SOURCE: Waste Connections, Inc.

Waste Connections, Inc.

February 08, 2010 16:05 ET

Waste Connections Reports Fourth Quarter Results and Provides 2010 Outlook

FOLSOM, CA--(Marketwire - February 8, 2010) - Waste Connections, Inc. (NYSE: WCN)

--  Revenue of $309.9 million, up 19.4% over the prior year period
--  GAAP EPS of $0.29 and adjusted EPS* of $0.37, up 23.3% over the prior
    year period
--  Full year net cash provided by operating activities of $303.6 million,
    or 25.5% of revenue
--  Full year free cash flow* of $192.3 million, or $2.39 per share,
    up 25.6%
--  Repurchased approximately $62.6 million of common stock during second
    half of the year
--  Expects approximately 7.5% revenue growth in 2010, excluding additional
    acquisitions, and continuing margin expansion

Waste Connections, Inc. (NYSE: WCN) today announced its results for the fourth quarter of 2009. Revenue totaled $309.9 million, a 19.4% increase over revenue of $259.6 million in the year ago period. Operating income was $58.9 million versus $49.3 million in the fourth quarter of 2008. Net income attributable to Waste Connections in the quarter was $23.3 million, or $0.29 per share on a diluted basis of 80.0 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $27.3 million, or $0.34 per share on a diluted basis of 81.0 million shares.

Adjusted net income attributable to Waste Connections in the quarter was $29.3 million*, or $0.37 per share*, adjusted for costs primarily associated with the early termination of certain interest rate swaps. Adjusted net income attributable to Waste Connections in the prior year period was $24.3 million*, or $0.30 per share*, adjusted primarily for both acquisition costs associated with the LeMay transaction and a benefit to the income tax provision due to a decrease in the Company's estimated deferred tax liabilities primarily resulting from the LeMay transaction.

Non-cash costs for equity-based compensation, amortization of acquisition-related intangibles, and amortization of debt discount related to convertible debt instruments in connection with the adoption of new accounting guidance on January 1, 2009, were $7.2 million ($4.5 million net of taxes, or approximately $0.06 per share) in the quarter compared to $5.2 million ($3.2 million net of taxes, or approximately $0.04 per share) in the year ago period.

"Our results in the quarter once again exceeded the upper end of our expectations, positioning us well for 2010. Improving organic growth, recent acquisitions and continuing cost controls drove an approximate 20% year-over-year increase in revenue in the quarter, a 24% increase in adjusted operating income before depreciation and amortization*, and a 23% increase in adjusted earnings per share*. We reported record free cash flow* for the year of $192.3 million, or 16.1% of revenue, despite increasing capital expenditures year-over-year as we pulled a portion of 2010's capital expenditures into 2009," said Ronald J. Mittelstaedt, Chairman and Chief Executive Officer. "More importantly, we believe many of the drivers for further improvement in 2010 are already in place: core pricing, sequentially improving volume growth, higher recycled commodity prices, lower priced fuel hedges and reduced capital expenditures. These drivers should produce strong double-digit growth in earnings per share and another record year for free cash flow."

For the year ended December 31, 2009, revenue was $1.19 billion, a 13.5% increase over revenue of $1.05 billion in the year ago period. Operating income was $230.7 million versus $212.4 million for the same period in 2008. Net income attributable to Waste Connections for the year ended December 31, 2009, was $109.8 million, or $1.37 per share on a diluted basis of 80.3 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $102.9 million, or $1.44 per share on a diluted basis of 71.4 million shares. Adjusted net income attributable to Waste Connections in 2009 was $117.9 million*, or $1.47 per share*, compared to $100.3 million*, or $1.40 per share* in 2008.

For the year ended December 31, 2009, non-cash costs for equity-based compensation, amortization of acquisition-related intangibles, and amortization of debt discount related to convertible debt instruments in connection with the adoption of new accounting guidance on January 1, 2009, were $27.0 million ($16.9 million net of taxes, or approximately $0.21 per share) compared to $18.6 million ($11.5 million net of taxes, or approximately $0.16 per share) in the year ago period.

