PR Newswire | Aug 6, 2020 04:06PM EDT

08/06 15:05 CDT

Waste Connections Reports Second Quarter 2020 Results and Provides 2020 Outlook TORONTO, Aug. 6, 2020

- Revenue of $1.306 billion, exceeding preliminary expectations

- Incurs $417.4 million non-cash impairment charge for certain E&P waste assets

- Net loss attributable to Waste Connections of $227.1 million, or $0.86 per share

- Adjusted net income attributable to Waste Connections* of $158.0 million, or $0.60 per share

- Adjusted EBITDA* of $394.3 million, or 30.2% of revenue, exceeding preliminary expectations

- YTD net cash provided by operating activities of $753.2 million

- YTD adjusted free cash flow* of $494.6 million, or 18.6% of revenue

- Signs or closes acquisitions YTD with approximately $100 million total annualized revenues

- Provides full year 2020 outlook above May's preliminary expectations

TORONTO, Aug. 6, 2020 /PRNewswire/ -- Waste Connections, Inc. (TSX/NYSE: WCN) ("Waste Connections" or the "Company") today announced its results for the second quarter of 2020.

"Strong operational execution and continued recovery in solid waste volumes drove better than expected results in the second quarter. Adjusted EBITDA* margin for solid waste collection, transfer and disposal expanded year over year in spite of significant COVID-19-related costs incurred during the quarter. In fact, the reported year-over-year margin decline in the period was entirely attributable to reduced E&P waste activity, as underlying solid waste margin expansion more than offset over $20 million in incremental COVID-related costs, primarily related to frontline supplemental wages, and the margin dilutive impact of acquisitions in the quarter. These results reflect the resilience of our underlying solid waste business as well as the dedication and commitment of our employees, who have maintained a focus on the health, safety and welfare of their colleagues, service continuity, expense management and community support, all while enduring the many challenges and hardships resulting from the pandemic," said Worthing F. Jackman, President and Chief Executive Officer.

Mr. Jackman added, "At the onset, we believed our preparedness and execution during this pandemic would leave us better positioned when we emerged from it. Although only in the early stages of a recovery, we already are pleased to provide our outlook for the full year above the preliminary expectations we had communicated in May. We remain encouraged by the pace of acquisition dialogue and are on track for another solid year of acquisition activity. Our strong operating performance, free cash flow generation and balance sheet strength keep us well-positioned during this uncertain period for additional acquisitions and incremental opportunistic capital investments, while maintaining our flexibility to increase the return of capital to shareholders."

Financial Impact from COVID-19

During the second quarter of 2020, our business was impacted by COVID-19 due to a reduction in revenue primarily in solid waste commercial collection and solid waste transfer and disposal resulting from a slowdown in activity associated with shelter-in-place or other closure restrictions or requirements imposed in response to the COVID-19 pandemic. Commercial collection activity slowed down in certain markets due to service reductions or suspensions by customers whose business activity was curtailed by such measures, with third party transfer and disposal volumes and roll-off activity typically following similar patterns, and some of the declines in E&P waste activity may also be related to COVID-19. The impacts to solid waste activity that we experienced during the second quarter varied by geography, the size and customer mix in each market, and the timing and extent of shutdown requirements and reopening policies across markets. In some markets, the impacts abated during the second quarter, as reopenings resulted in increased service requirements by commercial customers and higher landfill volumes and roll-off activity; in other cases, where reopenings were delayed, the improvements were less pronounced.

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

Through the second quarter, about 53% of solid waste commercial customers and 42% of associated revenue in competitive markets we track that had suspended or reduced service had reached out for a resumption in service or increase in frequency, up from 12% and 9%, respectively, in early May. Volumes in all of our solid waste regions exceeded our preliminary expectations, resulting in solid waste revenue down 5.3% year over year on a same store basis in the second quarter, about 70 basis points better than the preliminary expectations we provided in May. Moreover, excluding the most impacted markets in the Northeast and Canada, where closures were widespread and volumes were most impacted, solid waste revenues in the quarter were down 1.3% year over year on a same store basis.

