WCN 10-K diff: FY 2023-12-31 → FY 2025-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+68 paragraphs −77 paragraphs ~68 changed
FY 2023-12-31 (earlier)
ITEM 1A. RISK FACTORS
This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates, and projections as of the date of this filing. Actual results may differ materially from those expressed in forward-looking statements. See Item 7 of Part II – “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Risk Factors Related to Our Company and Industry
Our industry is highly competitive and includes companies with lower prices, return expectations or other advantages, and governmental service providers, which could adversely affect our ability to compete and our operating results .Our industry is highly competitive and requires substantial labor and capital resources. Some of the markets in which we compete or will seek to compete are served by one or more large, national companies, as well as by regional and local companies of varying sizes and resources. Some of our competitors may be able to provide or be willing to bid their services at lower prices than we may be willing to offer, which could impact our ability to win new business or retain existing business, including municipal contracts that come up for renewal. We also compete with counties, provinces, municipalities and solid waste districts that maintain or could develop their own waste collection and disposal operations. These operators may have financial advantages over us because of their access to user fees and similar charges, tax revenues and tax-exempt financing. If we are not able to replace revenues from contracts lost through competitive bidding or early termination or from the renegotiation of existing contracts with other revenues within a reasonable time, our revenues could decline. In addition, existing and future competitors may develop or offer new services or technologies,
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new facilities or other advantages. Our inability to compete effectively could hinder our growth or negatively impact our operating results.Price increases may not be adequate to offset the impact of increased costs, or may cause us to lose customers .We seek price increases necessary to offset increased costs, to improve operating margins and to obtain adequate returns on our deployed capital. Continuing outsized inflationary pressures may outpace price increases or drive the need for additional price increases; and, contractual, general economic, competitive or market-specific conditions sometimes limit our ability to raise prices or otherwise impact our plans with respect to implementing price increases. As a result of these factors, we may be unable to offset increases in costs, improve operating margins and obtain adequate investment returns through price increases. We may also lose customers to lower-price competitors, and new competitors may enter our markets as we raise prices.Competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions .
We seek to grow through strategic acquisitions in addition to internal growth. Although we have and expect to continue to identify numerous acquisition candidates that we believe may be suitable, we may not be able to acquire them at prices or on terms and conditions favorable to us.
Other companies have adopted or may in the future adopt our strategy of acquiring and consolidating regional and local businesses, and they may be willing to accept terms and conditions or valuations that we deem inappropriate. To the extent that competition increases, it may become uneconomical for us to make further acquisitions, or we may be unable to locate or acquire suitable acquisition candidates at price levels and on terms and conditions that we consider appropriate, particularly in markets we do not already serve.
We expect that increased consolidation in the solid waste services industry will continue to reduce the number of attractive acquisition candidates. Moreover, general economic conditions and the factors impacting the environment for attractive investments, including inflationary pressures and higher interest rates, may affect the desire of the owners of acquisition candidates to sell their companies. As a result, we may have fewer acquisition opportunities, and those opportunities may be on less attractive terms than in the past, which could cause a reduction in our rate of growth from acquisitions.Our ability to access the capital markets may be severely restricted at a time when we would like, or need, to do so. While we expect we will be able to fund some of our acquisitions with our existing resources, additional financing to pursue additional acquisitions may be required. However, particularly if market conditions deteriorate, we may be unable to secure additional financing or additional financing may not be available to us on favorable terms, which could have an impact on our flexibility to pursue additional acquisition opportunities. In addition, disruptions in the capital and credit markets could adversely affect our ability to draw on our credit facility or raise other capital. Our access to funds under the credit facility is dependent on the ability of the banks that are parties to the facility to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period.
We may lose contracts through competitive bidding, early termination or governmental action .
We derive a significant portion of our revenues from market areas where we have exclusive arrangements, including franchise agreements, municipal contracts and certificates issued by Washington State known as G Certificates. Many franchise agreements and municipal contracts are for a specified term and are, or will be, subject to competitive bidding in the future. For example, we have approximately 444 contracts, representing approximately 4.6% of our annual revenues, which are set for expiration or automatic renewal on or before December 31, 2024. Although we intend to bid on existing contracts subject to competitive bidding in the future and additional municipal contracts and franchise agreements, we may not be the successful bidder, or we may need to lower our price in order to retain the contract. In addition, some of our customers, including municipalities, have and others may terminate their contracts with us before the end of the terms of those contracts. Similar risks may affect our contracts to operate municipally-owned assets, such as landfills.
32Table of ContentsGovernmental action may also affect our exclusive arrangements. Municipalities may annex unincorporated areas within counties where we provide collection services. As a result, our customers in annexed areas may be required to obtain services from competitors that have been previously franchised by the annexing municipalities to provide those services. In addition, municipalities in which we provide services on a competitive basis may elect to franchise those services to other service providers. Unless we are awarded franchises by these municipalities, we will lose customers. Municipalities may also decide to provide services to their residents themselves, on an optional or mandatory basis, causing us to lose customers. If we are not able to replace revenues from contracts lost through competitive bidding or early termination or from the renegotiation of existing contracts with other revenues within a reasonable time, our revenues could decline. Municipalities sometimes also promulgate “flow control” laws and regulations requiring us to deliver waste we collect within a particular jurisdiction to facilities not owned or controlled by us, which could increase our costs and reduce our revenues.Our financial and operating performance may be affected by restrictions associated with renewals or the inability to renew landfill operating permits, obtain new landfills and expand existing ones .We currently own and/or operate 103 landfills throughout the United States and Canada. Our ability to meet our financial and operating objectives depends in part on our ability to acquire, lease, or renew landfill operating permits, expand existing landfills and develop new landfill sites. It has become increasingly difficult and expensive to obtain required permits and approvals to build, operate and expand solid waste management facilities, including landfills and transfer stations. In addition, approvals may include operating restrictions or additional requirements, which could impact financial results. Although generally less time consuming, the process of obtaining permits and approvals for E&P landfills has similar uncertainties. Operating permits for landfills in states and provinces where we operate must generally be renewed every five to ten years, although some permits are required to be renewed more frequently. These operating permits often must be renewed several times during the permitted life of a landfill. The permit and approval process is often time consuming, requiring numerous hearings and compliance with zoning, environmental and other requirements.
States and municipalities are also increasingly adopting requirements for environmental justice reviews as part of certain permitting decisions. These policies generally require permitting agencies to give heightened attention to the potential for projects to disproportionately impact low-income and minority communities. The permitting and approval process is frequently challenged by special interest and other groups, including those utilizing social media to further their objectives, and may result in the denial of a permit or renewal, the award of a permit or renewal for a shorter duration than we believed was otherwise required by law, or burdensome terms and conditions being imposed on our operations. For example, see the discussions regarding the Los Angeles County, California Landfill Expansion Litigation—A. Chiquita Canyon, LLC Lawsuit Against Los Angeles County in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. We may not be able to obtain new landfill sites or expand the permitted capacity of our existing landfills when necessary, and may ultimately be required to expense up to the carrying value of the landfill or expansion project, less the recoverable value of the property and other amounts recovered. Obtaining new landfill sites is important to our expansion into new, non-exclusive solid waste markets and in our E&P waste business. If we do not believe that we can obtain a landfill site in a non-exclusive market, we may choose not to enter that market. Expanding existing landfill sites is important in those markets where the remaining lives of our landfills are relatively short. We may choose to forego acquisitions and internal growth in these markets because increased volumes would further shorten the lives of these landfills. Any of these circumstances could adversely affect our operating results.
Increases in labor costs and limitations on labor availability could impact our financial results .
Labor is one of our highest costs and relatively small increases in labor costs per employee could materially affect our cost structure. A shortage of qualified employees in our markets would require us to incur additional costs related to wages and benefits, to hire more expensive temporary employees or to contract for services with more expensive third-party vendors. In addition, higher turnover can result in increased costs associated with recruiting and training; it can also impact operating costs, including maintenance and risk. As a result of labor constraints, we have experienced increased competition with other businesses in our markets for qualified employees, which has driven higher turnover and increased the time it takes to fill job openings.
33Table of ContentsIncreases in capital expenditures and the timing of receipt of fleet and equipment could impact our financial results .Increases in fleet, equipment and landfill construction costs due to cost pressures, acquisitions and new contracts could result in capital expenditures being higher than anticipated. In addition, supply chain disruptions and inflationary pressures have and are expected to continue to result in higher costs, delays or lack of availability of fleet, equipment or supplies. This could impact our ability to generate free cash flow in line with our expectations, the timing of our free cash flow generation, or otherwise adversely affect our financial results.Our accruals for our landfill site closure and post-closure costs may be inadequate .We regularly accrue amounts and establish reserves to pay capping, closure and post-closure maintenance costs for landfill sites that we own and operate as well as for landfills we operate under life-of-site agreements. Our obligations to pay closure or post-closure costs sometimes exceed the amount we have accrued and reserved and other amounts available from funds or reserves established to pay such costs, resulting in adjustments to accruals and reserves and additional costs. The completion or closure of a landfill site does not end our environmental obligations. After completion or closure of a landfill site, we sometimes incur additional costs, including recently as a result of an elevated temperature landfill (“ETLF”) event, which has resulted in increased leachate generation and related capital and operating expenses that have increased our closure and post closure costs at our Chiquita Canyon Landfill. In addition, environmental problems may occur that could result in substantial remediation costs, regulatory enforcement actions and related fines or potential litigation. The potential increased regulation of per- and polyfluoroalkyl substances (“PFAS”), bisphenol A (“BPA”) phthalates, methane and other emerging contaminants could result in greater expenditures for closure and post-closure costs. It is also possible that accruals may need to be expanded and that costs incurred related to these activities could be accelerated. Paying additional amounts for closure or post-closure costs and/or for environmental remediation and/or for litigation could harm our financial condition, operating results, or cash flow.The level of exploration, development and production activity of E&P companies will impact the demand for our E&P waste services.The value of crude oil has impacted and may in the future impact the level of drilling or production activity in the basins where we operate; however, we cannot provide assurances that higher crude oil prices will result in increased capital spending and related activity in the basins where we operate. E&P companies may elect to decrease investment in basins where lower crude oil prices or volatility in crude oil prices make the returns on investment inadequate or uncertain or impact the ability of E&P companies to access capital on economically advantageous terms or at all. Similarly, growth in production rates may be impacted by factors including volatility in crude oil prices and the level of global demand, as well as limitations on production as a result of higher operational costs. Energy transition, or a transformation of the global energy sector from fossil-based systems of energy production and consumption to renewable energy sources, could also affect investments by E&P companies in the basins where we operate. In certain locations where blending activities occur, the value of any recovered oil could vary based on the value of crude oil. See the section Impairments of Property and Equipment and Finite-Lived Intangible Assets in Note 3, “Summary of Significant Accounting Policies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K regarding the impairment charges recorded during the year ended December 31, 2021 on property and equipment in our E&P waste operations.A portion of our growth and future financial performance depends on our ability to integrate acquired businesses, and the performance of our acquisitions .
A component of our growth strategy involves achieving economies of scale and operating efficiencies by growing through acquisitions. We may not achieve these goals unless we effectively combine the operations of acquired businesses with our existing operations. In addition, we are not always able to control the timing of our acquisitions. Our inability to complete acquisitions within the time frames that we expect may cause our operating results to be less favorable than expected, which could cause our share price to decline. In addition, we may change our strategy with respect to a market or acquired businesses and decide to sell such operations at a loss, or keep those operations and recognize an impairment of goodwill and/or intangible assets. Similar risks may affect contracts that we are awarded to operate municipally-owned assets, such as landfills.34
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Some acquisitions may not fulfill our anticipated financial or strategic objectives in a given market due to factors that we cannot control, such as market conditions, including the price of crude oil or the value of recycled commodities, market position, competition, customer base, loss of key employees, third-party legal challenges or governmental actions. In addition, acquisitions may have liabilities or risks that we fail or are unable to discover, or that become more adverse to our business than we anticipated at the time of acquisition. As a successor owner, we may be legally responsible for those liabilities that arise from businesses that we acquire, whether we expressly assume them or not, including as a result of sellers not having sufficient funds to perform their obligations or liabilities being imposed on us under various regulatory schemes and other applicable laws. In addition, our insurance program may not cover such sites and will not cover liabilities associated with some environmental issues that may have existed prior to attachment of coverage. A successful uninsured claim against us could harm our financial condition or operating results. Additionally, there may be other risks of which we are unaware that could have an adverse effect on businesses that we acquire or have acquired, such as foreign, state, provincial and local regulations and administrative risks. Another example of risk is interested parties that may bring actions against us in connection with operations that we acquire or have acquired. Furthermore, risks or liabilities we judge to be not material or remote at the time of acquisition may develop into more serious risks to our business. See discussion in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Any adverse outcome resulting from such risks or liabilities could harm our operations and financial results and create negative publicity, which could damage our reputation, competitive position and share price.Our results will be affected by changes in recycled commodity prices and quantities .
We provide recycling services to some of our customers. The recyclables we process for sale include paper products and plastics that are shipped primarily to customers in the United States, as well as other markets, including Asia. The sale prices of and the demand for recyclable commodities are frequently volatile and when they decline, our revenues, operating results and cash flows will be affected. The value of recyclables may be impacted by factors including: changes to international waste importation and exportation laws; quality concerns; the volatility of crude oil prices, which impacts plastic; and the demand for paper products, which impacts fiber, along with the extent to which manufacturers rely on recycled feedstock.To the extent that we develop and construct new recycling facilities, we may avoid third party processing fees and increase the amount of recyclables that we are able to market and sell. The cost and timing of the completion of new facilities is uncertain as is the quantity and quality of recyclables that we process and sell.
Singlestream recycling facilities process a wide range of commingled materials and tend to receive a higher percentage of non-recyclables, particularly in residential collection, which results in increased processing and residual disposal costs to achieve quality standards. As a result, we have increased the fees that we charge customers at our recycling facilities in order to recover the higher processing costs for recyclables. This may result in lower recycled commodity volumes at our recycling facilities, as customers may elect to pursue cheaper alternatives for processing or disposal. Any such reduction could impact revenues, operating results and cash flow. Some of our recycling operations offer rebates to customers based on the market prices of commodities we buy to process for resale. Therefore, if we recognize increased revenues resulting from higher prices for recyclable commodities, the rebates we pay to suppliers will also increase, which also may impact our operating results. To the extent that there is an economic slowdown, a resulting decline in demand for recycled commodities has and could in the future impact our revenues, operating results and cash flow.
Our results will be affected by changes in the value of renewable fuels and quantities of gas generated and beneficially reused .
Variations in the price of methane gas and other energy-related products that are marketed and sold by our landfill gas recovery operations affect our results. Pursuant to the Energy Independence and Security Act of 2007, the United States EPA has promulgated the Renewable Fuel Standards, or RFS, which require refiners to either blend "renewable fuels," such as ethanol and biodiesel, into their transportation fuels or to purchase renewable fuel credits, known as renewable identification numbers, or RINs, in lieu of blending. In some cases, landfill gas generated at our landfills in the United States and Canada qualifies as a renewable fuel for which RINs are available. The price of RINs has been extremely volatile and is dependent upon a variety of factors, including potential legislative changes, the availability of RINs for purchase, the demand for RINs, which is dependent on transportation fuel production levels, the mix of the petroleum
35Table of Contentsbusiness’ petroleum products and fuel blending performed at the refineries and downstream terminals, all of which can vary significantly from period to period. In addition, demand for RINs can be impacted by the ability of refineries to obtain small refinery exemptions, or SREs, through the EPA. Any reductions or limitations on the requirement to blend renewable fuel and any related waivers including SREs, would likely reduce the demand for RINs, which could impact the value of RINs. The Canadian federal government has promulgated the Clean Fuel Regulations, or CFRs, pursuant to the Canadian Environmental Protection Act, 1999, which have replaced the Renewable Fuel Regulations. Under the CFRs, gasoline and diesel producers and importers (primary suppliers) must lower the carbon intensity of the gasoline and diesel that they produce in Canada and/or import in accordance with prescribed limits through the use of compliance credits. Supplying low carbon fuels can qualify for credit creation under the CFRs. We continue to evaluate evolving markets and legal regimes in the United States and Canada with respect to the beneficial use of methane gas and energy-related products generated in connection with our operations.
A significant reduction in the value of RINs in the United States or the price paid for our renewable fuel in Canada could adversely impact our reported results. To manage a portion of this risk, we may enter into contractual agreements to sell RINs at a fixed price. As of December 31, 2023, we had no contractual fixed price agreements to sell RINs in place.
Variations in the volume of methane gas generated, marketed and sold by our landfill gas recovery operations also affect our results. Our operations and gas generation rates are impacted by many variables, including the maintenance and operations of recovery wells and gas generation systems, the amount and type of waste in our landfills, the age of the landfill, weather and related temperature. In addition, there may be variability in the extent to which we are able to beneficially market and sell for beneficial reuse the gas generated and captured, including as a result of delays in the start-up of new facilities or other impacts to operations. To the extent that we develop and construct new renewable natural gas, or RNG, facilities, the cost and timing of the completion of new facilities is uncertain as is the quantity and quality of gas generated and the associated benefits, including any tax benefits related to the Inflation Reduction Act of 2022.Increases in risk management costs and the amount that we self-insure for various risks or limitations of our insurance coverage could reduce our operating margins and reported earnings .We maintain insurance policies for automobile, general, employer’s, environmental, cyber, employment practices and directors’ and officers’ liability, as well as for employee group health insurance, property insurance and workers’ compensation. We carry umbrella policies for certain types of claims to provide excess coverage over the underlying policies and per incident deductibles or self-insured retentions. The amounts that we effectively self-insure could cause significant volatility in our operating margins and reported earnings based on the event and claim costs of incidents, accidents, injuries and adverse judgments. Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and our third-party claims administrator. To the extent these estimates are inaccurate, we may recognize substantial additional expenses in future periods that would reduce operating margins and reported earnings. Furthermore, while we maintain liability insurance, our insurance is subject to coverage limitations. If we were to incur substantial liability on a covered claim, our insurance coverage may be inadequate to cover the entirety of such liability. This could have a material adverse effect on our financial position, results of operations and cash flows. One form of coverage limitation concerns claims for punitive damages, which are generally excluded from coverage under all of our liability insurance policies. A punitive damage award could have an adverse effect on our reported earnings in the period in which it occurs. Significant increases in premiums on insurance that we retain, as well as higher deductibles or self-insured retentions, could reduce our margins.
Our business is subject to operational and safety risks, including the risk of personal injury to employees and others .
Providing environmental and waste management services, including operating a commercial truck fleet and constructing and operating landfills, involves risks such as truck accidents, equipment defects, malfunctions and failures. Additionally, we closely monitor and manage landfills to minimize the risk of waste mass instability and releases of hazardous materials or odors that could be triggered by weather or natural disasters. There may also be risks presented by the potential for subsurface chemical reactions causing elevated landfill temperatures. For example, see the discussion regarding the South Coast Air Quality Management District Hearing Board Case No. 6177-4 and Elevated Temperature Landfill Event in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
36Table of ContentsWe also build and operate natural gas fueling stations, some of which also serve the public or third parties. Operation of fueling stations and landfill gas collection and control systems involves additional risks of fire and explosion. Any of these risks could potentially result in injury or death of employees and others, a need to shut down or reduce operation of facilities, increased operating expense and exposure to liability for pollution and other environmental damage, and property damage or destruction.
While we seek to minimize our exposure to such risks through comprehensive training, compliance and response and recovery programs, as well as vehicle and equipment maintenance programs and the use of personal protective equipment, if we were to incur substantial liabilities in excess of any applicable insurance coverage, our business, results of operations and financial condition could be adversely affected. Any such incidents could also tarnish our reputation and reduce the value of our brand. Additionally, a major operational failure, even if suffered by a competitor, may bring enhanced scrutiny and regulation of our industry, with a corresponding increase in operating expense.
The seasonal nature of our business and “event-driven” waste projects cause our results to fluctuate .Based on historic trends, excluding impacts from an economic recession, we would expect our operating results to vary seasonally, with revenues typically lowest in the first quarter, higher in the second and third quarters, and lower in the fourth quarter than in the second and third quarters. We expect the fluctuation in our revenues between our highest and lowest quarters to be approximately 10%. This seasonality reflects the lower volume of solid waste generated during the late fall, winter and early spring because of decreased construction and demolition activities during the winter months in Canada and the U.S., and reduced E&P activity during harsh weather conditions. Conversely, mild winter weather conditions may reduce demand for oil and natural gas, which may cause our customers to curtail their drilling programs, which could result in production of lower volumes of E&P waste.
Adverse winter weather conditions, including severe storms or extended periods of inclement weather, slow waste collection activities, resulting in higher labor and operational costs. Greater precipitation in the winter increases the weight of collected solid waste, resulting in higher disposal costs, which are calculated primarily on a per ton basis. Certain weather conditions, including severe storms, may result in temporary suspension of our operations, which can significantly impact the operating results of the affected areas. Conversely, weather-related occurrences and other “event-driven” waste projects can boost revenues through heavier weight loads or additional work for a limited time. These factors impact period-to-period comparisons of financial results, and our share price may be negatively affected by these variations.
Climate change, including adverse weather and the adoption of climate change legislation or regulations restricting emissions of greenhouse gases, could adversely affect our operations and increase operating costs .
Our operations and assets are subject to risks associated with the effects of climate change and adverse weather conditions. Risks associated with climate change, such as increased frequency and/or intensity of weather events, flooding, wildfires, sea level rise, and other weather- and climate-related events, could negatively impact our operations. For example, these events could disrupt or result in suspension of collection activities, disrupt landfill and transfer station operations, or hinder landfill development or expansion. It is also possible that these events could disrupt our customers’ businesses, thereby reducing the amount of waste generated by their operations.
Additional laws and regulations related to climate change, including restricting emissions of greenhouse gases, could also be promulgated, which could result in increased operational costs or disruption to our clients’ business, thereby impacting our operational results and financial condition. Conversely, favorable investor expectations regarding potential investment tax credits or other benefits stemming from the Inflation Reduction Act of 2022 may not materialize or could fail to meet expectations.
Increases in the price of diesel or compressed natural gas, or CNG, fuel may adversely affect our collection business and reduce our operating margins .
The market price of diesel fuel is volatile. We generally purchase diesel fuel at market prices, which have fluctuated significantly in recent years, including as a result of geopolitical events or inflationary pressures. This could adversely affect our waste collection business through a combination of higher fuel and disposal-related transportation costs and
37Table of Contentsreduce our operating margins and reported earnings. To manage a portion of this risk, we have entered into fixed-price fuel purchase contracts. During periods of falling diesel fuel prices, it may become more expensive to purchase fuel under fixed-price fuel purchase contracts than at market prices.
We utilize CNG, in a small percentage of our fleet and we may convert more of our fleet from diesel fuel to CNG over time. The market price of CNG is also volatile; a significant increase in such cost could adversely affect our operating margins and reported earnings.Our financial results could be adversely affected by impairments of goodwill, indefinite-lived intangibles or property and equipment .As a result of our acquisition strategy, we have a material amount of goodwill, indefinite-lived intangibles and property and equipment recorded in our financial statements. We do not amortize our existing goodwill or indefinite-lived intangibles and are required to test goodwill and indefinite-lived intangibles for impairment annually in the fourth quarter of the year and whenever events or changes in circumstances indicate that the carrying value of goodwill and/or indefinite-lived intangible assets may not be recoverable using the one-step process prescribed in the accounting guidance. The process screens for and measures the amount of the impairment, if any. The recoverability of property and equipment is tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Application of the impairment test requires judgment. A significant deterioration in a key estimate or assumption or a less significant deterioration to a combination of assumptions could result in an additional impairment charge in the future, which could have a significant adverse impact on our reported results. See the sections Goodwill and Indefinite-Lived Intangible Assets and Impairments of Property and Equipment and Finite-Lived Intangible Assets in Note 3, “Summary of Significant Accounting Policies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K regarding the impairment charges recorded during the year ended December 31, 2021 on indefinite-lived intangible assets, finite-lived intangible assets and property and equipment in our E&P waste operations.Our indebtedness could adversely affect our financial condition and limit our financial flexibility .As of December 31, 2023, we had approximately $6.812 billion of total indebtedness outstanding, and we may incur additional debt in the future. This amount of indebtedness could:● increase our vulnerability to general adverse economic and industry conditions;● expose us to interest rate risk to the extent that a portion of our indebtedness is at variable rates;
● limit our ability to obtain additional financing or refinancing at attractive rates;
● require the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund our growth strategy, working capital, capital expenditures, dividends, share repurchases and other general corporate purposes;
● limit our flexibility in planning for, or reacting to, changes in our business and the industry; and
● place us at a competitive disadvantage relative to our competitors with less debt.A portion of our indebtedness is at variable rates which are based on the Canadian Dollar Offered Rate, or CDOR, which will cease publication by June 28, 2024. The Canadian Alternative Reference Rate working group, or CARR, supports the transition to the Canadian Overnight Repo Rate Average, or CORRA, rate. We are developing a plan to transition our indebtedness from CDOR to CORRA. In addition, at December 31, 2023 $890.0 million of our indebtedness, including interest rate swaps, is at variable rates which are based on the Secured Overnight Financing Rate, or SOFR, as a result of the transition from the London Interbank Offered Rate, or LIBOR. Although SOFR has been endorsed by the Alternative Reference Rate Committee as its preferred replacement for LIBOR, it remains uncertain whether or when SOFR or other alternative reference rates will be widely accepted by lenders as the replacement for LIBOR. This may, in turn, impact the liquidity of the SOFR loan market, and SOFR itself, with the risk of increased volatility, which could result in higher borrowing costs for us. Further, as the use of SOFR-based rates is relatively new, there could be
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unanticipated difficulties, disruptions or methodological or other changes with the calculation and publication of SOFR based rates, which in turn could trigger another benchmark transition or otherwise cause a reliance on an alternate base rate. This could also result in increased borrowing costs for us and thereby adversely affect our financial condition and earnings.
Our ability to execute our financial strategy and our ability to incur indebtedness is somewhat dependent upon our ability to maintain investment grade credit ratings on our senior debt. The credit rating process is contingent upon our credit profile and several other factors, many of which are beyond our control, including methodologies established and interpreted by third-party rating agencies. If we were unable to maintain our investment grade credit ratings in the future, our interest expense would increase and our ability to obtain financing on favorable terms could be adversely affected.Further, our outstanding indebtedness is subject to financial and other covenants, which may be affected by changes in economic or business conditions or other events that are beyond our control. If we fail to comply with the covenants under any of our indebtedness, we may be in default under the indebtedness, which may entitle the lenders or holders of indebtedness to accelerate the debt obligations. A default under one of our loans or debt securities could result in cross-defaults under our other indebtedness. In order to avoid defaulting on our indebtedness, we may be required to take actions such as reducing or delaying capital expenditures, reducing or eliminating dividends or share repurchases, selling assets, restructuring or refinancing all or part of our existing debt, or seeking additional equity capital, any of which may not be available on terms that are favorable to us, if at all.
We may be unable to obtain performance or surety bonds, letters of credit or other financial assurances or to maintain adequate insurance coverage .If we are unable to obtain performance or surety bonds, letters of credit or insurance, we may not be able to enter into additional collection contracts or retain necessary landfill operating permits. Collection contracts, municipal contracts, transfer station operations and landfill closure and post-closure obligations may require performance or surety bonds, letters of credit or other financial assurance to secure contractual performance or comply with federal, state, provincial or local environmental laws or regulations. We typically satisfy these requirements by posting bonds or letters of credit. As of December 31, 2023, we had $1.645 billion of such surety bonds in place and $142.0 million of letters of credit issued and outstanding. Closure bonds are difficult and costly to obtain. If we are unable to obtain performance or surety bonds or additional letters of credit in sufficient amounts or at acceptable rates, we could be precluded from entering into additional collection contracts or obtaining or retaining landfill operating permits. Any future difficulty in obtaining insurance also could impair our ability to secure future contracts that are conditional upon the contractor having adequate insurance coverage. Accordingly, our failure to obtain performance or surety bonds, letters of credit or other financial assurances or to maintain adequate insurance coverage could limit our operations or violate federal, state, provincial, or local requirements, which could have a materially adverse effect on our business, financial condition and results of operations.
Alternatives to landfill disposal may cause our revenues and operating results to decline .
Counties and municipalities in which we operate landfills may be required to formulate and implement comprehensive plans to reduce the volume of MSW deposited in landfills through waste planning, composting, recycling or other programs, while working to reduce the amount of waste they generate. Some state, provincial and local governments mandate diversion, recycling and waste reduction at the source and prohibit the disposal of certain types of wastes, such as yard waste, food waste and electronics, at landfills. Even where not prohibited by state, provincial or local laws, some grocery stores and restaurants have chosen to divert their organic waste from landfills, while other companies have set zero-waste goals and communicated an intention to cease the disposal of any waste in landfills. Although such actions are useful to protect our environment, these actions, as well as the actions of our customers to reduce waste or seek disposal alternatives, have reduced and may in the future further reduce the volume of waste going to landfills in certain areas, which may affect our ability to operate our landfills at full capacity and could adversely affect our operating results.
39Table of ContentsLabor union activity could divert management attention and adversely affect our operating results .From time to time, labor unions attempt to organize our employees, and these efforts are likely to continue in the future. Certain groups of our employees are represented by unions, and we have negotiated collective bargaining agreements with most of these unions. Additional groups of employees may seek union representation in the future. As a result of these activities, we may be subjected to unfair labor practice charges, grievances, complaints and other legal and administrative proceedings initiated against us by unions or federal, state or provincial labor boards, which could negatively impact our operating results. Negotiating collective bargaining agreements with these unions could divert our management’s attention, which could also adversely affect our operating results. If we are unable to negotiate acceptable collective bargaining agreements, we might have to wait through “cooling off” periods, which may be followed by work stoppages, including strikes or lock-outs. Depending on the type and duration of any such labor disruptions, our operating expenses could increase significantly, which could adversely affect our financial condition, results of operations and cash flows.
We could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate and the accrued pension benefits are not fully funded .We participate in 17 “multiemployer” pension plans administered by employee and union trustees. We make periodic contributions to these plans to fund pension benefits for our union employees pursuant to our various contractual obligations to do so. In the event that we withdraw from participation in or otherwise cease our contributions to one of these plans, then applicable law regarding withdrawal liability could require us to make additional contributions to the plan if the accrued benefits are not fully funded, and we would have to reflect that “withdrawal liability” as an expense in our consolidated statement of operations and as a liability on our consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent to which accrued benefits are funded. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that participate in these plans, we may decide to discontinue participation in a multiemployer plan, and in that event, we could face withdrawal liability. Some multiemployer plans in which we participate may from time to time have significant accrued benefits that are not funded. The size of our potential withdrawal liability may be affected by the level of unfunded accrued benefits, the actuarial assumptions used by the plan and the investment gains and losses experienced by the plan.We have established long-term, aspirational targets associated with sustainability and ESG-related investments and projects which may or may not be achieved .Stakeholder input, business considerations, and potential regulation have reinforced the importance of developing and implementing sustainability and environmental, social, and governance, or ESG, initiatives. In 2020, we adopted long-term, aspirational sustainability targets, which we expanded in 2022 and 2023; we also committed over $500 million for investments and projects to support these efforts. Our ability to achieve these targets will depend significantly on, among other things, the success of these investments and projects and our ability to meet our financial and operating objectives, which can be impacted by the numerous risks and uncertainties associated with our business and the industry in which we operate. There is a risk that some or all of the expected benefits of these investments and projects may fail to materialize, may cost more to achieve or may not occur within the anticipated time periods, including as a result of limitations on technology, permitting requirements, labor constraints or supply chain disruptions. In addition, there is a risk that the actions taken by us to achieve these targets may have a negative impact on our existing business and increase capital expenditures, which could adversely affect our operating results. Our failure to achieve these targets, or a perception among key stakeholders that such targets are insufficient or unattainable, could damage our reputation, competitive position and share price.
