Waste Connections Reports First Quarter 2005 Results

Waste Connections Reports First Quarter 2005 Results

    Business Editors/Environment Writers

    FOLSOM, Calif.--(BUSINESS WIRE)--April 20, 2005--Waste Connections, Inc. (NYSE:WCN)

--	Reports Earnings Per Share of $0.40 and Free Cash Flow of $30.9 Million, or 18.7% of Revenue
--	Revenue and Net Income Increased 13.4% and 19.2%, Respectively
--	Reports 3% Internal Price Growth
--	Awarded First Long-Term Rail-Haul and Disposal Contract
--	Repurchases Approximately $45 Million of Common Stock

    Waste Connections, Inc. (NYSE:WCN) today announced first quarter earnings of $0.40 per share on a diluted basis of 48.9 million shares, an increase of 14.3% over diluted earnings per share from continuing operations of $0.35 in the year ago period. Revenue for the first quarter of 2005 was $165.5 million, a 13.4% increase over revenue of $146 million in the first quarter of 2004. Operating income for the first quarter of 2005 was $38.3 million, an 8.8% increase over operating income of $35.3 million in the first quarter of 2004. Net income in the quarter was $19.4 million, a 19.2% increase over net income from continuing operations in the year ago period.
    Ronald J. Mittelstaedt, Chairman and Chief Executive Officer, said, "We are very pleased with our first quarter performance as it sets us up well for the remainder of 2005. Pricing growth was strong in the quarter and should remain around this level for the full year. Volume growth, which was impacted in the quarter by our termination of certain unprofitable contracts, should continue to increase during the year, especially if anticipated increases in special waste activity materialize. Our record free cash flow and strong operating results enabled us to fund acquisitions and almost $45 million in stock repurchases, ahead of where we thought we would be at this time, yet maintaining our leverage ratio. In the quarter, we acquired an MSW landfill in San Benito County, California, which has allowed us to internalize a portion of our disposal volumes in the San Jose market. We also signed an agreement to acquire a collection operation in South Dakota that longer-term should be internalized into one of our landfills in Nebraska. Combined with a smaller tuck-in completed in California, these acquisitions represent almost $10 million of acquired annualized revenue. Finally, we were awarded our first long-term rail-haul and disposal contract in the Pacific Northwest since entering the intermodal services business last November. Operations under this contract should commence in the fourth quarter of 2006, with total revenue estimated at more than $100 million over the contract's 20-year term."
    Waste Connections will be hosting a conference call related to first quarter earnings and second quarter outlook on April 21st at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com and through a link on our web site at www.wasteconnections.com. A playback of the call will be available at both of these sites.
    Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly secondary markets in the Western and Southern U.S. The Company serves more than one million residential, commercial and industrial customers from a network of operations in 22 states. The Company also provides intermodal services for the movement of containers in the Pacific Northwest. Waste Connections, Inc. was founded in September 1997 and is headquartered in Folsom, California.
    For more information, visit the Waste Connections web site at www.wasteconnections.com. Copies of financial literature, including this release, are available on the Waste Connections web site or through contacting us directly at 916-608-8200.
    For non-GAAP measures, see accompanying Non-GAAP Reconciliation Schedule.
    In the fourth quarter of 2004, Waste Connections classified as discontinued operations the results of its Georgia operations that were swapped with Waste Industries. Results for the first quarter of 2004 have been restated to present the results for these operations as discontinued operations, as well as the results of certain operations in Eastern Washington sold in August 2004.

