Waste Connections Reports Second Quarter 2014 Results - Revenue of $524.7 million, up 7.2%

- Reports 4.1% solid waste price + volume growth and 25.9% E&P waste growth

- Adjusted EBITDA* of $182.5 million, or 34.8% of revenue, up 7.7%

- GAAP EPS of $0.50 and adjusted EPS* of $0.53, up 12.8%

- YTD net cash provided by operating activities of $279.7 million

- YTD adjusted free cash flow* increases 18.8% to $208.6 million, or 20.7% of revenue

THE WOODLANDS, Texas, July 21, 2014 /PRNewswire/ -- Waste Connections, Inc. (NYSE: WCN) today announced its results for the second quarter of 2014.  Revenue in the second quarter totaled $524.7 million, a 7.2% increase over revenue of $489.4 million in the year ago period.  Operating income was $118.7 million compared to $93.1 million in the second quarter of 2013.  Adjusted EBITDA* in the current year period was $182.5 million, up 7.7% over adjusted EBITDA of $169.4 million in the prior year period.  Adjusted EBITDA, a non-GAAP measure, excludes the impact of items such as acquisition-related costs and the loss, in the year ago period, on the Company's prior corporate office lease, as shown in the detailed reconciliation in the attached table.

Net income attributable to Waste Connections in the quarter was $62.7 million, or $0.50 per share on a diluted basis of 124.8 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $44.0 million, or $0.35 per share on a diluted basis of 124.1 million shares.

Adjusted net income attributable to Waste Connections* in the quarter was $66.2 million, or $0.53 per share, versus $57.8 million, or $0.47 per share, in the prior year period.  Adjusted net income and adjusted net income per diluted share, both non-GAAP measures, exclude certain items net of tax, as shown in the detailed reconciliation in the attached table, that affect comparability of results between periods. 

"Higher than expected E&P waste activity and consistent solid waste pricing growth continue to drive strong results in the year.  Through the first half of 2014, adjusted EBITDA as a percentage of revenue was up 80 basis points year-over-year, and adjusted free cash flow increased 18.8% to more than $200 million, or over 20% of revenue," said Ronald J. Mittelstaedt, Chief Executive Officer and Chairman.  "We are extremely pleased with these results, especially given tougher year-over-year comparisons in solid waste landfill volumes and increasing collection cost pressures during this stage of the economic recovery."

Mr. Mittelstaedt added, "We now expect the two development stage landfills acquired earlier this year to be open before year-end.  And as we look at the remainder of the year, our balance sheet is well positioned for expected increases in both acquisition activity and the return of capital to stockholders."

For the six months ended June 30, 2014, revenue was $1.01 billion, a 7.1% increase over revenue of $939.3 million in the year ago period.  Operating income was $219.3 million compared to $180.0 million for the same period in 2013.  Adjusted EBITDA for the six months ended June 30, 2014, was $346.6 million, up 9.9% over adjusted EBITDA of $315.4 million in the prior year period.  Net income attributable to Waste Connections for the six months ended June 30, 2014, was $111.7 million, or $0.89 per share on a diluted basis of 124.8 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $85.5 million, or $0.69 per share on a diluted basis of 124.0 million shares.  Adjusted net income attributable to Waste Connections for the six months ended June 30, 2014, was $120.7 million, or $0.97 per share, compared to $103.5 million, or $0.84 per share, in the year ago period.

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

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.

Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 22nd at 8:30 A.M. Eastern Time.  The call will be broadcast live over the Internet at www.streetevents.com or through a link on our website at www.wasteconnections.com.  A playback of the call will be available at both of these websites. 

