EX-99.1 2 tv519593_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

 

 

WASTE CONNECTIONS REPORTS FIRST QUARTER 2019 RESULTS

 

-Revenue of $1.245 billion, exceeding outlook
-Reports over 5.0% solid waste price growth, exceeding high end of outlook
-Net income attributable to Waste Connections of $125.6 million, or $0.48 per share
-Adjusted net income attributable to Waste Connections* of $163.9 million, or $0.62 per share, up 10.7% per share
-Adjusted EBITDA* of $385.7 million, or 31.0% of revenue, exceeding outlook
-Net cash provided by operating activities of $363.8 million
-Adjusted free cash flow* of $246.3 million, or 19.8% of revenue
-Signs or closes acquisitions YTD with approximately $100 million total annualized revenue

 

 

TORONTO, ONTARIO, April 24, 2019 - Waste Connections, Inc. (TSX/NYSE: WCN) (“Waste Connections” or the “Company”) today announced its results for the first quarter of 2019.

 

“We are extremely pleased with the strong start to the year which, along with expected sequential improvement in volume growth and recently completed acquisitions, positions us well for the remainder of 2019. Continuing strength in solid waste price growth once again drove underlying margin expansion and better than expected financial results in the quarter, enabling us to overcome weather-related impacts across multiple markets and further declines in recycled commodity values. In addition, adjusted free cash flow* of almost 20% of revenue in the quarter puts us solidly on track to achieve our full year outlook of $950 million,” said Worthing F. Jackman, President.

 

Mr. Jackman added, “Year-to-date, we’ve signed or closed acquisitions with total annualized revenue of approximately $100 million, putting us on pace to potentially deliver another outsized year of acquisition activity. These acquisitions include new market entries in Colorado, Illinois and Iowa, and tuck-ins in Colorado, Montana, Nebraska, New York and Wyoming. Our strong financial profile and free cash flow generation provide us the flexibility to fund continuing outsized acquisition activity while increasing the return of capital to shareholders.”

 

Q1 2019 Results

 

Revenue in the first quarter totaled $1.245 billion, up from $1.140 billion in the year ago period. Operating income, which included $16.1 million in impairments and other operating items, was $184.9 million; this compares to $188.7 million in the year ago period. Net income attributable to Waste Connections in the first quarter was $125.6 million, or $0.48 per share on a diluted basis of 264.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $124.9 million, or $0.47 per share on a diluted basis of 264.6 million shares.

 

Adjusted net income attributable to Waste Connections* in the first quarter was $163.9 million, or $0.62 per share, versus $148.6 million, or $0.56 per share, in the prior year period. Adjusted EBITDA* in the first quarter was $385.7 million and 31.0% of revenue, as compared to adjusted EBITDA* of $356.9 million and 31.3% of revenue in the prior year period. Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude acquisition-related items and impairments and other operating items, as reflected in the detailed reconciliations in the attached tables.

 

 

 

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

 

 

 

Q1 2019 Conference Call

 

Waste Connections will be hosting a conference call related to first quarter earnings on April 25th at 8:30 A.M. Eastern Time. To access the call, listeners should dial 800-954-0602 (within North America) or 212-231-2919 (international) approximately 10 minutes prior to the scheduled start time and ask the operator for the Waste Connections conference call (a passcode is not required). A replay of the conference call will be available until May 2, 2019 by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode #21919993. The call will be broadcast live over the Internet through a link on the Company’s website at www.wasteconnections.com.  A playback of the call will be available on the Company’s website.

 

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on April 25th, providing the Company's second quarter 2019 outlook for revenue, price plus volume growth for solid waste and adjusted EBITDA*.

 

*A non-GAAP measure.

 

About Waste Connections

 

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the United States and Canada. Through its R360 Environmental Solutions subsidiary, Waste Connections is also 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 six million residential, commercial, industrial, and exploration and production customers in 41 states in the U.S., and six provinces in Canada. The Company also provides intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest.

 

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 (905) 532-7510. Investors can also obtain these materials and other documents filed with the U.S. Securities and Exchange Commission (“SEC”) and the Canadian securities regulators free of charge at the SEC’s website, www.sec.gov, and at the System for Electronic Document Analysis and Retrieval maintained by the Canadian Securities Administrators at www.sedar.com.

