Exhibit 99.1
Waste Connections Reports Fourth Quarter and 2003 Results
and Provides 2004 Outlook
FOLSOM, Calif.--(BUSINESS WIRE)--Feb. 18, 2004--
-- Reports record 2003 earnings per share of $2.18 and free cash flow of
$75.8 million, or 13.4% of revenue
-- Acquires approximately $65 million annualized revenue in 2003
-- Reports internal growth of 2.1% price and 1.4% volume in the
fourth quarter
-- Increases internalization rate to 69% in the fourth quarter
Waste Connections, Inc. (NYSE:WCN) today announced fourth quarter earnings
of $0.57 per share on 33.1 million diluted shares, an increase of 21.3% over
diluted earnings per share of $0.47 in the fourth quarter of 2002. Revenue for
the fourth quarter of 2003 was $150.0 million, a 14.2% increase over revenue of
$131.3 million in the fourth quarter of 2002. Operating income for the fourth
quarter of 2003 was $37.0 million, a 12.7% increase over operating income of
$32.8 million in the fourth quarter of 2002.
For the year ended December 31, 2003, revenue was $563.5 million, a 13%
increase over revenue of $498.7 million in the prior year. Operating income for
the year was $145.0 million, an 11.4% increase over operating income of $130.1
million in 2002. Income before a gain resulting from the cumulative effect of
adopting SFAS No. 143 for the full year 2003 was $65.3 million, a 17.8% increase
over net income of $55.5 million for the prior year. Diluted earnings per share
before the gain on accounting change for the year was $2.17, an increase of
14.2% over diluted earnings per share of $1.90 in 2002.
Ronald J. Mittelstaedt, Chairman and Chief Executive Officer, said, "2003
was an important year for Waste Connections as the benefits of our
differentiated strategy continued to shine through in a difficult economy. Our
financial margins continue to lead the industry and were relatively stable year
over year. In fact, adjusting for structurally lower margins from certain
acquisitions, margins in our base business increased in 2003. Our internal
growth and internalization rates reached new highs for the year in the fourth
quarter providing good momentum into 2004. Free cash flow for the year of $75.8
million, or 13.4% of revenue, exceeded our original expectations and is expected
to remain strong. We believe the strength of our free cash flow is even more
impressive when considering our capital expenditures for the year were $70
million, or almost 150% of depreciation and amortization in 2003 and $8 million
above our original budget as we began to accelerate fleet purchases to take
advantage of certain tax benefits. Finally, we continued to expand our corporate
and regional infrastructure in 2003 to accommodate additional future growth,
improve field execution to original budgets, and comply with increased
regulatory requirements."
Mr. Mittelstaedt continued, "In the fourth quarter we signed or closed
acquisitions with annualized revenues of almost $14 million, bringing the total
annualized revenues acquired in the year to approximately $65 million, again
exceeding our original target while maintaining our disciplined approach to
targeting attractive markets. We believe the most attractive markets are either
integrated or non-integrated exclusive markets, and competitive markets where we
can be integrated and attain high market share. We acquired Scott Waste
Services, the largest private solid waste services company in Kentucky and the
leading provider in the Bowling Green market. In addition, we agreed to acquire
a new 688 acre MSW landfill that, when completed, will allow us to internalize
volumes coming out of the Central Kentucky and Bowling Green market areas. We
also completed tuck-in acquisitions in Oregon and South Dakota. There remain a
number of acquisition candidates across the US, but we continue to believe the
vast majority of the more attractive opportunities are concentrated in the
exclusive markets on the West Coast and that Waste Connections is well
positioned when these acquisition opportunities arise."
2004 OUTLOOK
Waste Connections also announced its outlook for 2004. The Company's outlook
assumes no change in the current economic environment, excludes the impact of
any additional acquisitions that may be completed during the year, and includes
approximately $3.5 million additional projected bonus costs relative to 2003.
The guidance provided below is forward looking, and actual results may differ
materially depending on risk factors detailed at the end of this release and in
our periodic SEC filings.
