Waste Connections, Inc. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2021
	Or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number 1-34370

WASTE CONNECTIONS, INC.

(Exact name of registrant as specified in its charter)

Ontario, Canada

(State or other jurisdiction of incorporation or organization)

98-1202763

(I.R.S. Employer Identification No.)

6220 Hwy 7, Suite 600

Woodbridge

Ontario L4H 4G3

Canada

(Address of principal executive offices)

(905) 532-7510

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, no par value	WCN	New York Stock Exchange (“NYSE”) Toronto Stock Exchange (“TSX”)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


þ Large Accelerated Filer	◻ Accelerated Filer	◻ Non-accelerated Filer	☐ Smaller Reporting Company	☐ Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common shares:

As of October 15, 2021: 260,526,895 common shares

Table of Contents

WASTE CONNECTIONS, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION (unaudited)
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Net Income	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	66
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	67
Item 6.	Exhibits	67
Signatures		68

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands of U.S. dollars, except share and per share amounts)


	September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and equivalents	$	339,479	$	617,294
Accounts receivable, net of allowance for credit losses of $20,306 and $19,380 at September 30, 2021 and December 31, 2020, respectively		692,051		630,264
Prepaid expenses and other current assets		128,758		160,714
Total current assets		1,160,288		1,408,272

Restricted cash		118,893		97,095
Restricted investments		58,430		57,516
Property and equipment, net		5,414,789		5,284,506
Operating lease right-of-use assets		162,640		170,923
Goodwill		6,006,533		5,726,650
Intangible assets, net		1,264,728		1,155,079
Other assets, net		88,531		92,323
Total assets	$	14,274,832	$	13,992,364
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	341,211	$	290,820
Book overdraft		16,527		17,079
Deferred revenue		254,135		233,596
Accrued liabilities		448,541		404,923
Current portion of operating lease liabilities		37,236		30,671
Current portion of contingent consideration		42,359		43,297
Current portion of long-term debt and notes payable		5,289		8,268
Total current liabilities		1,145,298		1,028,654

Long-term portion of debt and notes payable		4,869,213		4,708,678
Long-term portion of operating lease liabilities		132,589		147,223
Long-term portion of contingent consideration		24,592		28,439
Deferred income taxes		777,968		760,044
Other long-term liabilities		442,016		455,888
Total liabilities		7,391,676		7,128,926

Commitments and contingencies (Note 18)

Equity:
Common shares: 260,526,784 shares issued and 260,453,918 shares outstanding at September 30, 2021; 262,899,174 shares issued and 262,824,990 shares outstanding at December 31, 2020		3,726,134		4,030,368
Additional paid-in capital		184,995		170,555
Accumulated other comprehensive income (loss)		17,553		(651)
Treasury shares: 72,866 and 74,184 shares at September 30, 2021 and December 31, 2020, respectively		—		—
Retained earnings		2,949,984		2,659,001
Total Waste Connections’ equity		6,878,666		6,859,273
Noncontrolling interest in subsidiaries		4,490		4,165
Total equity		6,883,156		6,863,438
	$	14,274,832	$	13,992,364

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)

(In thousands of U.S. dollars, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	1,597,168	$	1,389,552	$	4,527,042	$	4,047,739
Operating expenses:
Cost of operations		946,098		828,822		2,673,209		2,429,957
Selling, general and administrative		155,520		136,003		454,885		404,213
Depreciation		171,965		157,590		498,588		459,641
Amortization of intangibles		35,337		32,653		100,237		96,062
Impairments and other operating items		3,104		3,805		9,819		442,582
Operating income		285,144		230,679		790,304		215,284

Interest expense		(40,418)		(40,636)		(124,171)		(119,562)
Interest income		495		903		2,342		4,396
Other income (expense), net		3,140		702		5,452		(3,046)
Loss on early extinguishment of debt		(115,288)		—		(115,288)		—
Income before income tax provision		133,073		191,648		558,639		97,072

Income tax provision		(18,419)		(33,657)		(106,578)		(23,654)
Net income		114,654		157,991		452,061		73,418
Plus (less): Net loss (income) attributable to noncontrolling interests		(273)		58		(325)		594
Net income attributable to Waste Connections	$	114,381	$	158,049	$	451,736	$	74,012

Earnings per common share attributable to Waste Connections’ common shareholders:
Basic	$	0.44	$	0.60	$	1.73	$	0.28
Diluted	$	0.44	$	0.60	$	1.72	$	0.28

Shares used in the per share calculations:
Basic		260,550,774		262,998,317		261,372,827		263,253,087
Diluted		261,145,220		263,507,486		261,879,754		263,718,001

Cash dividends per common share	$	0.205	$	0.185	$	0.615	$	0.555

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	114,654	$	157,991	$	452,061	$	73,418

Other comprehensive income (loss), before tax:
Interest rate swap amounts reclassified into interest expense		5,143		2,893		15,000		4,595
Changes in fair value of interest rate swaps		(401)		1,846		14,081		(68,047)
Foreign currency translation adjustment		(64,197)		45,886		(3,170)		(55,738)
Other comprehensive income (loss), before tax		(59,455)		50,625		25,911		(119,190)
Income tax (expense) benefit related to items of other comprehensive income (loss)		(1,257)		(1,256)		(7,707)		16,815
Other comprehensive income (loss), net of tax		(60,712)		49,369		18,204		(102,375)
Comprehensive income (loss)		53,942		207,360		470,265		(28,957)
Plus (less): Comprehensive loss (income) attributable to noncontrolling interests		(273)		58		(325)		594
Comprehensive income (loss) attributable to Waste Connections	$	53,669	$	207,418	$	469,940	$	(28,363)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands of U.S. dollars, except share amounts)


	WASTE CONNECTIONS' EQUITY
						ACCUMULATED
				ADDITIONAL		OTHER
	COMMON SHARES			PAID-IN		COMPREHENSIVE		TREASURY SHARES			RETAINED		NONCONTROLLING
	SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		SHARES	AMOUNT		EARNINGS		INTERESTS		TOTAL
Balances at December 31, 2020	262,824,990	$	4,030,368	$	170,555	$	(651)	74,184	$	—	$	2,659,001	$	4,165	$	6,863,438
Sale of common shares held in trust	1,318		131		—		—	(1,318)		—		—		—		131
Vesting of restricted share units	340,529		—		—		—	—		—		—		—		—
Vesting of performance-based restricted share units	154,251		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	19,150		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(186,039)		—		(18,490)		—	—		—		—		—		(18,490)
Equity-based compensation	—		—		9,573		—	—		—		—		—		9,573
Exercise of warrants	3,490		—		—		—	—		—		—		—		—
Repurchase of common shares	(666,184)		(65,999)		—		—	—		—		—		—		(65,999)
Cash dividends on common shares	—		—		—		—	—		—		(53,909)		—		(53,909)
Amounts reclassified into earnings, net of taxes	—		—		—		3,525	—		—		—		—		3,525
Changes in fair value of cash flow hedges, net of taxes	—		—		—		15,243	—		—		—		—		15,243
Foreign currency translation adjustment	—		—		—		28,054	—		—		—		—		28,054
Net income (loss)	—		—		—		—	—		—		160,309		(2)		160,307
Balances at March 31, 2021	262,491,505		3,964,500		161,638		46,171	72,866		—		2,765,401		4,163		6,941,873
Vesting of restricted share units	647		—		—		—	—		—		—		—		—
Fair value adjustment for common shares in deferred compensation plan exchanged for other investment options	—		—		(1,177)		—	—		—		—		—		(1,177)
Tax withholdings related to net share settlements of equity-based compensation	(176)		—		(20)		—	—		—		—		—		(20)
Equity-based compensation	—		—		11,791		—	—		—		—		—		11,791
Exercise of warrants	21,280		—		—		—	—		—		—		—		—
Repurchase of common shares	(2,079,806)		(239,641)		—		—	—		—		—		—		(239,641)
Cash dividends on common shares	—		—		—		—	—		—		(53,421)		—		(53,421)
Amounts reclassified into earnings, net of taxes	—		—		—		3,720	—		—		—		—		3,720
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(4,599)	—		—		—		—		(4,599)
Foreign currency translation adjustment	—		—		—		32,973	—		—		—		—		32,973
Net income	—		—		—		—	—		—		177,047		54		177,101
Balances at June 30, 2021	260,433,450		3,724,859		172,232		78,265	72,866		—		2,889,027		4,217		6,868,600
Vesting of restricted share units	1,525		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	360		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(534)		—		(66)		—	—		—		—		—		(66)
Equity-based compensation	—		—		12,829		—	—		—		—		—		12,829
Exercise of warrants	8,304		—		—		—	—		—		—		—		—
Issuance of shares under employee share purchase plan	10,813		1,275		—		—	—		—		—		—		1,275
Cash dividends on common shares	—		—		—		—	—		—		(53,424)		—		(53,424)
Amounts reclassified into earnings, net of taxes	—		—		—		3,780	—		—		—		—		3,780
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(295)	—		—		—		—		(295)
Foreign currency translation adjustment	—		—		—		(64,197)	—		—		—		—		(64,197)
Net income	—		—		—		—	—		—		114,381		273		114,654
Balances at September 30, 2021	260,453,918	$	3,726,134	$	184,995	$	17,553	72,866	$	—	$	2,949,984	$	4,490	$	6,883,156

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands of U.S. dollars, except share amounts)


	WASTE CONNECTIONS' EQUITY
						ACCUMULATED
				ADDITIONAL		OTHER
	COMMON SHARES			PAID-IN		COMPREHENSIVE		TREASURY SHARES			RETAINED		NONCONTROLLING
	SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		SHARES	AMOUNT		EARNINGS		INTERESTS		TOTAL
Balances at December 31, 2019	263,618,161	$	4,135,343	$	154,917	$	(10,963)	81,514	$	—	$	2,654,207	$	4,850	$	6,938,354
Sale of common shares held in trust	7,330		679		—		—	(7,330)		—		—		—		679
Vesting of restricted share units	366,603		—		—		—	—		—		—		—		—
Vesting of performance-based restricted share units	281,186		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	20,229		—		—		—	—		—		—		—		—
Fair value adjustment for common shares in deferred compensation plan exchanged for other investment options	—		—		(533)		—	—		—		—		—		(533)
Tax withholdings related to net share settlements of equity-based compensation	(226,766)		—		(23,090)		—	—		—		—		—		(23,090)
Equity-based compensation	—		—		10,144		—	—		—		—		—		10,144
Exercise of warrants	9,751		—		—		—	—		—		—		—		—
Repurchase of common shares	(1,271,977)		(105,654)		—		—	—		—		—		—		(105,654)
Cash dividends on common shares	—		—		—		—	—		—		(48,018)		—		(48,018)
Amounts reclassified into earnings, net of taxes	—		—		—		(323)	—		—		—		—		(323)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(42,649)	—		—		—		—		(42,649)
Foreign currency translation adjustment	—		—		—		(184,717)	—		—		—		—		(184,717)
Net income (loss)	—		—		—		—	—		—		143,035		(142)		142,893
Balances at March 31, 2020	262,804,517		4,030,368		141,438		(238,652)	74,184		—		2,749,224		4,708		6,687,086
Vesting of restricted share units	5,537		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	3,269		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(2,398)		—		(201)		—	—		—		—		—		(201)
Equity-based compensation	—		—		9,912		—	—		—		—		—		9,912
Exercise of warrants	240		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(48,894)		—		(48,894)
Amounts reclassified into earnings, net of taxes	—		—		—		1,574	—		—		—		—		1,574
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(8,722)	—		—		—		—		(8,722)
Foreign currency translation adjustment	—		—		—		83,093	—		—		—		—		83,093
Net loss	—		—		—		—	—		—		(227,072)		(395)		(227,467)
Balances at June 30, 2020	262,811,165		4,030,368		151,149		(162,707)	74,184		—		2,473,258		4,313		6,496,381
Vesting of restricted share units	3,228		—		—		—	—		—		—		—		—
Fair value adjustment for common shares in deferred compensation plan exchanged for other investment options	—		—		(145)		—	—		—		—		—		(145)
Tax withholdings related to net share settlements of equity-based compensation	(1,003)		—		(99)		—	—		—		—		—		(99)
Equity-based compensation	—		—		11,701		—	—		—		—		—		11,701
Exercise of warrants	9,435		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(49,009)		—		(49,009)
Amounts reclassified into earnings, net of taxes	—		—		—		2,126	—		—		—		—		2,126
Changes in fair value of cash flow hedges, net of taxes	—		—		—		1,357	—		—		—		—		1,357
Foreign currency translation adjustment	—		—		—		45,886	—		—		—		—		45,886
Net income (loss)	—		—		—		—	—		—		158,049		(58)		157,991
Balances at September 30, 2020	262,822,825	$	4,030,368	$	162,606	$	(113,338)	74,184	$	—	$	2,582,298	$	4,255	$	6,666,189

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of U.S. dollars)


	Nine Months Ended September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	452,061	$	73,418
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of assets and impairments		9,302		423,832
Depreciation		498,588		459,641
Amortization of intangibles		100,237		96,062
Loss on early extinguishment of debt		115,288		—
Deferred income taxes, net of acquisitions		(24,282)		(77,613)
Amortization of debt issuance costs		3,887		6,146
Share-based compensation		42,694		38,316
Interest accretion		12,068		12,843
Payment of contingent consideration recorded in earnings		(520)		—
Adjustments to contingent consideration		89		16,852
Other		(1,286)		936
Net change in operating assets and liabilities, net of acquisitions		61,835		135,140
Net cash provided by operating activities		1,269,961		1,185,573

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired		(561,276)		(173,810)
Capital expenditures for property and equipment		(479,480)		(420,694)
Capital expenditures for undeveloped landfill property		—		(66,809)
Proceeds from disposal of assets		10,109		11,564
Other		(4,193)		(317)
Net cash used in investing activities		(1,034,840)		(650,066)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		1,943,192		1,790,625
Principal payments on notes payable and long-term debt		(1,814,034)		(1,505,641)
Premiums paid on early extinguishment of debt		(110,617)		—
Payment of contingent consideration recorded at acquisition date		(7,998)		(2,812)
Change in book overdraft		(563)		(862)
Payments for repurchase of common shares		(305,640)		(105,654)
Payments for cash dividends		(160,754)		(145,921)
Tax withholdings related to net share settlements of equity-based compensation		(18,576)		(23,390)
Debt issuance costs		(17,997)		(11,117)
Proceeds from issuance of shares under employee share purchase plan		1,275		—
Proceeds from sale of common shares held in trust		131		679
Net cash used in financing activities		(491,581)		(4,093)

Effect of exchange rate changes on cash, cash equivalents and restricted cash		443		980

Net increase (decrease) in cash, cash equivalents and restricted cash		(256,017)		532,394
Cash, cash equivalents and restricted cash at beginning of period		714,389		423,221
Cash, cash equivalents and restricted cash at end of period	$	458,372	$	955,615

Non-cash financing activities:
Liabilities assumed and notes payable issued to sellers of businesses acquired	$	103,016	$	67,789

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

1.BASIS OF PRESENTATION AND SUMMARY

The accompanying condensed consolidated financial statements relate to Waste Connections, Inc. and its subsidiaries (the “Company”) for the three and nine month periods ended September 30, 2021 and 2020. In the opinion of management, the accompanying balance sheets and related interim statements of net income, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items, necessary for their fair statement in conformity with U.S. generally accepted accounting principles (“GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Examples include accounting for landfills, self-insurance accruals, income taxes, allocation of acquisition purchase price, contingent consideration accruals and asset impairments. An additional area that involves estimation is when the Company estimates the amount of potential exposure it may have with respect to litigation, claims and assessments in accordance with the accounting guidance on contingencies. Actual results for all estimates could differ materially from the estimates and assumptions that the Company uses in the preparation of its condensed consolidated financial statements.

Interim results are not necessarily indicative of results for a full year. These interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

2.REPORTING CURRENCY

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.

3.NEW ACCOUNTING STANDARDS

Accounting Standards Adopted

Income Taxes – Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance that simplifies the accounting for income taxes as part of its overall initiative to reduce complexity in applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments include removal of certain exceptions to the general principles of income taxes, and simplification in several other areas such as accounting for a franchise tax that is partially based on income. The standard is effective for public business entities that are U.S. Securities and Exchange Commission (“SEC”) filers for annual periods beginning after December 15, 2020, and interim periods within those reporting periods. The Company adopted the new standard as of January 1, 2021. The adoption of this new standard did not have a material impact on the Company’s consolidated financial statements.

Accounting Standards Pending Adoption

Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued guidance to provide temporary optional expedients and exceptions to the guidance in GAAP on

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contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). One-week and two-month U.S. dollar LIBOR settings as well as all non-U.S. dollar LIBOR settings will stop being published on December 31, 2021, while the remaining U.S. dollar LIBOR settings will be discontinued on June 30, 2023. Under the new guidance, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Under the guidance, entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.

The guidance is effective upon issuance. The guidance on contract modifications is applied prospectively from March 12, 2020. It may also be applied to modifications of existing contracts made earlier in the interim period that includes the effective date. The guidance on hedging is applied to eligible hedging relationships existing as of the beginning of the interim period that includes the effective date and to new eligible hedging relationships entered into after the beginning of that interim period. The relief is temporary and generally cannot be applied to contract modifications that occur after December 31, 2022 or hedging relationships entered into or evaluated after that date. However, certain optional expedients can be applied to hedging relationships evaluated in periods after December 31, 2022. The Company is currently assessing the potential impact of implementing this new guidance on its consolidated financial statements. The Company had a combined $1,281,000 of U.S. based LIBOR loans as of September 30, 2021. The Company estimates that if the reference rate for these loans had transitioned from LIBOR to SOFR as of September 30, 2021, the impact to annual interest expense would have been an increase of less than $1,000. This relief is expected to permit the Company to maintain cash flow ‎hedge accounting as described in Note 12.

SEC amends MD&A and other Regulation S-K disclosure requirements. In November 2020, the SEC adopted amendments to Regulation S-K to eliminate certain disclosure requirements and to revise several others to make the disclosures provided in management’s discussion and analysis more useful for investors. Key changes included: (1) enhancements and clarification of the disclosure requirements for liquidity and capital resources; (2) elimination of five years of Selected Financial Data; (3) replacement of the current requirement for two years of quarterly tabular disclosure with a principles-based requirement to provide information only when there are material retrospective changes; (4) codification of prior SEC guidance on critical accounting estimates; (5) elimination of the tabular disclosure of contractual obligations; and (6) conforming amendments for foreign private issuers. The amended rules were posted to the Federal Register on January 11, 2021 and became effective February 10, 2021. Registrants are required to comply with the new rules beginning with the first fiscal year ending on or after August 9, 2021. Registrants may early adopt the amended rules at any time after the effective date (on an item-by-item basis), as long as they provide the disclosure responsive to an amended item in its entirety.

4.IMPAIRMENTS OF PROPERTY, EQUIPMENT, GOODWILL AND INTANGIBLE ASSETS

Property, equipment and finite-lived intangible assets are carried on the Company’s consolidated financial statements based on their cost less accumulated depreciation or amortization. Finite-lived intangible assets consist of long-term franchise agreements, contracts, customer lists, permits and other agreements. The recoverability of these assets is tested whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

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Typical indicators that an asset may be impaired 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.

If any of these or other indicators occur, a test of recoverability is performed by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If the carrying value is in excess of the undiscounted expected future cash flows, impairment is measured by comparing the fair value of the asset to its carrying value. Fair value is determined by an internally developed discounted projected cash flow analysis of the asset. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether an impairment has occurred for the group of assets for which the projected cash flows can be identified. If the fair value of an asset is determined to be less than the carrying amount of the asset or asset group, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. Several impairment indicators are beyond the Company’s control, and whether or not they will occur cannot be predicted with any certainty. Estimating future cash flows requires significant judgment and projections may vary from cash flows eventually realized. There are other considerations for impairments of landfills, as described below.

There are certain indicators listed above that require significant judgment and understanding of the waste industry when applied to landfill development or expansion projects. A regulator or court may deny or overturn a landfill development or landfill expansion permit application before the development or expansion permit is ultimately granted. Management may periodically divert waste from one landfill to another to conserve remaining permitted landfill airspace. Therefore, certain events could occur in the ordinary course of business and not necessarily be considered indicators of impairment due to the unique nature of the waste industry.

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, the Company evaluates its reporting units for impairment if events or circumstances similar to the indicators listed above change between annual tests indicating a possible impairment.

Through June 30, 2020, the Company’s reporting units consisted of its five geographic solid waste operating segments and its non-hazardous oil and natural gas exploration and production (“E&P”) waste treatment, recovery and disposal services segment. As of July 2020, the Company combined all operations of the E&P segment into the Southern segment, based on the Company’s determination that the two operating segments met the aggregation criteria, and eliminated the E&P segment.

The Company estimates the fair value of each of its reporting units using discounted cash flow analyses. 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. The Company compares the fair value of each reporting unit with the carrying value of the net assets assigned to each 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, the Company compares the estimated fair value of each indefinite-lived intangible asset to its carrying value. If the fair value of the indefinite-lived

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intangible asset is less than its carrying value, an impairment charge would be recorded to earnings in the Company’s Condensed Consolidated Statements of Net Income.

The demand for the Company’s E&P waste services depends on the continued demand for, and production of, oil and natural gas. Crude oil and natural gas prices historically have been volatile. Macroeconomic and geopolitical conditions, including a significant decline in oil prices occurring in 2020 driven by both surplus production and supply, as well as the decrease in demand caused by factors including the coronavirus disease 2019 (“COVID-19”) pandemic, resulted in decreased levels of oil and natural gas exploration and production activity and a corresponding decrease in demand for the Company’s E&P waste services in 2020. During the nine months ended September 30, 2020, total E&P revenue declined $75,158, compared to the prior year period, on oil rig count declines of 72% in certain basins. The most impacted basins included the Williston Basin in North Dakota, the Eagle Ford Basin in Texas and the Powder River Basin in Wyoming, all of which have relatively high costs associated with drilling, making them less attractive than other basins, including the Permian Basin in Texas and New Mexico. Additionally, across the industry there was uncertainty regarding future demand for oil and related services, as noted by several energy companies during 2020, many of whom are customers of the Company’s E&P operations. These companies wrote down the values of their oil and gas assets in anticipation of the potential for the decarbonization of their energy product mix given an increased global focus on reducing greenhouse gases and addressing climate change. Such uncertainty regarding global demand had a significant impact on the investment and operating plans of the Company’s E&P waste customers in the basins where the Company operates.

