Waste Connections ( WCN) Q2 2011 Earnings Call July 20, 2011 8:30 a.m. ET Executives Ron Mittelstaedt - Chairman and Chief Executive Officer Worthing Jackman - Chief Financial Officer Analysts Hamzah Mazari – Credit Suisse Scott Levine – JP Morgan Michael E. Hoffman – Wunderlich Securities, Inc. Al Kaschalk - Wedbush William Fisher – Raymond James Corey Greendale – First Analysis Presentation Operator
As many listeners and investors already know, we acquired County Waste, located in New York's Hudson Valley and completed a $250 million senior note financing early in the second quarter. More recently, we closed a new $1.2 billion five-year credit facility providing us with more than $600 million in available excess revolver capacity, and we were upgraded by Standard & Poors to BBB, putting us among the highest investment-graded rated companies in our sector.Put simply, the year has played out very well for us so far. Before we get into much more detail, let me turn the call over to Worthing for our forward-looking disclaimer and other housekeeping items. Worthing 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 related to expected volume and pricing trends, recycled commodity prices, contribution from closed acquisitions, potential acquisition and privatization activity, share repurchases, dividends, available borrowing capacity, anticipated capital expenditures, as well as our third quarter 2010 and full year 2011 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 earnings per share, and free cash flow. 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 performance of our operations. Other companies may calculate these non-GAAP measures differently. I'll now turn the call back over to Ron. Ron Mittelstaedt Thank you Worthing. We are extremely pleased with our performance in the second quarter. Revenue was $390.2 million, up 18.1% over the prior year period. Internal growth in the quarter was 5.5%, broken down as follows: positive 2.8% from core price, positive 0.8% from surcharges, positive 0.5% from volume, and positive 1.4% from recycling, intermodal and other services. Net pricing, or core price plus surcharges, was 3.6%. This is up 20 basis points sequentially from the prior quarter, due to a slight increase in surcharges related primarily to higher fuel prices. Given these higher fuel prices, we expect the net pricing to remain above 3% for the remainder of this year. Volume growth in Q2 was positive 0.5%, which was a half to a full point above our expectations, primarily due to increase in special waste and C&D disposal volumes and roll off activity. We expect a portion of this modest improvement to continue into the second half of the year, but remind listeners that volume on a reported basis in Q3 should be negative due to the difficult comparison in the third quarter of 2010. As listeners may recall, we reported a positive 3.2% volume growth and called out a notably large special waste job that had contributed about 2% of that volume in 2010. Looking at landfill volumes, disposal volumes in the second quarter, adjusted for the impact of acquisitions, were up about 6% year over year due to increases in special waste and C&D volumes. MSW volumes were slightly negative. Almost 60% of our landfills reported year over year increases in overall disposal volumes in Q2 and a little more than half of our sites reported increase in just MSW volumes. These trends are expected to continue into Q3. Read the rest of this transcript for free on seekingalpha.com