8-K
Waste Connections, Inc. (WCN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant To Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 2, 2023
Waste Connections, Inc.
(Exact name of registrant as specified in its charter)
| | | | | |
|---|---|---|---|---|
| Ontario, Canada | 1-34370 | 98-1202763 | ||
| (State or other jurisdiction of Incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
6220 Hwy 7 , Suite 600
Woodbridge
Ontario **** L4H 4G3
Canada
(Address of principal executive offices)
Registrant’s telephone number, including area code: ( 905 ) 532-7510
Not Applicable
(Former name or address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Shares, no par value | WCN | New York Stock Exchange (“NYSE”)<br>Toronto Stock Exchange (“TSX”) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| | | |
|---|---|---|
| | ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| | | |
| | ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | | |
| | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| | | |
| | ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
See Item 7.01 below.
Item 7.01 Regulation FD Disclosure.
On August 2, 2023, Waste Connections, Inc., a corporation organized under the laws of Ontario, Canada (“Waste Connections” or the “Company”), issued a press release announcing its second quarter 2023 results and updated outlook for 2023. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information furnished in Items 2.02 and 7.01 is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section, and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
Safe Harbor and Forward-Looking Information
This document 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 document 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 document include, but are not limited to, statements about expected 2023 and 2024 financial results, outlook and related assumptions, and potential acquisition activity. 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 document. Waste Connections undertakes no obligation to update the forward-looking statements set forth in this document, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.
Item 9.01 Financial Statements and Exhibits.
(d)Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release, dated August 2, 2023, issued by Waste Connections, Inc. |
| 104 | The cover page of Waste Connections, Inc. on Current Report on Form 8-K formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | |
|---|---|---|
| | WASTE CONNECTIONS, INC. | |
| | | |
| | | |
| Date: August 2, 2023 | BY: | /s/ Mary Anne Whitney |
| | | Mary Anne Whitney |
| | | Executive Vice President and Chief Financial Officer |
_
Exhibit 99.1
WASTE CONNECTIONS REPORTS SECOND QUARTER 2023 RESULTS AND RAISES FULL YEAR
MARGIN OUTLOOK
| - | Top-to-bottom beat led by solid execution in Q2 sets up increases to full year 2023 outlook |
|---|---|
| - | Revenue of $2.021 billion, above outlook and up 11.3% year over year |
| --- | --- |
| - | Net income^(a)^ of $209.2 million, and adjusted EBITDA^(b)^ of $628.9 million, above outlook |
| --- | --- |
| - | Adjusted EBITDA^(b)^ margin of 31.1% of revenue, 30bps above outlook |
| --- | --- |
| - | Net income of $0.81 per share, and adjusted net income^(b)^ of $1.02 per share |
| --- | --- |
| - | Year to date net cash provided by operating activities of $1.017 billion and adjusted free cash flow^(b)^ of $630.0 million, or 16.1% of revenue |
| --- | --- |
| - | Year to date closed acquisitions with over $160 million of total annualized revenue, including Arrowhead Environmental Holdings, LLC (“Arrowhead”), the largest integrated waste-to-rail disposal network in the Northeast U.S. |
| --- | --- |
| - | Updates full year 2023 outlook to net income of approximately $931 million, increasing adjusted EBITDA^(b)^ to approximately $2.525 billion or 31.5% on revenue of approximately $8.025 billion |
| --- | --- |
TORONTO, ONTARIO, August 2, 2023 - Waste Connections, Inc. (TSX/NYSE: WCN) (“Waste Connections” or the “Company”) today announced its results for the second quarter of 2023 and updated its outlook for the full year.
“We are extremely pleased by the strength of operational execution during the quarter for a solid beat on revenue and adjusted EBITDA^(b)^ to deliver margins 30 basis points above our outlook. Solid waste core pricing growth of 9.8% positioned us to expand underlying solid waste collection, transfer and disposal margins by one hundred basis points in the period, largely overcoming the ongoing headwinds from year-over-year declines in recovered commodity values and continued inflationary pressures during the period,” said Ronald J. Mittelstaedt, President and Chief Executive Officer.
