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8-K - 8-K - Waste Connections US, Inc.d615999d8k.htm

Exhibit 99.1

 

LOGO

WASTE CONNECTIONS REPORTS THIRD QUARTER 2013 RESULTS

 

    Revenue of $503.6 million, up 18.3%

 

    Double digit increase in landfill volumes drives 2.2% organic solid waste volume growth

 

    Adjusted EBITDA* of $177.1 million, or 35.2% of revenue, up 28.0%

 

    GAAP EPS of $0.49 and adjusted EPS* of $0.51, up 18.6%

 

    YTD net cash provided by operating activities of $385.4 million

 

    YTD adjusted free cash flow* increases 17.6% to $263.4 million, or 18.3% of revenue

 

    Announces $25 million revenue follow-on acquisition in Minnesota

THE WOODLANDS, TX, October 22, 2013 - Waste Connections, Inc. (NYSE: WCN) today announced its results for the third quarter of 2013. Revenue totaled $503.6 million, an 18.3% increase over revenue of $425.7 million in the year ago period. Operating income was $115.6 million compared to $89.1 million in the third quarter of 2012. Operating income in the current year period included approximately $1.7 million ($1.1 million net of taxes) associated with gains on the disposal of assets and on the Company’s prior office leases resulting primarily from the relocation of our corporate headquarters from California to Texas. Adjusted EBITDA* in the third quarter of 2013 was $177.1 million, up 28.0% over adjusted EBITDA* of $138.3 million in the prior year period. Adjusted EBITDA, a non-GAAP measure, excludes the impact of items such as gains on both the disposal of assets and from litigation settlements, acquisition-related costs and expenses incurred in connection with the relocation of our corporate headquarters from California to Texas, as shown in the detailed reconciliation in the attached table.

Net income attributable to Waste Connections in the quarter was $60.7 million, or $0.49 per share on a diluted basis of 124.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $49.4 million, or $0.40 per share on a diluted basis of 123.7 million shares.

Adjusted net income attributable to Waste Connections* in the quarter was $63.7 million or $0.51 per share versus $53.2 million, or $0.43 per share, in the prior year period. Adjusted net income and adjusted net income per diluted share, both non-GAAP measures, primarily exclude the impact of acquisition-related items such as amortization of intangibles and acquisition-related expenses, as well as gains on both the disposal of assets and from litigation settlements, and expenses incurred in connection with the relocation of our corporate headquarters from California to Texas, all net of tax, as shown in the detailed reconciliation in the attached table.

“Double digit increases in municipal solid waste disposal volumes and continuing improvement in roll off activity enabled us once again to meet or exceed the upper end of our expectations for the quarter. Strong solid waste organic growth and roll over contribution from the R360 acquisition drove 18% and 28% year-over-year increases in the third quarter for revenue and adjusted EBITDA. Our strong operating performance and free cash flow generation positioned us to increase our dividend 15% and pull forward almost $10 million of next year’s landfill equipment purchases into the fourth quarter of this year to take advantage of bonus depreciation tax benefits, in addition to the previously discussed accelerated CNG fleet purchases,” said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. “As anticipated, acquisition activity has increased as we approach year-end. In October, we signed an agreement to acquire an approximate $25 million annual revenue collection operation in Minnesota’s Twin Cities region, expanding our footprint in that market following the SKB transfer and landfill acquisition completed last year.”

 

* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.


Mr. Mittelstaedt added, “While it’s early to discuss our formal outlook for 2014, we believe the upcoming year is already setting up nicely. Continued pricing strength and positive volumes within solid waste and an expected double digit growth in E&P waste from both new development projects and increased activity from customer conversions to offsite facilities, should result in an approximate 50 basis points year-over-year expansion in adjusted EBITDA margins, excluding the impact of acquisitions. The newly announced Minnesota transaction, combined with other municipal solid waste and E&P waste acquisitions we expect to complete later this year and next, provide incremental growth for 2014.”

For the nine months ended September 30, 2013, revenue was $1.44 billion, a 19.0% increase over revenue of $1.21 billion in the year ago period. Operating income was $295.6 million compared to $235.9 million for the same period in 2012. Adjusted EBITDA* for the nine months ended September 30, 2013, was $492.5 million, up 27.5% over adjusted EBITDA* of $386.1 million in the prior year period. Net income attributable to Waste Connections for the nine months ended September 30, 2013, was $146.2 million, or $1.18 per share on a diluted basis of 124.1 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $123.1 million, or $1.02 per share on a diluted basis of 121.2 million shares. Adjusted net income attributable to Waste Connections* for the nine months ended September 30, 2013, was $167.3 million, or $1.35 per share, compared to $142.2 million, or $1.17 per share, in the year ago period.

