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8-K - FORM 8-K - Waste Connections US, Inc.c12049e8vk.htm
Exhibit 99.1
(WASTE CONNECTIONS INC. LOGO)
WASTE CONNECTIONS REPORTS FOURTH QUARTER RESULTS AND PROVIDES 2011 OUTLOOK
   
Q4 revenue of $336.0 million, up 8.4%, and operating margins above expectations
 
   
Q4 GAAP EPS of $0.31 and adjusted EPS* of $0.32, up 33.3% over prior year period
 
   
Full year revenue of $1.32 billion, up 10.8%, and adjusted EPS* of $1.24, up 26.5%
 
   
Full year net cash provided by operating activities of $328.4 million
 
   
Full year free cash flow* of $212.5 million, or 16.1% of revenue
 
   
Repurchased almost 6% of outstanding common stock during the year
 
   
Initiated regular quarterly cash dividend of $0.075 per share
 
   
Expects continuing revenue, operating margin and free cash flow growth in 2011
FOLSOM, CA, February 8, 2011 - Waste Connections, Inc. (NYSE: WCN) today announced its results for the fourth quarter of 2010. Revenue totaled $336.0 million, an 8.4% increase over revenue of $309.9 million in the year ago period. Operating income was $67.7 million, or 20.2% of revenue, versus $58.9 million in the fourth quarter of 2009. Net income attributable to Waste Connections in the quarter was $36.1 million, or $0.31 per share on a diluted basis of 115.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $23.3 million, or $0.19 per share on a diluted basis of 119.9 million shares. Shares and per share numbers reflect a three-for-two stock split effective November 12, 2010.
Adjusted net income attributable to Waste Connections in the quarter was $36.7 million*, or $0.32 per share*, adjusting for acquisition-related costs expensed due to the implementation of accounting guidance for business combinations effective January 1, 2009. Adjusted net income attributable to Waste Connections in the prior year period was $29.3 million*, or $0.24 per share*, adjusted primarily for costs associated with the early termination of certain interest rate swaps.
Non-cash costs for equity-based compensation, amortization of acquisition-related intangibles, and amortization of debt discount related to convertible debt instruments in connection with the adoption of accounting guidance on January 1, 2009, were $6.6 million ($4.1 million net of taxes, or approximately $0.04 per share) in the quarter compared to $7.2 million ($4.5 million net of taxes, or approximately $0.04 per share) in the year ago period.
“Increasing disposal volumes, record recycled commodity values, strong core pricing, and a stable cost structure drove results above expectations throughout 2010. Adjusted operating income before depreciation and amortization* as a percentage of revenue expanded more than 100 basis points in 2010 over the prior year, and adjusted EPS* increased 26.5%. We generated record free cash flow during the year, remained disciplined in our acquisition strategy, and returned approximately 6% of market cap to shareholders,” said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. “We already are well positioned for continuing margin expansion, increasing free cash flow, and double digit growth in earnings per share in 2011; any volume growth from an improving economy, continuation of current recycled commodity prices, or acquisitions completed during the year should provide further upside to our outlook provided below. We also remain committed to repurchasing between four and five percent of outstanding shares during the year and expect to increase the amount of the quarterly cash dividend later in the year.”
Mr. Mittelstaedt added, “Our strategic focus on exclusive and secondary markets, unique corporate culture, and discipline in deploying capital, have produced a differentiated asset mix within our industry and differentiated financial performance.”
     