On January 1, 2009, Waste Connections adopted new accounting guidance related to minority interests, the provisions of which, among others, require for all periods presented that (1) minority interests be renamed noncontrolling interests, (2) a company present amounts of consolidated net income attributable to the parent and to the noncontrolling interests, and (3) a company present such noncontrolling interests as equity. Financial statements for the current and prior year periods reflect the adoption of this new accounting guidance related to such noncontrolling interests.

2010 OUTLOOK

Waste Connections also announced its outlook for 2010 assuming no change in the current economic environment. The Company's outlook excludes the impact of any additional acquisitions, expensing of acquisition-related transaction costs, charge associated with the announced optional redemption of convertible notes on April 1st, and any impact to the income tax provision from changes in the Company's deferred tax liabilities.

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 2010 are subject to quarterly fluctuations.

--  Revenue is estimated to be approximately $1.28 billion.
--  Depreciation expense is estimated to be approximately 10.2% of revenue.
--  Amortization expense for acquisition-related intangibles is estimated
    to be approximately 1.1% of revenue.
--  Closure and post-closure accretion expense is estimated to be
    approximately 0.2% of revenue.
--  Operating income is estimated to be approximately 20.2% of revenue.
--  Net interest expense is estimated to be approximately $40.5 million.
--  Effective tax rate is expected to be approximately 38.5%.
--  Net income attributable to noncontrolling interests is estimated to
    reduce net income by approximately $1.0 million.
--  Net cash provided by operating activities is estimated to be
    approximately 25.0% of revenue.
--  Capital expenditures are estimated to range between $115 million and
    $120 million.

CONFERENCE CALL

Waste Connections will be hosting a conference call related to fourth quarter results and 2010 outlook on February 9th at 8:30 A.M. Eastern Time. The call will be broadcast live over the Internet at www.streetevents.com or through a link on our website at www.wasteconnections.com. A playback of the call will be available at both of these websites.

Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly secondary markets in the Western and Southern U.S. The Company serves approximately two million residential, commercial and industrial customers from a network of operations in 26 states. The Company also provides intermodal services for the movement of containers in the Pacific Northwest. Waste Connections, Inc. was founded in September 1997 and is headquartered in Folsom, California.

For more information, visit the Waste Connections web site at www.wasteconnections.com. Copies of financial literature, including this release, are available on the Waste Connections web site or through contacting us directly at (916) 608-8200.

* A non-GAAP measure; see accompanying Non-GAAP Reconciliation Schedule.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this report are forward-looking in nature, including statements related to our 2010 outlook. These statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates," or the negative thereof or comparable terminology, or by discussions of strategy. Our business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) our acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (2) a portion of our growth and future financial performance depends on our ability to integrate acquired businesses into our organization and operations; (3) downturns in the worldwide economy adversely affect operating results; (4) our results are vulnerable to economic conditions and seasonal factors affecting the regions in which we operate; (5) we may be subject in the normal course of business to judicial, administrative or other third party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity; (6) we may be unable to compete effectively with larger and better capitalized companies and governmental service providers; (7) we may lose contracts through competitive bidding, early termination or governmental action; (8) price increases may not be adequate to offset the impact of increased costs or may cause us to lose volume; (9) increases in the price of fuel may adversely affect our business and reduce our operating margins; (10) increases in labor and disposal and related transportation costs could impact our financial results; (11) efforts by labor unions could divert management attention and adversely affect operating results; (12) we could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate; (13) increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings; (14) competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions; (15) our indebtedness could adversely affect our financial condition; we may incur substantially more debt in the future; (16) each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, including environmental liabilities; (17) liabilities for environmental damage may adversely affect our financial condition, business and earnings; (18) our accruals for our landfill site closure and post-closure costs may be inadequate; (19) the financial soundness of our customers could affect our business and operating results; (20) we depend significantly on the services of the members of our senior, regional and district management team, and the departure of any of those persons could cause our operating results to suffer; (21) our decentralized decision-making structure could allow local managers to make decisions that adversely affect our operating results; (22) because we depend on railroads for our intermodal operations, our operating results and financial condition are likely to be adversely affected by any reduction or deterioration in rail service; (23) we may incur additional charges related to capitalized expenditures, which would decrease our earnings; (24) our financial results are based upon estimates and assumptions that may differ from actual results; (25) the adoption of new accounting standards or interpretations could adversely affect our financial results; (26) our financial and operating performance may be affected by the inability to renew landfill operating permits, obtain new landfills and expand existing ones; (27) future changes in laws or renewed enforcement of laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results; (28) extensive and evolving environmental and health and safety laws and regulations may restrict our operations and growth and increase our costs; (29) climate change regulations may adversely affect operating results; (30) extensive regulations that govern the design, operation and closure of landfills may restrict our landfill operations or increase our costs of operating landfills; (31) alternatives to landfill disposal may cause our revenues and operating results to decline; (32) fluctuations in prices for recycled commodities that we sell and rebates we offer to customers may cause our revenues and operating results to decline; and (33) unusually adverse weather conditions may interfere with our operations, harming our operating results. These risks and uncertainties, as well as others, are discussed in greater detail in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change.