Waste Connections, Inc. is an integrated solid waste services company that provides waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets. Through its R360 Environmental Solutions subsidiary, the Company also is 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 two million residential, commercial, industrial, and exploration and production customers from a network of operations in 31 states. The Company also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. Waste Connections, Inc. was founded in September 1997 and is headquartered in The Woodlands, Texas.

Waste Connections will be hosting a conference call related to third quarter earnings and fourth quarter outlook on October 23rd 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 (832) 442-2200.

 

* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule

 

- 2 -


Information Regarding Forward-Looking Statements

Certain statements contained in this release are forward-looking in nature, including statements related to: economic trends and the impact of such trends on our business, expectations with respect to pricing strength and waste volume growth, expectations with respect to E&P waste and customer activity, the timing, cost and tax impacts of landfill equipment and CNG fleet purchases, and expectations regarding incremental growth. 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. 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, which may reduce the anticipated benefit from acquired businesses; (2) a portion of our growth and future financial performance depends on our ability to integrate acquired businesses into our organization and operations; (3) our indebtedness could adversely affect our financial condition and limit our financial flexibility; (4) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (5) our industry is highly competitive and includes larger and better capitalized companies, companies with lower prices, return expectations or other advantages, and governmental service providers, which could adversely affect our ability to compete and our operating results; (6) we may lose contracts through competitive bidding, early termination or governmental action; (7) price increases may not be adequate to offset the impact of increased costs or may cause us to lose volume; (8) economic downturns adversely affect operating results; (9) our results are vulnerable to economic conditions and seasonal factors affecting the regions in which we operate; (10) the E&P waste disposal business depends on oil and gas prices and the level of drilling and production activity in the basins in which we operate;(11) we have limited experience in running an E&P waste treatment, recovery and disposal business; (12) our E&P waste business is dependent upon the willingness of our customers to outsource their waste management activities; (13) changes in laws or government regulations regarding hydraulic fracturing could increase our customers’ costs of doing business and reduce oil and gas production by our customers, which could adversely impact our business; (14) our E&P waste business could be adversely affected by changes in laws regulating E&P waste; (15) 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; (16) increases in the price of diesel fuel may adversely affect our collection business and reduce our operating margins; (17) increases in labor and disposal and related transportation costs could impact our financial results; (18) efforts by labor unions could divert management attention and adversely affect operating results; (19) we could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate and the accrued pension benefits are not fully funded; (20) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (21) each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, including environmental liabilities; (22) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (23) our accruals for our landfill site closure and post-closure costs may be inadequate; (24) the financial soundness of our customers could affect our business and operating results; (25) 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; (26) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (27) we may incur charges related to capitalized expenditures of landfill development projects, which would decrease our earnings; (28) 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; (29) our financial results could be adversely affected by impairments of goodwill or indefinite-lived intangibles; (30) our financial results are based upon estimates and assumptions that may differ from actual results; (31) the adoption of new accounting standards or interpretations could adversely affect our financial results; (32) pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements; and (33) if we are not able to develop and protect intellectual property, or if a competitor develops or obtains exclusive rights to a breakthrough technology, our financial results may suffer. 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 / (832) 442-2266     Mary Anne Whitney / (832) 442-2253
worthingj@wasteconnections.com     maryannew@wasteconnections.com

.

 

- 3 -


WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(Unaudited)

(in thousands, except share and per share amounts)

 

     Three months ended September 30,     Nine months ended September 30,  
     2012     2013     2012     2013  

Revenues

   $ 425,654      $ 503,646      $ 1,212,815      $ 1,442,918   

Operating expenses:

        

Cost of operations

     243,243        274,141        698,351        794,588   

Selling, general and administrative

     47,977        53,536        143,899        159,690   

Depreciation

     42,313        55,863        119,331        162,277   

Amortization of intangibles

     6,267        6,211        18,115        18,861   

Loss (gain) on disposal of assets

     244        (1,129     715        1,993   

Gain from litigation settlement

     (3,537     —          (3,537     —     

Loss (gain) on prior office leases

     —          (596     —          9,902   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     89,147        115,620        235,941        295,607   

Interest expense

     (11,949     (17,911     (36,063     (55,851

Other income (expense), net

     825        845        1,663        (119
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax provision

