Waste Connections Reports Fourth Quarter Results And Provides 2019 Outlook
Fourth Quarter 2018 Highlights
- Revenue of $1.262 billion, exceeding outlook
- Reports 4.9% solid waste price + volume growth, exceeding outlook
- Net income attributable to Waste Connections of $132.5 million, or $0.50 per share
- Adjusted net income attributable to Waste Connections* of $166.2 million, or $0.63 per share, up 21.2% per share
- Adjusted EBITDA* of $397.2 million, or 31.5% of revenue
Full-Year 2018 Highlights
- Revenue of $4.923 billion, up 6.3%
- Net income attributable to Waste Connections of $546.9 million, or $2.07 per share
- Adjusted net income attributable to Waste Connections* of $667.3 million or $2.52 per share, up 16.7% per share
- Adjusted EBITDA* of $1.566 billion, or 31.8% of revenue, up 7.3% and 30 basis points YoY
- Net cash provided by operating activities of $1.411 billion, up 18.9%
- Adjusted free cash flow* of $879.9 million, or 17.9% of revenue, up 15.2%
Looking at 2019
- Expects revenue of approximately $5.310 billion, excluding additional acquisitions
- Expects adjusted EBITDA* margin expansion of 30 basis points YoY
- Expects net cash provided by operating activities of approximately $1.525 billion and double digit adjusted free cash flow* per share growth
TORONTO, Feb. 13, 2019 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the fourth quarter of 2018.
"2018 finished on a high note, as financial results for the fourth quarter exceeded expectations on better than expected solid waste organic growth, E&P waste activity and acquisition contribution. We are also extremely pleased with our results for the full year as adjusted EBITDA* as a percent of revenue expanded 30 basis points, and adjusted free cash flow* increased 15.2%. Increases in both solid waste pricing growth, which was up 130 basis points year-over-year to 4.5%, and E&P waste activity enabled us to overcome the precipitous decline in recycled commodity values and certain cost pressures noted during the year," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "The strength of these results continues to reflect the benefits of our purposeful culture, differentiated strategy and disciplined execution."
Mr. Mittelstaedt added, "2018 was also noteworthy for the continuing elevated pace of acquisition activity. Our acquisition of American Disposal in the fourth quarter brought total annualized acquired revenue to more than $360 million for the year, with rollover revenue contribution of approximately $200 million in 2019. Along with continued strong pricing growth, this already positions us for high single digit revenue growth and another 30 basis points adjusted EBITDA* margin expansion in 2019, with any growth in solid waste volumes, E&P waste activity or additional acquisitions providing further upside. We have increased adjusted free cash flow* per share at a compounded rate of more than 15% per year over the past several years, and expect continuing double-digit per share growth in the upcoming year. Our strong financial profile continues to afford the flexibility to fund outsized acquisition activity, an increasing cash dividend and opportunistic share repurchases."
* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule
Q4 2018 Results
Revenue in the fourth quarter totaled $1.262 billion, up from $1.157 billion in the prior year period. Operating income, which included $14.0 million of impairments and other operating items and $2.8 million of acquisition-related costs, was $200.0 million. This compares to $175.0 million in the prior year period, which included $15.2 million of impairments and other operating items and $7.0 million of acquisition-related costs.
Net income attributable to Waste Connections in the fourth quarter was $132.5 million, or $0.50 per share on a diluted basis of 264.5 million shares. In the prior year period, the Company reported $315.1 million, or $1.19 per share on a diluted basis of 264.6 million shares; this included a $209.4 million benefit to the income tax provision primarily resulting from enactment of the Tax Cuts and Jobs Act of 2017 (the "Tax Act").
Adjusted net income attributable to Waste Connections* in the fourth quarter was $166.2 million, or $0.63 per share, versus $137.0 million, or $0.52 per share, in the prior year period. Adjusted EBITDA* in the fourth quarter was $397.2 million, as compared to adjusted EBITDA* of $360.7 million 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 the impact of the Tax Act, fair value accounting changes to certain equity awards, and acquisition-related items, as shown in the detailed reconciliation in the attached schedules.
