Date: October 22, 2007
Source: Waste Connections, Inc.
* Reports revenue of $250.8 million and earnings per share of $0.41- Revenue and operating income increase 15.8% and 20.1%, respectively
* Reports internal growth of 11.2%- Reports YTD free cash flow of $81.2 million, or 11.4% of revenue
* Completes approximately $35 million YTD of acquired annualized revenue
* Reduces borrowing cost through refinancing of revolving credit facility
Waste Connections, Inc. today announced its results for the third quarter 2007. Revenue totaled $250.8 million, a 15.8% increase over revenue of $216.5 million in the year ago period. Operating income was $57.1 million, a 20.1% increase over operating income of $47.5 million in the third quarter of 2006. Net income in the quarter was $28.7 million, or $0.41 per share on a diluted basis of 69.9 million shares. In the year ago period, the Company reported net income of $21.9 million and diluted earnings per share of $0.31. The effective tax rate in the quarter was 34.9% compared to 39.9% in the year ago period.
"Strong organic growth and a stable cost environment enabled us to exceed the upper end of our expectations for the quarter. This strength in our existing business combined with the acceleration of acquisition activity in the second half of the year provides building blocks for revenue growth and continuing margin improvement in 2008 and beyond," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Finally, our successful refinancing in the quarter not only lowers our future borrowing cost, but also provides additional financial capacity and flexibility to fund our growth strategy and return cash to shareholders."
For the nine months ended September 30, 2007, revenue was $710.8 million, a 15.8% increase over revenue of $613.7 million in the year ago period. Operating income was $157.3 million, a 23.4% increase over operating income of $127.5 million for the same period in 2006. Net income for the nine months ended September 30, 2007, was $76.3 million, or $1.08 per share on a diluted basis of 70.4 million shares. In the year ago period, the Company reported net income of $56.8 million, or $0.81 per share on a diluted basis of 70.4 million shares.
Waste Connections will be hosting a conference call related to third quarter earnings and fourth quarter outlook on October 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," "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' financial results are based upon estimates and assumptions that may differ from actual results; (6) efforts by labor unions could divert management attention and adversely affect operating results; (7) Waste Connections may lose contracts or permits through competitive bidding, early termination or governmental action; (8) Waste Connections' results are vulnerable to economic conditions and seasonal factors affecting the regions in which it operates; (9) Waste Connections may be subject in the normal course of business to judicial and administrative proceedings that could interrupt its operations, require expensive remediation and create negative publicity; (10) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit Waste Connections' ability to grow through acquisitions; (11) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (12) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (13) 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; (14) Waste Connections' intermodal business could be adversely affected by steamship lines diverting business to ports other than those Waste Connections services, or by heightened security measures or actual or threatened terrorist attacks; (15) Waste Connections depends significantly on the services of the members of its senior and district management team, and the departure of any of those persons could cause its operating results to suffer; (16) Waste Connections' decentralized decision-making structure could result in local managers making decisions that adversely affect Waste Connections' operating results; (17) Waste Connections may incur additional charges related to capitalized expenditures, which would decrease its earnings; (18) each business that Waste Connections acquires or has acquired may have liabilities that Waste Connections fails or is unable to discover, including environmental liabilities; (19) liabilities for environmental damage may adversely affect Waste Connections' business and earnings; and (20) the adoption of new accounting standards or interpretations could adversely impact 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 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2007 (Unaudited) (in thousands, except share and per share amounts) Three months ended Nine months ended September 30, September 30, 2006 2007 2006 2007 Revenues $216,547 $250,775 $613,686 $710,811 Operating expenses: Cost of operations 128,709 145,790 368,346 416,234 Selling, general and administrative 21,424 25,782 61,846 74,482 Depreciation and amortization 19,072 22,196 56,040 62,716 Loss (gain) on disposal of assets (189) (97) (35) 95 Operating income 47,531 57,104 127,489 157,284 Interest expense (7,572) (8,717) (21,685) (24,830) Minority interests (3,719) (4,175) (9,748) (11,145) Other income (expense), net 141 (174) (3,840) 243 Income before income taxes 36,381 44,038 92,216 121,552 Income tax provision (14,508) (15,356) (35,420) (45,225) Net income $21,873 $28,682 $56,796 $76,327 Basic earnings