 

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 2019 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

 

 

 

 

Waste Connections, Inc.

CONDENSED Consolidated Statements of NET INCOME

THRee months ended MARCH 31, 2018 and 2019 (Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

 

   Three months ended
March 31,		 
   2018   2019 
Revenues  $1,140,131   $1,244,637 
Operating expenses:          
Cost of operations   659,803    733,690 
Selling, general and administrative   131,308    132,586 
Depreciation   133,185    146,847 
Amortization of intangibles   26,098    30,542 
Impairments and other operating items   1,030    16,112 
Operating income   188,707    184,860 
           
Interest expense   (32,370)   (37,287)
Interest income   1,155    3,311 
Other income (expense), net   (387)   2,558 
Foreign currency transaction gain (loss)   (221)   103 
Income before income tax provision   156,884    153,545 
           
Income tax provision   (31,852)   (27,968)
Net income   125,032    125,577 
Plus (less): Net loss (income) attributable to noncontrolling interests   (163)   45 
Net income attributable to Waste Connections  $124,869   $125,622 
           
Earnings per common share attributable to Waste Connections’
common shareholders:		          
Basic  $0.47   $0.48 
Diluted  $0.47   $0.48 
           
Shares used in the per share calculations:          
Basic   263,827,963    263,603,418 
Diluted   264,588,069    264,336,930 
           
Cash dividends per common share  $0.14   $0.16 

 

 

 

 

Waste Connections, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

 

   December 31, 2018   March 31,
2019		 
ASSETS          
Current assets:          
Cash and equivalents  $319,305   $499,482 
Accounts receivable, net of allowance for doubtful accounts of $16,760 and $15,124 at December 31, 2018 and March 31, 2019, respectively   609,545    599,369 
Prepaid expenses and other current assets   164,053    144,006 
Total current assets   1,092,903    1,242,857 
Restricted cash   84,661    85,200 
Restricted investments   47,486    47,926 
Property and equipment, net   5,168,996    5,119,785 
Operating lease right-of-use assets   -    199,703 
Goodwill   5,031,685    5,065,530 
Intangible assets, net   1,128,628    1,105,553 
Other assets, net   72,970    65,374 
Total assets  $12,627,329   $12,931,928 
LIABILITIES AND EQUITY          
Current liabilities:          
Accounts payable  $359,967   $339,261 
Book overdraft   18,518    15,734 
Accrued liabilities   289,544    264,706 
Current portion of operating lease liabilities   -    29,810 
Current portion of contingent consideration   11,612    11,650 
Deferred revenue   179,282    181,950 
Current portion of long-term debt and notes payable   1,786    1,016 
Total current liabilities   860,709    844,127 
           
Long-term debt and notes payable   4,153,465    4,157,081 
Long-term portion of operating lease liabilities   -    176,328 
Long-term portion of contingent consideration   43,003    44,686 
Deferred income taxes   760,033    766,641 
Other long-term liabilities   349,931    374,391 
Total liabilities   6,167,141    6,363,254 
Commitments and contingencies          
Equity:          
Common shares: 263,271,302 shares issued and 263,141,413 shares outstanding at December 31, 2018; 263,673,497 shares issued and 263,587,245 shares outstanding at March 31, 2019   4,131,307    4,134,917 
Additional paid-in capital   133,577    128,230 
Accumulated other comprehensive income (loss)   (74,786)   (45,978)
Treasury shares: 129,889 and 86,252 shares at December 31, 2018 and March 31, 2019, respectively   -    - 
Retained earnings   2,264,510    2,345,970 
Total Waste Connections’ equity   6,454,608    6,563,139 
Noncontrolling interest in subsidiaries   5,580    5,535 
Total equity   6,460,188    6,568,674 
   $12,627,329   $12,931,928 

 

 

 

 

 

Waste Connections, Inc.