In July, revenue on a reported basis declined approximately 1.9% year-over-year, or approximately 4.7% excluding acquisitions completed since the year ago period, and adjusted EBITDA* margin declined an estimated 70 basis points year over year. Reduction in E&P waste activity accounted for the entire year over year decline in revenue and exceeded the estimated adjusted EBITDA* margin decline for the month. Solid waste collection, transfer and disposal revenue was down approximately 2.4% year over year on a same store basis in July, or up 0.5% excluding Canada and the Northeast U.S. To date, about 60% of solid waste commercial customers and 50% of associated revenue in competitive markets we track that had suspended or reduced service have reached out for a resumption in service or increase in frequency.

The ultimate impact of the COVID-19 outbreak on our business, results of operations, financial condition and cash flows will depend largely on future developments, including the duration and spread of the outbreak in the U.S. and Canada, its severity, the actions to contain the novel coronavirus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

2020 Outlook

Waste Connections also provided its outlook for 2020, which assumes no significant change in underlying economic trends. The Company's outlook excludes any impact from additional acquisitions that may close during the year, and expensing of transaction-related items. 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 filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. Certain components of the outlook for 2020 are subject to quarterly fluctuations. See reconciliations in the attached schedules.

* Revenue is estimated to be approximately $5.325 billion. * Net income attributable to Waste Connections is estimated to be approximately $184 million, and adjusted EBITDA* is estimated to be approximately $1.610 billion, or about 30.2% of revenue. * Capital expenditures are estimated to be approximately $550 million. * Net cash provided by operating activities is estimated to range between $1.344 billion and $1.374 billion, and adjusted free cash flow* is estimated to range between $805 million and $835 million, or between approximately 50.0% and 52.0% of adjusted EBITDA*.

Q2 2020 Results

Revenue in the second quarter totaled $1.306 billion, as compared to $1.370 billion in the year ago period. Operating loss was $232.4 million, which included: $437.3 million in impairments and other operating items, due primarily to $417.4 million related to a decrease in property, plant and equipment at certain E&P landfills in the Bakken, Eagle Ford and Powder River basins as a result of the Company's impairment testing and $16.8 million in adjustments to contingent liabilities associated with acquisitions closed in prior years. This operating loss compares to operating income of $222.1 million in the second quarter of 2019, which included $11.3 million primarily related to transaction-related expenses.

Net loss attributable to Waste Connections in the second quarter was $227.1 million, or $0.86 per share on a diluted basis of 263.0 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $148.8 million, or $0.56 per share on a diluted basis of 264.5 million shares.

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

Adjusted net income attributable to Waste Connections* in the second quarter was $158.0 million, or $0.60 per diluted share on an adjusted diluted basis of 263.3 million shares, versus $181.3 million, or $0.69 per diluted share, in the prior year period. Adjusted EBITDA* in the second quarter was $394.3 million, as compared to adjusted EBITDA* of $425.3 million in the prior year period.

Adjusted net income attributable to Waste Connections, adjusted net income attributable to Waste Connections per diluted share and adjusted EBITDA, all non-GAAP measures, primarily exclude impairments and other operating items and acquisition-related items. For detailed reconciliations, please refer to the attached schedules.

Six Months Year to Date Results

For the six months ended June 30, 2020, revenue was $2.658 billion, as compared to revenue of $2.614 billion in the year ago period. Operating loss, which included $445.2 million primarily related to impairments and other operating items, was $15.4 million, compared to operating income of $407.0 million for the same period in 2019, which included $31.3 million primarily related to impairments and other operating items.

Net loss attributable to Waste Connections for the six months ended June 30, 2020, was $84.0 million, or $0.32 per share on a diluted basis of 263.4 million shares. In the year ago period, the Company reported net income attributable to Waste Connections of $274.5 million, or $1.04 per share on a diluted basis of 264.4 million shares.

