Date: July 22, 2008
Source: Waste Connections, Inc.
Reports revenue of $267.0 million, up 10.8%, and earnings per share of $0.39
Reports pricing growth of 5.4% and internal growth of 4.6%
Reports YTD free cash flow of $79.2 million, or 15.3% of revenue, up 54.0%
Increases available capital to fund potential acquisition activity
Waste Connections, Inc. (NYSE: WCN) today announced its results for the second quarter 2008. Revenue totaled $267.0 million, a 10.8% increase over revenue of $241.1 million in the year ago period. Operating income was $55.6 million versus $53.8 million in the second quarter of 2007. Net income in the quarter was $26.2 million, or $0.39 per share on a diluted basis of 67.8 million shares. In the year ago period, the Company reported net income of $25.3 million and diluted earnings per share of $0.36. Non-cash costs for equity-based compensation and amortization of acquisition-related intangibles were $3.3 million ($2.0 million net of taxes, or approximately $0.03 per share) in the quarter compared to $2.5 million ($1.5 million net of taxes, or approximately $0.02 per share) in the year ago period.
"We remain extremely pleased with our performance in the year considering the rapid escalation in fuel costs and weakening economic environment. A 55% year-over-year increase in average fuel prices drove an approximate $8 million increase in fuel expense in the quarter and resulted in fuel costs as a percentage of revenue increasing approximately 285 basis points, or 50 basis points ($1.3 million) above expectations for the quarter. Fortunately, continuing pricing strength and operating improvements enabled us to recover most of the dollar impact of this unprecedented increase," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Our strong free cash flow, expansion of our credit facility and recently executed private note placement agreement position us to fund a potential increase in acquisition activity later in the year, with access to additional capital if necessary."
For the six months ended June 30, 2008, revenue was $517.3 million, a 12.5% increase over revenue of $460.0 million in the year ago period. Operating income was $106.4 million versus $100.2 million for the same period in 2007. Net income for the six months ended June 30, 2008, was $49.4 million, or $0.73 per share on a diluted basis of 68.0 million shares. In the year ago period, the Company reported net income of $47.6 million, or $0.67 per share on a diluted basis of 70.6 million shares. Non-cash costs for equity-based compensation and amortization of acquisition-related intangibles for the six months ended June 30, 2008, were $6.8 million ($4.1 million net of taxes, or approximately $0.06 per share) compared to $5.2 million ($3.2 million net of taxes, or approximately $0.04 per share) in the year ago period.
Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 23rd at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at http://www.streetevents.com and through a link on the Company's web site at http://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.
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 23 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 http://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 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) Waste Connections may be unable to compete effectively with larger and better capitalized companies and governmental service providers; (2) increases in the price of fuel may adversely affect Waste Connections' business and reduce its operating margins; (3) increases in labor and disposal and related transportation costs could impact Waste Connections' financial results; (4) increases in insurance costs and the amount that Waste Connections self-insures for various risks could reduce its operating margins and reported earnings; (5) Waste Connections depends significantly on the services of the members of its senior, regional and district management team, and the departure of any of those persons could cause its operating results to suffer; (6) Waste Connections' financial results are based upon estimates and assumptions that may differ from actual results; (7) efforts by labor unions could divert management attention and adversely affect operating results; (8) Waste Connections' results are vulnerable to economic conditions and seasonal factors affecting the regions in which it operates; (9) Waste Connections may lose contracts through competitive bidding, early termination or governmental action; (10) Waste Connections may be subject in the normal course of business to judicial and administrative proceedings that could interrupt its operations, require expensive remediation, result in adverse judgments or settlements and create negative publicity; (11) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit Waste Connections' ability to grow through acquisitions; (12) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (13) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (14) because Waste Connections depends on railroads for its intermodal operations, its operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (15) Waste Connections' decentralized decision-making structure could allow local managers to make decisions that adversely affect Waste Connections' operating results; (16) Waste Connections may incur additional charges related to capitalized expenditures, which would decrease its earnings; (17) each business that Waste Connections acquires or has acquired may have liabilities that Waste Connections fails or is unable to discover, including environmental liabilities; (18) liabilities for environmental damage may adversely affect Waste Connections' business and earnings; and (19) the adoption of new accounting standards or interpretations could adversely affect Waste Connections' financial results. 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. 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 that may change.
