Waste Connections Earnings 2019-03-31
WCN 10Q Quarterly Report
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
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 March 31, 2019 |
|
| 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
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.)
610 Applewood Crescent, 2nd Floor
Vaughan
Ontario L4K 0E3
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 |
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 ☑ 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 ☑ 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):
| ☑ Large accelerated | ☐ Accelerated | ☐ Non-accelerated | ☐ Smaller reporting | ☐ Emerging growth |
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 ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common shares:
As of April 18, 2019: 263,682,959 common shares
WASTE CONNECTIONS, INC.
FORM 10‑Q
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PART I – FINANCIAL INFORMATION
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of U.S. dollars, except share and per share amounts)
|
|
| March 31, |
| December 31, |
| ||
|
|
| 2019 |
| 2018 |
| ||
| ASSETS |
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
| Cash and equivalents |
| $ | 499,482 |
| $ | 319,305 |
|
| Accounts receivable, net of allowance for doubtful accounts of $15,124 and $16,760 at March 31, 2019 and December 31, 2018, respectively |
|
| 599,369 |
|
| 609,545 |
|
| Prepaid expenses and other current assets |
|
| 144,006 |
|
| 164,053 |
|
| Total current assets |
|
| 1,242,857 |
|
| 1,092,903 |
|
|
|
|
|
|
|
|
|
|
| Restricted cash |
|
| 85,200 |
|
| 84,661 |
|
| Restricted investments |
|
| 47,926 |
|
| 47,486 |
|
| Property and equipment, net |
|
| 5,119,785 |
|
| 5,168,996 |
|
| Operating lease right-of-use assets |
|
| 199,703 |
|
| — |
|
| Goodwill |
|
| 5,065,530 |
|
| 5,031,685 |
|
| Intangible assets, net |
|
| 1,105,553 |
|
| 1,128,628 |
|
| Other assets, net |
|
| 65,374 |
|
| 72,970 |
|
| Total assets |
| $ | 12,931,928 |
| $ | 12,627,329 |
|
| LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
| Accounts payable |
| $ | 339,261 |
| $ | 359,967 |
|
| Book overdraft |
|
| 15,734 |
|
| 18,518 |
|
| Accrued liabilities | 264,706 | 289,544 | |||||
| Current portion of operating lease liabilities |
|
| 29,810 |
|
| — |
|
| Current portion of contingent consideration |
|
| 11,650 |
|
| 11,612 |
|
| Deferred revenue |
|
| 181,950 |
|
| 179,282 |
|
| Current portion of long-term debt and notes payable |
|
| 1,016 |
|
| 1,786 |
|
| Total current liabilities |
|
| 844,127 |
|
| 860,709 |
|
|
|
|
|
|
|
|
|
|
| Long-term debt and notes payable |
|
| 4,157,081 |
|
| 4,153,465 |
|
| Long-term portion of operating lease liabilities |
|
| 176,328 |
|
| — |
|
| Long-term portion of contingent consideration |
|
| 44,686 |
|
| 43,003 |
|
| Deferred income taxes |
|
| 766,641 |
|
| 760,033 |
|
| Other long-term liabilities |
|
| 374,391 |
|
| 349,931 |
|
| Total liabilities |
|
| 6,363,254 |
|
| 6,167,141 |
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies (Note 18) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity: |
|
|
|
|
|
|
|
| Common shares: 263,673,497 shares issued and 263,587,245 shares outstanding at March 31, 2019; 263,271,302 shares issued and 263,141,413 shares outstanding at December 31, 2018 |
|
| 4,134,917 |
|
| 4,131,307 |
|
| Additional paid-in capital |
|
| 128,230 |
|
| 133,577 |
|
| Accumulated other comprehensive income (loss) |
|
| (45,978) |
|
| (74,786) |
|
| Treasury shares: 86,252 and 129,889 shares at March 31, 2019 and December 31, 2018, respectively |
|
| — |
|
| — |
|
| Retained earnings |
|
| 2,345,970 |
|
| 2,264,510 |
|
| Total Waste Connections’ equity |
|
| 6,563,139 |
|
| 6,454,608 |
|
| Noncontrolling interest in subsidiaries |
|
| 5,535 |
|
| 5,580 |
|
| Total equity |
|
| 6,568,674 |
|
| 6,460,188 |
|
|
|
| $ | 12,931,928 |
| $ | 12,627,329 |
|
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 March 31, |
| ||||
|
|
| 2019 |
| 2018 |
| ||
| Revenues |
| $ | 1,244,637 |
| $ | 1,140,131 |
|
| Operating expenses: |
|
|
|
|
|
|
|
| Cost of operations |
|
| 733,690 |
|
| 659,803 |
|
| Selling, general and administrative |
|
| 132,586 |
|
| 131,308 |
|
| Depreciation |
|
| 146,847 |
|
| 133,185 |
|
| Amortization of intangibles |
|
| 30,542 |
|
| 26,098 |
|
| Impairments and other operating items |
|
| 16,112 |
|
| 1,030 |
|
| Operating income |
|
| 184,860 |
|
| 188,707 |
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
| (37,287) |
|
| (32,370) |
|
| Interest income |
|
| 3,311 |
|
| 1,155 |
|
| Other income (expense), net |
|
| 2,558 |
|
