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, ~~2019~~2020
	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.)

610 Applewood Crescent, 2^nd Floor

Vaughan

Ontario L4K 0E3

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):


þLarge 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 ~~18, 2019: 263,676,837~~16, 2020: 262,897,746 common shares

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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


	September 30,		December 31,		September 30,		December 31,
	2019		2018		2020		2019
ASSETS
Current assets:
Cash and equivalents	$	303,778	$	319,305	$	859,096	$	326,738
Accounts receivable, net of allowance for doubtful accounts of $15,369 and $16,760 at September 30, 2019 and December 31, 2018, respectively		676,676		609,545
Accounts receivable, net of allowance for credit losses of $20,657 and $16,432 at September 30, 2020 and December 31, 2019, respectively						616,630		662,808
Prepaid expenses and other current assets		124,836		164,053		115,690		141,052
Total current assets		1,105,290		1,092,903		1,591,416		1,130,598

Restricted cash		92,050		84,661		96,519		96,483
Restricted investments		50,602		47,486		47,161		51,179
Property and equipment, net		5,375,166		5,168,996		5,193,378		5,516,347
Operating lease right-of-use assets		189,697		—		168,974		183,220
Goodwill		5,297,556		5,031,685		5,534,567		5,510,851
Intangible assets, net		1,097,036		1,128,628		1,127,279		1,163,063
Other assets, net		62,838		72,970		90,153		85,954
Total assets	$	13,270,235	$	12,627,329	$	13,849,447	$	13,737,695
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	428,492	$	359,967	$	403,946	$	436,970
Book overdraft		20,429		18,518		15,092		15,954
Accrued liabilities		299,139		289,544		400,293		280,808
Current portion of operating lease liabilities		30,162		—		30,196		29,929
Current portion of contingent consideration		12,393		11,612		62,492		26,659
Deferred revenue		200,677		179,282		216,675		216,443
Current portion of long-term debt and notes payable		502		1,786		6,772		465
Total current liabilities		991,794		860,709		1,135,466		1,007,228

Long-term portion of debt and notes payable		4,039,405		4,153,465		4,680,219		4,353,782
Long-term portion of operating lease liabilities		166,347		—		145,642		160,033
Long-term portion of contingent consideration		44,561		43,003		26,030		42,825
Deferred income taxes		800,223		760,033		725,343		818,622
Other long-term liabilities		431,565		349,931		470,558		416,851
Total liabilities		6,473,895		6,167,141		7,183,258		6,799,341

Commitments and contingencies (Note 18)
Commitments and contingencies (Note 19)

Equity:
Common shares: 263,697,618 shares issued and 263,616,104 shares outstanding at September 30, 2019; 263,271,302 shares issued and 263,141,413 shares outstanding at December 31, 2018		4,135,343		4,131,307
Common shares: 262,897,009 shares issued and 262,822,825 shares outstanding at September 30, 2020; 263,699,675 shares issued and 263,618,161 shares outstanding at December 31, 2019						4,030,368		4,135,343
Additional paid-in capital		147,188		133,577		162,606		154,917
Accumulated other comprehensive loss		(61,228)		(74,786)		(113,338)		(10,963)
Treasury shares: 81,514 and 129,889 shares at September 30, 2019 and December 31, 2018, respectively		—		—
Treasury shares: 74,184 and 81,514 shares at September 30, 2020 and December 31, 2019, respectively						—		—
Retained earnings		2,569,663		2,264,510		2,582,298		2,654,207
Total Waste Connections’ equity		6,790,966		6,454,608		6,661,934		6,933,504
Noncontrolling interest in subsidiaries		5,374		5,580		4,255		4,850
Total equity		6,796,340		6,460,188		6,666,189		6,938,354
	$	13,270,235	$	12,627,329	$	13,849,447	$	13,737,695

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

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Revenues	$	1,412,444	$	1,281,110	$	4,026,719	$	3,661,209	$	1,389,552	$	1,412,444	$	4,047,739	$	4,026,719
Operating expenses:
Cost of operations		835,098		736,122		2,384,607		2,120,947		828,822		835,098		2,429,957		2,384,607
Selling, general and administrative		137,883		139,014		410,132		398,582		136,003		137,883		404,213		410,132
Depreciation		157,994		148,232		461,616		423,866		157,590		157,994		459,641		461,616
Amortization of intangibles		31,934		26,871		93,821		79,444		32,653		31,934		96,062		93,821
Impairments and other operating items		12,935		(1,998)		32,949		6,106		3,805		12,935		442,582		32,949
Operating income		236,600		232,869		643,594		632,264		230,679		236,600		215,284		643,594

Interest expense		(36,780)		(32,078)		(111,313)		(96,874)		(40,636)		(36,780)		(119,562)		(111,313)
Interest income		2,056		1,467		7,186		3,677		903		2,056		4,396		7,186
Other income (expense), net		(19)		600		4,562		2,053		702		(19)		(3,046)		4,562
Income before income tax provision		201,857		202,858		544,029		541,120		191,648		201,857		97,072		544,029

Income tax provision		(42,783)		(52,092)		(110,539)		(126,509)		(33,657)		(42,783)		(23,654)		(110,539)
Net income		159,074		150,766		433,490		414,611		157,991		159,074		73,418		433,490
Plus (less): Net loss (income) attributable to noncontrolling interests		35		77		89		(218)
Plus: Net loss attributable to noncontrolling interests										58		35		594		89
Net income attributable to Waste Connections	$	159,109	$	150,843	$	433,579	$	414,393	$	158,049	$	159,109	$	74,012	$	433,579

Earnings per common share attributable to Waste Connections’ common shareholders:
Basic	$	0.60	$	0.57	$	1.64	$	1.57	$	0.60	$	0.60	$	0.28	$	1.64
Diluted	$	0.60	$	0.57	$	1.64	$	1.57	$	0.60	$	0.60	$	0.28	$	1.64

Shares used in the per share calculations:
Basic		263,853,681		263,628,838		263,768,258		263,657,274		262,998,317		263,853,681		263,253,087		263,768,258
Diluted		264,587,456		264,394,757		264,473,345		264,376,320		263,507,486		264,587,456		263,718,001		264,473,345

Cash dividends per common share	$	0.16	$	0.14	$	0.48	$	0.42	$	0.185	$	0.160	$	0.555	$	0.480

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

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Net income	$	159,074	$	150,766	$	433,490	$	414,611	$	157,991	$	159,074	$	73,418	$	433,490

Other comprehensive income (loss), before tax:
Interest rate swap amounts reclassified into interest expense		(1,974)		4,279		(6,918)		2,407		2,893		(1,974)		4,595		(6,918)
Fuel hedge amounts reclassified into cost of operations		—		(1,810)		—		(4,647)
Changes in fair value of interest rate swaps		(15,482)		863		(56,818)		15,828		1,846		(15,482)		(68,047)		(56,818)
Changes in fair value of fuel hedges		—		295		—		2,956
Foreign currency translation adjustment		(24,911)		35,455		60,404		(67,349)		45,886		(24,911)		(55,738)		60,404
Other comprehensive income (loss), before tax		(42,367)		39,082		(3,332)		(50,805)		50,625		(42,367)		(119,190)		(3,332)
Income tax (expense) benefit related to items of other comprehensive income (loss)		4,626		(985)		16,890		(4,405)		(1,256)		4,626		16,815		16,890
Other comprehensive income (loss), net of tax		(37,741)		38,097		13,558		(55,210)		49,369		(37,741)		(102,375)		13,558
Comprehensive income		121,333		188,863		447,048		359,401
Plus (less): Comprehensive loss (income) attributable to noncontrolling interests		35		77		89		(218)
Comprehensive income attributable to Waste Connections	$	121,368	$	188,940	$	447,137	$	359,183
Comprehensive income (loss)										207,360		121,333		(28,957)		447,048
Plus: Comprehensive loss attributable to noncontrolling interests										58		35		594		89
Comprehensive income (loss) attributable to Waste Connections									$	207,418	$	121,368	$	(28,363)	$	447,137

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

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

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


	WASTE CONNECTIONS' EQUITY																WASTE CONNECTIONS' EQUITY
						ACCUMULATED																ACCUMULATED
				ADDITIONAL		OTHER														ADDITIONAL		OTHER
	COMMON SHARES			PAID-IN		COMPREHENSIVE		TREASURY SHARES			RETAINED		NONCONTROLLING				COMMON SHARES			PAID-IN		COMPREHENSIVE		TREASURY SHARES			RETAINED		NONCONTROLLING
	SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		SHARES	AMOUNT		EARNINGS		INTERESTS		TOTAL		SHARES	AMOUNT		CAPITAL		LOSS		SHARES	AMOUNT		EARNINGS		INTERESTS		TOTAL
Balances at December 31, 2018	263,141,413	$	4,131,307	$	133,577	$	(74,786)	129,889	$	—	$	2,264,510	$	5,580	$	6,460,188
Balances at December 31, 2019																	263,618,161	$	4,135,343	$	154,917	$	(10,963)	81,514	$	—	$	2,654,207	$	4,850	$	6,938,354
Sale of common shares held in trust	43,637		3,610		—		—	(43,637)		—		—		—		3,610	7,330		679		—		—	(7,330)		—		—		—		679
Vesting of restricted share units	400,555		—		—		—	—		—		—		—		—	366,603		—		—		—	—		—		—		—		—
Vesting of performance-based restricted share units	180,258		—		—		—	—		—		—		—		—	281,186		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	15,371		—		—		—	—		—		—		—		—	20,229		—		—		—	—		—		—		—		—
Fair value adjustment for common shares in deferred compensation plan exchanged for other investment options																	—		—		(533)		—	—		—		—		—		(533)
Tax withholdings related to net share settlements of equity-based compensation	(202,679)		—		(16,974)		—	—		—		—		—		(16,974)	(226,766)		—		(23,090)		—	—		—		—		—		(23,090)
Equity-based compensation	—		—		11,627		—	—		—		—		—		11,627	—		—		10,144		—	—		—		—		—		10,144
Exercise of warrants	8,690		—		—		—	—		—		—		—		—	9,751		—		—		—	—		—		—		—		—
Repurchase of common shares																	(1,271,977)		(105,654)		—		—	—		—		—		—		(105,654)
Cash dividends on common shares	—		—		—		—	—		—		(42,084)		—		(42,084)	—		—		—		—	—		—		(48,018)		—		(48,018)
Amounts reclassified into earnings, net of taxes	—		—		—		(1,817)	—		—		—		—		(1,817)	—		—		—		(323)	—		—		—		—		(323)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(11,555)	—		—		—		—		(11,555)	—		—		—		(42,649)	—		—		—		—		(42,649)
Foreign currency translation adjustment	—		—		—		42,180	—		—		—		—		42,180	—		—		—		(184,717)	—		—		—		—		(184,717)
Cumulative effect adjustment from adoption of new accounting pronouncement	—		—		—		—	—		—		(2,078)		—		(2,078)
Net income (loss)	—		—		—		—	—		—		125,622		(45)		125,577	—		—		—		—	—		—		143,035		(142)		142,893
Balances at March 31, 2019	263,587,245		4,134,917		128,230		(45,978)	86,252		—		2,345,970		5,535		6,568,674
Sale of common shares held in trust	973		85		—		—	(973)		—		—		—		85
Vesting of restricted share units	6,495		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(3,081)		—		(290)		—	—		—		—		—		(290)
Equity-based compensation	—		—		10,254		—	—		—		—		—		10,254
Exercise of warrants	9,607		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(42,131)		—		(42,131)
Amounts reclassified into earnings, net of taxes	—		—		—		(1,817)	—		—		—		—		(1,817)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(18,827)	—		—		—		—		(18,827)
Foreign currency translation adjustment	—		—		—		43,135	—		—		—		—		43,135
Distributions to noncontrolling interests	—		—		—		—	—		—		—		(117)		(117)
Net income (loss)	—		—		—		—	—		—		148,848		(9)		148,839
Balances at June 30, 2019	263,601,239		4,135,002		138,194		(23,487)	85,279		—		2,452,687		5,409		6,707,805
Sale of common shares held in trust	3,765		341		—		—	(3,765)		—		—		—		341
Balances at March 31, 2020																	262,804,517		4,030,368		141,438		(238,652)	74,184		—		2,749,224		4,708		6,687,086
Vesting of restricted share units	6,827		—		—		—	—		—		—		—		—	5,537		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	1,004		—		—		—	—		—		—		—		—	3,269		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(3,501)		—		(328)		—	—		—		—		—		(328)	(2,398)		—		(201)		—	—		—		—		—		(201)
Equity-based compensation	—		—		9,322		—	—		—		—		—		9,322	—		—		9,912		—	—		—		—		—		9,912
Exercise of warrants	6,770		—		—		—	—		—		—		—		—	240		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(42,133)		—		(42,133)	—		—		—		—	—		—		(48,894)		—		(48,894)
Amounts reclassified into earnings, net of taxes	—		—		—		(1,451)	—		—		—		—		(1,451)	—		—		—		1,574	—		—		—		—		1,574
Changes in fair value of cash flow hedges, net of taxes	—		—		—		(11,379)	—		—		—		—		(11,379)	—		—		—		(8,722)	—		—		—		—		(8,722)
Foreign currency translation adjustment	—		—		—		(24,911)	—		—		—		—		(24,911)	—		—		—		83,093	—		—		—		—		83,093
Net loss																	—		—		—		—	—		—		(227,072)		(395)		(227,467)
Balances at June 30, 2020																	262,811,165		4,030,368		151,149		(162,707)	74,184		—		2,473,258		4,313		6,496,381
Vesting of restricted share units																	3,228		—		—		—	—		—		—		—		—
Fair value adjustment for common shares in deferred compensation plan exchanged for other investment options																	—		—		(145)		—	—		—		—		—		(145)
Tax withholdings related to net share settlements of equity-based compensation																	(1,003)		—		(99)		—	—		—		—		—		(99)
Equity-based compensation																	—		—		11,701		—	—		—		—		—		11,701
Exercise of warrants																	9,435		—		—		—	—		—		—		—		—
Cash dividends on common shares																	—		—		—		—	—		—		(49,009)		—		(49,009)
Amounts reclassified into earnings, net of taxes																	—		—		—		2,126	—		—		—		—		2,126
Changes in fair value of cash flow hedges, net of taxes																	—		—		—		1,357	—		—		—		—		1,357
Foreign currency translation adjustment																	—		—		—		45,886	—		—		—		—		45,886
Net income (loss)	—		—		—		—	—		—		159,109		(35)		159,074	—		—		—		—	—		—		158,049		(58)		157,991
Balances at September 30, 2019	263,616,104	$	4,135,343	$	147,188	$	(61,228)	81,514	$	—	$	2,569,663	$	5,374	$	6,796,340
Balances at September 30, 2020																	262,822,825	$	4,030,368	$	162,606	$	(113,338)	74,184	$	—	$	2,582,298	$	4,255	$	6,666,189

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

Table of Contents

WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

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


	WASTE CONNECTIONS' EQUITY																WASTE CONNECTIONS' EQUITY
						ACCUMULATED																ACCUMULATED
				ADDITIONAL		OTHER														ADDITIONAL		OTHER
	COMMON SHARES			PAID-IN		COMPREHENSIVE		TREASURY SHARES			RETAINED		NONCONTROLLING				COMMON SHARES			PAID-IN		COMPREHENSIVE		TREASURY SHARES			RETAINED		NONCONTROLLING
	SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		SHARES	AMOUNT		EARNINGS		INTERESTS		TOTAL		SHARES	AMOUNT		CAPITAL		INCOME (LOSS)		SHARES	AMOUNT		EARNINGS		INTERESTS		TOTAL
Balances at December 31, 2017	263,494,670	$	4,187,568	$	115,743	$	108,413	166,133	$	—	$	1,856,946	$	5,400	$	6,274,070
Balances at December 31, 2018																	263,141,413	$	4,131,307	$	133,577	$	(74,786)	129,889	$	—	$	2,264,510	$	5,580	$	6,460,188
Sale of common shares held in trust	26,849		1,947		—		—	(26,849)		—		—		—		1,947	43,637		3,610		—		—	(43,637)		—		—		—		3,610
Vesting of restricted share units	452,700		—		—		—	—		—		—		—		—	400,555		—		—		—	—		—		—		—		—
Vesting of performance-based restricted share units	154,181		—		—		—	—		—		—		—		—	180,258		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	114		—		—		—	—		—		—		—		—	15,371		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(206,084)		—		(14,121)		—	—		—		—		—		(14,121)	(202,679)		—		(16,974)		—	—		—		—		—		(16,974)
Equity-based compensation	—		—		7,991		—	—		—		—		—		7,991	—		—		11,627		—	—		—		—		—		11,627
Repurchase of common shares	(594,474)		(42,040)		—		—	—		—		—		—		(42,040)
Exercise of warrants																	8,690		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(36,814)		—		(36,814)	—		—		—		—	—		—		(42,084)		—		(42,084)
Amounts reclassified into earnings, net of taxes	—		—		—		(1,303)	—		—		—		—		(1,303)	—		—		—		(1,817)	—		—		—		—		(1,817)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		9,114	—		—		—		—		9,114	—		—		—		(11,555)	—		—		—		—		(11,555)
Foreign currency translation adjustment	—		—		—		(59,330)	—		—		—		—		(59,330)	—		—		—		42,180	—		—		—		—		42,180
Cumulative effect adjustment from adoption of new accounting pronouncement	—		—		—		—	—		—		16,296		—		16,296	—		—		—		—	—		—		(2,078)		—		(2,078)
Net income (loss)																	—		—		—		—	—		—		125,622		(45)		125,577
Balances at March 31, 2019																	263,587,245		4,134,917		128,230		(45,978)	86,252		—		2,345,970		5,535		6,568,674
Sale of common shares held in trust																	973		85		—		—	(973)		—		—		—		85
Vesting of restricted share units																	6,495		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation																	(3,081)		—		(290)		—	—		—		—		—		(290)
Equity-based compensation																	—		—		10,254		—	—		—		—		—		10,254
Exercise of warrants																	9,607		—		—		—	—		—		—		—		—
Cash dividends on common shares																	—		—		—		—	—		—		(42,131)		—		(42,131)
Amounts reclassified into earnings, net of taxes																	—		—		—		(1,817)	—		—		—		—		(1,817)
Changes in fair value of cash flow hedges, net of taxes																	—		—		—		(18,827)	—		—		—		—		(18,827)
Foreign currency translation adjustment																	—		—		—		43,135	—		—		—		—		43,135
Distributions to noncontrolling interests	—		—		—		—	—		—		—		(103)		(103)	—		—		—		—	—		—		—		(117)		(117)
Net income	—		—		—		—	—		—		124,869		163		125,032
Balances at March 31, 2018	263,327,956		4,147,475		109,613		56,894	139,284		—		1,961,297		5,460		6,280,739
Net income (loss)																	—		—		—		—	—		—		148,848		(9)		148,839
Balances at June 30, 2019																	263,601,239		4,135,002		138,194		(23,487)	85,279		—		2,452,687		5,409		6,707,805
Sale of common shares held in trust	2,638		199		—		—	(2,638)		—		—		—		199	3,765		341		—		—	(3,765)		—		—		—		341
Vesting of restricted share units	15,723		—		—		—	—		—		—		—		—	6,827		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	4,311		—		—		—	—		—		—		—		—	1,004		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(6,173)		—		(468)		—	—		—		—		—		(468)	(3,501)		—		(328)		—	—		—		—		—		(328)
Equity-based compensation	—		—		8,968		—	—		—		—		—		8,968	—		—		9,322		—	—		—		—		—		9,322
Exercise of options and warrants	17,571		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(36,770)		—		(36,770)
Amounts reclassified into earnings, net of taxes	—		—		—		(2,204)	—		—		—		—		(2,204)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		3,890	—		—		—		—		3,890
Foreign currency translation adjustment	—		—		—		(43,474)	—		—		—		—		(43,474)
Cumulative effect adjustment from adoption of new accounting pronouncement	—		—		—		—	—		—		(3,053)		—		(3,053)
Net income	—		—		—		—	—		—		138,682		132		138,814
Balances at June 30, 2018	263,362,026		4,147,674		118,113		15,106	136,646		—		2,060,156		5,592		6,346,641
Sale of common shares held in trust	2,964		235		—		—	(2,964)		—		—		—		235
Vesting of restricted share units	12,154		—		—		—	—		—		—		—		—
Restricted share units released from deferred compensation plan	644		—		—		—	—		—		—		—		—
Tax withholdings related to net share settlements of equity-based compensation	(4,878)		—		(387)		—	—		—		—		—		(387)
Equity-based compensation	—		—		6,591		—	—		—		—		—		6,591
Exercise of warrants																	6,770		—		—		—	—		—		—		—		—
Cash dividends on common shares	—		—		—		—	—		—		(36,863)		—		(36,863)	—		—		—		—	—		—		(42,133)		—		(42,133)
Amounts reclassified into earnings, net of taxes	—		—		—		1,786	—		—		—		—		1,786	—		—		—		(1,451)	—		—		—		—		(1,451)
Changes in fair value of cash flow hedges, net of taxes	—		—		—		856	—		—		—		—		856	—		—		—		(11,379)	—		—		—		—		(11,379)
Foreign currency translation adjustment	—		—		—		35,455	—		—		—		—		35,455	—		—		—		(24,911)	—		—		—		—		(24,911)
Net income (loss)	—		—		—		—	—		—		150,843		(77)		150,766	—		—		—		—	—		—		159,109		(35)		159,074
Balances at September 30, 2018	263,372,910	$	4,147,909	$	124,317	$	53,203	133,682	$	—	$	2,174,136	$	5,515	$	6,505,080
Balances at September 30, 2019																	263,616,104	$	4,135,343	$	147,188	$	(61,228)	81,514	$	—	$	2,569,663	$	5,374	$	6,796,340

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

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WASTE CONNECTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of U.S. dollars)


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	433,490	$	414,611	$	73,418	$	433,490
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of assets and impairments		31,852		6,852		423,832		31,852
Depreciation		461,616		423,866		459,641		461,616
Amortization of intangibles		93,821		79,444		96,062		93,821
Amortization of leases		17,661		—		14,281		17,661
Deferred income taxes, net of acquisitions		41,481		45,765		(77,613)		41,481
Amortization of debt issuance costs		3,708		3,087		6,146		3,708
Share-based compensation		35,510		35,434		38,316		35,510
Interest accretion		12,283		11,135		12,843		12,283
Payment of contingent consideration recorded in earnings		—		(11)
Adjustments to contingent consideration		1,466		349		16,852		1,466
Other		(1,316)		180		936		(1,316)
Net change in operating assets and liabilities, net of acquisitions		53,858		17,080		120,859		53,858
Net cash provided by operating activities		1,185,430		1,037,792		1,185,573		1,185,430

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired		(420,392)		(500,064)		(173,810)		(420,392)
Capital expenditures for property and equipment		(433,526)		(373,512)		(420,694)		(433,526)
Capital expenditure for purchase of greenfield landfill site		(31,683)		—
Capital expenditures for undeveloped landfill property						(66,809)		(31,683)
Proceeds from disposal of assets		2,626		3,698		11,564		2,626
Change in restricted investments, net of interest income		(2,171)		—
Other		(526)		(568)		(317)		(2,697)
Net cash used in investing activities		(885,672)		(870,446)		(650,066)		(885,672)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		1,021,795		165,737		1,790,625		1,021,795
Principal payments on notes payable and long-term debt		(1,184,165)		(387,700)		(1,505,641)		(1,184,165)
Payment of contingent consideration recorded at acquisition date		(1,621)		(5,459)		(2,812)		(1,621)
Change in book overdraft		1,911		(243)		(862)		1,911
Payments for repurchase of common shares		—		(42,040)		(105,654)		—
Payments for cash dividends		(126,348)		(110,447)		(145,921)		(126,348)
Tax withholdings related to net share settlements of equity-based compensation		(17,592)		(14,976)		(23,390)		(17,592)
Debt issuance costs		(5,938)		(2,839)		(11,117)		(5,938)
Proceeds from sale of common shares held in trust		4,036		2,381		679		4,036
Other		(117)		(103)
Distributions to noncontrolling interests						—		(117)
Net cash used in financing activities		(308,039)		(395,689)		(4,093)		(308,039)

Effect of exchange rate changes on cash, cash equivalents and restricted cash		143		(528)		980		143

Net decrease in cash, cash equivalents and restricted cash		(8,138)		(228,871)
Net increase (decrease) in cash, cash equivalents and restricted cash						532,394		(8,138)
Cash, cash equivalents and restricted cash at beginning of period		403,966		556,467		423,221		403,966
Plus: change in cash held for sale		—		192
Cash, cash equivalents and restricted cash at end of period	$	395,828	$	327,788	$	955,615	$	395,828

Non-cash financing activities:
Liabilities assumed and notes payable issued to sellers of businesses acquired	$	94,009	$	100,753	$	67,791	$	94,009

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

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

1.BASIS OF PRESENTATION AND SUMMARY

The accompanying condensed consolidated financial statements relate to Waste Connections, Inc. and its subsidiaries (the “Company”) for the three and nine month periods ended September 30, ~~2019~~2020 and ~~2018.~~2019. In the opinion of management, the accompanying balance sheets and related interim statements of net income, comprehensive income (loss), cash flows and equity include all adjustments, consisting only of normal recurring items, necessary for their fair statement in conformity with U.S. generally accepted accounting principles (“GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Examples include accounting for landfills, self-insurance accruals, income taxes, allocation of acquisition purchase price, contingent consideration accruals and asset impairments. An additional area that involves estimation is when the Company estimates the amount of potential exposure it may have with respect to litigation, claims and assessments in accordance with the accounting guidance on contingencies. Actual results for all estimates could differ materially from the estimates and assumptions that the Company uses in the preparation of its condensed consolidated financial statements.

The challenges posed by the outbreak of coronavirus disease 2019 (“COVID-19”) on the global economy persisted through the third quarter of 2020 and continue to impact the demand for the Company’s services to varying degrees and in varying ways across the U.S. and Canada and across a variety of lines of business, including commercial collection and solid waste and exploration and production (“E&P”) waste disposal. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. In some markets where a portion of these measures have been curtailed, the impact to demand for the Company’s services has decreased as activity levels have increased. The impact of the COVID-19 pandemic on the Company’s 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, its severity, the actions to contain the novel coronavirus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume, all of which are uncertain and cannot be predicted at this time.

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, ~~2018.~~2019.

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.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

3.NEW ACCOUNTING STANDARDS

Accounting Standards Adopted

~~Lease Accounting~~Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. In ~~February~~June 2016, the Financial Accounting Standards Board, (“FASB”) issued guidance introducing a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables, that requires ~~lessees~~entities to ~~recognize a right-of-use asset~~incorporate considerations of historical information, current information and ~~a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease).~~reasonable and supportable forecasts. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. The new standard ~~was~~became effective for public ~~companies~~business entities that are U.S. Securities and Exchange Commission (“SEC”) filers for ~~fiscal years,~~annual periods beginning after December 15, 2019 and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The FASB issued new guidance in July 2018, which amended the guidance to allow the issuer to elect from two adoption alternatives: 1) apply the new guidance at the beginning of the earliest comparative period presented; or 2) apply the new guidance at the effective date and recognize a cumulative-effect adjustment, without adjusting the comparative periods presented.

~~Table of Contents~~years.

~~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 adopted the new standard on January 1, 2019 and elected to apply the new guidance at the effective date and recognize a cumulative-effect adjustment, without adjusting the comparative periods presented. The Company applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected not to reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) whether initial direct costs exist for any existing leases. The Company also applied the (1) practical expedient for land easements where the Company elected to not apply the leases standard to certain existing land easements at transition and (2) practical expedient to include both the lease and nonlease components as a single component and account for it as a lease. The Company has completed its assessment of the provisions of the lease accounting guidance and implementation of its leasing software solution to manage and account for leases under the new standard.

As Reported
December 31, 2018

Adoption of Lease Guidance
Increase (Decrease)

Balance
January 1, 2019
Operating lease right-of-use assets
$
-

$
206,501

$
206,501
Total assets
$
12,627,329

$
206,501

$
12,833,830
Current portion of operating lease liabilities
$
-

$
29,640

$
29,640
Total current liabilities
$
860,709

$
29,640

$
890,349
Long-term portion of operating lease liabilities
$
-

$
180,005

$
180,005
Deferred income taxes
$
760,033

$
(1,066)

$
758,967
Total liabilities
$
6,167,141

$
208,579

$
6,375,720
Retained earnings
$
2,264,510

$
(2,078)

$
2,262,432
Total liabilities and equity
$
12,627,329

$
206,501

$
12,833,830

2020. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial statements ~~of net income or consolidated statements of cash flows.~~as pre-existing processes for estimating expected credit losses for trade receivables aligned with the expected credit loss model. See Note 97 for additional information and disclosures related to the adoption of this ~~amended guidance.~~

~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~. In August 2017, the FASB issued guidance which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update are intended to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. The effective date for the standard is for fiscal years beginning after December 15, 2018. The adoption of this guidance, effective January 1, 2019, did not have a material impact on the Company’s consolidated financial statements.

~~Derivatives and Hedging: Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting~~. As LIBOR is expected to no longer be published by 2021, the FASB issued guidance in October 2018 which added the OIS rate based on SOFR as an eligible benchmark interest rate in order to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes. The Company adopted the new guidance effective January 1, 2019 on a prospective basis. The Company is developing a plan to transition its interest rate swaps from LIBOR to SOFR. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.standard.

~~SEC Simplified and Updated Disclosure Requirements. In August 2018, the U.S. Securities and Exchange Commission (the “SEC”) amended its rules to require an analysis of changes in stockholders’ equity in the financial~~

~~Table of Contents~~

~~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)~~

statements included in Quarterly Reports on Form 10-Q. The analysis, which can be presented as a note or separate statement, is required for the current and comparative quarter and year-to-date interim periods. The amended rules became effective on November 15, 2018. In addition, the SEC’s Division of Corporation Finance issued a Compliance and Disclosure Interpretation (the “CDI”) that provides transition guidance related to this new disclosure. For calendar year-end companies, the CDI allows a filer the option to first present the changes in stockholders’ equity in its Form 10-Q for the quarter ending March 31, 2019. The Company elected this option and has included the statement of shareholders’ equity within this Form 10-Q.

~~SEC modernizes and simplifies certain Regulation S-K disclosure requirements~~. In March 2019, the SEC amended its rules to modernize and simplify certain disclosure requirements in Regulation S-K and the related rules and forms. These changes include, among other things, (1) allowing registrants to redact confidential information from most exhibits to their filings without filing a confidential treatment request; (2) revising the requirements for management’s discussion and analysis to allow flexibility, including allowing registrants providing three years of financial statements to omit discussion of the earliest year and cross-reference its discussion in a previous filing; (3) removing the example risk factors in Regulation S-K to encourage more meaningful company-specific disclosure; (4) clarifying the description of property requirements to emphasize that those disclosures should only include properties that are material to the registrant; and (5) requiring XBRL data tagging for items on the cover pages of certain filings, as well as the use of hyperlinks for information that is incorporated by reference and available on EDGAR. The provisions regarding the redaction of confidential information in exhibits were effective upon publication in the Federal Register. The provisions requiring XBRL data tagging are subject to a three-year phase-in, depending on the filing status of the registrant, which, for the Company, were effective for the period ending June 30, 2019. All other provisions were effective on May 2, 2019.

Accounting Standards Pending Adoption

~~Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments~~Income Taxes – Simplifying the Accounting for Income Taxes. In ~~June 2016,~~December 2019, the FASB issued guidance ~~which introduces~~that simplifies the accounting for income taxes as part of its overall initiative to reduce complexity in applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments include removal of certain exceptions to the general principles of income taxes, and simplification in several other areas such as accounting for a ~~new forward-looking approach,~~franchise tax that is partially based on ~~expected losses, to estimate credit losses on certain types of financial instruments, including trade~~ ~~receivables, which will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts.~~income. The standard will be effective for public business entities that are SEC filers for annual periods beginning after December 15, ~~2019~~2020, and interim periods within those ~~years.~~reporting periods. Early adoption is permitted. The Company ~~does not expect~~is currently assessing the ~~adoption of~~impact that adopting this guidance towill have ~~a material impact~~ on its condensed consolidated financial ~~statements.~~statements.

Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued guidance to provide temporary optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”), anticipated to be phased out by the end of 2021, and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). Under the new guidance, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Under the guidance, entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.

The guidance is effective upon issuance. The guidance on contract modifications is applied prospectively from any date beginning March 12, 2020. It may also be applied to modifications of existing contracts made earlier in the interim period that includes the effective date. The guidance on hedging is applied to eligible hedging relationships existing as of the beginning of the interim period that includes the effective date and to new eligible hedging relationships entered into after the beginning of that interim period. The relief is temporary and generally cannot be applied to contract modifications that occur after December 31, 2022 or hedging relationships entered into or evaluated after that date. However, certain optional expedients can be applied to hedging relationships evaluated in periods after December 31, 2022. The Company is currently assessing the potential impact of implementing this new guidance on its condensed consolidated financial statements. To the extent that the transition away from the use of LIBOR might affect the Company’s ability to maintain cash ‎flow hedge accounting as described in Note 13, the relief is expected to permit the Company to maintain that cash flow ‎hedge accounting.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

4.RECLASSIFICATION

As disclosed within other ~~footnotes of~~notes to the financial statements, segment information reported in the Company’s prior year has been reclassified to conform ~~with~~to the ~~2019~~2020 presentation.

5.~~REVENUE~~IMPAIRMENTS OF PROPERTY, EQUIPMENT, GOODWILL AND INTANGIBLE ASSETS

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

Typical indicators that an asset may be impaired include, but are not limited to, the following:

●

a significant adverse change in legal factors or in the business climate;

●

an adverse action or assessment by a regulator;

●

a more likely than not expectation that a segment or a significant portion thereof will be sold;

●

the testing for recoverability of a significant asset group within a segment; or

●

current period or expected future operating cash flow losses.

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

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

Goodwill and indefinite-lived intangible assets are tested for impairment on at least an annual basis in the fourth quarter of the year. In addition, the Company evaluates its reporting units for impairment if events or circumstances similar to the indicators listed above change between annual tests indicating a possible impairment.

The Company estimates the fair value of each of its reporting units using discounted cash flow analyses. Through June 30, 2020, the Company’s reporting units consisted of its 5 geographic solid waste operating segments and its E&P segment. As of July 2020, the Company combined all operations ~~primarily consist~~ of ~~providing non-hazardous waste collection, transfer, disposal and recycling services, non-hazardous exploration and production (“~~the E~~&P”) waste treatment, recovery and disposal services~~&P segment into the Southern segment, based

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

on the Company’s determination that the two operating segments met the aggregation criteria, and eliminated the E&P segment. Discounted cash flow analyses require significant assumptions and estimates about the future operations of each reporting unit and the future discrete cash flows related to each indefinite-lived intangible asset. Significant judgments inherent in these analyses include the determination of appropriate discount rates, the amount and timing of expected future cash flows, growth rates and income tax rates. The Company compares the fair value of each reporting unit with the carrying value of the net assets assigned to each reporting unit. If the fair value of a reporting unit is greater than the carrying value of the net assets, including goodwill, assigned to the reporting unit, then no impairment results. If the fair value is less than its carrying value, an impairment charge is recorded for the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. In testing indefinite-lived intangible assets for impairment, the Company compares the estimated fair value of each indefinite-lived intangible asset to its carrying value. If the fair value of the indefinite-lived intangible asset is less than its carrying value, an impairment charge would be recorded to earnings in the Company’s Condensed Consolidated Statements of Net Income.

