Date: February 9, 2009
Source: Waste Connections, Inc.
Reports revenue of
Reports operating margins, excluding acquisition-related costs, above expectations
Reports GAAP and adjusted Cash EPS of
Reports 2008 net cash provided by operating activities of
Reports record full year free cash flow of
Non-cash costs for equity-based compensation and amortization of
acquisition-related intangibles were
"We are extremely pleased with our results in the fourth quarter
especially in light of the most challenging macro environment we have ever
experienced. A contracting economy, precipitous drop in recycling commodity
prices and difficult weather conditions in the Pacific Northwest weighed on
revenue," said
Mr. Mittelstaedt added, "While 2008 was a record year for acquired
revenue, we enter 2009 with one of the strongest balance sheets in our sector
and are uniquely positioned with the available capital necessary to fund
additional growth opportunities, such as the acquisition of certain assets
from
For the year ended
2009 OUTLOOK
The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic SEC filings. Certain components of the outlook for 2009 are subject to quarterly fluctuations.
Revenue is estimated to increase 14.5% to approximately
Depreciation and amortization, which includes approximately
Operating income is estimated to be approximately 20.5% of revenue.
Net interest expense, which includes approximately
Effective tax rate is expected to be approximately 38.0%.
Net cash provided by operating activities is estimated to be approximately 24.5% of revenue.
Capital expenditures are estimated to be approximately
Diluted shares outstanding are expected to average approximately 81 million.
The above outlook includes approximately
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For non-GAAP measures, see accompanying Non-GAAP Reconciliation Schedule.
For more information, visit the
Certain statements contained in this press release are forward-looking in
nature, including statements regarding our expected 2009 outlook. 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.
Our 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) a portion of our growth and future financial performance
depends on our ability to integrate acquired businesses into our organization
and operations; (2) our acquisitions may not be successful, resulting in
changes in strategy, operating losses or a loss on sale of the business
acquired; (3) downturns in the worldwide economy adversely affect operating
results; (4) our results are vulnerable to economic conditions and seasonal
factors affecting the regions in which we operate; (5) we may be unable to
compete effectively with larger and better capitalized companies and
governmental service providers; (6) we may lose contracts through competitive
bidding, early termination or governmental action; (7) price increases may not
be adequate to offset the impact of increased costs or may cause us to lose
volume; (8) increases in the price of fuel may adversely affect our business
and reduce our operating margins; (9) increases in labor and disposal and
related transportation costs could impact our financial results; (10) we could
face significant withdrawal liability if we withdraw from participation in one
or more multiemployer pension plans in which we participate; (11) efforts by
labor unions could divert management attention and adversely affect operating
results; (12) increases in insurance costs and the amount that we self-insure
for various risks could reduce our operating margins and reported earnings;
(13) competition for acquisition candidates, consolidation within the waste
industry and economic and market conditions may limit our ability to grow
through acquisitions; (14) our indebtedness could adversely affect our
financial condition; we may incur substantially more debt in the future; (15)
each business that we acquire or have acquired may have liabilities that we
fail or are unable to discover, including environmental liabilities; (16)
liabilities for environmental damage may adversely affect our financial
condition, business and earnings; (17) our accruals for our landfill site
closure and post-closure costs may be inadequate; (18) we may be subject in
the normal course of business to judicial, administrative or other third party
proceedings that could interrupt our operations, require expensive
remediation, result in adverse judgments, settlements or fines and create
negative publicity; (19) the financial soundness of our customers could affect
our business and operating results; (20) we depend significantly on the
services of the members of our senior, regional and district management team,
and the departure of any of those persons could cause our operating results to
suffer; (21) our decentralized decision-making structure could allow local
managers to make decisions that adversely affect our operating results; (22)
because we depend on railroads for our intermodal operations, our operating
results and financial condition are likely to be adversely affected by any
reduction or deterioration in rail service; (23) we may incur additional
charges related to capitalized expenditures, which would decrease our
earnings; (24) our financial results are based upon estimates and assumptions
that may differ from actual results; (25) the adoption of new accounting
standards or interpretations could adversely affect our financial results;
