-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WEPi9C15z+ZSg4ZCEtu4npnDrrhkIBZhGFvgMjOzUbbvegubYPSlEaIdO9bAanm4 AupSvV5IVIpcIZL6Us0mbg== 0001157523-04-001591.txt : 20040219 0001157523-04-001591.hdr.sgml : 20040219 20040218184918 ACCESSION NUMBER: 0001157523-04-001591 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040218 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASTE CONNECTIONS INC/DE CENTRAL INDEX KEY: 0001057058 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 943283464 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31507 FILM NUMBER: 04614274 BUSINESS ADDRESS: STREET 1: 620 COOLIDGE DRIVE STREET 2: SUITE 350 CITY: FOLSOM STATE: CA ZIP: 95630 BUSINESS PHONE: 9166088200 MAIL ADDRESS: STREET 1: 620 COOLIDGE DRIVE STREET 2: SUITE 350 CITY: FOLSOM STATE: CA ZIP: 95630-3155 8-K 1 a4576029.txt WASTE CONNECTIONS, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) February 18, 2004 WASTE CONNECTIONS, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) COMMISSION FILE NO. 0-23981 94-3283464 (I.R.S. Employer Identification No.) 35 Iron Point Circle, Suite 200, Folsom, CA 95630 (Address of principal executive offices) Registrant's telephone number, including area code: (916) 608-8200 INFORMATION TO BE INCLUDED IN THE REPORT Item 7. Financial Statements and Exhibits. (c) The following Exhibits are furnished herewith: 99.1 Press release, dated February 18, 2004. Item 9. Regulation FD Disclosure. The information furnished under this Item 9 is intended to be furnished pursuant to Item 12, "Results of Operations and Financial Condition," in accordance with SEC Release No. 33-8216. On February 18, 2004, Waste Connections, Inc. issued a press release announcing its fourth quarter and full year 2003 earnings, and also an outlook on first quarter and full year 2004. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. WASTE CONNECTIONS, INC. (Registrant) BY: /s/ Ronald J. Mittelstaedt ------------------------------------- Date: February 18, 2004 Ron J. Mittelstaedt, President and Chief Executive Officer EXHIBIT INDEX Exhibit No. DESCRIPTION 99.1 Press release dated February 18, 2004, issued by Waste Connections, Inc. EX-99.1 3 a4576029ex99.txt PRESS RELEASE Exhibit 99.1 Waste Connections Reports Fourth Quarter and 2003 Results and Provides 2004 Outlook FOLSOM, Calif.--(BUSINESS WIRE)--Feb. 18, 2004-- -- Reports record 2003 earnings per share of $2.18 and free cash flow of $75.8 million, or 13.4% of revenue -- Acquires approximately $65 million annualized revenue in 2003 -- Reports internal growth of 2.1% price and 1.4% volume in the fourth quarter -- Increases internalization rate to 69% in the fourth quarter Waste Connections, Inc. (NYSE:WCN) today announced fourth quarter earnings of $0.57 per share on 33.1 million diluted shares, an increase of 21.3% over diluted earnings per share of $0.47 in the fourth quarter of 2002. Revenue for the fourth quarter of 2003 was $150.0 million, a 14.2% increase over revenue of $131.3 million in the fourth quarter of 2002. Operating income for the fourth quarter of 2003 was $37.0 million, a 12.7% increase over operating income of $32.8 million in the fourth quarter of 2002. For the year ended December 31, 2003, revenue was $563.5 million, a 13% increase over revenue of $498.7 million in the prior year. Operating income for the year was $145.0 million, an 11.4% increase over operating income of $130.1 million in 2002. Income before a gain resulting from the cumulative effect of adopting SFAS No. 143 for the full year 2003 was $65.3 million, a 17.8% increase over net income of $55.5 million for the prior year. Diluted earnings per share before the gain on accounting change for the year was $2.17, an increase of 14.2% over diluted earnings per share of $1.90 in 2002. Ronald J. Mittelstaedt, Chairman and Chief Executive Officer, said, "2003 was an important year for Waste Connections as the benefits of our differentiated strategy continued to shine through in a difficult economy. Our financial margins continue to lead the industry and were relatively stable year over year. In fact, adjusting for structurally lower margins from certain acquisitions, margins in our base business increased in 2003. Our internal growth and internalization rates reached new highs for the year in the fourth quarter providing good momentum into 2004. Free cash flow for the year of $75.8 million, or 13.4% of revenue, exceeded our original expectations and is expected to remain strong. We believe the strength of our free cash flow is even more impressive when considering our capital expenditures for the year were $70 million, or almost 150% of depreciation and amortization in 2003 and $8 million above our original budget as we began to accelerate fleet purchases to take advantage of certain tax benefits. Finally, we continued to expand our corporate and regional infrastructure in 2003 to accommodate additional future growth, improve field execution to original budgets, and comply with increased regulatory