Waste Connections Reports Fourth Quarter Results And Provides 2017 Outlook

Fourth Quarter 2016 Highlights

- Revenue of $1.049 billion, exceeding outlook

- Reports 3.7% solid waste core price + volume growth

- Net income attributable to Waste Connections of $85.6 million, or $0.49 per share

- Adjusted net income attributable to Waste Connections* of $120.3 million, or $0.68 per share, up 38.8% per share

- Adjusted EBITDA* of $325.4 million, or 31.0% of revenue, exceeding outlook

Full-Year 2016 Highlights

- Revenue of $3.376 billion

- Reports 4.7% solid waste core price + volume growth

- Net cash provided by operating activities of $795.3 million

- Adjusted free cash flow* of $550.9 million, or 16.3% of revenue

Looking at 2017

- Expects revenue of approximately $4.45 billion, excluding additional divestitures and acquisitions

- Expects more than 15% YoY growth in adjusted free cash flow per share

TORONTO, Feb. 21, 2017 /CNW/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the fourth quarter of 2016. Revenue in the fourth quarter, which included $497.9 million from the Progressive Waste acquisition completed on June 1, 2016, totaled $1.049 billion, up from $531.9 million in the year ago period. Operating income, which included $23.0 million of impairments and other items primarily related to the expected divestiture of certain assets acquired in the Progressive Waste acquisition and $16.0 million of items also related to that transaction, was $139.2 million compared to $101.7 million in the fourth quarter of 2015, which included acquisition-related transaction costs of $2.9 million associated with the acquisition of Rock River Environmental Services.

Net income attributable to Waste Connections in the fourth quarter was $85.6 million, or $0.49 per share on a diluted basis of 175.9 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $52.1 million, or $0.42 per share on a diluted basis of 123.1 million shares.

Adjusted net income attributable to Waste Connections* in the fourth quarter was $120.3 million, or $0.68 per share, versus $59.8 million, or $0.49 per share, in the prior year period. Adjusted EBITDA* in the fourth quarter was $325.4 million, as compared to adjusted EBITDA* of $175.6 million in the prior year period. Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude the impact of acquisition-related items and impairments and other operating items, as reflected in the detailed reconciliation in the attached tables.

"Our acquisition of Progressive Waste made 2016 a transformational year for Waste Connections. More importantly, our culture and operating playbook enabled us to drive significant improvements in safety, quality of revenue and operating performance within these operations, all pacing 12 to 18 months ahead of our initial expectations. This was evident in the fourth quarter as our results once again exceeded expectations. This underlying strength, together with the previously announced acquisition of Groot Industries and continuing improvements in recycled commodity values and E&P waste activity, should position us well for 2017," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer.

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

Mr. Mittelstaedt added, "Free cash flow generation is synonymous with our name. Waste Connections' industry-leading 50+% conversion of EBITDA to free cash flow should drive a more than 15% year-over-year increase in free cash flow per share in 2017, and our strong financial profile provides us the flexibility to fund a continuing, above average amount of expected acquisition activity while increasing the return of capital to shareholders."

For the year ended December 31, 2016, revenue was $3.376 billion, as compared to revenue of $2.117 billion in 2015. Operating income, which included $118.3 million of items primarily related to the Progressive Waste acquisition and $27.7 million of impairments and other items, was $452.3 million, compared to operating loss of $61.5 million in the prior year. In 2015, the Company recorded net impairment charges of approximately $497.1 million against its E&P segment.

Net income attributable to Waste Connections in 2016 was $246.5 million, or $1.60 per share on a diluted basis of 154.1 million shares. In 2015, the Company reported net loss attributable to Waste Connections of $95.8 million, or $0.78 per share on a diluted basis of 123.5 million shares.

Adjusted net income attributable to Waste Connections* in 2016 was $395.2 million, or $2.57 per share, compared to $244.9 million, or $1.98 per share, in the prior year. Adjusted EBITDA* in 2016 was $1.071 billion, as compared to $710.6 million in the prior year.

2017 OUTLOOK

Waste Connections also announced its outlook for 2017, which assumes no change in the current economic environment. The Company's outlook excludes any impact from additional divestitures and acquisitions that may close during the year, and expensing of transaction-related items. 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 filings with the Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2017 are subject to quarterly fluctuations. See reconciliation in the attached tables.

