Waste Connections, Inc. ( WCN) Q3 2011 Earnings Conference Call October 19, 2011 8:30 AM ET Executives Ron Mittelstaedt – Chairman and CEO Steve Bouck – President Worthing Jackman – CFO Darrell Chambliss – COO Analysts Scott Levine – JPMorgan Hamzah Mazari – Credit Suisse William Fisher – Raymond James Al Kaschalk – Wedbush Securities Michael Hoffman - Wunderlich Securities Matthew Dodson – Edmunds White Partners Presentation Operator
Margins in the quarter expanded year-over-year despite an 80 basis point increase in fuel expense as a percentage of revenues. This resulted in year-over-year percentage growth in EBITDA and earnings per share once again surpassing revenue growth.On a 16.8% increase in revenue, adjusted operating income before depreciation and amortization grew 17.5%, and adjusted EPS grew 20% compared to Q3 2010. Free cash flow through the first nine months of 2011 was 19.5% of revenue, up 26% over the prior year period on a dollar basis. We’ve signed or completed acquisitions totaling over $200 million of annualized revenues and returned about $110 million to shareholders through stock repurchases and dividends so far this year. And as also announced yesterday, our Board of Directors authorized a 20% increase in the quarterly cash dividend as a result of our strong operating performance and capital position. Looking at 2012, the combination of about $80 million of acquisition rollover growth and expected core price at least equal to what we achieved in 2011, should position us well in the upcoming year. Before we get into much more details, let me turn the call over to Worthing for our forward-looking disclaimer, as well as other housekeeping items. Worthing Jackman Great. 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, including recycled commodity prices, contribution from closed acquisitions, signed or potential acquisition and privatization activities, share repurchases, dividends, available borrowing capacity and anticipated capital expenditures, as well as our fourth quarter 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 financial 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 Okay, thank you, Worthing. We are extremely pleased with our performance in the third quarter. Revenue was $404 million, up 16.8% over the prior year period. Internal growth in the quarter was a positive 5.2%, broken down as follows; positive 2.6% from core price, positive 0.9% from surcharges, negative 0.2% from volumes, and positive 1.9% from recycling, intermodal and other services. Net pricing or core price plus surcharges was 3.5% or slightly above our expectations for the quarter due to higher surcharges. We expect net pricing to remain above 3%, again in Q4. For the full year, this would result in net price of almost 3.5%, with core price at around 2.7%. We expect core pricing growth in 2012 to be at least equal to what we’ve achieved this year. Volume growth in Q3 was negative 0.2%, a notable improvement over our negative 1% outlook for the quarter, due primarily to better than expected special waste volumes and roll-off activities. Read the rest of this transcript for free on seekingalpha.com