The decrease in E&P activity, together with market expectations of a likely slow recovery in oil prices, reduced the expected future period cash flows of the Company’s E&P operations. Based on these events, the Company concluded that a triggering event occurred which required the Company to perform an impairment test of the property and equipment and intangible assets of its E&P operations as of June 30, 2020 using July 2020 industry projections for drilling activity by basin as the basis for expectations about future activity. Based upon the results of the impairment test, the Company concluded that the carrying value exceeded the projected undiscounted cash flows of four E&P landfills. The next step was to calculate the fair value of these four landfills using an income approach employing a discounted cash flow (DCF) model over the lesser of 40 years or the remaining life of each landfill. Additional key assumptions used in the DCF model included a discount rate of 12% applied to the cash flows, annual revenue projections based on E&P waste resulting from projected levels of oil and natural gas E&P activity during the forecast period at each location, gross margins based on estimated operating expense requirements during the forecast period, estimated capital expenditures over the forecast period and income taxes based on the estimated federal and state income tax rates applicable during the cash flow periods, all of which were classified as Level 3 in the fair value hierarchy. For each of the four landfills, the carrying value exceeded the calculated discounted fair value, resulting in the recording of an impairment charge of $417,384 to Impairments and other operating items in the Condensed Consolidated Statements of Net Income during the nine months ended September 30, 2020. The four landfills had $0 of intangible assets at June 30, 2020; therefore, no impairment charge was attributable to intangible assets. The impairment charge reduced the carrying value of property and equipment by $417,384. If the estimated annual cash flows in the DCF model for each asset or asset group tested was changed by 10%, the resulting impairment charge would change by approximately $3,000.

The aforementioned impairment charges were partially offset by a $4,145 adjustment to reduce the fair value of an amount payable in 2021 under a liability-classified contingent consideration arrangement calculated on future earnings and cash flows associated with the acquisition of an E&P business in 2014. Based upon the outlook for E&P waste services in the market where the acquired business operates, the payment of the contingent consideration was deemed unlikely and the carrying value was reduced to $0 as of June 30, 2020, resulting in a credit to Impairments and other operating items in the Condensed Consolidated Statements of Net Income.

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5.REVENUE

The Company’s operations primarily consist of providing non-hazardous waste collection, transfer, disposal and recycling services, E&P services, and intermodal services. The following table disaggregates the Company’s revenues by service line for the periods indicated:


		Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Commercial	$	465,246	$	406,037	$	1,335,686	$	1,197,971
Residential		422,543		387,566		1,240,337		1,131,486
Industrial and construction roll off		249,417		216,894		695,975		618,122
Total collection		1,137,206		1,010,497		3,271,998		2,947,579
Landfill		328,147		308,795		927,207		855,631
Transfer		225,827		205,910		632,282		575,761
Recycling		55,772		21,377		129,759		59,701
E&P		38,519		26,218		101,137		131,748
Intermodal and other		38,377		27,141		112,602		84,970
Intercompany		(226,680)		(210,386)		(647,943)		(607,651)
Total	$	1,597,168	$	1,389,552	$	4,527,042	$	4,047,739

The factors that impact the timing and amount of revenue recognized for each service line may vary based on the nature of the service performed. Generally, the Company recognizes revenue at the time it performs a service. In the event that the Company bills for services in advance of performance, it recognizes deferred revenue for the amount billed and subsequently recognizes revenue at the time the service is provided. Substantially all of the deferred revenue recorded as of June 30, 2021 was recognized as revenue during the three months ended September 30, 2021 when the service was performed.

See Note 11 for additional information regarding revenue by reportable segment.

Contract Acquisition Costs

The incremental direct costs of obtaining a contract, which consist of sales incentives, are recognized as Other assets in the Company’s Condensed Consolidated Balance Sheet, and are amortized to Selling, general and administrative expense over the estimated life of the relevant customer relationship, which ranges from one to five years. The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity would have recognized is one year or less. The Company had $18,954 and $19,669 of deferred sales incentives at September 30, 2021 and December 31, 2020, respectively.

6.ACCOUNTS RECEIVABLE

Accounts receivable are recorded when billed or accrued and represent claims against third parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for credit losses, represents their estimated net realizable value.

The allowance for credit losses is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics. The Company monitors the collectability of its trade receivables as one overall pool due

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to all trade receivables having similar risk characteristics. The Company estimates its allowance for credit losses based on historical collection trends, the age of outstanding receivables, geographical location of the customer, existing economic conditions and reasonable forecasts. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due receivable balances are written off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due.


	Nine Months Ended September 30,
	2021		2020
Beginning balance	$	19,380	$	16,432
Current period provision for expected credit losses		9,239		13,092
Write-offs charged against the allowance		(11,886)		(13,540)
Recoveries collected		3,574		4,722
Impact of changes in foreign currency		(1)		(49)
Ending balance	$	20,306	$	20,657

7.LANDFILL ACCOUNTING

At September 30, 2021, the Company’s landfills consisted of 84 owned landfills, five landfills operated under life-of-site operating agreements and five landfills operated under limited-term operating agreements. The Company’s landfills had site costs with a net book value of $2,601,014 at September 30, 2021. For the Company’s landfills operated under limited-term operating agreements and life-of-site operating agreements, the owner of the property (generally a municipality) usually owns the permit and the Company operates the landfill for a contracted term. Where the contracted term is not the life of the landfill, the property owner is generally responsible for final capping, closure and post-closure obligations. The Company is responsible for all final capping, closure and post-closure liabilities at the landfills it operates under life-of-site operating agreements.

The Company’s internal and third-party engineers perform surveys at least annually to estimate the remaining disposal capacity at its landfills. Many of the Company’s existing landfills have the potential for expanded disposal capacity beyond the amount currently permitted. The Company’s landfill depletion rates are based on the remaining disposal capacity, considering both permitted and probable expansion airspace, at the landfills it owns and landfills it operates, but does not own, under life-of-site agreements. The Company’s landfill depletion rate is based on the term of the operating agreement at its 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 certain criteria is included in the estimate of total landfill airspace.

Based on remaining permitted capacity as of September 30, 2021, and projected annual disposal volumes, the average remaining landfill life for the Company’s owned landfills and landfills operated under life-of-site operating agreements is estimated to be approximately 27 years. As of September 30, 2021, the Company is seeking to expand permitted capacity at 12 of its owned landfills and three landfills that it operates under life-of-site operating agreements, and considers the achievement of these expansions to be probable. Although the Company cannot be certain that all future expansions will be permitted as designed, the average remaining life, when considering remaining permitted capacity, probable expansion capacity and projected annual disposal volume, of the Company’s owned landfills and landfills operated under life-of-site operating agreements is approximately 32 years. The estimated remaining lives of the Company’s owned landfills and landfills operated under life-of-site operating agreements range from 1 to 283 years, with approximately 90% of the projected annual disposal volume from landfills with remaining lives of less than 70 years.

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During the nine months ended September 30, 2021 and 2020, the Company expensed $160,470 and $149,988, respectively, or an average of $4.56 and $4.51 per ton consumed, respectively, related to landfill depletion at owned landfills and landfills operated under life-of-site agreements.

The Company reserves for estimated final capping, closure and post-closure maintenance obligations at the landfills it owns and landfills it operates under life-of-site operating agreements. The Company calculates the net present value of its final capping, closure and post-closure liabilities 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 current 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 the Company’s final capping, closure and post-closure liabilities being recorded in “layers.” The Company’s discount rate assumption for purposes of computing 2021 and 2020 “layers” for final capping, closure and post-closure obligations was 3.25% and 4.75%, respectively, which reflects the Company’s long-term credit adjusted risk free rate as of the end of 2020 and 2019. The Company’s inflation rate assumption is 2.25% and 2.50% for the years ending December 31, 2021 and 2020, respectively. The resulting final capping, closure and post-closure obligations are recorded on the Condensed 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. During the nine months ended September 30, 2021 and 2020, the Company expensed $10,783 and $11,174, respectively, or an average of $0.31 and $0.34 per ton consumed, respectively, related to final capping, closure and post-closure accretion expense.

The following is a reconciliation of the Company’s final capping, closure and post-closure liability balance from December 31, 2020 to September 30, 2021:


Final capping, closure and post-closure liability at December 31, 2020	$	301,896
Liability adjustments		(5,008)
Accretion expense associated with landfill obligations		10,783
Closure payments		(13,263)
Foreign currency translation adjustment		483
Final capping, closure and post-closure liability at September 30, 2021	$	294,891

Liability adjustments of $5,008 for the nine months ended September 30, 2021, represent non-cash changes to final capping, closure and post-closure liabilities and are recorded on the Condensed Consolidated Balance Sheets along with an offsetting addition to site costs, which is amortized to depletion expense as the remaining landfill airspace is consumed. The final capping, closure and post-closure liability is included in Other long-term liabilities in the Condensed Consolidated Balance Sheets. The Company performs its annual review of its cost and capacity estimates in the first quarter of each year.

At September 30, 2021 and December 31, 2020, $12,816 and $12,533, respectively, of the Company’s restricted cash balance and $55,716 and $54,833, respectively, of the Company’s restricted investments balance was for purposes of securing its performance of future final capping, closure and post-closure obligations.

8.ACQUISITIONS

The Company acquired 14 individually immaterial non-hazardous solid waste collection, transfer and recycling businesses during the nine months ended September 30, 2021. The total acquisition-related costs incurred during the

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nine months ended September 30, 2021 for these acquisitions were $6,220. These expenses are included in Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Net Income.

The Company acquired 11 individually immaterial non-hazardous solid waste collection, transfer, recycling and disposal businesses during the nine months ended September 30, 2020. The total acquisition-related costs incurred during the nine months ended September 30, 2020 for these acquisitions were $4,497. These expenses are included in Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Net Income.

The results of operations of the acquired businesses have been included in the Company’s Condensed Consolidated Financial Statements from their respective acquisition dates. The Company expects these acquired businesses to contribute towards the achievement of the Company’s strategy to expand through acquisitions. Goodwill acquired is attributable to the synergies and ancillary growth opportunities expected to arise after the Company’s acquisition of these businesses.

The following table summarizes the consideration transferred to acquire these businesses and the preliminary amounts of identifiable assets acquired and liabilities assumed at the acquisition dates for the acquisitions consummated in the nine months ended September 30, 2021 and 2020:


	2021		2020
	Acquisitions		Acquisitions
Fair value of consideration transferred:
Cash	$	561,276	$	173,810
Debt assumed		30,485		54,089
Change in open working capital settlements at quarter end		—		1,505
		591,761		229,404

Recognized amounts of identifiable assets acquired and liabilities assumed associated with businesses acquired:
Accounts receivable		19,792		3,805
Prepaid expenses and other current assets		2,007		1,681
Operating lease right-of-use assets		1,707		48
Property and equipment		152,955		105,827
Long-term franchise agreements and contracts		76,847		46,440
Indefinite-lived intangibles		—		13,465
Customer lists		46,449		8,187
Permits and other intangibles		83,659		—
Other assets		4		—
Accounts payable and accrued liabilities		(27,406)		(2,685)
Current portion of operating lease liabilities		(727)		(31)
Deferred revenue		(4,771)		(1,091)
Contingent consideration		(2,512)		(3,677)
Long-term portion of operating lease liabilities		(980)		(16)
Other long-term liabilities		(2,306)		(2,119)
Deferred income taxes		(33,829)		(4,081)
Total identifiable net assets		310,889		165,753
Goodwill	$	280,872	$	63,651

Goodwill acquired during the nine months ended September 30, 2021 and 2020, totaling $114,006 and $48,926, respectively, is expected to be deductible for tax purposes.

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The fair value of acquired working capital related to 11 individually immaterial acquisitions completed during the twelve months ended September 30, 2021, is provisional pending receipt of information from the acquirees to support the fair value of the assets acquired and liabilities assumed. Any adjustments recorded relating to finalizing the working capital for these 11 acquisitions are not expected to be material to the Company’s financial position.

The gross amount of trade receivables due under contracts acquired during the nine months ended September 30, 2021, is $21,673, of which $1,881 is expected to be uncollectible. The gross amount of trade receivables due under contracts acquired during the nine months ended September 30, 2020, is $3,840, of which $35 is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisitions of these businesses.

9.INTANGIBLE ASSETS, NET

Intangible assets, exclusive of goodwill, consisted of the following at September 30, 2021:


	Gross				Accumulated		Net
	Carrying		Accumulated		Impairment		Carrying
	Amount		Amortization		Loss		Amount
Finite-lived intangible assets:
Long-term franchise agreements and contracts	$	670,163	$	(266,082)	$	—	$	404,081
Customer lists		682,417		(429,470)		—		252,947
Permits and other		462,558		(90,545)		—		372,013
		1,815,138		(786,097)		—		1,029,041
Indefinite-lived intangible assets:
Solid waste collection and transportation permits		172,056		—		—		172,056
Material recycling facility permits		42,283		—		—		42,283
E&P facility permits		59,855		—		(38,507)		21,348
		274,194		—		(38,507)		235,687
Intangible assets, exclusive of goodwill	$	2,089,332	$	(786,097)	$	(38,507)	$	1,264,728

The weighted-average amortization period of long-term franchise agreements and contracts acquired during the nine months ended September 30, 2021 was 20.7 years. The weighted-average amortization period of customer lists acquired during the nine months ended September 30, 2021 was 11.3 years. The weighted-average amortization period of finite-lived permits and other acquired during the nine months ended September 30, 2021 was 40.0 years.

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Intangible assets, exclusive of goodwill, consisted of the following at December 31, 2020:


	Gross				Accumulated		Net
	Carrying		Accumulated		Impairment		Carrying
	Amount		Amortization		Loss		Amount
Finite-lived intangible assets:
Long-term franchise agreements and contracts	$	600,674	$	(234,972)	$	—	$	365,702
Customer lists		636,035		(382,020)		—		254,015
Permits and other		378,952		(79,277)		—		299,675
		1,615,661		(696,269)		—		919,392
Indefinite-lived intangible assets:
Solid waste collection and transportation permits		172,056		—		—		172,056
Material recycling facility permits		42,283		—		—		42,283
E&P facility permits		59,855		—		(38,507)		21,348
		274,194		—		(38,507)		235,687
Intangible assets, exclusive of goodwill	$	1,889,855	$	(696,269)	$	(38,507)	$	1,155,079

Estimated future amortization expense for the next five years relating to finite-lived intangible assets is as follows:


For the year ending December 31, 2021	$	137,970
For the year ending December 31, 2022	$	126,734
For the year ending December 31, 2023	$	108,413
For the year ending December 31, 2024	$	93,719
For the year ending December 31, 2025	$	79,642

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

10.LONG-TERM DEBT

The following table presents the Company’s long-term debt as of September 30, 2021 and December 31, 2020:


	September 30,		December 31,
	2021		2020
Revolver under Credit Agreement, bearing interest ranging from 1.09% to 1.43% ^(a)	$	634,924	$	203,927
Term loan under Credit Agreement, bearing interest at 1.09% ^(a)		650,000		650,000
4.64% Senior Notes due 2021 ^(b)		—		100,000
2.39% Senior Notes due 2021 ^(c)		—		150,000
3.09% Senior Notes due 2022 ^(d)		—		125,000
2.75% Senior Notes due 2023 ^(d)		—		200,000
3.24% Senior Notes due 2024 ^(d)		—		150,000
3.41% Senior Notes due 2025 ^(d)		—		375,000
3.03% Senior Notes due 2026 ^(d)		—		400,000
3.49% Senior Notes due 2027 ^(d)		—		250,000
4.25% Senior Notes due 2028		500,000		500,000
3.50% Senior Notes due 2029		500,000		500,000
2.60% Senior Notes due 2030		600,000		600,000
2.20% Senior Notes due 2032		650,000		—
3.05% Senior Notes due 2050		500,000		500,000
2.95% Senior Notes due 2052		850,000		—
Notes payable to sellers and other third parties, bearing interest ranging from 2.42% to 10.35%, principal and interest payments due periodically with due dates ranging from 2028 to 2036 ^(a)		38,334		43,131
Finance leases, bearing interest at 1.89% with a lease expiration date of 2026 ^(a)		7,137		3,754
		4,930,395		4,750,812
Less – current portion		(5,289)		(8,268)
Less – unamortized debt discount and issuance costs		(55,893)		(33,866)
	$	4,869,213	$	4,708,678

____________________

(a)	Interest rates represent the interest rates in effect at September 30, 2021.

(b)	All of the outstanding 4.64% Senior Notes due 2021 were redeemed by the Company on April 1, 2021.

(c)	All of the outstanding 2.39% Senior Notes due 2021 were redeemed by the Company on June 1, 2021.

(d)	All of the outstanding Senior Notes issued pursuant to the 2008 and 2016 master note purchase agreements were redeemed by the Company on September 20, 2021.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

Credit Agreement

Details of the 2021 Credit Agreement and Credit Agreement, as applicable, are as follows:


	September 30,			December 31,
	2021			2020
Revolver under Credit Agreement
Available	$	1,100,391		$	1,238,937
Letters of credit outstanding	$	114,685		$	119,636
Total amount drawn, as follows:	$	634,924		$	203,927
Amount drawn - U.S. LIBOR rate loan	$	631,000		$	200,000
Interest rate applicable - U.S. LIBOR rate loan		1.09	%		1.35	%
Amount drawn – Canadian bankers’ acceptance	$	3,924		$	3,927
Interest rate applicable – Canadian bankers’ acceptance		1.43	%		1.66	%
Commitment – rate applicable		0.09	%		0.15	%
Term loan under Credit Agreement
Amount drawn – U.S. based LIBOR loan	$	650,000		$	650,000
Interest rate applicable – U.S. based LIBOR loan		1.09	%		1.35	%

In addition to the $114,685 of letters of credit at September 30, 2021 issued and outstanding under the 2021 Credit Agreement, the Company has issued and outstanding letters of credit totaling $6,819 under facilities other than the 2021 Credit Agreement.

On March 21, 2018, the Company and the lenders named therein entered into an Amended and Restated Revolving Credit and Term Loan Agreement (as amended, restated, supplemented or otherwise modified and as in effect immediately prior to the Closing Date (as defined below), the “Credit Agreement”), pursuant to which the lenders made loans and other extensions of credit to the Company thereunder.

On July 30, 2021 (the “Closing Date”), the Company amended and restated the Credit Agreement in its entirety pursuant to a Second Amended and Restated Revolving Credit and Term Loan Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “2021 Credit Agreement”) entered into by the 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, the other lenders ‎named therein ‎(the “Lenders”) ‎and any other financial institutions from time to time party thereto. The 2021 Credit Agreement has a scheduled maturity date of July 30, 2026, which may be extended further upon agreement by the Lenders with respect to their respective commitments and credit extensions outstanding.

Pursuant to the terms and conditions of the 2021 Credit Agreement, the Lenders committed to providing a ‎$2,500,000 credit facility to the Company, consisting of (i) revolving advances up to an aggregate principal amount of $1,850,000 at any one time ‎outstanding (representing an increase of $287,500 from the Credit Agreement), and (ii) a term loan in an aggregate principal amount of $650,000, which term loan was fully drawn as of the Closing Date (with existing term loans outstanding under the Credit Agreement immediately prior to the Closing Date continued and now outstanding under and governed by the terms of the 2021 Credit Agreement). As part of the aggregate commitments under the revolving advances, the 2021 Credit Agreement provides for letters of credit to be issued at the request of the Company in an aggregate amount not to exceed $320,000 and for swing line loans to be issued at the request of the Company in an aggregate amount not to exceed the lesser of $100,000 and the aggregate commitments under the revolving advances. This swing line sublimit is part of, and not in addition to, the aggregate commitments under the revolving advances. Existing letters of credit in place under the Credit Agreement immediately prior to the Closing Date are continued and now deemed issued under and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

governed by the terms of the 2021 Credit Agreement. Subject to certain specified conditions and additional deliveries, the Company has the option to request increases in the aggregate commitments for revolving advances and one or more additional term loans, provided that (i) the aggregate principal amount of such requests does not exceed $500,000 and (ii) the aggregate principal amount of commitments and term loans under the credit facility does not exceed $3,000,000. As of the Closing Date, there are no commitments by Lenders for any such increases in aggregate commitments for revolving advances or additional term loans described in the preceding sentence.

Advances are available under the 2021 Credit Agreement in U.S. dollars and Canadian dollars. Interest accrues on the term loan at a LIBOR rate or a base rate, at the Company’s option, plus an applicable margin. Interest accrues on revolving advances, at the Company’s option, (i) at a LIBOR rate or a base rate for U.S. dollar borrowings, plus an applicable margin, and (ii) at the Canadian prime rate for Canadian dollar borrowings, plus an applicable margin. Canadian dollar borrowings are also available by way of bankers' acceptances or BA equivalent notes, subject to the payment of a drawing fee. The fees for letters of credit in U.S. dollars and Canadian dollars are also based on the applicable margin. The applicable margin used in connection with interest rates and fees is based on the debt rating of the Company’s public non-credit-enhanced, senior unsecured long-term debt (the “Debt ‎Rating”)‎. The applicable margin for LIBOR rate loans, drawing fees for bankers’ acceptances, BA equivalent notes and letter of credit fees ranges from ‎0.750% to 1.250%‎, and the applicable margin for U.S. base rate loans, Canadian prime rate loans and swing line loans ranges from 0.00% to 0.250%. The Company will also pay a fee based on the Debt Rating on the actual daily unused amount of the aggregate revolving commitments ranging from 0.065% to 0.150%.‎ The 2021 Credit Agreement contains hardwired mechanics for the replacement of LIBOR, including (1) mechanics to transition to a rate based upon the secured overnight financing rate (“SOFR”) published by the Federal Reserve Bank of New York or a successor administrator on its website (or a successor source) upon the earlier of (x) LIBOR’s cessation or loss of representativeness, (y) June 30, 2023 and (z) the effectiveness of an early opt-in election by the Company and the agents subject to certain terms and (2) mechanics to transition to an alternate benchmark rate giving due consideration to any evolving or then-prevailing market conventions for U.S. dollar-denominated syndicated credit facilities at such time upon the occurrence of certain subsequent transition events, the unavailability of SOFR-based alternatives or the effectiveness of an early opt-in election by the Company and the agents subject to certain terms.