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 the expected timing for recently acquired landfills to open; expected acquisition activity; the Company's ability to finance additional acquisitions; and the expected return of capital to stockholders.  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 results are vulnerable to economic conditions; (2) 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; (3) our E&P waste business depends on the level of drilling and production activity in the basins in which we operate and the willingness of E&P companies to outsource their waste services activities; (4) we have limited experience in running an E&P waste treatment, recovery and disposal business; (5) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (6)  our indebtedness could adversely affect our financial condition and limit our financial flexibility; (7) price increases may not be adequate to offset the impact of increased costs, or may cause us to lose volume; (8) fluctuations in prices for recycled commodities that we sell and rebates we offer to customers may cause our revenues and operating results to decline; (9) the seasonal nature of our business and "event-driven" waste projects cause our results to fluctuate; (10) we may lose contracts through competitive bidding, early termination or governmental action; (11) increases in labor costs could impact our financial results; (12) increases in the price of diesel or compressed natural gas fuel may adversely affect our collection business and reduce our operating margins; (13) labor union activity could divert management attention and adversely affect our operating results; (14) 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; (15) our financial results could be adversely affected by impairments of goodwill or indefinite-lived intangibles; (16) we may incur charges related to capitalized expenditures of landfill development projects, which would decrease our earnings; (17) pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements; (18) 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; (19) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (20) a portion of our growth and future financial performance depends on our ability to integrate acquired businesses, and the success of our acquisitions; (21) each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, or that become more adverse to our business than we anticipated at the time of acquisition; (22) our financial results are based upon estimates and assumptions that may differ from actual results; (23) our accruals for our landfill site closure and post-closure costs may be inadequate; (24) we depend significantly on the services of the members of our senior and regional management team, and the departure of any of those persons could cause our operating results to suffer; (25) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (26) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (27) we rely on computer systems to run our business and disruptions or privacy breaches in these systems could impact our ability to service our customers and adversely affect our financial results, damage our reputation, and expose us to litigation risk; and (28) 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 and subsequent Quarterly Reports on Form 10-Q.  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.

– financial tables attached –


CONTACT:




Worthing Jackman / (832) 442-2266

Mary Anne Whitney / (832) 442-2253

worthingj@wasteconnections.com 

maryannew@wasteconnections.com

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2014

(Unaudited)

(in thousands, except share and per share amounts)



Three months ended

June 30,


Six months ended

June 30,


2013


2014


2013


2014









Revenues

$    489,381


$    524,693


$  939,272


$ 1,006,402

Operating expenses:








Cost of operations

268,484


286,950


520,447


550,011

Selling, general and administrative

52,903


56,526


106,154


112,172

Depreciation

54,766


57,105


106,414


112,922

Amortization of intangibles

6,211


6,720


12,650


13,456

Loss (gain) on disposal of assets

3,445


(1,324)


3,122


(1,465)

Loss on prior corporate office lease

10,498


-


10,498


-

Operating income

93,074


118,716


179,987


219,306









Interest expense

(18,928)


(15,940)


(37,940)


(32,851)

Other income (expense), net

(1,706)


661


(965)


137

Income before income tax provision

72,440


103,437


141,082


186,592









Income tax provision

(28,445)


(40,537)


(55,408)


(74,470)

Net income

43,995


62,900


85,674


112,122

Less: net income attributable to noncontrolling interests

 

(28)


 

(236)


 

(151)


 

(443)

Net income attributable to Waste Connections

$      43,967


$      62,664


$    85,523


$   111,679









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








Basic

$          0.36


$          0.50


$        0.69


$          0.90









Diluted

$          0.35


$          0.50


$        0.69


$           0.89









Shares used in the per share calculations:








     Basic

123,610,969


124,230,572


123,496,519


124,096,619

     Diluted

124,080,423


124,848,351


123,993,311


124,781,097









Cash dividends per common share

$ 0.10


$ 0.115


$ 0.20


$ 0.23

 

 


WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)






December 31,


June 30,





2013


2014

ASSETS

Current assets:






Cash and equivalents


$             13,591


$             21,404


Accounts receivable, net of allowance for doubtful

      accounts of $7,348 and $5,678 at December 31, 2013

      and June 30, 2014, respectively


234,001


254,858


Deferred income taxes


41,275


41,964


Prepaid expenses and other current assets


39,638


30,460



Total current assets


328,505


348,686








Property and equipment, net


2,450,649


2,446,043

Goodwill


1,675,154


1,675,726

Intangible assets, net


527,871


515,176

Restricted assets


35,921


38,171

Other assets, net


46,152


45,434





$        5,064,252


$        5,069,236








LIABILITIES AND EQUITY





Current liabilities:






Accounts payable


$            105,394


$          115,623


Book overdraft


12,456


12,475


Accrued liabilities


119,026


131,216


Deferred revenue


71,917


77,927


Current portion of contingent consideration


30,840


32,406


Current portion of long-term debt and notes payable


5,385


4,031


      Total current liabilities


345,018


373,678








Long-term debt and notes payable


2,067,590


1,931,262

Long-term portion of contingent consideration


24,710


26,867

Other long-term liabilities


77,035


84,699

Deferred income taxes


501,692


509,110


      Total liabilities


3,016,045


2,925,616








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;  123,566,487 and 124,116,793 shares issued and outstanding at December 31, 2013 and June 30, 2014, respectively


