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, 2022
	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 21, 2022: 257,201,348 common shares

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	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	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	60
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 6.	Exhibits	61
Signatures		62

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,
	2022		2021
ASSETS
Current assets:
Cash and equivalents	$	200,179	$	147,441
Accounts receivable, net of allowance for credit losses of $20,512 and $18,480 at September 30, 2022 and December 31, 2021, respectively		810,932		709,614
Prepaid expenses and other current assets		219,203		175,722
Total current assets		1,230,314		1,032,777
Restricted cash		108,194		72,174
Restricted investments		55,922		59,014
Property and equipment, net		6,353,367		5,721,949
Operating lease right-of-use assets		190,860		160,567
Goodwill		6,574,860		6,187,643
Intangible assets, net		1,489,242		1,350,597
Other assets, net		127,909		115,203
Total assets	$	16,130,668	$	14,699,924
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	507,899	$	392,868
Book overdraft		10,734		16,721
Deferred revenue		306,019		273,720
Accrued liabilities		457,904		442,596
Current portion of operating lease liabilities		34,526		38,017
Current portion of contingent consideration		54,867		62,804
Current portion of long-term debt and notes payable		6,718		6,020
Total current liabilities		1,378,667		1,232,746
Long-term portion of debt and notes payable		6,211,971		5,040,500
Long-term portion of operating lease liabilities		163,848		129,628
Long-term portion of contingent consideration		30,896		31,504
Deferred income taxes		986,252		850,921
Other long-term liabilities		415,664		421,080
Total liabilities		9,187,298		7,706,379
Commitments and contingencies (Note 18)
Equity:
Common shares: 257,183,663 shares issued and 257,118,204 shares outstanding at September 30, 2022; 260,283,158 shares issued and 260,212,496 shares outstanding at December 31, 2021		3,271,958		3,693,027
Additional paid-in capital		229,445		199,482
Accumulated other comprehensive income		(83,476)		39,584
Treasury shares: 65,459 and 70,662 shares at September 30, 2022 and December 31, 2021, respectively		—		—
Retained earnings		3,520,446		3,056,845
Total Waste Connections’ equity		6,938,373		6,988,938
Noncontrolling interest in subsidiaries		4,997		4,607
Total equity		6,943,370		6,993,545
	$	16,130,668	$	14,699,924

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

1

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,
	2022		2021		2022		2021
Revenues	$	1,879,868	$	1,597,168	$	5,342,558	$	4,527,042
Operating expenses:
Cost of operations		1,120,629		946,098		3,198,039		2,673,209
Selling, general and administrative		186,887		155,520		518,705		454,885
Depreciation		193,287		171,965		562,174		498,588
Amortization of intangibles		38,859		35,337		113,956		100,237
Impairments and other operating items		13,438		3,104		19,467		9,819
Operating income		326,768		285,144		930,217		790,304
Interest expense		(51,161)		(40,418)		(137,565)		(124,171)
Interest income		1,784		495		2,574		2,342
Other income, net		8,487		3,140		2,373		5,452
Loss on early extinguishment of debt		—		(115,288)		—		(115,288)
Income before income tax provision		285,878		133,073		797,599		558,639
Income tax provision		(48,753)		(18,419)		(155,899)		(106,578)
Net income		237,125		114,654		641,700		452,061
Less: Net income attributable to noncontrolling interests		(213)		(273)		(390)		(325)
Net income attributable to Waste Connections	$	236,912	$	114,381	$	641,310	$	451,736
Earnings per common share attributable to Waste Connections’ common shareholders:
Basic	$	0.92	$	0.44	$	2.49	$	1.73
Diluted	$	0.92	$	0.44	$	2.49	$	1.72
Shares used in the per share calculations:
Basic		257,197,010		260,550,774		257,438,756		261,372,827
Diluted		257,891,635		261,145,220		258,060,751		261,879,754
Cash dividends per common share	$	0.230	$	0.205	$	0.690	$	0.615

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

2

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	237,125	$	114,654	$	641,700	$	452,061
Other comprehensive income (loss), before tax:
Interest rate swap amounts reclassified into interest expense		948		5,143		9,344		15,000
Changes in fair value of interest rate swaps		27,679		(401)		74,969		14,081
Foreign currency translation adjustment		(145,955)		(64,197)		(185,030)		(3,170)
Other comprehensive income (loss), before tax		(117,328)		(59,455)		(100,717)		25,911
Income tax expense related to items of other comprehensive income		(7,586)		(1,257)		(22,343)		(7,707)
Other comprehensive income (loss), net of tax		(124,914)		(60,712)		(123,060)		18,204
Comprehensive income		112,211		53,942		518,640		470,265
Less: Comprehensive income attributable to noncontrolling interests		(213)		(273)		(390)		(325)
Comprehensive income attributable to Waste Connections	$	111,998	$	53,669	$	518,250	$	469,940

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

3

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		SHARES	AMOUNT		EARNINGS		INTERESTS		TOTAL
Balances at December 31, 2021	260,212,496	$	3,693,027	$	199,482	$	39,584	70,662	$	—	$	3,056,845	$	4,607	$	6,993,545
Sale of common shares held in trust	2,203		305		—		—	(2,203)		—		—		—		305
Vesting of restricted share units	312,706		—		—		—	—		—		—		—		—
Vesting of performance-based restricted share units	57,677		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	19,149		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(143,243)		—		(17,236)		—	—		—		—		—		(17,236)
Equity-based compensation	—		—		14,139		—	—		—		—		—		14,139
Exercise of warrants	11,560		—		—		—	—		—		—		—		—
Issuance of shares under employee share purchase plan	12,015		1,554		—		—	—		—		—		—		1,554
Repurchase of common shares	(3,388,155)		(424,999)		—		—	—		—		—		—		(424,999)
Cash dividends on common shares	—		—		—		—	—		—		(59,391)		—		(59,391)
Amounts reclassified into earnings, net of taxes	—		—		—		3,491	—		—		—		—		3,491
Changes in fair value of cash flow hedges, net of taxes	—		—		—		32,854	—		—		—		—		32,854
Foreign currency translation adjustment	—		—		—		34,429	—		—		—		—		34,429
Net income	—		—		—		—	—		—		180,324		44		180,368
Balances at March 31, 2022	257,096,408		3,269,887		196,385		110,358	68,459		—		3,177,778		4,651		6,759,059
Sale of common shares held in trust	3,000		355		—		—	(3,000)		—		—		—		355
Vesting of restricted share units	522		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(145)		—		(30)		—	—		—		—		—		(30)
Equity-based compensation	—		—		14,412		—	—		—		—		—		14,412
Exercise of warrants	806		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(59,421)		—		(59,421)
Amounts reclassified into earnings, net of taxes	—		—		—		2,680	—		—		—		—		2,680
Changes in fair value of cash flow hedges, net of taxes	—		—		—		1,904	—		—		—		—		1,904
Foreign currency translation adjustment	—		—		—		(73,504)	—		—		—		—		(73,504)
Net income	—		—		—		—	—		—		224,074		133		224,207
Balances at June 30, 2022	257,100,591		3,270,242		210,767		41,438	65,459		—		3,342,431		4,784		6,869,662
Vesting of restricted share units	4,135		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	360		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(1,449)		—		(200)		—	—		—		—		—		(200)
Equity-based compensation	—		—		18,878		—	—		—		—		—		18,878
Issuance of shares under employee share purchase plan	14,567		1,716		—		—	—		—		—		—		1,716
Cash dividends on common shares	—		—		—		—	—		—		(58,897)		—		(58,897)
Amounts reclassified into earnings, net of taxes	—		—		—		697	—		—		—		—		697
Changes in fair value of cash flow hedges, net of taxes	—		—		—		20,344	—		—		—		—		20,344
Foreign currency translation adjustment	—		—		—		(145,955)	—		—		—		—		(145,955)
Net income	—		—		—		—	—		—		236,912		213		237,125
Balances at September 30, 2022	257,118,204	$	3,271,958	$	229,445	$	(83,476)	65,459	$	—	$	3,520,446	$	4,997	$	6,943,370

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

4

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.

5

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of U.S. dollars)

	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	641,700	$	452,061
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of assets and impairments		11,503		9,302
Depreciation		562,174		498,588
Amortization of intangibles		113,956		100,237
Loss on early extinguishment of debt		—		115,288
Deferred income taxes, net of acquisitions		91,098		(24,282)
Current period provision for expected credit losses		11,097		9,239
Amortization of debt issuance costs		3,879		3,887
Share-based compensation		48,395		42,694
Interest accretion		13,218		12,068
Payment of contingent consideration recorded in earnings		(2,982)		(520)
Adjustments to contingent consideration		(1,030)		89
Other		(8,412)		(1,286)
Net change in operating assets and liabilities, net of acquisitions		15,541		52,596
Net cash provided by operating activities		1,500,137		1,269,961
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired		(1,272,910)		(561,276)
Capital expenditures for property and equipment		(618,313)		(479,480)
Proceeds from disposal of assets		23,341		10,109
Other		9,296		(4,193)
Net cash used in investing activities		(1,858,586)		(1,034,840)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		3,148,624		1,943,192
Principal payments on notes payable and long-term debt		(2,052,412)		(1,814,034)
Premiums paid on early extinguishment of debt		—		(110,617)
Payment of contingent consideration recorded at acquisition date		(12,114)		(7,998)
Change in book overdraft		(5,983)		(563)
Payments for repurchase of common shares		(424,999)		(305,640)
Payments for cash dividends		(177,710)		(160,754)
Tax withholdings related to net share settlements of equity-based compensation		(17,466)		(18,576)
Debt issuance costs		(11,454)		(17,997)
Proceeds from issuance of shares under employee share purchase plan		3,271		1,275
Proceeds from sale of common shares held in trust		660		131
Net cash provided by (used in) financing activities		450,417		(491,581)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(3,210)		443
Net increase (decrease) in cash, cash equivalents and restricted cash		88,758		(256,017)
Cash, cash equivalents and restricted cash at beginning of period		219,615		714,389
Cash, cash equivalents and restricted cash at end of period	$	308,373	$	458,372
Non-cash financing activities:
Liabilities assumed and notes payable issued to sellers of businesses acquired	$	179,126	$	103,016

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

6

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, 2022 and 2021. In the opinion of management, the accompanying balance sheets and related interim statements of net income, comprehensive income, 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, 2021.

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 Pending Adoption

Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance to provide temporary optional expedients and exceptions to the guidance in GAAP on 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 stopped 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 was effective upon issuance.  The guidance on contract modifications was applied prospectively from March 12, 2020.  The guidance on hedging is applied to eligible hedging relationships existing as of the beginning of the

7

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)

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 determined that the new guidance will not have a material effect on its consolidated financial statements.  The Company had a combined $1,251,000 of U.S. LIBOR based loans as of September 30, 2022. The Company estimates that if the reference rate for these loans had transitioned from LIBOR to SOFR as of September 30, 2022, the impact to annual interest expense would have been immaterial.  

In October 2022, the Company adopted the applicable practical expedients of the standard when it converted the option of a LIBOR interest rate in its Credit Agreement to a SOFR interest rate and correspondingly amended its five interest rate swap agreements that are specifically designated to the amended Credit Agreement.  As permitted by the practical expedients in the standard, the Company maintained cash flow hedge accounting for its interest rate swap agreements as the conversion of the LIBOR interest rate to SOFR was the only modification to the interest rate swap agreements.  See Notes 10 and 19 for further details on the amendment to the Credit Agreement.

4.REVENUE

The Company’s operations primarily consist of providing non-hazardous waste collection, transfer, disposal and recycling services, non-hazardous oil and natural gas exploration and production (“E&P”) waste treatment, recovery and disposal 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,
	2022		2021		2022		2021
Commercial	$	564,592	$	465,246	$	1,602,793	$	1,335,686
Residential		487,995		422,543		1,391,603		1,240,337
Industrial and construction roll off		315,904		249,417		870,949		695,975
Total collection		1,368,491		1,137,206		3,865,345		3,271,998
Landfill		345,215		328,147		984,700		927,207
Transfer		271,685		225,827		751,117		632,282
Recycling		48,246		55,772		178,845		129,759
E&P		56,995		38,519		154,706		101,137
Intermodal and other		47,604		38,377		139,605		112,602
Intercompany		(258,368)		(226,680)		(731,760)		(647,943)
Total	$	1,879,868	$	1,597,168	$	5,342,558	$	4,527,042

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, 2022 was recognized as revenue during the three months ended September 30, 2022 when the service was performed.

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

8

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)

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 Company would have recognized is one year or less.  The Company had $19,627 and $18,954 of deferred sales incentives at September 30, 2022 and December 31, 2021, respectively.

5.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 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.

The following is a rollforward of the Company’s allowance for credit losses for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
Beginning balance	$	18,480	$	19,380
Current period provision for expected credit losses		11,097		9,239
Write-offs charged against the allowance		(12,866)		(11,886)
Recoveries collected		3,912		3,574
Impact of changes in foreign currency		(111)		(1)
Ending balance	$	20,512	$	20,306

6.LANDFILL ACCOUNTING

At September 30, 2022, the Company’s landfills consisted of 86 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 $2,949,498 at September 30, 2022. 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.

9

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)

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, 2022, 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 30 years. As of September 30, 2022, the Company is seeking to expand permitted capacity at eight of its owned landfills and two 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 34 years.  The estimated remaining lives of the Company’s owned landfills and landfills operated under life-of-site operating agreements range from 1 to 330 years, with approximately 90% of the projected annual disposal volume from landfills with remaining lives of less than 70 years.