The borrowings under the 2021 Credit Agreement are unsecured and there are no subsidiary guarantors under the 2021 Credit Agreement‎. The 2021 Credit Agreement contains customary representations, warranties, covenants and events of default, including, among others, a change of control event of default and limitations on the incurrence of indebtedness and liens, new lines of business, mergers, transactions with affiliates and burdensome agreements. During the continuance of an event of default, the Lenders may take a number of actions, including, among others, declaring the entire amount then outstanding under the 2021 Credit Agreement to be due and payable.

The 2021 Credit Agreement includes a financial covenant limiting, as of the last day of each fiscal quarter, the ratio of (a) Consolidated Total Funded Debt (as defined in the 2021 Credit Agreement) as of such date to (b) Consolidated EBITDA (as defined in the 2021 Credit Agreement), measured for the preceding 12 months, to not more than 3.75 to 1.00 (or 4.25 to 1.00 during material acquisition periods, subject to certain limitations). As of September 30, 2021, the Company was in compliance with its financial covenants under the 2021 Credit Agreement.

Senior Notes

On September 20, 2021, the Company completed an underwritten public offering (the “Offering”) of $650,000 aggregate principal amount of 2.20% Senior Notes due 2032 (the “2032 Senior Notes”) and $850,000 aggregate principal amount of 2.95% Senior Notes due 2052 (the “2052 Senior Notes” and, together with the 2032 Senior Notes, the “Notes”). The Company issued the Notes under the Indenture, dated as of November 16, 2018 (the “Base Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the Fifth Supplemental

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

Indenture, dated as of September 20, 2021 (the “Supplemental Indenture” and the Base Indenture as so supplemented, the “Indenture”).

In connection with the Offering, the Company exercised its right to repay the $1,500,000 of senior notes (the “Private Notes”) that were governed by its 2008 and 2016 master note purchase agreements. The Company repaid the Private Notes, including the $110,617 make-whole payment, with the net proceeds from the Offering and borrowings under the revolving credit facility provided under its 2021 Credit Agreement. The Company recorded $115,288 to Loss on early extinguishment of debt during the nine months ended September 30, 2021 due to the repayment of the Private Notes and associated make-whole premium and related offering fees and expenses.

The Company will pay interest on the Notes semi-annually in arrears. The 2032 Senior Notes will mature on January 15, 2032 and the 2052 Senior Notes will mature on January 15, 2052. The Notes are the Company’s senior unsecured obligations, ranking equally in right of payment with its other existing and future unsubordinated debt and senior to any of its future subordinated debt. The Notes are not guaranteed by any of the Company’s subsidiaries.

The Company may, prior to October 15, 2031 (three months before the maturity date), redeem some or all of the 2032 Senior Notes, at any time and from time to time, at a redemption price equal to the greater of 100% of the principal amount of the 2032 Senior Notes redeemed, or the sum of the present values of the remaining scheduled payments of principal and interest on the 2032 Senior Notes redeemed. Commencing on October 15, 2031 (three months before the maturity date), the Company may redeem some or all of the 2032 Senior Notes, at any time and from time to time, at a redemption price equal to the principal amount of the 2032 Senior Notes being redeemed plus accrued and unpaid interest to, but excluding, the redemption date. The Company may, prior to July 15, 2051 (six months before the maturity date), redeem some or all of the 2052 Senior Notes, at any time and from time to time, at a redemption price equal to the greater of 100% of the principal amount of the 2052 Senior Notes redeemed, or the sum of the present values of the remaining scheduled payments of principal and interest on the 2052 Senior Notes redeemed. Commencing on July 15, 2051 (six months before the maturity date), the Company may redeem some or all of the 2052 Senior Notes, at any time and from time to time, at a redemption price equal to the principal amount of the 2052 Senior Notes being redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Under certain circumstances, the Company may become obligated to pay additional amounts (the “Additional Amounts”) with respect to the Notes to ensure that the net amounts received by each holder of the Notes will not be less than the amount such holder would have received if withholding taxes or deductions were not incurred on a payment under or with respect to the Notes. If such payment of Additional Amounts are a result of a change in the laws or regulations, including a change in any official position, the introduction of an official position or a holding by a court of competent jurisdiction, of any jurisdiction from or through which payment is made by or on behalf of the Notes having power to tax, and the Company cannot avoid such payments of Additional Amounts through reasonable measures, then the Company may redeem the Notes then outstanding at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date).

If the Company experiences certain kinds of changes of control, each holder of the Notes may require the Company to repurchase all or a portion of the Notes for cash at a price equal to 101% of the aggregate principal amount of such Notes, plus any accrued but unpaid interest up to the date of repurchase.

The covenants in the Indenture include limitations on liens, sale-leaseback transactions and mergers and sales of all or substantially all of the Company’s assets. The Indenture also includes customary events of default with respect to the Notes. As of September 30, 2021, the Company was in compliance with all applicable covenants in the Indenture.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

Upon an event of default, the principal of and accrued and unpaid interest on all the Notes may be declared to be due and payable by the Trustee or the holders of not less than 25% in principal amount of the outstanding Notes. Upon such a declaration, such principal and accrued interest on all of the Notes will be due and payable immediately. In the case of an event of default resulting from certain events of bankruptcy, insolvency or reorganization, the principal (or such specified amount) of and accrued and unpaid interest, if any, on all outstanding Notes will become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of the Notes. Under certain circumstances, the holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.

11.SEGMENT REPORTING

The Company’s revenues are generated from the collection, transfer, recycling and disposal of non-hazardous solid waste and the treatment, recovery and disposal of non-hazardous E&P waste. No single contract or customer accounted for more than 10% of the Company’s total revenues at the consolidated or reportable segment level during the periods presented.

The Company manages its operations through five geographic operating segments, which are also its reportable segments. Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts.

The Company’s Southern segment services customers located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New Mexico, North Dakota, southern Oklahoma, western Tennessee, Texas, Wyoming and along the Gulf of Mexico; the Company’s Eastern segment services customers located in Delaware, northern Illinois, Kentucky, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, eastern Tennessee, Vermont, Virginia and Wisconsin; the Company’s Western segment services customers located in Alaska, California, Idaho, Montana, Nevada, Oregon, Washington and western Wyoming; the Company’s Central segment services customers located in Arizona, Colorado, southern Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, South Dakota, western Texas, Utah and eastern Wyoming; and the Company’s Canada segment services customers located in the state of Michigan and in the provinces of Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan.

The Company’s 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. The Company defines 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. The Company’s 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. A reconciliation of segment EBITDA to Income before income tax provision is included at the end of this Note 11.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

Summarized financial information concerning the Company’s reportable segments for the three and nine months ended September 30, 2021 and 2020, is shown in the following tables:


Three Months Ended			Intercompany		Reported		Segment
September 30, 2021	Revenue		Revenue^(b)		Revenue		EBITDA^(c)
Eastern	$	470,637	$	(74,408)	$	396,229	$	106,908
Southern		418,917		(47,959)		370,958		99,612
Western		371,846		(39,826)		332,020		108,280
Central		310,551		(36,869)		273,682		95,026
Canada		251,897		(27,618)		224,279		92,275
Corporate^(a)		—		—		—		(6,551)
	$	1,823,848	$	(226,680)	$	1,597,168	$	495,550


Three Months Ended			Intercompany		Reported		Segment
September 30, 2020	Revenue		Revenue^(b)		Revenue		EBITDA^(c)
Eastern	$	413,499	$	(69,146)	$	344,353	$	90,991
Southern		375,636		(45,061)		330,575		81,394
Western		337,768		(36,547)		301,221		101,071
Central		262,458		(33,892)		228,566		82,887
Canada		210,577		(25,740)		184,837		72,516
Corporate^(a)		—		—		—		(4,132)
	$	1,599,938	$	(210,386)	$	1,389,552	$	424,727


Nine Months Ended			Intercompany		Reported		Segment
September 30, 2021	Revenue		Revenue^(b)		Revenue		EBITDA^(c)
Eastern	$	1,310,265	$	(207,958)	$	1,102,307	$	295,411
Southern		1,214,798		(142,342)		1,072,456		291,964
Western		1,056,482		(113,669)		942,813		301,507
Central		882,159		(106,246)		775,913		268,952
Canada		711,281		(77,728)		633,553		254,857
Corporate^(a)		—		—		—		(13,743)
	$	5,174,985	$	(647,943)	$	4,527,042	$	1,398,948


Nine Months Ended			Intercompany		Reported		Segment
September 30, 2020	Revenue		Revenue^(b)		Revenue		EBITDA^(c)
Eastern	$	1,194,213	$	(198,767)	$	995,446	$	258,333
Southern		1,171,709		(138,412)		1,033,297		276,844
Western		953,861		(105,122)		848,739		267,523
Central		749,093		(95,365)		653,728		235,742
Canada		586,514		(69,985)		516,529		185,589
Corporate^(a)		—		—		—		(10,462)
	$	4,655,390	$	(607,651)	$	4,047,739	$	1,213,569

____________________

(a)

The majority of Corporate expenses are allocated to the five 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 five operating segments and comprise the net EBITDA of the Company’s Corporate segment for the periods presented.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

(b)

Intercompany revenues reflect each segment’s total intercompany sales, including intercompany sales within a segment and between segments. Transactions within and between segments are generally made on a basis intended to reflect the market value of the service.

(c)

For those items included in the determination of segment EBITDA, the accounting policies of the segments are the same as those described in the Company’s most recent Annual Report on Form 10-K.

Total assets for each of the Company’s reportable segments at September 30, 2021 and December 31, 2020, were as follows:


	September 30,		December 31,
	2021		2020
Eastern	$	3,483,854	$	3,134,462
Southern		3,370,932		3,402,081
Western		2,093,299		1,861,079
Central		2,217,407		2,160,246
Canada		2,563,773		2,544,379
Corporate		545,567		890,117
Total Assets	$	14,274,832	$	13,992,364

The following tables show changes in goodwill during the nine months ended September 30, 2021 and 2020, by reportable segment:


	Eastern		Southern		Western		Central		Canada		Total
Balance as of December 31, 2020	$	1,374,577	$	1,532,215	$	442,862	$	824,204	$	1,552,792	$	5,726,650
Goodwill acquired		169,561		2,970		60,999		47,344		—		280,874
Goodwill acquisition adjustments		—		—		—		—		(2)		(2)
Impact of changes in foreign currency		—		—		—		—		(989)		(989)
Balance as of September 30, 2021	$	1,544,138	$	1,535,185	$	503,861	$	871,548	$	1,551,801	$	6,006,533


	Eastern		Southern		Western		Central		Canada		Total
Balance as of December 31, 2019	$	1,331,180	$	1,528,225	$	400,037	$	729,470	$	1,521,939	$	5,510,851
Goodwill acquired		6,228		3,648		43,151		10,450		174		63,651
Impact of changes in foreign currency		—		—		—		—		(39,935)		(39,935)
Balance as of September 30, 2020	$	1,337,408	$	1,531,873	$	443,188	$	739,920	$	1,482,178	$	5,534,567

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

A reconciliation of the Company’s primary measure of segment profitability (segment EBITDA) to Income before income tax provision in the Condensed Consolidated Statements of Net Income is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Eastern segment EBITDA	$	106,908	$	90,991	$	295,411	$	258,333
Southern segment EBITDA		99,612		81,394		291,964		276,844
Western segment EBITDA		108,280		101,071		301,507		267,523
Central segment EBITDA		95,026		82,887		268,952		235,742
Canada segment EBITDA		92,275		72,516		254,857		185,589
Subtotal reportable segments		502,101		428,859		1,412,691		1,224,031
Unallocated corporate overhead		(6,551)		(4,132)		(13,743)		(10,462)
Depreciation		(171,965)		(157,590)		(498,588)		(459,641)
Amortization of intangibles		(35,337)		(32,653)		(100,237)		(96,062)
Impairments and other operating items		(3,104)		(3,805)		(9,819)		(442,582)
Interest expense		(40,418)		(40,636)		(124,171)		(119,562)
Interest income		495		903		2,342		4,396
Other income (expense), net		3,140		702		5,452		(3,046)
Loss on early extinguishment of debt		(115,288)		—		(115,288)		—
Income before income tax provision	$	133,073	$	191,648	$	558,639	$	97,072

12.DERIVATIVE FINANCIAL INSTRUMENTS

The Company recognizes all derivatives on the Condensed Consolidated Balance Sheets at fair value. All of the Company’s derivatives have been designated as cash flow hedges; therefore, the gain or loss on the derivatives will be recognized in accumulated other comprehensive income (loss) (“AOCIL”) and reclassified into earnings in the same period during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. The Company classifies cash inflows and outflows from derivatives within operating activities on the Condensed Consolidated Statements of Cash Flows.

One of the Company’s objectives for utilizing derivative instruments is to reduce its exposure to fluctuations in cash flows due to changes in the variable interest rates of certain borrowings under the Credit Agreement. The Company’s strategy to achieve that objective involves entering into interest rate swaps. The interest rate swaps outstanding at September 30, 2021 were specifically designated to the Credit Agreement and accounted for as cash flow hedges.

At September 30, 2021, the Company’s derivative instruments included six interest rate swap agreements as follows:


			Fixed		Variable
	Notional		Interest		Interest Rate
Date Entered	Amount		Rate Paid*		Received	Effective Date	Expiration Date
August 2017	$	100,000	1.900	%	1-month LIBOR	July 2019	July 2022
August 2017	$	200,000	2.200	%	1-month LIBOR	October 2020	October 2025
August 2017	$	150,000	1.950	%	1-month LIBOR	February 2020	February 2023
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
December 2018	$	200,000	2.850	%	1-month LIBOR	July 2022	July 2027

____________________

* Plus applicable margin.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

The fair values of derivative instruments designated as cash flow hedges as of September 30, 2021, were as follows:


Derivatives Designated as Cash	Asset Derivatives			Liability Derivatives
Flow Hedges	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps	Prepaid expenses and other current assets	$	—	Accrued liabilities^(a)	$	(20,988)
				Other long-term liabilities		(44,619)
Total derivatives designated as cash flow hedges		$	—		$	(65,607)

____________________

(a)Represents the estimated amount of the existing unrealized losses on interest rate swaps as of September 30, 2021 (based on the interest rate yield curve at that date), included in AOCIL expected to be reclassified into pre-tax earnings within the next 12 months. The actual amounts reclassified into earnings are dependent on future movements in interest rates.

The fair values of derivative instruments designated as cash flow hedges as of December 31, 2020, were as follows:


Derivatives Designated as Cash	Asset Derivatives			Liability Derivatives
Flow Hedges	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps	Prepaid expenses and other current assets	$	—	Accrued liabilities	$	(20,023)
				Other long-term liabilities		(74,666)
Total derivatives designated as cash flow hedges		$	—		$	(94,689)

The following table summarizes the impact of the Company’s cash flow hedges on the results of operations, comprehensive income (loss) and AOCIL for the three and nine months ended September 30, 2021 and 2020:

Derivatives

Statement of

Amount of (Gain) or Loss Reclassified

Designated as Cash

Amount of Gain or (Loss) Recognized

Net Income

from AOCIL into Earnings,

Flow Hedges

as AOCIL on Derivatives, Net of Tax ^(a)

Classification

Net of Tax ^(b)

Three Months Ended

September 30,

2021

2020

2021

2020

Interest rate swaps

(295)

1,357

Interest expense

3,780

2,126

Derivatives

Statement of

Amount of (Gain) or Loss Reclassified

Designated as Cash

Amount of Gain or (Loss) Recognized

Net Income

from AOCIL into Earnings,

Flow Hedges

as AOCIL on Derivatives, Net of Tax ^(a)

Classification

Net of Tax ^(b)

Nine Months Ended

September 30,

2021

2020

2021

2020

Interest rate swaps

10,349

(50,014)

Interest expense

11,025

3,377

____________________

(a)In accordance with the derivatives and hedging guidance, the changes in fair values of interest rate swaps have been recorded in equity as a component of AOCIL. As the critical terms of the interest rate swaps match the underlying debt being hedged, all unrealized changes in fair value are recorded in AOCIL.

(b)Amounts reclassified from AOCIL into earnings related to realized gains and losses on interest rate swaps are recognized when interest payments or receipts occur related to the swap contracts, which correspond to when interest payments are made on the Company’s hedged debt.

See Note 16 for further discussion on the impact of the Company’s hedge accounting to its consolidated comprehensive income (loss) and AOCIL.

13.FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist primarily of cash and equivalents, trade receivables, restricted cash and investments, trade payables, debt instruments, contingent consideration obligations and interest rate swaps. As of September 30, 2021 and December 31, 2020, the carrying values of cash and equivalents, trade receivables, restricted cash

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(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

and investments, trade payables and contingent consideration are considered to be representative of their respective fair values. The carrying values of the Company’s debt instruments, excluding certain notes as listed in the table below, approximate their fair values as of September 30, 2021 and December 31, 2020, based on current borrowing rates, current remaining average life to maturity and borrower credit quality for similar types of borrowing arrangements, and are classified as Level 2 within the fair value hierarchy. The carrying values and fair values of the Company’s debt instruments where the carrying values do not approximate their fair values as of September 30, 2021 and December 31, 2020, are as follows:


	Carrying Value at				*Fair Value at**
	September 30,		December 31,		September 30,		December 31,
	2021		2020		2021		2020
4.64% Senior Notes due 2021	$	—	$	100,000	$	—	$	100,850
2.39% Senior Notes due 2021	$	—	$	150,000	$	—	$	150,695
3.09% Senior Notes due 2022	$	—	$	125,000	$	—	$	128,482
2.75% Senior Notes due 2023	$	—	$	200,000	$	—	$	206,204
3.24% Senior Notes due 2024	$	—	$	150,000	$	—	$	158,140
3.41% Senior Notes due 2025	$	—	$	375,000	$	—	$	403,025
3.03% Senior Notes due 2026	$	—	$	400,000	$	—	$	424,874
3.49% Senior Notes due 2027	$	—	$	250,000	$	—	$	271,198
4.25% Senior Notes due 2028	$	500,000	$	500,000	$	573,700	$	597,050
3.50% Senior Notes due 2029	$	500,000	$	500,000	$	547,350	$	570,450
2.60% Senior Notes due 2030	$	600,000	$	600,000	$	616,800	$	644,520
2.20% Senior Notes due 2032	$	650,000	$	—	$	640,250	$	—
3.05% Senior Notes due 2050	$	500,000	$	500,000	$	495,100	$	540,050
2.95% Senior Notes due 2052	$	850,000	$	—	$	828,665	$	—

____________________

*Senior Notes are classified as Level 2 within the fair value hierarchy. Fair value inputs include third-party calculations of the market interest rate of notes with similar ratings in similar industries over the remaining note terms.

For details on the fair value of the Company’s interest rate swaps, restricted cash and investments and contingent consideration, refer to Note 15.

14.NET INCOME PER SHARE INFORMATION

The following table sets forth the calculation of the numerator and denominator used in the computation of basic and diluted net income per common share attributable to the Company’s shareholders for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Numerator:
Net income attributable to Waste Connections for basic and diluted earnings per share	$	114,381	$	158,049	$	451,736	$	74,012
Denominator:
Basic shares outstanding		260,550,774		262,998,317		261,372,827		263,253,087
Dilutive effect of equity-based awards		594,446		509,169		506,927		464,914
Diluted shares outstanding		261,145,220		263,507,486		261,879,754		263,718,001

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

15.FAIR VALUE MEASUREMENTS

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis in periods subsequent to their initial measurement. These tiers include: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data.

The Company’s financial assets and liabilities recorded at fair value on a recurring basis include derivative instruments and restricted cash and investments. At September 30, 2021 and December 31, 2020, the Company’s derivative instruments included pay-fixed, receive-variable interest rate swaps. The Company’s interest rate swaps are recorded at their estimated fair values based on quotes received from financial institutions that trade these contracts. The Company verifies the reasonableness of these quotes using similar quotes from another financial institution as of each date for which financial statements are prepared. For the Company’s interest rate swaps, the Company also considers the Company’s creditworthiness in its determination of the fair value measurement of these instruments in a net liability position and the counterparties’ creditworthiness in its determination of the fair value measurement of these instruments in a net asset position. The Company’s restricted cash and investments are valued at quoted market prices in active markets for similar assets, which the Company receives from the financial institutions that hold such investments on its behalf. The Company’s restricted cash and investments measured at fair value are invested primarily in money market accounts, bank time deposits, U.S. government and agency securities and Canadian bankers’ acceptance notes.