There is increasing interest in companies developing and implementing more robust environmental, social, and governance policies and practices and disclosure around climate-related risk identification and mitigation. In addition, certain investors and lenders are incorporating ESG factors into their investment or lending process, alongside traditional financial considerations. Developing and implementing policies and practices, and developing additional disclosure in relation to climate change and other environmental and social risk issues, can involve significant costs and require a significant time commitment from our Board of Directors, management and employees. In addition, our failure to
40Table of Contentsimplement such policies, practices and disclosure could adversely affect our reputation, competitive position and share price and our ability to raise capital, even if our operating results or prospects have not changed.
Our Company published its 2023 Sustainability Report, available at www.wasteconnections.com/sustainability, to communicate our efforts to our investors and other stakeholders. The 2023 Sustainability Report does not constitute part of, and is not incorporated by reference into, this Annual Report on Form 10-K or any other report we provide to the SEC or other securities regulators.We depend significantly on the services of the members of our senior and regional management team, and the departure of any of those persons could cause our operating results to suffer .Our success depends significantly on the continued individual and collective contributions of our senior and regional management team. The loss of the services of any member of our senior and regional management or the inability to hire and retain experienced management personnel could harm our operating results.Our decentralized decision-making structure could allow local managers to make decisions that may adversely affect our operating results .
We manage our operations on a decentralized basis. Local managers have the authority to make many decisions concerning their operations without obtaining prior approval from executive officers, subject to compliance with general company-wide policies. Poor decisions by local managers could result in the loss of customers or increases in costs, in either case adversely affecting operating results.
General Risk FactorsOur results are vulnerable to economic conditions .
Our business and results of operations may be adversely affected by changes in national or global economic conditions, including higher inflation rates and economic slowdowns.
Macroeconomic pressures, including inflationary cost pressures, have had and continue to have a significant impact on our operating costs and capital expenditures. We may be limited in our ability to dynamically address these impacts on a significant portion of our revenue due to contractual provisions, including under long-term contracts, which may include limitations on the level of cost recovery through rate adjustments or a lag in any such recovery. Efforts to recover cost increases may also be limited by ongoing or increasing inflationary pressures and competitive market responses to higher pricing and continued cost pressures. The inability to adequately increase prices to offset increased costs and inflationary pressures, or otherwise mitigate the impact of these macroeconomic conditions on our business, may impact our financial results.
In an economic slowdown, we may experience the negative effects of the following, any of which could adversely impact our operating income and cash flows: decreased waste generation, increased competitive pricing pressure, increased customer turnover, and reductions in customer service requirements. In a recessionary environment, two of our business lines that could see a more immediate impact are construction and demolition debris and E&P waste disposal, as demand for new construction or energy exploration decreases. Our commercial and industrial collection activity and the related demand for our landfill disposal and other services may also be impacted, depending on the drivers of the economic slowdown. In addition, a weaker economy may result in declines in recycled commodity prices. Worsening economic conditions or a prolonged or recurring economic recession could adversely affect our operating results and expected seasonal fluctuations. Further, we cannot assure that any improvement in economic conditions after such a slowdown will result in an immediate, if at all, positive improvement in our operating results or cash flows.
41Table of ContentsPublic health crises and the effects of related governmental initiatives could adversely affect our business, financial condition and results of operations .
Public health crises, such as the COVID-19 pandemic, may impact our operations or our customers’ operations in ways that adversely affect our business, results of operations and financial condition. Fear of such events and their duration and spread might also alter consumer confidence, behavior and spending patterns, resulting in an economic slowdown that could continue to affect demand for our services.Our financial results are based upon estimates and assumptions that may differ from actual results .In preparing our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, estimates and assumptions are made that affect the accounting for and recognition of assets, liabilities, revenues and expenses. These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements is dependent on future events, cannot be calculated with a high degree of precision from data available or is not capable of being readily calculated based on generally accepted methodologies. In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment. The most difficult, subjective and complex estimates and the assumptions that deal with the greatest amount of uncertainty are related to our accounting for landfills, self-insurance accruals, income taxes, allocation of acquisition purchase price, asset impairments and litigation, claims and assessments. Actual results for all estimates could differ materially from the estimates and assumptions that we use, which could have an adverse effect on our financial condition and results of operations.
Income taxes may be uncertain .
Our actual effective tax rate may vary from our expectation and that variance may be material. Tax interpretations, regulations and legislation in the various jurisdictions in which we and our affiliates operate are subject to measurement uncertainty and the interpretations can impact net income, income tax expense or recovery, and deferred income tax assets or liabilities. In addition, tax rules and regulations, including those relating to foreign jurisdictions, are subject to interpretation and require judgment by us that may be challenged by the taxation authorities upon audit.
Changes in our tax provision or an increase to our tax liabilities, whether due to legislation commonly referred to as the Tax Cut and Jobs Act (“Tax Act”) or other applicable tax legislation, or the interpretations of the Tax Act or other applicable tax legislation, such as through final regulations and the potential reversal of its provisions by a subsequent federal administration, or a final determination of tax audits or otherwise, could have a material adverse effect on our financial position, results of operations, and cash flows.
Future changes to U.S., Canadian and foreign tax laws could materially adversely affect us .
We cannot give any assurance as to what our effective tax rate will be in the future, because of, among other things, uncertainty regarding the tax policies of the jurisdictions where we operate.
For example, the U.S. Congress, the Canadian government, the Organisation for Economic Co-operation and Development, or OECD, and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations, including in the area of base erosion and profit shifting, or BEPS, where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. Although the timing and methods of implementation vary, numerous countries have responded to the BEPS project by implementing, or proposing to implement, changes to tax laws and tax treaties, at a rapid pace.
In 2019, Canada ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, or the MLI, as part of the OECD/G20 initiative to counter what was perceived as BEPS. The MLI has entered into force for various of Canada's tax treaties but does not impact the tax treaty between Canada and the U.S.
In addition, the OECD has made r ecommendations regarding cross-border tax structures that are seen to exploit certain differences in the income tax laws of two or more countries, and the Canadian government has indicated that it will
42Table of Contentsintroduce domestic legislation largely consistent with such recommendations. Further t o announcements made in the 2021 Canadian federal budget, draft legislation implementing a first package of hybrid mismatch rules has been introduced and is being considered by the Canadian Parliament and if enacted in the form proposed will generally apply retroactively to payments arising on or after July 1, 2022. A second Canadian legislative package is anticipated to be released, which would comprise the rules consistent with the OECD proposals that were not previously addressed including, amongst other items, an income inclusion rule and a rule intended to tax untaxed profit.
Other new and proposed Canadian tax legislation may also impact our Canadian tax exposure. As an example Canadian Parliament is considering draft legislation that is intended to limit the Canadian tax deductibility of interest and financing expenses in certain circumstances and among other things, the Pillar Two global minimum tax rules that seek to implement a 15% minimum effective tax for large multinational enterprises that have a business presence in Canada.
The international and domestic tax environment continues to change as a result of these and related tax policy initiatives and reforms. As a result of these and other changes, the tax laws in the United States, Canada, and other countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect us and our affiliates. As a result of the rapidly changing and increasingly complex tax environment, our cost of tax compliance may increase and adversely affect our business, financial condition and results of operations.Our operations in Canada expose us to exchange rate fluctuations that could adversely affect our financial performance and our reported results of operations .
Our operations in Canada are conducted primarily in Canadian dollars. Our consolidated financial statements are denominated in U.S. dollars, and to prepare those financial statements we must translate the amounts of the assets, liabilities, net sales, other revenues and expenses of our operations in Canada from Canadian dollars into U.S. dollars using exchange rates for the current period. Fluctuations in the exchange rates that are unfavorable to us would have an adverse effect on our financial performance and reported results of operations.
Technology and Information Security Risks
We are increasingly dependent on technology in our operations and a failure of our technology could impact our ability to service our customers and adversely affect our financial results, damage our reputation, and expose us to litigation risk .
Our businesses rely on computer systems to provide customer information, process customer transactions and provide other general information necessary to manage our businesses. We also rely on a payment card industry-compliant third party to protect our customers’ credit card information. We have an active disaster recovery plan in place that we continuously review and test. However, our computer systems are subject to damage or interruption due to cybersecurity threats, system conversions, power outages, computer or telecommunication failures, catastrophic physical events such as fires, tornadoes and hurricanes and usage errors by our employees. Given the unpredictability of the timing, nature and scope of such disruptions, we could be potentially subject to operational delays and interruptions in our ability to provide services to our customers. Any disruption caused by the unavailability of our computer systems could adversely affect our revenues or could require significant investment to fix or replace them, and, therefore, could affect our operating results.
A cybersecurity incident could negatively impact our business and our relationships with customers, vendors and employees and expose us to increased liability. Cybersecurity attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact.As we pursue our acquisition growth strategy and pursue new initiatives that improve our operations and reduce our costs, we are also expanding and improving our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with
43Table of Contentsacquisitions and new initiatives, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. If our network of security controls, policy enforcement mechanisms or monitoring systems we use to address these threats to technology fail, the theft or compromise of confidential or otherwise protected company, customer or employee information, destruction or corruption of data, security breaches or other manipulation or improper use of our systems and networks could result in financial losses from remedial actions, business disruption, loss of business or potential liability, liabilities due to the violation of privacy laws and other legal actions, and damage to our reputation.
If we are not able to develop and protect intellectual property, or if a competitor develops or obtains exclusive rights to a breakthrough technology, our financial results may suffer .Our existing and proposed service offerings to customers may require that we develop or license, and protect, new technologies. We may experience difficulties or delays in the research, development, production and/or marketing of new products and services which may negatively impact our operating results and prevent us from recouping or realizing a return on the investments required to bring new products and services to market. Further, protecting our intellectual property rights and combating unlicensed copying and use of intellectual property is difficult, and any inability to obtain or protect new technologies could impact our services to customers and development of new revenue sources. Additionally, a competitor may develop or obtain exclusive rights to a “breakthrough technology” that claims to provide a revolutionary change in traditional waste management. If we have inferior intellectual property to our competitors, our financial results may suffer.
Legal, Regulatory and Compliance Risks
Extensive and evolving environmental, health and safety laws and regulations may restrict our operations and growth and increase our costs .Existing environmental laws and regulations have become more stringently enforced in recent years. Further, under the new federal administration that took office in 2021 in the United States, certain policies and initiatives of the prior administration have been modified or reversed, which could adversely affect our operating results. Moreover, under the new federal administration, additional federal regulation has been promulgated that could not only increase our cost of doing business, but also those of our customers, which could lead to a diminution in their business that could adversely affect our operating results. For example, a policy shift away from curtailment of regulation, narrowing Clean Water Act jurisdiction, or enabling oil and gas development on federal lands could adversely affect our business and our customers’ business. In addition, our industry is subject to regular enactment of new or amended federal, state, provincial and local environmental and health and safety statutes, regulations and ballot initiatives, as well as judicial decisions interpreting these requirements, which have become more stringent over time. Citizen suits brought pursuant to environmental laws as well as purported class actions based on nuisance and negligence claims related to alleged landfill odors have proliferated, along with the use of social media to drive such efforts. In addition, various state, provincial and local governments and the Canadian federal government have enacted, have the authority to enact or are considering enacting laws and regulations that restrict the movement or disposal within their jurisdictions of certain types of waste generated outside their jurisdictions. We expect these trends to continue, which could lead to material increases in our costs for future environmental, health and safety compliance. These requirements also impose substantial capital and operating costs and operational limitations on us and may adversely affect our business. In addition, federal, state, provincial and local governments may change the rights they grant to, the restrictions they impose on or the laws and regulations they enforce against, solid waste and E&P waste services companies. These changes could adversely affect our operations in various ways, including without limitation, by restricting the way in which we manage storm water runoff, comply with health and safety laws, treat and dispose of E&P or other waste or our ability to operate and expand our business.
Governmental authorities and various interest groups in the United States and Canada have implemented laws and regulations designed to limit greenhouse gas, or GHG, emissions in response to growing concerns regarding climate change. For example, the State of California, the Canadian federal government and several Canadian provinces have enacted climate change laws, and other states and provinces in which we operate are considering similar actions. The EPA made an endangerment finding in 2009 allowing certain GHGs to be regulated under the CAA. This finding allows the
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EPA to create regulations that will impact our operations – including imposing emission reporting, permitting, control technology installation and monitoring requirements, although the materiality of the impacts will not be known until all applicable regulations are promulgated and finalized. The Canadian federal government enacted the Greenhouse Gas Pollution Pricing Act in June 2018, which established a national carbon-pricing regime starting in 2019 for provinces and territories in Canada where there is no provincial regime in place or where the provincial regime does not meet the federal benchmark. Several Canadian provinces have promulgated legislation and regulations to limit GHG emissions through requirements of specific controls, carbon levies, cap and trade programs or other measures. Comprehensive GHG legislation or regulation, including carbon pricing, affects not only our business, but also that of our customers.
Increased regulation of GHG emissions from oil and natural gas E&P operations may also increase the costs to our customers of developing and producing hydrocarbons, and as a result, may have an indirect and adverse effect on the amount of oilfield waste delivered to our facilities by our customers. For example, in November 2023, the EPA finalized rules providing additional and more stringent regulation and control of methane emissions from oil and natural gas E&P operations. Statutes and regulations governing methane also increase the costs of our operations, and future climate change statutes and regulations may have an impact as well. Further, governmental authorities have considered or have begun to implement increased regulation of PFAS and potentially other emerging contaminants, which could adversely affect our operations. The regulation of these substances could increase or accelerate our financial obligations associated with leachate treatment as well as closure obligations, post-closure maintenance and other environmental remediation related to our solid waste facilities. Further, more stringent permitting obligations, including those relating to air and wastewater, as well as enhanced treatment of landfill leachate and landfill gas could adversely affect our operations in various ways, including without limitation, increased operational expenses as well as treatment and disposal costs, greater capital expenditures to meet control requirements, costs of compliance with permitting and health and safety requirements, and litigation risk.
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 .
Governmental agencies may, among other things, impose fines or penalties on us relating to the conduct of our business, attempt to revoke or deny renewal of our operating permits, franchises or licenses for violations or alleged violations of environmental laws or regulations or as a result of third-party challenges, require us to install additional pollution control equipment or require us to remediate potential environmental problems relating to any real property that we or our predecessors ever owned, leased or operated or any waste that we or our predecessors ever collected, transported, disposed of or stored. For example, see the discussion regarding the South Coast Air Quality Management District Hearing Board Case No. 6177-4 and Elevated Temperature Landfill Event in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Individuals, citizens groups, trade associations or environmental activists may also bring actions against us in connection with our current or former operations that could interrupt or limit the scope of our business or result in adverse judgments or settlements requiring substantial payments. For example, see the discussion regarding the Jefferson Parish, Louisiana Landfill Litigation in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Any adverse outcome in such proceedings could harm our operations and financial results and create negative publicity, which could damage our reputation, competitive position and share price.
Pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements .
We are, and from time to time become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business. Many of these matters raise complicated factual and legal issues and are subject to uncertainties and complexities, all of which make the matters costly to address. For example, in recent years, wage and employment laws have changed regularly and become increasingly complex, which has fostered litigation, including purported class actions. Similarly, purported class actions based on claims related to allegedly unlawful landfill odors and rates and fees charged under certain contracts for collection services have proliferated, as have citizen suits brought pursuant to environmental laws, such as those regulating the treatment of storm water runoff. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is uncertain.45
Table of ContentsAdditionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our consolidated financial condition, results of operations and cash flows. See discussion in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.Extensive regulations that govern the design, operation, expansion and closure of landfills may restrict our landfill operations or increase our costs of operating landfills .If we fail to comply with federal, state and provincial regulations, as applicable, governing the design, operation, expansion, closure and financial assurance of MSW, non-MSW and E&P waste landfills, we could be required to undertake investigatory or remedial activities, curtail operations or close such landfills temporarily or permanently. Future changes to these regulations, including an increased regulation of PFAS, may require us to modify, supplement or replace equipment or facilities at substantial costs.If regulatory agencies fail to enforce these regulations vigorously or consistently, our competitors whose facilities are not forced to comply with the regulations may obtain an advantage over us. Our financial obligations arising from any failure to comply with these regulations could harm our business and operating results.
Liabilities for environmental damage may adversely affect our financial condition, business and earnings .
We may be liable for any environmental damage that our current or former operations cause, including damage to neighboring landowners or residents, particularly as a result of the contamination of soil, groundwater or surface water, and especially drinking water, or to natural resources. We may be liable for damage resulting from conditions existing before we acquired these operations. Even if we obtain legally enforceable representations, warranties and indemnities from the sellers of these operations, they may not cover the liabilities fully or the sellers may not have sufficient funds to perform their obligations.We may also be liable for any on-site environmental contamination caused by pollutants or hazardous substances the transportation, treatment or disposal of which we or our predecessors arranged or conducted. Some environmental laws and regulations may impose strict, joint and several liability in connection with releases of regulated substances into the environment. New or increased regulation of substances, such as PFAS or other emerging contaminants, could also lead to increased or previously unauthorized remediation costs or litigation risk. Therefore, in some situations we could be exposed to liability as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, third parties, including our predecessors. If we were to incur liability for environmental damage, environmental clean-ups, corrective action or damage not covered by insurance or in excess of the amount of our coverage, our financial condition or operating results could be materially adversely affected.
FY 2025-12-31 (later)
ITEM 1A. RISK FACTORS
This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates, and projections as of the date of this filing. Actual results may differ materially from those expressed in forward-looking statements. See Item 7 of Part II – “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Risk Factors Related to Our Company and Industry
Our industry is highly competitive and includes companies with lower prices, return expectations or other advantages, and governmental service providers, which could adversely affect our ability to compete and our operating results .Our industry is highly competitive and requires substantial labor and capital resources. Some of the markets in which we compete or will seek to compete are served by one or more large, national companies, as well as by regional and local companies of varying sizes and resources. Some of our competitors may be able to provide or be willing to bid their services at lower prices than we may be willing to offer, which could impact our ability to win new business or retain existing business, including municipal contracts that come up for renewal. We also compete with counties, provinces, municipalities and solid waste districts that maintain or could develop their own waste collection and disposal operations. These operators may have financial advantages over us because of their access to user fees and similar charges, tax revenues and tax-exempt financing. If we are not able to replace revenues from contracts lost within a reasonable time, our revenues could decline. In addition, existing and future competitors may develop or offer new services or technologies, new facilities or other competitive advantages. Our inability to compete effectively could hinder our growth or negatively impact our operating results.Price increases may not be adequate to offset the impact of increased costs, or may cause us to lose customers .We seek price increases necessary to offset increased costs, to improve operating margins and to obtain adequate returns on our deployed capital. Inflationary or other cost pressures may outpace price increases or drive the need for additional price increases; and contractual, general economic, competitive or market-specific conditions sometimes limit or delay our ability to raise prices or otherwise impact our plans with respect to implementing price increases. As a result of these factors, we may be unable to offset increases in costs, improve operating margins and obtain adequate investment returns through price increases. Price increases may also result in customer churn as we may lose volumes which we are unable to replace at equivalent levels, including from either losing customers to lower-priced competitors or new competitors entering our markets as we raise prices.Competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions .
We seek to grow through strategic acquisitions in addition to internal growth. Although we have and expect to continue to identify numerous acquisition candidates that we believe may be suitable, we may not be able to acquire them at prices or on terms and conditions favorable to us.
Other companies have adopted or may in the future adopt our strategy of acquiring and consolidating regional and local businesses, and they may be willing to accept terms and conditions or valuations that we deem inappropriate. To the extent that competition increases, it may become uneconomical for us to make further acquisitions, or we may be unable to locate or acquire suitable acquisition candidates at price levels and on terms and conditions that we consider appropriate, particularly in markets we do not already serve.
We expect that increased consolidation in the solid waste services industry will continue to reduce the number of attractive acquisition candidates. Moreover, general economic conditions and the factors impacting the environment for attractive investments, including inflationary pressures and higher interest rates, may affect the desire of the owners of acquisition candidates to sell their companies. As a result, we may have fewer acquisition opportunities, and those opportunities may be on less attractive terms than in the past, which could cause a reduction in our rate of growth from acquisitions.33Table of ContentsWhile we expect to fund some of our acquisitions with our existing resources, additional financing to pursue additional acquisitions may be required. Our ability to access the capital markets may be restricted at a time when we would like, or need, to do so, or additional financing may not be available to us on favorable terms, which could have an impact on our flexibility to pursue additional acquisition opportunities. In addition, disruptions in the capital and credit markets could adversely affect our ability to draw on our credit facility or raise other capital.
We may lose contracts through competitive bidding, early termination or governmental action .
We derive a significant portion of our revenues from market areas where we have exclusive arrangements, including franchise agreements, municipal contracts and certificates issued by Washington State known as G Certificates. Many franchise agreements and municipal contracts are for a specified term and are, or will be, subject to competitive bidding in the future. For example, we have approximately 454 contracts, representing approximately 4.0% of our annual revenues, which are set for expiration or automatic renewal on or before December 31, 2026. Although we intend to bid on existing contracts subject to competitive bidding in the future and additional municipal contracts and franchise agreements, we may not be the successful bidder, or we may need to lower our price in order to retain the contract. In addition, some of our customers, including municipalities, have terminated and others may terminate their contracts with us before the end of the terms of those contracts. Similar risks may affect our contracts to operate municipally-owned assets, such as landfills.
Governmental action may also affect our exclusive arrangements. Municipalities may annex unincorporated areas within counties where we provide collection services. As a result, our customers in annexed areas may be required to obtain services from competitors that have been previously franchised by the annexing municipalities to provide those services. In addition, municipalities in which we provide services on a competitive basis may elect to franchise those services to other service providers. Unless we are awarded franchises by these municipalities, we will lose customers. Municipalities may also decide to provide services to their residents themselves, on an optional or mandatory basis, causing us to lose customers. If we are not able to replace revenues from contracts lost within a reasonable time, our revenues could decline. Municipalities sometimes also promulgate “flow control” laws and regulations requiring us to deliver waste we collect within a particular jurisdiction to facilities not owned or controlled by us, which could increase our costs and reduce our revenues.Our financial and operating performance may be affected by restrictions associated with renewals or the inability to renew landfill operating permits, obtain new landfills and expand existing ones .We currently own and/or operate 114 landfills throughout the United States and Canada. Our ability to meet our financial and operating objectives depends in part on our ability to acquire, or renew landfill operating permits, expand existing landfills and develop new landfill sites on terms that are acceptable to us. It has become increasingly difficult, expensive and time-consuming to obtain required permits and approvals to build, operate and expand solid waste management facilities, including landfills. In addition, approvals may include operating restrictions or additional requirements, which could impact financial results. Although generally less time consuming, the process of obtaining permits and approvals for E&P landfills has similar uncertainties. Operating permits for landfills in states and provinces where we operate must generally be renewed every five to ten years, although some permits are required to be renewed more frequently. These operating permits often must be renewed several times during the permitted life of a landfill. The permit and approval process is often time-consuming, requiring numerous hearings and compliance with zoning, environmental and other requirements. Further, permits may be subject to resistance from communities, citizen groups, adjacent landowners and businesses, governmental agencies and municipalities, and may also be subject to other political pressures. A delay in or failure to obtain or renew operating permits for our landfills could have a material adverse effect on our financial condition, operating results, or cash flow. Furthermore, compliance issues with our operating authorizations could result in the need for us to transport our collected waste to other landfills we operate, or to our competitors’ landfills, which could increase our operating costs.
States and municipalities are also increasingly adopting requirements for environmental justice reviews as part of certain permitting decisions. These policies generally require permitting agencies to give heightened attention to the potential for projects to disproportionately impact low-income and minority communities. The permitting and approval process is frequently challenged by special interest and other groups, including those utilizing social media to further their objectives, and may result in the denial of a permit or renewal, the award of a permit or renewal for a shorter duration than
34Table of Contentswe believed was otherwise required by law, or burdensome terms and conditions being imposed on our operations. For example, see the discussions regarding the Los Angeles County, California Landfill Expansion Litigation in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. We may not be able to obtain new landfill sites or expand the permitted capacity of our existing landfills when necessary, and may ultimately be required to expense up to the carrying value of the landfill or expansion project, less the recoverable value of the property and other amounts recovered. Obtaining new landfill sites is important to our expansion into new, non-exclusive solid waste markets and in our E&P waste business. If we do not believe that we can obtain a landfill site in a non-exclusive market, we may choose not to enter that market. Expanding existing landfill sites is important in those markets where the remaining lives of our landfills are relatively short. We may choose to forego acquisitions and internal growth in these markets because increased volumes would further shorten the lives of these landfills. Any of these circumstances could adversely affect our operating results.
Increases in labor costs and limitations on labor availability could impact our financial results .
Labor is one of our highest costs and relatively small increases in labor costs per employee could materially affect our cost structure. A shortage of qualified employees in our markets would require us to incur additional costs related to wages and benefits, to hire more expensive temporary employees or to contract for services with more expensive third-party vendors. In addition, higher turnover can result in increased costs associated with recruiting and training; it can also impact operating costs, including maintenance and risk.Increases in capital expenditures and the timing of receipt of fleet and equipment could impact our financial results .Increases in costs for fleet, equipment, technology and landfill construction due to cost pressures, regulatory requirements, tariffs, acquisitions, new contracts and growth projects, including sustainability-related projects, could result in capital expenditures being higher than anticipated. In addition, supply chain constraints and inflationary pressures have resulted in and are expected to continue to result in higher costs, delays or lack of availability of fleet, equipment or supplies. This could impact our ability to generate free cash flow in line with our expectations, the timing of our free cash flow generation, or otherwise adversely affect our financial results.Our accruals for our landfill site closure and post-closure costs may be inadequate .We regularly accrue amounts and establish reserves to pay capping, closure and post-closure maintenance and remediation costs for landfill sites that we own and operate as well as for landfills we operate under life-of-site agreements. Our obligations to pay closure or post-closure costs sometimes exceed the amount we have accrued and reserved and other amounts available from funds or reserves established to pay such costs or the timing associated with such outlays may change, resulting in adjustments to accruals and reserves and additional costs. Additionally, if a landfill closure occurs earlier than anticipated, closure and post-closure outlays could be required to be accelerated.
Furthermore, the completion or closure of a landfill site does not end our environmental obligations. After completion or closure of a landfill site, or a section of an active landfill, we may incur additional costs. For example, in 2023 and 2024, an ongoing elevated temperature landfill (“ETLF”) event resulted in increased leachate generation and related capital and operating expenses that increased our closure and post closure costs at our Chiquita Canyon Landfill, which ultimately ceased active waste disposal operations as of December 31, 2024. In addition, environmental problems may occur that could result in substantial remediation costs, regulatory enforcement actions and related fines or potential litigation. For example, see the discussions regarding the Elevated Temperature Landfill Event, Chiquita Canyon Landfill Civil Litigation, and County of Los Angeles Litigation in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. The potential increased regulation of per- and polyfluoroalkyl substances (“PFAS”), bisphenol A (“BPA”) phthalates, methane and other emerging contaminants could result in greater expenditures for closure and post-closure costs. It is also possible that accruals may need to be expanded and that costs incurred related to these activities could be accelerated. Paying additional amounts for closure or post-closure costs and/or for environmental remediation and/or for litigation could harm our financial condition, operating results, or cash flow.
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Table of ContentsThe level of exploration, development and production activity of E&P companies will impact the demand for our E&P waste services.The value of crude oil has impacted and may in the future impact the level of drilling or production activity in the basins where we operate; however, we cannot provide assurances that higher crude oil prices will result in increased capital spending and related activity in the basins where we operate. E&P companies may elect to decrease investment in basins where lower crude oil prices or volatility in crude oil prices make the returns on investment inadequate or uncertain or impact the ability of E&P companies to access capital on economically advantageous terms or at all. Similarly, growth in production rates may be impacted by factors including volatility in crude oil prices and the level of global demand, as well as limitations on production as a result of higher operational costs. Energy transition, or a transformation of the global energy sector from fossil-based systems of energy production and consumption to renewable energy sources or nuclear sources, could also affect investments by E&P companies in the basins where we operate. In certain locations where blending activities occur, the value of any recovered oil could vary based on the value of crude oil.A portion of our growth and future financial performance depends on our ability to integrate acquired businesses, and the performance of our acquisitions .
A component of our growth strategy involves achieving economies of scale and operating efficiencies by growing through acquisitions. We may not achieve these goals unless we effectively combine the operations of acquired businesses with our existing operations. In addition, we are not always able to control the timing of our acquisitions. Our inability to complete acquisitions within the time frames that we expect may cause our operating results to be less favorable than expected, which could cause our share price to decline. In addition, we may change our strategy with respect to a market or acquired businesses and decide to sell such operations at a loss, or keep those operations and recognize an impairment of goodwill and/or intangible assets. Similar risks may affect contracts that we are awarded to operate municipally-owned assets, such as landfills.Some acquisitions may not fulfill our anticipated financial or strategic objectives in a given market due to factors that we cannot control, such as market conditions, including the price of crude oil or the value of recycled commodities, market position, competition, customer base, loss of key employees, third-party legal challenges or governmental actions. In addition, acquisitions may have liabilities or risks that we fail or are unable to discover, or that become more adverse to our business than we anticipated at the time of acquisition. As a successor owner, we may be legally responsible for those liabilities that arise from businesses that we acquire, whether we expressly assume them or not, including as a result of sellers not having sufficient funds to perform their obligations or liabilities being imposed on us under various regulatory schemes and other applicable laws. In addition, our insurance program may not cover such sites and will not cover liabilities associated with some environmental issues that may have existed prior to attachment of coverage. A successful uninsured claim against us could harm our financial condition or operating results. Furthermore, risks or liabilities we judge to be not material or remote at the time of acquisition may develop into more serious risks to our business. See discussion in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Any adverse outcome resulting from such risks or liabilities could harm our operations and financial results and create negative publicity, which could damage our reputation, competitive position and share price.Our results will be affected by changes in recycled commodity prices and quantities .