During the nine months ended September 30, 2022 and 2021, the Company expensed $172,118 and $160,470, respectively, or an average of $4.88 and $4.56 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 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 2022 and 2021 “layers” for final capping, closure and post-closure obligations was 3.25% for both years, which reflects the Company’s long-term credit adjusted risk free rate as of the end of 2021 and 2020. The Company’s long-term inflation rate assumption is 2.25% for the years ending December 31, 2022 and 2021. 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, 2022 and 2021, the Company expensed $12,008 and $10,783, respectively, or an average of $0.34 and $0.31 per ton consumed, respectively, related to final capping, closure and post-closure accretion expense.

10

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)

The following is a reconciliation of the Company’s final capping, closure and post-closure liability balance from December 31, 2021 to September 30, 2022:

Final capping, closure and post-closure liability at December 31, 2021	$	302,537
Liability adjustments		36,152
Accretion expense associated with landfill obligations		12,008
Closure payments		(11,867)
Assumption of closure liabilities from acquisitions		3,498
Disposition of closure liabilities from divested operations		(916)
Foreign currency translation adjustment		(2,518)
Final capping, closure and post-closure liability at September 30, 2022	$	338,894

Liability adjustments of $36,152 for the nine months ended September 30, 2022, 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, 2022 and December 31, 2021, $10,632 and $12,609, respectively, of the Company’s restricted cash balance and $53,243 and $56,289, respectively, of the Company’s restricted investments balance was for purposes of securing its performance of future final capping, closure and post-closure obligations.

7.ACQUISITIONS

The Company acquired 15 individually immaterial non-hazardous solid waste collection, transfer, recycling and disposal businesses during the nine months ended September 30, 2022.  The total acquisition-related costs incurred during the nine months ended September 30, 2022 for these acquisitions were $18,694. These expenses are included in Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Net Income.

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 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 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

11

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)

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, 2022 and 2021:

	2022		2021
	Acquisitions		Acquisitions
Fair value of consideration transferred:
Cash	$	1,272,910	$	561,276
Debt assumed		96,814		30,485
		1,369,724		591,761
Recognized amounts of identifiable assets acquired and liabilities assumed associated with businesses acquired:
Accounts receivable		32,329		19,792
Prepaid expenses and other current assets		6,549		2,007
Operating lease right-of-use assets		3,160		1,707
Property and equipment		617,267		152,955
Long-term franchise agreements and contracts		109,364		76,847
Customer lists		69,378		46,449
Permits and other intangibles		97,548		83,659
Other assets		—		4
Accounts payable and accrued liabilities		(34,905)		(27,406)
Current portion of operating lease liabilities		(1,100)		(727)
Deferred revenue		(7,766)		(4,771)
Contingent consideration		(6,543)		(2,512)
Long-term portion of operating lease liabilities		(2,060)		(980)
Other long-term liabilities		(3,498)		(2,306)
Deferred income taxes		(26,440)		(33,829)
Total identifiable net assets		853,283		310,889
Goodwill	$	516,441	$	280,872

Goodwill acquired during the nine months ended September 30, 2022 and 2021, totaling $272,186 and $114,006, respectively, is expected to be deductible for tax purposes.

The fair value of acquired working capital related to 11 individually immaterial acquisitions completed during the twelve months ended September 30, 2022, 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, 2022, was $37,486, of which $5,157 was expected to be uncollectible. The gross amount of trade receivables due under contracts acquired during the nine months ended September 30, 2021, was $21,673, of which $1,881 was expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisition of these businesses.

12

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)

8.INTANGIBLE ASSETS, NET

Intangible assets, exclusive of goodwill, consisted of the following at September 30, 2022:

	Gross				Accumulated		Net
	Carrying		Accumulated		Impairment		Carrying
	Amount		Amortization		Loss		Amount
Finite-lived intangible assets:
Long-term franchise agreements and contracts	$	787,112	$	(283,638)	$	—	$	503,474
Customer lists		769,618		(505,380)		—		264,238
Permits and other		629,199		(108,353)		—		520,846
		2,185,929		(897,371)		—		1,288,558
Indefinite-lived intangible assets:
Solid waste collection and transportation permits		181,613		—		—		181,613
E&P facility permits		59,855		—		(40,784)		19,071
		241,468		—		(40,784)		200,684
Intangible assets, exclusive of goodwill	$	2,427,397	$	(897,371)	$	(40,784)	$	1,489,242

The weighted-average amortization period of long-term franchise agreements and contracts acquired during the nine months ended September 30, 2022 was 34.7 years. The weighted-average amortization period of customer lists acquired during the nine months ended September 30, 2022 was 11.5 years.  The weighted-average amortization period of finite-lived permits and other acquired during the nine months ended September 30, 2022 was 40.0 years.

Intangible assets, exclusive of goodwill, consisted of the following at December 31, 2021:

	Gross				Accumulated		Net
	Carrying		Accumulated		Impairment		Carrying
	Amount		Amortization		Loss		Amount
Finite-lived intangible assets:
Long-term franchise agreements and contracts	$	724,128	$	(278,827)	$	—	$	445,301
Customer lists		711,047		(450,109)		—		260,938
Permits and other		538,481		(94,807)		—		443,674
		1,973,656		(823,743)		—		1,149,913
Indefinite-lived intangible assets:
Solid waste collection and transportation permits		181,613		—		—		181,613
E&P facility permits		59,855		—		(40,784)		19,071
		241,468		—		(40,784)		200,684
Intangible assets, exclusive of goodwill	$	2,215,124	$	(823,743)	$	(40,784)	$	1,350,597

Estimated future amortization expense for the next five years relating to finite-lived intangible assets owned as of September 30, 2022 is as follows:

For the year ending December 31, 2022	$	152,928
For the year ending December 31, 2023	$	139,704
For the year ending December 31, 2024	$	122,246
For the year ending December 31, 2025	$	105,661
For the year ending December 31, 2026	$	90,203

13

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)

9.LEASES

The Company rents certain equipment and facilities under short-term agreements, non-cancelable operating lease agreements and finance leases.  The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date.  The lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date.

Key estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.

The lease guidance requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs.  Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The lease term for the Company’s leases includes the noncancelable period of the lease, plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

Lease payments included in the measurement of the lease liability comprise fixed payments or variable lease payments.  The variable lease payments take into account annual changes in the consumer price index and common area maintenance charges, if known.

ROU assets for operating and finance leases are periodically reviewed for impairment losses. The Company uses the long-lived asset impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment – Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.  The Company did not recognize an impairment charge for any of its ROU assets during the nine months ended September 30, 2022 and 2021.

The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset.  The Company did not recognize any significant remeasurements during the nine months ended September 30, 2022 and 2021.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company has elected to apply the short-term lease recognition and measurement exemption allowed for in the lease accounting standard.  The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term.

14

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)

Lease cost for operating and finance leases for the three and nine months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating lease cost	$	9,822	$	9,798	$	30,814	$	30,188
Finance lease cost:
Amortization of leased assets		682		296		1,802		2,826
Interest on leased liabilities		61		34		161		107
Total lease cost	$	10,565	$	10,128	$	32,777	$	33,121

Supplemental cash flow information and non-cash activity related to the Company’s leases are as follows:

	Nine Months Ended September 30,
	2022			2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	30,313	$	29,993
Operating cash flows from finance leases	$	161	$	107
Financing cash flows from finance leases	$	4,890	$	2,752
Non-cash activity:
Right-of-use assets obtained in exchange for lease liabilities - operating leases	$	53,967	$	15,512
Right-of-use assets obtained in exchange for lease liabilities - finance leases	$	3,369	$	6,250

Weighted-average remaining lease term and discount rate for the Company’s leases are as follows:

	Nine Months Ended September 30,
	2022		2021
Weighted average remaining lease term - operating leases	8.9	years	8.3	years
Weighted average remaining lease term - finance leases	4.4	years	4.9	years
Weighted average discount rate - operating leases	2.96	%	3.49	%
Weighted average discount rate - finance leases	1.96	%	1.89	%

As of September 30, 2022, future minimum lease payments, reconciled to the respective lease liabilities, are as follows:

		Operating Leases		Finance Leases
Last 3 months of 2022	$	10,094	$	727
2023		38,993		2,905
2024		31,160		2,905
2025		25,595		2,905
2026		21,092		2,320
Thereafter		101,335		898
Minimum lease payments		228,269		12,660
Less: imputed interest		(29,895)		(527)
Present value of minimum lease payments		198,374		12,133
Less: current portion of lease liabilities		(34,526)		(2,682)
Long-term portion of lease liabilities	$	163,848	$	9,451

15

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)

10.LONG-TERM DEBT

The following table presents the Company’s long-term debt as of September 30, 2022 and December 31, 2021:

	September 30,		December 31,
	2022		2021
Revolver under Credit Agreement, bearing interest ranging from 4.12% to 4.76% (a)	$	738,165	$	803,944
Term loan under Credit Agreement, bearing interest at 4.12% (a)		650,000		650,000
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		650,000
3.20% Senior Notes due 2032		500,000		—
4.20% Senior Notes due 2033		750,000		—
3.05% Senior Notes due 2050		500,000		500,000
2.95% Senior Notes due 2052		850,000		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)		34,439		37,508
Finance leases, bearing interest ranging from 1.89% to 2.16%, with lease expiration dates ranging from 2026 to 2027 (a)		12,133		10,519
		6,284,737		5,101,971
Less – current portion		(6,718)		(6,020)
Less – unamortized debt discount and issuance costs		(66,048)		(55,451)
	$	6,211,971	$	5,040,500

____________________

(a) Interest rates represent the interest rates in effect at September 30, 2022.

Credit Agreement

Details of the Credit Agreement are as follows:

	September 30,			December 31,
	2022			2021
Revolver under Credit Agreement
Available	$	1,069,127		$	933,775
Letters of credit outstanding	$	42,708		$	112,281
Total amount drawn, as follows:	$	738,165		$	803,944
Amount drawn - U.S. LIBOR rate loan	$	601,000		$	631,000
Interest rate applicable - U.S. LIBOR rate loan		4.12	%		1.10	%
Amount drawn - U.S. base rate loan	$	—		$	158,000
Interest rate applicable - U.S. base rate loan		—	%		3.25	%
Amount drawn - U.S. swingline loan	$	—		$	11,000
Interest rate applicable - U.S. swingline loan		—	%		3.25	%
Amount drawn – Canadian bankers’ acceptance	$	137,165		$	3,944
Interest rate applicable – Canadian bankers’ acceptance		4.76	%		1.45	%
Commitment – rate applicable		0.09	%		0.09	%
Term loan under Credit Agreement
Amount drawn – U.S. based LIBOR loan	$	650,000		$	650,000
Interest rate applicable – U.S. based LIBOR loan		4.12	%		1.10	%

16

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)

In addition to the $42,708 of letters of credit at September 30, 2022 issued and outstanding under the Credit Agreement, the Company has issued and outstanding letters of credit totaling $84,742 under a facility other than the Credit Agreement.

Senior Notes

On March 9, 2022, the Company completed an underwritten public offering of $500,000 aggregate principal amount of 3.20% Senior Notes due 2032 (the “New 2032 Senior Notes”). The Company issued the New 2032 Senior Notes under the Indenture, dated as of November 16, 2018 (the “Base Indenture”), by and between the Company and U.S. Bank Trust Company, National Association, as successor in interest to U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the Sixth Supplemental Indenture, dated as of March 9, 2022 (the “Sixth Supplemental Indenture”).  The New 2032 Senior Notes will mature on June 1, 2032.

The Company may, prior to March 1, 2032 (three months before the maturity date) (the “New 2032 Senior Notes Par Call Date”), redeem some or all of the New 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 New 2032 Senior Notes redeemed, or the sum of the present values of the remaining scheduled payments of principal and interest on the New 2032 Senior Notes redeemed discounted to the redemption date (assuming the New 2032 Senior Notes matured on the New 2032 Senior Notes Par Call Date), plus, in either case, accrued and unpaid interest thereon to the redemption date. Commencing on March 1, 2032 (three months before the maturity date), the Company may redeem some or all of the New 2032 Senior Notes, at any time and from time to time, at a redemption price equal to the principal amount of the New 2032 Senior Notes being redeemed plus accrued and unpaid interest thereon to the redemption date.

On August 18, 2022, the Company completed an underwritten public offering of $750,000 aggregate principal amount of 4.20% Senior Notes due 2033 (the “2033 Senior Notes” and, together with the New 2032 Senior Notes, the “Senior Notes”). The Company issued the 2033 Senior Notes under the Base Indenture, as supplemented by the Seventh Supplemental Indenture, dated as of August 18, 2022 (the “Seventh Supplemental Indenture” and the Base Indenture as supplemented by the Sixth Supplemental Indenture and the Seventh Supplemental Indenture, the “Indenture”).  The 2033 Senior Notes will mature on January 15, 2033.

The Company may, prior to October 15, 2032 (three months before the maturity date) (the “2033 Senior Notes Par Call Date”), redeem some or all of the 2033 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 2033 Senior Notes redeemed, or the sum of the present values of the remaining scheduled payments of principal and interest on the 2033 Senior Notes redeemed discounted to the redemption date (assuming the 2033 Senior Notes matured on the 2033 Senior Notes Par Call Date), plus, in either case, accrued and unpaid interest thereon to the redemption date. Commencing on October 15, 2032 (three months before the maturity date), the Company may redeem some or all of the 2033 Senior Notes, at any time and from time to time, at a redemption price equal to the principal amount of the 2033 Senior Notes being redeemed plus accrued and unpaid interest thereon to the redemption date.