The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020, were as follows:


	Fair Value Measurement at September 30, 2021 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Interest rate swap derivative instruments – net liability position	$	(65,607)	$	—	$	(65,607)	$	—
Restricted cash	$	118,893	$	118,893	$	—	$	—
Restricted investments	$	58,769	$	—	$	58,769	$	—
Contingent consideration	$	(66,951)	$	—	$	—	$	(66,951)


	Fair Value Measurement at December 31, 2020 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Interest rate swap derivative instruments – net liability position	$	(94,689)	$	—	$	(94,689)	$	—
Restricted cash	$	97,095	$	97,095	$	—	$	—
Restricted investments	$	58,181	$	—	$	58,181	$	—
Contingent consideration	$	(71,736)	$	—	$	—	$	(71,736)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

The following table summarizes the changes in the fair value for Level 3 liabilities related to contingent consideration for the nine months ended September 30, 2021 and 2020:


	Nine Months Ended September 30,
	2021		2020
Beginning balance	$	71,736	$	69,484
Contingent consideration recorded at acquisition date		2,512		3,677
Payment of contingent consideration recorded at acquisition date		(7,998)		(2,812)
Payment of contingent consideration recorded in earnings		(520)		—
Adjustments to contingent consideration		89		16,852
Interest accretion expense		1,147		1,422
Foreign currency translation adjustment		(15)		(101)
Ending balance	$	66,951	$	88,522

16.OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) includes changes in the fair value of interest rate swaps that qualify for hedge accounting. The components of other comprehensive income (loss) and related tax effects for the three and nine months ended September 30, 2021 and 2020 are as follows:


	Three Months Ended September 30, 2021
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	5,143	$	(1,363)	$	3,780
Changes in fair value of interest rate swaps		(401)		106		(295)
Foreign currency translation adjustment		(64,197)		—		(64,197)
	$	(59,455)	$	(1,257)	$	(60,712)


	Three Months Ended September 30, 2020
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	2,893	$	(767)	$	2,126
Changes in fair value of interest rate swaps		1,846		(489)		1,357
Foreign currency translation adjustment		45,886		—		45,886
	$	50,625	$	(1,256)	$	49,369


	Nine Months Ended September 30, 2021
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	15,000	$	(3,975)	$	11,025
Changes in fair value of interest rate swaps		14,081		(3,732)		10,349
Foreign currency translation adjustment		(3,170)		—		(3,170)
	$	25,911	$	(7,707)	$	18,204


	Nine Months Ended September 30, 2020
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	4,595	$	(1,218)	$	3,377
Changes in fair value of interest rate swaps		(68,047)		18,033		(50,014)
Foreign currency translation adjustment		(55,738)		—		(55,738)
	$	(119,190)	$	16,815	$	(102,375)

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

A rollforward of the amounts included in AOCIL, net of taxes, for the nine months ended September 30, 2021 and 2020, is as follows:


			Foreign		Accumulated
			Currency		Other
	Interest		Translation		Comprehensive
	Rate Swaps		Adjustment		Income (Loss)
Balance at December 31, 2020	$	(69,596)	$	68,945	$	(651)
Amounts reclassified into earnings		11,025		—		11,025
Changes in fair value		10,349		—		10,349
Foreign currency translation adjustment		—		(3,170)		(3,170)
Balance at September 30, 2021	$	(48,222)	$	65,775	$	17,553


			Foreign		Accumulated
			Currency		Other
	Interest		Translation		Comprehensive
	Rate Swaps		Adjustment		Income (Loss)
Balance at December 31, 2019	$	(29,255)	$	18,292	$	(10,963)
Amounts reclassified into earnings		3,377		—		3,377
Changes in fair value		(50,014)		—		(50,014)
Foreign currency translation adjustment		—		(55,738)		(55,738)
Balance at September 30, 2020	$	(75,892)	$	(37,446)	$	(113,338)

See Note 12 for further discussion on the Company’s derivative instruments.

17.SHAREHOLDERS’ EQUITY

Share-Based Compensation

Restricted Share Units

A summary of activity related to restricted share units (“RSUs”) during the nine-month period ended September 30, 2021, is presented below:


		Unvested Shares
Outstanding at December 31, 2020		772,625
Granted		454,573
Forfeited		(53,285)
Vested and issued		(342,701)
Outstanding at September 30, 2021		831,212

The weighted average grant-date fair value per share for the common shares underlying the RSUs granted during the nine-month period ended September 30, 2021 was $97.76.

Recipients of the Company’s RSUs who participate in the Company’s Nonqualified Deferred Compensation Plan may have elected in years prior to 2015 to defer some or all of their RSUs as they vest until a specified date or dates they choose. At the end of the deferral periods, unless a qualified participant makes certain other elections, the Company issues

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(Unaudited)

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to recipients who deferred their RSUs common shares of the Company underlying the deferred RSUs. At September 30, 2021 and 2020, the Company had 100,861 and 178,119 vested deferred RSUs outstanding, respectively.

Performance-Based Restricted Share Units

A summary of activity related to performance-based restricted share units (“PSUs”) during the nine-month period ended September 30, 2021, is presented below:


		Unvested Shares
Outstanding at December 31, 2020		434,558
Granted		116,784
Forfeited		(5,048)
Vested and issued		(154,251)
Outstanding at September 30, 2021		392,043

During the nine months ended September 30, 2021, the Company’s Compensation Committee granted PSUs with three-year performance-based metrics that the Company must meet before those awards may be earned, and the performance period for those grants ends on December 31, 2023. The Compensation Committee will determine the achievement of performance results and corresponding vesting of PSUs for each performance period. The weighted average grant-date fair value per share for the common shares underlying all PSUs granted during the nine-month period ended September 30, 2021 was $96.99.

Deferred Share Units

A summary of activity related to deferred share units (“DSUs”) during the nine-month period ended September 30, 2021, is presented below:


		Vested Shares
Outstanding at December 31, 2020		21,586
Granted		2,856
Outstanding at September 30, 2021		24,442

The DSUs consist of a combination of DSU grants outstanding under the Progressive Waste share-based compensation plans that were continued by the Company following the Progressive Waste acquisition and DSUs granted by the Company since the Progressive Waste acquisition. The weighted average grant-date fair value per share for the common shares underlying the DSUs granted during the nine-month period ended September 30, 2021 was $99.80.

Other Restricted Share Units

RSU grants outstanding under the Progressive Waste share-based compensation plans were continued by the Company following the Progressive Waste acquisition and allow for the issuance of shares or cash settlement to employees upon

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(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

vesting. A summary of activity related to Progressive Waste RSUs during the nine-month period ended September 30, 2021, is presented below:


Outstanding at December 31, 2020		66,554
Cash settled		(1,318)
Outstanding at September 30, 2021		65,236

No RSUs under the Progressive Waste share-based compensation plans were granted subsequent to June 1, 2016. All remaining RSUs were vested as of March 31, 2019.

Share Based Options

Share based options outstanding under the Progressive Waste share-based compensation plans were continued by the Company following the Progressive Waste acquisition and allow for the issuance of shares or cash settlement to employees upon vesting. A summary of activity related to Progressive Waste share based options during the nine-month period ended September 30, 2021, is presented below:


Outstanding at December 31, 2020		51,200
Cash settled		(5,331)
Outstanding at September 30, 2021		45,869

No share based options under the Progressive Waste share-based compensation plans were granted subsequent to June 1, 2016. All outstanding share based options were vested as of December 31, 2017.

Employee Share Purchase Plan

On May 15, 2020, the Company’s shareholders approved the 2020 Employee Share Purchase Plan (the “ESPP”). Under the ESPP, qualified employees may elect to have payroll deductions withheld from their eligible compensation on each payroll date in amounts equal to or greater than one percent (1%) but not in excess of ten percent (10%) of eligible compensation in order to purchase the Company’s common shares under certain terms and subject to certain restrictions set forth in the ESPP. The exercise price is equal to 95% of the closing price of the Company’s common shares on the last day of the relevant offering period, subject to certain restrictions. The maximum number of shares that may be issued under the ESPP is 1,000,000. Under the ESPP, employees purchased 10,813 of the Company’s common shares for $1,275 during the nine months ended September 30, 2021.

Normal Course Issuer Bid

On July 27, 2021, the Board of Directors of the Company approved, subject to receipt of regulatory approvals, the annual renewal of the Company’s normal course issuer bid (the “NCIB”) to purchase up to 13,025,895 of the Company’s common shares during the period of August 10, 2021 to August 9, 2022 or until such earlier time as the NCIB is completed or terminated at the option of the Company. The renewal followed the conclusion of the Company’s NCIB that expired August 9, 2021. The Company received Toronto Stock Exchange (the “TSX”) approval for its annual renewal of the NCIB on August 6, 2021. Under the NCIB, the Company may make share repurchases only in the open market, including on the New York Stock Exchange (the “NYSE”), the TSX, and/or alternative Canadian trading systems, at the prevailing market price at the time of the transaction.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

In accordance with TSX rules, any daily repurchases made through the TSX and alternative Canadian trading systems is limited to a maximum of 75,704 common shares, which represents 25% of the average daily trading volume on the TSX of 302,816 common shares for the period from February 1, 2021 to July 31, 2021. The TSX rules also allow the Company to purchase, once a week, a block of common shares not owned by any insiders, which may exceed such daily limit. The maximum number of shares that can be purchased per day on the NYSE will be 25% of the average daily trading volume for the four calendar weeks preceding the date of purchase, subject to certain exceptions for block purchases.

The timing and amounts of any repurchases pursuant to the NCIB will depend on many factors, including the Company’s capital structure, the market price of the common shares and overall market conditions. All common shares purchased under the NCIB shall be immediately cancelled following their repurchase.

For the nine months ended September 30, 2021, the Company repurchased 2,745,990 common shares pursuant to the NCIB in effect during that period at an aggregate cost of $305,640. During the nine months ended September 30, 2020, the Company repurchased 1,271,977 common shares pursuant to the NCIB at an aggregate cost of $105,654. As of September 30, 2021, the remaining maximum number of shares available for repurchase under the current NCIB was 13,025,895.

Cash Dividend

In October 2020, the Company announced that its Board of Directors increased its regular quarterly cash dividend by $0.02, from $0.185 to $0.205 per Company common share. Cash dividends of $160,754 and $145,921 were paid during the nine months ended September 30, 2021 and 2020, respectively.

18.COMMITMENTS AND CONTINGENCIES

In the normal course of its business and as a result of the extensive governmental regulation of the solid waste and E&P waste industries, the Company is subject to various judicial and administrative proceedings involving Canadian regulatory authorities as well as U.S. federal, state and local agencies. In these proceedings, an agency may subpoena the Company for records, or seek to impose fines on the Company or revoke or deny renewal of an authorization held by the Company, including an operating permit. From time to time, the Company may also be subject to actions brought by special interest or other groups, adjacent landowners or residents in connection with the permitting and licensing of landfills, transfer stations, and E&P waste treatment, recovery and disposal operations, or alleging environmental damage or violations of the permits and licenses pursuant to which the Company operates. The Company uses $1,000 as a threshold (up from the previously required threshold of $300) for disclosing environmental matters involving potential monetary sanctions.

In addition, the Company is a party to various claims and suits pending for alleged damages to persons and property, alleged violations of certain laws and alleged liabilities arising out of matters occurring during the normal operation of the Company’s business. Except as noted in the matters described below, as of September 30, 2021, there is no current proceeding or litigation involving the Company or its property that the Company believes could have a material adverse effect on its business, financial condition, results of operations or cash flows.

Lower Duwamish Waterway Superfund Site Allocation Process

In November 2012, the Company’s subsidiary, Northwest Container Services, Inc. (“NWCS”), was named by the U.S. Environmental Protection Agency, Region 10 (the “EPA”) as a potentially responsible party (“PRP”), along with more than 100 others, under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or the “Superfund” law) with respect to the Lower Duwamish Waterway Superfund Site (the “LDW Site”). Listed on the

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National Priorities List in 2001, the LDW Site is a five-mile stretch of the Duwamish River flowing into Elliott Bay in Seattle, Washington. A group of PRPs known as the Lower Duwamish Working Group (“LDWG”) and consisting of the City of Seattle, King County, the Port of Seattle, and Boeing Company conducted a Remedial Investigation/Feasibility Study for the LDW Site. On December 2, 2014, the EPA issued its Record of Decision (the “ROD”) describing the selected clean-up remedy, and therein estimated that clean-up costs (in present value dollars as of November 2014) would total approximately $342,000. However, it is possible that additional costs could be incurred based upon various factors. The EPA estimates that it will take seven years to implement the clean-up. The ROD also requires ten years of monitoring following the clean-up, and provides that if clean-up goals have not been met by the end of this period, then additional clean-up activities, at additional cost, may be required at that time. Implementation of the clean-up will not begin until after the ongoing Early Action Area (“EAA”) clean-ups have been completed. Typically, costs for monitoring may be in addition to those expended for the clean-up. While three of the EAA clean-ups have been completed to date, some work remains to be done on three other EAAs. Implementation of the clean-up also must await additional baseline sampling throughout the LDW Site and the preparation of a remedial design for performing the clean-up. On April 27, 2016, the LDWG entered into a third amendment of its Administrative Order on Consent with the EPA (the “AOC 3”) in which it agreed to perform the additional baseline sediment sampling and certain technical studies needed to prepare the actual remedial design. The LDWG and the EPA entered into a fourth amendment to the AOC in July 2018 primarily addressing development of a proposed remedy for the upper reach of the LDW Site, river mile 3 to river mile 5. At the April 24, 2019 stakeholders meeting, the LDWG projected that the remedial design for the upper reach could be completed by August 2024. In late September 2020, the EPA informed attorneys for several PRPs that the work may be completed by late 2023 or early 2024.

On August 16, 2016, the EPA sent individual letters to each of the PRPs for the LDW Site, including NWCS, stating that it expected to initiate negotiations with all PRPs in early 2018 relating to a Remedial Design/Remedial Action (“RD/RA”) Consent Decree. An RD/RA Consent Decree provides for the cleanup of the entire site and is often referred to as a “global settlement.” In August 2014, NWCS entered into an Alternative Dispute Resolution Memorandum of Agreement with several dozen other PRPs and a neutral allocator to conduct a confidential and non-binding allocation of certain past response costs allegedly incurred at the LDW Site as well as the anticipated future response costs associated with the clean-up. In March 2017, the PRPs provided the EPA with notice that the allocation was not scheduled to conclude until mid-2019. Later extensions pushed the allocation conclusion date first to early 2020 and then to July 2020. The EPA was informed of those changes. The allocator issued his preliminary allocation report on June 28, 2021. The final allocation report will be issued only after the allocator considers comments of the parties on the preliminary report. In July 2021, the EPA was informed of the issuance of the preliminary allocation report in a telephone conference with allocation participants. In that call, the EPA reiterated its expectation that settlement negotiations would begin in 2022. NWCS is defending itself vigorously in this confidential allocation process. At this point, the Company is not able to determine the likelihood of the allocation process being completed as intended by the participating PRPs, its specific allocation, or the likelihood of the parties then negotiating a global settlement with the EPA. Thus, NWCS cannot reasonably determine the likelihood of any outcome in this matter, including its potential liability.

On February 11, 2016, NWCS received a letter (the “Letter”) from the United States Department of Commerce, National Oceanic and Atmospheric Administration (“NOAA”), describing certain investigatory activities conducted by the Elliott Bay Trustee Council (the “Council”). The Council consists of all of the natural resources trustees for the LDW Site as well as two nearby Superfund sites, the Harbor Island site and the Lockheed West site. The members of the Council include the United States, on behalf of the U.S. National Oceanic and Atmospheric Administration and the U.S. Department of the Interior, the Washington State Department of Ecology, and the Suquamish and Muckleshoot Indian Tribes (together, the “Trustees”). The Letter appears to allege that NWCS may be a potentially liable party that allegedly contributed to the release of hazardous substances that have injured natural resources at the LDW Site. Damages to natural resources are in addition to clean-up costs. The Letter, versions of which NWCS believes were sent to all or a group of the PRPs for the LDW Site, also notified its recipients of their opportunity to participate in the Trustees’ development of

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an Assessment Plan and the performance of a Natural Resources Damages Assessment (“NRDA”) in accordance with the Assessment Plan for both the LDW Site and the east and west waterways of the Harbor Island site. NWCS timely responded with correspondence to the NOAA Office of General Counsel, in which it declined the invitation at that time. NWCS does not know how other PRPs responded to the Letter, and has not received any further communication from NOAA or the Trustees. The Trustees have not responded to NWCS’ letter. The Trustees released their Assessment Plan in March 2019. The Assessment Plan does not set forth a timeline for implementation. At this point, the Company is not able to determine the likelihood or amount of an assessment of natural resource damages against NWCS in connection with this matter.

Los Angeles County, California Landfill Expansion Litigation

Chiquita Canyon, LLC Lawsuit Against Los Angeles County

In October 2004, the Company’s subsidiary, Chiquita Canyon, LLC (“CCL”), then under prior ownership, filed an application (the “Application”) with the County of Los Angeles (the “County”) Department of Regional Planning (“DRP”) for a conditional use permit (the “CUP”) to authorize the continued operation and expansion of the Chiquita Canyon Landfill (the “Landfill”). The Landfill has operated since 1972, and as a regional landfill, accepted over two million tons of materials for disposal and beneficial use in 2020. The Application requested expansion of the existing waste footprint on CCL’s contiguous property, an increase in maximum elevation, creation of a new entrance and new support facilities, construction of a facility for the County or another third-party operator to host household hazardous waste collection events, designation of an area for mixed organics/composting, and other modifications.

After many years of reviews and delays, upon the recommendation of County staff, the County’s Regional Planning Commission (the “Commission”) approved the Application on April 19, 2017, but imposed operating conditions, fees and exactions that substantially reduce the historical landfill operations and represent a large increase in aggregate taxes and fees. CCL objected to many of the requirements imposed by the Commission. Current estimates for new costs imposed on CCL under the CUP are in excess of $300,000.

CCL appealed the Commission’s decision to the County Board of Supervisors, but the appeal was not successful. At a subsequent hearing, on July 25, 2017, the Board of Supervisors approved the CUP. On October 20, 2017, CCL filed in the Superior Court of California, County of Los Angeles a verified petition for writ of mandate and complaint against the County and the County Board of Supervisors captioned Chiquita Canyon, LLC v. County of Los Angeles, No. BS171262 (Los Angeles Co. Super Ct.) (the “Complaint”). The Complaint challenges the terms of the CUP in 13 counts generally alleging that the County violated multiple California and federal statutes and California and federal constitutional protections. CCL seeks the following relief: (a) an injunction and writ of mandate against certain of the CUP’s operational restrictions, taxes and fees, (b) a declaration that the challenged conditions are unconstitutional and in violation of state and federal statutes, (c) reimbursement for any such illegal fees paid under protest, (d) damages, (e) an award of just compensation for a taking, (f) attorney fees, and (g) all other appropriate legal and equitable relief.

Extensive motions practice and an interlocutory appeal occurred in 2018 and 2019 over the permissible scope of CCL’s challenge to the CUP, specifically 13 operational conditions in the CUP. The Superior Court ruled in CCL’s favor on November 13, 2019, finding that the County was estopped from contending that CCL has waived its rights to challenge the legality of the 13 operational conditions. The County sought interlocutory review of the Superior Court’s decision in the Court of Appeal, which denied the County’s petition on February 7, 2020.

Following full briefing and oral argument on June 22, 2020 on six of CCL’s causes of action, the Superior Court issued its decision on July 2, 2020, granting CCL’s petition for writ of mandate in part and denying it in part. CCL prevailed with respect to 12 of the challenged conditions, many of which imposed new fees and exactions on the Landfill. Before

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE, PER TON AND PER GALLON AMOUNTS)

entry of final judgment, the Superior Court will hear CCL’s remaining causes of action. A trial on CCL’s remaining causes of action is scheduled for August 1, 2022. Once the Superior Court has entered final judgment, CCL and the County will be permitted to appeal any adverse ruling to the California Court of Appeal. After entry of final judgment and resolution of any appeals, the Superior Court will issue a writ directing the County Board of Supervisors to set aside its decision on the permit with respect to 12 of the challenged conditions. The Board will be allowed to make additional findings to support four of those conditions and reconsider its permit decision in light of the Superior Court’s writ. CCL will continue to vigorously prosecute the lawsuit. However, at this point, the Company is not able to determine the likelihood of any outcome in this matter.

December 11, 2017 Notice of Violation Regarding Certain CUP Conditions.

The County, through its DRP, issued a Notice of Violation, dated December 11, 2017 (the “NOV”), alleging that CCL violated certain conditions of the CUP, including Condition 79(B)(6) of the CUP by failing to pay an $11,600 Bridge & Thoroughfare Fee (“B&T Fee”) that was purportedly due on July 25, 2017. The alleged B&T fee was ostensibly to fund the construction of transportation infrastructure in the area of the Landfill. At the time the NOV was issued, CCL had already contested the legality of the B&T fee in the October 20, 2017 Complaint filed against the County in Los Angeles County Superior Court, described above under paragraph A (the “CUP lawsuit”).

On January 12, 2018, CCL filed an appeal of the alleged violations in the NOV. Subsequently, CCL filed additional legal arguments and exhibits contesting the NOV. On March 6, 2018, a DRP employee designated as hearing officer sustained the NOV, including the $11,600 B&T fee, and imposed an administrative penalty in the amount of $83 and a noncompliance fee of $0.75. A written decision memorializing the hearing officer’s findings and order was issued on July 10, 2018. On April 13, 2018, CCL filed in the Superior Court of California, County of Los Angeles a Petition for Writ of Administrative Mandamus against the County seeking to overturn the decision sustaining the NOV, contending that the NOV and decision are not supported by the facts or law. On July 17, 2018, the Court granted CCL leave to pay the $11,600 B&T fee and to amend its Complaint in the CUP lawsuit to reflect the payment under protest, allowing the challenge to the B&T fee under the Mitigation Fee Act to proceed in the CUP lawsuit. CCL paid the B&T fee under protest on August 10, 2018, and also paid on that date the administrative penalty of $83 and a noncompliance fee of $0.75. The Court indicated that the NOV case would be coordinated with the CUP lawsuit. The NOV case has been continued multiple times as the CUP lawsuit was adjudicated; it is now set for trial on January 18, 2022. The Superior Court’s July 2, 2020 decision in the CUP lawsuit upheld the B&T fee against a Mitigation Fee Act challenge, and addressed two other conditions that were also the subject of the NOV, which may impact the scope of the B&T fee/NOV case. CCL will continue to vigorously prosecute the lawsuit. However, at this point, the Company is not able to determine the likelihood of any outcome in this matter.