- financial tables attached -
WASTE CONNECTIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX months ENDED JUNE 30, 2007 And 2008
(Unaudited)
(in thousands, except share and per share amounts)
Three months ended Six months ended
June 30, June 30,
2007 2008 2007 2008
Revenues $241,084 $267,033 $460,035 $517,333
Operating expenses:
Cost of operations 141,574 159,862 270,443 308,994
Selling, general
and administrative 24,790 27,065 48,700 54,155
Depreciation and
amortization 20,930 24,065 40,520 47,288
Loss on disposal
of assets 32 451 192 508
Operating income 53,758 55,590 100,180 106,388
Interest expense, net (8,295) (8,920) (16,113) (18,240)
Minority interests (4,130) (3,807) (6,970) (7,179)
Other income, net 365 345 417 333
Income before income
taxes 41,698 43,208 77,514 81,302
Income tax provision (16,432) (16,974) (29,868) (31,950)
Net income $25,266 $26,234 $47,646 $49,352
Basic earnings per
common share $0.37 $0.39 $0.70 $0.74
Diluted earnings per
common share $0.36 $0.39 $0.67 $0.73
Shares used in the
per share
calculations:
Basic 68,592,474 66,468,457 68,529,546 66,628,927
Diluted 70,625,086 67,842,845 70,606,846 67,982,399
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
December 31, June 30,
2007 2008
ASSETS
Current assets:
Cash and equivalents $10,298 $10,645
Accounts receivable, net of
allowance for doubtful
accounts of $4,387 and $3,603 at
December 31, 2007 and June 30, 2008,
respectively 123,882 127,112
Deferred income taxes 14,732 16,591
Prepaid expenses and other current assets 21,953 18,285
Total current assets 170,865 172,633
Property and equipment, net 865,330 873,035
Goodwill 811,049 824,969
Intangible assets, net 93,957 108,096
Restricted assets 19,300 20,486
Other assets, net 21,457 21,380
$1,981,958 $2,020,599
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $59,912 $63,311
Book overdraft 8,835 9,157
Accrued liabilities 69,578 76,734
Deferred revenue 44,074 46,764
Current portion of long-term debt and
notes payable 13,315 13,481
Total current liabilities 195,714 209,447
Long-term debt and notes payable 719,518 701,100
Other long-term liabilities 38,053 36,817
Deferred income taxes 223,308 238,649
Total liabilities 1,176,593 1,186,013
Commitments and contingencies
Minority interests 30,220 31,372
Stockholders' equity:
Preferred stock: $0.01 par value;
7,500,000 shares authorized;
none issued and outstanding - -
Common stock: $0.01 par value;
150,000,000 shares authorized;
67,052,135 and 66,540,160
shares issued and outstanding at
December 31, 2007 and June 30, 2008,
respectively 670 665
Additional paid-in capital 254,284 234,218
Retained earnings 524,481 573,833
Accumulated other comprehensive income (4,290) (5,502)
Total stockholders' equity 775,145 803,214
$1,981,958 $2,020,599
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2007 AND 2008
(Unaudited)
(Dollars in thousands)
Six months ended
June 30,
2007 2008
Cash flows from operating activities:
Net income $47,646 $49,352
Adjustments to reconcile net income to
net cash provided by operating activities:
Loss on disposal of assets 192 508
Depreciation 38,459 44,474
Amortization of intangibles 2,061 2,814
Deferred income taxes, net of acquisitions 3,741 13,769
Minority interests 6,970 7,179
Amortization of debt issuance costs 961 970
Stock-based compensation 3,134 3,956
Interest income on restricted assets (261) (287)
Closure and post-closure accretion 522 729
Excess tax benefit associated with
equity-based compensation (8,534) (1,928)
Net change in operating assets and
liabilities, net of acquisitions 12,387 8,391
Net cash provided by operating activities 107,278 129,927
Cash flows from investing activities:
Payments for acquisitions, net of cash
acquired (40,591) (33,437)