We provide recycling services to some of our customers. The recyclables we process for sale include paper products and plastics that are shipped primarily to customers in the United States, as well as other markets, including Asia. The sale prices of and the demand for recyclable commodities are frequently volatile and when they decline, our revenues, operating results and cash flows will be affected. The value of recyclables may be impacted by factors including: changes to international waste importation and exportation laws; quality concerns; the volatility of crude oil prices, which impacts plastic; and the demand for paper products, which impacts fiber, along with the extent to which manufacturers rely on recycled feedstock.To the extent that we develop and construct new recycling facilities, we may avoid third party processing fees and increase the amount of recyclables that we are able to market and sell, thereby increasing our exposure to changes in
36Table of Contentsrecycled commodity prices. The cost and timing of the completion of new facilities is uncertain as is the quantity and quality of recyclables that we process and sell. To the extent that we make investments in robotics or other technology for sorting, the quality and subsequent value of recyclables may be impacted by the effectiveness of such sorting technology.
Single-stream recycling facilities process a wide range of commingled materials and tend to receive a higher percentage of non-recyclables, particularly in residential collection, which results in increased processing and residual disposal costs to achieve quality standards. As a result, we have increased the fees that we charge customers at our recycling facilities in order to recover the higher processing costs for recyclables. This may result in lower recycled commodity volumes at our recycling facilities, as customers may elect to pursue cheaper alternatives for processing or disposal. Any such reduction could impact revenues, operating results and cash flow. Some of our recycling operations offer rebates to customers based on the market prices of commodities we buy to process for resale. Therefore, if we recognize increased revenues resulting from higher prices for recyclable commodities, the rebates we pay to suppliers will also increase, which also may impact our operating results.
Our results will be affected by changes in the value of renewable fuels and quantities of gas generated and beneficially reused .
Variations in the price of methane gas and other energy-related products that are marketed and sold by our landfill gas recovery operations affect our results. Pursuant to the Energy Independence and Security Act of 2007, the United States EPA has promulgated the Renewable Fuel Standards, or RFS, which require refiners to either blend "renewable fuels," such as ethanol and biodiesel, into their transportation fuels or to purchase renewable fuel credits, known as renewable identification numbers, or RINs, in lieu of blending. In some cases, landfill gas generated at our landfills in the United States and Canada qualifies as a renewable fuel for which RINs are available. The price of RINs has been extremely volatile and is dependent upon a variety of factors, including potential legislative changes, the availability of RINs for purchase, the demand for RINs, which is dependent on transportation fuel production levels, the mix of the petroleum business’ petroleum products and fuel blending performed at the refineries and downstream terminals, all of which can vary significantly from period to period. In addition, demand for RINs can be impacted by the ability of refineries to obtain small refinery exemptions, or SREs, through the EPA. Any reductions or limitations on the requirement to blend renewable fuel and any related waivers including SREs, would likely reduce the demand for RINs, which could impact the value of RINs. The Canadian federal government has promulgated the Clean Fuel Regulations, or CFRs, pursuant to the Canadian Environmental Protection Act, 1999, which have replaced the Renewable Fuel Regulations. Under the CFRs, gasoline and diesel producers and importers (primary suppliers) must lower the carbon intensity of the gasoline and diesel that they produce in Canada and/or import in accordance with prescribed limits through the use of compliance credits. Supplying low carbon fuels can qualify for credit creation under the CFRs. We continue to evaluate evolving markets and legal regimes in the United States and Canada with respect to the beneficial use of methane gas and energy-related products generated in connection with our operations.
A significant reduction in the value of RINs in the United States or the price paid for our renewable fuel in Canada could adversely impact our reported results. To manage a portion of this risk, we may enter into contractual agreements to sell RINs at a fixed price. As of December 31, 2025, we had no contractual fixed price agreements to sell RINs in place.
Variations in the volume of methane gas generated, marketed and sold by our landfill gas recovery operations also affect our results. Our operations and gas generation rates are impacted by many variables, including the maintenance and operations of recovery wells and gas generation systems, the amount and type of waste in our landfills, the age of the landfill, weather and related temperature. In addition, there may be variability in the extent to which we are able to beneficially market and sell for beneficial reuse the gas generated and captured, including as a result of delays in the start-up of new facilities or other impacts to operations. To the extent that we develop and construct new renewable natural gas, or RNG, facilities, either directly or through partnerships with third parties, the cost and timing of the completion of new facilities is uncertain as is the quantity and quality of gas generated and the associated operating costs and benefits, including any tax benefits related to the Inflation Reduction Act of 2022.Increases in risk management costs and the amount that we self-insure for various risks or limitations of our insurance coverage could reduce our operating margins and reported earnings .37Table of ContentsWe maintain insurance policies for automobile, general, employer’s, environmental, cyber, employment practices and directors’ and officers’ liability, as well as for employee group health insurance, property insurance and workers’ compensation. We carry umbrella policies for certain types of claims to provide excess coverage over the underlying policies and per incident deductibles or self-insured retentions. The amounts that we effectively self-insure could cause significant volatility in our operating margins and reported earnings based on the event and claim costs of incidents, accidents, injuries and adverse judgments. Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and our third-party claims administrator. To the extent these estimates are inaccurate, we may recognize substantial additional expenses in future periods that would reduce operating margins and reported earnings. Furthermore, while we maintain liability insurance, our insurance is subject to coverage limitations. If we were to incur substantial liability on a covered claim, our insurance coverage may be inadequate to cover the entirety of such liability. This could have a material adverse effect on our financial position, results of operations and cash flows. One form of coverage limitation concerns claims for punitive damages, which are generally excluded from coverage under all of our liability insurance policies. A punitive damages award could have an adverse effect on our reported earnings in the period in which it occurs. We have seen and may continue to see significant increases in premiums on insurance that we retain, as well as higher deductibles or self-insured retentions, both of which have impacted and could continue to impact our financial results.
Our business is subject to operational and safety risks, including the risk of personal injury to employees and others .
Providing environmental and waste management services, including operating a commercial truck fleet and constructing and operating landfills, involves risks such as vehicular or other accidents, and equipment defects, malfunctions or failures. Additionally, we closely monitor and manage landfills to minimize the risk of waste mass instability and releases of hazardous materials or odors that could be triggered by weather, natural disasters or other causes outside our control. There may also be risks presented by the potential for subsurface chemical reactions causing elevated landfill temperatures. For example, see the discussion regarding the Elevated Temperature Landfill Event in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.We also build and operate natural gas fueling stations, some of which also serve the public or third parties. Operation of fueling stations and landfill gas collection and control systems involves additional risks of fire and explosion. Any of these risks could potentially result in injury or death of employees and others, a need to shut down or reduce operation of facilities, increased operating expense and exposure to liability for pollution and other environmental damage, and property damage or destruction.
While we seek to minimize our exposure to such risks through comprehensive training, compliance and response and recovery programs, as well as vehicle and equipment maintenance programs and the use of personal protective equipment, if we were to incur substantial liabilities in excess of any applicable insurance coverage, our business, results of operations and financial condition could be adversely affected. Any such incidents could also tarnish our reputation and reduce the value of our brand. Additionally, a major operational failure, even if suffered by a competitor, may bring enhanced scrutiny and regulation of our industry, with a corresponding increase in operating expense.
The seasonal nature of our business and “event-driven” waste projects cause our results to fluctuate .Based on historic trends, excluding any impact from an economic recession, we would expect our operating results to vary seasonally, with revenues typically lowest in the first quarter, higher in the second and third quarters, and lower in the fourth quarter than in the second and third quarters. We expect the fluctuation in our revenues between our highest and lowest quarters to be approximately 10%. This seasonality reflects the lower volume of solid waste generated during the late fall, winter and early spring because of decreased construction and demolition activities during the winter months in Canada and the U.S., and reduced E&P activity during harsh weather conditions. Conversely, mild winter weather conditions may reduce demand for oil and natural gas, which may cause our customers to curtail their drilling programs, which could result in production of lower volumes of E&P waste.
Adverse winter weather conditions, including severe storms or extended periods of inclement weather, slow waste collection activities, resulting in higher labor and operational costs. Greater precipitation in the winter increases the weight
38Table of Contentsof collected solid waste, resulting in higher disposal costs, which are calculated primarily on a per ton basis. Certain weather conditions, including severe storms, may result in temporary suspension of our operations, which can significantly impact the operating results of the affected areas. Conversely, weather-related occurrences and other “event-driven” waste projects can boost revenues through heavier weight loads or additional work for a limited time. These factors impact period-to-period comparisons of financial results, and our share price may be negatively affected by these variations.
Climate change, including adverse weather and the adoption of climate change legislation or regulations restricting emissions of greenhouse gases, could adversely affect our operations and increase operating costs .
Our operations and assets are subject to risks associated with the effects of climate change and adverse weather conditions. Risks associated with climate change, such as increased frequency and/or intensity of weather events, flooding, wildfires, sea level rise, and other weather and climate-related events, could negatively impact our operations. For example, these events could disrupt or result in suspension of collection activities, disrupt landfill and transfer station operations, increase maintenance expenses, hinder landfill development or expansion, or generate increased volumes of leachate. It is also possible that these events could disrupt our customers’ businesses, thereby reducing the amount of waste generated by their operations.
Additional laws and regulations related to climate change, including restricting emissions of greenhouse gases, or GHG, could also be promulgated, and such laws and rules could increase our compliance costs, and result in heightened capital expenditures. Furthermore, additional climate change-related regulation could result in increased operational costs or disruption to our customers’ business, thereby impacting our operational results and financial condition. Conversely, favorable investor expectations regarding potential investment tax credits or other benefits stemming from the IRA may not materialize or could fail to meet expectations, particularly in light of the rollback to certain IRA provisions by the OBBA.
Increases in the price of diesel fuel may adversely affect our collection business and reduce our operating margins .
The market price of diesel fuel is volatile. We generally purchase diesel fuel at market prices, which have fluctuated significantly in recent years, including as a result of geopolitical events or inflationary pressures. Tariffs may also increase fuel prices. This could adversely affect our waste collection business through a combination of higher fuel and disposal-related transportation costs and reduce our operating margins and reported earnings. To manage a portion of this risk, we have entered into fixed-price fuel purchase contracts. During periods of falling diesel fuel prices, it may become more expensive to purchase fuel under fixed-price fuel purchase contracts than at market prices.Our financial results could be adversely affected by impairments of goodwill, indefinite-lived intangibles or property and equipment .As a result of our acquisition strategy, we have a material amount of goodwill, indefinite-lived intangibles and property and equipment recorded in our financial statements. We do not amortize our existing goodwill or indefinite-lived intangibles and are required to test goodwill and indefinite-lived intangibles for impairment annually in the fourth quarter of the year and whenever events or changes in circumstances indicate that the carrying value of goodwill and/or indefinite-lived intangible assets may not be recoverable using the one-step process prescribed in the accounting guidance. The process screens for and measures the amount of the impairment, if any. The recoverability of property and equipment is tested for impairment whenever changes in facts and circumstances indicate that their carrying amount may not be recoverable. Application of the impairment test requires judgment. A significant deterioration in a key estimate or assumption or a less significant deterioration to a combination of assumptions could result in an additional impairment charge in the future, which could have a significant adverse impact on our reported results.Our indebtedness could adversely affect our financial condition and limit our financial flexibility .As of December 31, 2025, we had approximately $8.889 billion of total indebtedness outstanding, and we may incur additional debt in the future. This amount of indebtedness could:● increase our vulnerability to general adverse economic and industry conditions;39
Table of Contents● expose us to interest rate risk to the extent that a portion of our indebtedness is at variable rates;
● limit our ability to obtain additional financing or refinancing at attractive rates;
● require the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund our growth strategy, working capital, capital expenditures, dividends, share repurchases and other general corporate purposes;
● limit our flexibility in planning for, or reacting to, changes in our business and the industry; and
● place us at a competitive disadvantage relative to our competitors with less debt.A portion of our indebtedness is at variable rates which are based on the Canadian Overnight Repo Rate Average, or CORRA, as a result of the transition from the Canadian Dollar Offered Rate, or CDOR, which ceased publication on June 28, 2024. In addition, at December 31, 2025, $915 million of our indebtedness, including interest rate swaps, is at variable rates which are based on the term Secured Overnight Financing Rate, or term SOFR, as a result of the transition from the London Interbank Offered Rate, or LIBOR. SOFR and CORRA have a limited history as reference rates, and changes in these rates have, on occasion, been more volatile than changes in other benchmark or market rates. The liquidity of the SOFR and CORRA loan markets could result in higher borrowing costs for us. There could be unanticipated difficulties, disruptions or methodological or other changes with the calculation and publication of these rates, which in turn could trigger another benchmark transition or otherwise cause a reliance on an alternate base rate. This could also result in increased borrowing costs for us and thereby adversely affect our financial condition and earnings.
Our ability to execute our financial strategy and incur indebtedness is somewhat dependent upon our ability to maintain investment grade credit ratings on our senior debt. The credit rating process is contingent upon our credit profile and several other factors, many of which are beyond our control, including methodologies established and interpreted by third-party rating agencies. If we were unable to maintain our investment grade credit ratings in the future, our interest expense would increase and our ability to obtain financing on favorable terms could be adversely affected.Further, our outstanding indebtedness is subject to financial and other covenants, which may be affected by changes in economic or business conditions or other events that are beyond our control. If we fail to comply with the covenants under any of our indebtedness, we may be in default under the indebtedness, which may entitle the lenders or holders of indebtedness to accelerate the debt obligations. A default under one of our loans or debt securities could result in cross-defaults under our other indebtedness. In order to avoid defaulting on our indebtedness, we may be required to take actions such as reducing or delaying capital expenditures, reducing or eliminating dividends or share repurchases, selling assets, restructuring or refinancing all or part of our existing debt, or seeking additional equity capital, any of which may not be available on terms that are favorable to us, if at all.
We may be unable to obtain performance or surety bonds, letters of credit or other financial assurances or to maintain adequate insurance coverage .If we are unable to obtain performance or surety bonds, letters of credit or insurance, we may not be able to enter into additional collection contracts or retain necessary landfill operating permits. Collection contracts, municipal contracts, transfer station operations and landfill closure and post-closure obligations may require performance or surety bonds, letters of credit or other financial assurance to secure contractual performance or comply with federal, state, provincial or local environmental laws or regulations. We typically satisfy these requirements by posting bonds or letters of credit. As of December 31, 2025, we had $2.157 billion of such surety bonds in place and $220.6 million of letters of credit issued and outstanding. Closure bonds are difficult and costly to obtain. If we are unable to obtain performance or surety bonds or additional letters of credit in sufficient amounts or at acceptable rates, we could be precluded from entering into additional collection contracts or obtaining or retaining landfill operating permits. Any future difficulty in obtaining insurance also could impair our ability to secure future contracts that are conditional on the contractor having adequate insurance coverage. Accordingly, our failure to obtain performance or surety bonds, letters of credit or other financial assurances or to maintain adequate insurance coverage could limit our operations or violate federal, state, provincial, or local requirements, which could have a materially adverse effect on our business, financial condition and results of operations.
40Table of ContentsIncreasing customer preference for alternatives to landfill disposal and bans on certain types of waste may cause our revenues and operating results to decline .
Counties and municipalities in which we operate landfills may be required to formulate and implement comprehensive plans to reduce the volume of MSW deposited in landfills through waste planning, composting, recycling or other programs, while working to reduce the amount of waste they generate. Some state, provincial and local governments mandate diversion, recycling and waste reduction at the source and prohibit the disposal of certain types of wastes, such as yard waste, food waste and electronics, at landfills. Even where not prohibited by state, provincial or local laws, some grocery stores and restaurants have chosen to divert their organic waste from landfills, while other companies have set zero-waste goals and communicated an intention to cease the disposal of any waste in landfills. Although such actions are useful to protect the environment, these actions, as well as those of our customers to reduce waste or seek disposal alternatives, have reduced and may in the future further reduce the volume of waste going to landfills in certain areas and the landfill gas produced from those landfills. This may affect our ability to operate our landfills at full capacity and lower the production of gas from our RNG facilities, and could adversely affect our operating results.
Labor union activity could divert management attention, increase costs, and disrupt operations, thereby adversely affect our operating results .From time to time, labor unions attempt to organize our employees, and these efforts are likely to continue in the future. Certain groups of our employees are represented by unions, and we have negotiated collective bargaining agreements with most of these unions. Additional groups of employees may seek union representation in the future. As a result of these activities, we may be subjected to unfair labor practice charges, grievances, complaints and other legal and administrative proceedings initiated against us by unions or federal, state or provincial labor boards, which could negatively impact our operating results. Negotiating collective bargaining agreements with these unions could divert our management’s attention, which could also adversely affect our operating results. If we are unable to negotiate acceptable collective bargaining agreements, we might have to wait through “cooling off” periods, which may be followed by work stoppages, including strikes or lock-outs. Depending on the type and duration of any such labor disruptions, our operating expenses could increase significantly, which could adversely affect our financial condition, results of operations and cash flows.
We could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate and the accrued pension benefits are not fully funded .We participate in 16 “multiemployer” pension plans administered by employee and union trustees. We make periodic contributions to these plans to fund pension benefits for our union employees pursuant to our various contractual obligations to do so. In the event that we withdraw from participation in or otherwise cease our contributions to one of these plans, then applicable law regarding withdrawal liability could require us to make additional contributions to the plan if the accrued benefits are not fully funded, and we would have to reflect that “withdrawal liability” as an expense in our consolidated statement of operations and as a liability on our consolidated balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent to which accrued benefits are funded. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that participate in these plans, we may decide to discontinue participation in a multiemployer plan, and in that event, we could face withdrawal liability. Some multiemployer plans in which we participate may from time to time have significant accrued benefits that are not funded. The size of our potential withdrawal liability may be affected by the level of unfunded accrued benefits, the actuarial assumptions used by the plan and the investment gains and losses experienced by the plan.We have established long-term, aspirational targets associated with sustainability and ESG-related investments and projects which may or may not be achieved .Stakeholder input, business considerations, and potential regulation have reinforced the importance of developing and implementing sustainability and environmental, social, and governance, or ESG, initiatives. In 2020, we adopted long-term, aspirational sustainability targets, which we have since expanded and updated; we also committed $500 million for investments and projects to support these efforts. Our ability to achieve these targets will depend significantly on, among other things, the success of these investments and projects and our ability to meet our financial and operating objectives,
41Table of Contentswhich can be impacted by the numerous risks and uncertainties associated with our business and the industry in which we operate. There is a risk that some or all of the expected benefits of these investments and projects may fail to materialize, may cost more to achieve or may not occur within the anticipated time periods, including as a result of limitations on technology, permitting requirements, labor constraints or supply chain disruptions. In addition, there is a risk that the actions taken by us to achieve these targets may have a negative impact on our existing business and increase capital expenditures or decrease investments in other aspects of the business, which could adversely affect our operating results or future growth. Our failure to achieve these targets, or a perception among key stakeholders that such targets are insufficient or unattainable, could damage our reputation, competitive position and share price.
While there continues to be interest from many stakeholders in ESG policies, practices and disclosure around climate-related risk identification and mitigation by businesses, initiatives to promote the development and implementation of robust ESG policies and the disclosure of climate related risk are in a state of flux among U.S. federal, state, and Canadian regulators. In the United States, many federal climate change and ESG requirements have stalled, and prospective federal requirements will be determined by litigation or new congressional or regulatory action. Regardless of federal action, certain states have initiated independent state specific programs. In addition, certain investors and lenders are incorporating ESG factors into their investment or lending process, alongside traditional financial considerations, to varying extents. Developing and implementing policies and practices, and developing additional disclosure in relation to climate change and other environmental and social risk issues, can involve significant costs and require a significant time commitment from our Board of Directors, management and employees. In addition, a failure to implement such policies, practices and disclosure could adversely affect our reputation, competitive position and share price and our ability to raise capital, even if our operating results or prospects have not changed. Furthermore, public statements regarding ESG matters are increasingly subject to scrutiny by regulators, investors and the public. Any actual or perceived “greenwashing”—defined generally as the misrepresentation or exaggeration of ESG or sustainability practices or commitments not adequately supported by measurable actions or outcomes—could result in reputational harm and legal liability, including regulatory enforcement actions, investor lawsuits and consumer claims under securities and consumer protection laws. Finally, should states implement differing requirements, the complexity of compliance could increase our costs and adversely affect our business prospects.We depend significantly on the services of the members of our senior and regional management team, and the departure of any of those persons could cause our operating results to suffer .Our success depends significantly on the continued individual and collective contributions of our senior and regional management team. The loss of the services of any member of our senior and regional management, the failure of our succession planning to develop an adequate pipeline of future leaders, or the inability to hire and retain experienced management personnel could harm our operating results.Our decentralized decision-making structure could allow local managers to make decisions that may adversely affect our operating results .
We manage our operations on a decentralized basis. Local managers have the authority to make many decisions concerning their operations without obtaining prior approval from executive officers, subject to compliance with general company-wide policies. Poor decisions by local managers could result in the loss of customers or increases in costs, in either case adversely affecting operating results.
General Risk FactorsOur results are vulnerable to economic conditions, including inflationary pressures and trade policies.
Our business and results of operations may be adversely affected by changes in national or global economic conditions, including higher inflation rates, changes in global trade policies and economic slowdowns.
Macroeconomic pressures, including inflationary cost pressures, have had and continue to have a significant impact on our operating costs and capital expenditures. We may be limited in our ability to dynamically address these impacts on a significant portion of our revenue due to contractual provisions, including under long-term contracts, which may include
42Table of Contentslimitations on the level of cost recovery through rate adjustments or a lag in any such recovery. Efforts to recover cost increases may also be limited by ongoing or increasing inflationary pressures and competitive market responses to higher pricing and continued cost pressures. The inability to adequately increase prices to offset increased costs and inflationary pressures, or otherwise mitigate the impact of these macroeconomic conditions on our business, may impact our financial results. In addition, the imposition of tariffs by the United States government, including on imports from Canada and Mexico, could increase our costs through their impact on vehicle and fuel costs, among other things, and may also have general adverse economic effects in the markets we serve, including Canada, all of which is impossible to predict with any precision.
In an economic slowdown, we may experience the negative effects of the following, any of which could adversely impact our operating income and cash flows: decreased waste generation, increased competitive pricing pressure, increased customer turnover, and reductions in customer service requirements. In a recessionary environment, two of our business lines that could see a more immediate impact are construction and demolition debris and E&P waste disposal, as demand for new construction or energy exploration decreases. Our commercial and industrial collection activity and the related demand for our landfill disposal and other services may also be impacted, depending on the drivers of the economic slowdown. In addition, a weaker economy may result in declines in demand for and prices of recycled commodities. Worsening economic conditions or a prolonged or recurring economic recession could adversely affect our operating results and expected seasonal fluctuations. Further, we cannot assure that any improvement in economic conditions after such a slowdown will result in an immediate, if at all, positive improvement in our operating results or cash flows.Our financial results are based upon estimates and assumptions that may differ from actual results .In preparing our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, we make estimates and assumptions that affect the accounting for and recognition of assets, liabilities, revenues and expenses. We are required to make these estimates and assumptions because certain information that is used in the preparation of our financial statements is dependent on future events, cannot be calculated with a high degree of precision from data available or is not capable of being readily calculated based on generally accepted methodologies. In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment. The most difficult, subjective and complex estimates and the assumptions that deal with the greatest amount of uncertainty are related to our accounting for landfills, self-insurance accruals, income taxes, allocation of acquisition purchase price, asset impairments and litigation, claims and assessments. Actual results for all estimates could differ materially from the estimates and assumptions that we use, which could have an adverse effect on our financial condition and results of operations.
Uncertainties in the interpretation and application of existing, new and proposed U.S., Canadian and foreign tax laws could materially adversely affect us .
We are subject to income taxes in the United States, Canada, and various other jurisdictions in which we and our affiliates carry on operations. Our operations are complex, and related tax legislation and interpretations thereof are continually changing. Our actual effective tax rate may vary from our expectation and that variance may be material. We cannot give any assurance as to what our effective tax rate will be in the future, because of, among other things, changes in the mix of our earnings in various jurisdictions, challenges by tax authorities, and changes in the tax laws and policies of the jurisdictions where we operate. As a result of the continuously changing and increasingly complex tax environment, our cost of tax compliance may increase and adversely affect our business, financial condition and results of operations.
From time to time, changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability, including on a retroactive basis. There can be no assurance that changes in tax laws in the United States, Canada and the other jurisdictions in which we operate, such as changes resulting from the increased global focus on issues related to the taxation of multinational corporations, will not materially and adversely affect our effective tax rate, tax payments, financial condition and results of operations. For example, Canada has enacted certain hybrid mismatch rules following recommendations of the Organization for Economic Cooperation and Development (OECD) and has also enacted the Global Minimum Tax Act which, for fiscal years beginning on or after December 31, 2023, implements a minimum effective tax rate of 15% for large multinational groups operating in Canada. Canada has also released draft legislative proposals which propose to implement an additional undertaxed profits rule effective for fiscal years beginning on or after December 31, 2024. The OECD announced on January 5, 2026 that the OECD/G20 Inclusive Framework on
43Table of Contentsbase erosion and profit shifting has reached agreement on key elements of a “side-by-side” package allowing for continued coordinated operation of Pillar Two global minimum tax arrangements. In light of this agreement, it is not yet clear whether Canada will proceed with such draft legislation to implement the undertaxed profits rule or whether it will delay the currently proposed effective date. Furthermore, in the U.S., Congress’ response to the OECD recommendations and other matters continues to evolve, and tax changes, including, for example, due to legislation commonly referred to as the Tax Cut and Jobs Act, may also impact our tax exposure and may have a material adverse effect on our financial position, results of operations, and cash flows.
Tax interpretations, regulations and legislation in the various jurisdictions in which we and our affiliates operate are subject to measurement uncertainty and may impact net income, income tax expense or recovery, and deferred income tax assets or liabilities. In addition, tax rules and regulations, including those relating to foreign jurisdictions, are subject to interpretation and require judgment by us that may be challenged by multiple taxation authorities upon audit. If an audit results in an assessment, future financial results may include unfavorable adjustments to our tax liabilities, which could adversely affect our business, results of operations and financial condition.Our operations in Canada expose us to exchange rate fluctuations that could adversely affect our financial performance and our reported results of operations .
Our operations in Canada are conducted primarily in Canadian dollars. Our consolidated financial statements are denominated in U.S. dollars, and to prepare those financial statements we must translate the amounts of the assets, liabilities, net sales, other revenues and expenses of our operations in Canada from Canadian dollars into U.S. dollars using exchange rates for the current period. Fluctuations in the exchange rates that are unfavorable to us would have an adverse effect on our financial performance and reported results of operations.
Technology and Information Security Risks
We are increasingly dependent on technology in our operations and a failure of our technology could impact our ability to service our customers and adversely affect our financial results, damage our reputation, and expose us to litigation risk .
Our businesses rely on computer systems to provide customer information, process customer transactions and provide other general information necessary to manage our businesses. We also rely on a payment card industry-compliant third party to protect our customers’ credit card information. We have an active disaster recovery plan in place that we continuously review and test. However, our computer systems are subject to damage or interruption due to cybersecurity threats, system conversions, power outages, computer or telecommunication failures, catastrophic physical events such as fires, tornadoes and hurricanes and usage errors by our employees. Given the unpredictability of the timing, nature and scope of such disruptions, we could be potentially subject to operational delays and interruptions in our ability to provide services to our customers. Any disruption caused by the unavailability of our computer systems could adversely affect our revenues or could require significant investment to fix or replace them, and, therefore, could affect our operating results.
A cybersecurity incident could negatively impact our business and our relationships with customers, vendors and employees and expose us to increased liability. Cybersecurity attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact.As we pursue our acquisition growth strategy and pursue new initiatives that improve our operations and reduce our costs, we are also expanding and improving our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. If our network of security controls, policy enforcement mechanisms or monitoring systems we use to address these threats to technology fail, the theft or compromise of confidential or otherwise protected
44Table of Contentscompany, customer or employee information, destruction or corruption of data, security breaches or other manipulation or improper use of our systems and networks could result in financial losses from remedial actions, business disruption, loss of business or potential liability, liabilities due to the violation of privacy laws and other legal actions, and damage to our reputation.
Our inability to adapt to and manage the benefits and risks of Artificial Intelligence (AI) could expose us to liability or put us at a disadvantage.
If we are not able to adapt and effectively incorporate potential advantages of AI in our business, it may negatively impact our ability to compete. On the other hand, if we are not able to effectively manage the commercial and legal risks of AI, including the potential for poor or inconsistent quality, privacy concerns, risks related to automated decision-making, and the potential for exposure of confidential and/or propriety information, we may suffer harm to our results of operation and reputation. The development, adoption, and commercial use of generative AI technologies are still in their early stages and ineffective or inadequate AI development or deployment practices by us or our third-party developers or vendors could result in unintended consequences. Developing, testing, and deploying resource-intensive AI systems may require additional investment and increase our costs. Commercial use of AI is subject to a complex and evolving regulatory landscape, and the technologies underlying AI and its uses are the subject of ongoing review by various government and regulatory agencies. Compliance with these developing regulations may be complex, costly and time-consuming, and there is a risk of regulatory enforcement or litigation if we fail to comply with these requirements.
If we are not able to develop new service offerings and protect intellectual property, or if a competitor develops or obtains exclusive rights to a breakthrough technology, our financial results may suffer .Our existing and proposed service offerings to customers may require that we develop or license, and protect, new technologies. We may experience difficulties or delays in the research, development, production and/or marketing of new products and services which may negatively impact our operating results and prevent us from recouping or realizing a return on the investments required to bring new products and services to market. Further, protecting our intellectual property rights and combating unlicensed copying and use of intellectual property is difficult, and any inability to obtain or protect new technologies could impact our services to customers and development of new revenue sources. Additionally, a competitor may develop or obtain exclusive rights to a “breakthrough technology” that claims to provide a revolutionary change in traditional waste management. If we have inferior intellectual property to our competitors, our financial results may suffer.