“Our performance in the first half of 2023, along with recent acquisitions and reduced headwinds from fuel and other commodity-related impacts, positions us to increase our full year outlook for adjusted EBITDA^(b)^ to approximately $2.525 billion, expanding our adjusted EBITDA^(b)^ margin to 31.5%, up 40 basis points from our initial outlook and up 70 basis points as compared to the prior year.”
Mr. Mittelstaedt added, “The strength of our results reflects our focus on quality of revenue through the shedding of low margin volumes and furthered by strategic acquisitions, including Arrowhead, a $100 million revenue integrated transportation and disposal network with rail access providing enhanced internalization opportunities to our operations across the Northeast. Already having completed acquisitions with over $160 million in annualized solid waste revenue year to date, we see plenty of runway and opportunity for continued activity throughout the balance of the year. Most importantly, we are encouraged by improving trends in safety and employee retention, as we double down on human capital in our decentralized operating model, including through the realignment of our organizational structure with the addition of a sixth region and refinements to our corporate operational structure, and we look forward to driving outsized margin expansion in the second half of 2023 and into 2024.”
Q2 2023 Results
Revenue in the second quarter totaled $2.021 billion, up from $1.816 billion in the year ago period. Operating income was $344.1 million, which included $27.8 million primarily in executive separation costs, impairments and other operating items, and
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transaction-related expenses. This compares to operating income of $329.6 million in the second quarter of 2022, which included $6.8 million primarily in impairments and other operating items and transaction-related expenses. Net income in the second quarter was $209.2 million, or $0.81 per share on a diluted basis of 258.1 million shares. In the year ago period, the Company reported net income of $224.1 million, or $0.87 per share on a diluted basis of 257.7 million shares.
Adjusted net income^(b)^ in the second quarter was $262.3 million, or $1.02 per diluted share, versus $257.1 million, or $1.00 per diluted share, in the prior year period. Adjusted EBITDA^(b)^ in the second quarter was $628.9 million, as compared to $566.8 million in the prior year period. Adjusted net income, adjusted net income per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and acquisition-related items, as reflected in the detailed reconciliations in the attached tables.
Six Months Year to Date Results
For the six months ended June 30, 2023, revenue was $3.922 billion, up from $3.463 billion in the year ago period. Operating income, which included $32.1 million primarily attributable to executive separation costs, impairments and other operating items, and transaction-related expenses, was $658.8 million, as compared to operating income of $603.4 million in the prior year period, which included $13.4 million primarily attributable to transaction-related expenses.
Net income for the six months ended June 30, 2023 was $407.0 million, or $1.58 per share on a diluted basis of 258.1 million shares. In the year ago period, the Company reported net income of $404.4 million, or $1.57 per share on a diluted basis of 258.1 million shares.
Adjusted net income^(b)^ for the six months ended June 30, 2023 was $492.7 million, or $1.91 per diluted share, compared to $470.6 million, or $1.82 per diluted share, in the year ago period. Adjusted EBITDA^(b)^ for the six months ended June 30, 2023 was $1.196 billion, as compared to $1.069 billion in the prior year period.
Updated 2023 Outlook
Waste Connections also updated its outlook for 2023, which assumes no change in the current economic environment or underlying economic trends. The Company’s outlook excludes any impact from additional acquisitions that may close during the year, and expensing of transaction-related items. 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 filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2023 are subject to quarterly fluctuations. See reconciliations in the attached tables.
