, 2021, by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #21998075.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on October 28th, providing the Company's fourth quarter 2021 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA(b).

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 (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 eight million residential, commercial and industrial customers in mostly exclusive and secondary markets across 44 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.  The Company's updated 2021 Sustainability Report provides progress updates on its targets and investments towards their achievement.  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 and 2022 financial results, outlook and related assumptions, 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

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2021

(Unaudited)

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

 
                           
   

Three months ended

September 30,

 

Nine months ended

September 30,

 
   

2020

 

2021

 

2020

 

2021

 
                   

Revenues

 

$

1,389,552

 

$

1,597,168

 

$

4,047,739

 

$

4,527,042

 

Operating expenses:

                         

Cost of operations

   

828,822

   

946,098

   

2,429,957

   

2,673,209

 

Selling, general and administrative

   

136,003

   

155,520

   

404,213

   

454,885

 

Depreciation

   

157,590

   

171,965

   

459,641

   

498,588

 

Amortization of intangibles

   

32,653

   

35,337

   

96,062

   

100,237

 

Impairments and other operating items

   

3,805

   

3,104

   

442,582

   

9,819

 

Operating income

   

230,679

   

285,144

   

215,284

   

790,304

 
                           

Interest expense

   

(40,636)

   

(40,418)

   

(119,562)

   

(124,171)

 

Interest income

   

903

   

495

   

4,396

   

2,342

 

Other income (expense), net

   

702

   

3,140

   

(3,046)

   

5,452

 

Loss on early extinguishment of debt

   

-

   

(115,288)

   

-

   

(115,288)

 

Income before income tax provision

   

191,648

   

133,073

   

97,072

   

558,639

 
                           

Income tax provision

   

(33,657)

   

(18,419)

   

(23,654)

   

(106,578)

 

Net income

   

157,991

   

114,654

   

73,418

   

452,061

 

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

   

58

   

(273)

   

594

   

(325)

 

Net income attributable to Waste Connections

 

$

158,049

 

$

114,381

 

$

74,012

 

$

451,736

 
                           

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

                         

Basic

 

$

0.60

 

$

0.44

 

$

0.28

 

$

1.73

 
                           

Diluted

 

$

0.60

 

$

0.44

 

$

0.28

 

$

1.72

 
                           

Shares used in the per share calculations:

                         

Basic

   

262,998,317

   

260,550,774

   

263,253,087

   

261,372,827

 

Diluted

   

263,507,486

   

261,145,220

   

263,718,001

   

261,879,754

 
                           
                           

Cash dividends per common share

 

$

0.185

 

$

0.205

 

$

0.555

 

$

0.615

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 
               
   

December 31,

2020

 

September 30,

2021

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

617,294

 

$

339,479

 

Accounts receivable, net of allowance for credit losses of $19,380 and $20,306 at December 31, 2020 and September 30, 2021, respectively

   

630,264

   

692,051

 

Prepaid expenses and other current assets

   

160,714

   

128,758

 

Total current assets

   

1,408,272

   

1,160,288

 

Restricted cash

   

97,095

   

118,893

 

Restricted investments

   

57,516

   

58,430

 

Property and equipment, net

   

5,284,506

   

5,414,789

 

Operating lease right-of-use assets

   

170,923

   

162,640

 

Goodwill

   

5,726,650

   

6,006,533

 

Intangible assets, net

   

1,155,079

   

1,264,728

 

Other assets, net

   

92,323

   

88,531

 

Total assets

 

$

13,992,364

 

$

14,274,832

 

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

290,820

 

$

341,211

 

Book overdraft

   

17,079

   

16,527

 

Deferred revenue

   

233,596

   

254,135

 

Accrued liabilities

   

404,923

   

448,541

 

Current portion of operating lease liabilities

   

30,671

   

37,236

 

Current portion of contingent consideration

   

43,297

   

42,359

 

Current portion of long-term debt and notes payable

   

8,268

   

5,289

 

Total current liabilities

   

1,028,654

   

1,145,298

 
               

Long-term portion of debt and notes payable

   

4,708,678

   