- financial tables attached -

                         WASTE CONNECTIONS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF INCOME
        THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2009
                               (Unaudited)
           (in thousands, except share and per share amounts)

                              Three months ended     Twelve months ended
                                  December 31,           December 31,
                            ----------------------  ----------------------
                               2008        2009        2008        2009
                            ----------  ----------  ----------  ----------

Revenues                    $  259,568  $  309,897  $1,049,603  $1,191,393
Operating expenses:
   Cost of operations          154,534     181,584     628,075     692,415
   Selling, general and
    administrative              29,949      33,615     111,114     138,026
   Depreciation                 23,637      31,670      91,095     117,796
   Amortization of
    intangibles                  2,115       3,611       6,334      12,962
   Loss (gain) on disposal
    of assets                       60         556         629        (481)
                            ----------  ----------  ----------  ----------
Operating income                49,273      58,861     212,356     230,675

Interest expense               (12,405)    (12,344)    (43,102)    (49,161)
Interest income                  2,790         139       3,297       1,413
Other expense, net                (518)     (8,607)       (633)     (7,551)
                            ----------  ----------  ----------  ----------
Income before income taxes      39,140      38,049     171,918     175,376

Income tax provision           (10,624)    (14,495)    (56,775)    (64,565)
                            ----------  ----------  ----------  ----------
Net income                  $   28,516  $   23,554  $  115,143  $  110,811
Less: net income
 attributable to
 noncontrolling interests       (1,248)       (295)    (12,240)       (986)
                            ----------  ----------  ----------  ----------
Net income attributable to
 Waste Connections          $   27,268  $   23,259  $  102,903  $  109,825
                            ==========  ==========  ==========  ==========

Earnings per common share
 attributable to Waste
 Connections' common
 stockholders:
   Basic                    $     0.34  $     0.30  $     1.47  $     1.38
                            ==========  ==========  ==========  ==========

   Diluted                  $     0.34  $     0.29  $     1.44  $     1.37
                            ==========  ==========  ==========  ==========

Shares used in the per share
 calculations:
   Basic                    79,792,842  78,803,152  70,024,874  79,413,067
                            ==========  ==========  ==========  ==========
   Diluted                  81,031,028  79,952,014  71,419,712  80,337,441
                            ==========  ==========  ==========  ==========





                         WASTE CONNECTIONS, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                               (Unaudited)
           (in thousands, except share and per share amounts)

                                                December 31,  December 31,
                                                    2008          2009
                                                ------------  ------------ 
ASSETS
Current assets:
 Cash and equivalents                           $    265,264  $      9,639
 Accounts receivable, net of allowance for
  doubtful accounts of $3,846 and $4,058 at
  December 31, 2008 and 2009, respectively           118,456       138,972
 Deferred income taxes                                22,347        17,748
 Prepaid expenses and other current assets            23,144        33,495
                                                ------------  ------------
    Total current assets                             429,211       199,854

Property and equipment, net                          984,124     1,308,392
Goodwill                                             836,930       906,710
Intangible assets, net                               306,444       354,303
Restricted assets                                     23,009        27,377
Other assets, net                                     20,639        23,812
                                                ------------  ------------
                                                $  2,600,357  $  2,820,448
                                                ============  ============

LIABILITIES AND EQUITY
Current liabilities:
 Accounts payable                               $     65,537  $     86,669
 Book overdraft                                        4,315        12,117
 Accrued liabilities                                  95,220        93,380
 Deferred revenue                                     45,694        50,138
 Current portion of long-term debt and notes
  payable                                              4,698         2,609
                                                ------------  ------------
    Total current liabilities                        215,464       244,913

