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Item 7. Management’s Discussion and Analysis

2021-02-18 compared with 2020-02-13 · 283 added, 228 removed, 434 unchanged (54% of the section changed)

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The following discussion should be read in conjunction with the “Selected Financial Data” included in Item 6 of this Annual Report on Form 10-K, our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

We make statements in this Annual Report on Form 10-K that are forward-looking in nature.

These include:

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

● Discussion of competition, loss of contracts, price increases and additional exclusive arrangements;

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

● Statements regarding oil prices and fuel price expectations;

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

● Other statements on a variety of topics such as the COVID-19 pandemic, credit risk of customers, seasonality, labor/pension costs and labor union activity, operational and safety risks, acquisitions, litigation results, goodwill impairments, insurance costs and cybersecurity threats.

These statements can be ‎identified by the use of forward-looking terminology such as “believes,” “expects,” “intends,” “may,” “might,” “will,” ‎‎“could,” “should” or “anticipates,” or the negative thereof or comparable terminology, or by discussions of strategy.

Our ‎business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ ‎materially from those projected by any forward-looking statements.

Factors that could cause actual results to differ ‎from those projected include, but are not limited to, those listed under the heading “ITEM 1A.

Risk Factors” and elsewhere in this Annual Report on Form 10-‎K.

There may be additional risks of which we are not presently aware or that we currently believe are immaterial that ‎could have an adverse impact on our business.

We make no commitment to revise or update any forward-looking ‎statements to reflect events or circu‎mstances that may change, unless required under applicable securities laws.

Industry Overview

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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;

reliability of services;

track record of environmental compliance;

ability to accept multiple waste types at a single facility;

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.

If the prices of crude oil and natural gas substantially decline, it could lead to declines in the level of production activity and demand for our E&P waste services, which could result in the recognition of impairment charges on our intangible assets and property and equipment associated with our E&P operations.

Macroeconomic and geopolitical conditions, including a significant decline in oil prices driven by both surplus production and supply, as well as the decrease in demand caused by factors including the COVID-19 pandemic, have resulted in decreased levels of oil and natural gas exploration and production activity and a corresponding decrease in demand for our E&P waste services.

Through June 30, 2020, we maintained a separate E&P segment, which was combined with our Southern segment on July 1, 2020.

During the year ended December 31, 2020, our total E&P revenue declined 44%, compared to the prior year period, on rig count declines of 56% 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 basins where we operate.

Based on these events and the outlook for future drilling activity and resulting demand for our E&P waste services not showing significant improvement, we concluded that the carrying value of 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 year ended December 31, 2020.

See the section Impairments of Property and Equipment and Finite-Lived Intangible Assets in Note 3, “Summary of Significant Accounting Policies,” of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a further discussion of this impairment charge.

Executive Overview

We are an integrated solid waste services company that provides non-hazardous waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the U.S.

Through our R360 Environmental Solutions subsidiary, we are also a leading provider of non-hazardous E&P waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the U.S.

We also provide intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities.

We are an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, along with recycling and resource recovery, in mostly exclusive and secondary markets across 43 states in the U.S.

and six provinces in Canada.

Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest.

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.

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We also target niche markets, like E&P waste treatment and disposal services.

THE COVID-19 PANDEMIC’S IMPACT 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.

The COVID-19 pandemic has had adverse impacts on our business since March 2020, when we experienced decreasing revenues associated with declines primarily in commercial collection, transfer station and landfill volumes as a result of COVID-19-related 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 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 supplemental pay and bonuses 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.

During 2020, the aggregate impact of these actions was an increase to our cost of operations of over $35 million, primarily due to supplemental pay for our frontline employees.

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 deferred 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.

In total in 2020, we deferred $44.6 million in payroll taxes in conjunction with the CARES Act, of which 50% is due by December 31, 2021 and 50% is due by December 31, 2022.

To the extent available, we also utilized similar programs being offered by the federal and provincial governments in Canada and received CAD $2.6 million in federal wage subsidies pursuant to the Canadian Emergency Wage Subsidy.

During the second quarter of 2020, our business was impacted by the COVID-19 pandemic 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 the COVID-19 pandemic.

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 the COVID-19 pandemic, 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 the COVID-19 pandemic, albeit to a lesser extent than in the prior period in many markets.

The impacts to solid waste activity from the COVID-19 pandemic 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 the COVID-19 pandemic, 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.

During the fourth quarter of 2020, the impacts to our business related to the COVID-19 pandemic continued to moderate as compared to prior periods, in spite of the reinstatement of shutdowns and other restrictions on activity in many markets.

Throughout the pandemic, revenue in solid waste commercial collection and solid waste transfer and disposal has largely reflected 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 has persisted.

The recovery in more impacted markets, particularly those where reopenings continue to be delayed or where additional restrictions have been imposed, were generally less pronounced.

The impacts to solid waste activity from the COVID-19 pandemic that we experienced during the fourth quarter largely continued to reflect the pace of reopening activity and varied by geography, the size and customer mix in each market.

In some markets, improving trends in commercial service requirements, landfill tons and roll off activity that we had seen in prior quarters continued;

in others, commercial volume recovery remained steady or declined modestly.

Recovery in solid waste commercial activity remained essentially in line with the prior quarter, with 65% of customers and 56% of revenue in competitive markets we track that had previously suspended or reduced service due to the COVID-19 pandemic, that had since reached out for either a resumption of service or an increase in frequency.

Year over year landfill tons and roll off pulls both improved sequentially in the fourth quarter, with same store municipal solid waste tons up 2% year over year after being down 3% year over year in the third quarter.

All regions showed improving volumes, led by our mostly exclusive market Western Region, where volumes improved sequentially by 3.7 percentage points.

As a result, solid waste collection, transfer and disposal revenue was up 0.7% year over year on a same store basis in the fourth quarter, an improvement of 2.7 percentage points from the third quarter, which was down 2.0% 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.

2020 Financial Performance

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Operating Results

Revenues in 2019 increased 9.5% to $5.389 billion from $4.923 billion in 2018, due partly to acquisitions closed during, or subsequent to, the prior year, net of divestitures, which accounted for $292.0 million in incremental revenues in 2019, with the remainder due primarily to internal growth in solid waste and higher E&P waste activity.

Solid waste internal growth was 4.3%, due to price increases and fuel, materials and environmental surcharges, which were partially offset by lower volumes and recycled commodity values.

Pricing growth was 5.2%, with core pricing up 5.1% and fuel, materials and environmental surcharges adding another 0.1%.

Volumes decreased by 0.2% on increases in landfill and hauling volumes, more than offset by purposeful shedding of poor quality volumes at certain Progressive Waste operations.

Decreases in recycled commodity prices resulted in another 0.7% decrease to internal solid waste growth.

E&P waste revenues increased to $256.0 million from $244.6 million in 2018, due primarily to increased activity at existing facilities.

In 2019, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, a non-GAAP financial measure (refer to page 68 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), increased 6.8% to $1.674 billion, from $1.566 billion in 2018.

Revenues in 2020 increased 1.1% to $5.446 billion from $5.389 billion in 2019.

Acquisitions closed during, or subsequent to, the prior year, net of divestitures, accounted for $197.2 million in incremental revenues in 2020.

Excluding the impact of such acquisitions, revenues decreased 2.6% due principally to E&P waste revenue decreasing to $144.0 million from $256.0 million in 2019, with the remainder due predominantly to lower internal growth in solid waste, in both cases primarily as a result of the COVID-19 pandemic.

Solid waste internal growth was negative 0.4%, due to lower volumes and lower fuel, materials and environmental surcharges more than offsetting price increases and higher recycled commodity values.

Pricing growth was 4.3%, with core pricing up 4.5%, partially offset by materials and environmental surcharges of negative 0.2%.

Volumes decreased by 4.8% on decreases in landfill and hauling volumes primarily due to the impact of the COVID-19 pandemic.

Increases in the value of recycled commodities resulted in a 0.1% increase to internal solid waste growth.

Net income attributable to Waste Connections decreased 63.9% to $204.7 million in 2020, from $566.8 million in 2019.

In 2020, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, a non-GAAP financial measure (refer to page 76 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), decreased 0.7% to $1.662 billion, from $1.674 billion in 2019.

As a percentage of revenue, adjusted EBITDA decreased from 31.1% in 2019, to 30.5% in 2020.

This 0.7 percentage point decrease was primarily due to lower recycled commodity values and renewable energy credits derived from the sale of landfill gas.

Adjusted net income attributable to Waste Connections, a non-GAAP financial measure (refer to page 69 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), in 2019 increased 7.8% to $719.6 million from $667.3 million in 2018.

This 0.6% decrease was due to the decline in E&P waste revenue, which was partially offset by the expansion of adjusted EBITDA margin in solid waste.

Adjusted net income attributable to Waste Connections, a non-GAAP financial measure (refer to page 77 of this Annual Report on Form 10-K for a definition and reconciliation to Net income attributable to Waste Connections), in 2020 decreased 3.3% to $695.8 million from $719.6 million in 2019.

Adjusted Free Cash Flow

Net cash provided by operating activities increased 9.2% to $1.541 billion in 2019, from $1.411 billion in 2018, and capital expenditures for property and equipment increased from $546.1 million in 2018 to $634.4 million in 2019, an increase of $88.3 million, or 16.2%.

The increase in capital expenditures was primarily due to acquisitions closed during, or subsequent to, the prior year, as well as new municipal contracts awarded during the year.

Adjusted free cash flow, a non-GAAP financial measure (refer to page 67 of this Annual Report on Form 10-K for a definition and reconciliation to Net cash provided by operating activities), increased by $36.9 million to $916.8 million in 2019, from $879.9 million in 2018.

Net cash provided by operating activities decreased 8.6% to $1.409 billion in 2020, from $1.541 billion in 2019.

Capital expenditures for property and equipment decreased from $634.4 million in 2019 to $597.1 million in 2020, a decrease of $37.3 million, or 5.9%, while capital expenditures for undeveloped landfill properties increased from $31.7 million in 2019 to $67.5 million in 2020, an increase of $35.8 million, or 112.9%.

Adjusted free cash flow, a non-GAAP financial measure (refer to page 75 of this Annual Report on Form 10-K for a definition and reconciliation to Net cash provided by operating activities), decreased by $74.9 million to $841.9 million in 2020, from $916.8 million in 2019.

Adjusted free cash flow as a percentage of revenues was 15.5% in 2020, as compared to 17.0% in 2019.

Return of Capital to Shareholders

In 2019, we returned $175.1 million to shareholders through cash dividends declared by our Board of Directors, which also increased the quarterly cash dividend by 15.6%, from $0.16 to $0.185 per common share in October 2019.

Return of Capital and Distributions to Shareholders

In 2020, we distributed $305.6 million to shareholders through a combination of cash dividends and share repurchases.

We paid cash dividends of $199.9 million to shareholders through cash dividends declared by our Board of Directors, which also increased the quarterly cash dividend by 10.8%, from $0.185 to $0.205 per common share in October 2020.

Cash dividends increased $24.8 million, or 14.2%, from $175.1 million in 2019 due to a 15.6% increase in the quarterly cash dividend declared by our Board of Directors in October 2019, followed by the additional increase in October 2020.

Our Board of Directors intends to review the quarterly dividend during the fourth quarter of each year, with a long-term objective of increasing the amount of the dividend.

In 2019, we did not repurchase any common shares due to expectations regarding the size and timing of acquisitions.

We expect the amount of capital we return to shareholders through share repurchases to vary depending on our financial condition and results of operations, capital structure, the amount of cash we deploy on acquisitions, expectations regarding the timing and size of acquisitions, the market price of

our common shares, and overall market conditions.

In 2020, we also repurchased 1,271,977 common shares at an aggregate cost of $105.7 million.

We cannot assure you as to the amounts or timing of future share repurchases or dividends.

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We target a leverage ratio, as defined in our Credit Agreement, of approximately 2.5x – 3.0x total debt to EBITDA.

The percentage increase in EBITDA in 2019 more than offset the percentage increase in debt in 2019;

therefore, our leverage ratio decreased to 2.41x at December 31, 2019, from 2.45x at December 31, 2018.