| - | Revenue is estimated to be approximately $8.025 billion, down $25 million from our original outlook to reflect a reduction in fuel and material surcharges of $35 million as a result of lower fuel costs. |
|---|---|
| - | Net income is estimated to be approximately $931.0 million, and adjusted EBITDA^(b)^ is estimated to be approximately $2.525 billion, or about 31.5% of revenue, as compared to our original outlook for adjusted EBITDA^(b)^ of $2.500 billion or 31.1% of revenue. |
| --- | --- |
| - | Capital expenditures are estimated to be approximately $950 million, up $25 million from our original outlook. |
| --- | --- |
| - | Net cash provided by operating activities is estimated to be approximately $2.141 billion, and adjusted free cash flow^(b)^ is estimated to be approximately $1.225 billion, or about 15.3% of revenue. |
| --- | --- |
Environmental, Social and Governance
Waste Connections views its Environmental, Social and Governance (“ESG”) efforts as integral to its business, with initiatives consistent with its objective of long-term value creation. In 2020, the Company introduced long-term, aspirational ESG targets and committed $500 million for investments to meet or exceed such sustainability targets. These investments primarily focus on reducing emissions, increasing resource recovery of both recyclable commodities and clean energy fuels, reducing reliance on off-site disposal for landfill leachate, further improving safety and enhancing employee engagement. The Company’s 2022 Sustainability Report provides progress updates on its targets and investments towards their achievement, and introduces new emissions reduction targets. For more information, visit wasteconnections.com/sustainability.
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^^^(a)^ All references to "Net income" refer to the financial statement line item "Net income attributable to Waste Connections"
^^^(b)^A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule
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Q3 2023 Earnings Conference Call
Waste Connections will be hosting a conference call related to second quarter earnings on August 3rd at 8:30 A.M. Eastern Time. A live audio webcast of the conference call can be accessed by visiting investors.wasteconnections.com and selecting “News & Events” from the website menu. Alternatively, conference call participants can preregister by clicking here. Registered participants will receive dial-in instructions and a personalized code for entry to the conference call. A replay of the conference call will be available until August 10, 2023, by calling 877-344-7529 (within North America) or 412-317-0088 (international) and entering Passcode #3794968.
Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on August 3rd, providing the Company's third quarter 2023 outlook for revenue, price plus volume growth for solid waste, and adjusted EBITDA^(b)^.
About Waste Connections
Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, including by rail, along with resource recovery primarily through recycling and renewable fuels generation. The Company serves more than eight million residential, commercial and industrial customers in mostly exclusive and secondary markets across 44 states in the U.S. and six provinces in Canada. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. For more information, visit Waste Connections at wasteconnections.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 2023 and 2024 financial results, outlook and related assumptions, and potential acquisition activity. 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) 442-2253Joe Box / (832) 442-2153
maryannew@wasteconnections.comjoe.box@wasteconnections.com
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Waste Connections, Inc.
CONDENSED Consolidated Statements of NET INCOME
THRee AND SIX months ended JUNE 30, 2022 and 2023
(Unaudited)
(in thousands of U.S. dollars, except share and per share amounts)
| | | | | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three months ended<br>June 30, | | Six months ended<br>June 30, | | ||||||||
| | 2022 | 2023 | 2022 | 2023 | | ||||||||
| | | | | | | | | | | ||||
| Revenues | | $ | 1,816,435 | | $ | 2,021,095 | | $ | 3,462,690 | | $ | 3,921,598 | |
| Operating expenses: | | | | | | | | | | | | | |
| Cost of operations | | | 1,087,892 | | | 1,197,349 | | | 2,077,410 | | | 2,344,290 | |
| Selling, general and administrative | | | 168,404 | | | 216,385 | | | 331,818 | | | 410,052 | |
| Depreciation | | | 188,937 | | | 213,322 | | | 368,887 | | | 417,380 | |
| Amortization of intangibles | | | 37,462 | | | 39,052 | | | 75,098 | | | 78,335 | |
| Impairments and other operating items | | | 4,150 | | | 10,859 | | | 6,028 | | | 12,724 | |