  • Revenue is estimated to be approximately $4.45 billion.
  • Adjusted EBITDA* is estimated to be approximately $1.41 billion, or about 31.7% of revenue.
  • Adjusted free cash flow* is estimated to be approximately $725 million, or about 16.3% of revenue

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

CONFERENCE CALL

Waste Connections will be hosting a conference call related to fourth quarter earnings and 2017 outlook on February 22nd 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.

About Waste Connections Waste Connections is an integrated solid waste services company that provides waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the United States and Canada. Through its R360 Environmental Solutions subsidiary, Waste Connections is also a leading provider of non-hazardous oilfield waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the United States, including the Permian, Bakken and Eagle Ford Basins. Waste Connections serves more than six million residential, commercial, industrial, and exploration and production customers in 40 states and the District of Columbia in the U.S., and five provinces in Canada. The Company also provides intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.

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 (905) 532-7510. Investors can also obtain these materials and other documents filed with the Securities and Exchange Commission (SEC) and the Canadian securities regulators free of charge at the SEC's website, www.sec.gov, and at the System for Electronic Document Analysis and Retrieval (SEDAR) maintained by the Canadian Securities Administrators at www.sedar.com.

Safe Harbor and Forward-Looking Information This press release contains forward-looking statements (which include "forward-looking information" as that term is defined in applicable securities laws in Canada) within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements are neither historical facts nor assurances of future performance and reflect Waste Connections' current beliefs and expectations regarding future events and operating performance. These forward-looking statements are often identified by the words "may," "might," "believes," "thinks," "expects," "intends" or other words of similar meaning. All of the forward-looking statements included in this press release are made pursuant to the safe harbor provisions of the PSLRA and applicable securities laws in Canada. Forward-looking statements involve risks and uncertainties. Forward-looking statements in this press release include, but are not limited to, statements about expected 2017 financial results, capital expenditures, adjusted free cash flow, outlook and related assumptions, potential operating trends and acquisition activity and return of capital to shareholders of the Company. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, without limitation, the following: the possibility that any of the anticipated benefits of the combination of the Company and Waste Connections US, Inc. (f/k/a Waste Connections, Inc.) will not be realized; the ability of the combined company to successfully achieve business objectives, including integrating the two companies or the effects of unexpected costs, liabilities or delays; the potential benefits and synergies of the transaction; and expectations for other economic, business and/or competitive factors. In addition, you should carefully consider the risks and uncertainties and other factors that may affect future results of the combined company that are disclosed in filings that have been made by the Company (including, under its former name, Progressive Waste Solutions Ltd.) and by Waste Connections US, Inc. (including, under its former name, Waste Connections, Inc.) with the Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

– financial tables attached –

CONTACT:

Worthing Jackman / (832) 442-2266

Mary Anne Whitney / (832) 442-2253

worthingj@wasteconnections.com

maryannew@wasteconnections.com

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)

THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2015 and 2016

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

Three months ended

December 31,

Twelve months ended

December 31,

2015

2016

2015

2016

Revenues

$

531,937

$

1,048,622

$

2,117,287

$

3,375,863

Operating expenses:

Cost of operations

297,939

617,948

1,177,409

1,957,712

Selling, general and administrative

62,276

124,267

237,484

474,263

Depreciation

62,039

122,612

240,357

393,600

Amortization of intangibles

7,619

21,593

29,077

70,312

Impairments and other operating items

334

23,045

494,492

27,678

Operating income (loss)

101,730

139,157

(61,532)

452,298

Interest expense

(16,850)

(27,418)

(64,236)

(92,709)

Other income (expense), net

912

476

(518)

655

Foreign currency transaction gain

-

782

-

1,121

Income (loss) before income tax provision

85,792

112,997

(126,286)

361,365

Income tax (provision) benefit

(33,404)

(27,294)

31,592

(114,044)

Net income (loss)

52,388

85,703

(94,694)

247,321

Less: Net income attributable to noncontrolling interests

(327)

(111)

(1,070)

(781)