Legal, Regulatory and Compliance Risks
Extensive and evolving environmental, health and safety laws and regulations may restrict our operations and growth and increase our costs .Existing environmental laws and regulations have become more stringently enforced in recent years. In addition, our industry is subject to regular enactment of new or amended federal, state, provincial and local environmental and health and safety statutes, regulations and ballot initiatives, as well as judicial decisions interpreting these requirements, which have generally become more stringent over time. Citizen suits brought pursuant to environmental laws as well as purported class and mass actions based on nuisance and negligence claims related to alleged landfill odors have proliferated, along with the use of social media to drive such efforts. In addition, various state, provincial and local governments and the Canadian federal government have enacted, have the authority to enact or are considering enacting laws and regulations that restrict the movement or disposal within their jurisdictions of certain types of waste generated outside their jurisdictions. We expect these trends to continue, which could lead to material increases in our costs for future environmental, health and safety compliance. These requirements also impose substantial capital and operating costs and operational limitations on us and may adversely affect our business. In addition, federal, state, provincial and local governments may change the rights they grant to, the restrictions they impose on or the laws and regulations they enforce against, solid waste and E&P waste services companies. These changes could adversely affect our operations in various ways, including without limitation, by restricting the way in which we manage storm water runoff, comply with health and safety laws, treat and dispose of E&P or other waste or our ability to operate and expand our business.45
Table of ContentsGovernmental authorities and various interest groups in the United States and Canada have implemented laws and regulations designed to limit GHG emissions in response to growing concerns regarding climate change. For example, the State of California, the Canadian federal government and several Canadian provinces have enacted climate change laws, and other states and provinces in which we operate are considering similar actions. The EPA made an endangerment finding in 2009 allowing certain GHGs to be regulated under the CAA. While the Trump administration is seeking to roll back this finding, the EPA’s prior regulatory actions created regulations that will impact our operations by imposing emission reporting, permitting, control technology installation and monitoring requirements, although the materiality of the impacts will not be known until all applicable regulations are promulgated and finalized, including following any regulatory appeals. The Canadian federal government enacted the Greenhouse Gas Pollution Pricing Act in June 2018, which established a national carbon-pricing regime starting in 2019 for provinces and territories in Canada where there is no provincial regime in place or where the provincial regime does not meet the federal benchmark. The Canadian Government recently enacted new regulations that will restrict methane emissions from certain MSW landfills. Several Canadian provinces have promulgated legislation and regulations to limit GHG emissions through requirements of specific controls, carbon levies, cap and trade programs or other measures. The EPA identified methane emissions from landfills and from oil and gas facilities as a focus for enforcement and compliance resources in its National Enforcement and Compliance Initiatives for 2024 through 2027. Comprehensive GHG legislation or regulation, including carbon pricing, affects not only our business, but also that of our customers. The State of California enacted Senate Bill 219 in 2024, requiring companies with revenues exceeding $1 billion and operating within California to report Scope 1 and Scope 2 emissions beginning in 2026 (for emissions occurring in fiscal year 2025) and Scope 3 emissions beginning in 2027 (for emissions occurring in fiscal year 2026). Companies disclosing emissions in California must obtain formal assurance from approved data verification firms to ensure regulatory compliance.
Increased regulation of GHG emissions from oil and natural gas E&P operations may also increase the costs to our customers of developing and producing hydrocarbons, and as a result, may have an indirect and adverse effect on the amount of oilfield waste delivered to our facilities by our customers. For example, in November 2023 and March 2024, the EPA finalized rules providing additional and more stringent regulation and control of methane emissions from oil and natural gas E&P operations and implementing a methane waste emissions charge applicable to certain E&P operations. Statutes and regulations governing methane also increase the costs of our operations, and future climate change statutes and regulations may have an impact as well. Further, governmental authorities have considered or have begun to implement increased regulation of PFAS and potentially other emerging contaminants, which could adversely affect our operations as well as our customers’ operations. The regulation of these substances could increase or accelerate our financial obligations associated with leachate treatment as well as closure obligations, post-closure maintenance and other environmental remediation related to our solid waste facilities. Further, more stringent permitting obligations, including those relating to air and wastewater, as well as enhanced treatment of landfill leachate and landfill gas could adversely affect our operations in various ways, including without limitation, increased operational expenses as well as treatment and disposal costs, greater capital expenditures to meet control requirements, costs of compliance with permitting and health and safety requirements, and litigation risk.
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, which could damage our reputation .
Governmental agencies may, among other things, impose fines or penalties on us relating to the conduct of our business, attempt to revoke or deny renewal of our operating permits, franchises or licenses for violations or alleged violations of environmental laws or regulations or as a result of third-party challenges, require us to install additional pollution control equipment or require us to remediate potential environmental problems relating to any real property that we or our predecessors ever owned, leased or operated or any waste that we or our predecessors ever collected, transported, disposed of or stored. For example, see the discussion regarding the Elevated Temperature Landfill Event in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. While we do not provide hazardous waste collection, transfer or disposal services, our failure to strictly follow federal, state, provincial or local laws regulating the collection, storage, treatment or transportation of listed or characteristically hazardous substances may also subject us to regulatory enforcement actions, fines or other liability. Any adverse outcome in such proceedings could harm our operations and financial results and create negative publicity, which could damage our reputation, competitive position and share price.
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Pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements .
We are, and from time to time become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business. Many of these matters raise complicated factual and legal issues and are subject to uncertainties and complexities, all of which make the matters costly to address. For example, in recent years, wage and employment laws have changed regularly and become increasingly complex, which has fostered litigation, including purported class actions. Similarly, purported class actions based on claims related to allegedly unlawful landfill odors and rates and fees charged under certain contracts for collection services have proliferated, as have citizen suits brought pursuant to environmental laws, such as those regulating the treatment of storm water runoff. Individuals, citizens groups, trade associations, environmental activists or governmental entities may also bring actions against us in connection with our current or former operations that could interrupt or limit the scope of our business. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our consolidated financial condition, results of operations and cash flows. See discussion in Note 13, “Commitments and Contingencies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.Extensive regulations that govern the design, operation, expansion and closure of landfills may restrict our landfill operations or increase our costs of operating landfills .If we fail to comply with federal, state and provincial regulations, as applicable, governing the design, operation, expansion, closure and financial assurance of MSW, non-MSW and E&P waste landfills, we could be required to undertake investigatory or remedial activities, curtail operations or close such landfills temporarily or permanently. Future changes to these regulations, including an increased regulation of PFAS, may require us to modify, supplement or replace equipment or facilities, or perform additional corrective actions, at substantial costs.If regulatory agencies fail to enforce these regulations vigorously or consistently, our competitors whose facilities are not forced to comply with the regulations may obtain an advantage over us. Our financial obligations arising from any failure to comply with these regulations could harm our business and operating results.
Liabilities for environmental damage may adversely affect our financial condition, business and earnings .
We may be liable for any environmental damage that our current or former operations cause, including damage to neighboring landowners or residents, particularly as a result of the contamination of soil, groundwater or surface water, and especially drinking water, or to natural resources. We may be liable for damage resulting from conditions existing before we acquired these operations. Even if we obtain legally enforceable representations, warranties and indemnities from the sellers of these operations, they may not cover the liabilities fully or the sellers may not have sufficient funds to perform their obligations.We may also be liable for any on-site environmental contamination caused by pollutants or hazardous substances the transportation, treatment or disposal of which we or our predecessors arranged or conducted. Some environmental laws and regulations may impose strict, joint and several liability in connection with releases of regulated substances into the environment. New or increased regulation of substances, such as PFAS or other emerging contaminants, could also lead to increased or previously unauthorized remediation costs or litigation risk. For example, in 2024, the EPA designated two of the most widely used PFAS as CERCLA hazardous substances, which could trigger additional obligations or liabilities under CERCLA or other laws and regulations. Therefore, in some situations we could be exposed to liability as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, third parties, including our predecessors. If we were to incur liability for environmental damage, environmental clean-ups, corrective action or damage not covered by insurance or in excess of the amount of our coverage, our financial condition or operating results could be materially adversely affected.
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Item 7 · Management's Discussion & Analysis
+341 paragraphs −402 paragraphs ~341 changed
FY 2023-12-31 (earlier)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
We make statements in this Annual Report on Form 10-K that are forward-looking in nature. These include:● Statements regarding our landfills, including capacity, duration, special projects, demand for and pricing of recyclables, estimated closure and post-closure liabilities, landfill alternatives and related capital expenditures, operating expenses and leachate;● Discussion of competition, loss of contracts, price increases and additional exclusive and/or long-term collection service arrangements;
● Forecasts of cash flows necessary for operations and free cash flow to reduce leverage as well as our ability to draw on our credit facility and access the capital markets to refinance or expand;
● Statements regarding our ability to access capital resources or credit markets;● Plans for, and the amount of, certain capital expenditures for our existing and newly acquired properties and equipment;● Statements regarding fuel, oil and natural gas demand, prices, and price volatility;
● Assessments of regulatory developments and potential changes in environmental, health, safety and tax laws and regulations; and● Other statements on a variety of topics such as the COVID-19 pandemic, inflation, credit risk of customers, seasonality, labor/pension costs and labor union activity, employee retention costs, operational and safety risks, acquisitions, litigation developments and results, goodwill impairments, insurance costs and cybersecurity threats.These statements can be identified by the 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 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, those listed under the heading “ITEM 1A. Risk Factors” and elsewhere in this 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 that could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements to reflect events or circumstances that may change, unless required under applicable securities laws.
Industry OverviewThe solid waste industry is local and highly competitive in nature, requiring substantial labor and capital resources. We compete for collection accounts primarily on the basis of price and, to a lesser extent, the quality of service, and compete for landfill business on the basis of tipping fees, geographic location and quality of operations. The solid waste industry has been consolidating and continues to consolidate as a result of a number of factors, including the increasing costs and complexity associated with waste management operations and regulatory compliance. Many small independent
51Table of Contentsoperators and municipalities lack the capital resources, management, operating skills and technical expertise necessary to operate effectively in such an environment. The consolidation trend has caused solid waste companies to operate larger landfills that have complementary collection routes that can use company-owned disposal capacity. Controlling the point of transfer from haulers to landfills has become increasingly important as landfills continue to close and disposal capacity moves farther from the collection markets it serves.Generally, the most profitable operators within the solid waste industry are those companies that are vertically integrated or enter into long-term collection contracts. A vertically integrated operator will benefit from: (1) the internalization of waste, which is bringing waste to a company-owned landfill; (2) the ability to charge third-party haulers tipping fees either at landfills or at transfer stations; and (3) the efficiencies gained by being able to aggregate and process waste at a transfer station prior to landfilling.
Executive OverviewWe are an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, including by rail, along with resource recovery primarily through recycling and renewable fuels generation, in mostly exclusive and secondary markets across 44 states in the U.S. and six provinces in Canada. Waste Connections also provides E&P waste services in several basins across the U.S. and Canada, as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.
We generally seek to avoid highly competitive, large urban markets and instead target markets where we can attain high market share either through exclusive contracts, vertical integration or asset positioning. In markets where waste collection services are provided under exclusive arrangements, or where waste disposal is municipally owned or funded or available at multiple municipal sources, we believe that controlling the waste stream by providing collection services under exclusive arrangements is often more important to our growth and profitability than owning or operating landfills. We also target niche markets, like non-hazardous E&P waste treatment, recovery and disposal services.
2023 Financial Performance
The functional currency of the Company, as the parent corporate entity, and its operating subsidiaries in the United States is the U.S. dollar. The functional currency of the Company’s Canadian operations is the Canadian dollar. The reporting currency of the Company is the U.S. dollar. The Company’s consolidated Canadian dollar financial position is translated to U.S. dollars by applying the foreign currency exchange rate in effect at the consolidated balance sheet date. The Company’s consolidated Canadian dollar results of operations and cash flows are translated to U.S. dollars by applying the average foreign currency exchange rate in effect during the reporting period. The resulting translation adjustments are included in other comprehensive income or loss. Gains and losses from foreign currency transactions are included in earnings for the period.Operating ResultsRevenues in 2023 increased 11.2% to $8.022 billion from $7.212 billion in 2022. Acquisitions closed during, or subsequent to the prior year, net of divestitures, accounted for $407.3 million in incremental revenues in 2023. Excluding the impact of such acquisitions, revenues increased 5.6% due predominantly to higher internal growth in solid waste. Solid waste internal growth was up 6.2%, due to higher price increases, partially offset by lower surcharges, lower volumes and lower recycled commodities. Pricing growth was 9.0%, with core pricing up 9.5%, offset by materials and environmental surcharges of 0.5%. Volumes decreased by 2.0% due primarily to the intentional shedding of lower quality revenue, including through the purposeful non-renewal of certain residential hauling contracts, and decreases in the value of recycled commodities resulted in a 0.8% offset to internal solid waste growth. Higher E&P waste activity resulted in a 0.2% increase to overall growth, while decreases in landfill gas sales, including renewable energy credits, and other revenue resulted in a 0.2% decrease to overall growth and foreign exchange impacts resulted in a 0.5% decrease to overall growth.
Net income attributable to Waste Connections decreased 8.7% to $762.8 million in 2023, from $835.7 million in 2022, principally as a result of impairments and other operating items, which increased to $238.8 million in 2023 from $18.2
52Table of Contentsmillion in 2022. In 2023, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, a non-GAAP financial measure (refer to page 75 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), increased 13.6% to $2.523 billion, from $2.221 billion in 2022. As a percentage of revenue, adjusted EBITDA increased from 30.8% in 2022, to 31.5% in 2023. This 0.7 percentage point increase reflects a 1.3 percentage point increase primarily from price-led organic growth in solid waste exceeding cost inflation and lower cost of fuel during the year, partially offset by a 0.6 percentage point decrease from lower recycled commodity and landfill gas revenues. Adjusted net income attributable to Waste Connections, a non-GAAP financial measure (refer to page 76 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), in 2023 increased 9.7% to $1.081 billion from $985.3 million in 2022.
Adjusted Free Cash Flow
Net cash provided by operating activities increased 5.2% to $2.127 billion in 2023, from $2.022 billion in 2022, on increases in cash interest from $177.4 million to $260.9 million and increases in cash taxes from $100.2 million to $207.0 million. Capital expenditures for property and equipment increased from $912.7 million in 2022 to $934.0 million in 2023. Adjusted free cash flow, a non-GAAP financial measure (refer to page 74 of this Annual Report on Form 10-K for a definition and reconciliation to Net cash provided by operating activities), increased by $59.3 million to $1.224 billion in 2023, from $1.165 billion in 2022. Adjusted free cash flow as a percentage of revenues was 15.3% in 2023, as compared to 16.2% in 2022.Return of Capital and Distributions to ShareholdersIn 2023, we distributed $270.6 million to shareholders through cash dividends declared by our Board of Directors, which also increased the quarterly cash dividend by 11.8%, from $0.255 to $0.285 per common share in October 2023. Cash dividends increased $27.6 million, or 11.4%, from $243.0 million in 2022 due to a 10.9% increase in the quarterly cash dividend declared by our Board of Directors in November 2022, followed by the additional increase in October 2023. Our Board of Directors intends to review the quarterly dividend during the fourth quarter of each year, with a long-term objective of increasing the amount of the dividend. We expect the amount of capital we return to shareholders through share repurchases to vary depending on our financial condition and results of operations, capital structure, the amount of cash we deploy on acquisitions, expectations regarding the timing and size of acquisitions, the market price of our common shares, and overall market conditions. We cannot assure as to the amounts or timing of future dividends or share repurchases. We have the ability under our Credit Agreement and Term Loan Agreement to repurchase our common shares and pay dividends provided that we maintain specified financial ratios.Capital PositionWe target a Leverage Ratio, as defined substantially identically in both our Credit Agreement and Term Loan Agreement, of approximately 2.5x – 3.0x total debt to EBITDA. The Leverage Ratio is a non-GAAP ratio (refer to page 76 of this Annual Report on Form 10-K for more information on this ratio). The combination of lower debt resulting from opportunistic repayment during 2023 and higher EBITDA in 2023 resulted in a decrease in our Leverage Ratio from 2.93x at December 31, 2022 to 2.60x at December 31, 2023. Cash balances decreased from $78.6 million at December 31, 2022 to $78.4 million at December 31, 2023, and we had $1.357 billion of remaining borrowing capacity under our Credit Agreement, which matures in July 2026. In total, we had $1.103 billion in prepayable debt outstanding at December 31, 2023.Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements. As described by the SEC, critical accounting estimates and assumptions are those that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on the financial condition or operating performance of a company. Such critical accounting estimates and assumptions are applicable to our reportable segments.53
Table of ContentsWe believe that of our significant accounting policies, which are described in Note 3 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, we believe these are the most critical to fully understand and evaluate our financial condition and results of operations.Insurance liabilities . We maintain insurance policies for automobile, general, employer’s, environmental, cyber, employment practices and directors’ and officers’ liability as well as for employee group health insurance, property insurance and workers’ compensation. We carry umbrella policies for certain types of claims to provide excess coverage over the underlying policies and per incident deductibles or self-insured retentions. Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and third-party claims administrator. The insurance accruals are influenced by our past claims experience factors and by published industry development factors. If we experience insurance claims or costs above or below our historically evaluated levels, our estimates could be materially affected. The frequency and amount of claims or incidents could vary significantly over time, which could materially affect our self-insurance liabilities. Additionally, the actual costs to settle the self-insurance liabilities could materially differ from the original estimates and cause us to incur additional costs in future periods associated with prior year claims.Income taxes . Deferred income tax assets and liabilities are determined based on differences between the financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. If our judgment and estimates concerning assumptions made in calculating our expected future income tax rates are incorrect, our deferred income tax assets and liabilities would change. Based on our deferred income tax liability balance at December 31, 2023, each 0.1 percentage point change to our expected future income tax rates would change our deferred income tax liability balance and income tax expense by approximately $3.9 million.Accounting for landfills . We recognize landfill depletion expense as airspace of a landfill is consumed. Our landfill depletion rates are based on the remaining disposal capacity at our landfills, considering both permitted and probable expansion airspace. We calculate the net present value of our final capping, closure and post-closure commitments by estimating the total obligation in current dollars, inflating the obligation based upon the expected date of the expenditure and discounting the inflated total to its present value using a credit-adjusted risk-free rate. Any changes in expectations that result in an upward revision to the estimated undiscounted cash flows are treated as a new liability and are inflated and discounted at rates reflecting market conditions. Any changes in expectations that result in a downward revision (or no revision) to the estimated undiscounted cash flows result in a liability that is inflated and discounted at rates reflecting the market conditions at the time the cash flows were originally estimated. This policy results in our final capping, closure and post-closure liabilities being recorded in “layers.” The resulting final capping, closure and post-closure obligations are recorded on the consolidated balance sheet along with an offsetting addition to site costs, which is amortized to depletion expense as the remaining landfill airspace is consumed. Interest is accreted on the recorded liability using the corresponding discount rate. In the event that changes in an estimate for a closure and post-closure liability are associated with a significant change in facts and circumstances at a landfill or a non-operating section of a landfill, corresponding adjustments to recorded liabilities and Impairments and other operating items are made as soon as is practical. The accounting methods discussed below require us to make certain estimates and assumptions. Changes to these estimates and assumptions, including as a result of inflation, could have a material effect on our financial condition and results of operations. Any changes to our estimates are applied prospectively.
Landfill development costs . Landfill development costs include the costs of acquisition, construction associated with excavation, liners, site berms, groundwater monitoring wells, gas recovery systems and leachate collection systems. We estimate the total costs associated with developing each landfill site to its final capacity. Total landfill costs include the development costs associated with expansion airspace. Expansion airspace is described below. Landfill development costs depend on future events and thus actual costs could vary significantly from our estimates. Material differences between estimated and actual development costs may affect our cash flows by increasing our capital expenditures and thus affect our results of operations by increasing our landfill depletion expense.Final capping, closure and post-closure obligations . We accrue for estimated final capping, closure and post-closure maintenance obligations at the landfills we own, and the landfills that we operate, but do not own, under life-of-site
54Table of Contentsagreements. We could have additional material financial obligations relating to final capping, closure and post-closure costs at other disposal facilities that we currently own or operate or that we may own or operate in the future. Our discount rate assumption for purposes of computing 2023 and 2022 “layers” for final capping, closure and post-closure obligations is based on our long-term credit adjusted risk free rate. Our discount rate was 5.50% for 2023 and ranged from 3.25% to 5.50% for 2022. Our long-term inflation rate assumption was 2.75% for 2023 and ranged from 2.25% to 2.75% for 2022. Significant reductions in our estimates of the remaining lives of our landfills or significant increases in our estimates of the landfill final capping, closure and post-closure maintenance costs could have a material adverse effect on our financial condition and results of operations. In the event that changes in an estimate for a closure and post-closure liability are associated with a significant change in facts and circumstances at a landfill or a non-operating section of a landfill, corresponding adjustments to recorded liabilities and Impairments and other operating items are made as soon as is practical. In 2023, we recorded an additional $159.5 million of charges to adjust the carrying value of a closure and post-closure liability at an area of a landfill site that has been deemed to reach final capacity. Additionally, changes in regulatory or legislative requirements could increase our costs related to our landfills, resulting in a material adverse effect on our financial condition and results of operations.Disposal capacity . Our internal and third-party engineers perform surveys at least annually to estimate the remaining disposal capacity at our landfills. Our landfill depletion rates are based on the remaining disposal capacity, considering both permitted and probable expansion airspace, at the landfills that we own and at landfills that we operate, but do not own, under life-of-site agreements. Our landfill depletion rate is based on the term of the operating agreement at our operated landfill that has capitalized expenditures. Expansion airspace consists of additional disposal capacity being pursued through means of an expansion that has not yet been permitted. Expansion airspace that meets the following criteria is included in our estimate of total landfill airspace:
1)
whether the land where the expansion is being sought is contiguous to the current disposal site, and we either own the expansion property or have rights to it under an option, purchase, operating or other similar agreement;
2)
whether total development costs, final capping costs, and closure/post-closure costs have been determined;
3)
whether internal personnel have performed a financial analysis of the proposed expansion site and have determined that it has a positive financial and operational impact;
4)
whether internal personnel or external consultants are actively working to obtain the necessary approvals to obtain the landfill expansion permit; and
5)
whether we consider it probable that we will achieve the expansion (for a pursued expansion to be considered probable, there must be no significant known technical, legal, community, business or political restrictions or similar issues existing that we believe are more likely than not to impair the success of the expansion).
We may be unsuccessful in obtaining permits for expansion disposal capacity at our landfills. In such cases, we will charge the previously capitalized development costs to expense. This will adversely affect our operating results and cash flows and could result in greater landfill depletion expense being recognized on a prospective basis.
We periodically evaluate our landfill sites for potential impairment indicators. Our judgments regarding the existence of impairment indicators are based on regulatory factors, market conditions and operational performance of our landfills. Future events could cause us to conclude that impairment indicators exist and that our landfill carrying costs are impaired. Any resulting impairment loss could have a material adverse effect on our financial condition and results of operations.Goodwill and indefinite-lived intangible assets testing . Goodwill and indefinite-lived intangible assets are tested for impairment on at least an annual basis in the fourth quarter of the year. In addition, we evaluate our reporting units for impairment if events or circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include, but are not limited to, the following:● a significant adverse change in legal factors or in the business climate;
● an adverse action or assessment by a regulator;
● a more likely than not expectation that a segment or a significant portion thereof will be sold;
● the testing for recoverability of a significant asset group within a segment; or
● current period or expected future operating cash flow losses.55
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As part of our goodwill impairment test, we estimate the fair value of each of our reporting units using discounted cash flow analyses. Our reporting units consisted of our six geographic solid waste operating segments at December 31, 2023, 2022 and 2021. We compare the fair value of each reporting unit with the carrying value of the net assets assigned to the reporting unit. If the fair value of a reporting unit is greater than the carrying value of the net assets, including goodwill, assigned to the reporting unit, then no impairment results. If the fair value is less than its carrying value, an impairment charge is recorded for the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. In testing indefinite-lived intangible assets for impairment, we compare the estimated fair value of each indefinite-lived intangible asset to its carrying value. If the fair value of the indefinite-lived intangible asset is less than its carrying value, an impairment charge would be recorded to earnings in our Consolidated Statements of Net Income.
Discounted cash flow analyses require significant assumptions and estimates about the future operations of each reporting unit and the future discrete cash flows related to each indefinite-lived intangible asset. Significant judgments inherent in these analyses include the determination of appropriate discount rates, the amount and timing of expected future cash flows, growth rates and income tax rates. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate our results against our current market capitalization. For our impairment testing of our operating segments for the year ended December 31, 2023, we determined that the indicated fair value of each of our reporting units exceeded their carrying value in excess of 200% and, therefore, we did not record an impairment charge. The detailed results of our 2023, 2022 and 2021 impairment tests are described in Note 3 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.Business Combination Accounting . We recognize, separately from goodwill, the identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values. We measure and recognize goodwill as of the acquisition date as the excess of: (a) the aggregate of the fair value of consideration transferred, the fair value of the noncontrolling interest in the acquiree (if any) and the acquisition date fair value of our previously held equity interest in the acquiree (if any), over (b) the fair value of assets acquired and liabilities assumed. At the acquisition date, we measure the fair values of all assets acquired and liabilities assumed that arise from contractual contingencies. We measure the fair values of all noncontractual contingencies if, as of the acquisition date, it is more likely than not that the contingency will give rise to an asset or liability.
General
Our revenues consist mainly of fees we charge customers for collection, transfer, recycling and disposal of non-hazardous solid waste and treatment, recovery and disposal of non-hazardous E&P waste.Our solid waste collection business involves the collection of waste from residential, commercial and industrial customers for transport to transfer stations, or directly to landfills or recycling centers. Solid waste collection services include both recurring and temporary customer relationships. The services are performed under service agreements, municipal contracts or franchise agreements with governmental entities. Our existing franchise agreements and most of our existing municipal contracts give us the exclusive right to provide specified waste services in the specified territory during the contract term. These exclusive arrangements are awarded, at least initially, on a competitive bid basis and subsequently on a bid or negotiated basis. The standard customer service agreements generally range from one to five years in duration, although some exclusive franchises are for significantly longer periods. Residential collection services are also provided on a subscription basis with individual households.The fees we charge for collection services are based primarily on the market, collection frequency and level of service, route density, type and volume or weight of the waste collected, type of equipment and containers furnished, the distance to the disposal or processing facility, the cost of disposal or processing, and prices charged by competitors for similar services.
The terms of our contracts sometimes limit our ability to pass on price increases. Long-term solid waste collection contracts often contain a formula, generally based on a published price index, that automatically adjusts fees to cover increases in some, but not all, operating costs, or that limit increases to less than 100% of the increase in the applicable price index.56
Table of ContentsRevenue at landfills is primarily generated by charging tipping fees on a per ton and/or per yard basis to third parties based on the volume disposed and the nature of the waste.
Revenue at transfer stations is primarily generated by charging tipping or disposal fees on a per ton and/or per yard basis. The fees charged to third parties are based primarily on the market, type and volume or weight of the waste accepted, the distance to the disposal facility, the method of transportation used and the cost of disposal.
Many of our landfill and transfer station customers have entered into one to ten year disposal contracts with us, most of which provide for annual indexed price increases.
Our revenues from E&P waste services are primarily generated through the treatment, recovery and disposal of non-hazardous exploration and production waste from vertical and horizontal drilling, hydraulic fracturing, production and clean-up activity, as well as other services.
Our revenues from recycling services result from the sale of recycled commodities, which are generated by offering residential, commercial, industrial and municipal customers recycling services for a variety of recyclable materials, including compost, cardboard, mixed paper, plastic containers, glass bottles and ferrous and aluminum metals. We own and operate recycling operations and market collected recyclable materials to third parties for processing before resale. In some instances, we utilize a third party to market recycled materials. In certain instances, we issue recycling rebates to municipal or commercial customers, which can be based on the price we receive upon the sale of recycled commodities, a fixed contractual rate or other measures. We also receive rebates when we dispose of recycled commodities at third-party facilities.
Other revenues consist primarily of the sale of methane gas and renewable energy credits generated from our MSW landfills and revenues from intermodal services. Intermodal revenue is primarily generated through providing intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities. The fees received for intermodal services are based on negotiated rates and vary depending on volume commitments by the shipper and destination.No single contract or customer accounted for more than 10% of our total revenues at the consolidated or reportable segment level during the periods presented. The following table disaggregates our revenue by service line for the periods indicated (in thousands of U.S. dollars).
Years Ended December 31,
202320222021Commercial$2,476,891$2,176,295$1,813,426Residential
2,125,0681,891,1081,673,819Industrial and construction roll off
1,333,0201,183,624954,181Total collection
5,934,9795,251,0274,441,426Landfill
1,483,3971,328,9421,233,499Transfer
1,198,3851,026,050859,113Recycling
147,039204,876205,076E&P
232,211210,562138,707Intermodal and other
171,721188,471152,194Intercompany
(1,145,781)(998,069)(878,654)Total
$8,021,951
$7,211,859
$6,151,361Cost of operations includes labor and benefits, tipping fees paid to third-party disposal facilities, vehicle and equipment maintenance, workers’ compensation, vehicle and equipment insurance, insurance and employee group health claims expense, third-party transportation expense, fuel, the cost of materials we purchase for recycling, district and state taxes and host community fees and royalties. Our significant costs of operations in 2023 were labor, employee benefits, third-party disposal and transportation, vehicle, equipment and property maintenance, taxes and fees, risk management and fuel. We use a number of programs to reduce overall cost of operations, including increasing the use of automated routes to reduce labor and workers’ compensation exposure, utilizing comprehensive maintenance and health and safety
57
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programs, and increasing the use of transfer stations to further enhance internalization rates. We carry insurance for automobile liability, general liability, employer’s liability, environmental liability, cyber liability, employment practices liability and directors’ and officers’ liability as well as for employee group health claims, property and workers’ compensation. If we experience insurance claims or costs above or below our historically evaluated levels, our estimates could be materially affected.Selling, general and administrative, or SG&A, expense includes management, sales force, clerical and administrative employee compensation and benefits, legal, accounting and other professional services, acquisition expenses, bad debt expense and lease cost for our administrative offices.
Depreciation expense includes depreciation of equipment and fixed assets over their estimated useful lives using the straight-line method. Depletion expense includes depletion of landfill site costs and total future development costs as remaining airspace of the landfill is consumed. Remaining airspace at our landfills includes both permitted and probable expansion airspace. Amortization expense includes the amortization of finite-lived intangible assets, consisting primarily of long-term franchise agreements and contracts, customer lists, permits and other agreements. We use an accelerated or straight-line basis for amortization, depending on the attributes of the related intangibles. Goodwill and indefinite-lived intangible assets, consisting primarily of certain perpetual rights to provide solid waste collection and transportation services in specified territories, are not amortized.We capitalize some third-party expenditures related to development projects, such as legal and engineering. We expense all third-party and indirect acquisition costs, including third-party legal and engineering expenses, executive and corporate overhead, public relations and other corporate services, as we incur them. We charge against net income any unamortized capitalized expenditures and advances (net of any portion that we believe we may recover, through sale or otherwise) that may become impaired, such as those that relate to any operation that is permanently shut down and any landfill development project that we believe will not be completed. We routinely evaluate all capitalized costs, and expense those related to projects that we believe are not likely to succeed. For example, if we are unsuccessful in our attempts to obtain or defend permits that we are seeking or have been awarded to operate or expand a landfill, we will no longer generate anticipated income from the landfill and we will be required to expense in a future period up to the carrying value of the landfill or expansion project, less the recoverable value of the property and other amounts recovered.
Presentation of Results of Operations, Segment Reporting, and Liquidity and Capital Resources
The following discussion and analysis of our Results of Operations, Segment Reporting, and Liquidity and Capital Resources includes a comparison for the year ended December 31, 2023 to the year ended December 31, 2022. A similar discussion and analysis that compares the year ended December 31, 2022 to the year ended December 31, 2021 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Exhibit 99.2 of our Form 8-K filed on August 3, 2023.
