(Mark
One)
|
||
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
|
For
the quarterly period ended March 31, 2009
|
||
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 1-31507
|
|
WASTE
CONNECTIONS, INC.
|
|
(Exact
name of registrant as specified in its charter)
|
|
Delaware
|
|
(State
or other jurisdiction of incorporation or organization)
|
|
94-3283464
|
|
(I.R.S.
Employer Identification No.)
|
|
2295 Iron
Point Road, Suite 200, Folsom, CA 95630
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
(916)
608-8200
|
|
(Registrant’s
telephone number, including area
code)
|
þ
Large accelerated filer
|
¨ Accelerated
filer
|
¨ Non-accelerated
filer
|
¨ Smaller reporting
company
|
As
of April 30, 2009:
|
80,066,646 shares
of common stock
|
Page
|
|||
PART I
– FINANCIAL INFORMATION (unaudited)
|
|||
Item 1.
|
Financial
Statements
|
||
Condensed
Consolidated Balance Sheets
|
1
|
||
Condensed
Consolidated Statements of Income
|
2
|
||
Condensed
Consolidated Statements of Equity and Comprehensive Income
|
3
|
||
Condensed
Consolidated Statements of Cash Flows
|
4
|
||
Notes
to Condensed Consolidated Financial Statements
|
5
|
||
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
33
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
46
|
|
Item 4.
|
Controls
and Procedures
|
49
|
|
PART II
– OTHER INFORMATION
|
|||
Item 1.
|
Legal
Proceedings
|
50
|
|
Item 6.
|
Exhibits
|
52
|
|
Signatures
|
53
|
||
Exhibit
Index
|
54
|
December
31,
2008
|
March
31,
2009
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and equivalents
|
$ | 265,264 | $ | 335,758 | ||||
Accounts
receivable, net of allowance for doubtful accounts of $3,846 and $3,309 at
December 31, 2008 and March 31, 2009, respectively
|
118,456 | 116,543 | ||||||
Deferred
income taxes
|
22,347 | 21,066 | ||||||
Prepaid
expenses and other current assets
|
23,144 | 17,097 | ||||||
Total
current assets
|
429,211 | 490,464 | ||||||
Property
and equipment, net
|
984,124 | 991,098 | ||||||
Goodwill
|
836,930 | 839,203 | ||||||
Intangible
assets, net
|
306,444 | 303,822 | ||||||
Restricted
assets
|
23,009 | 24,647 | ||||||
Other
assets, net
|
20,639 | 19,930 | ||||||
$ | 2,600,357 | $ | 2,669,164 | |||||
LIABILITIES
AND EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 65,537 | $ | 60,634 | ||||
Book
overdraft
|
4,315 | 8,430 | ||||||
Accrued
liabilities
|
95,220 | 99,984 | ||||||
Deferred
revenue
|
45,694 | 44,296 | ||||||
Current
portion of long-term debt and notes payable
|
4,698 | 3,901 | ||||||
Total
current liabilities
|
215,464 | 217,245 | ||||||
Long-term
debt and notes payable
|
819,828 | 855,205 | ||||||
Other
long-term liabilities
|
47,509 | 54,893 | ||||||
Deferred
income taxes
|
255,559 | 259,885 | ||||||
Total
liabilities
|
1,338,360 | 1,387,228 | ||||||
|
||||||||
Commitments
and contingencies (Note 13)
|
||||||||
|
||||||||
Equity:
|
||||||||
Preferred
stock: $0.01 par value per share; 7,500,000 shares authorized; none issued
and outstanding
|
— | — | ||||||
Common
stock: $0.01 par value per share; 150,000,000 shares authorized;
79,842,239 and 80,049,077 shares issued and outstanding at December 31,
2008 and March 31, 2009, respectively
|
798 | 800 | ||||||
Additional
paid-in capital
|
661,555 | 662,512 | ||||||
Accumulated
other comprehensive loss
|
(23,937 | ) | (27,269 | ) | ||||
Retained
earnings
|
622,913 | 644,891 | ||||||
Total
Waste Connections’ equity
|
1,261,329 | 1,280,934 | ||||||
Noncontrolling
interests
|
668 | 1,002 | ||||||
Total
equity
|
1,261,997 | 1,281,936 | ||||||
$ | 2,600,357 | $ | 2,669,164 |
Three
months ended March 31,
|
||||||||
2008
|
2009
|
|||||||
Revenues
|
$ | 250,300 | $ | 262,675 | ||||
Operating
expenses:
|
||||||||
Cost
of operations
|
149,132 | 154,703 | ||||||
Selling,
general and administrative
|
27,090 | 32,515 | ||||||
Depreciation
|
21,827 | 24,840 | ||||||
Amortization
of intangibles
|
1,396 | 2,476 | ||||||
Loss
on disposal of assets
|
57 | 507 | ||||||
Operating
income
|
50,798 | 47,634 | ||||||
Interest
expense
|
(10,612 | ) | (12,249 | ) | ||||
Interest
income
|
224 | 1,024 | ||||||
Other
income (expense), net
|
(12 | ) | 6 | |||||
Income
before income taxes
|
40,398 | 36,415 | ||||||
Income
tax provision
|
(14,570 | ) | (14,103 | ) | ||||
Net
income
|
25,828 | 22,312 | ||||||
Less:
Net income attributable to noncontrolling interests
|
(3,373 | ) | (334 | ) | ||||
Net
income attributable to Waste Connections
|
$ | 22,455 | $ | 21,978 | ||||
Earnings
per common share attributable to Waste Connections’ common
stockholders:
|
||||||||
Basic
|
$ | 0.34 | $ | 0.27 | ||||
Diluted
|
$ | 0.33 | $ | 0.27 | ||||
Shares
used in the per share calculations:
|
||||||||
Basic
|
66,789,398 | 79,963,438 | ||||||
Diluted
|
68,121,953 | 80,758,941 |
Waste
Connections’ Equity
|
||||||||||||||||||||||||
Accumulated
Other
Comprehensive
Income
(Loss)
|
||||||||||||||||||||||||
Additional
Paid-In
Capital
|
||||||||||||||||||||||||
Comprehensive
Income
|
Common
Stock
|
Retained
Earnings
|
Noncontrolling
Interests
|
|||||||||||||||||||||
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
Balances
at December 31, 2007
|
67,052,135
|
$
|
670
|
$
|
254,284
|
$
|
(4,290
|
)
|
$
|
524,481
|
$
|
30,220
|
$
|
805,365
|
||||||||||
Cumulative
change from adoption of accounting policy - FSP No. APB
14-1
|
—
|
—
|
13,726
|
—
|
(4,471
|
)
|
—
|
9,255
|
||||||||||||||||
Vesting
of restricted stock
|
222,863
|
2
|
(2
|
)
|
—
|
—
|
—
|
—
|
||||||||||||||||
Cancellation
of restricted stock and warrants
|
(72,082
|
)
|
(1
|
)
|
(2,192
|
)
|
—
|
—
|
—
|
(2,193
|
)
|
|||||||||||||
Stock-based
compensation
|
—
|
—
|
7,854
|
—
|
—
|
—
|
7,854
|
|||||||||||||||||
Exercise
of stock options and warrants
|
1,030,594
|
10
|
19,079
|
—
|
—
|
—
|
19,089
|
|||||||||||||||||
Issuance
of common stock, net of issuance costs of $17,195
|
12,650,000
|
127
|
393,803
|
—
|
—
|
—
|
393,930
|
|||||||||||||||||
Excess
tax benefit associated with equity-based compensation
|
—
|
—
|
6,441
|
—
|
—
|
—
|
6,441
|
|||||||||||||||||
Repurchase
of common stock
|
(1,041,271
|
)
|
(10
|
)
|
(31,517
|
)
|
—
|
—
|
—
|
(31,527
|
)
|
|||||||||||||
Issuance
of common stock warrants to consultants
|
—
|
—
|
79
|
—
|
—
|
—
|
79
|
|||||||||||||||||
Amounts
reclassified into earnings, net of taxes
|
—
|
—
|
—
|
4,010
|
—
|
—
|
4,010
|
|||||||||||||||||
Changes
in fair value of swaps, net of taxes
|
—
|
—
|
—
|
(23,657
|
)
|
—
|
—
|
(23,657
|
)
|
|||||||||||||||
Distributions
to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
(8,232
|
)
|
(8,232
|
)
|
|||||||||||||||