The demand for the Company’s E&P waste services depends on the continued demand for, and production of, oil and natural gas. Crude oil and natural gas prices historically have been volatile. Macroeconomic and geopolitical conditions, including a significant decline in oil prices driven by both surplus production and supply, as well as the decrease in demand caused by factors including the COVID-19 pandemic, have resulted in decreased levels of oil and natural gas exploration and production activity and a corresponding decrease in demand for the Company’s E&P waste services. During the nine months ended September 30, 2020, total E&P revenue declined $75,158, compared to the prior year period, on rig count declines of 72% in certain basins. The most impacted basins include the Williston Basin in North Dakota, the Eagle Ford Basin in Texas and the Powder River Basin in Wyoming, all of which have relatively high costs associated with drilling, making them less attractive than other basins, including the Permian Basin in Texas and New Mexico. Additionally, across the industry there is uncertainty regarding future demand for oil and related services, as noted by several energy companies, many of whom are customers of the Company’s E&P segment. 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 the Company’s E&P waste customers in the basins where the Company operates.

The decrease in exploration and production activity, together with market expectations of a likely slow recovery in oil prices, reduced the expected future period cash flows of the Company’s E&P operations. Based on these events, the Company concluded that a triggering event occurred which required the Company to perform an impairment test of the property and equipment and intangible assets of its E&P operations as of June 30, 2020 using July 2020 industry projections for drilling activity by basin as the basis for expectations about future activity. Based upon the results of the impairment test, the Company concluded that the carrying value exceeded the projected undiscounted cash flows of four E&P landfills. The next step was to calculate the fair value of these four landfills using an income approach employing a discounted cash flow (“DCF”) model over the lesser of 40 years or the remaining life of each landfill. Additional key assumptions used in the DCF model included a discount rate of 12% applied to the cash flows, annual revenue projections based on E&P waste resulting from projected levels of oil and natural gas exploration and production activity during the forecast period at each location, gross margins based on estimated operating expense requirements during the forecast period, estimated capital expenditures over the forecast period and income taxes based on the estimated federal and state income tax rates applicable during the cash flow periods. For each of the 4 landfills, the carrying value exceeded the calculated discounted fair value, resulting in the recording of an impairment charge of $417,384 to Impairments and other operating items in the Condensed Consolidated Statements of Net Income during the nine months ended September 30, 2020. The four landfills had $0 of intangible assets at June 30, 2020; therefore, 0 impairment charge was attributable to intangible assets. The impairment charge reduced the carrying value of property and equipment by $417,384. If the estimated annual cash flows in the DCF model for each asset or asset group tested was changed by 10%, the resulting impairment charge would change by approximately $3,000.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

6.REVENUE

The Company’s operations primarily consist of providing non-hazardous waste collection, transfer, disposal and recycling services, non-hazardous 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,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Commercial	$	408,415	$	369,543	$	1,186,565	$	1,080,261	$	406,037	$	408,415	$	1,197,971	$	1,186,565
Residential		355,574		300,026		1,024,105		881,927		387,566		355,574		1,131,486		1,024,105
Industrial and construction roll off		226,801		202,130		629,597		573,877		216,894		226,801		618,122		629,597
Total collection		990,790		871,699		2,840,267		2,536,065		1,010,497		990,790		2,947,579		2,840,267
Landfill		310,633		285,945		852,073		790,056		308,795		310,633		855,631		852,073
Transfer		209,585		187,961		575,337		495,317		205,910		209,585		575,761		575,337
Recycling		14,142		23,371		50,676		69,559		21,377		14,142		59,701		50,676
E&P		70,874		68,049		205,743		189,071		26,218		70,874		131,748		205,743
Intermodal and other		26,520		34,261		90,491		105,588		27,141		26,520		84,970		90,491
Intercompany		(210,100)		(190,176)		(587,868)		(524,447)		(210,386)		(210,100)		(607,651)		(587,868)
Total	$	1,412,444	$	1,281,110	$	4,026,719	$	3,661,209	$	1,389,552	$	1,412,444	$	4,047,739	$	4,026,719

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, ~~2019~~2020 was recognized as revenue during the three months ended September 30, ~~2019~~2020 when the service was performed.

See Note 1112 for additional information regarding revenue by reportable segment.

Contract Acquisition Costs

The incremental direct costs of obtaining a contract, which consist of sales incentives, are recognized as Other assets in the Company’s Condensed Consolidated Balance Sheet, and are amortized to Selling, general and administrative expense over the estimated life of the relevant customer relationship, which ranges from one to five years. The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity would have recognized is one year or less. The Company had ~~approximately $16,900~~$19,669 and $16,846 of deferred sales incentives at ~~both~~ September 30, ~~2019~~2020 and December 31, ~~2018.~~2019, respectively.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

7.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 from January 1, 2020 to September 30, 2020:


Beginning balance	$	16,432
Current period provision for expected credit losses		13,092
Write-offs charged against the allowance		(13,540)
Recoveries collected		4,722
Impact of changes in foreign currency		(49)
Ending balance	$	20,657

6.8.LANDFILL ACCOUNTING

At September 30, ~~2019,~~2020, the Company’s landfills consisted of 8583 owned landfills, 76 landfills operated under life-of-site operating agreements, 4 landfills operated under limited-term operating agreements and 1 development stage landfill. The Company’s landfills had site costs with a net book value of ~~$2,961,560~~$2,645,221 at September 30, ~~2019.~~2020. For the Company’s landfills operated under limited-term operating agreements and life-of-site operating agreements, the owner of the property (generally a municipality) usually owns the permit and the Company operates the landfill for a contracted term. Where the contracted term is not the life of the landfill, the property owner is generally responsible for final capping, closure and post-closure obligations. The Company is responsible for all final capping, closure and post-closure liabilities at the landfills it operates under life-of-site operating agreements.

The Company’s internal and third-party engineers perform surveys at least annually to estimate the remaining disposal capacity at its landfills. Many of the Company’s existing landfills have the potential for expanded disposal capacity beyond

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~~WASTE CONNECTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

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.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Based on remaining permitted capacity as of September 30, ~~2019,~~2020, 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 2728 years. As of September 30, ~~2019,~~2020, the Company is seeking to expand permitted capacity at 610 of its owned landfills and 3 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 3032 years, with lives ranging from approximately 1 to ~~177~~204 years.

During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the Company expensed ~~$169,064~~$149,988 and ~~$153,010,~~$169,064, respectively, or an average of ~~$4.77~~$4.51 and ~~$4.58~~$4.77 per ton consumed, respectively, related to landfill depletion at owned landfills and landfills operated under life-of-site agreements.

The Company reserves for estimated final capping, closure and post-closure maintenance obligations at the landfills it owns and landfills it operates under life-of-site operating agreements. The Company calculates the net present value of its final capping, closure and post-closure liabilities by estimating the total obligation in current dollars, inflating the obligation based upon the expected date of the expenditure and discounting the inflated total to its present value using a credit-adjusted risk-free rate. Any changes in expectations that result in an upward revision to the estimated undiscounted cash flows are treated as a new liability and are inflated and discounted at rates reflecting current market conditions. Any changes in expectations that result in a downward revision (or no revision) to the estimated undiscounted cash flows result in a liability that is inflated and discounted at rates reflecting the market conditions at the time the cash flows were originally estimated. This policy results in the Company’s final capping, closure and post-closure liabilities being recorded in “layers.” The Company’s discount rate assumption for purposes of computing ~~2019~~2020 and ~~2018~~2019 “layers” for final capping, closure and post-closure obligations was 4.75% for both years, which reflects the Company’s long-term credit adjusted risk free ~~rate as of the end of both 2018 and 2017.~~rate. The Company’s inflation rate assumption is 2.5% for the years ending December 31, ~~2019~~2020 and ~~2018.~~2019. The resulting final capping, closure and post-closure obligations are recorded on the ~~condensed consolidated balance sheet~~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, ~~2019~~2020 and ~~2018,~~2019, the Company expensed ~~$10,656~~$11,174 and ~~$9,583~~$10,656, respectively, or an average of ~~$0.30~~$0.34 and ~~$0.29~~$0.30 per ton consumed, respectively, related to final capping, closure and post-closure accretion expense.

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~~WASTE CONNECTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

The following is a reconciliation of the Company’s final capping, closure and post-closure liability balance from December 31, ~~2018~~2019 to September 30, ~~2019:~~2020:


Final capping, closure and post-closure liability at December 31, 2018	$	251,782
Liabilities incurred		15,573
Final capping, closure and post-closure liability at December 31, 2019			$	291,474
Liability adjustments				(1,861)
Accretion expense associated with landfill obligations		10,656		11,174
Closure payments		(1,203)		(3,257)
Assumption of closure liabilities from acquisitions		8,707		2,135
Foreign currency translation adjustment		1,146		(1,178)
Final capping, closure and post-closure liability at September 30, 2019	$	286,661
Final capping, closure and post-closure liability at September 30, 2020			$	298,487

~~Liabilities incurred~~Liability adjustments of ~~$15,573~~$1,861 for the nine months ended September 30, ~~2019,~~2020, represent non-cash ~~increases~~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.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

At September 30, ~~2019~~2020 and December 31, ~~2018, $11,538~~2019, $17,589 and ~~$12,325,~~$12,324, respectively, of the Company’s restricted cash balance and ~~$47,993~~$44,558 and ~~$44,939,~~$48,590, respectively, of the Company’s restricted investments balance was for purposes of securing its performance of future final capping, closure and post-closure obligations.

7.9.ACQUISITIONS

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

The Company acquired 13 individually immaterial non-hazardous solid waste collection, transfer and disposal businesses during the nine months ended September 30, 2019. The total acquisition-related costs incurred during the nine months ended September 30, 2019 for these acquisitions ~~was~~were $8,057. ~~These expenses are included in Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Net Income.~~

The Company acquired 15 individually immaterial non-hazardous solid waste collection, recycling, transfer and disposal businesses during the nine months ended September 30, 2018. The purchase price for one of these acquisitions included contingent consideration of $11,593, representing the fair value of up to $12,582 of amounts payable to the former owners based on the achievement of certain operating targets specified in the asset purchase agreement. The fair value of the contingent consideration was determined using probability assessments of the expected future cash flows over the three-year period in which the obligation is expected to be settled, and applying a discount rate of 2.7%. As of September 30, 2019, the obligation recognized at the purchase date has not materially changed. Any changes in the fair value of the contingent consideration subsequent to the acquisition date will be charged or credited to expense until the contingency is settled. The total acquisition-related costs incurred during the nine months ended September 30, 2018 for these acquisitions was $4,907. These expenses are included in Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Net Income.

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

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~~WASTE CONNECTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

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, 2019 and 2018:

2019

2018

Acquisitions

Acquisitions
Fair value of consideration transferred:




Cash

$
420,392

$
500,064
Debt assumed

50,574

65,010

470,966

565,074

Recognized amounts of identifiable assets acquired and liabilities assumed associated with businesses acquired:




Accounts receivable

15,042

12,817
Prepaid expenses and other current assets

5,079

2,355
Property and equipment

210,105

346,275
Long-term franchise agreements and contracts

14,838

10,888
Customer lists

28,467

27,330
Permits and other intangibles

17,835

31,183
Other assets

7

19
Accounts payable and accrued liabilities

(11,310)

(3,982)
Deferred revenue

(9,128)

(4,169)
Contingent consideration

(1,003)

(11,669)
Other long-term liabilities

(8,707)

(15,532)
Deferred income taxes

(13,287)

(391)
Total identifiable net assets

247,938

395,124
Goodwill

$
223,028

$
169,950

Goodwill acquired during the nine months ended September 30, 2020 and 2019, totaling $48,926 and ~~2018, totaling~~ $81,903, ~~and $169,559,~~ respectively, is expected to be deductible for tax purposes.

The fair value of acquired working capital related to 106 individually immaterial acquisitions completed during the twelve months ended September 30, ~~2019,~~2020, 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 10six 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, 2019, is $16,469, of which $1,427 is expected to be uncollectible. The gross amount of trade receivables due under contracts acquired during the nine months ended September 30, 2018, is $14,015, of which $1,198 is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisitions of these businesses.

1314

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

8.10.INTANGIBLE ASSETS, NET

Intangible assets, exclusive of goodwill, consisted of the following at September 30, ~~2019:~~2020:


	Gross				Accumulated		Net		Gross				Accumulated		Net
	Carrying		Accumulated		Impairment		Carrying		Carrying		Accumulated		Impairment		Carrying
	Amount		Amortization		Loss		Amount		Amount		Amortization		Loss		Amount
Finite-lived intangible assets:
Long-term franchise agreements and contracts	$	487,001	$	(183,121)	$	—	$	303,880	$	588,000	$	(220,502)	$	—	$	367,498
Customer lists		561,642		(288,732)		—		272,910		594,215		(360,264)		—		233,951
Permits and other		358,314		(60,290)		—		298,024		364,263		(74,120)		—		290,143
		1,406,957		(532,143)		—		874,814		1,546,478		(654,886)		—		891,592
Indefinite-lived intangible assets:
Solid waste collection and transportation permits		158,591		—		—		158,591		172,056		—		—		172,056
Material recycling facility permits		42,283		—		—		42,283		42,283		—		—		42,283
E&P facility permits		59,855		—		(38,507)		21,348		59,855		—		(38,507)		21,348
		260,729		—		(38,507)		222,222		274,194		—		(38,507)		235,687
Intangible assets, exclusive of goodwill	$	1,667,686	$	(532,143)	$	(38,507)	$	1,097,036	$	1,820,672	$	(654,886)	$	(38,507)	$	1,127,279

The weighted-average amortization period of long-term franchise agreements and contracts acquired during the nine months ended September 30, ~~2019~~2020 was ~~19.2~~14.1 years. The weighted-average amortization period of customer lists acquired during the nine months ended September 30, ~~2019~~2020 was ~~10.0 years. The weighted-average amortization period of finite-lived permits and other intangibles acquired during the nine months ended September 30, 2019 was 36.8~~11.0 years.

Intangible assets, exclusive of goodwill, consisted of the following at December 31, ~~2018:~~2019:


	Gross				Accumulated		Net		Gross				Accumulated		Net
	Carrying		Accumulated		Impairment		Carrying		Carrying		Accumulated		Impairment		Carrying
	Amount		Amortization		Loss		Amount		Amount		Amortization		Loss		Amount
Finite-lived intangible assets:
Long-term franchise agreements and contracts	$	476,833	$	(157,986)	$	—	$	318,847	$	550,340	$	(192,462)	$	—	$	357,878
Customer lists		530,614		(232,461)		—		298,153		587,562		(308,427)		—		279,135
Permits and other		338,601		(49,195)		—		289,406		367,127		(63,299)		—		303,828
		1,346,048		(439,642)		—		906,406		1,505,029		(564,188)		—		940,841
Indefinite-lived intangible assets:
Solid waste collection and transportation permits		158,591		—		—		158,591		158,591		—		—		158,591
Material recycling facility permits		42,283		—		—		42,283		42,283		—		—		42,283
E&P facility permits		59,855		—		(38,507)		21,348		59,855		—		(38,507)		21,348
		260,729		—		(38,507)		222,222		260,729		—		(38,507)		222,222
Intangible assets, exclusive of goodwill	$	1,606,777	$	(439,642)	$	(38,507)	$	1,128,628	$	1,765,758	$	(564,188)	$	(38,507)	$	1,163,063

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


For the year ending December 31, 2019	$	125,699
For the year ending December 31, 2020	$	113,177	$	128,665
For the year ending December 31, 2021	$	98,310	$	113,928
For the year ending December 31, 2022	$	84,543	$	98,516
For the year ending December 31, 2023	$	71,283	$	83,699
For the year ending December 31, 2024			$	72,100

1415

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

9.11.~~LEASES~~LONG-TERM DEBT

The following table presents the Company’s long-term debt as of September 30, 2020 and December 31, 2019:


	September 30,		December 31,
	2020		2019
Revolver under Credit Agreement, bearing interest ranging from 1.35% to 1.68% ^(a)	$	178,749	$	916,247
Term loan under Credit Agreement, bearing interest at 1.35% ^(a)		650,000		700,000
4.64% Senior Notes due 2021 ^(b)		100,000		100,000
2.39% Senior Notes due 2021 ^(c)		150,000		150,000
3.09% Senior Notes due 2022		125,000		125,000
2.75% Senior Notes due 2023		200,000		200,000
3.24% Senior Notes due 2024		150,000		150,000
3.41% Senior Notes due 2025		375,000		375,000
3.03% Senior Notes due 2026		400,000		400,000
3.49% Senior Notes due 2027		250,000		250,000
4.25% Senior Notes due 2028		500,000		500,000
3.50% Senior Notes due 2029		500,000		500,000
2.60% Senior Notes due 2030		600,000		—
3.05% Senior Notes due 2050		500,000		—
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 2021 to 2036 ^(a)		43,160		9,638
		4,721,909		4,375,885
Less – current portion		(6,772)		(465)
Less – unamortized debt discount and issuance costs		(34,918)		(21,638)
	$	4,680,219	$	4,353,782

____________________

(a)	Interest rates represent the interest rates incurred at September 30, 2020.

(b)	The Company has recorded the 4.64% Senior Notes due 2021 (the “2021 Senior Notes”) in long-term in the table above as the Company has the intent and ability to redeem the 2021 Senior Notes on April 1, 2021 using borrowings under the Credit Agreement.

(c)	The Company has recorded the 2.39% Senior Notes due 2021 (the “New 2021 Senior Notes”) in long-term in the table above as the Company has the intent and ability to redeem the New 2021 Senior Notes on June 1, 2021 using borrowings under the Credit Agreement.

Senior Notes due 2030 and 2050

On January 23, 2020, the Company completed an underwritten public offering of $600,000 aggregate principal amount of 2.60% Senior Notes due 2030 (the “2030 Senior Notes”). The 2030 Senior Notes were issued under the Indenture, dated as of November 16, 2018 (the “Base Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the Third Supplemental Indenture, dated as of January 23, 2020. The Company is amortizing $5,435 of debt issuance costs through the maturity date.

The Company ~~rents certain equipment~~will pay interest on the 2030 Senior Notes semi-annually in arrears and ~~facilities under both short-term agreements~~the 2030 Senior Notes will mature on February 1, 2030. The 2030 Senior Notes are senior unsecured obligations, ranking equally in right of payment

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

with the Company’s other existing and ~~non-cancelable operating lease agreements.~~ future unsubordinated debt and senior to any of the Company’s future subordinated debt. The 2030 Senior Notes are not guaranteed by any of the Company’s subsidiaries.

The Company ~~determines if~~may redeem some or all of the 2030 Senior Notes at its option prior to November 1, 2029 (three months before the maturity date) at any time and from time to time at a redemption price equal to the greater of 100% of the principal amount of the 2030 Senior Notes redeemed, or the sum of the present values of the remaining scheduled payments of principal and interest on the 2030 Senior Notes redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Commencing on November 1, 2029 (three months before the maturity date), the Company may redeem some or all of the 2030 Senior Notes, at any time and from time to time, at a redemption price equal to the principal amount of the 2030 Senior Notes being redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

On March 13, 2020, the Company completed an ~~arrangement is or contains a lease at contract inception.~~underwritten public offering of $500,000 aggregate principal amount of 3.05% Senior Notes due 2050 (the “2050 Senior Notes”). The 2050 Senior Notes were issued under the Base Indenture, as supplemented by the Fourth Supplemental Indenture, dated as of March 13, 2020 (the Base Indenture as so supplemented, the “Indenture”). The Company ~~recognizes~~is amortizing a ~~right-of-use (“ROU”) asset~~$7,375 debt discount and $5,682 of debt issuance costs through the maturity date.

The Company will pay interest on the 2050 Senior Notes semi-annually in arrears and the 2050 Senior Notes will mature on April 1, 2050. The 2050 Senior Notes are senior unsecured obligations, ranking equally in right of payment with the Company’s other existing and future unsubordinated debt and senior to any of the Company’s future subordinated debt. The 2050 Senior Notes are not guaranteed by any of the Company’s subsidiaries.

The Company may redeem some or all of the 2050 Senior Notes at its option prior to October 1, 2049 (six months before the maturity date) at any time and from time to time at a ~~lease liability at~~redemption price equal to the ~~lease commencement date. The lease liability is initially measured at~~greater of 100% of the principal amount of the 2050 Senior Notes redeemed, or the sum of the present ~~value~~values of the remaining scheduled payments of principal and interest on the 2050 Senior Notes redeemed, plus accrued and unpaid ~~lease payments~~interest to, but excluding, the redemption date. Commencing on October 1, 2049 (six months before the maturity date), the Company may redeem some or all of the 2050 Senior Notes, at any time and from time to time, at a redemption price equal to the ~~lease commencement~~principal amount of the 2050 Senior Notes being redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

~~Key estimates and judgments include how~~Under certain circumstances, the Company ~~determines (1)~~may become obligated to pay additional amounts (the “Additional Amounts”) with respect to the ~~discount rate it uses~~2030 and/or 2050 Senior Notes (the “Notes”), to ~~discount~~ensure that the ~~unpaid lease payments~~net amounts received by each holder of the Notes will not be less than the amount such holder would have received if withholding taxes or deductions were not incurred on a payment under or with respect to ~~present value, (2) lease term and (3) lease payments.~~

~~The lease guidance requires~~the Notes. If such payment of Additional Amounts is a ~~lessee to discount its unpaid lease payments using the interest rate implicit~~result of a change in the ~~lease~~laws or ~~if that rate cannot be readily determined, its incremental borrowing rate. Generally,~~regulations, including a change in any official position, the introduction of an official position or a holding by a court of competent jurisdiction, of any jurisdiction from or through which payment is made by or on behalf of the Notes having power to tax, and the Company cannot ~~determine~~avoid such payments of Additional Amounts through reasonable measures, then the Company may redeem the 2030 and/or 2050 Senior Notes then outstanding at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, ~~rate implicit in~~if any, to, but excluding, the ~~lease because it does not have access~~redemption date (subject to the ~~lessor’s estimated residual value~~right of holders of record on the relevant record date to receive interest due on an interest payment date that is on 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 equalprior 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 leases are periodically reviewed for impairment losses. The Company uses the long-lived assets 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 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 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.

~~Lease cost for operating leases for the three and nine months ended September 30, 2019 was as follows:~~redemption date).

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019
Operating lease cost

$
9,696

$
28,886

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

1517

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

Nine Months Ended

September 30, 2019
Operating cash flow information:

Cash paid for amounts included in the measurement of lease liabilities

$
28,374
Non-cash activity:

Right-of-use assets obtained in exchange for lease liabilities

$
7,363

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


	~~Nine Months Ended~~
	~~September 30, 2019~~
~~Weighted average remaining lease term~~	~~8.9~~	~~years~~
~~Weighted average discount rate~~	~~3.99~~	%

~~As of September 30, 2019, future minimum lease payments, as calculated under the new lease guidance and reconciled to the operating lease liability, are as follows:~~

Last 3 months of 2019

$
9,662
2020

36,429
2021

33,160
2022

31,906
2023

28,701
Thereafter

96,292
Minimum lease payments

236,150
Less: imputed interest

(39,641)
Present value of minimum lease payments

196,509
Less: current portion of operating lease liabilities

(30,162)
Long-term portion of operating lease liabilities

$
166,347

~~As of December 31, 2018, minimum lease payments under non-cancelable operating leases by period were expected to be as follows:~~

2019

$
37,902
2020

35,204
2021

32,259
2022

30,974
2023

27,882
Thereafter

94,205

$
258,426

~~A summary of rent expense for both short-term agreements and non-cancelable operating lease agreements for the years ended December 31, 2018 and 2017 was as follows:~~

2018

2017
Rent expense

$
42,646

$
43,383

~~Table of Contents~~

~~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, 2019 and December 31, 2018:~~

September 30,

December 31,


2019

2018

Revolver under Credit Agreement, bearing interest ranging from 3.05% to 3.14% ^(a)

$
427,806

$
481,610

Term loan under Credit Agreement, bearing interest at 3.14% ^(a)

700,000

1,237,500

5.25% Senior Notes due 2019 ^(b)

175,000

175,000

4.64% Senior Notes due 2021

100,000

100,000

2.39% Senior Notes due 2021

150,000

150,000

3.09% Senior Notes due 2022

125,000

125,000

2.75% Senior Notes due 2023

200,000

200,000

3.24% Senior Notes due 2024

150,000

150,000

3.41% Senior Notes due 2025

375,000

375,000

3.03% Senior Notes due 2026

400,000

400,000

3.49% Senior Notes due 2027

250,000

250,000

4.25% Senior Notes due 2028

500,000

500,000

3.50% Senior Notes due 2029

500,000

—

Tax-exempt bonds

—

15,930

Notes payable to sellers and other third parties, bearing interest ranging from 2.75% to 10.90%, principal and interest payments due periodically with due dates ranging from 2019 to 2036 ^(a)

9,705

14,653

4,062,511

4,174,693

Less – current portion

(502)

(1,786)

Less – debt issuance costs

(22,604)

(19,442)

$
4,039,405

$
4,153,465

~~____________________~~

~~(a)~~

~~Interest rates represent the interest rates incurred at September 30, 2019.~~

~~(b)~~

The Company has recorded the 2019 Senior Notes in long-term in the table above as the Company has the intent and ability to redeem the 2019 Senior Notes on November 1, 2019 using borrowings under the Credit Agreement.

~~2029 Senior Notes~~

On April 16, 2019, the Company completed an underwritten public offering of $500,000 aggregate principal amount of 3.50% Senior Notes due 2029 (the “2029 Senior Notes”). The 2029 Senior Notes were issued under the Indenture, dated as of November 16, 2018 (the “Base Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the Second Supplemental Indenture, dated as of April 16, 2019 (the Base Indenture as so supplemented, the “Indenture”).

The Company will pay interest on the 2029 Senior Notes semi-annually, commencing on November 1, 2019, and the 2029 Senior Notes will mature on May 1, 2029. The 2029 Senior Notes are senior unsecured obligations, ranking equally in right of payment with the Company’s other existing and future unsubordinated debt and senior to any of the Company’s future subordinated debt. The 2029 Senior Notes are not guaranteed by any of the Company’s subsidiaries.

The Company may redeem some or all of the 2029 Senior Notes at its option prior to February 1, 2029 (three months before the maturity date) at any time and from time to time at a redemption price equal to the greater of 100% of the principal amount of the 2029 Senior Notes redeemed, or the sum of the present values of the remaining scheduled payments of principal and interest on the 2029 Senior Notes redeemed, plus accrued and unpaid interest to, but excluding, the

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~~WASTE CONNECTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

redemption date. Commencing on February 1, 2029 (three months before the maturity date), the Company may redeem some or all of the 2029 Senior Notes, at any time and from time to time, at a redemption price equal to the principal amount of the 2029 Senior Notes being redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Under certain circumstances, the Company may become obligated to pay additional amounts (the “Additional Amounts”) with respect to the 2029 Senior Notes to ensure that the net amounts received by each holder of the 2029 Senior Notes will not be less than the amount such holder would have received if withholding taxes or deductions were not incurred on a payment under or with respect to the 2029 Senior Notes. If such payment of Additional Amounts is 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 2029 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 2029 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 2029 Senior Notes may require the Company to repurchase all or a portion of the 2029 Senior Notes for cash at a price equal to 101% of the aggregate principal amount of such 2029 Senior Notes, plus any accrued but unpaid interest to, but excluding, the date of repurchase.

The covenants in the Indenture include limitations on liens, sale-leaseback transactions and mergers and sales of all or substantially all of the Company’s assets. The Indenture also includes customary events of default with respect to the ~~2029 Senior~~ Notes. As of September 30, ~~2019,~~2020, 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 ~~2029~~2030 and/or 2050 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 ~~2029 Senior Notes.~~Notes of the applicable series. Upon such a declaration, such principal and accrued interest on all of the ~~2029~~2030 and/or 2050 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 ~~2029~~2030 and/or 2050 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 ~~2029 Senior~~applicable series of the Notes.Under certain circumstances, the holders of a majority in principal amount of the outstanding Notes of any series may rescind any such acceleration with respect to the Notes of that series and its consequences.

Credit Agreement

Details of the Credit Agreement are as follows:


	September 30,			December 31,
	2020			2019
Revolver under Credit Agreement
Available	$	1,257,856		$	538,642
Letters of credit outstanding	$	125,895		$	107,611
Total amount drawn, as follows:	$	178,749		$	916,247
Amount drawn - U.S. LIBOR rate loan	$	175,000		$	897,000
Interest rate applicable - U.S. LIBOR rate loan		1.35	%		2.90	%
Amount drawn – Canadian bankers’ acceptance	$	3,749		$	19,247
Interest rate applicable – Canadian bankers’ acceptance		1.68	%		3.18	%
Commitment – rate applicable		0.15	%		0.12	%
Term loan under Credit Agreement
Amount drawn – U.S. based LIBOR loan	$	650,000		$	700,000
Interest rate applicable – U.S. based LIBOR loan		1.35	%		2.90	%

12.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.

Prior to July 2020, the Company managed its operations through 5 geographic solid waste operating segments and its E&P segment, which were also its reportable segments. As of July 2020, the Company’s chief operating decision maker determined that the Company’s E&P and Southern operating segments met all the aggregation criteria and eliminated the E&P segment by combining all operations of the E&P segment into the Southern segment. After giving effect to this combination, the Company’s reportable segments consist of its 5 geographic solid waste operating segments. Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts. The segment information presented herein reflects the realignment of these districts. Segment results for the 2019 periods

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

~~Credit Agreement~~

~~Details of~~reflected in this report have been reclassified to reflect the ~~Credit Agreement are as follows:~~

September 30,

December 31,


2019

2018


Revolver under Credit Agreement





Available

$
1,012,786

$
955,779

Letters of credit outstanding

$
121,908

$
125,111

Total amount drawn, as follows:

$
427,806

$
481,610

Amount drawn - U.S. LIBOR rate loan

$
382,500

$
357,000

Interest rate applicable - U.S. LIBOR rate loan

3.14
%

3.62
%

Amount drawn – Canadian bankers’ acceptance

$
45,306

$
124,610

Interest rate applicable – Canadian bankers’ acceptance

3.05
%

3.40
%

Commitment – rate applicable

0.12
%

0.12
%

Term loan under Credit Agreement



Amount drawn – U.S. based LIBOR loan

$
700,000

$
1,237,500

Interest rate applicable – U.S. based LIBOR loan

3.14
%

3.62
%

~~Tax Exempt Bonds~~

In January 2019, the Company gave notice to redeem its LeMay Washington Bond with a remaining principal balance of $15,930. The Company paid in full the principal and accrued interest on this bond on March 6, 2019.

~~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. NaN single contract or customer accounted for more than 10%realignment of the Company’s ~~total revenues at~~reportable segments for comparison with the ~~consolidated or reportable segment level during the periods presented.~~

The Company manages its operations through 5 geographic operating segments and its E&P segment, which includes the majority of the Company’s E&P waste treatment and disposal operations. The Company’s 5 geographic operating segments and its E&P segment comprise the Company’s reportable segments. Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts. In the first quarter of 2019, the Company moved two districts from the Eastern segment to the Central segment because their locationssame period in ~~Iowa were closer in proximity to operations in the Company’s Central segment. The segment information presented herein reflects the realignment of these districts.~~2020.

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

The ~~E&P~~Company’s Chief Operating Decision Maker evaluates operating segment ~~services~~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 12.

Summarized financial information concerning the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019, is shown in the following tables:


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


Three Months Ended			Intercompany		Reported		Segment
September 30, 2019	Revenue		Revenue^(b)		Revenue		EBITDA^(c)
Eastern	$	399,936	$	(69,049)	$	330,887	$	88,101
Southern		417,133		(45,678)		371,455		113,209
Western		324,859		(35,651)		289,208		90,059
Central		262,737		(32,663)		230,074		81,746
Canada		217,879		(27,059)		190,820		66,794
Corporate^(a)		—		—		—		(446)
	$	1,622,544	$	(210,100)	$	1,412,444	$	439,463

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


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


Nine Months Ended			Intercompany		Reported		Segment
September 30, 2019	Revenue		Revenue^(b)		Revenue		EBITDA^(c)
Eastern	$	1,137,258	$	(189,924)	$	947,334	$	250,106
Southern		1,214,125		(129,931)		1,084,194		327,139
Western		922,737		(101,552)		821,185		253,504
Central		715,997		(89,685)		626,312		219,280
Canada		624,470		(76,776)		547,694		193,702
Corporate^(a)		—		—		—		(11,751)
	$	4,614,587	$	(587,868)	$	4,026,719	$	1,231,980

____________________

(a)

Corporate consists of expenses associated with its administrative departments and certain centralized expenses including cash and equity-based incentive compensation, direct acquisition expenses and share-based compensation expenses associated with Progressive Waste share-based grants outstanding at June 1, 2016 that were continued by the Company. Amounts reflected are net of allocations to the 5 operating segments.

(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, 2020 and December 31, 2019, were as follows:


	September 30,		December 31,
	2020		2019
Eastern	$	3,055,672	$	3,099,283
Southern		3,441,079		3,952,449
Western		1,860,596		1,718,015
Central		1,956,234		1,885,468
Canada		2,444,922		2,490,291
Corporate		1,090,944		592,189
Total Assets	$	13,849,447	$	13,737,695

Table of Contents

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)

~~E&P customers located~~The following tables show changes in ~~Arkansas, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, Wyoming~~goodwill during the nine months ended September 30, 2020 and ~~along the Gulf of Mexico.~~2019, by reportable segment:

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.


