Date: July 26, 2006
Source: Waste Connections, Inc.
Revenue increases 14.8% to $207.0 million
* Reports internal growth of 5.1% price and 2.8% volume
* Completes approximately $27.5 million YTD of acquired annualized revenue
Waste Connections, Inc. (NYSE: WCN) today announced its results for the second quarter 2006. Revenue totaled $207.0 million, a 14.8% increase over revenue of $180.3 million in the year ago period. Operating income was $40.8 million versus $43.6 million in the second quarter of 2005. Net income was $19.2 million, or $0.41 per share on a diluted basis of 46.9 million shares. In the year ago period, the Company reported income from continuing operations of $21.8 million and diluted earnings per share from continuing operations of $0.45.
The Company noted three items in the second quarter 2006 results which combined to decrease diluted earnings per share by approximately $0.05:
additional development costs for insurance claims from prior years of $3.8 million ($2.4 million net of taxes), or a reduction of approximately $0.05 per share;
stock-based compensation costs of $1.0 million ($0.6 million net of taxes), or a reduction of approximately $0.01 per share; and
reduced interest expense due to the redemption of convertible notes of $1.0 million ($0.6 million net of taxes), or an increase of approximately $0.01 per share.
"Pricing and volume growth remain above the upper end of our original expectations for the full year, and we expect this trend to continue during the third quarter. This strength has enabled us to offset higher than anticipated current year costs, primarily in fuel and related items. We expect this strong pricing environment to continue into next year and provide for margin expansion in 2007 when year-to-year costs again become more comparable," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Fuel and related items increased as a percentage of revenue by approximately 265 basis points in the second quarter compared to the year ago period. This increase was due to the more than doubling of current fuel prices relative to prices we paid last year under a fixed-price fuel supply contract that expired at the end of 2005."
Mr. Mittelstaedt continued, "Acquisition activity increased significantly during the second quarter with the closing in early June of the previously announced purchase of El Dorado Disposal Service from Waste Management. El Dorado Disposal Service provides collection, recycling and transfer services in El Dorado County, California, under long-term franchise agreements. This acquisition together with previously announced awarded contracts already positions us for approximately 10% year-over-year reported revenue growth in 2007, excluding the impact of any additional acquisitions."
For the six months ended June 30, 2006, revenue was $397.1 million, a 15.2% increase over revenue of $344.7 million in the year ago period. Operating income was $80.0 million versus $82.3 million for the same period in 2005. Net income for the six months ended June 30, 2006, was $34.9 million, or $0.74 per share on a diluted basis of 47.2 million shares. In the year ago period, the Company reported income from continuing operations of $41.3 million and diluted earnings per share from continuing operations of $0.85.
The Company noted the following items in the current year six-month period which contributed to the year-over-year change in net income and diluted earnings per share:
write-off of unamortized debt issuance costs associated with convertible notes redeemed during the second quarter of $4.2 million ($2.6 million net of taxes), or a decrease of approximately $0.06 per share;
additional development costs for insurance claims from prior years of $3.8 million ($2.4 million net of taxes), or a decrease of approximately $0.05 per share;
stock-based compensation costs of $1.6 million ($1.0 million net of taxes), or a decrease of approximately $0.02 per share; and
reduced interest expense due to the redemption of convertible notes of $1.0 million ($0.6 million net of taxes), or an increase of approximately $0.01 per share.
Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 27th at 10:00 A.M. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com and through a link on the Company's web site at www.wasteconnections.com. A playback of the call will be available at both of these sites.
For non-GAAP measures, see accompanying Non-GAAP Reconciliation Schedule.
In the second quarter of 2005, Waste Connections classified as discontinued operations the results of certain operations in Utah and California that were exited during that quarter. Results for 2005 have been reclassified to present the results for these operations as discontinued operations.
In accordance with the Company's adoption of SFAS 123R at the beginning of the first quarter of 2006, excess tax benefits on the exercise of stock options, which totaled $5.5 million for the six months ended June 30, 2006, are now classified as a cash flow from financing activities, rather than as a cash flow from operating activities as classified in prior year periods. This requirement will reduce the amounts recorded as net cash provided by operating activities, and will increase the amount recorded as net cash provided by financing activities. In order to improve comparability to prior periods, the Company's definition of free cash flow, a non-GAAP financial measure, has been expanded to include the excess tax benefits on the exercise of stock options. Total cash flow will remain unchanged from what would have been reported under prior accounting rules.
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 residential, commercial and industrial customers from a network of operations in 22 states. The Company also provides intermodal services for the movement of containers in the Pacific Northwest. 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.
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