Higher debt in 2020, along with a small reduction in EBITDA, resulted in an increase in our leverage ratio from 2.41x at December 31, 2019 to 2.68x at December 31, 2020.

Cash balances increased from $326.7 million at December 31, 2019 to $617.3 million at December 31, 2020, and we had $1.239 billion of remaining borrowing capacity under our Credit Agreement, which matures in March 2023.

Critical Accounting Estimates and Assumptions

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements.

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements.

As described by the SEC, critical accounting estimates and assumptions are those that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on the financial condition or operating performance of a company.

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Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and third-party claims administrator.

The insurance accruals are influenced by our past claims experience factors, which have a limited history, and by published industry development factors.

The insurance accruals are influenced by our past claims experience factors and by published industry development factors.

If we experience insurance claims or costs above or below our historically evaluated levels, our estimates could be materially affected.

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Based on our deferred income tax liability balance at December 31, 2020, each 0.1 percentage point change to our expected future income tax rates would change our deferred income tax liability balance and income tax expense by approximately $3.0 million.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act.

The Tax Act made broad and complex changes to the U.S.

tax code that affected 2017, including, but not limited to, (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (2) bonus depreciation that will allow for full expensing of qualified property.

The Tax Act also established new tax laws that affected years beginning after December 31, 2017, including, but not limited to, (1) a reduction of the U.S.

federal corporate income tax rate from 35 percent to 21 percent;

(2) elimination of the corporate alternative minimum tax;

(3) the creation of the base erosion anti-abuse tax, which acts similar to a new minimum tax;

(4) a general elimination of U.S.

federal income taxes on dividends from foreign subsidiaries;

(5) a new provision designed to tax global intangible low-taxed income, which allows for the possibility of using foreign tax credits, or FTCs, and a deduction of up to 50 percent to offset the income tax liability (subject to some limitations);

new limitation on deductible interest expense;

(7) limitations on the deductibility of certain executive compensation;

(8) bonus depreciation that allows for full expensing of qualified property;

and (9) limitations on net operating losses.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No.

118, or SAB 118, which provides guidance on accounting for the tax effects of the Tax Act.

SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740.

In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In connection with our analysis of the Tax Act, we recorded a discrete net income tax benefit of $269.8 million in the year ended December 31, 2017.

This net income tax benefit was primarily the result of the reduction to the corporate income tax rate.

Additionally, the Tax Act’s one-time deemed repatriation transition tax, or the Transition Tax, on certain unrepatriated earnings of non-U.S.

subsidiaries is a tax on previously untaxed accumulated and current earnings and profits of certain of our non-U.S.

subsidiaries.

To determine the amount of the Transition Tax, we had to determine, in addition to other factors, the amount of post-1986 earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S.

income taxes paid on such earnings.

We were able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax obligation of $1.0 million for the year ended December 31, 2017.

The Transition Tax, which has been determined to be complete, resulted in a total Transition Tax obligation of $0.7 million, with a corresponding adjustment of $0.3 million to income tax expense for the year ended December 31, 2018.

Further, as it relates to our policy regarding the accounting for the tax impacts of global intangible low-taxed income, we have elected to record the tax impacts as period costs.

Additionally, in conjunction with the Tax Act, we recorded a provisional deferred income tax expense of $62.4 million for the year ended December 31, 2017 associated with a portion of our U.S.

earnings no longer permanently reinvested.

During the year ended December 31, 2018, we recorded a deferred income tax expense of $6.4 million associated with refinements to the prior year estimate as a measurement period adjustment pursuant to SAB 118.

This resulted in total deferred income tax expense of $68.8 million which has been determined to be complete.

Accounting for landfills .

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Landfill development costs depend on future events and thus actual costs could vary significantly from our estimates.

Material differences

between estimated and actual development costs may affect our cash flows by increasing our capital expenditures and thus affect our results of operations by increasing our landfill depletion expense.

Material differences between estimated and actual development costs may affect our cash flows by increasing our capital expenditures and thus affect our results of operations by increasing our landfill depletion expense.

Final capping, closure and post-closure obligations .

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We could have additional material financial obligations relating to final capping, closure and post-closure costs at other disposal facilities that we currently own or operate or that we may own or operate in the future.

Our discount rate assumption for purposes of computing 2019 and 2018 “layers” for final capping, closure and post-closure obligations was 4.75% for both years, which reflects our long-term credit adjusted risk free rate as of the end of both 2018 and 2017.

Our discount rate assumption for purposes of computing 2020 and 2019 “layers” for final capping, closure and post-closure obligations was 4.75% for both years, which reflects our long-term credit adjusted risk free rate.

Our inflation rate assumption was 2.5% for the years ended December 31, 2020 and 2019.

Significant reductions in our estimates of the remaining lives of our landfills or significant increases in our estimates of the landfill final capping, closure and post-closure maintenance costs could have a material adverse effect on our financial condition and results of operations.

Additionally, changes in regulatory or legislative requirements could increase our costs related to our landfills, resulting in a material adverse effect on our financial condition and results of operations.

Additionally, changes in

regulatory or legislative requirements could increase our costs related to our landfills, resulting in a material adverse effect on our financial condition and results of operations.

We own two landfills for which the prior owner is obligated to reimburse us for certain costs we incur for final capping, closure and post-closure activities on the portion of the landfills utilized by the prior owner.

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● 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 the segment;

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

● current period or expected future operating cash flow losses.

We elected to early adopt the guidance issued by the Financial Accounting Standards Board, or FASB, “Simplifying the Test for Goodwill Impairment” on January 1, 2017.

The new guidance removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation.

As such, the impairment analysis is only one step.

In this step, we estimate the fair value of each of our reporting units, which consisted of testing our five geographic solid waste operating segments and our E&P segment at December 31, 2019, 2018, and 2017, using discounted cash flow analyses, which require significant assumptions and estimates about the future operations of each reporting unit.

We compare the fair value of each reporting unit to the carrying value of its net assets.

As part of our goodwill impairment test, we estimate the fair value of each of our reporting units using discounted cash flow analyses.

At December 31, 2019 and 2018, our reporting units consisted of our five geographic solid waste operating segments and our E&P segment.

As of July 1, 2020, we combined all operations of our E&P segment into the Southern segment, based on our determination that the two operating segments met the aggregation criteria, and eliminated the E&P segment.

We compare the fair value of each reporting unit with the carrying value of the net assets assigned to the reporting unit.

If the fair value of a reporting unit is greater than the carrying value of the net assets, including goodwill, assigned to the reporting unit, then no impairment results.

If the fair value is less than its carrying value, an impairment charge is recorded for the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

If the fair value is less than its carrying value, an impairment

charge is recorded for the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

In testing indefinite-lived intangible assets for impairment, we compare the estimated fair value of each indefinite-lived intangible asset to its carrying value.

If the fair value of the indefinite-lived intangible asset is less than its carrying value, an impairment charge would be recorded to earnings in our Consolidated Statements of Net Income.

Significant judgments inherent in these analyses include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates.

Discounted cash flow analyses require significant assumptions and estimates about the future operations of each reporting unit and the future discrete cash flows related to each indefinite-lived intangible asset.

Significant judgments inherent in these analyses include the determination of appropriate discount rates, the amount and timing of expected future cash flows, growth rates and income tax rates.

In assessing the reasonableness of our determined fair values of our reporting units, we evaluate our results against our current market capitalization.

For our impairment testing of our solid waste geographic operating segments for the year ended December 31, 2019, we determined that the indicated fair value of our reporting units exceeded their carrying value by approximately 120% on average and, therefore, we did not record an impairment charge.

For our impairment testing of our operating segments for the year ended December 31, 2020, we determined that the indicated fair value of our reporting units exceeded their carrying value by approximately 150% on average and, therefore, we did not record an impairment charge.

The detailed results of our 2020, 2019 and 2018 impairment tests are described in Note 3 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Upon adopting the goodwill impairment accounting guidance in the first quarter of 2017, we performed an updated impairment test for our E&P segment.

The impairment test involved measuring the recoverability of goodwill by comparing the E&P segment’s carrying amount, including goodwill, to the fair value of the reporting unit.

The fair value was estimated using an income approach employing a DCF model.

The DCF model incorporated projected cash flows over a forecast period based on the remaining estimated lives of the operating locations comprising the E&P segment.

This was based on a number of key assumptions, including, but not limited to, a discount rate of 11.7%, 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, gross margins based on estimated operating expense requirements during the forecast period and estimated capital expenditures over the forecast period, all of which were classified as Level 3 in the fair value hierarchy.

The impairment test showed the carrying value of the E&P segment exceeded its fair value by an amount in excess of the carrying amount of goodwill, or $77.3 million.

Therefore, we recorded an impairment charge of $77.3 million, consisting of the carrying amount of goodwill at our E&P segment at January 1, 2017, to Impairments and other operating charges in the Consolidated Statements of Net Income during the year ended December 31, 2017.

Additionally, we evaluated the recoverability of the E&P segment’s indefinite-lived intangible assets (other than goodwill) by comparing the estimated fair value of each indefinite-lived intangible asset to its carrying value.

We estimated the fair value of the indefinite-lived intangible assets using an excess earnings approach.

Based on the result of the recoverability test during the years ended December 31, 2019, 2018 and 2017, we did not record an impairment charge.

Business Combination Accounting .

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Many of our landfill and transfer station customers have entered into one to ten year disposal contracts with us, most of which provide for annual indexed price increases.

Our revenues from E&P waste services are primarily generated through the treatment, recovery and disposal of non-hazardous exploration and production waste from vertical and horizontal drilling, hydraulic fracturing, production and clean-up activity, as well as other services including closed loop collection systems, the transportation of waste to the disposal facility in certain markets and the sale of recovered products.

E&P activity varies across market areas that are tied to the natural resource basins in which the drilling activity occurs and reflects the regulatory environment, pricing and disposal alternatives available in any given market.

Our revenues from recycling services are generated by offering residential, commercial, industrial and municipal customers recycling services for a variety of recyclable materials, including compost, cardboard, mixed paper, plastic containers, glass bottles and ferrous and aluminum metals.

The Company owns recycling operations and markets

collected recyclable materials to third parties for processing before resale.

In certain instances, the Company issues recycling rebates to municipal or commercial customers, which can be based on the price it receives upon the sale of recycled commodities, a fixed contractual rate or other measures.

The Company also receives rebates when it disposes of recycled commodities at third-party facilities.

Our revenues from recycling services result from the sale of recycled commodities, which are generated by offering residential, commercial, industrial and municipal customers recycling services for a variety of recyclable materials, including compost, cardboard, mixed paper, plastic containers, glass bottles and ferrous and aluminum metals.

We own and operate recycling operations and market collected recyclable materials to third parties for processing before resale.

In some instances, we utilize a third party to market recycled materials.

In certain instances, we issue recycling rebates to municipal or commercial customers, which can be based on the price we receive upon the sale of recycled commodities, a fixed contractual rate or other measures.

We also receive rebates when we dispose of recycled commodities at third-party facilities.

Other revenues consist primarily of the sale of methane gas generated from our MSW landfills and revenues from intermodal services.

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Cost of operations includes labor and benefits, tipping fees paid to third-party disposal facilities, vehicle and equipment maintenance, workers’ compensation, vehicle and equipment insurance, insurance and employee group health claims expense, third-party transportation expense, fuel, the cost of materials we purchase for recycling, district and state taxes and host community fees and royalties.

Our significant costs of operations in 2019 were labor, third-party disposal and transportation, vehicle and equipment maintenance, taxes and fees, insurance and fuel.

Our significant costs of operations in 2020 were labor, including the discretionary costs added for frontline employee support, as well as employee benefits, third-party disposal and transportation, vehicle, equipment and property maintenance, taxes and fees, insurance and fuel.

We use a number of programs to reduce overall cost of operations, including increasing the use of automated routes to reduce labor and workers’ compensation exposure, utilizing comprehensive maintenance and health and safety programs, and increasing the use of transfer stations to further enhance internalization rates.

We carry insurance for automobile liability, general liability, employer’s liability, environmental liability, cyber liability, employment practices liability and directors’ and officers’ liability as well as for employee group health claims, property and workers’ compensation.