Adjusted net income attributable to Waste Connections* for the six months ended June 30, 2020, was $328.5 million, or $1.25 per diluted share on an adjusted diluted share basis of 263.8 million shares, compared to $345.2 million, or $1.31 per diluted share, in the year ago period. Adjusted EBITDA* for the six months ended June 30, 2020, was $802.8 million, as compared to $811.0 million in the prior year period.

Q2 2020 Earnings Conference Call

Waste Connections will be hosting a conference call related to second quarter earnings on August 7th at 8:30 A.M. Eastern Time. To access the call, listeners should dial 800-747-0367 (within North America) or 212-231-2915 (international) approximately 10 minutes prior to the scheduled start time and ask the operator for the Waste Connections conference call (a passcode is not required). A replay of the conference call will be available until August 14, 2020 by calling 800-633-8284 (within North America) or 402-977-9140 (international) and entering Passcode # 21964629. The call will be broadcast live over the Internet through a link on the Company's website at www.wasteconnections.com. A playback of the call will be available on the Company's website.

Waste Connections will be filing a Form 8-K on EDGAR and on SEDAR (as an "Other" document) prior to markets opening on August 7th, providing the Company's third quarter 2020 outlook for revenue, core price plus volume growth for solid waste and adjusted EBITDA*.

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

About Waste Connections

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the United States and Canada. Through its R360 Environmental Solutions subsidiary, Waste Connections is also a leading provider of non-hazardous oilfield waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the United States, including the Permian, Bakken and Eagle Ford Basins. Waste Connections serves more than seven million residential, commercial, industrial, and exploration and production customers in 42 states in the U.S., and six provinces in Canada. The Company also provides intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest.

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 website or through contacting us directly at (905) 532-7510. Investors can also obtain these materials and other documents filed with the U.S. Securities and Exchange Commission ("SEC") and the Canadian securities regulators free of charge at the SEC's website, www.sec.gov, and at the System for Electronic Document Analysis and Retrieval maintained by the Canadian Securities Administrators at www.sedar.com.

Safe Harbor and Forward-Looking Information

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 ("PSLRA"), including "forward-looking information" within the meaning of applicable Canadian securities laws. These forward-looking statements are neither historical facts nor assurances of future performance andreflect Waste Connections' current beliefs and expectations regarding future events and operating performance. These forward-looking statements can be identified by use of forward-looking terminology, such as "believes," "expects," "intends," "may," "might," "will," "could," "should," or "anticipates," or the negative thereof or comparable terminology, or by the discussions of strategy. All of the forward-looking statements included in this press release are made pursuant to the safe harbor provisions of the PSLRA and applicable securities laws in Canada. Forward-looking statements involve risks and uncertainties. Forward-looking statements in this press release include, but are not limited to, statements about the expected impacts of the novel coronavirus pandemic and the COVID-19 outbreak, 2020 financial results, outlook and related assumptions, capital expenditures, the return of capital to shareholders and potential acquisition activity. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in the Company's filings with the SEC and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. Waste Connections undertakes no obligation to update the forward-looking statements set forth in this press release, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.

- financial tables attached -

CONTACT:

Mary Anne Whitney / (832) 442-2253Joe Box / (281) 873-3205

maryannew@wasteconnections.com joe.box@wasteconnections.com

WASTE CONNECTIONS, INC.CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2020(Unaudited)(in thousands of U.S. dollars, except share and per share amounts)

Three months ended Six months ended June 30, June 30,

2019 2020 2019 2020

Revenues $ 1,369,639 $ 1,305,782 $ 2,614,275 $ 2,658,187

Operatingexpenses:

Cost of operations 815,819 785,710 1,549,508 1,601,134

Selling, general 139,664 132,158 272,249 268,210and administrative

Depreciation 156,776 151,230 303,623 302,051

Amortization of 31,344 31,771 61,886 63,409intangibles

Impairments andother operating 3,902 437,270 20,014 438,777items

Operating income 222,134 (232,357) 406,995 (15,394)(loss)

Interest expense (37,245) (40,936) (74,533) (78,926)