| (387) |
|
| Foreign currency transaction gain (loss) |
|
| 103 |
|
| (221) |
|
| Income before income tax provision |
|
| 153,545 |
|
| 156,884 |
|
|
|
|
|
|
|
|
|
|
| Income tax provision |
|
| (27,968) |
|
| (31,852) |
|
| Net income |
|
| 125,577 |
|
| 125,032 |
|
| Plus (less): Net loss (income) attributable to noncontrolling interests |
|
| 45 |
|
| (163) |
|
| Net income attributable to Waste Connections |
| $ | 125,622 |
| $ | 124,869 |
|
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| Earnings per common share attributable to Waste Connections’ common shareholders: |
|
|
|
|
|
|
|
| Basic |
| $ | 0.48 |
| $ | 0.47 |
|
| Diluted |
| $ | 0.48 |
| $ | 0.47 |
|
|
|
|
|
|
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|
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| Shares used in the per share calculations: |
|
|
|
|
|
|
|
| Basic |
|
| 263,603,418 |
|
| 263,827,963 |
|
| Diluted |
|
| 264,336,930 |
|
| 264,588,069 |
|
|
|
|
|
|
|
|
|
|
| Cash dividends per common share |
| $ | 0.16 |
| $ | 0.14 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands of U.S. dollars)
|
|
| Three months ended March 31, |
| ||||
|
|
| 2019 |
| 2018 |
| ||
| Net income |
| $ | 125,577 |
| $ | 125,032 |
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss), before tax: |
|
|
|
|
|
|
|
| Interest rate swap amounts reclassified into interest expense |
|
| (2,472) |
|
| (599) |
|
| Fuel hedge amounts reclassified into cost of operations |
|
| — |
|
| (1,148) |
|
| Changes in fair value of interest rate swaps |
|
| (15,721) |
|
| 11,769 |
|
| Changes in fair value of fuel hedges |
|
| — |
|
| 615 |
|
| Foreign currency translation adjustment |
|
| 42,180 |
|
| (59,331) |
|
| Other comprehensive income (loss), before tax |
|
| 23,987 |
|
| (48,694) |
|
| Income tax (expense) benefit related to items of other comprehensive income (loss) |
|
| 4,821 |
|
| (2,826) |
|
| Other comprehensive income (loss), net of tax |
|
| 28,808 |
|
| (51,520) |
|
| Comprehensive income |
|
| 154,385 |
|
| 73,512 |
|
| Plus (less): Comprehensive loss (income) attributable to noncontrolling interests |
|
| 45 |
|
| (163) |
|
| Comprehensive income attributable to Waste Connections |
| $ | 154,430 |
| $ | 73,349 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
THREE MONTHS ENDED MARCH 31, 2019
(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, 2018 |
| 263,141,413 |
| $ | 4,131,307 |
| $ | 133,577 |
| $ | (74,786) |
| 129,889 |
| $ | — |
| $ | 2,264,510 |
| $ | 5,580 |
| $ | 6,460,188 |
| Sale of common shares held in trust |
| 43,637 |
|
| 3,610 |
|
| — |
|
| — |
| (43,637) |
|
| — |
|
| — |
|
| — |
|
| 3,610 |
| Vesting of restricted share units |
| 400,555 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| Vesting of performance-based restricted share units |
| 180,258 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| Restricted share units released from deferred compensation plan |
| 15,371 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| Tax withholdings related to net share settlements of equity-based compensation |
| (202,679) |
|
| — |
|
| (16,973) |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| (16,973) |
| Equity-based compensation |
| — |
|
| — |
|
| 11,626 |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 11,626 |
| Exercise of warrants |
| 8,690 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| Cash dividends on common shares |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| (42,084) |
|
| — |
|
| (42,084) |
| Amounts reclassified into earnings, net of taxes |
| — |
|
| — |
|
| — |
|
| (1,817) |
| — |
|
| — |
|
| — |
|
| — |
|
| (1,817) |
| Changes in fair value of cash flow hedges, net of taxes |
| — |
|
| — |
|
| — |
|
| (11,555) |
| — |
|
| — |
|
| — |
|
| — |
|
| (11,555) |
| Foreign currency translation adjustment |
| — |
|
| — |
|
| — |
|
| 42,180 |
| — |
|
| — |
|
| — |
|
| — |
|
| 42,180 |
| Cumulative effect adjustment from adoption of new accounting pronouncement |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| (2,078) |
|
| — |
|
| (2,078) |
| Net income |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 125,622 |
|
| (45) |
|
| 125,577 |
| Balances at March 31, 2019 |
| 263,587,245 |
| $ | 4,134,917 |
| $ | 128,230 |
| $ | (45,978) |
| 86,252 |
| $ | — |
| $ | 2,345,970 |
| $ | 5,535 |
| $ | 6,568,674 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
THREE MONTHS ENDED MARCH 31, 2018
(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, 2017 |
| 263,494,670 |
| $ | 4,187,568 |
| $ | 115,743 |
| $ | 108,413 |
| 166,133 |
| $ | — |
| $ | 1,856,946 |
| $ | 5,400 |
| $ | 6,274,070 |