We carry insurance for automobile liability, general liability, employer’s liability, environmental liability, cyber liability, employment practices liability and directors’ and

officers’ liability as well as for employee group health claims, property and workers’ compensation.

If we experience insurance claims or costs above or below our historically evaluated levels, our estimates could be materially affected.

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Income tax provision

Net loss (income) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net income attributable to Waste Connections

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During the year ended December 31, 2020, incremental revenue from acquisitions closed during, or subsequent to, the year ended December 31, 2019, increased revenues by approximately $212.8 million.

Operations that were divested in 2018 decreased revenues by approximately $20.7 million for the year ended December 31, 2019.

During the year ended December 31, 2019, the net increase in prices charged to our customers at our existing operations was $237.0 million, consisting of $230.5 million of core price increases and $6.5 million from surcharges.

During the year ended December 31, 2019, volume decreases in our existing business decreased solid waste revenues by $8.9 million due primarily to declines in transfer station volumes in our Eastern segment resulting from the termination of our New York City Department of Sanitation marine terminal operations contract with a third party, declines in residential collection in certain markets at our Eastern segment due to competition from lower-priced haulers, declines in residential collection in our Southern and Canada segments due to the non-renewal of certain contracts acquired in the Progressive Waste acquisition and declines in landfill municipal solid waste volumes in our Southern and Central segments exceeding increased collection and landfill volumes in our Western segment.

E&P revenues at facilities owned and fully-operated during the years ended December 31, 2019 and 2018 increased by $10.8 million due to increased drilling activity and E&P disposal volumes primarily in our Louisiana Gulf of Mexico and Permian Basins.

Operations that were divested in 2020, and the full year impact of operations that were divested in 2019, decreased revenues by approximately $15.6 million for the year ended December 31, 2020.

During the year ended December 31, 2020, the net increase in prices charged to our customers at our existing operations was $216.0 million, consisting of $227.7 million of core price increases, partially offset by a decrease in surcharges of $11.7 million.

During the year ended December 31, 2020, volume decreases in our existing business decreased solid waste revenues by $238.8 million, due primarily to the economic disruptions resulting from the COVID-19 pandemic that began in March 2020 and continued throughout 2020.

The decreases during the year ended December 31, 2020 resulting from the COVID-19 pandemic were partially offset by increased residential municipal solid waste and recycling collection services, increased landfill municipal solid waste and special waste volumes in certain markets and the impact of one additional business day in 2020 resulting from leap year.

E&P revenues at facilities owned during the year ended December 31, 2020 and 2019 decreased $112.1 million.

Decreases in the demand for crude oil as a result of economic disruptions from the COVID-19 pandemic 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 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 the COVID-19 pandemic.

A decrease in the average Canadian dollar to U.S.

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dollar exchange rates on our Canadian revenues were 0.7472 and 0.7537 in the years ended December 31, 2020 and 2019, respectively.

Revenues from sales of recyclable commodities at facilities owned during the years ended December 31, 2019 and 2018 decreased $31.9 million, due primarily to decreased prices for old corrugated cardboard and other fiber products resulting from a reduction in overseas demand.

Other revenues decreased by $16.6 million during the year ended December 31, 2019, due primarily to a decrease in intermodal revenues resulting from customer losses causing a reduction in cargo volume as well as a reduction in the prices for renewal energy credits associated with the generation of landfill gas primarily in our Canada segment.

Revenues from sales of recyclable commodities at facilities owned during the years ended December 31, 2020 and 2019 increased $4.3 million due primarily to higher prices for old corrugated cardboard and higher volumes collected from residential recycling customers, partially offset by decreased collected commercial recycling volumes caused by economic disruptions resulting from the COVID-19 pandemic and decreased prices for plastic and aluminum.

Other revenues decreased by $2.2 million during the year ended December 31, 2020, due primarily to a $6.6 million decrease in intermodal revenues resulting from a reduction in intermodal cargo volumes and a $0.2 million decrease in other non core revenue sources, partially offset by a $4.6 million increase resulting from higher prices for renewable energy credits associated with the generation of landfill gas at our Canada segment.

Cost of Operations .

Total cost of operations increased $78.0 million, or 2.4%, to $3.277 billion for the year ended December 31, 2020, from $3.199 billion for the year ended December 31, 2019.

The increase was primarily the result of $210.4 million of operating costs from acquisitions closed during, or subsequent to, the year ended December 31, 2018 and an increase in operating costs at our existing operations of $149.5 million, assuming foreign currency parity, partially offset by a decrease in operating costs of $17.7 million at operations divested during, or subsequent to, the year ended December 31, 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 $149.5 million for the year ended December 31, 2019, assuming foreign currency parity, was comprised of an increase in labor expenses of $48.1 million due primarily to employee pay rate increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $27.1 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 $18.3 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 $13.6 million resulting from higher costs per ton charged by third party processors of recyclable commodities, an increase in 401(k) matching expenses of $9.5 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 $7.6 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 transportation and treatment, an increase in subcontracted operating expenses of $6.6 million due primarily to utilizing third party haulers to assist in the performance of certain collection contracts at our solid waste segments and certain operating activities at our E&P segment, an increase in taxes on revenues of $6.5 million due primarily to increased revenues in our solid waste markets, an increase in landfill monitoring, environmental compliance and daily cover expenses of $5.2 million due to increased compliance requirements under our landfill operating permits, an increase in diesel fuel expense of $4.8 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, a $4.4 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 and an increase in the deductible on our auto claims resulting in a higher portion of costs being paid by us, an increase in equipment and facility rental expenses of $3.1 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 $2.1 million due primarily to insurance cost increases, 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 and $8.2 million of other net expense increases, partially offset by a decrease in employee benefits expenses of $5.9 million due primarily to a reduction in the employer-paid portion of medical claims resulting from a change in medical plan providers, a decrease in compressed natural gas expense of $5.0 million due primarily to the recognition in 2019 of two years of tax credits associated with the purchase of compressed natural gas fuel and a $4.7 million decrease in intermodal expenses resulting from a decrease in intermodal cargo volume due to customer losses.

The increase was primarily the result of $134.6 million of additional operating costs from acquisitions closed during, or subsequent to, the year ended December 31, 2019, partially offset by a decrease in operating costs at our existing operations of $35.3 million, assuming foreign currency parity, a decrease in operating costs of $17.6 million at operations divested during, or subsequent to, the year ended December 31, 2019 and a decrease of $3.7 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 year ended December 31, 2020 of $35.3 million, assuming foreign currency parity, included the following decreases totaling $74.4 million due to solid waste, intermodal and E&P volume losses resulting from the impact of the COVID-19 pandemic:

a decrease in third-party disposal expenses of $23.1 million, a decrease in third-party trucking and transportation expenses of $15.2 million, a decrease in direct labor expenses at our Eastern segment and E&P operations of $11.1 million due to headcount reductions, a decrease in intermodal rail expenses of $6.1 million;

a decrease in subcontracted E&P operating expenses of $5.7 million, a decrease in equipment and facility maintenance and repair expenses of $5.5 million at our E&P operations, a decrease in expenses for processing recyclable commodities of $5.3 million due to a decrease in commercial recycling volumes collected and a decrease in revenue-based royalties paid by our E&P operations of $2.4 million.

The remaining increase in operating costs at our existing operations of $39.1 million for the year ended December 31, 2020 consisted of an increase in truck, container, equipment and facility maintenance and repair expenses at our solid waste operations of $17.7 million due to cost increases and a higher quantity of large repairs, an increase in labor expenses totaling $15.7 million at the solid waste operations of our Southern segment and our Western, Central and Canada segments due primarily to annual pay increases and the impact of an additional working day during the year ended December 31, 2020, an increase in other cash incentive compensation to non-management personnel of $13.8 million to recognize the services they are providing during the COVID-19 pandemic, an increase of $11.4 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic, an increase in expenses for auto and workers’ compensation claims of $9.4 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 compressed natural gas expense of $4.6 million due primarily to 2020 expenses being net of one year of tax credits for purchases occurring in 2020 whereas 2019 expenses were net of two years of tax credits for purchases occurring in 2019 and 2018, an increase in landfill gas system operating supplies and maintenance expenses at our solid waste operations of $3.5 million, an increase in recurring taxes on revenues of $3.4 million due primarily to increased revenues in our Western Region, an increase in leachate expense of $3.1 million due to higher per gallon disposal costs, an increase in leachate gallons disposed of due to storms causing higher precipitation in certain markets where our landfills are located, increased leachate in landfill cells constructed in 2020 and an increase in the percentage of leachate generated that required processing and disposal at third-party locations, an increase in property tax expenses of $2.0 million due primarily to reassessed values of certain landfills and property acquired in recent acquisitions and $0.9 million of other net expense increases, partially offset by a decrease in fuel expense of $24.0 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 $9.1 million due to a reduction in medical visits, a decrease in 401(k) matching expenses of $8.4 million as we suspended our 401(k) match as of June 1, 2020 and 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.

Cost of operations as a percentage of revenues increased 0.8 percentage points to 60.2% for the year ended December 31, 2020, from 59.4% for the year ended December 31, 2019.

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 year ended December 31, 2018, a 0.2 percentage point increase from higher maintenance and repair expenses, a 0.2 percentage point increase from higher labor expenses, a 0.2 percentage point increase from higher 401(k) matching expenses, a 0.2 percentage point increase from an increase in recyclable commodities processing expenses, a 0.1 percentage point increase from higher leachate disposal expenses and a 0.1 percentage point increase from higher subcontracted operating expenses, partially offset by a 0.3 percentage point decrease from improved internalization of collected waste volumes disposed at third party locations.

SG&A expenses increased $21.9 million, or 4.2%, to $546.3 million for the year ended December 31, 2019, from $524.4 million for the year ended December 31, 2018.

The increase was comprised of $25.9 million of additional SG&A expenses from operating locations at acquisitions closed during, or subsequent to, the year ended December 31, 2018, partially offset by a decrease of $1.0 million in SG&A expenses at our existing operations, assuming foreign currency parity, a decrease of $1.7 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods and a decrease of $1.3 million consisting of SG&A expenses from operations divested during, or subsequent to, the year ended December 31, 2018.

The decrease in SG&A expenses at our existing operations of $1.0 million, assuming foreign currency parity, for the year ended December 31, 2019 was comprised of a decrease in professional fees expense of $13.1 million primarily due to reduced legal expenses resulting from reimbursements related to legal matters covered under our insurance policies and the settlement of certain legal matters subsequent to December 31, 2018, a decrease of $5.0 million in equity-based compensation expenses associated with the prior year adjustment of Waste Connections, Inc.

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, a further decrease in equity-based compensation expenses of $1.1 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 $4.6 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, a decrease in employee benefits expenses of $2.9 million due primarily to a reduction in the employer-paid portion of medical claims resulting from a change in medical plan providers 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 deferred compensation expenses of $5.9 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked, an increase in equity-based compensation expenses of $5.6 million associated with our annual recurring grant of restricted share units to our personnel, an increase in direct acquisition expenses of $3.7 million due to higher acquisition activity, an increase in 401(k) matching expenses of $3.4 million due to our increasing the maximum matching contribution rate to our employees and credits recorded in the prior year period from employee forfeitures, an increase in payroll and payroll-related expenses of $2.8 million due primarily to annual compensation increases, an increase in management training expenses of $1.5 million due to an expansion of our management training curriculum, an increase in credit card fee expenses of $1.5 million due to an increase in the volume of customers paying for services with credit cards, an increase in software licenses and subscriptions expenses of $1.5 million due primarily to the addition of new human resources and data security applications and $2.6 million of other net expense increases.

The increase as a percentage of revenues consisted of a 0.5 percentage point increase from higher labor expenses, a 0.5 percentage point increase resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic and other cash incentive compensation paid to non-management personnel, a 0.4 percentage point increase from higher maintenance and repair expenses, a 0.2 percentage point increase from an increase in expenses for auto and workers’ compensation claims, a 0.2 percentage point increase from the net impact of cost of operations expenses from acquisitions closed during, or subsequent to, the year ended December 31, 2019 and a 0.2 percentage point increase from all other net changes, partially offset by a 0.4 percentage point decrease from lower diesel fuel expenses, a 0.3 percentage point decrease from lower trucking and transportation expenses, a 0.3 percentage point decrease from lower disposal expenses and a 0.2 percentage point decrease from lower 401(k) match expenses.