requirements." Mr. Mittelstaedt continued, "In the fourth quarter we signed or closed acquisitions with annualized revenues of almost $14 million, bringing the total annualized revenues acquired in the year to approximately $65 million, again exceeding our original target while maintaining our disciplined approach to targeting attractive markets. We believe the most attractive markets are either integrated or non-integrated exclusive markets, and competitive markets where we can be integrated and attain high market share. We acquired Scott Waste Services, the largest private solid waste services company in Kentucky and the leading provider in the Bowling Green market. In addition, we agreed to acquire a new 688 acre MSW landfill that, when completed, will allow us to internalize volumes coming out of the Central Kentucky and Bowling Green market areas. We also completed tuck-in acquisitions in Oregon and South Dakota. There remain a number of acquisition candidates across the US, but we continue to believe the vast majority of the more attractive opportunities are concentrated in the exclusive markets on the West Coast and that Waste Connections is well positioned when these acquisition opportunities arise." 2004 OUTLOOK Waste Connections also announced its outlook for 2004. The Company's outlook assumes no change in the current economic environment, excludes the impact of any additional acquisitions that may be completed during the year, and includes approximately $3.5 million additional projected bonus costs relative to 2003. The guidance provided below is forward looking, and actual results may differ materially depending on risk factors detailed at the end of this release and in our periodic SEC filings. -- Revenue for the full year is estimated to range between $620 million and $625 million. This assumes internal growth for the full year of 3.0% to 3.5% excluding the impact of commodities, with around 2.5% from price and the remainder from volume. First quarter revenue is estimated in the range of $146.5 million to $147.5 million. -- Selling, general and administrative expense is estimated at approximately 9.6% of revenue for the full year, subject to quarterly fluctuations. -- Depreciation, depletion and amortization is estimated at approximately 8.8% of revenue for the full year, subject to quarterly fluctuations. Depreciation, depletion and amortization is estimated at approximately 9% of revenue in the first quarter with an expected 20 to 30 basis point sequential decline in the second quarter due to seasonal quarterly revenue fluctuations. -- Operating income for the full year is estimated to range between 25.0% and 25.4% of revenue. Operating income for the first quarter is estimated in the range of 23.5% to 24.0% of revenue reflecting typical seasonality and the impact of adverse weather in certain locations. An almost 200 basis point sequential operating income margin improvement is expected in the second quarter primarily due to seasonality and lower depreciation, depletion and amortization as a percent of revenue. -- Minority interests expense is estimated to remain at approximately 1.9% for the full year. -- Effective tax rate is expected to be 37% for the full year. -- Net cash provided by operating activities for the full year is estimated to be between 26% and 27% of revenue, subject to quarterly fluctuations. -- Capital expenditures are estimated to be $70 million for the full year, or approximately 11% of revenue. Waste Connections will be hosting a conference call related to fourth quarter earnings and the 2004 outlook on February 19th at 8:30 a.m. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com and through a link on our web site at www.wasteconnections.com. A playback of the call will be available at both of these sites. Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly secondary markets in the Western, Midwestern, Southwestern and Southeastern U.S. The Company serves more than one million residential, commercial and industrial customers. Waste Connections, Inc. was founded in September 1997 and is headquartered in Folsom, California. 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 web site or through contacting us directly at 916-608-8200. Certain statements contained in this press release are forward-looking in nature. 