19.SUBSEQUENT EVENTS

On October 27, 2021, the Company announced that its Board of Directors increased its regular quarterly cash dividend by $0.025, from 0.205 to $0.23 per Company common share, and then declared a regular quarterly cash dividend of $0.23 per Company common share. The dividend will be paid on November 23, 2021, to shareholders of record on the close of business on November 9, 2021.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We make statements in this Quarterly Report on Form 10-Q that are forward-looking in nature. These include:

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Statements regarding our landfills, including capacity, duration, special projects, demand for and pricing of recyclables, landfill alternatives and related capital expenditures;

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Discussion of competition, loss of contracts, price increases and additional exclusive and/or long-term collection service arrangements;

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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;

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Statements regarding our ability to access capital resources or credit markets at all or on favorable terms;

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Plans for, and the amounts of, certain capital expenditures for our existing and newly acquired properties and equipment;

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Statements regarding fuel, oil and natural gas demand, prices, and price volatility;

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Assessments of regulatory developments and potential changes in environmental, health, safety and tax laws and regulations; and

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Other statements on a variety of topics such as the COVID-19 pandemic, credit risk of customers, seasonality, labor/pension costs and labor union activity, operational and safety risks, acquisitions, litigation 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, risk factors detailed from time to time in our filings with the SEC and the securities commissions or similar regulatory authorities in Canada.

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.

OVERVIEW OF OUR BUSINESS

We are an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, along with recycling and resource recovery, in mostly exclusive and secondary markets across 44 states in the U.S. and six provinces in Canada. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.

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Environmental, organizational and financial sustainability initiatives have been key components of our success since we were founded in 1997. We remain committed to growing and expanding these efforts as our industry and technology continue to evolve. To that end, we have made a $500 million commitment to the advancement of the long-term, aspirational targets outlined in our 2021 Sustainability Report. This report can be found at www.wasteconnections.com/sustainability but does not constitute a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q.

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 E&P waste treatment and disposal services.

As of September 30, 2021, we served residential, commercial, industrial and E&P customers in 44 states in the U.S. and six provinces in Canada: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming, and the provinces of Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan.

The 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 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. 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.

The demand for our E&P waste services depends on the continued demand for, and production of, oil and natural gas. Crude oil and natural gas prices historically have been volatile. Macroeconomic and geopolitical conditions, including a significant decline in oil prices driven by both surplus production and supply, as well as the decrease in demand caused by factors including the COVID-19 pandemic, have resulted in decreased levels of oil and natural gas exploration and production activity and a corresponding decrease in demand for our E&P waste services. Additionally, across the industry there is uncertainty regarding future demand for oil and related services, as noted by several energy companies, many of whom are customers of our E&P operations. These companies have written down the values of their oil and gas assets in anticipation of the potential for the decarbonization of their energy product mix given an increased global focus on reducing greenhouse gases and addressing climate change. Such uncertainty regarding global demand has had a significant impact on the investment and operating plans of our E&P waste customers in the basins where we operate. If the prices of crude oil and natural gas substantially decline, it could lead to declines in the level of production activity and demand for our E&P waste services, which could result in the recognition of additional impairment charges on our intangible assets and property and equipment associated with our E&P operations. See Note 4 to our Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for a discussion of the impairment charge recorded during the nine months ended September 30, 2020.

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THE COVID-19 PANDEMIC’S IMPACT ON OUR RESULTS OF OPERATIONS

March 11, 2021 marked the one year anniversary of COVID-19 being declared a global pandemic by the World Health Organization. The related economic disruptions largely associated with closures or restrictions put into effect following the onset of the COVID-19 pandemic resulted in declines in solid waste commercial collection, transfer station and landfill volumes, and roll off activity. Throughout the remaining fiscal year 2020, solid waste revenue and reported volumes largely reflected the pace and shape of the closures and subsequent reopening activity, with the timing and magnitude of recovery varying by market. Reported solid waste volumes in 2020 turned slightly negative in the first quarter, were most negative in the second quarter, and showed sequential improvement during the second half of the year, finishing the year at negative 3.1% in the fourth quarter. In the first quarter of 2021, the final period to include comparisons to pre-COVID-19 activity levels on a year over year basis, solid waste volumes were down 3.2%. In the second quarter of 2021, solid waste volumes increased sequentially by 9.6% to up 6.5% on a year over year basis, with positive volumes in all regions. In the third quarter, volumes remained positive but declined sequentially to up 2.1% on a year over year basis, reflecting tougher comparisons to the prior year given the sequential improvement in the second half of 2020 as a result of reopening activity.

The COVID-19 pandemic also contributed to the decline in demand for and the value of crude oil, which impacted E&P drilling activity and resulted in lower E&P waste revenue, with the quarterly run rate decreasing from approximately $60 million in the first quarter of 2020 to approximately $25 million through the first quarter of 2021. E&P waste revenue increased sequentially by $6.5 million to $31.2 million in the second quarter of 2021 on increased drilling activity in several active shale basins and increased sequentially again in the third quarter of 2021 to $35.0 million.

Since the onset of the COVID-19 pandemic, protecting the health, welfare and safety of our employees has been our top priority. Recognizing the potential for financial hardship and other challenges, we have looked to provide a safety net for our employees on issues of income and family health. To that end, since the onset of the pandemic through the third quarter of 2021, we have incurred over $40 million in incremental COVID-19-related costs, primarily supplemental pay for frontline employees. We continue to support our employees and their families, with certain costs continuing in 2021, albeit to a lesser extent than in the prior year, as employee COVID-19 cases and related impacts are similarly abating. The impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows in future periods will depend largely on future developments, including the duration and spread of the outbreak in the U.S. and Canada, the rate of vaccinations, the severity of COVID-19 variants, the actions to contain such coronavirus variants, and how quickly and to what extent normal economic and operating conditions can resume.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or 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 condensed 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. Refer to our most recent Annual Report on Form 10-K for a complete description of our critical accounting estimates and assumptions.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of the new accounting standards that affect us, see Note 3 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

The following table sets forth items in our Condensed Consolidated Statements of Net Income in thousands of U.S. dollars and as a percentage of revenues for the periods indicated.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Revenues	$	1,597,168	100.0	%	$	1,389,552	100.0	%	$	4,527,042	100.0	%	$	4,047,739	100.0	%
Cost of operations		946,098	59.2			828,822	59.6			2,673,209	59.1			2,429,957	60.0
Selling, general and administrative		155,520	9.8			136,003	9.8			454,885	10.0			404,213	10.0
Depreciation		171,965	10.8			157,590	11.3			498,588	11.0			459,641	11.4
Amortization of intangibles		35,337	2.2			32,653	2.4			100,237	2.2			96,062	2.4
Impairments and other operating items		3,104	0.2			3,805	0.3			9,819	0.2			442,582	10.9
Operating income		285,144	17.8			230,679	16.6			790,304	17.5			215,284	5.3

Interest expense		(40,418)	(2.5)			(40,636)	(2.9)			(124,171)	(2.7)			(119,562)	(2.9)
Interest income		495	—			903	0.1			2,342	—			4,396	0.1
Other income (expense), net		3,140	0.2			702	0.0			5,452	0.1			(3,046)	(0.1)
Loss on early extinguishment of debt		(115,288)	(7.2)			—	0.0			(115,288)	(2.6)			—	0.0
Income tax provision		(18,419)	(1.1)			(33,657)	(2.4)			(106,578)	(2.3)			(23,654)	(0.6)
Net income		114,654	7.2			157,991	11.4			452,061	10.0			73,418	1.8
Net loss (income) attributable to noncontrolling interests		(273)	(0.0)			58	0.0			(325)	0.0			594	0.0
Net income attributable to Waste Connections	$	114,381	7.2	%	$	158,049	11.4	%	$	451,736	10.0	%	$	74,012	1.8	%

Revenues. Total revenues increased $207.6 million, or 14.9%, to $1.597 billion for the three months ended September 30, 2021, from $1.390 billion for the three months ended September 30, 2020. Total revenues increased $479.3 million, or 11.8%, to $4.527 billion for the nine months ended September 30, 2021, from $4.048 billion for the nine months ended September 30, 2020.

Acquisitions closed during or subsequent to the three months ended September 30, 2020 increased revenues by $54.1 million for the three months ended September 30, 2021. Acquisitions closed during or subsequent to the nine months ended September 30, 2020 increased revenues by $145.4 million for the nine months ended September 30, 2021.

Operations that were divested subsequent to September 30, 2020 decreased revenues by $2.8 million and $9.5 million, respectively, for the three and nine months ended September 30, 2021.

During the three months ended September 30, 2021, the net increase in prices charged to our customers at our existing operations was $67.7 million, consisting of $62.0 million of core price increases and surcharges of $5.7 million. During the nine months ended September 30, 2021, the net increase in prices charged to our customers at our existing operations was $180.9 million, consisting of $176.3 million of core price increases and surcharges of $4.6 million.

During the three and nine months ended September 30, 2021, volume increases in our existing business increased solid waste revenues by $28.9 million and $68.6 million, respectively, as many of our markets benefitted from increased business activity resulting from reductions in COVID-19-related restrictions.

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E&P revenues at facilities owned during the three months ended September 30, 2021 increased $11.3 million due to a recovery in the demand for crude oil resulting in increased drilling and production and increased demand for our E&P waste services. E&P revenues at facilities owned during the nine months ended September 30, 2021 decreased $27.7 million attributable to the first and second quarter results in 2021 being adversely impacted by decreases in the demand for crude oil as a result of economic disruptions from the COVID-19 pandemic resulting in a drop in the value of crude oil, decreases in drilling and production activity levels and decreases in overall demand for our E&P waste services, with our third quarter results in 2021 benefitting from recoveries in the demand for crude oil and our E&P disposal services.

An increase in the average Canadian dollar to U.S. dollar currency exchange rate resulted in an increase in revenues of $10.5 million and $41.3 million, respectively, for the three and nine months ended September 30, 2021. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues were 0.7936 and 0.7511 for the three months ended September 30, 2021 and 2020, respectively. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues were 0.7996 and 0.7399 for the nine months ended September 30, 2021 and 2020, respectively.

Revenues from sales of recyclable commodities at facilities owned during the three and nine months ended September 30, 2021 and 2020 increased $28.3 million and $57.6 million, respectively, due primarily to higher prices for old corrugated cardboard, aluminum and other paper products, higher volumes collected from residential recycling customers and the partial recovery of collected commercial recycling volumes which declined in the prior year period due to economic disruptions resulting from the COVID-19 pandemic.

Other revenues increased $9.6 million during the three months ended September 30, 2021, due primarily to a $6.4 million increase resulting from higher prices for renewable energy credits associated with the generation of landfill gas in our Canada segment and a $3.2 million increase in other non-core revenue sources. Other revenues increased $22.7 million during the nine months ended September 30, 2021, due primarily to a $20.5 million increase resulting from higher prices for renewable energy credits associated with the generation of landfill gas at our Canada segment and a $5.9 million increase in other non-core revenue sources, partially offset by a $3.7 million decrease in intermodal revenues due primarily to customer losses and shipping port logistical constraints resulting in a reduction in intermodal cargo volumes.

Cost of Operations. Total cost of operations increased $117.3 million, or 14.1%, to $946.1 million for the three months ended September 30, 2021, from $828.8 million for the three months ended September 30, 2020. The increase was primarily the result of an increase in operating costs at our existing operations of $85.0 million, assuming foreign currency parity, $28.8 million of additional operating costs from acquisitions closed subsequent to the three months ended September 30, 2020 and $5.5 million resulting from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease in operating costs of $2.0 million at operations divested subsequent to the three months ended September 30, 2020.

The increase in operating costs of $85.0 million, assuming foreign currency parity, at our existing operations for the three months ended September 30, 2021, consisted of an increase in labor expenses of $28.1 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $12.5 million due to parts and service rate increases and additional maintenance and repair requirements resulting from increased truck and equipment operating hours to support increases in our solid waste volumes, an increase in diesel fuel expense of $9.8 million due to higher fuel prices and increased consumption resulting from additional truck and equipment operating hours to support solid waste volume increases, an increase in third-party trucking and transportation expenses of $9.4 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in third-party disposal expenses of $8.6 million due primarily to increased solid waste collection volumes, an increase in taxes on revenues of $7.7 million due primarily to increased revenues in our solid waste markets and a credit recorded to expenses during the prior year period at Chiquita Canyon landfill due to a reversal of amounts accrued for certain fees and exactions resulting from our successful challenge of these expenses, an increase in 401(k) matching expenses of $4.6 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in subcontracted hauling services of $3.5 million due to outsourcing the servicing of certain non-strategic contracts and commercial collection customers to third party haulers, an increase in employee medical benefits expenses of $2.5 million due to an increase in medical visits, an increase in leachate expense of $2.4 million due primarily to the impact of hurricanes and tropical storms causing higher precipitation in certain markets

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where our landfills are located, an increase in expenses for auto and workers’ compensation claims of $1.9 million due primarily to an increase in incidents and adjustments recorded in the prior year period to decrease projected losses on outstanding claims originally recorded prior to 2020, an increase in insurance premium expenses of $1.3 million due primarily to increased insurance premium costs for auto and environmental compliance and $3.6 million of other net expense increases, partially offset by a decrease in supplemental bonuses and other cash incentive compensation to non-management personnel of $7.0 million due to the prior year period including non-recurring expenses to recognize services provided by our front-line employees during the COVID-19 pandemic and a decrease in expenses for processing recyclable commodities of $3.9 million due to increased recyclable commodity values resulting in price reductions charged by third-party recycling processors.

Total cost of operations increased $243.2 million, or 10.0%, to $2.673 billion for the nine months ended September 30, 2021, from $2.430 billion for the nine months ended September 30, 2020. The increase was primarily the result of an increase in operating costs at our existing operations of $149.0 million, assuming foreign currency parity, $77.5 million of additional operating costs from acquisitions closed subsequent to the nine months ended September 30, 2020 and $22.8 million resulting from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease in operating costs of $6.1 million at operations divested subsequent to the nine months ended September 30, 2020.

The increase in operating costs of $149.0 million, assuming foreign currency parity, at our existing operations for the nine months ended September 30, 2021, consisted of an increase in labor expenses at our solid waste operations of $54.4 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $23.2 million due primarily to parts and service rate increases, an increase in third-party trucking and transportation expenses of $21.6 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in third-party disposal expenses of $20.8 million due primarily to increased solid waste collection volumes, an increase in diesel fuel expense of $17.2 million due to higher fuel prices, an increase in employee medical benefits expenses of $14.0 million due to an increase in medical visits, an increase in taxes on revenues of $12.9 million due primarily to increased revenues in our solid waste markets, an increase in subcontracted hauling services at our solid waste operations of $10.0 million due to outsourcing the servicing of certain non-strategic contracts and commercial collection customers to third party haulers, an increase in 401(k) matching expenses of $6.4 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in landfill maintenance, environmental compliance and daily cover expenses of $3.8 million due to increased compliance requirements under our landfill operating permits, an increase in insurance premium expenses of $3.3 million due primarily to increased insurance premium costs for auto and environmental compliance, an increase in leachate expense of $1.7 million due primarily to the impact of hurricanes and tropical storms causing higher precipitation in certain markets where our landfills are located, an increase in heavy equipment rental expenses of $1.4 million to provide support for solid waste volume increases at our disposal operations, an increase in property tax expenses of $1.3 million due primarily to reassessed property values at certain locations and an increase in capital assets that are subject to property tax assessments and $2.7 million of other net expense increases, partially offset by a decrease in supplemental bonuses and other cash incentive compensation to non-management personnel of $22.1 million due to the prior year period including non-recurring expenses to recognize services provided by our front-line employees during the COVID-19 pandemic, a decrease in expenses for auto and workers’ compensation claims of $6.2 million due primarily to higher claims severity in the prior year period and adjustments recorded in the current year period to decrease projected losses on outstanding claims originally recorded prior to 2021, a decrease in expenses for processing recyclable commodities of $6.1 million due to increased recyclable commodity values resulting in price reductions charged by third-party recycling processors, a decrease in labor at our E&P operations of $4.3 million due to headcount reductions resulting from E&P disposal volume decreases, a decrease in subcontracted operating and remediation services at our E&P operations of $3.9 million due to E&P disposal volume decreases and a decrease in intermodal rail expenses of $3.1 million due to a reduction in cargo volume.

Cost of operations as a percentage of revenues decreased 0.4 percentage points to 59.2% for the three months ended September 30, 2021, from 59.6% for the three months ended September 30, 2020. The decrease as a percentage of revenues consisted of a 0.6 percentage point decrease from a reduction in supplemental bonuses and other cash incentive compensation to non-management personnel, a 0.2 percentage point decrease from a reduction in expenses for processing

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recyclable commodities and a 0.2 percentage point decrease from all other net changes, partially offset by a 0.3 percentage point increase from higher 401(k) matching expenses and a 0.3 percentage point increase from higher diesel fuel expenses.

Cost of operations as a percentage of revenues decreased 0.9 percentage points to 59.1% for the nine months ended September 30, 2021, from 60.0% for the nine months ended September 30, 2020. The decrease as a percentage of revenues consisted of a 0.6 percentage point decrease from a decrease in supplemental bonuses and other cash incentive compensation to non-management personnel, a 0.2 percentage point decrease from a reduction in expenses for auto and workers’ compensation claims, a 0.2 percentage point decrease from leveraging existing personnel to support our solid waste revenue volume growth and a 0.1 percentage point decrease from all other net changes, partially offset by a 0.2 percentage point increase from higher employee medical expenses.

SG&A. SG&A expenses increased $19.5 million, or 14.4%, to $155.5 million for the three months ended September 30, 2021, from $136.0 million for the three months ended September 30, 2020. The increase was comprised of an increase of $15.9 million in SG&A expenses at our existing operations, assuming foreign currency parity, $2.9 million of additional SG&A expenses from operating locations at acquisitions closed subsequent to the three months ended September 30, 2020 and $0.9 million resulting from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease in SG&A expenses of $0.2 million at operations divested subsequent to the three months ended September 30, 2020.

The increase in SG&A expenses at our existing operations of $15.9 million, assuming foreign currency parity, for the three months ended September 30, 2021, was comprised of a collective increase in travel, meeting, training and community activity expenses of $4.3 million attributable to increased travel and social gatherings in the current year period due to a reduction in restrictions associated with the COVID-19 pandemic, an increase in direct acquisition expenses of $3.3 million due to an increase in acquisition activity in the comparable periods, an increase in administrative payroll expenses of $2.9 million due primarily to annual pay and headcount increases, an increase in accrued recurring cash incentive compensation expense to our management of $1.8 million, an increase in 401(k) matching expenses of $1.8 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in expenses for uncollectible accounts receivable of $1.4 million primarily due to non-recurring expense reductions recorded in the prior year period to adjust reserves for uncollectible accounts receivable based upon actual payment defaults from customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic being less than originally estimated, an increase in employee relocation expenses of $0.8 million and $1.9 million of other net expense increases, partially offset by a decrease in equity-based compensation expenses of $1.2 million resulting primarily from expense increases recorded during the prior year period to the amount of performance-based restricted share units granted in 2018 that were estimated to ultimately vest based on the achievement of required financial performance results and a decrease in deferred compensation expenses of $1.1 million as a result of higher increases during the prior year period in the market value of investments to which employee deferred compensation liability balances are tracked.

SG&A expenses increased $50.7 million, or 12.5%, to $454.9 million for the nine months ended September 30, 2021, from $404.2 million for the nine months ended September 30, 2020. The increase was comprised of an increase of $38.3 million in SG&A expenses at our existing operations, assuming foreign currency parity, $8.9 million of additional SG&A expenses from operating locations at acquisitions closed subsequent to the nine months ended September 30, 2020 and $4.1 million resulting from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease in SG&A expenses of $0.6 million at operations divested subsequent to the nine months ended September 30, 2020.

The increase in SG&A expenses at our existing operations of $38.3 million, assuming foreign currency parity, for the nine months ended September 30, 2021, was comprised of an increase in accrued recurring cash incentive compensation expense to our management of $16.2 million, a collective increase in travel, meeting, training and community activity expenses of $5.0 million due to increased travel and social gatherings in the current year period due to a reduction in restrictions associated with the COVID-19 pandemic, an increase in employee medical benefits expenses of $4.1 million due to an increase in medical visits, an increase in administrative payroll expenses of $4.0 million due primarily to annual pay and headcount increases, an increase in deferred compensation expenses of $3.1 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked, an increase in 401(k)

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matching expenses of $2.4 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in professional fees of $2.3 million due primarily to adjustments recorded during the prior year period to reduce estimated accrued liabilities associated with unbilled legal services and increased expenses associated with professional tax services, an increase in advertising expenses of $1.7 million due primarily to cost reduction efforts associated with the COVID-19 pandemic reducing the prior year period expenses, an increase in direct acquisition expenses of $1.7 million due to an increase in acquisition activity in the comparable periods, an increase in employee relocation expenses of $1.6 million and an increase in equity-based compensation expenses of $1.2 million associated with the net impact of current and prior period adjustments of our common shares held in our deferred compensation plan by certain key executives to fair value as a result of the shares being exchanged for other investment options, partially offset by a decrease in expenses for uncollectible accounts receivable of $4.9 million primarily due to the prior year period incurring increased expenses due to customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic and $0.1 million of other net expense decreases.

SG&A as a percentage of revenues was unchanged at 9.8% for the three months ended September 30, 2020 and 2021 and 10.0% for the nine months ended September 30, 2020 and 2021.