Capital expenditures for property and
equipment (64,509) (48,323)
Proceeds from disposal of assets 559 1,366
Increase in restricted assets, net of
interest income (750) (900)
Decrease (increase) in other assets (485) 112
Net cash used in investing activities (105,776) (81,182)
Cash flows from financing activities:
Proceeds from long-term debt 42,000 90,500
Principal payments on notes payable and
long-term debt (45,668) (111,046)
Change in book overdraft 5,838 322
Proceeds from option and warrant exercises 21,082 7,543
Excess tax benefit associated with
equity-based compensation 8,534 1,928
Distributions to minority interest holders (6,272) (6,027)
Payments for repurchase of common stock (51,894) (31,527)
Debt issuance costs (100) (91)
Net cash used in financing activities (26,480) (48,398)
Net increase (decrease) in cash and equivalents (24,978) 347
Cash and equivalents at beginning of period 34,949 10,298
Cash and equivalents at end of period $9,971 $10,645
ADDITIONAL STATISTICS
THREE MONTHS ENDED JUNE 30, 2008
(Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:
Three Months Ended
June 30, 2008
Price 5.4%
Volume (1.5%)
Intermodal, Recycling and Other 0.7%
Total 4.6%
Uneliminated Revenue Breakdown:
Three Months Ended
June 30, 2008
Collection $196,047 65.1%
Disposal and Transfer 79,913 26.5%
Intermodal, Recycling and Other 25,327 8.4%
Total $301,287 100.0%
Inter-company elimination $34,254
Days Sales Outstanding for the three months ended June 30, 2008:
43 (27 net of deferred revenue)
Internalization for the three months ended June 30, 2008: 66%
Other Cash Flow Items for the three months ended June 30, 2008:
Cash Interest Paid: $10,088
Cash Taxes Paid: $12,319
Debt to Capitalization: 47.1%
Share Information for the three months ended June 30, 2008:
Basic shares outstanding 66,468,457
Dilutive effect of options and warrants 1,214,259
Dilutive effect of restricted stock 160,129
Diluted shares outstanding 67,842,845
NON-GAAP RECONCILIATION SCHEDULE
(in thousands)
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. Waste Connections defines free cash flow as net cash provided by operating activities, plus proceeds from disposal of assets and excess tax benefit associated with equity-based compensation, plus or minus change in book overdraft, less capital expenditures for property and equipment and distributions to minority interest holders. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate free cash flow differently.
Free cash flow reconciliation:
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008
Net cash provided by operating
activities $65,334 $129,927
Plus: Change in book overdraft 3,918 322
Plus: Proceeds from disposal of assets 1,065 1,366
Plus: Excess tax benefit associated with
equity-based compensation 827 1,928
Less: Capital expenditures for property
and equipment (24,215) (48,323)
Less: Distributions to minority
interest holders (3,185) (6,027)
Free cash flow $43,744 $79,193
Free cash flow as % of revenues 16.4% 15.3%
Three Months Ended Six Months Ended
June 30, 2007 June 30, 2007
Net cash provided by operating
activities $46,364 $107,278
Plus: Change in book overdraft 5,838 5,838
Plus: Proceeds from disposal of assets 344 559
Plus: Excess tax benefit associated with
equity-based compensation 6,274 8,534
Less: Capital expenditures for property
and equipment (28,362) (64,509)
Less: Distributions to minority interest
holders (3,920) (6,272)
Free cash flow $26,538 $51,428
Free cash flow as % of revenues 11.0% 11.2%
For more information, contact:
Worthing Jackman
Waste Connections, Inc.
916-608-8266
worthingj@wasteconnections.com.
Web site: www.wasteconnections.com.
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