Changes
in ownership interest in noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
(33,560
|
)
|
(33,560
|
)
|
|||||||||||||||
Net
income
|
$
|
115,143
|
—
|
—
|
—
|
—
|
102,903
|
12,240
|
115,143
|
|||||||||||||||
Other
comprehensive loss
|
(31,609
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Income
tax effect of other comprehensive loss
|
11,962
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||
Comprehensive
income
|
95,496
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||
Comprehensive
income attributable to noncontrolling interests
|
(12,240
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Comprehensive
income attributable to Waste Connections
|
$
|
83,256
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Balances
at December 31, 2008
|
79,842,239
|
798
|
661,555
|
(23,937
|
)
|
622,913
|
668
|
1,261,997
|
||||||||||||||||
Vesting
of restricted stock
|
248,162
|
2
|
(2
|
)
|
—
|
—
|
—
|
—
|
||||||||||||||||
Cancellation
of restricted stock and warrants
|
(84,263
|
)
|
(1
|
)
|
(2,341
|
)
|
—
|
—
|
—
|
(2,342
|
)
|
|||||||||||||
Stock-based
compensation
|
—
|
—
|
2,162
|
—
|
—
|
—
|
2,162
|
|||||||||||||||||
Exercise
of stock options and warrants
|
42,939
|
1
|
1,017
|
—
|
—
|
—
|
1,018
|
|||||||||||||||||
Excess
tax benefit associated with equity-based compensation
|
—
|
—
|
115
|
—
|
—
|
—
|
115
|
|||||||||||||||||
Issuance
of common stock warrants to consultants
|
—
|
—
|
6
|
—
|
—
|
—
|
6
|
|||||||||||||||||
Amounts
reclassified into earnings, net of taxes
|
—
|
—
|
—
|
4,110
|
—
|
—
|
4,110
|
|||||||||||||||||
Changes
in fair value of interest rate swaps, net of taxes
|
—
|
—
|
—
|
(7,442
|
)
|
—
|
—
|
(7,442
|
)
|
|||||||||||||||
Net
income
|
$
|
22,312
|
—
|
—
|
—
|
—
|
21,978
|
334
|
22,312
|
|||||||||||||||
Other
comprehensive loss
|
(5,374
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Income
tax effect of other comprehensive loss
|
2,042
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||
Comprehensive
income
|
18,980
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||
Comprehensive
income attributable to noncontrolling interests
|
(334
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Comprehensive
income attributable to Waste Connections
|
$
|
18,646
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Balances
at March 31, 2009
|
80,049,077
|
$
|
800
|
$
|
662,512
|
$
|
(27,269
|
)
|
$
|
644,891
|
$
|
1,002
|
$
|
1,281,936
|
Three
months ended March 31,
|
||||||||
2008
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 25,828 | $ | 22,312 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Loss
on disposal of assets
|
57 | 507 | ||||||
Depreciation
|
21,827 | 24,840 | ||||||
Amortization
of intangibles
|
1,396 | 2,476 | ||||||
Deferred
income taxes, net of acquisitions
|
7,583 | 7,649 | ||||||
Amortization
of debt issuance costs
|
454 | 484 | ||||||
Amortization
of debt discount
|
1,101 | 1,171 | ||||||
Stock-based
compensation
|
2,065 | 2,162 | ||||||
Interest
income on restricted assets
|
(170 | ) | (132 | ) | ||||
Closure
and post-closure accretion
|
333 | 352 | ||||||
Excess
tax benefit associated with equity-based compensation
|
(1,101 | ) | (115 | ) | ||||
Net
change in operating assets and liabilities, net of
acquisitions
|
5,220 | 8,843 | ||||||
Net
cash provided by operating activities
|
64,593 | 70,549 | ||||||
Cash
flows from investing activities:
|
||||||||
Payments
for acquisitions, net of cash acquired
|
(32,327 | ) | (5,298 | ) | ||||
Capital
expenditures for property and equipment
|
(24,108 | ) | (29,412 | ) | ||||
Proceeds
from disposal of assets
|
301 | 161 | ||||||
Increase
in restricted assets, net of interest income
|
(621 | ) | (1,506 | ) | ||||
Decrease
in other assets
|
96 | 166 | ||||||
Net
cash used in investing activities
|
(56,659 | ) | (35,889 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from long-term debt
|
80,500 | 75,000 | ||||||
Principal
payments on notes payable and long-term debt
|
(57,487 | ) | (44,372 | ) | ||||
Change
in book overdraft
|
(3,596 | ) | 4,115 | |||||
Proceeds
from option and warrant exercises
|
5,124 | 1,018 | ||||||
Excess
tax benefit associated with equity-based compensation
|
1,101 | 115 | ||||||
Distributions
to noncontrolling interests
|
(2,842 | ) | — | |||||
Payments
for repurchase of common stock
|
(31,527 | ) | — | |||||
Debt
issuance costs
|
— | (42 | ) | |||||
Net
cash (used in) provided by financing activities
|
(8,727 | ) | 35,834 | |||||
Net
(decrease) increase in cash and equivalents
|
(793 | ) | 70,494 | |||||
Cash
and equivalents at beginning of period
|
10,298 | 265,264 | ||||||
Cash
and equivalents at end of period
|
$ | 9,505 | $ | 335,758 | ||||
Non-cash
financing activity:
|
||||||||
Liabilities
assumed and notes payable issued to sellers of businesses
acquired
|
$ | 4,978 | $ | 2,810 |
1.
|
BASIS
OF PRESENTATION AND SUMMARY
|
2.
|
NEW
ACCOUNTING STANDARDS
|
3.
|
STOCK-BASED
COMPENSATION
|
Unvested
Shares
|
||||
Outstanding
at December 31, 2008
|
906,572
|
|||
Granted
|
373,296
|
|||
Forfeited
|
(9,557
|
)
|
||
Vested
|
(248,162
|
)
|
||
Outstanding
at March 31, 2009
|
1,022,149
|
4.
|
LANDFILL
ACCOUNTING
|
Final
capping, closure and post-closure liability at December 31,
2008
|
$
|
22,002
|
||
Adjustments
to final capping, closure and post-closure liabilities
|
(1,407
|
)
|
||
Liabilities
incurred
|
394
|
|||
Accretion
expense
|
352
|
|||
Closure
payments
|
(136
|
)
|
||
Final
capping, closure and post-closure liability at March 31,
2009
|
$
|
21,205
|
5.
|
LONG-TERM
DEBT
|
Long-term
debt consists of the
following:
|
December 31,
2008
|
March 31,
2009
|
|||||||
Revolver
under Credit Facility, bearing interest ranging from 1.06% to
3.25%*
|
$ | 400,000 | $ | 435,000 | ||||
2026 Notes,
bearing interest at 3.75%, net of discount of $10,930 and $9,759 as of
December 31, 2008 and March 31, 2009,
respectively
|
189,070 | 190,241 | ||||||
2015
Senior Notes, bearing interest at 6.22%
|
175,000 | 175,000 | ||||||
Tax-Exempt
Bonds, bearing interest ranging from 0.45% to 7.25%*
|
53,960 | 53,435 | ||||||
Notes
payable to sellers in connection with acquisitions, bearing interest at
5.5% to 10.35%*
|
4,888 | 3,990 | ||||||
Notes
payable to third parties, bearing interest at 9.0% to
10.9%*
|
1,608 | 1,440 | ||||||
824,526 | 859,106 | |||||||
Less – current
portion
|
(4,698 | ) | (3,901 | ) | ||||
$ | 819,828 | $ | 855,205 |
*
|
Interest
rates in the table above represent the range of interest rates incurred
during the three month period ended March 31,
2009.
|
Condensed
Consolidated
Balance
Sheet
|
December 31,
2008
Balance
as Reported
in
the 2008 Annual
Report
on Form 10-
K
|
Cumulative
Retrospective
Adjustment
|
December 31,
2008
Balance
as Presented in
the
March 31, 2009
Quarterly
Report on
Form
10-Q
|
|||||||||
Other
assets, net
|
$ | 20,922 | $ | (283 | ) | $ | 20,639 | |||||
Long-term
debt and notes payable
|
$ | 830,758 | $ | (10,930 | ) | $ | 819,828 | |||||
Deferred
income tax liabilities
|
$ | 251,514 | $ | 4,045 | $ | 255,559 | ||||||
Additional
paid-in capital
|
$ | 647,829 | $ | 13,726 | $ | 661,555 | ||||||
Retained
earnings
|
$ | 630,037 | $ | (7,124 | ) | $ | 622,913 |
Condensed
Consolidated
Statement
of Income
|
Balance
for the
Period
Ended
March 31,
2008, as
Reported
in the
March 31,
2008
Quarterly
Report on
Form
10-Q
|
Retrospective
Adjustment
|
Balance
for the Period
Ended
March 31, 2008,
as
Presented in the
March 31,
2009
Quarterly
Report on
Form
10-Q
|
|||||||||
Interest
expense
|
$ | 9,543 | $ | 1,069 | $ | 10,612 | ||||||
Income
tax provision
|
$ | 14,976 | $ | (406 | ) | $ | 14,570 |
Condensed
Consolidated
Statement
of Cash Flows
|
Balance
for the
Period
Ended
March 31,
2008, as
Reported
in the
March 31,
2008
Quarterly
Report on
Form
10-Q
|
Retrospective
Adjustment
|
Balance
for the Period
Ended
March 31, 2008,
as
Presented in the
March 31,
2009
Quarterly
Report on
Form
10-Q
|
|||||||||
Deferred
income taxes, net of acquisitions
|
$ | 7,989 | $ | (406 | ) | $ | 7,583 | |||||
Amortization
of debt issuance costs
|
$ | 486 | $ | (32 | ) | $ | 454 | |||||
Amortization
of debt discount
|
$ | — | $ | 1,101 | $ | 1,101 |
Condensed
Consolidated
Balance
Sheet
|
March
31, 2009
Balance
as Reported
in
the March 31,
2009
Quarterly
Report
on
Form
10-Q
|
FSP
No. APB 14-1
Adjustment
|
March
31, 2009 Balance
Prior
to Adoption of
FSP
No. APB 14-1
|
|||||||||
Other
assets, net
|
$ | 19,930 | $ | 251 | $ | 20,181 | ||||||
Long-term
debt and notes payable
|
$ | 855,205 | $ | 9,759 | $ | 864,964 | ||||||
Deferred
income tax liabilities
|
$ | 259,885 | $ | (3,612 | ) | $ | 256,273 | |||||
Additional
paid-in capital
|
$ | 662,512 | $ | (13,726 | ) | $ | 648,786 | |||||
Retained
earnings
|
$ | 644,891 | $ | 7,830 | $ | 652,721 |
Condensed
Consolidated
Statement
of Income
|
Balance
for the
Period
Ended
March 31,
2009, as
Reported
in the
March 31,
2009
Quarterly
Report on
Form
10-Q
|
FSP
No. APB 14-1
Adjustment
|
Balance
for the Period
Ended
March 31, 2009
Prior
to Adoption of
FSP
No. APB 14-1
|
|||||||||
Interest
expense
|
$ | 12,249 | $ | (1,139 | ) | $ | 11,110 | |||||
Income
tax provision
|
$ | 14,103 | $ | 433 | $ | 14,536 |
Condensed
Consolidated
Statement
of Cash Flows
|
Balance
for the
Period
Ended
March 31,
2009, as
Reported
in the
March 31,
2009
Quarterly
Report on
Form
10-Q
|
FSP
No. APB 14-1
Adjustment
|
Balance
for the Period
Ended
March 31, 2009
Prior
to Adoption of
FSP
No. APB 14-1
|
|||||||||
Deferred
income taxes, net of acquisitions
|
$ | 7,649 | $ | 433 | $ | 8,082 | ||||||
Amortization
of debt issuance costs
|
$ | 484 | $ | 32 | $ | 516 | ||||||
Amortization
of debt discount
|
$ | 1,171 | $ | (1,171 | ) | $ | — |
Operating
Income
|
Net
Income
|
Basic
Earnings per
Share
Attributable
to
Waste
Connections’
Common
Stockholders
|
Diluted
Earnings
per
Share
Attributable
to
Waste
Connections’
Common
Stockholders
|
|||||||||||||
Amount
as reported for the period ended March 31, 2008, in the Company’s
March 31, 2008 Quarterly Report on Form 10-Q
|
$ | 50,798 | $ | 26,491 | $ | 0.35 | $ | 0.34 | ||||||||
Impact
of incremental interest expense (net of tax) recognized during the period
ended March 31, 2008, as a result of adoption of FSP No.
APB 14-1
|
— | (663 | ) | (0.01 | ) | (0.01 | ) | |||||||||
Amount
as presented for the period ended March 31, 2008, in the Company’s
March 31, 2009 Report on Form 10-Q
|
$ | 50,798 | $ | 25,828 | $ | 0.34 | $ | 0.33 |
Operating
Income
|
Net
Income
|
Basic
Earnings per
Share
Attributable
to
Waste
Connections’
Common
Stockholders
|
Diluted
Earnings
per
Share
Attributable
to
Waste
Connections’
Common
Stockholders
|
|||||||||||||
Amount
as reported for the period ended March 31, 2009, in the Company’s
March 31, 2009 Quarterly Report on Form 10-Q
|
$ | 47,634 | $ | 22,312 | $ | 0.27 | $ | 0.27 | ||||||||
Impact
of incremental interest expense (net of tax) recognized during the period
ended March 31, 2009, as a result of adoption of FSP No.
APB 14-1
|
— | 706 | 0.01 | 0.01 | ||||||||||||
Amount
that would have been reported for the period ended March 31, 2009,
prior to adoption of FSP No. APB 14-1
|
$ | 47,634 | $ | 23,018 | $ | 0.28 | $ | 0.28 |
December 31,
2008
|
March 31,
2009
|
|||||||
Carrying
amount of equity component
|
$ | 13,726 | $ | 13,726 | ||||
Principal
amount of liability component
|
$ | 200,000 | $ | 200,000 | ||||
Unamortized
discount on liability component
|
(10,930 | ) | (9,759 | ) | ||||
Net
carrying amount of liability component
|
$ | 189,070 | $ | 190,241 |
6.
|
ACQUISITIONS
|
2008
Acquisitions
|
2009
Acquisition
|
|||||||
Fair
value of consideration transferred:
|
||||||||
Cash
|
$ | 31,988 | $ | 2,413 | ||||
Debt
assumed
|
2,140 | 2,781 | ||||||
Common
stock warrants
|
30 | — | ||||||
34,158 | 5,194 | |||||||
Recognized
amounts of identifiable assets acquired and liabilities
assumed:
|
||||||||
Accounts
receivable
|
1,309 | — | ||||||
Other
current assets
|
272 | 153 | ||||||
Property
and equipment
|
4,721 | 2,606 | ||||||
Long-term
franchise agreements and contracts
|
15,915 | 100 | ||||||
Other
intangibles
|
869 | 91 | ||||||
Non-competition
agreements
|
30 | — | ||||||
Accounts
payable
|
(49 | ) | (19 | ) | ||||
Accrued
liabilities
|
(1,728 | ) | — | |||||
Deferred
revenue
|
(582 | ) | (10 | ) | ||||
Deferred
income taxes
|
(479 | ) | — | |||||
Total
identifiable net assets
|
20,278 | 2,921 | ||||||
Goodwill
|
$ | 13,880 | $ | 2,273 |
2008
Acquisitions
|
2009
Acquisition
|
|||||||
Cash
consideration transferred
|
$ | 31,988 | $ | 2,413 | ||||
Payment
of contingent consideration
|
— | 2,000 | ||||||
Payment
of acquisition-related liabilities
|
339 | 885 | ||||||
Payments
for acquisitions, net of cash acquired
|
$ | 32,327 | $ | 5,298 |
WASTE
CONNECTIONS, INC.
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(Unaudited)
|
(Dollar
amounts in thousands, except share, per share, per gallon and per ton
amounts)
|
7.
|
INTANGIBLE
ASSETS
|
Intangible
assets, exclusive of goodwill, consist of the following at March 31,
2009:
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
||||||||||
Amortizable
intangible assets:
|
||||||||||||
Long-term
franchise agreements and contracts
|
$ | 179,446 | $ | (14,252 | ) | $ | 165,194 | |||||
Non-competition
agreements
|
9,751 | (5,312 | ) | 4,439 | ||||||||
Other
|
26,036 | (8,007 | ) | 18,029 | ||||||||
215,233 | (27,571 | ) | 187,662 | |||||||||
Nonamortized
intangible assets:
|
||||||||||||
Indefinite-lived
intangible assets
|
116,160 | — | 116,160 | |||||||||
Intangible
assets, exclusive of goodwill
|
$ | 331,393 | $ | (27,571 | ) | $ | 303,822 |
For
the year ended December 31, 2009
|
$
|
9,852
|
||
For
the year ended December 31, 2010
|
$
|
9,765
|
||
For
the year ended December 31, 2011
|
$
|
9,608
|
||
For
the year ended December 31, 2012
|
$
|
9,458
|
||
For
the year ended December 31, 2013
|
$
|
8,040
|
8.
|
SEGMENT
REPORTING
|
WASTE
CONNECTIONS, INC.
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(Unaudited)
|
(Dollar
amounts in thousands, except share, per share, per gallon and per ton
amounts)
|
2008
|
Gross
Revenues
|
Intercompany
Revenues(b)
|
Net
Revenue
|
Operating
Income
Before
Depreciation,
Amortization
and
Gain
(Loss) on
Disposal
of Assets(c)
|
Total
Assets(d),
(e)
|
|||||||||||||||
Western
|
$ | 134,194 | $ | (12,674 | ) | $ | 121,520 | $ | 36,710 | $ | 745,096 | |||||||||
Central
|
78,855 | (8,848 | ) | 70,007 | 20,693 | 595,366 | ||||||||||||||
Southern
|
69,230 | (10,457 | ) | 58,773 | 18,384 | 583,938 | ||||||||||||||
Corporate(a)
|
— | — | — | (1,709 | ) | 78,585 | ||||||||||||||
$ | 282,279 | $ | (31,979 | ) | $ | 250,300 | $ | 74,078 | $ | 2,002,985 | ||||||||||
2009
|
Gross
Revenues
|
Intercompany
Revenues(b)
|
Net
Revenue
|
Operating
Income
Before
Depreciation,
Amortization
and
Gain
(Loss) on
Disposal
of Assets(c)
|
Total
Assets(d),
(e)
|
|||||||||||||||
Western
|
$ | 157,687 | $ | (19,425 | ) | $ | 138,262 | $ | 39,333 | $ | 1,080,379 | |||||||||
Central
|
75,227 | (7,658 | ) | 67,569 | 21,431 | 613,156 | ||||||||||||||
Southern
|
67,057 | (10,213 | ) | 56,844 | 19,204 | 596,457 | ||||||||||||||
Corporate(a)
|
— | — | — | (4,511 | ) | 379,172 | ||||||||||||||
$ | 299,971 | $ | (37,296 | ) | $ | 262,675 | $ | 75,457 | $ | 2,669,164 |
(a) Corporate
functions include accounting, legal, tax, treasury, information
technology, risk management, human resources, training and other typical
administrative functions.
|
|
(b) Intercompany
revenues reflect each segment’s total intercompany sales, including
intercompany sales within a segment and between segments. Transactions
within and between segments are generally made on a basis intended to
reflect the market value of the service.
|
|
(c) For
those items included in the determination of operating income before
depreciation, amortization and gain (loss) from disposal of assets, the
accounting policies of the segments are the same as those described in the
Company’s most recent Annual Report on Form 10-K.
|
|
(d) Goodwill
is included within total assets for each of the Company’s three geographic
operating segments. During the second quarter of 2008, the Company
realigned its organizational structure, which reduced the number of its
geographic operating segments from four to three. This realignment
resulted in the reallocation of goodwill among its segments. The following
tables show changes in goodwill during the three months ended March 31,
2008 and 2009, by reportable
segment:
|
Western
|
Central
|
Southern
|
Total
|
|||||||||||||
Balance
as of December 31, 2007
|
||||||||||||||||
Goodwill
|
$ | 257,915 | $ | 301,027 | $ | 252,107 | $ | 811,049 | ||||||||
Accumulated
impairment losses
|
— | — | — | — | ||||||||||||
257,915 | 301,027 | 252,107 | 811,049 | |||||||||||||
Goodwill
acquired during the three months ended March 31, 2008
|
8,694 | 5,138 | 48 | 13,880 | ||||||||||||
Balance
as of March 31, 2008
|
||||||||||||||||
Goodwill
|
266,609 | 306,165 | 252,155 | 824,929 | ||||||||||||
Accumulated
impairment losses
|
— | — | — | — | ||||||||||||
$ | 266,609 | $ | 306,165 | $ | 252,155 | $ | 824,929 |
WASTE
CONNECTIONS, INC.
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(Unaudited)
|
(Dollar
amounts in thousands, except share, per share, per gallon and per ton
amounts)
|
Western
|
Central
|
Southern
|
Total
|
|||||||||||||
Balance
as of December 31, 2008
|
||||||||||||||||
Goodwill
|
$ | 257,560 | $ | 313,145 | $ | 266,225 | $ | 836,930 | ||||||||
Accumulated
impairment losses
|
— | — | — | — | ||||||||||||
257,560 | 313,145 | 266,225 | 836,930 | |||||||||||||
Goodwill
acquired during the three months ended March 31, 2009
|
2,289 | — | — | 2,289 | ||||||||||||
Goodwill
adjustments during the three months ended March 31, 2009
|
— | (16 | ) | — | (16 | ) | ||||||||||
Balance
as of March 31, 2009
|
||||||||||||||||
Goodwill
|
259,849 | 313,129 | 266,225 | 839,203 | ||||||||||||
Accumulated
impairment losses
|
— | — | — | — | ||||||||||||
$ | 259,849 | $ | 313,129 | $ | 266,225 | $ | 839,203 |
Three
Months Ended
|
||||||||
March 31,
2008
|
March
31, 2009
|
|||||||
Operating
income before depreciation, amortization and gain (loss) on disposal of
assets
|
$ | 74,078 | $ | 75,457 | ||||
Depreciation
|
(21,827 | ) | (24,840 | ) | ||||
Amortization
of intangibles
|
(1,396 | ) | (2,476 | ) | ||||
Loss
on disposal of assets
|
(57 | ) | (507 | ) | ||||
Interest
expense
|
(10,612 | ) | (12,249 | ) | ||||
Interest
income
|
224 | 1,024 | ||||||
Other
income (expense)
|
(12 | ) | 6 | |||||
Income
before income taxes
|
$ | 40,398 | $ | 36,415 |
Three
months ended
March
31,
|
||||||||
2008
|
2009
|
|||||||
Collection
|
$ | 186,161 | $ | 209,782 | ||||
Disposal
and transfer
|
72,158 | 76,267 | ||||||
Recycling
and other
|
23,960 | 13,922 | ||||||
282,279 | 299,971 | |||||||
Less:
intercompany elimination
|
(31,979 | ) | (37,296 | ) | ||||
Total
revenues
|
$ | 250,300 | $ | 262,675 |
WASTE
CONNECTIONS, INC.