 

1,236


1,241

Additional paid-in capital


796,085


808,849

Retained earnings


1,247,630


1,330,813

Accumulated other comprehensive loss


(1,869)


(2,480)

Total Waste Connections' equity


2,043,082


2,138,423

Noncontrolling interest in subsidiaries


5,125


5,197

Total equity


2,048,207


2,143,620



$       5,064,252


$        5,069,236

 

 

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2013 AND 2014

(Unaudited)

(Dollars in thousands)



Six months ended


June 30,


2013


2014









Cash flows from operating activities:




Net income

$

85,674


$

112,122

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




Loss (gain) on disposal of assets

3,122


(1,465)

Depreciation

106,414


112,922

Amortization of intangibles

12,650


13,456

Deferred income taxes, net of acquisitions

14,990


7,114

Amortization of debt issuance costs

2,016


1,594

Equity-based compensation

7,446


9,444

Interest income on restricted assets

(196)


(235)

Interest accretion

2,533


2,427

Excess tax benefit associated with equity-based compensation

(2,667)


(7,096)

Loss on prior corporate office lease

10,498


-

Net change in operating assets and liabilities, net of acquisitions

13,043


29,398

Net cash provided by operating activities

255,523


279,681





Cash flows from investing activities:




Payments for acquisitions, net of cash acquired

(1,181)


(29,596)

Proceeds from adjustment to acquisition consideration

18,000


843

Capital expenditures for property and equipment

(87,541)


(83,679)

Proceeds from disposal of assets

3,622


5,863

Increase in restricted assets, net of interest income

(81)


(2,015)

Other

(1,140)


589

Net cash used in investing activities

(68,321)


(107,995)





Cash flows from financing activities:




Proceeds from long-term debt

93,500


122,000

Principal payments on notes payable and long-term debt

(256,732)


(259,682)

Payment of contingent consideration recorded at acquisition date

(2,743)


(542)

Change in book overdraft

(90)


18

Proceeds from option and warrant exercises

1,330


2,958

Excess tax benefit associated with equity-based compensation

2,667


7,096

Payments for cash dividends

(24,654)


(28,496)

Tax withholdings related to net share settlements of restricted stock units

 

(5,362)


 

(6,729)

Distributions to noncontrolling interests

(198)


(371)

Debt issuance costs

(1,920)


(125)

Net cash used in financing activities

(194,202)


(163,873)





Net increase (decrease) in cash and equivalents

(7,000)


7,813

Cash and equivalents at beginning of period

23,212


13,591

Cash and equivalents at end of period

$

16,212


$

21,404

 

 

                                             ADDITIONAL STATISTICS

                                                  (Dollars in thousands)

 

Solid Waste Internal Growth:  The following table reflects a breakdown of the components of our solid waste internal growth for the three months ended June 30, 2014:



Three months ended

June 30, 2014

Solid Waste Internal Growth:

  Core Price

 

2.6%

  Surcharges

0.0%

  Volume

1.5%

  Recycling

(0.6%)

Total Solid Waste Internal Growth

3.5%

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three and six month periods ending June 30, 2014:



Three months ended
June 30, 2014



Six months ended
June 30, 2014














Solid Waste Collection

$

322,763



54.6%



$

628,766



55.6%

Solid Waste Disposal and Transfer


158,913



26.9%




294,476



26.0%

E&P Waste Treatment, Disposal and Recovery


82,646



14.0%




155,964



13.8%

Solid Waste Recycling


14,836



2.5%




29,739



2.6%

Intermodal and Other


11,970



2.0%




22,842



2.0%

Total before inter-company elimination


591,128



100.0%




1,131,787



100.0%














Inter-company elimination


(66,435)







(125,385)




  Reported Revenue

$

524,693






$

1,006,402




 

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three month periods ending June 30, 2013 and 2014:



Three months ended
June 30,


2013


2014

Solid waste, net

$

11,051


$

3,655

E&P waste, net


57,926



-

Acquisitions, net

$

68,977


$

3,655

 

Other Cash Flow Items: The following table reflects cash interest and cash taxes for the three and six month periods ending June 30, 2013 and 2014:



Three months ended
June 30,



Six months ended
June 30,


2013


2014



2013


2014

Cash Interest Paid

$

24,106


$

19,188



$

33,901


$

31,030

Cash Taxes Paid


17,641



40,612




18,340



41,261

 