    Certain statements contained in this press release are forward-looking in nature. These statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. Waste Connections' business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) Waste Connections may be unable to compete effectively with larger and better capitalized companies and governmental service providers, which may result in reduced volume and revenues and lower profits; (2) increases in Waste Connections' insurance costs and the amount that it self-insures for various risks could reduce its operating margins and reported earnings; (3) further increases in the price of fuel may adversely affect Waste Connections' business and earnings; (4) increases in labor and disposal and related transportation costs could reduce Waste Connections' operating margins; (5) Waste Connections may lose contracts through competitive bidding, early termination or governmental action, which would cause its volumes and revenues to decline; (6) Waste Connections' intermodal business could be adversely affected by steamship lines diverting business to ports other than those it services, or by heightened security measures or actual or threatened terrorist attacks, which could cause its intermodal revenues to decline; (7) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (8) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (9) because Waste Connections depends on railroads for its intermodal operations, its operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (10) Waste Connections' decentralized decision-making structure could allow local managers to make decisions that adversely affect its pricing growth and operating results; (11) the geographic concentration of Waste Connections' business makes its pricing growth and operating results vulnerable to economic and seasonal factors affecting the regions in which it operates; (12) Waste Connections volume growth may be limited by the inability to renew landfill operating permits, obtain new landfills and expand existing ones; (13) extensive and evolving environmental laws and regulations may restrict Waste Connections' operations and growth and increase its costs; and (14) Waste Connections may be subject in the normal course of business to judicial and administrative proceedings that could interrupt its operations, require expensive remediation and create negative publicity. These risks and uncertainties, as well as others, are discussed in greater detail in Waste Connections' filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. There may be additional risks of which Waste Connections is not presently aware or that it currently believes are immaterial which could have an adverse impact on its business. Waste Connections makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made.

WASTE CONNECTIONS, INC. CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 2004 AND 2005 (Unaudited) (in thousands, except share and per share amounts)

Three months ended March 31, ------------------------ 2004 2005 ----------- -----------

Revenues $ 145,964 $ 165,517 Operating expenses: Cost of operations 82,593 95,285 Selling, general and administrative 15,130 17,242 Depreciation and amortization 13,035 14,769 Gain on sale of assets (50) (121) ----------- ----------- Operating income 35,256 38,342

Interest expense (6,823) (4,934) Minority interests (2,631) (2,687) Other income, net 34 105 ----------- ----------- Income from continuing operations before income tax 25,836 30,826

Income tax provision (9,598) (11,467) ----------- ----------- Income from continuing operations 16,238 19,359 Loss from discontinued operations, net of tax (36) - ----------- -----------

Net income $ 16,202 $ 19,359 =========== ===========

Basic earnings per common share: Continuing operations $ 0.38 $ 0.41 Discontinued operations (0.01) - ----------- ----------- Net income per common share $ 0.37 $ 0.41 =========== ===========

Diluted earnings per common share(a): Continuing operations $ 0.35 $ 0.40 Discontinued operations - - ----------- ----------- Net income per common share $ 0.35 $ 0.40 =========== ===========

Shares used in the per share calculations: Basic 43,285,119 47,486,402 =========== =========== Diluted 50,184,702 48,878,703 =========== ===========

(a) Diluted earnings per share assumes conversion of the 5.5% Convertible Subordinated Notes due 2006 prior to its redemption on April 15, 2004. The interest expense related to these notes, net of tax effects, for the three months ended March 31, 2004 was $1,476.

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share and per share amounts)

December March 31, 2004 31, 2005 ---------- ---------- ASSETS Current assets: Cash and equivalents $ 3,610 $ 3,721 Accounts receivable, less allowance for doubtful accounts of $2,414 and $2,420 at December 31,2004 and March 31, 2005, respectively 80,864 78,856 Deferred tax assets - 2,071 Prepaid expenses and other current assets 17,008 11,523 ---------- ---------- Total current assets 101,482 96,171

Property and equipment, net 640,730 648,772 Goodwill 642,773 641,973 Intangible assets, net 68,741 68,139 Restricted cash 14,159 12,876 Other assets, net 23,598 34,229 ---------- ---------- $1,491,483 $1,502,160 ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 34,280 $ 34,635 Book overdraft 8,661 2,745 Accrued liabilities 38,780 44,398 Deferred revenue 24,155 25,379 Current portion of long-term debt and notes payable 9,266 8,248 ---------- ---------- Total current liabilities 115,142 115,405

Long-term debt and notes payable 489,343 500,757 Other long-term liabilities 9,020 17,753 Deferred tax liabilities 146,035 148,516 ---------- ---------- Total liabilities 759,540 782,431

Commitments and contingencies Minority interests 24,421 24,707

Stockholders' equity: Preferred stock: $0.01 par value; 7,500,000 shares authorized; none issued and outstanding - - Common stock: $0.01 par value; 100,000,000 shares authorized; 47,605,791 and 46,804,755 shares issued and outstanding at December 31, 2004 and March 31, 2005, respectively 476 468 Additional paid-in capital 444,404 411,121 Deferred stock compensation (1,598) (1,667) Retained earnings 261,365 280,724 Accumulated other comprehensive income 2,875 4,376 ---------- ---------- Total stockholders' equity 707,522 695,022 ---------- ---------- $1,491,483 $1,502,160 ========== ==========

