Waste Connections Posts Strong First Quarter as Expected

Date: April 21, 2008

Source: Waste Connections, Inc.

Waste Connections Reports First Quarter 2008 Results

  • Reports revenue of $250.3 million, up 14.3%, and earnings per share of $0.34

  • Reports internal growth of 8.1%

  • Reports free cash flow of $35.4 million, or 14.2% of revenue, up 42.4%

  • Repurchases approximately $31.5 million of common stock

Waste Connections, Inc. (NYSE: WCN) today announced its results for the first quarter 2008. Revenue totaled $250.3 million, a 14.3% increase over revenue of $219.0 million in the year ago period. Operating income was $50.8 million, a 9.4% increase over operating income of $46.4 million in the first quarter of 2007. Net income in the quarter was $23.1 million, or $0.34 per share on a diluted basis of 68.1 million shares. In the year ago period, the Company reported net income of $22.4 million and diluted earnings per share of $0.32. Non-cash costs for equity-based compensation and amortization of acquisition-related intangibles were $3.5 million ($2.1 million net of taxes, or approximately $0.03 per share) in the quarter compared to $2.7 million ($1.7 million net of taxes, or approximately $0.02 per share) in the year ago period.

"We continue to be extremely pleased with the underlying strength of our business in the face of spiraling fuel costs and more difficult weather conditions during the quarter. Excluding the dilutive margin impact of acquisitions completed since the year ago period, operating margins were almost flat year-over-year despite an almost 40% increase in average fuel costs resulting in fuel as a percentage of revenue increasing more than 150 basis points in the quarter," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "Continuing pricing strength and the improving performance of recently completed acquisitions position us to recover a significant portion of this recent spike in fuel costs should diesel prices remain at record levels for the remainder of the year."

Waste Connections will be hosting a conference call related to first quarter earnings and second quarter outlook on April 22nd 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 approximately 1.5 million residential, commercial and industrial customers from a network of operations in 23 states. The Company also provides intermodal services for the movement of containers in the Pacific Northwest. Waste Connections, Inc. was founded in September 1997 and is headquartered in Folsom, California.

For more information, visit the Waste Connections web site at http://www.wasteconnections.com. Copies of financial literature, including this release, are available on the Waste Connections web site or through contacting us directly at (916) 608-8200.

Certain statements contained in this press release are forward-looking in nature. These statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates," or the negative thereof or comparable terminology, or by discussions of strategy. Waste Connections' business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) Waste Connections may be unable to compete effectively with larger and better capitalized companies and governmental service providers; (2) increases in the price of fuel may adversely affect Waste Connections' business and reduce its operating margins; (3) increases in labor and disposal and related transportation costs could impact Waste Connections' financial results; (4) increases in insurance costs and the amount that Waste Connections self-insures for various risks could reduce its operating margins and reported earnings; (5) Waste Connections depends significantly on the services of the members of its senior, regional and district management team, and the departure of any of those persons could cause its operating results to suffer; (6) Waste Connections' financial results are based upon estimates and assumptions that may differ from actual results; (7) efforts by labor unions could divert management attention and adversely affect operating results; (8) Waste Connections' results are vulnerable to economic conditions and seasonal factors affecting the regions in which it operates; (9) Waste Connections may lose contracts through competitive bidding, early termination or governmental action; (10) Waste Connections may be subject in the normal course of business to judicial and administrative proceedings that could interrupt its operations, require expensive remediation, result in adverse judgments or settlements and create negative publicity; (11) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit Waste Connections' ability to grow through acquisitions; (12) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (13) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (14) because Waste Connections depends on railroads for its intermodal operations, its operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (15) Waste Connections' decentralized decision- making structure could allow local managers to make decisions that adversely affect Waste Connections' operating results; (16) Waste Connections may incur additional charges related to capitalized expenditures, which would decrease its earnings; (17) each business that Waste Connections acquires or has acquired may have liabilities that Waste Connections fails or is unable to discover, including environmental liabilities; (18) liabilities for environmental damage may adversely affect Waste Connections' business and earnings; and (19) the adoption of new accounting standards or interpretations could adversely affect Waste Connections' financial results. These risks and uncertainties, as well as others, are discussed in greater detail in Waste Connections' filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. There may be additional risks of which Waste Connections is not presently aware or that it currently believes are immaterial which could have an adverse impact on its business. Waste Connections makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.