*  
A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

 

 


 

For the year ended December 31, 2010, revenue was $1.32 billion, a 10.8% increase over revenue of $1.19 billion in the year ago period. Operating income was $272.4 million, versus $230.7 million for the same period in 2009. Net income attributable to Waste Connections for the year ended December 31, 2010, was $135.1 million, or $1.16 per share on a diluted basis of 116.9 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $109.8 million, or $0.91 per share on a diluted basis of 120.5 million shares. Adjusted net income attributable to Waste Connections for the year ended December 31, 2010, was $145.0 million*, or $1.24 per share*, compared to $117.9 million*, or $0.98 per share* in the year ago period.
For the year ended December 31, 2010, non-cash costs for equity-based compensation, amortization of acquisition-related intangibles, loss on the early redemption of the 2026 Notes (net of make-whole payment), and amortization of debt discount related to convertible debt instruments in connection with the adoption of accounting guidance on January 1, 2009, were $29.4 million ($18.2 million net of taxes, or approximately $0.16 per share), compared to $27.0 million ($16.9 million net of taxes, or approximately $0.14 per share) in the year ago period.
2011 OUTLOOK
Waste Connections also announced its outlook for 2011, which assumes no change in the current economic environment. The Company’s outlook excludes the impact of any additional acquisitions and expensing of acquisition-related transaction costs. And as noted above, any volume growth from an improving economy or continuation of current recycled commodity prices should provide further upside to this outlook.
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 SEC filings. Certain components of the outlook for 2011 are subject to quarterly fluctuations.
   
Revenue is estimated to be approximately $1.375 billion.
   
Depreciation expense is estimated to be approximately 10.0% of revenue.
   
Amortization expense for acquisition-related intangibles is estimated to be approximately 1.0% of revenue.
   
Closure and post-closure accretion expense is estimated to be approximately 0.15% of revenue.
   
Operating income is estimated to be approximately 21.5% of revenue.
   
Net interest expense is estimated to be approximately $36.5 million.
   
Effective tax rate is expected to be approximately 39.0%.
   
Net income attributable to noncontrolling interests is estimated to reduce net income by approximately $1.2 million.
   
Net cash provided by operating activities is estimated to be approximately 26.0% of revenue.
   
Capital expenditures are estimated to range between $130 million and $135 million.
CONFERENCE CALL
Waste Connections will be hosting a conference call related to fourth quarter results and 2011 outlook on February 9th at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com or through a link on our web site at www.wasteconnections.com. A playback of the call will be available at both of these web sites.
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 two million residential, commercial and industrial customers from a network of operations in 27 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 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.
     
*  
A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

 

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Information Regarding Forward-Looking Statements
Certain statements contained in this release are forward-looking in nature, including statements related to expected share repurchases, dividend payments, recycled commodity prices, expected contribution from closed acquisitions, future acquisition activity, expected margin expansion, free cash flow growth and earnings per share growth, and our 2011 outlook. 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. Our 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) our acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (2) a portion of our growth and future financial performance depends on our ability to integrate acquired businesses into our organization and operations; (3) downturns in the worldwide economy adversely affect operating results; (4) our results are vulnerable to economic conditions and seasonal factors affecting the regions in which we operate; (5) we may be subject in the normal course of business to judicial, administrative or other third party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity; (6) we may be unable to compete effectively with larger and better capitalized companies and governmental service providers; (7) we may lose contracts through competitive bidding, early termination or governmental action; (8) price increases may not be adequate to offset the impact of increased costs or may cause us to lose volume; (9) increases in the price of fuel may adversely affect our business and reduce our operating margins; (10) increases in labor and disposal and related transportation costs could impact our financial results; (11) efforts by labor unions could divert management attention and adversely affect operating results; (12) we could face significant withdrawal liability if we withdraw from participation in one or more underfunded multiemployer pension plans in which we participate; (13) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (14) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (15) our indebtedness could adversely affect our financial condition; we may incur substantially more debt in the future; (16) each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, including environmental liabilities; (17) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (18) our accruals for our landfill site closure and post-closure costs may be inadequate; (19) the financial soundness of our customers could affect our business and operating results; (20) we depend significantly on the services of the members of our senior, regional and district management team, and the departure of any of those persons could cause our operating results to suffer; (21) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (22) we may incur charges related to capitalized expenditures of landfill development projects, which would decrease our earnings; (23) because we depend on railroads for our intermodal operations, our operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (24) our financial results are based upon estimates and assumptions that may differ from actual results; (25) the adoption of new accounting standards or interpretations could adversely affect our financial results; (26) our financial and operating performance may be affected by the inability to renew landfill operating permits, obtain new landfills and expand existing ones; (27) future changes in laws or renewed enforcement of laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results; (28) fluctuations in prices for recycled commodities that we sell and rebates we offer to customers may cause our revenues and operating results to decline; (29) extensive and evolving environmental, health, safety and employment laws and regulations may restrict our operations and growth and increase our costs; (30) climate change regulations may adversely affect operating results; (31) extensive regulations that govern the design, operation and closure of landfills may restrict our landfill operations or increase our costs of operating landfills; (32) alternatives to landfill disposal may cause our revenues and operating results to decline; and (33) unusually adverse weather conditions may interfere with our operations, harming our operating results. These risks and uncertainties, as well as others, are discussed in greater detail in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.
— financial tables attached —
CONTACT:
Worthing Jackman / (916) 608-8266
worthingj@wasteconnections.com

