WASTE CONNECTIONS REPORTS FOURTH QUARTER 2021 RESULTS AND PROVIDES 2022 OUTLOOK
Fourth Quarter Highlights
- Strong price-led organic growth and acquisition activity, along with continuing underlying margin expansion, drives Q4 results above expectations and provides higher entry point into 2022
- Revenue of $1.624 billion, net income(a) of $166.3 million, and adjusted EBITDA(b) of $495.4 million, or 30.5% of revenue
- Net income and adjusted net income(b) of $0.64 and $0.83 per share, respectively
Full Year 2021 Highlights
- Revenue of $6.151 billion, up 13.0%
- Net income of $618.0 million, or $2.36 per share, and adjusted net income(b) of $846.6 million, or $3.23 per share, up 22.3%
- Adjusted EBITDA(b) of $1.919 billion, up 15.5%, and adjusted EBITDA margin of 31.2%, up 70 basis points
- Net cash provided by operating activities of $1.698 billion, up 20.6%
- Adjusted free cash flow(b) of $1.010 billion, up 19.9% on capital expenditures of $744.3 million, up 24.7%
- Completes acquisitions with approximately $400 million of total annualized revenue in 2021
Expectations for 2022
- Strong pricing and acquisition growth to drive double digit percentage increases in revenue and adjusted free cash flow(b), along with continuing underlying margin expansion
- Revenue of approximately $6.875 billion, up 11.8%, excluding additional acquisitions
- Net income of approximately $846 million and adjusted EBITDA(b) of approximately $2.145 billion, or about 31.2% of revenue
- Net cash provided by operating activities of approximately $2.000 billion
- Adjusted free cash flow(b) of approximately $1.150 billion, up 13.9%, on capital expenditures up 14.2% to approximately $850 million, including $100 million for new landfill gas and resource recovery facilities
- Increasing return of capital to shareholders, including opportunistic share repurchases
TORONTO, Feb. 16, 2022 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the fourth quarter of 2021 and outlook for 2022.
"2021's results are a reflection of how a culture of commitment and accountability to all stakeholders enabled us to excel in a challenging operating environment, overcome inflationary pressures and supply chain issues, execute our growth strategy, expand margins, support employee health and welfare, and position the Company well for 2022 and beyond. The year ended on a high note, as strong solid waste organic growth and acquisition activity, along with continuing underlying margin expansion, drove Q4 financial results once again above expectations. We are also extremely pleased with our results for the full year, as adjusted EBITDA(b) margin expanded 70 basis points. Moreover, we delivered 20% growth in adjusted free cash flow(b) to $1.010 billion, in spite of capital expenditures up 25%, as we continued to reinvest in and grow our business," said Worthing F. Jackman, President and Chief Executive Officer.
"Acquisition activity accelerated in the fourth quarter, resulting in approximately $400 million in acquired annualized revenues in 2021 and setting up acquisition contribution approaching 6% in 2022, including transactions completed year to date. Along with solid waste pricing growth of about 6.5%, this already positions us for double-digit percentage growth in revenue, adjusted EBITDA(b) and adjusted free cash flow(b) in 2022. Additional acquisitions expected to be completed during the year, improvement in commodity-driven revenues and E&P waste activity, or moderation of inflationary trends would provide incremental benefit."
Mr. Jackman continued, "The strength and consistency of our results reflect the durability of our market model and the benefits of an intentional culture focused on employees and value creation. Proactive pricing, along with a step-up in capital expenditures and over $1 billion in acquisition outlays in 2021, positions us for continued double digit growth in 2022, while preserving the balance sheet strength and flexibility to capitalize on another potential above average year of acquisition activity, invest in sustainability-focused growth projects and increase return of capital to shareholders."
Q4 2021 Results
Revenue in the fourth quarter totaled $1.624 billion, up from $1.398 billion in the year ago period. Operating income was $249.3 million, which included $28.4 million primarily related to impairments and other acquisition-related costs. This compares to operating income of $197.1 million in the fourth quarter of 2020, which included $29.0 million primarily related to impairments and other acquisition-related costs. Net income in the fourth quarter was $166.3 million, or $0.64 per share on a diluted basis of 261.3 million shares. In the year ago period, the Company reported net income of $130.7 million, or $0.50 per share on a diluted basis of 263.6 million shares.