The Company will pay interest on the Senior Notes semi-annually in arrears. The Senior 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 Senior Notes are not guaranteed by any of the Company’s subsidiaries.

Under certain circumstances, the Company may become obligated to pay additional amounts (the “Additional Amounts”) with respect to the Senior Notes to ensure that the net amounts received by each holder of the Senior Notes will not be less than the amount such holder would have received if withholding taxes or deductions were not incurred on

17

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 payment under or with respect to the Senior 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 Senior Notes having power to tax, and the Company cannot avoid such payments of Additional Amounts through reasonable measures, then the Company may redeem the Senior 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 Senior Notes may require the Company to repurchase all or a portion of the Senior Notes for cash at a price equal to 101% of the aggregate principal amount of such Senior Notes, plus any accrued and unpaid interest, if any, to, but excluding the purchase date.

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 Senior Notes. As of September 30, 2022, the Company was in compliance with all applicable covenants in the Indenture.

Upon an event of default, the principal of and accrued and unpaid interest on all the Senior 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 Senior Notes. Upon such a declaration, such principal and accrued interest on all of the Senior 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 Senior 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 Senior Notes. Under certain circumstances, the holders of a majority in principal amount of the outstanding Senior Notes may rescind any such acceleration with respect to the Senior Notes and its consequences.

Term Loan Agreement

On October 31, 2022 (the “Effective Date”), the Company, as borrower, Bank of America, N.A., as administrative agent, and the other lenders from time to time party thereto (the “New TL Lenders”) entered into that certain Term Loan Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement”), pursuant to which the New TL Lenders made loans to the Company in an aggregate stated principal amount of $800,000.  The Term Loan Agreement permits the proceeds of borrowings thereunder to be used for (i) refinancing outstanding indebtedness, (ii) financing permitted acquisitions and financing dividends or other permitted equity distributions, (iii) capital expenditures, working capital, payment of certain transaction fees, costs and expenses and (iv) any other lawful corporate purposes.  The Company intends to use substantially all of the proceeds of borrowings under the Term Loan Agreement to repay revolving borrowings outstanding under its Credit Agreement (as defined below) following the implementation of the Term Loan Agreement

Pursuant to the terms and conditions of the Term Loan Agreement, the New TL Lenders committed to provide the term loan as set forth above, which term loan was fully drawn as of the Effective Date.  Amounts borrowed under the Term Loan Agreement and repaid or prepaid may not be reborrowed.  The Term Loan Agreement has a scheduled maturity date of July 30, 2026.

Interest accrues on the term loan by reference to SOFR for specified interest periods (“Term SOFR”) (including for all Term SOFR loans, a credit spread adjustment of 0.10% for all applicable interest periods) or a base rate, at the Company’s option, plus an applicable margin.  The applicable margin used in connection with calculating interest rates and fees is based on the debt rating of the Company’s public non-credit-enhanced, senior unsecured long-term debt.  The

18

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)

applicable margin for Term SOFR loans ranges from 0.750% to 1.250% per annum, and the applicable margin for base rate loans ranges from 0.00% to 0.250% per annum.

The Term Loan Agreement contains customary benchmark replacement mechanics in connection with certain benchmark transition events, as well as customary mechanics with respect to the unavailability of a tenor of a then-current benchmark rate. The borrowings under the Term Loan Agreement are unsecured and there are no subsidiary guarantors under the Term Loan Agreement.  

The Term Loan 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 New TL Lenders may take a number of actions, including, among others, declaring the entire amount then outstanding under the Term Loan Agreement and related loan documents to be due and payable.

The Term Loan Agreement includes a financial covenant limiting, as of the last day of each fiscal quarter, the ratio of (i) Consolidated Total Funded Debt (as defined in the Term Loan Agreement) outstanding as of such date to (b) Consolidated EBITDA (as defined in the Term Loan 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).

Amendment No. 1 to Second Amended and Restated Revolving Credit and Term Loan Agreement

The Company is party to that certain Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of July 30, 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the Company, as borrower, Bank of America, N.A., acting through its Canada Branch, as the global agent, the swing line lender and an l/c issuer, Bank of America, N.A., as the U.S. agent and an l/c issuer, and the lenders and any other financial institutions from time to time party thereto.

On the Effective Date, the Company entered into an amendment to the Credit Agreement (the “First Amendment”), which among other things, (i) amended certain definitions and other provisions to replace the LIBOR-based benchmark rates for certain U.S. dollar-denominated loans and other extensions of credit under the Credit Agreement with Term SOFR, and (ii) made certain changes conforming to the Term Loan Agreement.  The rates of interest payable by the Company per annum on its outstanding revolving loans immediately prior to the Effective Date did not materially change immediately after the Effective Date as a result of the replacement of LIBOR-based benchmark rates with Term SOFR.  In addition, because the replacement of LIBOR-based benchmark rates with Term SOFR was implemented through the First Amendment and not as a result of the hardwired benchmark replacement setting provisions of the Credit Agreement, the credit spread adjustment applicable to Term SOFR loans is a flat 0.10% per annum across all applicable interest periods instead of a varying credit spread adjustment across the same interest periods ranging from 0.11448% to 0.42826%.

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 the following five geographic solid waste operating segments: Eastern, Southern, Western, Central and Canada.  The Company’s five geographic solid waste operating segments comprise its

19

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)

reportable segments.  Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts.  

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.

Summarized financial information concerning the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021, is shown in the following tables:

Three Months Ended			Intercompany		Reported		Segment
September 30, 2022	Revenue		Revenue(b)		Revenue		EBITDA(c)
Eastern	$	595,696	$	(94,644)	$	501,052	$	133,393
Southern		479,758		(51,392)		428,366		130,668
Western		428,271		(42,792)		385,479		115,701
Central		364,470		(41,813)		322,657		116,337
Canada		270,041		(27,727)		242,314		87,910
Corporate(a)		—		—		—		(11,657)
	$	2,138,236	$	(258,368)	$	1,879,868	$	572,352

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

Nine Months Ended			Intercompany		Reported		Segment
September 30, 2022	Revenue		Revenue(b)		Revenue		EBITDA(c)
Eastern	$	1,664,120	$	(262,733)	$	1,401,387	$	367,223
Southern		1,375,785		(143,891)		1,231,894		363,785
Western		1,222,412		(129,300)		1,093,112		331,049
Central		1,022,470		(113,709)		908,761		317,397
Canada		789,531		(82,127)		707,404		265,402
Corporate(a)		—		—		—		(19,042)
	$	6,074,318	$	(731,760)	$	5,342,558	$	1,625,814

20

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)

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

____________________

(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.

(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, 2022 and December 31, 2021, were as follows:

	September 30,		December 31,
	2022		2021
Eastern	$	4,076,614	$	3,652,311
Southern		3,718,418		3,513,355
Western		2,542,731		2,260,222
Central		2,680,170		2,332,564
Canada		2,557,822		2,513,608
Corporate		554,913		427,864
Total Assets	$	16,130,668	$	14,699,924

The following tables show changes in goodwill during the nine months ended September 30, 2022 and 2021, by reportable segment:

	Eastern		Southern		Western		Central		Canada		Total
Balance as of December 31, 2021	$	1,607,723	$	1,588,467	$	539,732	$	892,209	$	1,559,512	$	6,187,643
Goodwill acquired		182,697		83,970		8,060		73,788		167,926		516,441
Impact of changes in foreign currency		—		—		—		—		(129,224)		(129,224)
Balance as of September 30, 2022	$	1,790,420	$	1,672,437	$	547,792	$	965,997	$	1,598,214	$	6,574,860

21

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)

	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

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,
	2022		2021		2022		2021
Eastern segment EBITDA	$	133,393	$	106,908	$	367,223	$	295,411
Southern segment EBITDA		130,668		99,612		363,785		291,964
Western segment EBITDA		115,701		108,280		331,049		301,507
Central segment EBITDA		116,337		95,026		317,397		268,952
Canada segment EBITDA		87,910		92,275		265,402		254,857
Subtotal reportable segments		584,009		502,101		1,644,856		1,412,691
Unallocated corporate overhead		(11,657)		(6,551)		(19,042)		(13,743)
Depreciation		(193,287)		(171,965)		(562,174)		(498,588)
Amortization of intangibles		(38,859)		(35,337)		(113,956)		(100,237)
Impairments and other operating items		(13,438)		(3,104)		(19,467)		(9,819)
Interest expense		(51,161)		(40,418)		(137,565)		(124,171)
Interest income		1,784		495		2,574		2,342
Other income (expense), net		8,487		3,140		2,373		5,452
Loss on early extinguishment of debt		—		(115,288)		—		(115,288)
Income before income tax provision	$	285,878	$	133,073	$	797,599	$	558,639

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, 2022 were specifically designated to the Credit Agreement and accounted for as cash flow hedges.

22

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)

At September 30, 2022, the Company’s derivative instruments included five interest rate swap agreements as follows:

			Fixed		Variable
	Notional		Interest		Interest Rate
Date Entered	Amount		Rate Paid*		Received	Effective Date	Expiration Date
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.

The fair values of derivative instruments designated as cash flow hedges as of September 30, 2022, 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(a)	$	14,000	Accrued liabilities	$	—
	Other assets, net		19,231
Total derivatives designated as cash flow hedges		$	33,231		$	—

____________________

(a)Represents the estimated amount of the existing unrealized gains on interest rate swaps as of September 30, 2022 (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, 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	$	(18,675)
				Other long-term liabilities		(32,406)
Total derivatives designated as cash flow hedges		$	—		$	(51,081)

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, 2022 and 2021:

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					Three Months Ended
	September 30,					September 30,
	2022		2021			2022		2021
Interest rate swaps	$	20,344	$	(295)	Interest expense	$	697	$	3,780

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					Nine Months Ended
	September 30,					September 30,
	2022		2021			2022		2021
Interest rate swaps	$	55,102	$	10,349	Interest expense	$	6,868	$	11,025

23

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)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, 2022 and December 31, 2021, the carrying values of cash and equivalents, trade receivables, restricted cash 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, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, are as follows:

	Carrying Value at				Fair Value (a) at
	September 30,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
4.25% Senior Notes due 2028	$	500,000	$	500,000	$	473,200	$	561,350
3.50% Senior Notes due 2029	$	500,000	$	500,000	$	449,150	$	539,500
2.60% Senior Notes due 2030	$	600,000	$	600,000	$	501,840	$	610,440
2.20% Senior Notes due 2032	$	650,000	$	650,000	$	505,570	$	637,065
3.20% Senior Notes due 2032	$	500,000	$	—	$	419,400	$	—
4.20% Senior Notes due 2033	$	750,000	$	—	$	679,725	$	—
3.05% Senior Notes due 2050	$	500,000	$	500,000	$	334,000	$	496,350
2.95% Senior Notes due 2052	$	850,000	$	850,000	$	551,225	$	828,580

____________________

*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.

24

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)

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, 2022 and 2021:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Numerator:
Net income attributable to Waste Connections for basic and diluted earnings per share	$	236,912	$	114,381	$	641,310	$	451,736
Denominator:
Basic shares outstanding		257,197,010		260,550,774		257,438,756		261,372,827
Dilutive effect of equity-based awards		694,625		594,446		621,995		506,927
Diluted shares outstanding		257,891,635		261,145,220		258,060,751		261,879,754

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, 2022 and December 31, 2021, 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 is valued at quoted market prices in active markets for identical assets, which the Company receives from the financial institutions that hold such investments on its behalf. The Company’s restricted cash measured at fair value is invested primarily in money market accounts, bank time deposits and U.S. government and agency securities. The Company’s restricted 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 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.

25

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)

The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021, were as follows:

	Fair Value Measurement at September 30, 2022 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 asset position	$	33,231	$	—	$	33,231	$	—
Restricted cash	$	108,194	$	108,194	$	—	$	—
Restricted investments	$	54,811	$	—	$	54,811	$	—
Contingent consideration	$	(85,763)	$	—	$	—	$	(85,763)

	Fair Value Measurement at December 31, 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	$	(51,081)	$	—	$	(51,081)	$	—
Restricted cash	$	72,174	$	72,174	$	—	$	—
Restricted investments	$	58,797	$	—	$	58,797	$	—
Contingent consideration	$	(94,308)	$	—	$	—	$	(94,308)

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, 2022 and 2021:

	Nine Months Ended September 30,
	2022		2021
Beginning balance	$	94,308	$	71,736
Contingent consideration recorded at acquisition date		6,543		2,512
Payment of contingent consideration recorded at acquisition date		(12,114)		(7,998)
Payment of contingent consideration recorded in earnings		(2,982)		(520)
Adjustments to contingent consideration		(1,030)		89
Interest accretion expense		1,073		1,147
Foreign currency translation adjustment		(35)		(15)
Ending balance	$	85,763	$	66,951

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, 2022 and 2021 are as follows:

	Three Months Ended September 30, 2022
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	948	$	(251)	$	697
Changes in fair value of interest rate swaps		27,679		(7,335)		20,344
Foreign currency translation adjustment		(145,955)		—		(145,955)
	$	(117,328)	$	(7,586)	$	(124,914)

26

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)

	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)

	Nine Months Ended September 30, 2022
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	9,344	$	(2,476)	$	6,868
Changes in fair value of interest rate swaps		74,969		(19,867)		55,102
Foreign currency translation adjustment		(185,030)		—		(185,030)
	$	(100,717)	$	(22,343)	$	(123,060)

	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

A rollforward of the amounts included in AOCIL, net of taxes, for the nine months ended September 30, 2022 and 2021, is as follows:

			Foreign		Accumulated
			Currency		Other
	Interest		Translation		Comprehensive
	Rate Swaps		Adjustment		Income (Loss)
Balance at December 31, 2021	$	(37,544)	$	77,128	$	39,584
Amounts reclassified into earnings		6,868		—		6,868
Changes in fair value		55,102		—		55,102
Foreign currency translation adjustment		—		(185,030)		(185,030)
Balance at September 30, 2022	$	24,426	$	(107,902)	$	(83,476)

			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

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

27

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)

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, 2022, is presented below:

	Unvested Shares
Outstanding at December 31, 2021	861,695
Granted	463,457
Forfeited	(53,579)
Vested and issued	(317,363)
Outstanding at September 30, 2022	954,210

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, 2022 was $120.55.