| Operating income | | | 329,590 | | | 344,128 | | | 603,449 | | | 658,817 | |
| | | | | | | | | | | | | | |
| Interest expense | | | (45,079) | | | (67,545) | | | (86,404) | | | (135,898) | |
| Interest income | | | 652 | | | 1,338 | | | 790 | | | 4,053 | |
| Other income (expense), net | | | (2,649) | | | (200) | | | (6,114) | | | 2,974 | |
| Income before income tax provision | | | 282,514 | | | 277,721 | | | 511,721 | | | 529,946 | |
| | | | | | | | | | | | | | |
| Income tax provision | | | (58,307) | | | (68,551) | | | (107,146) | | | (122,940) | |
| Net income | | | 224,207 | | | 209,170 | | | 404,575 | | | 407,006 | |
| Plus/(Less): Net loss (income) attributable to noncontrolling interests | | | (133) | | | 38 | | | (177) | | | 15 | |
| Net income attributable to Waste Connections | | $ | 224,074 | | $ | 209,208 | | $ | 404,398 | | $ | 407,021 | |
| | | | | | | | | | | | | | |
| Earnings per common share attributable to Waste Connections’ common shareholders: | | | | | | | | | | | | | |
| Basic | | $ | 0.87 | | $ | 0.81 | | $ | 1.57 | | $ | 1.58 | |
| | | | | | | | | | | | | | |
| Diluted | | $ | 0.87 | | $ | 0.81 | | $ | 1.57 | | $ | 1.58 | |
| | | | | | | | | | | | | | |
| Shares used in the per share calculations: | | | | | | | | | | | | | |
| Basic | | | 257,179,434 | | | 257,596,993 | | | 257,555,033 | | | 257,485,587 | |
| Diluted | | | 257,736,745 | | | 258,110,491 | | | 258,140,714 | | | 258,050,350 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Cash dividends per common share | | $ | 0.23 | | $ | 0.255 | | $ | 0.46 | | $ | 0.51 | |
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Waste Connections, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands of U.S. dollars, except share and per share amounts)
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | **** | December 31,<br>2022 | June 30,<br>2023 | ||||
| ASSETS | | | | | | | |
| Current assets: | | | | | | | |
| Cash and equivalents | | $ | 78,637 | | $ | 91,712 | |
| Accounts receivable, net of allowance for credit losses of $22,939 and $22,710 at December 31, 2022 and June 30, 2023, respectively | | | 833,862 | | | 855,479 | |
| Prepaid expenses and other current assets | | | 205,146 | | | 164,485 | |
| Total current assets | | | 1,117,645<br><br> | | | 1,111,676<br><br> | |
| Restricted cash | | | 102,727 | | | 112,623 | |
| Restricted investments | | | 68,099 | | | 73,075 | |
| Property and equipment, net | | | 6,950,915 | | | 7,030,118 | |
| Operating lease right-of-use assets | | | 192,506 | | | 248,967 | |
| Goodwill | | | 6,902,297 | | | 6,992,466 | |
| Intangible assets, net | | | 1,673,917 | | | 1,659,645 | |
| Other assets, net | | | 126,497 | | | 130,957 | |
| Total assets | | $ | 17,134,603 | | $ | 17,359,527 | |
| <br><br>LIABILITIES AND EQUITY | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable | | $ | 638,728 | | $ | 539,216 | |
| Book overdraft | | | 15,645 | | | 15,411 | |
| Deferred revenue | | | 325,002 | | | 341,408 | |
| Accrued liabilities | | | 431,247 | | | 452,949 | |
| Current portion of operating lease liabilities | | | 35,170 | | | 32,747 | |
| Current portion of contingent consideration | | | 60,092 | | | 71,065 | |
| Current portion of long-term debt and notes payable | | | 6,759 | | | 10,699 | |
| Total current liabilities | | | 1,512,643 | | | 1,463,495 | |
| | | | | | | | |
| Long-term portion of debt and notes payable | | | 6,890,149 | | | 6,681,384 | |
| Long-term portion of operating lease liabilities | | | 165,462 | | | 224,566 | |
| Long-term portion of contingent consideration | | | 21,323 | | | 21,344 | |
| Deferred income taxes | | | 1,013,742 | | | 1,048,986 | |
| Other long-term liabilities | | | 417,640 | | | 460,295 | |
| Total liabilities | | | 10,020,959 | | | 9,900,070 | |
| Commitments and contingencies | | | | | | | |
| Equity: | | | | | | | |
| Common shares: 257,211,175 shares issued and 257,145,716 shares outstanding at December 31, 2022; 257,614,671 shares issued and 257,555,015 shares outstanding at June 30, 2023 | | | 3,271,958 | | | 3,274,564 | |
| Additional paid-in capital | | | 244,076 | | | 255,667 | |
| Accumulated other comprehensive loss | | | (56,830) | | | (1,081) | |
| Treasury shares: 65,459 and 59,656 shares at December 31, 2022 and June 30, 2023, respectively | | | - | | | - | |
| Retained earnings | | | 3,649,494 | | | 3,925,376 | |
| Total Waste Connections’ equity | | | 7,108,698 | | | 7,454,526 | |
| Noncontrolling interest in subsidiaries | | | 4,946 | | | 4,931 | |
| Total equity | | | 7,113,644 | | | 7,459,457 | |
| Total liabilities and equity | | $ | 17,134,603 | | $ | 17,359,527 | |
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Waste Connections, Inc.