                           WASTE CONNECTIONS, INC.
                  THREE MONTHS ENDED MARCH 31, 2007 AND 2008
              (in thousands, except share and per share amounts)

                                                    Three months ended
                                                         March 31,
                                                 2007                2008

    Revenues                                $   218,951         $   250,300
    Operating expenses:
      Cost of operations                        128,869             149,132
      Selling, general and administrative        23,910              27,090
      Depreciation and amortization              19,590              23,223
      Loss on disposal of assets                    160                  57
    Operating income                             46,422              50,798

    Interest expense, net                        (7,818)             (9,319)
    Minority interests                           (2,840)             (3,373)
    Other income (expense), net                      51                 (12)
    Income before income taxes                   35,815              38,094

    Income tax provision                        (13,435)            (14,976)
    Net income                                   22,380         $    23,118

    Basic earnings per common share         $      0.33         $      0.35

    Diluted earnings per common share       $      0.32         $      0.34

    Shares used in the per share calculations:
      Basic                                  68,465,359          66,789,398
      Diluted                                70,583,096          68,121,953

                           WASTE CONNECTIONS, INC.
              (in thousands, except share and per share amounts)

                                                  December 31,      March 31,
                                                     2007             2008
    Current assets:
      Cash and equivalents                           $10,298         $9,505
      Accounts receivable, net of allowance
       for doubtful accounts of $4,387 and
       $3,716 at December 31, 2007 and
       March 31, 2008, respectively                  123,882        116,193
      Deferred income taxes                           14,732         15,552
      Prepaid expenses and other current
       assets                                         21,953         15,512
        Total current assets                         170,865        156,762

    Property and equipment, net                      865,330        870,316
    Goodwill                                         811,049        824,929
    Intangible assets, net                            93,957        109,376
    Restricted assets                                 19,300         20,090
    Other assets, net                                 21,457         21,512
                                                  $1,981,958     $2,002,985

    Current liabilities:
      Accounts payable                               $59,912        $51,194
      Bank overdraft                                   8,835          5,239
      Accrued liabilities                             69,578         76,185
      Deferred revenue                                44,074         44,343
      Current portion of long-term debt
       and notes payable                              13,315         13,473
        Total current liabilities                    195,714        190,434

    Long-term debt and notes payable                 719,518        744,514
    Other long-term liabilities                       38,053         45,517
    Deferred income taxes                            223,308        227,197
        Total liabilities                          1,176,593      1,207,662

    Commitments and contingencies
    Minority interests                                30,220         30,751

    Stockholders' equity:
    Preferred stock: $0.01 par value;
     7,500,000 shares authorized;
     none issued and outstanding                           -              -
    Common stock: $0.01 par value;
     150,000,000 shares authorized;
     67,052,135 and 66,397,922 shares issued
     and outstanding at December 31, 2007 and
     March 31, 2008, respectively                        670            664
    Additional paid-in capital                       254,284        229,151
    Retained earnings                                524,481        547,599
    Accumulated other comprehensive income            (4,290)       (12,842)
        Total stockholders' equity                   775,145        764,572
                                                  $1,981,958     $2,002,985

                           Waste Connections, Inc.
               Condensed Consolidated Statements of Cash Flows
                  THREE MONTHS ENDED MARCH 31, 2007 AND 2008
                            (Dollars in thousands)

                                                        Three months ended
                                                              March 31,
                                                        2007           2008