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2004 AND 2005 (Unaudited) (Dollars in thousands)

Three months ended March 31, ------------------ 2004 2005 -------- --------

Cash flows from operating activities: Net income $ 16,202 $ 19,359 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposal of assets (38) (121) Depreciation 12,828 14,129 Amortization of intangibles 615 640 Deferred income taxes, net of acquisitions 5,495 (3,018) Minority interests 2,631 2,687 Amortization of debt issuance costs 625 296 Stock-based compensation 200 255 Interest income on restricted cash (70) (70) Closure and post-closure accretion 103 167 Tax benefit on the exercise of stock options 1,859 2,358 Net change in operating assets and liabilities, net of acquisitions 8,097 16,184 -------- -------- Net cash provided by operating activities 48,547 52,866 -------- --------

Cash flows from investing activities: Payments for acquisitions, net of cash acquired (6,081) (6,719) Capital expenditures for property and equipment (15,628) (14,315) Proceeds from disposal of assets 184 647 Net change in other assets 1,326 1,089 -------- -------- Net cash used in investing activities (20,199) (19,298) -------- --------

Cash flows from financing activities: Proceeds from long-term debt 21,500 37,032 Principal payments on notes payable and long-term debt (56,963) (26,485) Book overdraft (658) (5,916) Proceeds from option and warrant exercises 10,585 9,285 Distributions to minority interest holders (2,940) (2,401) Payments for repurchase of common stock - (44,941) Debt issuance costs (237) (31) -------- -------- Net cash provided by (used in) financing activities 28,713 (33,457) -------- --------

Net increase (decrease) in cash and equivalents (365) 111 Cash and equivalents at beginning of period 5,276 3,610 -------- -------- Cash and equivalents at end of period $ 4,911 $ 3,721 ======== ========

ADDITIONAL STATISTICS THREE MONTHS ENDED MARCH 31, 2005 (Dollars in thousands)

Internal Growth: The following table reflects revenue growth for operations owned for at least 12 months:

Price 3.0% Volume 0.2% Recycling 0.2% ------------------ Total 3.4%

Uneliminated Revenue Breakdown:

Collection $119,939 63.6% Disposal and Transfer 50,096 26.6% Intermodal 10,035 5.3% Recycling and Other 8,471 4.5% --------- -------- Total $188,541 100.0%

Inter-company elimination $ 23,024

Days Sales Outstanding: 43

Internalization: 71%

Other Cash Flow Items:

Cash Interest Paid: $4,483 Cash Taxes Paid: $ 85

Debt to Capitalization: 43.3%

Total Debt divided by Total Debt plus Total Stockholders' Equity: ($500,757 + $8,248) / ($500,757 + $8,248 + $695,022) = 42.3%

Share Information for the three months ended March 31, 2005:

Basic shares outstanding 47,486,402 Dilutive effect of options and warrants 1,174,792 Dilutive effect of convertible notes 178,502 Dilutive effect of restricted stock 39,007 -------------- Diluted shares outstanding 48,878,703

Shares repurchased 1,294,800

NON-GAAP RECONCILIATION SCHEDULE THREE MONTHS ENDED MARCH 31, 2005 (in thousands)

Free cash flow, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a valuation and liquidity measure in the solid waste industry. Waste Connections defines free cash flow as net cash provided by operating activities, plus cash proceeds from disposal of assets, plus or minus change in book overdraft, less capital expenditures and distributions to minority interest holders. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate free cash flow differently.

Free cash flow reconciliation:

Three Months Ended March 31, 2005 -------------------- Net cash provided by operating activities $52,866 Less: Change in book overdraft (5,916) Plus: Cash proceeds from disposal of assets 647 Less: Capital expenditures for property and equipment (14,315) Less: Distributions to minority interest holders (2,401) -------------------- Free cash flow $30,881 -------------------- Free cash flow as % of revenues 18.7%

--30--JR/sf*

CONTACT: Waste Connections, Inc. Worthing Jackman, 916-608-8266 worthingj@wasteconnections.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: ENVIRONMENT EARNINGS CONFERENCE CALLS SOURCE: Waste Connections, Inc.

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