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8-K - FORM 8-K - Waste Connections US, Inc.c20124e8vk.htm
Exhibit 99.1
(WASTE CONNECTIONS INC. LOGO)
WASTE CONNECTIONS REPORTS SECOND QUARTER 2011 RESULTS
    Revenue of $390.2 million, up 18.1%
 
    Internal growth of 5.5% and operating margins above expectations
 
    GAAP EPS and adjusted EPS* of $0.39, up 21.9%
 
    YTD net cash provided by operating activities of $190 million
 
    YTD free cash flow* of $145.5 million, or 20.2% of revenue
 
    Completes new $1.2 billion unsecured revolving credit facility
 
    Returns $59.4 million YTD to stockholders through share repurchases and dividends
FOLSOM, CA, July 19, 2011 - Waste Connections, Inc. (NYSE: WCN) today announced its results for the second quarter of 2011. Revenue totaled $390.2 million, an 18.1% increase over revenue of $330.5 million in the year ago period. Operating income was $84.8 million, or 21.7% of revenue, up 22.3% over operating income of $69.4 million in the second quarter of 2010. Net income attributable to Waste Connections in the quarter was $44.4 million, or $0.39 per share on a diluted basis of 114.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $30.4 million, or $0.26 per share on a diluted basis of 117.5 million shares.
Adjusted net income attributable to Waste Connections in the quarter was $44.8 million*, or $0.39 per share*, adjusting primarily for acquisition-related costs expensed during the period. Adjusted net income attributable to Waste Connections in the prior year period was $37.2 million*, or $0.32 per share*, adjusting primarily for costs associated with the early redemption of the Company’s 2026 Notes.
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 were $8.6 million ($5.4 million net of taxes, or approximately $0.05 per share) in the quarter compared to $8.5 million ($5.3 million net of taxes, or approximately $0.05 per share) in the year ago period.
“2011 continues to play out well for us. Core pricing, increasing disposal volumes and record recycling commodity values once again contributed to solid results in the quarter. These factors, together with better than expected contribution from recent acquisitions, enabled us to exceed the upper end of our outlook. Adjusted operating income before depreciation and amortization* as a percentage of revenue in the second quarter expanded 30 basis points over the prior year period despite a 100 basis point increase in fuel expense as a percentage of revenue, and adjusted EPS* increased more than 20%,” said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. “Our strong free cash flow, low leverage and more than $600 million of available capacity under our new credit facility provide tremendous flexibility to fund our growth strategy and return of capital to shareholders.”
     
*   A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

 

 


 

For the six months ended June 30, 2011, revenue was $721.7 million, a 13.1% increase over revenue of $638.0 million in the year ago period. Operating income was $153.4 million, or 21.3% of revenue, up 18.9% over operating income of $129.0 million for the same period in 2010. Net income attributable to Waste Connections for the six months ended June 30, 2011, was $81.0 million, or $0.71 per share on a diluted basis of 114.4 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $58.0 million, or $0.49 per share on a diluted basis of 117.7 million shares. Adjusted net income attributable to Waste Connections for the six months ended June 30, 2011, was $81.7 million*, or $0.71 per share*, up 22.1% and 24.6%, respectively, compared to $66.9 million*, or $0.57 per share* in the year ago period.
For the six months ended June 30, 2011, 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 were $15.6 million ($9.7 million net of taxes, or approximately $0.08 per share), compared to $16.3 million ($10.1 million net of taxes, or approximately $0.09 per share) in the year ago period.
Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets. The Company serves more than two million residential, commercial and industrial customers from a network of operations in 29 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.
Waste Connections will be hosting a conference call related to second quarter earnings and third quarter outlook on July 20th 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 website at www.wasteconnections.com. A playback of the call will be available at both of these websites.
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 website or through contacting us directly at (916) 608-8200.
     