Condensed Consolidated Statements of Cash Flows
SIX months ended JUNE 30, 2022 and 2023
(Unaudited)
(in thousands of U.S. dollars)
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | | Six months ended June 30, | | ||||
| | **** | 2022 | 2023 | ||||
| Cash flows from operating activities: | | | | | | | |
| Net income | | $ | 404,575 | | $ | 407,006 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
| Loss on disposal of assets and impairments | | | 6,048 | | | 12,558 | |
| Depreciation | | | 368,887 | | | 417,380 | |
| Amortization of intangibles | | | 75,098 | | | 78,335 | |
| Deferred income taxes, net of acquisitions | | | 84,991 | | | 31,427 | |
| Current period provision for expected credit losses | | | 6,907 | | | 7,035 | |
| Amortization of debt issuance costs | | | 2,484 | | | 3,241 | |
| Share-based compensation | | | 27,716 | | | 41,469 | |
| Interest accretion | | | 8,798 | | | 9,835 | |
| Adjustments to contingent consideration | | | (1,030) | | | (910) | |
| Other | | | (2,173) | | | (2,828) | |
| Net change in operating assets and liabilities, net of acquisitions | | | (8,623) | | | 12,164 | |
| Net cash provided by operating activities | | | 973,678 | | | 1,016,712 | |
| | | | | | | | |
| Cash flows from investing activities: | | | | | | | |
| Payments for acquisitions, net of cash acquired | | | (546,982) | | | (213,152) | |
| Capital expenditures for property and equipment | | | (371,428) | | | (394,143) | |
| Proceeds from disposal of assets | | | 16,894 | | | 3,819 | |
| Other | | | 9,566 | | | (1,145) | |
| Net cash used in investing activities | | | (891,950) | | | (604,621) | |
| | | | | | | | |
| Cash flows from financing activities: | | | | | | | |
| Proceeds from long-term debt | | | 1,517,732 | | | 538,421 | |
| Principal payments on notes payable and long-term debt | | | (920,107) | | | (768,059) | |
| Payment of contingent consideration recorded at acquisition date | | | (8,898) | | | (2,193) | |
| Change in book overdraft | | | (54) | | | (234) | |
| Payments for repurchase of common shares | | | (424,999) | | | - | |
| Payments for cash dividends | | | (118,812) | | | (131,140) | |
| Tax withholdings related to net share settlements of equity-based compensation | | | (17,266) | | | (28,675) | |
| Debt issuance costs | | | (4,668) | | | - | |
| Proceeds from issuance of shares under employee share purchase plan | | | 1,554 | | | 1,841 | |
| Proceeds from sale of common shares held in trust | | | 660 | | | 765 | |
| Net cash provided by (used in) financing activities | | | 25,142 | | | (389,274) | |
| | | | | | | | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | | (1,941) | | | 154 | |
| | | | | | | | |
| Net increase in cash, cash equivalents and restricted cash | | | 104,929 | | | 22,971 | |
| Cash, cash equivalents and restricted cash at beginning of period | | | 219,615 | | | 181,364 | |
| Cash, cash equivalents and restricted cash at end of period | | $ | 324,544 | | $ | 204,335 | |
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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 and six month periods ended June 30, 2023:
| | | | | | | ||
|---|---|---|---|---|---|---|---|
| | Three months ended<br><br>June 30, 2023 | | Six months ended<br><br>June 30, 2023 | ||||
| Core Price | | | 9.8% | | | 10.3% | |
| Surcharges | | | (0.7%) | | | 0.00% | |
| Volume | | | (1.9%) | | | (1.6%) | |
| Recycling | | | (1.5%) | | | (1.7%) | |
| Foreign Exchange Impact | (0.7%) | | | (0.8%) | |||
| Total | | 5.0% | | | 6.2% |
Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2022 and 2023:
