Quarterly Results

Third Quarter 2023
Waste Connections Reports Third Quarter 2023 Results

  • Revenue of $2.065 billion, up 9.8% year over year
  • Net income(a) of $229.0 million, and adjusted EBITDA(b) of $671.2 million, up 14.1% year over year
  • Adjusted EBITDA(b) margin of 32.5% of revenue, up 120 basis points year over year and up 140 basis points sequentially from Q2
  • Net income of $0.89 per share, and adjusted net income(b) of $1.17 per share
  • Year to date net cash provided by operating activities of $1.571 billion and adjusted free cash flow(b) of $969.3 million
  • Acquisition activity expected to continue through year-end, with an estimated rollover contribution in 2024 of almost 2% from approximately $250 million in annualized revenues signed or closed to date in 2023

TORONTO, Oct. 25, 2023 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the third quarter of 2023.   

"We are extremely pleased by the durability of our financial and operating results in the quarter, with momentum for continued outsized margin expansion.  Solid operational execution enabled us to deliver adjusted EBITDA(b) margin of 32.5% in the third quarter, as expected, up 140 basis points sequentially and up 120 basis points year over year, in spite of over $15 million in unforeseen headwinds.  During the quarter, we overcame elevated levels of risk-related expenses and other lagging effects of higher employee turnover in prior periods, as well as site-specific incremental operating expenses at one of our landfills in California," said Ronald J. Mittelstaedt, President and Chief Executive Officer.  "The expected Q4 and ongoing expanding impacts from that evolving landfill situation are currently being evaluated, along with a recent shorter-term development at a landfill in Texas, and as such weren't anticipated in the full year outlook we provided in August. We expect to get more clarity going forward but currently estimate the range of outcomes in Q4 to include impacts of up to $20 million to revenue, adjusted EBITDA and adjusted free cash flow."

Mr. Mittelstaedt continued, "We remain encouraged by the pace of improvement in employee retention, which, along with our differentiated strategy and execution, should provide for above average underlying margin expansion in solid waste collection, transfer and disposal in 2024.  On that basis, we should be positioned for high single-digit adjusted EBITDA(b) growth in 2024 on expected mid to high single-digit revenue growth, including approximately $150 million of revenue carryover from acquisitions signed or closed year to date, with upside potential from additional acquisition activity and any further improvement in commodity-related activity."

Mr. Mittelstaedt concluded, "As anticipated, the strength of our operating performance, free cash flow generation and balance sheet positioned us for another double-digit increase to our quarterly cash dividend, demonstrating once again the compatibility of funding our differentiated growth strategy and acquisition activity, along with an increasing return of capital to shareholders."

Q3 2023 Results

Revenue in the third quarter totaled $2.065 billion, up from $1.880 billion in the year ago period.  Operating income was $353.0 million, which included $59.2 million primarily in impairments and other operating items, including $31.3 million of expenses associated with adjustments to contingent liabilities from acquisitions closed in prior periods and $25.0 million related to a non-cash impairment to adjust the carrying value of certain assets.  This compares to operating income of $326.8 million in the third quarter of 2022, which included $25.1 million primarily in impairments and other operating items and transaction-related expenses.  Net income in the third quarter was $229.0 million, or $0.89 per share on a diluted basis of 258.2 million shares.  In the year ago period, the Company reported net income of $236.9 million, or $0.92 per share on a diluted basis of 257.9 million shares. 

Adjusted net income(b) in the third quarter was $303.1 million, or $1.17 per diluted share, versus $284.9 million, or $1.10 per diluted share, in the prior year period.  Adjusted EBITDA(b) in the third quarter was $671.2 million, as compared to $588.1 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, 2023, revenue was $5.986 billion, up from $5.343 billion in the year ago period.  Operating income, which included $91.3 million primarily attributable to impairments and other operating items, executive separation costs, and transaction-related expenses, was $1.012 billion, as compared to operating income of $930.2 million in the prior year period, which included $38.5 million primarily attributable to impairments and other operating items and transaction-related expenses.   