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


	Eastern		Southern		Western		Central		Canada		Total
Balance as of December 31, 2018	$	1,126,486	$	1,517,610	$	398,174	$	540,435	$	1,448,980	$	5,031,685
Goodwill acquired		22,146		10,329		1,334		189,194		25		223,028
Goodwill divested		—		(845)		—		—		—		(845)
Impact of changes in foreign currency		—		—		—		—		43,688		43,688
Balance as of September 30, 2019	$	1,148,632	$	1,527,094	$	399,508	$	729,629	$	1,492,693	$	5,297,556

A reconciliation of the Company’s primary measure of segment ~~EBITDA~~profitability (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, 2019 and 2018, is shown~~ in the ~~following tables:~~Condensed Consolidated Statements of Net Income is as follows:

Three Months Ended



Intercompany

Reported

Segment
September 30, 2019

Revenue

Revenue^(b)

Revenue

EBITDA^(c)
Eastern

$
399,936

$
(69,049)

$
330,887

$
88,101
Southern

347,630

(42,442)

305,188

77,406
Western

324,859

(35,651)

289,208

90,059
Central

262,737

(32,663)

230,074

81,746
Canada

217,879

(27,059)

190,820

66,794
E&P

69,503

(3,236)

66,267

35,803
Corporate^(a)

—

—

—

(446)

$
1,622,544

$
(210,100)

$
1,412,444

$
439,463


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Eastern segment EBITDA	$	90,991	$	88,101	$	258,333	$	250,106
Southern segment EBITDA		81,394		113,209		276,844		327,139
Western segment EBITDA		101,071		90,059		267,523		253,504
Central segment EBITDA		82,887		81,746		235,742		219,280
Canada segment EBITDA		72,516		66,794		185,589		193,702
Subtotal reportable segments		428,859		439,909		1,224,031		1,243,731
Unallocated corporate overhead		(4,132)		(446)		(10,462)		(11,751)
Depreciation		(157,590)		(157,994)		(459,641)		(461,616)
Amortization of intangibles		(32,653)		(31,934)		(96,062)		(93,821)
Impairments and other operating items		(3,805)		(12,935)		(442,582)		(32,949)
Interest expense		(40,636)		(36,780)		(119,562)		(111,313)
Interest income		903		2,056		4,396		7,186
Other income (expense), net		702		(19)		(3,046)		4,562
Income before income tax provision	$	191,648	$	201,857	$	97,072	$	544,029

Three Months Ended



Intercompany

Reported

Segment
September 30, 2018

Revenue

Revenue^(b)

Revenue

EBITDA^(c)
Eastern

$
349,212

$
(64,347)

$
284,865

$
82,733
Southern

321,306

(38,266)

283,040

70,159
Western

303,614

(32,596)

271,018

86,174
Central

218,124

(28,221)

189,903

71,276
Canada

211,682

(24,628)

187,054

68,819
E&P

67,348

(2,118)

65,230

35,099
Corporate^(a)

—

—

—

(8,286)

$
1,471,286

$
(190,176)

$
1,281,110

$
405,974

Nine Months Ended

Intercompany

Reported

Segment
September 30, 2019

Revenue

Revenue^(b)

Revenue

EBITDA^(c)
Eastern

$
1,137,258

$
(189,924)

$
947,334

$
250,106
Southern

1,011,572

(121,040)

890,532

226,294
Western

922,737

(101,552)

821,185

253,504
Central

715,997

(89,685)

626,312

219,280
Canada

624,470

(76,776)

547,694

193,702
E&P

202,553

(8,891)

193,662

100,845
Corporate^(a)

—

—

—

(11,751)

$
4,614,587

$
(587,868)

$
4,026,719

$
1,231,980

13.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, 2020 were specifically designated to the Credit Agreement and accounted for as cash flow hedges.

2021

Table of Contents

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, 2018

Revenue

Revenue^(b)

Revenue

EBITDA^(c)
Eastern

$
953,165

$
(164,253)

$
788,912

$
222,772
Southern

951,313

(111,824)

839,489

207,853
Western

874,464

(94,584)

779,880

240,006
Central

604,823

(77,337)

527,486

195,018
Canada

615,157

(71,290)

543,867

195,390
E&P

186,734

(5,159)

181,575

95,009
Corporate^(a)

—

—

—

(14,368)

$
4,185,656

$
(524,447)

$
3,661,209

$
1,141,680

~~____________________~~

~~(a)~~

Corporate functions include accounting, legal, tax, treasury, information technology, risk management, human resources, training and other administrative functions. Amounts reflected are net of allocations to the 6 operating segments.

~~(b)~~

~~(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, 2019 and December 31, 2018, were as follows:~~

September 30,

December 31,

2019

2018
Eastern

$
2,737,208

$
2,673,316
Southern

2,994,260

2,892,994
Western

1,697,050

1,596,129
Central

1,884,207

1,506,326
Canada

2,454,152

2,412,971
E&P

962,761

969,808
Corporate

540,597

575,785
Total Assets

$
13,270,235

$
12,627,329

~~The following tables show changes in goodwill during the nine months ended September 30, 2019 and 2018, by reportable segment:~~

Eastern

Southern

Western

Central

Canada

E&P

Total
Balance as of December 31, 2018

$
1,143,355

$
1,517,610

$
398,174

$
523,566

$
1,448,980

$
—

$
5,031,685
Goodwill transferred

(16,869)

—

—

16,869

—

—

—
Goodwill acquired

22,146

10,329

1,334

189,194

25

—

223,028
Goodwill divested

—

(845)

—

—

—

—

(845)
Impact of changes in foreign currency

—

—

—

—

43,688

—

43,688
Balance as of September 30, 2019

$
1,148,632

$
1,527,094

$
399,508

$
729,629

$
1,492,693

$
—

$
5,297,556

    Eastern

Southern

Western

Central

Canada

E&P

Total
Balance as of December 31, 2017

$
804,133

$
1,436,320

$
397,508

$
468,275

$
1,575,538

$
—

$
4,681,774
Goodwill transferred

(16,869)

—

—

16,869

—

—

—
Goodwill acquired

122,136

4,800

666

42,197

151

—

169,950
Goodwill adjustment for assets held for sale

—

10,194

—

—

—

—

10,194
Impact of changes in foreign currency

—

—

—

—

(48,622)

—

(48,622)
Balance as of September 30, 2018

$
909,400

$
1,451,314

$
398,174

$
527,341

$
1,527,067

$
—

$
4,813,296

~~Table of Contents~~

~~WASTE CONNECTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

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

Three Months Ended

Nine Months Ended

September 30,

September 30,


2019

2018

2019

2018

Eastern segment EBITDA

$
88,101

$
82,733

$
250,106

$
222,772

Southern segment EBITDA

77,406

70,159

226,294

207,853

Western segment EBITDA

90,059

86,174

253,504

240,006

Central segment EBITDA

81,746

71,276

219,280

195,018

Canada segment EBITDA

66,794

68,819

193,702

195,390

E&P segment EBITDA

35,803

35,099

100,845

95,009

Subtotal reportable segments

439,909

414,260

1,243,731

1,156,048

Unallocated corporate overhead

(446)

(8,286)

(11,751)

(14,368)

Depreciation

(157,994)

(148,232)

(461,616)

(423,866)

Amortization of intangibles

(31,934)

(26,871)

(93,821)

(79,444)

Impairments and other operating items

(12,935)

1,998

(32,949)

(6,106)

Interest expense

(36,780)

(32,078)

(111,313)

(96,874)

Interest income

2,056

1,467

7,186

3,677

Other income (expense), net

(19)

600

4,562

2,053

Income before income tax provision

$
201,857

$
202,858

$
544,029

$
541,120

~~12.~~~~DERIVATIVE FINANCIAL INSTRUMENTS~~

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, 2019 were specifically designated to the Credit Agreement and accounted for as cash flow hedges.

~~Table of Contents~~

~~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, ~~2019,~~2020, the Company’s derivative instruments included 1610 interest rate swap agreements as follows:


			Fixed		Variable					Fixed		Variable
	Notional		Interest		Interest Rate			Notional		Interest		Interest Rate
Date Entered	Amount		Rate Paid*		Received	Effective Date	Expiration Date	Amount		Rate Paid*		Received	Effective Date	Expiration Date
May 2014	$	50,000	2.344	%	1-month LIBOR	October 2015	October 2020	$	50,000	2.344	%	1-month LIBOR	October 2015	October 2020
May 2014	$	25,000	2.326	%	1-month LIBOR	October 2015	October 2020	$	25,000	2.326	%	1-month LIBOR	October 2015	October 2020
May 2014	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020
May 2014	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020
April 2016	$	100,000	1.000	%	1-month LIBOR	February 2017	February 2020
June 2016	$	75,000	0.850	%	1-month LIBOR	February 2017	February 2020
June 2016	$	150,000	0.950	%	1-month LIBOR	January 2018	January 2021
June 2016	$	150,000	0.950	%	1-month LIBOR	January 2018	January 2021
July 2016	$	50,000	0.900	%	1-month LIBOR	January 2018	January 2021
July 2016	$	50,000	0.890	%	1-month LIBOR	January 2018	January 2021
August 2017	$	100,000	1.900	%	1-month LIBOR	July 2019	July 2022	$	100,000	1.900	%	1-month LIBOR	July 2019	July 2022
August 2017	$	200,000	2.200	%	1-month LIBOR	October 2020	October 2025	$	200,000	2.200	%	1-month LIBOR	October 2020	October 2025
August 2017	$	150,000	1.950	%	1-month LIBOR	February 2020	February 2023	$	150,000	1.950	%	1-month LIBOR	February 2020	February 2023
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
December 2018	$	200,000	2.850	%	1-month LIBOR	July 2022	July 2027	$	200,000	2.850	%	1-month LIBOR	July 2022	July 2027

____________________

* Plus applicable margin.

~~Another~~On September 28, 2020, the Company terminated 4 of its interest rate swaps with notional amounts of $150,000, $150,000, $50,000 and $50,000, each of which would have expired in January 2021. As a result of terminating these interest rate swaps, the Company made total cash payments of $853 to the counterparties of the Company’s objectives for utilizing derivative instruments is to reduce its exposure to fluctuations in cash flows due to changes in the price of diesel fuel. The Company’s strategy to achieve that objective involves periodically entering into fuel hedges that are specifically designated to certain forecasted diesel fuel purchases and accounted for as cash flow hedges. The Company had 1 fuel hedge agreement in place at September 30, 2018, which expired at December 31, 2018. At September 30, 2019, the Company had 0 fuel hedge agreements in place.swap agreements.

The fair values of derivative instruments designated as cash flow hedges as of September 30, ~~2019,~~2020, were as follows:

Derivatives Designated as Cash

Asset Derivatives

Liability Derivatives
Flow Hedges

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value
Interest rate swaps

Prepaid expenses and other current assets^(a)

$
2,954

Accrued liabilities^(a)

$
(2,148)

Other assets, net

842

Other long-term liabilities

(53,288)
Total derivatives designated as cash flow hedges

$
3,796

$
(55,436)


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)	$	—	Accrued liabilities^(a)	$	(19,825)
				Other long-term liabilities		(83,429)
Total derivatives designated as cash flow hedges		$	—		$	(103,254)

____________________

(a)Represents the estimated amount of the existing unrealized ~~gains and~~ losses, respectively, on interest rate swaps as of September 30, ~~2019~~2020 (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, ~~2018,~~2019, were as follows:


Derivatives Designated as Cash	Derivative Assets			Derivative Liabilities			Asset Derivatives			Liability Derivatives
Flow Hedges	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps	Prepaid expenses and other current assets^(a)	$	10,737	Other long-term liabilities	$	(9,314)	Prepaid expenses and other current assets	$	2,845	Accrued liabilities	$	(3,680)
	Other assets, net		10,675							Other long-term liabilities		(38,967)
Total derivatives designated as cash flow hedges		$	21,412		$	(9,314)		$	2,845		$	(42,647)

~~Table of Contents~~

~~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 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, 2019 and 2018:

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), (c)

Three Months Ended

Three Months Ended

September 30,

September 30,


2019

2018



2019

2018
Interest rate swaps

$
(11,379)

$
634

Interest expense

$
(1,451)

$
3,145
Fuel hedges

—

222

Cost of operations

—

(1,359)
Total

$
(11,379)

$
856

$
(1,451)

$
1,786

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), (c)

Nine Months Ended

Nine Months Ended

September 30,

September 30,


2019

2018



2019

2018
Interest rate swaps

$
(41,761)

$
11,634

Interest expense

$
(5,085)

$
1,769
Fuel hedges

—

2,226

Cost of operations

—

(3,490)
Total

$
(41,761)

$
13,860

$
(5,085)

$
(1,721)

~~____________________~~

~~(a)~~In accordance with the derivatives and hedging guidance, the changes in fair values of interest rate swaps and fuel hedges 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. Because changes in the actual price of diesel fuel and changes in the DOE index price did not offset exactly each reporting period, the Company assessed whether the fuel hedges were highly effective using the cumulative dollar offset approach.

~~(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.

~~(c)~~Amounts reclassified from AOCIL into earnings related to realized gains and losses on the fuel hedges are recognized when settlement payments or receipts occur related to the hedge contracts, which correspond to when the underlying fuel is consumed.

~~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, interest rate swaps and fuel hedges. As of September 30, 2019 and December 31, 2018, 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, 2019 and December 31, 2018, 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

~~Table of Contents~~

~~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)~~

~~where the carrying values do not approximate their fair values as of September 30, 2019 and December 31, 2018, are as follows:~~

Carrying Value at

Fair Value* at

September 30,

December 31,

September 30,

December 31,


2019

2018

2019

2018

5.25% Senior Notes due 2019

$
175,000

$
175,000

$
175,361

$
177,870

4.64% Senior Notes due 2021

$
100,000

$
100,000

$
102,783

$
101,292

2.39% Senior Notes due 2021

$
150,000

$
150,000

$
149,210

$
144,305

3.09% Senior Notes due 2022

$
125,000

$
125,000

$
126,640

$
120,682

2.75% Senior Notes due 2023

$
200,000

$
200,000

$
200,664

$
188,363

3.24% Senior Notes due 2024

$
150,000

$
150,000

$
153,789

$
142,877

3.41% Senior Notes due 2025

$
375,000

$
375,000

$
389,912

$
355,541

3.03% Senior Notes due 2026

$
400,000

$
400,000

$
407,943

$
367,143

3.49% Senior Notes due 2027

$
250,000

$
250,000

$
261,260

$
234,243

4.25% Senior Notes due 2028

$
500,000

$
500,000

$
567,850

$
506,100

3.50% Senior Notes due 2029

$
500,000

$
—

$
537,550

$
—

~~____________________~~

*Senior Notes are classified as Level 2 within the fair value hierarchy. Fair value is based on quotes of bonds with similar ratings in similar industries.

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

~~14.~~~~NET INCOME PER SHARE INFORMATION~~

The following table sets forth the calculation of the numerator and denominator used in the computation of basic and diluted net income per common share attributable to the Company’s shareholders for the three and nine months ended September 30, 2019 and 2018:

Three Months Ended

Nine Months Ended

September 30,

September 30,


2019

2018

2019

2018

Numerator:

Net income attributable to Waste Connections for basic and diluted earnings per share

$
159,109

$
150,843

$
433,579

$
414,393

Denominator:









Basic shares outstanding

263,853,681

263,628,838

263,768,258

263,657,274

Dilutive effect of equity-based awards

733,775

765,919

705,087

719,046

Diluted shares outstanding

264,587,456

264,394,757

264,473,345

264,376,320

~~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,

~~Table of Contents~~

~~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)~~

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, 2018, the Company’s derivative instruments included pay-fixed, receive-variable interest rate swaps and pay-fixed, receive-variable diesel fuel hedges. At September 30, 2019 and December 31, 2018, 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. The Company uses a discounted cash flow (“DCF”) model to determine the estimated fair value of the diesel fuel hedges. The assumptions used in preparing the DCF model include: (i) estimates for the forward DOE index curve; and (ii) the discount rate based on risk-free interest rates over the term of the hedge contracts. The DOE index curve used in the DCF model was obtained from financial institutions that trade these contracts. Significant increases (decreases) in the forward DOE index curve would result in a significantly higher (lower) fair value measurement. For the Company’s interest rate swaps and fuel hedges, the Company also considers the Company’s creditworthiness in its determination of the fair value measurement of these instruments in a net liability position and the counterparties’ creditworthiness in its determination of the fair value measurement of these instruments in a net asset position. The Company’s restricted cash and investments are valued at quoted market prices in active markets for similar assets, which the Company receives from the financial institutions that hold such investments on its behalf. The Company’s restricted cash and investments measured at fair value are invested primarily in money market accounts, bank time deposits, U.S. government and agency securities and Canadian bankers’ acceptance notes.

~~The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2019 and December 31, 2018, were as follows:~~

Fair Value Measurement at September 30, 2019 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

$
(51,640)

$
—

$
(51,640)

$
—
Restricted cash and investments

$
142,291

$
—

$
142,291

$
—
Contingent consideration

$
(56,954)

$
—

$
—

$
(56,954)

Fair Value Measurement at December 31, 2018 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

$
12,098

$
—

$
12,098

$
—
Restricted cash and investments

$
131,422

$
—

$
131,422

$
—
Contingent consideration

$
(54,615)

$
—

$
—

$
(54,615)

~~Table of Contents~~

~~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 table summarizes the changes in the fair value for Level 3 derivatives for the nine months ended September 30, 2019 and 2018:~~

Nine Months Ended September 30,


2019

2018

Beginning balance

$
—

$
3,880

Realized gains included in earnings

—

(2,837)

Unrealized gains included in AOCIL

—

2,661

Ending balance

$
—

$
3,704

~~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, 2019 and 2018:~~

Nine Months Ended September 30,


2019

2018

Beginning balance

$
54,615

$
47,285

Contingent consideration recorded at acquisition date

1,003

11,669

Payment of contingent consideration recorded at acquisition date

(1,621)

(5,459)

Payment of contingent consideration recorded in earnings

—

(11)

Adjustments to contingent consideration

1,466

349

Interest accretion expense

1,383

1,308

Foreign currency translation adjustment

108

(117)

Ending balance

$
56,954

$
55,024

~~16.~~~~OTHER COMPREHENSIVE INCOME (LOSS)~~

Other comprehensive income (loss) includes changes in the fair value of interest rate swaps and fuel hedges 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, 2019 and 2018 are as follows:

Three Months Ended September 30, 2019

Gross

Tax Effect

Net of Tax
Interest rate swap amounts reclassified into interest expense

$
(1,974)

$
523

$
(1,451)
Changes in fair value of interest rate swaps

(15,482)

4,103

(11,379)
Foreign currency translation adjustment

(24,911)

—

(24,911)

$
(42,367)

$
4,626

$
(37,741)

Three Months Ended September 30, 2018

Gross

Tax Effect

Net of Tax
Interest rate swap amounts reclassified into interest expense

$
4,279

$
(1,134)

$
3,145
Fuel hedge amounts reclassified into cost of operations

(1,810)

451

(1,359)
Changes in fair value of interest rate swaps

863

(229)

634
Changes in fair value of fuel hedges

295

(73)

222
Foreign currency translation adjustment

35,455

—

35,455

$
39,082

$
(985)

$
38,097

2722

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Nine Months Ended September 30, 2019


Gross

Tax Effect

Net of Tax
Interest rate swap amounts reclassified into interest expense

$
(6,918)

$
1,833

$
(5,085)
Changes in fair value of interest rate swaps

(56,818)

15,057

(41,761)
Foreign currency translation adjustment

60,404

—

60,404

$
(3,332)

$
16,890

$
13,558

Nine Months Ended September 30, 2018


Gross

Tax Effect

Net of Tax
Interest rate swap amounts reclassified into interest expense

$
2,407

$
(638)

$
1,769
Fuel hedge amounts reclassified into cost of operations

(4,647)

1,157

(3,490)
Changes in fair value of interest rate swaps

15,828

(4,194)

11,634
Changes in fair value of fuel hedges

2,956

(730)

2,226
Foreign currency translation adjustment

(67,349)

—

(67,349)

$
(50,805)

$
(4,405)

$
(55,210)

~~A rollforward~~The following table summarizes the impact of the ~~amounts included in~~Company’s cash flow hedges on the results of operations, comprehensive income (loss) and AOCIL ~~net of taxes,~~ for the three and nine months ended September 30, ~~2019~~2020 and ~~2018, is as follows:~~2019:


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
			Foreign		Accumulated		September 30,					September 30,
			Currency		Other		2020		2019			2020		2019
	Interest		Translation		Comprehensive
	Rate Swaps		Adjustment		Income (Loss)
Balance at December 31, 2018	$	8,892	$	(83,678)	$	(74,786)
Amounts reclassified into earnings		(5,085)		—		(5,085)
Changes in fair value		(41,761)		—		(41,761)
Foreign currency translation adjustment		—		60,404		60,404
Balance at September 30, 2019	$	(37,954)	$	(23,274)	$	(61,228)
Interest rate swaps							$	1,357	$	(11,379)	Interest expense	$	2,126	$	(1,451)


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), (c)
									Nine Months Ended					Nine Months Ended
					Foreign		Accumulated		September 30,					September 30,
					Currency		Other		2020		2019			2020		2019
			Interest		Translation		Comprehensive
	Fuel Hedges		Rate Swaps		Adjustment		Income (Loss)
Balance at December 31, 2017	$	2,907	$	13,951	$	91,555	$	108,413
Amounts reclassified into earnings		(3,490)		1,769		—		(1,721)
Changes in fair value		2,226		11,634		—		13,860
Foreign currency translation adjustment		—		—		(67,349)		(67,349)
Balance at September 30, 2018	$	1,643	$	27,354	$	24,206	$	53,203
Interest rate swaps									$	(50,014)	$	(41,761)	Interest expense	$	3,377	$	(5,085)

____________________

(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 1217 for further discussion on the impact of the Company’s ~~derivative instruments.~~hedge accounting to its consolidated comprehensive income (loss) and AOCIL.

14.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, 2020 and December 31, 2019, 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, 2020 and December 31, 2019, 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

2823

Table of Contents

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)

where the carrying values do not approximate their fair values as of September 30, 2020 and December 31, 2019, are as follows:


	Carrying Value at				*Fair Value at**
	September 30,		December 31,		September 30,		December 31,
	2020		2019		2020		2019
4.64% Senior Notes due 2021	$	100,000	$	100,000	$	101,590	$	102,654
2.39% Senior Notes due 2021	$	150,000	$	150,000	$	150,928	$	149,823
3.09% Senior Notes due 2022	$	125,000	$	125,000	$	128,623	$	126,884
2.75% Senior Notes due 2023	$	200,000	$	200,000	$	205,995	$	201,121
3.24% Senior Notes due 2024	$	150,000	$	150,000	$	157,976	$	153,804
3.41% Senior Notes due 2025	$	375,000	$	375,000	$	402,757	$	389,127
3.03% Senior Notes due 2026	$	400,000	$	400,000	$	424,805	$	406,768
3.49% Senior Notes due 2027	$	250,000	$	250,000	$	271,516	$	259,789
4.25% Senior Notes due 2028	$	500,000	$	500,000	$	600,300	$	562,050
3.50% Senior Notes due 2029	$	500,000	$	500,000	$	568,850	$	533,500
2.60% Senior Notes due 2030	$	600,000	$	—	$	648,060	$	—
3.05% Senior Notes due 2050	$	500,000	$	—	$	525,200	$	—

____________________

*Senior Notes are classified as Level 2 within the fair value hierarchy. Fair value is based on quotes of bonds with similar ratings in similar industries.

For details on the fair value of the Company’s interest rate swaps, restricted cash and investments and contingent consideration, refer to Note 16.

15.NET INCOME PER SHARE INFORMATION


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Numerator:
Net income attributable to Waste Connections for basic and diluted earnings per share	$	158,049	$	159,109	$	74,012	$	433,579
Denominator:
Basic shares outstanding		262,998,317		263,853,681		263,253,087		263,768,258
Dilutive effect of equity-based awards		509,169		733,775		464,914		705,087
Diluted shares outstanding		263,507,486		264,587,456		263,718,001		264,473,345

16.FAIR VALUE MEASUREMENTS

Table of Contents

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)

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 assets and liabilities measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019, were as follows:


	Fair Value Measurement at September 30, 2020 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Interest rate swap derivative instruments – net liability position	$	(103,254)	$	—	$	(103,254)	$	—
Restricted cash and investments	$	143,931	$	—	$	143,931	$	—
Contingent consideration	$	(88,522)	$	—	$	—	$	(88,522)


	Fair Value Measurement at December 31, 2019 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	$	(39,802)	$	—	$	(39,802)	$	—
Restricted cash and investments	$	147,318	$	—	$	147,318	$	—
Contingent consideration	$	(69,484)	$	—	$	—	$	(69,484)

Table of Contents

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 table summarizes the changes in the fair value for Level 3 liabilities related to contingent consideration for the nine months ended September 30, 2020 and 2019:


	Nine Months Ended September 30,
	2020		2019
Beginning balance	$	69,484	$	54,615
Contingent consideration recorded at acquisition date		3,677		1,003
Payment of contingent consideration recorded at acquisition date		(2,812)		(1,621)
Adjustments to contingent consideration		16,852		1,466
Interest accretion expense		1,422		1,383
Foreign currency translation adjustment		(101)		108
Ending balance	$	88,522	$	56,954

See Note 5 regarding non-recurring fair value measurements.

17.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, 2020 and 2019 are as follows:


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


	Three Months Ended September 30, 2019
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	(1,974)	$	523	$	(1,451)
Changes in fair value of interest rate swaps		(15,482)		4,103		(11,379)
Foreign currency translation adjustment		(24,911)		—		(24,911)
	$	(42,367)	$	4,626	$	(37,741)


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


	Nine Months Ended September 30, 2019
	Gross		Tax Effect		Net of Tax
Interest rate swap amounts reclassified into interest expense	$	(6,918)	$	1,833	$	(5,085)
Changes in fair value of interest rate swaps		(56,818)		15,057		(41,761)
Foreign currency translation adjustment		60,404		—		60,404
	$	(3,332)	$	16,890	$	13,558

Table of Contents

WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

A rollforward of the amounts included in AOCIL, net of taxes, for the nine months ended September 30, 2020 and 2019, is as follows:


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


			Foreign		Accumulated
			Currency		Other
	Interest		Translation		Comprehensive
	Rate Swaps		Adjustment		Income (Loss)
Balance at December 31, 2018	$	8,892	$	(83,678)	$	(74,786)
Amounts reclassified into earnings		(5,085)		—		(5,085)
Changes in fair value		(41,761)		—		(41,761)
Foreign currency translation adjustment		—		60,404		60,404
Balance at September 30, 2019	$	(37,954)	$	(23,274)	$	(61,228)

See Note 13 for further discussion on the Company’s derivative instruments.

18.SHAREHOLDERS’ EQUITY

Share-Based Compensation

Employee Share Purchase Plan

On May 15, 2020, the Company’s shareholders approved the 2020 Employee Share Purchase Plan (the “ESPP”). Under the ESPP, qualified employees may elect to have payroll deductions withheld from their eligible compensation on each payroll date in amounts equal to or greater than 1 percent (1%) but not in excess of 10 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. As of September 30, 2020, NaN of the Company’s common shares have been purchased under the ESPP.

Table of Contents

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)

Restricted Share Units

A summary of activity related to restricted share units (“RSUs”) during the nine-month period ended September 30, ~~2019,~~2020, is presented below:


		Unvested Shares
Outstanding at December 31, ~~2018~~2019		~~987,563~~861,012
Granted		~~341,459~~326,045
Forfeited		~~(46,503)~~(33,181)
Vested and issued		~~(413,877)~~(375,368)
Outstanding at September 30, ~~2019~~2020		~~868,642~~778,508

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, ~~2019~~2020 was ~~$81.15.~~$101.80.

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, ~~2019~~2020 and ~~2018,~~2019, the Company had ~~247,999~~178,119 and ~~264,374~~247,999 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, ~~2019,~~2020, is presented below:


		Unvested Shares
Outstanding at December 31, ~~2018~~2019		~~532,086~~504,484
Granted		~~152,656~~211,987
Forfeited		(727)
Vested and issued		~~(180,258)~~(281,186)
Outstanding at September 30, ~~2019~~2020		~~504,484~~434,558

During the nine months ended September 30, ~~2019,~~2020, 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, ~~2021.~~2022. During the same period, the Company’s Compensation Committee also granted PSUs with a one-year performance-based metric that the Company must meet before those awards may be earned, with the awards then subject to time-based vesting for the remaining three years of their four-year vesting period. 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, ~~2019~~2020 was ~~$80.85.~~$87.19.

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Deferred Share Units

A summary of activity related to deferred share units (“DSUs”) during the nine-month period ended September 30, ~~2019,~~2020, is presented below:


		Vested Shares
Outstanding at December 31, ~~2018~~2019		~~17,176~~18,970
Granted		~~3,804~~
~~Cash settled~~		~~(2,010)~~2,616
Outstanding at September 30, ~~2019~~2020		~~18,970~~21,586

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, ~~2019~~2020 was ~~$83.80.~~$103.81.

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, ~~2019,~~2020, is presented below:


Outstanding at December 31, ~~2018~~2019		~~122,259~~73,884
Cash settled		~~(46,023)~~
~~Forfeited~~		~~(2,352)~~(7,330)
Outstanding at September 30, ~~2019~~2020		~~73,884~~

~~A summary of vesting activity related to Progressive Waste RSUs during the nine-month period ended September 30, 2019, is presented below:~~


~~Vested at December 31, 2018~~		~~120,153~~
~~Vested over remaining service period~~		~~2,106~~
~~Cash settled~~		~~(46,023)~~
~~Forfeited~~		~~(2,352)~~
~~Vested at September 30, 2019~~		~~73,884~~66,554

NaN RSUs under the Progressive Waste share-based compensation plans were granted subsequent to June 1, 2016. ~~During the nine months ended September 30, 2019, 964 Progressive Waste RSUs were forfeited and have been redistributed to the other remaining active participants.~~ All remaining RSUs were vested as of March 31, 2019.

~~Other Performance-Based Restricted Share Units~~

PSU grants outstanding under the Progressive Waste share-based compensation plans were continued by the Company following the Progressive Waste acquisition and allow for cash settlement only to employees upon vesting based on

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~~achieving target results. A summary of activity related to Progressive Waste PSUs during the nine-month period ended September 30, 2019, is presented below:~~


~~Outstanding at December 31, 2018~~		~~22,791~~
~~Cash settled, net of notional dividend~~		~~(22,791)~~
~~Outstanding at September 30, 2019~~		—

~~NaN PSUs under the Progressive Waste share-based compensation plans were granted subsequent to June 1, 2016. All outstanding PSUs were vested as of December 31, 2018.~~

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, ~~2019,~~2020, is presented below:


Outstanding at December 31, ~~2018~~2019		~~165,156~~126,161
Cash settled		~~(31,097)~~(74,461)
Outstanding at September 30, ~~2019~~2020		~~134,059~~51,700

NaN 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.

Normal Course Issuer Bid

On July ~~25, 2019,~~23, 2020, the Board of Directors of the Company approved, subject to receipt of regulatory approvals, the annual renewal of the Company’s normal course issuer bid (the “NCIB”) to purchase up to ~~13,184,474~~13,144,773 of the Company’s

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common shares during the period of August ~~8, 2019~~10, 2020 to August ~~7, 2020~~9, 2021 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 7, ~~2019.~~2020. The Company received ~~Toronto Stock Exchange (the “TSX”)~~TSX approval for its annual renewal of the NCIB on August ~~2, 2019.~~5, 2020. 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 ~~79,933~~112,638 common shares, which represents 25% of the average daily trading volume on the TSX of ~~319,734~~450,555 common shares for the period from February 1, ~~2019~~2020 to July 31, ~~2019.~~2020. 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.

~~Table~~For the nine months ended September 30, 2020, the Company repurchased 1,271,977 common shares pursuant to the NCIB at an aggregate cost of ~~Contents~~

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$105,654. During the nine months ended September 30, 2019, the Company did not repurchase any common shares pursuant to ~~its NCIB in effect during such period. For~~ the ~~nine months ended September 30, 2018, the Company repurchased 594,474 common shares pursuant to its NCIB in effect during such period at an aggregate cost of $42,040.~~NCIB. As of September 30, ~~2019,~~2020, the remaining maximum number of shares available for repurchase under the current NCIB was ~~13,184,474.~~11,912,497.

Cash Dividend

In October ~~2018,~~2019, the Company announced that its Board of Directors increased its regular quarterly cash dividend by ~~$0.02,~~$0.025, from ~~$0.14~~$0.16 to ~~$0.16~~$0.185 per Company common share. Cash dividends of ~~$126,348~~$145,921 and ~~$110,447~~$126,348 were paid during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

~~18.~~19.COMMITMENTS AND CONTINGENCIES

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

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, ~~2019,~~2020, 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.

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Lower Duwamish Waterway Superfund Site Allocation Process

In November 2012, the Company’s subsidiary, Northwest Container Services, Inc. (“NWCS”), was named by the U.S. Environmental Protection Agency, Region 10 (the “EPA”) as a potentially responsible party (“PRP”), along with more than 100 others, under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or the “Superfund” law) with respect to the Lower Duwamish Waterway Superfund Site (the “LDW Site”). Listed on the National Priorities List in 2001, the LDW Site is a five-mile stretch of the Duwamish River flowing into Elliott Bay in Seattle, Washington. A group of PRPs known as the Lower Duwamish Working Group (“LDWG”) and consisting of the City of Seattle, King County, the Port of Seattle, and Boeing Company conducted a Remedial Investigation/Feasibility Study for the LDW Site. On December 2, 2014, the EPA issued its Record of Decision (the “ROD”) describing the selected clean-up remedy, and therein estimated that clean-up costs (in present value dollars as of November 2014) would total approximately $342,000. However, it is possible that additional costs could be incurred based upon various factors. The EPA estimates that it will take seven years to implement the clean-up. The ROD also requires ten years of monitoring following the clean-up, and provides that if clean-up goals have not been met by the end of this period, then additional clean-up activities, at additional cost, may be required at that time. Implementation of the clean-up will not begin until after the ongoing Early Action Area (“EAA”) clean-ups have been completed. Typically, costs for monitoring may be in addition to those expended for the clean-up. While three of the EAA clean-ups have been completed to date, some work remains to be done on three other EAAs. Implementation of the clean-up also must await additional baseline sampling throughout the LDW Site and the preparation of a remedial design for performing the clean-up. On April 27, 2016, the LDWG entered into a third amendment of its Administrative Order on Consent with the EPA (the “AOC 3”) in which it

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agreed to perform the additional baseline sediment sampling and certain technical studies needed to prepare the actual remedial design. The LDWG and the EPA entered into a fourth amendment to the AOC in July 2018 primarily addressing development of a proposed remedy for the upper reach of the LDW Site, river mile 3 to river mile 5. At the April 24, 2019 stakeholders meeting the LDWG projected completion of the remedial design for the upper reach could be completed by August 2024. In late September 2020, the EPA informed attorneys for several PRPs that the work may be completed by late 2023 or early 2024.

On August 16, 2016, the EPA sent individual letters to each of the PRPs for the LDW Site, including NWCS, stating that it ~~expects~~expected to initiate negotiations with all PRPs in early 2018 relating to a Remedial Design/Remedial Action (“RD/RA”) Consent Decree. An RD/RA Consent Decree provides for the cleanup of the entire site and is often referred to as a “global settlement.” In August 2014, NWCS entered into an Alternative Dispute Resolution Memorandum of Agreement with several dozen other PRPs and a neutral allocator to conduct a confidential and non-binding allocation of certain past response costs allegedly incurred at the LDW Site as well as the anticipated future response costs associated with the clean-up. The pre-remedial design work under the AOC 3 ~~is now~~was not expected to conclude until the end of 2019, and in March 2017, the PRPs provided the EPA with notice that the allocation was not scheduled to conclude until mid-2019. Later extensions pushed the allocation conclusion date to early 2020 and the EPA was informed of that schedule. The allocation participants voted in June 2019 to extend the final allocation report deadline to July 2020. The EPA ~~has been~~was informed of that change. In January 2020, the allocator informed the parties that the preliminary allocation report will be delayed and in May 2020 he advised the parties that he hoped to issue the preliminary report by the end of June 2020, but the report has not yet been issued. The final allocation report will be issued only after the allocator considers comments of the parties on the preliminary report. In June 2017, attorneys for the EPA informed attorneys for several PRPs that the EPA expected to begin RD/RA negotiations in the late summer or early fall of 2018. Those negotiations ~~have~~did not ~~been scheduled and there is no recent indication from~~occur. In September 2020, the EPA ~~regarding when they will begin.~~informed attorneys for several PRPs that the EPA intends to initiate settlement negotiations in 2021, and the EPA was informed of the delay in the issuance of the preliminary allocation report. NWCS is defending itself vigorously in this confidential allocation process. At this point, the Company is not able to determine the likelihood of the allocation process being completed as intended by the participating PRPs, its specific allocation, or the likelihood of the parties then negotiating a global settlement with the EPA. Thus, NWCS cannot reasonably determine the likelihood of any outcome in this matter, including its potential liability.

