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Waste Connections Inc. (WCN)
Q1 2009 Earnings Call
April 22, 2009 8:30 am ET
Ron Mittelstaedt – Chairman and Chief Executive Officer
Steven Bouck – President
Worthing Jackman – Executive Vice President and Chief Financial Officer
Michael Hoffman – Wunderlich Securities
William Fisher – Raymond James
Scott Levine – JPMorgan
Corey Greendale – First Analysis
Jonathan Ellis – Merrill Lynch
[Philip Blackik] for David Feinberg – Goldman Sachs
Justin Maurer – Lord Abbett
Previous Statements by WCN
» Waste Connections, Inc. Q2 2009 Earnings Call Transcript
» Waste Connections, Inc Q4 2008 Earnings Call Transcript
» Waste Connections Inc. Q3 2008 Earnings Conference Call Transcript
I'd like to welcome everyone to our conference call to discuss first quarter 2009 results and provide our detailed outlook for the second quarter. I am joined this morning by Steve Bouck, our President, Worthing Jackman, our CFO and several other members of our senior management team.
As stated in our earnings release we are extremely pleased with our start to this year. Though the weak economy continues to weigh on revenue, we exceeded our outlook for operating income before depreciation, amortization and accretion, excluding certain one-time items identified in our press release, increased free cash flow 28% over the prior year period, announced a record amount of acquisitions, saw some recovery in recycled commodity prices throughout the quarter and may be nearing the bottom for volume decline.
But before we get into a more detailed discussion on these and other topics, let me turn the call over to Worthing for our forward-looking disclaimer, some changes in GAAP investors should be aware of and other housekeeping items.
We must inform everyone listening that certain matters discussed in this conference call are forward-looking statements intended to qualify for the Safe Harbor some liability established by the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to various risks and uncertainties which could cause actual results to differ materially from those currently anticipated. These risks and uncertainties are set forth in the company's periodic filings with the Securities and Exchange Commission. Shareholders, potential investors and other participants are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.
The forward-looking statements made herein are made only as of the date of this conference call and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
On the call we will discuss non-GAAP measures such as operating income before depreciation, amortization and accretion, free cash flow, cash earnings and adjusted cash earnings. Please refer to our earnings release for a reconciliation of such non-GAAP measures to the most comparable GAAP measure. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently.
I'd now like to highlight three changes in GAAP effective this quarter that impact year-to-year comparisons and the presentation of our financials. First, SFAS 141(R) requires us to expense acquisition related costs that previously have been included as an element of purchase price and capitalized as such transactions.
Second, APB 14-1 requires us to record a non-cash interest expense equal to the difference between the cash coupon in our convertible notes and the estimated non-convertible borrowing rate back at the time of the issuance of these notes. It also requires us to include such non-cash interest costs in both our current and prior year periods.
Finally SFAS 160 requires for current and prior year periods that minority interest be renamed non-controlling interest, that we present amounts of consolidated net income attributable to Waste Connections and to the non-controlling interest, which essentially means we move that below net income and that we move such non-controlling interest to a component of equity on our balance sheet.
With that said, I'll now turn the call back over to Ron.
Well if we get any more accounting pronouncements we won't have time to worry about calls, so. Okay, as previously stated we are extremely pleased with our results in the quarter. Revenue was $262.7 million, up 4.9% over the prior year period driven by a 10.6% increase from acquisition activity.
Organic growth was a negative 5.7% broken down as follow, a positive 5.8% core price, a negative 1.7% from surcharges, a negative 5.8% volume and a negative 4% for recycling, intermodal and other services.
Core pricing of 5.8% came in at the upper end of our original 5.5% to 6% range we had expected for Q1, and this is up sequentially from 5.2% in Q4. Core pricing for the full year remains on track to average about 5%.
But mathematically on a reported basis will decline throughout the year as we begin to comp higher seasonal revenue quarters in the year ago period. Surcharges in selected markets due to changes in certain costs such as fuel, decreased as expected by 1.7% in Q1 due primarily to lower fuel prices.
We believe surcharges in 2009 will average a negative 2% unless there is a material increase in the market price for fuel later in the year. Overall pricing for 2009 is now fairly locked in with an average of 5% core price and a negative 2% in surcharges, resulting in a net 3% plus all in price, no different than what we had communicated for the year in February.