Net income for the nine months ended September 30, 2023 was $636.0 million, or $2.46 per share on a diluted basis of 258.1 million shares.  In the year ago period, the Company reported net income of $641.3 million, or $2.49 per share on a diluted basis of 258.1 million shares. 

Adjusted net income(b) for the nine months ended September 30, 2023 was $795.8 million, or $3.08 per diluted share, compared to $755.5 million, or $2.93 per diluted share, in the year ago period. Adjusted EBITDA(b) for the nine months ended September 30, 2023 was $1.867  billion, as compared to $1.657 billion in the prior year period. 

 

 (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 2023 Earnings Conference Call

Waste Connections will be hosting a conference call related to third quarter earnings on October 26th 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 2, 2023, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #5793196.   

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on October 26th, providing the Company's fourth quarter 2023 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA(b).

About Waste Connections

Waste Connections (wasteconnections.com) is an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, including by rail, along with resource recovery primarily through recycling and renewable fuels generation.  The Company serves approximately nine 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.  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 and focused 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.  For more information and updates on our progress towards targeted achievement, visit 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 2023 and 2024 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, 2022 AND 2023

(Unaudited)

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

 
   
   

Three months ended
September 30,

 

Nine months ended
September 30,

 
   

2022

 

2023

 

2022

 

2023

 
                   

Revenues

 

$

1,879,868

 

$

2,064,744

 

$

5,342,558

 

$

5,986,342

 

Operating expenses:

                         

Cost of operations

   

1,120,629

   

1,204,603

   

3,198,039

   

3,548,893

 

Selling, general and administrative

   

186,887

   

196,316

   

518,705

   

606,367

 

Depreciation

   

193,287

   

214,966

   

562,174

   

632,347

 

Amortization of intangibles

   

38,859

   

39,405

   

113,956

   

117,740

 

Impairments and other operating items

   

13,438

   

56,477

   

19,467

   

69,201

 

Operating income

   

326,768

   

352,977

   

930,217

   

1,011,794

 
                           

Interest expense

   

(51,161)

   

(69,016)

   

(137,565)

   

(204,914)

 

Interest income

   

1,784

   

2,833

   

2,574

   

6,886

 

Other income, net

   

8,487

   

5,372

   

2,373

   

8,346

 

Income before income tax provision

   

285,878

   

292,166

   

797,599

   

822,112

 
                           

Income tax provision

   

(48,753)

   

(62,975)

   

(155,899)

   

(185,915)

 

Net income

   

237,125

   

229,191

   

641,700

   

636,197

 

Less: Net income attributable to noncontrolling interests

   

(213)

   

(165)

   

(390)

   

(150)

 

Net income attributable to Waste Connections

 

$

236,912

 

$

229,026

 

$

641,310

 

$

636,047

 
                           

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

                         

Basic

 

$

0.92

 

$

0.89

 

$

2.49

 

$

2.47

 
                           

Diluted

 

$

0.92

 

$

0.89

 

$

2.49

 

$

2.46

 
                           

Shares used in the per share calculations:

                         

Basic

   

257,197,010

   

257,633,703

   

257,438,756

   

257,535,408

 

Diluted

   

257,891,635

   

258,229,404

   

258,060,751

   

258,110,484

 
                           
                           

Cash dividends per common share

 

$

0.23

 

$

0.255

 

$

0.690

 

$

0.765

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

 
   
   

December 31,
2022

 

September 30,
2023

 

ASSETS

             

Current assets:

             

Cash and equivalents

 

$

78,637

 

$

96,187

 

Accounts receivable, net of allowance for credit losses of $22,939 and $23,970 at
December 31, 2022 and September 30, 2023, respectively

   

833,862

   

868,093

 

Prepaid expenses and other current assets

   

205,146

   

187,442

 

Total current assets

   

1,117,645

   

1,151,722

 

Restricted cash

   

102,727

   

102,844

 

Restricted investments

   

68,099

   

75,990

 