| Sale of common shares held in trust |
| 26,849 |
|
| 1,947 |
|
| — |
|
| — |
| (26,849) |
|
| — |
|
| — |
|
| — |
|
| 1,947 |
| Vesting of restricted share units |
| 452,700 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| Vesting of performance-based restricted share units |
| 154,181 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| Restricted share units released from deferred compensation plan |
| 114 |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| Tax withholdings related to net share settlements of equity-based compensation |
| (206,084) |
|
| — |
|
| (14,121) |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| (14,121) |
| Equity-based compensation |
| — |
|
| — |
|
| 7,991 |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 7,991 |
| Repurchase of common shares |
| (594,474) |
|
| (42,040) |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| (42,040) |
| Cash dividends on common shares |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| (36,814) |
|
| — |
|
| (36,814) |
| Amounts reclassified into earnings, net of taxes |
| — |
|
| — |
|
| — |
|
| (1,301) |
| — |
|
| — |
|
| — |
|
| — |
|
| (1,301) |
| Changes in fair value of cash flow hedges, net of taxes |
| — |
|
| — |
|
| — |
|
| 9,112 |
| — |
|
| — |
|
| — |
|
| — |
|
| 9,112 |
| Foreign currency translation adjustment |
| — |
|
| — |
|
| — |
|
| (59,331) |
| — |
|
| — |
|
| — |
|
| — |
|
| (59,331) |
| Cumulative effect adjustment from adoption of new accounting pronouncement |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 16,296 |
|
| — |
|
| 16,296 |
| Distributions to noncontrolling interests |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (103) |
|
| (103) |
| Net income |
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 124,869 |
|
| 163 |
|
| 125,032 |
| Balances at March 31, 2018 | 263,327,956 | $ | 4,147,475 | $ | 109,613 | $ | 56,893 | 139,284 | $ | — | $ | 1,961,297 | $ | 5,460 | $ | 6,280,738 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
WASTE CONNECTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of U.S. dollars)
|
|
| Three months ended March 31, |
| ||||
|
|
| 2019 |
| 2018 |
| ||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
| Net income |
| $ | 125,577 |
| $ | 125,032 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| Loss on disposal of assets and impairments |
|
| 16,372 |
|
| 2,863 |
|
| Depreciation |
|
| 146,847 |
|
| 133,185 |
|
| Amortization of intangibles |
|
| 30,542 |
|
| 26,098 |
|
| Amortization of leases |
|
| 7,214 |
|
| — |
|
| Deferred income taxes, net of acquisitions |
|
| 10,126 |
|
| 20,957 |
|
| Amortization of debt issuance costs |
|
| 1,148 |
|
| 1,076 |
|
| Share-based compensation |
|
| 15,168 |
|
| 9,180 |
|
| Interest accretion |
|
| 3,972 |
|
| 3,665 |
|
| Payment of contingent consideration recorded in earnings |
|
| — |
|
| (11) |
|
| Adjustments to contingent consideration |
|
| 1,466 |
|
| 702 |
|
| Other |
|
| (145) |
|
| 101 |
|
| Net change in operating assets and liabilities, net of acquisitions |
|
| 5,485 |
|
| (15,601) |
|
| Net cash provided by operating activities |
|
| 363,772 |
|
| 307,247 |
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
| Payments for acquisitions, net of cash acquired |
|
| (14,920) |
|
| (311,964) |
|
| Capital expenditures for property and equipment |
|
| (114,238) |
|
| (91,216) |
|
| Proceeds from disposal of assets |
|
| 639 |
|
| 1,002 |
|
| Other |
|
| 473 |
|
| (104) |
|
| Net cash used in investing activities |
|
| (128,046) |
|
| (402,282) |
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
| Proceeds from long-term debt |
|
| 55,354 |
|
| 35,625 |
|
| Principal payments on notes payable and long-term debt |
|
| (52,051) |
|
| (106,812) |
|
| Payment of contingent consideration recorded at acquisition date |
|
| (275) |
|
| (2,205) |
|
| Change in book overdraft |
|
| (2,784) |
|
| (295) |
|
| Payments for repurchase of common shares |
|
| — |
|
| (42,040) |
|
| Payments for cash dividends |
|
| (42,084) |
|
| (36,814) |
|
| Tax withholdings related to net share settlements of equity-based compensation |
|
| (16,973) |
|
| (14,121) |
|
| Debt issuance costs |
|
| — |
|
| (2,188) |
|
| Proceeds from sale of common shares held in trust |
|
| 3,610 |
|
| 1,947 |
|
| Other |
|
| — |
|
| (103) |
|
| Net cash used in financing activities |
|
| (55,203) |
|
| (167,006) |
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| 193 |
|
| 18 |
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| 180,716 |
|
| (262,023) |
|
| Cash, cash equivalents and restricted cash at beginning of period |
|
| 403,966 |
|
| 556,467 |