Long-term debt and notes payable                     819,828       867,554
Other long-term liabilities                           47,509        45,013
Deferred income taxes                                255,559       305,932
                                                ------------  ------------
    Total liabilities                              1,338,360     1,463,412

Commitments and contingencies

Equity:
Preferred stock: $0.01 par value; 7,500,000
 shares authorized; none issued and outstanding            -             -
Common stock: $0.01 par value; 150,000,000
 shares authorized;  79,842,239 and 78,599,083
 shares issued and outstanding at December 31,
 2008 and 2009, respectively                             798           786
Additional paid-in capital                           661,555       625,173
Retained earnings                                    622,913       732,738
Accumulated other comprehensive loss                 (23,937)       (4,892)
                                                ------------  ------------
 Total Waste Connections' equity                   1,261,329     1,353,805
Noncontrolling interests                                 668         3,231
                                                ------------  ------------
 Total equity                                      1,261,997     1,357,036
                                                ------------  ------------
                                                $  2,600,357  $  2,820,448
                                                ============  ============





                         WASTE CONNECTIONS, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2009
                               (Unaudited)
                              (in thousands)

                                                      Twelve months ended
                                                          December 31,
                                                      --------------------
                                                        2008       2009
                                                      ---------  ---------


Cash flows from operating activities:
Net income                                            $ 115,143  $ 110,811
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Loss (gain) on disposal of assets                         629       (481)
  Depreciation                                           91,095    117,796
  Amortization of intangibles                             6,334     12,962
  Deferred income taxes, net of acquisitions             30,277     38,224
  Amortization of debt issuance costs                     1,840      1,942
  Amortization of debt discount                           4,404      4,684
  Stock-based compensation                                7,854      9,336
  Interest income on restricted assets                     (543)      (488)
  Closure and post-closure accretion                      1,400      2,055
  Excess tax benefit associated with equity-based
   compensation                                          (6,441)    (4,054)
  Net change in operating assets and liabilities, net
   of acquisitions                                       18,417     10,850
                                                      ---------  ---------
Net cash provided by operating activities               270,409    303,637
                                                      ---------  ---------

Cash flows from investing activities:
  Payments for acquisitions, net of cash acquired      (355,150)  (420,011)
  Capital expenditures for property and equipment      (113,496)  (128,251)
  Proceeds from disposal of assets                        2,560      5,061
  Increase in restricted assets, net of interest
   income                                                (2,653)    (3,880)
  Decrease (increase) in other assets                     1,092     (1,146)
                                                      ---------  ---------
Net cash used in investing activities                  (467,647)  (548,227)
                                                      ---------  ---------

Cash flows from financing activities:
  Proceeds from long-term debt                          302,000    426,500
  Principal payments on notes payable and long-term
   debt                                                (223,854)  (401,970)
  Change in book overdraft                               (4,520)     7,802
  Proceeds from option and warrant exercises             19,089     15,397
  Excess tax benefit associated with equity-based
   compensation                                           6,441      4,054
  Distributions to noncontrolling interests              (8,232)         -
  Payments for repurchase of common stock               (31,527)   (62,624)
  Proceeds from secondary stock offering, net           393,930          -
  Debt issuance costs                                    (1,123)      (194)
                                                      ---------  ---------
Net cash provided by (used in) financing activities     452,204    (11,035)
                                                      ---------  ---------

Net increase (decrease) in cash and equivalents         254,966   (255,625)
Cash and equivalents at beginning of period              10,298    265,264
                                                      ---------  ---------
Cash and equivalents at end of period                 $ 265,264  $   9,639
                                                      =========  =========




                          ADDITIONAL STATISTICS
              THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009
                         (Dollars in thousands)

Internal Growth:  The following table reflects revenue growth for
operations owned for at least 12 months:



                                       Three Months  Twelve Months
                                           Ended         Ended
                                        December 31,  December 31,
                                            2009          2009
                                        ------------  ------------
     Core Price                                  4.1%          4.8%
     Surcharges                                 (2.0%)        (2.1%)
     Volume                                     (4.5%)        (6.2%)
     Intermodal, Recycling and Other             1.4%         (2.5%)
                                        ------------  ------------
     Total                                      (1.0%)        (6.0%)