Interest income 1,818 1,317 5,129 3,493

Other income 1,920 5,772 4,581 (3,749)(expense), net

Income (loss)before income tax 188,627 (266,204) 342,172 (94,576)provision

Income tax(provision) (39,788) 38,737 (67,756) 10,003benefit

Net income (loss) 148,839 (227,467) 274,416 (84,573)

Plus: Net lossattributable to 9 395 54 536noncontrollinginterests

Net income (loss)attributable to $ 148,848 $ (227,072) $ 274,470 $ (84,037)Waste Connections

Earnings (loss)per common shareattributable toWaste Connections'commonshareholders:

Basic $ 0.56 $ (0.86) $ 1.04 $ (0.32)

Diluted $ 0.56 $ (0.86) $ 1.04 $ (0.32)

Shares used in theper sharecalculations:

Basic 263,846,970 262,994,275 263,725,867 263,390,685

Diluted 264,494,943 262,994,275 264,416,610 263,390,685

Cash dividends per $ 0.160 $ 0.185 $ 0.320 $ 0.370common share

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

December 31, June 30, 2019 2020

ASSETS

Current assets:

Cash and equivalents $ 326,738 $ 790,551

Accounts receivable, net of allowance for creditlosses of $16,432 and $19,965 at December 31, 2019 662,808 608,801and June 30, 2020, respectively

Prepaid expenses and other current assets 141,052 105,574

Total current assets 1,130,598 1,504,926

Restricted cash 96,483 92,873

Restricted investments 51,179 46,391

Property and equipment, net 5,516,347 5,045,872

Operating lease right-of-use assets 183,220 173,905

Goodwill 5,510,851 5,488,305

Intangible assets, net 1,163,063 1,152,303

Other assets, net 85,954 89,430

Total assets $ 13,737,695 $ 13,594,005

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable $ 436,970 $ 367,355

Book overdraft 15,954 15,348

Accrued liabilities 280,808 341,333

Current portion of operating lease liabilities 29,929 30,933

Current portion of contingent consideration 26,659 62,213

Deferred revenue 216,443 214,478

Current portion of long-term debt and notes 465 7,658payable

Total current liabilities 1,007,228 1,039,318

Long-term portion of debt and notes payable 4,353,782 4,694,736

Long-term portion of operating lease liabilities 160,033 149,763

Long-term portion of contingent consideration 42,825 25,801

Deferred income taxes 818,622 728,730

Other long-term liabilities 416,851 459,276

Total liabilities 6,799,341 7,097,624

Commitments and contingencies

Equity:

Common shares: 263,699,675 shares issued and263,618,161 shares outstanding at December 31, 4,135,343 4,030,3682019; 262,885,349 shares issued and 262,811,165shares outstanding at June 30, 2020

Additional paid-in capital 154,917 151,149

Accumulated other comprehensive loss (10,963) (162,707)

Treasury shares: 81,514 and 74,184 shares at - -December 31, 2019 and June 30, 2020, respectively

Retained earnings 2,654,207 2,473,258

Total Waste Connections' equity 6,933,504 6,492,068

Noncontrolling interest in subsidiaries 4,850 4,313

Total equity 6,938,354 6,496,381

$ 13,737,695 $ 13,594,005

WASTE CONNECTIONS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSIX MONTHS ENDED JUNE 30, 2019 AND 2020(Unaudited)(in thousands of U.S. dollars)

Six months ended June 30,

2019 2020

Cash flows from operating activities:

Net income (loss) $ 274,416 $ (84,573)

Adjustments to reconcile net income (loss) to netcash provided by operating activities:

Loss on disposal of assets and impairments 18,924 420,169

Depreciation 303,623 302,051

Amortization of intangibles 61,886 63,409

Amortization of leases 13,183 9,863

Deferred income taxes, net of acquisitions 18,911 (66,821)

Amortization of debt issuance costs 2,414 4,783

Share-based compensation 26,763 24,643

Interest accretion 8,143 8,512

Adjustments to contingent consideration 1,466 16,794

Other (1,514) 1,596

Net change in operating assets and liabilities, 24,833 52,759net of acquisitions

Net cash provided by operating activities 753,048 753,185

Cash flows from investing activities:

Payments for acquisitions, net of cash acquired (381,422) (86,325)

Capital expenditures for property and equipment (253,790) (268,711)

Capital expenditures for undeveloped landfill - (16,450)property

Proceeds from disposal of assets 1,198 10,642

Change in restricted investments, net of interest (6,206) 4,532income

Other (70) (3,644)

Net cash used in investing activities (640,290) (359,956)

Cash flows from financing activities:

Proceeds from long-term debt 1,016,154 1,790,625

Principal payments on notes payable and long-term (1,134,589) (1,484,118)debt

Payment of contingent consideration recorded at (550) (2,251)acquisition date

Change in book overdraft (534) (606)

Payments for repurchase of common shares - (105,654)

Payments for cash dividends (84,215) (96,912)

Tax withholdings related to net share settlements (17,264) (23,291)of equity-based compensation

Debt issuance costs (5,838) (10,957)

Proceeds from sale of common shares held in trust 3,695 679

Other (117) -

Net cash provided by (used in) financing (223,258) 67,515activities

Effect of exchange rate changes on cash, cash 270 (541)equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents (110,230) 460,203and restricted cash

Cash, cash equivalents and restricted cash at 403,966 423,221beginning of period

Cash, cash equivalents and restricted cash at end $ 293,736 $ 883,424of period

ADDITIONAL STATISTICS(in thousands of U.S. dollars, except where noted)

Solid Waste Internal Growth:The following table reflects a breakdown of the components of our solid waste internal growth for the three months ended June 30, 2020:

U.S. Canada Total

Core Price 4.4 % 5.0 % 4.5 %

Surcharges (0.1 % (0.9) % (0.2) %

Volume (8.5 % (16.4) % (9.6) %

Recycling (0.1 % 0.6 % (0.0) %

Foreign Exchange Impact - (3.3) % (0.5) %

Total (4.3 % (15.0) % (5.8) %

Revenue Breakdown:The following table reflects a breakdown of our revenue for the three month periods ended June 30, 2019 and 2020:

Three months ended June 30, 2019

Revenue Inter-company Reported % Elimination Revenue

Solid Waste Collection $ 958,124 $ (2,733) $ 955,391 69.8%

Solid Waste Disposal and 501,401 (198,008) 303,393 22.1%Transfer

Solid Waste Recycling 16,730 (405) 16,325 1.2%

E&P Waste Treatment, Recovery 68,039 (4,021) 64,018 4.7%and Disposal

Intermodal and Other 31,134 (622) 30,512 2.2%

Total $ 1,575,428 $ (205,789) $ 1,369,639 100.0%

Three months ended June 30, 2020

Revenue Inter-company Reported % Elimination Revenue

Solid Waste Collection $ 948,072 $ (3,432) $ 944,640 72.4%

Solid Waste Disposal and 469,704 (191,301) 278,403 21.3%Transfer

Solid Waste Recycling 20,217 (660) 19,557 1.5%

E&P Waste Treatment, Recovery 40,152 (4,644) 35,508 2.7%and Disposal

Intermodal and Other 27,811 (137) 27,674 2.1%

Total $ 1,505,956 $ (200,174) $ 1,305,782 100.0%

Contribution from Acquisitions The following table reflects revenues from acquisitions, net of divestitures, for the three month periods ended June 30, 2019 and 2020:

Three months ended June 30,

2019 2020

Acquisitions, net $ 77,396 $ 40,727

ADDITIONAL STATISTICS (continued)(in thousands of U.S. dollars, except where noted)

Other Cash Flow Items:The following table reflects cash interest and cash taxes for the three and six-month periods ended June 30, 2019 and 2020:

Three months ended Six months ended June 30, June 30,

2019 2020 2019 2020

Cash Interest Paid $ 46,084 $ 45,782 $ 68,258 $ 62,828

Cash Taxes Paid 14,121 8,440 20,532 13,050

Debt to Book Capitalization as of June 30, 2020:42%

Internalizationfor the three months ended June 30, 2020: 56%

Days Sales Outstandingfor the three months ended June 30, 2020: 42 (27 net of deferred revenue)

Share Information for the three months ended June 30, 2020:

Basic shares outstanding 262,994,275

Dilutive effect of equity-based awards (a) -

Diluted shares outstanding 262,994,275



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For the three months ended June 30, 2020, equity-based awards to purchase(a)322,779 of common shares were excluded from the computation of diluted loss per share as they were anti-dilutive.