Full Year 2018 Results
For the year ended December 31, 2018, revenue was $4.923 billion, as compared to revenue of $4.630 billion in 2017. Operating income, which included $40.7 million of impairments and other operating items, fair value accounting changes to certain equity awards, and other acquisition-related costs, was $832.2 million. This compares to operating income of $627.1 million in the prior year, which included $189.2 million of expenses primarily related to both goodwill impairment against the Company's E&P segment resulting from the early adoption of FASB's recent accounting pronouncement simplifying the test for goodwill impairment, and impairments and other operating items mostly related to the divestiture or expected divestiture of certain assets acquired in the Progressive Waste acquisition.
Net income attributable to Waste Connections in 2018 was $546.9 million, or $2.07 per share on a diluted basis of 264.4 million shares. In 2017, the Company reported net income attributable to Waste Connections of $576.8 million, or $2.18 per share on a diluted basis of 264.3 million shares; this included a $205.6 million benefit to the income tax provision primarily related to the Tax Act.
Adjusted net income attributable to Waste Connections* in 2018 was $667.3 million, or $2.52 per share, compared to $570.7 million, or $2.16 per share, in the prior year. Adjusted EBITDA* in 2018 was $1.566 billion, as compared to $1.461 billion in the prior year. 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 the impact of the Tax Act, acquisition-related items and impairments and other operating items, as reflected in the detailed reconciliations in the attached tables.
2019 Outlook
Waste Connections also announced its outlook for 2019, which assumes no change in the current economic environment. 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 Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2019 are subject to quarterly fluctuations. See reconciliations in the attached tables.
-- Revenue is estimated at approximately $5.310 billion.
-- Net income attributable to Waste Connections is estimated at
approximately $636.0 million.
-- Adjusted EBITDA* is estimated at approximately $1.705 billion, or about
32.1% of revenue.
-- Net cash provided by operating activities is estimated to be
approximately $1.525 billion.
-- Adjusted free cash flow* is estimated to be approximately $950.0
million.
* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule
Q4 2018 Earnings and 2019 Outlook Conference Call
Waste Connections will be hosting a conference call related to fourth quarter earnings and 2019 outlook on February 14(th) at 8:30 A.M. Eastern Time. To access the call, listeners should dial 877-256-3271 (within North America) or 212-231-2927 (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 February 21, 2019 by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode # 21912651. 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 February 14(th), providing the Company's first quarter 2019 outlook for revenue, price plus volume growth for solid waste and adjusted EBITDA*.
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 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 (SEDAR) 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 the amount of capital returned 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
maryannew@wasteconnections.com
* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2018
(Unaudited)
(in thousands of U.S. dollars, except share and per share amounts)
Three months ended
Twelve months ended
December 31,
December 31,
2017 2018 2017 2018
---
Revenues $
1,157,175 $
1,261,732 $
4,630,488 $
4,922,941
Operating expenses:
Cost of operations 680,373 744,757 2,704,775 2,865,704
Selling, general and administrative 126,038 125,806 509,638 524,388
Depreciation 135,179 148,841 530,187 572,708
Amortization of intangibles 25,411 28,336 102,297 107,779
Impairments and other operating items 15,160 14,012 156,493 20,118
Operating income 175,014 199,980 627,098 832,244
Interest expense (32,534) (35,230) (125,297) (132,104)
Interest income 2,042 3,493 5,173 7,170
Other income (expense), net 175 (1,113) 3,736 1,263
Foreign currency transaction gain
(loss) 1,302 (1,110) (2,200) (1,433)
Income before income tax provision 145,999 166,020 508,510 707,140
Income tax (provision) benefit 169,129 (33,477) 68,910 (159,986)
Net income 315,128 132,543 577,420 547,154
Less: Net income attributable to
noncontrolling interests (42) (65) (603) (283)
Net income attributable to
Waste Connections $
315,086 $
132,478 $
576,817 $
546,871
===
Earnings per common share