| | | | | |
|---|
| | | | | | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three months ended June 30, 2022 | | ||||||||||||||
| | Revenue | Inter-company<br>Elimination | Reported<br>Revenue | % | |||||||||||||
| Solid Waste Collection | | $ | 1,297,402 | | $ | (3,391) | | $ | 1,294,011 | | 71.2 | % | |||||
| Solid Waste Disposal and Transfer | | | 601,194 | | | (238,162) | | | 363,032 | | 20.0 | % | |||||
| Solid Waste Recycling | | | 67,504 | | | (2,823) | | | 64,681 | | 3.6 | % | |||||
| E&P Waste Treatment, Recovery and Disposal | | | 54,155 | | | (3,712) | | | 50,443 | | 2.8 | % | |||||
| Intermodal and Other | | | 46,310 | | | (2,042) | | | 44,268 | | 2.4 | % | |||||
| Total | | $ | 2,066,565 | | $ | (250,130) | | $ | 1,816,435 | | 100.0 | % | |||||
| | | | | |
| | | | | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three months ended June 30, 2023 | | |||||||||
| | Revenue | Inter-company<br>Elimination | Reported<br>Revenue | % | ||||||||
| Solid Waste Collection | | $ | 1,485,705 | | $ | (4,334) | | $ | 1,481,371 | | 73.3 | % |
| Solid Waste Disposal and Transfer | | | 688,965 | | | (281,280) | | | 407,685 | | 20.2 | % |
| Solid Waste Recycling | | | 38,319 | | | (991) | | | 37,328 | | 1.9 | % |
| E&P Waste Treatment, Recovery and Disposal | | | 58,607 | | | (3,194) | | | 55,413 | | 2.7 | % |
| Intermodal and Other | | | 39,459 | | | (161) | | | 39,298 | | 1.9 | % |
| Total | | $ | 2,311,055 | | $ | (289,960) | | $ | 2,021,095 | | 100.0 | % |
Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and six month periods ended June 30, 2022 and 2023:
| | | | | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three months ended<br>June 30, | | Six months ended<br>June 30, | ||||||||
| | 2022 | 2023 | 2022 | 2023 | ||||||||
| Acquisitions, net | | $ | 141,356 | | $ | 121,285 | | $ | 251,363 | | $ | 253,394 |
7
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 and six month periods ended June 30, 2022 and 2023:
| | | | | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three months ended<br>June 30, | | Six months ended<br>June 30, | ||||||||
| | 2022 | 2023 | 2022 | 2023 | ||||||||
| Cash Interest Paid | | $ | 43,853 | | $ | 62,361 | | $ | 76,013 | | $ | 117,492 |
| Cash Taxes Paid | | | 20,423 | | | 39,713 | | | 37,812 | | | 51,040 |
Debt to Book Capitalization as of June 30, 2023: 47%
Internalization for the three months ended June 30, 2023: 56%
Days Sales Outstanding for the three months ended June 30, 2023: 39 (23 net of deferred revenue)
Share Information for the three months ended June 30, 2023:
| Basic shares outstanding | 257,596,993 | |
|---|---|---|
| Dilutive effect of equity-based awards | | 513,498 |
| Diluted shares outstanding | | 258,110,491 |
8
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. 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<br>June 30, | | Six months ended<br>June 30, | ||||||||
| | 2022 | 2023 | 2022 | 2023 | ||||||||
| Net income attributable to Waste Connections | | $ | 224,074 | | $ | 209,208 | | $ | 404,398 | | $ | 407,021 |
| Plus/(Less): Net income (loss) attributable to noncontrolling interests | | | 133 | | | (38) | | | 177 | | | (15) |
| Plus: Income tax provision | | | 58,307 | | | 68,551 | | | 107,146 | | | 122,940 |
| Plus: Interest expense | | | 45,079 | | | 67,545 | | | 86,404 | | | 135,898 |
| Less: Interest income | | | (652) | | | (1,338) | | | (790) | | | (4,053) |
| Plus: Depreciation and amortization | | | 226,399 | | | 252,374 | | | 443,985 | | | 495,715 |
