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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                 

Commission file number 1-34370

Graphic

WASTE CONNECTIONS, INC.

(Exact name of registrant as specified in its charter)

Ontario, Canada

(State or other jurisdiction of incorporation or organization)

98-1202763

(I.R.S. Employer Identification No.)

6220 Hwy 7, Suite 600

Woodbridge

Ontario L4H 4G3

Canada

(Address of principal executive offices)

(905) 532-7510

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, no par value

WCN

New York Stock Exchange (“NYSE”)
Toronto Stock Exchange (“TSX”)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes þ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

þ Large Accelerated
Filer

Accelerated
Filer

Non-accelerated
Filer

Smaller Reporting
Company

Emerging Growth
Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common shares:

As of October 15, 2021: 260,526,895 common shares

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

September 30, 

December 31, 

    

2021

    

2020

ASSETS

 

  

 

  

 

Current assets:

 

  

 

  

 

Cash and equivalents

$

339,479

$

617,294

Accounts receivable, net of allowance for credit losses of $20,306 and $19,380 at September 30, 2021 and December 31, 2020, respectively

 

692,051

 

630,264

Prepaid expenses and other current assets

 

128,758

 

160,714

Total current assets

 

1,160,288

 

1,408,272

Restricted cash

118,893

97,095

Restricted investments

 

58,430

 

57,516

Property and equipment, net

 

5,414,789

 

5,284,506

Operating lease right-of-use assets

162,640

170,923

Goodwill

 

6,006,533

 

5,726,650

Intangible assets, net

 

1,264,728

 

1,155,079

Other assets, net

 

88,531

 

92,323

Total assets

$

14,274,832

$

13,992,364

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

341,211

$

290,820

Book overdraft

 

16,527

 

17,079

Deferred revenue

 

254,135

 

233,596

Accrued liabilities

448,541

 

404,923

Current portion of operating lease liabilities

 

37,236

30,671

Current portion of contingent consideration

 

42,359

 

43,297

Current portion of long-term debt and notes payable

 

5,289

 

8,268

Total current liabilities

 

1,145,298

 

1,028,654

Long-term portion of debt and notes payable

 

4,869,213

 

4,708,678

Long-term portion of operating lease liabilities

132,589

147,223

Long-term portion of contingent consideration

 

24,592

 

28,439

Deferred income taxes

 

777,968

 

760,044

Other long-term liabilities

 

442,016

 

455,888

Total liabilities

 

7,391,676

 

7,128,926

Commitments and contingencies (Note 18)

 

  

 

  

Equity:

 

 

  

Common shares: 260,526,784 shares issued and 260,453,918 shares outstanding at September 30, 2021; 262,899,174 shares issued and 262,824,990 shares outstanding at December 31, 2020

 

3,726,134

 

4,030,368

Additional paid-in capital

 

184,995

 

170,555

Accumulated other comprehensive income (loss)

 

17,553

 

(651)

Treasury shares: 72,866 and 74,184 shares at September 30, 2021 and December 31, 2020, respectively

 

 

Retained earnings

 

2,949,984

 

2,659,001

Total Waste Connections’ equity

 

6,878,666

 

6,859,273

Noncontrolling interest in subsidiaries

 

4,490

 

4,165

Total equity

 

6,883,156

 

6,863,438

$

14,274,832

$

13,992,364

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)

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

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

    

Revenues

$

1,597,168

$

1,389,552

$

4,527,042

$

4,047,739

Operating expenses:

 

 

 

 

Cost of operations

 

946,098

828,822

2,673,209

2,429,957

Selling, general and administrative

 

155,520

136,003

454,885

404,213

Depreciation

 

171,965

157,590

498,588

459,641

Amortization of intangibles

 

35,337

32,653

100,237

96,062

Impairments and other operating items

 

3,104

3,805

9,819

442,582

Operating income

 

285,144

 

230,679

 

790,304

 

215,284

Interest expense

 

(40,418)

(40,636)

(124,171)

(119,562)

Interest income

 

495

903

2,342

4,396

Other income (expense), net

 

3,140

702

5,452

(3,046)

Loss on early extinguishment of debt

(115,288)

(115,288)

Income before income tax provision

 

133,073

 

191,648

 

558,639

 

97,072

Income tax provision

 

(18,419)

(33,657)

(106,578)

(23,654)

Net income

 

114,654

 

157,991

 

452,061

 

73,418

Plus (less): Net loss (income) attributable to noncontrolling interests

 

(273)

58

(325)

594

Net income attributable to Waste Connections

$

114,381

$

158,049

$

451,736

$

74,012

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

 

  

 

  

 

  

 

  

Basic

$

0.44

$

0.60

$

1.73

$

0.28

Diluted

$

0.44

$

0.60

$

1.72

$

0.28

Shares used in the per share calculations:

 

 

 

 

Basic

 

260,550,774

 

262,998,317

 

261,372,827

263,253,087

Diluted

 

261,145,220

 

263,507,486

 

261,879,754

263,718,001

Cash dividends per common share

$

0.205

$

0.185

$

0.615

$

0.555

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)

    

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Net income

$

114,654

$

157,991

$

452,061

$

73,418

Other comprehensive income (loss), before tax:

 

 

 

 