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On February 11, 2016, NWCS received a letter (the “Letter”) from the United States Department of Commerce, National Oceanic and Atmospheric Administration (“NOAA”), describing certain investigatory activities conducted by the Elliott Bay Trustee Council (the “Council”). The Council consists of all of the natural resources trustees for the LDW Site as well as two nearby Superfund sites, the Harbor Island site and the Lockheed West site. The members of the Council include the United States, on behalf of the U.S. National Oceanic and Atmospheric Administration and the U.S. Department of the Interior, the Washington State Department of Ecology, and the Suquamish and Muckleshoot Indian Tribes (together, the “Trustees”). The Letter appears to allege that NWCS may be a potentially liable party that allegedly contributed to the release of hazardous substances that have injured natural resources at the LDW Site. Damages to natural resources are in addition to clean-up costs. The Letter, versions of which NWCS believes were sent to all or a group of the PRPs for the LDW Site, also notified its recipients of their opportunity to participate in the Trustees’ development of an Assessment Plan and the performance of a Natural Resources Damages Assessment (“NRDA”) in accordance with the Assessment Plan for both the LDW Site and the east and west waterways of the Harbor Island site. NWCS timely responded with correspondence to the NOAA Office of General Counsel, in which it declined the invitation at that time. NWCS does not know how other PRPs responded to the Letter, and has not received any further communication from NOAA or the Trustees. The Trustees have not responded to NWCS’ letter. The Trustees released their Assessment Plan in March 2019. The Assessment Plan does not set forth a timeline for implementation. At this point, the Company is not able to determine the likelihood or amount of an assessment of natural resource damages against NWCS in connection with this matter.

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Los Angeles County, California Landfill Expansion Litigation

Chiquita Canyon, LLC Lawsuit Against Los Angeles County

In October 2004, the Company’s subsidiary, Chiquita Canyon, LLC (“CCL”), then under prior ownership, filed an application (the “Application”) with the County of Los Angeles (the “County”) Department of Regional Planning (“DRP”) for a conditional use permit (the “CUP”) to authorize the continued operation and expansion of the Chiquita Canyon Landfill (the “Landfill”). The Landfill has operated since 1972, and as a regional landfill, accepted approximately 32 million tons of materials for disposal and beneficial use in ~~2016.~~2018. 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.

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On December 6, 2017, the County filed a demurrer to and motion to strike regarding portions of the Complaint, arguing that the Complaint iswas legally insufficient to proceed. ~~At an initial trial-setting~~After full briefing, the hearing on February 8, 2018, the Superior Court suggested that the Complaint should be amended to separate the claims seeking a writ of mandamus against the County. CCL filed its First Amended Complaint on March 23, 2018. The County filed its demurrer and motion to strike challenging portions of the First Amended Complaint on April 25, 2018. CCL filed its combined opposition to the demurrer and motion to strike ~~on July 3, 2018. The County filed a combined reply brief on July 10, 2018. The hearing on the demurrer~~regarding CCL’s First Amended Complaint took place on July 17, 2018. The Superior Court sustained the demurrer and granted the motion to strike. The effect of the Court’s rulings was to bar CCL from proceeding with its challenges to 14 of the 29 CUP conditions at issue in the litigation, including 13 operational conditions and CCL’s challenge to the $11,600 B&T Fee discussed below. ~~The Superior Court set a trial date of June 18, 2019 for the remaining mandamus claims.~~ The Superior Court granted CCL leave to amend its Complaint if CCL chose to pay the $11,600 B&T fee to allow a challenge to the B&T fee to proceed under the Mitigation Fee Act. CCL paid the $11,600 B&T fee on August 10, 2018 and filed its Second Amended Complaint on August 16, 2018, reflecting that the B&T fee had been paid under protest and allowing the challenges to the B&T fee to go forward.

On September 14, 2018, CCL sought discretionary review by the California Court of Appeal of the Superior Court’s July 17, 2018 decision barring the challenge to 13 operational conditions. ~~On October 5, 2018, the~~The Court of Appeal ~~decided~~agreed to hear CCL’s appeal and ~~after full briefing by the parties, heard oral argument~~ on ~~January 9, 2019.~~

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On February 25, 2019, the Court of Appeal issued its decision, reversing the trial court orders that granted the County’s motion to strike and demurrer. The Court of Appeal ruled that CCL had adequately pled a claim that the County was equitably estopped from contending that CCL had forfeited its rights to challenge the legality of the 13 operational conditions. CCL’s Complaint sets forth that CCL relied on representations made by the County in 2017 that CCL could reserve its legal rights to challenge the CUP in a separate reservation of rights letter rather than the affidavit of acceptance of the CUP that the County compelled Chiquita to file.

~~At a trial setting conference on May 28, 2019, the equitable estoppel issues in this case were discussed and the Superior Court continued the June 18, 2019 trial date to April 23, 2020.~~ The Superior Court ~~also~~ set an evidentiary hearing on the equitable estoppel issues for November 12, 2019. Discovery occurred on these issues in July through September 2019. Following full briefing and oral argument on November 12, 2019, the Superior Court issued its decision on November 13, 2019, finding that the County was estopped from contending that CCL has waived its rights to challenge the legality of the 13 operational conditions. The County sought interlocutory review of the Superior Court’s decision in the Court of Appeal, which denied the County’s petition on February 7, 2020.

Following full briefing and oral argument on June 22, 2020 on six of CCL’s causes of action, the Superior Court issued its decision on July 2, 2020, granting CCL’s petition for writ of mandate in part and denying it in part. CCL prevailed with respect to 12 of the challenged conditions, many of which imposed new fees and exactions on the Landfill. Before entry of final judgment, the Superior Court will hear CCL’s remaining causes of action. A cause of action for a taking under the Fifth Amendment of the U.S. Constitution is the subject of a pending motion for leave to amend the Complaint. CCL is awaiting assignment to an individual calendar court for its remaining causes of action. Once the Superior Court has entered final judgment, CCL and the County will be permitted to appeal any adverse ruling to the California Court of Appeal. After entry of final judgment and resolution of any appeals, the Superior Court will issue a writ directing the County Board of Supervisors to set aside its decision on the permit with respect to 12 of the challenged conditions. The Board will be allowed to make additional findings to support four of those conditions and reconsider its permit decision in light of the Superior Court’s writ. CCL will continue to vigorously prosecute the lawsuit. However, at this point, the Company is not able to determine the likelihood of any outcome in this matter.

CEQA Lawsuit Against Los Angeles County Challenging Environmental Review for Landfill Expansion

A separate lawsuit involving CCL and the Landfill was filed on August 24, 2017 by community activists alleging that the environmental review underlying the CUP was inadequate under state law. The Val Verde Civic Association, Citizens for Chiquita Canyon Landfill Compliance, and the Santa Clarita Organization for Planning and the Environment filed a petition for writ of mandate in the Superior Court of California, County of Los Angeles against the County, naming CCL as the real party in interest. The lawsuit seeks to overturn the County’s approval of the CUP for the expansion of the Landfill and the certification of the final Environmental Impact Report, arguing that the report violates the California Environmental Quality Act. Pursuant to Condition No. 6 of the CUP, which requires CCL to defend, indemnify, and hold harmless the County, its agents, officers, and employees from any claim or proceeding against the County brought by any

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third party to attack, set aside, void, or annul the CUP approval, CCL ~~has~~ agreed to reimburse the County for its legal costs associated with defense of the lawsuit. As the real party in interest, CCL has a right to notice and an opportunity to be heard in opposition to the petition for writ of mandate. ~~The petitioners~~Initial briefs were filed ~~their Opening Brief with the court on September 27, 2018. CCL filed its Opposition Brief with the court on November 28,~~in 2018 and ~~the petitioners filed their Reply Brief on December 20, 2018. A trial date had been scheduled for February 8, 2019, but on February 6, 2019, the court reassigned the case to~~ a ~~different judge and vacated the trial date. A new~~ trial date was ~~scheduled for~~set in February 2019, which was later rescheduled and held in August ~~23,~~ 2019. Just prior to the August 23, 2019 trial, the court issued a tentative ruling that upheld most of the environmental analysis, with one exception relating to mitigation for odor impacts, and also asking the parties for further information relating to air quality monitoring. At the conclusion of oral argument on August 23, 2019, the court asked the parties to return on September 13, 2019 for further oral argument on the odor mitigation issue. The court did not issue a tentative ruling at the September 13, 2019 hearing, additional oral argument was had, and the court took the matter under submission. The court issued a final ruling on October 10, 2019 and a final judgment on December 4, 2019, denying the writ petition in ~~full~~full. One petitioner, Santa Clarita Organization for Planning and ~~directing~~the Environment, appealed the judgment. All interested parties filed their briefs by July 1, 2020 and the County ~~to prepare a proposed judgment, serve it on the opposing parties for approval as to form, and lodge it with the court. Once the court issues a notice of entry of judgment, the petitioners may~~did not file an ~~appeal from~~opposition brief. No amicus or “friend of the ~~judgment within 60 days or~~court” briefs were filed, so the ~~judgment will be final.~~case was fully briefed on July 1, 2020. The court has set oral argument for November 18, 2020.

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.

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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, dated July 10, 2018, was received by CCL on July 12, 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 June 22, 2018, Chiquita filed a Motion for Stay seeking to halt enforcement of the B&T fee and penalty and the accrual of any further penalties pending the resolution of the Petition for Writ of Mandamus. The motion was heard and denied by the Court on July 17, 2018. As explained above, the Court granted CCL leave to pay the $11,600 B&T fee and to amend its Complaint to reflect the payment under protest, allowing the challenge to the B&T fee to proceed. CCL paid the B&T fee on August 10, 2018, and also paid on that date the administrative penalty of $83 and a noncompliance fee of $0.75. As directed by the Court, CCL amended its Complaint in a Second Amended Complaint filed in the CUP action on August 16, 2018. The Court indicated that the NOV case would likely be tried in conjunction with the CUP case, set for June 18, 2019, and that the cases would be coordinated. At the May ~~29,~~28, 2019 trial setting conference referenced above where the trial of the CUP case was set for April 23, 2020, the Superior Court set the trial for the B&T fee/NOV case for June 25, 2020. However, following the rescheduling of the trial date for the CUP case, the Superior Court agreed to continue the trial date for the B&T fee/NOV case to October 20, 2020. At an August 20, 2020 status conference, the Superior Court again continued the trial date for the B&T fee/NOV case to January 14, 2021. The Superior Court’s July 2, 2020 decision in the CUP case upheld the B&T fee and addressed two other conditions that were also the subject of the NOV, which may impact the scope of the B&T fee/NOV case. CCL will continue to vigorously prosecute the lawsuit. However, at this point, the Company is not able to determine the likelihood of any outcome in this matter.

Town of Colonie, New York Landfill Expansion Litigation

On April 16, 2014, the Town of Colonie (the “Town”) filed an application (the “Application”) with the New York State Department of Environmental Conservation (“DEC”) to modify the Town’s then-current Solid Waste Management Facility Permit and for other related permits to authorize the development and operation of Area 7 of the Town of Colonie Landfill (the “Landfill”), which is located in Albany County, New York. DEC issued the requested permits on April 5,

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

2018 (the “Permits”). The Company’s subsidiary, Capital Region Landfills, Inc. (“CRL”), has been the sole operator of the Landfill since September 2011 pursuant to an operating agreement between CRL and the Town.

On May 7, 2018, the Town of Halfmoon, New York, and five of its residents, commenced an Article 78 special proceeding in the Supreme Court of the State of New York, Saratoga County, against DEC, the Town, CRL, and the Company (the “Halfmoon Proceeding”). On that same date, the Town of Waterford, New York, and eleven of its residents, also commenced an Article 78 special proceeding in the Supreme Court of the State of New York, Saratoga County, against the same respondents (the “Waterford Proceeding”). On June 4, 2018, the Town and CRL filed Verified Answers, including motions to dismiss the petitions, and the Company separately moved to dismiss the petitions. The Waterford Petitioners stipulated to removing the Company as a respondent when they filed an Amended Verified Petition on June 15, 2018. The Halfmoon Petitioners served an Amended Verified Petition on July 5, 2018, retaining all originally named parties, including the Company.

The Petitioners alleged that, in granting the Permits, DEC failed to comply with the procedural and substantive requirements of New York’s Environmental Conservation Law and State Environmental Quality Review Act, and their implementing regulations. The Petitioners asked the court to: annul the Permits and invalidate DEC’s Findings Statement, enjoin the Town and CRL from taking any action authorized by the Permits, require an issues conference and possibly an adjudicatory hearing before DEC can re-consider the Town’s permit application; remand all regulatory issues to a DEC Administrative Law Judge; and award costs and disbursements. The Waterford Petitioners also requested reasonable attorneys’ fees.

On July 13, 2018, the Honorable Ann C. Crowell granted a venue change motion filed by DEC, and ordered that the Halfmoon Proceeding and the Waterford Proceeding be transferred to the Supreme Court, Albany County. CRL’s opposition submissions, including its responsive pleadings, Memorandum of Law, and supporting Affidavits, were filed

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~~WASTE CONNECTIONS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

and served on or before July 25, 2018. On August 28, 2018, the Towns of Waterford and Halfmoon filed a motion seeking an order preliminarily enjoining during the pendency of the proceedings all activities relating to the expansion of the Landfill which are authorized by the Permits. On September 18, 2018, CRL and the Company filed and served Memoranda of Law in opposition to the preliminary injunction motion, with supporting Affidavits, and, on September 24, 2018, the Towns of Waterford and Halfmoon filed a Reply Memorandum of Law in further support of their injunctive motion. The Honorable Debra J. Young denied the Petitioners’ motion for preliminary injunction on November 30, 2018.

On January 23, 2019, the court held that the Petitioners lacked standing to maintain the proceedings and dismissed both the Waterford and Halfmoon Amended Verified Petitions in their entirety. In late February and early March 2019, the Waterford and Halfmoon Petitioners filed notices of appeal to the Appellate Division, Third Department, of both Judge Crowell’s decision to transfer the proceedings to Albany County and of Judge Young’s dismissal of the Amended Verified Petitions.

On March 7, 2019, the Waterford Petitioners moved, with consent of the Halfmoon Petitioners, to consolidate the appeals. Respondents opposed the consolidation motion to the extent that it may result in inequitable briefing under the Appellate Division rules. On April 4, 2019, the Appellate Division, Third Department granted the consolidation motion “to the extent that the appeals shall be heard together and may be perfected upon a joint record on appeal.”

On April 26, 2019, the Waterford Petitioners filed a motion with the Appellate Division, Third Department, seeking an order preliminarily enjoining construction activities or the acceptance of waste at the Landfill. The Company, CRL, and the Town of Colonie opposed the motion, which was summarily denied by the Third Department, Appellate Division on June 20, 2019.

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WASTE CONNECTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

On June 25, 2019, the Waterford Petitioners filed their appellate brief and the joint record on appeal. The Halfmoon Petitioners filed their appellate brief on August 21, 2019. ~~All respondents’ opposition briefs are currently due by~~The Company, CRL, and the Town filed their joint appellee brief and supplemental appendix on November 20, ~~2019,~~2019. On February 24, 2020, after receiving multiple filing extensions, DEC filed its appellee brief and ~~the~~supplemental appendix. The Waterford and Halfmoon ~~Petitioners’~~Petitioners filed their reply briefs on March 10, 2020 and March 13, 2020, respectively.

The Appellate Division, Third Department originally scheduled the appeals to be argued during the court’s May 2020 term. The appeals were adjourned as a result of the COVID-19 pandemic. On September 14, 2020, the Appellate Division, Third Department held virtual oral argument in the appeals. The Company anticipates that the Appellate Division, Third Department will ~~be due ten days from service~~issue a decision in the appeals by the end of ~~same.~~2020 or shortly thereafter.

~~19.~~20.SUBSEQUENT ~~EVENTS~~EVENT

On October 28, ~~2019,~~2020, the Company announced that its Board of Directors increased its regular quarterly cash dividend by ~~$0.025,~~$0.02, from ~~$0.16~~$0.185 to ~~$0.185~~$0.205 per Company common share, and then declared a regular quarterly cash dividend of ~~$0.185~~$0.205 per Company common share. The dividend will be paid on November ~~26, 2019,~~25, 2020, to shareholders of record on the close of business on November ~~12, 2019.~~10, 2020.

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

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q are forward-looking in nature, including statements related to our ability and intent to draw on our Credit Agreement or raise additional capital, the responsibilities of our subsidiaries with regard to possible cleanup obligations imposed by the EPA or other regulatory authorities, the impact of global ~~regional and local~~ economic conditions, including the price of crude oil, on our volume, business and results of ~~operations,~~operations; the impact of the COVID-19 pandemic on our business, financial condition and results of operations; our ability to generate internal growth or expand permitted capacity at landfills we own or operate; our ability to grow through acquisitions and our expectations with respect to the impact of acquisitions on our expected revenues and expenses following the integration of such businesses; the competitiveness of our industry and how such competition may affect our operating results; the possibility of losing contracts through competitive bidding, early termination or governmental action; the effects of financial difficulties of some of our customers, including governmental entities, affecting their credit risk; our ability to provide adequate cash to fund our operating activities; our ability to draw from our credit facility or raise additional capital; our ability to generate free cash flow and reduce our leverage; the impact on our tax positions of changes in U.S. tax law and future changes in tax laws in the jurisdictions in which we operate; the effects of landfill special waste projects on volume results; the impact that price increases may have on our business and operating results; demand for recyclable commodities and recyclable commodity pricing; the effects of seasonality on our business and results of ~~operations,~~operations; our ability to ~~address any impacts of inflation~~obtain additional exclusive arrangements; increasing alternatives to landfill disposal; increases in labor and pension plan costs or the impact that labor union activity may have on our ~~business, demand for recyclable commodities (including landfill gas reclamation)~~operating results; operational and ~~recyclable commodity pricing,~~safety risks, including the risk of personal injury to employees and others; our expectations with respect to the purchase of fuel and fuel prices; our expectations with respect to capital expenditures, our expectations with respect to our ability to obtain expansions of permitted landfill capacity and to provide collection services under exclusive arrangements, our expectations with respect to our normal course issuer bid (our share repurchase program) and future dividend payments,expenditures; our expectations with respect to the outcomes of our legal ~~proceedings, our expectations with respect to~~proceedings; the ~~potential financial~~ impairment of our ~~reporting units caused by dispositions~~goodwill; insurance costs; disruptions to or breaches of ~~certain operating units,~~ our ~~expectations about new accounting standards, our expectations about potential non-performance by counterparties to our hedge agreements~~information systems and ~~our expectations with respect~~other cybersecurity threats; and environmental, health and safety laws and regulations, including changes to the ~~anticipated benefits~~regulation of ~~any acquisitions.~~landfills, solid waste disposal, E&P waste disposal, or hydraulic fracturing. 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, ~~the following:~~

●

~~Our results are vulnerable to economic conditions;~~

●

Our industry is highly competitive and includes companies with lower prices, return expectations or other advantages, and governmental service providers, which could adversely affect our ability to compete and our operating results;

●

~~Competition for acquisition candidates, consolidation within the waste industry and economic and market conditions may limit our ability to grow through acquisitions;~~

●

~~Price increases may not be adequate to offset the impact of increased costs, or may cause us to lose customers;~~

●

~~We may lose contracts through competitive bidding, early termination or governmental action;~~

●

~~Our financial and operating performance may be affected by the inability to renew landfill operating permits, obtain new landfills and expand existing ones;~~

●

~~Lower crude oil prices may adversely affect the level of exploration, development and production activity of E&P companies and the demand for our E&P waste services;~~

●

~~Increases in labor costs and limitations on labor availability could impact our financial results;~~

●

~~Increases in capital expenditures could impact our financial results;~~

●

~~A portion of our growth and future financial performance depends on our ability to integrate acquired businesses, and the success of our acquisitions;~~

●

~~The seasonal nature of our business and “event-driven” waste projects cause our results to fluctuate;~~

●

~~Our results will be affected by changes in recycled commodity prices and quantities;~~

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●

~~Our results will be affected by changes in the value of renewable fuels;~~

●

~~Increases in the price of diesel or compressed natural gas fuel may adversely affect our collection business and reduce our operating margins;~~

●

~~Our financial results are based upon estimates and assumptions that may differ from actual results;~~

●

~~Our accruals for our landfill site closure and post-closure costs may be inadequate;~~

●

~~Increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings;~~

●

We may be subject in the normal course of business to judicial, administrative or other third-party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity;

●

~~Pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements;~~

●

~~Our financial results could be adversely affected by impairments of goodwill, indefinite-lived intangibles or property and equipment;~~

●

~~Income and other taxes may be uncertain;~~

●

~~Future changes to U.S., Canadian and foreign income and other tax laws could materially adversely affect us;~~

●

Each business that we acquire or have acquired may have liabilities or risks that we fail or are unable to discover, or that become more adverse to our business than we anticipated at the time of acquisition;

●

~~Our indebtedness could adversely affect our financial condition and limit our financial flexibility;~~

●

~~We may be unable to obtain performance or surety bonds, letters of credit or other financial assurances or to maintain adequate insurance coverage;~~

●

~~Our operations in Canada expose us to exchange rate fluctuations that could adversely affect our financial performance and our reported results of operations;~~

●

~~Alternatives to landfill disposal may cause our revenues and operating results to decline;~~

●

~~Labor union activity could divert management attention and adversely affect our operating results;~~

●

We could face significant withdrawal liability if we withdraw from participation in one or more multiemployer pension plans in which we participate and the accrued pension benefits are not fully funded;

●

We rely on computer systems to run our business and disruptions or privacy breaches in these systems could impact our ability to service our customers and adversely affect our financial results, damage our reputation, and expose us to litigation risk;

●

~~Extensive and evolving environmental, health and safety laws and regulations may restrict our operations and growth and increase our costs;~~

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●

~~Our business is subject to operational and safety risks, including the risk of personal injury to employees and others;~~

●

~~Future changes in laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results;~~

●

~~Extensive regulations that govern the design, operation, expansion and closure of landfills may restrict our landfill operations or increase our costs of operating landfills;~~

●

~~Our E&P waste business could be adversely affected by changes in laws regulating E&P waste;~~

●

~~Liabilities for environmental damage may adversely affect our financial condition, business and earnings;~~

●

~~We depend significantly on the services of the members of our senior and regional management team, and the departure of any of those persons could cause our operating results to suffer;~~

●

~~Our decentralized decision-making structure could allow local managers to make decisions that may adversely affect our operating results; and~~

●

~~If we are not able to develop and protect intellectual property, or if a competitor develops or obtains exclusiverights to a breakthrough technology, our financial results may suffer.~~

~~These risks~~those listed above and ~~uncertainties, as well as others, are discussed in greater detail~~elsewhere in this ~~Quarterly Report on Form 10-Q~~report and in our other filings with the ~~U.S. Securities and Exchange Commission, or~~ SEC, ~~made by the Company, including its most recent Annual Report on Form 10-K,~~ as well as in ~~the Company’s~~our filings during the year with the Canadian Securities Administrators. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may ~~change, except where we are expressly required to do so by law.~~change.

OVERVIEW OF OUR BUSINESS

We are an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, along with recycling and ~~recycling services~~resource recovery, in mostly exclusive and secondary markets across 42 states in the U.S. and six provinces in Canada. ~~Through our R360 Environmental Solutions subsidiary, we are~~Waste Connections also ~~a leading provider of~~provides non-hazardous ~~exploration and production, or E&P,~~oilfield waste treatment, recovery and disposal services in several ofbasins across the ~~most active natural resource producing areas in the~~ U.S. ~~We also provide~~, as well as intermodal services for the ~~rail haul~~ movement of cargo and solid waste containers in the Pacific ~~Northwest through a network of intermodal facilities.~~Northwest.

We generally seek to avoid highly competitive, large urban markets and instead target markets where we can attain high market share either through exclusive contracts, vertical integration or asset positioning. In markets where waste collection services are provided under exclusive arrangements, or where waste disposal is municipally owned or funded or available at multiple municipal sources, we believe that controlling the waste stream by providing collection services under exclusive arrangements is often more important to our growth and profitability than owning or operating landfills. We also target niche markets, like E&P waste treatment and disposal services.

As of September 30, ~~2019,~~2020, we served residential, commercial, industrial and E&P customers in 42 states in the U.S. and six provinces in Canada: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon,

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Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming, and the provinces of Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan.

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The solid waste industry is local and highly competitive in nature, requiring substantial labor and capital resources. The participants 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 E&P waste services industry is regional in nature and is also highly fragmented, with acquisition opportunities available in several active natural resource basins. Competition for E&P waste comes primarily from smaller regional companies that utilize a variety of disposal methods and generally serve specific geographic markets, and other solid waste companies. In addition, customers in many markets have the option of using internal disposal methods or outsourcing to another third-party disposal company. The principal competitive factors in this business include: gaining customer approval of treatment and disposal facilities; location of facilities in relation to customer activity; reputation; reliability of services; track record of environmental compliance; ability to accept multiple waste types at a single facility; and price.

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. IfMacroeconomic and geopolitical conditions, including a significant decline in oil prices driven by both surplus production and supply, as well as the ~~prices~~decrease in demand caused by factors including the COVID-19 pandemic, have resulted in decreased levels of ~~crude~~ oil and natural gas ~~substantially decline, it could lead~~exploration and production activity and a corresponding decrease in demand for our E&P waste services. Through June 30, 2020, we maintained a separate E&P segment which was combined with our Southern segment on July 1, 2020. During the nine months ended September 30, 2020, our total E&P revenue declined 36%, compared to the prior year period, on rig count declines of 72% in certain basins. The most impacted basins included the Williston Basin in North Dakota, the Eagle Ford Basin in Texas and the Powder River Basin in Wyoming, all of which had relatively high costs associated with drilling, making them less attractive than other basins, including the Permian Basin in Texas and New Mexico. Additionally, across the industry there 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 ~~level of production~~basins where we operate. Based on these events and the outlook for future drilling activity and resulting demand for our E&P waste services ~~which could result in~~not showing significant improvement, we concluded that the ~~recognition~~carrying value of ~~impairment charges on our intangible assets and~~ property and equipment at four E&P landfills exceeded their estimated fair value, resulting in an impairment charge of $417.4 million being recorded during the nine months ended September 30, 2020. See Note 5 to our Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for a further discussion of this impairment charge.

THE IMPACT OF COVID-19 ON OUR RESULTS OF OPERATIONS

During the first quarter of 2020, COVID-19 emerged across North America. The World Health Organization declared COVID-19 a global pandemic on March 11, 2020.

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The COVID-19 pandemic has had adverse impacts on our business since March 2020, when we experienced decreasing revenues associated with ~~our~~declines primarily in commercial collection, transfer station and landfill volumes as a result of COVID-19 economic disruptions. In addition, and to a lesser extent, solid waste roll off revenue was impacted in some markets, and year-over-year reductions in E&P ~~operations.~~revenue, resulting primarily from the drop in the value of crude oil, were driven by both surplus production and supply, as well as the decrease in demand caused by factors including the COVID-19 pandemic. In late February we formed a task force to commence preparedness in the event the scope of the COVID-19 outbreak expanded. Protecting the health, safety and welfare of our employees was and remains our first priority, which led to our introduction of various health and safety protocols in early March, including the distribution of safety and preparedness updates, revised policies on employee time off, leaves of absence and short-term disability, modifications to our operations to minimize community spread of COVID-19, and enhanced resources to enable remote working, communications and digital connectivity to help non-frontline employees work from home more efficiently.

In recognition of the Company’s status as an essential services provider, and to reduce employee concerns regarding income, healthcare and family obligations, we implemented a supplemental pay bonus for frontline employees representing 80% of our workforce, emergency wages for employees out of work due to COVID-19 and extended benefits coverage in markets where reductions in customer activity have impacted employee hours. In addition, we expanded our Employee Relief Fund and initiated the Waste Connections Scholarship Program to help employee children achieve their vocational, technical and university education goals. These actions increased our cost of operations nominally in the first quarter and further impacted the second and third quarters of 2020 as discussed below. We also implemented a number of measures to reduce our operating costs and preserve cash, which included hiring limitations, wage freezes for all managers and region and corporate personnel, restrictions on travel, group meetings and other discretionary spending, and the suspension of the Company’s 401(k) match effective June 1, 2020. In addition, we began and intend to continue deferring qualified U.S. payroll and other tax payments as permitted by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which the U.S. government enacted on March 27, 2020. Through the third quarter of 2020, we deferred $29.4 million in payroll taxes in conjunction with the CARES Act of which 50% are due by December 31, 2021 and 50% are due by December 31, 2022. To the extent available, we may utilize similar programs being offered by the federal and provincial governments in Canada. With respect to our liquidity and capital resources, as of September 30, 2020, we had $859.1 million of cash and equivalents and $1.258 billion of remaining borrowing capacity under our Credit Agreement, which matures in March 2023.

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

Through the second quarter of 2020, about 53% of solid waste commercial customers and 42% of associated revenue in competitive markets we track that had suspended or reduced service due to COVID-19, had since reached out for either a resumption of service or an increase in frequency. Volumes in all of our solid waste regions exceeded our initial expectations, resulting in solid waste revenue down 5.3% on a same store basis in the quarter, about 0.7 percentage points better than the expectations we provided in May. Moreover, excluding the most impacted markets in the Northeast and Canada, where closures were widespread and volumes were most impacted, solid waste revenues were down only 1.3% year over year on a same store basis.

During the third quarter of 2020, our business continued to be impacted by COVID-19, albeit to a lesser extent than in the prior period in many markets. Revenue in solid waste commercial collection and solid waste transfer and disposal continued to reflect the extent to which the slowdown in activity associated with shelter-in-place or other closure restrictions or requirements in effect since the first quarter of 2020 have persisted.

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The impacts to solid waste activity from COVID-19 that we experienced during the third quarter reflected the pace of reopening activity and varied by geography, the size and customer mix in each market. In some markets, impacts began to abate in the second quarter, when a portion of the lost volumes returned; in other cases, the impacts of the pandemic abated more during the third quarter, when reopenings resulted in increased service requirements by commercial customers and higher landfill volumes and roll off activity. In markets where reopenings continue to be delayed or where additional restrictions have been imposed, the improvements were less pronounced.

Through the third quarter, about 68% of solid waste commercial customers and 57% of associated revenue in competitive markets we track that had suspended or reduced service due to COVID-19, had since reached out for either a resumption of service or an increase in frequency, an increase from 53% and 42%, respectively, through the second quarter. As a result, solid waste collection, transfer and disposal revenue was down 2.0% year over year on a same store basis in the third quarter, but was an improvement of 3.3 percentage points from second quarter 2020 revenue, which was down 5.3% year over year.

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, its severity, the actions to contain the novel coronavirus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

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, ~~2019~~2020 AND ~~2018~~2019

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,


2019

2018


2019

2018


Revenues

$
1,412,444

100.0
%
$
1,281,110

100.0
%

$
4,026,719

100.0
%
$
3,661,209

100.0
%

Cost of operations

835,098

59.1

736,122

57.5

2,384,607

59.2

2,120,947

57.9

Selling, general and administrative

137,883

9.8

139,014

10.8

410,132

10.2

398,582

10.9

Depreciation

157,994

11.2

148,232

11.6

461,616

11.5

423,866

11.6

Amortization of intangibles

31,934

2.2

26,871

2.1

93,821

2.3

79,444

2.2

Impairments and other operating items

12,935

0.9

(1,998)

(0.2)

32,949

0.8

6,106

0.1

Operating income

236,600

16.8

232,869

18.2

643,594

16.0

632,264

17.3

Interest expense

(36,780)

(2.6)

(32,078)

(2.5)

(111,313)

(2.8)

(96,874)

(2.7)

Interest income

2,056

0.1

1,467

0.1

7,186

0.2

3,677

0.1

Other income (expense), net

(19)

(0.0)

600

0.0

4,562

0.1

2,053

0.1

Income tax provision

(42,783)

(3.0)

(52,092)

(4.0)

(110,539)

(2.7)

(126,509)

(3.5)

Net income

159,074

11.3

150,766

11.8

433,490

10.8

414,611

11.3

Net loss (income) attributable to noncontrolling interests

35

0.0

77

0.0

89

0.0

(218)

(0.0)

Net income attributable to Waste Connections

$
159,109

11.3
%
$
150,843

11.8
%

$
433,579

10.8
%
$
414,393

11.3
%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
Revenues	$	1,389,552	100.0	%	$	1,412,444	100.0	%	$	4,047,739	100.0	%	$	4,026,719	100.0	%
Cost of operations		828,822	59.6			835,098	59.1			2,429,957	60.0			2,384,607	59.2
Selling, general and administrative		136,003	9.8			137,883	9.8			404,213	10.0			410,132	10.2
Depreciation		157,590	11.3			157,994	11.2			459,641	11.4			461,616	11.5
Amortization of intangibles		32,653	2.4			31,934	2.3			96,062	2.4			93,821	2.3
Impairments and other operating items		3,805	0.3			12,935	0.9			442,582	10.9			32,949	0.8
Operating income		230,679	16.6			236,600	16.7			215,284	5.3			643,594	16.0

Interest expense		(40,636)	(2.9)			(36,780)	(2.6)			(119,562)	(2.9)			(111,313)	(2.8)
Interest income		903	0.1			2,056	0.1			4,396	0.1			7,186	0.2
Other income (expense), net		702	0.0			(19)	(0.0)			(3,046)	(0.1)			4,562	0.1
Income tax provision		(33,657)	(2.4)			(42,783)	(3.0)			(23,654)	(0.6)			(110,539)	(2.7)
Net income		157,991	11.4			159,074	11.2			73,418	1.8			433,490	10.8
Net loss attributable to noncontrolling interests		58	0.0			35	0.0			594	0.0			89	0.0
Net income attributable to Waste Connections	$	158,049	11.4	%	$	159,109	11.2	%	$	74,012	1.8	%	$	433,579	10.8	%

Revenues. Total revenues ~~increased $131.3~~decreased $22.8 million, or ~~10.3%~~1.6%, to $1.390 billion for the three months ended September 30, 2020, from $1.412 billion for the three months ended September 30, ~~2019, from $1.281~~2019. Total revenues increased $21.0 million, or 0.5%, to $4.048 billion for the ~~three~~nine months ended September 30, ~~2018. Total revenues increased $365.5 million, or 10.0%, to~~2020, from $4.027 billion for the nine months ended September 30, ~~2019, from $3.661 billion for the nine months ended September 30, 2018.~~2019.