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 to recipients who deferred their RSUs common shares of the Company underlying the deferred RSUs. At September 30, 2022 and 2021, the Company had 81,352 and 100,861 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, 2022, is presented below:

	Unvested Shares
Outstanding at December 31, 2021	392,043
Granted	95,038
Forfeited	(87,554)
Vested and issued	(57,677)
Outstanding at September 30, 2022	341,850

During the nine months ended September 30, 2022, 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, 2024. 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, 2022 was $117.94.

28

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)

Deferred Share Units

A summary of activity related to deferred share units (“DSUs”) during the nine-month period ended September 30, 2022, is presented below:

	Vested Shares
Outstanding at December 31, 2021	24,442
Granted	2,094
Outstanding at September 30, 2022	26,536

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, 2022 was $121.00.

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 vesting. A summary of activity related to Progressive Waste RSUs during the nine-month period ended September 30, 2022, is presented below:

Outstanding at December 31, 2021	63,032
Cash settled	(5,203)
Outstanding at September 30, 2022	57,829

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, 2022, is presented below:

Outstanding at December 31, 2021	45,869
Cash settled	(2,299)
Outstanding at September 30, 2022	43,570

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

29

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)

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, provided, however, that such exercise price will not be less than 85% of the volume weighted average price of the Company’s common shares as reflected on the Toronto Stock Exchange (the “TSX”) over the final five trading days of such offering period. The maximum number of shares that may be issued under the ESPP is 1,000,000.  Under the ESPP, employees purchased 26,582 of the Company’s common shares for $3,271 during the nine months ended September 30, 2022.

Normal Course Issuer Bid

On July 26, 2022, 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 12,859,066 of the Company’s common shares during the period of August 10, 2022 to August 9, 2023 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, 2022. The Company received TSX approval for its annual renewal of the NCIB on August 8, 2022.  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.

In accordance with TSX rules, any daily repurchases made through the TSX and alternative Canadian trading systems is limited to a maximum of 85,956 common shares, which represents 25% of the average daily trading volume on the TSX of 343,825 common shares for the period from February 1, 2022 to July 31, 2022. 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, 2022, the Company repurchased 3,388,155 common shares pursuant to the NCIB in effect during that period at an aggregate cost of $424,999.  During 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.  As of September 30, 2022, the remaining maximum number of shares available for repurchase under the current NCIB was 12,859,066.

Cash Dividend

In October 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. Cash dividends of $177,710 and $160,754 were paid during the nine months ended September 30, 2022 and 2021, 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

30

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)

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, 2022, 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.

Los Angeles County, California Landfill Expansion Litigation

A. 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 approximately two and a half million tons of materials for disposal and beneficial use in 2021.  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.

Following extensive litigation in 2018 and 2019 on the permissible scope of CCL’s challenge, full briefing occurred, and oral argument was held 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.  On October 11, 2022, CCL

31

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)

and the County entered into a settlement agreement that requires Chiquita to file a CUP modification application with the County embodying the terms of the settlement agreement.  If the CUP modification application is approved by the County and certain other contingencies are satisfied, Chiquita will dismiss this lawsuit.  However, at this point, the Company is not able to determine the likelihood of any outcome in this matter.

B. 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.  On October 11, 2022, CCL and the County entered into a settlement agreement, described above under paragraph A.  If the CUP modification application is approved by the County and certain other contingencies are satisfied, Chiquita will dismiss this lawsuit.  However, at this point, the Company is not able to determine the likelihood of any outcome in this matter.

19.SUBSEQUENT EVENTS

On November 2, 2022, the Company announced that its Board of Directors increased its regular quarterly cash dividend by $0.025, from $0.23 to $0.255 per Company common share, and then declared a regular quarterly cash dividend of $0.255 per Company common share. The dividend will be paid on December 1, 2022, to shareholders of record on the close of business on November 16, 2022.

See Note 10 for a discussion of the Term Loan Agreement and Amendment No. 1 to the Company’s Second Amended and Restated Revolving Credit and Term Loan Agreement, both of which became effective on October 31, 2022.

32

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:

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

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

● Forecasts of cash flows necessary for operations and free cash flow to reduce leverage as well as our ability to draw on our credit facility and access the capital markets to refinance or expand;

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

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

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

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

● Other statements on a variety of topics such as the coronavirus disease 2019 (“COVID-19”) pandemic, inflation, 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 resource recovery primarily through recycling and renewable fuels generation, in mostly exclusive and secondary markets across 43 states in the U.S. and six provinces in Canada. Waste Connections also provides non-hazardous oil and natural gas exploration and production (“E&P”) 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.

33

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, in 2020, we introduced long-term, aspirational ESG targets and committed over $500 million for investments to meet or exceed such sustainability targets. These investments primarily focus on reducing emissions, increasing resource recovery of both recyclable commodities and clean energy fuels, reducing reliance on off-site disposal for landfill leachate, further improving safety through reduced incidents and enhancing employee engagement through improved voluntary turnover and Servant Leadership scores.  Our 2022 Sustainability Report provides progress updates on its targets and investments towards their achievement. 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 non-hazardous E&P waste treatment, recovery and disposal services.

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. Subject to certain recent developments discussed below, 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 E&P 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 impairment charges on our intangible assets and property and equipment associated with our E&P operations.  Conversely, sustained increases in prices of crude oil as a result of inflationary pressures, the uncertainty associated with the Ukrainian conflict and any related bans on oil sales from Russia or supply chain disruptions as recently experienced could result in increasing levels of production activity and demand for our E&P waste services.

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

March 11, 2022 marked the two-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 in the first quarter of 2020 resulted in declines in solid waste commercial collection, transfer station and landfill volumes, and roll off activity. Throughout the remaining fiscal year 2020 and during 2021, 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.  Most of the impacts to solid waste volumes associated with the pandemic have largely abated, with landfill volumes and roll off pulls returning to pre-pandemic levels.  In certain markets, commercial collection volumes have not returned to pre-pandemic levels.

The COVID-19 pandemic also contributed to a decline in demand for and the value of crude oil, which impacted E&P drilling activity and resulted in lower E&P waste revenue.  In recent quarters, E&P waste revenue has improved sequentially on increased drilling activity in several of the major basins.

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 year-end 2021, we incurred over $40 million in incremental COVID-19-related costs, primarily supplemental pay for frontline employees. Through the nine months ended September 30, 2022, we have continued to provide support for our employees and their families, including approximately $10 million in supplemental pay and benefits due to surges in cases related to certain variants of COVID-19.

As a result of the COVID-19 pandemic and subsequent reopening activity, we have also experienced an impact to our operating costs as a result of factors including supply chain disruptions and labor constraints, as demand has recovered and competition has increased.  As a result, we have incurred incremental costs associated with higher wages, increased overtime as a result of higher turnover, and increased reliance on third-party services.  

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, 2022 AND 2021

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,
	2022				2021				2022				2021
Revenues	$	1,879,868	100.0	%	$	1,597,168	100.0	%	$	5,342,558	100.0	%	$	4,527,042	100.0	%
Cost of operations		1,120,629	59.6			946,098	59.2			3,198,039	59.9			2,673,209	59.1
Selling, general and administrative		186,887	9.9			155,520	9.7			518,705	9.7			454,885	10.0
Depreciation		193,287	10.3			171,965	10.8			562,174	10.5			498,588	11.0
Amortization of intangibles		38,859	2.1			35,337	2.2			113,956	2.1			100,237	2.2
Impairments and other operating items		13,438	0.7			3,104	0.2			19,467	0.4			9,819	0.2
Operating income		326,768	17.4			285,144	17.9			930,217	17.4			790,304	17.5
Interest expense		(51,161)	(2.7)			(40,418)	(2.5)			(137,565)	(2.6)			(124,171)	(2.7)
Interest income		1,784	0.1			495	0.0			2,574	0.1			2,342	0.0
Other income (expense), net		8,487	0.4			3,140	0.2			2,373	0.0			5,452	0.1
Loss on early extinguishment of debt		—	—			(115,288)	(7.2)			—	—			(115,288)	(2.6)
Income tax provision		(48,753)	(2.6)			(18,419)	(1.2)			(155,899)	(2.9)			(106,578)	(2.3)
Net income		237,125	12.6			114,654	7.2			641,700	12.0			452,061	10.0
Net loss (income) attributable to noncontrolling interests		(213)	(0.0)			(273)	(0.0)			(390)	(0.0)			(325)	(0.0)
Net income attributable to Waste Connections	$	236,912	12.6	%	$	114,381	7.2	%	$	641,310	12.0	%	$	451,736	10.0	%

Revenues.  Total revenues increased $282.7 million, or 17.7%, to $1.880 billion for the three months ended September 30, 2022, from $1.597 billion for the three months ended September 30, 2021. Total revenues increased $815.5 million, or 18.0%, to $5.343 billion for the nine months ended September 30, 2022, from $4.527 billion for the nine months ended September 30, 2021.

Acquisitions closed during, or subsequent to, the comparable periods increased revenues for the three and nine months ended September 30, 2022 by $154.1 million and $410.6 million, respectively.

Operations that were divested subsequent to September 30, 2021 decreased revenues for the three and nine months ended September 30, 2022 by $3.4 million and $8.6 million, respectively.

During the three months ended September 30, 2022, the net increase in prices charged to our customers at our existing operations was $154.2 million, consisting of $126.3 million of core price increases and surcharges of $27.9 million.  During the nine months ended September 30, 2022, the net increase in prices charged to our customers at our existing operations was $376.9 million, consisting of $315.3 million of core price increases and surcharges of $61.6 million.

During the three months ended September 30, 2022, we recognized volume losses totaling $22.3 million, which were comprised of $14.5 million of declines primarily associated with the nonrenewal of two residential collection contracts subsequent to September 30, 2021 and $7.8 million of declines primarily attributable to decreases in landfill disposal volumes, partially offset by increases in roll off collection. During the nine months ended September 30, 2022, we recognized volume losses totaling $24.3 million, which was comprised of $39.2 million of declines associated with the aforementioned residential collection contracts, partially offset by $14.9 million of increases primarily attributable to commercial and roll off collection.

E&P waste revenues at facilities owned during the three and nine months ended September 30, 2022 and 2021 increased $19.3 million and $55.7 million, respectively, due to increases in overall demand for our E&P waste services resulting from higher demand for crude oil contributing to increases in drilling and production activity levels.

Revenues from sales of recyclable commodities at facilities owned during the three and nine months ended September 30, 2022 and 2021 decreased $19.5 million and $0.3 million, respectively.  Prices for old corrugated cardboard, aluminum, plastics and other paper products increased from the prior period during the six months ended June 30, 2022 before

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declining during the three months ended September 30, 2022. The impact of lower prices on revenues from sales of recyclable commodities was partially offset by the impact of recognizing certain recyclable commodity sales gross of selling and processing expenses.

A decrease in the average Canadian dollar to U.S. dollar currency exchange rate resulted in a decrease in revenues for the three and nine months ended September 30, 2022 of $7.8 million and $16.2 million, respectively. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues during the three months ended September 30, 2022 and 2021 were 0.7660 and 0.7936, respectively. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues during the nine months ended September 30, 2022 and 2021 were 0.7792 and 0.7996, respectively.

Other revenues increased $8.1 million during the three months ended September 30, 2022, due primarily to a $3.6 million increase in intermodal revenues due primarily to reductions in shipping port logistical constraints which decreased intermodal cargo volumes in the prior year period, a $3.5 million increase in landfill gas revenue resulting from increased volumes generated and higher prices for renewable energy credits and a $1.0 million increase in other non-core revenue sources.  Other revenues increased $21.7 million during the nine months ended September 30, 2022, due primarily to a $9.6 million increase in landfill gas revenues and renewable energy credits, an $8.2 million increase in intermodal revenues and a $3.9 million increase in other non-core revenue sources.

Cost of Operations.  Total cost of operations increased $174.5 million, or 18.4%, to $1.121 billion for the three months ended September 30, 2022, from $946.1 million for the three months ended September 30, 2021. The increase was primarily the result of $101.8 million of additional operating costs from acquisitions closed during, or subsequent to, the three months ended September 30, 2021 and an increase in operating costs at our existing operations of $79.1 million, assuming foreign currency parity, partially offset by a decrease in operating costs of $4.0 million resulting from a lower average foreign currency exchange rate in effect during the current period and a decrease of $2.4 million from operations divested subsequent to the three months ended September 30, 2021.