Depreciation. Depreciation expense increased $14.4 million, or 9.1%, to $172.0 million for the three months ended September 30, 2021, from $157.6 million for the three months ended September 30, 2020. The increase was comprised of an increase in depreciation expense of $5.8 million from the impact of additions to our fleet and equipment purchased to support our existing operations, an increase in depletion expense of $4.8 million resulting from increased landfill municipal solid waste and special waste volumes, depreciation expense of $3.3 million from acquisitions closed subsequent to the three months ended September 30, 2020 and $1.2 million resulting from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease in depreciation and depletion expense of $0.7 million from operations divested subsequent to the three months ended September 30, 2020.

Depreciation expense increased $39.0 million, or 8.5%, to $498.6 million for the nine months ended September 30, 2021, from $459.6 million for the nine months ended September 30, 2020. The increase was comprised of an increase in depreciation expense of $15.7 million from the impact of additions to our fleet and equipment purchased to support our existing operations, depreciation and depletion expense of $11.1 million from acquisitions closed subsequent to the nine months ended September 30, 2020, an increase in depletion expense of $9.8 million resulting from increased landfill municipal solid waste and special waste volumes and $4.8 million resulting from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease in depreciation and depletion expense of $2.4 million from operations divested subsequent to the nine months ended September 30, 2020.

Depreciation expense as a percentage of revenues decreased 0.5 percentage points to 10.8% for the three months ended September 30, 2021, from 11.3% for the three months ended September 30, 2020. Depreciation expense as a percentage of revenues decreased 0.4 percentage points to 11.0% for the nine months ended September 30, 2021, from 11.4% for the nine months ended September 30, 2020. The decreases as a percentage of revenues were primarily attributable to leveraging volume increases in our solid waste revenues.

Amortization of Intangibles. Amortization of intangibles expense increased $2.6 million, or 8.2%, to $35.3 million for the three months ended September 30, 2021, from $32.7 million for the three months ended September 30, 2020. The increase was the result of $3.2 million from intangible assets acquired in acquisitions closed subsequent to the three months ended September 30, 2020 and $0.3 million from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease of $0.8 million from certain intangible assets becoming fully amortized subsequent to September 30, 2020 and a decrease of $0.1 million from operations divested subsequent to the three months ended September 30, 2020.

Amortization of intangibles expense increased $4.1 million, or 4.3%, to $100.2 million for the nine months ended September 30, 2021, from $96.1 million for the nine months ended September 30, 2020. The increase was the result of $8.5 million from intangible assets acquired in acquisitions closed subsequent to the nine months ended September 30, 2020 and $1.3 million from an increase in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by a decrease of $5.4 million from certain intangible assets becoming fully amortized

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subsequent to September 30, 2020 and a decrease of $0.3 million from operations divested subsequent to the nine months ended September 30, 2020.

Amortization expense as a percentage of revenues decreased 0.2 percentage points to 2.2% for the three and nine months ended September 30, 2021, from 2.4% for the three and nine months ended September 30, 2020. The decreases as a percentage of revenues were primarily attributable to leveraging volume increases in our solid waste revenues.

Impairments and Other Operating Items. Impairments and other operating items decreased $0.7 million, to net losses totaling $3.1 million for the three months ended September 30, 2021, from net losses totaling $3.8 million for the three months ended September 30, 2020.

The net losses of $3.1 million recorded during the three months ended September 30, 2021 consisted of $2.0 million of charges to terminate or write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to their original estimated termination date and $1.1 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations.

The net losses of $3.8 million recorded during the three months ended September 30, 2020 consisted of $1.9 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations, $1.8 million of charges to terminate or write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to their original estimated termination date and $0.1 million of other net charges to expense.

Impairments and other operating items decreased $432.8 million, to net losses totaling $9.8 million for the nine months ended September 30, 2021, from net losses totaling $442.6 million for the nine months ended September 30, 2020.

The net losses of $9.8 million recorded during the nine months ended September 30, 2021 consisted of a $4.6 million loss resulting from property and equipment damaged in a facility fire, $3.2 million of charges to terminate or write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to their original estimated termination date, $1.5 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations and $0.5 million of other net charges.

During the nine months ended September 30, 2020, we concluded that a triggering event occurred which required us to perform an impairment test of the property and equipment and intangible assets of our E&P operations as of June 30, 2020. As a result of the impairment test, we concluded that the carrying value of four E&P landfills exceeded their estimated fair value, resulting in an impairment charge of $417.4 million to property and equipment. The remaining net losses of $25.2 million recorded during the nine months ended September 30, 2020 consisted of $16.8 million to adjust the carrying value of contingent consideration liabilities, $4.3 million of charges to terminate or write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to their original estimated termination date, $3.4 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations and $0.7 million of other net charges.

Operating Income. Operating income increased $54.4 million, or 23.6%, to $285.1 million for the three months ended September 30, 2021, from $230.7 million for the three months ended September 30, 2020. Operating income increased $575.0 million, or 267.1%, to $790.3 million for the nine months ended September 30, 2021, from $215.3 million for the nine months ended September 30, 2020.

Our operating results for the nine months ended September 30, 2020 were adversely impacted by the aforementioned impairment charge at our E&P operations of $417.4 million. The remaining increase in our operating income for the three and nine months ended September 30, 2021 was due primarily to price increases for our solid waste services, increases in solid waste collection and disposal volumes, operating income contributions from increased sales of recyclable commodities and renewable energy credits associated with the generation of landfill gas, operating income generated from acquisitions closed subsequent to the three and nine months ended September 30, 2020 and an increase in the average Canadian dollar to U.S. dollar currency exchange rate.

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Operating income as a percentage of revenues increased 1.2 percentage points to 17.8% for the three months ended September 30, 2021, from 16.6% for the three months ended September 30, 2020. The increase as a percentage of revenues was comprised of a 0.5 percentage point decrease in depreciation expense, a 0.4 percentage point decrease in cost of operations, a 0.2 percentage point decrease in amortization expense and a 0.1 percentage point decrease in impairments and other operating items.

Operating income as a percentage of revenues increased 12.2 percentage points to 17.5% for the nine months ended September 30, 2021, from 5.3% for the nine months ended September 30, 2020. The increase as a percentage of revenues was comprised of a 10.7 percentage point decrease in impairments and other operating items, a 0.9 percentage point decrease in cost of operations, a 0.4 percentage point decrease in depreciation expense and a 0.2 percentage point decrease in amortization expense.

Interest Expense. Interest expense decreased $0.2 million, or 0.5%, to $40.4 million for the three months ended September 30, 2021, from $40.6 million for the three months ended September 30, 2020. The decrease was primarily attributable to a decrease of $3.4 million from the repayment of $1.75 billion of senior unsecured notes in 2021 and $0.7 million of other net decreases, partially offset by an increase of $1.5 million from higher net interest rates on borrowings outstanding under our Credit Agreement due primarily to $600 million in interest rate swap agreements commencing in October 2020 at higher interest rates than $575 million in interest rate swap agreements which expired between September 2020 and October 2020, an increase of $1.2 million due to an increase in the average borrowings outstanding under our Credit Agreement and an increase of $1.2 million from the September 2021 issuance of our 2032 Senior Notes (as defined below) and our 2052 Senior Notes (as defined below).

Interest expense increased $4.6 million, or 3.9%, to $124.2 million for the nine months ended September 30, 2021, from $119.6 million for the nine months ended September 30, 2020. The increase was primarily attributable to an increase of $5.0 million from higher net interest rates on borrowings outstanding under our Credit Agreement due primarily to $600 million in interest rate swap agreements commencing in October 2020 at higher interest rates than $575 million in interest rate swap agreements which expired between September 2020 and October 2020, an increase of $3.1 million from the March 2020 issuance of our 2050 Senior Notes (as defined below), an increase of $1.2 million from the September 2021 issuance of our 2032 Senior Notes (as defined below) and our 2052 Senior Notes (as defined below), an increase of $0.9 million from the January 2020 issuance of our 2030 Senior Notes (as defined below) and $0.2 million of other net increases, partially offset by a decrease of $4.8 million from the repayment of $1.75 billion of senior unsecured notes in 2021 and a decrease of $1.0 million due to a reduction in the average borrowings outstanding under our Credit Agreement.

Interest Income. Interest income decreased $0.4 million to $0.5 million for the three months ended September 30, 2021, from $0.9 million for the three months ended September 30, 2020. Interest income decreased $2.1 million to $2.3 million for the nine months ended September 30, 2021, from $4.4 million for the nine months ended September 30, 2020. The decreases were primarily attributable to lower reinvestment rates in the current period.

Other Income (Expense), Net. Other income (expense), net increased $2.4 million, to an income total of $3.1 million for the three months ended September 30, 2021, from an income total of $0.7 million for the three months ended September 30, 2020.

Other income of $3.1 million recorded during the three months ended September 30, 2021 consisted of $2.0 million of adjustments to certain current assets acquired in prior period acquisitions and a $1.1 million increase in other net income.

Other income of $0.7 million recorded during the three months ended September 30, 2020 consisted of $1.5 million of earnings on investments purchased to fund our employee deferred compensation obligations, partially offset by a $0.8 million decrease from other net expenses.

Other income (expense), net increased $8.5 million, to an income total of $5.5 million for the nine months ended September 30, 2021, from an expense total of $3.0 million for the nine months ended September 30, 2020.

Other income of $5.5 million recorded during the nine months ended September 30, 2021 consisted of $2.0 million of income earned on investments purchased to fund our employee deferred compensation obligations, an increase in

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foreign currency transaction gains of $0.9 million attributable to the impact of an increase in the Canadian dollar to U.S. dollar exchange rate during the period, $0.6 million of net adjustments to certain current assets and liabilities acquired in prior period acquisitions and a $2.0 million increase in other net income sources.

Other expense of $3.0 million recorded during the nine months ended September 30, 2020 consisted of a $3.0 million adjustment to increase certain accrued liabilities acquired in the 2016 Progressive Waste acquisition and an increase in foreign currency transaction losses of $1.5 million attributable to the impact of a decrease in the Canadian dollar to U.S. dollar exchange rate during the period, partially offset by a $1.0 million adjustment to decrease certain non-acquisition accrued liabilities recorded in prior periods and a $0.5 million increase in other expenses.

Loss on Early Extinguishment of Debt. Loss on early extinguishment of debt was $115.3 million for the three and nine months ended September 30, 2021 and consists of the payment of a make-whole premium and the write-off of remaining unamortized loan fees associated with the early repayment of the outstanding senior notes under our master note purchase agreements.

Income Tax Provision. Income taxes decreased $15.3 million, to $18.4 million for the three months ended September 30, 2021, from $33.7 million for the three months ended September 30, 2020. Our effective tax rate for the three months ended September 30, 2021 was 13.8%. Our effective tax rate for the three months ended September 30, 2020 was 17.6%. Income taxes increased $82.9 million, to $106.6 million for the nine months ended September 30, 2021, from $23.7 million for the nine months ended September 30, 2020. Our effective tax rate for the nine months ended September 30, 2021 was 19.1%. Our effective tax rate for the nine months ended September 30, 2020 was 24.4%.

The income tax provision for the nine months ended September 30, 2021 included benefits of $2.0 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 nine months ended September 30, 2020 included a $27.4 million expense associated with certain 2019 related-party payments no longer being deductible for tax purposes due to the finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and a $4.1 million expense related to an increase in our deferred income tax liabilities resulting from the impairment of certain assets within our E&P operations, which impacted the geographical apportionment of our state income taxes. Additionally, the income tax benefit for the nine months ended September 30, 2020 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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SEGMENT RESULTS

General

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 (dollars in thousands of U.S. dollars).


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		2021		2020
Commercial	$	465,246	$	406,037	$	1,335,686	$	1,197,971
Residential		422,543		387,566		1,240,337		1,131,486
Industrial and construction roll off		249,417		216,894		695,975		618,122
Total collection		1,137,206		1,010,497		3,271,998		2,947,579
Landfill		328,147		308,795		927,207		855,631
Transfer		225,827		205,910		632,282		575,761
Recycling		55,772		21,377		129,759		59,701
E&P		38,519		26,218		101,137		131,748
Intermodal and other		38,377		27,141		112,602		84,970
Intercompany		(226,680)		(210,386)		(647,943)		(607,651)
Total	$	1,597,168	$	1,389,552	$	4,527,042	$	4,047,739

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.

At September 30, 2021, our Southern segment services customers located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New Mexico, North Dakota, southern Oklahoma, western Tennessee, Texas, Wyoming and along the Gulf of Mexico; our Eastern segment services customers located in Delaware, northern Illinois, Kentucky, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, eastern Tennessee, Vermont, Virginia and Wisconsin; our Western segment services customers located in Alaska, California, Idaho, Montana, Nevada, Oregon, Washington and western Wyoming; our Central segment services customers located in Arizona, Colorado, southern Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, South Dakota, western Texas, Utah and eastern Wyoming; and our Canada segment services customers located in the state of Michigan and in the provinces of Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan.

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Revenues, net of intercompany eliminations, for our reportable segments are shown in the following table in thousands of U.S. dollars and as a percentage of total revenues for the periods indicated.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Eastern	$	396,229	24.8	%	$	344,353	24.8	%	$	1,102,307	24.4	%	$	995,446	24.6	%
Southern		370,958	23.2			330,575	23.8			1,072,456	23.7			1,033,297	25.5
Western		332,020	20.8			301,221	21.7			942,813	20.8			848,739	21.0
Central		273,682	17.1			228,566	16.4			775,913	17.1			653,728	16.1
Canada		224,279	14.1			184,837	13.3			633,553	14.0			516,529	12.8
	$	1,597,168	100.0	%	$	1,389,552	100.0	%	$	4,527,042	100.0	%	$	4,047,739	100.0	%

Segment EBITDA for our reportable segments is shown in the following table in thousands of U.S. dollars and as a percentage of segment revenues for the periods indicated.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Western		108,280	32.6	%		101,071	33.6	%	$	301,507	32.0	%	$	267,523	31.5	%
Eastern		106,908	27.0	%		90,991	26.4	%		295,411	26.8	%		258,333	26.0	%
Southern		99,612	26.9	%		81,394	24.6	%		291,964	27.2	%		276,844	26.8	%
Central		95,026	34.7	%		82,887	36.3	%		268,952	34.7	%		235,742	36.1	%
Canada		92,275	41.1	%		72,516	39.2	%		254,857	40.2	%		185,589	35.9	%
Corporate^(a)		(6,551)	—			(4,132)	—			(13,743)	—			(10,462)	—
	$	495,550	31.0	%	$	424,727	30.6	%	$	1,398,948	30.9	%	$	1,213,569	30.0	%

(a)

The majority of Corporate expenses are allocated to the five 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 five 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 11 to our Condensed Consolidated Financial Statements included in Part 1, Item 1 of this report.

Significant changes in revenue and segment EBITDA for our reportable segments for the three and nine month periods ended September 30, 2021, compared to the three and nine month periods ended September 30, 2020, are discussed below.

Segment Revenue

Revenue in our Eastern segment increased $51.8 million, or 15.1%, to $396.2 million for the three months ended September 30, 2021, from $344.4 million for the three months ended September 30, 2020. The components of the increase consisted of revenue growth from acquisitions closed subsequent to the three months ended September 30, 2020 of $22.3 million, net price increases of $16.5 million and the impact of a partial recovery of collected commercial recycling volumes, which declined in the prior year period due to economic disruptions resulting from the COVID-19 pandemic, and higher prices for old corrugated cardboard, other paper products, plastics and aluminum contributing to a $13.4 million increase in sales from recyclable commodities, partially offset by other revenue decreases of $0.4 million.

Revenue in our Eastern segment increased $106.9 million, or 10.7%, to $1.102 billion for the nine months ended September 30, 2021, from $995.4 million for the nine months ended September 30, 2020. The components of the increase consisted of net price increases of $43.8 million, revenue growth from acquisitions closed subsequent to the nine months ended September 30, 2020 of $42.3 million, the impact of a partial recovery of collected commercial recycling volumes, which declined in the prior year period due to economic disruptions resulting from the COVID-19 pandemic, and higher prices for old corrugated cardboard, other paper products, plastics and aluminum contributing to a $28.2 million increase in sales from recyclable commodities and other revenue increases of $0.7 million, partially offset by solid waste volume decreases of $8.1 million attributable primarily to COVID-19-related economic disruptions in our Northeastern markets,

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which commenced in March 2020 and continued into 2021, driving declines in commercial collection and roll off collection volumes.

Revenue in our Southern segment increased $40.4 million, or 12.2%, to $371.0 million for the three months ended September 30, 2021, from $330.6 million for the three months ended September 30, 2020. The components of the increase consisted of net price increases of $22.3 million, an increase in revenue at our E&P operations of $9.7 million due to a recovery in the demand for crude oil resulting in increased drilling and production and increased demand for our E&P waste services and solid waste volume increases of $6.4 million due primarily to higher commercial collection, roll off collection, transfer station and landfill volumes, higher prices for old corrugated cardboard, plastics and aluminum products contributing to a $1.4 million increase in sales from recyclable commodities, revenue growth from acquisitions closed subsequent to the three months ended September 30, 2020 of $1.0 million and other revenue increases of $0.9 million, partially offset by net revenue reductions from divestitures closed subsequent to September 30, 2020 of $1.3 million.

Revenue in our Southern segment increased $39.2 million, or 3.8%, to $1.072 billion for the nine months ended September 30, 2021, from $1.033 billion for the nine months ended September 30, 2020. The components of the increase consisted of net price increases of $53.7 million, solid waste volume increases of $10.8 million due primarily to higher commercial collection, roll off collection, transfer station and landfill volumes, higher prices for old corrugated cardboard, plastics and aluminum products contributing to a $5.8 million increase in sales from recyclable commodities, $1.7 million resulting from higher prices from the sale of landfill gas, revenue growth from acquisitions closed subsequent to the nine months ended September 30, 2020 of $1.4 million and other revenue increases of $0.8 million, partially offset by a decline in revenue at our E&P operations of $29.7 million and net revenue reductions from divestitures closed subsequent to September 30, 2020 of $5.3 million. The decrease in revenue at our E&P operations was attributable to the first and second quarter results in 2021 being adversely impacted by decreases in the demand for crude oil as a result of economic disruptions from the COVID-19 pandemic resulting in a drop in the value of crude oil, decreases in drilling and production activity levels and decreases in overall demand for our E&P waste services, with our third quarter results in 2021 benefitting from recoveries in the demand for crude oil and our E&P disposal services.

Revenue in our Western segment increased $30.8 million, or 10.2%, to $332.0 million for the three months ended September 30, 2021, from $301.2 million for the three months ended September 30, 2020. The components of the increase consisted of solid waste volume increases of $14.8 million attributable to increased collection and disposal volumes, net price increases of $7.3 million, revenue growth from acquisitions closed subsequent to the three months ended September 30, 2020 of $4.6 million and recyclable commodity revenue increases of $4.4 million due primarily to higher prices for old corrugated cardboard, metals and aluminum and higher volumes collected from residential recycling customers, partially offset by intermodal revenue decreases of $0.3 million.

Revenue in our Western segment increased $94.1 million, or 11.1%, to $942.8 million for the nine months ended September 30, 2021, from $848.7 million for the nine months ended September 30, 2020. The components of the increase consisted of solid waste volume increases of $47.3 million attributable to increased collection and disposal volumes, net price increases of $21.2 million, revenue growth from acquisitions closed subsequent to the nine months ended September 30, 2020 of $20.0 million, recyclable commodity revenue increases of $9.1 million due primarily to higher prices for old corrugated cardboard, metals and aluminum and higher volumes collected from residential recycling customers and other revenue increases of $0.2 million, partially offset by intermodal revenue decreases of $3.7 million due primarily to customer losses and shipping port logistical constraints resulting in a reduction in intermodal cargo volumes.

Revenue in our Central segment increased $45.1 million, or 19.7%, to $273.7 million for the three months ended September 30, 2021, from $228.6 million for the three months ended September 30, 2020. The components of the increase consisted of revenue growth from acquisitions closed subsequent to the three months ended September 30, 2020 of $26.1 million, net price increases of $11.0 million, higher prices for old corrugated cardboard and aluminum products contributing to a $3.2 million increase in sales from recyclable commodities, solid waste volume increases of $3.7 million due primarily to higher commercial and roll off collection volumes, an increase in E&P revenue of $1.6 million and other revenue increases of $1.0 million, partially offset by net revenue reductions from divestitures closed subsequent to September 30, 2020 of $1.5 million.

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Revenue in our Central segment increased $122.2 million, or 18.7%, to $775.9 million for the nine months ended September 30, 2021, from $653.7 million for the nine months ended September 30, 2020. The components of the increase consisted of revenue growth from acquisitions closed subsequent to the nine months ended September 30, 2020 of $81.5 million, net price increases of $30.4 million, solid waste volume increases of $5.9 million due primarily to commercial and roll off collection volumes and higher landfill special waste volumes, higher prices for old corrugated cardboard and aluminum products contributing to a $4.7 million increase in sales from recyclable commodities, an increase in E&P revenue of $1.9 million and other revenue increases of $2.0 million, partially offset by net revenue reductions from divestitures closed subsequent to September 30, 2020 of $4.2 million.

Revenue in our Canada segment increased $39.5 million, or 21.3%, to $224.3 million for the three months ended September 30, 2021, from $184.8 million for the three months ended September 30, 2020. The components of the increase consisted of net price increases of $10.7 million, $10.5 million resulting from a higher average foreign currency exchange rate in effect during the comparable reporting periods, $6.4 million resulting from higher prices for renewable energy credits associated with the generation of landfill gas, recyclable commodity revenue increases of $5.9 million due primarily to higher prices for old corrugated cardboard and higher volumes collected from residential recycling customers, solid waste volume increases of $4.5 million due primarily to higher collection and disposal volumes and other revenue increases of $1.5 million.