During the three months ended September 30, ~~2019,~~2020, incremental revenue from acquisitions closed during, or subsequent to, the three months ended September 30, ~~2018,~~2019, increased revenues by approximately ~~$82.8~~$47.2 million. During the nine months ended September 30, ~~2019,~~2020, incremental revenue from acquisitions closed during, or subsequent to, the nine months ended September 30, ~~2018,~~2019, increased revenues by approximately ~~$242.2~~$156.3 million.

Operations that were divested subsequent to September 30, ~~2018~~2019 decreased revenues by approximately ~~$5.8~~$2.9 million and ~~$18.8~~$11.7 million, respectively, for the three and nine months ended September 30, ~~2019.~~2020.

During the three months ended September 30, ~~2019,~~2020, the net increase in prices charged to our customers at our existing operations was ~~$61.1~~$49.1 million, consisting of ~~$60.1~~$53.8 million of core price increases, ~~and $1.0 million from surcharges.~~partially offset by a decrease in surcharges of $4.7 million. During the nine months ended September 30, ~~2019,~~2020, the net increase in prices charged to our customers at our existing operations was ~~$174.5~~$168.0 million, consisting of ~~$168.4~~$173.9 million of core price increases, ~~and $6.1 million from surcharges.~~partially offset by a decrease in surcharges of $5.9 million.

During the three and nine months ended September 30, ~~2019,~~2020, volume ~~increases~~decreases in our existing business ~~increased~~decreased solid waste revenues by ~~$10.3~~$74.6 million and $199.8 million, respectively, due primarily to ~~increased collection~~the economic disruptions resulting from COVID-19 that began in March 2020 and landfill volumes in our Western segment and increased roll off and landfill special waste in our Central segment exceeding declines in transfer station volumes in our Eastern segment’s New York City market due to reduced inbound waste fromhave continued throughout the ~~New York Department~~third quarter of ~~Sanitation and reduced landfill municipal solid waste in our Eastern and Southern segments. During~~2020. The decreases during the nine months ended September 30, 2020 resulting from COVID-19 were partially offset by increased landfill special waste volumes in certain markets and the impact of one additional business day resulting from leap year.

E&P revenues at facilities owned during the three and nine months ended September 30, 2020 and 2019 decreased $42.8 million and $75.2 million, respectively. Decreases in the demand for crude oil as a result of economic disruptions from COVID-19 resulted in a drop in the value of crude oil, decreases in drilling and production activity levels and decreases in overall demand for our E&P waste services. Drilling and production activity was also adversely impacted by

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~~volume increases~~the drop in our existing business increased solid waste revenues by $7.0 million due primarily to increased collection and landfill volumes in our Western segment, increased landfill volumes in our Eastern segment and increased roll off collection and landfill special waste in our Central segment exceeding declines in transfer station volumes in our Eastern segment’s New York City market, reduced landfill municipal solid waste in our Eastern, Central and Southern segments and reduced residential collection in our Southern and Canada segments.

~~E&P revenues at facilities owned and fully-operated during~~ the ~~three and nine months ended September 30, 2019 and 2018 increased by $1.4 million and $12.5 million, respectively,~~value of crude oil due to the increased ~~drilling activity~~supply of oil resulting from Saudi Arabia and ~~E&P disposal volumes at~~Russia abandoning production quotas and increasing production levels, which was exacerbated by the ~~majority~~impact of ~~basins we operate.~~COVID-19.

A decrease in the average Canadian dollar to U.S. dollar currency exchange rate resulted in a decrease in revenues of ~~$1.9~~$1.6 million and ~~$16.6~~$9.6 million, respectively, for the three and nine months ended September 30, ~~2019.~~2020. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues were ~~0.7573~~0.7511 and ~~0.7651~~0.7573 in the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The average Canadian dollar to U.S. dollar exchange rates on our Canadian revenues were ~~0.7524~~0.7399 and ~~0.7761~~0.7524 in the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Revenues from sales of recyclable commodities at facilities owned during the three months ended September 30, 2020 and 2019 increased $2.4 million. Revenues from sales of recyclable commodities at facilities owned during the nine months ended September 30, 2020 and 2019 decreased $2.5 million. Prices for old corrugated cardboard and ~~2018 decreased $9.5 million~~volumes from increased residential collection increased in the second and ~~$21.9 million, respectively, due primarily~~third quarters of 2020, contributing to ~~decreased~~the increase in revenues for the three months ended September 30, 2020. Lower prices for old corrugated cardboard ~~and other fiber products~~in the first quarter of 2020, decreased collected commercial recycling volumes caused by economic disruptions resulting from ~~a reduction~~COVID-19 and decreased prices for plastic and aluminum contributed to the overall decrease in ~~overseas demand.~~ revenues for the nine months ended September 30, 2020.

Other revenues ~~decreased~~increased by ~~$7.1~~$0.4 million during the three months ended September 30, ~~2019, due primarily to reduced demand causing a reduction in the prices for renewal energy credits associated with the generation of landfill gas primarily at our Canada segment. Other revenues~~2020 and decreased by ~~$13.4~~$4.5 million during the nine months ended September 30, ~~2019,~~2020. The decrease for the nine months ended September 30, 2020 was due primarily to a ~~decrease~~reduction in intermodal ~~revenues resulting from customer losses causing a reduction in~~ cargo ~~volume and reduced demand causing a reduction in the prices for renewal energy credits associated with the generation of landfill gas primarily at our Canada segment.~~volumes.

Cost of Operations. Total cost of operations ~~increased $99.0~~decreased $6.3 million, or ~~13.4%~~0.8%, to $828.8 million for the three months ended September 30, 2020, from $835.1 million for the three months ended September 30, ~~2019, from $736.1~~2019. The decrease was primarily the result of a decrease in operating costs at our existing operations of $31.7 million, ~~for~~assuming foreign currency parity, a decrease in operating costs of $3.5 million at operations divested during, or subsequent to, the three months ended September 30, ~~2018. The increase was primarily~~2019 and a decrease of $0.9 million resulting from a decrease in the ~~result~~average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by $29.8 million of ~~$57.6 million of~~additional operating costs from acquisitions closed during, or subsequent to, the three months ended September 30, ~~2018~~2019.

The decrease in operating costs at our existing operations for the three months ended September 30, 2020 of $31.7 million, assuming foreign currency parity, included the following decreases totaling $27.6 million due to solid waste, intermodal and ~~an increase~~E&P volume losses resulting from the impact of COVID-19: a decrease in third-party disposal expenses of $6.7 million, a decrease in third-party trucking and transportation expenses of $6.0 million, a decrease in direct labor expenses at our E&P operations of $3.0 million due to headcount reductions, a decrease in equipment and facility maintenance and repair expenses of $2.8 million at our E&P operations, a decrease in direct labor expenses at our Eastern segment of $2.6 million due to headcount reductions, a decrease in expenses for processing recyclable commodities of $2.4 million due to a decrease in commercial recycling volumes collected, a decrease in intermodal rail expenses of $2.1 million and a decrease in subcontracted E&P operating expenses of $2.0 million.

The remaining decrease in operating costs at our existing operations of ~~$47.5~~$4.1 million ~~assuming foreign currency parity,~~for the three months ended September 30, 2020 consisted of a decrease in fuel expense of $7.3 million due to a decrease in the price of diesel fuel and declines in the volume of fuel used in our operations, a decrease in taxes on revenues of $4.9 million from the reversal of recorded liabilities for certain fees and exactions at Chiquita Canyon landfill due to our successful challenge of increases assessed in prior periods, a decrease in 401(k) matching expenses of $3.9 million as we suspended our 401(k) match as of June 1, 2020, a decrease in employee medical benefits expenses of $3.5 million due to a reduction in medical visits, a decrease in expenses for auto and workers’ compensation claims of $2.2 million due primarily to adjustments recorded in the current year period to decrease projected losses on outstanding claims originally recorded in prior periods, a decrease in labor expenses at our Canada segment of $1.7 million due to the receipt of a government subsidy reimbursing us for certain payroll expenditures remitted to our employees during the COVID-19 pandemic and a decrease in subcontracted hauling services at our solid waste operations of $1.5 million due primarily to the net impact of our Canada segment reversing expenses accrued in a prior period and incurring less expenses in the current period associated with estimated equipment charge overages related to an outsourced collection contract exceeding an increase in expenses at our Eastern segment associated with outsourcing the servicing of certain non-strategic collection customers to third party haulers,

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partially offset by an increase in other cash incentive compensation to non-management personnel of $8.5 million to recognize the services they are providing during the COVID-19 pandemic, an increase in labor expenses totaling $4.3 million at our Western and Central segments, and the solid waste operations of our Southern segment, due primarily to annual pay increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $4.0 million at our solid waste operations due to cost increases and a higher quantity of large repairs, an increase in landfill operating expenses of $1.2 million at our solid waste operations due primarily to increased gas system repairs and $2.9 million of other net expense increases.

Total cost of operations increased $45.4 million, or 1.9%, to $2.430 billion for the nine months ended September 30, 2020, from $2.385 billion for the nine months ended September 30, 2019. The increase was primarily the result of $98.3 million of additional operating costs from acquisitions closed during, or subsequent to, the nine months ended September 30, 2019, partially offset by a decrease in operating costs at our existing operations of ~~$5.1~~$35.0 million, assuming foreign currency parity, a decrease in operating costs of $12.7 million at operations divested during, or subsequent to, the ~~three~~nine months ended September 30, ~~2018~~2019 and a decrease of ~~$1.0~~$5.2 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.

The decrease in operating costs at our existing operations for the nine months ended September 30, 2020 of $35.0 million, assuming foreign currency parity, included the following decreases totaling $57.0 million due to solid waste, intermodal and E&P volume losses resulting from the impact of COVID-19: a decrease in third-party disposal expenses of $18.3 million, a decrease in third-party trucking and transportation expenses of $15.0 million, a decrease in direct labor expenses at our Eastern segment of $4.5 million due to headcount reductions, a decrease in equipment and facility maintenance and repair expenses of $4.2 million at our E&P operations, a decrease in intermodal rail expenses of $4.1 million, a decrease in subcontracted E&P operating expenses of $3.6 million, a decrease in direct labor expenses at our E&P operations of $3.4 million due to headcount reductions, a decrease in expenses for processing recyclable commodities of $2.3 million due to a decrease in commercial recycling volumes collected and a decrease in revenue-based royalties paid by our E&P operations of $1.6 million.

The remaining increase in operating costs at our existing operations of ~~$47.5~~$22.0 million for the ~~three~~nine months ended September 30, ~~2019, assuming foreign currency parity, was comprised~~2020 consisted of an increase in other cash incentive compensation to non-management personnel of $13.5 million to recognize the services they are providing during the COVID-19 pandemic, an increase in labor expenses totaling $13.4 million at our Western and Central segments, and the solid waste operations of ~~$16.2 million~~our Southern segment, due primarily to ~~employee~~annual pay ~~rate~~ increases and the impact of an additional working day during the nine months ended September 30, 2020, an increase of $11.5 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of COVID-19, an increase in truck, container, equipment and facility maintenance and repair expenses at our solid waste operations of ~~$8.6~~$10.9 million due to ~~parts and service rate~~cost increases and ~~variability impacting the timing~~a higher quantity of ~~major~~large repairs, an increase in third-party trucking and transportation expenses of $4.5 million due primarily to outsourcing transportation services to third party operators at certain locations and increased rates charged by third parties to provide trucking and transportation services, an increase of $4.5 million resulting from higher costs per ton charged by third party processors of recyclable commodities, a $2.9 million increase in expenses for auto and workers’ compensation claims of $10.6 million due primarily to increases in our deductibles for auto claims, higher claims severity in the current year period and adjustments recorded in the prior year period to decrease projected losses on outstanding claims originally recorded prior to 2019, an increase in ~~401(k) matching expenses~~leachate expense of ~~$2.6~~$2.5 million due to ~~our increasing the maximum matching contribution rate to our employees~~higher precipitation in Florida and ~~higher credits recorded~~increased leachate in ~~the prior year period resulting from employee forfeitures,~~landfill cells constructed in 2020, an increase in ~~third party disposal~~property tax expenses of $2.3 million due primarily to ~~disposal rate~~reassessed values of certain landfills and property acquired in recent acquisitions, an increase in landfill gas system repairs and maintenance expenses at our solid waste operations of $1.8 million and $2.9 million of other net expense increases, ~~exceeding~~partially offset by a decrease in fuel expense of $17.2 million due to a decrease in the ~~benefits~~price of ~~improved internalization~~diesel fuel and declines in the volume of ~~waste collected~~fuel used in our ~~Southern and Eastern segments, an increase~~operations, a decrease in employee medical benefits expenses of $14.0 million due to a reduction in medical visits, a decrease in taxes on revenues of ~~$2.1~~$4.9 million from the reversal of recorded liabilities for certain fees and exactions at Chiquita Canyon landfill due to our successful challenge of increases assessed in prior periods, a decrease in 401(k) matching expenses of $4.7 million as we suspended our 401(k) match as of June 1, 2020, a decrease in compressed natural gas expense of $2.0 million due primarily to ~~increased revenues~~the recognition in ~~our solid waste markets, an increase~~2020 of tax credits associated with the purchase of compressed natural gas, a decrease in ~~leachate disposal expenses~~insurance premiums of $1.5 million due to increased precipitation from harsh weather generating higher leachate volumes primarily in our Eastern and Southern segments as well as higher costs per gallon for leachate treatment, an increase in subcontracted operating expenses of $1.5$2.0 million due primarily to ~~subcontracting certain operating activities~~the net impact of credits from premium audits exceeding increases associated with auto and environmental policy renewals, a decrease in labor expenses at our ~~E&P~~Canada segment of $1.7 million due to the receipt of a government subsidy reimbursing us for certain payroll expenditures remitted to our employees during the COVID-19 pandemic and ~~an increase~~a decrease in ~~equipment and facility rental expenses~~subcontracted hauling services at our solid waste operations of ~~$1.1~~$0.9 million due primarily to ~~increased truck rental~~the net impact of our Canada segment reversing expenses accrued in a prior period and incurring less expenses in ~~our Southern segment and~~ the ~~adoption on~~current period associated with estimated equipment charge

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~~January 1, 2019 of new accounting standards associated with leases, partially offset by $0.3 million of other net expense decreases.~~

~~Total cost of operations increased $263.7 million, or 12.4%,~~overages related to $2.385 billion for the nine months ended September 30, 2019, from $2.121 billion for the nine months ended September 30, 2018. The increase was primarily the result of $159.9 million of operating costs from acquisitions closed during, or subsequent to, the nine months ended September 30, 2018 andan outsourced collection contract exceeding an increase in ~~operating costs~~expenses at our ~~existing operations~~Eastern segment associated with outsourcing the servicing of $129.0 million, assuming foreign currency parity, partially offset by a decrease in operating costs of $16.1 million at operations divested during, or subsequent to, the nine months ended September 30, 2018 and a decrease of $9.1 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.

The increase in operating costs at our existing operations of $129.0 million for the nine months ended September 30, 2019, assuming foreign currency parity, was comprised of an increase in labor expenses of $37.3 million due primarily to employee pay rate increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $23.7 million due to parts and service rate increases and variability impacting the timing of major repairs, an increase in third-party trucking and transportation expenses of $18.1 million due primarily to outsourcing transportation servicescertain non-strategic collection customers to third party operators at certain locations and increased rates charged by third parties to provide trucking and transportation services, an increase of $9.8 million resulting from higher costs per ton charged by third party processors of recyclable commodities, an increase in 401(k) matching expenses of $6.3 million due to our increasing the maximum matching contribution rate to our employees and higher credits recorded in the prior year period resulting from employee forfeitures, an increase in leachate disposal expenses of $6.0 million due to increased precipitation from harsh weather generating higher leachate volumes primarily in our Eastern and Southern segments as well as higher costs per gallon for leachate treatment, an increase in taxes on revenues of $5.3 million due primarily to increased revenues in our solid waste markets, an increase in subcontracted operating expenses of $3.7 million due primarily to subcontracting certain operating activities at our E&P segment, an increase in diesel fuel expense of $3.5 million due primarily to the prior year period benefiting from purchasing a portion of our diesel fuel needs under a favorable fuel hedge agreement that expired in December 2018, an increase in compressed natural gas expense of $3.3 million due primarily to a non-recurring reduction in expense during the prior year period resulting from recording retroactive tax credits associated with purchases of compressed natural gas fuel, an increase in equipment and facility rental expenses of $2.8 million due primarily to increased truck rental expenses in our Southern segment and the adoption on January 1, 2019 of new accounting standards associated with leases, an increase in insurance premiums for our auto and workers’ compensation policies of $2.2 million due primarily to our growth from acquisitions and a non-recurring reduction in expense during the prior year period in our Canada segment resulting from an annual workers’ compensation premium audit, an increase in third party disposal expenses of $2.0 million due primarily to disposal rate increases exceeding the benefits of improved internalization of waste collected in our Southern and Eastern segments and $8.4 million of other net expense increases, partially offset by a $3.4 million decrease in intermodal expenses resulting from a decrease in intermodal cargo volume due to customer losses.haulers.

Cost of operations as a percentage of revenues increased ~~1.6~~0.5 percentage points to 59.6% for the three months ended September 30, 2020, from 59.1% for the three months ended September 30, ~~2019, from 57.5% for the three months ended September 30, 2018.~~2019. The increase as a percentage of revenues consisted of a combined 1.3 percentage point increase from labor expenses, maintenance and repair expenses and recurring taxes on revenues not declining at the same rate as the decline in our revenues at locations owned in the comparable periods due primarily to the economic disruptions resulting from COVID-19, a 0.6 percentage point increase resulting from the accrual of other cash incentive compensation to non-management personnel, a 0.2 percentage point increase from increased landfill site maintenance and repairs, a 0.2 percentage point increase from the net impact of cost of operations expenses from acquisitions closed during, or subsequent to, the three months ended September 30, ~~2018,~~2019 and a 0.3 percentage point increase from all other net changes, partially offset by a 0.4 percentage point decrease from the reversal of recorded liabilities for certain fees and exactions at Chiquita Canyon landfill, a 0.4 percentage point decrease from lower diesel fuel expenses, a 0.3 percentage point decrease from a reduction in expenses for auto and workers’ compensation claims, a 0.3 percentage point decrease from lower trucking and transportation expenses, a 0.3 percentage point decrease from lower 401(k) match expenses, a 0.2 percentage point decrease from lower employee medical benefits expenses and a 0.2 percentage point decrease from lower subcontracted operating expenses.

Cost of operations as a percentage of revenues increased 0.8 percentage points to 60.0% for the nine months ended September 30, 2020, from 59.2% for the nine months ended September 30, 2019. The increase as a percentage of revenues consisted of a 0.6 percentage point increase from higher labor expenses, a 0.3 percentage point increase resulting from ~~higher maintenance and repair expenses and~~the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of COVID-19, a 0.3 ~~percentage point increase from an increase in recyclable commodities processing expenses at third party locations.~~

Cost of operations as a percentage of revenues increased 1.3 percentage points to 59.2% for the nine months ended September 30, 2019, from 57.9% for the nine months ended September 30, 2018. The increase as a percentage of revenues consisted of a 0.5 percentage point increase from the net impact of cost of operations expenses from acquisitions closed during, or subsequent to, the nine months ended September 30, ~~2018,~~2019, a 0.3 percentage point increase resulting from the accrual of other cash incentive compensation to non-management personnel, a 0.3 percentage point increase from higher maintenance and repair expenses, a 0.2 percentage point increase from ~~higher third-party trucking~~an increase in expenses for auto and ~~transportation expenses, a 0.2 percentage point increase from higher labor expenses, a 0.2 percentage point increase from higher 401(k) matching expenses~~workers’ compensation claims and a 0.2 percentage point increase from ~~an increase in recyclable commodities processing expenses,~~all other net changes, partially offset by a 0.4 percentage point decrease from lower diesel fuel expenses, a 0.4 percentage point decrease from lower trucking and transportation expenses, a 0.3 percentage point decrease from ~~improved internalization of collected waste volumes disposed at third party locations.~~lower employee medical benefits expenses and a 0.3 percentage point decrease from lower disposal expenses.

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SG&A. SG&A expenses decreased ~~$1.1~~$1.9 million, or ~~0.8%~~1.4%, to $136.0 million for the three months ended September 30, 2020, from $137.9 million for the three months ended September 30, ~~2019, from $139.0 million for the three months ended September 30, 2018.~~2019. The decrease was comprised of a ~~decrease~~decline of ~~$7.3~~$4.2 million in SG&A expenses at our existing operations, assuming foreign currency parity, ~~a decrease of $0.4 million consisting of SG&A expenses from operations divested during, or subsequent to, the three months ended September 30, 2018~~ and a ~~decrease~~decline of $0.2 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by ~~$6.8~~$2.5 million of additional SG&A expenses from operating locations at acquisitions closed during, or subsequent to, the three months ended September 30, ~~2018.~~2019.

The decrease in SG&A expenses at our existing operations, assuming foreign currency parity, of ~~$7.3~~$4.2 million for the three months ended September 30, ~~2019~~2020 was comprised of a collective decrease in travel, meeting, training and community activity expenses of ~~$5.0~~$5.9 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, a decrease in 401(k) matching expenses of $1.5 million as we suspended our 401(k) match as of June 1, 2020, a decrease in legal expenses of $1.3 million due to the impact of work on legal matters being postponed resulting from temporary court closures, a decrease in employee medical benefits expenses of $0.9 million due to a reduction in medical visits and $1.9 million of other net expense decreases, partially offset by an increase in equity-based compensation expenses of $2.4 million resulting primarily from an increased value of our recurring grant of restricted and performance share units to our personnel and adjustments to the amount of performance-based restricted share units granted in 2018 that are estimated to ultimately vest, an increase in share-based compensation expenses of $1.7 million due primarily to increased share price volatility in the current period for 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 based on changes in fair value, an increase in direct acquisition expenses of $1.3 million due to an increase in acquisition activity, an increase in deferred compensation expenses of $1.2 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked and an increase of $0.7 million in equity-based compensation expenses associated with ~~adjusting common shares of~~fair value adjustments to Waste Connections, Inc.

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common shares held in our deferred compensation plan by certain key executives ~~to fair value~~ as a result of the shares being exchanged for other investment ~~options,~~options.

SG&A expenses decreased $5.9 million, or 1.4%, to $404.2 million for the nine months ended September 30, 2020, from $410.1 million for the nine months ended September 30, 2019. The decrease was comprised of a ~~further~~decline of $14.2 million in SG&A expenses at our existing operations, assuming foreign currency parity, and a decline of $0.9 million resulting from a decrease in ~~equity-based~~the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by $9.2 million of additional SG&A expenses from operating locations at acquisitions closed during, or subsequent to, the nine months ended September 30, 2019.

The decrease in SG&A expenses at our existing operations, assuming foreign currency parity, of $14.2 million for the nine months ended September 30, 2020 was comprised of a collective decrease in travel, meeting, training and community activity expenses of $18.3 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, a decrease in direct acquisition expenses of $3.6 million due to a decline in acquisition activity, a decrease in employee medical benefits expenses of $3.6 million due to a reduction in medical visits, a decrease in professional fees of $3.0 million due primarily to work on legal matters being postponed resulting from temporary court closures and a decrease in third party tax consulting expenses, a decrease in deferred compensation expenses of ~~$2.5~~$3.0 million as a result of decreases in the market value of investments to which employee deferred compensation liability balances are tracked, a decrease in share-based compensation expenses of $1.7 million due primarily to decreased share price volatility and fewer outstanding shares in the current period for 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 based on changes in fair value, a decrease in office supplies and office utilities of ~~$3.0~~$1.7 million ~~in professional fees expense resulting primarily from reduced legal expenses~~due to office closures resulting from ~~the settlement of certain legal matters subsequent to September 30, 2018 and~~shelter at home restrictions, a decrease in 401(k) matching expenses of ~~$1.8~~$1.5 million as we suspended our 401(k) match as of June 1, 2020 and $0.3 million of other net expense decreases, partially offset by an increase in expenses for uncollectible accounts receivable of $5.5 million due to customers experiencing financial difficulties resulting ~~primarily~~ from the economic impact of COVID-19, an increase in accrued recurring cash incentive compensation expense to our management of $5.2 million, an increase of $4.0 million in equity-based compensation expenses associated with fair value adjustments to ~~prior period reserve estimates at~~Company common shares held in our ~~E&P segment, partially offset~~deferred compensation plan by certain key executives as a result of the shares being exchanged for other investment options, an increase in payroll expenses ~~$1.8~~of $3.2 million as a result of ~~increased headcount and~~ annual pay increases, additional paid time off benefits and the impact of an additional working day during the nine months ended September 30, 2020, an increase in ~~401(k) matching~~software licenses and subscriptions expenses of ~~$1.0~~$2.3 million due primarily to ~~our increasing~~ the ~~maximum matching contribution rate to our employees,~~addition of new sales and customer service applications, an increase ~~in direct acquisition expenses~~ of ~~$0.7~~$1.2 million ~~due~~resulting from the payment of supplemental bonuses to ~~higher acquisition activity, an increase in management training expenses~~non-management employees to provide financial assistance associated with the impact of ~~$0.8 million due to an expansion of our management training curriculum~~COVID-19 and an increase in equity-based compensation expenses of ~~$0.7~~$1.1 million ~~associated with~~resulting primarily from the impact of an increased value of our ~~annual~~ recurring grant of restricted and performance share units to our ~~personnel.~~personnel, net of adjustments to the amount of performance-based restricted share units estimated to ultimately vest.

SG&A expenses ~~increased $11.5 million, or 2.9%,~~as a percentage of revenues was 9.8% for both the three months ended September 30, 2020 and 2019. The percentage of revenues impact from the reduction in travel, meeting, training and community activity expenses was offset by an increase from higher equity-based and share-based compensation expenses.

SG&A expenses as a percentage of revenues decreased 0.2 percentage points to ~~$410.1 million~~10.0% for the nine months ended September 30, ~~2019,~~2020, from ~~$398.6 million~~10.2% for the nine months ended September 30, ~~2018.~~2019. The decrease as a percentage of revenues consisted of a 0.4 percentage point decrease from a reduction in travel, meeting, training and community activity expenses, a 0.1 percentage point decrease from lower direct acquisition expenses, a 0.1 percentage point decrease from lower medical benefits expenses, a 0.1 percentage point decrease from lower deferred compensation expense, a 0.1 percentage point decrease from lower legal expenses and a 0.1 percentage point decrease from all other net changes, partially offset by a 0.3 percentage point increase ~~was comprised of $19.6~~associated with administrative salaries and wages, a 0.2 percentage point increase due to higher expenses for uncollectible accounts receivable and a 0.2 percentage point increase from higher cash incentive compensation expense.

Depreciation. Depreciation expense decreased $0.4 million, ~~of additional SG&A expenses from operating locations at acquisitions closed during,~~ or ~~subsequent~~0.3%, to $157.6 million for the ~~nine~~three months ended September 30, ~~2018, partially offset by~~2020, from $158.0 million for the three months ended September 30, 2019. The decrease was comprised of a decrease in depletion expense of $9.0 million at our existing landfills due primarily to economic disruptions resulting

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from COVID-19 causing a decrease in E&P and municipal solid waste volumes and a decrease of ~~$5.2 million in SG&A expenses at our existing operations, assuming foreign currency parity, a decrease of $1.7~~$0.2 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by an increase in depreciation and depletion expense of $4.6 million from acquisitions closed during, or subsequent to, the three months ended September 30, 2019 and an increase in depreciation expense at our existing operations of $4.2 million due primarily to the impact of additions to our fleet and equipment purchased to support our existing operations.

Depreciation expense decreased $2.0 million, or 0.4%, to $459.6 million for the nine months ended September 30, 2020, from $461.6 million for the nine months ended September 30, 2019. The decrease was comprised of a decrease in depletion expense of $20.1 million at our existing landfills due primarily to economic disruptions resulting from COVID-19 causing a decrease in E&P and municipal solid waste and a decrease of ~~$1.2~~$1.0 million ~~consisting~~resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by an increase in depreciation and depletion expense of ~~SG&A expenses~~$15.0 million from ~~operations divested~~acquisitions closed during, or subsequent to, the nine months ended September 30, ~~2018.~~

~~The decrease~~2019 and an increase in ~~SG&A expenses~~depreciation expense at our existing operations of ~~$5.2~~$4.1 million ~~assuming foreign currency parity,~~due primarily to the impact of additions to our fleet and equipment purchased to support our existing operations exceeding certain equipment acquired from the Progressive Waste acquisition becoming fully depreciated in June 2019.

Depreciation expense as a percentage of revenues increased 0.1 percentage points to 11.3% for the three months ended September 30, 2020, from 11.2% for the three months ended September 30, 2019. The decrease in our revenues due to economic disruptions resulting from COVID-19 contributed to a 0.6 percentage point increase, which was partially offset by a 0.5 percentage point reduction attributable to reduced E&P and municipal solid waste landfill volumes.

Depreciation expense as a percentage of revenues decreased 0.1 percentage points to 11.4% for the nine months ended September 30, ~~2019 was comprised of a decrease in professional fees expense of $11.4 million resulting primarily~~2020, from reduced legal expenses resulting from the settlement of certain legal matters subsequent to September 30, 2018, a decrease of $5.0 million in equity-based compensation expenses associated with adjusting common shares of Waste Connections, Inc. held in our deferred compensation plan by certain key executives to fair value as a result of the shares being exchanged for other investment options, a further decrease in equity-based compensation expenses of $1.4 million associated with 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 based on changes in fair value, a decrease of $3.1 million in expenses for uncollectible accounts receivable resulting primarily from improved collection results in our solid waste segments and adjustments to prior period reserve estimates at our E&P segment and a decrease in integration-related expenses of $2.8 million incurred in the prior year period resulting from the acquisition of Progressive Waste, partially offset by an increase in equity-based compensation expenses of $6.7 million associated with our annual recurring grant of restricted share units to our personnel, an increase in direct acquisition expenses of $3.2 million due to higher acquisition activity, an increase in 401(k) matching expenses of $2.1 million due to our increasing the maximum matching contribution rate to our employees, an increase in deferred compensation expenses of $2.0 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked, an increase in accrued recurring cash incentive compensation expense to our management of $1.9 million, an increase in management training expenses of $1.4 million due to an expansion of our management training curriculum and $1.2 million of other net expense increases.

SG&A expenses as a percentage of revenues decreased 1.0 percentage points to 9.8% for the three months ended September 30, 2019, from 10.8% for the three months ended September 30, 2018. The decrease as a percentage of revenues

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consisted of a 0.4 percentage point decrease from lower equity-based compensation expenses associated with the exchange of shares held in our deferred compensation plan, a 0.3 percentage point decrease from lower legal expenses, a 0.2 percentage point decrease from lower equity-based compensation expenses for equity awards accounted for as liabilities and a 0.1 percentage point decrease from a reduction in expenses for uncollectible accounts receivable.

~~SG&A expenses as a percentage of revenues decreased 0.7 percentage points to 10.2%~~11.5% for the nine months ended September 30, ~~2019, from 10.9% for the nine months ended September 30, 2018.~~2019. The decrease as a percentage of revenues consisted of a 0.4 percentage point decrease from lower legal expenses, a combined 0.2 percentage point decrease from lower equity-based compensation expenses associated with the exchange of shares held in our deferred compensation plan and equity awards accounted for as liabilities, a 0.1 percentage point decrease from lower expenses for uncollectible accounts receivable, a 0.1 percentage point decrease from integration-related expenses resulting from ~~the acquisition of Progressive Waste~~declines in E&P and ~~a 0.1 percentage point decrease from all other changes,~~municipal solid waste landfill volumes, partially offset by a ~~0.2~~0.3 percentage point increase resulting from ~~increased equity-based compensation expenses associated with~~a decrease in our ~~annual recurring grant of restricted share units~~revenues due to ~~our personnel.~~economic disruptions resulting from COVID-19.

~~Depreciation~~Amortization of Intangibles. ~~Depreciation~~Amortization of intangibles expense increased ~~$9.8~~$0.8 million, or ~~6.6%~~2.3%, to ~~$158.0~~$32.7 million for the three months ended September 30, ~~2019,~~2020, from ~~$148.2~~$31.9 million for the three months ended September 30, ~~2018.~~2019. The increase was ~~comprised~~the result of ~~depreciation and depletion expense of $6.8~~$4.0 million from intangible assets acquired in acquisitions closed during, or subsequent to, the three months ended September 30, ~~2018 and additional depletion expense of $4.7 million at our existing landfills due primarily to higher E&P and municipal solid waste volumes,~~2019, partially offset by a decrease ~~in depreciation expense at our existing operations~~ of ~~$1.4~~$3.1 million ~~due primarily to the impact of~~from certain ~~equipment acquired from the acquisition of Progressive Waste~~intangible assets becoming fully ~~depreciated~~amortized subsequent to September 30, ~~2018 exceeding~~2019 and a decrease of $0.1 million resulting from a decrease in the ~~impact~~average foreign currency exchange rate in effect during the comparable reporting periods.

Amortization of ~~additions~~intangibles expense increased $2.3 million, or 2.4%, to ~~our fleet and equipment purchased~~$96.1 million for the nine months ended September 30, 2020, from $93.8 million for the nine months ended September 30, 2019. The increase was the result of $12.2 million from intangible assets acquired in acquisitions closed during, or subsequent to, ~~support our existing operations~~the nine months ended September 30, 2019, partially offset by a decrease of $9.6 million from certain intangible assets becoming fully amortized subsequent to September 30, 2019 and a decrease of $0.3 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.

Depreciation expense increased $37.7 million, or 8.9%, to $461.6 million for the nine months ended September 30, 2019, from $423.9 million for the nine months ended September 30, 2018. The increase was comprised of depreciation and depletion expense of $18.0 million from acquisitions closed during, or subsequent to, the nine months ended September 30, 2018, an increase in depletion expense of $13.8 million at our existing landfills due primarily to higher E&P and municipal solid waste volumes and additional depreciation expense of $8.1 million associated with additions to our fleet and equipment purchased to support our existing operations exceeding the impact of certain equipment acquired from the acquisition of Progressive Waste becoming fully depreciated subsequent to September 30, 2018, partially offset by a decrease of $2.2 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.

~~Depreciation~~Amortization expense as a percentage of revenues decreased 0.4 percentage points to 11.2% for the three months ended September 30, 2019, from 11.6% for the three months ended September 30, 2018. Depreciation expense as a percentage of revenues decreasedincreased 0.1 percentage points to ~~11.5%~~2.4% for the three and nine months ended September 30, ~~2019,~~2020, from ~~11.6%~~2.3% for the three and nine months ended September 30, ~~2018. The decrease as a percentage of revenues for both periods was attributable~~2019.

Impairments and Other Operating Items. Impairments and other operating items decreased $9.1 million, to ~~certain equipment acquired from the acquisition of Progressive Waste becoming fully depreciated subsequent to September 30, 2018.~~

~~Amortization of Intangibles. Amortization of intangibles expense increased $5.0 million, or 18.8% to $31.9~~net losses totaling $3.8 million for the three months ended September 30, ~~2019,~~2020, from ~~$26.9~~net losses totaling $12.9 million for the three months ended September 30, ~~2018.~~ 2019.