The increase in operating costs of $79.1 million, assuming foreign currency parity, at our existing operations for the three months ended September 30, 2022 consisted of an increase in labor and recurring incentive compensation expenses of $24.0 million due primarily to employee pay increases, an increase in fuel expense of $16.8 million due to higher diesel and natural gas prices, an increase in third-party trucking and transportation expenses of $15.2 million due primarily to higher rates charged by third-party providers, an increase in truck, container, equipment and facility maintenance and repair expenses of $7.6 million due primarily to increased collection routes and equipment operating hours and parts and service rate increases, an increase in expenses for purchasing and processing recyclable commodities of $4.3 million due to processing expenses charged by third parties increasing as recyclable commodity values decline in certain of our regulated operating markets and the impact of recognizing certain recyclable commodity sales gross of selling and processing expenses, an increase in third-party disposal expenses of $4.0 million due primarily to disposal rate increases and higher roll off collection volumes, an increase in intermodal rail expenses of $2.0 million due to higher cargo volumes, an increase in subcontracted hauling services at our solid waste operations of $1.6 million due to higher costs charged by third-party providers, an increase in taxes on revenues of $1.2 million due primarily to increased revenues and $2.4 million of other net expense increases.

Total cost of operations increased $524.8 million, or 19.6%, to $3.198 billion for the nine months ended September 30, 2022, from $2.673 billion for the nine months ended September 30, 2021. The increase was primarily the result of $271.5 million of additional operating costs from acquisitions closed during, or subsequent to, the nine months ended September 30, 2021 and an increase in operating costs at our existing operations of $268.4 million, assuming foreign currency parity, partially offset by a decrease in operating costs of $8.4 million resulting from a lower average foreign currency exchange rate in effect during the current period and a decrease of $6.7 million from operations divested subsequent to the nine months ended September 30, 2021.

The increase in operating costs of $268.4 million, assuming foreign currency parity, at our existing operations for the nine months ended September 30, 2022 consisted of an increase in labor and recurring incentive compensation expenses of $71.0 million due primarily to employee pay increases, an increase in fuel expense of $57.4 million due to higher diesel and natural gas prices, an increase in third-party trucking and transportation expenses of $40.6 million due primarily to increased landfill special waste volumes requiring trucking and transportation services to our landfills and higher rates

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charged by third-party providers, an increase in truck, container, equipment and facility maintenance and repair expenses of $31.5 million due primarily to increased collection routes and equipment operating hours and parts and service rate increases, an increase in third-party disposal expenses of $18.5 million due primarily to increased solid waste collection volumes, an increase in expenses for purchasing and processing recyclable commodities of $11.4 million due to processing expenses charged by third parties increasing as recyclable commodity values decline in certain of our regulated operating markets and the impact of recognizing certain recyclable commodity sales gross of selling and processing expenses, an increase in supplemental compensation to non-management personnel of $9.0 million to provide financial assistance associated with the impact of the COVID-19 pandemic, an increase in taxes on revenues of $7.4 million due primarily to increased revenues, an increase in intermodal rail expenses of $4.2 million due to higher cargo volumes, an increase in subcontracted hauling services at our solid waste operations of $3.3 million due to higher costs charged by third-party providers, an increase in leachate expense of $2.8 million due primarily to higher precipitation in certain markets where our landfills are located and higher costs charged by third parties to transport and treat leachate, an increase in landfill maintenance, environmental compliance and daily cover expenses of $1.7 million due to increased compliance requirements under our landfill operating permits, an increase in expenses for auto and workers’ compensation claims of $1.5 million due primarily to increased claim severity, an increase in 401(k) matching expenses of $1.5 million due to higher employee earnings and $6.6 million of other net expense increases.

Cost of operations as a percentage of revenues increased 0.4 percentage points to 59.6% for the three months ended September 30, 2022, from 59.2% for the three months ended September 30, 2021. The increase as a percentage of revenues consisted of a 0.8 percentage point increase from higher diesel and natural gas expenses, a 0.6 percentage point increase from higher third-party trucking and transportation expenses and a 0.6 percentage point increase from acquisitions closed during, or subsequent to, the three months ended September 30, 2021 having operating margins lower than our company average, partially offset by a combined 1.4 percentage point decrease from disposal, taxes on revenues, labor and repairs and maintenance due to price-driven revenue increases and a 0.2 percentage point decrease from all other net changes.

Cost of operations as a percentage of revenues increased 0.8 percentage points to 59.9% for the nine months ended September 30, 2022, from 59.1% for the nine months ended September 30, 2021. The increase as a percentage of revenues consisted of a 0.8 percentage point increase from higher fuel expense, a 0.5 percentage point increase from higher third-party trucking and transportation expenses, a 0.5 percentage point increase from acquisitions closed during, or subsequent to, the nine months ended September 30, 2021 having operating margins lower than our company average and a 0.2 percentage point increase from supplemental compensation to provide financial assistance associated with the impact of the COVID-19 pandemic, partially offset by a combined 1.2 percentage point decrease from disposal, taxes on revenues, labor and employee benefits due to price-driven revenue increases.

SG&A.  SG&A expenses increased $31.4 million, or 20.2%, to $186.9 million for the three months ended September 30, 2022, from $155.5 million for the three months ended September 30, 2021. The increase was comprised of an increase of $21.7 million, assuming foreign currency parity, at our existing operations and $10.7 million from acquisitions closed during, or subsequent to, the three months ended September 30, 2021, partially offset by a decrease of $0.7 million resulting from a lower average foreign currency exchange rate in effect during the current period and a decrease of $0.3 million from operations divested subsequent to the three months ended September 30, 2021.

The increase in SG&A expenses at our existing operations of $21.7 million, assuming foreign currency parity, for the three months ended September 30, 2022 was comprised of a collective increase in travel, meetings, training and community activity expenses of $6.6 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 direct acquisition expenses of $4.8 million due to an increase in acquisition activity in the current period, an increase in administrative payroll expenses of $4.7 million due primarily to annual pay increases, an increase in equity-based compensation expenses of $3.3 million associated with our annual recurring grant of restricted share units to our personnel, an increase in software license fees of $1.2 million associated with new information technology applications and an increase in professional fees of $1.1 million due primarily to increased legal services.

SG&A expenses increased $63.8 million, or 14.0%, to $518.7 million for the nine months ended September 30, 2022, from $454.9 million for the nine months ended September 30, 2021. The increase was comprised of an increase of $36.2 million, assuming foreign currency parity, at our existing operations and $29.9 million from acquisitions closed during, or

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subsequent to, the nine months ended September 30, 2021, partially offset by a decrease of $1.4 million resulting from a lower average foreign currency exchange rate in effect during the current period and a decrease of $0.9 million from operations divested subsequent to the nine months ended September 30, 2021.

The increase in SG&A expenses at our existing operations of $36.2 million, assuming foreign currency parity, for the nine months ended September 30, 2022 was comprised of a collective increase in travel, meetings, training and community activity expenses of $19.8 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 direct acquisition expenses of $12.5 million due to an increase in acquisition activity in the current period, an increase in administrative payroll expenses of $10.8 million due primarily to annual pay increases, an increase in equity-based compensation expenses of $6.0 million associated with our annual recurring grant of restricted share units to our personnel, an increase in professional fees of $2.8 million due primarily to increased legal services, an increase in software license fees of $2.3 million associated with new information technology applications, an increase of $0.8 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic and $1.3 million of other net expense increases, partially offset by a decrease in deferred compensation expenses of $9.7 million as a result of decreases in the market value of investments to which employee deferred compensation liability balances are tracked, a decrease of $5.2 million in equity-based compensation expenses associated with the prior year period including  adjustments to increase the fair value of our common shares held in our deferred compensation plan by certain key executives as a result of the shares being exchanged for other investment options, a decrease in accrued recurring cash incentive compensation expense to our management of $3.1 million and a decrease in equity-based compensation expenses of $2.1 million associated with changes in our share price resulting in fair value measurement decreases to equity awards accounted for as liabilities that were granted to employees of Progressive Waste prior to June 1, 2016, which are subject to valuation adjustments each period.

SG&A expenses as a percentage of revenues increased 0.2 percentage points to 9.9% for the three months ended September 30, 2022, from 9.7% for the three months ended September 30, 2021. The increase as a percentage of revenues was primarily attributable to increased travel, meetings, training and community activity expenses and higher direct acquisition expenses, partially offset by the impact of price-driven revenue increases in our solid waste services and acquisitions closed during, or subsequent to, the three months ended September 30, 2021 having lower SG&A expenses as a percentage of revenues than our company average.

SG&A expenses as a percentage of revenues decreased 0.3 percentage points to 9.7% for the nine months ended September 30, 2022, from 10.0% for the nine months ended September 30, 2021. The decrease as a percentage of revenues was primarily attributable to lower equity compensation expenses, lower cash incentive compensation expense, lower deferred compensation expense, acquisitions closed during, or subsequent to, the nine months ended September 30, 2021 having lower SG&A expenses as a percentage of revenues than our company average and the impact of price-driven revenue increases in our solid waste services, partially offset by increased travel, meetings, training and community activity expenses and higher direct acquisition expenses.

Depreciation.  Depreciation expense increased $21.3 million, or 12.4%, to $193.3 million for the three months ended September 30, 2022, from $172.0 million for the three months ended September 30, 2021. The increase was comprised of an increase in depreciation and depletion expense of $16.5 million from acquisitions closed during, or subsequent to, the three months ended September 30, 2021 and an increase in depreciation expense of $7.7 million from the impact of additions to our fleet and equipment purchased to support our existing operations, partially offset by a decrease in depletion expense of $1.3 million resulting primarily from non-recurring charges recorded in the prior year period to adjust landfill closure liabilities, a decrease in depreciation and depletion expense of $0.8 million from operations divested subsequent to the three months ended September 30, 2021 and a decrease of $0.8 million resulting from a lower average foreign currency exchange rate in effect during the current period.

Depreciation expense increased $63.6 million, or 12.8%, to $562.2 million for the nine months ended September 30, 2022, from $498.6 million for the nine months ended September 30, 2021. The increase was comprised of an increase in depreciation and depletion expense of $41.9 million from acquisitions closed during, or subsequent to, the nine months ended September 30, 2021, an increase in depreciation expense of $19.0 million from the impact of additions to our fleet and equipment purchased to support our existing operations and an increase in depletion expense of $6.9 million resulting

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from increased landfill special waste and E&P volumes and higher landfill development costs increasing our per ton landfill depletion rates, partially offset by a decrease in depreciation and depletion expense of $2.5 million from operations divested subsequent to the nine months ended September 30, 2021 and a decrease of $1.7 million resulting from a lower average foreign currency exchange rate in effect during the current period.

Depreciation expense as a percentage of revenues decreased 0.5 percentage points to 10.3% for the three months ended September 30, 2022, from 10.8% for the three months ended September 30, 2021. Depreciation expense as a percentage of revenues decreased 0.5 percentage points to 10.5% for the nine months ended September 30, 2022, from 11.0% for the nine months ended September 30, 2021. The decreases as a percentage of revenues were primarily attributable to the impact of price-driven revenue increases in our solid waste services.

Amortization of Intangibles.  Amortization of intangibles expense increased $3.6 million, or 10.0%, to $38.9 million for the three months ended September 30, 2022, from $35.3 million for the three months ended September 30, 2021. The increase was the result of $9.7 million from intangible assets acquired in acquisitions closed during, or subsequent to, the three months ended September 30, 2021, partially offset by a decrease of $5.9 million from certain intangible assets becoming fully amortized subsequent to September 30, 2021 and a decrease of $0.2 million resulting from a lower average foreign currency exchange rate in effect during the current period.

Amortization of intangibles expense increased $13.8 million, or 13.7%, to $114.0 million for the nine months ended September 30, 2022, from $100.2 million for the nine months ended September 30, 2021. The increase was the result of $28.7 million from intangible assets acquired in acquisitions closed during, or subsequent to, the nine months ended September 30, 2021, partially offset by a decrease of $14.5 million from certain intangible assets becoming fully amortized subsequent to September 30, 2021 and a decrease of $0.4 million resulting from a lower average foreign currency exchange rate in effect during the current period.

Amortization of intangibles expense as a percentage of revenues was 2.2% for the three and nine months ended September 30, 2021 and 2.1% for the three and nine months ended September 30, 2022. The decrease was attributable to the impact of price-driven revenue increases in our solid waste services.

Impairments and Other Operating Items.  Impairments and other operating items increased $10.3 million, to net losses totaling $13.4 million for the three months ended September 30, 2022, from net losses totaling $3.1 million for the three months ended September 30, 2021.

The net losses of $13.4 million recorded during the three months ended September 30, 2022 consisted of an $8.4 million lawsuit judgment accrual and $5.5 million of charges to write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to the original estimated termination date, partially offset by $0.5 million of other net credits.

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.

Impairments and other operating items increased $9.7 million, to net losses totaling $19.5 million for the nine months ended September 30, 2022, from net losses totaling $9.8 million for the nine months ended September 30, 2021.

The net losses of $19.5 million recorded during the nine months ended September 30, 2022 consisted of $10.5 million of charges to write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to the original estimated termination date, an $8.4 million lawsuit judgment accrual and $0.6 million of other net charges.