attributable to Waste Connections'
common shareholders:
Basic $
1.19 $
0.50 $
2.19 $
2.07
===
Diluted $
1.19 $
0.50 $
2.18 $
2.07
===
Shares used in the per share
calculations:
Basic 263,825,060 263,628,941 263,682,608 263,650,155
Diluted 264,610,894 264,453,655 264,302,411 264,395,618
Cash dividends per common
share $
0.14 $
0.16 $
0.50 $
0.58
===
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of U.S. dollars, except share and per share amounts)
December 31, December 31,
2017 2018
ASSETS
Current assets:
Cash and equivalents $
433,815 $
319,305
Accounts receivable, net of
allowance for doubtful accounts of
$17,154 and $16,760 at December
31, 2017 and 2018, respectively 554,458 609,545
Current assets held for sale 1,596
Prepaid expenses and other current
assets 186,999 164,053
Total current assets 1,176,868 1,092,903
Restricted cash 119,412 84,661
Restricted investments 47,600 47,486
Property and equipment, net 4,820,934 5,168,996
Goodwill 4,681,774 5,031,685
Intangible assets, net 1,087,436 1,128,628
Long-term assets held for sale 12,625
Other assets, net 68,032 72,970
$
12,014,681 $
12,627,329
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $
330,523 $
359,967
Book overdraft 19,223 18,518
Accrued liabilities 278,039 289,544
Deferred revenue 145,197 179,282
Current portion of contingent
consideration 15,803 11,612
Current liabilities held for sale 2,155
Current portion of long-term debt
and notes payable 11,659 1,786
Total current liabilities 802,599 860,709
Long-term debt and notes payable 3,899,572 4,153,465
Long-term portion of contingent
consideration 31,482 43,003
Other long-term liabilities 316,191 349,931
Deferred income taxes 690,767 760,033
Total liabilities 5,740,611 6,167,141
Commitments and contingencies
Equity:
Common shares: 263,660,803 shares
issued and 263,494,670 shares
outstanding at December 31, 2017;
263,271,302 shares issued and
263,141,413 shares outstanding at
December 31, 2018 4,187,568 4,131,307
Additional paid-in capital 115,743 133,577
Accumulated other comprehensive
income (loss) 108,413 (74,786)
Treasury shares: 166,133 and
129,889 shares at December 31,
2017 and 2018, respectively
Retained earnings 1,856,946 2,264,510
Total Waste Connections' equity 6,268,670 6,454,608
Noncontrolling interest in
subsidiaries 5,400 5,580
Total equity 6,274,070 6,460,188
$
12,014,681 $
12,627,329
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2018
(Unaudited)
(in thousands of U.S. dollars)
Twelve months ended December 31,
2017 2018
Cash flows from operating
activities:
Net income $
577,420 $
547,154
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loss on disposal of assets and
impairments 134,491 10,193
Depreciation 530,187 572,708
Amortization of intangibles 102,297 107,779
Deferred income taxes, net of
acquisitions (153,283) 77,859
Amortization of debt issuance costs 4,341 4,158
Share-based compensation 39,361 43,803
Interest accretion 13,822 14,861
Payment of contingent consideration
recorded in earnings (10,012) (11)
Adjustments to contingent
consideration 17,754 349
Other 1,611 943
Net change in operating assets and
liabilities, net of acquisitions (70,729) 31,439
Net cash provided by operating
activities 1,187,260 1,411,235
Cash flows from investing
activities:
Payments for acquisitions, net of
cash acquired (410,695) (830,091)
Capital expenditures for property
and equipment (479,287) (546,145)
Proceeds from disposal of assets 28,432 5,385
Other 636 (969)
Net cash used in investing
activities (860,914) (1,371,820)
Cash flows from financing
activities:
Proceeds from long-term debt 973,754 1,022,737
Principal payments on notes payable
and long-term debt (770,106) (970,773)
Payment of contingent consideration
recorded at acquisition date (17,158) (6,127)
Change in book overdraft 8,241 (839)
Payments for repurchase of common
shares (58,928)
Payments for cash dividends (131,975) (152,550)
Tax withholdings related to net
share settlements of equity-based
compensation (13,994) (15,032)
Debt issuance costs (3,667) (8,630)
Proceeds from sale of common shares
held in trust 10,814 2,667
Other 851 (103)
Net cash provided by (used in)
financing activities 56,760 (187,578)
Effect of exchange rates changes on
cash, cash equivalents and
restricted cash 1,795 (1,290)
Net increase (decrease) in cash,
cash equivalents and restricted
cash 384,901 (149,453)
Cash, cash equivalents and
restricted cash at beginning of
year 168,476 553,227
Plus (less): change in cash held for
sale (150) 192
Cash, cash equivalents and
restricted cash at end of year $
553,227 $
403,966
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 December 31, 2018:
U.S.
