Waste Connections, Inc. [WCN] Filings

10-Q 1 wcn-20210930x10q.htm 10-Q

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

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

Table of Contents

WASTE CONNECTIONS, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION (unaudited)
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Net Income	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	66
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	67
Item 6.	Exhibits	67
Signatures		68

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

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

Waste Connections, Inc. [WCN] Filings
10-Q	[2021-10-28]
10-Q	[2021-08-05]
10-Q	[2021-04-29]
10-K	[2021-02-18]
10-Q	[2020-10-29]
10-Q	[2020-08-07]
10-Q	[2020-05-07]
10-K	[2020-02-13]
10-Q	[2019-10-29]
10-Q	[2019-07-30]
10-Q	[2019-04-25]
10-K	[2019-02-14]
10-Q	[2018-10-30]
10-Q	[2018-07-25]
10-Q	[2018-05-02]
10-K	[2018-02-15]
10-Q	[2017-10-26]
10-Q	[2017-07-26]
10-Q	[2017-05-01]
10-K	[2017-02-27]
10-Q	[2016-10-31]
10-Q	[2016-08-05]