 

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WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2010
(Unaudited)
(in thousands, except share and per share amounts)
                                 
    Three months ended     Twelve months ended  
    December 31,     December 31,  
    2009     2010     2009     2010  
 
                               
Revenues
  $ 309,897     $ 335,955     $ 1,191,393     $ 1,319,757  
Operating expenses:
                               
Cost of operations
    181,584       191,512       692,415       749,487  
Selling, general and administrative
    33,615       39,395       138,026       149,860  
Depreciation
    31,670       33,525       117,796       132,874  
Amortization of intangibles
    3,611       3,782       12,962       14,582  
Loss (gain) on disposal of assets
    556       (1 )     (481 )     571  
 
                       
Operating income
    58,861       67,742       230,675       272,383  
 
                               
Interest expense
    (12,344 )     (9,292 )     (49,161 )     (40,134 )
Interest income
    139       136       1,413       590  
Loss on extinguishment of debt
                      (10,193 )
Other income (expense), net
    (8,607 )     860       (7,551 )     2,830  
 
                       
Income before income tax provision
    38,049       59,446       175,376       225,476  
 
                               
Income tax provision
    (14,495 )     (23,011 )     (64,565 )     (89,334 )
 
                       
Net income
    23,554       36,435       110,811       136,142  
Less: net income attributable to noncontrolling interests
    (295 )     (290 )     (986 )     (1,038 )
 
                       
Net income attributable to Waste Connections
  $ 23,259     $ 36,145     $ 109,825     $ 135,104  
 
                       
 
                               
Earnings per common share attributable to Waste Connections’ common stockholders:
                               
Basic
  $ 0.20     $ 0.32     $ 0.92     $ 1.17  
 
                       
Diluted
  $ 0.19     $ 0.31     $ 0.91     $ 1.16  
 
                       
 
                               
Shares used in the per share calculations:
                               
Basic
    118,204,728       114,212,664       119,119,601       115,646,173  
 
                       
Diluted
    119,928,021       115,327,440       120,506,162       116,894,204  
 
                       
 
                               
Cash dividends per common share
        $ 0.075           $ 0.075  
 
                       

 

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WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
                 
    December 31,     December 31,  
    2009     2010  
ASSETS
               
Current assets:
               
Cash and equivalents
  $ 9,639     $ 9,873  
Accounts receivable, net of allowance for doubtful accounts of $4,058 and $5,084 at December 31, 2009 and 2010, respectively
    138,972       152,156  
Deferred income taxes
    17,748       20,130  
Prepaid expenses and other current assets
    33,495       33,402  
 
           
Total current assets
    199,854       215,561  
 
               
Property and equipment, net
    1,308,392       1,337,476  
Goodwill
    906,710       927,852  
Intangible assets, net
    354,303       381,475  
Restricted assets
    27,377       30,441  
Other assets, net
    23,812       23,179  
 
           
 
  $ 2,820,448     $ 2,915,984  
 
           
 