Uneliminated Revenue Breakdown:

                                  Three Months Ended  Twelve Months Ended
                                   December 31, 2009  December 31, 2009
                                   -----------------  -----------------
   Collection                      $   229,738  64.9% $   901,768  66.1%
   Disposal and Transfer               103,477  29.3%     392,497  28.8%
   Intermodal, Recycling and Other      20,526   5.8%      68,845   5.1%
                                   ----------- -----  ----------- -----
   Total before inter-company
    elimination                    $   353,741 100.0% $ 1,363,110 100.0%

   Inter-company elimination       $    43,844        $   171,717
                                   -----------        -----------
      Reported Revenue             $   309,897        $ 1,191,393
                                   -----------        -----------


Days Sales Outstanding for the three months ended December 31, 2009:  41
(26 net of deferred revenue)


Internalization for the three months ended December 31, 2009:  63%


Other Cash Flow Items:

                                      Three Months  Twelve Months
                                          Ended        Ended
                                       December 31,  December 31,
                                           2009         2009
                                      ------------- -------------
   Cash Interest Paid                 $      13,930 $      41,662
   Cash Taxes Paid                    $       9,005 $      26,848
   Interest Rate Swap Termination
    Payment                           $       9,249 $       9,249



Debt to Book Capitalization as of December 31, 2009:  39%


Share Information for the three months ended December 31, 2009:


      Basic shares outstanding                78,803,152
      Dilutive effect of options and warrants    848,150
      Dilutive effect of restricted stock        300,712
                                              ----------
      Diluted shares outstanding              79,952,014



                     NON-GAAP RECONCILIATION SCHEDULE
                              (in thousands)

Reconciliation of Operating Income before Depreciation and Amortization:

Operating income before depreciation and amortization, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a valuation measure in the solid waste industry. Waste Connections defines operating income before depreciation and amortization as operating income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any gain or loss on disposal of assets. The Company provides adjustments to this calculation to exclude the effects of items management believes impact the comparability of operating results between periods. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses operating income before depreciation and amortization as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company's operations. Other companies may calculate operating income before depreciation and amortization differently.

                                                Three Months  Three Months
                                                   Ended         Ended
                                                December 31,  December 31,
                                                    2008          2009
                                                ------------  ------------
Operating income                                $     49,273  $     58,861
Plus: Depreciation and amortization                   25,752        35,281
Plus: Closure and post-closure accretion                 334           559
Plus: Loss on disposal of assets                          60           556
Adjustments:
  Plus: Acquisition-related transaction costs (a)      1,500          (191)
  Plus: Loss on prior corporate office lease (b)           -           218
                                                ------------  ------------
Adjusted operating income before depreciation
 and amortization                               $     76,919  $     95,284
                                                ------------  ------------

As % of revenues                                        29.6%         30.7%


                                              Tweleve Months Tweleve Months
                                                   Ended         Ended
                                                December 31,  December 31,
                                                    2008          2009
                                                ------------  ------------
Operating income                                $    212,356  $    230,675
Plus: Depreciation and amortization                   97,429       130,758
Plus: Closure and post-closure accretion               1,400         2,055
Plus/less: Loss (gain) on disposal of assets             629          (481)
Adjustments:
  Plus: Acquisition-related transaction costs (a)      1,500         3,987
  Plus: Loss on prior corporate office lease (b)           -         1,839
                                                ------------  ------------
Adjusted operating income before depreciation
 and amortization                               $    313,314  $    368,833
                                                ------------  ------------

As % of revenues                                        29.9%         31.0%


(a) Reflects the addback of acquisition-related costs expensed in 2008
    related to the LeMay transaction, and in 2009 due to the implementation
    of new accounting guidance for business combinations effective
    January 1, 2009.

(b) Reflects the addback of a loss on the Company's prior corporate office
    lease due to the relocation of the Company's corporate office.




               NON-GAAP RECONCILIATION SCHEDULE (continued)
                              (in thousands)

Reconciliation of Free Cash Flow:

Free cash flow, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a valuation and liquidity measure in the solid waste industry. Waste Connections defines free cash flow as net cash provided by operating activities, plus proceeds from disposal of assets, plus or minus change in book overdraft, plus excess tax benefit associated with equity-based compensation, less capital expenditures for property and equipment and distributions to noncontrolling interests. This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures. Management uses free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of the Company's operations. Other companies may calculate free cash flow differently.