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(Unaudited)
|
(Dollar
amounts in thousands, except share, per share, per gallon and per ton
amounts)
|
9.
|
DERIVATIVE
FINANCIAL INSTRUMENTS
|
Date
Entered
|
Notional
Amount
|
Fixed
Interest
Rate
Paid*
|
Variable
Interest
Rate
Received
|
Effective
Date
|
Expiration
Date
|
||||||||
December
2005
|
$
|
150,000
|
4.76
|
%
|
1-month
LIBOR
|
June
2006
|
June
2009
|
||||||
November
2007
|
$
|
50,000
|
4.37
|
%
|
1-month
LIBOR
|
February
2009
|
February
2011
|
||||||
November
2007
|
$
|
50,000
|
4.37
|
%
|
1-month
LIBOR
|
February
2009
|
February
2011
|
||||||
November
2007
|
$
|
75,000
|
4.37
|
%
|
1-month
LIBOR
|
February
2009
|
February
2011
|
||||||
November
2007
|
$
|
75,000
|
4.40
|
%
|
1-month
LIBOR
|
March
2009
|
March
2011
|
||||||
November
2007
|
$
|
50,000
|
4.29
|
%
|
1-month
LIBOR
|
June
2009
|
June
2011
|
||||||
November
2007
|
$
|
100,000
|
4.35
|
%
|
1-month
LIBOR
|
June
2009
|
June
2011
|
||||||
March
2009
|
$
|
175,000
|
2.85
|
%
|
1-month
LIBOR
|
February
2011
|
February
2014
|
*
Plus applicable margin.
|
WASTE
CONNECTIONS, INC.
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(Unaudited)
|
(Dollar
amounts in thousands, except share, per share, per gallon and per ton
amounts)
|
Date
Entered
|
Notional
Amount
(in
gallons
per
month)
|
Diesel
Rate
Paid
Fixed
|
Diesel
Rate Received
Variable
|
Effective
Date
|
Expiration
Date
|
|||||||
October
2008
|
250,000
|
$
|
3.750
|
DOE
Diesel Fuel Index*
|
January
2009
|
December
2010
|
||||||
October
2008
|
100,000
|
$
|
3.745
|
DOE
Diesel Fuel Index*
|
January
2009
|
December
2010
|
||||||
October
2008
|
250,000
|
$
|
3.500
|
DOE
Diesel Fuel Index*
|
January
2009
|
December
2010
|
||||||
December
2008
|
100,000
|
$
|
3.000
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
||||||
December
2008
|
150,000
|
$
|
3.000
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
||||||
December
2008
|
150,000
|
$
|
2.820
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
||||||
December
2008
|
150,000
|
$
|
2.700
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
||||||
December
2008
|
400,000
|
$
|
2.950
|
DOE
Diesel Fuel Index*
|
January
2011
|
December
2011
|
||||||
December
2008
|
400,000
|
$
|
3.030
|
DOE
Diesel Fuel Index*
|
January
2012
|
December
2012
|
*
If the national U.S. on-highway average price for a gallon of diesel fuel
(“average price”), as published by the Department of Energy, exceeds the
contract price per gallon, the Company receives the difference between the
average price and the contract price (multiplied by the notional gallons)
from the counterparty. If the national U.S. on-highway average price for a
gallon of diesel fuel is less than the contract price per gallon, the
Company pays the difference to the
counterparty.
|
Derivatives
Designated as Cash Flow Hedges under SFAS 133
|
Balance
Sheet Location
|
Fair
Value
|
||||
Interest
rate swaps
|
Accrued
liabilities(a)
|
$
|
(13,892
|
)
|
||
Other
long-term liabilities
|
(14,010
|
)
|
||||
Fuel
hedges
|
Accrued
liabilities(b)
|
(8,689
|
)
|
|||
Other
long-term liabilities
|
(7,392
|
)
|
||||
Total
derivatives designated as cash flow hedges under SFAS 133
|
$
|
(43,983
|
)
|
(a) Represents
the estimated net amount of the existing unrealized losses on interest
rate swaps as of March 31, 2009 (based on the interest rate yield curve at
that date), included in accumulated other comprehensive loss expected to
be reclassified into pre-tax earnings within the next 12 months. The
timing of actual amounts reclassified into earnings is dependent on future
movements in interest rates.
|
|
(b) Represents
the estimated net amount of the existing unrealized losses on fuel hedges
as of March 31, 2009 (based on the forward DOE diesel fuel index curve at
that date), included in accumulated other comprehensive loss expected to
be reclassified into pre-tax earnings within the next 12 months. The
timing of actual amounts reclassified into earnings is dependent on future
movements in diesel fuel
prices.
|
Derivatives
Designated as Cash Flow
Hedges
under SFAS 133
|
Amount
of
Gain
or (Loss)
Recognized
in
Other
Comprehensive Income on
Derivatives
(Effective
Portion)
(a)
|
Statement
of
Income
Classification
|
Amount
of Gain or
(Loss)
Reclassified
from
AOCL into
Earnings
(Effective
Portion)
(b),
(c)
|
||||||
Interest
rate swaps
|
$
|
(2,553
|
)
|
Interest
expense
|
$
|
2,487
|
|||
Fuel
hedges
|
(4,889
|
)
|
Cost
of operations
|
1,623
|
|||||
Total
|
$
|
(7,442
|
)
|
$
|
4,110
|
(a) In
accordance with SFAS 133, the effective portions of the changes in fair
values of interest rate swaps and fuel hedges have been recorded in equity
as a component of AOCL. As the critical terms of the interest rate swaps
match the underlying debt being hedged, no ineffectiveness is recognized
on these swaps and, therefore, all unrealized changes in fair value are
recorded in AOCL. Because changes in the actual price of diesel fuel and
changes in the DOE index price do not offset exactly, the Company assesses
whether the fuel hedges are highly effective using the cumulative dollar
offset approach.
|
|
(b) Amounts
reclassified from AOCL into earnings related to realized gains and losses
on interest rate swaps are recognized when interest payments or receipts
occur related to the swap contracts.
|
|
(c) Amounts
reclassified from AOCL into earnings related to realized gains and losses
on fuel hedges are recognized when settlement payments or receipts occur
related to the swap contracts, which correspond to when the underlying
fuel is consumed.
|
10.
|
NET
INCOME PER SHARE INFORMATION
|
Three
months ended
March
31,
|
||||||||
2008
|
2009
|
|||||||
Numerator:
|
||||||||
Net
income attributable to Waste Connections for basic and diluted earnings
per share
|
$ | 22,455 | $ | 21,978 | ||||
Denominator:
|
||||||||
Basic
shares outstanding
|
66,789,398 | 79,963,438 | ||||||
Dilutive
effect of stock options and warrants
|
1,189,879 | 721,776 | ||||||
Dilutive
effective of restricted stock
|
142,676 | 73,727 | ||||||
Diluted
shares outstanding
|
68,121,953 | 80,758,941 |
11.
|
FAIR
VALUE MEASUREMENTS
|
Fair
Value Measurement at December 31, 2008 Using
|
||||||||||||||||
Total
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
|||||||||||||
Interest
rate swap derivative instruments – liability position
|
$ | (27,796 | ) | $ | — | $ | (27,796 | ) | $ | — | ||||||
Fuel
hedge derivative instruments – liability position
|
$ | (10,813 | ) | $ | — | $ | — | $ | (10,813 | ) | ||||||
Cash
equivalent money market funds
|
$ | 256,060 | $ | 256,060 | $ | — | $ | — | ||||||||
Restricted
assets
|
$ | 21,429 | $ | 21,429 | $ | — | $ | — | ||||||||
Fair
Value Measurement at March 31, 2009 Using
|
||||||||||||||||
Total
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
|||||||||||||
Interest
rate swap derivative instruments – liability position
|
$ | (27,902 | ) | $ | — | $ | (27,902 | ) | $ | — | ||||||
Fuel
hedge derivative instruments – liability position
|
$ | (16,081 | ) | $ | — | $ | — | $ | (16,081 | ) | ||||||
Cash
equivalent money market funds
|
$ | 325,943 | $ | 325,943 | $ | — | $ | — | ||||||||
Restricted
assets
|
$ | 22,979 | $ | 22,979 | $ | — | $ | — |
Level
3 Inputs
|
||||
Balance
as of December 31, 2008
|
$
|
(10,813
|
)
|
|
Realized
losses included in earnings
|
2,617
|
|||
Unrealized
losses included in
|
||||
Accumulated
Other
|
||||
Comprehensive
Loss
|
(7,885
|
)
|
||
Balance
as of March 31, 2009
|
$
|
(16,081
|
)
|
12.