The ~~increase was the result~~net losses of ~~$7.9~~$3.8 million ~~from intangible assets acquired in acquisitions closed~~recorded during ~~or subsequent to,~~ the three months ended September 30, ~~2018, partially offset by~~2020 consisted of $1.9 million of losses on property and equipment that were disposed of through sales or as a ~~decrease of $2.9 million from certain intangible assets becoming fully amortized subsequent to September 30, 2018.~~

Amortization of intangibles expense increased $14.4 million, or 18.1% to $93.8 million for the nine months ended September 30, 2019, from $79.4 million for the nine months ended September 30, 2018. The increase was the result of ~~$23.0~~being damaged in operations, $1.8 million ~~from intangible assets acquired in acquisitions closed during,~~of charges to terminate or ~~subsequent~~write off the carrying cost of certain contracts that were not, or are not expected to ~~the nine months ended September 30, 2018, partially offset by a decrease~~be, renewed prior to their original estimated termination date and $0.1 million of ~~$7.9 million from certain intangible assets becoming fully amortized subsequent~~other net charges to ~~September 30, 2018 and a decrease of $0.7 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.~~expense.

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Amortization expense as a percentage of revenues increased 0.1 percentage points to 2.2% for the three months ended September 30, 2019, from 2.1% for the three months ended September 30, 2018. Amortization expense as a percentage of revenues increased 0.1 percentage points to 2.3% for the nine months ended September 30, 2019, from 2.2% for the nine months ended September 30, 2018. The increases as a percentage of revenues were due primarily to the impact of amortization expense associated with acquisitions closed during, or subsequent to, the three and nine months ended September 30, 2018.

~~Impairments and Other Operating Items~~. Impairments and other operating items increased $14.9 million, to net losses totaling $12.9 million for the three months ended September 30, 2019, from net gains totaling $2.0 million for the three months ended September 30, 2018.

The net losses of $12.9 million recorded during the three months ended September 30, 2019 consisted of $8.0 million resulting from the abandonment of aan E&P landfill development project, ~~at our E&P segment,~~ $3.5 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations, $1.2 million of charges to terminate or write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to their original estimated termination date and $0.2 million of other net ~~charges.~~

The net gains of $2.0 million recorded during the three months ended September 30, 2018 consisted of the reversal of $6.3 million of expenses recognized in prior periods to adjust the carrying cost of assets held for disposal to fair market value due to modifications to our divestiture plan and changes in the fair market value of the divested operations, partially offset by $2.0 million of losses on trucks and equipment that were scrapped, disposed of through sales or disposed of as a result of being damaged in operations, $0.7 million of charges to ~~write off the carrying cost of certain contracts that were not renewed prior to their original estimated termination date and $1.6 million of other net charges.~~expense.

Impairments and other operating items increased ~~$26.8~~$409.7 million, to net losses totaling $442.6 million for the nine months ended September 30, 2020, from net losses totaling $32.9 million for the nine months ended September 30, ~~2019, from net losses totaling $6.1 million~~2019.

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, resulted in decreased levels of oil and natural gas exploration and production activity and a corresponding decrease in demand for our E&P waste services. During the nine months ended September 30, ~~2018.~~2020, our E&P revenue declined $75.2 million on rig count declines of 72% in certain basins. The most impacted basins include the Williston Basin in North Dakota, the Eagle Ford Basin in Texas and the Powder River Basin in Wyoming, all of which have relatively high costs associated with drilling, making them less attractive than other basins, including the Permian Basin in Texas and New Mexico. Additionally, across the industry there 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.

Based on these events, we concluded during the second quarter of 2020 that a triggering event occurred which required us to perform an impairment test of the property and equipment and intangible assets of our E&P operations as of June 30, 2020. As a result of the impairment test, we determined that the carrying value of four landfills in our E&P operations exceeded their estimated fair value, resulting in an impairment charge of $417.4 million to property and equipment.

The remaining net losses of $25.2 million recorded during the nine months ended September 30, 2020 consisted of $16.8 million to adjust the carrying value of contingent consideration liabilities, $4.3 million of charges to terminate or write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to their original estimated termination date, $3.4 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations and $0.7 million of other net charges.

The net losses of $32.9 million recorded during the nine months ended September 30, 2019 consisted of $14.3 million of charges to terminate or write off the carrying cost of certain contracts that were not, or are not expected to be, renewed prior to their original estimated termination date, $8.0 million resulting from the abandonment of aan E&P landfill development project, ~~at our E&P segment,~~ $7.7 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations, $1.7 million of expenses associated with the settlement of various litigation claims and a $1.5 million expense charge to increase the fair value of amounts payable under liability-classified contingent consideration arrangements from acquisitions closed in periods prior to 2018, partially offset by $0.3 million of other gains.

The net losses of $6.1 million recorded during the nine months ended September 30, 2018 consisted of $7.7 million of losses on trucks and equipment that were scrapped, disposed of through sales or disposed of as a result of being damaged in operations, $2.1 million of charges to write off the carrying cost of certain contracts that were not expected to be renewed prior to their original estimated termination date and $2.6 million of other net charges, partially offset by the reversal of $6.3 million of expenses recognized in prior periods to adjust the carrying cost of assets held for disposal to fair market value due to modifications to our divestiture plan and changes in the fair market value of the divested operations.

Operating Income. Operating income ~~increased $3.7~~decreased $5.9 million, or ~~1.6%~~2.5%, to $230.7 million for the three months ended September 30, 2020, from $236.6 million for the three months ended September 30, ~~2019, from $232.9~~2019. Operating income decreased $428.3 million, or 66.5%, to $215.3 million for the ~~three~~nine months ended September 30, ~~2018. The increase was primarily attributable to operating income generated~~2020, from ~~acquisitions and price-led growth in our existing solid waste business, partially offset by an increase in impairments and other operating charges.~~

~~Operating income increased $11.3 million, or 1.8%, to~~ $643.6 million for the nine months ended September 30, ~~2019, from $632.3 million~~2019. Contributing to decreases for the three and nine ~~months ended September 30, 2018. The increase was primarily attributable to~~month comparable periods were declines in our existing solid waste and E&P operations resulting from the impact of COVID-19, partially offset by solid waste price increases and operating income generated from acquisitions, ~~price-led growth in~~with the comparable nine month period further impacted by the impairment charge attributable to four of our ~~existing solid waste business and gross margins recognized on~~ E&P ~~volume growth, partially offset by an~~landfills.

Operating income as a percentage of revenues decreased 0.1 percentage points to 16.6% for the three months ended September 30, 2020, from 16.7% for the three months ended September 30, 2019. The decrease as a percentage of revenues was comprised of a 0.5 percentage point increase in ~~impairments and other operating charges.~~cost of operations, a 0.1 percentage point increase in

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Operating income as a percentage of revenues decreased 1.4 percentage points to 16.8% for the three months ended September 30, 2019, from 18.2% for the three months ended September 30, 2018. The decrease as a percentage of revenues was comprised of a 1.6 percentage point increase in cost of operations, a 1.1 percentage point increase in impairments and other operating itemsdepreciation expense and a 0.1 percentage point increase in amortization expense, partially offset by a ~~1.0~~0.6 percentage point decrease in ~~SG&A expense~~impairments and ~~a 0.4 percentage point decrease in depreciation expense.~~other operating items.

Operating income as a percentage of revenues decreased ~~1.3~~10.7 percentage points to 5.3% for the nine months ended September 30, 2020, from 16.0% for the nine months ended September 30, ~~2019, from 17.3% for the nine months ended September 30, 2018.~~2019. The decrease as a percentage of revenues was comprised of a ~~1.3 percentage point increase in cost of operations, a 0.7~~10.1 percentage point increase in impairments and other operating items, a 0.8 percentage point increase in cost of operations and a 0.1 percentage point increase in amortization expense, partially offset by a ~~0.7~~0.2 percentage point decrease in SG&A expense and a 0.1 percentage point decrease in depreciation expense.

Interest Expense. Interest expense increased ~~$4.7~~$3.8 million, or ~~14.7%~~10.5%, to $40.6 million for the three months ended September 30, 2020, from $36.8 million for the three months ended September 30, ~~2019, from $32.1 million for the three months ended September 30, 2018.~~2019. The increase was primarily attributable to an increase of ~~$5.3~~$3.9 million from the ~~November 2018~~January 2020 issuance of our ~~2028~~2030 Senior Notes, an increase of ~~$4.4~~$3.8 million from the March 2020 issuance of our 2050 Senior Notes, an increase of $0.4 million from higher net interest rates on borrowings outstanding under our Credit Agreement due primarily to a $150 million interest rate swap agreement commencing in February 2020 at a higher interest rate than two interest rate swap agreements totaling $175 million which expired in February 2020 and $0.7 million of other net increases, partially offset by a decrease of $2.7 million due to a reduction in the average borrowings outstanding under our Credit Agreement and a decrease of $2.3 million from the repayment of our 2019 Senior Notes.

Interest expense increased $8.3 million, or 7.4%, to $119.6 million for the nine months ended September 30, 2020, from $111.3 million for the nine months ended September 30, 2019. The increase was primarily attributable to an increase of $10.8 million from the January 2020 issuance of our 2030 Senior Notes, an increase of $8.4 million from the March 2020 issuance of our 2050 Senior Notes, an increase of $5.1 million from the April 2019 issuance of our 2029 Senior Notes, an increase of ~~$0.5~~$1.0 million ~~due to~~from higher net interest rates on borrowings outstanding ~~borrowings~~ under our Credit Agreement due primarily to a $150 million interest rate swap agreement commencing in February 2020 at a higher interest rate than two interest rate swap agreements totaling $175 million which expired in February 2020 and ~~$0.1~~$0.4 million of other net increases, partially offset by a decrease of ~~$5.6~~$10.5 million due to a ~~decrease in the average borrowings outstanding under our Credit Agreement.~~

Interest expense increased $14.4 million, or 14.9%, to $111.3 million for the nine months ended September 30, 2019, from $96.9 million for the nine months ended September 30, 2018. The increase was primarily attributable to an increase of $15.9 million from the November 2018 issuance of our 2028 Senior Notes, an increase of $8.0 million from the April 2019 issuance of our 2029 Senior Notes and an increase of $2.3 million due to higher interest rates on outstanding borrowings under our Credit Agreement, partially offset by a decrease of $10.7 million due to a decreasereduction in the average borrowings outstanding under our Credit Agreement and a decrease of ~~$0.5~~$6.9 million from the ~~redemption~~repayment of $175 million of our ~~2018~~2019 Senior ~~Notes using proceeds from our Credit Agreement and $0.6 million of other net decreases.~~Notes.

Interest Income. Interest income ~~increased $0.6~~decreased $1.2 million, to $0.9 million for the three months ended September 30, 2020, from $2.1 million for the three months ended September 30, ~~2019, from $1.5~~2019. Interest income decreased $2.8 million, to $4.4 million for the ~~three~~nine months ended September 30, ~~2018. Interest income increased $3.5 million, to~~2020, from $7.2 million for the nine months ended September 30, ~~2019,~~2019. The decreases were primarily attributable to lower reinvestment rates in the current period.

Other Income (Expense). Other income (expense) increased $0.7 million, to an income total of $0.7 million for the three months ended September 30, 2020, from ~~$3.7~~an income total of $0 for the three months ended September 30, 2019. The increase was due primarily to a $1.5 million increase in the value of investments purchased to fund our employee deferred compensation obligations due to stock market valuation increases and $0.1 million of other net income increases, partially offset by interest rate swap termination costs of $0.9 million associated with our early termination in September 2020 of four interest rate swap agreements.

Other income (expense) decreased $7.6 million, to an expense total of $3.0 million for the nine months ended September 30, ~~2018. The increases were primarily attributable to higher reinvestment rates in the current period and higher average cash balances.~~

~~Other Income. Other~~2020, from an income decreased $0.6 million, to $0 for the three months ended September 30, 2019, from $0.6 million for the three months ended September 30, 2018. The decrease was due primarily to a decrease in income earned on investments purchased to fund our employee deferred compensation obligations.

~~Other income increased $2.5 million, to~~total of $4.6 million for the nine months ended September 30, ~~2019, from $2.1 million for the nine months ended September 30, 2018.~~2019. The ~~increase~~decrease was due primarily to a ~~$2.2~~$2.6 million ~~increase~~decrease in ~~income earned on~~the value of investments purchased to fund our employee deferred compensation obligations ~~and~~due to stock market valuation declines, a ~~$1.1~~$3.0 million adjustment to increase certain accrued liabilities acquired in the 2016 Progressive Waste acquisition, an increase in foreign currency transaction ~~gains,~~losses of $2.2 million attributable to changes in the average foreign currency exchange rate in effect during the comparable reporting periods impacting our third party debt in Canadian dollars and our inter-entity financing arrangements and interest rate swap termination costs of $0.9 million, partially offset by ~~a $0.8~~$1.1 million ~~decrease in~~of other net ~~income sources.~~expense increases.

Income Tax Provision. Income taxes decreased ~~$9.3~~$9.1 million, ~~or 17.9%,~~ to $33.7 million for the three months ended September 30, 2020, from $42.8 million for the three months ended September 30, ~~2019, from $52.1 million~~2019. Our effective tax rate for the three months ended September 30, ~~2018.~~2020 was 17.6%. Our effective tax rate for the three months ended September 30, 2019 was 21.2%. ~~Our effective tax rate for the three months ended September 30, 2018 was 25.7%.~~ Income taxes decreased ~~$16.0~~$86.8 million, ~~or 12.6%,~~ to ~~$110.5~~$23.7 million for the nine months ended September 30, ~~2019,~~2020, from ~~$126.5~~$110.5 million

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for the nine months ended September 30, ~~2018.~~2019. Our effective tax rate for the nine months ended September 30, 2020 was 24.4%. Our effective tax rate for the nine months ended September 30, 2019 was 20.3%. ~~Our effective~~

The income tax ~~rate~~provision for the nine months ended September 30, ~~2018 was 23.4%.~~ 2020 included a $27.4 million expense associated with certain 2019 related-party payments no longer being deductible for tax purposes due to the finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and a $4.1 million expense related to an increase in our deferred income tax liabilities resulting from the impairment of certain assets within our E&P operations, which impacted the geographical apportionment of our state income taxes. Additionally, the income tax benefit for the nine months ended September 30, 2020 included a benefit of $5.3 million from share-based payment awards being recognized in the income statement when settled, as well as a portion of our internal financing being taxed at effective rates substantially lower than the U.S. federal statutory rate.

The income tax provision for the three and nine months ended September 30, 2019 included a $3.8 million expense primarily associated with a reduction in deferred income tax assets related to compensation of executive officers no longer deemed deductible for tax purposes. Additionally, the income tax provision for the three and nine months ended September 30, 2019 included a benefit of $0.1 million and $5.4 million, respectively, from share-based payment awards being

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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 three and nine months ended September 30, 2018 included a $6.6 million expense primarily associated with refinements to the estimates, as provided by Staff Accounting Bulletin No. 118, of the impact of a portion of our U.S. earnings no longer deemed to be permanently reinvested in conjunction with the Tax Cuts and Jobs Act, or the Tax Act. The income tax provision for the nine months ended September 30, 2018 included a $5.6 million expense associated with the restructuring of our internal refinancing in conjunction with the Tax Act, as well as a $3.1 million benefit related to a reduction in our deferred income tax liabilities resulting from state legislation enacted in the current year and changes in our geographical apportionment due to acquisition activity. Additionally, the income tax provision for the three and nine months ended September 30, 2018 included a benefit of $0.1 million and $4.9 million, respectively, from share-based payment awards being recognized in the income statement when settled and a portion of our internal financing is taxed at effective rates substantially lower than the U.S. federal statutory rate.

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,


2019

2018

2019

2018
Commercial

$
408,415

$
369,543

$
1,186,565

$
1,080,261
Residential

355,574

300,026

1,024,105

881,927
Industrial and construction roll off

226,801

202,130

629,597

573,877
Total collection

990,790

871,699

2,840,267

2,536,065
Landfill

310,633

285,945

852,073

790,056
Transfer

209,585

187,961

575,337

495,317
Recycling

14,142

23,371

50,676

69,559
E&P

70,874

68,049

205,743

189,071
Intermodal and other

26,520

34,261

90,491

105,588
Intercompany

(210,100)

(190,176)

(587,868)

(524,447)
Total

$
1,412,444

$
1,281,110

$
4,026,719

$
3,661,209


	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019		2020		2019
Commercial	$	406,037	$	408,415	$	1,197,971	$	1,186,565
Residential		387,566		355,574		1,131,486		1,024,105
Industrial and construction roll off		216,894		226,801		618,122		629,597
Total collection		1,010,497		990,790		2,947,579		2,840,267
Landfill		308,795		310,633		855,631		852,073
Transfer		205,910		209,585		575,761		575,337
Recycling		21,377		14,142		59,701		50,676
E&P		26,218		70,874		131,748		205,743
Intermodal and other		27,141		26,520		84,970		90,491
Intercompany		(210,386)		(210,100)		(607,651)		(587,868)
Total	$	1,389,552	$	1,412,444	$	4,047,739	$	4,026,719

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.

~~We manage~~Prior to July 2020, we managed our operations through five geographic solid waste operating segments and our E&P segment, which ~~includes~~were also our reportable segments. As of July 2020, our Chief Operating Decision Maker determined that the ~~majority~~E&P and Southern operating segments met all of the aggregation criteria and has eliminated our E&P segment by combining all operations of the E&P segment into the Southern segment. After giving effect to this combination, our reportable segments consist of our ~~E&P waste treatment and disposal operations. Our~~ five geographic solid waste operating segments and ~~our~~no longer include a separate E&P ~~segment comprise our reportable segments.~~

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segment. Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts. ~~In the first quarter of 2019, we moved two districts from our Eastern segment to our Central segment because their location was closer in proximity to operations in our Central segment.~~ The segment information presented herein reflects the realignment of these districts. Segment results for the 2019 periods reflected in this report have been reclassified to reflect the realignment of our reportable segments for comparison with the same period in 2020.

At September 30, ~~2019,~~2020, under the current orientation, our Eastern segment services customers located in northern Illinois, Kentucky, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, eastern Tennessee, Vermont, Virginia and Wisconsin; our Southern segment services customers located in

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Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New Mexico, North Dakota, southern Oklahoma, western Tennessee, Texas, Wyoming and ~~Texas;~~along the Gulf of Mexico; our Western segment services customers located in Alaska, California, Idaho, Montana, Nevada, Oregon, Washington and western Wyoming; our Central segment services customers located in Arizona, Colorado, southern Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, South Dakota, western Texas, Utah and eastern Wyoming; and our Canada segment services customers located in the state of Michigan and in the provinces of Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan. ~~The E&P segment services E&P customers located in Arkansas, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, Wyoming and along the Gulf of Mexico.~~

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

Three Months Ended September 30,

Nine Months Ended September 30,


2019

2018


2019

2018


Eastern

$
330,887

23.4
%
$
284,865

22.2
%

$
947,334

23.5
%
$
788,912

21.5
%

Southern

305,188

21.6

283,040

22.1

890,532

22.1

839,489

22.9

Western

289,208

20.5

271,018

21.2

821,185

20.4

779,880

21.3

Central

230,074

16.3

189,903

14.8

626,312

15.6

527,486

14.4

Canada

190,820

13.5

187,054

14.6

547,694

13.6

543,867

14.9

E&P

66,267

4.7

65,230

5.1

193,662

4.8

181,575

5.0

$
1,412,444

100.0
%
$
1,281,110

100.0
%

$
4,026,719

100.0
%
$
3,661,209

100.0
%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
Eastern	$	344,353	24.8	%	$	330,887	23.4	%	$	995,446	24.6	%	$	947,334	23.5	%
Southern		330,575	23.8			371,455	26.3			1,033,297	25.5			1,084,194	26.9
Western		301,221	21.7			289,208	20.5			848,739	21.0			821,185	20.4
Central		228,566	16.4			230,074	16.3			653,728	16.1			626,312	15.6
Canada		184,837	13.3			190,820	13.5			516,529	12.8			547,694	13.6
	$	1,389,552	100.0	%	$	1,412,444	100.0	%	$	4,047,739	100.0	%	$	4,026,719	100.0	%

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

Three Months Ended September 30,

Nine Months Ended September 30,


2019

2018


2019

2018


Western

$
90,059

31.1
%
$
86,174

31.8
%

$
253,504

30.9
%
$
240,006

30.8
%

Eastern

88,101

26.6
%

82,733

29.0
%

250,106

26.4
%

222,772

28.2
%

Southern

77,406

25.4
%

70,159

24.8
%

226,294

25.4
%

207,853

24.8
%

Central

81,746

35.5
%

71,276

37.5
%

219,280

35.0
%

195,018

37.0
%

Canada

66,794

35.0
%

68,819

36.8
%

193,702

35.4
%

195,390

35.9
%

E&P

35,803

54.0
%

35,099

53.8
%

100,845

52.1
%

95,009

52.3
%

Corporate^(a)

(446)

—

(8,286)

—

(11,751)

—

(14,368)

—

$
439,463

31.1
%
$
405,974

31.7
%

$
1,231,980

30.6
%
$
1,141,680

31.2
%


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
Western	$	101,071	33.6	%	$	90,059	31.1	%	$	267,523	31.5	%	$	253,504	30.9	%
Eastern		90,991	26.4	%		88,101	26.6	%		258,333	26.0	%		250,106	26.4	%
Central		82,887	36.3	%		81,746	35.5	%		235,742	36.1	%		219,280	35.0	%
Southern		81,394	24.6	%		113,209	30.5	%		276,844	26.8	%		327,139	30.2	%
Canada		72,516	39.2	%		66,794	35.0	%		185,589	35.9	%		193,702	35.4	%
Corporate^(a)		(4,132)	—			(446)	—			(10,462)	—			(11,751)	—
	$	424,727	30.6	%	$	439,463	31.1	%	$	1,213,569	30.0	%	$	1,231,980	30.6	%

(a)

Corporate ~~functions include accounting, legal, tax, treasury, information technology, risk management, human resources, training~~consists of expenses associated with its administrative departments and ~~other administrative functions.~~certain centralized expenses including cash and equity-based incentive compensation, direct acquisition expenses and share-based compensation expenses associated with Progressive Waste share-based grants outstanding at June 1, 2016 that were continued by the Company. Amounts reflected are net of allocations to the ~~six~~five operating segments.

A reconciliation of segment EBITDA to Income before income tax provision is included in Note 1112 to our Condensed Consolidated Financial Statements included in Part 1, Item 1 of this report.

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Significant changes in revenue and segment EBITDA for our reportable segments for the three and nine month periods ended September 30, ~~2019,~~2020, compared to the three and nine month periods ended September 30, ~~2018,~~2019, are discussed below:

Segment Revenue

Revenue in our Eastern segment increased ~~$46.0~~$13.5 million, or ~~16.2%~~4.1%, to $344.4 million for the three months ended September 30, 2020, from $330.9 million for the three months ended September 30, ~~2019, from $284.9 million for the three months ended September 30, 2018.~~2019. The components of the increase consisted of net revenue growth from acquisitions closed during, or subsequent to, the three months ended September 30, ~~2018,~~2019, of ~~$38.8~~$32.1 million, ~~and~~ net price increases of ~~$14.9~~$13.5 million and other revenue increases of $0.5 million, partially offset by solid waste volume decreases of ~~$3.2~~$29.7 million attributable primarily to COVID-19 economic disruptions driving declines in commercial collection, roll off collection, transfer station and landfill volumes ~~in our New York City market~~ and ~~reduced landfill municipal solid waste, decreased recyclable commodity sales~~net revenue reductions from divestitures closed subsequent to September 30, 2019 of ~~$4.3 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products and other revenue decreases of $0.2~~$2.9 million.

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Revenue in our Eastern segment increased ~~$158.4~~$48.1 million, or ~~20.1%~~5.1%, to $995.4 million for the nine months ended September 30, 2020, from $947.3 million for the nine months ended September 30, ~~2019, from $788.9 million for the nine months ended September 30, 2018.~~2019. The components of the increase consisted of net revenue growth from acquisitions closed during, or subsequent to, the nine months ended September 30, ~~2018,~~2019, of ~~$124.6~~$107.4 million and net price increases of ~~$44.0~~$45.1 million, partially offset by solid waste volume decreases of ~~$1.6~~$89.9 million attributable primarily ~~due~~ to COVID-19 economic disruptions driving declines in ~~residential~~commercial collection, ~~and~~roll off collection, transfer station and landfill volumes, ~~in our New York City market exceeding higher landfill municipal solid waste and special waste volumes,~~net revenue reductions from divestitures closed subsequent to September 30, 2019 of $11.1 million, decreased recyclable commodity sales of ~~$8.2~~$2.1 million resulting from ~~the impact of~~a decrease in recycling volumes collected and declines in prices for ~~old corrugated cardboard~~plastic and ~~other fiber products~~aluminum and other revenue decreases of ~~$0.4~~$1.3 million.

Revenue in our Southern segment ~~increased $22.2~~decreased $40.9 million, or ~~7.8%~~11.0%, to ~~$305.2~~$330.6 million for the three months ended September 30, ~~2019,~~2020, from ~~$283.0~~$371.5 million for the three months ended September 30, ~~2018.~~2019. The components of the decrease consisted of a decline in revenue at our E&P operations of $41.6 million, partially offset by an increase in revenue at our solid waste operations of $0.7 million. The $41.6 million decrease in revenue at our E&P operations was attributable to decreases in the demand for crude oil as a result of economic disruptions from COVID-19 resulting in a drop in the value of crude oil, decreases in drilling and production activity levels and decreases in overall demand for our E&P waste services. The components of the $0.7 million increase in revenue at our solid waste operations consisted of net price increases of $11.0 million and other revenue increases of $0.8 million, partially offset by solid waste volume decreases of $11.1 million attributable primarily to the net impact of COVID-19 economic disruptions driving declines in commercial collection, roll off collection, transfer station and municipal solid waste landfill volumes that exceeded increases in landfill special waste volumes.

Revenue in our Southern segment decreased $50.9 million, or 4.7%, to $1.033 billion for the nine months ended September 30, 2020, from $1.084 billion for the nine months ended September 30, 2019. The components of the decrease consisted of a decline in revenue at our E&P operations of $72.7 million, partially offset by an increase in revenue at our solid waste operations of $21.8 million. The $72.7 million decrease in revenue at our E&P operations was attributable to decreases in the demand for crude oil as a result of economic disruptions from COVID-19 resulting in a drop in the value of crude oil, decreases in drilling and production activity levels and decreases in overall demand for our E&P waste services. Drilling and production activity during the nine months ended September 30, 2020 were also adversely impacted by the drop in the value of crude oil due to the increased supply of oil resulting from Saudi Arabia and Russia abandoning production quotas and increasing production levels, which was exacerbated by the impact of COVID-19. The components of the $21.8 million increase in revenue at our solid waste operations consisted of net price increases of $41.8 million and net revenue growth from acquisitions closed during, or subsequent to, the nine months ended September 30, 2019 of $12.3 million, partially offset by solid waste volume decreases of $30.3 million attributable primarily to COVID-19 economic disruptions driving declines in commercial collection, roll off collection, transfer station and municipal solid waste landfill volumes that exceeded increases in landfill special waste volumes, net revenue reductions from divestitures closed subsequent to September 30, 2019 of $0.6 million and other revenue decreases of $1.4 million.

Revenue in our Western segment increased $12.0 million, or 4.2%, to $301.2 million for the three months ended September 30, 2020, from $289.2 million for the three months ended September 30, 2019. The components of the increase consisted of net revenue growth from acquisitions closed during, or subsequent to, the three months ended September 30, ~~2018,~~

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2019, of $7.3 million, ~~and~~ net price increases of ~~$14.3~~$7.2 million and other revenue increases of $0.4 million, partially offset by ~~net~~intermodal revenue ~~reductions from divestitures closed subsequent to September 30, 2018 of $5.8 million, solid waste volume~~ decreases of ~~$1.1~~$2.9 million due primarily ~~from declines~~to a reduction in landfill municipal solid waste, decreased recyclable commodity sales of $1.1 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products and $0.9 million of other revenue decreases.intermodal cargo volumes.

Revenue in our ~~Southern~~Western segment increased ~~$51.0~~$27.5 million, or ~~6.1%~~3.4%, to ~~$890.5~~$848.7 million for the nine months ended September 30, ~~2019,~~2020, from ~~$839.5~~$821.2 million for the nine months ended September 30, ~~2018.~~2019. The components of the increase consisted of net price increases of ~~$42.3~~$23.4 million and net revenue growth from acquisitions closed during, or subsequent to, the three months ended September 30, 2019, of $9.4 million, partially offset by intermodal revenue decreases of $4.5 million due to a reduction in intermodal cargo volumes and other revenue decreases of $0.8 million.

Revenue in our Central segment decreased $1.5 million, or 0.7%, to $228.6 million for the three months ended September 30, 2020, from $230.1 million for the three months ended September 30, 2019. The components of the decrease consisted of solid waste volume decreases of $17.5 million due to the impact of COVID-19 economic disruptions driving decreases in commercial collection, roll off collection, transfer station and landfill volumes and other revenue decreases of $0.5 million, partially offset by net price increases of $9.1 million and net revenue growth from acquisitions closed during, or subsequent to, the three months ended September 30, 2019, of $7.4 million.

Revenue in our Central segment increased $27.4 million, or 4.4%, to $653.7 million for the nine months ended September 30, 2020, from $626.3 million for the nine months ended September 30, 2019. The components of the increase consisted of net price increases of $30.0 million and revenue growth from acquisitions closed during, or subsequent to, the nine months ended September 30, ~~2018,~~2019, of ~~$43.7~~$26.5 million, partially offset by ~~net revenue reductions from divestitures closed subsequent to September 30, 2018 of $18.8 million,~~ solid waste volume decreases of ~~$12.2~~$28.0 million primarily from declines in residential customers at certain locations acquired in the Progressive Waste acquisition and reductions in landfill municipal solid waste volumes, decreased recyclable commodity sales of $3.3 million resulting fromdue to the impact of ~~declines~~COVID-19 economic disruptions driving decreases in ~~prices for old corrugated cardboard~~commercial collection, roll off collection, transfer station and ~~other fiber products~~landfill volumes and other revenue decreases of ~~$0.7~~$1.1 million.

Revenue in our ~~Western~~Canada segment ~~increased $18.2~~decreased $6.0 million, or ~~6.7%~~3.1%, to ~~$289.2~~$184.8 million for the three months ended September 30, ~~2019,~~2020, from $271.0 million for the three months ended September 30, 2018. The components of the increase consisted of solid waste volume increases of $9.7 million due to the net impact of increases associated with landfill municipal solid waste, landfill special waste, residential collection and commercial collection, net price increases of $9.3 million and other revenue increases of $0.5 million, partially offset by decreased recyclable commodity sales of $1.3 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products.

Revenue in our Western segment increased $41.3 million, or 5.3%, to $821.2 million for the nine months ended September 30, 2019, from $779.9 million for the nine months ended September 30, 2018. The components of the increase consisted of net price increases of $26.0 million and solid waste volume increases of $21.9 million due to the net impact of increases associated with landfill municipal solid waste, landfill special waste, residential collection and commercial collection and other revenue increases of $1.1 million, partially offset by decreased intermodal revenue of $3.6 million resulting from customer losses causing a reduction in cargo volume and decreased recyclable commodity sales of $4.1 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products.

Revenue in our Central segment increased $40.2 million, or 21.2%, to $230.1 million for the three months ended September 30, 2019, from $189.9 million for the three months ended September 30, 2018. The components of the increase consisted of revenue growth from acquisitions closed during, or subsequent to, the three months ended September 30, 2018, of $25.5 million, net price increases of $10.6 million and volume increases of $4.8 million primarily due to increased roll off collection and landfill special waste, partially offset by other revenue decreases of $0.7 million.

Revenue in our Central segment increased $98.8 million, or 18.7%, to $626.3 million for the nine months ended September 30, 2019, from $527.5 million for the nine months ended September 30, 2018. The components of the increase consisted of revenue growth from acquisitions closed during, or subsequent to, the nine months ended September 30, 2018, of $68.3 million, net price increases of $29.8 million and volume increases of $1.7 million primarily due to increased roll off collection and landfill special waste exceeding lower landfill municipal solid waste, partially offset by other revenue decreases of $1.0 million.

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~~Revenue in our Canada segment increased $3.7 million, or 2.0%, to~~ $190.8 million for the three months ended September 30, ~~2019, from $187.1 million for the three months ended September 30, 2018.~~2019. The components of the ~~increase~~decrease consisted of ~~net price increases~~solid waste volume decreases of ~~$12.0~~$16.2 million ~~and revenue growth from acquisitions closed during, or subsequent~~due to the ~~three months ended September 30, 2018,~~net impact of ~~$1.2 million, partially offset by~~COVID-19 economic disruptions driving decreases in commercial collection, roll off collection, transfer station and landfill volumes and a decrease of ~~$1.9~~$1.6 million resulting from a lower average foreign currency exchange rate in effect during the comparable reporting periods, ~~a decrease~~partially offset by net price increases of ~~$5.6~~$8.3 million, an increase of $2.9 million resulting from ~~reduced demand causing a reduction~~an increase in the prices for ~~renewal~~renewable energy credits and natural gas associated with the generation and sale of landfill gas and ~~decreased recyclable commodity sales~~other revenue increases of ~~$2.0 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products.~~$0.6 million.

Revenue in our Canada segment ~~increased $3.8~~decreased $31.2 million, or ~~0.7%~~5.7%, to $516.5 million for the nine months ended September 30, 2020, from $547.7 million for the nine months ended September 30, ~~2019, from $543.9 million for the nine months ended September 30, 2018.~~2019. The components of the ~~increase~~decrease consisted of ~~net price increases~~solid waste volume decreases of ~~$32.4~~$50.9 million ~~revenue growth from acquisitions closed during, or subsequent~~due to the ~~nine months ended September 30, 2018,~~net impact of ~~$4.5 million~~COVID-19 economic disruptions driving decreases in commercial collection, roll off collection, transfer station and ~~$0.2 million of other revenue increases, partially offset by~~landfill volumes and a decrease of ~~$16.6~~$9.6 million resulting from a lower average foreign currency exchange rate in effect during the comparable reporting, ~~periods, a decrease~~partially offset by net price increases of ~~$9.1~~$27.6 million, ~~resulting~~net revenue growth from reduced demand causing a reduction in the prices for renewal energy credits associated with the generation of landfill gas, decreased recyclable commodity sales of $4.5 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products and solid waste volume decreases of $3.1 million primarily associated with losses in residential revenue resulting from the non-renewal of certain contracts acquired in the Progressive Waste acquisition.

~~Revenue in our E&P segment increased $1.1 million,~~acquisitions closed during, or ~~1.6%,~~subsequent to, $66.3 million for the three months ended September 30, 2019, from $65.2 million for the three months ended September 30, 2018. Revenue in our E&P segment increased $12.1 million, or 6.7%, to $193.7 million for the nine months ended September 30, 2019 ~~from $181.6~~of $0.6 million ~~for the nine months ended September 30, 2018. The~~and other revenue increases ~~were due to increased drilling activity and E&P disposal volumes at the majority~~ of ~~basins we operate.~~ $1.1 million.