Condensed Consolidated Statements of Cash Flows

THREE months ended MARCH 31, 2018 and 2019

(Unaudited)

(in thousands of U.S. dollars)

 

   Three months ended March 31, 
   2018   2019 
Cash flows from operating activities:          
Net income  $125,032   $125,577 
Adjustments to reconcile net income to net cash provided by operating activities:          
Loss on disposal of assets and impairments   2,863    16,372 
Depreciation   133,185    146,847 
Amortization of intangibles   26,098    30,542 
Amortization of leases   -    7,214 
Deferred income taxes, net of acquisitions   20,957    10,126 
Amortization of debt issuance costs   1,076    1,148 
Share-based compensation   9,180    15,168 
Interest accretion   3,665    3,972 
Payment of contingent consideration recorded in earnings   (11)   - 
Adjustments to contingent consideration   702    1,466 
Other   101    (145)
Net change in operating assets and liabilities, net of acquisitions   (15,601)   5,485 
Net cash provided by operating activities   307,247    363,772 
           
Cash flows from investing activities:          
Payments for acquisitions, net of cash acquired   (311,964)   (14,920)
Capital expenditures for property and equipment   (91,216)   (114,238)
Proceeds from disposal of assets   1,002    639 
Other   (104)   473 
Net cash used in investing activities   (402,282)   (128,046)
           
Cash flows from financing activities:          
Proceeds from long-term debt   35,625    55,354 
Principal payments on notes payable and long-term debt   (106,812)   (52,051)
Payment of contingent consideration recorded at acquisition date   (2,205)   (275)
Change in book overdraft   (295)   (2,784)
Payments for repurchase of common shares   (42,040)   - 
Payments for cash dividends   (36,814)   (42,084)
Tax withholdings related to net share settlements of equity-based compensation   (14,121)   (16,973)
Debt issuance costs   (2,188)   - 
Proceeds from sale of common shares held in trust   1,947    3,610 
Other   (103)   - 
Net cash used in financing activities   (167,006)   (55,203)
Effect of exchange rates changes on cash, cash equivalents and restricted cash   18    193 
Net increase (decrease) in cash, cash equivalents and restricted cash   (262,023)   180,716 
Cash, cash equivalents and restricted cash at beginning of period   556,467    403,966 
Plus: change in cash held for sale   101    - 
Cash, cash equivalents and restricted cash at end of period  $294,545   $584,682 

 

 

 

 

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 months ended March 31, 2019:

 

   U.S.   Canada   Total 
Core Price   4.8%    6.4%    5.0% 
Surcharges   0.2%    0.4%    0.2% 
Volume   (1.0%)   (2.2%)   (1.2%)
Recycling   (0.5%)   (0.6%)   (0.5%)
Foreign Exchange Impact   -    (5.1%)   (0.7%)
Total   3.5%    (1.1%)   2.8% 

 

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended March 31, 2018 and 2019:

 

   Three Months Ended March 31, 2018 
   Revenue  

Inter-company

Elimination

   Reported
Revenue		   % 
Solid Waste Collection  $809,646   $(2,399)  $807,247    70.8% 
Solid Waste Disposal and Transfer   370,929    (149,568)   221,361    19.4% 
Solid Waste Recycling   23,485    (972)   22,513    2.0% 
E&P Waste Treatment, Recovery and Disposal   58,359    (2,749)   55,610    4.9% 
Intermodal and Other   34,004    (604)   33,400    2.9% 
Total  $1,296,423   $(156,292)  $1,140,131    100.0% 

 

 

   Three Months Ended March 31, 2019 
   Revenue  

Inter-company

Elimination

  

Reported

Revenue

   % 
Solid Waste Collection  $891,353   $(2,176)  $889,177    71.4% 
Solid Waste Disposal and Transfer   405,791    (165,046)   240,745    19.3% 
Solid Waste Recycling   19,804    (504)   19,300    1.6% 
E&P Waste Treatment, Recovery and Disposal   66,831    (3,694)   63,137    5.1% 
Intermodal and Other   32,837    (559)   32,278    2.6% 
Total  $1,416,616   $(171,979)  $1,244,637    100.0% 

 

 

Contribution from Acquisitions: The following table reflects revenues from solid waste acquisitions, net of divestitures, for the three month periods ended March 31, 2018 and 2019:

 

   Three months ended
March 31,		 
   2018   2019 
Acquisitions, net  $10,800   $68,985 

 

 

 

 

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 month periods ended March 31, 2018 and 2019:

 