NON-GAAP RECONCILIATION SCHEDULE(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:

Adjusted EBITDA, a non-GAAP financial measure, is provided supplementally because it is widely used by investors as a performance and valuation measure in the solid waste industry. Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations. Waste Connections defines adjusted EBITDA as net income (loss) attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus or minus income tax provision (benefit), plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income. Waste Connections further adjusts this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of its business. This measure is not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate adjusted EBITDA differently.

Three months ended Six months ended June 30, June 30,

2019 2020 2019 2020

Net income (loss) attributable $ 148,848 $ (227,072) $ 274,470 $ (84,037)to Waste Connections

Less: Net loss attributable to (9) (395) (54) (536)noncontrolling interests

Plus/(Less): Income tax 39,788 (38,737) 67,756 (10,003)provision (benefit)

Plus: Interest expense 37,245 40,936 74,533 78,926

Less: Interest income (1,818) (1,317) (5,129) (3,493)

Plus: Depreciation and 188,120 183,001 365,509 365,460amortization

Plus: Closure and post-closure 3,682 3,709 7,172 7,617accretion

Plus: Impairments and other 3,902 437,270 20,014 438,777operating items

Plus/(Less): Other expense (1,920) (5,772) (4,581) 3,749(income), net

Adjustments:

Plus: Transaction-related 6,184 1,016 7,021 2,162expenses (a)

Plus: Fair value changes to 1,262 1,683 4,283 4,223certain equity awards (b)

Adjusted EBITDA $ 425,284 $ 394,322 $ 810,994 $ 802,845

As % of revenues 31.1% 30.2% 31.0% 30.2%



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(a)Reflects the addback of acquisition-related transaction costs.

(b)Reflects fair value accounting changes associated with certain equity awards.

NON-GAAP RECONCILIATION SCHEDULE (continued)(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted Free Cash Flow:

Adjusted 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. Management uses adjusted free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of Waste Connections' operations. Waste Connections defines adjusted free cash flow as net cash provided by operating activities, plus or minus change in book overdraft, plus proceeds from disposal of assets, less capital expenditures for property and equipment and distributions to noncontrolling interests. Waste Connections further adjusts this calculation to exclude the effects of items management believes impact the ability to assess the operating performance of its business. This measure is not a substitute for, and should be used in conjunction with, GAAP liquidity or financial measures. Other companies may calculate adjusted free cash flow differently.

Three months ended Six months ended June 30, June 30,

2019 2020 2019 2020

Net cash provided by $ 389,276 $ 383,599 $ 753,048 $ 753,185operating activities

Plus/(Less): Change in book 2,250 3,243 (534) (606)overdraft

Plus: Proceeds from 559 7,143 1,198 10,642disposal of assets

Less: Capital expenditures (139,552) (130,930) (253,790) (268,711)for property and equipment

Less: Distributions to (117) - (117) -noncontrolling interests

Adjustments:

Cash received for - (4,974) (2,376) (4,974)divestitures (a)

Transaction-related 6,184 1,016 7,021 2,162expenses (b)

Pre-existing ProgressiveWaste share-based grants 189 - 2,371 6,440(c)

Tax effect (d) (1,213) (251) (2,910) (3,569)

Adjusted free cash flow $ 257,576 $ 258,846 $ 503,911 $ 494,569

As % of revenues 18.8% 19.8% 19.3% 18.6%



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(a)Reflects the elimination of cash received in conjunction with the divestiture of certain Progressive Waste operations.

(b)Reflects the addback of acquisition-related transaction costs.

(c)Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.