Canada
Total
Core Price 4.1% 6.2% 4.4%
Surcharges 0.4% 0.8% 0.4%
Volume 0.3% (0.7%) 0.1%
Recycling (0.7%) (1.6%) (0.8%)
Foreign Exchange Impact (3.9%) (0.6%)
Total 4.1% 0.8% 3.5%
Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended December 31, 2017 and 2018:
Three Months Ended December 31, 2017
Revenue Inter- Reported %
company Revenue
Elimination
Solid Waste
Collection $
800,625 $
(2,396) $
798,229 69.0%
Solid Waste
Disposal and
Transfer 388,010 (149,909) 238,101 20.6%
Solid Waste
Recycling 30,285 (1,730) 28,555 2.4%
E&P Waste
Treatment,
Recovery and
Disposal 55,812 (2,547) 53,265 4.6%
Intermodal
and Other 39,331 (306) 39,025 3.4%
Total $
1,314,063 $
(156,888) $
1,157,175 100.0%
Three Months Ended December 31, 2018
Revenue Inter- Reported %
company Revenue
Elimination
Solid Waste
Collection $
874,601 $
(2,338) $
872,263 69.1%
Solid Waste
Disposal and
Transfer 447,998 (177,946) 270,052 21.4%
Solid Waste
Recycling 23,075 (1,208) 21,867 1.7%
E&P Waste
Treatment,
Recovery and
Disposal 67,192 (3,218) 63,974 5.1%
Intermodal
and Other 34,308 (732) 33,576 2.7%
Total $
1,447,174 $
(185,442) $
1,261,732 100.0%
Contribution from Acquisitions: The following table reflects revenues from solid waste acquisitions, net of divestitures, for the three and twelve month periods ended December 31, 2017 and 2018:
Three months ended
Twelve months ended
December 31, December 31,
2017 2018 2017 2018
Acquisitions, net $
37,615 $
61,420 $
1,002,979 $
153,139
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 twelve-month periods ended December 31, 2017 and 2018:
Three months ended Twelve months ended
December 31,
December 31,
2017 2018 2017 2018
Cash
Interest
Paid $
39,145 $
39,296 $
115,645 $
124,338
Cash
Taxes
Paid 74,101 19,102 155,532 52,464
Debt to Book Capitalization as of December 31, 2018: 39%
Internalization for the three months ended December 31, 2018: 56%
Days Sales Outstanding for the three months ended December 31, 2018: 44 (31 net of deferred revenue)
Share Information for the three months ended December 31, 2018:
Basic shares outstanding 263,628,941
Dilutive effect of equity-
based awards 824,714
Diluted shares outstanding 264,453,655
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 net income attributable to noncontrolling interests, plus or minus income tax provision (benefit), plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus any loss 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
Twelve months ended
December 31, December 31,
2017 2018 2017 2018
Net income attributable
to Waste Connections $
315,086 $
132,478 $
576,817 $
546,871
Plus: Net income
attributable to
noncontrolling
interests 42 65 603 283
Plus (Less): Income tax
provision (benefit) (169,129) 33,477 (68,910) 159,986
Plus: Interest expense 32,534 35,230 125,297 132,104
Less: Interest income (2,042) (3,493) (5,173) (7,170)
Plus: Depreciation and
amortization 160,590 177,177 632,484 680,487
Plus: Closure and post-
closure accretion 2,976 3,248 11,781 12,997
Plus: Impairments and
other operating items 15,160 14,012 156,493 20,118
Plus (Less): Other
expense (income), net (175) 1,113 (3,736) (1,263)
Plus (Less): Foreign
currency transaction
loss (gain) (1,302) 1,110 2,200 1,433
Adjustments:
Plus: Transaction-
related expenses (a) 1,282 3,701 5,700 8,607
Plus (less): Fair value
changes to certain
equity awards (b) 3,033 (896) 16,357 9,205
Plus (less) :
Integration-related
and other expenses (c) 2,645 (35) 10,612 2,760
Adjusted EBITDA $
360,700 $
397,187 $
1,460,525 $
1,566,418
As % of revenues 31.2% 31.5% 31.5% 31.8%
(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.