|
COMPREHENSIVE
INCOME
|
Three
months ended
March
31,
|
||||||||
2008
|
2009
|
|||||||
Net
income
|
$ | 25,828 | $ | 22,312 | ||||
Unrealized
loss on swaps, net of tax benefit of $5,398 and $2,042 for the three
months ended March 31, 2008 and 2009, respectively
|
(8,552 | ) | (3,332 | ) | ||||
Comprehensive
income
|
17,276 | 18,980 | ||||||
Comprehensive
income attributable to noncontrolling interests
|
(3,373 | ) | (334 | ) | ||||
Comprehensive
income attributable to Waste Connections
|
$ | 13,903 | $ | 18,646 |
Three
months ended March 31, 2008
|
||||||||||||
Gross
|
Tax
effect
|
Net
of tax
|
||||||||||
Interest
rate swap amounts reclassified into interest expense
|
$ | 788 | $ | (305 | ) | $ | 483 | |||||
Changes
in fair value of interest rate swaps
|
(14,738 | ) | 5,703 | (9,035 | ) | |||||||
$ | (13,950 | ) | $ | 5,398 | $ | (8,552 | ) | |||||
Three
months ended March 31, 2009
|
||||||||||||
Gross
|
Tax
effect
|
Net
of tax
|
||||||||||
Interest
rate swap amounts reclassified into interest expense
|
$ | 4,011 | $ | (1,524 | ) | $ | 2,487 | |||||
Fuel
hedge amounts reclassified into cost of operations
|
2,617 | (994 | ) | 1,623 | ||||||||
Changes
in fair value of interest rate swaps
|
(4,117 | ) | 1,564 | (2,553 | ) | |||||||
Changes
in fair value of fuel hedges
|
(7,885 | ) | 2,996 | (4,889 | ) | |||||||
|
$ | (5,374 | ) | $ | 2,042 | $ | (3,332 | ) |
Fuel
Hedges
|
Interest
Rate
Swaps
|
Accumulated
Other
Comprehensive
Loss
|
||||||||||
Balance
at December 31, 2008
|
$ | (6,704 | ) | $ | (17,233 | ) | $ | (23,937 | ) | |||
Amounts
reclassified into earnings
|
1,623 | 2,487 | 4,110 | |||||||||
Change
in fair value
|
(4,889 | ) | (2,553 | ) | (7,442 | ) | ||||||
Balance
at March 31, 2009
|
$ | (9,970 | ) | $ | (17,299 | ) | $ | (27,269 | ) |
13.
|
COMMITMENTS
AND CONTINGENCIES
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
●
|
A
portion of our growth and future financial performance depends on our
ability to integrate acquired businesses into our organization and
operations;
|
|
●
|
Our
acquisitions may not be successful, resulting in changes in strategy,
operating losses or a loss on sale of the business
acquired;
|
|
●
|
Downturns
in the worldwide economy adversely affect operating
results;
|
|
●
|
Our
results are vulnerable to economic conditions and seasonal factors
affecting the regions in which we operate;
|
|
●
|
We
may be unable to compete effectively with larger and better capitalized
companies and governmental service providers;
|
|
●
|
We
may lose contracts through competitive bidding, early termination or
governmental action;
|
|
●
|
Price
increases may not be adequate to offset the impact of increased costs or
may cause us to lose volume;
|
|
●
|
Increases
in the price of fuel may adversely affect our business and reduce our
operating margins;
|
|
●
|
Increases
in labor and disposal and related transportation costs could impact our
financial results;
|
|
●
|
We
could face significant withdrawal liability if we withdraw from
participation in one or more multiemployer pension plans in which we
participate;
|
|
●
|
Efforts
by labor unions could divert management attention and adversely affect
operating results;
|
|
●
|
Increases
in insurance costs and the amount that we self-insure for various risks
could reduce our operating margins and reported
earnings;
|
|
●
|
Competition
for acquisition candidates, consolidation within the waste industry and
economic and market conditions may limit our ability to grow through
acquisitions;
|
|
●
|
Our
indebtedness could adversely affect our financial condition; we may incur
substantially more debt in the future;
|
|
●
|
Each
business that we acquire or have acquired may have liabilities that we
fail or are unable to discover, including environmental
liabilities;
|
●
|
Liabilities
for environmental damage may adversely affect our financial condition,
business and earnings;
|
|
●
|
Our
accruals for our landfill site closure and post-closure costs may be
inadequate;
|
|
●
|
We
may be subject in the normal course of business to judicial,
administrative or other third party proceedings that could interrupt our
operations, require expensive remediation, result in adverse judgments,
settlements or fines and create negative publicity;
|
|
●
|
The
financial soundness of our customers could affect our business and
operating results;
|
|
●
|
We
depend significantly on the services of the members of our senior,
regional and district management team, and the departure of any of those
persons could cause our operating results to suffer;
|
|
●
|
Our
decentralized decision-making structure could allow local managers to make
decisions that adversely affect our operating results;
|
|
●
|
Because
we depend on railroads for our intermodal operations, our operating
results and financial condition are likely to be adversely affected by any
reduction or deterioration in rail service;
|
|
●
|
We
may incur additional charges related to capitalized expenditures, which
would decrease our earnings;
|
|
●
|
Our
financial results are based upon estimates and assumptions that may differ
from actual results;
|
|
●
|
The
adoption of new accounting standards or interpretations could adversely
affect our financial results;
|
|
●
|
Our
financial and operating performance may be affected by the inability to
renew landfill operating permits, obtain new landfills and expand existing
ones;
|
|
●
|
Future
changes in laws regulating the flow of solid waste in interstate commerce
could adversely affect our operating results;
|
|
●
|
Fluctuations
in prices for recycled commodities that we sell and rebates we offer to
customers may cause our revenues and operating results to
decline;
|
|
●
|
Extensive
and evolving environmental and health and safety laws and regulations may
restrict our operations and growth and increase our
costs;
|
|
●
|
Extensive
regulations that govern the design, operation and closure of landfills may
restrict our landfill operations or increase our costs of operating
landfills; and
|
|
●
|
Unusually
adverse weather conditions may interfere with our operations, harming our
operating results.
|
Three
months ended March 31,
|
||||||||||||||||
2008
|
2009
|
|||||||||||||||
Collection
|
$ | 186,161 | 65.9 | % | $ | 209,782 | 70.0 | % | ||||||||
Disposal
and transfer
|
72,158 | 25.6 | 76,267 | 25.4 | ||||||||||||
Recycling
and other
|
23,960 | 8.5 | 13,922 | 4.6 | ||||||||||||
282,279 | 100.0 | % | 299,971 | 100.0 | % | |||||||||||
Less:
intercompany elimination
|
(31,979 | ) | (37,296 | ) | ||||||||||||
Total
revenue
|
$ | 250,300 | $ | 262,675 |
2009
|
Net
Revenue(a)
|
Operating
Income
Before
Depreciation,
Amortization
and
Gain
(Loss) on
Disposal
of Assets
|
Total
Assets
|
|||||||||
Western
|
$ | 138,262 | $ | 39,333 | $ | 1,080,379 | ||||||
Central
|
67,569 | 21,431 | 613,156 | |||||||||
Southern
|
56,844 | 19,204 | 596,457 | |||||||||
Corporate
|
— | (4,511 | ) | 379,172 | ||||||||
$ | 262,675 | $ | 75,457 | $ | 2,669,164 |
2008
|
Net
Revenue(a)
|
Operating
Income
Before
Depreciation,
Amortization
and
Gain
(Loss) on
Disposal
of Assets
|
Total
Assets
|
|||||||||
Western
|
$ | 121,520 | $ | 36,710 | $ | 745,096 | ||||||
Central
|
70,007 | 20,693 | 595,366 | |||||||||
Southern
|
58,773 | 18,384 | 583,938 | |||||||||
Corporate
|
— | (1,709 | ) | 78,585 | ||||||||
$ | 250,300 | $ | 74,078 | $ | 2,002,985 |
(a)
Revenues are presented net of intercompany
eliminations.