     78,023        98,554        201,541        239,637   

Income tax provision

     (28,403     (37,641     (77,967     (93,049
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     49,620        60,913        123,574        146,588   

Less: Net income attributable to noncontrolling interests

     (235     (207     (470     (359
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Waste Connections

   $ 49,385      $ 60,706      $ 123,104      $ 146,229   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share attributable to Waste Connections’ common stockholders:

        

Basic

   $ 0.40      $ 0.49      $ 1.02      $ 1.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.40      $ 0.49      $ 1.02      $ 1.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in the per share calculations:

        

Basic

     123,031,259        123,676,936        120,571,106        123,557,317   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     123,665,589        124,279,666        121,198,901        124,089,422   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividends per common share

   $ 0.09      $ 0.10      $ 0.27      $ 0.30   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

- 4 -


WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

 

     December 31,
2012
    September 30,
2013
 

ASSETS

    

Current assets:

    

Cash and equivalents

   $ 23,212      $ 19,281   

Accounts receivable, net of allowance for doubtful accounts of $6,548 and $6,458 at December 31, 2012 and September 30, 2013, respectively

     235,762        238,842   

Deferred income taxes

     45,798        37,952   

Prepaid expenses and other current assets

     57,714        33,405   
  

 

 

   

 

 

 

Total current assets

     362,486        329,480   

Property and equipment, net

     2,457,606        2,424,716   

Goodwill

     1,636,557        1,637,541   

Intangible assets, net

     541,908        521,204   

Restricted assets

     34,889        35,265   

Other assets, net

     42,580        46,441   
  

 

 

   

 

 

 
   $ 5,076,026      $ 4,994,647   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Accounts payable

   $ 130,260      $ 115,404   

Book overdraft

     12,567        12,192   

Accrued liabilities

     121,829        134,951   

Deferred revenue

     69,930        68,644   

Current portion of contingent consideration

     49,018        30,722   

Current portion of long-term debt and notes payable

     33,968        7,456   
  

 

 

   

 

 

 

Total current liabilities

     417,572        369,369   

Long-term debt and notes payable

     2,204,967        2,025,664   

Long-term portion of contingent consideration

     30,346        25,044   

Other long-term liabilities

     75,129        83,784   

Deferred income taxes

     464,882        483,433   
  

 

 

   

 

 

 

Total liabilities

     3,192,896        2,987,294   

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; 123,019,494 and 123,546,188 shares issued and outstanding at December 31, 2012 and September 30, 2013, respectively

     1,230        1,235   

Additional paid-in capital

     779,904        791,519   

Accumulated other comprehensive loss

     (6,165     (2,947

Retained earnings

     1,103,188        1,212,412   
  

 

 

   

 

 

 

Total Waste Connections’ equity

     1,878,157        2,002,219   

Noncontrolling interest in subsidiaries

     4,973        5,134   
  

 

 

   

 

 

 

Total equity

     1,883,130        2,007,353   
  

 

 

   

 

 

 
   $ 5,076,026      $ 4,994,647   
  

 

 

   

 

 

 

 

- 5 -


WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(Unaudited)

(Dollars in thousands)

 

     Nine months ended September 30,  
     2012     2013  

Cash flows from operating activities:

    

Net income

   $ 123,574      $ 146,588   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Loss on disposal of assets

     715        1,993   

Depreciation

     119,331        162,277   

Amortization of intangibles

     18,115        18,861   

Deferred income taxes, net of acquisitions

     18,451        24,411   

Amortization of debt issuance costs

     1,247        2,836   

Equity-based compensation

     14,036        11,268   

Interest income on restricted assets

     (491     (295

Interest accretion

     2,798        3,677   

Excess tax benefit associated with equity-based compensation

     (3,415     (3,539

Loss on prior office leases

     —          9,902   

Payment of contingent consideration recorded in earnings

     —          (5,059

Net change in operating assets and liabilities, net of acquisitions

     32,378        12,484   
  

 

 

   

 

 

 

Net cash provided by operating activities

     326,739        385,404   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Payments for acquisitions, net of cash acquired

     (223,256     (2,031

Proceeds from adjustment to acquisition consideration

     —          18,000   

Capital expenditures for property and equipment

     (110,995     (140,872

Proceeds from disposal of assets

     2,107        9,075   

Increase in restricted assets, net of interest income

     4,779        (81

Other

     (6,287     (4,868
  

 

 

   

 

 

 

Net cash used in investing activities

     (333,652     (120,777
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from long-term debt

