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8-K - FORM 8-K - Waste Connections US, Inc.d526681d8k.htm

Exhibit 99.1

 

LOGO

WASTE CONNECTIONS REPORTS FIRST QUARTER 2013 RESULTS

 

   

Revenue of $449.9 million, up 19.5%

 

   

Adjusted EBITDA* of $146.1 million, or 32.5% of revenue, up 25.6%

 

   

GAAP and adjusted EPS* of $0.34 and $0.37, respectively

 

   

Net cash provided by operating activities of $133.0 million

 

   

Adjusted free cash flow* increases 28.9% to $100.2 million, or 22.3% of revenue

THE WOODLANDS, TX, April 24, 2013—Waste Connections, Inc. (NYSE: WCN) today announced its results for the first quarter of 2013. Revenue totaled $449.9 million, a 19.5% increase over revenue of $376.4 million in the year ago period. Operating income was $86.9 million compared to $65.1 million in the first quarter of 2012. Adjusted EBITDA* in the first quarter of 2013 was $146.1 million, up 25.6% over adjusted EBITDA* of $116.3 million in the prior year period. Adjusted EBITDA, a non-GAAP measure, excludes the impact of items such as acquisition-related costs and expenses incurred in connection with the relocation of our corporate headquarters from California to Texas, as shown in the detailed reconciliation in the attached table.

Net income attributable to Waste Connections in the quarter was $41.6 million, or $0.34 per share on a diluted basis of 123.9 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $31.3 million, or $0.27 per share on a diluted basis of 115.9 million shares.

Adjusted net income attributable to Waste Connections* in the quarter was $45.7 million, or $0.37 per share, versus $40.7 million, or $0.35 per share, in the prior year period. Adjusted net income and adjusted net income per diluted share, both non-GAAP measures, primarily exclude the impact of acquisition-related items such as amortization of intangibles and transaction costs, as well as expenses incurred in connection with the relocation of our corporate headquarters from California to Texas, all net of tax, as shown in the detailed reconciliation in the attached table.

“2013 is off to a great start as continued strong pricing growth, improving landfill volumes and ramping E&P activity drove better than expected margins and free cash flow in the period. Adjusted EBITDA as a percentage of revenue in the first quarter was 32.5%, or about 50 basis points above our expectations. More importantly, adjusted free cash flow, a hallmark of our strategy, exceeded $100 million and was 22.3% of revenue in the period,” said Ronald J. Mittelstaedt, Chief Executive Officer and Chairman. “We remain well positioned to benefit from both improving fundamentals within our business and upside from potential acquisitions and newly permitted E&P waste facilities.”

Waste Connections, Inc. is an integrated solid waste services company that provides waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets. Through its R360 Environmental Solutions subsidiary, the Company also is a leading provider of non-hazardous oilfield waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the United States, including the Permian, Bakken and Eagle Ford Basins. Waste Connections serves more than two million residential, commercial, industrial, and exploration and production customers from a network of operations in 31 states. The Company also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. Waste Connections, Inc. was founded in September 1997 and is headquartered in The Woodlands, Texas.

 

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


For more information, visit the Waste Connections web site at www.wasteconnections.com. Copies of financial literature, including this release, are available on the Waste Connections website or through contacting us directly at (832) 442-2200.

