Reports revenue of $259.6 million, up 4.8%
Reports operating margins, excluding acquisition-related costs, above expectations
Reports GAAP and adjusted Cash EPS of $0.34
Reports 2008 net cash provided by operating activities of $270.4 million, or 25.8% of revenue
Reports record full year free cash flow of $153.2 million, or $2.14 per share, up 44.2%
Revenue totaled $259.6 million, a 4.8% increase over revenue of $247.7 million in the year ago period. Operating income was $49.3 million versus $49.7 million in the fourth quarter of 2007. Net income in the quarter was $27.9 million, or $0.34 per share on a diluted basis of 81.0 million shares. In the year ago period, the company reported net income of $22.8 million and diluted earnings per share of $0.33.
Non-cash costs for equity-based compensation and amortization of acquisition-related intangibles were $4.1 million ($2.5 million net of taxes, or around $0.03 per share) in the quarter compared to $2.7 million ($1.6 million net of taxes, or around $0.02 per share) in the year ago period. SG&A in the current period included a $1.5 million ($0.9 million net of taxes, or around $0.01 per share) charge for transaction costs associated with the LeMay acquisition completed in the quarter, and the income tax provision included a $3.9 million (or around $0.05 per share) benefit due to a decrease in the company’s estimated deferred tax rate primarily resulting from the LeMay acquisition.
We are extremely pleased with our results in the fourth quarter especially in light of the most challenging macro environment we have ever experienced. A contracting economy, precipitous drop in recycling commodity prices and difficult weather conditions in the Pacific Northwest weighed on revenue, said Ronald J. Mittelstaedt, chairman and chief executive officer. However, continued pricing strength and operational improvements drove our margin for operating income before depreciation and amortization, excluding acquisition-related costs, about 100 basis points above the upper end of our outlook for the quarter. In addition, the LeMay acquisition met our expectation for operating income before depreciation and amortization despite around $2.5 million lower than expected revenue in the period.
Mittelstaedt added, While 2008 was a record year for acquired revenue, we enter 2009 with one of the strongest balance sheets in our sector and are uniquely positioned with the available capital necessary to fund additional growth opportunities, such as the acquisition of certain assets from Republic Services announced today.
In 2007, the company reported net income of $99.1 million, or $1.42 per share on a diluted basis of 70.0 million shares. Non-cash costs for equity-based compensation and amortization of acquisition-related intangibles for the year ended December 31, 2008, were $14.2 million ($8.8 million net of taxes, or around $0.12 per share) compared to $10.5 million ($6.4 million net of taxes, or around $0.09 per share) in 2007.
2009 OUTLOOK
Waste Connections also announced its outlook for 2009 assuming no change in the current economic environment. The company’s outlook also assumes the announced transaction with Republic Services closes April 1, 2009, but excludes the impact of any additional acquisitions, divestiture purchases or expensing of related transaction costs.
The outlook provided below is forward looking, and actual results may differ materially depending on risks and uncertainties detailed at the end of this release and in our periodic SEC filings. Certain components of the outlook for 2009 are subject to quarterly fluctuations.
Revenue is estimated to increase 14.5% to around $1.2 billion.
Depreciation and amortization, which includes around $14.5 million of non-cash amortization expense for acquisition-related intangibles, is estimated to be around 10.5% of revenue.
Operating income is estimated to be around 20.5% of revenue.
Net interest expense, which includes around $4.5 million for non-cash expense associated with the adoption of FSP No. APB 14-1, is estimated at around $48.5 million.
Effective tax rate is expected to be around 38.0%.
Net cash provided by operating activities is estimated to be around 24.5% of revenue.
Capital expenditures are estimated to be around $125 million.
Diluted shares outstanding are expected to average around 81 million.
The outlook includes around $29.0 million of non-cash related costs ($17.8 million net of taxes, or around $0.22 per share), consisting of an estimated $14.5 million for amortization of acquisition-related intangibles, $10.0 million for equity-based compensation costs and $4.5 million for non-cash interest expense related to convertible debentures associated with the adoption of FSP No. APB 14-1. In addition to increased amortization of acquisition-related intangibles, higher landfill depletion expense associated with certain sites expected to be acquired from Republic Services also contributes to the projected year-over-year increase in depreciation and amortization expense as a percentage of revenue from 9.3% in 2008.