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. Waste Connections' business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may materially differ from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) competition or unfavorable industry conditions could lead to a decrease in demand for the Company's services and to a decline in prices realized by the Company for its services, (2) the Company depends in part on acquisitions for growth, it may be required to pay increased prices for acquisitions, and it may experience difficulty in integrating and deriving synergies from acquisitions, or finding acquisition targets suitable to its growth strategy. (3) the Company may not always have access to the additional capital that it may require for its growth strategy or its cost of capital may increase, (4) governmental regulations may require increased capital expenditures or otherwise affect the Company's business, (5) companies that Waste Connections acquires could have undiscovered liabilities, (6) large, long-term collection contracts on which the Company depends may not be replaced when they expire or are terminated, and (7) the Company is highly dependent on the services of senior management, who would be difficult or impossible to replace. These risks and uncertainties, as well as others, are discussed in greater detail in the Company's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and its subsequent Quarterly Reports on Form 10-Q. There may be additional risks that the Company does not presently know or that it currently believes are immaterial which could have an adverse impact on its business. The Company makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. WASTE CONNECTIONS, INC. CONSOLIDATED STATEMENTS OF INCOME THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2002 AND 2003 (Unaudited) (in thousands, except share and per share amounts) Three months ended Twelve months ended December 31, December 31, ----------------------- ----------------------- 2002 2003 2002 2003 ----------- ----------- ----------- ----------- Revenues $131,341 $149,994 $498,661 $563,509 Operating expenses: Cost of operations 75,230 85,186 282,187 316,841 Selling, general and administrative 12,898 14,605 47,366 54,367 Depreciation and amortization 10,381 13,192 38,977 47,347 ----------- ----------- ----------- ----------- Operating income 32,832 37,011 130,131 144,954 Interest expense (8,374) (7,828) (31,372) (31,666) Minority interests (2,546) (2,743) (9,367) (10,549) Other income (expense), net (70) (36) (813) (192) ----------- ----------- ----------- ----------- Income before income tax provision and cumulative effect of change in accounting principle 21,842 26,404 88,579 102,547 Income tax provision (8,082) (9,114) (33,113) (37,233) ----------- ----------- ----------- ----------- Income before cumulative effect of change in accounting principle 13,760 17,290 55,466 65,314 Cumulative effect of change in accounting principle, net of tax expense of $166 - - - 282 ----------- ----------- ----------- ----------- Net income $13,760 $17,290 $55,466 $65,596 =========== =========== =========== =========== Basic earnings per common share: Income before cumulative effect of change in accounting principle $0.49 $0.61 $2.00 $2.31 Cumulative effect of change in accounting principle - - - .01 ----------- ----------- ----------- ----------- Net income per common share $0.49 $0.61 $2.00 $2.32 =========== =========== =========== =========== Diluted earnings per common share(a): Income before cumulative effect of change in accounting principle $ 0.47 $ 0.57 $ 1.90 $ 2.17 Cumulative effect of change in accounting principle - - - .01 ----------- ----------- ----------- ----------- Net income per common share $0.47 $0.57 $1.90 $2.18 =========== =========== =========== =========== Shares used in the per share calculations: Basic 27,977,289 28,538,113 27,750,642 28,327,296 =========== =========== =========== =========== Diluted 32,601,816 33,073,258 32,325,624 32,871,652 =========== =========== =========== =========== Supplemental information: Operating income before depreciation and amortization(b) $43,213 $50,203 $169,108 $192,301 (a) Diluted earnings per share assumes conversion of the 5.5% Convertible Subordinated Notes due 2006. The interest expense related to these notes, net of tax effects, for the three months ended December 31, 2002 and 2003 was $1,473 and $1,476, respectively, and for the twelve months ended December 31, 2002 and 2003 was $5,852 and $5,902, respectively. (b) A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule. WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share and per share amounts) December December 31, 2002 31, 2003 ----------- ----------- ASSETS Current assets: Cash and equivalents $4,067 $5,276 Accounts receivable, less allowance for doubtful accounts of $2,509 and $2,570 at December 31, 2002 and 2003, respectively 63,488 72,474 Prepaid expenses and other current assets 8,652 11,270 ----------- ----------- Total current assets 76,207 89,020 Property and equipment, net 578,040 613,225 Goodwill, net 548,975 590,054 Intangible assets, net 33,498 64,784 Other assets, net 25,162 38,869 ----------- ----------- $1,261,882 $1,395,952 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $30,688 $38,682 Accrued liabilities 45,905 31,920 Deferred revenue 19,016 23,738 Current portion of long-term debt and notes payable 3,646 9,740 ----------- ----------- Total current liabilities 99,255 104,080 Long-term debt and notes payable 578,481 601,891 Other long-term liabilities 14,813 8,400 Deferred income taxes 94,543 120,162 ----------- ----------- Total liabilities 787,092 834,533 Commitments and contingencies Minority