per common share $0.32 $0.42 $0.83 $1.12 Diluted earnings per common share $0.31 $0.41 $0.81 $1.08 Shares used in the per share calculations: Basic 68,235,948 68,022,587 68,166,312 68,358,534 Diluted 69,895,736 69,868,793 70,404,437 70,350,770 WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share and per share amounts) December 31, September 30, 2006 2007 ASSETS Current assets: Cash and equivalents $34,949 $13,089 Accounts receivable, net of allowance for doubtful accounts of $3,489 and $4,098 at December 31, 2006 and September 30, 2007, respectively 100,269 124,616 Deferred income taxes 9,373 12,645 Prepaid expenses and other current assets 15,642 14,726 Total current assets 160,233 165,076 Property and equipment, net 736,428 855,872 Goodwill 750,397 784,948 Intangible assets, net 86,098 90,252 Restricted assets 15,917 16,999 Other assets, net 24,818 22,129 $1,773,891 $1,935,276 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $53,010 $58,498 Book overdraft - 6,495 Accrued liabilities 57,810 70,250 Deferred revenue 32,161 41,620 Current portion of long-term debt and notes payable 6,884 12,098 Total current liabilities 149,865 188,961 Long-term debt and notes payable 637,308 687,595 Other long-term liabilities 16,712 30,759 Deferred income taxes 205,532 212,348 Total liabilities 1,009,417 1,119,663 Commitments and contingencies Minority interests 27,992 28,700 Stockholders' equity: Preferred stock: $0.01 par value per share; 7,500,000 shares authorized; none issued and outstanding - - Common stock: $0.01 par value per share; 150,000,000 shares authorized; 68,266,038 and 67,882,968 shares issued and outstanding at December 31, 2006 and September 30, 2007, respectively 455 679 Additional paid-in capital 310,229 284,326 Retained earnings 422,731 501,727 Accumulated other comprehensive income 3,067 181 Total stockholders' equity 736,482 786,913 $1,773,891 $1,935,276 WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2007 (Unaudited) (Dollars in thousands) Nine months ended September 30, 2006 2007 Cash flows from operating activities: Net income $56,796 $76,327 Adjustments to reconcile net income to net cash provided by operating activities: Loss (gain) on disposal of assets (35) 95 Depreciation 52,990 59,553 Amortization of intangibles 3,050 3,163 Deferred income taxes, net of acquisitions 11,524 7,984 Minority interests 9,748 11,145 Amortization of debt issuance costs 5,758 1,695 Stock-based compensation 2,562 4,636 Interest income on restricted assets (462) (332) Closure and post-closure accretion 476 769 Excess tax benefit associated with equity-based compensation (5,660) (10,190) Net change in operating assets and liabilities, net of acquisitions 15,593 15,220 Net cash provided by operating activities 152,340 170,065 Cash flows from investing activities: Payments for acquisitions, net of cash acquired (35,948) (85,652) Capital expenditures for property and equipment (73,482) (96,106) Proceeds from disposal of assets 1,950 955 Increase in restricted assets, net of interest income (792) (750) Increase in other assets (321) (512) Net cash used in investing activities (108,593) (182,065) Cash flows from financing activities: Proceeds from long-term debt 655,996 574,000 Principal payments on notes payable and long-term debt (608,141) (549,748) Change in book overdraft (6,143) 6,495 Proceeds from option and warrant exercises 26,048 24,829 Excess tax benefit associated with equity-based compensation 5,660 10,190 Distributions to minority interest holders (7,840) (10,437) Payments for repurchase of common stock (100,245) (64,038) Debt issuance costs (6,069) (1,151) Net cash used in financing activities (40,734) (9,860) Net increase (decrease) in cash and equivalents 3,013 (21,860) Cash and equivalents at beginning of period 7,514 34,949 Cash and equivalents at end of period $10,527 $13,089 ADDITIONAL STATISTICS THREE MONTHS ENDED SEPTEMBER 30, 2007 (Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:
Three Months Ended September 30, 2007 Price 4.2% Volume 5.0% Intermodal, Recycling and Other 2.0% Total 11.2% Uneliminated Revenue Breakdown: Three Months Ended September 30, 2007 Collection $180,333 63.5% Disposal and Transfer 78,861 27.8% Intermodal, Recycling and Other 24,605 8.7% Total $283,799 100.0% Inter-company elimination $33,024
Days Sales Outstanding for the three months ended September 30, 2007: 46 (30 net of deferred revenue)
Internalization for the three months ended September 30, 2007: 66% Other Cash Flow Items for the three months ended September 30, 2007: Cash Interest Paid: $7,947 Cash Taxes Paid: $7,328 Debt to Capitalization: 47.1% Share Information for the three months ended September 30, 2007: Basic shares outstanding 68,022,587 Dilutive effect of options and warrants 1,483,459 Dilutive effect of restricted stock 362,747 Diluted shares outstanding 69,868,793 Shares repurchased 407,900 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 Nine Months Ended September 30, 2007 September 30, 2007 Net cash provided by operating activities $62,787 $170,065 Plus: Change in book overdraft 657 6,495 Plus: Proceeds from disposal of assets 397 955 Plus: Excess tax benefit associated with equity-based compensation 1,655 10,190 Less: Capital expenditures for property and equipment (31,597) (96,106) Less: Distributions to minority interest holders (4,165) (10,437) Free cash flow $29,734 $81,162 Free cash flow as % of revenues 11.9% 11.4%