Information Regarding Forward-Looking Statements

Certain statements contained in this release are forward-looking in nature, including statements related to: expected operating performance, including pricing growth and E&P activity; expected acquisitions activity and newly permitted E&P waste facilities, and the impact of the relocation of the Company’s corporate headquarters from Folsom, California to The Woodlands, Texas. These statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” or “anticipates,” or the negative thereof or comparable terminology, or by discussions of strategy. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) our acquisitions may not be successful, which may reduce the anticipated benefit from acquired businesses; (2) a portion of our growth and future financial performance depends on our ability to integrate acquired businesses into our organization and operations; (3) our indebtedness could adversely affect our financial condition and limit our financial flexibility; (4) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (5) our industry is highly competitive and includes larger and better capitalized companies, companies with lower prices, return expectations or other advantages, and governmental service providers, which could adversely affect our ability to compete and our operating results; (6) we may lose contracts through competitive bidding, early termination or governmental action; (7) price increases may not be adequate to offset the impact of increased costs or may cause us to lose volume; (8) economic downturns adversely affect operating results; (9) our results are vulnerable to economic conditions and seasonal factors affecting the regions in which we operate; (10) the E&P waste disposal business depends on oil and gas prices and the level of drilling and production activity in the basins in which we operate;(11) we have limited experience in running an E&P waste treatment, recovery and disposal business; (12) our E&P waste business is dependent upon the willingness of our customers to outsource their waste management activities; (13) changes in laws or government regulations regarding hydraulic fracturing could increase our customers’ costs of doing business and reduce oil and gas production by our customers, which could adversely impact our business; (14) our E&P waste business could be adversely affected by changes in laws regulating E&P waste; (15) we may be subject in the normal course of business to judicial, administrative or other third party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity; (16) increases in the price of diesel fuel may adversely affect our collection business and reduce our operating margins; (17) increases in labor and disposal and related transportation costs could impact our financial results; (18) efforts by labor unions could divert management attention and adversely affect operating results; (19) we could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate and the accrued pension benefits are not fully funded; (20) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (21) each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, including environmental liabilities; (22) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (23) our accruals for our landfill site closure and post-closure costs may be inadequate; (24) the financial soundness of our customers could affect our business and operating results; (25) we depend significantly on the services of the members of our senior, regional and district management team, and the departure of any of those persons could cause our operating results to suffer; (26) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (27) we may incur charges related to capitalized expenditures of landfill development projects, which would decrease our earnings; (28) because we depend on railroads for our intermodal operations, our operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (29) our financial results could be adversely affected by impairments of goodwill or indefinite-lived intangibles; (30) our financial results are based upon estimates and assumptions that may differ from actual results; (31) the adoption of new accounting standards or interpretations could adversely affect our financial results; (32) pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements; and (33) if we are not able to develop and protect intellectual property, or if a competitor develops or obtains exclusive rights to a breakthrough technology, our financial results may suffer. These risks and uncertainties, as well as others, are discussed in greater detail in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.

 

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– financial tables attached –

CONTACT:

 

Worthing Jackman / (832) 442-2266     Mary Anne Whitney / (832) 442-2253
worthingj@wasteconnections.com     maryannew@wasteconnections.com

 

 

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WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31, 2012 AND 2013

(Unaudited)

(in thousands, except share and per share amounts)

 

     Three months ended
March 31,
 
     2012     2013  

Revenues

   $ 376,430      $ 449,892   

Operating expenses:

    

Cost of operations

     216,681        251,963   

Selling, general and administrative

     51,174        53,251   

Depreciation

     37,173        51,649   

Amortization of intangibles

     5,631        6,438   

Loss (gain) on disposal of assets

     715        (322
  

 

 

   

 

 

 

Operating income

     65,056        86,913   

Interest expense

     (12,285     (19,012

Other income, net

     819        742   
  

 

 

   

 

 

 

Income before income tax provision

     53,590        68,643   

Income tax provision

     (22,151     (26,963
  

 

 

   

 

 

 

Net income

     31,439        41,680   

Less: net income attributable to noncontrolling interests

     (136     (124
  

 

 

   

 

 

 

Net income attributable to Waste Connections

   $ 31,303      $ 41,556   
  

 

 

   

 

 

 

Earnings per common share attributable to Waste Connections’ common stockholders:

    

Basic

   $ 0.27      $ 0.34   
  

 

 

   

 

 

 

Diluted

   $ 0.27      $ 0.34   
  

 

 

   

 

 

 

Shares used in the per share calculations:

    

Basic

     115,188,134        123,380,799   
  

 

 

   

 

 

 

Diluted

     115,876,461        123,904,929   
  

 

 

   

 

 

 

Cash dividends per common share

   $ 0.09      $ 0.10   
  

 

 

   

 

 

 

 

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WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

 

     December 31,     March 31,  
     2012     2013  

ASSETS

    

Current assets:

    

Cash and equivalents

   $ 23,212      $ 14,280   

Accounts receivable, net of allowance for doubtful accounts of $6,548 and $6,491 at December 31, 2012 and March 31, 2013, respectively

     235,762        219,915   

Deferred income taxes

     45,798        36,096   

Prepaid expenses and other current assets

     57,714        32,799   
  

 

 

   

 

 

 

Total current assets

     362,486        303,090   

Property and equipment, net

     2,457,606        2,436,035   

Goodwill

     1,636,557        1,637,339   

Intangible assets, net

     541,908        535,462   

Restricted assets

     34,889        35,002   

Other assets, net

     42,580        42,875   
  

 

 

   

 

 

 
   $ 5,076,026      $ 4,989,803   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Accounts payable

   $ 130,260      $ 118,237   

Book overdraft

     12,567        12,549   

Accrued liabilities

     121,829        118,193   

Deferred revenue

     69,930        68,850   

Current portion of contingent consideration

     49,018        49,136   

Current portion of long-term debt and notes payable

     33,968        35,182   
  

 

 

   

 

 

 