               
LIABILITIES AND EQUITY
               
Current liabilities:
               
Accounts payable
  $ 86,669     $ 85,252  
Book overdraft
    12,117       12,396  
Accrued liabilities
    93,380       99,075  
Deferred revenue
    50,138       54,157  
Current portion of long-term debt and notes payable
    2,609       2,657  
 
           
Total current liabilities
    244,913       253,537  
 
               
Long-term debt and notes payable
    867,554       909,978  
Other long-term liabilities
    45,013       47,637  
Deferred income taxes
    305,932       334,414  
 
           
Total liabilities
    1,463,412       1,545,566  
 
               
Commitments and contingencies
               
 
               
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; 117,898,624 and 113,950,081 shares issued and outstanding at December 31, 2009 and 2010, respectively
    786       1,139  
Additional paid-in capital
    625,173       509,218  
Retained earnings
    732,738       858,887  
Accumulated other comprehensive loss
    (4,892 )     (3,095 )
 
           
Total Waste Connections’ equity
    1,353,805       1,366,149  
Noncontrolling interests
    3,231       4,269  
 
           
Total equity
    1,357,036       1,370,418  
 
           
 
  $ 2,820,448     $ 2,915,984  
 
           

 

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WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2010
(Unaudited)
(Dollars in thousands)
                 
    Twelve months ended  
    December 31,  
    2009     2010  
 
               
Cash flows from operating activities:
               
Net income
  $ 110,811     $ 136,142  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Loss (gain) on disposal of assets
    (481 )     571  
Depreciation
    117,796       132,874  
Amortization of intangibles
    12,962       14,582  
Deferred income taxes, net of acquisitions
    38,224       26,431  
Loss on redemption of 2026 Notes, net of make-whole payment
          2,255  
Amortization of debt issuance costs
    1,942       1,574  
Amortization of debt discount
    4,684       1,245  
Equity-based compensation
    9,336       11,331  
Interest income on restricted assets
    (488 )     (511 )
Closure and post-closure accretion
    2,055       1,766  
Excess tax benefit associated with equity-based compensation
    (4,054 )     (11,997 )
Net change in operating assets and liabilities, net of acquisitions
    10,850       12,133  
 
           
Net cash provided by operating activities
    303,637       328,396  
 
           
 
               
Cash flows from investing activities:
               
Payments for acquisitions, net of cash acquired
    (420,011 )     (81,010 )
Capital expenditures for property and equipment
    (128,251 )     (134,829 )
Proceeds from disposal of assets
    5,061       6,659  
Increase in restricted assets, net of interest income
    (3,880 )     (2,552 )
Increase in other assets
    (1,146 )     (2,492 )
 
           
Net cash used in investing activities
    (548,227 )     (214,224 )
 
           
 
               
Cash flows from financing activities:
               
Proceeds from long-term debt
    426,500       483,253  
Principal payments on notes payable and long-term debt
    (401,970 )     (467,660 )
Change in book overdraft
    7,802       279  
Proceeds from option and warrant exercises
    15,397       33,074  
Excess tax benefit associated with equity-based compensation
    4,054       11,997  
Payments for repurchase of common stock
    (62,624 )     (166,320 )
Payments for cash dividends
          (8,561 )
Debt issuance costs
    (194 )      
 
           
Net cash used in financing activities
    (11,035 )     (113,938 )
 
           
 
               
Net increase (decrease) in cash and equivalents
    (255,625 )     234  
Cash and equivalents at beginning of period
    265,264       9,639  
 
           
Cash and equivalents at end of period
  $ 9,639     $ 9,873  
 
           

 

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ADDITIONAL STATISTICS
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2010
(Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:
                 
    Three months ended     Twelve months ended  
    December 31, 2010     December 31, 2010  
Core Price
    2.6 %     2.7 %
Surcharges
    0.3 %     0.2 %
Volume
    0.9 %     0.0 %
Intermodal, Recycling and Other
    2.5 %     2.6 %
 