58Table of ContentsResults of Operations
The following table sets forth items in our Consolidated Statements of Net Income in thousands of U.S. dollars and as a percentage of revenues for the periods indicated:
Years Ended December 31,
2023% of Revenues2022% of RevenuesRevenues$8,021,951100.0
%
$7,211,859100.0
%
Cost of operations4,744,513
59.14,336,012
60.1
Selling, general and administrative799,119
10.0696,467
9.7
Depreciation845,638
10.5763,285
10.6
Amortization of intangibles157,573
2.0155,675
2.2
Impairments and other operating items238,796
3.018,230
0.2
Operating income1,236,312
15.41,242,190
17.2
Interest expense(274,642)(3.4)(202,331)
(2.8)
Interest income9,350
0.1
5,9500.1
Other income, net12,4810.23,154
0.0
Income tax provision(220,675)(2.8)(212,962)
(2.9)
Net income762,826
9.5836,001
11.6Net income attributable to noncontrolling interests(26)
(0.0)
(339)
(0.0)
Net income attributable to Waste Connections$762,800
9.5%
$835,662
11.6%
Years Ended December 31, 2023 and 2022
Revenues . Total revenues increased $810.1 million, or 11.2%, to $8.022 billion for the year ended December 31, 2023, from $7.212 billion for the year ended December 31, 2022.
Acquisitions closed during, or subsequent to, the year ended December 31, 2022, increased revenues by $410.9 million for the year ended December 31, 2023.
Operations that were divested in 2023 and the full year impact of operations that were divested in 2022, decreased revenues by $3.6 million for the year ended December 31, 2023.
During the year ended December 31, 2023, the net increase in prices charged to our customers at our existing operations was $616.6 million, consisting of $651.1 million of core price increases and decreases in surcharges of $34.5 million.
During the year ended December 31, 2023, we recognized volume losses totaling $137.0 million, due to lower collection and post collection volumes primarily in our Eastern, Canada and Southern segments.
E&P waste revenues at facilities owned during the years ended December 31, 2023 and 2022 increased $17.1 million, due to increases in overall demand for our E&P waste services as a result of increases in drilling and production activity levels in certain basins.
Revenues from sales of recyclable commodities at facilities owned during the years ended December 31, 2023 and 2022 decreased $51.3 million. The decrease is primarily attributable to lower average commodity pricing for old corrugated cardboard, plastics and other paper products as compared to the prior period. Commodity pricing was unfavorable for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. Commodity pricing for the three months ended December 31, 2023 was favorable as compared to the three months ended December 31, 2022.
A decrease in the average Canadian dollar to U.S. dollar currency exchange rate resulted in a decrease in revenues of $33.3 million for the year ended December 31, 2023. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues were 0.7410 and 0.7682 for the years ended December 31, 2023 and 2022, respectively.
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Other revenues decreased $9.3 million during the year ended December 31, 2023, due primarily to a $9.4 million decrease in intermodal revenues, as well as a $2.3 million decrease in landfill gas revenues on lower values for renewable energy credits net of higher landfill gas volumes, partially offset by a $2.4 million increase in other non-core revenue sources.
Cost of Operations . Total cost of operations increased $408.5 million, or 9.4%, to $4.745 billion for the year ended December 31, 2023, from $4.336 billion for the year ended December 31, 2022. The increase was primarily the result of $241.0 million of additional operating costs from acquisitions closed during, or subsequent to, the year ended December 31, 2022, and an increase in operating costs at our existing operations of $187.1 million, assuming foreign currency parity, partially offset by a decrease in operating costs of $17.7 million resulting from a lower average foreign currency exchange rate in effect during the current period and a decrease of $1.9 million from operations divested during, or subsequent to, the year ended December 31, 2022.
The increase in operating costs of $187.1 million, assuming foreign currency parity, at our existing operations for the year ended December 31, 2023, consisted of higher labor and recurring incentive compensation expenses of $91.3 million, an increase in risk management expenses of $44.6 million due to higher claim and premium costs, an increase in truck, container, equipment and facility maintenance and repair expenses of $34.2 million, an increase in other facility operating costs of $15.3 million, an increase in taxes on revenues of $14.9 million as the result of increased revenues, an increase in landfill maintenance and leachate costs of $11.7 million and a net increase of other expenses of $7.3 million, partially offset by a decrease in third-party trucking and transportation expenses of $16.3 million due to lower transfer station and intermodal volumes, a decrease in supplemental compensation to non-management personnel of $9.0 million associated with the impact of the COVID-19 pandemic that occurred in the prior year period and a decrease in fuel expense of $6.9 million due to lower diesel and natural gas prices.
Cost of operations as a percentage of revenues decreased 1.0 percentage points to 59.1% for the year ended December 31, 2023, from 60.1% for the year ended December 31, 2022. The decrease as a percentage of revenues was primarily driven by the impact of price-led revenue growth, a 0.6 percentage point decrease in third-party trucking and transportation expenses, a 0.5 percentage point decrease in disposal costs and a 0.4 percentage point decrease in fuel costs due to lower diesel and natural gas prices, partially offset by a 0.5 percentage point increase in risk management expenses.
SG&A . SG&A expenses increased $102.6 million, or 14.7%, to $799.1 million for the year ended December 31, 2023, from $696.5 million for the year ended December 31, 2022. The increase was comprised of an increase of $76.6 million, assuming foreign currency parity, at our existing operations and $28.9 million from acquisitions closed during, or subsequent to, the year ended December 31, 2022, partially offset by a decrease of $2.9 million resulting from a lower average foreign currency exchange rate in effect during the current period.
The increase in SG&A expenses at our existing operations of $76.6 million, assuming foreign currency parity, for the year ended December 31, 2023 was comprised of an increase in administrative payroll expenses of $22.8 million, an increase in incentive compensation expense of $16.5 million, an increase in executive separation costs of $16.1 million, an increase in deferred compensation expenses of $9.9 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked, an increase in equity-based compensation expenses of $8.9 million associated with our annual recurring grants of restricted share units to our personnel, an increase in professional fees of $5.4 million, an increase in software license fees of $5.2 million, a collective increase in travel, meetings and training expenses of $4.5 million and $1.6 million of other net expense increases, partially offset by a decrease in direct acquisition expenses of $14.3 million due to a decrease in acquisition activity in the current period.
SG&A expenses as a percentage of revenues increased 0.3 percentage points to 10.0% for the year ended December 31, 2023, from 9.7% for the year ended December 31, 2022. The increase as a percentage of revenues was primarily attributable to a 0.2 percentage point increase in executive separation costs, a 0.2 percentage point increase in incentive based compensation costs and a 0.1 percentage point increase in deferred compensation expense, partially offset by a 0.2 percentage point decrease in direct acquisition expenses due to a decrease in acquisition activity.
Depreciation . Depreciation expense increased $82.3 million, or 10.8%, to $845.6 million for the year ended December 31, 2023, from $763.3 million for the year ended December 31, 2022. The increase was comprised of an increase in60
Table of Contentsdepreciation and depletion expense of $56.7 million from acquisitions closed during, or subsequent to, the year ended December 31, 2022, an increase in depreciation expense of $24.4 million from the impact of additions to our fleet and equipment purchased to support our existing operations and $4.5 million of other net increases, partially offset by a decrease of $3.3 million resulting from a lower average foreign currency exchange rate in effect during the current period.
Depreciation expense as a percentage of revenues decreased 0.1 percentage points to 10.5% for the year ended December 31, 2023, from 10.6% for the year ended December 31, 2022. The decrease as a percentage of revenues was primarily attributable to the impact of price driven revenue increases in our solid waste services, partially offset by acquisitions closed during, or subsequent to, the year ended December 31, 2022 having higher depreciation expense as a percentage of revenue than our company average.
Amortization of Intangibles . Amortization of intangibles expense increased $1.9 million, or 1.2%, to $157.6 million for the year ended December 31, 2023, from $155.7 million for the year ended December 31, 2022. The increase was the result of $21.6 million from intangible assets acquired in acquisitions closed during, or subsequent to, the year ended December 31, 2022, partially offset by a decrease of $18.8 million from certain intangible assets becoming fully amortized subsequent to December 31, 2022, and a decrease of $0.9 million resulting from a lower average foreign currency exchange rate in effect during the current period.
Amortization of intangibles expense as a percentage of revenues decreased 0.2 percentage points to 2.0% for the year ended December 31, 2023, from 2.2% for the year ended December 31, 2022. The decrease as a percentage of revenues was attributable to the impact of price-driven revenue increases in our solid waste services.
Impairments and Other Operating Items . Impairments and other operating items increased $220.6 million, to net losses totaling $238.8 million for the year ended December 31, 2023, from net losses totaling $18.2 million for the year ended December 31, 2022.
The net losses of $238.8 million recorded during the year ended December 31, 2023 consisted of $159.5 million of charges to adjust the carrying value of a closure and post-closure liability related to a non-active area of a landfill site, $31.3 million of charges to adjust the carrying value of contingent consideration liabilities associated with acquisitions closed in prior periods, $25.0 million of charges to adjust the carrying value of certain assets impaired as a result of an adjustment to fair market value, $17.3 million of charges to write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to the original estimated termination date, $13.2 million of net losses on property and equipment disposal and uninsured damages to an operating facility and $10.6 million lawsuit judgment charges, partially offset by an $8.7 million gain related to insured recoveries for damages to an operating facility, $7.8 million of gains on the disposal of certain non-strategic operating locations and $1.6 million other net adjustments.
The net losses of $18.2 million recorded during the year ended December 31, 2022 consisted of $10.8 million of charges to write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to the original estimated termination date and an $8.4 million lawsuit judgment accrual, partially offset by $1.0 million of other net gains.
Operating Income . Operating income decreased $5.9 million, or 0.5%, to $1.236 billion for the year ended December 31, 2023, from $1.242 billion for the year ended December 31, 2022.
The decrease in our operating income for the year ended December 31, 2023 was due primarily to an increase in charges to adjust the carrying value of a closure and post-closure liability related to a non-active area of a landfill site, an increase in charges related to adjustments for contingent consideration liabilities and impairments, lower recyclable commodity pricing and an increase in executive separation costs, partially offset by price increases for our solid waste services, operating income generated from acquisitions closed during, or subsequent to, the year ended December 31, 2022 and an increase in earnings at our E&P waste operations.
Operating income as a percentage of revenues decreased 1.8 percentage points to 15.4% for the year ended December 31, 2023, from 17.2% for the year ended December 31, 2022. The decrease as a percentage of revenues was comprised of a 2.8 percentage point increase in impairments and other operating items and a 0.3 percentage point increase in SG&A61
Table of Contentsexpenses, partially offset by a 1.0 percentage point decrease in our costs of operations, a 0.2 percentage point decrease in amortization expense and a 0.1 percentage point decrease in depreciation expense.
Interest Expense . Interest expense increased $72.3 million, or 35.7%, to $274.6 million for the year ended December 31, 2023, from $202.3 million for the year ended December 31, 2022. The increase was primarily attributable to an increase of $30.7 million due to a net increase in the average borrowings outstanding under our Credit Agreement and Term Loan Agreement, an increase of $22.7 million from the issuance of $1.250 billion of senior unsecured notes during, or subsequent to, the year ended December 31, 2022, an increase of $15.5 million from higher interest rates on borrowings outstanding under our Credit Agreement and Term Loan Agreement and $3.4 million of other net expense increases.
Interest Income . Interest income increased $3.4 million to $9.4 million for the year ended December 31, 2023, from $6.0 million for the year ended December 31, 2022. The increase was primarily attributable to higher average investment rates in the current period.
Other Income, Net . Other income, net increased $9.3 million, to $12.5 million for the year ended December 31, 2023, from $3.2 million for the year ended December 31, 2022.
Other income of $12.5 million recorded during the year ended December 31, 2023 consisted of $4.3 million from an increase in the value of investments purchased to fund our employee deferred compensation obligations, a $4.2 million reduction to certain accrued liabilities acquired in an acquisition closed in a prior year period, $3.6 million in other net income sources and $0.4 million from an increase in the average foreign currency exchange rate in effect during the comparable reporting period reducing the U.S. dollar consideration required to settle international liabilities.
Other income of $3.2 million recorded during the year ended December 31, 2022 consisted of income from transactions primarily as a result of the impact from changes in foreign currency exchange rates of $7.0 million related to the decrease in the Canadian dollar to the U.S. dollar exchange rate in the period, and $1.4 million of other income, partially offset by $5.2 million from a decline in the value of investments purchased to fund our employee deferred compensation obligations.
Income Tax Provision . Income taxes increased $7.7 million, to $220.7 million for the year ended December 31, 2023, from $213.0 million for the year ended December 31, 2022. Our effective tax rate for the year ended December 31, 2023 was 22.4%. Our effective tax rate for the year ended December 31, 2022 was 20.3%.
The income tax provision for the year ended December 31, 2023 included a benefit of $3.5 million from share-based payment awards being recognized in the income statement when settled, as well as a portion of our internal financing being taxed at effective rates substantially lower than the U.S. federal statutory rate.
The income tax provision for the year ended December 31, 2022 included a benefit of $2.7 million from share-based payment awards being recognized in the income statement when settled, as well as a portion of our internal financing being taxed at effective rates substantially lower than the U.S. federal statutory rate.
Our effective tax rate is dependent upon the proportion of pre-tax income among the jurisdictions where we do business. As such, our effective tax rate will be subject to some variability depending upon the proportional contribution of pre-tax income across jurisdictions in any period.
Segment Reporting
Effective April 1, 2023, we modified our organizational structure under new regional operating segments as the result of continued growth in our business. We now report revenue and segment EBITDA based on the following six geographic solid waste operating segments: Western, Southern, Central, Eastern, Canada and MidSouth. A small number of operating locations have been reallocated from the Western segment to the Central segment, the previous Eastern segment has been bifurcated into two smaller geographies now referred to as the Eastern segment and MidSouth segment, and a small number of operating locations have been reallocated from the Southern segment to the MidSouth segment. Our six geographic solid waste operating segments comprise our reportable segments. Each operating segment is responsible for managing62
Table of Contentsseveral vertically integrated operations, which are comprised of districts. While certain corporate or regional overhead expense allocations may affect comparability on a period-over-period basis, the segment information presented herein reflects the realignment of these regions.
Our Chief Operating Decision Maker evaluates operating segment profitability and determines resource allocations based on several factors, of which the primary financial measure is segment EBITDA. We define segment EBITDA as earnings before interest, taxes, depreciation, amortization, impairments and other operating items, other income (expense) and loss on early extinguishment of debt. Segment EBITDA is not a measure of operating income, operating performance or liquidity under GAAP and may not be comparable to similarly titled measures reported by other companies. Our management uses segment EBITDA in the evaluation of segment operating performance as it is a profit measure that is generally within the control of the operating segments.Summarized financial information for our reportable segments are shown in the following tables in thousands of U.S. dollars and as a percentage of total segment revenue for the periods indicated:
Years Ended
EBITDADepreciation and
December 31, 2023Revenue
EBITDA
MarginAmortization
Western
$1,669,289
$483,20528.9%$
199,426
Southern1,642,274518,00231.5%
179,948
Central1,440,157512,28335.6
%169,370
Eastern1,380,233353,06125.6%
207,909Canada
995,842390,66439.2
%121,326MidSouth
894,156246,13627.5
%117,397Corporate (a)
—
(25,032)—
7,835
$8,021,951
$2,478,31930.9%
$
1,003,211
Years Ended
EBITDA
Depreciation and
December 31, 2022Revenue
EBITDA
MarginAmortization
Western
$1,428,031
$424,93529.8%$
155,882
Southern1,494,439466,51931.2%
175,614
Central1,288,348446,31534.6
%156,895
Eastern1,233,695281,52222.8%
190,480
Canada940,624349,40337.1%
118,388MidSouth
826,722235,70528.5
%112,866Corporate (a)
—
(25,019)—
8,835
$7,211,859
$2,179,38030.2%
$
918,960(a)
The majority of Corporate expenses are allocated to the six operating segments. Direct acquisition expenses, expenses associated with common shares held in the deferred compensation plan exchanged for other investment options and share-based compensation expenses associated with Progressive Waste share-based grants outstanding at June 1, 2016 that were continued by the Company are not allocated to the six operating segments and comprise the net EBITDA for our Corporate segment for the periods presented.A reconciliation of segment EBITDA to Income before income tax provision is included in Note 17 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Significant changes in revenue, EBITDA and depreciation, depletion and amortization for our reportable segments for the year ended December 31, 2023, compared to the year ended December 31, 2022, are discussed below.
Western
Revenue increased $241.3 million to $1.669 billion for 2023, from $1.428 billion for 2022, due to contributions from acquisitions, price increases and increases in residential and commercial collection volumes, partially offset by decreased
63Table of Contentsroll off and post-collection volumes, lower intermodal revenue and a decrease in the price of recyclable commodities as compared to the prior year period.
EBITDA increased $58.3 million to $483.2 million, or a 28.9% EBITDA margin for 2023, from $424.9 million, or a 29.8% EBITDA margin for 2022. The decrease in our EBITDA margin was due to an increase in risk management expenses due to higher claim and premium costs, an increase in allocated corporate overhead, higher labor costs due primarily to wage increases and increases in other operating costs, partially offset by lower trucking costs.
Depreciation, depletion and amortization expense increased $43.5 million, to $199.4 million for 2023, from $155.9 million for 2022, due to assets acquired in acquisitions and additions to our fleet and equipment.SouthernRevenue increased $147.8 million to $1.642 billion for 2023, from $1.494 billion for 2022, due to solid waste price increases, contributions from acquisitions, increased E&P waste revenues attributable to increases in the demand for our E&P waste services and increased landfill volumes, partially offset by lower residential collection volumes due to the purposeful non-renewal of collection contracts during the current and prior year periods and other decreases in residential volumes, lower transfer station volumes and a decrease in recyclable commodity prices as compared to the prior year period.
EBITDA increased $51.5 million to $518.0 million, or a 31.5% EBITDA margin for 2023, from $466.5 million, or a 31.2% EBITDA margin for 2022. The increase in our EBITDA margin was due to price-led increases in solid waste revenue, the impact of acquisitions having higher EBITDA margins than our segment average, lower trucking costs related to lower transfer station volumes, the purposeful non-renewal of certain residential contracts and increased earnings at our E&P waste operations, partially offset by an increase in risk management expenses due to higher claim and premium costs, higher labor costs due to wage increases, the operational impact of temporary volume limitations at a landfill that occurred in the three months ended December 31, 2023 and increased leachate expense.
Depreciation, depletion and amortization expense increased $4.3 million, to $179.9 million for 2023, from $175.6 million for 2022, due to assets acquired in acquisitions, partially offset by a reduction in amortization expense associated with the loss of certain residential service contracts.
Central
Revenue increased $151.8 million to $1.440 billion for 2023, from $1.288 billion for 2022, due to price increases and contributions from acquisitions, partially offset by lower residential revenues and a decrease in the value of recyclable commodities compared to the prior year period.
EBITDA increased $66.0 million to $512.3 million, or a 35.6% EBITDA margin for 2023, from $446.3 million, or a 34.6% EBITDA margin for 2022. The increase in our EBITDA margin was due to the benefits from price-led increases in revenue and lower benefits costs, partially offset by an increase in risk management expenses due to higher claim and premium costs, a decrease in the value of recyclable commodities as compared to the prior year periods and an increase in allocated corporate overhead.
Depreciation, depletion and amortization expense increased $12.5 million, to $169.4 million for 2023, from $156.9 million for 2022, due to assets acquired in acquisitions and additions to our fleet and equipment as compared to the prior year periods.EasternRevenue increased $146.5 million to $1.380 billion for 2023, from $1.234 billion for 2022, due to price increases and contributions from acquisitions, partially offset by decreased post-collection volumes, decreased residential and commercial service revenues, lower roll off volumes and a decrease in the value of recyclable commodities compared to the prior year period.
64Table of ContentsEBITDA increased $71.6 million to $353.1 million, or a 25.6% EBITDA margin for 2023, from $281.5 million, or a 22.8% EBITDA margin for 2022. The increase in our EBITDA margin was due primarily to price-led increases in revenue, lower benefits costs, a decrease in trucking and disposal expenses as a result of purposefully lost volumes, lower diesel costs due to a decline in average fuel prices and a decrease in truck, container, equipment and facility maintenance and repair expenses, partially offset by higher labor costs, the impact of acquisitions having lower EBITDA margins than our segment average, an increase in risk management expenses due to higher claim and premium costs and lower recycle commodity revenues, net of lower rebates, driven by lower average commodity pricing.
Depreciation, depletion and amortization expense increased $17.4 million, to $207.9 million for 2023, from $190.5 million for 2022, due to assets acquired in acquisitions and additions to our fleet and equipment, partially offset by a reduction in amortization expense associated with the loss of certain residential service contracts.CanadaRevenue increased $55.2 million to $995.8 million for 2023, from $940.6 million for 2022, due to price increases, contributions from acquisitions, and an increase in landfill volumes, partially offset by a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, a decrease in residential collection volumes and lower prices for recyclable commodities as compared to the prior year period.
EBITDA increased $41.3 million to $390.7 million, or a 39.2% EBITDA margin for 2023, from $349.4 million, or a 37.1% EBITDA margin for 2022. The increase in our EBITDA margin was due to price-led increases in revenue, decreases in diesel and natural gas costs due to a decline in average fuel prices, lower labor expenses and a decrease in trucking costs, partially offset by lower recycle commodity revenues, net of lower rebates, driven by lower average commodity pricing, an increase in risk management expenses due to higher claim and premium costs, an increase in truck, container, equipment and facility maintenance and repair expenses and an increase in allocated corporate expense as compared to the prior year period.
Depreciation, depletion and amortization expense increased $2.9 million, to $121.3 million for 2023, from $118.4 million for 2022, due to assets acquired in acquisitions, partially offset by a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.MidSouthRevenue increased $67.5 million to $894.2 million for 2023, from $826.7 million for 2022, due to price increases partially offset by a decrease in the value of recyclable commodities compared to the prior year periods.
EBITDA increased $10.4 million to $246.1 million, or a 27.5% EBITDA margin for 2023, from $235.7 million, or a 28.5% EBITDA margin for 2022. The decrease in our EBITDA margin was due primarily to an increase in risk management expenses due to higher claim and premium costs, an increase in allocated corporate overhead and benefits expense, lower recycle commodity revenues and an increase in recycle processing costs driven by lower average commodity pricing, partially offset by price-led revenue growth, lower disposal costs due to increased internalization in certain markets and decreases in diesel and natural gas costs due to a decline in average fuel prices.
Depreciation, depletion and amortization expense increased $4.5 million, to $117.4 million for 2023, from $112.9 million for 2022, due to additions to our fleet and equipment, higher depletion expense due to higher landfill development costs increasing our per ton landfill depletion rates and increased landfill volumes.
Corporate
EBITDA remained flat as compared to 2022 with a loss of $25.0 million for both periods. As compared to prior year, expense increases included higher incentive compensation costs, an increase in executive separation expenses, increased deferred compensation expenses, increased equity-based compensation expense associated with our annual recurring grants of restricted share units to our personnel, increased administrative payroll costs primarily driven by wage increases and additional headcount to support continued growth, higher professional fees driven by legal costs, increased costs due
65Table of Contentsto increased travel and meetings and increased expenses associated with information systems and applications, partially offset by increased allocation of costs to our operating segments driven by overall higher corporate expenses, lower direct acquisition expenses associated with a decrease in acquisition activity in the current year period, and lower compensation to non-management personnel associated with the impact of the COVID-19 pandemic that occurred in the first three months of 2022 that did not reoccur in the current year period.Liquidity and Capital ResourcesThe following table sets forth certain cash flow information for the years ended December 31, 2023 and 2022 (in thousands of U.S. dollars):
2023
2022Net cash provided by operating activities
$2,126,817
$2,022,492Net cash used in investing activities(1,581,079)
(3,087,171)Net cash provided by (used in) financing activities(544,405)
1,028,463Effect of exchange rate changes on cash, cash equivalents and restricted cash1,341(2,035)
Net increase (decrease) in cash, cash equivalents and restricted cash
2,674
(38,251)Cash, cash equivalents and restricted cash at beginning of year181,364
219,615Cash, cash equivalents and restricted cash at end of year
$184,038
$181,364Operating Activities Cash FlowsNet cash provided by operating activities increased $104.3 million to $2.127 billion for the year ended December 31, 2023, from net cash provided by operating activities of $2.022 billion for the year ended December 31, 2022. The significant components of the increase included the following:
1) Increase in earnings — Our increase in net cash provided by operating activities was favorably impacted by $241.3 million from an increase in net income, excluding depreciation, amortization of intangibles, share-based compensation, adjustments to closure and post-closure liabilities, adjustments to and payments of contingent consideration recorded in earnings and loss on disposal of assets and impairments, due primarily to price increases, earnings from acquisitions closed during, or subsequent to, the year ended December 31, 2022, a decrease in compensation to non-management personnel associated with the impact of the COVID-19 pandemic that occurred in the year ended December 31, 2022 that did not reoccur in the current period and an increase in earnings at our E&P waste operations.
2) Accounts receivable — Our increase in net cash provided by operating activities was favorably impacted by $79.9 million from accounts receivable as changes in accounts receivable resulted in a decrease to operating cash flows of $20.6 million for the year ended December 31, 2023, compared to a decrease to operating cash flows of $100.5 million for the year ended December 31, 2022. The decreases for the years ended December 31, 2023 and 2022 were due to increases in revenue, which remained as outstanding receivables at the end of the period.
3) Prepaid expenses — Our increase in net cash provided by operating activities was favorably impacted by $11.0 million from prepaid expenses as changes in prepaid expenses resulted in an increase to operating cash flows of $10.3 million for the year ended December 31, 2023, compared to a decrease to operating cash flows of $0.7 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023 was due primarily to decreased prepaid income tax payments, partially offset by a net decrease in prepaids related to insurance claim and premium payments. The decrease for the year ended December 31, 2022 was due primarily to increases from payments of annual insurance premiums, payments of annual information system licenses and higher parts and fuel inventory, partially offset by a decrease in prepaid income tax payments.
66Table of Contents4) Accounts payable and accrued liabilities — Our increase in net cash provided by operating activities was unfavorably impacted by $110.7 million from accounts payable and accrued liabilities as changes in accounts payable and accrued liabilities resulted in an increase to operating cash flows of $54.1 million for the year ended December 31, 2023, compared to an increase to operating cash flows of $164.8 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023 was due primarily to an increase in accrued insurance costs, an increase in accrued compensation costs, an increase in accrued interest due to the timing of interest payments, an increase in property taxes attributable to payment timing and an increase in outstanding obligations to vendors, partially offset by a decrease from the timing of tax payments. The increase for the year ended December 31, 2022 was due primarily to increases in operating expenses during the period which remained as outstanding obligations at December 31, 2022, the timing of processing year-end payments to vendors for capital expenditures and increased accrued interest due to the timing of interest payments for our senior unsecured notes issued subsequent to December 31, 2021, partially offset by the payment of deferred payroll taxes.
5) Deferred income taxes — Our increase in net cash provided by operating activities was unfavorably impacted by $87.2 million from deferred income taxes as changes in deferred income taxes resulted in an increase to operating cash flows of $6.3 million for the year ended December 31, 2023, compared to an increase to operating cash flows of $93.5 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023 was primarily due to accelerated tax depreciation from capital expenditures. The increase for the year ended December 31, 2022 was primarily attributable to tax benefits resulting from the divestiture of certain non-strategic E&P disposal operating locations.
6) Deferred revenue — Our increase in net cash provided by operating activities was unfavorably impacted by $15.7 million from deferred revenue as changes in deferred revenue resulted in an increase to operating cash flows of $26.5 million for the year ended December 31, 2023, compared to an increase to operating cash flows of $42.2 million for the year ended December 31, 2022. For both comparative periods, deferred revenue increased due to price increases on our advanced billed residential and commercial collection services.
7) Closure and post closure expenditures – Our increase in net cash provided by operating activities was unfavorably impacted by $20.6 million from an increase in payments for closure and post closure activities as changes in expenditures for these items resulted in a decrease to operating cash flows of $39.4 million for the year ended December 31, 2023, compared to a decrease in operating cash flows of $18.9 million for the year ended December 31, 2022. The increase in expenditures as compared to the prior year period was due primarily to additional costs incurred in relation to an Elevated Temperature Landfill event at a landfill.
At December 31, 2023, we had a working capital deficit of $546.1 million, including cash and equivalents of $78.4 million. Our working capital deficit increased $151.1 million from a working capital deficit of $395.0 million at December 31, 2022 including cash and equivalents of $78.6 million, due primarily to an increase in the short-term portion of closure and post closure accruals, an increase in contingent consideration liabilities, an increase in deferred revenues, an increase in accrued insurance costs and a decrease in prepaid income tax, partially offset by an increase in accounts receivables as a result of increases in revenue and decreases in accounts payable and accrued liabilities driven by the timing of payments for obligations to vendors. To date, we have experienced no loss or lack of access to our cash and equivalents; however, we can provide no assurances that access to our cash and equivalents will not be impacted by adverse conditions in the financial markets. Our strategy in managing our working capital is generally to apply the cash generated from our operations that remains after satisfying our working capital and capital expenditure requirements, along with share repurchase and dividend programs, to reduce the unhedged portion of our indebtedness under our Credit Agreement and to minimize our cash balances.Investing Activities Cash FlowsNet cash used in investing activities decreased $1.506 billion to $1.581 billion for the year ended December 31, 2023, from $3.087 billion for the year ended December 31, 2022. The significant components of the decrease included the following:
1) A decrease in cash paid for acquisitions of $1.530 billion; and
67Table of Contents2) A decrease in capital expenditures at operations owned in the comparable periods of $15.8 million due to decreases in land and facility expenditures and landfill site costs, partially offset by increased truck and equipment purchases; less
3) An increase in capital expenditures at operations acquired during the comparative periods of $37.1 million due to increased expenditures for landfill site costs, trucks, containers and equipment.Financing Activities Cash FlowsNet cash used in financing activities increased $1.573 billion to $544.4 million for the year ended December 31, 2023, from net cash provided by financing activities of $1.028 billion for the year ended December 31, 2022. The significant components of the increase included the following:
1) An increase from the net change in long-term borrowings of $1.975 billion in which long-term borrowings decreased $230.6 million during the year ended December 31, 2023 and increased $1.745 billion during the year ended December 31, 2022;
2) An increase from higher cash dividends paid of $27.6 million due primarily to an increase in our average quarterly dividend rate for the year ended December 31, 2023 to $0.263 per share, from $0.236 per share for the year ended December 31, 2022; and
3) An increase in tax withholdings related to net share settlements of equity-based compensation of $12.7 million due to an increase in the value of equity-based compensation awards vesting; less
4) A decrease from lower payments to repurchase our common shares of $425.0 million that occurred in the year ended December 31, 2022; and
5) A decrease from lower payments related to the issuance of debt of $13.3 million that occurred during the year ended December 31, 2022.
On July 25, 2023, our Board of Directors approved, subject to receipt of regulatory approvals, the annual renewal of our normal course issuer bid, or the NCIB, to purchase up to 12,881,534 of our common shares during the period of August 10, 2023 to August 9, 2024 or until such earlier time as the NCIB is completed or terminated at our option. Shareholders may obtain a copy of our TSX Form 12 – Notice of Intention to Make a Normal Course Issuer Bid, without charge, by request directed to our Executive Vice President and Chief Financial Officer at (832) 442-2200. The timing and amounts of any repurchases pursuant to the NCIB will depend on many factors, including our capital structure, the market price of our common shares, any share buyback taxes applicable and overall market conditions. All common shares purchased under the NCIB will be immediately cancelled following their repurchase. Information regarding our NCIB plan can be found under the section Normal Course Issuer Bid in Note 14, “Shareholders’ Equity,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.