4,869,213

 

Long-term portion of operating lease liabilities

   

147,223

   

132,589

 

Long-term portion of contingent consideration

   

28,439

   

24,592

 

Deferred income taxes

   

760,044

   

777,968

 

Other long-term liabilities

   

455,888

   

442,016

 

Total liabilities

   

7,128,926

   

7,391,676

 

Commitments and contingencies

             

Equity:

             

Common shares: 262,899,174 shares issued and 262,824,990 shares outstanding at December 31, 2020; 260,526,784 shares issued and 260,453,918 shares outstanding at September 30, 2021

   

4,030,368

   

3,726,134

 

Additional paid-in capital

   

170,555

   

184,995

 

Accumulated other comprehensive income (loss)

   

(651)

   

17,553

 

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

   

-

   

-

 

Retained earnings

   

2,659,001

   

2,949,984

 

Total Waste Connections' equity

   

6,859,273

   

6,878,666

 

Noncontrolling interest in subsidiaries

   

4,165

   

4,490

 

Total equity

   

6,863,438

   

6,883,156

 
   

$

13,992,364

 

$

14,274,832

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2021

(Unaudited)

(in thousands of U.S. dollars)

 
               
   

Nine months ended September 30,

 
   

2020

 

2021

 

Cash flows from operating activities:

             

Net income

 

$

73,418

 

$

452,061

 

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

             

Loss on disposal of assets and impairments

   

423,832

   

9,302

 

Depreciation

   

459,641

   

498,588

 

Amortization of intangibles

   

96,062

   

100,237

 

Loss on early extinguishment of debt

   

-

   

115,288

 

Deferred income taxes, net of acquisitions

   

(77,613)

   

(24,282)

 

Amortization of debt issuance costs

   

6,146

   

3,887

 

Share-based compensation

   

38,316

   

42,694

 

Interest accretion

   

12,843

   

12,068

 

Payment of contingent consideration recorded in earnings

   

-

   

(520)

 

Adjustments to contingent consideration

   

16,852

   

89

 

Other

   

936

   

(1,286)

 

Net change in operating assets and liabilities, net of acquisitions

   

135,140

   

61,835

 

Net cash provided by operating activities

   

1,185,573

   

1,269,961

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(173,810)

   

(561,276)

 

Capital expenditures for property and equipment

   

(420,694)

   

(479,480)

 

Capital expenditures for undeveloped landfill property

   

(66,809)

   

-

 

Proceeds from disposal of assets

   

11,564

   

10,109

 

Other

   

(317)

   

(4,193)

 

Net cash used in investing activities

   

(650,066)

   

(1,034,840)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

1,790,625

   

1,943,192

 

Principal payments on notes payable and long-term debt

   

(1,505,641)

   

(1,814,034)

 

Premiums paid on early extinguishment of debt

   

-

   

(110,617)

 

Payment of contingent consideration recorded at acquisition date

   

(2,812)

   

(7,998)

 

Change in book overdraft

   

(862)

   

(563)

 

Payments for repurchase of common shares

   

(105,654)

   

(305,640)

 

Payments for cash dividends

   

(145,921)

   

(160,754)

 

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

   

(23,390)

   

(18,576)

 

Debt issuance costs

   

(11,117)

   

(17,997)

 

Proceeds from issuance of shares under employee share purchase plan

   

-

   

1,275

 

Proceeds from sale of common shares held in trust

   

679

   

131

 

Net cash used in financing activities

   

(4,093)

   

(491,581)

 

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

   

980

   

443

 

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

   

532,394

   

(256,017)

 

Cash, cash equivalents and restricted cash at beginning of period

   

423,221

   

714,389

 

Cash, cash equivalents and restricted cash at end of period

 

$

955,615

 

$

458,372

 

 

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, 2021:

 
             
   

Three months ended
September 30, 2021

 

Nine months ended
September 30, 2021

          Core Price

 

4.7

%

 

4.6

%

          Surcharges

 

0.4

%

 

0.1

%

          Volume

 

2.2

%

 

1.8

%

          Recycling

 

2.1

%

 