| Plus: Closure and post-closure accretion | | | 3,992 | | | 4,567 | | | 8,087 | | | 9,087 |
| Plus: Impairments and other operating items | | | 4,150 | | | 10,859 | | | 6,028 | | | 12,724 |
| Plus/(Less): Other expense (income), net | | | 2,649 | | | 200 | | | 6,114 | | | (2,974) |
| Adjustments: | | | | | | | | | | | | |
| Plus: Transaction-related expenses^(a)^ | | | 3,692 | | | 1,824 | | | 8,232 | | | 3,905 |
| Plus/(Less): Fair value changes to equity awards^(b)^ | | | (1,009) | | | 72 | | | (847) | | | 445 |
| Plus: Executive separation costs^(c)^ | | | - | | | 15,063 | | | - | | | 15,063 |
| Adjusted EBITDA | | $ | 566,814 | | $ | 628,887 | | $ | 1,068,934 | | $ | 1,195,756 |
| | | | | | | | | | | | | |
| As % of revenues | | | 31.2% | | | 31.1% | | | 30.9% | | | 30.5% |
____________________________
| (a) | Reflects the addback of acquisition-related transaction costs. |
|---|---|
| (b) | Reflects fair value accounting changes associated with certain equity awards. |
| --- | --- |
| (c) | Reflects the cash and non-cash components of severance expense associated with a recent executive departure. |
| --- | --- |
9
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 liquidity measure in the solid waste industry. Waste Connections calculates 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 periodic distributions to noncontrolling interests. Waste Connections further adjusts this calculation to exclude the effects of items management believes impact the ability to evaluate the liquidity of its business operations. 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<br>June 30, | | Six months ended<br>June 30, | ||||||||
| | **** | 2022 | 2023 | 2022 | 2023 | |||||||
| Net cash provided by operating activities | | $ | 532,781 | | $ | 574,353 | | $ | 973,678 | | $ | 1,016,712 |
| Less: Change in book overdraft | | | (141) | | | (5,655) | | | (54) | | | (234) |
| Plus: Proceeds from disposal of assets | | | 1,881 | | | 2,559 | | | 16,894 | | | 3,819 |
| Less: Capital expenditures for property and equipment | | | (219,110) | | | (218,357) | | | (371,428) | | | (394,143) |
| Adjustments: | | | | | | | | | | | | |
| Cash received for divestitures^(a)^ | | | - | | | - | | | (5,671) | | | - |
| Transaction-related expenses^(b)^ | | | 3,692 | | | 1,015 | | | 27,096 | | | 2,264 |
| Executive separation costs^(c)^ | | | - | | | 1,686 | | | - | | | 1,686 |
| Pre-existing Progressive Waste share-based grants^(d)^ | | | (64) | | | 843 | | | 12 | | | 841 |
| Tax effect^(e)^ | | | (1,056) | | | (471) | | | (2,165) | | | (990) |
| Adjusted free cash flow | | $ | 317,983 | | $ | 355,973 | | $ | 638,362 | | $ | 629,955 |
| | | | | | | | | | | | | |
| As % of revenues | | | 17.5% | | | 17.6% | | | 18.4% | | | 16.1% |
___________________________
| (a) | Reflects the elimination of cash received in conjunction with the divestiture of certain operations. |
|---|---|
| (b) | Reflects the addback of acquisition-related transaction costs and the settlement of an acquired tax liability. |
| --- | --- |
| (c) | Reflects the cash component of severance expense associated with a recent executive departure. |
| --- | --- |
| (d) | Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period. |
| --- | --- |
| (e) | The aggregate tax effect of footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods. |
| --- | --- |
10
NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands of U.S. dollars, except per share amounts)
Reconciliation of 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<br>June 30, | | Six months ended<br>June 30, | ||||||||