Adjusted net income(b) in the fourth quarter was $217.1 million, or $0.83 per diluted share, versus $178.6 million, or $0.68 per diluted share, in the prior year period. Adjusted EBITDA(b) in the fourth quarter was $495.4 million and 30.5% of revenue, as compared to $426.6 million and 30.5% 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.
Full Year 2021 Results
For the year ended December 31, 2021, revenue was $6.151 billion, up from $5.446 billion in the year ago period. Operating income, which included $32.3 million in impairments and other operating items, $11.3 million in acquisition-related costs, and $8.4 million in fair value accounting changes to equity awards, was $1.040 billion, as compared to operating income of $412.4 million for the same period in 2020, which included $482.1 million in costs primarily related to impairments and other operating items.
Net income in 2021 was $618.0 million, or $2.36 per share on a diluted basis of 261.7 million shares. In the year ago period, the Company reported net income of $204.7 million, or $0.78 per share on a diluted basis of 263.7 million shares.
Adjusted net income(b) in 2021 was $846.6 million, or $3.23 per diluted share, compared to $695.8 million, or $2.64 per diluted share, in the year ago period. Adjusted EBITDA(b) in 2021 was $1.919 billion and 31.2% of revenue, up from $1.662 billion and 30.5% of revenue in the prior year period.
2022 Outlook
Waste Connections also announced its outlook for 2022, which assumes no change in the current economic environment. 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 2022 are subject to quarterly fluctuations. See reconciliations in the attached tables.
- Revenue is estimated at approximately $6.875 billion;
- Net income is estimated at approximately $846 million;
- Adjusted EBITDA(b) is estimated at approximately $2.145 billion, or about 31.2% of revenue;
- Net cash provided by operating activities is estimated at approximately $2.0 billion;
- Capital expenditures are estimated to be approximately $850 million;
- Adjusted free cash flow(b) is estimated at approximately $1.150 billion, or 16.7% of revenue; and
- Fully diluted share count is estimated at 259.0 million.
Q4 2021 Earnings and 2022 Outlook Conference Call
Waste Connections will be hosting a conference call related to fourth quarter earnings and 2022 outlook on February 17th 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 800-935-9319 (within North America) or 212-231-2925 (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 February 24th, 2022, by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #22014930.
Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on February 17th, providing the Company's first quarter 2022 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". |
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 43 states in the U.S. and six provinces in Canada. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. For more information, visit Waste Connections at wasteconnections.com.
Environmental, Social and Governance
Waste Connections views its Environmental, Social and Governance ("ESG") efforts as integral to its business, with initiatives consistent with its objective of long-term value creation. In 2020, the Company introduced long-term, aspirational ESG targets and committed over $500 million for investments to meet or exceed such sustainability targets. These investments primarily focus on reducing emissions, increasing resource recovery of both recyclable commodities and clean energy fuels, reducing reliance on off-site disposal for landfill leachate, further improving safety through reduced incidents and enhancing employee engagement through improved voluntary turnover and Servant Leadership scores. 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 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 |