Revenue in our Canada segment increased $117.1 million, or 22.7%, to $633.6 million for the nine months ended September 30, 2021, from $516.5 million for the nine months ended September 30, 2020. The components of the increase consisted of $41.3 million resulting from a higher average foreign currency exchange rate in effect during the comparable reporting periods, net price increases of $31.8 million, $20.5 million resulting from higher prices for renewable energy credits associated with the generation of landfill gas, solid waste volume increases of $12.7 million due primarily to higher roll off collection and landfill special waste volumes, recyclable commodity revenue increases of $9.9 million due primarily to higher prices for old corrugated cardboard and higher volumes collected from residential recycling customers and other revenue increases of $0.9 million.

Segment EBITDA

Segment EBITDA in our Western segment increased $7.2 million, or 7.1%, to $108.3 million for the three months ended September 30, 2021, from $101.1 million for the three months ended September 30, 2020. The increase was due primarily to an increase in revenues of $30.8 million and a decrease in expenses for processing recyclable commodities of $2.5 million due to increased recyclable commodity values resulting in price reductions charged by third-party recycling processors, partially offset by an increase in labor expenses of $6.4 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in taxes on revenues of $4.1 million due primarily to increased revenues in our solid waste markets and credit recorded to expenses during the prior year period at Chiquita Canyon landfill due to a reversal of amounts accrued for certain fees and exactions resulting from our successful challenge of these expenses, an increase in third-party trucking and transportation expenses of $3.3 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, $2.8 million of additional operating costs from acquisitions closed subsequent to the three months ended September 30, 2020, an increase in diesel fuel expense of $2.7 million due to higher fuel prices and increased consumption resulting from additional truck and equipment operating hours to support solid waste volume increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $1.8 million due to parts and service rate increases and additional maintenance and repair requirements resulting from increased truck and equipment operating hours to support increases in our solid waste volumes, an increase in 401(k) matching expenses of $1.3 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in employee medical benefits expenses of $1.2 million due to an increase in medical visits, an increase in third-party disposal expenses of $1.1 million due primarily to increased solid waste collection volumes and $1.4 million of other net expense increases.

Segment EBITDA in our Western segment increased $34.0 million, or 12.7%, to $301.5 million for the nine months ended September 30, 2021, from $267.5 million for the nine months ended September 30, 2020. The increase was due primarily to an increase in revenues of $94.1 million, a decrease in expenses for processing recyclable commodities of $4.2 million due to increased recyclable commodity values resulting in price reductions charged by third-party recycling

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processors, a decrease in intermodal rail expenses of $3.2 million due to a reduction in cargo volume and a decrease in supplemental bonuses and other cash incentive compensation to non-management personnel of $2.4 million due to the prior year period including non-recurring expenses to recognize services provided by our front-line employees during the COVID-19 pandemic, partially offset by an increase in labor expenses of $15.3 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, $13.9 million of additional operating costs from acquisitions closed subsequent to the nine months ended September 30, 2020, an increase in third-party trucking and transportation expenses of $6.6 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in taxes on revenues of $5.4 million due primarily to increased revenues in our solid waste markets, an increase in diesel fuel expense of $5.1 million due to higher fuel prices, an increase in third-party disposal expenses of $5.0 million due primarily to increased solid waste collection volumes, an increase in employee medical benefits expenses of $4.2 million due to an increase in medical visits, an increase in truck, container, equipment and facility maintenance and repair expenses of $4.0 million due primarily to parts and service rate increases, an increase in corporate overhead expense allocations of $3.0 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation, an increase in 401(k) matching expenses of $1.7 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in landfill maintenance, environmental compliance and daily cover expenses of $1.2 million due to increased compliance requirements under our landfill operating permits and $4.5 million of other net expense increases.

Segment EBITDA in our Eastern segment increased $15.9 million, or 17.5%, to $106.9 million for the three months ended September 30, 2021, from $91.0 million for the three months ended September 30, 2020. The increase was due primarily to an increase in revenues of $51.8 million and $0.9 million of other net expense decreases, partially offset by $16.3 million of additional operating costs from acquisitions closed subsequent to the three months ended September 30, 2020, an increase in labor expenses of $5.4 million due primarily to employee pay increases, an increase in third-party trucking and transportation expenses of $3.2 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in truck, container, equipment and facility maintenance and repair expenses of $2.5 million due to parts and service rate increases and variability in the timing of major repairs, an increase in third-party disposal expenses of $2.0 million due primarily to increased rates for third party disposal and increased commercial collection volumes, an increase in leachate expense of $1.8 million due primarily to the impact of hurricanes causing higher precipitation in certain markets where our landfills are located, an increase in diesel fuel expense of $1.7 million due to higher fuel prices, an increase in 401(k) matching expenses of $1.4 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in employee medical benefits expenses of $1.4 million due to an increase in medical visits and an increase in taxes on revenues of $1.1 million due primarily to price-led increases in revenues.

Segment EBITDA in our Eastern segment increased $37.1 million, or 14.4%, to $295.4 million for the nine months ended September 30, 2021, from $258.3 million for the nine months ended September 30, 2020. The increase was due primarily to an increase in revenues of $106.9 million, a decrease in supplemental bonuses and other cash incentive compensation to non-management personnel of $3.2 million due to the prior year period including non-recurring expenses to recognize services provided by our front-line employees during the COVID-19 pandemic and a decrease in expenses for uncollectible accounts receivable of $3.2 million primarily due to the prior year period incurring increased expenses due to customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic, partially offset by $27.7 million of additional operating costs from acquisitions closed subsequent to the nine months ended September 30, 2020, an increase in labor expenses of $10.4 million due primarily to employee pay increases, an increase in third-party disposal expenses of $6.2 million due primarily to increased rates paid for third party disposal and increased volumes in our Northeastern markets as they began to recover in 2021 from economic disruptions attributable to the COVID-19 pandemic, an increase in third-party trucking and transportation expenses of $6.2 million due primarily to opening a new transfer station facility in the latter half of 2020 and increased transfer station volumes in our Northeastern markets as they began to recover in 2021 from economic disruptions attributable to the COVID-19 pandemic, an increase in employee medical benefits expenses of $5.0 million due to an increase in medical visits, an increase in truck, container, equipment and facility maintenance and repair expenses of $4.9 million due primarily to parts and service rate increases, an increase in diesel fuel expense of $3.3 million due to higher fuel prices, an increase in taxes on revenues of $2.6 million due primarily to price-led increases in revenues, an increase in corporate overhead expense allocations of $2.0 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation, an

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increase in 401(k) matching expenses of $1.9 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in landfill maintenance expenses of $1.5 million due to increased gas recovery system operating expenses and expenses incurred to adhere to compliance requirements under our landfill operating permits and other net expense increases of $4.5 million.

Segment EBITDA in our Southern segment increased $18.2 million, or 22.4%, to $99.6 million for the three months ended September 30, 2021, from $81.4 million for the three months ended September 30, 2020. The increase was due to an increase in revenues of $41.7 million from organic growth and acquisitions, partially offset by an increase in labor expenses of $5.9 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $4.3 million due to parts and service rate increases and additional maintenance and repair requirements resulting from increased truck and equipment operating hours to support increases in our solid waste volumes, an increase in third-party disposal expenses of $2.4 million due primarily to increased solid waste collection volumes, an increase in diesel fuel expense of $2.3 million due to higher fuel prices and increased consumption resulting from additional truck and equipment operating hours to support solid waste volume increases, an increase in 401(k) matching expenses of $2.1 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in third-party trucking and transportation expenses of $1.7 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in subcontracted hauling services of $1.5 million due to outsourcing the servicing of certain non-strategic collection customers to third party haulers, an increase in employee medical benefits expenses of $1.5 million due to an increase in medical visits, an increase in taxes on revenues of $1.0 million due primarily to increased revenues in our solid waste markets, a decrease to EBITDA of $0.3 million from the impact of operations disposed of subsequent to the three months ended September 30, 2020 and other net expense increases of $0.5 million.

Segment EBITDA in our Southern segment increased $15.2 million, or 5.5%, to $292.0 million for the nine months ended September 30, 2021, from $276.8 million for the nine months ended September 30, 2020. The increase was due to an increase in solid waste revenues of $74.2 million from organic growth and acquisitions, a decrease in expenses for auto and workers’ compensation claims of $5.7 million due primarily to higher claims severity in the prior year period and adjustments recorded in the current year period to decrease projected losses on outstanding claims originally recorded prior to 2021 and a decrease in supplemental bonuses and other cash incentive compensation to non-management personnel of $3.7 million due to the prior year period including non-recurring expenses to recognize services provided by our front-line employees during the COVID-19 pandemic, partially offset by a decrease in EBITDA at our E&P operations of $14.2 million, consisting of a $29.7 million decrease in revenues being partially offset by a total decrease in expenses of $15.5 million attributable to declines in disposal volumes, headcount and equipment hours operated, an increase in labor expenses at our solid waste operations of $8.7 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in subcontracted hauling services at our solid waste operations of $7.6 million due to outsourcing the servicing of certain non-strategic collection customers to third party haulers, an increase in truck, container, equipment and facility maintenance and repair expenses of $6.6 million due to parts and service rate increases and additional maintenance and repair requirements resulting from increased truck and equipment operating hours to support increases in our solid waste volumes, an increase in employee medical benefits expenses of $5.4 million due to an increase in medical visits, an increase in third-party disposal expenses at our solid waste operations of $5.2 million due primarily to increased solid waste collection volumes, an increase in third-party trucking and transportation expenses at our solid waste operations of $4.8 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in diesel fuel expense of $3.1 million due to higher fuel prices and increased consumption resulting from additional truck and equipment operating hours to support solid waste volume increases, an increase in 401(k) matching expenses of $2.5 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, a decrease to EBITDA of $2.4 million from the impact of operations disposed of subsequent to the nine months ended September 30, 2020, an increase in expenses for uncollectible accounts receivable of $1.7 million, an increase in taxes on revenues of $1.4 million due primarily to increased revenues, an increase in corporate overhead expense allocations of $1.3 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation, an increase in leachate expense of $1.2 million due primarily to the impact of hurricanes causing higher precipitation in certain markets where our landfills are located and other net expense increases of $2.3 million.

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Segment EBITDA in our Central segment increased $12.1 million, or 14.6%, to $95.0 million for the three months ended September 30, 2021, from $82.9 million for the three months ended September 30, 2020. The increase was due primarily to an increase in revenues of $46.6 million from organic growth and acquisitions, partially offset by $12.4 million of additional operating costs from certain acquisitions closed subsequent to the three months ended September 30, 2020, an increase in labor expenses of $9.0 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $3.1 million due to parts and service rate increases and additional maintenance and repair requirements resulting from increased truck and equipment operating hours to support increases in our solid waste volumes, an increase in third-party disposal expenses of $2.6 million due primarily to increased solid waste collection volumes, an increase in 401(k) matching expenses of $1.4 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in diesel fuel expense of $1.2 million due to higher fuel prices and increased consumption resulting from additional truck and equipment operating hours to support solid waste volume increases, an increase in employee medical benefits expenses of $1.1 million due to an increase in medical visits, an increase in taxes on revenues of $1.1 million due primarily to increased revenues in our solid waste markets, a decrease to EBITDA of $0.3 million from the impact of operations disposed of subsequent to the three months ended September 30, 2020 and other net expense increases of $2.3 million.

Segment EBITDA in our Central segment increased $33.3 million, or 14.1%, to $269.0 million for the nine months ended September 30, 2021, from $235.7 million for the nine months ended September 30, 2020. The increase was due primarily to an increase in revenues of $126.4 million from organic growth and acquisitions and a decrease in supplemental bonuses and other cash incentive compensation to non-management personnel of $2.4 million due to the prior year period including non-recurring expenses to recognize services provided by our front-line employees during the COVID-19 pandemic, partially offset by $44.4 million of additional operating costs from certain acquisitions closed subsequent to the nine months ended September 30, 2020, an increase in labor expenses of $16.6 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $7.0 million due primarily to parts and service rate increases, an increase in employee medical benefits expenses of $4.1 million due to an increase in medical visits, an increase in third-party disposal expenses of $3.7 million due primarily to increased solid waste collection volumes, an increase in corporate overhead expense allocations of $3.4 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation, an increase in third-party trucking and transportation expenses of $3.3 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in taxes on revenues of $2.8 million due primarily to increased revenues, an increase in expenses for uncollectible accounts receivable of $1.9 million due primarily to the prior year period collection of certain accounts deemed uncollectible in 2019, an increase in 401(k) matching expenses of $1.9 million due to the prior year period reflecting less expenses due to the impact of the June 1, 2020 to December 31, 2020 suspension of our 401(k) match, an increase in diesel fuel expense of $1.6 million due to higher fuel prices, a decrease to EBITDA of $0.4 million from the impact of operations disposed of subsequent to the nine months ended September 30, 2020 and other net expense increases of $4.4 million.

Segment EBITDA in our Canada segment increased $19.8 million, or 27.2%, to $92.3 million for the three months ended September 30, 2021, from $72.5 million for the three months ended September 30, 2020. The increase was comprised of an increase of $15.8 million assuming foreign currency parity during the comparable reporting periods and an increase of $4.0 million from a higher average foreign currency exchange rate in effect during the comparable reporting periods. The $15.8 million increase, which assumes foreign currency parity, was due primarily to an increase in revenues of $29.0 million, partially offset by an increase in labor expenses of $4.9 million due primarily to employee pay increases and headcount additions to support solid waste volume increases, an increase in subcontracted hauling services of $2.2 million due primarily to the prior year period results including the impact of reversing accrued expenses associated with estimated equipment charge overages related to an outsourced collection contract, an increase in diesel fuel expense of $2.0 million due to higher fuel prices and increased consumption resulting from additional truck and equipment operating hours to support solid waste volume increases, an increase in insurance premium expense of $0.9 million due to the prior year period results including the impact of recording a credit to expense resulting from premium audit refunds, an increase in expenses for uncollectible accounts receivable of $0.9 million primarily due to non-recurring expense reductions recorded in the prior year period to adjust reserves for uncollectible accounts receivable based upon actual payment defaults from customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic

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being less than originally estimated, an increase in truck, container, equipment and facility maintenance and repair expenses of $0.8 million due to parts and service rate increases and additional maintenance and repair requirements resulting from increased truck and equipment operating hours to support increases in our solid waste volumes and other net expense increases of $1.5 million.

Segment EBITDA in our Canada segment increased $69.3 million, or 37.3%, to $254.9 million for the nine months ended September 30, 2021, from $185.6 million for the nine months ended September 30, 2020. The increase was comprised of an increase of $54.6 million assuming foreign currency parity during the comparable reporting periods and an increase of $14.7 million from a higher average foreign currency exchange rate in effect during the comparable reporting periods. The $54.6 million increase, which assumes foreign currency parity, was due primarily to an increase in revenues of $75.4 million, partially offset by an increase in labor expenses of $9.1 million due primarily to employee pay increases and headcount additions to support solid waste volume increases and the receipt in the prior year period of a government subsidy reimbursing us for certain payroll expenditures remitted to our employees during the COVID-19 pandemic, an increase in diesel fuel expense of $4.4 million due to higher fuel prices and increased consumption resulting from additional truck and equipment operating hours to support solid waste volume increases, an increase in subcontracted hauling services of $1.7 million due primarily to the prior year period results including the impact of reversing accrued expenses associated with estimated equipment charge overages related to an outsourced collection contract, an increase in third-party trucking and transportation expenses of $1.4 million due primarily to increased transfer station and landfill special waste volumes requiring trucking and transportation services to our landfills, an increase in truck, container, equipment and facility maintenance and repair expenses of $1.8 million due to parts and service rate increases and additional maintenance and repair requirements resulting from increased truck and equipment operating hours to support increases in our solid waste volumes and other net expense increases of $2.4 million.

Segment EBITDA at Corporate decreased $2.5 million, to a loss of $6.6 million for the three months ended September 30, 2021, from a loss of $4.1 million for the three months ended September 30, 2020. The decrease was due to a decrease in corporate overhead allocated through charges to our segments of $10.2 million due to a decrease in expenses qualifying for allocation, an increase in direct acquisition expenses of $3.3 million due to an increase in acquisition activity in the comparable periods and a collective increase in travel, meeting, training and community activity expenses of $1.0 million due to increased travel and social gatherings in the current year period due to a reduction in restrictions associated with the COVID-19 pandemic, partially offset by a decrease in cash incentive compensation expense of $7.9 million due primarily to the prior year period including expenses for supplemental bonuses and other cash incentive compensation to non-management personnel to recognize services provided by our front-line employees during the COVID-19 pandemic, a decrease in equity-based compensation expenses of $1.2 million resulting primarily from expense increases recorded during the prior year period to the amount of performance-based restricted share units granted in 2018 that were estimated to ultimately vest based on the achievement of required financial performance results, a decrease in deferred compensation expenses of $1.1 million as a result of higher increases during the prior year period in the market value of investments to which employee deferred compensation liability balances are tracked and $1.8 million of other net expense decreases.

Segment EBITDA at Corporate decreased $3.2 million, to a loss of $13.7 million for the nine months ended September 30, 2021, from a loss of $10.5 million for the nine months ended September 30, 2020. The decrease was due to an increase in deferred compensation expenses of $3.1 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked, an increase in administrative payroll expenses of $1.7 million due primarily to annual pay increases, an increase in direct acquisition expenses of $1.7 million due to an increase in acquisition activity in the comparable periods, an increase in employee relocation expenses of $1.7 million, a collective increase in travel, meeting, training and community activity expenses of $1.6 million due to increased travel and social gatherings in the current year period due to a reduction in restrictions associated with the COVID-19 pandemic, an increase in equity-based compensation expenses of $1.2 million associated with the net impact of current and prior period adjustments of our common shares held in our deferred compensation plan by certain key executives to fair value as a result of the shares being exchanged for other investment options and $0.7 million of other net expense increases, partially offset by an increase in corporate overhead allocated through charges to our segments of $8.5 million due to an increase in expenses qualifying for allocation.

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LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth certain cash flow information for the nine months ended September 30, 2021 and 2020 (in thousands of U.S. dollars):


	Nine Months Ended
	September 30,
	2021		2020
Net cash provided by operating activities	$	1,269,961	$	1,185,573
Net cash used in investing activities		(1,034,840)		(650,066)
Net cash used in financing activities		(491,581)		(4,093)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		443		980
Net increase (decrease) in cash, cash equivalents and restricted cash		(256,017)		532,394
Cash, cash equivalents and restricted cash at beginning of period		714,389		423,221
Cash, cash equivalents and restricted cash at end of period	$	458,372	$	955,615

Operating Activities Cash Flows

For the nine months ended September 30, 2021, net cash provided by operating activities was $1.270 billion. For the nine months ended September 30, 2020, net cash provided by operating activities was $1.186 billion. The $84.4 million increase was due primarily to the following:

Increase in earnings — Our increase in net cash provided by operating activities was favorably impacted by $109.6 million from an increase in net income, excluding depreciation, amortization of intangibles, loss on early extinguishment of debt, share-based compensation, 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 subsequent to the nine months ended September 30, 2020, earnings generated from the increased sales of recyclable commodities and renewal energy credits associated with the generation of landfill gas and an increase in the average Canadian dollar to U.S. dollar currency exchange rate offsetting a decline in earnings at our E&P operations.

Deferred income taxes — Our increase in net cash provided by operating activities was favorably impacted by $53.3 million from deferred income taxes as changes in deferred income taxes resulted in a decrease to operating cash flows of $24.3 million for the nine months ended September 30, 2021, compared to a decrease to operating cash flows of $77.6 million for the nine months ended September 30, 2020. The decrease in deferred taxes for the nine months ended September 30, 2021 was primarily due to the tax deduction timing of make-whole premium payments attributable to the early extinguishment of the outstanding senior notes under our master note purchase agreements. The decrease in deferred taxes for the nine months ended September 30, 2020 was attributable to the impairment of certain assets within our E&P operations.

Other long-term liabilities — Our increase in net cash provided by operating activities was favorably impacted by $17.5 million from other long-term liabilities, as changes in other long-term liabilities resulted in an increase to operating cash flows of $12.7 million for the nine months ended September 30, 2021, compared to a decrease to operating cash flows of $4.8 million for the nine months ended September 30, 2020. The increase for the nine months ended September 30, 2021 was primarily attributable to the receipt of funds associated with the eminent domain purchase of an operating facility that will be replaced with a newly constructed facility in a future period and an increase in employee deferred compensation liabilities. The decrease for the nine months ended September 30, 2020 was primarily attributable to the cash settlement of equity awards accounted for as liabilities that were granted to employees of Progressive Waste prior to June 1, 2016.

Deferred revenue — Our increase in net cash provided by operating activities was favorably impacted by $12.4 million from deferred revenue as changes in deferred revenue resulted in an increase to operating cash flows of $15.8 million for the nine months ended September 30, 2021, compared to an increase to operating cash flows of $3.4 million for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, deferred revenue increased due to price increases on our advanced billed residential and commercial collection services and the timing of bi-monthly advance service billings.

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Prepaid expenses – Our increase in net cash provided by operating activities was favorably impacted by $12.3 million from prepaid expenses due primarily to a decrease in prepaid vendor payments.

Accounts receivable – Our increase in net cash provided by operating activities was unfavorably impacted by $88.3 million from accounts receivable as changes in accounts receivable resulted in a decrease to operating cash flows of $42.4 million for the nine months ended September 30, 2021, compared to an increase to operating cash flows of $45.9 million for the nine months ended September 30, 2020. The decrease for the nine months ended September 30, 2021 was due to increases in revenues, which remained as outstanding receivables at September 30, 2021. The increase for the nine months ended September 30, 2020 was attributable to the collection of outstanding accounts receivable existing prior to the COVID-19-driven economic downturn, with accounts receivable at September 30, 2020 reflecting the impact of lower uncollected revenues.

