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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, 2022

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 21, 2022: 257,201,348 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, 

    

2022

    

2021

ASSETS

 

  

 

  

 

Current assets:

 

  

 

  

 

Cash and equivalents

$

200,179

$

147,441

Accounts receivable, net of allowance for credit losses of $20,512 and $18,480 at September 30, 2022 and December 31, 2021, respectively

 

810,932

 

709,614

Prepaid expenses and other current assets

 

219,203

 

175,722

Total current assets

 

1,230,314

 

1,032,777

Restricted cash

108,194

72,174

Restricted investments

 

55,922

 

59,014

Property and equipment, net

 

6,353,367

 

5,721,949

Operating lease right-of-use assets

190,860

160,567

Goodwill

 

6,574,860

 

6,187,643

Intangible assets, net

 

1,489,242

 

1,350,597

Other assets, net

 

127,909

 

115,203

Total assets

$

16,130,668

$

14,699,924

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

507,899

$

392,868

Book overdraft

 

10,734

 

16,721

Deferred revenue

 

306,019

 

273,720

Accrued liabilities

457,904

 

442,596

Current portion of operating lease liabilities

 

34,526

38,017

Current portion of contingent consideration

 

54,867

 

62,804

Current portion of long-term debt and notes payable

 

6,718

 

6,020

Total current liabilities

 

1,378,667

 

1,232,746

Long-term portion of debt and notes payable

 

6,211,971

 

5,040,500

Long-term portion of operating lease liabilities

163,848

129,628

Long-term portion of contingent consideration

 

30,896

 

31,504

Deferred income taxes

 

986,252

 

850,921

Other long-term liabilities

 

415,664

 

421,080

Total liabilities

 

9,187,298

 

7,706,379

Commitments and contingencies (Note 18)

 

  

 

  

Equity:

 

 

  

Common shares: 257,183,663 shares issued and 257,118,204 shares outstanding at September 30, 2022; 260,283,158 shares issued and 260,212,496 shares outstanding at December 31, 2021

 

3,271,958

 

3,693,027

Additional paid-in capital

 

229,445

 

199,482

Accumulated other comprehensive income

 

(83,476)

 

39,584

Treasury shares: 65,459 and 70,662 shares at September 30, 2022 and December 31, 2021, respectively

 

 

Retained earnings

 

3,520,446

 

3,056,845

Total Waste Connections’ equity

 

6,938,373

 

6,988,938

Noncontrolling interest in subsidiaries

 

4,997

 

4,607

Total equity

 

6,943,370

 

6,993,545

$

16,130,668

$

14,699,924

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, 

    

2022

    

2021

    

2022

    

2021

    

Revenues

$

1,879,868

$

1,597,168

$

5,342,558

$

4,527,042

Operating expenses:

 

 

 

 

Cost of operations

 

1,120,629

946,098

3,198,039

2,673,209

Selling, general and administrative

 

186,887

155,520

518,705

454,885

Depreciation

 

193,287

171,965

562,174

498,588

Amortization of intangibles

 

38,859

35,337

113,956

100,237

Impairments and other operating items

 

13,438

3,104

19,467

9,819

Operating income

 

326,768

 

285,144

 

930,217

 

790,304

Interest expense

 

(51,161)

(40,418)

(137,565)

(124,171)

Interest income

 

1,784

495

2,574

2,342

Other income, net

 

8,487

3,140

2,373

5,452

Loss on early extinguishment of debt

(115,288)

(115,288)

Income before income tax provision

 

285,878

 

133,073

 

797,599

 

558,639

Income tax provision

 

(48,753)

(18,419)

(155,899)

(106,578)

Net income

 

237,125

 

114,654

 

641,700

 

452,061

Less: Net income attributable to noncontrolling interests

 

(213)

(273)

(390)

(325)

Net income attributable to Waste Connections

$

236,912

$

114,381

$

641,310

$

451,736

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

 

  

 

  

 

  

 

Basic

$

0.92

$

0.44

$

2.49

$

1.73

Diluted

$

0.92

$

0.44

$

2.49

$

1.72

Shares used in the per share calculations:

 

 

 

 

Basic

 

257,197,010

 

260,550,774

 

257,438,756

261,372,827

Diluted

 

257,891,635

 

261,145,220

 

258,060,751

261,879,754

Cash dividends per common share

$

0.230

$

0.205

$

0.690

$

0.615

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 September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

Net income

$

237,125

$

114,654

$

641,700

$

452,061

Other comprehensive income (loss), before tax:

 

 

 

 

Interest rate swap amounts reclassified into interest expense

 

948

5,143

9,344

15,000

Changes in fair value of interest rate swaps

 

27,679

(401)

74,969

14,081

Foreign currency translation adjustment

 

(145,955)

(64,197)

(185,030)

(3,170)

Other comprehensive income (loss), before tax

 

(117,328)

 

(59,455)

 

(100,717)

 

25,911

Income tax expense related to items of other comprehensive income

 

(7,586)

(1,257)

(22,343)

(7,707)

Other comprehensive income (loss), net of tax

 

(124,914)

 

(60,712)

 

(123,060)

 

18,204

Comprehensive income

 

112,211

 

53,942

 

518,640

 

470,265

Less: Comprehensive income attributable to noncontrolling interests

 

(213)

(273)

(390)

(325)

Comprehensive income attributable to Waste Connections

$

111,998

$

53,669

$

518,250

$

469,940

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

  

SHARES

  

AMOUNT

  

EARNINGS

  

INTERESTS

  

TOTAL

Balances at December 31, 2021

260,212,496

$

3,693,027

$

199,482

$

39,584

70,662

$

$

3,056,845

$

4,607

$

6,993,545

Sale of common shares held in trust

 

2,203

 

305

 

 

 

(2,203)

 

 

 

 

305

Vesting of restricted share units

 

312,706

 

 

 

 

 

 

 

 

Vesting of performance-based restricted share units

 

57,677

 

 

 

 

 

 

 

 

Restricted share units released from deferred compensation plan

 

19,149

 

 

 

 

 

 

 

 

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

 

(143,243)

 

 

(17,236)

 

 

 

 

 

 

(17,236)

Equity-based compensation

 

 

 

14,139

 

 

 

 

 

 

14,139

Exercise of warrants

 

11,560

 

 

 

 

 

 

 

 

Issuance of shares under employee share purchase plan

12,015

1,554

1,554

Repurchase of common shares

(3,388,155)

(424,999)

(424,999)

Cash dividends on common shares

 

 

 

 

 

 

 

(59,391)

 

 

(59,391)

Amounts reclassified into earnings, net of taxes

 

 

 

 

3,491

 

 

 

 

 

3,491

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

 

 

 

 

32,854

 

 

 

 

 

32,854

Foreign currency translation adjustment

 

 

 

 

34,429

 

 

 

 

 

34,429

Net income

 

 

 

 

 

 

180,324

 

44

 

180,368

Balances at March 31, 2022

 

257,096,408

3,269,887

196,385

110,358

 

68,459

3,177,778

4,651

6,759,059

Sale of common shares held in trust

 

3,000

355

 

(3,000)

355

Vesting of restricted share units

 

522

 

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

 

(145)

(30)

 

(30)

Equity-based compensation

 

14,412

 

14,412

Exercise of warrants

 

806

 

Cash dividends on common shares

 

 

(59,421)

(59,421)

Amounts reclassified into earnings, net of taxes

 

2,680

 

2,680

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

 

1,904

 

1,904

Foreign currency translation adjustment

 

(73,504)

 

(73,504)

Net income

 

 

224,074

133

224,207

Balances at June 30, 2022

 

257,100,591

3,270,242

210,767

41,438

 

65,459

3,342,431

4,784

6,869,662

Vesting of restricted share units

 

4,135

 

 

 

 

 

 

 

 

Restricted share units released from deferred compensation plan

 

360

 

 

 

 

 

 

 

 

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

 

(1,449)

 

(200)

 

 

 

 

 

 

(200)

Equity-based compensation

 

 

 

18,878

 

 

 

 

 

 

18,878

Issuance of shares under employee share purchase plan

14,567

1,716

1,716

Cash dividends on common shares

 

 

 

 

 

 

 

(58,897)

 

 

(58,897)

Amounts reclassified into earnings, net of taxes

 

 

 

 

697

 

 

 

 

 

697

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

 

 

 

 

20,344

 

 

 

 

 

20,344

Foreign currency translation adjustment

 

 

 

 

(145,955)

 

 

 

 

 

(145,955)

Net income

 

 

 

 

 

 

 

236,912

 

213

 

237,125

Balances at September 30, 2022

 

257,118,204

$

3,271,958

$

229,445

$

(83,476)

 

65,459

$

$

3,520,446

$

4,997

$

6,943,370

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)

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)