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

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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.

Operating Income.  Operating income increased $41.7 million, or 14.6%, to $326.8 million for the three months ended September 30, 2022, from $285.1 million for the three months ended September 30, 2021. 

The increase in our operating income for the three months ended September 30, 2022 was due primarily to price increases for our solid waste services, operating income generated from acquisitions closed during, or subsequent to, the three months ended September 30, 2021 and an increase in earnings at our E&P waste operations.

Operating income increased $139.9 million, or 17.7%, to $930.2 million for the nine months ended September 30, 2022, from $790.3 million for the nine months ended September 30, 2021. 

The increase in our operating income for the nine months ended September 30, 2022 was due primarily to price increases for our solid waste services, operating income contributions from increased sales of renewable energy credits associated with the generation of landfill gas, operating income generated from acquisitions closed during, or subsequent to, the nine months ended September 30, 2021 and an increase in earnings at our E&P waste operations.

Operating income as a percentage of revenues decreased 0.5 percentage points to 17.4% for the three months ended September 30, 2022, from 17.9% for the three months ended September 30, 2021. The decrease in operating income as a percentage of revenues was comprised of a 0.4 percentage point increase in cost of operations, a 0.5 percentage point increase in impairments and other operating items and a 0.2 percentage point increase in SG&A expense, partially offset by a 0.5 percentage point decrease in depreciation expense and a 0.1 percentage point decrease in amortization expense.

Operating income as a percentage of revenues decreased 0.1 percentage points to 17.4% for the nine months ended September 30, 2022, from 17.5% for the nine months ended September 30, 2021.  The decrease in operating income as a percentage of revenues was comprised of a 0.8 percentage point increase in cost of operations and a 0.2 percentage point increase in impairments and other operating items, partially offset by a 0.5 percentage point decrease in depreciation expense, a 0.3 percentage point decrease in SG&A expense and a 0.1 percentage point decrease in amortization expense.

Interest Expense.  Interest expense increased $10.8 million, or 26.6%, to $51.2 million for the three months ended September 30, 2022, from $40.4 million for the three months ended September 30, 2021. The increase was primarily attributable to an increase of $16.5 million from the issuance of $2.75 billion of senior unsecured notes during, or subsequent to, the three months ended September 30, 2021, an increase of $4.0 million from higher interest rates on borrowings outstanding under our Credit Agreement and an increase of $0.9 million due to an increase in the average borrowings outstanding under our Credit Agreement, partially offset by a decrease of $10.5 million from the repayment of $1.5 billion of senior unsecured notes in September 2021 and $0.1 million of other net decreases.

Interest expense increased $13.4 million, or 10.8%, to $137.6 million for the nine months ended September 30, 2022, from $124.2 million for the nine months ended September 30, 2021. The increase was primarily attributable to an increase of $41.5 million from the issuance of $2.75 billion of senior unsecured notes during, or subsequent to, the nine months ended September 30, 2021, an increase of $6.2 million due to an increase in the average borrowings outstanding under our Credit Agreement and an increase of $3.6 million from higher interest rates on borrowings outstanding under our Credit Agreement, partially offset by a decrease of $37.1 million from the repayment of $1.75 billion of senior unsecured notes during the nine months ended September 30, 2021 and $0.8 million of other net decreases.

Other Income.  Other income increased $5.4 million, to $8.5 million for the three months ended September 30, 2022, from $3.1 million for the three months ended September 30, 2021. Other income decreased $3.1 million, to $2.4 million for the nine months ended September 30, 2022, from $5.5 million for the nine months ended September 30, 2021.

Other income of $8.5 million recorded during the three months ended September 30, 2022 consisted of income from transactions primarily as a result of the impact from changes in foreign currency exchange rates on certain debt of $6.0 million and $2.5 million of other income.

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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 income.

Other income of $2.4 million recorded during the nine months ended September 30, 2022 consisted of income from transactions primarily as a result of the impact from changes in foreign currency exchange rates on certain debt of $7.9 million and $0.7 million of other income, partially offset by $6.2 million from a decline in the value of investments purchased to fund our employee deferred compensation obligations.

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, income from transactions primarily as a result of the impact from changes in foreign currency exchange rates on certain debt of $0.9 million and $2.6 million of other income sources.

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 consisted 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 increased $30.4 million, to $48.8 million for the three months ended September 30, 2022, from $18.4 million for the three months ended September 30, 2021. Our effective tax rate for the three months ended September 30, 2022 was 17.1%. Our effective tax rate for the three months ended September 30, 2021 was 13.8%. Income taxes increased $49.3 million, to $155.9 million for the nine months ended September 30, 2022, from $106.6 million for the nine months ended September 30, 2021. Our effective tax rate for the nine months ended September 30, 2022 was 19.5%. Our effective tax rate for the nine months ended September 30, 2021 was 19.1%. 

The income tax provision for the nine months ended September 30, 2022 included a benefit of $2.5 million from share-based payment awards being recognized in the income statement when settled, as well as a portion of our internal financing being taxed at effective rates substantially lower than the U.S. federal statutory rate.

The income tax provision for the nine months ended September 30, 2021 included a benefit 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.

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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,
	2022		2021		2022		2021
Commercial	$	564,592	$	465,246	$	1,602,793	$	1,335,686
Residential		487,995		422,543		1,391,603		1,240,337
Industrial and construction roll off		315,904		249,417		870,949		695,975
Total collection		1,368,491		1,137,206		3,865,345		3,271,998
Landfill		345,215		328,147		984,700		927,207
Transfer		271,685		225,827		751,117		632,282
Recycling		48,246		55,772		178,845		129,759
E&P		56,995		38,519		154,706		101,137
Intermodal and other		47,604		38,377		139,605		112,602
Intercompany		(258,368)		(226,680)		(731,760)		(647,943)
Total	$	1,879,868	$	1,597,168	$	5,342,558	$	4,527,042

We manage our operations through the following five geographic solid waste operating segments: Eastern, Southern, Western, Central and Canada. Our five geographic solid waste operating segments comprise our reportable segments.  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.  Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts.

Summarized financial information for our reportable segments are shown in the following tables in thousands of U.S. dollars and as a percentage of total segment revenue for the periods indicated.

Three Months Ended					EBITDA		Depreciation and
September 30, 2022	Revenue		EBITDA(b)		Margin		Amortization
Eastern	$	501,052	$	133,393	26.6	%	$	72,343
Southern		428,366		130,668	30.5	%		49,831
Western		385,479		115,701	30.0	%		39,727
Central		322,657		116,337	36.1	%		38,851
Canada		242,314		87,910	36.3	%		29,530
Corporate(a)		—		(11,657)	—			1,864
	$	1,879,868	$	572,352	30.4	%	$	232,146

Three Months Ended					EBITDA		Depreciation and
September 30, 2021	Revenue		EBITDA(b)		Margin		Amortization
Eastern	$	396,229	$	106,908	27.0	%	$	60,981
Southern		370,958		99,612	26.9	%		49,171
Western		332,020		108,280	32.6	%		32,529
Central		273,682		95,026	34.7	%		34,615
Canada		224,279		92,275	41.1	%		27,650
Corporate(a)		—		(6,551)	—			2,356
	$	1,597,168	$	495,550	31.0	%	$	207,302

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Nine Months Ended					EBITDA		Depreciation and
September 30, 2022	Revenue		EBITDA(b)		Margin		Amortization
Eastern	$	1,401,387	$	367,223	26.2	%	$	207,754
Southern		1,231,894		363,785	29.5	%		147,001
Western		1,093,112		331,049	30.3	%		113,907
Central		908,761		317,397	34.9	%		111,892
Canada		707,404		265,402	37.5	%		88,809
Corporate(a)		—		(19,042)	—			6,767
	$	5,342,558	$	1,625,814	30.4	%	$	676,130

Nine Months Ended					EBITDA		Depreciation and
September 30, 2021	Revenue		EBITDA(b)		Margin		Amortization
Eastern	$	1,102,307	$	295,411	26.8	%	$	173,488
Southern		1,072,456		291,964	27.2	%		141,070
Western		942,813		301,507	32.0	%		93,997
Central		775,913		268,952	34.7	%		99,221
Canada		633,553		254,857	40.2	%		84,274
Corporate(a)		—		(13,743)	—			6,775
	$	4,527,042	$	1,398,948	30.9	%	$	598,825

(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.

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

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, EBITDA and depreciation, depletion and amortization for our reportable segments for the three and nine month periods ended September 30, 2022, compared to the three and nine month periods ended September 30, 2021, are discussed below.

Eastern

Revenue increased $104.9 million to $501.1 million for the three months ended September 30, 2022, from $396.2 million for the three months ended September 30, 2021. Revenue increased $299.1 million to $1.401 billion for the nine months ended September 30, 2022, from $1.102 billion for the nine months ended September 30, 2021. The increase in revenues for the three and nine months ended September 30, 2022 was due to price increases, contributions from acquisitions and increased landfill gas sales attributable to higher volumes produced, partially offset by decreased residential collection volumes and lower prices for recyclable commodities.

EBITDA increased $26.5 million to $133.4 million for the three months ended September 30, 2022, from $106.9 million for the three months ended September 30, 2021. EBITDA margin was 26.6% and 27.0% for the three months ended September 30, 2022 and 2021, respectively. EBITDA increased $71.8 million to $367.2 million for the nine months ended September 30, 2022, from $295.4 million for the nine months ended September 30, 2021. EBITDA margin was 26.2% and 26.8% for the nine months ended September 30, 2022 and 2021, respectively. The decrease in our EBITDA margin for the three and nine months ended September 30, 2022 was due primarily to increased diesel fuel expenses, increased third-party trucking and transportation expenses, increased repair and maintenance expenses, increased corporate overhead allocations and increased travel, meetings, training and community activity expenses, partially offset by benefits from price-led revenue increases and the impact of acquisitions having higher EBITDA margins than our segment average.

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Depreciation, depletion and amortization expense increased $11.3 million, to $72.3 million for the three months ended September 30, 2022, from $61.0 million for the three months ended September 30, 2021. Depreciation, depletion and amortization expense increased $34.3 million, to $207.8 million for the nine months ended September 30, 2022, from $173.5 million for the nine months ended September 30, 2021. The increase for the three and nine months ended September 30, 2022 was due to assets acquired in acquisitions, additions to our fleet and equipment and higher depletion expense due to higher landfill development costs increasing our per ton landfill depletion rates.

Southern

Revenue increased $57.4 million to $428.4 million for the three months ended September 30, 2022, from $371.0 million for the three months ended September 30, 2021. Revenue increased $159.4 million to $1.232 billion for the nine months ended September 30, 2022, from $1.072 billion for the nine months ended September 30, 2021. The increase in revenues for the three and nine months ended September 30, 2022 was due to solid waste price increases, increased E&P waste revenues attributable to increases in drilling and production activity levels resulting in increases in the demand for our E&P waste services and contributions from acquisitions, partially offset by lower residential collection volumes due to the loss of a collection contract subsequent to September 30, 2021, a decrease resulting from the divestiture of certain non-strategic operating locations and lower landfill special waste volumes.

EBITDA increased $31.1 million to $130.7 million for the three months ended September 30, 2022, from $99.6 million for the three months ended September 30, 2021. EBITDA margin was 30.5% and 26.9% for the three months ended September 30, 2022 and 2021, respectively. EBITDA increased $71.8 million to $363.8 million for the nine months ended September 30, 2022, from $292.0 million for the nine months ended September 30, 2021. EBITDA margin was 29.5% and 27.2% for the nine months ended September 30, 2022 and 2021, respectively. The increase in our EBITDA margin for the three and nine months ended September 30, 2022 was due to increased earnings at our E&P operations and price-led increases in solid waste revenue, partially offset by increased diesel and natural gas fuel expenses, the impact of acquisitions having lower EBITDA margins than our segment average, increased cost of recyclable commodities expenses, increased travel, meetings, training and community activity expenses and increased legal expenses.

Depreciation, depletion and amortization expense increased $0.6 million, to $49.8 million for the three months ended September 30, 2022, from $49.2 million for the three months ended September 30, 2021. Depreciation, depletion and amortization expense increased $5.9 million, to $147.0 million for the nine months ended September 30, 2022, from $141.1 million for the nine months ended September 30, 2021. The increase for the three and nine months ended September 30, 2022 was due to assets acquired in acquisitions, additions to our fleet and equipment and higher depletion expense due to increased landfill volumes and higher landfill development costs increasing our per ton landfill depletion rates, partially offset by a decrease resulting from the divestiture of certain non-strategic operating locations, a reduction in amortization expense associated with the loss of a large residential collection contract and a decrease in depletion expense resulting  from non-recurring charges recorded in the prior year period to adjust landfill closure liabilities.

Western

Revenue increased $53.5 million to $385.5 million for the three months ended September 30, 2022, from $332.0 million for the three months ended September 30, 2021. The increase for the three months ended September 30, 2022 was due to contributions from acquisitions, price increases, increased collection volumes and increased intermodal revenue, partially offset by lower prices for recyclable commodities.

Revenue increased $150.3 million to $1.093 billion for the nine months ended September 30, 2022, from $942.8 million for the nine months ended September 30, 2021. The increase for the nine months ended September 30, 2022 was due to contributions from acquisitions, price increases, increased collection volumes, higher prices during the first six months in the comparable periods for recyclable commodities and increased intermodal revenue, partially offset by lower prices for recyclable commodities during the third quarter period.