Twelve months ended
December 31,
2017 2018
Net cash
provided by
operating
activities $
1,187,260 $
1,411,235
Plus/(Less):
Change in
book
overdraft 8,241 (839)
Plus: Proceeds
from disposal
of assets 28,432 5,385
Less: Capital
expenditures
for property
and equipment (479,287) (546,145)
Less:
Distributions
to
noncontrolling
interests (103)
Adjustments:
Payment of
contingent
consideration
recorded in
earnings (a) 10,012 11
Cash received
for
divestitures
(b) (21,100) (2,030)
Transaction-
related items
(c) 5,700 8,607
Integration-
related and
other
expenses (d) 10,602 2,760
Pre-existing
Progressive
Waste share-
based grants
(e) 17,037 5,772
Synergy bonus
(f) 11,798
Tax effect (g) (14,804) (4,752)
Adjusted free
cash flow $
763,891 $
879,901
As % of
revenues 16.5% 17.9%
(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
during the
period.
(f) Reflects the
addback of
cash bonuses
paid
pursuant to
the
Company's
Synergy
Bonus
Program in
conjunction
with the
Progressive
Waste
acquisition.
(g) The aggregate
tax effect
of footnotes
(a) through
(f) 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
Twelve months ended
December 31, December 31,
2017 2018 2017 2018
Reported net income
attributable to Waste
Connections $
315,086 $
132,478 $
576,817 $
546,871
Adjustments:
Amortization of
intangibles (a) 25,411 28,336 102,297 107,779
Impairments and other
operating items (b) 15,160 14,012 156,493 20,118
Transaction-related
expenses (c) 1,282 3,701 5,700 8,607
Fair value changes to
certain equity awards
(d) 3,033 (896) 16,357 9,205
Integration-related
and other expenses (e) 2,645 (35) 10,612 2,760
Tax effect (f) (16,151) (11,383) (91,979) (37,165)
Tax items (g) (209,418) (205,631) 9,093
Adjusted net income
attributable to Waste
Connections $
137,048 $
166,213 $
570,666 $
667,268
Diluted earnings per
common share
attributable to Waste
Connections' common
shareholders:
Reported net income $
1.19 $
0.50 $
2.18 $
2.07
Adjusted net income $
0.52 $
0.63 $
2.16 $
2.52
(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.
(g) In 2018,
primarily
reflects
refinements
to the
estimates,
as provided
by Staff
Accounting
Bulletin
No. 118, of
the impact
of a
portion of
the
Company's
U.S.
earnings no
longer
permanently
reinvested
in
conjunction
with the
Tax Act.
In 2017,
reflects
income tax
benefit
primarily
resulting
from a
reduction
of deferred
tax
liabilities
due to
enactment
of the Tax
Act,
partially
offset by
deferred
income tax
expense due
to a
portion of
the
Company's
U.S.
earnings no
longer
permanently
reinvested,
also
related to
the Tax
Act.
2019 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)
Reconciliation of Adjusted EBITDA:
---
2019 Outlook
Estimate
Observation
Net income attributable to
Waste Connections $
636,000
Plus: Net income
attributable to
noncontrolling interests 1,000
Plus: Income tax provision 201,000
Approximate 24.0% effective rate*
Plus: Interest expense, net 134,000
Plus: Depreciation and
Depletion 600,000
Approximately 11.3% of revenue
Plus: Amortization 120,000
Plus: Closure and post-
closure accretion 13,000
Adjusted EBITDA $
1,705,000
Approximately 32.1% of revenue
*Rather than current estimated
rate of 21.5%, reflects
midpoint of estimated 21.5% to
26.5% potential range resulting
from IRS proposed regulations
released in late December 2018
related to the Tax Act, which,
if finalized and implemented in
2019, could impact 2019's
effective tax rate.
Reconciliation of Adjusted Free Cash Flow:
---
2019 Outlook
Estimate
Net cash provided by operating
activities $
1,525,000
Less: Capital expenditures (575,000)
Adjusted free cash flow $
950,000
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SOURCE Waste Connections, Inc.