Property and equipment, net

   

6,950,915

   

7,096,769

 

Operating lease right-of-use assets

   

192,506

   

263,491

 

Goodwill

   

6,902,297

   

7,313,084

 

Intangible assets, net

   

1,673,917

   

1,618,692

 

Other assets, net

   

126,497

   

108,648

 

Total assets

 

$

17,134,603

 

$

17,731,240

 

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

 

$

638,728

 

$

604,542

 

Book overdraft

   

15,645

   

15,782

 

Deferred revenue

   

325,002

   

342,726

 

Accrued liabilities

   

431,247

   

446,436

 

Current portion of operating lease liabilities

   

35,170

   

32,677

 

Current portion of contingent consideration

   

60,092

   

100,813

 

Current portion of long-term debt and notes payable

   

6,759

   

32,760

 

Total current liabilities

   

1,512,643

   

1,575,736

 
               

Long-term portion of debt and notes payable

   

6,890,149

   

6,803,439

 

Long-term portion of operating lease liabilities

   

165,462

   

239,768

 

Long-term portion of contingent consideration

   

21,323

   

21,195

 

Deferred income taxes

   

1,013,742

   

1,048,283

 

Other long-term liabilities

   

417,640

   

451,524

 

Total liabilities

   

10,020,959

   

10,139,945

 

Commitments and contingencies

             

Equity:

             

Common shares: 257,211,175 shares issued and 257,145,716 shares outstanding at
     December 31, 2022; 257,640,960 shares issued and 257,581,304 shares outstanding at
     September 30, 2023

   

3,271,958

   

3,276,631

 

Additional paid-in capital

   

244,076

   

270,104

 

Accumulated other comprehensive loss

   

(56,830)

   

(49,262)

 

Treasury shares: 65,459 and 59,656 shares at December 31, 2022 and September 30, 2023,
     respectively

   

-

   

-

 

Retained earnings

   

3,649,494

   

4,088,726

 

Total Waste Connections' equity

   

7,108,698

   

7,586,199

 

Noncontrolling interest in subsidiaries

   

4,946

   

5,096

 

Total equity

   

7,113,644

   

7,591,295

 

Total liabilities and equity

 

$

17,134,603

 

$

17,731,240

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2023

(Unaudited)

(in thousands of U.S. dollars)

 
   
   

Nine months ended September 30,

 
   

2022

 

2023

 

Cash flows from operating activities:

             

Net income

 

$

641,700

 

$

636,197

 

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

             

Loss on disposal of assets and impairments

   

11,503

   

37,470

 

Depreciation

   

562,174

   

632,347

 

Amortization of intangibles

   

113,956

   

117,740

 

Deferred income taxes, net of acquisitions

   

91,098

   

29,060

 

Current period provision for expected credit losses

   

11,097

   

13,363

 

Amortization of debt issuance costs

   

3,879

   

4,862

 

Share-based compensation

   

48,395

   

56,110

 

Interest accretion

   

13,218

   

14,827

 

Payment of contingent consideration recorded in earnings

   

(2,982)

   

-

 

Adjustments to contingent consideration

   

(1,030)

   

30,367

 

Other

   

(8,412)

   

(3,535)

 

Net change in operating assets and liabilities, net of acquisitions

   

15,541

   

2,068

 

Net cash provided by operating activities

   

1,500,137

   

1,570,876

 
               

Cash flows from investing activities:

             

Payments for acquisitions, net of cash acquired

   

(1,272,910)

   

(573,185)

 

Capital expenditures for property and equipment

   

(618,313)

   

(615,554)

 

Proceeds from disposal of assets

   

23,341

   

8,678

 

Other

   

9,296

   

(5,552)

 

Net cash used in investing activities

   

(1,858,586)

   

(1,185,613)

 
               

Cash flows from financing activities:

             

Proceeds from long-term debt

   

3,148,624

   

1,242,554

 

Principal payments on notes payable and long-term debt

   

(2,052,412)

   

(1,383,415)

 