*   A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.
Information Regarding Forward-Looking Statements
Certain statements contained in this release are forward-looking in nature, including statements related to expected performance of our base business, expected share repurchases and dividend payments, expected contribution from closed acquisitions, and future acquisition activity and growth strategy. 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

 

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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. 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 SIX MONTHS ENDED JUNE 30, 2010 AND 2011
(Unaudited)
(in thousands, except share and per share amounts)
                                 
    Three months ended     Six months ended  
    June 30,     June 30,  
    2010     2011     2010     2011  
Revenues
  $ 330,477     $ 390,184     $ 638,018     $ 721,652  
Operating expenses:
                               
Cost of operations
    187,346       221,872       364,336       408,938  
Selling, general and administrative
    36,353       41,169       72,011       80,007  
Depreciation
    33,464       36,939       64,908       69,975  
Amortization of intangibles
    3,598       5,673       7,184       9,650  
Loss (gain) on disposal of assets
    365       (267 )     622       (292 )
 
                       
Operating income
    69,351       84,798       128,957       153,374  
 
                               
Interest expense
    (9,161 )     (11,087 )     (21,423 )     (19,920 )
Interest income
    165       143       318       276  
Loss on extinguishment of debt
    (9,734 )           (10,193 )      
Other income (expense), net
    (169 )     (245 )     469       149  
 
                       
Income before income tax provision
    50,452       73,609       98,128       133,879  
 
                               
Income tax provision
    (19,815 )     (29,004 )     (39,678 )     (52,481 )
 
                       
Net income
    30,637       44,605       58,450       81,398  
Less: net income attributable to noncontrolling interests
    (237 )     (192 )     (477 )     (446 )
 
                       
Net income attributable to Waste Connections
  $ 30,400     $ 44,413     $ 57,973     $ 80,952  
 
                       
 
                               
Earnings per common share attributable to Waste Connections’ common stockholders:
                               
Basic
  $ 0.26     $ 0.39     $ 0.50     $ 0.71  
 
                       
 
                               
Diluted
  $ 0.26     $ 0.39     $ 0.49     $ 0.71  
 
                       
 
                               
Shares used in the per share calculations:
                               
Basic
    116,243,700       113,509,668       116,401,140       113,514,439  
 
                       
Diluted
    117,482,751       114,308,710       117,747,552       114,354,979  
 
                       
 
                               
Cash dividends per common share
  $     $ 0.075     $     $ 0.15  
 
                       

 

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WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
                 
    December 31,     June 30,  
    2010     2011  
ASSETS
               
Current assets:
               
Cash and equivalents
  $ 9,873     $ 16,951  
Accounts receivable, net of allowance for doubtful accounts of $5,084 and $4,728 at December 31, 2010 and June 30, 2011, respectively
    152,156       174,974  
Deferred income taxes
    20,130       16,231  
Prepaid expenses and other current assets
    33,402       28,449  
 
           
Total current assets
    215,561       236,605  
 
               
Property and equipment, net
    1,337,476       1,361,804  
Goodwill
    927,852       1,104,823  
Intangible assets, net
    381,475       455,841  
Restricted assets
    30,441       28,185  
Other assets, net
    23,179       26,630  
 
           
 
  $ 2,915,984     $ 3,213,888  
 
           
 
               
LIABILITIES AND EQUITY
               
Current liabilities:
               
Accounts payable
  $ 85,252     $ 82,293  
Book overdraft
    12,396       10,478  
Accrued liabilities
    99,075       105,920  
Deferred revenue
    54,157       61,720  
Current portion of long-term debt and notes payable
    2,657       2,693  
 
           
Total current liabilities
    253,537       263,104  
 
               
Long-term debt and notes payable
    909,978       1,135,976  
Other long-term liabilities
    47,637       50,018  
Deferred income taxes
    334,414       364,900  
 
           
Total liabilities
    1,545,566       1,813,998  
 
               
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; 250,000,000 shares authorized; 113,950,081 and 113,034,132 shares issued and outstanding at December 31, 2010 and June 30, 2011, respectively
    1,139       1,130  
Additional paid-in capital
    509,218       473,142  
Retained earnings
    858,887       922,798  
Accumulated other comprehensive loss
    (3,095 )     (1,428 )
 
           
Total Waste Connections’ equity
    1,366,149       1,395,642  
Noncontrolling interest in subsidiaries
    4,269       4,248  
 