-- Revenue for the full year is estimated to range between $620 million and
$625 million. This assumes internal growth for the full year of 3.0% to
3.5% excluding the impact of commodities, with around 2.5% from price
and the remainder from volume. First quarter revenue is estimated in the
range of $146.5 million to $147.5 million.
-- Selling, general and administrative expense is estimated at
approximately 9.6% of revenue for the full year, subject to quarterly
fluctuations.
-- Depreciation, depletion and amortization is estimated at approximately
8.8% of revenue for the full year, subject to quarterly fluctuations.
Depreciation, depletion and amortization is estimated at approximately
9% of revenue in the first quarter with an expected 20 to 30 basis point
sequential decline in the second quarter due to seasonal quarterly
revenue fluctuations.
-- Operating income for the full year is estimated to range between 25.0%
and 25.4% of revenue. Operating income for the first quarter is
estimated in the range of 23.5% to 24.0% of revenue reflecting typical
seasonality and the impact of adverse weather in certain locations. An
almost 200 basis point sequential operating income margin improvement is
expected in the second quarter primarily due to seasonality and lower
depreciation, depletion and amortization as a percent of revenue.
-- Minority interests expense is estimated to remain at approximately 1.9%
for the full year.
-- Effective tax rate is expected to be 37% for the full year.
-- Net cash provided by operating activities for the full year is estimated
to be between 26% and 27% of revenue, subject to quarterly fluctuations.
-- Capital expenditures are estimated to be $70 million for the full year,
or approximately 11% of revenue.
Waste Connections will be hosting a conference call related to fourth
quarter earnings and the 2004 outlook on February 19th at 8:30 a.m. Eastern
Time. The call will be broadcast live over the Internet at www.streetevents.com
and through a link on our web site at www.wasteconnections.com. A playback of
the call will be available at both of these sites.
Waste Connections, Inc. is an integrated solid waste services company that
provides solid waste collection, transfer, disposal and recycling services in
mostly secondary markets in the Western, Midwestern, Southwestern and
Southeastern U.S. The Company serves more than one million residential,
commercial and industrial customers. Waste Connections, Inc. was founded in
September 1997 and is headquartered in Folsom, California. 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 web site or through contacting us directly at 916-608-8200.
Certain statements contained in this press release are forward-looking in
nature. 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. Waste Connections' business and operations are subject
to a variety of risks and uncertainties and, consequently, actual results may
materially differ 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) competition or unfavorable industry
conditions could lead to a decrease in demand for the Company's services and to
a decline in prices realized by the Company for its services, (2) the Company
depends in part on acquisitions for growth, it may be required to pay increased
prices for acquisitions, and it may experience difficulty in integrating and
deriving synergies from acquisitions, or finding acquisition targets suitable to
its growth strategy. (3) the Company may not always have access to the
additional capital that it may require for its growth strategy or its cost of
capital may increase, (4) governmental regulations may require increased capital
expenditures or otherwise affect the Company's business, (5) companies that
Waste Connections acquires could have undiscovered liabilities, (6) large,
long-term collection contracts on which the Company depends may not be replaced
when they expire or are terminated, and (7) the Company is highly dependent on
the services of senior management, who would be difficult or impossible to
replace. These risks and uncertainties, as well as others, are discussed in
greater detail in the Company's filings with the Securities and Exchange
Commission, including its most recent Annual Report on Form 10-K and its
subsequent Quarterly Reports on Form 10-Q. There may be additional risks that
the Company does not presently know or that it currently believes are immaterial
which could have an adverse impact on its business. The Company makes no
commitment to revise or update any forward-looking statements in order to
reflect events or circumstances after the date any such statement is made.