   Three months ended
March 31,		 
   2018   2019 
Cash Interest Paid  $22,440   $22,174 
Cash Taxes Paid   6,670    6,411 

 

 

Debt to Book Capitalization as of March 31, 2019: 39%

 

 

Internalization for the three months ended March 31, 2019: 55%

 

 

Days Sales Outstanding for the three months ended March 31, 2019: 43 (30 net of deferred revenue)

 

 

Share Information for the three months ended March 31, 2019:

 

Basic shares outstanding   263,603,418 
Dilutive effect of equity-based awards   733,512 
Diluted shares outstanding   264,336,930 

 

 

 

 

 

NON-GAAP RECONCILIATION SCHEDULE

(in thousands of U.S. dollars, except where noted)

 

 

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 foreign currency transaction loss, less foreign currency transaction gain. 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
March 31,		 
   2018   2019 
Net income attributable to Waste Connections  $124,869   $125,622 
Plus (less): Net income (loss) attributable to noncontrolling interests   163    (45)
Plus: Income tax provision   31,852    27,968 
Plus: Interest expense   32,370    37,287 
Less: interest income   (1,155)   (3,311)
Plus: Depreciation and amortization   159,283    177,389 
Plus: Closure and post-closure accretion   3,238    3,490 
Plus: Impairments and other operating items   1,030    16,112 
Plus (less): Other expense (income), net   387    (2,558)
Plus (less): Foreign currency transaction loss (gain)   221    (103)
Adjustments:          
Plus: Transaction-related expenses (a)   2,385    837 
Plus: Fair value changes to certain equity awards (b)   1,163    3,021 
Plus: Integration-related and other expenses (c)   1,110    - 
Adjusted EBITDA  $356,916   $385,709 
           
As % of revenues   31.3%    31.0% 

 

____________________________________________

(a)Reflects the addback of acquisition-related transaction costs.
(b)Reflects fair value accounting changes associated with certain equity awards.
(c)Reflects the addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.

 

 

 

 

NON-GAAP RECONCILIATION SCHEDULE (continued)

(in thousands of U.S. dollars, except where noted)

 

 

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.

 

   Three months ended
March 31,		 
   2018   2019 
Net cash provided by operating activities  $307,247   $363,772 
Less: Change in book overdraft   (295)   (2,784)
Plus: Proceeds from disposal of assets   1,002    639 
Less: Capital expenditures for property and equipment   (91,216)   (114,238)
Less: Distributions to noncontrolling interests   (103)   - 
Adjustments:          
     Payment of contingent consideration recorded in earnings (a)   11    - 
     Cash received for divestitures (b)   -    (2,376)
     Transaction-related expenses (c)   2,385    837 
     Integration-related and other expenses (d)   1,110    - 
     Pre-existing Progressive Waste share-based grants (e)   1,919    2,182 
     Tax effect (f)   (1,907)   (1,697)
Adjusted free cash flow  $220,153   $246,335 
           
As % of revenues   19.3%    19.8% 

 

____________________________________________

(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 Progressive Waste operations.
(c)Reflects the addback of acquisition-related items, including transaction costs.
(d)Reflects the addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.
(e)Reflects the cash settlement of pre-existing Progressive Waste share-based awards and related payments during the period.
(f)The aggregate tax effect of footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.

 

 

 

 

 

 

 

NON-GAAP RECONCILIATION SCHEDULE (continued)

(in thousands of U.S. dollars, except per share amounts)

 

 

Reconciliation of Net Income attributable to Waste Connections to 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
March 31,		 
   2018   2019 
Reported net income attributable to Waste Connections  $124,869   $125,622 
Adjustments:          
Amortization of intangibles (a)   26,098    30,542 
Impairments and other operating items (b)   1,030    16,112 
Transaction-related expenses (c)   2,385    837 
Fair value changes to certain equity awards (d)   1,163    3,021 
Integration-related and other expenses (e)   1,110    - 
     Tax effect (f)   (8,044)   (12,197)
Adjusted net income attributable to Waste Connections  $148,611   $163,937 
           
Diluted earnings per common share attributable to Waste Connections’ common shareholders:          
Reported net income  $0.47   $0.48 
Adjusted net income  $0.56   $0.62 

 

____________________________________________

(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 addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.
(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.