01—Abstract
Summary
Summary of the 10-K filed February 18, 2021. Cited figures are marked; the original filing is the authoritative source.
Waste Connections, Inc. reported 2020 revenues of $5.446 billiona, up from $5.389 billion in 2019, but net income attributable to Waste Connections fell 63.9% to $204.7 million, driven primarily by $466.7 million in impairments and other operating items, including a $417.4 million impairment charge on property and equipment at four E&P landfills.
Excluding acquisitions, revenues decreased 2.6% as the COVID-19 pandemic reduced solid waste volumes and E&P waste revenue fell to $144.0 millionb from $256.0 million. Adjusted EBITDA was $1.662 billion, a 0.7% decline, with the margin at 30.5% versus 31.1% in 2019. Cash generation remained solid, with net cash from operating activities of $1.409 billion and adjusted free cash flow of $841.9 million.
The company returned $305.6 millionc to shareholders through dividends ($199.9 million) and share repurchases ($105.7 million), and the quarterly dividend was raised 10.8% to $0.205 per share in October 2020. Leverage rose to 2.68x at year-end from 2.41x, with total indebtedness of approximately $4.751 billion and $1.239 billion of remaining borrowing capacity under the Credit Agreement.
The company completed 21 acquisitions for $481.6 milliond in 2020 and expects 2021 capital expenditures for property and equipment of approximately $625 million. Management highlighted 17% of its workforce under collective bargaining agreements, a 12% reduction in incident rate, and over $35 million in incremental COVID-19-related costs, primarily supplemental pay for frontline employees.
02—Key points
Key Highlights
- Revenue rose 1.1% to $5.446 billion, but excluding acquisitions revenue decreased 2.6%, principally due to lower E&P waste revenue and COVID-19-related solid waste volume declines
- Net income attributable to Waste Connections decreased 63.9% to $204.7 million, reflecting a $417.4 million E&P landfill impairment charge
- Adjusted EBITDA was $1.662 billion, down 0.7%, with margin of 30.5% versus 31.1% in 2019
- Net cash provided by operating activities was $1.409 billion, and adjusted free cash flow was $841.9 million
- Shareholder returns totaled $305.6 million in 2020 through $199.9 million in cash dividends and $105.7 million in share repurchases; the quarterly dividend was increased to $0.205 per share
- Leverage ratio increased to 2.68x at December 31, 2020 from 2.41x, with total indebtedness of approximately $4.751 billion and $1.239 billion of remaining Credit Agreement borrowing capacity
- Completed 21 acquisitions for $481.6 million in 2020 and expects approximately $625 million in 2021 capital expenditures for property and equipment
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Waste Connections kept $0.04.
- Revenue$5.45B100.0%
- Cost of revenue−$3.28B60.2%
- Gross profit$2.17B39.8%
- Operating costs−$1.76B32.3%
- Operating income$412.4M7.6%
- Interest, other & tax−$208.4M3.8%
- Net income$204.0M3.7%
Where FY2020 revenue went
$5.45B- Cost of revenue: $3.28B, 60% of revenue
- Other operating costs: $1.22B, 22% of revenue
- Net income: $204.0M, 3.7% of revenue
- SG&A: $537.6M, 9.9% of revenue
- Interest, other & tax: $208.4M, 3.8% of revenue
Kept 3.7% as net incomeNet income $204.0M · 3.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 18, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $5.45B$5.39B | +1.1% |
| Cost of Revenue | $3.28B$3.20B | +2.4% |
| Gross Profit | $2.17B$2.19B | −0.9% |
| SG&A Expenses | $537.63M$546.28M | −1.6% |
| Operating Income | $412.43M$837.78M | −50.8% |
| Interest Expense | $162.38M$147.37M | +10.2% |
| Net Income | $203.99M$566.68M | −64.0% |
| EPS (Basic) | $0.78$2.15 | −63.7% |
| EPS (Diluted) | $0.78$2.14 | −63.6% |
| Shares Outstanding (Basic) | 263.19M263.79M | −0.2% |
| Shares Outstanding (Diluted) | 263.69M264.53M | −0.3% |
05—Questions
Frequently Asked Questions
What drove the sharp decline in net income in 2020?
Net income attributable to Waste Connections fell to $204.7 million from $566.8 million, primarily because impairments and other operating items rose to $466.7 million. The largest component was a $417.4 million impairment on property and equipment at four E&P landfills, following a decline in crude oil prices and reduced E&P activity linked to the COVID-19 pandemic.
How did the COVID-19 pandemic affect the company's results?
The filing states that the pandemic reduced commercial collection, transfer station, and landfill volumes, and cut E&P revenue to $144.0 million from $256.0 million. Solid waste volume decreases reduced revenue by $238.8 million, partly offset by price increases of $216.0 million. The company incurred over $35 million in incremental COVID-19-related costs, mainly supplemental pay for frontline employees.
How strong is the company's balance sheet and liquidity position?
Cash and equivalents increased to $617.3 million at December 31, 2020 from $326.7 million, and remaining Credit Agreement borrowing capacity was $1.239 billion. Leverage rose to 2.68x from 2.41x against a target range of approximately 2.5x to 3.0x total debt to EBITDA. The Credit Agreement matures in March 2023.
What are the company's capital allocation priorities going forward?
The company expects to spend approximately $625 million on property and equipment capital expenditures in 2021, plus opportunistic spending on undeveloped landfill property. It intends to fund these primarily from cash on hand, internally generated funds, and Credit Agreement borrowings. It also continues to pursue acquisitions, pays a quarterly dividend with a long-term objective of increases, and has a normal course issuer bid authorizing up to 13,144,773 shares for the period ending August 9, 2021.
What labor and safety trends does the filing highlight?
As of December 31, 2020, the company employed 18,933 active employees, with 17% of its workforce under collective bargaining agreements, mostly with the Teamsters Union. It reported no work stoppages in 2020 and a 12% reduction in incident rate. Total turnover improved by 11.2% and voluntary turnover fell 18.0% year over year.
06—Continue