ADDITIONAL STATISTICS (continued)

Debt to Book Capitalization as of June 30, 2014: Debt to Book Capitalization as of June 30, 2014:  47%

Internalization for the three months ended June 30, 2014:Internalization for the three months ended June 30, 2014: 53%

Days Sales Outstanding for the three months ended June 30, 2014:Days Sales Outstanding for the three months ended June 30, 2014: 44 (31 net of deferred revenue)

Share Information for the three months ended June 30, 2014:

Basic shares outstanding

124,230,572

Dilutive effect of options and warrants

110,406

Dilutive effect of restricted stock units

507,373

Diluted shares outstanding

124,848,351

 

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 net income, plus 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, plus other expense, 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
June 30,


Six months ended
June 30,


2013


2014


2013


2014

Net Income

$

43,995


$

62,900


$

85,674


$

112,122

Plus: Income tax provision


28,445



40,537



55,408



74,470

Plus: Interest expense


18,928



15,940



37,940



32,851

Plus: Depreciation and amortization


60,977



63,825



119,064



126,378

Plus: Closure and post-closure accretion


753



861



1,514



1,739

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


3,445



(1,324)



3,122



(1,465)

Plus/less: Other expense (income), net


1,706



(661)



965



(137)

Adjustments:












     Plus: Loss on prior corporate office lease (a)


10,498



-



10,498



-

Plus: Acquisition-related costs (b)


333



390



806



648

Plus: Corporate relocation expenses (c)


270



-



422



-

Adjusted EBITDA

$

169,350


$

182,468


$

315,413


$

346,606













As % of revenues


34.6%



34.8%



33.6%



34.4%



























(a)

Reflects the addback of the loss on the prior corporate office lease resulting from the relocation of the Company's corporate headquarters from California to Texas.

(b)

Reflects the addback of acquisition-related transaction costs.

(c)

Reflects the addback of costs associated with the relocation of the Company's corporate headquarters from California to Texas.




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

June 30,


Six months ended

June 30,


2013


2014


2013


2014









Net cash provided by operating activities

$122,565


$134,724


$255,523


$279,681

Plus/Less: Change in book overdraft

(73)


(117)


(90)


18

Plus: Proceeds from disposal of assets

2,899


4,551


3,622


5,863

Plus: Excess tax benefit associated with equity-based

         compensation

569


2,036


2,667


7,096

Less: Capital expenditures for property and equipment

(50,636)


(48,087)


(87,541)


(83,679)

Less: Distributions to noncontrolling interests

-


-


(198)


(371)

Adjustment:








  Corporate office relocation (a)

270


-


1,832


-

  Tax effect (b)

(103)


-


(161)


-

Adjusted free cash flow

$75,491


$93,107


$175,654


$208,608


15.4%


17.7%


18.7%


20.7%



















(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.

(b)

The tax effect of the corporate office relocation is calculated based on the applied tax rates for the respective periods.

 

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 the 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

June 30,


Six months ended

June 30,


2013


2014


2013


2014









Reported net income attributable to Waste Connections

$       43,967


$       62,664


$       85,523


$       111,679

Adjustments:








     Amortization of intangibles (a)

6,211


6,720


12,650


13,456

     Acquisition-related costs (b)

2,020


390


2,494


648

     Loss (gain) on disposal of assets (c)

3,445


(1,324)


3,122


(1,465)

     Corporate relocation expenses (d)

270


-


422


-

     Loss on prior corporate office lease (e)

10,498


-


10,498


-

     Tax effect (f)

(8,584)


(2,219)


(11,163)


(4,847)

     Impact of deferred tax adjustment (g)

-


-


-


1,220

Adjusted net income attributable to Waste Connections

$       57,827


$       66,231


$      103,546


$      120,691









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








Reported net income

$           0.35


$           0.50


$           0.69


$           0.89

Adjusted net income

$           0.47


$           0.53


$           0.84


$           0.97




















(a)

(b)

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

Reflects the elimination of acquisition-related expenses, including transaction costs and adjustments to the fair value of contingent consideration.

(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 the loss on the prior corporate office lease resulting from the relocation of the Company's corporate headquarters from California to Texas.

(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 elimination of an increase to the income tax provision associated with an increase in the Company's deferred tax liabilities resulting from the enactment of New York State's 2014-2015 Budget Act on March 31, 2014.




 

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SOURCE Waste Connections, Inc.



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