     334,000        212,500   

Principal payments on notes payable and long-term debt

     (545,069     (418,316

Payment of contingent consideration recorded at acquisition date

     (4,099     (23,530

Change in book overdraft

     (3,383     (374

Proceeds from option and warrant exercises

     1,042        2,234   

Excess tax benefit associated with equity-based compensation

     3,415        3,539   

Payments for repurchase of common stock

     (18,597     —     

Payments for cash dividends

     (32,182     (37,005

Tax withholdings related to net share settlements of restricted stock units

     (6,039     (5,421

Distributions to noncontrolling interests

     (94     (198

Debt issuance costs

     (776     (1,987

Proceeds from common stock offering, net

     369,584        —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     97,802        (268,558
  

 

 

   

 

 

 

Net increase (decrease) in cash and equivalents

     90,889        (3,931

Cash and equivalents at beginning of period

     12,643        23,212   
  

 

 

   

 

 

 

Cash and equivalents at end of period

   $ 103,532      $ 19,281   
  

 

 

   

 

 

 

 

- 6 -


ADDITIONAL STATISTICS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013

(Dollars in thousands)

Revenue Growth: The following table reflects changes in our revenue for the three months ended September 30, 2013:

 

     Three months ended
September 30, 2013
 

Solid Waste Internal Growth:

  

Core Price

     2.4

Surcharges

     0.3

Volume

     2.2

Recycling

     (0.0 %) 
  

 

 

 

Total Solid Waste Internal Growth

     4.9

Intermodal and Other

     (0.5 %) 

Acquisitions, net

     13.9
  

 

 

 

Total

     18.3
  

 

 

 

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three and nine month periods ending September 30, 2013:

 

     Three months ended
September 30, 2013
    Nine months ended
September 30, 2013
 

Solid Waste Collection

   $ 312,872        55.0   $ 912,488        55.9

Solid Waste Disposal and Transfer

     158,142        27.8        434,513        26.6   

E&P Waste Treatment, Disposal and Recovery

     68,605        12.0        194,720        12.0   

Solid Waste Recycling

     18,402        3.2        55,806        3.4   

Intermodal and Other

     11,329        2.0        34,702        2.1   
  

 

 

   

 

 

   

 

 

   

 

 

 
     569,350        100.0     1,632,229        100.0

Inter-company elimination

     (65,704       (189,311  
  

 

 

     

 

 

   

Reported Revenue

   $ 503,646        $ 1,442,918     
  

 

 

     

 

 

   

Days Sales Outstanding for the three months ended September 30, 2013: 44 (31 net of deferred revenue)

Internalization for the three months ended September 30, 2013: 54%

Other Cash Flow Items:

 

     Three months ended
September 30, 2013
     Nine months ended
September 30, 2013
 

Cash Interest Paid

   $ 9,129       $ 43,030   

Cash Taxes Paid

   $ 32,670       $ 51,010   

Debt to Book Capitalization as of September 30, 2013: 50%

Share Information for the three months ended September 30, 2013:

 

Basic shares outstanding

     123,676,936   

Dilutive effect of options and warrants

     182,175   

Dilutive effect of restricted stock units

     420,555   
  

 

 

 

Diluted shares outstanding

     124,279,666   
  

 

 

 

 

- 7 -


NON-GAAP RECONCILIATION SCHEDULE

(in thousands)

Reconciliation of Adjusted EBITDA:

Adjusted EBITDA, 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. Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company’s operations. Waste Connections defines adjusted EBITDA as income before income tax provision, plus interest expense, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on disposal of assets, plus other expense, less other income. 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. Other companies may calculate adjusted EBITDA differently.

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2012     2013     2012     2013  

Income before income tax provision

   $ 78,023      $ 98,554      $ 201,541      $ 239,637   

Plus: Interest expense

     11,949        17,911        36,063        55,851   

Plus: Depreciation and amortization

     48,580        62,074        137,446        181,138   

Plus: Closure and post-closure accretion

     645        727        1,870        2,241   

Plus/Less: Loss (gain) on disposal of assets

     244        (1,129     715        1,993   

Plus/less: Other expense (income), net

     (825     (845     (1,663     119   

Adjustments:

        

Plus/Less: Loss (gain) on prior office leases (a)

     —          (596     —          9,902   

Plus: Acquisition-related costs (b)

     1,451        167        3,610        974   

Plus: Corporate relocation expenses (c)

     1,774        215        6,491        636   

Plus: NEO one-time equity grants (d)

     —          —          3,585        —     

Less: Gain from litigation settlement (e)

     (3,537     —          (3,537     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 138,304      $ 177,078      $ 386,121      $ 492,491   
  

 

 

   

 

 

   

 

 

   

 

 

 

As % of revenues

     32.5     35.2     31.8     34.1

 

(a) Reflects the addback of the loss (gain) on prior office leases resulting primarily from the relocation of the Company’s corporate headquarters from California to Texas.
(b) Reflects the addback of acquisition-related transaction costs.
(c) Reflects the addback of costs associated with the relocation of the Company’s corporate headquarters from California to Texas.
(d) Reflects the addback of one-time equity compensation expense incurred at the time the Company’s NEOs’ employment contracts were modified.
(e) Reflects the elimination of a non-recurring gain from an arbitration award.