The Board of Directors of the Company authorized the initiation of a quarterly cash dividend in October 2010 and has increased it on an annual basis. In October 2023, we announced that our Board of Directors increased our regular quarterly cash dividend by $0.03, from $0.255 to $0.285 per share. Cash dividends of $270.6 million and $243.0 million were paid during the years ended December 31, 2023 and 2022, respectively. We cannot assure as to the amounts or timing of future dividends.
We made $934.0 million in capital expenditures for property and equipment during the year ended December 31, 2023, and we expect to make total capital expenditures for property and equipment of $1.15 billion in 2024, including approximately $150 million associated with renewable natural gas facilities. We intend to fund our planned 2024 capital expenditures principally through cash on hand, internally generated funds and borrowings under our Credit Agreement. In addition, we may make substantial additional capital expenditures in acquiring land and solid waste businesses. If we acquire additional landfill disposal facilities, we may also have to make significant expenditures to bring them into compliance with applicable regulatory requirements, obtain permits or expand our available disposal capacity. We cannot currently determine the amount of these expenditures because they will depend on the number, nature, condition and permitted status of any acquired landfill disposal facilities. We believe that our cash and equivalents, Credit Agreement and the funds we expect to generate from operations will provide adequate cash to fund our working capital and other cash needs for the foreseeable future. However, disruptions in the capital and credit markets could adversely affect our ability to draw on our Credit Agreement or raise other capital. Our access to funds under the Credit Agreement is dependent on
68Table of Contentsthe ability of the banks that are parties to the agreement to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time.
We have a revolving credit and term loan agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) with Bank of America, N.A., acting through its Canada Branch, as the global agent, the swing line lender and a letter of credit issuer, Bank of America, N.A., as the U.S. Agent and a letter of credit issuer, the other lenders named therein (the “Lenders”) and any other financial institutions from time to time party thereto. There are no subsidiary guarantors under the Credit Agreement. The Credit Agreement has a scheduled maturity date of July 30, 2026, which may be extended further upon agreement by Lenders holding at least 50% of the commitments and credit extensions outstanding, with respect to their respective commitments and credit extensions outstanding. Any Lender that does not agree to an extension of the maturity date shall not be so extended with respect to their commitments and credit extensions.
As of December 31, 2023, $650.0 million under the term loan and $453.2 million under the revolving credit facility were outstanding under the Credit Agreement, exclusive of outstanding standby letters of credit of $39.7 million. We also had $102.2 million of letters of credit issued and outstanding at December 31, 2023 under a facility other than the Credit Agreement. We did not have any amounts outstanding under our master note purchase agreements.
Pursuant to the terms and conditions of a Master Note Purchase Agreement dated as of June 1, 2016 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “2016 NPA”) between us and certain accredited institutional investors, we issued senior unsecured notes (the “2016 Private Placement Notes”) consisting of (i) $150.0 million of senior notes due June 1, 2021 (the “June 2021 Private Placement Notes”), (ii) $200.0 million of senior notes due June 1, 2023, (iii) $150.0 million of senior notes due April 20, 2024, (iv) $400.0 million of senior notes due June 1, 2026 and (v) $250.0 million of senior notes due April 20, 2027.
Pursuant to the terms and conditions of a Master Note Purchase Agreement dated as of July 15, 2008 (as amended, restated, amended and restated, assumed, supplemented or otherwise modified from time to time, the “2008 NPA”) between us and certain accredited institutional investors, we issued senior unsecured notes (the “2008 Private Placement Notes” and together with the 2016 Private Placement Notes, the “Private Placement Notes”) consisting of (i) $100.0 million of senior notes due April 1, 2021 (the “April 2021 Private Placement Notes” and together with the June 2021 Private Placement Notes, the “2021 Private Placement Notes”), (ii) $125.0 million of senior notes due August 20, 2022 and (iii) $375.0 million of senior notes due August 20, 2025.
We repaid at maturity the 2021 Private Placement Notes and repaid the other Private Placement Notes in connection with the Offering (defined below) in September 2021.
On November 16, 2018, we completed an underwritten public offering of $500.0 million aggregate principal amount of our 4.25% Senior Notes due December 1, 2028 (the “2028 Senior Notes”). The 2028 Senior Notes were issued under the Indenture, dated as of November 16, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented through the First Supplemental Indenture, dated as of November 16, 2018.
On April 16, 2019, we completed an underwritten public offering of $500.0 million aggregate principal amount of our 3.50% Senior Notes due May 1, 2029 (the “2029 Senior Notes”). The 2029 Senior Notes were issued under the Indenture, as supplemented through the Second Supplemental Indenture, dated as of April 16, 2019.On January 23, 2020, we completed an underwritten public offering of $600.0 million aggregate principal amount of 2.60% Senior Notes due February 1, 2030 (the “2030 Senior Notes”). The 2030 Senior Notes were issued under the Indenture, as supplemented through the Third Supplemental Indenture, dated as of January 23, 2020.
On March 13, 2020, we completed an underwritten public offering of $500.0 million aggregate principal amount of 3.05% Senior Notes due April 1, 2050 (the “2050 Senior Notes”). The 2050 Senior Notes were issued under the Indenture, as supplemented through the Fourth Supplemental Indenture, dated as of March 13, 2020.69
Table of ContentsOn September 20, 2021, we completed an underwritten public offering (the “Offering”) of $650.0 million aggregate principal amount of 2.20% Senior Notes due January 15, 2032 (the “2032 Senior Notes”) and $850.0 million aggregate principal amount of 2.95% Senior Notes due January 15, 2052 (the “2052 Senior Notes”). The 2032 Senior Notes and the 2052 Senior Notes were issued under the Indenture, as supplemented through the Fifth Supplemental Indenture, dated as of September 20, 2021.In connection with the Offering, we exercised our right to repay the $1.500 billion of Private Placement Notes then outstanding governed by the 2008 NPA and the 2016 NPA. We repaid the Private Placement Notes then outstanding, including the $110.6 million make-whole premium, with the net proceeds from the Offering and borrowings under the revolving credit facility provided under our Credit Agreement. We recorded $115.3 million to Loss on early extinguishment of debt during the year ended December 31, 2021 due to the repayment of the Private Placement Notes and associated make-whole premium and related fees.On March 9, 2022, we completed an underwritten public offering of $500.0 million aggregate principal amount of 3.20% Senior Notes due June 1, 2032 (the “New 2032 Senior Notes”). The New 2032 Senior Notes were issued under the Indenture, as supplemented through the Sixth Supplemental Indenture, dated as of March 9, 2022.On August 18, 2022, we completed an underwritten public offering of $750.0 million aggregate principal amount of 4.20% Senior Notes due January 15, 2033 (the “2033 Senior Notes” and, together with the 2028 Senior Notes, the 2029 Senior Notes, the 2030 Senior Notes, the 2032 Senior Notes, the New 2032 Senior Notes, the 2050 Senior Notes and the 2052 Senior Notes, the “Senior Notes”). The 2033 Senior Notes were issued under the Indenture, as supplemented through the Seventh Supplemental Indenture, dated as of August 18, 2022.
We pay interest on the Senior Notes semi-annually in arrears. The Senior Notes are our senior unsecured obligations, ranking equally in right of payment with our existing and future unsubordinated debt and senior to any of our future subordinated debt. The Senior Notes are not guaranteed by any of our subsidiaries.
On October 31, 2022, we, as borrower, Bank of America, N.A., as administrative agent, and the other lenders from time to time party thereto (the “New TL Lenders”) entered into that certain Term Loan Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement”), pursuant to which the New TL Lenders made loans to us in an aggregate stated principal amount of $800.0 million. We used substantially all of the proceeds of borrowings under the Term Loan Agreement to repay revolving borrowings under the Credit Agreement. Amounts borrowed under the Term Loan Agreement and repaid or prepaid may not be reborrowed. The Term Loan Agreement has a scheduled maturity date of July 30, 2026.
See Note 11 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the debt agreements.70
Table of ContentsContractual ObligationsAs of December 31, 2023, we had the following contractual obligations:
Payments Due by Period
(amounts in thousands of U.S. dollars)
Less Than1 to 3
Over 5
Recorded Obligations
Total
1 Year
Years
3 to 5 Years
Years
Long-term debt
$6,812,053
$26,462
$1,917,301
$510,089
$4,358,201Cash interest payments
$2,266,543
$262,256
$491,009
$313,828
$1,199,450Contingent consideration
$131,310
$94,996
$
3,224
$
3,224
$29,866Operating leases
$347,590
$42,776
$71,139
$60,688
$172,987Final capping, closure and post-closure
$2,328,665
$103,663
$73,377
$55,402
$2,096,223Long-term debt payments include:1) $453.2 million in principal payments due July 2026 related to our revolving credit facility under our Credit Agreement. Advances are available under the Credit Agreement in U.S. dollars and Canadian dollars and bear interest at fluctuating rates (See Note 11). At December 31, 2023, $240.0 million of the outstanding borrowings drawn under the revolving credit facility were in U.S. Term SOFR rate loans, bearing interest at a total rate ranging from 6.46% to 6.50% on such date. At December 31, 2023, $28.0 million of the outstanding borrowings drawn under the revolving credit facility were in U.S. base rate loans, bearing interest at a total rate of 8.50% on such date. At December 31, 2023, $15.1 million of the outstanding borrowings drawn under the revolving credit facility were in Canadian prime rate loans, bearing interest at a total rate of 7.20% on such date. At December 31, 2023, $170.1 million of the outstanding borrowings drawn under the revolving credit facility were in Canadian-based bankers’ acceptances, bearing interest at a total rate ranging from 6.40% to 6.46% on such date.
2) $650.0 million in principal payments due July 2026 related to our term loan under our Credit Agreement. Outstanding amounts on the term loan can be either base rate loans or Term SOFR loans. At December 31, 2023, all amounts outstanding under the term loan were in Term SOFR loans which bear interest at the Term SOFR rate plus the applicable margin (for a total rate of 6.50% on such date).
3) $800.0 million in principal payments due July 2026 related to our term loan under our Term Loan Agreement. Outstanding amounts on the term loan can be either base rate loans or Term SOFR loans. At December 31, 2023, all amounts outstanding under the term loan were in Term SOFR loans which bear interest at the Term SOFR rate plus the applicable margin (for a total rate of 6.44% on such date).
4) $500.0 million in principal payments due 2028 related to our 2028 Senior Notes. The 2028 Senior Notes bear interest at a rate of 4.25%.
5) $500.0 million in principal payments due 2029 related to our 2029 Senior Notes. The 2029 Senior Notes bear interest at a rate of 3.50%.
6) $600.0 million in principal payments due 2030 related to our 2030 Senior Notes. The 2030 Senior Notes bear interest at a rate of 2.60%.
7) $650.0 million in principal payments due 2032 related to our 2032 Senior Notes. The 2032 Senior Notes bear interest at a rate of 2.20%.
8) $500.0 million in principal payments due 2032 related to our New 2032 Senior Notes. The New 2032 Senior Notes bear interest at a rate of 3.20%.71
Table of Contents9) $750.0 million in principal payments due 2033 related to our 2033 Senior Notes. The 2033 Senior Notes bear interest at a rate of 4.20%.
10) $500.0 million in principal payments due 2050 related to our 2050 Senior Notes. The 2050 Senior Notes bear interest at a rate of 3.05%.
11) $850.0 million in principal payments due 2052 related to our 2052 Senior Notes. The 2052 Senior Notes bear interest at a rate of 2.95%.
12) $48.8 million in principal payments related to our notes payable to sellers and other third parties. Our notes payable to sellers and other third parties bear interest at rates between 2.42% and 10.35% at December 31, 2023, and have maturity dates ranging from 2024 to 2036.
13) $10.0 million in principal payments related to our financing leases. Our financing leases bear interest at rates between 1.89% and 5.07% at December 31, 2023, and have expiration dates ranging from 2026 to 2029.The following assumptions were made in calculating cash interest payments:1) We calculated cash interest payments on the Credit Agreement using the Term SOFR rate plus the applicable Term SOFR margin, the base rate plus the applicable base rate margin, the Canadian Dollar Offered Rate plus the applicable acceptance fee and the Canadian prime rate plus the applicable prime rate margin at December 31, 2023. We assumed the Credit Agreement is paid off when it matures in July 2026.
2) We calculated cash interest payments on the Term Loan Agreement using the Term SOFR rate plus the applicable Term SOFR margin at December 31, 2023. We assumed the Term Loan Agreement is paid off when it matures in July 2026.
3) We calculated cash interest payments on our interest rate swaps using the stated interest rate in the swap agreement less the Term SOFR rate through the earlier expiration of the term of the swaps or the term of the credit facility.
Contingent consideration payments include $115.0 million recorded as liabilities in our consolidated financial statements at December 31, 2023, and $16.3 million of future interest accretion on the recorded obligations.We are party to operating lease agreements and finance leases as discussed in Note 7 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. These lease agreements are established in the ordinary course of our business and are designed to provide us with access to facilities and equipment at competitive, market-driven prices.The estimated final capping, closure and post-closure expenditures presented above are in current dollars.
Amount of Commitment Expiration Per Period
(amounts in thousands of U.S. dollars)
Less Than
1 to 3
3 to 5
Over 5
Unrecorded Obligations (1)Total1 YearYearsYearsYears
Unconditional purchase obligations
$175,743
$139,459
$34,576
$1,242
$466
(1) We are party to unconditional purchase obligations as discussed in Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. These purchase obligations are established in the ordinary course of our business and are designed to provide us with access to products at competitive, market-driven prices. At December 31, 2023, our unconditional purchase obligations consisted of multiple fixed-price fuel purchase contracts under which we have 56.8 million gallons remaining to be purchased for a total of $175.7 million. The current fuel purchase contracts expire on or before September 30, 2029. These arrangements have not materially affected our financial position, results of operations or liquidity during the year ended December
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31, 2023, nor are they expected to have a material impact on our future financial position, results of operations or liquidity.
We have obtained standby letters of credit as discussed in Note 11 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K and financial surety bonds as discussed in Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. These standby letters of credit and financial surety bonds are generally obtained to support our financial assurance needs and landfill and E&P waste operations. These arrangements have not materially affected our financial position, results of operations or liquidity during the year ended December 31, 2023, nor are they expected to have a material impact on our future financial position, results of operations or liquidity.From time to time, we evaluate our existing operations and their strategic importance to us. If we determine that a given operating unit does not have future strategic importance, we may sell or otherwise dispose of those operations. Although we believe our reporting units would not be impaired by such dispositions, we could incur losses on them.
New Accounting Pronouncements
See Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a description of the new accounting standards that are applicable to us.
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Non-GAAP Financial MeasuresAdjusted Free Cash Flow
We present adjusted free cash flow, a non-GAAP financial measure, supplementally because it is widely used by investors as a liquidity measure in the solid waste industry. We calculate 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 periodic distributions to noncontrolling interests. We further adjust this calculation to exclude the effects of items management believes impact the ability to evaluate the liquidity of our business operations. 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. Our adjusted free cash flow for the years ended December 31, 2023, 2022 and 2021, are calculated as follows (amounts in thousands of U.S. dollars):
Years Ended December 31,
2023
2022
2021
Net cash provided by operating activities
$
2,126,817
$
2,022,492
$
1,698,229
Less: Change in book overdraft
(790)
(1,076)
(367)
Plus: Proceeds from disposal of assets
31,581
30,676
42,768
Less: Capital expenditures for property and equipment
(934,000)
(912,677)
(744,315)
Adjustments:
Payment of contingent consideration recorded in earnings (a)
—
2,982
520
Cash received for divestitures (b)
(6,194)
(5,671)
(17,118)
Transaction-related expenses (c)
5,519
30,825
30,771
Executive separation costs (d)
1,686
—
—
Pre-existing Progressive Waste share-based grants (e)
1,285
286
397
Tax effect (f)
(1,772)
(2,993)
(1,287)
Adjusted free cash flow
$
1,224,132
$
1,164,844
$
1,009,598
(a)
Reflects the addback of acquisition-related payments for contingent consideration that were recorded as expenses in earnings and as a component of cash flows from operating activities as the amounts paid exceeded the fair value of the contingent consideration recorded at the acquisition date.
(b) Reflects the elimination of cash received in conjunction with the divestiture of certain operations.
(c) Reflects the addback of acquisition-related transaction costs and, in 2022, the settlement of an acquired tax liability.
(d) Reflects the cash component of severance expense associated with an executive departure.
(e)
Reflects the cash settlement of pre-existing Progressive Waste share-based awards during the period.
(f) The aggregate tax effect of footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.
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Table of ContentsAdjusted EBITDAWe present adjusted EBITDA, a non-GAAP financial measure, 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 our operations. We define adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus income tax provision, 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, plus loss on early extinguishment of debt. We further adjust this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of our 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. Our adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021, are calculated as follows (amounts in thousands of U.S. dollars):
Years Ended December 31,
20232022
2021Net income attributable to Waste Connections
$762,800
$835,662
$618,047
Plus: Net income attributable to noncontrolling interests
26339442Plus: Income tax provision220,675212,962152,253Plus: Interest expense274,642202,331162,796Less: Interest income(9,350)(5,950)(2,916)Plus: Depreciation and amortization1,003,211918,960813,009Plus: Closure and post-closure accretion19,60516,25314,497Plus: Impairments and other operating items238,79618,23032,316Less: Other income, net(12,481)(3,154)(6,285)
Plus: Loss on early extinguishment of debt
—
—
115,288Adjustments:
Plus: Transaction-related expenses (a)10,65324,93311,318Plus (less): Fair value changes to equity awards (b)(1,726)868,393Plus: Executive separation costs (c)16,105
—
—Adjusted EBITDA
$2,522,956
$2,220,652
$1,919,158(a) Reflects the addback of acquisition-related transaction costs.
(b) Reflects fair value accounting changes associated with certain equity awards .
(c) Reflects the cash and non-cash components of severance expense associated with an executive departure.
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Adjusted Net Income Attributable to Waste Connections and Adjusted Net Income per Diluted Share Attributable to Waste ConnectionsWe present adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections, both non-GAAP financial measures, supplementally because they are widely used by investors as valuation measures 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 our operations. We provide 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 our 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. Our adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections for the years ended December 31, 2023, 2022 and 2021, are calculated as follows (amounts in thousands of U.S. dollars, except per share amounts):
Years Ended December 31,
20232022
2021Reported net income attributable to Waste Connections
$762,800
$835,662
$618,047Adjustments:
Amortization of intangibles (a)157,573155,675139,279Impairments and other operating items (b)238,79618,23032,316Transaction-related expenses (c)10,65324,93311,318Fair value changes to equity awards (d)(1,726)868,393
Loss on early extinguishment of debt (e)
—
—
115,288
Executive separation costs (f)16,105——
Tax effect (g)(102,948)
(49,312)
(78,041)Adjusted net income attributable to Waste Connections
$1,081,253
$985,274
$846,600
Diluted earnings per common share attributable to Waste Connections’ common shareholders:
Reported net income
$2.95
$3.24
$2.36Adjusted net income
$4.19
$3.82
$3.23(a)
Reflects the elimination of the non-cash amortization of acquisition-related intangible assets.
(b)Reflects adjustments for 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)Reflects the make-whole premium and related fees associated with the early termination of $1.5 billion in senior notes.
(f)Reflects the cash and non-cash components of severance expense associated with an executive departure.(g)
The aggregate tax effect of the adjustments in footnotes (a) through (f) is calculated based on the applied tax rates for the respective periods.Leverage RatioThe Leverage Ratio is calculated by dividing our Consolidated Total Funded Debt by Consolidated EBITDA (each as defined substantially identically in our Credit Agreement and Term Loan Agreement). The Leverage Ratio is based on EBITDA, a non-GAAP financial measure. We present this ratio because it is used for the purposes of calculating financial covenants under our Credit Agreement and Term Loan Agreement. Management also uses this ratio as one of the principal measures to evaluate and monitor the indebtedness of the Company relative to its ability to generate income to service such debt. The Leverage Ratio is not a substitute for, and should be used in conjunction with, GAAP financial ratios. Other companies may calculate leverage ratios differently.
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InflationIn the current environment, we have seen inflationary pressures resulting from higher fuel, materials and labor costs in certain markets and higher resulting third-party costs in areas such as brokerage, repairs and construction. Consistent with industry practice, many of our contracts allow us to pass through certain costs to our customers, including increases in landfill tipping fees and, in some cases, fuel costs. To the extent that there are decreases in fuel costs, in some cases, a portion of these reductions are passed through to customers in the form of lower fuel and material surcharges. Therefore, we believe that we should be able to increase prices to offset many cost increases that result from inflation in the ordinary course of business. However, competitive pressures or delays in the timing of rate increases under certain of our contracts may require us to absorb at least part of these cost increases, especially if cost increases exceed the average rate of inflation. Management’s estimates associated with inflation have an impact on our accounting for landfill liabilities.
FY 2025-12-31 (later)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
We make statements in this Annual Report on Form 10-K that are forward-looking in nature. These include:● Statements regarding our landfills, including capacity, duration, demand for and pricing of recyclables, estimated closure and post-closure liabilities, landfill alternatives and related capital expenditures, operating expenses, leachate and the ETLF event at the Chiquita Canyon Landfill;● Discussion of competition, loss of contracts, price increases and additional exclusive and/or long-term collection service arrangements;
● Forecasts of cash flows necessary for operations and free cash flow to reduce leverage as well as our ability to draw on our credit facility and access the capital markets to refinance or expand;
● Statements regarding our ability to access capital resources or credit markets;● Plans for, and the amount and sources of, certain capital expenditures for our existing and newly acquired properties and equipment and the funding thereof;● Statements regarding fuel, oil and natural gas demand, prices, and price volatility;
● Assessments of regulatory developments and potential changes in environmental, health, safety and tax laws and regulations; and● Other statements on a variety of topics such as inflation, impacts of trade policies or tariffs, general economic conditions, credit risk of customers, seasonality, labor/pension costs and labor union activity, employee retention costs, operational and safety risks, acquisitions and their contribution to the Company’s strategy, dividends, share repurchases, litigation developments and results, goodwill impairments, insurance costs and cybersecurity threats.These statements can be identified by the 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 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, those listed under the heading “ITEM 1A. Risk Factors” and elsewhere in this 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 that could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements to reflect events or circumstances that may change, unless required under applicable securities laws.
Industry OverviewThe solid waste industry is local and highly competitive in nature, requiring substantial labor and capital resources. We compete for collection accounts primarily on the basis of price and, to a lesser extent, the quality of service, and compete for landfill business on the basis of tipping fees, geographic location and quality of operations. The solid waste industry has been consolidating and continues to consolidate as a result of a number of factors, including the increasing
52Table of Contentscosts and complexity associated with waste management operations and regulatory compliance. Some small independent operators and municipalities lack the capital resources, management, operating skills and technical expertise necessary to operate effectively in such an environment. The consolidation trend has caused solid waste companies to operate larger landfills that have complementary collection routes that can use company-owned disposal capacity. Owning a point of transfer to landfills has become increasingly important as landfills continue to close and some disposal capacity is farther from collection areas.Generally, the most profitable operators within the solid waste industry are those companies that are vertically integrated or enter into long-term collection contracts. A vertically integrated operator will benefit from: (1) the internalization of waste, which is bringing waste to a company-owned landfill; (2) the ability to charge third-party haulers tipping fees either at landfills or at transfer stations; and (3) the efficiencies gained by being able to aggregate and process waste at a transfer station prior to landfilling.
Executive OverviewWe are an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, including by rail, along with resource recovery primarily through recycling and renewable fuels generation, in mostly exclusive and secondary markets across 46 states in the U.S. and six provinces in Canada. Waste Connections also provides non-hazardous E&P waste treatment, recovery and disposal services in several basins across the U.S. and Canada, as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.
We generally target markets where we can operate efficiently, including secondary and rural markets, which often allows us to establish a substantial presence and operate profitably through exclusive contracts, vertical integration or asset positioning. In markets where waste collection services are provided under exclusive arrangements, or where waste disposal is municipally owned or funded or available at multiple municipal sources, we seek to achieve efficiencies through our collection services that aid our growth and profitability. We also target niche markets, like non-hazardous E&P waste treatment, recovery and disposal services.
2025 Financial Performance
The functional currency of the Company, as the parent corporate entity, and its operating subsidiaries in the United States, is the U.S. dollar. The functional currency of the Company’s Canadian operations is the Canadian dollar. The reporting currency of the Company is the U.S. dollar. The Company’s consolidated Canadian dollar financial position is translated to U.S. dollars by applying the foreign currency exchange rate in effect at the consolidated balance sheet date. The Company’s consolidated Canadian dollar results of operations and cash flows are translated to U.S. dollars by applying the average foreign currency exchange rate in effect during the reporting period. The resulting translation adjustments are included in other comprehensive income or loss. Gains and losses from foreign currency transactions are included in earnings for the period.Operating ResultsRevenues in 2025 increased 6.1% to $9.467 billion from $8.920 billion in 2024. Acquisitions closed during, or subsequent to, the prior year, net of divestitures, accounted for $377.2 million in incremental revenues in 2025. Excluding the impact of such acquisitions, revenues increased 1.9% due predominantly to higher internal growth in solid waste. Solid waste internal growth was up 2.3%, due to higher price increases, partially offset by declines in surcharges, volumes and recycled commodities, along with the closure of an operating facility at year-end 2024. Pricing growth was 6.4%, with core pricing up 6.5%, with offsets from lower materials and environmental surcharges of 0.1%. Volumes decreased by 2.8% due primarily to the intentional shedding of lower quality revenue, including through the purposeful non-renewal of certain residential hauling contracts. Additionally, internal solid waste growth declined by 0.8% as a result of the facility closure and 0.5% as a result of decreases in recycled commodities revenue. Higher E&P waste activity contributed 0.2% to overall growth, which was offset by lower landfill gas sales, including renewable energy credits, and other revenue, down 0.2%, and foreign exchange impacts resulted in a 0.3% decrease to overall growth.
53Table of ContentsNet income attributable to Waste Connections increased 74% to $1.077 billion in 2025, from $617.6 million in 2024, principally as a result of impairments and other operating items, which decreased to $109.7 million in 2025 from $613.0 million in 2024. In 2025, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, a non-GAAP financial measure (refer to page 74 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), increased 7.7% to $3.125 billion, from $2.902 billion in 2024. As a percentage of revenue, adjusted EBITDA increased from 32.5% in 2024, to 33.0% in 2025. This 0.5 percentage point increase reflects price-led organic growth in solid waste exceeding cost inflation and lower cost of fuel during the year, partially offset by lower recycled commodity and landfill gas revenues. Adjusted net income attributable to Waste Connections, a non-GAAP financial measure (refer to page 75 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), in 2025 increased 7.2% to $1.328 billion from $1.239 billion in 2024.Return of Capital and Distributions to ShareholdersIn 2025, we distributed $839.3 million to shareholders through a combination of cash dividends and share repurchases. We paid $333.8 million to shareholders through cash dividends declared by our Board of Directors, which also increased the quarterly cash dividend by 11.1%, from $0.315 to $0.350 per common share in October 2025. Cash dividends increased $31.5 million, or 10.4%, from $302.3 million in 2024 due to a 10.5% increase in the quarterly cash dividend declared by our Board of Directors in October 2024, followed by the additional increase in October 2025 and reflects the reduced share count resulting from repurchases. In 2025, we also repurchased 2.8 million common shares at an aggregate cost of $505.5 million pursuant to our normal course issuer bid, which was renewed in August 2025 and provides for repurchases of up to 12,855,691 shares, being 5% of the shares outstanding as of July 31, 2025. Our Board of Directors intends to review the quarterly dividend during the fourth quarter of each year, with a long-term objective of increasing the amount of the dividend. We expect the amount of capital we return to shareholders through share repurchases to vary depending on our financial condition and results of operations, capital structure, the amount of cash we deploy on acquisitions, expectations regarding the timing and size of acquisitions, the market price of our common shares, and overall market conditions. We cannot assure as to the amounts or timing of future dividends or share repurchases. We have the ability under our Revolving Credit Agreement to repurchase our common shares and pay dividends provided that we maintain specified financial ratios.Capital PositionWe target a Leverage Ratio, as defined in our Revolving Credit Agreement, of approximately 2.5x – 3.0x total debt to EBITDA. The Leverage Ratio is a non-GAAP ratio (refer to page 75 of this Annual Report on Form 10-K for more information on this ratio). Higher debt resulting from outlays for acquisitions and share repurchases during 2025 were largely offset by higher EBITDA in 2025, resulting in a nominal increase in our Leverage Ratio from 2.67x at December 31, 2024 to 2.75x at December 31, 2025. Cash balances decreased from $62.4 million at December 31, 2024 to $46.0 million at December 31, 2025, and we had $581.1 million of remaining borrowing capacity under our Revolving Credit Agreement, which matures in February 2029. In total, we had $2.2 billion in prepayable debt outstanding at December 31, 2025.Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements. As described by the SEC, critical accounting estimates and assumptions are those that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on the financial condition or operating performance of a company. Such critical accounting estimates and assumptions are applicable to our reportable segments.We believe that of our significant accounting policies, which are described in Note 3 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, we believe these are the most critical to fully understand and evaluate our financial condition and results of operations.54
Table of ContentsInsurance liabilities . We maintain insurance policies for automobile, general, employer’s, environmental, cyber, employment practices and directors’ and officers’ liability as well as for employee group health insurance, property insurance and workers’ compensation. We carry umbrella policies for certain types of claims to provide excess coverage over the underlying policies and per incident deductibles or self-insured retentions. Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and third-party claims administrator. The insurance accruals are influenced by our past claims experience factors and by published industry development factors. If we experience insurance claims or costs above or below our historically evaluated levels, our estimates could be materially affected. The frequency and amount of claims or incidents could vary significantly over time, which could materially affect our self-insurance liabilities. Additionally, the actual costs to settle the self-insurance liabilities could materially differ from the original estimates and cause us to incur additional costs in future periods associated with prior year claims.Income taxes . Deferred income tax assets and liabilities are determined based on differences between the financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. If our judgment and estimates concerning assumptions made in calculating our expected future income tax rates are incorrect, our deferred income tax assets and liabilities would change. Based on our deferred income tax liability balance at December 31, 2025, each 0.1 percentage point change to our expected future income tax rates would change our deferred income tax liability balance and income tax expense by approximately $4.2 million.Accounting for landfills . We recognize landfill depletion expense as airspace of a landfill is consumed. Our landfill depletion rates are based on the remaining disposal capacity at our landfills, considering both permitted and probable expansion airspace. We calculate the net present value of our final capping, closure and post-closure commitments by estimating the total obligation in current dollars, inflating the obligation based upon the expected date of the expenditure and discounting the inflated total to its present value using a credit-adjusted risk-free rate. Any changes in expectations that result in an upward revision to the estimated undiscounted cash flows are treated as a new liability and are inflated and discounted at rates reflecting market conditions. Any changes in expectations that result in a downward revision (or no revision) to the estimated undiscounted cash flows result in a liability that is inflated and discounted at rates reflecting the market conditions at the time the cash flows were originally estimated. This policy results in our final capping, closure and post-closure liabilities being recorded in “layers.” The resulting final capping, closure and post-closure obligations are recorded on the consolidated balance sheet along with an offsetting addition to site costs, which is amortized to depletion expense as the remaining landfill airspace is consumed. Interest is accreted on the recorded liability using the corresponding discount rate. In the event that changes in an estimate for a closure and post-closure liability are associated with a significant change in facts and circumstances at a landfill or a non-operating section of a landfill, corresponding adjustments to recorded liabilities and Impairments and other operating items are made as soon as is practical. The accounting methods discussed below require us to make certain estimates and assumptions. Changes to these estimates and assumptions, including as a result of inflation, could have a material effect on our financial condition and results of operations. Any changes to our estimates are applied prospectively.