SG&A expenses decreased $8.7 million, or 1.6%, to $537.6 million for the year ended December 31, 2020, from $546.3 million for the year ended December 31, 2019.

The decrease was comprised of a decline of $20.7 million in SG&A expenses at our existing operations, assuming foreign currency parity, a decrease in SG&A expenses of $0.7 million at operations divested during, or subsequent to, the year ended December 31, 2019 and a decline of $0.7 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by $13.4 million of additional SG&A expenses from operating locations at acquisitions closed during, or subsequent to, the year ended December 31, 2019.

The decrease in SG&A expenses at our existing operations, assuming foreign currency parity, of $20.7 million for the year ended December 31, 2020, was comprised of a collective decrease in travel, meeting, training and community activity expenses of $22.4 million from shelter at home and other restrictions on our employees due to the COVID-19 pandemic resulting in the cancellation of non-essential off-site activities, a decrease in 401(k) matching expenses of $2.9 million due to our suspension of our 401(k) match as of June 1, 2020, a decrease in professional fees of $2.9 million due primarily to work on legal matters being postponed from temporary court closures and a decrease in third party tax consulting expenses, a decrease in office supplies and office utilities of $2.8 million due to office closures resulting from shelter at home restrictions, a decrease in direct acquisition expenses of $2.5 million due to changes in acquisition activity, a decrease in employee medical benefits expenses of $2.1 million due to a reduction in medical visits, a decrease in deferred compensation expenses of $1.6 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 $1.5 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 and $1.7 million of other net expense decreases, partially offset by an increase in accrued recurring cash incentive compensation expense to our management of $6.0 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 result of the shares being exchanged for other investment options, an increase in payroll expenses of $3.5 million as a result of annual pay increases, additional paid time off benefits and the impact of an additional working day during the year ended December 31, 2020, an increase in expenses for uncollectible accounts receivable of $3.3 million due to customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic, an increase in software licenses and subscriptions expenses of $1.7 million due primarily to the addition of new sales and customer service applications and an increase of $1.2 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic.

SG&A expenses as a percentage of revenues decreased 0.2 percentage points to 9.9% for the year ended December 31, 2020, from 10.1% for the year ended December 31, 2019.

The decrease as a percentage of revenues consisted of a 0.3 percentage point decrease from lower legal expenses, a 0.1 percentage point decrease from equity-based compensation expenses associated with the exchange of shares held in our deferred compensation plan, a 0.1 percentage point decrease from lower expenses for uncollectible accounts receivable and a 0.1 percentage point decrease from all other changes.

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, partially offset by a 0.2 percentage point increase associated with administrative salaries and wages.

Depreciation .

Depreciation expense increased $2.7 million, or 0.4%, to $621.1 million for the year ended December 31, 2020, from $618.4 million for the year ended December 31, 2019.

The increase was comprised of depreciation and depletion expense of $24.9 million from acquisitions closed during, or subsequent to, the year ended December 31, 2018, an increase in depletion expense of $16.0 million at our existing landfills due primarily to expected increases in future site build out and closure costs increasing our per unit depletion rates and higher E&P and municipal solid waste volumes and additional depreciation expense of $7.0 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 June 1, 2019, 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.

The increase was comprised of an increase in depreciation and depletion expense of $20.8 million from acquisitions closed during, or subsequent to, the year ended December 31, 2019 and an increase in depreciation expense at our existing operations of $10.2 million 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 and June 2020, partially offset by a decrease in depletion expense of $26.7 million at our existing landfills due primarily to economic disruptions resulting from the COVID-19 pandemic causing a decrease in E&P and municipal solid waste, a decrease in depreciation and depletion expense of $0.8 million from operations divested during, or subsequent to, the year ended December 31, 2019 and a decrease of $0.8 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.

Depreciation expense as a percentage of revenues decreased 0.1 percentage points to 11.4% for the year ended December 31, 2020, from 11.5% for the year ended December 31, 2019.

The decrease as a percentage of revenues was attributable to certain equipment acquired from the acquisition of Progressive Waste becoming fully depreciated subsequent to June 1, 2019.

The decrease as a percentage of revenues consisted of a 0.4 percentage point decrease from depletion expense due to declines in E&P and municipal solid waste landfill volumes, partially offset by a 0.3 percentage point increase from depreciation expense attributable to a decrease in our revenues due to economic disruptions resulting from the COVID-19 pandemic.

Amortization of Intangibles .

Amortization of intangibles expense increased $5.8 million, or 4.6%, to $131.3 million for the year ended December 31, 2020, from $125.5 million for the year ended December 31, 2019.

The increase was the result of $28.8 million from intangible assets acquired in acquisitions closed during, or subsequent to, the year ended December 31, 2018, partially offset by a decrease of $10.4 million from certain intangible assets becoming fully amortized subsequent to December 31, 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.

The increase was the result of $17.8 million from intangible assets acquired in acquisitions closed during, or subsequent to, the year ended December 31, 2019, partially offset by a decrease of $11.1 million from certain intangible assets becoming fully amortized subsequent to December 31, 2019, a decrease of $0.7 million from operations divested during, or subsequent to, the year ended December 31, 2019 and a decrease of $0.2 million resulting from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods.

Amortization expense as a percentage of revenues increased 0.1 percentage points to 2.4% for the year ended December 31, 2020, from 2.3% for the year ended December 31, 2019.

The increase as a percentage of revenues was due primarily to the impact of amortization expense associated with acquisitions closed during, or subsequent to, the year ended December 31, 2018.

The increase as a percentage of revenues was due primarily to the impact of amortization expense from intangible assets acquired in acquisitions closed during, or subsequent to, the year ended December 31, 2019.

Impairments and Other Operating Items .

Impairments and other operating items increased $404.8 million, to net losses totaling $466.7 million for the year ended December 31, 2020, from net losses totaling $61.9 million for the year ended December 31, 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 year ended December 31, 2020, our E&P revenue declined $112.1 million on rig count declines of 56% 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.

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 recording an impairment charge of $417.4 million to property and equipment during the year ended December 31, 2020.

The remaining net losses of $49.3 million recorded during the year ended December 31, 2020 consisted of $18.4 million to adjust the carrying value of contingent consideration liabilities, $13.3 million of charges to adjust the carrying values of certain long-lived assets acquired in the Progressive Waste acquisition, $6.9 million of losses on property and equipment that were disposed of through sales or as a result of being damaged in operations, $6.1 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, $3.6 million of losses on the disposal of certain non-strategic operating locations and $1.0 million of other net charges.

The net losses of $61.9 million recorded during the year ended December 31, 2019 consisted of $25.8 million of charges in our Eastern segment associated with the write-down of an operating permit and equipment at a non-strategic materials recovery facility that was disposed of by sale on January 2, 2020, $15.4 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, $8.5 million of losses on property and equipment at our existing operations that were disposed of through sales or as a result of being damaged in operations, $8.0 million resulting from the abandonment of a landfill development project at our E&P segment, $2.0 million of expenses associated with the settlement of various litigation claims, 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 2019 and $0.7 million of other net losses.

The net losses of $20.1 million recorded during the year ended December 31, 2018 consisted of an $11.0 million charge recorded for the potential settlement of a final judgment obtained against Progressive Waste Solutions of FL, Inc., now known as Waste Connections of Florida, Inc., $8.5 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, $3.8 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 $2.8 million of other net charges, partially offset by the reversal of $6.0 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 $5.6 million, or 0.7%, to $837.8 million for the year ended December 31, 2019, from $832.2 million for the year ended December 31, 2018.

The increase was primarily attributable to operating income generated from acquisitions, price-led growth in our existing solid waste business and gross margins recognized on E&P volume growth, partially offset by an increase in impairments and other operating charges.

Operating income decreased $425.4 million, or 50.8%, to $412.4 million for the year ended December 31, 2020, from $837.8 million for the year ended December 31, 2019.

The decrease was due primarily to declines in our existing solid waste and E&P volumes resulting from the impact of the COVID-19 pandemic, additional discretionary costs primarily for frontline support and the impairment charge attributable to four of our E&P landfills, partially offset by price increases and cost containment efforts implemented at our solid waste operations and operating income generated from acquisitions.

Operating income as a percentage of revenues decreased 7.9 percentage points to 7.6% for the year ended December 31, 2020, from 15.5% for the year ended December 31, 2019.

The decrease as a percentage of revenues was comprised of a 1.2 percentage point increase in cost of operations, a 0.8 percentage point increase in impairments and other operating items and a 0.1 percentage point increase in amortization expense, partially offset by a 0.6 percentage point decrease in SG&A expense and a 0.1 percentage point decrease in depreciation expense.

The decrease as a percentage of revenues was comprised of a 7.3 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 0.2 percentage point decrease in SG&A expense and a 0.1 percentage point decrease in depreciation expense.

Interest Expense .

Interest expense increased $15.0 million, or 10.2%, to $162.4 million for the year ended December 31, 2020, from $147.4 million for the year ended December 31, 2019.

The increase was primarily attributable to an increase of $18.6 million from the November 2018 issuance of our 2028 Senior Notes (as defined below), an increase of $12.4 million from the April 2019 issuance of our 2029 Senior Notes (as defined below) and an increase of $2.1 million due to higher interest rates on outstanding borrowings under our Credit Agreement (as defined below), partially offset by a decrease of $15.1 million due to a decrease in the average borrowings outstanding under our Credit Agreement, a decrease of $2.0 million from the repayment at maturity of our 2018 Senior Notes (as defined below) and 2019 Senior Notes (as defined below) using proceeds from our Credit Agreement and $0.7 million of other net decreases.

The increase was primarily attributable to an increase of $14.7 million from the January 2020 issuance of our 2030 Senior Notes (as defined below), an increase of $12.2 million from the March 2020 issuance of our 2050 Senior Notes (as defined below), an increase of $5.1 million from full year impact of the April 2019 issuance of our 2029 Senior Notes (as defined below), an increase of $3.4 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 $1.2 million of other net increases, partially offset by a decrease of $13.9 million due to a reduction in the average borrowings outstanding under our Credit Agreement and a decrease of $7.7 million from full year impact of the repayment of $175 million of our 2019 Senior Notes (as defined below).

Interest Income .

Interest income increased $2.6 million, to $9.8 million for the year ended December 31, 2019, from $7.2 million for the year ended December 31, 2018.

The increase was primarily attributable to higher reinvestment rates in the current period and higher average cash balances.

Interest income decreased $4.5 million, or 46.3%, to $5.3 million for the year ended December 31, 2020, from $9.8 million for the year ended December 31, 2019.

The decrease was primarily attributable to lower reinvestment rates in the current period.

Other Income (Expense), Net .

Other income (expense), net increased $5.9 million, to an income total of $5.7 million for the year ended December 31, 2019, from an expense total of $0.2 million for the year ended December 31, 2018.

The increase was due primarily to a $6.1 million increase in income earned on investments purchased to fund our employee deferred compensation obligations and a $2.8 million increase in foreign currency transaction gains, partially offset by a $2.8 million decrease in adjustments to accrued liabilities acquired in prior year acquisitions and a $0.2 million decrease in other net income sources.

Other income (expense), net decreased $7.1 million, to an expense total of $1.4 million for the year ended December 31, 2020, from an income total of $5.7 million for the year ended December 31, 2019.

The decrease was due primarily to an increase in foreign currency transaction losses of $4.5 million attributable to the impact of an increase in the Canadian dollar to U.S.

dollar exchange rate during latter half of 2020 impacting our cash accounts held in U.S.

dollars by our Canadian entities and $2.6 million of adjustments to increase certain accrued liabilities acquired in acquisitions closed prior to 2019.

Income Tax Provision .

Income taxes decreased $89.3 million, or 64.1%, to $49.9 million for the year ended December 31, 2020, from $139.2 million for the year ended December 31, 2019.

Our effective tax rate for the year ended December 31, 2019 was 19.7%.

Our effective tax rate for the year ended December 31, 2018 was 22.6%.

Our effective tax rate was 19.7% for the years ended December 31, 2020 and 2019.