    Cash flows from operating activities:
    Net income                                         $22,380        $23,118
    Adjustments to reconcile net income to
     net cash provided by operating
      Loss on disposal of assets                           160             57
      Depreciation                                      18,558         21,827
      Amortization of intangibles                        1,032          1,396
      Deferred income taxes, net of acquisitions         2,852          7,989
      Minority interests                                 2,840          3,373
      Amortization of debt issuance costs                  482            486
      Stock-based compensation                           1,663          2,065
      Interest income on restricted assets                (107)          (170)
      Closure and post-closure accretion                   253            333
      Excess tax benefit associated with
       equity-based compensation                        (2,260)        (1,101)
      Net change in operating assets and
       liabilities, net of acquisitions                 13,061          5,220
    Net cash provided by operating activities           60,914         64,593

    Cash flows from investing activities:
      Payments for acquisitions, net of
       cash acquired                                   (35,860)       (32,327)
      Capital expenditures for property
       and equipment                                   (36,147)       (24,108)
      Proceeds from disposal of assets                     215            301
      Increase in restricted assets, net of
       interest income                                    (581)          (621)
      Decrease (increase) in other assets                 (517)            96
    Net cash used in investing activities              (72,890)       (56,659)

    Cash flows from financing activities:
      Proceeds from long-term debt                      21,000         80,500
      Principal payments on notes payable and
       long-term debt                                  (23,616)       (57,487)
      Change in book overdraft                               -         (3,596)
      Proceeds from option and warrant exercises         6,513          5,124
      Excess tax benefit associated with
       equity-based compensation                         2,260          1,101
      Distributions to minority interest holders        (2,352)        (2,842)
      Payments for repurchase of common stock           (5,414)       (31,527)
      Debt issuance costs                                 (100)             -
    Net cash used in financing activities               (1,709)        (8,727)

    Net decrease in cash and equivalents               (13,685)          (793)
    Cash and equivalents at beginning of period         34,949         10,298
    Cash and equivalents at end of period              $21,264         $9,505

Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:

                            ADDITIONAL STATISTICS
                      THREE MONTHS ENDED MARCH 31, 2008
                            (Dollars in thousands)

                                                 Three Months Ended
                                                    March 31, 2008
    Price                                               5.3%
    Volume                                              2.2%
    Intermodal, Recycling and Other                     0.6%
    Total                                               8.1%

    Uneliminated Revenue Breakdown:

                                                 Three Months Ended
                                                    March 31, 2008
    Collection                                 $186,161          65.9%
    Disposal and Transfer                        72,158          25.6%
    Intermodal, Recycling and Other              23,960           8.5%
    Total                                      $282,279         100.0%

    Inter-company elimination                   $31,979

Days Sales Outstanding for the three months ended March 31, 2008: 42 (26 net of deferred revenue)

    Internalization for the three months ended March 31, 2008:  68%

    Other Cash Flow Items for the three months ended March 31, 2008:
      Cash Interest Paid:  $6,998
      Cash Taxes Paid:     $  215

    Debt to Capitalization:  49.8%

    Share Information for the three months ended March 31, 2008:

      Basic shares outstanding                      66,789,398
      Dilutive effect of options and warrants        1,189,879
      Dilutive effect of restricted stock              142,676
      Diluted shares outstanding                    68,121,953

      Shares repurchased                             1,041,271

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 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.

                                (in thousands)

    Free cash flow reconciliation:

                                   Three Months Ended     Three Months Ended
                                     March 31, 2007         March 31, 2008

    Net cash provided by
     operating activities                   $60,914                $64,593
    Change in book overdraft                      -                 (3,596)
    Plus: Proceeds from disposal of
     assets                                     215                    301
    Plus: Excess tax benefit associated
     with equity-based compensation           2,260                  1,101
    Less: Capital expenditures for
     property and equipment                 (36,147)               (24,108)
    Less: Distributions to minority
     interest holders                        (2,352)                (2,842)
    Free cash flow                          $24,890                $35,449

    Free cash flow as % of revenues            11.4%                  14.2%

For more information, contact:
Worthing Jackman
Waste Connections, Inc.
(916) 608-8266

Sign up to receive our free Weekly News Bulletin