|
| Plus: change in cash held for sale |
|
| — |
|
| 101 |
|
| Cash, cash equivalents and restricted cash at end of period |
| $ | 584,682 |
| $ | 294,545 |
|
|
|
|
|
|
|
|
|
|
| Non-cash financing activities: |
|
|
|
|
|
|
|
| Liabilities assumed and notes payable issued to sellers of businesses acquired |
| $ | 1,584 |
| $ | 64,622 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
WASTE CONNECTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)
1.BASIS OF PRESENTATION AND SUMMARY
The accompanying condensed consolidated financial statements relate to Waste Connections, Inc. and its subsidiaries (“WCI” or the “Company”) for the three month periods ended March 31, 2019 and 2018. In the opinion of management, the accompanying balance sheets and related interim statements of net income, comprehensive income, cash flows and equity include all adjustments, consisting only of normal recurring items, necessary for their fair statement in conformity with U.S. generally accepted accounting principles (“GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Examples include accounting for landfills, self-insurance accruals, income taxes, allocation of acquisition purchase price, contingent consideration accruals and asset impairments. An additional area that involves estimation is when the Company estimates the amount of potential exposure it may have with respect to litigation, claims and assessments in accordance with the accounting guidance on contingencies. Actual results for all estimates could differ materially from the estimates and assumptions that the Company uses in the preparation of its condensed consolidated financial statements.
Interim results are not necessarily indicative of results for a full year. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10‑K for the fiscal year ended December 31, 2018.
2.REPORTING CURRENCY
The functional currency of the Company, as the parent corporate entity, and its operating subsidiaries in the United States, is the U.S. dollar. The functional currency of the Company’s Canadian operations is the Canadian dollar. The reporting currency of the Company is the U.S. dollar. The Company’s consolidated Canadian dollar financial position is translated to U.S. dollars by applying the foreign currency exchange rate in effect at the consolidated balance sheet date. The Company’s consolidated Canadian dollar results of operations and cash flows are translated to U.S. dollars by applying the average foreign currency exchange rate in effect during the reporting period. The resulting translation adjustments are included in other comprehensive income or loss. Gains and losses from foreign currency transactions are included in earnings for the period.
3.NEW ACCOUNTING STANDARDS
Accounting Standards Adopted
Lease Accounting. In February 2016, the FASB issued guidance that requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. The new standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The FASB issued new guidance in July 2018, which amended the guidance to allow the issuer to elect from two adoption alternatives: 1) apply the new guidance at the beginning of the earliest comparative period presented; or 2) apply the new guidance at the effective date and recognize a cumulative-effect adjustment, without adjusting the comparative periods presented.
7
WASTE CONNECTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)
The Company adopted the new standard on January 1, 2019 and elected to apply the new guidance at the effective date and recognize a cumulative-effect adjustment, without adjusting the comparative periods presented. The Company applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) whether initial direct costs exist for any existing leases. The Company also applied (1) the practical expedient for land easements where the Company elected to not apply the leases standard to certain existing land easements at transition and (2) the practical expedient to include both the lease and nonlease components as a single component and account for it as a lease. The Company has completed its assessment of the provisions of the lease accounting guidance and implementation of its leasing software solution to manage and account for leases under the new standard.
|
| As reported |
| Adoption of lease guidance |
| Balance | |||
| Operating lease right-of-use assets | $ | - |
| $ | 206,501 |
| $ | 206,501 |
| Total assets | $ | 12,627,329 |
| $ | 206,501 |
| $ | 12,833,830 |
| Current portion of operating lease liabilities | $ | - |
| $ | 29,640 |
| $ | 29,640 |
| Total current liabilities | $ | 860,709 | ||||||