The income tax provision for the year ended December 31, 2020 included a $27.4 million expense associated with certain 2019 inter-entity payments no longer being deductible for tax purposes due to the finalization of tax regulations on April 7, 2020 under Internal Revenue Code section 267A and 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 year ended December 31, 2020 included a benefit of $5.4 million from share-based payment awards being recognized in the income statement when settled, as well as a portion of our internal financing being taxed at effective rates substantially lower than the U.S.

federal statutory rate.

The income tax provision for the year ended December 31, 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 year ended December 31, 2019 included a benefit of $5.5 million from share-based payment awards being recognized in the income statement when settled.

The income tax provision for the year ended December 31, 2018 included a $6.4 million expense primarily associated with refinements to the estimates, as provided by Staff Accounting Bulletin No.

118, of the impact of a portion of the Company’s U.S.

earnings no longer permanently reinvested in conjunction with the Tax Act.

Additionally, the income tax provision for the year ended December 31, 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 year ended December 31, 2018 included a benefit of $5.0 million from share-based payment awards being recognized in the income statement when settled.

Our effective tax rate is dependent upon the proportion of pre-tax income among the jurisdictions where we do business.

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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 our operations through five geographic solid waste operating segments and our E&P segment, which includes the majority of our E&P waste treatment and disposal operations.

Our five geographic solid waste operating segments and our E&P segment comprise our reportable segments.

Prior to the third quarter of 2020, we managed our operations through five geographic solid waste operating segments and our E&P segment, which were also our reportable segments.

In the third quarter of 2020, our Chief Operating Decision Maker determined that the E&P and Southern operating segments met all of the aggregation criteria and 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 five geographic operating segments and no longer include a separate E&P segment.

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

In the third quarter of 2017, we moved a district from our Eastern segment to our Canada segment as a significant amount of its revenues are received from Canadian-based customers.

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.

At December 31, 2019, 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 Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, southern Oklahoma, western Tennessee and Texas;

Segment results for the 2019 and 2018 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 December 31, 2020, under the current orientation, our Southern segment services customers located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New Mexico, North Dakota, southern Oklahoma, western Tennessee, Texas, Wyoming and along the Gulf of Mexico;

our Eastern segment services customers located in Delaware, northern Illinois, Kentucky, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, eastern Tennessee, Vermont, Virginia and Wisconsin;

our Western segment services customers located in Alaska, California, Idaho, Montana, Nevada, Oregon, Washington and western Wyoming;

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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 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.

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Corporate (a)

Corporate functions include accounting, legal, tax, treasury, information technology, risk management, human resources, training, direct acquisition expenses, other administrative functions and share-based compensation expenses associated with Progressive Waste share-based grants existing at June 1, 2016.

Amounts reflected are net of allocations to the six operating segments.

For the years ended December 31, 2018 and 2017, amounts also include Progressive Waste integration-related expenses.

The majority of Corporate expenses are allocated to the five operating segments.

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 are not allocated to the five operating segments and comprise the net EBITDA of our Corporate segment for the periods presented.

A reconciliation of segment EBITDA to Income before income tax provision is included in Note 16 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

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Segment Revenue

Revenue in our Southern segment decreased $79.4 million, or 5.5%, to $1.370 billion for the year ended December 31, 2020, from $1.449 billion for the year ended December 31, 2019.

The components of the decrease consisted of a decline in revenue at our E&P operations of $109.0 million, partially offset by an increase in revenue at our solid waste operations of $29.6 million.

The $109.0 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 the COVID-19 pandemic resulting in a drop in the value of crude oil, decreases in drilling and production activity levels and decreases in overall demand for our E&P waste services.

Drilling and production activity during the year ended December 31, 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 the COVID-19 pandemic.

The components of the $29.6 million increase in revenue at our solid waste operations consisted of net price increases of $54.3 million and net revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2019 of $12.5 million, partially offset by solid waste volume decreases of $36.0 million attributable primarily to COVID-19-related economic disruptions driving declines in commercial collection, roll off collection and municipal solid waste landfill volumes that exceeded increases in landfill special waste volumes, net revenue reductions from divestitures closed subsequent to December 31, 2019 of $0.6 million and other revenue decreases of $0.6 million.

Revenue in our Eastern segment increased $66.9 million, or 5.3%, to $1.336 billion for the year ended December 31, 2020, from $1.269 billion for the year ended December 31, 2019.

The components of the increase consisted of net revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2018, of $158.7 million and net price increases of $59.4 million, partially offset by decreased recyclable commodity sales of $11.8 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products, solid waste volume decreases of $8.8 million primarily due to declines in residential collection in our Albany, NY market and declines in transfer station volumes in our New York City market exceeding higher landfill special waste volumes and other revenue decreases of $0.5 million.

Revenue in our Southern segment increased $70.4 million, or 6.3%, to $1.193 billion for the year ended December 31, 2019, from $1.123 billion for the year ended December 31, 2018.

The components of the increase consisted of net price increases of $57.9 million and net revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2018, of $57.2 million, partially offset by net revenue reductions from divestitures closed subsequent to December 31, 2018 of $20.7 million, solid waste volume decreases of $19.7 million primarily associated with losses in residential revenue resulting from the non-renewal of certain contracts acquired in the Progressive Waste acquisition, decreases in commercial volumes in certain markets and reductions in landfill municipal solid waste volumes, decreased recyclable commodity sales of $4.2 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products and other revenue decreases of $0.1 million.

The components of the increase consisted of net revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2019, of $141.1 million and net price increases of $57.6 million, partially offset by solid waste volume decreases of $116.0 million attributable primarily to COVID-19-related economic disruptions driving declines in commercial collection, roll off collection, transfer station and landfill volumes, net revenue reductions from divestitures closed subsequent to December 31, 2019 of $13.7 million and other revenue decreases of $2.1 million.

Revenue in our Western segment increased $51.0 million, or 4.6%, to $1.150 billion for the year ended December 31, 2020, from $1.099 billion for the year ended December 31, 2019.

The components of the increase consisted of net price increases of $35.3 million, solid waste volume increases of $27.0 million due to the net impact of increases associated with landfill municipal solid waste, landfill special waste, residential collection and commercial collection and net revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2018, of $1.9 million, partially offset by decreased recyclable commodity sales of $5.6 million resulting from the impact of declines in

prices for old corrugated cardboard and other fiber products, decreased intermodal revenue of $3.5 million resulting from customer losses causing a reduction in cargo volume and other revenue decreases of $0.2 million.

The components of the increase consisted of net price increases of $30.6 million, net revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2019, of $16.5 million, solid waste volume increases of $9.2 million attributable to increased residential collection, transfer station and landfill municipal solid waste volumes and an increase in revenues from sales of recyclable commodities of $2.1 million due primarily to higher prices for old corrugated cardboard and higher volumes collected from residential recycling customers, partially offset by intermodal revenue decreases of $6.6 million due to a reduction in intermodal cargo volumes and other revenue decreases of $0.8 million.

Revenue in our Central segment increased $41.7 million, or 5.0%, to $880.3 million for the year ended December 31, 2020, from $838.6 million for the year ended December 31, 2019.

The components of the increase consisted of revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2018, of $90.2 million, net price increases of $41.0 million and other revenue increases of $1.3 million, partially offset by decreased recyclable commodity sales of $3.1 million resulting from the impact of declines in prices for old corrugated cardboard and solid waste volume decreases of $2.4 million due primarily to declines in landfill special waste volumes.

Revenue in our Canada segment increased $6.1 million, or 0.8%, to $733.3 million for the year ended December 31, 2019, from $727.2 million for the year ended December 31, 2018.

The components of the increase consisted of net price increases of $43.3 million, revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2018, of $4.7 million and $0.7 million of other revenue increases, partially offset by a decrease of $16.6 million resulting from a lower average foreign currency exchange rate in effect during the comparable reporting periods, a decrease of $13.4 million resulting 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 $7.2 million resulting from the impact of declines in prices for old corrugated cardboard and other fiber products and solid waste volume decreases of $5.4 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 $10.4 million, or 4.2%, to $256.1 million for the year ended December 31, 2019, from $245.7 million for the year ended December 31, 2018.

The increase was due to increased drilling activity and E&P disposal volumes primarily in our Louisiana Gulf of Mexico and Permian Basins.

The components of the increase consisted of revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2019, of $41.9 million and net price increases of $38.3 million, partially offset by solid waste volume decreases of $37.1 million due to the impact of COVID-19-related economic disruptions driving decreases in commercial collection, roll off collection, transfer station and landfill volumes, net revenue reductions from divestitures closed subsequent to December 31, 2019 of $1.3 million and other revenue decreases of $0.1 million.

Revenue in our Canada segment decreased $22.8 million, or 3.1%, to $710.5 million for the year ended December 31, 2020, from $733.3 million for the year ended December 31, 2019.

The components of the decrease consisted of solid waste volume decreases of $58.8 million due to the net impact of COVID-19-related economic disruptions driving decreases in commercial collection, roll off collection, transfer station and landfill volumes and a decrease of $7.1 million resulting from a lower average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by net price increases of $35.2 million, an increase of $4.6 million resulting from higher prices for renewable energy credits associated with the generation of landfill gas, an increase in revenues from sales of recyclable commodities of $2.0 million due primarily to higher prices for old corrugated cardboard and higher volumes collected from residential recycling customers, net revenue growth from acquisitions closed during, or subsequent to, the year ended December 31, 2019 of $0.8 million and other revenue increases of $0.5 million.

Segment EBITDA

Segment EBITDA in our Southern segment decreased $72.0 million, or 16.3%, to $369.4 million for the year ended December 31, 2020, from $441.4 million for the year ended December 31, 2019.

The decrease was due to a decline in E&P revenues of $109.0 million, an increase in truck, container, equipment and facility maintenance and repair expenses at our solid waste operations of $9.9 million due to cost increases and a higher quantity of large repairs, a net $8.3 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in labor expenses at our solid waste operations of $6.9 million due primarily to employee pay rate increases, an increase in expenses for auto and workers’ compensation claims of $6.4 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 of $3.6 million resulting from the payment of supplemental bonuses to non-management employees at our solid waste operations to provide financial assistance associated with the impact of the COVID-19 pandemic, an increase in subcontracted hauling services of $3.2 million due to outsourcing the servicing of certain non-strategic contracts and commercial collection customers to third party haulers, an increase in third party trucking and transportation expenses of $2.9 million at our solid waste operations due to increased landfill special waste volumes requiring transportation services to our disposal sites, an increase in leachate expense of $2.1 million due to higher per gallon disposal costs and an increase in leachate gallons disposed due to storms causing higher precipitation in certain markets where our landfills are located, an increase in

expenses for uncollectible accounts receivable at our E&P operations of $2.1 million due to customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic, an increase in corporate overhead expense allocations to our solid waste operations of $1.8 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation and an increase in compressed natural gas expense of $1.4 million due primarily to 2020 expenses being net of one year of tax credits for purchases occurring in 2020 whereas 2019 expenses were net of two years of tax credits for purchases occurring in 2019 and 2018, partially offset by an increase in revenues at our solid waste operations of $29.6 million, a decrease in third party disposal expenses at our solid waste operations of $8.8 million due primarily to declines in commercial and roll off collection volumes, a decrease in 401(k) matching expenses at our solid waste operations of $4.2 million as we suspended our 401(k) match as of June 1, 2020, a decrease in employee medical benefits expenses at our solid waste operations of $3.2 million due to a reduction in medical visits, a collective decrease in travel, meeting, training, and community activity expenses at our solid waste operations of $2.9 million due to shelter at home and other restrictions on our employees due to the COVID-19 pandemic resulting in the cancellation of non-essential off-site activities, a decrease in fuel expense at our solid waste operations of $2.0 million due to a decrease in the price of diesel fuel and declines in the volume of fuel used in our operations, a net $0.8 million decrease in all other expenses at our solid waste operations 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 $6.4 million, a decrease in operating activities outsourced to third-parties of $5.7 million, a decrease in equipment and property repair and maintenance expenses of $5.5 million, a decrease in third-party trucking and transportation services of $4.2 million, a decrease in fuel expense of $2.8 million, a decrease in royalty expenses paid on revenues of $2.4 million, a decrease in landfill operating supplies of $1.6 million, a decrease in travel, meetings and training expenses of $1.6 million, a decrease in equipment rental expenses of $0.8 million, a decrease in cell processing expenses of $0.8 million and $2.3 million of other net expense decreases.