(26) our financial and operating performance may be affected by the inability
to renew landfill operating permits, obtain new landfills and expand existing
ones; (27) future changes in laws regulating the flow of solid waste in
interstate commerce could adversely affect our operating results; (28)
fluctuations in prices for recycled commodities that we sell and rebates we
offer to customers may cause our revenues and operating results to decline;
(29) extensive and evolving environmental and health and safety laws and
regulations may restrict our operations and growth and increase our costs;
(30) extensive regulations that govern the design, operation and closure of
landfills may restrict our landfill operations or increase our costs of
operating landfills; and (31) unusually adverse weather conditions may
interfere with our operations, harming our operating results. These risks and
uncertainties, as well as others, are discussed in greater detail in our
filings with the
- financial tables attached -
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2007 AND 2008
(Unaudited)
(in thousands, except share and per share amounts)
Three months ended Twelve months ended
December 31, December 31,
2007 2008 2007 2008
Revenues $247,730 $259,568 $958,541 $1,049,603
Operating expenses:
Cost of operations 149,855 154,534 566,089 628,075
Selling, general and
administrative 25,083 29,949 99,565 111,114
Depreciation and
amortization 22,912 25,752 85,628 97,429
Loss on disposal of
assets 155 60 250 629
Operating income 49,725 49,273 207,009 212,356
Interest expense (9,143) (11,336) (35,023) (38,824)
Interest income 543 2,790 1,593 3,297
Minority interests (3,725) (1,248) (14,870) (12,240)
Other income
(expense), net 47 (518) 289 (633)
Income before income
taxes 37,447 38,961 158,998 163,956
Income tax provision (14,693) (11,030) (59,917) (58,400)
Net income $22,754 $27,931 $99,081 $105,556
Basic earnings per
common share $0.34 $0.35 $1.45 $1.51
Diluted earnings per
common share $0.33 $0.34 $1.42 $1.48
Shares used in the
per share
calculations:
Basic 67,882,400 79,792,842 68,238,523 70,024,874
Diluted 69,478,079 81,031,028 69,994,713 71,419,712
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
December 31, December 31,
2007 2008
ASSETS
Current assets:
Cash and equivalents $10,298 $265,264
Accounts receivable, net of allowance
for doubtful accounts of $4,387 and
$3,846 at December 31, 2007 and 2008,
respectively 123,882 118,456
Deferred income taxes 14,732 22,347
Prepaid expenses and other current
assets 21,953 23,144
Total current assets 170,865 429,211
Property and equipment, net 865,330 984,124
Goodwill 811,049 836,930
Intangible assets, net 93,957 306,444
Restricted assets 19,300 23,009
Other assets, net 21,457 20,922
$1,981,958 $2,600,640
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $59,912 $65,537
Book overdraft 8,835 4,315
Accrued liabilities 69,578 95,220
Deferred revenue 44,074 45,694
Current portion of long-term debt and
notes payable 13,315 4,698
Total current liabilities 195,714 215,464
Long-term debt and notes payable 719,518 830,758
Other long-term liabilities 38,053 47,509
Deferred income taxes 223,308 251,514
Total liabilities 1,176,593 1,345,245
Commitments and contingencies
Minority interests 30,220 668
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 79,842,239 shares
issued and outstanding at
December 31, 2007 and 2008, respectively 670 798
Additional paid-in capital 254,284 647,829
Retained earnings 524,481 630,037
Accumulated other comprehensive loss (4,290) (23,937)
Total stockholders' equity 775,145 1,254,727
$1,981,958 $2,600,640
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 2007 AND 2008
(Unaudited)
(Dollars in thousands)
Twelve months ended
December 31,
2007 2008
Cash flows from operating activities:
Net income $99,081 $105,556
Adjustments to reconcile net income to
net cash provided by operating activities:
Loss on disposal of assets 250 629
Depreciation 81,287 91,095
Amortization of intangibles 4,341 6,334
Deferred income taxes, net of
acquisitions 12,440 31,902
Minority interests 14,870 12,240
Amortization of debt issuance costs 2,182 1,966
Stock-based compensation 6,128 7,854
Interest income on restricted assets (684) (542)
Closure and post-closure accretion 1,155 1,400
Excess tax benefit associated with
equity-based compensation (14,137) (6,441)
Net change in operating assets and
liabilities, net of acquisitions 12,156 18,416
Net cash provided by operating activities 219,069 270,409
Cash flows from investing activities:
Payments for acquisitions, net of cash
acquired (109,429) (355,150)
Capital expenditures for property and
equipment (124,234) (113,496)
Proceeds from disposal of assets 1,016 2,560
Increase in restricted assets, net of
interest income (2,698) (2,653)
Decrease (increase) in other assets (264) 1,092
Net cash used in investing activities (235,609) (467,647)
Cash flows from financing activities:
Proceeds from long-term debt 626,000 302,000
Principal payments on notes payable and
long-term debt (568,607) (223,854)
Change in book overdraft 8,835 (4,520)
Proceeds from option and warrant
exercises 35,620 19,089
Excess tax benefit associated with
equity-based compensation 14,137 6,441
Distributions to minority interest
holders (12,642) (8,232)
Payments for repurchase of common stock (110,329) (31,527)
Proceeds from common stock offering, net - 393,930