Landfill development costs . Landfill development costs include the costs of acquisition, construction associated with excavation, liners, site berms, groundwater monitoring wells, gas recovery systems and leachate collection systems. We estimate the total costs associated with developing each landfill site to its final capacity. Total landfill costs include the development costs associated with expansion airspace. Expansion airspace is described below. Landfill development costs depend on future events and thus actual costs could vary significantly from our estimates. Material differences between estimated and actual development costs may affect our cash flows by increasing our capital expenditures and thus affect our results of operations by increasing our landfill depletion expense.Final capping, closure and post-closure obligations . We accrue for estimated final capping, closure and post-closure maintenance obligations at the landfills we own, and the landfills that we operate, but do not own, under life-of-site agreements. We could have additional material financial obligations relating to final capping, closure and post-closure costs at other disposal facilities that we currently own or operate or that we may own or operate in the future. Our discount rate assumption for purposes of computing 2025 and 2024 “layers” for final capping, closure and post-closure obligations is based on our long-term credit adjusted risk-free rate. Our discount rate was 5.50% for each of 2025 and 2024. Our long-term inflation rate assumption was 2.75% for each of the years ended December 31, 2025 and 2024. Significant
55Table of Contentsreductions in our estimates of the remaining lives of our landfills or significant increases in our estimates of the landfill final capping, closure and post-closure maintenance costs could have a material adverse effect on our financial condition and results of operations. In the event that changes in an estimate for a closure and post-closure liability are associated with a significant change in facts and circumstances at a landfill or a non-operating section of a landfill, corresponding adjustments to recorded liabilities and Impairments and other operating items are made as soon as is practical. In 2023, we recorded an additional $159.5 million of charges to adjust the carrying value of a closure and post-closure liability at an area of a landfill site that has been deemed to reach final capacity. Furthermore, during the quarter ended December 31, 2024, we recorded an additional $480.8 million of charges to adjust the carrying value of the closure and post-closure liability at the same landfill, which ceased active waste disposal operations as of December 31, 2024. Additionally, changes in regulatory or legislative requirements could increase our costs related to our landfills, resulting in a material adverse effect on our financial condition and results of operations.Disposal capacity . Our internal and third-party engineers perform surveys at least annually to estimate the remaining disposal capacity at our landfills. Our landfill depletion rates are based on the remaining disposal capacity, considering both permitted and probable expansion airspace, at the landfills that we own and at landfills that we operate, but do not own, under life-of-site agreements. Our landfill depletion rate is based on the term of the operating agreement at our operated landfill that has capitalized expenditures. Expansion airspace consists of additional disposal capacity being pursued through means of an expansion that has not yet been permitted. Expansion airspace that meets the following criteria is included in our estimate of total landfill airspace:
1)
whether the land where the expansion is being sought is contiguous to the current disposal site, and we either own the expansion property or have rights to it under an option, purchase, operating or other similar agreement;
2)
whether total development costs, final capping costs, and closure/post-closure costs have been determined;
3)
whether internal personnel have performed a financial analysis of the proposed expansion site and have determined that it has a positive financial and operational impact;
4)
whether internal personnel or external consultants are actively working to obtain the necessary approvals to obtain the landfill expansion permit; and
5)
whether we consider it probable that we will achieve the expansion (for a pursued expansion to be considered probable, there must be no significant known technical, legal, community, business or political restrictions or similar issues existing that we believe are more likely than not to impair the success of the expansion).
We may be unsuccessful in obtaining permits for expansion disposal capacity at our landfills. In such cases, we will charge the previously capitalized development costs to expense. This will adversely affect our operating results and cash flows and could result in greater landfill depletion expense being recognized on a prospective basis.
We periodically evaluate our landfill sites for potential impairment indicators. Our judgments regarding the existence of impairment indicators are based on regulatory factors, market conditions and operational performance of our landfills. Future events could cause us to conclude that impairment indicators exist and that our landfill carrying costs are impaired. Any resulting impairment loss could have a material adverse effect on our financial condition and results of operations.Loss Contingencies . We record accruals for various contingencies including legal exposures as they arise in the normal course of business. We determine whether to disclose and accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible, or probable, and if it can be reasonably estimated. Our assessment is developed in consultation with our internal and external legal counsel and other advisors and is based on an analysis of possible outcomes under various strategies. Loss contingency assumptions involve judgments that are inherently subjective and can involve matters that are in litigation, which, by its nature, is unpredictable. We believe that our qualitative and quantitative assessment of the probability of loss contingencies is reasonable, but because of the subjectivity involved and the unpredictable nature of the subject matter at issue, our assessment may prove ultimately to be incorrect, which could harm our financial condition, operating results, or cash flow.
Goodwill and indefinite-lived intangible assets testing . Goodwill and indefinite-lived intangible assets are tested for impairment on at least an annual basis in the fourth quarter of the year. In addition, we evaluate our reporting units for
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impairment if events or circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include, but are not limited to, the following:● a significant adverse change in legal factors or in the business climate;
● an adverse action or assessment by a regulator;
● a more likely than not expectation that a segment or a significant portion thereof will be sold;
● the testing for recoverability of a significant asset group within a segment; or
● current period or expected future operating cash flow losses.As part of our goodwill impairment test, we estimate the fair value of each of our reporting units using discounted cash flow analyses. Our reporting units consisted of our six geographic solid waste operating segments at December 31, 2025, 2024 and 2023. We compare the fair value of each reporting unit with the carrying value of the net assets assigned to the reporting unit. If the fair value of a reporting unit is greater than the carrying value of the net assets, including goodwill, assigned to the reporting unit, then no impairment results. If the fair value is less than its carrying value, an impairment charge is recorded for the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. In testing indefinite-lived intangible assets for impairment, we compare the estimated fair value of each indefinite-lived intangible asset to its carrying value. If the fair value of the indefinite-lived intangible asset is less than its carrying value, an impairment charge would be recorded to earnings in our Consolidated Statements of Net Income.
Discounted cash flow analyses require significant assumptions and estimates about the future operations of each reporting unit and the future discrete cash flows related to each indefinite-lived intangible asset. Significant judgments inherent in these analyses include the determination of appropriate discount rates, the amount and timing of expected future cash flows, growth rates and income tax rates. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate our results against our current market capitalization. For our impairment testing of our operating segments for the year ended December 31, 2025, we determined that the indicated fair value of each of our reporting units exceeded their carrying value in excess of 200% and, therefore, we did not record an impairment charge. The detailed results of our 2025, 2024 and 2023 impairment tests are described in Note 3 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.Business Combination Accounting . We recognize, separately from goodwill, the identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values. We measure and recognize goodwill as of the acquisition date as the excess of: (a) the aggregate of the fair value of consideration transferred, the fair value of the noncontrolling interest in the acquiree (if any) and the acquisition date fair value of our previously held equity interest in the acquiree (if any), over (b) the fair value of assets acquired and liabilities assumed. At the acquisition date, we measure the fair values of all assets acquired and liabilities assumed that arise from contractual contingencies. We measure the fair values of all noncontractual contingencies if, as of the acquisition date, it is more likely than not that the contingency will give rise to an asset or liability.
General
Our revenues consist mainly of fees we charge customers for collection, transfer, recycling and disposal of non-hazardous solid waste and treatment, recovery and disposal of non-hazardous E&P waste.Our solid waste collection business involves the collection of waste from residential, commercial and industrial customers for transport to transfer stations, or directly to landfills or recycling centers. Solid waste collection services include both recurring and temporary customer relationships. The services are performed under service agreements, municipal contracts or franchise agreements with governmental entities. Our existing franchise agreements and most of our existing municipal contracts give us the exclusive right to provide specified waste services in the specified territory during the contract term. These exclusive arrangements are awarded, at least initially, on a competitive bid basis and subsequently on a bid or negotiated basis. The standard customer service agreements generally range from one to five
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years in duration, although some exclusive franchises are for significantly longer periods. Residential collection services are also provided on a subscription basis with individual households.The fees we charge for collection services are based primarily on the market, collection frequency and level of service, route density, type and volume or weight of the waste collected, type of equipment and containers furnished, the distance to the disposal or processing facility, the cost of disposal or processing, and prices charged by competitors for similar services.
The terms of our contracts sometimes limit our ability to pass on price increases. Long-term solid waste collection contracts often contain a formula, generally based on a published price index, that automatically adjusts fees to cover increases in some, but not all, operating costs, or that limit increases to less than 100% of the increase in the applicable price index.Revenue at landfills is primarily generated by charging tipping fees on a per ton and/or per yard basis to third parties based on the volume disposed and the nature of the waste.
Revenue at transfer stations is primarily generated by charging tipping or disposal fees on a per ton and/or per yard basis. The fees charged to third parties are based primarily on the market, type and volume or weight of the waste accepted, the distance to the disposal facility, the method of transportation used and the cost of disposal.
Many of our landfill and transfer station customers have entered into one to ten year disposal contracts with us, most of which provide for annual indexed price increases.
Our revenues from E&P waste services are primarily generated through the treatment, recovery and disposal of non-hazardous exploration and production waste from vertical and horizontal drilling, hydraulic fracturing, production and clean-up activity, as well as other services.
Our revenues from recycling services result from the sale of recycled commodities, which are generated by offering residential, commercial, industrial and municipal customers recycling services for a variety of recyclable materials, including compost, cardboard, mixed paper, plastic containers, glass bottles and ferrous and aluminum metals. We own and operate recycling operations and market collected recyclable materials to third parties for processing before resale. In some instances, we utilize a third party to market recycled materials. In certain instances, we issue recycling rebates to municipal or commercial customers, which can be based on the price we receive upon the sale of recycled commodities, a fixed contractual rate or other measures. We also receive rebates when we dispose of recycled commodities at third-party facilities.
Other revenues consist primarily of the sale of methane gas and renewable energy credits generated from our MSW landfills and revenues from intermodal services. Intermodal revenue is primarily generated through providing intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities. The fees received for intermodal services are based on negotiated rates and vary depending on volume commitments by the shipper and destination.58
Table of ContentsNo single contract or customer accounted for more than 10% of our total revenues at the consolidated or reportable segment level during the periods presented. The following table disaggregates our revenue by service line for the periods indicated (in thousands of U.S. dollars).
Years Ended December 31,
202520242023Commercial $2,944,279
$2,670,549
$2,476,891Residential
2,364,5362,258,9112,125,068Industrial and construction roll off
1,439,2811,403,3131,333,020Total collection
6,748,0966,332,7735,934,979Landfill
1,541,9041,557,8721,483,397Transfer
1,461,6361,349,0801,198,385Recycling
240,057241,873147,039E&P
688,761521,504232,211Intermodal and other
175,465191,887171,721Intercompany
(1,389,004)(1,275,398)(1,145,781)Total
$9,466,915
$8,919,591
$8,021,951Cost of operations includes labor and benefits, tipping fees paid to third-party disposal facilities, vehicle and equipment maintenance, workers’ compensation, vehicle and equipment insurance, insurance and employee group health claims expense, third-party transportation expense, fuel, the cost of materials we purchase for recycling, district and state taxes and host community fees and royalties. Our significant costs of operations in 2025 were labor, employee benefits, third-party disposal and transportation, vehicle, equipment and property maintenance, taxes and fees, risk management and fuel. We use a number of programs to reduce overall cost of operations, including increasing the use of automated routes to reduce labor and workers’ compensation exposure, utilizing comprehensive maintenance and health and safety programs, and increasing the use of transfer stations to further enhance internalization rates. We carry insurance for automobile liability, general liability, employer’s liability, environmental liability, cyber liability, employment practices liability and directors’ and officers’ liability as well as for employee group health claims, property and workers’ compensation. If we experience insurance claims or costs above or below our historically evaluated levels, our estimates could be materially affected.Selling, general and administrative, or SG&A, expense includes management, sales force, clerical and administrative employee compensation and benefits, legal, accounting and other professional services, acquisition expenses, bad debt expense and lease cost for our administrative offices.
Depreciation expense includes depreciation of equipment and fixed assets over their estimated useful lives using the straight-line method. Depletion expense includes depletion of landfill site costs and total future development costs as remaining airspace of the landfill is consumed. Remaining airspace at our landfills includes both permitted and probable expansion airspace. Amortization expense includes the amortization of finite-lived intangible assets, consisting primarily of long-term franchise agreements and contracts, customer lists, permits and other agreements. We use an accelerated or straight-line basis for amortization, depending on the attributes of the related intangibles. Goodwill and indefinite-lived intangible assets, consisting primarily of certain perpetual rights to provide solid waste collection and transportation services in specified territories, are not amortized.We capitalize some third-party expenditures related to development projects, such as information technology, legal and engineering. We expense all third-party and indirect acquisition costs, including third-party legal and engineering expenses, executive and corporate overhead, public relations and other corporate services, as we incur them. We charge against net income any unamortized capitalized expenditures and advances (net of any portion that we believe we may recover, through sale or otherwise) that may become impaired, such as those that relate to any operation that is permanently shut down and any landfill development project that we believe will not be completed. We routinely evaluate all capitalized costs, and expense those related to projects that we believe are not likely to succeed. For example, if we are unsuccessful in our attempts to obtain or defend permits that we are seeking or have been awarded to operate or expand a landfill, we will no longer generate anticipated income from the landfill and we will be required to expense in a future period up to the carrying value of the landfill or expansion project, less the recoverable value of the property and other amounts recovered.
59Table of ContentsPresentation of Results of Operations, Segment Reporting, and Liquidity and Capital Resources
The following discussion and analysis of our Results of Operations, Segment Reporting, and Liquidity and Capital Resources includes a comparison for the year ended December 31, 2025 to the year ended December 31, 2024. A similar discussion and analysis that compares the year ended December 31, 2024 to the year ended December 31, 2023 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.Results of Operations
The following table sets forth items in our Consolidated Statements of Net Income in thousands of U.S. dollars and as a percentage of revenues for the periods indicated:
Years Ended December 31,
2025
% of Revenues
2024
% of Revenues Revenues$9,466,915100.0
%
$8,919,591100.0
%
Cost of operations5,455,382
57.65,191,706
58.2Selling, general and administrative959,544
10.1883,445
9.9Depreciation1,030,565
10.9974,001
10.9Amortization of intangibles201,541
2.1189,768
2.1Impairments and other operating items109,709
1.2613,012
6.9Operating income1,710,174
18.11,067,659
12.0
Interest expense(334,551)(3.5)(326,804)
(3.7)Interest income12,1390.1
11,6070.1
Other income, net30,1540.310,471
0.1Income tax provision(341,359)(3.6)(146,363)
(1.6)Net income1,076,557
11.4616,570
6.9Net loss attributable to noncontrolling interests
—
—1,003
0.0Net income attributable to Waste Connections$1,076,557
11.4%
$617,573
6.9%
Years Ended December 31, 2025 and 2024
Revenues . Total revenues increased $547.3 million, or 6.1%, to $9.467 billion for the year ended December 31, 2025, from $8.920 billion for the year ended December 31, 2024.
Acquisitions closed during, or subsequent to, the year ended December 31, 2024, increased revenues by $387.9 million, for the year ended December 31, 2025.
Operations that were divested during, or subsequent to, the year ended December 31, 2024, decreased revenues by $10.7 million for the year ended December 31, 2025.
The impact of operations that were closed during, or subsequent to, the year ended December 31, 2024, decreased revenues by $59.4 million for the year ended December 31, 2025.
During the year ended December 31, 2025, the net increase in prices charged to our customers at our existing operations was $526.6 million, consisting of $537.0 million of core price increases and decreases in surcharges of $10.4 million.
During the year ended December 31, 2025, we recognized volume losses totaling $238.0 million resulting from a decrease in roll off volumes, lower post-collection volumes in our Eastern, Southern and Central segments, lower residential collection volumes due primarily to the purposeful shedding of certain low-margin municipal contracts and lower commercial revenues.60
Table of ContentsE&P waste revenues at facilities owned during the year ended December 31, 2025 increased $17.6 million, due to nominal increases in overall activity levels in our Canada segment.
Revenues from sales of recyclable commodities at facilities owned during the years ended December 31, 2025 and 2024 decreased $37.7 million. The decrease was primarily attributable to lower prices for old corrugated cardboard and plastics.
A decrease in the average Canadian dollar to U.S. dollar currency exchange rate resulted in a decrease in revenues of $23.2 million for the year ended December 31, 2025. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues were 0.7160 and 0.7298 for the years ended December 31, 2025 and 2024, respectively.
Other revenues decreased $15.8 million during the year ended December 31, 2025, due primarily to a $13.6 million decrease in landfill gas revenues on lower values of renewable energy credits and a $3.1 million decrease in intermodal revenues, partially offset by a $0.9 million increase in other non-core revenue sources.
Cost of Operations . Total cost of operations increased $263.7 million, or 5.1%, to $5.455 billion for the year ended December 31, 2025, from $5.192 billion for the year ended December 31, 2024. The increase was primarily the result of $187.4 million of additional operating costs from acquisitions closed during, or subsequent to, the year ended December 31, 2024, and an increase in operating costs at our existing operations of $96.0 million, assuming foreign currency parity, partially offset by a decrease in operating costs of $11.3 million resulting from a lower average foreign currency exchange rate in effect during the current period and a decrease of $8.4 million from operations divested during, or subsequent to, the year ended December 31, 2024.
The increase in operating costs of $96.0 million, assuming foreign currency parity, at our existing operations for the year ended December 31, 2025, consisted of higher labor and recurring incentive compensation expenses of $53.7 million, an increase in trucking costs of $23.3 million, higher post-closure liability interest accretion expense of $17.4 million, an increase in risk management expenses of $11.1 million, an increase in taxes on revenues of $9.1 million, higher benefits costs of $9.0 million and a net increase of other expenses of $2.3 million, partially offset by a decrease in fuel expense of $11.3 million due to diesel prices, lower disposal costs of $10.4 million and a decrease in truck, container, equipment and facility maintenance and repair expenses of $8.2 million.
Cost of operations as a percentage of revenues decreased 0.6 percentage points to 57.6% for the year ended December 31, 2025, from 58.2% for the year ended December 31, 2024. The decrease as a percentage of revenues was primarily driven by the impact of price-led revenue growth, a 0.4 percentage point decrease in disposal costs as a result of increased internalization in certain markets, a 0.2 percentage point decrease due to the impact of acquisitions having lower operating costs as a percentage of revenue as compared to existing operations and a 0.2 percentage point decrease in fuel costs due to diesel prices, partially offset by a 0.2 percentage point increase in labor and benefits costs.
SG&A . SG&A expenses increased $76.1 million, or 8.6%, to $959.5 million for the year ended December 31, 2025, from $883.4 million for the year ended December 31, 2024. The increase was comprised of $53.1 million, assuming foreign currency parity, at our existing operations and $25.2 million from acquisitions closed during, or subsequent to, the year ended December 31, 2024, partially offset by a decrease of $2.2 million resulting from a lower average foreign currency exchange rate in effect during the current period.
The increase in SG&A expenses at our existing operations of $53.1 million, assuming foreign currency parity, for the year ended December 31, 2025 was comprised of an increase in administrative payroll expenses of $32.7 million, higher incentive compensation expense of $9.6 million, an increase in professional fees of $7.2 million and $3.6 million of other net expense increases.
SG&A expenses as a percentage of revenues increased 0.2 percentage points to 10.1% for the year ended December 31, 2025, from 9.9% for the year ended December 31, 2024. The increase as a percentage of revenues was primarily driven by a 0.3 percentage point increase in administrative payroll and incentive compensation expenses, partially offset by a 0.1 percentage point decrease in SG&A expenses from acquisitions closed during, or subsequent to, the year ended December 31, 2024.61
Table of ContentsDepreciation . Depreciation expense increased $56.6 million, or 5.8%, to $1.031 billion for the year ended December 31, 2025, from $974.0 million for the year ended December 31, 2024. The increase was comprised of an increase in depreciation and depletion expense of $45.1 million from acquisitions closed during, or subsequent to, the year ended December 31, 2024, and an increase in depreciation expense of $41.4 million from the impact of additions to our fleet and equipment purchased to support our existing operations, partially offset by a decrease of $26.3 million in depletion expense, a decrease of $2.7 million resulting from a lower average foreign currency exchange rate in effect during the current period and a decrease of $0.9 million from operations divested during, or subsequent to, the year ended December 31, 2024.
Depreciation expense as a percentage of revenues remained flat at 10.9% for the year ended December 31, 2025 and the year ended December 31, 2024. For both comparable periods, depreciation expense as a percentage of revenues was impacted by capital expenditures to support our existing operations and acquisitions closed during, or subsequent to, the year ended December 31, 2024 having higher depreciation expense as a percentage of revenue than our company average, partially offset by the impact of decreased depletion expenses as a result of lower landfill volumes.
Amortization of Intangibles . Amortization of intangibles expense increased $11.7 million, or 6.2%, to $201.5 million for the year ended December 31, 2025, from $189.8 million for the year ended December 31, 2024. The increase was the result of $33.6 million from intangible assets acquired in acquisitions closed during, or subsequent to, the year ended December 31, 2024, partially offset by a decrease of $21.0 million from certain intangible assets becoming fully amortized during the comparable periods, a decrease of $0.7 million due to a lower average foreign currency exchange rate in effect during the current period and a decrease of $0.2 million due to intangible assets divested during, or subsequent to, the year ended December 31, 2024.
Amortization of intangibles expense as a percentage of revenues remained flat at 2.1% for the year ended December 31, 2025 and the year ended December 31, 2024. For both comparable periods, amortization expense as a percentage of revenues was impacted by acquisitions closed during, or subsequent to, the year ended December 31, 2024 having higher amortization expense as a percentage of revenue than our company average, partially offset by decreases related to certain intangible assets becoming fully amortized during the comparable periods.
Impairments and Other Operating Items . Impairments and other operating items decreased $503.3 million, to net losses totaling $109.7 million for the year ended December 31, 2025, from net losses totaling $613.0 million for the year ended December 31, 2024.
The net losses of $109.7 million recorded during the year ended December 31, 2025 consisted of net losses of $67.4 million for an environmental liability at an operating facility in the period, net losses of $30.0 million for charges to write off the carrying cost of certain contracts and non-operating facility permits that were not, or are not expected to be, renewed prior to the original estimated termination date and net losses of $12.7 million on the disposal of property and equipment, partially offset by other net gains of $0.4 million.
During and prior to the year ended December 31, 2024, we worked to address regulatory constraints related to the active waste disposal operations that were preventing our Chiquita Canyon Landfill (“Chiquita”) from continuing to receive and manage waste from its customers. The primary constraints were tonnage limitations effective January 1, 2025 and the final permit approval needed for Chiquita to access otherwise permitted and constructed airspace. Without any resolution of these matters, we determined it was no longer economically feasible to operate Chiquita and made the decision to cease active waste disposal operations as of December 31, 2024. As a result, it became necessary to record charges of $480.8 million to adjust the carrying value of the landfill closure and post-closure liability and record an impairment charge of $116.1 million to adjust the carrying value of the landfill. See “Accounting for landfills” and “Final capping, closure and post-closure obligations” within “Critical Accounting Estimates and Assumptions” included in this Item 7 of Part II – “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The remaining net losses of $16.1 million recorded during the year ended December 31, 2024 consisted of $14.3 million of net losses on the disposal of property and equipment and uninsured damages to an operating facility, $2.8 million of charges to write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to the62
Table of Contentsoriginal estimated termination date and $1.5 million of other net losses, partially offset by net gains of $2.5 million on settlement of litigation.
Operating Income . Operating income increased $642.5 million, or 60.2%, to $1.710 billion for the year ended December 31, 2025, from $1.068 billion for the year ended December 31, 2024.
The increase in our operating income for the year ended December 31, 2025 was due primarily to price increases for our solid waste services, a decrease in impairments and other operating items, and operating income generated from acquisitions closed during, or subsequent to, the year ended December 31, 2024, partially offset by lower volumes, an increase in labor and recurring incentive compensation expenses and the impact of operations that were closed during, or subsequent to, the year ended December 31, 2024.
Operating income as a percentage of revenues increased 6.1 percentage points to 18.1% for the year ended December 31, 2025, from 12.0% for the year ended December 31, 2024. The increase as a percentage of revenues was comprised of a 5.7 percentage point decrease in impairments and other operating items and a 0.6 percentage point decrease in cost of operations, partially offset by a 0.2 percentage point increase in selling, general and administrative expenses.
Interest Expense . Interest expense increased $7.8 million, or 2.4%, to $334.6 million for the year ended December 31, 2025, from $326.8 million for the year ended December 31, 2024. The increase was primarily attributable to an increase of $15.1 million from the issuance of $500.0 million of senior unsecured notes during the year ended December 31, 2025, an increase of $7.2 million from the issuance of CAD $500.0 million of senior unsecured notes in the prior period, an increase of $5.3 million from the issuance of $750.0 million of senior unsecured notes in the prior period and an increase of $4.2 million due to higher average borrowings outstanding under our credit facilities during the year ended December 31, 2025 , partially offset by a decrease of $22.1 million from lower interest rates on borrowings outstanding during the comparable periods and a decrease of $1.9 million from other net expense decreases.
Interest Income . Interest income increased $0.5 million, or 4.6%, to $12.1 million for the year ended December 31, 2025, from $11.6 million for the year ended December 31, 2024. The increase was primarily attributable to higher average investment rates in the current period.
Other Income, Net . Other income, net increased $19.7 million, or 188.0%, to $30.2 million for the year ended December 31, 2025, from $10.5 million for the year ended December 31, 2024.
Other income of $30.2 million recorded during the year ended December 31, 2025 consisted of $11.2 million from proceeds on insurance claims, $5.5 million of gains from a decrease in the average foreign currency exchange rate in effect during the comparable reporting period, $5.1 million from an increase in the value of investments purchased to fund our employee deferred compensation obligations, $3.7 million from a vendor rebate and the reimbursement of expenditures and $4.7 million of income from other sources.
Other income of $10.5 million recorded during the year ended December 31, 2024 consisted of $12.0 million from a gain on sale of certain investments, $2.8 million from an increase in the value of investments purchased to fund our employee deferred compensation obligations and $0.7 million of other income, partially offset by $2.7 million from a decrease in the average foreign currency exchange rate in effect during the comparable reporting period and $2.3 million from the write off of unamortized loan fees as a result of the early extinguishment of our 2021 Revolving and Term Credit Agreement and 2022 Term Loan Agreement.
Income Tax Provision . Income taxes increased $195.0 million, to $341.4 million for the year ended December 31, 2025, from $146.4 million for the year ended December 31, 2024. Our effective tax rate for the year ended December 31, 2025 was 24.1%. Our effective tax rate for the year ended December 31, 2024 was 19.2%.
The income tax provision for the year ended December 31, 2025 included a benefit of $5.3 million from share-based payment awards being recognized in the income statement when settled, as well as a portion of our internal financing being taxed at effective rates substantially lower than the U.S. federal statutory rate.
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The income tax provision for the year ended December 31, 2024 included a benefit of $5.8 million from share-based payment awards being recognized in the income statement when settled, as well as a portion of our internal financing being taxed at effective rates substantially lower than the U.S. federal statutory rate.
Our effective tax rate is dependent upon the proportion of pre-tax income among the jurisdictions where we do business. As such, our effective tax rate will be subject to some variability depending upon the proportional contribution of pre-tax income across jurisdictions in any period.
Segment Reporting
We manage our operations through the following six geographic solid waste operating segments: Southern, Western, Eastern, Central, Canada and MidSouth. Our six geographic solid waste operating segments comprise our reportable segments. Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts. Certain corporate or regional overhead expense allocations may affect comparability of the segment information presented herein on a period-over-period basis.
Our Chief Operating Decision Maker evaluates operating segment profitability and determines resource allocations based on several factors, of which the primary financial measure is segment EBITDA. We define segment EBITDA as earnings before interest, taxes, depreciation, amortization, impairments and other operating items and other income (expense). Segment EBITDA is not a measure of operating income, operating performance or liquidity under GAAP and may not be comparable to similarly titled measures reported by other companies. Our management uses segment EBITDA in the evaluation of segment operating performance as it is a profit measure that is generally within the control of the operating segments.Summarized financial information for our reportable segments are shown in the following tables in thousands of U.S. dollars and as a percentage of total segment revenue for the periods indicated:
Year Ended
Segment
EBITDA
December 31, 2025
Revenue
Expenses
EBITDA
MarginSouthern$
1,907,809
$1,275,413
$632,39633.1%Western1,849,4191,336,182513,237
27.8%Eastern
1,702,2471,250,493451,75426.5
%
Central1,589,8851,015,023574,86236.2%Canada
1,324,877726,628598,24945.2
%MidSouth
1,092,678786,599306,07928.0
%Corporate (a)
—
24,588(24,588)
—
$
9,466,915
$6,414,926
$3,051,98932.2%
Year Ended
Segment
EBITDADecember 31, 2024
Revenue
Expenses
EBITDA
MarginSouthern$
1,757,193
$1,200,768
$556,42531.7%Western1,798,6691,277,911520,758
29.0%Eastern
1,564,2111,146,988417,22326.7
%
Central1,514,902972,101542,801
35.8%Canada
1,260,980709,501551,47943.7%MidSouth
1,023,636740,227283,409
27.7
%Corporate (a)
—
27,655(27,655)
—
$
8,919,591
$6,075,151
$2,844,44031.9%(a)
The majority of Corporate expenses are allocated to the six operating segments. Direct acquisition expenses, expenses associated with common shares held in the deferred compensation plan exchanged for other investment options and share-based compensation expenses associated with Progressive Waste share-based grants outstanding at June 1, 2016 that were continued by the Company are not allocated to the six operating segments and comprise the net EBITDA for our Corporate segment for the periods presented.64Table of ContentsA reconciliation of segment EBITDA to Income before income tax provision is included in Note 17 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Significant changes in revenue, segment expenses and EBITDA for our reportable segments for the year ended December 31, 2025, compared to the year ended December 31, 2024, are discussed below.SouthernRevenue increased $150.6 million to $1.908 billion for 2025, from $1.757 billion for 2024, due to contributions from acquisitions, price increases and an increase in landfill gas sales, partially offset by lower commercial and residential collection volumes, a decrease in roll off volumes, lower E&P waste revenues attributable to decreases in drilling and production activity and a decrease in recyclable commodity revenues as compared to the prior period.