Total current liabilities

     417,572        402,147   

Long-term debt and notes payable

     2,204,967        2,096,171   

Long-term portion of contingent consideration

     30,346        30,660   

Other long-term liabilities

     75,129        73,716   

Deferred income taxes

     464,882        472,436   
  

 

 

   

 

 

 

Total liabilities

     3,192,896        3,075,130   

Commitments and contingencies

    

Equity:

    

Preferred stock: $0.01 par value; 7,500,000 shares authorized; none issued and outstanding

     —          —     

Common stock: $0.01 par value; 250,000,000 shares authorized; 123,019,494 and 123,418,612 shares issued and outstanding at December 31, 2012 and March 31, 2013, respectively

     1,230        1,234   

Additional paid-in capital

     779,904        781,073   

Retained earnings

     1,103,188        1,132,434   

Accumulated other comprehensive loss

     (6,165     (4,967
  

 

 

   

 

 

 

Total Waste Connections’ equity

     1,878,157        1,909,774   

Noncontrolling interest in subsidiaries

     4,973        4,899   
  

 

 

   

 

 

 

Total equity

     1,883,130        1,914,673   
  

 

 

   

 

 

 
   $ 5,076,026      $ 4,989,803   
  

 

 

   

 

 

 

 

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WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2012 AND 2013

(Unaudited)

(Dollars in thousands)

 

     Three months ended
March 31,
 
     2012     2013  

Cash flows from operating activities:

    

Net income

   $ 31,439      $ 41,680   

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

    

Loss (gain) on disposal of assets

     715        (322

Depreciation

     37,173        51,649   

Amortization of intangibles

     5,631        6,438   

Deferred income taxes, net of acquisitions

     12,101        16,524   

Amortization of debt issuance costs

     415        858   

Equity-based compensation

     7,596        3,594   

Interest income on restricted assets

     (112     (113

Interest accretion

     836        1,293   

Excess tax benefit associated with equity-based compensation

     (3,005     (2,098

Net change in operating assets and liabilities, net of acquisitions

     7,792        13,455   
  

 

 

   

 

 

 

Net cash provided by operating activities

     100,581        132,958   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Payments for acquisitions, net of cash acquired

     (138,908     —     

Proceeds from adjustment to acquisition consideration

     —          18,000   

Capital expenditures for property and equipment

     (27,953     (36,905

Proceeds from disposal of assets

     753        723   

Other

     (1,861     (926
  

 

 

   

 

 

 

Net cash used in investing activities

     (167,969     (19,108
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from long-term debt

     184,000        26,500   

Principal payments on notes payable and long-term debt

     (474,865     (134,083

Payment of contingent consideration

     (3,528     (229

Change in book overdraft

     321        (17

Proceeds from option and warrant exercises

     530        761   

Excess tax benefit associated with equity-based compensation

     3,005        2,098   

Payments for cash dividends

     (10,010     (12,310

Tax withholdings related to net share settlements of restricted stock units

     (5,904     (5,280

Distributions to noncontrolling interests

     (95     (198

Debt issuance costs

     —          (24

Proceeds from common stock offering, net

     369,460        —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     62,914        (122,782
  

 

 

   

 

 

 

Net decrease in cash and equivalents

     (4,474     (8,932

Cash and equivalents at beginning of period

     12,643        23,212   
  

 

 

   

 

 

 

Cash and equivalents at end of period

   $ 8,169      $ 14,280   
  

 

 

   

 

 

 

 

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ADDITIONAL STATISTICS

THREE MONTHS ENDED MARCH 31, 2013

(Dollars in thousands)

Revenue Growth: The following table reflects changes in our revenue for the three months ended March 31, 2013:

 

     Three months ended
March 31, 2013
 

Solid Waste Internal Growth:

  

Core Price

     2.8

Surcharges

     0.4

Volume

     (1.9 %) 

Recycling

     (0.6 %) 
  

 

 

 

Total Solid Waste Internal Growth

     0.7

Intermodal and Other

     0.2

Acquisitions, net

     18.6
  

 

 

 

Total

     19.5
  

 

 

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three months ended March 31, 2013:

 

     Three Months Ended
March 31, 2013
 

Solid Waste Collection

   $ 293,144        57.9

Solid Waste Disposal and Transfer

     122,772        24.2

E&P Waste Treatment, Disposal & Recovery

     59,931        11.8

Solid Waste Recycling

     18,794        3.7

Intermodal and Other

     12,118        2.4
  

 

 

   

 

 

 

Total before inter-company elimination

   $ 506,759        100.0

Inter-company elimination

     (56,867  
  

 

 

   

Reported Revenue

   $ 449,892     
  

 

 

   