1.5

%

          Foreign Exchange Impact

 

0.7

%

 

1.0

%

          Total

 

10.1

%

 

9.0

%

 

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

                         
   

 Three months ended September 30, 2020

 
   

Revenue

 

Inter-company

Elimination

 

Reported

Revenue

 

%

Solid Waste Collection

 

$

1,010,497

 

$

(3,940)

 

$

1,006,557

 

72.4

%

Solid Waste Disposal and Transfer

   

514,705

   

(203,136)

   

311,569

 

22.4

%

Solid Waste Recycling

   

21,377

   

(656)

   

20,721

 

1.5

%

E&P Waste Treatment, Recovery and Disposal

   

26,218

   

(2,575)

   

23,643

 

1.7

%

Intermodal and Other

   

27,141

   

(79)

   

27,062

 

2.0

%

Total

 

$

1,599,938

 

$

(210,386)

 

$

1,389,552

 

100.0

%

 
   

 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

%

 

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

                         
   

Three months ended
September 30,

 

Nine months ended

September 30,

   

2020

 

2021

 

2020

 

2021

Acquisitions, net

 

$

44,214

 

$

51,368

 

$

144,509

 

$

136,035

 

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, 2020 and 2021:

                         
   

Three months ended

September 30,

 

Nine months ended

September 30,

   

2020

 

2021

 

2020

 

2021

Cash Interest Paid

 

$

23,572

 

$

38,685

 

$

86,400

 

$

120,647

Cash Taxes Paid

   

47,965

   

29,411

   

61,015

   

90,104

 

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

 

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

 

Days Sales Outstanding for the three months ended September 30, 2021: 40 (25 net of deferred revenue)

 

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

 
     

          Basic shares outstanding

 

260,550,774

          Dilutive effect of equity-based awards 

 

594,446

          Diluted shares outstanding

 

261,145,220

 

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,

   

2020

 

2021

 

2020

 

2021

Net income attributable to Waste Connections

 

$

158,049

 

$

114,381

 

$

74,012

 

$

451,736

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

   

(58)

   

273

   

(594)

   

325

Plus: Income tax provision

   

33,657

   

18,419

   

23,654

   

106,578

Plus: Interest expense

   

40,636

   

40,418

   

119,562

   

124,171

Less: Interest income

   

(903)

   

(495)

   

(4,396)

   

(2,342)

Plus: Depreciation and amortization

   

190,243

   

207,302

   

555,703

   

598,825

Plus: Closure and post-closure accretion

   

3,723

   

3,544

   

11,340

   

10,919

Plus: Impairments and other operating items

   

3,805

   

3,104

   

442,582

   

9,819

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

   

(702)

   

(3,140)

   

3,046

   

(5,452)

Plus: Loss on early extinguishment of debt

   

-

   

115,288

   

-

   

115,288

Adjustments:

                       

Plus: Transaction-related expenses(a)

   

2,335

   

5,637

   

4,497

   

6,220

Plus: Fair value changes to equity awards(b)

   

1,798

   

914

   

6,021

   

7,638

Adjusted EBITDA

 

$

432,583

 

$

505,645

 

$

1,235,427

 

$

1,423,725

                         

As % of revenues

   

31.1%

   

31.7%

   

30.5%

   

31.4%

 

____________________________

(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,

   

2020

 

2021

 

2020

 

2021

Net cash provided by operating activities

 

$

432,388

 

$

421,482

 

$

1,185,573

 

$

1,269,961

Less: Change in book overdraft

   

(256)

   

(373)

   

(862)

   

(563)

Plus: Proceeds from disposal of assets

   

922

   

2,204

   

11,564

   

10,109

Less: Capital expenditures for property and equipment

   

(151,983)

   

(208,089)

   

(420,694)

   

(479,480)

Adjustments:

                       

   Payment of contingent consideration recorded in earnings(a)

   

-

   

-

   

-

   

520

Cash received for divestitures(b)

   

-

   

-

   

(4,974)

   

-

Transaction-related expenses(c)

   

2,335

   

25,090

   

4,497

   

25,673

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

   