WASTE CONNECTIONS, INC. | ||||||||||||||||||
Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||||||||
Revenues | $ | 1,398,251 | $ | 1,624,319 | $ | 5,445,990 | $ | 6,151,361 | ||||||||||
Operating expenses: | ||||||||||||||||||
Cost of operations | 846,851 | 980,865 | 3,276,808 | 3,654,074 | ||||||||||||||
Selling, general and administrative | 133,419 | 157,452 | 537,632 | 612,337 | ||||||||||||||
Depreciation | 161,462 | 175,142 | 621,102 | 673,730 | ||||||||||||||
Amortization of intangibles | 35,239 | 39,042 | 131,302 | 139,279 | ||||||||||||||
Impairments and other operating items | 24,136 | 22,497 | 466,718 | 32,316 | ||||||||||||||
Operating income | 197,144 | 249,321 | 412,428 | 1,039,625 | ||||||||||||||
Interest expense | (42,813) | (38,625) | (162,375) | (162,796) | ||||||||||||||
Interest income | 857 | 573 | 5,253 | 2,916 | ||||||||||||||
Other income (expense), net | 1,654 | 833 | (1,392) | 6,285 | ||||||||||||||
Loss on early extinguishment of debt | - | - | - | (115,288) | ||||||||||||||
Income before income tax provision | 156,842 | 212,102 | 253,914 | 770,742 | ||||||||||||||
Income tax provision | (26,268) | (45,675) | (49,922) | (152,253) | ||||||||||||||
Net income | 130,574 | 166,427 | 203,992 | 618,489 | ||||||||||||||
Plus (less): Net loss (income) attributable to | 90 | (117) | 685 | (442) | ||||||||||||||
Net income attributable to Waste Connections | $ | 130,664 | $ | 166,310 | $ | 204,677 | $ | 618,047 | ||||||||||
Earnings per common share attributable to | ||||||||||||||||||
Basic | $ | 0.50 | $ | 0.64 | $ | 0.78 | $ | 2.37 | ||||||||||
Diluted | $ | 0.50 | $ | 0.64 | $ | 0.78 | $ | 2.36 | ||||||||||
Shares used in the per share calculations: | ||||||||||||||||||
Basic | 263,001,985 | 260,547,806 | 263,189,699 | 261,166,723 | ||||||||||||||
Diluted | 263,598,602 | 261,258,425 | 263,687,539 | 261,728,470 | ||||||||||||||
Cash dividends per common share | $ | 0.205 | $ | 0.230 | $ | 0.760 | $ | 0.845 | ||||||||||
WASTE CONNECTIONS, INC. | |||||||
December 31, 2020 | December 31, 2021 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 617,294 | $ | 147,441 | |||
Accounts receivable, net of allowance for credit losses of $19,380 and $18,480 at | 630,264 | 709,614 | |||||
Prepaid expenses and other current assets | 160,714 | 175,722 | |||||
Total current assets | 1,408,272 | 1,032,777 | |||||
Restricted cash | 97,095 | 72,174 | |||||
Restricted investments | 57,516 | 59,014 | |||||
Property and equipment, net | 5,284,506 | 5,721,949 | |||||
Operating lease right-of-use assets | 170,923 | 160,567 | |||||
Goodwill | 5,726,650 | 6,187,643 | |||||
Intangible assets, net | 1,155,079 | 1,350,597 | |||||
Other assets, net | 92,323 | 115,203 | |||||
Total assets | $ | 13,992,364 | $ | 14,699,924 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 290,820 | $ | 392,868 | |||
Book overdraft | 17,079 | 16,721 | |||||
Deferred revenue | 233,596 | 273,720 | |||||
Accrued liabilities | 404,923 | 442,596 | |||||
Current portion of operating lease liabilities | 30,671 | 38,017 | |||||
Current portion of contingent consideration | 43,297 | 62,804 | |||||
Current portion of long-term debt and notes payable | 8,268 | 6,020 | |||||
Total current liabilities | 1,028,654 | 1,232,746 | |||||
Long-term portion of debt and notes payable | 4,708,678 | 5,040,500 | |||||
Long-term portion of operating lease liabilities | 147,223 | 129,628 | |||||
Long-term portion of contingent consideration | 28,439 | 31,504 | |||||
Deferred income taxes | 760,044 | 850,921 | |||||
Other long-term liabilities | 455,888 | 421,080 | |||||
