Item 7.01 Regulation FD Disclosure.
During our earnings conference call on October 29, 2019, we highlighted the following outlook for the fourth quarter 2019.
(Dollar amounts are approximations)
For the fourth quarter of the year, we estimate our revenue to range from $1.335 billion to $1.345 billion. We expect price growth for solid waste to remain around 5%, with volume growth down between 1% and 1.5%. Net income attributable to Waste Connections is estimated to be between approximately $143.6 million and $142.4 million. Adjusted EBITDA, as reconciled below, is estimated to be approximately $405 million.
Q4 2019 OUTLOOK
NON-GAAP RECONCILIATION SCHEDULE
(in thousands of U.S. dollars, except where noted)
Reconciliation of Adjusted EBITDA:
| | | | | | | |
| Q4 2019 Outlook |
| Estimates | | Observation |
Net income attributable to Waste Connections | $ | 143,550 | | $ | 142,350 | | |
Plus: Income tax provision | | 39,300 | | | 39,000 | | Approximately 21.5% effective rate* |
Plus: Interest expense, net of interest income | | 34,500 | | | 34,500 | | |
Plus: Depreciation and depletion | | 152,000 | | | 153,500 | | Approximately 11.4% of revenue |
Plus: Amortization | | 32,000 | | | 32,000 | | Approximately 2.4% of revenue, or over $0.09 per diluted share net of taxes |
Plus: Closure and post-closure accretion | | 3,650 | | | 3,650 | | |
Adjusted EBITDA | $ | 405,000 | | $ | 405,000 | | |
*Our effective tax rate in the fourth quarter is estimated to be about 21.5%. We estimate that the Q4 rate would increase to approximately 35% in the event that the proposed regulations as originally drafted were to be enacted during the period, which would result in an impact of approximately $0.10 per share in Q4, with the rate declining back to approximately 22% in 2020.
These estimates assume no change in the current economic and operating environment. They also exclude any impact from additional acquisitions or divestitures that may close during the remainder of the year, and expensing of transaction-related items during the periods.
We also provided preliminary thoughts for full year 2020, which assume no change in the current economic environment. We believe that we remain in a price-led, solid waste organic growth range of between 4% and 6%, which should continue to drive underlying margin expansion in solid waste collection, transfer and disposal in 2020. Price is expected to remain around 5%, and our volumes should reflect underlying trends in macro activity. With respect to acquisitions, we could enter 2020 in a similar to position to the start of 2019, at which time we had approximately $200 million in revenue contribution in place from acquisitions, with the potential for additional contributions. All in, this could result in potential top line growth for 2020 of between 8% and 10% from solid waste organic growth and acquisition contribution that could already be in place by early next year. At current recycled commodity and landfill gas values, 2020 headwinds should be less than half of what we experienced in 2019, with any recovery in such values reducing that impact.
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 our operations. We define adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus income tax provision, plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other