WASTE CONNECTIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2002 AND 2003
(Unaudited)
(in thousands, except share and per share amounts)
Three months ended Twelve months ended
December 31, December 31,
----------------------- -----------------------
2002 2003 2002 2003
----------- ----------- ----------- -----------
Revenues $131,341 $149,994 $498,661 $563,509
Operating expenses:
Cost of operations 75,230 85,186 282,187 316,841
Selling, general
and
administrative 12,898 14,605 47,366 54,367
Depreciation and
amortization 10,381 13,192 38,977 47,347
----------- ----------- ----------- -----------
Operating income 32,832 37,011 130,131 144,954
Interest expense (8,374) (7,828) (31,372) (31,666)
Minority interests (2,546) (2,743) (9,367) (10,549)
Other income (expense),
net (70) (36) (813) (192)
----------- ----------- ----------- -----------
Income before income
tax provision and
cumulative effect of
change in accounting
principle 21,842 26,404 88,579 102,547
Income tax provision (8,082) (9,114) (33,113) (37,233)
----------- ----------- ----------- -----------
Income before
cumulative effect of
change in accounting
principle 13,760 17,290 55,466 65,314
Cumulative effect of
change in accounting
principle, net of tax
expense of $166 - - - 282
----------- ----------- ----------- -----------
Net income $13,760 $17,290 $55,466 $65,596
=========== =========== =========== ===========
Basic earnings per common share:
Income before
cumulative effect
of change in
accounting
principle $0.49 $0.61 $2.00 $2.31
Cumulative effect of
change in
accounting
principle - - - .01
----------- ----------- ----------- -----------
Net income per
common share $0.49 $0.61 $2.00 $2.32
=========== =========== =========== ===========
Diluted earnings per common share(a):
Income before
cumulative effect
of change in
accounting
principle $ 0.47 $ 0.57 $ 1.90 $ 2.17
Cumulative effect of
change in
accounting
principle - - - .01
----------- ----------- ----------- -----------
Net income per
common share $0.47 $0.57 $1.90 $2.18
=========== =========== =========== ===========
Shares used in the per share calculations:
Basic 27,977,289 28,538,113 27,750,642 28,327,296
=========== =========== =========== ===========
Diluted 32,601,816 33,073,258 32,325,624 32,871,652
=========== =========== =========== ===========
Supplemental
information:
Operating income
before
depreciation and
amortization(b) $43,213 $50,203 $169,108 $192,301
(a) Diluted earnings per share assumes conversion of the 5.5% Convertible
Subordinated Notes due 2006. The interest expense related to these notes,
net of tax effects, for the three months ended December 31, 2002 and 2003
was $1,473 and $1,476, respectively, and for the twelve months ended
December 31, 2002 and 2003 was $5,852 and $5,902, respectively.
(b) A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
December December
31, 2002 31, 2003
----------- -----------
ASSETS
Current assets:
Cash and equivalents $4,067 $5,276
Accounts receivable, less allowance for
doubtful accounts of $2,509 and $2,570 at
December 31, 2002 and 2003, respectively 63,488 72,474
Prepaid expenses and other current assets 8,652 11,270
----------- -----------
Total current assets 76,207 89,020
Property and equipment, net 578,040 613,225
Goodwill, net 548,975 590,054
Intangible assets, net 33,498 64,784
Other assets, net 25,162 38,869
----------- -----------
$1,261,882 $1,395,952
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $30,688 $38,682
Accrued liabilities 45,905 31,920
Deferred revenue 19,016 23,738
Current portion of long-term debt and notes
payable 3,646 9,740
----------- -----------
Total current liabilities 99,255 104,080
Long-term debt and notes payable 578,481 601,891
Other long-term liabilities 14,813 8,400
Deferred income taxes 94,543 120,162
----------- -----------
Total liabilities 787,092 834,533
Commitments and contingencies
Minority interests 23,078 23,925
Stockholders' equity:
Preferred stock: $0.01 par value; 7,500,000
shares authorized;
none issued and outstanding - -
Common stock: $0.01 par value; 50,000,000
shares authorized; 28,046,535 and 28,666,788
shares issued and outstanding at December 31,
2002 and 2003, respectively 280 287
Additional paid-in capital 332,705 348,146
Deferred stock compensation (775) (436)
Retained earnings 123,498 189,094
Unrealized (loss) gain on market value of
interest rate swaps (3,996) 403
----------- -----------