Total liabilities | 7,128,926 | 7,706,379 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Common shares: 262,899,174 shares issued and 262,824,990 shares outstanding at | 4,030,368 | 3,693,027 | |||||
Additional paid-in capital | 170,555 | 199,482 | |||||
Accumulated other comprehensive income (loss) | (651) | 39,584 | |||||
Treasury shares: 74,184 and 70,662 shares at December 31, 2020 and 2021, | - | - | |||||
Retained earnings | 2,659,001 | 3,056,845 | |||||
Total Waste Connections' equity | 6,859,273 | 6,988,938 | |||||
Noncontrolling interest in subsidiaries | 4,165 | 4,607 | |||||
Total equity | 6,863,438 | 6,993,545 | |||||
$ | 13,992,364 | $ | 14,699,924 | ||||
WASTE CONNECTIONS, INC. | |||||||
Twelve months ended December 31, | |||||||
2020 | 2021 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 203,992 | $ | 618,489 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Loss on disposal of assets and impairments | 445,647 | 27,727 | |||||
Depreciation | 621,102 | 673,730 | |||||
Amortization of intangibles | 131,302 | 139,279 | |||||
Loss on early extinguishment of debt | - | 115,288 | |||||
Deferred income taxes, net of acquisitions | (50,487) | 14,563 | |||||
Current period provision for expected credit losses | 15,509 | 9,719 | |||||
Amortization of debt issuance costs | 7,509 | 5,055 | |||||
Share-based compensation | 45,751 | 58,221 | |||||
Interest accretion | 17,205 | 15,970 | |||||
Payment of contingent consideration recorded in earnings | (10,371) | (520) | |||||
Adjustments to contingent consideration | 18,418 | 2,954 | |||||
Other | 2,426 | (1,260) | |||||
Net change in operating assets and liabilities, net of acquisitions | (39,482) | 19,014 | |||||
Net cash provided by operating activities | 1,408,521 | 1,698,229 | |||||
Cash flows from investing activities: | |||||||
Payments for acquisitions, net of cash acquired | (388,789) | (960,449) | |||||
Capital expenditures for property and equipment | (597,053) | (744,315) | |||||
Capital expenditures for undeveloped landfill property | (67,508) | - | |||||
Investment in noncontrolling interest | - | (25,000) | |||||
Proceeds from disposal of assets | 19,084 | 42,768 | |||||
Other | (11,777) | (6,486) | |||||
Net cash used in investing activities | (1,046,043) | (1,693,482) | |||||
Cash flows from financing activities: | |||||||
Proceeds from long-term debt | 1,815,625 | 2,112,193 | |||||
Principal payments on notes payable and long-term debt | (1,542,958) | (1,893,100) | |||||
Premiums paid on early extinguishment of debt | - | (110,617) | |||||
Payment of contingent consideration recorded at acquisition date | (12,566) | (12,934) | |||||
Change in book overdraft | 1,096 | (367) | |||||
Payments for repurchase of common shares | (105,654) | (338,993) | |||||
Payments for cash dividends | (199,883) | (220,203) | |||||
Tax withholdings related to net share settlements of equity-based compensation | (23,446) | (18,606) | |||||
Debt issuance costs | (11,117) | (18,521) | |||||
Proceeds from issuance of shares under employee share purchase plan | - | 1,222 | |||||
Proceeds from sale of common shares held in trust | 679 | 430 | |||||
Net cash used in financing activities | (78,224) | (499,496) | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 6,914 | (25) | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 291,168 | (494,774) | |||||
Cash, cash equivalents and restricted cash at beginning of year | 423,221 | 714,389 | |||||
Cash, cash equivalents and restricted cash at end of year | $ | 714,389 | $ | 219,615 | |||
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 twelve month periods ended December 31, 2021: | ||||||
Three months ended | Twelve months | |||||