Segment EBITDA in our Western segment increased $26.2 million, or 7.7%, to $364.8 million for the year ended December 31, 2020, from $338.6 million for the year ended December 31, 2019.

The increase was due primarily to an increase in revenues of $54.9 million, a decrease in intermodal expenses of $4.6 million resulting from a decrease in intermodal cargo volume due to customer losses, a decrease in corporate overhead expense allocations of $4.2 million due to a reduction in expenses qualifying for allocation resulting in a decrease in the overhead allocation rate, a decrease in professional fees expense of $1.4 million resulting primarily from reduced legal expenses resulting from the settlement of certain legal matters subsequent to December 31, 2018, a decrease in compressed natural gas expense of $1.1 million due primarily to the recognition in 2019 of two years of tax credits associated with the purchase of compressed natural gas fuel and a decrease in uncollectible accounts receivable of $1.1 million resulting primarily from improved collection results and the recovery of certain accounts reserved against in the prior period, partially offset by an increase in direct and administrative labor expenses of $11.5 million due primarily to employee pay rate increases, an increase in taxes on revenues of $7.2 million due primarily to higher landfill and collection revenues, an increase in disposal expenses of $4.7 million due primarily to higher residential and commercial collection volumes disposed at third party facilities, an increase of $4.7 million resulting from higher costs per ton charged by third party processors of recyclable commodities, an increase in expenses for auto and workers’ compensation claims of $3.6 million due primarily to higher adjustments recorded in the prior year period to decrease projected losses on outstanding claims and an increase in the deductible on our auto claims resulting in a higher portion of costs being paid by us, an increase in truck, container, equipment and facility maintenance and repair expenses of $3.3 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 $3.2 million due primarily to increased rates charged by third parties to provide trucking and transportation services, an increase in 401(k) matching expenses of $2.2 million due to our increasing the maximum matching contribution rate to our employees, an increase in property tax expenses of $0.9 million due to the reassessment of a landfill site following the receipt of an airspace expansion permit, an increase in landfill monitoring, environmental compliance and daily cover expenses of $0.9 million due to increased compliance requirements under our landfill operating permits, an increase in leachate disposal expenses of $0.8 million due to higher costs per gallon for leachate transportation and treatment, an increase in insurance premiums for our auto and workers’ compensation policies of $0.8 million due primarily to insurance cost increases and $3.3 million of other net expense increases.

The increase was due primarily to an increase in revenues of $51.0 million, a decrease in intermodal rail expenses of $6.0 million due to a reduction in cargo volume, 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 fuel expense of $3.3 million due to a decrease in the price of diesel fuel, a collective decrease in travel, meeting, training, and community activity expenses of $3.2 million due to shelter at home and other restrictions on our employees due to the COVID-19 pandemic resulting in the cancellation of non-essential off-site activities and a decrease in 401(k) matching expenses of $2.5 million as we suspended our 401(k) match as of June 1, 2020, partially offset by a net $12.1 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in labor expenses of $7.2 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 $5.2 million attributable to price-led increases in residential collection and landfill municipal solid waste revenues, an increase in third party disposal expenses of $3.9 million due primarily to disposal rate increases and higher residential collection tonnage, an increase in corporate overhead expense allocations of $2.5 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation, an increase of $2.3 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic, an increase in landfill site maintenance expenses of $1.9 million due primarily to increased daily cover costs, an increase in third-party trucking and transportation expenses of $1.8 million due primarily to higher transfer station volumes and landfill special waste volumes in certain markets that require transportation services to our disposal sites and increased rates charged by third parties to provide trucking and transportation services, an increase in leachate expense of $1.5 million due to higher per gallon disposal costs, increased leachate in landfill cells constructed in 2020 and an increase in the percentage of leachate generated that required processing and disposal at third-party locations, an increase in compressed natural gas expense of $1.3 million due primarily to 2020 expenses being net of one year of tax credits for purchases occurring in 2020 whereas 2019 expenses were net of two years of tax credits for purchases occurring in 2019 and 2018, an increase in expenses for auto and workers’ compensation claims of $1.0 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, an increase in expenses for uncollectible accounts receivable of $0.9 million due to customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic, an increase in truck, container, equipment and facility maintenance and repair expenses of $0.6 million due to cost increases and other expense increases of $2.5 million.

Segment EBITDA in our Eastern segment increased $12.8 million, or 3.9%, to $343.4 million for the year ended December 31, 2020, from $330.6 million for the year ended December 31, 2019.

The increase was due primarily to an increase in revenues of $197.0 million, a decrease in disposal expenses of $4.4 million due to improved internalization of collected volumes into our disposal locations, a decrease in employee benefits expenses of $2.2 million due primarily to a reduction in the employer-paid portion of medical claims resulting from a change in medical plan providers and a decrease in compressed natural gas expense of $0.9 million due primarily to the recognition in 2019 of two years of tax credits associated with the purchase of compressed natural gas fuel, partially offset by a net $124.8 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in direct and administrative labor expenses of $7.6 million due primarily to employee pay rate increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $7.2 million due to parts and service rate increases and variability impacting the timing of major repairs, an increase of $6.3 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 $5.0 million due primarily to increased rates charged by third parties to provide trucking and transportation services, an increase in expenses for auto and workers’ compensation claims of $4.7 million due primarily to higher adjustments recorded in the prior year period to reduce projected losses on outstanding claims, an increase in leachate disposal expenses of $3.8 million due to increased precipitation generating higher leachate volumes as well as higher costs per gallon for leachate treatment, 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 diesel fuel expense of $1.6 million due primarily to the prior year period benefiting from a favorable diesel fuel hedge agreement that expired in December 2018, an increase in subcontracted operating expenses of $0.9 million due primarily to utilizing third party haulers to assist in the performance of certain collection contracts, an increase in professional fees expenses of $0.9 million due primarily to increased costs associated with converting newly acquired sites to our third party billing statement solutions processor, an increase in insurance premiums for our auto and workers’ compensation policies of $0.6 million due primarily to insurance cost increases and growth from acquisitions, an increase in corporate overhead expense allocations of $0.6 million due to higher revenues for which overhead allocations are based and $2.8 million of other net expense increases.

Segment EBITDA in our Southern segment increased $29.2 million, or 10.6%, to $306.0 million for the year ended December 31, 2019, from $276.8 million for the year ended December 31, 2018.

The increase was due to an increase in revenues of $91.1 million from organic growth and acquisitions, a decrease in third party disposal expenses of $5.4 million due to improved internalization of waste collected at certain operating locations in Florida and Louisiana, a decrease in corporate overhead expense allocations of $4.0 million due to a reduction in expenses qualifying for allocation resulting in a decrease in the overhead allocation rate, a decrease in compressed natural gas expense of $2.1 million due primarily to the recognition in 2019 of two years of tax credits associated with the purchase of compressed natural gas fuel, a decrease in employee benefits expenses of $1.6 million due primarily to a reduction in the employer-paid portion of medical claims resulting from a change in medical plan providers, and a decrease in auto and workers’ compensation claims of $1.3 million due primarily to decreased claim severity in the current year period, partially offset by a net $32.0 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in direct and administrative labor expenses of $12.6 million due primarily to employee pay rate increases, an increase in truck, container, equipment and facility maintenance and repair expenses of $10.7 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 $4.9 million due primarily to increased rates charged by third parties to provide trucking and transportation services, an increase in 401(k) matching expenses of $3.4 million due to our increasing the maximum matching contribution rate to our employees, an increase in diesel fuel expense of $2.7 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 leachate disposal expenses of $2.2 million due to increased precipitation generating higher leachate volumes as well as higher costs per gallon for leachate treatment, a decrease to EBITDA of $1.7 million from the impact of operations disposed of during, or subsequent to, the year ended December 31, 2018, an increase in equipment and facility rental expenses of $1.4 million due primarily to increased truck rental expenses and the adoption on January 1, 2019 of new accounting standards associated with leases, an increase of $1.4 million resulting from higher costs per ton charged by third party processors of recyclable commodities, an increase in professional fees expenses of $1.1 million due primarily to increased costs associated with converting newly acquired sites to our third party billing statement solutions processor, an increase in insurance premiums for our auto and workers’ compensation policies of $0.7 million due primarily to insurance cost increases and growth from acquisitions and other expense increases of $1.5 million.

The increase was due primarily to an increase in revenues of $80.6 million from organic growth and acquisitions, $32.6 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 the COVID-19 pandemic, a decrease in fuel expense of $7.6 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 $4.5 million due to a reduction in medical visits, a collective decrease in travel, meeting, training, and community activity expenses of $3.1 million due to shelter at home and other restrictions on our employees due to the COVID-19 pandemic resulting in the cancellation of non-essential off-site activities, an increase to EBITDA of $2.8 million from the impact of operations disposed of during the year ended December 31, 2020, a decrease in 401(k) matching expenses of $2.4 million as we suspended our 401(k) match as of June 1, 2020 and other expense decreases of $0.7 million, partially offset by a net $103.0 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in corporate overhead expense allocations of $5.8 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation, an increase in truck, container, equipment and facility maintenance and repair expenses of $2.7 million due to cost increases and a higher quantity of large repairs, an increase of $2.7 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic, an increase in landfill gas system operating supplies and maintenance expenses of $2.3 million, an increase in expenses for uncollectible accounts receivable of $2.3 million due to customers experiencing financial difficulties resulting from the economic impact of the COVID-19 pandemic, an increase in compressed natural gas expense of $1.6 million due primarily to 2020 expenses being net of one year of tax credits for purchases occurring in 2020 whereas 2019 expenses were net of two years of tax credits for purchases occurring in 2019 and 2018 and an increase in subcontracted hauling services of $1.1 million due to outsourcing the servicing of certain non-strategic collection customers to third party haulers.

Segment EBITDA in our Central segment increased $20.9 million, or 7.2%, to $313.0 million for the year ended December 31, 2020, from $292.1 million for the year ended December 31, 2019.

The increase was due primarily to an increase in revenues of $127.0 million and a decrease in employee benefits expenses of $2.6 million due primarily to a reduction in the employer-paid portion of medical claims resulting from a change in medical plan providers, partially offset by a net $74.5 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in direct and administrative labor expenses of $8.5 million due primarily to employee pay rate increases, an increase in third-party trucking and transportation expenses of $6.7 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 401(k) matching expenses of $1.8 million due to our increasing the maximum matching contribution rate to our employees, an increase in diesel fuel expense of $1.3 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 of $1.2 million resulting from higher costs per ton charged by third party processors of recyclable commodities, an increase in truck, container, equipment and facility maintenance and repair expenses of $1.2 million due to the variability and timing of major repairs and an increase in corporate overhead expense allocations of $0.3 million due to higher revenues for which overhead allocations are based.

The increase was due primarily to an increase in revenues of $43.0 million from organic growth and acquisitions, $6.2 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 the COVID-19 pandemic, a decrease in expenses for uncollectible accounts receivable of $2.4 million due primarily to the current period collection of certain accounts deemed uncollectible in prior periods, a decrease in fuel expense of $2.4 million due to a decrease in the price of diesel fuel, a decrease in 401(k) matching expenses of $2.4 million as we suspended our 401(k) match as of June 1, 2020, a decrease in employee medical benefits expenses of $2.1 million due to a reduction in medical visits, a collective decrease in travel, meeting, training, and community activity expenses of $1.5 million due to shelter at home and other restrictions on our employees due to the COVID-19 pandemic resulting in the cancellation of non-essential off-site activities and other expense decreases of $1.6 million, partially offset by a net $24.6 million increase in cost of operations and SG&A expenses attributable to acquired operations, an increase in labor expenses of $7.5 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-related economic disruptions, an increase in truck, container, equipment and facility maintenance and repair expenses of $3.0 million due to cost increases and a higher quantity of large repairs, an increase of $2.3 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic, an increase in corporate overhead expense allocations of $2.2 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation and an increase in expenses for auto and workers’ compensation claims of $1.1 million due primarily to non-recurring adjustments recorded in the prior year period to decrease projected losses on outstanding claims.