Segment expenses increased $74.6 million to $1.275 billion for 2025, from $1.201 billion for 2024 due to an increase in expenses from acquisitions closed during the comparable periods, an increase in allocated corporate overhead, higher labor costs, an increase in third-party brokerage, an increase in equipment rental fees and higher landfill monitoring and maintenance costs , partially offset by a decrease in expenses from operations divested during the current period, lower fuel costs, a decrease in disposal expense and lower truck, container, equipment and facility maintenance and repair expenses.
EBITDA increased $76.0 million to $632.4 million, or a 33.1% EBITDA margin for 2025, from $556.4 million, or a 31.7% EBITDA margin for 2024. The increase in our EBITDA margin was due to the impact of acquisitions having higher EBITDA margins than our segment average, price-led increases in revenue, lower fuel costs and a decrease in truck, container, equipment and facility maintenance and repair expenses , partially offset by lower E&P activity from decreases in drilling and production activity, higher allocated corporate overhead and increased landfill monitoring and maintenance costs.
Western
Revenue increased $50.7 million to $1.849 billion for 2025, from $1.799 billion for 2024, due to price increases, contributions from acquisitions and increases in residential and commercial collection volumes, partially offset by a decrease from an operation closed at the end of the prior period, a decrease in recyclable commodity revenues as compared to the prior period and lower intermodal activity.
Segment expenses increased $58.3 million to $1.336 billion for 2025, from $1.278 billion for 2024 due to an increase in expenses from acquisitions closed during the comparable periods, increased labor and benefits costs, higher allocated corporate overhead, increased operating costs associated with higher collection volumes and higher risk management costs, partially offset by a decrease from an operation closed at the end of the prior period and a decrease in third-party brokerage.
EBITDA decreased $7.6 million to $513.2 million, or a 27.8% EBITDA margin for 2025, from $520.8 million, or a 29.0% EBITDA margin for 2024. The decrease in our EBITDA margin was due to an increase in post-closure liability interest accretion expense, an increase in contract labor and higher risk management costs, partially offset by price-led revenue growth and a decrease in other operating costs relative to revenue.EasternRevenue increased $138.0 million to $1.702 billion for 2025, from $1.564 billion for 2024, due to contributions from acquisitions and price increases, partially offset by decreases in roll off and post-collection volumes, lower commercial collection volumes due to the purposeful non-renewal of lower margin contracts and a decrease in recyclable commodity revenues as compared to the prior period.
Segment expenses increased $103.5 million to $1.250 billion for 2025, from $1.147 billion for 2024 due to an increase in expenses from acquisitions closed during the comparable periods, increases in allocated corporate overhead, higher trucking costs due to higher transfer volumes, an increase in risk management costs and higher labor costs, partially offset
65Table of Contentsby lower disposal expense, a decrease in truck, container, equipment and facility maintenance and repair expenses and lower fuel costs due to diesel prices.
EBITDA increased $34.6 million to $451.8 million, or a 26.5% EBITDA margin for 2025, from $417.2 million, or a 26.7% EBITDA margin for 2024. The decrease in our EBITDA margin was due primarily to higher allocated corporate overhead, an increase in trucking costs associated with internal transfer volumes, higher risk management costs and an increase in labor costs, partially offset by price-led revenue growth, the impact of acquisitions having higher EBITDA margins than our segment average, a decrease in truck, container, equipment and facility maintenance and repair expenses, lower fuel costs and a decrease in landfill monitoring and maintenance costs.
Central
Revenue increased $75.0 million to $1.590 billion for 2025, from $1.515 billion for 2024, due to price increases, contributions from acquisitions and an increase in landfill gas sales, partially offset by lower roll-off and post-collection volumes and a decrease in recyclable commodity revenues.
Segment expenses increased $42.9 million to $1.015 billion for 2025, from $972.1 million for 2024 due to an increase in labor and benefits expenses, higher allocated corporate overhead, an increase in third-party brokerage, higher risk management costs, an increase in disposal expense and an increase in landfill monitoring and maintenance costs.
EBITDA increased $32.1 million to $574.9 million, or a 36.2% EBITDA margin for 2025, from $542.8 million, or a 35.8% EBITDA margin for 2024. The increase in our EBITDA margin was due to price-led revenue growth and lower fuel costs, partially offset by an increase in allocated corporate overhead and higher risk management costs.CanadaRevenue increased $63.9 million to $1.325 billion for 2025, from $1.261 billion for 2024, due to price increases, contributions from acquisitions and higher E&P waste revenues attributable to an increase in volumes, partially offset by a decrease in commercial and residential collection volumes, a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, lower landfill gas sales primarily from lower renewable energy credits and a decrease in recyclable commodity revenues.
Segment expenses increased $17.1 million to $726.6 million for 2025, from $709.5 million for 2024 due to an increase in expenses from acquisitions closed during the comparable periods, higher labor and benefits costs, increased taxes associated with incremental volume and higher trucking costs, partially offset by a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, a decrease in truck, container, equipment and facility maintenance and repair expenses and lower fuel costs .
EBITDA increased $46.7 million to $598.2 million, or a 45.2% EBITDA margin for 2025, from $551.5 million, or a 43.7% EBITDA margin for 2024. The increase in our EBITDA margin was due to price-led increases in revenue, favorable fuel pricing, lower risk management expenses and a decrease in truck, container, equipment and facility maintenance and repair expenses , partially offset by a decline in renewable energy credit pricing, higher disposal expenses and an increase in allocated corporate overhead.MidSouthRevenue increased $69.0 million to $1.093 billion for 2025, from $1.024 billion for 2024, due to price increases and contributions from acquisitions, partially offset by a decrease in roll off and residential collection volumes, lower landfill gas sales primarily from lower renewable energy credits and a decrease in recyclable commodity revenues.
Segment expenses increased $46.4 million to $786.6 million for 2025, from $740.2 million for 2024 due to an increase in expenses from acquisitions closed during the comparable periods, higher labor and benefits expenses, an increase in third-party brokerage, higher allocated corporate overhead, an increase in truck, container, equipment and facility maintenance and repair expenses and higher risk management costs.
66Table of ContentsEBITDA increased $22.7 million to $306.1 million, or a 28.0% EBITDA margin for 2025, from $283.4 million, or a 27.7% EBITDA margin for 2024. The increase in our EBITDA margin was due primarily to price-led revenue growth and lower fuel costs due to diesel prices, partially offset by an increase in allocated corporate overhead.
Corporate
Segment expenses decreased $3.1 million to $24.6 million for 2025, from $27.7 million for 2024, due to increased allocation of costs to our operating segments and a decrease in deal costs associated with acquisitions closed during the comparable periods, partially offset by higher incentive compensation costs and higher administrative payroll costs to support continued growth in the business and increased professional fees. EBITDA increased $3.1 million in 2025 as compared to the prior period due to the decrease in segment expenses.Liquidity and Capital ResourcesThe following table sets forth certain cash flow information for the years ended December 31, 2025 and 2024 (in thousands of U.S. dollars):
2025
2024
Net cash provided by operating activities$2,414,069
$2,228,927
Net cash used in investing activities(2,023,243)(3,159,176)Net cash provided by (used in) financing activities(360,041)944,945Effect of exchange rate changes on cash, cash equivalents and restricted cash622(561)Net increase in cash, cash equivalents and restricted cash
31,40714,135Cash, cash equivalents and restricted cash at beginning of year198,173184,038Cash, cash equivalents and restricted cash at end of year$229,580
$198,173Operating Activities Cash FlowsNet cash provided by operating activities increased $185.1 million to $2.414 billion for the year ended December 31, 2025, from net cash provided by operating activities of $2.229 billion for the year ended December 31, 2024. The significant components of the increase included the following:
1) Deferred income taxes — Our increase in net cash provided by operating activities was favorably impacted by $173.9 million from deferred income taxes as changes in deferred income taxes resulted in an increase to operating cash flows of $116.6 million for the year ended December 31, 2025, compared to a decrease to operating cash flows of $57.3 million for the year ended December 31, 2024. The increase for the year ended December 31, 2025 was attributable to capital expenditures providing tax benefits resulting from accelerated depreciation and tax benefits resulting from payments for closure and post-closure activities in the period. The decrease for the year ended December 31, 2024 was attributable to capital expenditures providing tax benefits resulting from accelerated depreciation and tax benefits resulting from payments for closure and post-closure activities in the period.
2) Increase in earnings — Our increase in net cash provided by operating activities was favorably impacted by $68.4 million from an increase in net income, excluding depreciation, amortization of intangibles, share-based compensation, adjustments to closure, post-closure, and remediation liabilities, adjustments to and payments of contingent consideration, and loss on disposal of assets and impairments, due primarily to price increases for our solid waste services, operating income generated from acquisitions closed during, or subsequent to, the year ended December 31, 2024, and lower fuel costs, partially offset by increased other operating items, higher labor and benefits costs, higher risk management costs and an increase in trucking costs.
67Table of Contents3) Accounts payable and accrued liabilities — Our increase in net cash provided by operating activities was favorably impacted by $54.7 million from accounts payable and accrued liabilities as changes in accounts payable and accrued liabilities resulted in an increase to operating cash flows of $111.4 million for the year ended December 31, 2025, compared to an increase to operating cash flows of $56.7 million for the year ended December 31, 2024. The increase for the year ended December 31, 2025, was due primarily to an increase in accrued insurance costs, outstanding obligations to vendors and an increase in accrued payroll and benefits. The increase for the year ended December 31, 2024 was due primarily to an increase in accrued insurance costs and an increase in accrued interest due to the timing of interest payments, partially offset by a decrease in outstanding obligations to vendors.
4) Closure and post-closure expenditures — Our increase in net cash provided by operating activities was unfavorably impacted by $57.6 million from an increase in payments for closure and post-closure activities as changes in expenditures for these items resulted in a decrease to operating cash flows of $305.5 million for the year ended December 31, 2025, compared to a decrease in operating cash flows of $247.9 million for the year ended December 31, 2024.
5) Accounts receivable — Our increase in net cash provided by operating activities was unfavorably impacted by $57.4 million from accounts receivable as changes in accounts receivable resulted in a decrease to operating cash flows of $68.0 million for the year ended December 31, 2025, compared to a decrease to operating cash flows of $10.6 million for the year ended December 31, 2024. The decrease for the year ended December 31, 2025 was driven by higher revenues, which remained as outstanding receivables at the end of the period, and a reduction of receivables turnover relative to the prior period. The decrease for the year ended December 31, 2024 was due to increases in revenue, which remained as outstanding receivables at December 31, 2024, partially offset by an improvement in collections.
At December 31, 2025, we had a working capital deficit of $812.7 million, including cash and equivalents of $46.0 million. Our working capital deficit increased $160.8 million from a working capital deficit of $651.9 million at December 31, 2024, including cash and equivalents of $62.4 million, due primarily to an increase in accounts payable from an increase in accrued insurance costs, outstanding obligations to vendors and an increase in accrued payroll, and an increase in deferred revenue, partially offset by an increase in outstanding receivables driven by higher revenues and a reduction of receivables turnover relative to the prior period. To date, we have experienced no loss or lack of access to our cash and equivalents; however, we can provide no assurances that access to our cash and equivalents will not be impacted by adverse conditions in the financial markets. Our strategy in managing our working capital is generally to apply the cash generated from our operations that remains after satisfying our working capital and capital expenditure requirements, along with share repurchase and dividend programs, to reduce the unhedged portion of our indebtedness under our Revolving Credit Agreement and to minimize our cash balances.Investing Activities Cash FlowsNet cash used in investing activities decreased $1.136 billion to $2.023 billion for the year ended December 31, 2025, from $3.159 billion for the year ended December 31, 2024. The significant components of the decrease included the following:
1) A decrease in cash paid for acquisitions of $1.303 billion; less
2) An increase in capital expenditures at operations owned in the comparable periods of $71.5 million due to ongoing projects, expenditures for trucks and equipment and landfill site costs, partially offset by a decrease in expenditures for containers and compactors, land and facility improvements;
3) An increase in capital expenditures at operations acquired during the comparable period of $51.8 million due to expenditures for facility improvements, landfill site costs and trucks and equipment;
4) An increase of $ 37.0 million from proceeds from the sale of investment in noncontrolling interests in the prior period; and
5) An increase in capital expenditures for undeveloped landfill property of $15.1 million.
68Table of ContentsFinancing Activities Cash FlowsNet cash used in financing activities was $360.0 million for the year ended December 31, 2025, compared to net cash provided by financing activities of $944.9 million for the year ended December 31, 2024, representing a decrease of $1.305 billion. The significant components of the decrease included the following:
1) A decrease from the net change in long-term borrowings of $773.8 million in which long-term borrowings increased $548.6 million during the year ended December 31, 2025 and increased $1.322 billion during the year ended December 31, 2024;
2) A decrease from higher payments to repurchase our common shares of $505.5 million during the year ended December 31, 2025;
3) A decrease from higher cash dividends paid of $31.5 million due primarily to an increase in our average quarterly dividend rate for the year ended December 31, 2025 to $0.324 per share, from $0.293 per share for the year ended December 31, 2024; less
4) An increase from lower payments related to the issuance of debt of $8.5 million in which debt issuance costs increased $4.9 million during the year ended December 31, 2025 and increased $13.4 million during the year ended December 31, 2024.
On August 8, 2025, we announced the annual renewal of our normal course issuer bid, or the NCIB, to purchase up to 12,855,691 of our common shares during the period of August 12, 2025 to August 11, 2026 or until such earlier time as the NCIB is completed or terminated at our option. The timing and amounts of any repurchases pursuant to the NCIB will depend on market conditions, share price and other factors, including potential acquisition growth opportunities. All common shares purchased under the NCIB will be immediately cancelled following their repurchase. Information regarding the NCIB can be found under the section Normal Course Issuer Bid in Note 14, “Shareholders’ Equity,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.
The Board of Directors of the Company authorized the initiation of a quarterly cash dividend in October 2010 and has increased it on an annual basis. In October 2025, we announced that our Board of Directors increased our regular quarterly cash dividend by $0.035, from $0.315 to $0.350 per share. Cash dividends of $333.8 million and $302.3 million were paid during the years ended December 31, 2025 and 2024, respectively. We cannot assure as to the amounts or timing of future dividends.
Our business is capital intensive. Our capital requirements include acquisitions and capital expenditures, including for landfill cell construction, landfill development, landfill closure activities and intermodal facility construction in the future. We made $1.179 billion in capital expenditures for property and equipment during the year ended December 31, 2025, and we expect to make total capital expenditures for property and equipment in 2026 of approximately $1.250 billion. In addition, we made $15.1 million in capital expenditures for undeveloped landfill property during the year ended December 31, 2025 and may opportunistically make other capital expenditures for undeveloped landfill property in 2026. We intend to fund our planned 2026 capital expenditures principally through cash on hand, internally generated funds and borrowings under our Revolving Credit Agreement. In addition, we may make substantial additional capital expenditures in acquiring land and solid waste businesses. If we acquire additional landfill disposal facilities, we may also have to make significant expenditures to bring them into compliance with applicable regulatory requirements, obtain permits or expand our available disposal capacity. We cannot currently determine the amount of these expenditures because they will depend on the number, nature, condition and permitted status of any acquired landfill disposal facilities. We believe that our cash and equivalents, Revolving Credit Agreement and the funds we expect to generate from operations will provide adequate cash to fund our working capital and other cash needs for the foreseeable future. However, disruptions in the capital and credit markets could adversely affect our ability to draw on our Revolving Credit Agreement or raise other capital. Our access to funds under the Revolving Credit Agreement is dependent on the ability of the banks that are parties to the agreement to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time.
69Table of ContentsThe Company, as borrower, Bank of America, N.A., acting through its Canada Branch, as the global agent, the swing line lender and a letter of credit issuer, Bank of America, N.A., as the U.S. agent and a letter of credit issuer, and the other lenders and financial institutions from time to time party thereto (the “Lenders”) are party to that certain Revolving Credit Agreement, dated as of February 27, 2024 (as amended, restated, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), pursuant to which the Lenders provide loans and other credit extensions to the Company under a revolving credit facility. Borrowings under the Revolving Credit Agreement are unsecured and there are no subsidiary guarantors under the Revolving Credit Agreement. The Revolving Credit Agreement has a scheduled maturity date of February 27, 2029, subject to certain extension mechanics therein by which the Company may request two additional one-year maturity date extensions.
As of December 31, 2025, $2.382 billion under the revolving credit facility were outstanding under the Revolving Credit Agreement, exclusive of outstanding standby letters of credit of $37.3 million. We also had $183.3 million of letters of credit issued and outstanding at December 31, 2025 under a facility other than the Revolving Credit Agreement.
On November 16, 2018, we completed an underwritten public offering of $500.0 million aggregate principal amount of 4.25% Senior Notes due December 1, 2028 (the “2028 Senior Notes”). The 2028 Senior Notes were issued under the Indenture, dated as of November 16, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented through the First Supplemental Indenture, dated as of November 16, 2018.
On April 16, 2019, we completed an underwritten public offering of $500.0 million aggregate principal amount of 3.50% Senior Notes due May 1, 2029 (the “2029 Senior Notes”). The 2029 Senior Notes were issued under the Indenture, as supplemented through the Second Supplemental Indenture, dated as of April 16, 2019.On January 23, 2020, we completed an underwritten public offering of $600.0 million aggregate principal amount of 2.60% Senior Notes due February 1, 2030 (the “2030 Senior Notes”). The 2030 Senior Notes were issued under the Indenture, as supplemented through the Third Supplemental Indenture, dated as of January 23, 2020.
On March 13, 2020, we completed an underwritten public offering of $500.0 million aggregate principal amount of 3.05% Senior Notes due April 1, 2050 (the “2050 Senior Notes”). The 2050 Senior Notes were issued under the Indenture, as supplemented through the Fourth Supplemental Indenture, dated as of March 13, 2020.On September 20, 2021, we completed an underwritten public offering (the “Offering”) of $650.0 million aggregate principal amount of 2.20% Senior Notes due January 15, 2032 (the “2032 Senior Notes”) and $850.0 million aggregate principal amount of 2.95% Senior Notes due January 15, 2052 (the “2052 Senior Notes”). The 2032 Senior Notes and the 2052 Senior Notes were issued under the Indenture, as supplemented through the Fifth Supplemental Indenture, dated as of September 20, 2021.On March 9, 2022, we completed an underwritten public offering of $500.0 million aggregate principal amount of 3.20% Senior Notes due June 1, 2032 (the “New 2032 Senior Notes”). The New 2032 Senior Notes were issued under the Indenture, as supplemented through the Sixth Supplemental Indenture, dated as of March 9, 2022.On August 18, 2022, we completed an underwritten public offering of $750.0 million aggregate principal amount of 4.20% Senior Notes due January 15, 2033 (the “2033 Senior Notes”). The 2033 Senior Notes were issued under the Indenture, as supplemented through the Seventh Supplemental Indenture, dated as of August 18, 2022.
On February 21, 2024, we completed an underwritten public offering of $750.0 million aggregate principal amount of 5.00% Senior Notes due March 1, 2034 (the “2034 Senior Notes”). The 2034 Senior Notes were issued under the Indenture, as supplemented through the Eighth Supplemental Indenture, dated as of February 21, 2024.
On June 13, 2024, we completed an underwritten public offering of CAD $500.0 million aggregate principal amount of 4.50% Senior Notes due June 14, 2029 (the “New 2029 Senior Notes”). The New 2029 Senior Notes were issued under the Indenture, as supplemented by the Ninth Supplemental Indenture, dated as of June 13, 2024. The New 2029 Senior Notes were issued in Canada on a private placement basis.70
Table of ContentsOn June 4, 2025, we completed an underwritten public offering of $500.0 million aggregate principal amount of 5.25% Senior Notes due September 1, 2035 (the “2035 Senior Notes” and, together with the 2028 Senior Notes, the 2029 Senior Notes, the New 2029 Senior Notes, the 2030 Senior Notes, the 2032 Senior Notes, the New 2032 Senior Notes, the 2033 Senior Notes, the 2034 Senior Notes, the 2050 Senior Notes and the 2052 Senior Notes, the “Senior Notes”). The 2035 Senior Notes were issued under the Indenture, as supplemented by the Tenth Supplemental Indenture, dated as of June 4, 2025.
We pay interest on the Senior Notes semi-annually in arrears. The Senior Notes are our senior unsecured obligations, ranking equally in right of payment with our other existing and future unsubordinated debt and senior to any of our future subordinated debt. The Senior Notes are not guaranteed by any of our subsidiaries.
See Note 11 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the debt agreements and Senior Notes.Contractual ObligationsAs of December 31, 2025, we had the following contractual obligations:
Payments Due by Period
(amounts in thousands of U.S. dollars)
Less Than 1 to 3
Over 5
Recorded Obligations
Total
1 Year
Years
3 to 5 Years
Years
Long-term debt
$8,888,839
$8,667
$514,021
$3,856,843
$4,509,308Cash interest payments
$2,629,791
$340,055
$670,120
$392,398
$1,227,218Contingent consideration
$98,882
$65,029
$
3,224
$
3,224
$27,405Operating leases
$392,330
$57,662
$99,348
$73,607
$161,713Final capping, closure and post-closure
$2,308,339
$146,772
$106,275
$16,346
$2,038,946Long-term debt payments include:1) $2.382 billion in principal payments due February 2029 related to our revolving credit facility under our Revolving Credit Agreement. Advances are available under the Revolving Credit Agreement in U.S. dollars and Canadian dollars and bear interest at fluctuating rates (See Note 11). At December 31, 2025, $1.115 billion of the outstanding borrowings drawn under the revolving credit facility were in U.S. term SOFR rate loans, bearing interest at a total rate ranging from 4.59% to 4.75% on such date. At December 31, 2025, $38.0 million of the outstanding borrowings drawn under the revolving credit facility were in U.S. base rate loans, bearing interest at a total rate of 6.75% on such date. At December 31, 2025, $1.215 billion of the outstanding borrowings drawn under the revolving credit facility were in Canadian-based CORRA rate loans, bearing interest at a total rate ranging from 3.41% to 3.44% on such date. At December 31, 2025, $13.9 million of the outstanding borrowings drawn under the revolving credit facility were in Canadian-based prime rate loans, bearing interest at a total rate of 4.45% on such date.
2) $500.0 million in principal payments due 2028 related to our 2028 Senior Notes. The 2028 Senior Notes bear interest at a rate of 4.25%.
3) $500.0 million in principal payments due 2029 related to our 2029 Senior Notes. The 2029 Senior Notes bear interest at a rate of 3.50%.
4) $364.8 million in principal payments due 2029 related to our New 2029 Senior Notes. The New 2029 Senior Notes bear interest at a rate of 4.50%.
5) $600.0 million in principal payments due 2030 related to our 2030 Senior Notes. The 2030 Senior Notes bear interest at a rate of 2.60%.71
Table of Contents6) $650.0 million in principal payments due 2032 related to our 2032 Senior Notes. The 2032 Senior Notes bear interest at a rate of 2.20%.
7) $500.0 million in principal payments due 2032 related to our New 2032 Senior Notes. The New 2032 Senior Notes bear interest at a rate of 3.20%.
8) $750.0 million in principal payments due 2033 related to our 2033 Senior Notes. The 2033 Senior Notes bear interest at a rate of 4.20%.
9) $750.0 million in principal payments due 2034 related to our 2034 Senior Notes. The 2034 Senior Notes bear interest at a rate of 5.00%.
10) $500.0 million in principal payments due 2035 related to our 2035 Senior Notes. The 2035 Senior Notes bear interest at a rate of 5.25%.
11) $500.0 million in principal payments due 2050 related to our 2050 Senior Notes. The 2050 Senior Notes bear interest at a rate of 3.05%.
12) $850.0 million in principal payments due 2052 related to our 2052 Senior Notes. The 2052 Senior Notes bear interest at a rate of 2.95%.
13) $26.4 million in principal payments related to our notes payable to sellers and other third parties. Our notes payable to sellers and other third parties bear interest at rates between 2.42% and 10.35% at December 31, 2025, and have maturity dates ranging from 2028 to 2044.
14) $16.0 million in principal payments related to our financing leases. Our financing leases bear interest at rates between 1.89% and 5.35% at December 31, 2025, and have expiration dates ranging from 2026 to 2035.The following assumptions were made in calculating cash interest payments:1) We calculated cash interest payments on the Revolving Credit Agreement using the term SOFR rate plus the applicable term SOFR margin, the base rate plus the applicable base rate margin, the term CORRA rate plus the applicable margin and the Canadian prime rate plus the applicable prime rate margin at December 31, 2025. We assumed the Revolving Credit Agreement is paid off when it matures in February 2029.
2) We calculated cash interest payments on our interest rate swaps using the stated interest rate in the swap agreement less the term SOFR rate through the earlier expiration of the term of the swaps or the term of the credit facility.
Contingent consideration payments include $84.7 million recorded as liabilities in our consolidated financial statements at December 31, 2025, and $14.2 million of future interest accretion on the recorded obligations.We are party to operating lease agreements and finance leases as discussed in Note 7 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. These lease agreements are established in the ordinary course of our business and are designed to provide us with access to facilities and equipment at competitive, market-driven prices.72
Table of ContentsThe estimated final capping, closure and post-closure expenditures presented above are in current dollars.
Amount of Commitment Expiration Per Period
(amounts in thousands of U.S. dollars)
Less Than
1 to 3
3 to 5
Over 5
Unrecorded Obligations (1) Total 1 Year Years Years Years
Unconditional purchase obligations
$173,644
$136,579
$36,599
$466
$—
(1) We are party to unconditional purchase obligations as discussed in Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. These purchase obligations are established in the ordinary course of our business and are designed to provide us with access to products at competitive, market-driven prices. At December 31, 2025, our unconditional purchase obligations consisted of multiple fixed-price fuel purchase contracts under which we have 56.2 million gallons remaining to be purchased for a total of $173.6 million. The current fuel purchase contracts expire on or before September 30, 2029. These arrangements have not materially affected our financial position, results of operations or liquidity during the year ended December 31, 2025, nor are they expected to have a material impact on our future financial position, results of operations or liquidity.
We have obtained standby letters of credit as discussed in Note 11 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K and financial surety bonds as discussed in Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. These standby letters of credit and financial surety bonds are generally obtained to support our financial assurance needs and landfill and E&P waste operations. These arrangements have not materially affected our financial position, results of operations or liquidity during the year ended December 31, 2025, nor are they expected to have a material impact on our future financial position, results of operations or liquidity.From time to time, we evaluate our existing operations and their strategic importance to us. If we determine that a given operating unit does not have future strategic importance, we may sell or otherwise dispose of those operations. Although we believe our reporting units would not be impaired by such dispositions, we could incur losses on them.
New Accounting Pronouncements
See Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a description of the new accounting standards that are applicable to us.
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Non-GAAP Financial MeasuresAdjusted EBITDAWe present adjusted EBITDA, a non-GAAP financial measure, 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 our operations. We define adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus income tax provision, 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. We further adjust this calculation to exclude the effects of other items management believes impact the ability to assess the operating performance of our 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. Our adjusted EBITDA for the years ended December 31, 2025, 2024 and 2023, are calculated as follows (amounts in thousands of U.S. dollars):
Years Ended December 31,
2025
2024
2023Net income attributable to Waste Connections
$1,076,557
$617,573
$762,800
Plus (less): Net income (loss) attributable to noncontrolling interests
—(1,003)26Plus: Income tax provision341,359146,363220,675Plus: Interest expense334,551326,804274,642Less: Interest income(12,139)(11,607)(9,350)Plus: Depreciation and amortization1,232,1061,163,7691,003,211Plus: Closure and post-closure accretion47,95529,77419,605Plus: Impairments and other operating items109,709613,012238,796Less: Other income, net(30,154)(10,471)(12,481)Adjustments:
Plus: Transaction-related expenses (a)24,17826,05910,653Plus (less): Fair value changes to equity awards (b)4331,592(1,726)Plus: Executive separation costs (c)—
—
16,105Adjusted EBITDA
$3,124,555
$2,901,865
$2,522,956(a) Reflects the addback of acquisition-related transaction costs.
(b) Reflects fair value accounting changes associated with certain equity awards .
(c) Reflects the cash and non-cash components of severance expense associated with an executive departure.
74Table of Contents
Adjusted Net Income Attributable to Waste Connections and Adjusted Net Income per Diluted Share Attributable to Waste ConnectionsWe present adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections, both non-GAAP financial measures, supplementally because they are widely used by investors as valuation measures 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 our operations. We provide 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 our 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. Our adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections for the years ended December 31, 2025, 2024 and 2023, are calculated as follows (amounts in thousands of U.S. dollars, except per share amounts):
Years Ended December 31,
2025
2024
2023Reported net income attributable to Waste Connections
$1,076,557
$617,573
$762,800Adjustments:
Amortization of intangibles (a)201,541189,768157,573Impairments and other operating items (b)109,709613,012238,796Transaction-related expenses (c)24,17826,05910,653Fair value changes to equity awards (d)4331,592(1,726)
Executive separation costs (e)—
—
16,105Tax effect (f)
(84,084)(208,711)(102,948)Adjusted net income attributable to Waste Connections
$1,328,334
$1,239,293
$1,081,253
Diluted earnings per common share attributable to Waste Connections’ common shareholders:
Reported net income
$4.17
$2.39
$2.95Adjusted net income
$5.15
$4.79
$4.19(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)Reflects the cash and non-cash components of severance expense associated with an executive departure.(f)
The aggregate tax effect of the adjustments in footnotes (a) through (e) is calculated based on the applied tax rates for the respective periods.Leverage RatioThe Leverage Ratio is calculated by dividing our Consolidated Total Funded Debt by Consolidated EBITDA (as defined in our Revolving Credit Agreement). The Leverage Ratio is based on EBITDA, a non-GAAP financial measure. We present this ratio because it is used for the purpose of calculating financial covenants under our Revolving Credit Agreement. Management also uses this ratio as one of the principal measures to evaluate and monitor the indebtedness of the Company relative to its ability to generate income to service such debt. The Leverage Ratio is not a substitute for, and should be used in conjunction with, GAAP financial ratios. Other companies may calculate leverage ratios differently.
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InflationIn the current environment, we have seen inflationary pressures resulting from higher materials or labor costs in certain markets and higher resulting third-party costs in areas such as brokerage, repairs and construction. Additionally, significant changes in trade policies, including tariffs in the U.S. or retaliatory policies in other countries, including Canada, may increase the cost of certain equipment we purchase in the U.S. and Canada. Consistent with industry practice, many of our contracts allow us to pass through certain costs to our customers, including increases in landfill tipping fees and, in some cases, fuel costs. To the extent that there are decreases in fuel costs, in some cases, a portion of these reductions are passed through to customers in the form of lower fuel and material surcharges. We believe that, over time, we should be able to increase prices to offset many cost increases that result from inflation and any potential impact from changes in trade policies or tariffs within the ordinary course of business. However, competitive pressures or delays in the timing of rate increases under certain of our contracts may require us to absorb at least part of these cost increases, especially if cost increases exceed the average rate of inflation. Management’s estimates associated with inflation have an impact on our accounting for landfill liabilities.