Total stockholders' equity 451,712 537,494
----------- -----------
$1,261,882 $1,395,952
----------- -----------
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 2002 AND 2003
(Unaudited)
(Dollars in thousands)
Twelve months ended
December 31,
-------------------
2002 2003
--------- ---------
Cash flows from operating activities:
Net income $55,466 $65,596
Adjustments to reconcile net income to
net cash provided by operating activities:
Loss (gain) on disposal of assets (1) 333
Depreciation 37,626 45,670
Amortization of intangibles 1,351 1,677
Deferred income taxes 10,132 27,931
Minority interests 9,367 10,549
Cumulative effect of change in accounting
principle - (448)
Amortization of debt issuance costs 2,195 2,403
Stock-based compensation 847 266
Interest income on restricted cash (485) (302)
Net change in operating assets and liabilities,
net of acquisitions 11,418 462
--------- ---------
Net cash provided by operating activities 127,916 154,137
--------- ---------
Cash flows from investing activities:
Payments for acquisitions, net of cash
acquired (166,626) (84,855)
Capital expenditures for property and
equipment (56,776) (70,213)
Proceeds from disposal of assets 2,234 1,534
Net change in other assets (1,723) (7,417)
--------- ---------
Net cash used in investing activities (222,891) (160,951)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 381,000 108,941
Principal payments on notes payable and long-
term debt (290,962) (102,469)
Distributions to minority interest holders (5,880) (9,702)
Proceeds from option and warrant exercises 14,078 15,348
Debt issuance costs (6,473) (4,095)
--------- ---------
Net cash provided by financing activities 91,763 8,023
--------- ---------
Net increase (decrease) in cash and equivalents (3,212) 1,209
Cash and equivalents at beginning of period 7,279 4,067
--------- ---------
Cash and equivalents at end of period $4,067 $5,276
--------- ---------
ADDITIONAL STATISTICS
THREE MONTHS ENDED DECEMBER 31, 2003
(Dollars in thousands)
Internal Growth
The following table reflects revenue growth for operations owned for at least 12
months:
Price 2.1%
Volume 1.4%
Recycling 0.1%
------
Total 3.6%
Uneliminated Revenue Breakdown:
Collection $111,814 64.9%
Disposal and Transfer 53,235 30.9%
Recycling and Other 7,296 4.2%
----------- -----------
Total $172,345 100.0%
Inter-company
elimination $22,351
Days Sales Outstanding: 43.5
Internalization: 69.4%
Other Cash Flow Items:
Cash Interest Paid: $8,971
Cash Taxes Paid: $ 681
Debt to Capitalization: 53.2%
Total Debt divided by Total Debt plus Total Stockholders' Equity:
($601,891 + $9,740)/($601,891 + $9,740 + $537,494) = 53.2%
NON-GAAP RECONCILIATION SCHEDULE
(Dollars in thousands)
Operating income before depreciation and amortization and free cash flow, each a
non-GAAP financial measure, are provided supplementally because they are widely
used by investors as valuation and financial performance measures in the solid
waste industry. These measures should be used in conjunction with GAAP financial
measures. Management uses operating income before depreciation and amortization
and free cash flow as two of the principal measures to evaluate and monitor the
ongoing financial performance of our operations. Other companies may calculate
operating income before depreciation and amortization and free cash flow
differently.
Operating income before depreciation and amortization reconciliation:
Three Months Ended Twelve Months Ended
December 31, 2003 December 31, 2003
------------------ -------------------
Operating income $37,011 $144,954
Depreciation and amortization 13,192 47,347
------------------ -------------------
Operating income before
depreciation and amortization $50,203 $192,301
------------------ -------------------
Operating income before
depreciation and amortization
as a % of revenues 33.5% 34.1%
Free cash flow reconciliation:
Three Months Ended Twelve Months Ended
December 31, 2003 December 31, 2003
------------------ -------------------
Net cash provided by operating
activities $39,495 $154,137
Plus: Proceeds from disposal
of assets 627 1,534
Less: Capital expenditures (25,241) (70,213)
Less: Distributions to
minority interest holders (1,764) (9,702)
------------------ -------------------
Free cash flow $13,117 $75,756
------------------ -------------------
Free cash flow as a % of
revenues 8.7% 13.4%
CONTACT: Waste Connections, Inc.
Worthing Jackman, 916-608-8266
worthingj@wasteconnections.com