           
Total
    6.3 %     5.5 %
 
           
Uneliminated Revenue Breakdown:
                                 
    Three months ended     Twelve months ended  
    December 31, 2010     December 31, 2010  
Collection
  $ 239,213       62.2 %   $ 951,327       62.8 %
Disposal and Transfer
    115,851       30.1 %     458,241       30.3 %
Intermodal, Recycling and Other
    29,469       7.7 %     103,974       6.9 %
 
                       
Total before inter-company elimination
  $ 384,533       100.0 %   $ 1,513,542       100.0 %
 
                               
Inter-company elimination
  $ (48,578 )           $ (193,785 )        
 
                           
Reported Revenue
  $ 335,955             $ 1,319,757          
 
                           
Days Sales Outstanding for the three months ended December 31, 2010: 42 (27 net of deferred revenue)
Internalization for the three months ended December 31, 2010: 66%
Other Cash Flow Items:
                 
    Three months ended     Twelve months ended  
    December 31, 2010     December 31, 2010  
Cash Interest Paid
  $ 14,120     $ 39,913  
Cash Taxes Paid
  $ 13,881     $ 50,111  
Debt to Book Capitalization as of December 31, 2010: 40%
Share Information for the three months ended December 31, 2010:
         
Basic shares outstanding
    114,212,664  
Dilutive effect of options and warrants
    541,767  
Dilutive effect of restricted stock
    573,009  
 
     
Diluted shares outstanding
    115,327,440  

 

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NON-GAAP RECONCILIATION SCHEDULE
(in thousands)
Reconciliation of Adjusted Operating Income before Depreciation and Amortization:
Adjusted operating income before depreciation and amortization, 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. Waste Connections defines adjusted operating income before depreciation and amortization as operating income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any gain or loss on disposal of assets. The Company further adjusts this calculation to exclude the effects of items management believes impact the ability to assess the operating performance of our business. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses adjusted operating income before depreciation and amortization as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company’s operations. Other companies may calculate adjusted operating income before depreciation and amortization differently.
                 
    Three months ended     Three months ended  
    December 31, 2009     December 31, 2010  
Operating income
  $ 58,861     $ 67,742  
Plus: Depreciation and amortization
    35,281       37,307  
Plus: Closure and post-closure accretion
    559       443  
Plus/less: Loss (gain) on disposal of assets
    556       (1 )
Adjustments:
               
Plus: Acquisition-related transaction costs (a)
    (191 )     904  
Plus: Loss on prior corporate office lease (b)
    218        
 
           
Adjusted operating income before depreciation and amortization
  $ 95,284     $ 106,395  
 
           
 
               
As % of revenues
    30.7 %     31.7 %
                 
    Twelve months ended     Twelve months ended  
    December 31, 2009     December 31, 2010  
Operating income
  $ 230,675     $ 272,383  
Plus: Depreciation and amortization
    130,758       147,456  
Plus: Closure and post-closure accretion
    2,055       1,766  
Plus/less: Loss (gain) on disposal of assets
    (481 )     571  
Adjustments:
               
Plus: Acquisition-related transaction costs (a)
    3,987       2,081  
Plus: Loss on prior corporate office lease (b)
    1,839        
 
           
Adjusted operating income before depreciation and amortization
  $ 368,833     $ 424,257  
 
           
 
               
As % of revenues
    31.0 %     32.1 %
 
     
(a)  
Reflects the addback of acquisition-related costs expensed due to the implementation of accounting guidance for business combinations effective January 1, 2009.
 
(b)  
Reflects the addback of a loss on the Company’s prior corporate office lease due to the relocation of the Company’s corporate offices.

