Waste Connections, Inc. [WCN] Filings

10-Q 1 wcn-20230930x10q.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, 2023
	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 13, 2023: 257,643,341 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	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	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	58
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 6.	Exhibits	59
Signatures		60

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,
	2023		2022
ASSETS
Current assets:
Cash and equivalents	$	96,187	$	78,637
Accounts receivable, net of allowance for credit losses of $23,970 and $22,939 at September 30, 2023 and December 31, 2022, respectively		868,093		833,862
Prepaid expenses and other current assets		187,442		205,146
Total current assets		1,151,722		1,117,645

Restricted cash		102,844		102,727
Restricted investments		75,990		68,099
Property and equipment, net		7,096,769		6,950,915
Operating lease right-of-use assets		263,491		192,506
Goodwill		7,313,084		6,902,297
Intangible assets, net		1,618,692		1,673,917
Other assets, net		108,648		126,497
Total assets	$	17,731,240	$	17,134,603
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	604,542	$	638,728
Book overdraft		15,782		15,645
Deferred revenue		342,726		325,002
Accrued liabilities		446,436		431,247
Current portion of operating lease liabilities		32,677		35,170
Current portion of contingent consideration		100,813		60,092
Current portion of long-term debt and notes payable		32,760		6,759
Total current liabilities		1,575,736		1,512,643

Long-term portion of debt and notes payable		6,803,439		6,890,149
Long-term portion of operating lease liabilities		239,768		165,462
Long-term portion of contingent consideration		21,195		21,323
Deferred income taxes		1,048,283		1,013,742
Other long-term liabilities		451,524		417,640
Total liabilities		10,139,945		10,020,959

Commitments and contingencies (Note 18)

Equity:
Common shares: 257,640,960 shares issued and 257,581,304 shares outstanding at September 30, 2023; 257,211,175 shares issued and 257,145,716 shares outstanding at December 31, 2022		3,276,631		3,271,958
Additional paid-in capital		270,104		244,076
Accumulated other comprehensive loss		(49,262)		(56,830)
Treasury shares: 59,656 and 65,459 shares at September 30, 2023 and December 31, 2022, respectively		—		—
Retained earnings		4,088,726		3,649,494
Total Waste Connections’ equity		7,586,199		7,108,698
Noncontrolling interest in subsidiaries		5,096		4,946
Total equity		7,591,295		7,113,644
Total liabilities and equity	$	17,731,240	$	17,134,603

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,
	2023		2022		2023		2022
Revenues	$	2,064,744	$	1,879,868	$	5,986,342	$	5,342,558
Operating expenses:
Cost of operations		1,204,603		1,120,629		3,548,893		3,198,039
Selling, general and administrative		196,316		186,887		606,367		518,705
Depreciation		214,966		193,287		632,347		562,174
Amortization of intangibles		39,405		38,859		117,740		113,956
Impairments and other operating items		56,477		13,438		69,201		19,467
Operating income		352,977		326,768		1,011,794		930,217

Interest expense		(69,016)		(51,161)		(204,914)		(137,565)
Interest income		2,833		1,784		6,886		2,574
Other income, net		5,372		8,487		8,346		2,373
Income before income tax provision		292,166		285,878		822,112		797,599

Income tax provision		(62,975)		(48,753)		(185,915)		(155,899)
Net income		229,191		237,125		636,197		641,700
Less: Net income attributable to noncontrolling interests		(165)		(213)		(150)		(390)
Net income attributable to Waste Connections	$	229,026	$	236,912	$	636,047	$	641,310

Earnings per common share attributable to Waste Connections’ common shareholders:
Basic	$	0.89	$	0.92	$	2.47	$	2.49
Diluted	$	0.89	$	0.92	$	2.46	$	2.49

Shares used in the per share calculations:
Basic		257,633,703		257,197,010		257,535,408		257,438,756
Diluted		258,229,404		257,891,635		258,110,484		258,060,751

Cash dividends per common share	$	0.255	$	0.230	$	0.765	$	0.690

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

(Unaudited)

(In thousands of U.S. dollars)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	229,191	$	237,125	$	636,197	$	641,700

Other comprehensive income (loss), before tax:
Interest rate swap amounts reclassified into interest expense		(5,286)		948		(14,120)		9,344
Changes in fair value of interest rate swaps		7,788		27,679		20,979		74,969
Foreign currency translation adjustment		(50,020)		(145,955)		2,527		(185,030)
Other comprehensive income (loss), before tax		(47,518)		(117,328)		9,386		(100,717)
Income tax expense related to items of other comprehensive income (loss)		(663)		(7,586)		(1,818)		(22,343)
Other comprehensive income (loss), net of tax		(48,181)		(124,914)		7,568		(123,060)
Comprehensive income		181,010		112,211		643,765		518,640
Less: Comprehensive income attributable to noncontrolling interests		(165)		(213)		(150)		(390)
Comprehensive income attributable to Waste Connections	$	180,845	$	111,998	$	643,615	$	518,250

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, 2022	257,145,716	$	3,271,958	$	244,076	$	(56,830)	65,459	$	—	$	3,649,494	$	4,946	$	7,113,644
Sale of common shares held in trust	5,803		765		—		—	(5,803)		—		—		—		765
Vesting of restricted share units	325,490		—		—		—	—		—		—		—		—
Vesting of performance-based restricted share units	140,498		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	19,151		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(176,837)		—		(22,966)		—	—		—		—		—		(22,966)
Equity-based compensation	—		—		17,374		—	—		—		—		—		17,374
Exercise of warrants	13,019		—		—		—	—		—		—		—		—
Issuance of shares under employee share purchase plan	14,594		1,841		—		—	—		—		—		—		1,841
Cash dividends on common shares	—		—		—		—	—		—		(65,788)		—		(65,788)
Amounts reclassified into earnings, net of taxes	—		—		—		(2,999)	—		—		—		—		(2,999)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(2,425)	—		—		—		—		(2,425)
Foreign currency translation adjustment	—		—		—		1,682	—		—		—		—		1,682
Net income	—		—		—		—	—		—		197,813		23		197,836
Balances at March 31, 2023	257,487,434		3,274,564		238,484		(60,572)	59,656		—		3,781,519		4,969		7,238,964
Vesting of restricted share units	43,431		—		—		—	—		—		—		—		—
Vesting of performance-based restricted share units	55,167		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(62,304)		—		(5,709)		—	—		—		—		—		(5,709)
Equity-based compensation	—		—		22,892		—	—		—		—		—		22,892
Exercise of warrants	31,287		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(65,351)		—		(65,351)
Amounts reclassified into earnings, net of taxes	—		—		—		(3,494)	—		—		—		—		(3,494)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		12,120	—		—		—		—		12,120
Foreign currency translation adjustment	—		—		—		50,865	—		—		—		—		50,865
Net income (loss)	—		—		—		—	—		—		209,208		(38)		209,170
Balances at June 30, 2023	257,555,015		3,274,564		255,667		(1,081)	59,656		—		3,925,376		4,931		7,459,457
Vesting of restricted share units	1,845		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	142		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(22,917)		—		(740)		—	—		—		—		—		(740)
Equity-based compensation	—		—		15,177		—	—		—		—		—		15,177
Exercise of warrants	32,005		—		—		—	—		—		—		—		—
Issuance of shares under employee share purchase plan	15,214		2,067		—		—	—		—		—		—		2,067
Cash dividends on common shares	—		—		—		—	—		—		(65,676)		—		(65,676)
Amounts reclassified into earnings, net of taxes	—		—		—		(3,885)	—		—		—		—		(3,885)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		5,724	—		—		—		—		5,724
Foreign currency translation adjustment	—		—		—		(50,020)	—		—		—		—		(50,020)
Net income	—		—		—		—	—		—		229,026		165		229,191
Balances at September 30, 2023	257,581,304	$	3,276,631	$	270,104	$	(49,262)	59,656	$	—	$	4,088,726	$	5,096	$	7,591,295

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

AMOUNT

CAPITAL

INCOME (LOSS)

AMOUNT

EARNINGS

INTERESTS

TOTAL

Balances at December 31, 2021

260,212,496

3,693,027

199,482

39,584

70,662

—

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10-K	[2018-02-15]
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10-K	[2017-02-27]
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