                                                Three Months  Three Months
                                                   Ended         Ended
                                                December 31,  December 31,
                                                    2008          2009
                                                ------------  ------------
Net cash provided by operating activities       $     75,749  $     61,392
Less: Change in book overdraft                         4,315         7,754
Plus: Proceeds from disposal of assets                 1,061           712
Plus: Excess tax benefit associated with
 equity-based compensation                               794         3,358
Less: Capital expenditures for property and
 equipment                                           (33,960)      (43,962)
Less: Distributions to noncontrolling interests            -             -
                                                ------------  ------------
Free cash flow                                  $     47,959  $     29,254
                                                ------------  ------------

As % of revenues                                        18.5%          9.4%



                                              Tweleve Months Tweleve Months
                                                   Ended         Ended
                                                December 31,  December 31,
                                                    2008          2009
                                                ------------  ------------
Net cash provided by operating activities       $    270,409  $    303,637
Less/plus: Change in book overdraft                   (4,520)        7,802
Plus: Proceeds from disposal of assets                 2,560         5,061
Plus: Excess tax benefit associated with
 equity-based compensation                             6,441         4,054
Less: Capital expenditures for property and
 equipment                                          (113,496)     (128,251)
Less: Distributions to noncontrolling interests       (8,232)            -
                                                ------------  ------------
Free cash flow                                  $    153,162  $    192,303
                                                ------------  ------------

As % of revenues                                        14.6%         16.1%




               NON-GAAP RECONCILIATION SCHEDULE (continued)
                 (in thousands, except per share amounts)

Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income per diluted share:

Adjusted net income and adjusted net income per diluted share, both non-GAAP financial measures, are provided supplementally because they are widely used by investors as a valuation measure in the solid waste industry. The Company provides adjusted net income to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income has limitations due to the fact that it may exclude items that have an impact on the Company's financial condition and results of operations. Adjusted net income and adjusted net income per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Management uses adjusted net income and adjusted net income per diluted share as one of the principal measures to evaluate and monitor ongoing financial performance of the Company's operations.

                                     Three months ended Twelve months ended
                                         December 31,     December 31,
                                      ----------------  ------------------
                                        2008     2009     2008      2009
                                      -------  -------  --------  --------
Reported net income attributable to
 Waste Connections                    $27,268  $23,259  $102,903  $109,825
Adjustments:
  Swap termination costs, net of
   taxes (a)                                -    5,753         -     5,753
  Acquisition-related transaction
   costs, net of taxes (b)                920     (176)      920     2,630
  Loss on prior corporate office
   lease, net of taxes (c)                  -      136         -     1,144
  Loss (gain) on disposal of assets,
   net of taxes (d)                        37      346       386      (299)
  Impact of deferred tax
   adjustment (e)                      (3,931)       -    (3,931)   (1,142)
                                      -------  -------  --------  --------
Adjusted net income attributable to
 Waste Connections                    $24,294  $29,318  $100,278  $117,911
                                      =======  =======  ========  ========

Diluted earnings per common share
 attributable to Waste Connections
 common stockholders:
  Reported net income                 $  0.34  $  0.29  $   1.44  $   1.37
                                      =======  =======  ========  ========
  Adjusted net income                 $  0.30  $  0.37  $   1.40  $   1.47
                                      =======  =======  ========  ========

(a) Reflects the elimination of costs associated with the termination of
    a notional $175 million of interest rate swaps.

(b) Reflects the elimination of acquisition-related costs expensed in 2008
    related to the LeMay transaction, and in 2009 due to the
    implementation of new accounting guidance for business combinations
    effective January 1, 2009.

(c) Reflects the elimination of a loss on the Company's prior corporate
    office lease due to the relocation of the Company's corporate offices.

(d) Reflects the elimination of a loss (gain) on disposal of assets
    primarily related to the sale of certain routes and loss of certain
    service contracts.

(e) Reflects the elimination of a benefit to the income tax provision
    primarily from a reduction in the Company's deferred tax liabilities.

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