1,015

   

173

   

7,455

   

317

Tax effect(e)

   

(599)

   

(485)

   

(4,168)

   

(699)

Adjusted free cash flow

 

$

283,822

 

$

240,002

 

$

778,391

 

$

825,838

                         

As % of revenues

   

20.4%

   

15.0%

   

19.2%

   

18.2%

 

___________________________

(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 settlement of an acquired compensation 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,

   

2020

 

2021

 

2020

 

2021

Reported net income attributable to Waste Connections

 

$

158,049

 

$

114,381

 

$

74,012

 

$

451,736

Adjustments:

                       

Amortization of intangibles(a)

   

32,653

   

35,337

   

96,062

   

100,237

Impairments and other operating items(b)

   

3,805

   

3,104

   

442,582

   

9,819

Transaction-related expenses(c) 

   

2,335

   

5,637

   

4,497

   

6,220

Fair value changes to equity awards(d)

   

1,798

   

914

   

6,021

   

7,638

Loss on early extinguishment of debt(e)

   

-

   

115,288

   

-

   

115,288

Tax effect(f)

   

(10,000)

   

(41,531)

   

(137,523)

   

(61,466)

Tax items(g)

   

-

   

-

   

31,508

   

-

Adjusted net income attributable to Waste Connections

 

$

188,640

 

$

233,130

 

$

517,159

 

$

629,472

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

                       

Reported net income

 

$

0.60

 

$

0.44

 

$

0.28

 

$

1.72

Adjusted net income

 

$

0.72

 

$

0.89

 

$

1.96

 

$

2.39

                         

____________________________

(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.

(g)

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.

 

UPDATED 2021 OUTLOOK

NON-GAAP RECONCILIATION SCHEDULE

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

 

Reconciliation of Adjusted EBITDA:

                 
 

2021 Outlook

   

August
Estimates

   

Current 
Estimates

   

Observation

Net income attributable to Waste Connections

$

690,000

 

$

633,000

       

    Plus: Income tax provision (a)

 

184,294

   

156,487

   

Approximate 20.5% effective rate

 

    Plus: Interest expense, net

 

162,000

   

162,000

       

    Plus: Depreciation and Depletion

 

680,000

   

671,000

   

Approximately 11.0% of revenue

 

    Plus: Amortization

 

132,000

   

139,000

       

    Plus: Closure and post-closure accretion

 

15,000

   

15,000

       

    Plus: Loss on early extinguishment of debt (b)

 

-

   

115,288

       

    Plus: Impairments and other operating items (b)

 

6,712

   

9,819

       

    Plus: Other income, net (b)

 

(2,312)

   

(5,452)

       

    Adjustments: (b)

                 

        Plus: Transaction-related expenses

 

583

   

6,220

       

        Plus: Fair value changes to equity awards

 

6,723

   

7,638

       

Adjusted EBITDA

$

1,875,000

 

$

1,910,000

   

Approximately 31.3% of revenue

 

____________________________

(a)

Approximately 20.5% full year effective tax rate, including amounts reported for the nine month period ended September 30, 2021; figure excludes tax impact from early debt extinguishment costs.

(b)

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

 

Reconciliation of Adjusted Free Cash Flow:

 
 

 2021 Outlook

 
     

August 
Estimates

   

Current
Estimates

Net cash provided by operating activities

 

$

1,666,061

 

$

1,689,080

 

Plus: Proceeds from disposal of assets (a)

   

7,906

   

10,109

 

Less: Capital expenditures for property and equipment         

   

(675,000)

   

(700,000)

 

Adjustments: (a)

             

    Payment of contingent consideration recorded in earnings

   

520

   

520

 

    Transaction-related expenses

   

583

   

25,673

 

    Pre-existing Progressive Waste share-based grants

   

144

   

317

 

    Tax effect

   

(214)

   

(699)

 

Adjusted free cash flow

 

$

1,000,000

 

$

1,025,000

 
               

As % of revenues

   

16.7%

   

16.8%

 
               

____________________________

(a)

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

 

 

SOURCE Waste Connections, Inc.