Segment EBITDA

Segment EBITDA in our Western segment increased ~~$3.9~~$11.0 million, or ~~4.5%~~12.2%, to $101.1 million for the three months ended September 30, 2020, from $90.1 million for the three months ended September 30, ~~2019, from $86.2 million for the three months ended September 30, 2018.~~2019. The increase was due primarily to an increase in revenues of ~~$18.2~~$12.0 million, ~~and~~ a decrease in ~~corporate overhead~~taxes on revenues of $4.9 million from the reversal of recorded liabilities for certain fees and exactions at Chiquita Canyon landfill due to our successful challenge of increases assessed in prior periods, a decrease in intermodal rail expenses of $2.1 million due to a reduction in cargo volume, a decrease in fuel expense ~~allocations~~ of $1.1 million due to a decrease in the ~~overhead allocation rate,~~price of diesel fuel and declines in the volume of fuel used in our operations, a decrease in 401(k) matching expenses of $1.1 million as we suspended our 401(k) match as of June 1, 2020 and a collective decrease in travel, meeting, training, and community activity expenses of $0.9 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, partially offset by a net $5.4 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in ~~direct~~corporate overhead expense allocations of $3.3 million due to an increase in the overhead

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allocation rate, an increase in recurring taxes on revenues of $2.2 million attributable to price-led increases in residential collection and ~~administrative~~landfill municipal solid waste revenues and other expense increases of $0.2 million.

Segment EBITDA in our Western segment increased $14.0 million, or 5.5%, to $267.5 million for the nine months ended September 30, 2020, from $253.5 million for the nine months ended September 30, 2019. The increase was due primarily to an increase in revenues of $27.5 million, a decrease in taxes on revenues of $4.9 million from the reversal of recorded liabilities for certain fees and exactions at Chiquita Canyon landfill due to our successful challenge of increases assessed in prior periods, a decrease in intermodal rail expenses of $4.0 million due to a reduction in cargo volume, a collective decrease in travel, meeting, training, and community activity expenses of $2.6 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, a decrease in employee medical benefits expenses of $2.3 million due to a reduction in medical visits, a decrease in fuel expense of $2.3 million due to a decrease in the price of diesel fuel and a decrease in 401(k) matching expenses of $1.5 million as we suspended our 401(k) match as of June 1, 2020, partially offset by a net $6.2 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in labor expenses of ~~$4.4~~$4.6 million due primarily to employee pay rate increases, an additional calendar and business day in the current year period due to leap year, as well as emergency wages and other COVID-19-related employee costs, an increase in recurring taxes on revenues of $4.5 million attributable to price-led increases in residential collection and landfill municipal solid waste revenues, an increase in corporate overhead expense allocations of $3.2 million due to an increase in the overhead allocation rate, an increase of ~~$2.1~~$2.4 million resulting from ~~higher costs per ton charged by third party processors~~the payment of ~~recyclable commodities,~~supplemental bonuses to non-management employees to provide financial assistance associated with the impact of COVID-19, an increase in third party disposal expenses of ~~$2.0~~$2.2 million due primarily to disposal rate increases and higher residential ~~and commercial~~ collection ~~volumes disposed at third party facilities,~~tonnage, an increase in ~~taxes on revenues~~landfill site maintenance expenses of ~~$2.0~~$1.3 million due primarily to ~~higher landfill and collection revenues,~~increased daily cover costs, an increase in property tax expenses of $1.2 million due primarily to reassessed values of certain landfills, an increase in expenses for auto and workers’ compensation claims of $1.2 million due primarily to non-recurring adjustments recorded in the prior year period to decrease projected losses on outstanding claims originally recorded prior to 2019 and other expense increases of $4.3 million.

Segment EBITDA in our Eastern segment increased $2.9 million, or 3.3%, to $91.0 million for the three months ended September 30, 2020, from $88.1 million for the three months ended September 30, 2019. The increase was due primarily to an increase in revenues of $16.4 million from organic growth and acquisitions, $10.0 million of collective decreases in third-party disposal expenses, third-party trucking expenses, labor expenses and ~~transportation~~expenses for processing recyclable commodities attributable to declines in solid waste and commercial recycling volumes resulting primarily from economic disruptions caused by COVID-19, a decrease in fuel expense of $2.1 million due to a decrease in the price of diesel fuel and declines in the volume of fuel used in our operations, a decrease in employee medical benefits expenses of $1.6 million due to a reduction in medical visits, a decrease in 401(k) matching expenses of $1.1 million as we suspended our 401(k) match as of June 1, 2020, a collective decrease in travel, meeting, training, and community activity expenses of $1.0 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, an increase to EBITDA of $0.9 million from the impact of operations disposed of subsequent to the three months ended September 30, 2019 and other expense decreases of $0.6 million, partially offset by a net $23.8 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in corporate overhead expense allocations of $4.7 million due to an increase in the overhead allocation rate, an increase in truck, container, equipment and facility maintenance and repair expenses of $1.2 million due to an increase in facility repairs and the completion of certain vehicle and equipment maintenance activities that were postponed in the second quarter of 2020 and an increase in landfill operating expenses of $1.1 million due primarily to increased ~~rates charged~~gas system repairs.

Segment EBITDA in our Eastern segment increased $8.2 million, or 3.3%, to $258.3 million for the nine months ended September 30, 2020, from $250.1 million for the nine months ended September 30, 2019. The increase was due primarily to an increase in revenues of $59.2 million from organic growth and acquisitions, $26.0 million of collective decreases in third-party disposal expenses, third-party trucking expenses, labor expenses, expenses for processing recyclable commodities and taxes on revenues attributable to declines in solid waste and commercial recycling volumes resulting primarily from economic disruptions caused by ~~third parties~~COVID-19, a decrease in fuel expense of $5.5 million due to a decrease in the price of diesel fuel and declines in the volume of fuel used in our operations, a decrease in employee medical benefits expenses of $5.3 million due to a reduction in medical visits, a collective decrease in travel, meeting, training, and community activity expenses of $1.8 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, an increase to EBITDA of $1.5 million

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from the impact of operations disposed of during the nine months ended September 30, 2020, a decrease in 401(k) matching expenses of $1.3 million as we suspended our 401(k) match as of June 1, 2020 and other expense decreases of $1.9 million, partially offset by a net $78.0 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in corporate overhead expense allocations of $6.3 million due to an increase in the overhead allocation rate, an increase of $2.7 million resulting from the payment of supplemental bonuses to non-management employees to provide ~~trucking and transportation services,~~financial assistance associated with the impact of COVID-19, an increase in expenses for uncollectible accounts receivable of $2.5 million due to customers experiencing financial difficulties resulting from the economic impact of COVID-19, an increase in truck, container, equipment and facility maintenance and repair expenses of $1.5 million due to an increase in facility repairs as well as parts and service rate increases, ~~and variability impacting~~an increase in subcontracted hauling services of $1.2 million due to outsourcing the ~~timing~~servicing of ~~major repairs, a $1.3 million~~certain non-strategic collection customers to third party haulers, an increase in expenses for auto and workers’ compensation claims of $1.1 million due primarily to ~~higher~~non-recurring adjustments recorded in the prior year period to decrease projected losses on outstanding claims occurring prior to 2019 and an increase in ~~401(k) matching~~landfill operating expenses of ~~$0.5~~$1.0 million due primarily to ~~our increasing the maximum matching contribution rate to our employees.~~increased gas system repairs.

Segment EBITDA in our ~~Western~~Central segment increased ~~$13.5~~$1.2 million, or ~~5.6%~~1.4%, to $253.5 million for the nine months ended September 30, 2019, from $240.0 million for the nine months ended September 30, 2018. The increase was due primarily to an increase in revenues of $41.3 million, a decrease in intermodal expenses of $3.3 million resulting from a decrease in intermodal cargo volume due to customer losses and a decrease in corporate overhead expense allocations of $2.1 million due to a decrease in the overhead allocation rate, partially offset by an increase in direct and administrative labor expenses of $8.2 million due primarily to employee pay rate increases, an increase in taxes on revenues of $5.2 million due primarily to higher landfill and collection revenues, an increase in disposal expenses of $4.2 million due primarily to higher residential and commercial collection volumes disposed at third party facilities, an increase of $3.3 million resulting from higher costs per ton charged by third party processors of recyclable commodities, an increase in third-party trucking and transportation expenses of $3.2 million due primarily to increased rates charged by third parties to provide trucking and transportation services, an increase in truck, container, equipment and facility maintenance and

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repair expenses of $2.9 million due to parts and service rate increases and variability impacting the timing of major repairs, a $2.2 million increase in expenses for auto and workers’ compensation claims due primarily to higher adjustments recorded in the prior year period to decrease projected losses on outstanding claims, an increase in 401(k) matching expenses of $1.7 million due to our increasing the maximum matching contribution rate to our employees and $2.3 million of other net expense increases.

~~Segment EBITDA in our Eastern segment increased $5.4 million, or 6.5%, to $88.1~~$82.9 million for the three months ended September 30, ~~2019,~~2020, from ~~$82.7~~$81.7 million for the three months ended September 30, ~~2018.~~2019. The increase was due primarily to ~~an increase~~$2.9 million of collective decreases in ~~revenues~~third-party disposal expenses and third-party trucking expenses attributable to declines in solid waste volumes resulting from economic disruptions caused by COVID-19, a decrease in expenses for uncollectible accounts receivable of ~~$46.0~~$1.2 million due primarily to the current period collection of certain accounts deemed uncollectible in prior periods, a decrease in 401(k) matching expenses of $1.1 million as we suspended our 401(k) match as of June 1, 2020, a decrease in employee medical benefits expenses of $0.8 million due to a reduction in medical visits, a decrease in fuel expense of $0.8 million due to a decrease in the price of diesel fuel and declines in the volume of fuel used in our operations, a collective decrease in travel, meeting, training, and community activity expenses of $0.6 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities and other expense decreases of $1.1 million, partially offset by a net ~~$31.2~~$3.5 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in ~~direct~~corporate overhead expense allocations of $2.3 million due to an increase in the overhead allocation rate and ~~administrative~~a decrease in revenues of $1.5 million.

Segment EBITDA in our Central segment increased $16.4 million, or 7.5%, to $235.7 million for the nine months ended September 30, 2020, from $219.3 million for the nine months ended September 30, 2019. The increase was due primarily to an increase in revenues of $27.4 million, $5.3 million of collective decreases in third-party disposal expenses and third-party trucking expenses attributable to declines in solid waste volumes resulting from economic disruptions caused by COVID-19, a decrease in employee medical benefits expenses of $3.6 million due to a reduction in medical visits, a decrease in expenses for uncollectible accounts receivable of $1.9 million due primarily to the current period collection of certain accounts deemed uncollectible in prior periods, a decrease in fuel expense of $1.6 million due to a decrease in the price of diesel fuel, a decrease in 401(k) matching expenses of $1.3 million as we suspended our 401(k) match as of June 1, 2020, a collective decrease in travel, meeting, training, and community activity expenses of $1.2 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities and other expense decreases of $0.7 million, partially offset by a net $15.4 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in labor expenses of ~~$2.8~~$5.1 million due primarily to employee pay rate increases, an additional calendar and business day in the current year period due to leap year, as well as emergency wages and other COVID-19-related employee costs exceeding decreases in hours worked attributable to solid waste volume reductions resulting from COVID-19 economic disruptions, an increase in corporate overhead expense allocations of $2.7 million due to an increase in the overhead allocation rate, an increase of ~~$1.9~~$2.3 million resulting from ~~higher costs per ton charged by third party processors~~the payment of ~~recyclable commodities, a $1.8 million~~supplemental bonuses to non-management employees to provide financial assistance associated with the impact of COVID-19 and an increase in expenses for auto and workers’ compensation claims of $1.1 million due primarily to ~~higher~~non-recurring adjustments recorded in the prior year period to decrease projected losses on outstanding ~~claims,~~claims.

Segment EBITDA in our Southern segment decreased $31.8 million, or 28.1%, to $81.4 million for the three months ended September 30, 2020, from $113.2 million for the three months ended September 30, 2019. The decrease was due to a decrease in E&P revenues of $41.6 million, an increase in corporate overhead expense allocations to our solid waste operations of $3.3 million due to an increase in the overhead allocation rate, an increase in truck, container, equipment and facility maintenance and repair expenses at our solid waste operations of ~~$1.6~~$2.4 million due to an increase in facility repairs

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as well as parts and service rate increases, ~~and variability impacting the timing of major repairs,~~ an increase in ~~leachate~~labor expenses at our solid waste operations of $1.6 million due primarily to employee pay rate increases, an increase in expenses for uncollectible accounts receivable at our E&P operations of $1.5 million due to customers experiencing financial difficulties resulting from the economic impact of COVID-19 and $0.7 million of other net expense increases at our solid waste operations, partially offset by a decrease in 401(k) matching expenses at our solid waste operations of $1.9 million as we suspended our 401(k) match as of June 1, 2020, a decrease in third party disposal expenses at our solid waste operations of $1.4 million due primarily to declines in commercial and roll off collection volumes, a decrease in employee medical benefits expenses at our solid waste operations of $1.2 million due to a reduction in medical visits, a decrease in fuel expense at our solid waste operations of $0.9 million due to a decrease in the price of diesel fuel and declines in the volume of fuel used in our operations, a decrease in expenses for auto and workers’ compensation claims at our solid waste operations of $0.8 million due primarily to ~~higher costs per gallon for leachate treatment~~adjustments recorded in the current year period to decrease projected losses on outstanding claims originally recorded in prior periods, a collective decrease in travel, meeting, training, and community activity expenses at our solid waste operations of $0.7 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, an increase in ~~401(k) matching~~revenues at our solid waste operations of $0.7 million and the following expense decreases at our E&P operations which were directly attributable to the decline in E&P volumes and corresponding decline in E&P revenues: a decrease in labor expenses of $3.0 million; a decrease in equipment and property repair and maintenance expenses of $2.8 million; a decrease in operating activities outsourced to third-parties of $2.0 million; a decrease in fuel expense of $0.9 million; a decrease in landfill operating supplies of $0.9 million; a decrease in third-party trucking and transportation services of $0.6 million; a decrease in royalty expenses paid on revenues of $0.6 million; a decrease in travel, meetings and training expenses of $0.5 million ~~due to our increasing the maximum matching contribution rate to our employees.~~and $0.4 million of other net expense decreases.

Segment EBITDA in our ~~Eastern~~Southern segment ~~increased $27.3~~decreased $50.3 million, or ~~12.3%~~15.4%, to ~~$250.1~~$276.8 million for the nine months ended September 30, ~~2019,~~2020, from ~~$222.8~~$327.1 million for the nine months ended September 30, ~~2018.~~2019. The ~~increase~~decrease was due ~~primarily~~ to ~~an increase in revenues of $158.4 million and~~ a decrease in ~~disposal expenses~~E&P revenues of ~~$2.7~~$72.7 million, ~~due to improved internalization of collected volumes into our disposal locations, partially offset by~~ a net ~~$96.9~~$8.3 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in truck, container, equipment and facility maintenance and repair expenses at our solid waste operations of ~~$6.1~~$7.8 million due to an increase in facility repairs as well as parts and service rate increases, ~~and variability impacting the timing of major repairs,~~ an increase in ~~direct~~expenses for auto and ~~administrative~~workers’ compensation claims of $6.7 million at our solid waste operations due primarily to increases in our deductibles for auto claims, higher claims severity in the current year period and adjustments recorded in the prior year period to decrease projected losses on outstanding claims originally recorded prior to 2019, an increase in labor expenses at our solid waste operations of $6.0 million due primarily to employee pay rate increases, an increase ~~in third-party trucking and transportation expenses~~ of ~~$5.4 million due primarily to increased rates charged by third parties to provide trucking and transportation services, an increase of $4.8~~$3.6 million resulting from ~~higher costs per ton charged by third party processors~~the payment of ~~recyclable commodities, an increase in leachate disposal expenses~~supplemental bonuses to non-management employees at our solid waste operations to provide financial assistance associated with the impact of $3.5 million due to increased precipitation generating higher leachate volumes as well as higher costs per gallon for leachate treatment, an increase in expenses for auto and workers’ compensation claims of $3.2 million due primarily to higher adjustments recorded in the prior year period to reduce projected losses on outstanding claims,COVID-19, an increase in corporate overhead expense allocations to our solid waste operations of ~~$2.1~~$3.5 million due to ~~higher revenues for which overhead allocations are based,~~ an increase in ~~diesel fuel expense of $1.7 million due primarily to~~ the ~~prior year period benefiting from a favorable diesel fuel hedge agreement that expired in December 2018,~~overhead allocation rate, an increase in ~~401(k) matching~~third party trucking and transportation expenses of $2.2 million at our solid waste operations due to increased landfill special waste volumes requiring transportation services to our disposal sites, an increase in expenses for uncollectible accounts receivable at our E&P operations of $1.9 million due to customers experiencing financial difficulties resulting from the economic impact of COVID-19, an increase in leachate expense at our solid waste operations of $1.5 million due to higher precipitation at our ~~increasing the maximum matching contribution rate to our employees, an increase~~sites in compressed natural gas expense of $0.9 million due primarily to a non-recurring reduction in expense during the prior year period resulting from recording retroactive tax credits associated with purchases of compressed natural gas fuelFlorida and ~~$1.7~~$0.4 million of other net expense ~~increases.~~

~~Segment EBITDA in~~increases at our Southern segment increased $7.2 million, or 10.3%, to $77.4 million for the three months ended September 30, 2019, from $70.2 million for the three months ended September 30, 2018. The increase was due tosolid waste operations, partially offset by an increase in revenues at our solid waste operations of ~~$28.0~~$21.8 million, ~~from organic growth and acquisitions and~~ a decrease in third party disposal expenses at our solid waste operations of $1.4 million due to improved internalization of waste collected at certain operating locations in Florida and Louisiana, partially offset by a net $11.6 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in direct and administrative labor expenses of $3.9$6.3 million due primarily to declines in commercial and roll off collection volumes, a decrease in employee ~~pay rate increases, an increase in truck, container, equipment and facility maintenance and repair~~medical benefits expenses at our solid waste operations of ~~$2.0~~$5.4 million due to ~~parts~~a reduction in medical visits, a decrease in 401(k) matching expenses at our solid waste operations of $2.4 million as we suspended our 401(k) match as of June 1, 2020, a collective decrease in travel, meeting, training, and ~~service rate increases~~community activity expenses at our solid waste operations of $2.3 million due to shelter at home and ~~variability impacting~~other restrictions on our employees due to COVID-19 resulting in the ~~timing~~cancellation of ~~major repairs, an increase~~non-essential off-site activities, a decrease in ~~third-party trucking~~fuel expense at our solid waste operations of $1.6 million due to a decrease in the price of diesel fuel and ~~transportation expenses~~declines in the volume of fuel used in our operations, a decrease in compressed natural gas expense at our solid waste operations of $1.5 million due primarily to ~~increased rates charged by third parties~~the recognition in 2020 of tax credits associated with the purchase of compressed natural gas and the following expense decreases at our E&P operations which were directly attributable to ~~provide~~the decline in E&P volumes and corresponding decline in E&P revenues: a decrease in equipment and property repair and maintenance expenses of $4.2 million; a decrease in operating activities outsourced to third-parties of $3.6 million; a decrease in labor expenses of $3.4 million; a decrease in third-party trucking and transportation services ~~an increase~~of $3.2 million; a decrease in ~~401(k) matching expenses of $0.8 million due to our increasing the maximum matching contribution rate to our employees, an increase in diesel~~ fuel expense of ~~$0.6 million due primarily to the prior year period benefiting from purchasing a portion of our diesel fuel needs under a favorable fuel hedge agreement that expired in December 2018,~~$2.0 million; a decrease ~~to EBITDA~~in royalty expenses paid on revenues of ~~$0.3 million from the impact~~$1.6 million; a decrease in landfill operating supplies of ~~operations disposed of during, or subsequent to, the three months ended September 30, 2018 and $1.5 million of other net expense increases.~~$1.3 million; a decrease in

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Segment EBITDA in our Southern segment increased $18.4 million, or 8.9%, to $226.3 million for the nine months ended September 30, 2019, from $207.9 million for the nine months ended September 30, 2018. The increase was due to an increase in revenuestravel, meetings and training expenses of ~~$69.8 million from organic growth and acquisitions,~~$1.2 million; a decrease in ~~third party disposal~~equipment rental expenses of ~~$5.7~~$0.6 million ~~due to improved internalization of waste collected at certain operating locations in Florida~~ and ~~Louisiana, a decrease in corporate overhead expense allocations of $2.1 million due to a decrease in the overhead allocation rate and $0.3~~$1.9 million of other net expense decreases, partially offset by a net $27.6 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in direct and administrative labor expenses of $8.9 million due primarily to employee pay rate increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $7.3 million due to parts and service rate increases and variability impacting the timing of major repairs, an increase in third-party trucking and transportation expenses of $4.7 million due primarily to increased rates charged by third parties to provide trucking and transportation services, an increase in 401(k) matching expenses of $2.5 million due to our increasing the maximum matching contribution rate to our employees, an increase in leachate disposal expenses of $1.8 million due to increased precipitation generating higher leachate volumes as well as higher costs per gallon for leachate treatment, a decrease to EBITDA of $1.5 million from the impact of operations disposed of during, or subsequent to, the nine months ended September 30, 2018, an increase in diesel fuel expense of $1.5 million due primarily to the prior year period benefiting from purchasing a portion of our diesel fuel needs under a favorable fuel hedge agreement that expired in December 2018, an increase in compressed natural gas expense of $1.4 million due primarily to a non-recurring reduction in expense during the prior year period resulting from recording retroactive tax credits associated with purchases of compressed natural gas fuel, an increase in equipment and facility rental expenses of $1.3 million due primarily to increased truck rental expenses and the adoption on January 1, 2019 of new accounting standards associated with leases and an increase of $1.0 million resulting from higher costs per ton charged by third party processors of recyclable commodities.decreases.

Segment EBITDA in our ~~Central~~Canada segment increased ~~$10.4~~$5.7 million, or ~~14.7%~~8.6%, to ~~$81.7~~$72.5 million for the three months ended September 30, ~~2019,~~2020, from $71.3 million for the three months ended September 30, 2018. The increase was due primarily to an increase in revenues of $40.2 million, partially offset by a net $21.6 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in direct and administrative labor expenses of $2.9 million due primarily to employee pay rate increases, an increase in third-party trucking and transportation expenses of $1.9 million due primarily to transportation associated with increased landfill special waste volumes and increased rates charged by third parties to provide trucking and transportation services, an increase in truck, container, equipment and facility maintenance and repair expenses of $0.4 million due to the variability and timing of major repairs, an increase in 401(k) matching expenses of $0.4 million due to our increasing the maximum matching contribution rate to our employees and $2.6 million of other net expense increases.

Segment EBITDA in our Central segment increased $24.3 million, or 12.4%, to $219.3 million for the nine months ended September 30, 2019, from $195.0 million for the nine months ended September 30, 2018. The increase was due primarily to an increase in revenues of $98.8 million, partially offset by a net $55.0 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in direct and administrative labor expenses of $6.1 million due primarily to employee pay rate increases, an increase in third-party trucking and transportation expenses of $5.9 million due primarily to outsourcing transportation services to third party operators at certain locations, transportation associated with increased landfill special waste volumes and increased rates charged by third parties to provide trucking and transportation services, an increase in disposal expenses of $1.8 million due to increased disposal rates and strategic adjustments to redirect certain collected waste to third party disposal facilities, an increase in truck, container, equipment and facility maintenance and repair expenses of $1.4 million due to the variability and timing of major repairs, an increase in 401(k) matching expenses of $1.4 million due to our increasing the maximum matching contribution rate to our employees, an increase in diesel fuel expense of $1.2 million due primarily to the prior year period benefiting from purchasing a portion of our diesel fuel needs under a favorable fuel hedge agreement that expired in December 2018, an increase in corporate overhead expense allocations of $1.0 million due to higher revenues for which overhead allocations are based and an increase in compressed natural gas expense of $0.7 million due primarily to a non-recurring reduction in expense during the prior year period resulting from recording retroactive tax credits associated with purchases of compressed natural gas fuel.

~~Segment EBITDA in our Canada segment decreased $2.0 million, or 2.9%, to~~ $66.8 million for the three months ended September 30, ~~2019, from $68.8 million for the three months ended September 30, 2018.~~2019. The ~~decrease~~increase was

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comprised of ~~a decrease~~an increase of ~~$1.3~~$6.2 million assuming foreign currency parity during the comparable reporting periods and a decrease of ~~$0.7~~$0.5 million from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods. The ~~$1.3~~$6.2 million ~~decrease,~~increase, which assumes foreign currency parity, was due ~~primarily~~ to ~~an increase~~a decrease in ~~direct labor expenses~~subcontracted hauling services at our solid waste operations of ~~$2.7~~$2.8 million due primarily to the impact of reversing expenses accrued in a ~~reduction~~prior period and incurring less expenses in ~~open employment positions~~the current period associated with estimated equipment charge overages related to an outsourced collection contract, $2.4 million of collective decreases in third-party disposal expenses and ~~employee pay rate increases, an increase~~third-party trucking expenses attributable to declines in ~~truck, container, equipment and facility maintenance and repair~~solid waste volumes resulting from economic disruptions caused by COVID-19, a decrease in labor expenses of ~~$2.2~~$1.7 million due to the ~~variability and timing~~receipt of ~~major repairs and an increase~~a government subsidy reimbursing us for certain payroll expenditures remitted to our employees during the COVID-19 pandemic, a decrease in ~~third-party disposal expenses~~fuel expense of ~~$2.0~~$1.5 million due to ~~higher disposal rates charged by operators,~~a decrease in the price of diesel fuel and declines in the volume of fuel used in our operations, a decrease in insurance premium expense of $1.2 million due primarily to refunds received in the current period resulting from favorable workers’ compensation claim incident totals and a decrease in expenses for uncollectible accounts receivable of $1.2 million due primarily to the current period collection of certain accounts deemed uncollectible in prior periods, partially offset by ~~an increase~~a decrease in revenues of ~~$5.6~~$4.4 million and other expense increases of $0.2 million.

Segment EBITDA in our Canada segment decreased ~~$1.7~~$8.1 million, or ~~0.9%~~4.2%, to $185.6 million for the nine months ended September 30, 2020, from $193.7 million for the nine months ended September 30, ~~2019, from $195.4 million for the nine months ended September 30, 2018.~~2019. The decrease was comprised of ~~$5.8~~a decrease of $4.8 million assuming foreign currency parity during the comparable reporting periods and a decrease of $3.3 million from a ~~reduction~~decrease in the average foreign currency exchange rate in effect during the comparable reporting ~~periods, partially offset by an increase of $4.1 million assuming foreign currency parity during the comparable reporting~~ periods. The ~~$4.1~~$4.8 million ~~increase,~~decrease, which assumes foreign currency parity, was due primarily to a decrease in revenues of $21.6 million, additional expenses of $1.2 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of COVID-19 and an increase in ~~revenues~~other net expenses of ~~$20.4~~$1.3 million, partially offset by ~~an increase~~collective decreases totaling $7.2 million in ~~direct labor~~third-party disposal expenses and third-party trucking expenses attributable to declines in solid waste volumes resulting primarily from economic disruptions caused by COVID-19, a decrease in fuel expense of ~~$6.6~~$4.4 million due to declines in the market price of diesel fuel, a decrease in subcontracted hauling services at our solid waste operations of $3.2 million due primarily to the impact of reversing expenses accrued in a ~~reduction~~prior period and incurring less expenses in ~~open employment positions and employee pay rate increases,~~the current period associated with estimated equipment charge overages related to an ~~increase~~outsourced collection contract, a decrease in ~~truck, container, equipment and facility maintenance and repair~~labor expenses of ~~$4.6~~$1.7 million due to the ~~variability~~receipt of a government subsidy reimbursing us for certain payroll expenditures remitted to our employees during the COVID-19 pandemic, a decrease in insurance premium expense of $1.5 million due primarily to refunds received in the current period resulting from favorable workers’ compensation claim incident totals and ~~timing of major repairs, an increase~~a collective decrease in ~~third-party disposal~~travel, meeting, training, and community activity expenses of ~~$4.5~~$1.3 million due to ~~higher disposal rates charged by operators~~shelter at home and other ~~expense increases~~restrictions on our employees due to COVID-19 resulting in the cancellation of ~~$0.6 million.~~non-essential off-site activities.

Segment EBITDA ~~in our E&P segment increased $0.7~~at Corporate decreased $3.7 million, ~~or 2.0%,~~ to ~~$35.8~~a loss of $4.1 million for the three months ended September 30, ~~2019,~~2020, from $35.1 million for the three months ended September 30, 2018. The increase was due primarily to an increase in revenues of $1.1 million, a decrease of $1.2 million in expenses for uncollectible accounts receivable resulting primarily from adjustments to prior period reserve estimates and other expense decreases of $1.0 million, partially offset by an increase in direct labor expenses of $0.9 million due to employee pay rate increases and increased headcount to support higher disposal volumes, an increase in truck, container, equipment and facility maintenance and repair expenses of $0.9 million due to the variability and timing of major repairs and an increase in subcontracted operating expenses of $0.8 million due primarily to subcontracting certain operating activities to third parties.

Segment EBITDA in our E&P segment increased $5.8 million, or 6.1%, to $100.8 million for the nine months ended September 30, 2019, from $95.0 million for the nine months ended September 30, 2018. The increase was due primarily to an increase in revenues of $12.1 million, partially offset by an increase in subcontracted operating expenses of $3.3 million due primarily to subcontracting certain operating activities to third parties, an increase in direct labor expenses of $1.9 million due to employee pay rate increases and increased headcount to support higher disposal volumes and an increase in truck, container, equipment and facility maintenance and repair expenses of $1.1 million due to the variability and timing of major repairs.

~~Segment EBITDA at Corporate increased $7.9 million, to~~ a loss of $0.4 million for the three months ended September 30, ~~2019, from a loss of $8.3 million for the three months ended September 30, 2018.~~2019. The ~~increase~~decrease was due to ~~a decrease~~an increase in accrued cash incentive compensation expense to our management and non-management employees of ~~$5.0~~$9.5 million, in equity-based compensation expenses associated with adjusting common shares of Waste Connections, Inc. held in our deferred compensation plan by certain key executives to fair value as a result of the shares being exchanged for other investment options, a further decreasean increase in equity-based compensation expenses of ~~$2.5~~$2.4 million resulting primarily from an increased value of our recurring grant of restricted and performance share units to our personnel and adjustments to the amount of performance-based restricted share units granted in 2018 that are estimated to ultimately vest, an increase in share-based compensation expenses of $1.7 million due primarily to increased share price volatility in the current period for 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 based on changes in fair value, a decrease of $3.6 million in professional fees expense resulting primarily from reduced legal expenses resulting from the settlement of certain legal matters subsequent to September 30, 2018 and $0.9 million of other net expense decreases, partially offset by an increase in 401(k) matching expenses of $1.3 million due to credits recorded in the prior year period from employee forfeitures, a decrease in corporate overhead allocated to our segments of $0.8 million due to a reduction in allocable expenses, an increase in direct acquisition expenses of ~~$0.7~~$1.3 million due to ~~higher~~an increase in acquisition activity, an increase in deferred compensation expenses of $1.2 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked, an increase in software licenses and subscriptions expenses of $0.9 million due primarily to the addition of new sales and customer service applications, an increase of $0.7 million in equity-based compensation expenses ~~of $0.7 million~~ associated with fair value adjustments to Company common shares held in our ~~annual recurring grant~~deferred compensation plan by certain key executives as a result of ~~restricted share units to our personnel~~the shares being exchanged for other investment options and $1.8 million of other net expense increases, partially offset

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by an increase in ~~management training expenses~~corporate overhead allocated through charges to our segments of ~~$0.6~~$14.0 million due to an ~~expansion~~increase in expenses qualifying for allocation rates and a collective decrease in travel, meeting, training, office supplies and community activity expenses of $1.8 million due to shelter at home and other restrictions on our ~~management training curriculum.~~employees due to COVID-19 resulting in the cancellation of non-essential off-site activities.

Segment EBITDA at Corporate increased ~~$2.6~~$1.3 million, to a loss of $10.5 million for the nine months ended September 30, 2020, from a loss of $11.8 million for the nine months ended September 30, ~~2019, from a loss of $14.4 million for the nine months ended September 30, 2018.~~2019. The increase was due to an increase in corporate overhead allocated through charges to our segments of $16.1 million due to an increase in expenses qualifying for allocation, a collective decrease in travel, meeting, training, office supplies and community activity expenses of $6.0 million due to shelter at home and other restrictions on our employees due to COVID-19 resulting in the cancellation of non-essential off-site activities, a decrease in direct acquisition expenses of ~~$10.0~~$3.6 million due to a decline in ~~professional fees expense resulting primarily from reduced legal expenses resulting from the settlement~~

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~~of certain legal matters subsequent to September 30, 2018,~~acquisition activity, a decrease ~~of $5.0 million~~ in ~~equity-based~~deferred compensation expenses ~~associated with adjusting common shares~~ of ~~Waste Connections, Inc. held in our deferred compensation plan by certain key executives to fair value~~$3.0 million as a result of decreases in the ~~shares being exchanged for other investment options,~~market value of investments to which employee deferred compensation liability balances are tracked, a ~~further~~ decrease in ~~equity-based~~professional fees of $2.9 million due primarily to work on legal matters being postponed resulting from temporary court closures and a decrease in third party tax consulting expenses and a decrease in share-based compensation expenses of ~~$1.4~~$1.7 million due primarily to decreased share price volatility and less outstanding shares in the current period for 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 based on changes in fair value, partially offset by an increase in accrued cash incentive compensation expense to our management and non-management employees of $18.4 million, an increase of $4.0 million in equity-based compensation expenses associated with fair value adjustments to Company common shares held in our deferred compensation plan by certain key executives as a ~~decrease~~result of the shares being exchanged for other investment options, an increase in ~~integration-related~~software licenses and subscriptions expenses of ~~$2.8~~$2.2 million ~~incurred~~due primarily to the addition of new sales and customer service applications, an increase in ~~the prior year period resulting from the acquisition~~payroll and payroll related expenses of ~~Progressive Waste, partially offset by~~$2.1 million due to annual pay increases and increased employee termination pay, an increase in equity-based compensation expenses of ~~$6.7~~$1.1 million ~~associated with~~resulting primarily from the impact of an increased value of our ~~annual~~ recurring grant of restricted and performance share units to our personnel, ~~an increase in direct acquisition expenses~~net of ~~$3.2 million due~~adjustments to ~~higher acquisition activity, an increase in deferred compensation expenses~~the amount of ~~$2.0 million as a result of increases in the market value of investments~~performance-based restricted share units estimated to which employee deferred compensation liability balances are tracked, an increase in 401(k) matching expenses of $1.1 million due to credits recorded in the prior year period from employee forfeitures, an increase in management training expenses of $1.1 million due to an expansion of our management training curriculum, an increase in accrued recurring cash incentive compensation expense to our management of $1.0 millionultimately vest, and ~~$1.5~~$4.2 million of other net expense increases.

LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth certain cash flow information for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in thousands of U.S. dollars):

Nine Months Ended


September 30,

2019

2018

Net cash provided by operating activities

$
1,185,430

$
1,037,792

Net cash used in investing activities

(885,672)

(870,446)

Net cash used in financing activities

(308,039)

(395,689)

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

143

(528)

Net decrease in cash, cash equivalents and restricted cash

(8,138)

(228,871)

Cash, cash equivalents and restricted cash at beginning of period

403,966

556,467

Plus: change in cash held for sale

—

192

Cash, cash equivalents and restricted cash at end of period

$
395,828

$
327,788


	Nine Months Ended
	September 30,
	2020		2019
Net cash provided by operating activities	$	1,185,573	$	1,185,430
Net cash used in investing activities		(650,066)		(885,672)
Net cash used in financing activities		(4,093)		(308,039)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		980		143
Net increase (decrease) in cash, cash equivalents and restricted cash		532,394		(8,138)
Cash, cash equivalents and restricted cash at beginning of period		423,221		403,966
Cash, cash equivalents and restricted cash at end of period	$	955,615	$	395,828

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Operating Activities Cash Flows

For the nine months ended September 30, 2020, net cash provided by operating activities was $1.186 billion. For the nine months ended September 30, 2019, net cash provided by operating activities was $1.185 billion. ~~For the nine months ended September 30, 2018, net cash provided by operating activities was $1.038 billion.~~ The ~~$147.6~~$0.1 million increase was due primarily to the following:

~~Increase in earnings —~~ Our increase in net cash provided by operating activities was favorably impacted by $110.6 million from an increase in net income, excluding depreciation, intangible amortization, lease amortization, deferred taxes, equity based compensation, adjustments to and payments of contingent consideration recorded in earnings and impairments and other operating items, due primarily to the impact of acquisitions closed subsequent to September 30, 2018 and price-led earnings growth at certain solid waste segments.

~~Accounts payable and accrued liabilities —~~ Our increase in net cash provided by operating activities was favorably impacted by $61.2 million from accounts payable and accrued liabilities due primarily to period end timing of payments to vendors for goods and services.

Accounts receivable — Our increase in net cash provided by operating activities was favorably impacted by ~~$10.5~~$95.0 million from accounts receivable, ~~due~~as changes in accounts receivable, net of acquisitions, resulted in an increase to ~~improved collection results.~~operating cash flows of $46.0 million for the nine months ended September 30, 2020, compared to a decrease to operating cash flows of $49.1 million for the nine months ended September 30, 2019. During the nine months ended September 30, 2020, net price increases of $168.0 million were offset by volume decreases in our solid waste business and E&P business of $199.8 million and $75.2 million, respectively. The net decrease in revenues resulting from volume losses in excess of price increases during the nine months ended September 30, 2020 contributed to a decrease in accounts receivable at September 30, 2020. During the nine months ended September 30, 2019, we recognized net price increases of $174.5 million and volume increases in our solid waste business and E&P business of $7.0 million and $12.5 million, respectively. The increase in revenues resulting from price and volume increases during the nine months ended September 30, 2019 contributed to an increase in accounts receivable at September 30, 2019.

4)2)

~~Prepaid expenses~~Decrease in earnings — – Our increase in net cash provided by operating activities was unfavorably impacted by ~~$18.7~~$72.1 million from ~~prepaid expenses~~a decrease in net income, excluding depreciation, amortization of intangibles, amortization of leases, deferred income taxes, share-based compensation, adjustments to and payments of contingent consideration recorded in earnings and loss on disposal of assets and impairments, due primarily to a ~~higher utilization~~decline in earnings at our E&P operations, as well as economic disruptions resulting from COVID-19, and additional income tax expense due to the finalization of ~~prepaid income taxes during the prior year period.~~tax regulations under Internal Revenue Code section 267A.

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5)3)

~~Other long-term~~Accounts payable and accrued liabilities– — Our increase in net cash provided by operating activities was unfavorably impacted by ~~$15.6~~$13.1 million from ~~other long-term liabilities~~accounts payable and accrued liabilities. Although certain operating expenses declined as a result of solid waste and E&P volume losses due ~~primarily~~ to ~~lease payments~~economic disruptions resulting from COVID-19, our ~~adoption~~operating cash flows were adversely impacted from the timing of ~~new accounting standards~~vendor payments and payroll cycles as well as the payment of higher outstanding liabilities existing prior to the recent economic downturn. This decrease was partially offset by an increase in accrued payroll tax liabilities of $29.2 million associated with ~~leases.~~our deferral of qualifying U.S. payroll and other tax payments as permitted by the CARES Act, an increase in liabilities for cash incentive compensation of $19.1 million and an increase in accrued interest expense liabilities of $7.2 million due to the timing of interest payments for our outstanding senior note obligations. We expect to defer approximately $45.0 million of U.S. payroll and other tax payments in 2020 under the CARES Act, of which 50% will be remitted in 2021 and 50% remitted in 2022.

As of September 30, ~~2019,~~2020, we had a working capital surplus of ~~$113.5~~$456.0 million, including cash and equivalents of ~~$303.8~~$859.1 million. Our working capital surplus ~~decreased $118.7~~increased $332.6 million from a working capital surplus of ~~$232.2~~$123.4 million at December 31, ~~2018,~~2019, including cash and equivalents of ~~$319.3~~$326.7 million, due primarily to ~~decreased~~the impact of increased cash balances being partially offset by higher short-term contingent consideration liabilities, accrued liabilities and ~~the adoption of new accounting standards associated with leases requiring~~ a ~~current liability to be recorded for the portion of lease payments payable with the next twelve months.~~reduction in accounts receivable. To date, we have experienced no loss or lack of access to our cash and equivalents; however, we can provide no assurances that access to our cash and equivalents will not be impacted by adverse conditions in the financial markets. Our strategy in managing our working capital is generally to apply the cash generated from our operations that remains after satisfying our working capital and capital expenditure requirements, along with share repurchase and dividend programs, to reduce the unhedged portion of our indebtedness under our Credit Agreement and to minimize our cash balances.

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Investing Activities Cash Flows

Net cash used in investing activities ~~increased $15.3~~decreased $235.6 million to $650.1 million for the nine months ended September 30, 2020, from $885.7 million for the nine months ended September 30, ~~2019, from $870.4 million for the nine months ended September 30, 2018.~~2019. The significant components of the ~~increase~~decrease included the following:

~~An increase~~A decrease in ~~capital expenditures~~cash paid for acquisitions of ~~$60.0~~$246.6 million due primarily to ~~an increase~~a decrease in ~~trucks and heavy equipment for operations owned in~~acquisitions closed during the ~~comparable periods, increased additions to existing facilities and additional trucks and heavy equipment purchased for operations acquired subsequent to December 31, 2018; and~~nine months ended September 30, 2020;

A decrease in capital expenditures of $12.8 million due to decreases in vehicles for our collection operations and equipment for our disposal operations exceeding capital expenditures for landfill sites costs and expenditures for vehicles, containers and equipment purchased for operations acquired during, or subsequent to, the nine months ended September 30, 2019;

An increase from increased proceeds from the sale of property and equipment of $8.9 million; less

An increase in capital expenditures for undeveloped landfill property of ~~$31.7~~$35.1 million ~~due~~attributable to expenditures during the nine months ended September 30, 2020 for expansion land at certain existing landfill facilities exceeding expenditures during the nine months ended September 30, 2019 for the purchase of a greenfield landfill site in our Southern segment that will be developed into an operating location in the ~~future; less~~

~~A decrease in cash paid for acquisitions of $79.7 million due primarily to a decrease in acquisitions closed during the nine months ended September 30, 2019.~~future.

Financing Activities Cash Flows

Net cash used in financing activities decreased ~~$87.7~~$303.9 million to $4.1 million for the nine months ended September 30, 2020, from net cash used in financing activities of $308.0 million for the nine months ended September 30, ~~2019, from $395.7 million for the nine months ended September 30, 2018.~~2019. The significant components of the decrease included the following:

A decrease from the net change in long-term borrowings of ~~$59.6~~$447.4 million (long-term borrowings increased $285.0 million during the nine months ended September 30, 2020 and decreased $162.4 million during the nine months ended September 30, ~~2019 and decreased $222.0 million during the nine months ended September 30, 2018)~~2019) due primarily to maintaining a portion of the ~~availability of cash to repay outstanding obligations and higher repayments~~proceeds from our 2050 Senior Notes in ~~the prior year of long term debt assumed and paid in full from acquisitions; and~~cash; less

~~A decrease~~An increase in payments to repurchase our common shares of ~~$42.0~~$105.7 million ~~due to no shares being repurchased~~as we resumed our share repurchase activity during the nine months ended September 30, ~~2019;~~2020; less

An increase in debt issuance costs of $5.2 million due to costs incurred during the nine months ended September 30, 2020 for our 2030 Senior Notes and 2050 Senior Notes exceeding costs incurred during the nine months ended September 30, 2019 for our 2029 Senior Notes; less

An increase in tax withholdings related to net share settlements of equity-based compensation of $5.8 million due to an increase in the value of equity-based compensation awards vesting; less

An increase in cash dividends paid of ~~$15.9~~$19.6 million due primarily to an increase in our quarterly dividend rate for the nine months ended September 30, ~~2019~~2020 to ~~$0.16~~$0.185 per share, from ~~$0.14~~$0.16 per share for the nine months ended September 30, ~~2018.~~2019.

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 ~~25, 2019,~~23, 2020, our Board of Directors approved, subject to receipt of regulatory approvals, the annual renewal of our normal course issuer bid, or the NCIB, to purchase up to ~~13,184,474~~13,144,773 of our common shares during the period of August ~~8, 2019~~10, 2020 to August ~~7, 2020~~9, 2021 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 Senior 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

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price of our common shares and overall market conditions. All common shares purchased under the NCIB ~~shall~~will be immediately cancelled following their repurchase. Information regarding our NCIB ~~plan~~ can be found under the “Shareholders’ Equity” section in Note 1718 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.

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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 ~~2018,~~2019, our Board of Directors authorized an increase to our regular quarterly cash dividend of $0.025, from $0.16 to $0.185 per share. In October 2020, our Board of Directors authorized an increase to our regular quarterly cash dividend of $0.02, from ~~$0.14~~$0.185 to ~~$0.16~~$0.205 per share. Cash dividends of ~~$126.3~~$145.9 million and ~~$110.4~~$126.3 million were paid during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. We cannot assure you as to the amounts or timing of future dividends.

We made ~~$433.5~~$420.7 million in capital expenditures for property and equipment during the nine months ended September 30, ~~2019,~~2020, and we expect to make total capital expenditures for property and equipment of ~~between $600 million and $625~~approximately $575 million in ~~2019.~~2020. In addition, we made a$66.8 million in capital ~~expenditure of $31.7 million~~expenditures for ~~the purchase of a greenfield~~undeveloped landfill ~~site~~property during the nine months ended September 30, ~~2019.~~2020 and may opportunistically make other capital expenditures for undeveloped landfill property in 2020. We have funded and intend to fund the balance of our planned ~~2019~~2020 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 municipal solid waste and E&P 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.

As of September 30, ~~2019, $700.0~~2020, $650.0 million under the term loan and ~~$427.8~~$178.7 million under the revolving credit facility were outstanding under our Credit Agreement, exclusive of outstanding standby letters of credit of ~~$121.9~~$125.9 million. Our Credit Agreement matures in March 2023.

On ~~April 16, 2019,~~January 23, 2020, we completed an underwritten public offering of ~~$500.0~~$600.0 million aggregate principal amount of ~~our 3.50%~~2.60% Senior Notes due ~~2029,~~2030, or the ~~2029~~2030 Senior Notes. The ~~2029~~2030 Senior Notes were issued under the Indenture, dated as of November 16, 2018, by and between the Company and U.S. Bank National Association, as trustee, as supplemented by the ~~Second~~Third Supplemental Indenture, dated as of ~~April 16, 2019.~~January 23, 2020.

We will pay interest on the ~~2029~~2030 Senior Notes semi-annually ~~commencing on November 1, 2019,~~in arrears and the ~~2029~~2030 Senior Notes will mature on ~~May~~February 1, ~~2029.~~2030. The ~~2029~~2030 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 ~~2029~~2030 Senior Notes are not guaranteed by any of our subsidiaries.

On March 13, 2020, we completed an underwritten public offering of $500.0 million aggregate principal amount of 3.05% Senior Notes due 2050, or the 2050 Senior Notes. The 2050 Senior Notes were issued under the Indenture, dated as of November 16, 2018, by and between the Company and U.S. Bank National Association, as trustee, as supplemented by the Fourth Supplemental Indenture, dated as of March 13, 2020.

We will pay interest on the 2050 Senior Notes semi-annually in arrears and the 2050 Senior Notes will mature on April 1, 2050. The 2050 Senior Notes are 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 2050 Senior Notes are not guaranteed by any of our subsidiaries.

See Note 1011 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on the debt ~~agreement.~~agreements.

We are a well-known seasoned issuer with an effective shelf registration statement on Form S-3 filed in May 2018, which registers an unspecified amount of debt securities, including debentures, notes or other types of debt. In the future,

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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. WeUnless 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, ~~2019,~~2020, we had the following contractual obligations:

Payments Due by Period

(amounts in thousands of U.S. dollars)




Less Than

1 to 3



Over 5
Recorded Obligations

Total

1 Year

Years

3 to 5 Years

Years
Long-term debt

$
4,062,511

$
502

$
379,689

$
1,653,729

$
2,028,591
Cash interest payments

$
771,632

$
128,317

$
254,235

$
161,382

$
227,698
Contingent consideration

$
78,912

$
14,038

$
23,915

$
3,224

$
37,735
Final capping, closure and post-closure

$
1,508,736

$
17,676

$
33,745

$
17,666

$
1,439,649


	Payments Due by Period
	(amounts in thousands of U.S. dollars)
			Less Than		1 to 3				Over 5
Recorded Obligations	Total		1 Year		Years		3 to 5 Years		Years
Long-term debt	$	4,714,670	$	6,772	$	1,411,234	$	532,919	$	2,763,745
Cash interest payments	$	1,297,414	$	162,469	$	292,585	$	212,944	$	629,416
Contingent consideration	$	109,000	$	62,492	$	7,160	$	3,224	$	36,124
Operating leases	$	209,446	$	35,750	$	63,224	$	23,455	$	87,017
Final capping, closure and post-closure	$	1,527,763	$	5,454	$	65,995	$	13,750	$	1,442,564

____________________

Long-term debt payments include:

$~~427.8~~178.7 million in principal payments due March 2023 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, and Canadian dollar prime rate loans. At September 30, ~~2019, $382.5~~2020, $175.0 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 ~~3.14%~~1.35% on such date) and ~~$45.3~~$3.7 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 ~~3.05%~~1.68% on such date).

$~~700.0~~650.0 million in principal payments due March 2023 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, ~~2019,~~2020, 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 ~~3.14%~~1.35% on such date).

$175.0 million in principal payments due 2019 related to our 2019 Senior Notes. The 2019 Senior Notes bear interest at a rate of 5.25%. We have recorded this obligation in the payments due in 3 to 5 years category in the table above as we have the intent and ability to redeem the 2019 Senior Notes on November 1, 2019 using borrowings under our Credit Agreement.

$100.0 million in principal payments due 2021 related to our 2021 Senior Notes. The 2021 Senior Notes bear interest at a rate of 4.64%. We have recorded this obligation in the payments due in 1 to 3 years category in the table above as we have the intent and ability to redeem the 2021 Senior Notes on April 1, 2021 using borrowings under our Credit Agreement.

5)4)

$150.0 million in principal payments due 2021 related to our New 2021 Senior Notes. The New 2021 Senior Notes bear interest at a rate of 2.39%. We have recorded this obligation in the payments due in 1 to 3 years category in the table above as we have the intent and ability to redeem the New 2021 Senior Notes on June 1, 2021 using borrowings under our Credit Agreement.

6)5)

$125.0 million in principal payments due 2022 related to our 2022 Senior Notes. The 2022 Senior Notes bear interest at a rate of 3.09%.

7)6)

$200.0 million in principal payments due 2023 related to our 2023 Senior Notes. The 2023 Senior Notes bear interest at a rate of 2.75%.

8)7)

$150.0 million in principal payments due 2024 related to our 2024 Senior Notes. The 2024 Senior Notes bear interest at a rate of 3.24%.

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9)8)

$375.0 million in principal payments due 2025 related to our 2025 Senior Notes. The 2025 Senior Notes bear interest at a rate of 3.41%.

~~10)~~9)

$400.0 million in principal payments due 2026 related to our 2026 Senior Notes. The 2026 Senior Notes bear interest at a rate of 3.03%.

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~~11)~~10)

$250.0 million in principal payments due 2027 related to our 2027 Senior Notes. The 2027 Senior Notes bear interest at a rate of 3.49%.

~~12)~~11)

$500.0 million in principal payments due 2028 related to our 2028 Senior Notes. The 2028 Senior Notes bear interest at a rate of ~~4.250%~~4.25%.

~~13)~~12)

$500.0 million in principal payments due 2029 related to our 2029 Senior Notes. The 2029 Senior Notes bear interest at a rate of ~~3.500%~~3.50%.

13)

$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%.

14)

$~~9.7~~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%.

15)

$43.2 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 ~~2.75%~~2.42% and ~~10.90%~~10.35% at September 30, ~~2019,~~2020, and have maturity dates ranging from ~~2019~~2021 to 2036.

The following assumptions were made in calculating cash interest payments:

We calculated cash interest payments on the Credit Agreement using the LIBOR rate plus the applicable LIBOR margin, ~~and~~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, ~~2019.~~2020. We assumed the Credit Agreement is paid off when it matures in March 2023.

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 ~~$57.0~~$88.5 million recorded as liabilities in our Condensed Consolidated Financial Statements at September 30, ~~2019,~~2020, and ~~$21.9~~$20.5 million of future interest accretion on the recorded obligations.

We are party to operating lease agreements. These lease agreements are established in the ordinary course of our business and are designed to provide us with access to facilities 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
Operating leases

$
236,150

$
9,662

$
69,589

$
60,607

$
96,292
Unconditional purchase obligations

$
132,444

$
72,573

$
59,871

$
—

$
—


	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	$	138,217	$	89,523	$	48,694	$	—	$	—

____________________

(1)

We are party to ~~operating lease agreements and~~ unconditional purchase obligations. These ~~lease agreements and~~ purchase obligations are established in the ordinary course of our business and are designed to provide us with access to ~~facilities and~~ products at competitive, market-driven prices. At September 30, ~~2019,~~2020, our unconditional purchase obligations consisted of multiple fixed-price fuel purchase contracts under which we have ~~50.4~~54.8 million gallons remaining to be purchased for a total of ~~$132.4~~$138.2 million. The current fuel purchase contracts expire on or before December 31, ~~2021.~~2022. These arrangements have not materially affected our financial position, results of operations or

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liquidity during the nine months ended September 30, ~~2019,~~2020, 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 ~~$1.068~~$1.181 billion and ~~$977.6 million~~$1.081 billion at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. These arrangements have not materially affected our financial position, results of operations or liquidity during the nine months ended September 30, ~~2019,~~2020, 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, ~~2019~~2020 and ~~2018,~~2019, at all of our landfills during the respective period, is shown below (tons in thousands):

Nine Months Ended September 30,

2019

2018


Number

Total

Number

Total

of Sites

Tons

of Sites

Tons
Owned operational landfills and landfills operated under life-of-site agreements

92

35,412

89

33,387
Operated landfills

4

433

4

335

96

35,845

93

33,722


	Nine Months Ended September 30,
	2020		2019
	Number	Total	Number	Total
	of Sites	Tons	of Sites	Tons
Owned operational landfills and landfills operated under life-of-site agreements	89	33,268	92	35,412
Operated landfills	4	413	4	433
	93	33,681	96	35,845

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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, ~~2019~~2020 and ~~2018,~~2019, are calculated as follows (amounts in thousands of U.S. dollars):

Nine Months Ended

September 30,


2019

2018

Net cash provided by operating activities

$
1,185,430

$
1,037,792

Plus (less): Change in book overdraft

1,911

(243)

Plus: Proceeds from disposal of assets

2,626

3,698

Less: Capital expenditures for property and equipment

(433,526)

(373,512)

Less: Distributions to noncontrolling interests

(117)

(103)

Adjustments:

Payment of contingent consideration recorded in earnings ^(a)

—

11

Cash received for divestitures ^(b)

(2,376)

(1,250)

Transaction-related expenses ^(c)

8,057

4,907

Integration-related and other expenses ^(d)

—

2,794

Pre-existing Progressive Waste share-based grants ^(e)

4,306

5,219

Tax effect ^(f)

(3,375)

(3,609)

Adjusted free cash flow

$
762,936

$
675,704


	Nine Months Ended
	September 30,
	2020		2019
Net cash provided by operating activities	$	1,185,573	$	1,185,430
Plus (less): Change in book overdraft		(862)		1,911
Plus: Proceeds from disposal of assets		11,564		2,626
Less: Capital expenditures for property and equipment		(420,694)		(433,526)
Less: Distributions to noncontrolling interests		—		(117)
Adjustments:
Cash received for divestitures ^(a)		(4,974)		(2,376)
Transaction-related expenses ^(b)		4,497		8,057
Pre-existing Progressive Waste share-based grants ^(c)		7,455		4,306
Tax effect ^(d)		(4,168)		(3,375)
Adjusted free cash flow	$	778,391	$	762,936

____________________

(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 ~~Progressive Waste~~ operations.

~~(c)~~(b)

Reflects the addback of acquisition-related transaction costs.

~~(d)~~

~~Reflects the addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.~~

~~(e)~~(c)

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

~~(f)~~(d)

The aggregate tax effect of footnotes (a) through ~~(e)~~(c) 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)~~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, ~~2019~~2020 and ~~2018,~~2019, are calculated as follows (amounts in thousands of U.S. dollars):

Three Months Ended

Nine Months Ended

September 30,

September 30,


2019

2018

2019

2018

Net income attributable to Waste Connections

$
159,109

$
150,843

$
433,579

$
414,393

Plus (less): Net income (loss) attributable to noncontrolling interests

(35)

(77)

(89)

218

Plus: Income tax provision

42,783

52,092

110,539

126,509

Plus: Interest expense

36,780

32,078

111,313

96,874

Less: Interest income

(2,056)

(1,467)

(7,186)

(3,677)

Plus: Depreciation and amortization

189,928

175,103

555,437

503,310

Plus: Closure and post-closure accretion

3,649

3,253

10,821

9,749

Plus (less): Impairments and other operating items

12,935

(1,998)

32,949

6,106

Plus (less): Other expense (income), net

19

(600)

(4,562)

(2,053)

Adjustments:

Plus: Transaction-related expenses ^(a)

1,036

323

8,057

4,907

Plus: Fair value changes to equity awards ^(b)

(589)

6,880

3,693

10,101

Plus: Integration-related and other expenses ^(c)

—

379

—

2,795

Adjusted EBITDA

$
443,559

$
416,809

$
1,254,551

$
1,169,232


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income attributable to Waste Connections	$	158,049	$	159,109	$	74,012	$	433,579
Less: Net loss attributable to noncontrolling interests		(58)		(35)		(594)		(89)
Plus: Income tax provision		33,657		42,783		23,654		110,539
Plus: Interest expense		40,636		36,780		119,562		111,313
Less: Interest income		(903)		(2,056)		(4,396)		(7,186)
Plus: Depreciation and amortization		190,243		189,928		555,703		555,437
Plus: Closure and post-closure accretion		3,723		3,649		11,340		10,821
Plus: Impairments and other operating items		3,805		12,935		442,582		32,949
Plus (less): Other expense (income), net		(702)		19		3,046		(4,562)
Adjustments:
Plus: Transaction-related expenses ^(a)		2,335		1,036		4,497		8,057
Plus (less): Fair value changes to equity awards ^(b)		1,798		(589)		6,021		3,693
Adjusted EBITDA	$	432,583	$	443,559	$	1,235,427	$	1,254,551

____________________

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

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

~~(c)~~

~~Reflects the addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.~~

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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, ~~2019~~2020 and ~~2018,~~2019, 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,


2019

2018

2019

2018

Reported net income attributable to Waste Connections

$
159,109

$
150,843

$
433,579

$
414,393

Adjustments:

Amortization of intangibles ^(a)

31,934

26,871

93,821

79,444

Impairments and other operating items ^(b)

12,935

(1,998)

32,949

6,106

Transaction-related expenses ^(c)

1,036

323

8,057

4,907

Fair value changes to equity awards ^(d)

(589)

6,880

3,693

10,101

Integration-related and other expenses ^(e)

—

379

—

2,795

Tax effect ^(f)

(11,486)

(8,006)

(33,955)

(25,783)

Tax items ^(g)

—

6,578

—

9,093

Adjusted net income attributable to Waste Connections

$
192,939

$
181,870

$
538,144

$
501,056

Diluted earnings per common share attributable to Waste Connections’ common shareholders:









Reported net income

$
0.60

$
0.57

$
1.64

$
1.57

Adjusted net income

$
0.73

$
0.69

$
2.03

$
1.90


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Reported net income attributable to Waste Connections	$	158,049	$	159,109	$	74,012	$	433,579
Adjustments:
Amortization of intangibles ^(a)		32,653		31,934		96,062		93,821
Impairments and other operating items ^(b)		3,805		12,935		442,582		32,949
Transaction-related expenses ^(c)		2,335		1,036		4,497		8,057
Fair value changes to equity awards ^(d)		1,798		(589)		6,021		3,693
Tax effect ^(e)		(10,000)		(11,486)		(137,523)		(33,955)
Tax items ^(f)		—		—		31,508		—
Adjusted net income attributable to Waste Connections	$	188,640	$	192,939	$	517,159	$	538,144

Diluted earnings per common share attributable to Waste Connections’ common shareholders:
Reported net income	$	0.60	$	0.60	$	0.28	$	1.64
Adjusted net income	$	0.72	$	0.73	$	1.96	$	2.03

____________________

(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 addback of integration-related items, including rebranding costs, associated with the Progressive Waste acquisition.~~

~~(f)~~

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

~~(g)~~(f)

~~Primarily reflects refinements to the estimates, as provided by Staff Accounting Bulletin No. 118, of~~Reflects the impact of a portion of our ~~U.S. earnings~~2019 related-party payments no longer ~~permanently reinvested~~being deductible for tax purposes due to the finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and an increase in ~~conjunction with~~deferred tax liabilities resulting from the ~~Tax Act~~.E&P impairment.

INFLATION

Other than volatility in fuel prices, third party brokerage and labor costs in certain markets, inflation has not materially affected our operations in recent years. 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 our contracts, particularly amid the economic impact of the COVID-19 pandemic, may

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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

WeBased 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% to~~ 12%. 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. We use hedge agreements to manage a portion of our risks related to interest rates and fuel prices. While we are exposed to credit risk in the event of non-performance by counterparties to our hedge agreements, in all cases such counterparties are highly rated financial institutions and we do not anticipate ~~non-performance.~~non-performance under current market conditions. We do not hold or issue derivative financial instruments for trading purposes. We monitor our hedge positions by regularly evaluating the positions at market and by performing sensitivity analyses over the unhedged fuel and variable rate debt positions.

At September 30, ~~2019,~~2020, our derivative instruments included 1610 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					Fixed		Variable
	Notional		Interest		Interest Rate		Expiration	Notional		Interest		Interest Rate		Expiration
Date Entered	Amount		Rate Paid*		Received	Effective Date	Date	Amount		Rate Paid*		Received	Effective Date	Date
May 2014	$	50,000	2.344	%	1-month LIBOR	October 2015	October 2020	$	50,000	2.344	%	1-month LIBOR	October 2015	October 2020
May 2014	$	25,000	2.326	%	1-month LIBOR	October 2015	October 2020	$	25,000	2.326	%	1-month LIBOR	October 2015	October 2020
May 2014	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020
May 2014	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020	$	50,000	2.350	%	1-month LIBOR	October 2015	October 2020
April 2016	$	100,000	1.000	%	1-month LIBOR	February 2017	February 2020
June 2016	$	75,000	0.850	%	1-month LIBOR	February 2017	February 2020
June 2016	$	150,000	0.950	%	1-month LIBOR	January 2018	January 2021
June 2016	$	150,000	0.950	%	1-month LIBOR	January 2018	January 2021
July 2016	$	50,000	0.900	%	1-month LIBOR	January 2018	January 2021
July 2016	$	50,000	0.890	%	1-month LIBOR	January 2018	January 2021
August 2017	$	100,000	1.900	%	1-month LIBOR	July 2019	July 2022	$	100,000	1.900	%	1-month LIBOR	July 2019	July 2022
August 2017	$	200,000	2.200	%	1-month LIBOR	October 2020	October 2025	$	200,000	2.200	%	1-month LIBOR	October 2020	October 2025
August 2017	$	150,000	1.950	%	1-month LIBOR	February 2020	February 2023	$	150,000	1.950	%	1-month LIBOR	February 2020	February 2023
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
June 2018	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025	$	200,000	2.925	%	1-month LIBOR	October 2020	October 2025
December 2018	$	200,000	2.850	%	1-month LIBOR	July 2022	July 2027	$	200,000	2.850	%	1-month LIBOR	July 2022	July 2027

____________________

* Plus applicable margin.

On September 28, 2020, we terminated four of our interest rate swaps with notional amounts of $150.0 million, $150.0 million, $50.0 million and $50.0 million, each of which would have expired in January 2021. As a result of terminating these interest rate swaps, we made total cash payments of $0.9 million to the counterparties of the swap agreements.

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.

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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

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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, ~~2019~~2020 and December 31, ~~2018,~~2019, of ~~$277.8~~$3.7 million and ~~$885.0~~$766.2 million, respectively, including floating rate debt under our Credit ~~Agreement and floating rate tax-exempt bond obligations.~~Agreement. A one percentage point increase in interest rates on our variable-rate debt as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, would decrease our annual pre-tax income by approximately ~~$2.8~~$0.1 million and ~~$8.9~~$7.7 million, respectively. All of our remaining debt instruments are at fixed rates, or effectively fixed under the interest rate swap agreements described above; therefore, changes in market interest rates under these instruments would not significantly impact our cash flows or results of operations, subject to counterparty default risk.

The market price of diesel fuel is unpredictable and can fluctuate significantly. Because of the volume of fuel we purchase each year, a significant increase in the price of fuel could adversely affect our business and reduce our operating margins. To manage a portion of this risk, we periodically enter into fuel hedge agreements related to forecasted diesel fuel purchases, and we also enter into fixed price fuel purchase contracts. At September 30, ~~2019,~~2020, we had no fuel hedge agreements in place; however, we have entered into fixed price fuel purchase contracts for ~~2019~~2020 as described below.

For the year ending December 31, ~~2019,~~2020, we expect to purchase approximately ~~73.9~~79.9 million gallons of fuel, of which ~~45.3~~44.2 million gallons will be purchased at market prices and ~~28.6~~35.7 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, ~~2019~~2020 to December 31, ~~2019,~~2020, we expect to purchase approximately ~~11.3~~11.1 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 ~~2019~~2020 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 ~~sell~~market other collected recyclable materials to third parties for processing before resale. ToWhere 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, ~~2019~~2020 and ~~2018,~~2019, would have had a ~~$4.9~~$5.8 million and ~~$6.7~~$4.9 million impact on revenues for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, 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 ~~2018~~2019 or ~~2019.~~2020. A $0.01 change in the Canadian dollar to U.S. dollar exchange rate would impact our annual revenue and EBITDA by approximately ~~$9.8~~$9.4 million and ~~$3.6~~$3.4 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 Senior 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 Senior Vice President and Chief Financial Officer concluded as of September 30, ~~2019,~~2020, 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 Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended September 30, ~~2019,~~2020, 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 1819 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 National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on November 16, 2018)
~~4.2~~		Second Supplemental Indenture, dated as of April 16, 2019, by and between Waste Connections, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on April 16, 2019)
10.1 +		Separation Benefits Plan Participation Letter Agreement by and between Waste Connections US, Inc. and ~~Darrell W. Chambliss,~~Jason Craft, effective July ~~25, 2019 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q filed on July 30, 2019)~~
~~10.2 +~~		Separation Benefits Plan Participation Letter Agreement by and between Waste Connections US, Inc. and James M. Little, effective July 25, 2019 (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q filed on July 30, 2019)
~~10.3 +~~		Separation Benefits Plan Participation Letter Agreement by and between Waste Connections US, Inc. and Patrick J. Shea, effective July 25, 2019 (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 10-Q filed on July 30, 2019)1, 2020
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: October 29, ~~2019~~2020	BY:	/s/ Worthing F. Jackman
		Worthing F. Jackman
		President and Chief Executive Officer

Date: October 29, ~~2019~~2020	BY:	/s/ Mary Anne Whitney
		Mary Anne Whitney
		Senior Vice President and Chief Financial Officer

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		Page
PART I – FINANCIAL INFORMATION (unaudited)
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Net Income	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3837
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6567
Item 4.	Controls and Procedures	6769
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	6870
Item 6.	Exhibits	6870
Signatures		6971


	As Reported December 31, 2018		Adoption of Lease Guidance Increase (Decrease)		Balance January 1, 2019
Operating lease right-of-use assets	$	-	$	206,501	$	206,501
Total assets	$	12,627,329	$	206,501	$	12,833,830
Current portion of operating lease liabilities	$	-	$	29,640	$	29,640
Total current liabilities	$	860,709	$	29,640	$	890,349
Long-term portion of operating lease liabilities	$	-	$	180,005	$	180,005
Deferred income taxes	$	760,033	$	(1,066)	$	758,967
Total liabilities	$	6,167,141	$	208,579	$	6,375,720
Retained earnings	$	2,264,510	$	(2,078)	$	2,262,432
Total liabilities and equity	$	12,627,329	$	206,501	$	12,833,830


	2019		2018
	Acquisitions		Acquisitions
Fair value of consideration transferred:
Cash	$	420,392	$	500,064
Debt assumed		50,574		65,010
		470,966		565,074

Recognized amounts of identifiable assets acquired and liabilities assumed associated with businesses acquired:
Accounts receivable		15,042		12,817
Prepaid expenses and other current assets		5,079		2,355
Property and equipment		210,105		346,275
Long-term franchise agreements and contracts		14,838		10,888
Customer lists		28,467		27,330
Permits and other intangibles		17,835		31,183
Other assets		7		19
Accounts payable and accrued liabilities		(11,310)		(3,982)
Deferred revenue		(9,128)		(4,169)
Contingent consideration		(1,003)		(11,669)
Other long-term liabilities		(8,707)		(15,532)
Deferred income taxes		(13,287)		(391)
Total identifiable net assets		247,938		395,124
Goodwill	$	223,028	$	169,950


	Nine Months Ended
	September 30, 2019
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	28,374
Non-cash activity:
Right-of-use assets obtained in exchange for lease liabilities	$	7,363


Last 3 months of 2019	$	9,662
2020		36,429
2021		33,160
2022		31,906
2023		28,701
Thereafter		96,292
Minimum lease payments		236,150
Less: imputed interest		(39,641)
Present value of minimum lease payments		196,509
Less: current portion of operating lease liabilities		(30,162)
Long-term portion of operating lease liabilities	$	166,347


2019	$	37,902
2020		35,204
2021		32,259
2022		30,974
2023		27,882
Thereafter		94,205
	$	258,426