 

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NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands, except per share amounts)
Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income per diluted share:
Adjusted net income and adjusted net income per diluted share, both non-GAAP financial measures, are provided supplementally because they are widely used by investors as a valuation measure in the solid waste industry. The Company provides adjusted net income to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income has limitations due to the fact that it may exclude items that have an impact on the Company’s financial condition and results of operations. Adjusted net income and adjusted net income per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses adjusted net income and adjusted net income per diluted share as one of the principal measures to evaluate and monitor ongoing financial performance of the Company’s operations. Other companies may calculate adjusted net income and adjusted net income per diluted share differently.
                                 
    Three months ended     Twelve months ended  
    December 31,     December 31,  
    2009     2010     2009     2010  
 
                               
Reported net income attributable to Waste Connections
  $ 23,259     $ 36,145     $ 109,825     $ 135,104  
Adjustments:
                               
Swap termination costs, net of taxes (a)
    5,753             5,753        
Loss on extinguishment of debt, net of taxes (b)
                      6,320  
Acquisition-related transaction costs, net of taxes (c)
    (176 )     560       2,630       1,290  
Loss on prior corporate office lease, net of taxes (d)
    136             1,144        
Loss (gain) on disposal of assets, net of taxes (e)
    346             (299 )     776  
Impact of deferred tax adjustment (f)
                (1,142 )     1,547  
 
                       
Adjusted net income attributable to Waste Connections
  $ 29,318     $ 36,705     $ 117,911     $ 145,037  
 
                       
 
                               
Diluted earnings per common share attributable to Waste Connections common stockholders:
                               
Reported net income
  $ 0.19     $ 0.31     $ 0.91     $ 1.16  
 
                       
Adjusted net income
  $ 0.24     $ 0.32     $ 0.98     $ 1.24  
 
                       
 
     
(a)  
Reflects the elimination of costs associated with the termination of a notional $175 million of interest rate swaps.
 
(b)  
Reflects the elimination of costs associated with the early redemption of outstanding debt.
 
(c)  
Reflects the elimination of acquisition-related costs due to the implementation of accounting guidance for business combinations effective January 1, 2009.
 
(d)  
Reflects the elimination of a loss on the Company’s prior corporate office lease due to the relocation of the Company’s corporate offices.
 
(e)  
Reflects the elimination of a loss (gain) on disposal of assets.
 
(f)  
Reflects (1) the elimination in 2009 of a benefit to the income tax provision primarily from a reduction in the Company’s deferred tax liabilities, and (2) the elimination in 2010 of an increase to the income tax provision associated with an adjustment in the Company’s deferred tax liabilities primarily resulting from a voter-approved increase in Oregon state income tax rates.

 

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NON-GAAP RECONCILIATION SCHEDULE (continued)
(in thousands)
Reconciliation of Free Cash Flow:
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, plus or minus change in book overdraft, plus excess tax benefit associated with equity-based compensation, less capital expenditures for property and equipment and distributions to noncontrolling interests. This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures. Management uses free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company’s operations. Other companies may calculate free cash flow differently.
                 
    Three months ended     Three months ended  
    December 31, 2009     December 31, 2010  
Net cash provided by operating activities
  $ 61,392     $ 86,098  
Plus: Change in book overdraft
    7,754       653  
Plus: Proceeds from disposal of assets
    712       874  
Plus: Excess tax benefit associated with equity-based compensation
    3,358       3,061  
Less: Capital expenditures for property and equipment
    (43,962 )     (48,708 )
 
           
Free cash flow
  $ 29,254     $ 41,978  
 
           
 
               
As % of revenues
    9.4 %     12.5 %
                 
    Twelve months ended     Twelve months ended  
    December 31, 2009     December 31, 2010  
Net cash provided by operating activities
  $ 303,637     $ 328,396  
Plus: Change in book overdraft
    7,802       279  
Plus: Proceeds from disposal of assets
    5,061       6,659  
Plus: Excess tax benefit associated with equity-based compensation
    4,054       11,997  
Less: Capital expenditures for property and equipment
    (128,251 )     (134,829 )
 
           
Free cash flow
  $ 192,303     $ 212,502  
 
           
 
               
As % of revenues
    16.1 %     16.1 %

 

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