Debt issuance costs (1,125) (1,123)
Net cash provided by (used in) financing
activities (8,111) 452,204
Net increase (decrease) in cash and
equivalents (24,651) 254,966
Cash and equivalents at beginning of
period 34,949 10,298
Cash and equivalents at end of period $10,298 $265,264
ADDITIONAL STATISTICS
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008
(Dollars in thousands)
Internal Growth: The following table reflects revenue growth for
operations owned for at least 12 months:
Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008
Price 5.9% 5.6%
Volume (5.8%) (1.9%)
Intermodal, Recycling and Other (4.0%) (0.7%)
Total (3.9%) 3.0%
Uneliminated Revenue Breakdown:
Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008
Collection $205,082 69.4% $787,713 66.4%
Disposal and Transfer 75,846 25.6% 308,811 26.0%
Intermodal, Recycling and Other 14,801 5.0% 89,594 7.6%
Total before inter-company
elimination $295,729 100.0% $1,186,118 100.0%
Inter-company elimination $36,161 $136,515
Reported Revenue $259,568 $1,049,603
Days Sales Outstanding for the three months ended December 31, 2008: 42
(26 net of deferred revenue)
Internalization for the three months ended December 31, 2008: 65%
Other Cash Flow Items:
Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008
Cash Interest Paid $9,748 $32,626
Cash Taxes Paid $2,555 $24,635
Debt to Book Capitalization: 40.0%
Share Information for the three months ended December 31, 2008:
Basic shares outstanding 79,792,842
Dilutive effect of options and warrants 1,000,522
Dilutive effect of restricted stock 237,664
Diluted shares outstanding 81,031,028
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.
Free cash flow reconciliation:
Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008
Net cash provided by operating
activities $75,749 $270,409
Plus/less: Change in book overdraft 4,315 (4,520)
Plus: Proceeds from disposal of assets 1,061 2,560
Plus: Excess tax benefit associated
with equity-based compensation 794 6,441
Less: Capital expenditures for
property and equipment (33,960) (113,496)
Less: Distributions to minority
interest holders - (8,232)
Free cash flow $47,959 $153,162
Free cash flow as % of revenues 18.5% 14.6%
Three Months Ended Twelve Months Ended
December 31, 2007 December 31, 2007
Net cash provided by operating
activities $49,003 $219,069
Plus: Change in book overdraft 2,340 8,835
Plus: Proceeds from disposal of assets 61 1,016
Plus: Excess tax benefit associated
with equity-based compensation 3,948 14,137
Less: Capital expenditures for
property and equipment (28,127) (124,234)
Less: Distributions to minority
interest holders (2,205) (12,642)
Free cash flow $25,020 $106,181
Free cash flow as % of revenues 10.1% 11.1%
NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands, except per share amounts)
We provide cash earnings to show the impact of equity-based compensation and amortization of intangibles, net of taxes, which are non-cash. We do consider the dilutive impact to our shareholders when awarding equity-based compensation and value such awards accordingly. We provide adjusted cash earnings to exclude the effects of items management believes impact the comparability of operating results between periods.
These measures are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate cash earnings and adjusted cash earnings per share differently.
Cash earnings has limitations due to the fact that it does not include all expenses primarily related to our workforce. More specifically, if we did not pay out a portion of our compensation in the form of equity-based compensation, our cash salary expense would be higher. We compensate for this limitation by providing supplemental information about outstanding equity-based awards in the footnotes to our financial statements. Equity-based compensation programs are an important element of our compensation structure and all forms of equity-based awards are valued and included as appropriate in results of operations.
Adjusted cash earnings has additional limitations due to the fact that it may exclude items that have a cash impact on our financial condition and results of operations. We compensate for this limitation by using adjusted cash earnings in conjunction with, and not as a substitute for, GAAP financial measures.
Cash earnings and as adjusted cash earnings per diluted share:
Three months ended
December 31,
2007 2008
As reported net income $22,754 $27,931
Adjustments:
Impact of deferred tax adjustment (a) - (3,931)
Acquisition-related transaction
costs, net of taxes (b) - 920
Adjusted net income 22,754 24,920
Non-cash equity-based compensation
costs, net of taxes 913 1,196
Non-cash amortization of intangibles,
net of taxes 721 1,296
Adjusted cash earnings $24,388 $27,412
Diluted earnings per common share
As reported net income $0.33 $0.34
As adjusted net income $0.33 $0.31
Cash earnings and as adjusted cash earnings $0.35 $0.34
(a) Reflects the adjustment to accrued deferred tax liabilities resulting from a decrease in the Company's estimated deferred tax rate primarily due to the LeMay acquisition completed in the quarter.
(b) Reflects the elimination of one-time transaction costs associated with the LeMay acquisition.
For more information, contact:
Worthing Jackman of
916-608-8266
worthingj@wasteconnections.com
Web Site: http://www.wasteconnections.com/.
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