Segment EBITDA in our Canada segment decreased $0.3 million, or 0.1%, to $256.1 million for the year ended December 31, 2020, from $256.4 million for the year ended December 31, 2019.

The decrease was comprised of $5.8 million from a reduction in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by an increase of $1.0 million assuming foreign currency parity during the comparable reporting periods.

The $1.0 million increase, which assumes foreign currency parity, was due primarily to an increase in revenues of $22.7 million, partially offset by an increase in direct labor expenses of $8.4 million due primarily to a reduction in open employment positions and employee pay rate increases, an increase in third-party disposal expenses of $5.9 million due to higher disposal rates charged by operators, an increase in truck, container, equipment and facility maintenance and repair expenses of $5.2 million due to the variability and timing of major repairs and an increase in subcontracted operating expenses of $2.2 million due primarily to subcontracting the performance of a collection contract.

Segment EBITDA in our E&P segment increased $5.6 million, or 4.3%, to $135.4 million for the year ended December 31, 2019, from $129.8 million for the year ended December 31, 2018.

The increase was due primarily to an increase in revenues of $10.4 million, a decrease in third-party trucking and transportation expenses of $1.9 million due primarily to changes in customer mix in the Williston Basin reducing the requirement to provide trucking and transportation services and a decrease in expenses for uncollectible accounts receivable of $1.7 million due to adjustments to prior period reserve estimates, partially offset by an increase in subcontracted operating expenses of $3.8 million due primarily to subcontracting certain operating activities to third parties, an increase in direct labor expenses of $2.1 million due to employee pay rate increases and increased headcount to support higher disposal volumes, an increase in corporate overhead expense allocations of $1.5 million due primarily to higher revenues for which overhead allocations are based and other expense increases of $1.0 million.

Segment EBITDA at Corporate decreased $7.2 million, to a loss of $15.4 million for the year ended December 31, 2019, from a loss of $8.2 million for the year ended December 31, 2018.

The decrease was due to a reduction in corporate overhead allocated to our segments of $6.3 million due to a reduction in expenses qualifying for allocation resulting in a decrease in the overhead allocation rate, an increase in deferred compensation expenses of $5.9 million as a result of increases in the market value of investments to which employee deferred compensation liability balances are tracked, an increase in equity-based compensation expenses of $5.6 million associated with our annual recurring grant of restricted share units to our personnel, an increase in direct acquisition expenses of $3.7 million due to higher acquisition activity, an increase in 401(k) matching expenses of $3.1 million due to our increasing the maximum matching contribution rate to our employees and credits recorded in the prior year period from employee forfeitures, an increase in payroll and payroll-related expenses of $2.1 million due primarily to annual compensation increases, an increase in software licenses and subscriptions expenses of $1.5 million due primarily to the addition of new human resources and data security applications, an increase in management training expenses of $1.2 million due to an expansion of our management training curriculum and $1.1 million of other net expense increases, partially offset by a decrease of $13.4 million in professional fees expense resulting primarily from reduced legal expenses resulting from the settlement of

certain legal matters subsequent to December 31, 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 $1.1 million 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 integration-related expenses of $2.8 million incurred in the prior year period resulting from the acquisition of Progressive Waste and a decrease in accrued recurring cash incentive compensation expense to our management of $1.0 million.

The decrease was comprised of a decrease of $2.5 million from a decrease in the average foreign currency exchange rate in effect during the comparable reporting periods, partially offset by an increase of $2.2 million assuming foreign currency parity during the comparable reporting periods.

The $2.2 million increase, which assumes foreign currency parity, was due primarily to collective decreases totaling $8.9 million in third-party disposal expenses and third-party trucking expenses attributable to declines

in solid waste volumes resulting primarily from economic disruptions caused by the COVID-19 pandemic, a decrease in fuel expense of $6.0 million due to declines in the market price of diesel fuel, a decrease in subcontracted hauling services at our solid waste operations of $4.7 million due primarily to declines in commercial customers requiring less outsourcing of certain collection activities to third party collection companies and the impact of 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, a decrease in labor expenses of $2.4 million due to the receipt of government subsidies reimbursing us for certain payroll expenditures remitted to our employees during the COVID-19 pandemic and a collective decrease in travel, meeting, training, and community activity expenses of $1.5 million due to shelter at home and other restrictions on our employees due to the COVID-19 pandemic resulting in the cancellation of non-essential off-site activities, partially offset by a decrease in revenues of $15.7 million, an increase in truck, container, equipment and facility maintenance and repair expenses of $1.7 million due to parts and service rate increases and variability impacting the timing of major repairs, additional expenses of $1.3 million resulting from the payment of supplemental bonuses to non-management employees to provide financial assistance associated with the impact of the COVID-19 pandemic, an increase in landfill gas system operating supplies and maintenance expenses of $1.0 million, an increase in labor expenses of $1.0 million due primarily to employee pay rate increases exceeding the impact of headcount reductions and an increase in corporate overhead expense allocations of $0.6 million due to an increase in the overhead allocation rate resulting from an increase in corporate expenses qualifying for allocation.

Segment EBITDA at Corporate increased $0.1 million, to a loss of $15.3 million for the year ended December 31, 2020, from a loss of $15.4 million for the year ended December 31, 2019.

The increase was due to an increase in corporate overhead allocated through charges to our segments of $13.1 million due to an increase in expenses qualifying for allocation, a collective decrease in travel, meeting, training, office supplies and community activity expenses of $7.6 million due to shelter at home and other restrictions on our employees due to the COVID-19 pandemic resulting in the cancellation of non-essential off-site activities, a decrease in professional fees of $2.5 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 direct acquisition expenses of $2.5 million due to changes in acquisition activity, a decrease in deferred compensation expenses of $1.6 million as a result of decreases in the market value of investments to which employee deferred compensation liability balances are tracked and a decrease in share-based compensation expenses of $1.5 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, partially offset by an increase in accrued cash incentive compensation expense to our management and non-management employees of $19.4 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 result of the shares being exchanged for other investment options, an increase in software licenses and subscriptions expenses of $1.7 million due primarily to the addition of new sales and customer service applications, an increase in payroll and payroll related expenses of $1.5 million due to annual pay increases and increased employee termination pay and $2.1 million of other net expense increases.

Liquidity and Capital Resources

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

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

change in cash held for sale

Cash, cash equivalents and restricted cash at end of period

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

Cash, cash equivalents and restricted cash at end of year

Operating Activities Cash Flows

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For the year ended December 31, 2019, net cash provided by operating activities was $1.541 billion.

The $129.3 million increase was due primarily to the following:

1) Increase in earnings — Our increase in net cash provided by operating activities was favorably impacted by $134.3 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 December 31, 2018, price-led earnings growth at certain solid waste segments and gross margins recognized on E&P volume growth.

2) Accounts payable and accrued liabilities — Our increase in net cash provided by operating activities was favorably impacted by $29.7 million from accounts payable and accrued liabilities due primarily to period end timing of payments to vendors for goods and services.

3) Accounts receivable — Our increase in net cash provided by operating activities was favorably impacted by $14.8 million from accounts receivable due to improved collection results.

4) Prepaid expenses – Our increase in net cash provided by operating activities was unfavorably impacted by $30.6 million from prepaid expenses due primarily to a higher utilization of prepaid income taxes during the prior year period.

5) Other long-term liabilities – Our increase in net cash provided by operating activities was unfavorably impacted by $16.9 million from other long-term liabilities due primarily to lease payments, partially offset by increased liabilities associated with new or renewed leases and an increase in employee contributions and earnings under our deferred compensation plan.

The $132.0 million decrease was due primarily to the following:

1) Accounts payable and accrued liabilities — Our decrease in net cash provided by operating activities was unfavorably impacted by $108.0 million from accounts payable and accrued liabilities.

Although certain operating expenses declined as a result of solid waste and E&P volume losses due to economic disruptions resulting from the COVID-19 pandemic, our operating cash flows were adversely impacted from the timing of 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 $44.6 million associated with our deferral of qualifying U.S.

payroll and other tax payments as permitted by the CARES Act, of which a minimum of 50% will be remitted in 2021 and the remainder remitted in 2022, an increase in liabilities for cash incentive compensation of $6.3 million and an increase in accrued interest expense liabilities of $12.3 million due to the timing of interest payments for our outstanding senior note obligations.

2) Deferred income taxes — Our decrease in net cash provided by operating activities was unfavorably impacted by $105.1 million from deferred income taxes as changes in deferred income taxes resulted in a decrease to operating cash flows of $50.5 million for the year ended December 31, 2020, compared to an increase to operating cash flows of $54.6 million for the year ended December 31, 2019.

During the year ended December 31, 2020, deferred income taxes were unfavorably impacted by the impairment of certain property and equipment at our E&P operations.

During the year ended December 31, 2019, deferred income taxes were favorably impacted by accelerated tax depreciation from vehicles, equipment and containers acquired in business combinations.

3) Prepaid expenses — Our decrease in net cash provided by operating activities was unfavorably impacted by $26.9 million from prepaid expenses due primarily to an increase in prepaid income taxes, prepaid insurance and prepaid vendor payments.

4) Increase in earnings — Our decrease in net cash provided by operating activities was favorably impacted by $40.5 million from an increase in net income, excluding depreciation, amortization of intangibles, share-based compensation, adjustments to and payments of contingent consideration recorded in earnings and loss on disposal of assets and impairments, due primarily to price increases and cost containment efforts implemented in our solid waste markets and earnings from acquisitions closed during, or subsequent to, the year ended December 31, 2019 offsetting a decline in earnings at our E&P operations, as well as solid waste volume losses resulting from the COVID-19 pandemic.

5) Accounts receivable — Our decrease in net cash provided by operating activities was favorably impacted by $69.7 million from accounts receivable, as changes in accounts receivable, net of acquisitions, resulted in an increase to operating cash flows of $46.8 million for the year ended December 31, 2020, compared to a decrease to operating cash flows of $22.9 million for the year ended December 31, 2019.

During the year ended December 31, 2020, net price increases of $216.0 million were offset by volume decreases in our solid waste business and E&P business of $238.8 million and $112.1 million, respectively.

The net decrease in revenues resulting from volume losses in excess of price increases during the year ended December 31, 2020 contributed to a decrease in accounts receivable at December 31, 2020.

During the year ended December 31, 2019, we recognized net price increases of $237.0 million and a total of $1.9 million of net volume increases in our solid waste business and E&P business.

The increase in revenues resulting from price increases and volume increases during the year ended December 31, 2019 contributed to an increase in accounts receivable at December 31, 2019.

As of December 31, 2020, we had a working capital surplus of $379.6 million, including cash and equivalents of $617.3 million.

Our working capital surplus decreased $82.7 million from a working capital surplus of $206.1 million at December 31, 2018, including cash and equivalents of $319.3 million, due primarily to decreased cash balances 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.

To date, we have experienced no loss or lack of access to our cash

and equivalents;

Our working capital surplus increased $256.2 million from a working capital surplus of $123.4 million at December 31, 2019, including cash and equivalents of $326.7 million, due primarily to the impact of increased cash balances, increased prepaid expenses and decreased accounts payable being partially offset by higher accrued liabilities, short-term contingent consideration liabilities, higer deferred revenue and a 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.

Our strategy in managing our working capital is generally to apply the cash generated from our operations that remains after satisfying our working

capital and capital expenditure requirements, along with share repurchase and dividend programs, to reduce the unhedged portion of our indebtedness under our Credit Agreement and to minimize our cash balances.

Investing Activities Cash Flows

Net cash used in investing activities increased $54.2 million to $1.426 billion for the year ended December 31, 2019, from $1.372 billion for the year ended December 31, 2018.

The significant components of the increase included the following:

1) An increase in capital expenditures of $46.9 million due to an increase in landfill site costs, facilities and heavy equipment for operations owned in the comparable periods;

2) An increase in capital expenditures of $41.4 million due to additional trucks, containers, heavy equipment and landfill site costs for operations acquired subsequent to December 31, 2017;

3) An increase in capital expenditures of $31.7 million due to the purchase of a greenfield landfill site in our Southern segment that will be developed into an operating location in the future;

4) A decrease in cash paid for acquisitions of $93.5 million due primarily to a decrease in the overall size of acquisitions closed during the year ended December 31, 2019.