|
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
Revenues
|
100.0 | % | 100.0 | % | ||||
Cost
of operations
|
59.6 | 58.9 | ||||||
Selling,
general and administrative
|
10.8 | 12.4 | ||||||
Depreciation
|
8.7 | 9.5 | ||||||
Amortization
of intangibles
|
0.6 | 0.9 | ||||||
Loss
on disposal of assets
|
— | 0.2 | ||||||
Operating
income
|
20.3 | 18.1 | ||||||
Interest
expense
|
(4.2 | ) | (4.6 | ) | ||||
Interest
income
|
0.1 | 0.4 | ||||||
Other
income (expense), net
|
— | — | ||||||
Income
tax provision
|
(5.8 | ) | (5.4 | ) | ||||
Net
income attributable to noncontrolling interests
|
(1.4 | ) | (0.1 | ) | ||||
Net
income attributable to Waste Connections
|
9.0 | % | 8.4 | % |
March
31,
|
||||||||
2008
|
2009
|
|||||||
Net
cash provided by operating activities
|
$ | 64,593 | $ | 70,549 | ||||
Net
cash used in investing activities
|
(56,659 | ) | (35,889 | ) | ||||
Net
cash (used in) provided by financing activities
|
(8,727 | ) | 35,834 | |||||
Net
(decrease) increase in cash and equivalents
|
(793 | ) | 70,494 | |||||
Cash
and equivalents at beginning of period
|
10,298 | 265,264 | ||||||
Cash
and equivalents at end of period
|
$ | 9,505 | $ | 335,758 |
1)
|
An
increase in depreciation and amortization expense of
$4.1 million;
|
||
2)
|
An
increase of $1.0 million attributable to a decrease in the excess tax
benefit associated with equity-based compensation, due to a reduction in
stock option exercises resulting in reduced taxable income recognized by
employees that is tax deductible by us; and
|
||
3)
|
An
increase in cash flows from operating assets and liabilities, net of
effects from acquisitions, of $8.8 million for the three months ended
March 31, 2009. The significant components of the $8.8 million
in cash flows from changes in operating assets and liabilities, net of
effects from acquisitions, include the following:
|
||
a)
|
an
increase from accounts receivable of $1.8 million, due primarily to
improved accounts receivable turnover in 2009;
|
||
b)
|
an
increase from prepaids and other current assets of $6.3 million due
primarily to the utilization of prepaid income taxes;
|
||
c)
|
an
increase from other long term liabilities of $4.1 million due primarily to
recording a liability associated with the remaining lease on our prior
corporate office facilities;
|
||
d)
|
an
increase from accrued liabilities of $4.2 million, due primarily to
an increase in accrued interest due to changes in the payment timing for
LIBOR-based borrowings and our issuance in October 2008 of
$175 million of senior unsecured notes due October 1, 2015 (the
“2015 Senior Notes”), which pay interest semi-annually on
April 1 and October 1; less
|
||
e)
|
a
decrease from accounts payable of $6.2 million due primarily to the
timing of payments for operating
activities.
|
1)
|
A
decrease in payments for acquisitions of $27.0 million;
less
|
|
2)
|
An
increase in capital expenditures for property and equipment of $5.3
million, due primarily to a land and building purchase at one of our
California locations.
|
1)
|
A
decrease in payments to repurchase common stock of $31.5 million, due
to our election not to repurchase stock after March 31, 2008, and to
use our available capital to fund acquisition
opportunities;
|
|
2)
|
A
decrease in principal payments on long-term debt, net of proceeds of
$7.6 million;
|
|
3)
|
A
change in book overdraft of $7.7 million resulting from fluctuations
in our outstanding cash balances at banks for which outstanding check
balances can be offset;
|
|
4)
|
A
decrease in the amounts distributed to non-controlling interests of
$2.8 million due to the aforementioned purchase of the remaining 49%
interest in PCRCD; less
|
|
5)
|
A
decrease in proceeds from option and warrant exercises of
$4.0 million due to a decrease in the number of options and warrants
exercised in 2009; less
|
|
6)
|
A
decrease in the excess tax benefit associated with equity-based
compensation of $1.1 million, due to the aforementioned decrease in
options and warrants exercised in 2009, which resulted in decreased
taxable income, recognized by employees, that is tax deductible by
us.
|
Payments
Due by Period
|
||||||||||||||||||||
Recorded
Obligations
|
Total
|
Less
Than
1
Year
|
1
to 3
Years
|
3
to 5
Years
|
Over
5
Years
|
|||||||||||||||
Long-term
debt
|
$ | 868,864 | $ | 3,901 | $ | 204,094 | $ | 438,507 | $ | 222,362 | ||||||||||
Cash
interest payments
|
$ | 170,000 | $ | 41,902 | $ | 68,683 | $ | 29,357 | $ | 30,058 |
Long-term
debt payments include:
|
1)
|
$435.0
million in principal payments due 2012 related to our credit facility. Our
credit facility bears interest, at our option, at either the base rate
plus the applicable base rate margin (approximately 3.25% at March 31,
2009) on base rate loans, or the Eurodollar rate plus the applicable
Eurodollar margin (approximately 1.13% at March 31, 2009) on Eurodollar
loans. As of March 31, 2009, our credit facility allowed us to borrow up
to $845 million.
|
|
2)
|
$200.0
million in principal payments due 2026 related to our 2026 Notes. Holders
of the 2026 Notes may require us to purchase their notes in cash at a
purchase price of 100% of the principal amount of the 2026 Notes plus
accrued and unpaid interest, if any, upon a change in control, as defined
in the indenture, or, for the first time, on April 1, 2011. The 2026 Notes
bear interest at a rate of 3.75%.
|
|
3)
|
$175.0
million in principal payments due 2015 related to our 2015 Senior Notes.
Holders of the 2015 Senior Notes may require us to purchase their notes in
cash at a purchase price of 100% of the principal amount of the 2015
Senior Notes plus accrued and unpaid interest, if any, upon a change in
control, as defined in the master note purchase agreement. The 2015 Senior
Notes bear interest at a rate of 6.22%.
|
|
4)
|
$53.4
million in principal payments related to our tax-exempt bonds, of which
$10.3 million bears interest at fixed rates (between 7.0% and 7.25%) and
$43.1 million bears interest at variable rates (between 0.55% and 0.78%)
at March 31, 2009. The tax-exempt bonds have maturity dates ranging from
2012 to 2033.
|
|
5)
|
$4.0
million in principal payments related to our notes payable to sellers. Our
notes payable to sellers bear interest at rates between 5.5% and 10.35% at
March 31, 2009, and have maturity dates ranging from 2010 to
2036.
|
|
6)
|
$1.4
million in principal payments related to our notes payable to third
parties. Our notes payable to third parties bear interest at rates between
9.0% and 10.9% at March 31, 2009, and have maturity dates ranging from
2009 to 2019.
|
|
The
following assumptions were made in calculating cash interest
payments:
|
||
1)
|
We
calculated cash interest payments on the credit facility using the
Eurodollar rate plus the applicable Eurodollar margin at March 31, 2009.