EBITDA increased $7.4 million to $115.7 million for the three months ended September 30, 2022, from $108.3 million for the three months ended September 30, 2021. EBITDA margin was 30.0% and 32.6% for the three months ended September 30, 2022 and 2021, respectively. EBITDA increased $29.5 million to $331.0 million for the nine months

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ended September 30, 2022, from $301.5 million for the nine months ended September 30, 2021. EBITDA margin was 30.3% and 32.0% for the nine months ended September 30, 2022 and 2021, respectively. The decrease in our EBITDA margin for the three and nine months ended September 30, 2022 was due to increased diesel and natural gas fuel expenses, increased third-party trucking and transportation expenses, acquisitions having operating margins lower than our segment average, increased cost of recyclable commodities expenses, increased labor and recurring incentive compensation expenses and increased travel, meetings, training and community activity expenses, partially offset by benefits from price-led increases in revenue.

Depreciation, depletion and amortization expense increased $7.2 million, to $39.7 million for the three months ended September 30, 2022, from $32.5 million for the three months ended September 30, 2021. Depreciation, depletion and amortization expense increased $19.9 million, to $113.9 million for the nine months ended September 30, 2022, from $94.0 million for the nine months ended September 30, 2021. The increase for the three and nine months ended September 30, 2022 was due to assets acquired in acquisitions and additions to our fleet and equipment.

Central

Revenue increased $49.0 million to $322.7 million for the three months ended September 30, 2022, from $273.7 million for the three months ended September 30, 2021. The increase in revenues for the three months ended September 30, 2022 was due to price increases, contributions from acquisitions closed subsequent to September 30, 2021 and higher landfill and roll off collection volumes, partially offset by lower prices for recyclable commodities.

Revenue increased $132.9 million to $908.8 million for the nine months ended September 30, 2022, from $775.9 million for the nine months ended September 30, 2021. The increase for the nine months ended September 30, 2022 was due to price increases, contributions from acquisitions, higher landfill and roll off collection volumes and higher prices during the first six months in the comparable periods for recyclable commodities, partially offset by lower prices for recyclable commodities during the third quarter period.

EBITDA increased $21.3 million to $116.3 million for the three months ended September 30, 2022, from $95.0 million for the three months ended September 30, 2021. EBITDA margin was 36.1% and 34.7% for the three months ended September 30, 2022 and 2021, respectively. EBITDA increased $48.4 million to $317.4 million for the nine months ended September 30, 2022, from $269.0 million for the nine months ended September 30, 2021. EBITDA margin was 34.9% and 34.7% for the nine months ended September 30, 2022 and 2021, respectively. The increase in our EBITDA margin for the three and nine months ended September 30, 2022 was due to the benefits from price-led increases in revenue, partially offset by acquisitions having operating margins lower than our segment average and increased diesel and natural gas fuel expenses.

Depreciation, depletion and amortization expense increased $4.3 million, to $38.9 million for the three months ended September 30, 2022, from $34.6 million for the three months ended September 30, 2021. Depreciation, depletion and amortization expense increased $12.7 million, to $111.9 million for the nine months ended September 30, 2022, from $99.2 million for the nine months ended September 30, 2021. The increase for the three and nine months ended September 30, 2022 was due to assets acquired in acquisitions, additions to our fleet and equipment and higher depletion expense due to higher landfill development costs increasing our per ton landfill depletion rates.

Canada

Revenue increased $18.0 million to $242.3 million for the three months ended September 30, 2022, from $224.3 million for the three months ended September 30, 2021, due to price increases, contributions from acquisitions, higher commercial and roll off collection volumes and higher prices for renewable energy credits associated with the generation of landfill gas, partially offset by a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, lower prices for recyclable commodities, lower residential collection volumes due to the loss of a collection contract subsequent to September 30, 2021, lower landfill volumes and the divestiture of a non-strategic operating location.

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Revenue increased $73.8 million to $707.4 million for the nine months ended September 30, 2022, from $633.6 million for the nine months ended September 30, 2021, due to price increases, contributions from acquisitions, higher commercial and roll off collection volumes, higher prices for renewable energy credits associated with the generation of landfill gas and higher prices during the first six months in the comparable periods for recyclable commodities, partially offset by a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, lower residential collection volumes due to the loss of a collection contract subsequent to September 30, 2021, lower landfill volumes, lower prices for recyclable commodities during the third quarter period and the divestiture of a non-strategic operating location.

EBITDA decreased $4.4 million to $87.9 million for the three months ended September 30, 2022, from $92.3 million for the three months ended September 30, 2021. EBITDA margin was 36.3% and 41.1% for the three months ended September 30, 2022 and 2021, respectively. EBITDA increased $10.5 million to $265.4 million for the nine months ended September 30, 2022, from $254.9 million for the nine months ended September 30, 2021. EBITDA margin was 37.5% and 40.2% for the nine months ended September 30, 2022 and 2021, respectively. The decrease in our EBITDA margin during the three and nine months ended September 30, 2022 was due to acquisitions having operating margins lower than our segment average, increased diesel fuel expenses, increased disposal expenses, increased employee benefits expenses, increased subcontracted hauling services, increased cost of recyclable commodities expenses and increased travel, meetings, training and community activity expenses, partially offset by benefits from price-led increases in revenue.

Depreciation, depletion and amortization expense increased $1.9 million, to $29.5 million for the three months ended September 30, 2022, from $27.6 million for the three months ended September 30, 2021. Depreciation, depletion and amortization expense increased $4.5 million, to $88.8 million for the nine months ended September 30, 2022, from $84.3 million for the nine months ended September 30, 2021. The increases were due to assets acquired in acquisitions and additions to our fleet and equipment, partially offset by a decrease in depletion expense due to lower landfill disposal volumes, a decrease resulting from the divestiture of a non-strategic operating location and a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.

Corporate

EBITDA decreased $5.1 million, to a loss of $11.7 million for the three months ended September 30, 2022, from a loss of $6.6 million for the three months ended September 30, 2021. The decrease was due to increased direct acquisition expenses, increased equity-based compensation expenses, increased travel, meetings, training and community activity expenses and increased software license expenses, partially offset by increased allocations of corporate overhead expenses to our segments.

EBITDA decreased $5.3 million, to a loss of $19.0 million for the nine months ended September 30, 2022, from a loss of $13.7 million for the nine months ended September 30, 2021. The decrease was due to increased travel, meetings, training and community activity expenses, increased direct acquisition expenses, increased legal expenses, increased software license fees and the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic, partially offset by decreased equity-based compensation expenses, decreased deferred compensation expenses, decreased cash incentive compensation expense to our management and decreased allocations of corporate overhead expenses to our segments.

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LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth certain cash flow information for the nine months ended September 30, 2022 and 2021 (in thousands of U.S. dollars):

	Nine Months Ended
	September 30,
	2022		2021
Net cash provided by operating activities	$	1,500,137	$	1,269,961
Net cash used in investing activities		(1,858,586)		(1,034,840)
Net cash provided by (used in) financing activities		450,417		(491,581)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(3,210)		443
Net increase (decrease) in cash, cash equivalents and restricted cash		88,758		(256,017)
Cash, cash equivalents and restricted cash at beginning of period		219,615		714,389
Cash, cash equivalents and restricted cash at end of period	$	308,373	$	458,372

Operating Activities Cash Flows

For the nine months ended September 30, 2022, net cash provided by operating activities was $1.500 billion. For the nine months ended September 30, 2021, net cash provided by operating activities was $1.270 billion. The $230.2 million increase was due primarily to the following:

1) Increase in earnings — Our increase in net cash provided by operating activities was favorably impacted by $156.0 million from an increase in net income, excluding depreciation, amortization of intangibles, 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, earnings generated from an increase in landfill gas revenues and renewable energy credits and an increase in earnings at our E&P waste operations.

2) Deferred income taxes — Our increase in net cash provided by operating activities was favorably impacted by $115.4 million from deferred income taxes as changes in deferred income taxes resulted in an increase to operating cash flows of $91.1 million for the nine months ended September 30, 2022, compared to a decrease to operating cash flows of $24.3 million for the nine months ended September 30, 2021. The increase for the nine months ended September 30, 2022 was attributable to capital expenditures providing tax benefits resulting from accelerated depreciation and tax benefits resulting from the divestiture of certain non-strategic E&P disposal operating locations. 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.

3) Accounts payable and accrued liabilities — Our increase in net cash provided by operating activities was favorably impacted by $74.0 million from accounts payable and accrued liabilities as changes in accounts payable and accrued liabilities resulted in an increase to operating cash flows of $126.7 million for the nine months ended September 30, 2022, compared to an increase to operating cash flows of $52.7 million for the nine months ended September 30, 2021. The increase for the nine months ended September 30, 2022 was due primarily to increases in operating expenses during the period which remained as outstanding obligations at September 30, 2022,  increased accrued interest due to the timing of interest payments for our senior unsecured notes issued subsequent to September 30, 2021, increased property taxes attributable to payment timing and the timing of payroll cycles, partially offset by the payment of annual cash incentive compensation to our management, which was accrued as a liability at year end. 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.

4) Deferred revenue — Our increase in net cash provided by operating activities was favorably impacted by $10.7 million from deferred revenue as changes in deferred revenue resulted in an increase to operating cash flows of $26.5 million for the nine months ended September 30, 2022, compared to an increase to operating cash flows of $15.8 million for the nine months ended September 30, 2021. For both comparative periods, deferred revenue increased due to price increases on our advanced billed residential and commercial collection services.

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5) Accounts receivable – Our increase in net cash provided by operating activities was unfavorably impacted by $39.0 million from accounts receivable as changes in accounts receivable resulted in a decrease to operating cash flows of $90.6 million for the nine months ended September 30, 2022, compared to a decrease to operating cash flows of $51.6 million for the nine months ended September 30, 2021. The decrease for the nine months ended September 30, 2022 was due to increases in revenues, which remained as outstanding receivables at September 30, 2022. 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.

6) Other long-term liabilities – Our increase in net cash provided by operating activities was unfavorably impacted by $24.9 million from other long-term liabilities as changes in other long-term liabilities resulted in a decrease to operating cash flows of $12.2 million for the nine months ended September 30, 2022, compared to an increase to operating cash flows of $12.7 million for the nine months ended September 30, 2021. The decrease for the nine months ended September 30, 2022 was due primarily to decreased employee deferred compensation liabilities. 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.

7) Prepaid expenses – Our increase in net cash provided by operating activities was unfavorably impacted by $59.1 million from prepaid expenses as changes in prepaid expenses resulted in a decrease to operating cash flows of $22.9 million for the nine months ended September 30, 2022, compared to an increase to operating cash flows of $36.2 million for the nine months ended September 30, 2021. The decrease for the nine months ended September 30, 2022 was due primarily to increases from payments of annual insurance premiums and higher parts and fuel inventory. The increase for the nine months ended September 30, 2021 was due primarily to decreases in prepaid income tax payments and prepaid vendor payments.

As of September 30, 2022, we had a working capital deficit of $148.4 million, including cash and equivalents of $200.2 million.  Our working capital increased $51.6 million from a working capital deficit of $200.0 million at December 31, 2021 including cash and equivalents of $147.4 million, due primarily to an increase in cash balances, accounts receivable and prepaid expenses, partially offset by an increase in accounts payable and deferred revenue. 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 $823.7 million to $1.859 billion for the nine months ended September 30, 2022, from $1.035 billion for the nine months ended September 30, 2021. The significant components of the increase included the following:

1) An increase in cash paid for acquisitions of $711.6 million;

2) An increase in capital expenditures at operations owned in the comparable periods of $87.3 million due to increases in land and buildings, landfill site costs, trucks, equipment and containers; and

3) An increase in capital expenditures at operations acquired during the comparative periods of $51.5 million due to additional trucks, equipment and containers; less

4) An increase in proceeds from disposal of assets of $13.2 million due to additional disposal of non-strategic assets to provide funding toward new capital expenditures.

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Financing Activities Cash Flows

Net cash provided by financing activities increased $942.0 million to $450.4 million for the nine months ended September 30, 2022, from net cash used in financing activities of $491.6 million for the nine months ended September 30, 2021. The significant components of the increase included the following:

1) An increase from the net change in long-term borrowings of $966.1 million (long-term borrowings increased $1.098 billion during the nine months ended September 30, 2022 and increased $131.9.million during the nine months ended September 30, 2021); less

2) A decrease from higher payments to repurchase our common shares of $119.4 million due to an increased volume of shares repurchased; less

3) A decrease from higher cash dividends paid of $17.0 million due primarily to an increase in our quarterly dividend rate for the nine months ended September 30, 2022 to $0.23 per share, from $0.205 per share for the nine months ended September 30, 2021; less

4) A decrease from higher debt issuance costs of $6.5 million attributable to senior note offerings completed in 2022.

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 26, 2022, our Board of Directors approved, subject to receipt of regulatory approvals, the annual renewal of our normal course issuer bid, or the NCIB, to purchase up to 12,859,066 of our common shares during the period of August 10, 2022 to August 9, 2023 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 “Normal Course Issuer Bid” 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 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.  In October 2022, our Board of Directors authorized an increase to our regular quarterly cash dividend of $0.025, from $0.230 to $0.255 per share.  Cash dividends of $177.7 million and $160.8 million were paid during the nine months ended September 30, 2022 and 2021, respectively. We cannot assure you as to the amounts or timing of future dividends.