Net income (loss) attributable to Waste Connections

$

52,061

$

85,592

$

(95,764)

$

246,540

Earnings (loss) per common share attributable to Waste Connections' common shareholders:

Basic

$

0.42

$

0.49

$

(0.78)

$

1.61

Diluted

$

0.42

$

0.49

$

(0.78)

$

1.60

Shares used in the per share calculations:

Basic

122,628,841

175,398,200

123,491,931

153,550,008

Diluted

123,141,503

175,929,810

123,491,931

154,054,331

Cash dividends per common share

$

0.145

$

0.18

$

0.535

$

0.615

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of U.S. dollars, except share and per share amounts)

December 31, 2015

December 31, 2016

ASSETS

Current assets:

Cash and equivalents

$

10,974

$

154,382

Accounts receivable, net of allowance for doubtful accounts of $7,738 and $13,160 at December 31, 2015 and 2016, respectively

255,192

485,138

Deferred income taxes

49,727

89,177

Current assets held for sale

-

6,339

Prepaid expenses and other current assets

46,534

97,533

Total current assets

362,427

832,569

Property and equipment, net

2,738,288

4,738,055

Goodwill

1,422,825

4,390,261

Intangible assets, net

511,294

1,067,158

Restricted assets

46,232

63,406

Long-term assets held for sale

-

33,989

Other assets, net

40,732

67,664

$

5,121,798

$

11,193,102

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

115,206

$

251,253

Book overdraft

12,357

10,955

Accrued liabilities

136,018

269,402

Deferred revenue

90,349

134,081

Current portion of contingent consideration

22,217

21,453

Current liabilities held for sale

-

3,383

Current portion of long-term debt and notes payable

2,127

1,650

Total current liabilities

378,274

692,177

Long-term debt and notes payable

2,147,127

3,616,760

Long-term portion of contingent consideration

27,177

30,373

Other long-term liabilities

124,943

331,074

Deferred income taxes

452,493

867,841

Total liabilities

3,130,014

5,538,225

Commitments and contingencies

Equity:

Common shares: 122,375,955 shares issued and outstanding at December 31, 2015; 175,426,824 shares issued and 175,201,895 shares outstanding at December 31, 2016

1,224

4,174,808

Additional paid-in capital

736,652

102,220

Accumulated other comprehensive loss

(12,171)

(43,001)

Treasury shares: 0 and 224,929 shares at December 31, 2015 and 2016, respectively

-

-

Retained earnings

1,259,495

1,413,488

Total Waste Connections' equity

1,985,200

5,647,515

Noncontrolling interest in subsidiaries

6,584

7,362

Total equity

1,991,784

5,654,877

$

5,121,798

$

11,193,102

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2016

(Unaudited)

(in thousands of U.S. dollars)

Twelve months ended December 31,

2015

2016

Cash flows from operating activities:

Net income (loss)

$

(94,694)

$

247,321

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Loss on disposal of assets and impairments

518,657

26,741

Depreciation

240,357

393,600

Amortization of intangibles

29,077

70,312

Foreign currency transaction gain

-

(1,121)

Deferred income taxes, net of acquisitions

(132,454)

42,298

Amortization of debt issuance costs

3,097

4,847

Share-based compensation

20,318

44,772

Interest income on restricted assets

(428)

(477)

Interest accretion

6,761

10,505

Excess tax benefit associated with equity-based compensation

(2,069)

(5,196)

Payment of contingent consideration recorded in earnings

-

(493)

Adjustments to contingent consideration

(22,180)

(2,623)

Net change in operating assets and liabilities, net of acquisitions

10,557

(35,174)

Net cash provided by operating activities

576,999

795,312

Cash flows from investing activities:

Payments for acquisitions, net of cash acquired

(230,517)

(17,131)

Cash acquired in the Progressive Waste acquisition

-

65,768

Capital expenditures for property and equipment

(238,833)

(344,723)

Proceeds from disposal of assets

2,883

4,604

Change in restricted assets, net of interest income

(2,225)

(428)

Other

(1,842)

(4,485)

Net cash used in investing activities

(470,534)

(296,395)

Cash flows from financing activities:

Proceeds from long-term debt

1,489,500

3,469,289

Principal payments on notes payable and long-term debt

(1,429,195)

(3,714,044)

Payment of contingent consideration recorded at acquisition date

(2,190)

(16,322)

Change in book overdraft

(89)

(1,305)

Proceeds from option and warrant exercises

572

-

Excess tax benefit associated with equity-based compensation

2,069

5,196

Payments for repurchase of common shares

(91,165)

-

Payments for cash dividends

(65,990)

(92,547)

Tax withholdings related to net share settlements of restricted share units

(6,447)

(11,497)

Distributions to noncontrolling interests

(42)

(3)

Debt issuance costs

(6,867)

(13,506)

Proceeds from sale of common shares held in trust

-

19,870

Net cash used in financing activities

(109,844)

(354,869)

Effect of exchange rates changes on cash and equivalents

-

(598)

Net increase (decrease) in cash and equivalents

(3,379)

143,450

Cash and equivalents at beginning of period

14,353

10,974

Less: cash held for sale

-

(42)

Cash and equivalents at end of period

$

10,974

$

154,382

ADDITIONAL STATISTICS (in thousands of U.S. dollars, except where noted)

Solid Waste Internal Growth: The following table reflects a breakdown of the components of our solid waste internal growth for the three and twelve months ended December 31, 2016:

Three months ended

December 31, 2016

Twelve months ended

December 31, 2016

Solid Waste Internal Growth:

Core Price

2.7%

2.8%

Surcharges

(0.1%)

(0.3%)

Volume

1.0%

1.9%

Recycling

0.4%

0.1%

Total Solid Waste Internal Growth

4.0%

4.5%

Revenue Breakdown: The following table reflects a breakdown of our revenue for the three month periods ended December 31, 2015 and 2016:

Three Months Ended December 31, 2015

Revenue

Inter-company Elimination

Reported

Revenue

%

Solid Waste Collection

$

354,601

$

(1,472)

$

353,129

66.4%

Solid Waste Disposal and Transfer

175,565

(67,714)

107,851

20.3%

Solid Waste Recycling

11,678

(271)

11,407

2.1%

E&P Waste Treatment, Recovery and Disposal

45,427

(2,278)

43,149

8.1%

Intermodal and Other

16,401

-

16,401

3.1%

Total

$

603,672

$

(71,735)

$

531,937

100.0%

Three Months Ended December 31, 2016

Revenue

Inter-company Elimination

Reported

Revenue

%

Solid Waste Collection

$

739,986

$

(2,195)

$

737,791

70.3%

Solid Waste Disposal and Transfer

350,482

(135,713)

214,769

20.5%

Solid Waste Recycling

31,580

(2,387)

29,193

2.8%

E&P Waste Treatment, Recovery and Disposal

35,027

(2,859)

32,168

3.1%

Intermodal and Other

34,962

(261)

34,701

3.3%

Total

$

1,192,037

$

(143,415)

$

1,048,622

100.0%

Contribution from Acquisitions: The following table reflects revenues from acquisitions, net of divestitures, for the three and twelve month periods ended December 31, 2015 and 2016:

Three months ended December 31,

Twelve months ended December 31,

2015

2016

2015

2016

Solid waste, net

$

17,619

$

507,332

$

30,969

$

1,266,395

E&P waste, net

3,222

-

26,728

-

Acquisitions, net

$

20,841

$

507,332

$

57,697

$

1,266,395

ADDITIONAL STATISTICS (continued) (in thousands of U.S. dollars, except where noted)

Other Cash Flow Items: The following table reflects cash interest and cash taxes for the three and twelve-month periods ended December 31, 2015 and 2016:

Three months ended December 31,

Twelve months ended

December 31,

2015

2016

2015

2016

Cash Interest Paid

$

21,472

$

31,416

$

55,674

$

87,654

Cash Taxes Paid

21,695

33,084

102,279

69,589

Debt to Book Capitalization as of December 31, 2016: 39%

Internalization for the three months ended December 31, 2016: 52%

Days Sales Outstanding for the three months ended December 31, 2016: 43 (31 net of deferred revenue)

Share Information for the three months ended December 31, 2016:

Basic shares outstanding

175,398,200

Dilutive effect of options and warrants

35,791

Dilutive effect of restricted share units

495,819

Diluted shares outstanding

175,929,810

NON-GAAP RECONCILIATION SCHEDULE (in thousands of U.S. dollars, except where noted)

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 Waste Connections' operations. Waste Connections defines adjusted EBITDA as net income (loss) attributable to Waste Connections, plus net income attributable to noncontrolling interests, plus or minus income tax provision (benefit), plus interest expense, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income, plus foreign currency transaction loss, less foreign currency transaction gain. Waste Connections further adjusts this calculation to exclude the effects of other 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 financial measures. Other companies may calculate adjusted EBITDA differently.

Three months ended December 31,

Twelve months ended December 31,

2015

2016

2015

2016

Net income (loss) attributable to Waste Connections

$

52,061

$

85,592

$

(95,764)

$

246,540

Plus: Net income attributable to noncontrolling interests

327

111

1,070

781

Plus (less): Income tax provision (benefit)

33,404

27,294

(31,592)

114,044

Plus: Interest expense

16,850

27,418

64,236

92,709

Plus: Depreciation and amortization

69,658

144,205

269,434

463,912

Plus: Closure and post-closure accretion

1,058

3,027

3,978

8,936

Plus: Impairments and other operating items

334

23,045

494,492

27,678

Plus/Less: Other expense (income), net

(912)

(476)

518

(655)

Less: Foreign currency transaction gain

-

(782)

-

(1,121)

Adjustments:

Plus: Transaction-related expenses (a)

2,863

1,015

4,235

47,842

Plus: Pre-existing Progressive Waste share-based grants (b)

-

4,466

-

14,289

Plus: Severance-related and other expenses (c)

-

4,036

-

44,336

Plus: Synergy bonus (d)

-

6,498

-

11,798

Adjusted EBITDA

$

175,643

$

325,449

$

710,607

$

1,071,089

As % of revenues

33.0%

31.0%

33.6%

31.7%

(a)

Reflects the addback of acquisition-related transaction costs, including excise tax payments related to the Progressive Waste acquisition.

(b)

Reflects share-based compensation costs, including changes in fair value, associated with share-based awards granted by Progressive Waste outstanding at the time of the Progressive Waste acquisition.

(c)

Reflects the addback of severance-related expenses and other items, including certain professional fees, in connection with the Progressive Waste acquisition.

(d)

Reflects the addback of bonuses accrued pursuant to the Company's Synergy Bonus Program adopted on July 19, 2016 in conjunction with the Progressive Waste acquisition.

NON-GAAP RECONCILIATION SCHEDULE (continued) (in thousands of U.S. dollars, except where noted)

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 Waste Connections' 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. Waste Connections 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 December 31,

Twelve months ended December 31,

2015

2016

2015

2016

Net cash provided by operating activities

$

113,671

$

256,481

$

576,999

$

795,312

Less: Change in book overdraft

(154)

(7,355)

(89)

(1,305)

Plus: Proceeds from disposal of assets

1,207

1,578

2,883

4,604

Plus: Excess tax benefit associated with equity-based compensation

83

45

2,069

5,196

Less: Capital expenditures for property and equipment

(70,454)

(139,789)

(238,833)

(344,723)

Less: Distributions to noncontrolling interests

-

-

(42)

(3)

Adjustments:

Payment of contingent consideration recorded in earnings (a)

-

80

-

493

Transaction-related expenses (b)

-

3,480

-

45,228

Severance-related and other expenses (c)

-

4,005

-

82,526

Tax effect (d)

-

(7,846)

-

(36,384)

Adjusted free cash flow

$

44,353

$

110,679

$

342,987

$

550,944

As % of revenues

8.3%

10.6%

16.2%

16.3%

(a)

Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and as a component of cash flows 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 acquisition-related transaction costs, including excise tax payments, related to the Progressive Waste acquisition.

(c)

Reflects the addback of severance-related expenses and other items, including certain professional fees, in connection with the Progressive Waste acquisition.

(d)

The aggregate tax effect of footnotes (a) through (c) is calculated based on the applied tax rates for the respective periods.

