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SCV NEWS: Chiquita Landfill Owner to Merge; Posts 1Q Gain, Full-Year Loss

wasteconnectionsTexas-based Waste Connections Inc., operator of 44 landfills including Chiquita Canyon in the Santa Clarita Valley, reported first-quarter adjusted earnings Monday of 49 cents per share, beating Wall Street expectations of 47 cents.

For the full year ending Dec. 31, the company posted a loss of $95.8 million, or 78 cents per share, versus a gain of $232.5 million ($1.86 per share) one year earlier.

In January, Waste Connections announced plans to merger with Progressive Waste Solutions Ltd., an Ontario corporation, and Water Merger Sub LLC, a Delaware company. Waste Connections will become a wholly owned subsidiary of Progressive Waste, but the combined company will use the Waste Connections name and will be led by Waste Connections’ current management team.

 

Fourth Quarter 2015 Highlights

— Revenue of $531.9 million

— Reports solid waste price + volume growth of 4.8%

— Adjusted EBITDA* of $175.6 million, or 33.0% of revenue

— GAAP EPS of $0.42 and adjusted EPS* of $0.49

— Completes previously announced acquisition of Rock River Environmental Services

Full-Year 2015 Highlights

— Revenue of $2.12 billion

— Adjusted EBITDA* of $710.6 million, or 33.6% of revenue

— Net cash provided by operating activities of $577.0 million

— Free cash flow* of $343.0 million, or 16.2% of revenue

— Returns $157 million to stockholders through share repurchases and dividends

 

[Feb. 8, 2016] – Waste Connections Inc. today announced its results for the fourth quarter of 2015. Revenue totaled $531.9 million, up from $526.2 million in the year ago period. Operating income was $101.7 million compared to $114.0 million in the fourth quarter of 2014. Adjusted EBITDA* in the fourth quarter was $175.6 million, or 33.0% of revenue, compared to $178.2 million, or 33.9% of revenue, in the prior year period. Adjusted EBITDA, a non-GAAP measure, excludes the impact of items such as acquisition-related costs, as shown in the detailed reconciliation in the attached table.

Net income attributable to Waste Connections in the quarter was $52.1 million, or $0.42 per share on a diluted basis of 123.1 million shares. In the year ago period, Waste Connections reported net income attributable to Waste Connections of $60.8 million, or $0.49 per share on a diluted basis of 124.8 million shares.

Adjusted net income attributable to Waste Connections* in the quarter was $59.8 million, or $0.49 per share, versus $63.3 million, or $0.51 per share, in the prior year period. Adjusted net income and adjusted net income per diluted share, both non-GAAP measures, exclude certain items net of tax, as shown in the detailed reconciliation in the attached table, that affect comparability of results between periods.

“Favorable revenue trends and an approximate 180 basis points year-over-year margin expansion in solid waste drove exceptional results in 2015 and provide strong momentum into 2016. Industry-leading organic growth, margins, and an almost 50% conversion of EBITDA to free cash flow remain hallmarks of our differentiated market model and, together with disciplined capital deployment, are key drivers to delivering superior stockholder value creation,” said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer.

Mr. Mittelstaedt added, “We look forward to completing the previously announced combination with Progressive Waste. As noted in the January 19th transaction announcement, we believe we can instill the corporate culture, safety focus, operational excellence and accountability that have served us so well and which we believe are necessary for long-term success within Progressive Waste’s complementary markets. These improvements, together with expected immediate synergies and other cash flow benefits, should accelerate value creation for both companies’ shareholders. The stock-for-stock transaction structure also enables us to maintain the strength and flexibility of our balance sheet necessary to fund additional growth opportunities and further increase the return of capital to our shareholders.”

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

For the year ended December 31, 2015, revenue was $2.12 billion, up from $2.08 billion in 2014. Operating loss was $61.5 million, compared to operating income of $449.3 million in the prior year. In 2015, Waste Connections recorded net impairment charges of approximately $497.1 million against its E&P segment. Adjusted EBITDA in 2015 was $710.6 million, or 33.6% of revenue, compared to $717.1 million, or 34.5% of revenue, in the prior year.