Accounts payable and accrued liabilities — Our increase in net cash provided by operating activities was unfavorably impacted by $17.2 million from accounts payable and accrued liabilities as changes in accounts payable and accrued liabilities resulted in an increase to operating cash flows of $52.7 million for the nine months ended September 30, 2021, compared to an increase to operating cash flows of $69.9 million for the nine months ended September 30, 2020. The increase for the nine months ended September 30, 2021 was due primarily to increases in operating expenses during the period which remained as outstanding obligations at September 30, 2021, the settlement of an acquired compensation liability and the timing of payroll cycles. The increase for the nine months ended September 30, 2020 was due primarily to increases in accrued interest expense and accrued incentive compensation expense and the deferral of payroll taxes as permitted by the Coronavirus Aid, Relief, and Economic Security Act of 2020.

Capping, closure and post-closure expenditures – Our increase in net cash provided by operating activities was unfavorably impacted by a $10.0 million increase in capping, closure and post-closure expenditures due to the timing of interim capping requirements.

As of September 30, 2021, we had a working capital surplus of $15.0 million, including cash and equivalents of $339.5 million. Our working capital surplus decreased $364.6 million from a working capital surplus of $379.6 million at December 31, 2020 including cash and equivalents of $617.3 million, due primarily to the impact of decreased cash balances, decreased prepaid income taxes, increased accounts payable and accrued liabilities and increased deferred revenue being partially offset by increased accounts receivable. 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 Flows

Net cash used in investing activities increased $384.8 million to $1.035 billion for the nine months ended September 30, 2021, from $650.1 million for the nine months ended September 30, 2020. The significant components of the increase included the following:

An increase in cash paid for acquisitions of $387.5 million;

An increase in capital expenditures at operations owned in the comparable periods of $48.0 million due to increases in land and buildings, heavy equipment and containers; and

An increase in capital expenditures at operations acquired during the comparative periods of $10.8 million due to additional trucks and containers; less

A decrease in capital expenditures for undeveloped landfill property of $66.8 million attributable to expenditures during the nine months ended September 30, 2020 for expansion land at certain existing landfill facilities.

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Financing Activities Cash Flows

Net cash used in financing activities increased $487.5 million to net cash used in financing activities of $491.6 million for the nine months ended September 30, 2021, from net cash used in financing activities of $4.1 million for the nine months ended September 30, 2020. The significant components of the increase included the following:

An increase from the net change in long-term borrowings of $153.1 million (long-term borrowings increased $131.9 million during the nine months ended September 30, 2021 and increased $285.0 million during the nine months ended September 30, 2020);

An increase from premiums paid on early extinguishment of debt of $110.6 million resulting from the repayment in September 2021 of all of our outstanding senior notes under our master note purchase agreements;

An increase in payments to repurchase our common shares of $200.0 million due to a higher volume of shares repurchased;

An increase in cash dividends paid of $14.8 million due primarily to an increase in our quarterly dividend rate for the nine months ended September 30, 2021 to $0.205 per share, from $0.185 per share for the nine months ended September 30, 2020;

An increase in debt issuance costs of $6.9 million attributable to senior note offerings completed in the comparative periods; and

An increase in contingent consideration payments of $5.2 million due primarily to a payment remitted in 2021 to settle a contingent liability assumed in the Progressive Waste acquisition; less

A decrease in tax withholdings related to net share settlements of equity-based compensation of $4.8 million due to a decrease in the value of equity-based compensation awards vesting.

Our business is capital intensive. Our capital requirements include acquisitions and capital expenditures for landfill cell construction, landfill development, landfill closure activities and intermodal facility construction in the future.

On July 27, 2021, 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 13,025,895 of our common shares during the period of August 10, 2021 to August 9, 2022 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 and overall market conditions. All common shares purchased under the NCIB will be immediately cancelled following their repurchase. Information regarding our NCIB can be found under the “Shareholders’ Equity” section in Note 17 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Our Board of Directors authorized the initiation of a quarterly cash dividend in October 2010 and has increased it on an annual basis. In October 2020, our Board of Directors authorized an increase to our regular quarterly cash dividend of $0.02, from $0.185 to $0.205 per share. In October 2021, our Board of Directors authorized an increase to our regular quarterly cash dividend of $0.025, from $0.205 to $0.230 per share. Cash dividends of $160.8 million and $145.9 million were paid during the nine months ended September 30, 2021 and 2020, respectively. We cannot assure you as to the amounts or timing of future dividends.

We made $479.5 million in capital expenditures for property and equipment during the nine months ended September 30, 2021, and we expect to make total capital expenditures for property and equipment of approximately $700 million in 2021. We have funded and intend to fund the balance of our planned 2021 capital expenditures principally through cash on hand, internally generated funds and borrowings under our 2021 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, 2021 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

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foreseeable future. However, disruptions in the capital and credit markets could adversely affect our ability to draw on our 2021 Credit Agreement or raise other capital. Our access to funds under the 2021 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.

As of September 30, 2021, $650.0 million under the term loan and $634.9 million under the revolving credit facility were outstanding under our 2021 Credit Agreement, exclusive of outstanding standby letters of credit of $114.7 million. We also have $6.8 million of letters of credit issued and outstanding at September 30, 2021 under facilities other than the 2021 Credit Agreement. Our 2021 Credit Agreement matures in July 2026.

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 2032 (the “2032 Senior Notes”) and $850.0 million aggregate principal amount of 2.95% Senior Notes due 2052 (the “2052 Senior Notes” and, together with the 2032 Senior Notes, the “Notes”). We issued the Notes under the Indenture, dated as of November 16, 2018, by and between the Company and U.S. Bank National Association, as trustee, as supplemented by 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 senior notes (the “Private Notes”) that were governed by our 2008 and 2016 master note purchase agreements. We repaid the Private Notes, including the $110.6 million make-whole payment, with the net proceeds from the Offering and borrowings under the revolving credit facility provided under our 2021 Credit Agreement. We recorded $115.3 million to Loss on early extinguishment of debt during the nine months ended September 30, 2021 due to the repayment of the Private Notes and associated make-whole premium and related fees.

We will pay interest on the Notes semi-annually in arrears. The 2032 Senior Notes will mature on January 15, 2032 and the 2052 Senior Notes will mature on January 15, 2052. The 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 Notes are not guaranteed by any of our subsidiaries.

See Note 10 to our Condensed Consolidated Financial Statements included in Part I, Items 1 of this report for further details on the debt agreements.

We are a well-known seasoned issuer with an effective shelf registration statement on Form S-3 filed in September 2021, which registers an unspecified amount of debt securities, including debentures, notes or other types of debt. In the future, we may issue debt securities under our shelf registration statement or in private placements from time to time on an opportunistic basis, based on market conditions and available pricing. Unless otherwise indicated in the relevant offering documents, we expect to use the proceeds from any such offerings for general corporate purposes, including repaying, redeeming or repurchasing debt, acquiring additional assets or businesses, capital expenditures and increasing our working capital.

As of September 30, 2021, 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	$	4,930,395	$	5,289	$	10,843	$	1,296,186	$	3,618,077
Cash interest payments	$	1,963,715	$	140,932	$	297,562	$	277,549	$	1,247,672
Contingent consideration	$	85,819	$	42,359	$	5,724	$	3,224	$	34,512
Operating leases	$	198,888	$	9,922	$	70,255	$	43,761	$	74,950
Final capping, closure and post-closure	$	1,512,933	$	12,680	$	41,607	$	9,525	$	1,449,121

____________________

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Long-term debt payments include:

$634.9 million in principal payments due July 2026 related to our revolving credit facility under our 2021 Credit Agreement. We may elect to draw amounts on our 2021 Credit Agreement in U.S. dollar LIBOR rate loans, U.S. dollar base rate loans, Canadian-based bankers’ acceptances or BA equivalent notes, and Canadian dollar prime rate loans. At September 30, 2021, $631.0 million of the outstanding borrowings drawn under the revolving credit facility were in U.S. LIBOR rate loans, which bear interest at the LIBOR rate plus the applicable margin (for a total rate of 1.09% on such date) and $3.9 million of the outstanding borrowings drawn under the revolving credit facility were in Canadian-based bankers’ acceptances, which bear interest at the Canadian Dollar Offered Rate plus the applicable acceptance fee (for a total rate of 1.43% on such date).

$650.0 million in principal payments due July 2026 related to our term loan under our 2021 Credit Agreement. Outstanding amounts on the term loan can be either base rate loans or LIBOR loans. At September 30, 2021, all amounts outstanding under the term loan were in LIBOR loans which bear interest at the LIBOR rate plus the applicable margin (for a total rate of 1.09% on such date).

$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%.

$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%.

$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%.

$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%.

$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%.

$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%.

$38.3 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 September 30, 2021, and have maturity dates ranging from 2028 to 2036.

10)

$7.1 million in principal payments related to our financing leases. Our financing leases bear interest at a rate of 1.89% at September 30, 2021, and have a lease expiration date of 2026.

The following assumptions were made in calculating cash interest payments:

We calculated cash interest payments on the 2021 Credit Agreement using the LIBOR rate plus the applicable LIBOR 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 September 30, 2021. We assumed the 2021 Credit Agreement is paid off when it matures in July 2026.

We calculated cash interest payments on our interest rate swaps using the stated interest rate in the swap agreement less the LIBOR rate through the earlier expiration of the term of the swaps or the term of the credit facility.

Contingent consideration payments include $67.0 million recorded as liabilities in our Condensed Consolidated Financial Statements at September 30, 2021, and $18.8 million of future interest accretion on the recorded obligations.

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We are party to operating lease agreements and finance leases. 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⁾	Total		1 Year		Years		Years		Years
Unconditional purchase obligations	$	121,120	$	67,308	$	53,812	$	—	$	—

____________________

(1)

We are party to unconditional purchase obligations. 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 September 30, 2021, our unconditional purchase obligations consisted of multiple fixed-price fuel purchase contracts under which we have 48.6 million gallons remaining to be purchased for a total of $121.1 million. The current fuel purchase contracts expire on or before February 28, 2024. These arrangements have not materially affected our financial position, results of operations or liquidity during the nine months ended September 30, 2021, nor are they expected to have a material impact on our future financial position, results of operations or liquidity.

We have obtained financial surety bonds, primarily to support our financial assurance needs and landfill and E&P operations. We provided customers and various regulatory authorities with surety bonds in the aggregate amounts of approximately $1.286 billion and $1.210 billion at September 30, 2021 and December 31, 2020, respectively. These arrangements have not materially affected our financial position, results of operations or liquidity during the nine months ended September 30, 2021, 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.

The disposal tonnage that we received in the nine month periods ended September 30, 2021 and 2020, at all of our landfills during the respective period, is shown below (tons in thousands):


	Nine Months Ended September 30,
	2021		2020
	Number	Total	Number	Total
	of Sites	Tons	of Sites	Tons
Owned operational landfills and landfills operated under life-of-site agreements	89	35,167	89	33,268
Operated landfills	5	421	4	413
	94	35,588	93	33,681

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NON-GAAP FINANCIAL MEASURES

Adjusted Free Cash Flow

We present adjusted free cash flow, a non-GAAP financial measure, supplementally because it is widely used by investors as a valuation and liquidity measure in the solid waste industry. Management uses adjusted free cash flow as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We define adjusted free cash flow as net cash provided by operating activities, plus or minus change in book overdraft, plus proceeds from disposal of assets, less capital expenditures for property and equipment and distributions to noncontrolling interests. We further adjust this calculation to exclude the effects of 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 liquidity or financial measures. Other companies may calculate adjusted free cash flow differently. Our adjusted free cash flow for the nine month periods ended September 30, 2021 and 2020, are calculated as follows (amounts in thousands of U.S. dollars):


	Nine Months Ended
	September 30,
	2021		2020
Net cash provided by operating activities	$	1,269,961	$	1,185,573
Less: Change in book overdraft		(563)		(862)
Plus: Proceeds from disposal of assets		10,109		11,564
Less: Capital expenditures for property and equipment		(479,480)		(420,694)
Adjustments:
Payment of contingent consideration recorded in earnings ^(a)		520		—
Cash received for divestitures ^(b)		—		(4,974)
Transaction-related expenses ^(c)		25,673		4,497
Pre-existing Progressive Waste share-based grants ^(d)		317		7,455
Tax effect ^(e)		(699)		(4,168)
Adjusted free cash flow	$	825,838	$	778,391

____________________

(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 settlement of an acquired compensation liability.

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

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

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Adjusted EBITDA

We 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 three and nine month periods ended September 30, 2021 and 2020, are calculated as follows (amounts in thousands of U.S. dollars):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income attributable to Waste Connections	$	114,381	$	158,049	$	451,736	$	74,012
Plus (less): Net income (loss) attributable to noncontrolling interests		273		(58)		325		(594)
Plus: Income tax provision		18,419		33,657		106,578		23,654
Plus: Interest expense		40,418		40,636		124,171		119,562
Less: Interest income		(495)		(903)		(2,342)		(4,396)
Plus: Depreciation and amortization		207,302		190,243		598,825		555,703
Plus: Closure and post-closure accretion		3,544		3,723		10,919		11,340
Plus: Impairments and other operating items		3,104		3,805		9,819		442,582
Plus (less): Other expense (income), net		(3,140)		(702)		(5,452)		3,046
Plus: Loss on early extinguishment of debt		115,288		—		115,288		—
Adjustments:
Plus: Transaction-related expenses ^(a)		5,637		2,335		6,220		4,497
Plus: Fair value changes to equity awards ^(b)		914		1,798		7,638		6,021
Adjusted EBITDA	$	505,645	$	432,583	$	1,423,725	$	1,235,427

____________________

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

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

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Adjusted Net Income Attributable to Waste Connections and Adjusted Net Income per Diluted Share Attributable to Waste Connections

We 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 a valuation measure in the solid waste industry. Management uses adjusted net income attributable to Waste Connections and adjusted net income per diluted share attributable to Waste Connections as one of the principal measures to evaluate and monitor the ongoing financial performance of 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 three and nine month periods ended September 30, 2021 and 2020, are calculated as follows (amounts in thousands of U.S. dollars, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Reported net income attributable to Waste Connections	$	114,381	$	158,049	$	451,736	$	74,012
Adjustments:
Amortization of intangibles ^(a)		35,337		32,653		100,237		96,062
Impairments and other operating items ^(b)		3,104		3,805		9,819		442,582
Transaction-related expenses ^(c)		5,637		2,335		6,220		4,497
Fair value changes to equity awards ^(d)		914		1,798		7,638		6,021
Loss on early extinguishment of debt ^(e)		115,288		—		115,288		—
Tax effect ^(f)		(41,531)		(10,000)		(61,466)		(137,523)
Tax items ^(g)		—		—		—		31,508
Adjusted net income attributable to Waste Connections	$	233,130	$	188,640	$	629,472	$	517,159

Diluted earnings per common share attributable to Waste Connections’ common shareholders:
Reported net income	$	0.44	$	0.60	$	1.72	$	0.28
Adjusted net income	$	0.89	$	0.72	$	2.39	$	1.96

____________________

(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 make-whole premium and related fees associated with the early termination of $1.5 billion in senior notes.

(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.

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

INFLATION

In the current environment, we have seen inflationary pressures resulting from higher fuel 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

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business. However, competitive pressures or delays in the timing of rate increases under certain of our contracts, particularly amid the economic impact of the COVID-19 pandemic, 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.

SEASONALITY

Based on historic trends, excluding any impact from the COVID-19 pandemic or 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. This seasonality reflects (a) the lower volume of solid waste generated during the late fall, winter and early spring because of decreased construction and demolition activities during winter months in Canada and the U.S. and (b) reduced E&P activity during harsh weather conditions, with expected fluctuation due to such seasonality between our highest and lowest quarters of approximately 10%. In addition, some of our operating costs may be higher in the winter months. Adverse winter weather conditions slow waste collection activities, resulting in higher labor and operational costs. Greater precipitation in the winter increases the weight of collected municipal solid waste, resulting in higher disposal costs, which are calculated on a per ton basis.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to market risk, including changes in interest rates and prices of certain commodities, and to a lesser extent, foreign currency exchange rate risks. We use hedge agreements to manage a portion of our risks related to interest rates and fuel prices. While we are exposed to credit risk in the event of non-performance by counterparties to our hedge agreements, in all cases such counterparties are highly rated financial institutions and we do not anticipate non-performance under current market conditions. We do not hold or issue derivative financial instruments for trading purposes. We monitor our hedge positions by regularly evaluating the positions at market and by performing sensitivity analyses over the unhedged fuel and variable rate debt positions.

At September 30, 2021, our derivative instruments included six interest rate swap agreements that effectively fix the interest rate on the applicable notional amounts of our variable rate debt as follows (dollars in thousands of U.S. dollars):


			Fixed		Variable
	Notional		Interest		Interest Rate		Expiration
Date Entered	Amount		Rate Paid*		Received	Effective Date	Date
August 2017	$	100,000	1.900	%	1-month LIBOR	July 2019	July 2022
August 2017	$	200,000	2.200	%	1-month LIBOR	October 2020	October 2025
August 2017	$	150,000	1.950	%	1-month LIBOR	February 2020	February 2023
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
December 2018	$	200,000	2.850	%	1-month LIBOR	July 2022	July 2027

____________________

* Plus applicable margin.

Under derivatives and hedging guidance, the interest rate swap agreements are considered cash flow hedges for a portion of our variable rate debt, and we apply hedge accounting to account for these instruments. The notional amounts and all other significant terms of the swap agreements are matched to the provisions and terms of the variable rate debt being hedged.

We have performed sensitivity analyses to determine how market rate changes will affect the fair value of our unhedged floating rate debt. Such an analysis is inherently limited in that it reflects a singular, hypothetical set of assumptions. Actual market movements may vary significantly from our assumptions. Fair value sensitivity is not necessarily indicative of the ultimate cash flow or earnings effect we would recognize from the assumed market rate movements. We are exposed to cash flow risk due to changes in interest rates with respect to the unhedged floating rate balances owed at September 30, 2021 and December 31, 2020, of $434.9 million and $3.7 million, respectively, including floating rate debt under our Credit Agreement. A one percentage point increase in interest rates on our variable-rate debt

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as of September 30, 2021 and December 31, 2020, would decrease our annual pre-tax income by approximately $4.3 million and $0.1 million, respectively. All of our remaining debt instruments are at fixed rates, or effectively fixed under the interest rate swap agreements described above; therefore, changes in market interest rates under these instruments would not significantly impact our cash flows or results of operations, subject to counterparty default risk.

The market price of diesel fuel is unpredictable and can fluctuate significantly. Because of the volume of fuel we purchase each year, a significant increase in the price of fuel could adversely affect our business and reduce our operating margins. To manage a portion of this risk, we periodically enter into fuel hedge agreements related to forecasted diesel fuel purchases, and we also enter into fixed price fuel purchase contracts. At September 30, 2021, we had no fuel hedge agreements in place; however, we have entered into fixed price fuel purchase contracts for 2021 as described below.

For the year ending December 31, 2021, we expect to purchase approximately 80.7 million gallons of fuel, of which 39.8 million gallons will be purchased at market prices and 40.9 million gallons will be purchased under our fixed price fuel purchase contracts. We have performed sensitivity analyses to determine how market rate changes will affect the fair value of our unhedged, market rate diesel fuel purchases. Such an analysis is inherently limited in that it reflects a singular, hypothetical set of assumptions. Actual market movements may vary significantly from our assumptions. Fair value sensitivity is not necessarily indicative of the ultimate cash flow or earnings effect we would recognize from the assumed market rate movements. During the three month period of October 1, 2021 to December 31, 2021, we expect to purchase approximately 10.2 million gallons of fuel at market prices; therefore, a $0.10 per gallon increase in the price of fuel over the remaining three months in 2021 would decrease our pre-tax income during this period by approximately $1.0 million.

We market 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. Where possible, to reduce our exposure to commodity price risk with respect to recycled materials, we have adopted a pricing strategy of charging collection and processing fees for recycling volume collected from third parties. In the event of a decline in recycled commodity prices, a 10% decrease in average recycled commodity prices from the average prices that were in effect during the nine months ended September 30, 2021 and 2020, would have had a $12.6 million and $5.8 million impact on revenues for the nine months ended September 30, 2021 and 2020, respectively.

We have operations in Canada and, where significant, we have quantified and described the impact of foreign currency translation on components of income, including operating revenue and operating costs. However, the impact of foreign currency has not materially affected our results of operations in 2020 or 2021. A $0.01 change in the Canadian dollar to U.S. dollar exchange rate would impact our annual revenue and EBITDA by approximately $10.6 million and $4.3 million, respectively.

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Item 4.Controls and Procedures

As required by Rule 13a-15(b) under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on this evaluation, our President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded as of September 30, 2021, that our disclosure controls and procedures were effective at the reasonable assurance level such that information required to be disclosed in our Exchange Act reports: (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (2) is accumulated and communicated to our management, including our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended September 30, 2021, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.Legal Proceedings

Information regarding our legal proceedings can be found in Note 18 of our Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and is incorporated herein by reference.

Item 6.Exhibits

Exhibit Number		Description of Exhibits
3.1		Articles of Amendment (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 26, 2017)
3.2		Articles of Amalgamation (incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K filed on June 7, 2016)
3.3		Articles of Amendment (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on June 7, 2016)
3.4		By-law No. 1 of the Registrant (incorporated by reference to Exhibit 3.3 of the Registrant’s Form 8-K filed on June 7, 2016)
4.1		Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of July 30, 2021 (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on July 30, 2021)
4.2		Indenture, dated as of November 16, 2018, by and between Waste Connections, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on November 16, 2018)
4.3		Fifth Supplemental Indenture, dated as of September 20, 2021, by and between Waste Connections, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on September 20, 2021)
31.1		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a)
31.2		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a)
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. §1350
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350
101.INS		The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
104		Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	WASTE CONNECTIONS, INC.

Date: October 28, 2021	BY:	/s/ Worthing F. Jackman
		Worthing F. Jackman
		President and Chief Executive Officer

Date: October 28, 2021	BY:	/s/ Mary Anne Whitney
		Mary Anne Whitney
		Executive Vice President and Chief Financial Officer