Waste Connections Inc., Ontario, Canada, has announced its results for the fourth quarter of 2020 on Feb. 17.
According to the company, revenue in the fourth quarter totaled $1.398 billion, up from $1.362 billion in the year ago period. Operating income was $197.1 million, which included $24.1 million of impairments and other operating items primarily related to an adjustment to the carrying values of certain acquired long-lived assets and $5.3 million of acquisition-related costs. This compares to operating income of $194.2 million in the fourth quarter of 2019, which included $32.7 million of costs primarily resulting from impairments and other operating items.
Net income in the fourth quarter was $130.7 million, or $0.50 per share on a diluted basis of 263.6 million shares. In the year ago period, the company reported net income of $133.3 million, or $0.50 per share on a diluted basis of 264.6 million shares.
Adjusted net income in the fourth quarter was $178.6 million, or $0.68 per diluted share, versus $181.4 million, or $0.69 per diluted share, in the prior year period. Adjusted EBITDA in the fourth quarter was $426.6 million, as compared to $419.0 million in the prior year period.
For the year ended December 31, 2020, revenue was $5.446 billion, as compared to $5.389 billion in the year ago period. Operating income, which included $482.1 million in costs primarily related to the decrease in property and equipment at certain E&P landfills as a result of the company's impairment testing, was $412.4 million, as compared to $837.8 million in the prior year, which included $77.4 million of costs primarily resulting from impairments and other operating items.
Net income in 2020 was $204.7 million, or $0.78 per share on a diluted basis of 263.7 million shares. In the year ago period, the company reported net income of $566.8 million, or $2.14 per share on a diluted basis of 264.5 million shares.
Adjusted net income in 2020 was $695.8 million, or $2.64 per diluted share, compared to $719.6 million, or $2.72 per diluted share, in the year ago period. Adjusted EBITDA in 2020 was $1.662 billion, as compared to $1.674 billion in the prior year period.
"Q4 capped off a remarkable year for Waste Connections, culminating in a solid beat in the period and providing a higher entry point into 2021,” says Worthing F. Jackman, president and CEO of Waste Connections. “A more than 250 basis points higher than expected improvement in solid waste volumes and increased values for recycled commodities and renewable fuels drove adjusted EBITDA margins 50 basis points above expectations for the quarter. Moreover, we converted more than 50 percent of adjusted EBITDA to adjusted free cash flow in the year, while positioning ourselves for double-digit percentage growth in adjusted free cash flow in 2021.”
Jackman adds, “2020 was also noteworthy for the pace of acquisition activity, which accelerated in the fourth quarter to drive another outsized year of activity and an incremental 2 percent rollover revenue growth from such acquisitions in 2021. Acquisition dialogue remains elevated and given the strength of our balance sheet, we remain well positioned to fund additional acquisitions, while also increasing return of capital to shareholders through opportunistic share repurchases and dividend growth. With expected solid waste pricing plus volume growth of 5 percent and increasing recycling and renewable fuels values, 2021 is already positioned for continued growth and margin expansion, with upside from any further reopening activity, recovery in the economy or acquisitions completed during the year.”
Financial impact from COVID-19
Throughout the COVID-19 pandemic, Waste Connections says revenue from solid waste commercial collection, transfer and disposal has largely reflected the extent to which the slowdown in activity associated with shelter-in-place or other closure restrictions or requirements in effect since Q1 of 2020 have persisted.
Q2 was the first full quarter to reflect the impacts from the COVID-19 pandemic, and activity levels in impacted lines of business have shown improvement in subsequent quarters. Recoveries in more impacted markets, particularly those where reopenings continue to be delayed or where additional restrictions have been imposed, have generally been less pronounced.
The company has seen the following trends since Q2:
- Solid waste collection, transfer and disposal revenue improved from down 5.3 percent in Q2 to up 0.7 percent year over year on a same store basis in Q4, with reported solid waste volumes improving from down 9.6 percent in Q2 to down 3.1 percent in Q4.
- Year-over-year landfill tons, which were down approximately 10 percent in Q2, improved to down about 5 percent in Q4, and roll-off pulls improved from down approximately 11 percent in Q2 to down about 4 percent in Q4.
- Service resumptions or increases in frequency in solid waste commercial collection in competitive markets Waste Connections tracks that had previously suspended or reduced service due to the COVID-19 pandemic improved from recovery levels of 42 percent of such impacted revenue through Q2 to 56 percent at year end 2020.