Waste Connections Reports Fourth Quarter and 2004 Results and Provides

Waste Connections Reports Fourth Quarter and 2004 Results and Provides 2005 Outlook

    Business Editors

    FOLSOM, Calif.--(BUSINESS WIRE)--Feb. 22, 2005--Waste Connections, Inc. (NYSE:WCN)

--	Reports record 2004 free cash flow of $99.5 million, or 15.8% of revenue
--	Reports 2004 internal growth of 4.4% including commodities
--	Acquires approximately $40 million annualized revenue in 2004

    Waste Connections, Inc. (NYSE:WCN) today announced fourth quarter earnings of $0.30 per share from continuing operations on a diluted basis of 49.3 million shares compared to $0.39 in the year ago period. Management noted that the fourth quarter 2004 results included approximately $5.7 million of pre-tax expenses (approximately $3.6 million net of taxes) associated with previously expected and announced items, including a $1.6 million pre-tax non-cash charge associated with redeeming its $200 million term loan in conjunction with the refinancing of its senior credit facility, a $2.1 million pre-tax non-cash loss on sale of a corporate aircraft, and a $2 million reserve for a severe auto-related accident in the quarter. Management also noted in the quarter that insurance costs, excluding the severe accident, increased approximately $2.4 million (approximately $1.5 million net of taxes) associated with changes in actuarial estimates for existing claims under our self insurance program.
    Revenue for the fourth quarter of 2004 was $163.7 million, an 11.9% increase over revenue of $146.3 million in the fourth quarter of 2003. Operating income for the fourth quarter of 2004, including the insurance-related items and loss on sale of asset noted above, was $32.1 million compared to operating income of $37.8 million in the fourth quarter of 2003.
    For the year ended December 31, 2004, revenue was $629.4 million, a 15% increase over revenue of $547 million in the year ago period. Including the loss on sale of asset and insurance-related items noted above, operating income for the year was $150.3 million compared to operating income of $145.2 million in 2003. Net income from continuing operations for 2004, including a $1.1 million after-tax charge for early retirement of convertible notes in the second quarter and the fourth quarter items previously noted, was $72.5 million compared to net income from continuing operations of $65.7 million before a gain resulting from the cumulative effect of adopting SFAS No. 143 in the prior year period, and diluted earnings per share from continuing operations for 2004 was $1.50 compared to $1.45 before the gain on accounting change in the year ago period.
    In the fourth quarter of 2004, Waste Connections classified as discontinued operations the results of its Georgia operations that were swapped with Waste Industries. All periods presented have been restated to present the results for these operations as discontinued operations, as well as the results of the previously sold operations in Eastern Washington.
    Ronald J. Mittelstaedt, Chairman and Chief Executive Officer, said, "Our corporate theme in 2004 focused on execution and accountability, and that focus remains the same in 2005. We are extremely pleased with our 2004 performance in that we met or exceeded all of the financial targets we laid out last February based on items more in our control. Internal growth and free cash flow, in particular, both surpassed our initial expectations, and we improved our competitive position and expanded margins in many of our markets. Although we executed well on the factors we could control, a less controllable expense - insurance - was the primary item that hurt us in the year. In addition to the severe accident, our actuaries, in conjunction with the year end audit, this month increased their estimates for claims outstanding at year end. While estimated ultimate insurance costs are projected by actuaries based on industry standards, we believe our proactive approach to risk management could ultimately reduce our potential exposure. More importantly, our outlook for 2005 is consistent with pre-budget expectations communicated in October despite assumed increases in insurance costs going forward as a result of our year end actuarial review."
    Mr. Mittelstaedt continued, "In the fourth quarter we closed our previously announced acquisitions, bringing the total annualized revenues acquired in the year to approximately $40 million. Our acquisition of Northwest Container Services positions us to provide a comprehensive offering for both intermodal and disposal services to more effectively compete for rail-hauled disposal volumes into our landfills in the Pacific Northwest. We also completed the previously announced multi-market asset swap where we exited Georgia and strengthened our position in the Eastern Tennessee and Northern Mississippi markets. In December, the Kansas Supreme Court ruled in our favor by declining to hear the plaintiff's appeal regarding the proposed Harper County Landfill. We are now pressing forward to obtain the final permit and commence construction of that landfill as early as mid-2005. Additionally in the quarter, we took advantage of our strong credit profile and refinanced our senior credit facility in order to lower our average borrowing cost, expand the available credit capacity, and pre-approve a potential early redemption of our existing convertible notes that become callable beginning May 2006. Finally, we repurchased $72.9 million of common stock primarily during the second half of 2004. We expect to repurchase a minimum $100 million of additional stock under our repurchase program in 2005, representing approximately 6% of outstanding shares. Our strong financial profile and operating performance provide us the flexibility to both repurchase stock and pursue an acquisition program focused on the more attractive, exclusive markets on the West Coast."

