Waste Connections exceeds outlook for the third quarter

Waste Connections Inc., Toronto and with corporate offices in The Woodlands, Texas, has announced its results for the third quarter of 2017. Revenue in the third quarter totaled $1.206 billion, up from $1.085 billion in the year ago period. Operating income was $218.8 million, which included $7.2 million in charges primarily related to costs for transactions completed in the period and certain costs associated with the Progressive Waste acquisition, including share-based compensation costs associated with share-based awards assumed in that acquisition. This compares to operating income of $158.7 million in the third quarter of 2016, which included $20.3 million of items primarily related to the Progressive Waste acquisition completed on June 1, 2016.

Net income attributable to Waste Connections in the third quarter was $123.2 million, or $0.47 per share on a diluted basis of 264.3 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $88.6 million, or $0.34 per share on a diluted basis of 263.7 million shares.  Shares and per share numbers reflect a three-for-two share split completed in June 2017.

Adjusted net income attributable to Waste Connections in the third quarter was $158.1 million, or $0.60 per diluted share, versus $126.5 million, or $0.48 per diluted share, in the prior year period. Adjusted EBITDA in the third quarter was $393.4 million, as compared to adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $342.3 million in the prior year period. Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share, adjusted EBITDA, and adjusted free cash flow, all non-GAAP (non-generally accepted accounting principles) measures, primarily exclude the impact of acquisition-related items, as shown in the detailed reconciliation in the attached schedules.

"Continued strength across all lines of business enabled us to once again exceed our outlook for the third quarter. Adjusted EBITDA as a percent of revenue in the quarter expanded 100 basis points year-over-year, as expected, in spite of the impact from two hurricanes, which is especially noteworthy in light of the dilutive margin acquisitions completed since the year-ago period.  More importantly, adjusted free cash flow remains notably strong at $614.0 million year-to-date, or 17.7 percent of revenue and 55.8 percent of adjusted EBITDA," says Ronald J. Mittelstaedt, chairman and CEO. "We remain on track to meet or exceed the increased expectations for the full year we communicated in July despite the precipitous decline in recycled fiber values that began in September."

Mr. Mittelstaedt adds, "As anticipated last quarter, our strong operating performance, free cash flow growth and balance sheet strength provided for another double-digit percentage increase in the quarterly cash dividend.  We remain well positioned to fund expected above average acquisition activity in the near term while continuing to increase our return of capital to shareholders."

For the nine months ended Sept. 30, 2017, revenue was $3.473 billion, as compared to revenue of $2.327 billion in the year ago period.  Operating income, which included $167.0 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 share-based compensation costs associated with share-based awards assumed in the Progressive Waste acquisition, was $452.1 million, compared to $313.1 million for the same period in 2016, which included $102.3 million of items related to the Progressive Waste acquisition.

Net income attributable to Waste Connections for the nine months ended September 30, 2017, was $261.7 million, or $0.99 per share on a diluted basis of 264.1 million shares.  In the year ago period, the Company reported net income attributable to Waste Connections of $160.9 million, or $0.73 per share on a diluted basis of 220.1 million shares.

Adjusted net income attributable to Waste Connections for the nine months ended September 30, 2017, was $433.6 million, or $1.64 per diluted share, compared to $274.9 million, or $1.25 per diluted share, in the year ago period. Adjusted EBITDA for the nine months ended Sept. 30, 2017, was $1.100 billion, as compared to $745.6 million in the prior year period.

Waste Connections is an integrated solid waste services company that provides 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 38 states in the U.S., and five provinces in Canada.  The Company also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.

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