Core Price | 5.0 | % | 4.7 | % | ||
Surcharges | 0.7 | % | 0.3 | % | ||
Volume | 1.2 | % | 1.6 | % | ||
Recycling | 2.6 | % | 1.8 | % | ||
Foreign Exchange Impact | 0.5 | % | 0.9 | % | ||
Total | 10.0 | % | 9.3 | % | ||
Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended December 31, 2020 and 2021: | ||||||||||||
Three months ended December 31, 2020 | ||||||||||||
Revenue | Inter-company Elimination | Reported Revenue | % | |||||||||
Solid Waste Collection | $ | 1,024,099 | $ | (3,341) | $ | 1,020,758 | 73.0 | % | ||||
Solid Waste Disposal and Transfer | 493,093 | (200,272) | 292,821 | 20.9 | % | |||||||
Solid Waste Recycling | 26,688 | (909) | 25,779 | 1.9 | % | |||||||
E&P Waste Treatment, Recovery and Disposal | 27,690 | (2,163) | 25,527 | 1.8 | % | |||||||
Intermodal and Other | 33,427 | (61) | 33,366 | 2.4 | % | |||||||
Total | $ | 1,604,997 | $ | (206,746) | $ | 1,398,251 | 100.0 | % | ||||
Three months ended December 31, 2021 | ||||||||||||
Revenue | Inter-company Elimination | Reported | % | |||||||||
Solid Waste Collection | $ | 1,169,428 | $ | (2,780) | $ | 1,166,648 | 71.8 | % | ||||
Solid Waste Disposal and Transfer | 533,122 | (216,957) | 316,165 | 19.5 | % | |||||||
Solid Waste Recycling | 75,317 | (5,646) | 69,671 | 4.3 | % | |||||||
E&P Waste Treatment, Recovery and Disposal | 37,570 | (3,244) | 34,326 | 2.1 | % | |||||||
Intermodal and Other | 39,592 | (2,083) | 37,509 | 2.3 | % | |||||||
Total | $ | 1,855,029 | $ | (230,710) | $ | 1,624,319 | 100.0 | % | ||||
Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and twelve month periods ended December 31, 2020 and 2021: | ||||||||||||
Three months ended | Twelve months ended December 31, | |||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||
Acquisitions, net | $ | 52,721 | $ | 79,363 | $ | 197,231 | $ | 215,398 | ||||
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 twelve month periods ended December 31, 2020 and 2021: | ||||||||||||
Three months ended December 31, | Twelve months ended December 31, | |||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||
Cash Interest Paid | $ | 55,910 | $ | 36,839 | $ | 142,310 | $ | 157,485 | ||||
Cash Taxes Paid | 43,603 | 56,094 | 104,618 | 146,198 | ||||||||
Debt to Book Capitalization as of December 31, 2021: 42% | ||||||||||||
Internalization for the three months ended December 31, 2021: 55% | ||||||||||||
Days Sales Outstanding for the three months ended December 31, 2021: 40 (25 net of deferred revenue) | ||||||||||||
Share Information for the three months ended December 31, 2021: | ||||||||||||
Basic shares outstanding | 260,547,806 | |
Dilutive effect of equity-based awards | 710,619 | |
Diluted shares outstanding | 261,258,425 |
NON-GAAP RECONCILIATION SCHEDULE | ||||||||||||
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, plus loss on early extinguishment of debt. 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 December 31, | Twelve months ended December 31, | |||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||
Net income attributable to Waste Connections | $ | 130,664 | $ | 166,310 | $ | 204,677 | $ | 618,047 | ||||
Plus/(less): Net income (loss) attributable to noncontrolling | (91) | 117 | (685) | 442 | ||||||||
Plus: Income tax provision | 26,269 | 45,675 | 49,922 | 152,253 | ||||||||
Plus: Interest expense | 42,813 | 38,625 | 162,375 | 162,796 | ||||||||
Less: Interest income | (857) | (573) | (5,253) | (2,916) | ||||||||
Plus: Depreciation and amortization | 196,701 | 214,184 | 752,404 | 813,009 | ||||||||
Plus: Closure and post-closure accretion | 3,755 | 3,579 | 15,095 | 14,497 | ||||||||
Plus: Impairments and other operating items | 24,136 | 22,497 | 466,718 | 32,316 | ||||||||
