EX-99.1 2 a4746694ex991.txt WASTE CONNECTIONS, INC. EXHIBIT 99.1 Exhibit 99.1 Waste Connections Reports Third Quarter 2004 Results FOLSOM, Calif.--(BUSINESS WIRE)--Oct. 20, 2004--Waste Connections, Inc. (NYSE:WCN) -- Reports earnings per share of $0.46, up 24.3% -- Third quarter revenue and net income increased 13.2% and 32.3%, respectively -- Reports internal growth of 2.8% price and 1.6% volume -- Signs agreements to acquire $30 million annualized revenue Waste Connections, Inc. (NYSE:WCN) today announced third quarter earnings of $0.46 per share on a diluted basis of 49.0 million shares, a 24.3% increase over diluted earnings per share of $0.37 in the third quarter of 2003. Revenue for the third quarter of 2004 was $165.4 million, a 13.2% increase over revenue of $146.2 million in the third quarter of 2003. Operating income for the third quarter of 2004 was $42.8 million, a 13.3% increase over operating income of $37.8 million in the third quarter of 2003. Net income in the quarter was $22.5 million, a 32.3% increase over the year ago period. For the nine months ended September 30, 2004, revenue was $475.3 million, a 14.9% increase over revenue of $413.5 million in the year ago period. Operating income for the nine months ended September 30, 2004, was $118.3 million, a 9.6% increase over operating income of $107.9 million for the same period in 2003. Net income excluding a charge for early retirement of convertible notes, a non-GAAP measure, for the nine months ended September 30, 2004, was $58.9 million, a 22.7% increase over net income of $48.0 million before a gain resulting from the cumulative effect of adopting SFAS No. 143 in the prior year period. Including the cost for early retirement of convertible notes, diluted earnings per share for the nine months ended September 30, 2004 was $1.20. Excluding the charge for early retirement of debt, a non-GAAP measure, in the nine month period ended September 30, 2004, diluted earnings per share was $1.22, an increase of 15.1% over diluted earnings per share of $1.06 before the gain on accounting change in the year ago period. Ronald J. Mittelstaedt, Chairman and Chief Executive Officer, said, "Our execution at the local level and differentiated market strategy have been the primary drivers to our strong performance this year. Internal growth continues to track above initial expectations for the year with margins in the quarter beginning to demonstrate the year-over-year improvements we had expected. More importantly, we made significant progress in the quarter on new landfill development projects in Kansas, Kentucky and Colorado that should begin contributing in 2005. On the acquisition front, we completed the previously announced sale of a non-integrated collection operation in Washington and entered into a long-term disposal contract with the buyer. Additionally, we agreed to acquire Northwest Container Services, an inter-modal transfer services company with six locations in the Pacific Northwest Region, including Seattle, Tacoma and Portland. This strategic acquisition is expected to significantly improve our ability to compete for waste disposal contracts in a region that is highly dependent on rail haul services, attracting incrementally new volumes to our existing landfill network. We also signed or closed an additional three tuck-in transactions in South Dakota and Texas. These acquisitions bring the total amount of acquired annualized revenue either signed or closed this year to approximately $36 million." Waste Connections will be hosting a conference call related to third quarter earnings on October 21st at 8:30 A.M. Eastern Time. We will be broadcasting our quarterly conference call 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 and Southern U.S. The Company serves more than one million commercial, residential and industrial customers from a network of operations in 23 states. 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. For non-GAAP measures, see accompanying Non-GAAP Reconciliation Schedule. 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 differ materially 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) difficulties in making acquisitions, acquiring exclusive contracts and generating internal growth may cause Waste Connections' growth to be slower than expected; (2) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (3) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (4) Waste Connections competes for acquisition candidates with other purchasers, some of which have greater financial resources than it does, and these other purchasers may be able to offer more favorable acquisition terms, thus limiting Waste Connections' ability to grow through acquisition; (5) timing of acquisitions may cause fluctuations in Waste Connections' quarterly results, which may cause its stock price to decline; (6) rapid growth may strain Waste Connections' management, operational, financial and other resources; (7) Waste Connections may be unable to compete effectively with governmental service providers and larger and better capitalized companies, which may result in reduced revenues and lower profits; (8) Waste Connections may lose contracts through