Interest rate swap amounts reclassified into interest expense

 

5,143

2,893

15,000

4,595

Changes in fair value of interest rate swaps

 

(401)

1,846

14,081

(68,047)

Foreign currency translation adjustment

 

(64,197)

45,886

(3,170)

(55,738)

Other comprehensive income (loss), before tax

 

(59,455)

 

50,625

 

25,911

 

(119,190)

Income tax (expense) benefit related to items of other comprehensive income (loss)

 

(1,257)

(1,256)

(7,707)

16,815

Other comprehensive income (loss), net of tax

 

(60,712)

 

49,369

 

18,204

 

(102,375)

Comprehensive income (loss)

 

53,942

 

207,360

 

470,265

 

(28,957)

Plus (less): Comprehensive loss (income) attributable to noncontrolling interests

 

(273)

58

(325)

594

Comprehensive income (loss) attributable to Waste Connections

$

53,669

$

207,418

$

469,940

$

(28,363)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands of U.S. dollars, except share amounts)

WASTE CONNECTIONS' EQUITY

ACCUMULATED

ADDITIONAL

OTHER

COMMON SHARES

PAID-IN

COMPREHENSIVE

TREASURY SHARES

RETAINED

NONCONTROLLING

  

SHARES

  

AMOUNT

  

CAPITAL

  

INCOME (LOSS)

  

SHARES

  

AMOUNT

  

EARNINGS

  

INTERESTS

  

TOTAL

Balances at December 31, 2020

262,824,990

$

4,030,368

$

170,555

$

(651)

74,184

$

$

2,659,001

$

4,165

$

6,863,438

Sale of common shares held in trust

 

1,318

 

131

 

 

 

(1,318)

 

 

 

 

131

Vesting of restricted share units

 

340,529

 

 

 

 

 

 

 

 

Vesting of performance-based restricted share units

 

154,251

 

 

 

 

 

 

 

 

Restricted share units released from deferred compensation plan

 

19,150

 

 

 

 

 

 

 

 

Tax withholdings related to net share settlements of equity-based compensation

 

(186,039)

 

 

(18,490)

 

 

 

 

 

 

(18,490)

Equity-based compensation

 

 

 

9,573

 

 

 

 

 

 

9,573

Exercise of warrants

 

3,490

 

 

 

 

 

 

 

 

Repurchase of common shares

(666,184)

(65,999)

(65,999)

Cash dividends on common shares

 

 

 

 

 

 

 

(53,909)

 

 

(53,909)

Amounts reclassified into earnings, net of taxes

 

 

 

 

3,525

 

 

 

 

 

3,525

Changes in fair value of cash flow hedges, net of taxes

 

 

 

 

15,243

 

 

 

 

 

15,243

Foreign currency translation adjustment

 

 

 

 

28,054

 

 

 

 

 

28,054

Net income (loss)

 

 

 

 

 

 

160,309

 

(2)

 

160,307

Balances at March 31, 2021

 

262,491,505

3,964,500

161,638

46,171

 

72,866

2,765,401

4,163

6,941,873

Vesting of restricted share units

 

647

 

Fair value adjustment for common shares in deferred compensation plan exchanged for other investment options

(1,177)

(1,177)

Tax withholdings related to net share settlements of equity-based compensation

 

(176)

(20)

 

(20)

Equity-based compensation

 

11,791

 

11,791

Exercise of warrants

 

21,280

 

Repurchase of common shares

(2,079,806)

(239,641)

(239,641)

Cash dividends on common shares

 

 

(53,421)

(53,421)

Amounts reclassified into earnings, net of taxes

 

3,720

 

3,720

Changes in fair value of cash flow hedges, net of taxes

 

(4,599)

 

(4,599)

Foreign currency translation adjustment

 

32,973

 

32,973

Net income

 

 

177,047

54

177,101

Balances at June 30, 2021

 

260,433,450

3,724,859

172,232

78,265

 

72,866

2,889,027

4,217

6,868,600

Vesting of restricted share units

 

1,525

 

 

 

 

 

 

 

 

Restricted share units released from deferred compensation plan

 

360

 

 

 

 

 

 

 

 

Tax withholdings related to net share settlements of equity-based compensation

 

(534)

 

(66)

 

 

 

 

 

 

(66)

Equity-based compensation

 

 

 

12,829

 

 

 

 

 

 

12,829

Exercise of warrants

 

8,304

 

 

 

 

 

 

 

 

Issuance of shares under employee share purchase plan

10,813

1,275

1,275

Cash dividends on common shares

 

 

 

 

 

 

 

(53,424)

 

 

(53,424)

Amounts reclassified into earnings, net of taxes

 

 

 

 

3,780

 

 

 

 

 

3,780

Changes in fair value of cash flow hedges, net of taxes

 

 

 

 

(295)

 

 

 

 

 

(295)

Foreign currency translation adjustment

 

 

 

 

(64,197)

 

 

 

 

 

(64,197)

Net income

 

 

 

 

 

 

 

114,381

 

273

 

114,654

Balances at September 30, 2021

 

260,453,918

$

3,726,134

$

184,995

$

17,553

 

72,866

$

$

2,949,984

$

4,490

$

6,883,156

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands of U.S. dollars, except share amounts)