We assumed the credit facility is paid off when the credit facility
matures in 2012.
|
|
2)
|
We
calculated cash interest payments on our interest rate swaps using the
stated interest rate in the swap agreement less the Eurodollar rate
through the term of the swaps.
|
|
3)
|
We
calculated cash interest payments on the tax-exempt bonds using the
interest rate at March 31,
2009.
|
Amount
of Commitment Expiration Per Period
|
||||||||||||||||||||
(amounts
in thousands)
|
||||||||||||||||||||
Unrecorded
Obligations(1)
|
Total
|
Less
Than
1
Year
|
1
to 3
Years
|
3
to 5
Years
|
Over
5
Years
|
|||||||||||||||
Operating
leases
|
$ | 72,066 | $ | 8,386 | $ | 15,204 | $ | 12,704 | $ | 35,772 | ||||||||||
Unconditional
purchase obligations
|
20,971 | 20,971 | — | — | — | |||||||||||||||
$ | 93,037 | $ | 29,357 | $ | 15,204 | $ | 12,704 | $ | 35,772 |
(1)
|
We
are party to operating lease agreements and unconditional purchase
obligations. These lease agreements and purchase obligations are
established in the ordinary course of our business and are designed to
provide us with access to facilities and products at competitive,
market-driven prices. At March 31, 2009, our unconditional purchase
obligations consist of multiple fixed-price fuel purchase contracts under
which we have 7.8 million gallons remaining to be purchased for a total of
$21.0 million, plus taxes and transportation costs upon delivery. The
current fuel purchase contracts expire on or before December 31,
2009.
|
Three
months ended March 31,
|
||||||||||||||||
2008
|
2009
|
|||||||||||||||
Number
of
Sites
|
Total
Tons
|
Number
of
Sites
|
Total
Tons
|
|||||||||||||
Owned
landfills and landfills operated
under life-of-site agreements
|
29 | 1,972 | 30 | 1,954 | ||||||||||||
Operated
landfills
|
7 | 222 | 7 | 203 | ||||||||||||
36 | 2,194 | 37 | 2,157 |
Three
months ended
March
31,
|
||||||||
2008
|
2009
|
|||||||
Net
cash provided by operating activities
|
$ | 64,593 | $ | 70,549 | ||||
Change
in book overdraft
|
(3,596 | ) | 4,115 | |||||
Plus:
Proceeds from disposal of assets
|
301 | 161 | ||||||
Plus:
Excess tax benefit associated with equity-based
compensation
|
1,101 | 115 | ||||||
Less:
Capital expenditures for property and equipment
|
(24,108 | ) | (29,412 | ) | ||||
Less:
Distributions to noncontrolling interests
|
(2,842 | ) | — | |||||
Free
cash flow
|
$ | 35,449 | $ | 45,528 |
Date
Entered
|
Notional
Amount
|
Fixed
Interest
Rate
Paid*
|
Variable
Interest
Rate
Received
|
Effective
Date
|
Expiration
Date
|
|||||||||
December
2005
|
$
|
150,000
|
4.76
|
%
|
1-month
LIBOR
|
June
2006
|
June
2009
|
|||||||
November
2007
|
$
|
50,000
|
4.37
|
%
|
1-month
LIBOR
|
February
2009
|
February
2011
|
|||||||
November
2007
|
$
|
50,000
|
4.37
|
%
|
1-month
LIBOR
|
February
2009
|
February
2011
|
|||||||
November
2007
|
$
|
75,000
|
4.37
|
%
|
1-month
LIBOR
|
February
2009
|
February
2011
|
|||||||
November
2007
|
$
|
75,000
|
4.40
|
%
|
1-month
LIBOR
|
March
2009
|
March
2011
|
|||||||
November
2007
|
$
|
50,000
|
4.29
|
%
|
1-month
LIBOR
|
June
2009
|
June
2011
|
|||||||
November
2007
|
$
|
100,000
|
4.35
|
%
|
1-month
LIBOR
|
June
2009
|
June
2011
|
|||||||
March
2009
|
$
|
175,000
|
2.85
|
%
|
1-month
LIBOR
|
February
2011
|
February
2014
|
*
plus applicable margin.
|
Date
Entered
|
Notional
Amount
(in
gallons
per
month)
|
Diesel
Rate
Paid
Fixed
|
Diesel
Rate Received
Variable
|
Effective
Date
|
Expiration
Date
|
|||||||
October
2008
|
250,000
|
$ 3.750
|
DOE
Diesel Fuel Index*
|
January
2009
|
December
2010
|
|||||||
October
2008
|
100,000
|
$ 3.745
|
DOE
Diesel Fuel Index*
|
January
2009
|
December
2010
|
|||||||
October
2008
|
250,000
|
$ 3.500
|
DOE
Diesel Fuel Index*
|
January
2009
|
December
2010
|
|||||||
December
2008
|
100,000
|
$ 3.000
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
|||||||
December
2008
|
150,000
|
$ 3.000
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
|||||||
December
2008
|
150,000
|
$ 2.820
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
|||||||
December
2008
|
150,000
|
$ 2.700
|
DOE
Diesel Fuel Index*
|
January
2010
|
December
2010
|
|||||||
December
2008
|
400,000
|
$ 2.950
|
DOE
Diesel Fuel Index*
|
January
2011
|
December
2011
|
|||||||
December
2008
|
400,000
|
$ 3.030
|
DOE
Diesel Fuel Index*
|
January
2012
|
December
2012
|
*
|
If
the national U.S. on-highway average price for a gallon of diesel fuel
(“average price”), as published by the Department of Energy, exceeds the
contract price per gallon, we receive the difference between the average
price and the contract price (multiplied by the notional gallons) from the
counterparty. If the national U.S. on-highway average price for a gallon
of diesel fuel is less than the contract price per gallon, we pay the
difference to the
counterparty.
|
Item 1.
|
Legal
Proceedings
|
Item 6.
|
Exhibits
|
WASTE
CONNECTIONS, INC.
|
|||
Date:
May 8, 2009
|
BY:
|
/s/
Ronald J. Mittelstaedt
|
|
Ronald
J. Mittelstaedt,
|
|||
Chief
Executive Officer
|
Date:
May 8, 2009
|
BY:
|
/s/
Worthing F. Jackman
|
|
Worthing
F. Jackman,
|
|||
Executive
Vice President and
|
|||
Chief
Financial Officer
|
Exhibit
Number
|
Description
of Exhibits
|
|||
2.1
|
Asset
Purchase Agreement, dated as of February 6, 2009, by and among
Republic Services, Inc., Waste Connections, Inc. and the other entities
party thereto
|
|||
2.2
|
Amended
and Restated Asset Purchase Agreement, dated as of April 1, 2009, by
and among Republic Services, Inc., Waste Connections, Inc. and the other
entities party thereto
|
|||
2.3
|
Purchase
Agreement, dated as of April 1, 2009, by and among Republic Services,
Inc., Republic Services of California Holding Company, Inc., Republic
Services of California I, LLC, Waste Connections, Inc. and Chiquita
Canyon, Inc.
|
|||
2.4
|
Purchase
Agreement, dated as of April 1, 2009, by and among Republic Services,
Inc., Allied Waste Landfill Holdings, Inc., Allied Waste North America,
Inc., Anderson Regional Landfill, LLC, Waste Connections, Inc. and
Anderson County Landfill, Inc.
|
|||
2.5
|
Stock
Purchase Agreement, dated as of April 1, 2009, by and among Republic
Services, Inc., Chambers Development of North Carolina, Inc., Allied Waste
North America, Inc. and Waste Connections, Inc.
|
|||
3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (incorporated
by reference to the exhibit filed with the Registrant’s Form 10-Q
filed on July 24, 2007)
|
|||
3.2
|
Amended
and Restated Bylaws of the Registrant (incorporated by reference to the
exhibit filed with the Registrant’s Form 10-Q filed on July 22,
2004)
|
|||
3.3
|
Second
Amended and Restated Bylaws of the Registrant, effective May 15, 2009
(incorporated by reference to the exhibit filed with the Registrant’s Form
8-K filed on January 15, 2009)
|
|||
3.4
|
Third
Amended and Restated Bylaws of the Registrant, effective May 15, 2009
(incorporated by reference to the exhibit filed with the Registrant’s Form
8-K filed on April 23, 2009)
|
|||
10.1
|
+
|
Employment
Agreement between the Registrant and Rick Wojahn, dated as of
February 9, 2009
|
||
10.2
|
+
|
Employment
Agreement between the Registrant and Scott Schreiber, dated as of
February 9, 2009
|
||
31.1
|
Certification
of Chief Executive Officer pursuant to Exchange Act
Rules 13a-14(a)/15d-14(a)
|
|||
31.2
|
Certification
of Chief Financial Officer pursuant to Exchange Act
Rules 13a-14(a)/15d-14(a)
|
|||
32.1
|
Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to
18 U.S.C.
§1350
|