Payment of contingent consideration recorded at acquisition date

   

(12,114)

   

(4,255)

 

Change in book overdraft

   

(5,983)

   

137

 

Payments for repurchase of common shares

   

(424,999)

   

-

 

Payments for cash dividends

   

(177,710)

   

(196,815)

 

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

   

(17,466)

   

(29,415)

 

Debt issuance costs

   

(11,454)

   

-

 

Proceeds from issuance of shares under employee share purchase plan

   

3,271

   

3,908

 

Proceeds from sale of common shares held in trust

   

660

   

765

 

Net cash provided by (used in) financing activities

   

450,417

   

(366,536)

 
               

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

   

(3,210)

   

(1,060)

 
               

Net increase in cash, cash equivalents and restricted cash

   

88,758

   

17,667

 

Cash, cash equivalents and restricted cash at beginning of period

   

219,615

   

181,364

 

Cash, cash equivalents and restricted cash at end of period

 

$

308,373

 

$

199,031

 

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, 2023:

   

Three months ended

September 30, 2023

 

Nine months ended

September 30, 2023

 

Core Price

   

8.8 %

   

9.9 %

 

Surcharges

   

(1.1 %)

   

(0.4 %)

 

Volume

   

(2.4 %)

   

(1.9 %)

 

Recycling

   

(0.5 %)

   

(1.3 %)

 

Foreign Exchange Impact

   

(0.4 %)

   

(0.6 %)

 

Total

   

4.4 %

   

5.7 %

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended September 30, 2022 and 2023:

                           
   

 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

%

                           
                                                   
   

 Three months ended September 30, 2023

 
   

Revenue

 

Inter-company
Elimination

 

Reported
Revenue

 

%

Solid Waste Collection

 

$

1,512,745

 

$

(4,742)

 

$

1,508,003

 

73.0

%

Solid Waste Disposal and Transfer

   

703,544

   

(285,292)

   

418,252

 

20.3

%

Solid Waste Recycling

   

36,103

   

(988)

   

35,115

 

1.7

%

E&P Waste Treatment, Recovery and Disposal

   

62,066

   

(3,561)

   

58,505

 

2.8

%

Intermodal and Other

   

44,984

   

(115)

   

44,869

 

2.2

%

Total

 

$

2,359,442

 

$

(294,698)

 

$

2,064,744

 

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, 2022 and 2023:

                         
   

Three months ended
September 30,

 

Nine months ended
September 30,

   

2022

 

2023

 

2022

 

2023

Acquisitions, net

 

$

150,644

 

$

102,908

 

$

402,007

 

$

356,301

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, 2022 and 2023:

                         
   

Three months ended
September 30,

 

Nine months ended
September 30,

   

2022

 

2023

 

2022

 

2023

Cash Interest Paid

 

$

42,528

 

$

73,563

 

$

118,541

 

$

191,055

Cash Taxes Paid

   

15,787

   

74,510

   

53,599

   

125,550

Debt to Book Capitalization as of September 30, 2023:  47%

Internalization for the three months ended September 30, 2023:  56%

Days Sales Outstanding for the three months ended September 30, 2023:  39 (23 net of deferred revenue)

Share Information for the three months ended September 30, 2023:

     

Basic shares outstanding

 

257,633,703

Dilutive effect of equity-based awards 

 

595,701

Diluted shares outstanding

 

258,229,404

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,

   

2022

 

2023

 

2022

 

2023

Net income attributable to Waste Connections

 

$

236,912

 

$

229,026

 

$

641,310

 

$

636,047

Plus: Net income attributable to noncontrolling interests

   

213

   

165

   

390

   

150

Plus: Income tax provision

   

48,753

   

62,975

   

155,899

   

185,915

Plus: Interest expense

   

51,161

   

69,016

   

137,565

   

204,914

Less: Interest income

   

(1,784)

   

(2,833)

   

(2,574)

   

(6,886)

Plus: Depreciation and amortization

   

232,146

   

254,371

   

676,130

   