Plus/(less): Other expense (income), net | (1,654) | (833) | 1,392 | (6,285) | ||||||||
Plus: Loss on early extinguishment of debt | - | - | - | 115,288 | ||||||||
Adjustments: | ||||||||||||
Plus: Transaction-related expenses(a) | 5,306 | 5,098 | 9,803 | 11,318 | ||||||||
Plus/(less): Fair value changes to equity awards(b) | (485) | 755 | 5,536 | 8,393 | ||||||||
Adjusted EBITDA | $ | 426,557 | $ | 495,434 | $ | 1,661,984 | $ | 1,919,158 | ||||
As % of revenues | 30.5% | 30.5% | 30.5% | 31.2% | ||||||||
____________________________ | ||||||||||||
(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) | ||||||||||||
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. | ||||||||||||
Twelve months ended December 31, | ||||||||||||
2020 | 2021 | |||||||||||
Net cash provided by operating activities | $ | 1,408,521 | $ | 1,698,229 | ||||||||
Plus/(less): Change in book overdraft | 1,096 | (367) | ||||||||||
Plus: Proceeds from disposal of assets | 19,084 | 42,768 | ||||||||||
Less: Capital expenditures for property and equipment | (597,053) | (744,315) | ||||||||||
Adjustments: | ||||||||||||
Payment of contingent consideration recorded in earnings(a) | 10,371 | 520 | ||||||||||
Cash received for divestitures(b) | (10,673) | (17,118) | ||||||||||
Transaction-related expenses(c) | 9,803 | 30,771 | ||||||||||
Pre-existing Progressive Waste share-based grants(d) | 5,770 | 397 | ||||||||||
Tax effect(e) | (5,021) | (1,287) | ||||||||||
Adjusted free cash flow | $ | 841,898 | $ | 1,009,598 | ||||||||
As % of revenues | 15.5% | 16.4% | ||||||||||
___________________________ | |
(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) | ||||||||||||
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 December 31, | Twelve months ended December 31, | |||||||||||
2020 | 2021 | 2020 | 2021 | |||||||||
Reported net income attributable to Waste Connections | $ | 130,664 | $ | 166,310 | $ | 204,677 | $ | 618,047 | ||||
Adjustments: | ||||||||||||
Amortization of intangibles(a) | 35,239 | 39,042 | 131,302 | 139,279 | ||||||||
Impairments and other operating items(b) | 24,136 | 22,497 | 466,718 | 32,316 | ||||||||
Transaction-related expenses(c) | 5,306 | 5,098 | 9,803 | 11,318 | ||||||||
Fair value changes to equity awards(d) | (485) | 755 | 5,536 | 8,393 | ||||||||
Loss on early extinguishment of debt(e) | - | - | - | 115,288 | ||||||||
Tax effect(f) | (16,235) | (16,574) | (153,758) | (78,041) | ||||||||
Tax items(g) | - | - | 31,508 | - | ||||||||
Adjusted net income attributable to Waste Connections | $ | 178,625 | $ | 217,128 | $ | 695,786 | $ | 846,600 | ||||
Diluted earnings per common share attributable to Waste | ||||||||||||
Reported net income | $ | 0.50 | $ | 0.64 | $ | 0.78 | $ | 2.36 | ||||
Adjusted net income | $ | 0.68 | $ | 0.83 | $ | 2.64 | $ | 3.23 | ||||
____________________________ | |
(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. |
2022 OUTLOOK | |||||
Reconciliation of Adjusted EBITDA: | |||||
2022 Outlook | |||||
Estimates | Observation | ||||
Net income attributable to Waste Connections | $ | 846,000 | |||
Plus: Income tax provision | 239,000 | Approximate 22.0% effective rate | |||
Plus: Interest expense, net | 160,000 | ||||
Plus: Depreciation and Depletion | 745,000 | Approximately 10.8% of revenue | |||
Plus: Amortization | 140,000 | ||||
Plus: Closure and post-closure accretion | 15,000 | ||||
Adjusted EBITDA | $ | 2,145,000 | Approximately 31.2% of revenue | ||
Reconciliation of Adjusted Free Cash Flow: | |||
2022 Outlook | |||
Estimates | |||
Net cash provided by operating activities | $ | 2,000,000 | |
Less: Capital expenditures | (850,000) | ||
Adjusted free cash flow | $ | 1,150,000 | |
SOURCE Waste Connections, Inc.
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