           
Total equity
    1,370,418       1,399,890  
 
           
 
  $ 2,915,984     $ 3,213,888  
 
           

 

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WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2010 AND 2011
(Unaudited)
(Dollars in thousands)
                 
    Six months ended  
    June 30,  
    2010     2011  
 
               
Cash flows from operating activities:
               
Net income
  $ 58,450     $ 81,398  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Loss (gain) on disposal of assets
    622       (292 )
Depreciation
    64,908       69,975  
Amortization of intangibles
    7,184       9,650  
Deferred income taxes, net of acquisitions
    7,737       23,106  
Loss on redemption of 2026 Notes, net of make-whole payment
    2,255        
Amortization of debt issuance costs
    1,090       540  
Amortization of debt discount
    1,245        
Equity-based compensation
    5,625       5,962  
Interest income on restricted assets
    (271 )     (245 )
Closure and post-closure accretion
    880       967  
Excess tax benefit associated with equity-based compensation
    (6,423 )     (2,829 )
Net change in operating assets and liabilities, net of acquisitions
    422       1,744  
 
           
Net cash provided by operating activities
    143,724       189,976  
 
           
 
               
Cash flows from investing activities:
               
Payments for acquisitions, net of cash acquired
    (3,849 )     (216,062 )
Capital expenditures for property and equipment
    (50,495 )     (46,562 )
Proceeds from disposal of assets
    4,925       1,862  
Decrease (increase) in restricted assets, net of interest income
    (813 )     2,501  
Decrease (increase) in other assets
    39       (2,764 )
 
           
Net cash used in investing activities
    (50,193 )     (261,025 )
 
           
 
               
Cash flows from financing activities:
               
Proceeds from long-term debt
    281,000       427,500  
Principal payments on notes payable and long-term debt
    (308,860 )     (286,202 )
Change in book overdraft
    (2,172 )     (1,918 )
Proceeds from option and warrant exercises
    17,774       2,776  
Excess tax benefit associated with equity-based compensation
    6,423       2,829  
Payments for repurchase of common stock
    (83,665 )     (42,381 )
Payments for cash dividends
          (17,041 )
Tax withholdings related to net share settlements of restricted stock units
    (3,600 )     (5,271 )
Distributions to noncontrolling interests
          (675 )
Debt issuance costs
          (1,490 )
 
           
Net cash provided by (used in) financing activities
    (93,100 )     78,127  
 
           
 
               
Net increase in cash and equivalents
    431       7,078  
Cash and equivalents at beginning of period
    9,639       9,873  
 
           
Cash and equivalents at end of period
  $ 10,070     $ 16,951  
 
           

 

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ADDITIONAL STATISTICS
THREE AND SIX MONTHS ENDED JUNE 30, 2011
(Dollars in thousands)
Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:
         
    Three months ended  
    June 30, 2011  
Core Price
    2.8 %
Surcharges
    0.8 %
Volume
    0.5 %
Intermodal, Recycling and Other
    1.4 %
 
     
Total
    5.5 %
 
     
Revenue Breakdown:
                                 
    Three months ended     Six months ended  
    June 30, 2011     June 30, 2011  
Collection
  $ 275,170       61.5 %   $ 514,607       62.3 %
Disposal and Transfer
    133,722       29.9 %     243,282       29.4 %
Intermodal, Recycling and Other
    38,328       8.6 %     68,471       8.3 %
 
                       
Total before inter-company elimination
  $ 447,220       100.0 %   $ 826,360       100.0 %
 
                               
Inter-company elimination
  $ (57,036 )           $ (104,708 )        
 
                           
Reported Revenue
  $ 390,184             $ 721,652          
 
                           
Days Sales Outstanding for the three months ended June 30, 2011: 41 (26 net of deferred revenue)
Internalization for the three months ended June 30, 2011: 61%
Other Cash Flow Items:
                 
    Three months ended     Six months ended  
    June 30, 2011     June 30, 2011  
Cash Interest Paid
  $ 13,386     $ 16,732  
Cash Taxes Paid
  $ 12,210     $ 12,821  
Debt to Book Capitalization as of June 30, 2011: 45%
Share Information for the three months ended June 30, 2011:
         
