Waste Connections Inc., Toronto and with corporate offices in The Woodlands, Texas, has announced its results for 4Q 2017. Revenue in 4Q totaled $1.157 billion, up from $1.049 billion in the previous year. Operating income, which included $15.2 million of impairments, primarily related to the company's termination of a back-up landfill development project no longer deemed necessary, and $7.0 million of acquisition-related costs, was $175 million. This compares to $139.2 million in the year ago period, which included $23 million of impairments and other operating items and $16 million of acquisition-related costs.
Net income attributable to Waste Connections in 4Q, which included a $209.4 million benefit to the income tax provision primarily resulting from enactment of the Tax Cuts and Jobs Act of 2017 was $315.1 million, or $1.19 per share on a diluted basis of 264.6 million shares. The company reported net income attributable to Waste Connections of $85.6 million, or $0.32 per share on a diluted basis of 263.9 million shares over the last year. Shares and per share numbers reflect a three-for-two share split completed in June 2017.
Adjusted net income attributable to Waste Connections in 4Q 2017 was $137 million, or $0.52 per share, versus $120.3 million, or $0.46 per share, in the prior year period. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 4Q 2017 was $360.7 million, as compared to adjusted EBITDA of $325.4 million in the prior year period.
"Q4 capped off another exceptional year for Waste Connections, with better than expected solid waste volume growth and E&P (exploration and production) waste activity once again driving financial results in the period above expectations. Adjusted free cash flow for the full year of approximately $764 million or 16.5 percent of revenue and 52.3 percent of adjusted EBITDA continues to reflect the results of our differentiated strategy and purposeful focus on both quality of revenue and free cash flow generation," Ronald J. Mittelstaedt, CEO and chairman, says. "We are extremely pleased that adjusted free cash flow per share increased more than 20 percent in 2017, while the number of safety-related incidents in the year declined more than 20 percent."
"Recently completed acquisitions with total annualized revenue of approximately $70 million provide a strong start to what could be another year of above average acquisition activity,” Mittelstaedt continues. “In early 2018, we acquired Bay Disposal LLC and Hampton Roads Recovery Center LLC (Bay Disposal & Recycling). Bay Disposal & Recycling is an integrated provider of solid waste collection, recycling, transfer and disposal services to almost 70,000 customers in southeastern Virginia and northeastern North Carolina through four collection operations, five recycling facilities, one transfer station and a C&D (construction and demolition) landfill. We've also completed tuck-in acquisitions in New York and Texas. Our strong financial profile provides us the flexibility to fund this potential above average amount of acquisition activity while continuing to increase the return of capital to shareholders."
Revenue was $4.630 billion in 4Q 2017 as compared to revenue of $3.376 billion in 2016. Operating income, 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 the Financial Accounting Standards Board’s (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, was $627.1 million. This compares to operating income of $452.3 million in the prior year, which included $146 million of expenses primarily related to the Progressive Waste acquisition and the expected divestiture of certain assets acquired in the Progressive Waste acquisition.
Net income attributable to Waste Connections in 2017, which included a $205.6 million benefit to the income tax provision primarily related to the Tax Act, was $576.8 million, or $2.18 per share on a diluted basis of 264.3 million shares. In 2016, the company reported net income attributable to Waste Connections of $246.5 million, or $1.07 per share on a diluted basis of 231.1 million shares.
Adjusted net income attributable to Waste Connections in 2017 was $570.7 million, or $2.16 per share, compared to $395.2 million, or $1.71 per share, in the prior year. Adjusted EBITDA in 2017 was $1.461 billion, as compared to $1.071 billion in the prior year.
Waste Connections also announced its outlook for 2018, 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.
- Revenue is estimated to be approximately $4.825 billion.
- Net income attributable to Waste Connections is estimated to be approximately $570 million.
- Adjusted EBITDA is estimated to be approximately $1.550 billion, or about 32.1 percent of revenue.
- Net cash provided by operating activities is estimated to be approximately $1.350 billion, or 28 percent of revenue.
- Adjusted free cash flow is estimated to be approximately $850.0 million, or about 17.6 percent of revenue.