    2005 OUTLOOK

    Waste Connections also announced its outlook for 2005. The Company's outlook excludes the impact of any additional acquisitions that may be completed during the year and any new landfills that might be opened during the year. The Company's outlook also excludes the impact related to expensing of stock options and reclassification in the statement of cash flows of the tax benefit related to exercise of stock options under the FASB's statement 123R, which is effective for quarters beginning after June 15, 2005. The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic SEC filings.

    -- Revenue is estimated to range between $690 million and $700
    million. This assumes internal growth of approximately 3.0% to
    4.0%, excluding the impact of commodities, with around 2.5%
    from price and the remainder from volume. Intermodal services
    revenue is estimated at approximately $40 million and is
    included in the range.

    -- Selling, general and administrative expense is estimated at
    approximately 9.7% of revenue, subject to quarterly
    fluctuations.

    -- Depreciation, depletion and amortization is estimated at
    approximately 8.9% of revenue, subject to quarterly
    fluctuations.

    -- Operating income is estimated at approximately 24.5% of
    revenue, subject to quarterly fluctuations.

    -- Operating income before depreciation and amortization is
    estimated to range between $230 million and $233 million, or
    approximately 33.4% of revenue. As a percentage of revenue,
    this reflects the blended impact of year-over-year margin
    improvements in the solid waste business with the lower margin
    intermodal services business.

    -- Minority interest expense is estimated at approximately 1.7%,
    subject to quarterly fluctuations.

    -- Effective tax rate is expected to be 37.2%, subject to
    quarterly fluctuations.

    -- Net cash provided by operating activities is estimated to be
    between 25% and 26% of revenue, subject to quarterly
    fluctuations.

    -- Capital expenditures are estimated to be $70 million, or
    approximately 10% of revenue, plus an estimated $10 to $15
    million for the construction of a new collection facility in
    Pierce County, Washington and permitting and partial
    construction of portions of three new landfills in existing
    markets.

    Waste Connections will be hosting a conference call related to fourth quarter earnings and the 2005 outlook on February 23rd 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.

    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 governmental service providers and larger and better capitalized companies, which may result in reduced revenues and lower profits; (2)increases in the costs of labor, disposal, fuel or energy could reduce operating margins; (3) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (4) difficulties in making acquisitions, acquiring exclusive contracts and generating internal growth may cause Waste Connections' growth to be slower than expected; (5) Waste Connections may lose contracts through competitive bidding, early termination or governmental action, which would cause its revenues to decline;(6) Waste Connections' growth and future financial performance depend significantly on its ability to integrate acquired businesses into its organization and operations; (7) Waste Connections' acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; and (8) timing of acquisitions may cause fluctuations in Waste Connections' quarterly results, which may cause its stock price to decline. 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 and subsequent Quarterly Reports on Form 10-Q. 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 AND TWELVE MONTHS ENDED DECEMBER 31, 2003 AND 2004 (Unaudited) (in thousands, except share and per share amounts)

Three months ended Twelve months ended December 31, December 31, ----------------------------------------------- 2003 2004 2003 2004 ----------- ----------- ----------- -----------

Revenues $146,302 $163,657 $547,035 $629,363 Operating expenses: Cost of operations 82,135 98,513 304,111 359,542 Selling, general and administrative 13,790 15,818 51,772 61,761 Depreciation and amortization 12,720 14,836 45,717 55,424 Loss (gain) on sale of assets (109) 2,400 193 2,317 ----------- ----------- ----------- ----------- Operating income 37,766 32,090 145,242 150,319

Interest expense (7,828) (4,799) (31,666) (21,724) Minority interests (2,743) (2,525) (10,549) (11,520) Other income (expense), net 33 (1,417) 160 (2,817) ----------- ----------- ----------- ----------- Income from continuing operations before income tax 27,228 23,349 103,187 114,258

Income tax provision (9,419) (8,737) (37,470) (41,748) ----------- ----------- ----------- ----------- Income from continuing operations 17,809 14,612 65,717 72,510 Loss from discontinued operations, net of tax (519) (165) (403) (239) Cumulative effect of change in accounting principle, net of tax expense - - 282 - ----------- ----------- ----------- -----------

Net income $17,290 $14,447 $65,596 $72,271 =========== =========== =========== ===========

Basic earnings per common share: Continuing operations $0.41 $0.31 $1.54 $1.56 Discontinued operations (0.01) (0.01) (0.01) (0.01) Cumulative effect of change in accounting principle - - 0.01 - ----------- ----------- ----------- ----------- Net income per common share $0.40 $0.30 $1.54 $1.55 =========== =========== =========== ===========

Diluted earnings per common share(a): Continuing operations $0.39 $0.30 $1.45 $1.50 Discontinued operations (0.01) - (0.01) - Cumulative effect of change in accounting principle - - .01 - ----------- ----------- ----------- ----------- Net income per common share $0.38 $0.30 $1.45 $1.50 =========== =========== =========== ===========

Shares used in the per share calculations: Basic 42,807,170 47,908,324 42,490,944 46,581,441 =========== =========== =========== =========== Diluted 49,609,887 49,304,869 49,307,478 49,470,217 =========== =========== =========== ===========

(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 December 30, 2003 was $1,476, and for the twelve months ended December 31, 2003 and 2004 was $5,902 and $1,707, respectively.

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

Dec. 31, Dec. 31, 2003 2004 ----------- ----------- ASSETS Current assets: Cash and equivalents $5,276 $3,610 Accounts receivable, less allowance for doubtful accounts of $2,570 and $2,414 at December 31, 2003 and 2004, respectively 72,474 80,864 Prepaid expenses and other current assets 11,270 17,008 ----------- ----------- Total current assets 89,020 101,482

Property and equipment, net 613,225 640,730 Goodwill, net 590,054 642,773 Intangible assets, net 64,784 68,741 Restricted cash 17,734 14,159 Other assets, net 21,135 23,598 ----------- ----------- $1,395,952 $1,491,483 ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $38,682 $42,941 Accrued liabilities 31,920 37,944 Deferred revenue 23,738 24,155 Current portion of long-term debt and notes payable 9,740 9,266 ----------- ----------- Total current liabilities 104,080 114,306

Long-term debt and notes payable 601,891 489,343 Other long-term liabilities 8,400 9,020 Deferred income taxes 120,162 146,871 ----------- ----------- Total liabilities 834,533 759,540

Commitments and contingencies Minority interests 23,925 24,421

Stockholders' equity: Preferred stock: $0.01 par value; 7,500,000 shares authorized; none issued and outstanding - - Common stock: $0.01 par value; 50,000,000 and 100,000,000 shares authorized at December 31, 2003 and 2004, respectively; 43,000,182 and 47,605,791 shares issued and outstanding at December 31, 2003 and 2004, respectively 430 476 Additional paid-in capital 348,003 444,404 Deferred stock compensation (436) (1,598) Retained earnings 189,094 261,365 Accumulated other comprehensive income 403 2,875 ----------- ----------- Total stockholders' equity 537,494 707,522 ----------- ----------- $1,395,952 $1,491,483 ----------- -----------

WASTE CONNECTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS TWELVE MONTHS ENDED DECEMBER 31, 2003 AND 2004 (Unaudited) (Dollars in thousands)

Twelve months ended December 31, ------------------- 2003 2004 --------- ---------

Cash flows from operating activities: Net income $65,596 $72,271 Adjustments to reconcile net income to net cash provided by operating activities: Loss on disposal of assets 371 2,398 Gain on disposal of operations -- (68) Depreciation 45,670 54,470 Amortization of intangibles 1,677 2,477 Deferred income taxes, net of acquisitions 27,931 26,566 Minority interests 10,549 11,520 Cumulative effect of change in accounting principle (448) -- Amortization of debt issuance costs 2,403 3,685 Stock-based compensation 345 972 Interest income on restricted cash (302) (275) Closure and post-closure accretion 437 421 Tax benefit on the exercise of stock options 3,078 8,195 Net change in operating assets and liabilities, net of acquisitions (54) (3,007) --------- --------- Net cash provided by operating activities 157,253 179,625 --------- ---------

Cash flows from investing activities: Payments for acquisitions, net of cash acquired (84,855) (46,784) Capital expenditures for property and equipment (70,213) (71,201) Investment in unconsolidated entity (5,300) -- Proceeds from disposal of assets 1,496 2,088 Decrease (increase) in restricted cash, net of interest income (2,093) 3,405 Net change in other assets (24) 27 --------- --------- Net cash used in investing activities (160,989) (112,465) --------- ---------

Cash flows from financing activities: Proceeds from long-term debt 108,940 368,500 Principal payments on notes payable and long- term debt (102,469) (388,825) Proceeds from option and warrant exercises 12,271 36,959 Distributions to minority interest holders (9,702) (11,025) Payments for repurchase of common stock -- (72,889) Debt issuance costs (4,095) (1,546) --------- --------- Net cash used in financing activities 4,945 (68,826) --------- ---------

Net increase (decrease) in cash and equivalents 1,209 (1,666) Cash and equivalents at beginning of period 4,067 5,276 --------- --------- Cash and equivalents at end of period $5,276 $3,610 --------- ---------

ADDITIONAL STATISTICS THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004 (Dollars in thousands)

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

Three Months Ended Twelve Months Ended December 31, 2004 December 31, 2004 ------------------- ------------------- Price 2.8% 2.8% Volume - 0.8% Recycling 0.6% 0.8% ------------------- ------------------- Total 3.4% 4.4%

Uneliminated Revenue Breakdown:

Three Months Ended Twelve Months Ended December 31, 2004 December 31, 2004 --------------------- --------------------

Collection $119,037 63.7% $471,233 65.5% Disposal and Transfer 52,251 28.0% 209,324 29.1% Recycling and Other 8,748 4.7% 32,511 4.5% Intermodal 6,721 3.6% 6,721 0.9% ------------ -------- ------------- ------ Total $186,757 100.0% $719,789 100.0%

Inter-company elimination $23,100 $90,426

Days Sales Outstanding: 45 (Three months ended December 31, 2004; unadjusted for transactions closed in the quarter)

Internalization: 68% (Three months ended December 31, 2004)

Other Cash Flow Items for the three months ended December 31, 2004: Cash Interest Paid: $4,874 Cash Taxes Paid: $6,790

Debt to Capitalization as of December 31, 2004: 41.3% Total Debt divided by Total Debt plus Total Stockholders' Equity: ($489,343 + $9,266) / ($489,343 + $9,266 + $707,522) = 41.3%

Share Information for the three months ended December 31, 2004: Basic shares outstanding 47,908,324 Dilutive effect of options and warrants 1,268,860 Dilutive effect of convertible notes 82,099 Dilutive effect of restricted stock 45,586 ------------ Diluted shares outstanding 49,304,869

Shares repurchased 646,700

NON-GAAP RECONCILIATION SCHEDULE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004 (in thousands, except share and per share amounts)

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. This measure 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 Twelve Months Ended December 31, 2004 December 31, 2004 ------------------ ------------------- Net cash provided by operating activities $43,144 $179,625 Plus cash proceeds from disposal of assets 1,370 2,088 Less: Capital expenditures (15,000) (71,201) Less: Distributions to minority interest holders (2,156) (11,025) ------------------ ------------------- Free cash flow $27,358 $99,487 ------------------ ------------------- Free cash flow as % revenues 16.7% 15.8%

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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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