| | 2022 | 2023 | 2022 | 2023 | ||||||||
| Reported net income attributable to Waste Connections | | $ | 224,074 | | $ | 209,208 | | $ | 404,398 | | $ | 407,021 |
| Adjustments: | | | | | | | | | | | | |
| Amortization of intangibles^(a)^ | | | 37,462 | | | 39,052 | | | 75,098 | | | 78,335 |
| Impairments and other operating items^(b)^ | | | 4,150 | | | 10,859 | | | 6,028 | | | 12,724 |
| Transaction-related expenses^(c)^ | | | 3,692 | | | 1,824 | | | 8,232 | | | 3,905 |
| Fair value changes to equity awards^(d)^ | | | (1,009) | | | 72 | | | (847) | | | 445 |
| Executive separation costs^(e)^ | | | - | | | 15,063 | | | - | | | 15,063 |
| Tax effect^(f)^ | | | (11,224) | | | (13,746) | | | (22,316) | | | (24,770) |
| Adjusted net income attributable to Waste Connections | | $ | 257,145 | | $ | 262,332 | | $ | 470,593 | | $ | 492,723 |
| Diluted earnings per common share attributable to Waste Connections’ common shareholders: | | | | | | | | | | | | |
| Reported net income | | $ | 0.87 | | $ | 0.81 | | $ | 1.57 | | $ | 1.58 |
| Adjusted net income | | $ | 1.00 | | $ | 1.02 | | $ | 1.82 | | $ | 1.91 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
____________________________
| (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 cash and non-cash components of severance expense associated with a recent executive departure. |
| --- | --- |
| (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. |
| --- | --- |
11
UPDATED 2023 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)
Reconciliation of Adjusted EBITDA:
| | | | | |
|---|---|---|---|---|
| | | Updated 2023 Outlook | ||
| | | Estimates | Observation | |
| Net income attributable to Waste Connections | $ | 931,000 | | |
| Plus: Net income attributable to noncontrolling interests | | 200 | | |
| Plus: Income tax provision (a) | | 278,637 | | Approximate 23.0% effective rate |
| Plus: Interest expense, net | | 265,000 | | |
| Plus: Depreciation and Depletion | | 845,000 | | Approximately 10.5% of revenue |
| Plus: Amortization | | 158,000 | | |
| Plus: Closure and post-closure accretion | | 18,000 | | |
| Plus: Impairments and other operating items (b) | | 12,724 | | |
| Minus: Other income, net (b) | | (2,974) | | |
| Adjustments: (b) | | | | |
| Plus: Transaction-related expenses | | 3,905 | | |
| Plus: Executive separation costs | | 15,063 | | |
| Plus: Fair value changes to equity awards | | 445 | | |
| Adjusted EBITDA | $ | 2,525,000 | | Approximately 31.5% of revenue |
| | | | | |
____________________________
| (a) | Approximately 23.0% full year effective tax rate, including amounts reported for the six month period ended June 30, 2023. |
|---|---|
| (b) | Reflects amounts reported for the six month period ended June 30, 2023, as shown on page 9. |
| --- | --- |
Reconciliation of Adjusted Free Cash Flow:
| | | | <br><br> |
|---|---|---|---|
| | | | Updated<br><br>2023 Outlook |
| Net cash provided by operating activities | | $ | 2,141,433 |
| Less: Change in book overdraft (a) | | | (234) |
| Plus: Proceeds from disposal of assets | | | 30,000 |
| Less: Capital expenditures for property and equipment | | | (950,000) |
| Adjustments: (a) | | | |
| Transaction-related expenses | | | 2,264 |
| Executive separation costs | | | 1,686 |
| Pre-existing Progressive Waste share-based grants | | | 841 |
| Tax effect | | | (990) |
| Adjusted free cash flow | | $ | 1,225,000 |
| | | | |
| As % of revenues | | | 15.3% |
| | | | |
____________________________
| (a) | Reflects amounts reported for the six month period ended June 30, 2023, as shown on page 10. |
|---|
12