Days Sales Outstanding for the three months ended March 31, 2013: 44 (30 net of deferred revenue)

Internalization for the three months ended March 31, 2013: 57%

Other Cash Flow Items:

 

     Three Months Ended
March 31, 2013
 

Cash Interest Paid

   $ 9,796   

Cash Taxes Paid

   $ 699   

Debt to Book Capitalization as of March 31, 2013: 53%

Share Information for the three months ended March 31, 2013:

 

Basic shares outstanding

     123,380,799   

Dilutive effect of options and warrants

     202,115   

Dilutive effect of restricted stock

     322,015   
  

 

 

 

Diluted shares outstanding

     123,904,929   

 

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NON-GAAP RECONCILIATION SCHEDULE

(in thousands)

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 the Company’s operations. Waste Connections defines adjusted EBITDA as income before income tax provision, plus interest expense, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on disposal of assets, less other income. The Company further adjusts this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of our business. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate adjusted EBITDA differently.

 

     Three Months Ended
March 31, 2012
    Three months ended
March 31, 2013
 

Income before income tax provision

   $ 53,590      $ 68,643   

Plus: Interest expense

     12,285        19,012   

Plus: Depreciation and amortization

     42,804        58,087   

Plus: Closure and post-closure accretion

     612        761   

Plus/less: Loss (gain) on disposal of assets

     715        (322

Less: Other income, net

     (819     (742

Adjustments:

    

Plus: Acquisition-related costs (a)

     1,777        473   

Plus: Corporate relocation expenses (b)

     1,727        152   

Plus: NEO one-time equity grants (c)

     3,585        —     
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 116,276      $ 146,064   
  

 

 

   

 

 

 

As % of revenues

     30.9     32.5

 

(a) Reflects the addback of acquisition-related transaction costs.
(b) Reflects the addback of costs associated with the relocation of the Company’s corporate headquarters from California to Texas.
(c) Reflects the addback of one-time equity compensation expense incurred at the time the Company’s NEOs’ employment contracts were modified.

 

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NON-GAAP RECONCILIATION SCHEDULE (continued)

(in thousands)

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 the Company’s operations. Waste Connections defines adjusted free cash flow as net cash provided by operating activities, plus proceeds from disposal of assets, plus or minus change in book overdraft, plus excess tax benefit associated with equity-based compensation, less capital expenditures for property and equipment and distributions to noncontrolling interests. The Company 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
March 31, 2012
    Three months ended
March 31, 2013
 

Net cash provided by operating activities

   $ 100,581      $ 132,958   

Plus/less: Change in book overdraft

     321        (17

Plus: Proceeds from disposal of assets

     753        723   

Plus: Excess tax benefit associated with equity-based compensation

     3,005        2,098   

Less: Capital expenditures for property and equipment

     (27,953     (36,905

Less: Distributions to noncontrolling interests

     (95     (198

Adjustment:

    

Corporate office relocation, net of taxes (a)

     1,071        1,503   
  

 

 

   

 

 

 

Adjusted free cash flow

   $ 77,683      $ 100,162   
  

 

 

   

 

 

 

As % of revenues

     20.6     22.3

 

(a) Reflects the addback of third party expenses and reimbursable advances to employees associated with the relocation of our corporate headquarters from California to Texas.

 

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NON-GAAP RECONCILIATION SCHEDULE (continued)

(in thousands, except per share amounts)

Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income per Diluted Share:

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

 

     Three months ended
March 31,
 
     2012      2013  

Reported net income attributable to Waste Connections

   $ 31,303         41,556   

Adjustments:

     

Amortization of intangibles, net of taxes (a)

     3,492         3,975   

Acquisition-related costs, net of taxes (b)

     1,101         292   

Loss (gain) on disposal of assets, net of taxes (c)

     443         (199

Corporate relocation expenses, net of taxes (d)

     1,071         94   

NEO one-time equity grants, net of taxes (e)

     3,315         —     
  

 

 

    

 

 

 

Adjusted net income attributable to Waste Connections

   $ 40,725       $ 45,718   
  

 

 

    

 

 

 

Diluted earnings per common share attributable to Waste Connections common stockholders:

     

Reported net income

   $ 0.27       $ 0.34   
  

 

 

    

 

 

 

Adjusted net income

   $ 0.35       $ 0.37   
  

 

 

    

 

 

 

 

(a) Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.
(b) Reflects the elimination of acquisition-related transaction costs.
(c) Reflects the elimination of a loss (gain) on disposal of assets.
(d) Reflects the addback of costs associated with the relocation of the Company’s corporate headquarters from California to Texas.
(e) Reflects the addback of one-time equity compensation expense incurred at the time our NEOs’ employment contracts were modified.

 

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