NON-GAAP RECONCILIATION SCHEDULE (continued) (in thousands of U.S. dollars, except per share amounts)

Reconciliation of Net Income attributable to Waste Connections to Adjusted Net Income attributable to Waste Connections and Adjusted Net Income per Diluted Share attributable to Waste Connections:

Adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections, 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 attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations. Waste Connections provides adjusted net income attributable to Waste Connections to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income attributable to Waste Connections 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 attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate these non-GAAP financial measures differently.

Three months ended December 31,

Twelve months ended December 31,

2015

2016

2015

2016

Reported net income (loss) attributable to Waste Connections

$

52,061

$

85,592

$

(95,764)

$

246,540

Adjustments:

Amortization of intangibles (a)

7,619

21,593

29,077

70,312

Impairments and other operating items (b)

334

23,045

494,492

27,678

Transaction-related expenses (c)

2,863

1,015

4,235

47,842

Pre-existing Progressive Waste share-based grants (d)

-

4,466

-

14,289

Severance-related and other expenses (e)

-

4,036

-

44,336

Synergy bonus (f)

-

6,498

-

11,798

Tax effect (g)

(3,062)

(25,951)

(182,945)

(69,581)

Impact of deferred tax adjustments (h)

-

-

(4,198)

1,964

Adjusted net income attributable to Waste Connections

$

59,815

$

120,294

$

244,897

$

395,178

Diluted earnings (loss) per common share attributable to Waste Connections' common shareholders:

Reported net income (loss)

$

0.42

$

0.49

$

(0.78)

$

1.60

Adjusted net income

$

0.49

$

0.68

$

1.98

$

2.57

Shares used in the per share calculations:

Reported diluted shares

123,141,503

175,929,810

123,491,931

154,054,331

Adjusted diluted shares (i)

123,141,503

175,929,810

123,871,636

154,054,331

(a)

Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.

(b)

Reflects the addback of impairments and other operating items.

(c)

Reflects the addback of acquisition-related transaction costs, including excise tax payments related to the Progressive Waste acquisition.

(d)

Reflects share-based compensation costs, including changes in fair value, associated with share-based awards granted by Progressive Waste outstanding at the time of the Progressive Waste acquisition.

(e)

Reflects the addback of severance-related and other items, including certain professional fees, in connection with the Progressive Waste acquisition.

(f)

Reflects the addback of bonuses accrued pursuant to the Company's Synergy Bonus Program adopted on July 19, 2016 in connection with the Progressive Waste acquisition.

(g)

The aggregate tax effect of the adjustments in footnotes (a) through (f) is calculated based on the applied tax rates for the respective periods.

(h)

Reflects (1) the elimination in 2015 of an increase to the income tax benefit primarily associated with a decrease in our deferred tax liabilities resulting from the impairment of assets in our E&P segment that impacted the geographical apportionment of our state income taxes and (2) in 2016 reflects a change in the geographical apportionment of our deferred tax liabilities resulting from the Progressive Waste acquisition.

(i)

Reflects reported diluted shares adjusted for shares that were excluded from the reported diluted shares calculation due to reporting a net loss during the year ended December 31, 2015.

2017 OUTLOOK NON-GAAP RECONCILIATION SCHEDULE (in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

2017 Outlook

Estimate

Observation

Net income attributable to Waste Connections

$

463,000

Plus: Net income attributable to noncontrolling interests

1,000

Plus: Income tax provision

190,000

Approximate 29.0% effective rate

Plus: Interest expense, net

120,000

Plus: Depreciation and Depletion

523,000

Approximately 11.75% of revenue

Plus: Amortization

102,000

Approximately 2.30% of revenue

Plus: Closure and post-closure accretion

11,000

Approximately 0.25% of revenue

Adjusted EBITDA

$

1,410,000

Approximately 31.7% of revenue

Reconciliation of Adjusted Free Cash Flow:

2017 Outlook

Estimate

Observation

Net cash provided by operating activities

$

1,175,000

Approximately 26.4% of revenue

Less: Capital expenditures

(450,000)

Adjusted free cash flow

$

725,000

Approximately 16.3% of revenue

SOURCE Waste Connections, Inc.


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