Waste Connections, Inc. (WCN)

Get WCN Alerts
*Delayed - data as of Jun. 24, 2016  -  Find a broker to begin trading WCN now
Exchange: NYSE
Industry: Public Utilities
Community Rating:
Symbol List Views
FlashQuotes InfoQuotes
Stock Details
Summary Quote Real-Time Quote After Hours Quote Pre-market Quote Historical Quote Option Chain
Basic Chart Interactive Chart
Company Headlines Press Releases Market Stream
Analyst Research Guru Analysis Stock Report Competitors Stock Consultant Stock Comparison
Call Transcripts Annual Report Income Statement Revenue/EPS SEC Filings Short Interest Dividend History
Ownership Summary Institutional Holdings Insiders
(SEC Form 4)
 Save Stocks

Start Time: 08:33

End Time: 09:50

Waste Connections, Inc. (WCN)

Q3 2012 Earnings Call

23 October 2012 8:30 am ET


Ronald J. Mittelstaedt – Chief Executive Officer

Worthing F. Jackman – Executive Vice President and Chief Financial Officer

Steven F. Bouck – President of Waste Connections


Scott Levine – JPMorgan

Michael Hoffman – Wunderlich Securities, Inc.

Al Kaschalk – Wedbush Securities Inc.

Adam Thalhimer – BB&T Capital Markets

William Fisher – Raymond James

Joe Box – KeyBanc Capital Markets

Corey Greendale – First Analysis Securities Corporation

Alex Ovshey – Goldman Sachs

Barbara Noverini – Morningstar, Inc.

Jamie Yackow – Moab Capital Partners LLC

Tony Bancroft – Gabelli Asset Management

Stewart Scharf – S&P Capital IQ

Charlie Park – Findlay Park Partners



Good day, ladies and gentlemen, and welcome to Third Quarter 2012 Waste Connections Earnings Conference Call. My name is Deanna, and I’ll be the operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to your host for today, Mr. Ron Mittelstaedt, Chairman and Chief Executive Officer. Please proceed?

Ronald J. Mittelstaedt

Okay. Thank you, operator, and good morning. I’d like to welcome everyone to this conference call to discuss our third quarter 2012 results and the recently announced R360 acquisition, as well as provide both a detailed outlook for the fourth quarter, and a few early thoughts on 2013. I’m joined this morning by Steve Bouck, our President; Worthing Jackman, our CFO; and several other members of our senior management team.

As noted in our earnings release, we are once again extremely pleased with our performance in the third quarter as revenue, margins and free cash flow exceeded the upper end of our expectation. This strong performance was especially notable in light of declining recycled commodity values realized during the period.

As we’ve communicated throughout the year, year-over-year margin comparisons have been impacted primarily by decreases in recycled commodity values, our decision to turn away lower-priced disposable volumes at our Chiquita Canyon landfill and tough comp on special waste activity.

And while adjusted net income actually increased year-over-year, earnings on a per share basis have declined due to the higher share count resulting from the equity offering we completed earlier this year, and anticipation of increased acquisition activity.

Getting through these headwinds and deploying our excess capital for the R360 acquisition should start to significantly improve these comparisons. Moreover, as we look ahead, we are consciously encouraged by the recent improvement in construction data an uptick since early October in recycled commodity prices and our timetable for completing the R360 transaction. In fact, we believe the R360 acquisition should close before the end of this month.

Before we get into much more details, let me turn the call over to Worthing for our forward-looking disclaimer and other housekeeping items.

Worthing F. Jackman

Thank you, Ron, and good morning. We must inform everyone listening that certain matters discussed in this conference call are forward-looking statements intended to qualify for the Safe Harbors from liability established by the Private Securities Litigation Reform Act of 1995, including statements relating to expected volume and pricing trends, recycled commodity prices, expectations regarding period-to-period comparisons, potential acquisition activity, expected litigation outcomes, the anticipated closing date, contribution from and financing of announced acquisitions, contribution from closed acquisitions, share repurchases, the impact of the relocation of the Company’s corporate headquarters from California to Texas, comparative results among our regions, and our fourth quarter and 2013 outlook for financial results.

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. Stockholders, 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 adjusted operating income before depreciation and amortization, adjusted net income and adjusted net income per diluted share and adjusted free cash flow. Please refer to our earnings release for 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, and other companies may calculate these non-GAAP measures differently.

I'll now turn the call back over to Ron.

Ronald J. Mittelstaedt

Okay. Thank you, Worthing. As noted earlier, revenue in the third quarter exceeded our expectations. Revenue was $425.7 million, up 5.4% over the prior year period. Internal growth in the quarter was negative 2.7% broken down as follows. A positive 2.9% from core price, negative 3.4% volume, negative 2.2% from recycling, intermodal and other services and surcharges were flat. We expect core pricing growth to remain around 3% for Q4, and could see a slight increase in surcharges given current fuel prices.

At this point we believe that pricing in 2013 should look similar to this year, assuming no deterioration in the economy. Volume growth in Q3 was negative 3.4%, which was within our outlook of negative 3% to negative 3.5% for the quarter. Our decision to turn away lower-priced volumes at our Chiquita Canyon landfill, and tough year-over-year comp following record special waste levels last year account for over half of our volume losses this year alone.

For example, one stimulus driven special waste job in Q3 of 2011 accounted for almost 200,000 tons of disposal received in that period. The good news is that we will start to anniversary the impact of these two items as we get into 2013. In the meantime, two items have developed which will add to these losses beginning in Q4. First, the wrongful termination of the municipal contract in Madera, California that we are litigating with the intent of recovering several million dollars of estimated lost profit, and other damages.

The second item is the loss of a portion of subcontracted collection volumes from Oakleaf following its acquisition by Waste Management in mid 2011. The combined impact of these factors should result in volume losses remaining between negative 3% and negative 3.5% in Q4, 2012. Then improving in 2013 to between an estimated negative 1% and negative 1.5% under the current economic environment.

Read the rest of this transcript for free on seekingalpha.com