(d)The aggregate tax effect of footnotes (a) through (c) is calculated based on the applied tax rates for the respective periods.

NON-GAAP RECONCILIATION SCHEDULE (continued)(in thousands of U.S. dollars, except per share amounts)

Reconciliation of Adjusted Net Income attributable to Waste Connections and Adjusted Net Income per Diluted Share attributable to Waste Connections:

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

Three months ended Six months ended June 30, June 30,

2019 2020 2019 2020

Reported net income(loss) attributable $ 148,848 $ (227,072) $ 274,470 $ (84,037)to WasteConnections

Adjustments:

Amortization of 31,344 31,771 61,886 63,409intangibles (a)

Impairments andother operating 3,902 437,270 20,014 438,777items (b)

Transaction-related 6,184 1,016 7,021 2,162expenses (c)

Fair value changesto equity awards 1,262 1,683 4,283 4,223(d)

Tax effect (e) (10,272) (118,220) (22,469) (127,523)

Tax items (f) - 31,508 - 31,508

Adjusted net incomeattributable to $ 181,268 $ 157,956 $ 345,205 $ 328,519Waste Connections

Diluted earnings(loss) per commonshare attributableto WasteConnections' commonshareholders:

Reported net income $ 0.56 $ (0.86) $ 1.04 $ (0.32)(loss)

Adjusted net income $ 0.69 $ 0.60 $ 1.31 $ 1.25

Shares used in theper sharecalculations:

Reported diluted 264,494,943 262,994,275 264,416,610 263,390,685shares

Adjusted diluted 264,494,943 263,317,054 264,416,610 263,833,471shares (g)



__________________________________________________

(a)Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.

(b)Reflects the addback of impairments and other operating items.

(c)Reflects the addback of acquisition-related transaction costs.

(d)Reflects fair value accounting changes associated with certain equity awards.

(e)The aggregate tax effect of the adjustments in footnotes (a) through (d) is calculated based on the applied tax rates for the respective periods.

Reflects the impact of a portion of the Company's 2019 related-party payments no longer being deductible for tax purposes due to the (f)finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and an increase in deferred tax liabilities resulting from the E&P impairment.

Reflects reported diluted shares adjusted for shares that were excluded (g)from the reported diluted shares calculation due to our reporting a net loss during the three and six months ended June 30, 2020.

2020 OUTLOOKNON-GAAP RECONCILIATION SCHEDULES(in thousands of U.S. dollars, except where noted)

Reconciliation of Adjusted EBITDA:



2020 Outlook

Net income attributable to Waste Connections $ 184,089

Plus: Income tax provision (a) 64,000

Plus: Interest expense, net 155,000

Plus: Depreciation and depletion 615,000

Plus: Amortization 128,000

Plus: Closure and post-closure accretion 15,000

Plus: Impairments and other operating items (b) 438,777

Plus: Other income, net 3,749

Adjustments:

Plus: Transaction-related expenses (b) 2,162

Plus: Fair value changes to equity awards (b) 4,223

Adjusted EBITDA $ 1,610,000

As % of revenues 30.2%

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(a)Reflects amounts reported for the six-month period ended June 30, 2020 and 21.5% effective rate for 2H '20.

(b)Reflects amounts reported for the six-month period ended June 30, 2020, as shown on page 10.

Reconciliation of Adjusted Free Cash Flow:



2020 Outlook

Net cash provided by operating activities $ 1,344,299 $ 1,374,299

Plus: Proceeds from disposal of assets (a) 10,642 10,642

Less: Capital expenditures for property and (550,000) (550,000)equipment

Adjustments: (a)

Cash received from divestitures (4,974) (4,974)

Transaction-related expenses 2,162 2,162

Pre-existing Progressive Waste share-based grants 6,440 6,440

Tax effect (3,569) (3,569)

Adjusted free cash flow $ 805,000 $ 835,000

As % of Adjusted EBITDA 50.0% 51.9%

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(a)Reflects amounts reported for the six-month period ended June 30, 2020, as shown on page 11.

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SOURCE Waste Connections, Inc.