competitive bidding, early termination or governmental action, which would cause its revenues to decline; (9) increases in the costs of labor, disposal, fuel or energy could reduce operating margins; and (10) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings. These risks and uncertainties, as well as others, are discussed in greater detail in Waste Connections' filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and subsequent Quarterly Report on Form 10-Q. There may be additional risks of which Waste Connections is not presently aware or that it currently believes are immaterial which could have an adverse impact on its business. Waste Connections 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 NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2004 (Unaudited) (in thousands, except share and per share amounts) Three months ended Nine months ended September 30, September 30, ----------------------- ----------------------- 2003 2004 2003 2004 ----------- ----------- ----------- ----------- Revenues $146,178 $165,444 $413,515 $475,263 Operating expenses: Cost of operations 82,407 92,006 231,655 267,958 Selling, general and administrative 13,702 16,104 39,762 47,143 Depreciation and amortization 12,293 14,551 34,155 41,846 ----------- ----------- ----------- ----------- Operating income 37,776 42,783 107,943 118,316 Interest expense (8,002) (4,928) (23,838) (16,925) Minority interests (2,932) (3,309) (7,807) (8,995) Other income (expense), net 12 184 (155) (1,312) ----------- ----------- ----------- ----------- Income before income tax provision and cumulative effect of change in accounting principle 26,854 34,730 76,143 91,084 Income tax provision (9,882) (12,279) (28,119) (33,260) ----------- ----------- ----------- ----------- Income before cumulative effect of change in accounting principle 16,972 22,451 48,024 57,824 Cumulative effect of change in accounting principle, net of tax expense of $166 - - 282 - ----------- ----------- ----------- ----------- Net income $16,972 $22,451 $48,306 $57,824 =========== =========== =========== =========== Basic earnings per common share: Income before cumulative effect of change in accounting principle $0.40 $0.47 $1.13 $1.25 Cumulative effect of change in accounting principle - - .01 - ----------- ----------- ----------- ----------- Net income per common share $0.40 $0.47 $1.14 $1.25 =========== =========== =========== =========== Diluted earnings per common share(a): Income before cumulative effect of change in accounting principle $0.37 $0.46 $1.06 $1.20 Cumulative effect of change in accounting principle - - .01 - ----------- ----------- ----------- ----------- Net income per common share $0.37 $0.46 $1.07 $1.20 =========== =========== =========== =========== Shares used in the per share calculations: Basic 42,627,645 47,725,447 42,384,377 46,152,184 =========== =========== =========== =========== Diluted 49,426,433 48,966,181 49,206,116 49,538,370 =========== =========== =========== =========== Supplemental information: Operating income before depreciation and amortization (b) $50,069 $57,334 $142,098 $160,162 (a) Diluted earnings per share assumes conversion of the 5.5% Convertible Subordinated Notes due 2006 prior to its redemption on April 15, 2004. The interest expense related to these notes, net of tax effects, for the three months ended September 30, 2003 was $1,476, and for the nine months ended September 30, 2003 and 2004 was $4,427 and $1,707, 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 September 31, 30, 2003 2004 ----------- ----------- ASSETS Current assets: Cash and equivalents $5,276 $4,977 Accounts receivable, less allowance for doubtful accounts of $2,570 and $2,434 at December 31, 2003 and September 30, 2004, respectively 72,474 77,898 Prepaid expenses and other current assets 11,270 11,551 ----------- ----------- Total current assets 89,020 94,426 Property and equipment, net 613,225 635,999 Goodwill, net 590,054 603,489 Intangible assets, net 64,784 68,440 Restricted cash 17,734 13,777 Other assets, net 21,135 21,066 ----------- ----------- $1,395,952 $1,437,197 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $38,682 $40,729 Accrued liabilities 31,920 35,863 Deferred revenue 23,738 25,966 Current portion of long-term debt and notes payable 9,740 10,105 ----------- ----------- Total current liabilities 104,080 112,663 Long-term debt and notes payable 601,891 452,483 Other long-term liabilities 8,400 8,247 Deferred income taxes 120,162 135,582 ----------- ----------- Total liabilities 834,533 708,975 Commitments and contingencies Minority interests 23,925 24,052 Stockholders' equity: Common stock: $0.01 par value; 50,000,000 and 100,000,000 shares authorized at December 31, 2003 and September 30, 2004, respectively; 43,000,182 and 47,861,766 shares issued and outstanding at December 31, 2003 and September 30, 2004, respectively 430 479 Additional paid-in capital 348,003 456,950 Deferred stock compensation (436) (1,902) Retained earnings 189,094 246,918 Accumulated other comprehensive income 403 1,725 ----------- ----------- Total stockholders' equity 537,494 704,170 ----------- ----------- $1,395,952 $1,437,197 ----------- ----------- WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2004 (Unaudited) (Dollars in thousands) Nine months ended September 30, ------------------- 2003 2004 --------- --------- Cash flows from operating activities: Net income $48,306 $57,824 Adjustments to reconcile net income to net cash provided by operating activities: Loss on disposal of assets 276 119 Depreciation 33,034 39,979 Amortization of intangibles 1,120 1,867 Deferred income taxes 14,060 15,420 Minority interests 7,807 8,995 Cumulative effect of change in accounting principle (448) -- Amortization of debt issuance costs 1,786 1,740 Stock-based compensation 151 736 Interest income on restricted cash (230) (206) Closure and post-closure accretion 324 308 Net change in operating assets and liabilities, net of acquisitions 8,457 9,699 --------- --------- Net cash provided by operating activities 114,643 136,481 --------- --------- Cash flows from investing activities: Payments for acquisitions, net of cash acquired (78,035) (13,737) Capital expenditures for property and equipment (44,972) (56,201) Proceeds from disposal of assets 907 718 Net change in other assets (6,283) 4,174 --------- --------- Net cash used in investing activities (128,383) (65,046) --------- --------- Cash flows from financing activities: Proceeds from long-term debt 88,940 127,000 Principal payments on notes payable and long- term debt (72,350) (167,962) Distributions to minority interest holders (7,938) (8,869) Proceeds from option and warrant exercises 8,124 29,760 Payments for repurchase of common stock -- (51,206) Debt issuance costs (76) (457) --------- --------- Net cash used in financing activities 16,700 (71,734) --------- --------- Net increase (decrease) in cash and equivalents 2,960 (299) Cash and equivalents at beginning of period 4,067 5,276 --------- --------- Cash and equivalents at end of period $7,027 $4,977 --------- --------- ADDITIONAL STATISTICS THREE MONTHS ENDED SEPTEMBER 30, 2004 (Dollars in thousands) Internal Growth The following table reflects revenue growth for operations owned for at least 12 months: Price 2.8% Volume 1.6% Recycling 0.8% ---------------- Total 5.2% Uneliminated Revenue Breakdown: Collection $123,526 64.9% Disposal and Transfer 58,425 30.7% Recycling and Other 8,298 4.4% ---------------------- Total $190,249 100.0% Inter-company elimination $24,805 Days Sales Outstanding: 43 Internalization: 68% Other Cash Flow Items: Cash Interest Paid: $4,568 Cash Taxes Paid: $ 408 Debt to Capitalization: 39.6% Total Debt divided by Total Debt plus Total Stockholders' Equity: ($452,483 + $10,105) / ($452,483 + $10,105 + $704,170) = 39.6% NON-GAAP RECONCILIATION SCHEDULE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 (in thousands, except share and per share amounts) 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, liquidity 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 Nine Months Ended Ended September 30, September 30, 2004 2004 ---------------------------- Operating income $42,783 $118,316 Depreciation and amortization 14,551 41,846 ---------------------------- Operating income before depreciation and amortization $57,334 $160,162 ---------------------------- Operating income before depreciation and amortizationas % revenues 34.7% 33.7% Free cash flow reconciliation: Three Months Nine Months Ended Ended September 30, September 30, 2004 2004 ------------------------------- Net cash provided by operating activities $51,929 $136,481 Plus cash proceeds from disposal of assets 371 718 Less: Capital expenditures (22,306) (56,201) Less: Distributions to minority interest holders (2,940) (8,869) ------------------------------- Free cash flow $27,054 $72,129 ------------------------------- Free cash flow as % revenues 16.4% 15.2% Net income and EPS adjusted to exclude the cost for early extinguishment of debt are provided as a measure of our operating performance on a more comparable basis to historical periods. The item excluded is financing related and may not occur in every reporting period. Therefore, management evaluates net income and EPS performance excluding this item to evaluate and monitor the ongoing financial performance of our operations. These measures should be used in conjunction with GAAP net income and EPS. Net income and EPS reconciliation: Three Months Nine Months Ended Ended September 30, September 30, 2004 2004 -------------------------------- Income before cumulative effect of change in accounting principle $22,451 $57,824 After-tax loss from early retirement of debt -- 1,125 -------------------------------- Net income excluding loss from early retirement of debt $22,451 $58,949 -------------------------------- Diluted shares used in the per share calculation: 48,966,181 49,538,370 Diluted EPS excluding loss from early retirement of debt: $0.46 $1.22 Diluted earnings per share assumes conversion of the 5.5% Convertible Subordinated Notes due 2006 prior to their redemption on April 15, 2004. The interest expense related to these notes, net of tax effects, for the three and nine months ended September 30, 2004 was $0 and $1,707, respectively. CONTACT: Waste Connections, Inc. Worthing Jackman, 916-608-8266 worthingj@wasteconnections.com