Basic shares outstanding
    113,509,668  
Dilutive effect of options and warrants
    451,173  
Dilutive effect of restricted stock
    347,869  
 
     
Diluted shares outstanding
    114,308,710  

 

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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  
    June 30, 2010     June 30, 2011  
Operating income
  $ 69,351     $ 84,798  
Plus: Depreciation and amortization
    37,062       42,612  
Plus: Closure and post-closure accretion
    439       484  
Plus/less: Loss (gain) on disposal of assets
    365       (267 )
Adjustments:
               
Plus: Acquisition-related transaction costs (a)
    244       423  
 
           
Adjusted operating income before depreciation and amortization
  $ 107,461     $ 128,050  
 
           
 
               
As % of revenues
    32.5 %     32.8 %
                 
    Six months ended     Six months ended  
    June 30, 2010     June 30, 2011  
Operating income
  $ 128,957     $ 153,374  
Plus: Depreciation and amortization
    72,092       79,625  
Plus: Closure and post-closure accretion
    880       967  
Plus/less: Loss (gain) on disposal of assets
    622       (292 )
Adjustments:
               
Plus: Acquisition-related transaction costs (a)
    395       1,094  
 
           
Adjusted operating income before depreciation and amortization
  $ 202,946     $ 234,768  
 
           
 
               
As % of revenues
    31.8 %     32.5 %
 
     
(a)   Reflects the addback of acquisition-related costs.

 

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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     Six months ended  
    June 30,     June 30,  
    2010     2011     2010     2011  
 
                               
Reported net income attributable to Waste Connections
  $ 30,400     $ 44,413     $ 57,973     $ 80,952  
Adjustments:
                               
Loss on extinguishment of debt, net of taxes (a)
    6,035             6,320        
Acquisition-related transaction costs, net of taxes (b)
    151       507       245       923  
Loss (gain) on disposal of assets, net of taxes (c)
    648       (166 )     808       (181 )
Impact of deferred tax adjustment (d)
                1,547        
 
                       
Adjusted net income attributable to Waste Connections
  $ 37,234     $ 44,754     $ 66,893     $ 81,694  
 
                       
 
                               
Diluted earnings per common share attributable to Waste Connections common stockholders:
                               
Reported net income
  $ 0.26     $ 0.39     $ 0.49     $ 0.71  
 
                       
Adjusted net income
  $ 0.32     $ 0.39     $ 0.57     $ 0.71  
 
                       
 
     
(a)   Reflects the elimination of costs associated with the early redemption of outstanding debt.
 
(b)   Reflects the elimination of acquisition-related costs.
 
(c)   Reflects the elimination of a loss (gain) on disposal of assets.
 
(d)   Reflects the elimination 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  
    June 30, 2010     June 30, 2011  
Net cash provided by operating activities
  $ 60,044     $ 101,597  
Plus/less: Change in book overdraft
    (1,191 )     (1,903 )
Plus: Proceeds from disposal of assets
    4,123       1,074  
Plus: Excess tax benefit associated with equity-based compensation
    3,945       991  
Less: Capital expenditures for property and equipment
    (23,742 )     (27,034 )
Less: Distributions to noncontrolling interests
           
 
           
Free cash flow
  $ 43,179     $ 74,725  
 
           
 
               
As % of revenues
    13.1 %     19.2 %
                 
    Six months ended     Six months ended  
    June 30, 2010     June 30, 2011  
Net cash provided by operating activities
  $ 143,724     $ 189,976  
Plus: Change in book overdraft
    (2,172 )     (1,918 )
Plus: Proceeds from disposal of assets
    4,925       1,862  
Plus: Excess tax benefit associated with equity-based compensation
    6,423       2,829  
Less: Capital expenditures for property and equipment
    (50,495 )     (46,562 )
Less: Distributions to noncontrolling interests
          (675 )
 
           
Free cash flow
  $ 102,405     $ 145,512  
 
           
 
               
As % of revenues
    16.1 %     20.2 %

 

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