Net loss attributable to Waste Connections in 2015 was $95.8 million, or $0.78 per share on a diluted basis of 123.5 million shares. In 2014, Waste Connections reported net income attributable to Waste Connections of $232.5 million, or $1.86 per share on a diluted basis of 124.8 million shares. Adjusted net income attributable to Waste Connections in 2015 was $244.9 million, or $1.98 per share, compared to $254.2 million, or $2.04 per share, in the prior year.

 

2016 OUTLOOK

Waste Connections also announced its outlook for 2016, which assumes no change in the current economic environment. Waste Connections’ outlook excludes any impact from the pending combination with Progressive Waste. This outlook also excludes the impact of any additional acquisitions and expensing of acquisition-related transaction costs. The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic SEC filings. Certain components of the outlook for 2016 are subject to quarterly fluctuations.

* Revenue is estimated to be between $2.20 billion and $2.22 billion, of which approximately $150 million is expected to be E&P waste-related.

* Adjusted EBITDA is estimated to be approximately $750 million, or 33.9% of revenue, the components of which as a percentage of revenue are as follows:

* Operating income is estimated to be approximately 21.0% of revenue;

* Depreciation and depletion expense is estimated to be approximately 11.5% of revenue;

* Amortization of intangibles expense is estimated to be approximately 1.25% of revenue; and

* Closure and post-closure accretion expense is estimated to be approximately 0.20% of revenue.

* Net interest expense is estimated to be approximately $66 million.

* Effective tax rate is expected to be approximately 39.2%.

* Noncontrolling interests is estimated to reduce net income by approximately $0.8 million.

* Net cash provided by operating activities is estimated to be approximately 27.0% of revenue.

* Capital expenditures are estimated to be approximately $230 million.

PENDING COMBINATION WITH PROGRESSIVE WASTE SOLUTIONS LTD.

 

On January 18, 2016, Waste Connections entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Progressive Waste Solutions Ltd., a corporation organized under the laws of Ontario (“Progressive Waste”) and Water Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of Progressive Waste (“Merger Sub”). Subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into Waste Connections (the “Merger”), with Waste Connections surviving the Merger as a wholly-owned subsidiary of Progressive Waste.

The transaction is expected to close in the second quarter of 2016. Upon closing, the combined company will use the Waste Connections name and it is anticipated that its shares will trade on the New York Stock Exchange and the Toronto Stock Exchange. Upon completion of the transaction, the combined company will be led by Waste Connections’ current management team. The Board of Directors for the combined company will include the five current members of Waste Connections’ Board and two members from Progressive Waste’s current Board.

Under the terms of the Merger Agreement, Waste Connections’ stockholders will receive 2.076843 Progressive Waste shares for each Waste Connections share they own. Subject to the approval of Progressive Waste’s shareholders, Progressive Waste expects to implement, immediately following the Merger, a share consolidation whereby every 2.076843 shares will be consolidated into one Progressive Waste share on the basis of 0.4815 (1 divided by the 2.076843 ratio above) of a share on a post-consolidation basis for each one share outstanding on a pre-consolidation basis. If the share consolidation is approved by Progressive Waste’s shareholders and effected, Waste Connections’ stockholders will receive one share of the combined company for each existing Waste Connections share. Upon the completion of the transaction and regardless of whether or not the share consolidation occurs, Waste Connections’ stockholders will own approximately 70% of the combined company, and Progressive Waste shareholders will own approximately 30%.

The transaction is subject to customary closing conditions, including the approval of both companies’ shareholders, U.S. antitrust approval and the approval of the Toronto Stock Exchange.

 

About Waste Connections

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, 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 two million residential, commercial, industrial, and exploration and production customers from a network of operations in 32 states. Waste Connections 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.

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