 

- 8 -


NON-GAAP RECONCILIATION SCHEDULE (continued)

(in thousands)

Reconciliation of Adjusted Free Cash Flow:

Adjusted 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. Management uses adjusted free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company’s operations. Waste Connections defines adjusted 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. The Company further adjusts this calculation to exclude the effects of items management believes impact the ability to assess the operating performance of its business. This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures. Other companies may calculate adjusted free cash flow differently.

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2012     2013     2012     2013  

Net cash provided by operating activities

   $ 121,799      $ 129,881      $ 326,739      $ 385,404   

Less: Change in book overdraft

     (3,519     (284     (3,383     (374

Plus: Proceeds from disposal of assets

     610        5,453        2,107        9,075   

Plus: Excess tax benefit associated with equity-based compensation

     132        872        3,415        3,539   

Less: Capital expenditures for property and equipment

     (43,550     (53,331     (110,995     (140,872

Less: Distributions to noncontrolling interests

     —          —          (94     (198

Adjustments:

        

Payment of contingent consideration recorded in earnings (a)

     —          5,059        —          5,059   

Corporate office relocation (b)

     599        215        8,616        2,047   

Tax effect (c)

     (674     (82     (2,467     (244
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted free cash flow

   $ 75,397      $ 87,783      $ 223,938      $ 263,436   
  

 

 

   

 

 

   

 

 

   

 

 

 

As % of revenues

     17.7     17.4     18.5     18.3

 

(a) Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and a component of cash flow from operating activities as the amounts paid exceeded the fair value of the contingent consideration recorded at the acquisition date.
(b) Reflects the addback of third party expenses and reimbursable advances to employees associated with the relocation of our corporate headquarters from California to Texas.
(c) The tax effect of the corporate office relocation is calculated based on the applied tax rates for the respective periods.

 

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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. Management uses adjusted net income and adjusted net income per diluted share as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company’s operations. Waste Connections 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 excludes 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. Other companies may calculate adjusted net income and adjusted net income per diluted share differently.

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2012     2013     2012     2013  

Reported net income attributable to Waste Connections

   $ 49,385      $ 60,706      $ 123,104      $ 146,229   

Adjustments:

        

Amortization of intangibles (a)

     6,267        6,211        18,115        18,861   

Acquisition-related expenses (b)

     1,451        167        3,610        2,661   

Loss (gain) on disposal of assets (c)

     244        (1,129     715        1,993   

Corporate relocation expenses (d)

     1,774        215        6,491        636   

Loss (gain) on prior office leases (e)

     —          (596     —          9,902   

NEO one-time equity grants (f)

     —          —          3,585        —     

Gain from litigation settlement (g)

     (3,537     —          (3,537     —     

Tax effect (h)

     (2,356     (1,862     (9,920     (13,025
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income attributable to Waste Connections

   $ 53,228      $ 63,712      $ 142,163      $ 167,257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share attributable to Waste Connections common stockholders:

        

Reported net income

   $ 0.40      $ 0.49      $ 1.02      $ 1.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 0.43      $ 0.51      $ 1.17      $ 1.35   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.
(b) Reflects the elimination of acquisition-related expenses, including transaction costs and adjustments to the fair value of contingent consideration.
(c) Reflects the elimination of a loss (gain) on disposal of assets.
(d) Reflects the addback of costs associated with the relocation of the Company’s corporate headquarters from California to Texas.
(e) Reflects the addback of the loss (gain) on prior office leases resulting primarily from the relocation of the Company’s corporate headquarters from California to Texas.
(f) Reflects the addback of one-time equity compensation expense incurred at the time our NEOs’ employment contracts were modified.
(g) Reflects the elimination of a non-recurring gain from an arbitration award.
(h) The aggregate tax effect of the adjustments in footnotes (a) through (g) is calculated based on the applied tax rates for the respective periods.

 

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