Monday, integrated solid waste services company Waste Connections Inc. (WCN) said its third quarter earnings rose from a year ago, reflecting the impact of the acquisition of divested assets from Republic Services, a company-wide reduction in headcount earlier in the year, and continuing wage and expense controls. Revenues increased 15.9% year-on-year. Both earnings and revenues came in ahead of Street expectations. Additionally, the company's board authorized an increase in the share buy-back program by $300 million.
The Folsom, California-based company's third-quarter net income attributable to the company rose to $34.26 million or $0.43 per share from $27.61 million or $0.40 per share in the year ago quarter. On average, seven analysts polled by Thomson Reuters expected the company to earn $0.41 per share for the quarter. Analysts' estimates typically exclude special items.
Quarterly revenues grew 15.9% to $316.0 million from $272.7 million in the year ago period, exceeding Street estimate of $314.27 million.
In the prior second quarter of fiscal 2009, Waste Connections reported net income attributable to the company of $30.4 million, up from $25.6 million last year. Earnings per share was flat at $0.38 on higher share count, but above analysts expectations. Revenues increased 13.4% to $302.8 million from $267.0 million in the same quarter a year ago, above the Street estimates of $297.61 million.
Commenting on the results for the quarter, Ronald Mittelstaedt, chairman and chief executive officer, said, "We are extremely pleased with our results in the quarter as we exceeded the upper end of our expectations in a relatively stable, but still challenging, environment. This quarter fully reflected the impact of the acquisition of divested assets from Republic Services, a company-wide reduction in headcount earlier in the year, and continuing wage and expense controls."
Waste Connections' operating income was $64.8 million for the quarter, compared to $56.7 million last year. Adjusted operating income before depreciation and amortization rose to $101.28 million from $81.48 million a year ago.
Non-cash costs for equity-based compensation, amortization of acquisition-related intangibles, and amortization of debt discount related to convertible debt instruments were $4.5 million net of taxes or approximately $0.06 per share in the quarter, compared to $2.7 million net of taxes or approximately $0.04 per share in the year ago period.
Selling, general and administrative expenses in the current period increased to $35.75 million from $27.0 million a year ago. Expenses for the quarter included approximately $0.8 million net of taxes or approximately $0.01 per share associated with the expensing of acquisition costs, primarily related to the Sanipac transaction and the acquisition of divested assets from Republic Services, Inc.
Waste Connections' free cash flow more than doubled to $58.230 million for the quarter, compared to $26.010 million last year.
Earlier in the quarter, the company announced it reached a long-term agreement to expand its landfill gas to energy operations at the Potrero Hills Landfill in Northern California. Under the 25-year agreement with DTE Biomass Energy, landfill gas would be recovered and converted into renewable electric power. The project is expected to produce enough electricity to power approximately 7,000 homes per year.
Year-to-date, Waste Connections reported net income attributable to the company of $86.57 million or $1.08 per share, up from $75.64 million or $1.11 per share in the corresponding period last year.
For the nine months ended September 30, 2009, the company generated revenue of $881.5 million, an 11.6% increase over $790.0 million in the year ago comparable period.
Separately, the company announced it closed the sale of notes under its existing master note purchase agreement in a private placement with certain institutional accredited investors. The company sold $175 million aggregate principal amount of senior unsecured notes at a fixed interest rate of 5.25% per annum with interest payable in arrears semi-annually on May 1 and November 1 beginning on May 1, 2010, and with principal payable at the maturity of the notes on November 1, 2019.
The company intends to utilize the proceeds from the sale of the notes to reduce borrowings under the senior unsecured revolving credit facility and for general corporate purposes.
Waste Connections said its Board of Directors authorized a $300 million increase to its ongoing common stock repurchase program, increasing the total authorized amount from $500 million to $800 million. The Board extended the program's term through December 31, 2012. As of September 30, 2009, the remaining maximum dollar value of shares available for repurchase under the program was approximately $40 million.
Amongst peers, nonhazardous solid waste collection and disposal services Republic Services Inc. (RSG) intends to report its third quarter earnings on November 2. Analysts currently estimate the company to earn $0.36 per share on revenues of $2.07 billion for the quarter.
WCN closed Monday's trading at $31.28, up $0.42 or 1.36%, on a volume of about 0.759 million shares. In the past 52-week period, the stock traded in a range of $20.52 - 36.63, on a 3-month average volume of about 0.405 million shares.
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