We made $618.3 million in capital expenditures for property and equipment during the nine months ended September 30, 2022, and we expect to make total capital expenditures for property and equipment of approximately $850 million in 2022, net of asset sales.  We have funded and intend to fund the balance of our planned 2022 capital expenditures principally through cash on hand, internally generated funds and borrowings under our Credit Agreement. In addition, we may make substantial additional capital expenditures in acquiring land and solid waste businesses. If we acquire additional landfill disposal facilities, we may also have to make significant expenditures to bring them into compliance with applicable regulatory requirements, obtain permits or expand our available disposal capacity. We cannot currently determine the amount of these expenditures because they will depend on the number, nature, condition and permitted status of any acquired landfill disposal facilities. We believe that our cash and equivalents, Credit Agreement and the funds we expect to generate from operations will provide adequate cash to fund our working capital and other cash needs for the foreseeable future. However, disruptions in the capital and credit markets could adversely affect our ability to draw on our Credit Agreement or raise other capital. Our access to funds under the Credit Agreement is dependent on 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.

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As of September 30, 2022, $650.0 million under the term loan and $738.2 million under the revolving credit facility were outstanding under the Credit Agreement, exclusive of outstanding standby letters of credit of $42.7 million. We also had $84.7 million of letters of credit issued and outstanding at September 30, 2022 under a facility other than the Credit Agreement.  Our Credit Agreement matures in July 2026.

On March 9, 2022, we completed an underwritten public offering of $500.0 million aggregate principal amount of 3.20% Senior Notes due 2032 (the “New 2032 Senior Notes”). We issued the New 2032 Senior Notes under the Indenture, dated as of November 16, 2018, by and between the Company and U.S. Bank Trust Company, National Association, as successor in interest to U.S. Bank National Association, as trustee, as supplemented by the Sixth Supplemental Indenture, dated as of March 9, 2022. The New 2032 Senior Notes will mature on June 1, 2032.

On August 18, 2022, we completed an underwritten public offering of $750.0 million aggregate principal amount of 4.20% Senior Notes due 2033 (the “2033 Senior Notes” and, together with the New 2032 Senior Notes, the “Senior Notes”). We issued the 2033 Senior Notes under the Indenture, dated as of November 16, 2018, by and between the Company and U.S. Bank Trust Company, National Association, as successor in interest to U.S. Bank National Association, as trustee, as supplemented by the Seventh Supplemental Indenture, dated as of August 18, 2022. The 2033 Senior Notes will mature on January 15, 2033.

We will pay interest on the Senior Notes semi-annually in arrears. The Senior Notes are our senior unsecured obligations, ranking equally in right of payment with our other existing and future unsubordinated debt and senior to any of our future subordinated debt. The Senior Notes are not guaranteed by any of our subsidiaries.

On October 31, 2022, the Company, as borrower, Bank of America, N.A., as agent, and the other lenders from time to time party thereto (the “New TL Lenders”) entered into that certain Term Loan Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement”), pursuant to which the New TL Lenders made loans to the Company thereunder. The Term Loan Agreement has a scheduled maturity date of July 30, 2026.

Pursuant to the terms and conditions of the Term Loan Agreement, the New TL Lenders committed to provide a term loan in an aggregate principal amount of $800.0 million, which term loan was fully drawn on October 31, 2022.  Amounts borrowed under the Term Loan Agreement and repaid or prepaid may not be reborrowed.

The Company is party to that certain Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of July 30, 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the Company, as borrower, Bank of America, N.A., acting through its Canada Branch, as the global agent, the swing line lender and an l/c issuer, Bank of America, N.A., as the U.S. agent and an l/c issuer, and the lenders and any other financial institutions from time to time party thereto.

On October 31, 2022, the Company entered into an amendment to the Credit Agreement, which among other things, (i) amended certain definitions and other provisions to replace the LIBOR-based benchmark rates for certain U.S. dollar-denominated loans and other extensions of credit under the Credit Agreement with SOFR-based rates, and (ii) made certain changes conforming to the Term Loan Agreement

See Note 10 to our Condensed Consolidated Financial Statements included in Part I, Item 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.

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As of September 30, 2022, 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	$	6,284,737	$	6,718	$	13,971	$	1,400,338	$	4,863,710
Cash interest payments	$	2,397,779	$	211,017	$	431,160	$	364,184	$	1,391,418
Contingent consideration	$	103,800	$	54,640	$	13,036	$	3,224	$	32,900
Operating leases	$	228,269	$	10,094	$	70,153	$	46,687	$	101,335
Final capping, closure and post-closure	$	1,634,162	$	14,512	$	36,925	$	12,945	$	1,569,780

____________________

Long-term debt payments include:

1) $738.2 million in principal payments due July 2026 related to our revolving credit facility under our Credit Agreement.  We may elect to draw amounts on our 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, 2022, $601.0 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 4.12% on such date).  At September 30, 2022, $137.2 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 4.76% on such date).

2) $650.0 million in principal payments due July 2026 related to our term loan under our Credit Agreement. Outstanding amounts on the term loan can be either base rate loans or LIBOR loans. At September 30, 2022, 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 4.12% on such date).

3) $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%.

4) $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%.

5) $600.0 million in principal payments due 2030 related to our 2030 Senior Notes. The 2030 Senior Notes bear interest at a rate of 2.60%.

6) $650.0 million in principal payments due 2032 related to our 2032 Senior Notes. The 2032 Senior Notes bear interest at a rate of 2.20%.

7) $500.0 million in principal payments due 2032 related to our New 2032 Senior Notes. The New 2032 Senior Notes bear interest at a rate of 3.20%.

8) $750.0 million in principal payments due 2033 related to our 2033 Senior Notes. The 2033 Senior Notes bear interest at a rate of 4.20%.

9) $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%.

10) $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%.

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11) $34.4 million in principal payments related to our notes payable to sellers and other third parties. Our notes payable to sellers and other third parties bear interest at rates between 2.42% and 10.35% at September 30, 2022, and have maturity dates ranging from 2028 to 2036.

12) $12.1 million in principal payments related to our financing leases.  Our financing leases bear interest at rates between 1.89% and 2.16% at September 30, 2022, and have expiration dates ranging from 2026 to 2027.

The following assumptions were made in calculating cash interest payments:

1) We calculated cash interest payments on the 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, 2022. We assumed the Credit Agreement is paid off when it matures in July 2026.

2) 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 $85.8 million recorded as liabilities in our Condensed Consolidated Financial Statements at September 30, 2022, and $18.0 million of future interest accretion on the recorded obligations.

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	$	92,514	$	74,065	$	18,449	$	—	$	—

____________________

(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, 2022, our unconditional purchase obligations consisted of multiple fixed-price fuel purchase contracts under which we have 35.5 million gallons remaining to be purchased for a total of $92.5 million. The current fuel purchase contracts expire on or before December 31, 2024. These arrangements have not materially affected our financial position, results of operations or liquidity during the nine months ended September 30, 2022, 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 $1.425 billion and $1.301 billion at September 30, 2022 and December 31, 2021, respectively. These arrangements have not materially affected our financial position, results of operations or liquidity during the nine months ended September 30, 2022, 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.

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The disposal tonnage that we received in the nine month periods ended September 30, 2022 and 2021, at all of our landfills during the respective period, is shown below (tons in thousands):

	Nine Months Ended September 30,
	2022		2021
	Number	Total	Number	Total
	of Sites	Tons	of Sites	Tons
Owned operational landfills and landfills operated under life-of-site agreements	91	35,291	89	35,167
Operated landfills	5	449	5	421
	96	35,740	94	35,588

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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, 2022 and 2021, are calculated as follows (amounts in thousands of U.S. dollars):

	Nine Months Ended
	September 30,
	2022		2021
Net cash provided by operating activities	$	1,500,137	$	1,269,961
Less: Change in book overdraft		(5,983)		(563)
Plus: Proceeds from disposal of assets		23,341		10,109
Less: Capital expenditures for property and equipment		(618,313)		(479,480)
Adjustments:
Payment of contingent consideration recorded in earnings (a)		2,982		520
Cash received for divestitures (b)		(5,671)		—
Transaction-related expenses (c)		37,558		25,673
Pre-existing Progressive Waste share-based grants (d)		286		317
Tax effect (e)		(5,377)		(699)
Adjusted free cash flow	$	928,960	$	825,838

____________________

(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 the settlement of an acquired tax 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, 2022 and 2021, are calculated as follows (amounts in thousands of U.S. dollars):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income attributable to Waste Connections	$	236,912	$	114,381	$	641,310	$	451,736
Plus: Net income attributable to noncontrolling interests		213		273		390		325
Plus: Income tax provision		48,753		18,419		155,899		106,578
Plus: Interest expense		51,161		40,418		137,565		124,171
Less: Interest income		(1,784)		(495)		(2,574)		(2,342)
Plus: Depreciation and amortization		232,146		207,302		676,130		598,825
Plus: Closure and post-closure accretion		4,061		3,544		12,148		10,919
Plus: Impairments and other operating items		13,438		3,104		19,467		9,819
Less: Other income, net		(8,487)		(3,140)		(2,373)		(5,452)
Plus: Loss on early extinguishment of debt		—		115,288		—		115,288
Adjustments:
Plus: Transaction-related expenses (a)		10,461		5,637		18,694		6,220
Plus: Fair value changes to equity awards (b)		1,196		914		349		7,638
Adjusted EBITDA	$	588,070	$	505,645	$	1,657,005	$	1,423,725

____________________

(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, 2022 and 2021, 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,
	2022		2021		2022		2021
Reported net income attributable to Waste Connections	$	236,912	$	114,381	$	641,310	$	451,736
Adjustments:
Amortization of intangibles (a)		38,859		35,337		113,956		100,237
Impairments and other operating items (b)		13,438		3,104		19,467		9,819
Transaction-related expenses (c)		10,461		5,637		18,694		6,220
Fair value changes to equity awards (d)		1,196		914		349		7,638
Loss on early extinguishment of debt (e)		—		115,288		—		115,288
Tax effect (f)		(15,944)		(41,531)		(38,260)		(61,466)
Adjusted net income attributable to Waste Connections	$	284,922	$	233,130	$	755,516	$	629,472
Diluted earnings per common share attributable to Waste Connections’ common shareholders:
Reported net income	$	0.92	$	0.44	$	2.49	$	1.72
Adjusted net income	$	1.10	$	0.89	$	2.93	$	2.39

____________________

(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.

INFLATION

In the current environment, we have seen inflationary pressures resulting from higher fuel, materials and labor costs in certain markets and higher resulting third-party costs in areas such as brokerage, repairs and construction.  Consistent with industry practice, many of our contracts allow us to pass through certain costs to our customers, including increases in landfill tipping fees and, in some cases, fuel costs.  To the extent that there are decreases in fuel costs, in some cases, a portion of these reductions are passed through to customers in the form of lower fuel and material surcharges. Therefore, we believe that we should be able to increase prices to offset many cost increases that result from inflation in the ordinary course of business. However, competitive pressures or delays in the timing of rate increases under certain of our contracts may require us to absorb at least part of these cost increases, especially if cost increases exceed the average rate of inflation. Management’s estimates associated with inflation have an impact on our accounting for landfill liabilities.

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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. 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 variable rate debt positions.

At September 30, 2022, our derivative instruments included five 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	$	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, 2022 and December 31, 2021, of $438.2 million and $603.9 million, respectively, including floating rate debt under our Credit Agreement. A one percentage point increase in interest rates on our variable-rate debt as of September 30, 2022 and December 31, 2021, would decrease our annual pre-tax income by approximately $4.4 million and $6.0 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.

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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, 2022, we had no fuel hedge agreements in place; however, we have entered into fixed price fuel purchase contracts for 2022 as described below.

For the year ending December 31, 2022, we expect to purchase approximately 88.0 million gallons of fuel, of which 43.9 million gallons will be purchased at market prices and 44.1 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, 2022 to December 31, 2022, we expect to purchase approximately 11.0 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 2022 would decrease our pre-tax income during this period by approximately $1.1 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, 2022 and 2021, would have had a $17.1 million and $12.6 million impact on revenues for the nine months ended September 30, 2022 and 2021, 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 2021 or 2022. A $0.01 change in the Canadian dollar to U.S. dollar exchange rate would impact our annual revenue and EBITDA by approximately $12.0 million and $4.5 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, 2022, 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, 2022, 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	Indenture, dated as of November 16, 2018, by and between Waste Connections, Inc. and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2018)
4.2	Seventh Supplemental Indenture, dated as of August 18, 2022, by and between Waste Connections, Inc. and U.S. Bank Trust Company National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on August 18, 2022)
4.3	Term Loan Agreement, dated as of October 31, 2022 (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on November 1, 2022)
4.4	Amendment No. 1 to Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of October 31, 2022 (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on November 1, 2022)
10.1 +	Separation Benefits Plan of Waste Connections US, Inc., as amended and restated effective July 26, 2022 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q filed on August 3, 2022)
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.

+ Management contract or compensatory plan, contract or arrangement.

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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: November 3, 2022	BY:	/s/ Worthing F. Jackman
		Worthing F. Jackman
		President and Chief Executive Officer
Date: November 3, 2022	BY:	/s/ Mary Anne Whitney
		Mary Anne Whitney
		Executive Vice President and Chief Financial Officer

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