Net cash used in investing activities decreased $380.0 million to $1.046 billion for the year ended December 31, 2020, from $1.426 billion for the year ended December 31, 2019.

The significant components of the decrease included the following:

1) A decrease in cash paid for acquisitions of $347.8 million;

2) A decrease in cash paid for investments in noncontrolling interests of $25.0 million;

3) A decrease in capital expenditures at operations owned in the comparable periods of $55.8 million due to decreases in container and vehicles for our collection operations and equipment for our disposal operations exceeding capital expenditures for landfill sites;

4) An increase from higher proceeds from the sale of divested operations and property and equipment of $15.5 million;

5) An increase in capital expenditures at operations acquired subsequent to December 31, 2018 of $18.5 million due to additional trucks, containers, heavy equipment and landfill site costs;

6) An increase in capital expenditures for undeveloped landfill property of $35.8 million attributable to expenditures during the year ended December 31, 2020 for expansion land at certain existing landfill facilities exceeding expenditures during the year ended December 31, 2019 for the purchase of a greenfield landfill site in our Southern segment that will be developed into an operating location in the future.

Financing Activities Cash Flows

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The significant components of the decrease included the following:

1) A decrease from the net change in long-term borrowings of $53.2 million (long-term borrowings increased $105.1 million during the year ended December 31, 2019 and increased $51.9 million during the year ended December 31, 2018) due primarily to the net of higher repayments in the prior year of long term debt assumed and paid in full from acquisitions being partially offset by prior year borrowings to fund acquisitions;

2) A decrease in payments to repurchase our common shares of $58.9 million due to no shares being repurchased during the year ended December 31, 2019;

1) A decrease from the net change in long-term borrowings of $167.6 million (long-term borrowings increased $272.7 million during the year ended December 31, 2020 and increased $105.1 million during the year ended December 31, 2019) due primarily to maintaining a portion of the proceeds from our 2050 Senior Notes in cash;

2) An increase in payments to repurchase our common shares of $105.7 million as we resumed our share repurchase activity during the year ended December 31, 2020;

3) An increase in cash dividends paid of $24.8 million due primarily to an increase in our average quarterly dividend rate for the year ended December 31, 2020 to $0.190 per share, from $0.166 per share for the year ended December 31, 2019;

4) An increase in contingent consideration payments of $9.4 million due primarily to payments during the year ended December 31, 2020 attributable to the settlement of certain legal matters at an acquired solid waste collection company;

5) 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;

6) An increase in debt issuance costs of $5.2 million due to costs incurred during the year ended December 31, 2020 for our 2030 Senior Notes and 2050 Senior Notes exceeding costs incurred during the year ended December 31, 2019 for our 2029 Senior Notes.

Our business is capital intensive.

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On July 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 13,144,773 of our common shares during the period of August 10, 2020 to August 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 price of our common shares and overall market conditions.

Shareholders may obtain a copy of our TSX Form 12 – Notice of Intention to Make a Normal Course Issuer Bid, without charge, by request directed to our Executive Vice President and Chief Financial Officer at (832) 442-2200.

and amounts of any repurchases pursuant to the NCIB will depend on many factors, including our capital structure, the market price of our common shares and overall market conditions.

All common shares purchased under the NCIB will be immediately cancelled following their repurchase.

Information regarding our NCIB plan can be found under the “Shareholders’ Equity” section in Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10K and is incorporated herein by reference.

The Board of Directors authorized the initiation of a quarterly cash dividend in October 2010 and has increased it on an annual basis.

In October 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.

The Board of Directors of the Company authorized the initiation of a quarterly cash dividend in October 2010 and has increased it on an annual basis.

In October 2020, our Board of Directors authorized an increase to our regular quarterly cash dividend of $0.02, from $0.185 to $0.205 per share.

Cash dividends of $199.9 million and $175.1 million were paid during the years ended December 31, 2020 and 2019, respectively.

We cannot assure you as to the amounts or timing of future dividends.

We made $634.4 million in capital expenditures for property and equipment and $31.7 million for the purchase of a greenfield landfill site during the year ended December 31, 2019, and we expect to make total capital expenditures for property and equipment of between $600 million and $625 million in 2020.

We made $597.1 million in capital expenditures for property and equipment during the year ended December 31, 2020, and we expect to make total capital expenditures for property and equipment of approximately $625 million in 2021.

In addition, we made $67.5 million in capital expenditures for undeveloped landfill property during the year ended December 31, 2020 and may opportunistically make other capital expenditures for undeveloped landfill property in 2021.

We intend to fund our planned 2021 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 MSW and E&P waste businesses.

In addition, we may make substantial additional capital expenditures in acquiring land and 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.

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The Credit Agreement has a scheduled maturity date of March 21, 2023.

As of December 31, 2019, $700.0 million under the term loan and $916.2 million under the revolving credit facility were outstanding under our Credit Agreement, exclusive of outstanding standby letters of credit of $107.6 million.

As of December 31, 2020, $650.0 million under the term loan and $203.9 million under the revolving credit facility were outstanding under the Credit Agreement, exclusive of outstanding standby letters of credit of $119.6 million.

We also have issued $6.6 million of letters of credit at December 31, 2020 under facilities other than the Credit Agreement.

On June 1, 2016, we entered into a Master Note Purchase Agreement (as supplemented by the First Supplement dated as of February 13, 2017 (the “2016 First Supplement”) and as amended, restated, amended and restated, assumed, supplemented or modified from time to time, the “2016 NPA”) with certain accredited institutional investors.

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1 to Master Note Purchase Agreement (the “2016 NPA First Amendment”), with each of the holders party thereto, which amended the 2016 NPA.

The 2016 NPA First Amendment, among other things, provided for certain amendments to the 2016 NPA to facilitate (i) certain conforming changes to align certain provisions of the 2016 NPA, the 2008 NPA (as defined below) and the Credit Agreement and (ii) the release of all subsidiary guarantors in relation to obligations under the 2016 NPA and the 2016 NPA Notes (as defined below) (the “2016 Release”).

Credit Agreement and (ii) the release of all subsidiary guarantors in relation to obligations under the 2016 NPA and the 2016 NPA Notes (as defined below) (the “2016 Release”).

Pursuant to the terms and conditions of the 2016 NPA, we have outstanding senior unsecured notes (the “2016 NPA Notes”) at December 31, 2019 consisting of (i) $150.0 million of 2.39% senior notes due June 1, 2021 (the “New 2021 Senior Notes”), (ii) $200.0 million of 2.75% senior notes due June 1, 2023 (the “2023 Senior Notes”), (iii) $400.0 million of 3.03% senior notes due June 1, 2026 (the “2026 Senior Notes”) and (iv) $400.0 million of the 2017A Senior Notes.

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The 2028 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 First Supplemental Indenture, dated as of November 16, 2018 (the Base Indenture as so supplemented, the “Indenture”).

Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of November 16, 2018.

We will pay interest on the 2028 Senior Notes semi-annually, commencing on June 1, 2019, and the 2028 Senior Notes will mature on December 1, 2028.

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On April 16, 2019, we completed an underwritten public offering of $500.0 million aggregate principal amount of our 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, by and between the Company and U.S.

Bank National Association, as trustee, as supplemented by the Second Supplemental Indenture, dated as of April 16, 2019.

We 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 were issued under the Base Indenture, as supplemented by the Second Supplemental Indenture, dated as of April 16, 2019.

We will pay interest on the 2029 Senior Notes semi-annually in arrears and the 2029 Senior Notes will mature on May 1, 2029.

The 2029 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 Senior Notes are not guaranteed by any of our subsidiaries.

On January 23, 2020, we completed an underwritten public offering of $600.0 million aggregate principal amount of 2.60% Senior Notes due 2030 (the “2030 Senior Notes”).

The 2030 Senior Notes were issued under the Base Indenture, as supplemented by the Third Supplemental Indenture, dated as of January 23, 2020.

We will pay interest on the 2030 Senior Notes semi-annually in arrears and the 2030 Senior Notes will mature on February 1, 2030.

The 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 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 (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.

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 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 2050 Senior Notes are not guaranteed by any of our subsidiaries.

See Note 10 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details on the debt agreements.

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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.

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.

5) $125.0 million in principal payments due 2022 related to our 2022 Senior Notes.

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The 2029 Senior Notes bear interest at a rate of 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) $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) $43.1 million in principal payments related to our notes payable to sellers and other third parties.

Our notes payable to sellers and other third parties bear interest at rates between 2.42% and 10.35% at December 31, 2020, and have maturity dates ranging from 2021 to 2036.

16) $3.8 million in principal payments related to our financing leases.

Our financing leases bear interest at a rate of 1.89% at December 31, 2020, and have a lease expiration date of 2026.

The following assumptions were made in calculating cash interest payments:

1) We calculated cash interest payments on the Credit Agreement using the LIBOR rate plus the applicable LIBOR margin and the Canadian Dollar Offered Rate plus the applicable acceptance fee at December 31, 2019.

1) We calculated cash interest payments on the Credit Agreement using the LIBOR rate plus the applicable LIBOR margin, the base rate plus the applicable base rate margin, the Canadian Dollar Offered Rate plus the applicable acceptance fee and the Canadian prime rate plus the applicable prime rate margin at December 31, 2020.

We assumed the Credit Agreement is paid off when it matures in March 2023.

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Contingent consideration payments include $71.7 million recorded as liabilities in our consolidated financial statements at December 31, 2020, and $20.1 million of future interest accretion on the recorded obligations.

We are party to operating lease agreements as discussed in Note 8 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10 K.

These lease agreements are established in the ordinary course of our business and are designed to provide us with access to facilities at competitive, market-driven prices.

We are party to operating lease agreements and finance leases as discussed in Note 8 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

These lease agreements are established in the ordinary course of our business and are designed to provide us with access to facilities and equipment at competitive, market-driven prices.

The estimated final capping, closure and post-closure expenditures presented above are in current dollars.

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Cash received for divestitures (b)

Transaction-related items (c)

Transaction-related expenses (c)

Integration-related and other expenses (d)

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

Synergy bonus (f)

Tax effect (g)

Tax effect (f)

Adjusted free cash flow

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.

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

Reflects the addback of acquisition-related transaction costs.

(b) Reflects the elimination of cash received in conjunction with the divestiture of certain operations.

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

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

Reflects the addback of cash bonuses paid pursuant to our Synergy Bonus Program in conjunction with the Progressive Waste acquisition.

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

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

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

Adjusted EBITDA

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Management uses adjusted EBITDA as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations.

We define adjusted EBITDA as net income attributable to Waste Connections, plus or minus net income (loss) attributable to noncontrolling interests, plus or minus income tax provision (benefit), plus interest expense, less interest income, plus depreciation and amortization expense, plus closure and post-closure accretion expense, plus or minus any loss or gain on impairments and other operating items, plus other expense, less other income.

We define adjusted EBITDA as net income attributable to Waste Connections, minus net 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.

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Net income (loss) attributable to noncontrolling interests

Income tax provision (benefit)

Income tax provision

Interest expense

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Transaction-related expenses (a)

Fair value changes to certain equity awards (b)

Fair value changes to equity awards (b)

Integration-related and other expenses (c)

Adjusted EBITDA

Reflects the addback of acquisition-related transaction costs.

Reflects fair value accounting changes associated with certain equity awards.

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

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

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

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Transaction-related expenses (c)

Fair value changes to certain equity awards (d)

Fair value changes to equity awards (d)

Integration-related and other expenses (e)

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

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

In 2018, primarily reflects refinements to the estimates, as provided by Staff Accounting Bulletin No.

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earnings no longer permanently reinvested in conjunction with the Tax Act.

In 2017, reflects income tax benefit primarily resulting from a reduction of deferred tax liabilities due to enactment of the Tax Act, partially offset by deferred income tax expense due to a portion of our U.S.

earnings no longer permanently reinvested, also related to the Tax Act.

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.

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 may require us to absorb at least part of these cost increases, especially if cost increases exceed the average rate of inflation.

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 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis