Waste Connections, Inc. [WCN] Filings

10-Q 1 wcn-20220930x10q.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, 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

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

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	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	60
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 6.	Exhibits	61
Signatures		62

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,
	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.

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,
	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.

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,
	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.

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		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.

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, 2020

262,824,990

4,030,368

170,555

(651)

Waste Connections, Inc. [WCN] Filings
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10-Q	[2022-08-03]
10-Q	[2022-05-04]
10-K	[2022-02-17]
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]