750,087

Plus: Closure and post-closure accretion

   

4,061

   

4,609

   

12,148

   

13,696

Plus: Impairments and other operating items

   

13,438

   

56,477

   

19,467

   

69,201

Less: Other income, net

   

(8,487)

   

(5,372)

   

(2,373)

   

(8,346)

Adjustments:

                       

Plus: Transaction-related expenses(a)

   

10,461

   

3,108

   

18,694

   

7,014

Plus/(Less): Fair value changes to equity awards(b)

   

1,196

   

(379)

   

349

   

65

Plus: Executive separation costs(c)

   

-

   

-

   

-

   

15,063

Adjusted EBITDA

 

$

588,070

 

$

671,163

 

$

1,657,005

 

$

1,866,920

                         

As % of revenues

   

31.3 %

   

32.5 %

   

31.0 %

   

31.2 %

       

(a)

Reflects the addback of acquisition-related transaction costs.

(b)

Reflects fair value accounting changes associated with certain equity awards.

(c)

Reflects the cash and non-cash components of severance expense associated with an executive departure. 

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 liquidity measure in the solid waste industry.  Waste Connections calculates 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 periodic distributions to noncontrolling interests.  Waste Connections further adjusts this calculation to exclude the effects of items management believes impact the ability to evaluate the liquidity of its business operations.  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,

   

2022

 

2023

 

2022

 

2023

Net cash provided by operating activities

 

$

526,459

 

$

554,164

 

$

1,500,137

 

$

1,570,876

Plus/(Less): Change in book overdraft

   

(5,929)

   

371

   

(5,983)

   

137

Plus: Proceeds from disposal of assets

   

6,447

   

4,859

   

23,341

   

8,678

Less: Capital expenditures for property and equipment

   

(246,885)

   

(221,411)

   

(618,313)

   

(615,554)

Adjustments:

                       

Payment of contingent consideration recorded in earnings(a)

   

2,982

   

-

   

2,982

   

-

Cash received for divestitures(b)

   

-

   

-

   

(5,671)

   

-

Transaction-related expenses(c)

   

10,461

   

1,572

   

37,558

   

3,836

Executive separation costs(d)

   

-

   

-

   

-

   

1,686

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

   

274

   

-

   

286

   

841

Tax effect(f)

   

(3,212)

   

(231)

   

(5,377)

   

(1,221)

Adjusted free cash flow

 

$

290,597

 

$

339,324

 

$

928,960

 

$

969,279

                         

As % of revenues

   

15.5 %

   

16.4 %

   

17.4 %

   

16.2 %

         

(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 the settlement of an acquired tax liability.

(d)

Reflects the cash component of severance expense associated with an executive departure. 

(e)

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

(f)

The aggregate tax effect of footnotes (a) through (e) 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 valuation measures 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,

   

2022

 

2023

 

2022

 

2023

Reported net income attributable to Waste Connections

 

$

236,912

 

$

229,026

 

$

641,310

 

$

636,047

Adjustments:

                       

Amortization of intangibles(a)

   

38,859

   

39,405

   

113,956

   

117,740

Impairments and other operating items(b)

   

13,438

   

56,477

   

19,467

   

69,201

Transaction-related expenses(c) 

   

10,461

   

3,108

   

18,694

   

7,014

Fair value changes to equity awards(d)

   

1,196

   

(379)

   

349

   

65

Executive separation costs(e)

   

-

   

-

   

-

   

15,063

Tax effect(f)

   

(15,944)

   

(24,586)

   

(38,260)

   

(49,356)

Adjusted net income attributable to Waste Connections

 

$

284,922

 

$

303,051

 

$

755,516

 

$

795,774

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

                       

Reported net income

 

$

0.92

 

$

0.89

 

$

2.49

 

$

2.46

Adjusted net income

 

$

1.10

 

$

1.17

 

$

2.93

 

$

3.08

         

(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 cash and non-cash components of severance expense associated with an executive departure.

(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.

 

SOURCE Waste Connections, Inc.