interests 23,078 23,925 Stockholders' equity: Preferred stock: $0.01 par value; 7,500,000 shares authorized; none issued and outstanding - - Common stock: $0.01 par value; 50,000,000 shares authorized; 28,046,535 and 28,666,788 shares issued and outstanding at December 31, 2002 and 2003, respectively 280 287 Additional paid-in capital 332,705 348,146 Deferred stock compensation (775) (436) Retained earnings 123,498 189,094 Unrealized (loss) gain on market value of interest rate swaps (3,996) 403 ----------- ----------- Total stockholders' equity 451,712 537,494 ----------- ----------- $1,261,882 $1,395,952 ----------- ----------- WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS TWELVE MONTHS ENDED DECEMBER 31, 2002 AND 2003 (Unaudited) (Dollars in thousands) Twelve months ended December 31, ------------------- 2002 2003 --------- --------- Cash flows from operating activities: Net income $55,466 $65,596 Adjustments to reconcile net income to net cash provided by operating activities: Loss (gain) on disposal of assets (1) 333 Depreciation 37,626 45,670 Amortization of intangibles 1,351 1,677 Deferred income taxes 10,132 27,931 Minority interests 9,367 10,549 Cumulative effect of change in accounting principle - (448) Amortization of debt issuance costs 2,195 2,403 Stock-based compensation 847 266 Interest income on restricted cash (485) (302) Net change in operating assets and liabilities, net of acquisitions 11,418 462 --------- --------- Net cash provided by operating activities 127,916 154,137 --------- --------- Cash flows from investing activities: Payments for acquisitions, net of cash acquired (166,626) (84,855) Capital expenditures for property and equipment (56,776) (70,213) Proceeds from disposal of assets 2,234 1,534 Net change in other assets (1,723) (7,417) --------- --------- Net cash used in investing activities (222,891) (160,951) --------- --------- Cash flows from financing activities: Proceeds from long-term debt 381,000 108,941 Principal payments on notes payable and long- term debt (290,962) (102,469) Distributions to minority interest holders (5,880) (9,702) Proceeds from option and warrant exercises 14,078 15,348 Debt issuance costs (6,473) (4,095) --------- --------- Net cash provided by financing activities 91,763 8,023 --------- --------- Net increase (decrease) in cash and equivalents (3,212) 1,209 Cash and equivalents at beginning of period 7,279 4,067 --------- --------- Cash and equivalents at end of period $4,067 $5,276 --------- --------- ADDITIONAL STATISTICS THREE MONTHS ENDED DECEMBER 31, 2003 (Dollars in thousands) Internal Growth The following table reflects revenue growth for operations owned for at least 12 months: Price 2.1% Volume 1.4% Recycling 0.1% ------ Total 3.6% Uneliminated Revenue Breakdown: Collection $111,814 64.9% Disposal and Transfer 53,235 30.9% Recycling and Other 7,296 4.2% ----------- ----------- Total $172,345 100.0% Inter-company elimination $22,351 Days Sales Outstanding: 43.5 Internalization: 69.4% Other Cash Flow Items: Cash Interest Paid: $8,971 Cash Taxes Paid: $ 681 Debt to Capitalization: 53.2% Total Debt divided by Total Debt plus Total Stockholders' Equity: ($601,891 + $9,740)/($601,891 + $9,740 + $537,494) = 53.2% NON-GAAP RECONCILIATION SCHEDULE (Dollars in thousands) Operating income before depreciation and amortization and free cash flow, each a non-GAAP financial measure, are provided supplementally because they are widely used by investors as valuation and financial performance measures in the solid waste industry. These measures should be used in conjunction with GAAP financial measures. Management uses operating income before depreciation and amortization and free cash flow as two of the principal measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate operating income before depreciation and amortization and free cash flow differently. Operating income before depreciation and amortization reconciliation: Three Months Ended Twelve Months Ended December 31, 2003 December 31, 2003 ------------------ ------------------- Operating income $37,011 $144,954 Depreciation and amortization 13,192 47,347 ------------------ ------------------- Operating income before depreciation and amortization $50,203 $192,301 ------------------ ------------------- Operating income before depreciation and amortization as a % of revenues 33.5% 34.1% Free cash flow reconciliation: Three Months Ended Twelve Months Ended December 31, 2003 December 31, 2003 ------------------ ------------------- Net cash provided by operating activities $39,495 $154,137 Plus: Proceeds from disposal of assets 627 1,534 Less: Capital expenditures (25,241) (70,213) Less: Distributions to minority interest holders (1,764) (9,702) ------------------ ------------------- Free cash flow $13,117 $75,756 ------------------ ------------------- Free cash flow as a % of revenues 8.7% 13.4% CONTACT: Waste Connections, Inc. Worthing Jackman, 916-608-8266 worthingj@wasteconnections.com -----END PRIVACY-ENHANCED MESSAGE-----