Important disclosures appear on the last page of this report.

The Henry FundHenry B. Tippie School of ManagementAlec Davis [alec-davis@uiowa.edu]

Waste Connections Inc. (WCN) April 21, 2015Industrials – Environmental and Waste Management Industry Stock Rating Hold

Investment Thesis Target Price $48-56

Waste Connections Inc. maintains a strong niche position in the waste collectionand disposal space by focusing on less competitive secondary markets andsecuring long term contracts. The oilfield exploration and production (E&P)waste remediation business that had been driving growth will contract sharplythis year due to the fall in the price of oil. We believe the current valuation andP/E multiple reflect the company’s strong operating position and moderategrowth potential, and we rate the stock as a “hold” while managementreconsiders growth strategies based on recent changes in the energy sector.

Drivers of Thesis Strong market position in less competitive areas, focus on long term

contracts and decentralized management structure will ensure operatingmargins above 21%.

WCN will resume EPS growth of 7-10% in 2016 after absorbing contractionof E&P activity in 2015.

Price increases in waste collection and disposal industries will be low(1-2%) but steady and business remains on upward cycle.

Risks to Thesis E&P activity in the US will fall 30% over, eliminating the companies’

biggest growth opportunity with a 15% decline in 2015.

US per capita waste generation has stagnated and trends towardsalternative destinations for waste (recycling, waste-to-energy) will limitvolume growth to less than 2% by tonnage.

Increased competition in the M&A portion of the industry is driving priceshigher; we forecast 2-3% growth, less than management target of 4-5%.

Henry Fund DCF $56.85Henry Fund DDM $42.22Relative Multiple EPS $48.34Price DataCurrent Price $46.1752 Week Range $42.05-$50.93Consensus 1 YR Target $50.56Key StatisticsMarket Cap ($B) 5.97Shares Outstanding (M)Institutional OwnershipFive Year Beta

124.294%.691

Dividend Yield 1.08%Price/Earnings (ttm) 24.6Price/Earnings (FY1) 24.4Price/Sales (ttm) 2.87Price/Book (mrq) 2.71ProfitabilityOperating Margin 21.61%Profit Margin 11.18%Return on Assets (ttm) 1.16%Return on Equity (ttm) 6.4%

Source: Factset

Earnings EstimatesYear 2013 2014 2015E 2016E 2017E 2018EEPS $1.58 $1.87 $1.89 $2.08 $2.27 $2.63

growth 20.61% 18.35% 1.04% 10.00% 9.11% 6.74%12 Month Performance Company Description

Waste Connections is an integrated serviceprovider for the collection, transfer, recycling anddisposal of municipal solid waste (MSW) as well asrecovery, treatment and disposal of non-hazardous exploration and production wastefrom oil and gas resource producing areas of theUnited States. The company operates in 31 statesand is headquartered in The Woodlands, TX.

25.7

10.9 10.4

28.0

0.69.9

16.1

20.7

11.2

0

10

20

30

P/E ROE EV/EBITDA

WCN Industry Sector

-10%

0%

10%

20%

30%

40%

50%

A M J J A S O N D J F M

WCN S&P 500

Source: Factset

Source: Yahoo Finance

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EXECUTIVE SUMMARY

Waste Connections Inc. has experienced strong growthand a favorable market niche position over the past 5years, however fallout from the collapse of the E&Pbusiness has severely impacted the company’s growthstrategy.

The outlook for the municipal solid waste (MSW)collection and disposal industries is stable, driven by astrong US economy and a rebound in the residential andcommercial construction sectors. We expect 1.5-2%revenue growth across the industry, and compoundedwith acquisitions fueled by strong free cash flow, expect 5-7% growth rate for WCN, approximately half of which willbe driven by acquisition. This is below management’starget growth rate of 8-10%.

Almost 40% of the company’s growth in 2014 was from theE&P sector, which is now forecasted to have a projected30% decline in 2015 and low to moderate growth in thefollowing years. Our 2 year outlook price for oil of$70/barrel will mean 0-3% revenue growth on a per sitebasis for the E&P division.

We believe the company’s above industry averageoperating margins, low operating costs, and strong freecash flow generation make the current P/E multiple of 25reasonable relative to the rest of the market, howevereither a rebound in energy prices or a major acquisitionwill be needed to continue the growth momentum of thestock and push valuations higher. For these reasons webelieve WCN is accurately priced and maintain a “hold”rating.

Company Description

Waste Connections Inc. is an integrated solid wasteservices company that provides waste collection, transfer,disposal and recycling services in mostly exclusive andsecondary markets. The core solid waste operations arebased on the west coast, but the company continues toexpand its national footprint through acquisitions.

In 2012 the WCN completed its acquisition of R360, anenvironmental solutions company that provides non-hazardous oilfield waste treatment, recovery, and disposalservices for exploration and production (E&P) operationsin the most active natural resource producing areas of theUnited States.

The company reports revenue through 5 segments: SolidWaste Collection, Solid Waste Disposal & Transfer, SolidWaste Recycling, and E&P Waste Treatment, Recovery &Disposal.

Waste Collection and Disposal

The core business operations for WCN are focused on non-hazardous solid waste collection, transportation, anddisposal. Waste collection services are provided formunicipal, residential, commercial, and industrialcustomers.

Collections operations at WCN are generally based ongovernment certificates and exclusive long term franchiseagreements in the 7-15 year range as opposed to the 1-3range for contracts in competitive metropolitan markets.In the state of Washington the company has been awardedG certificates which allow for the perpetual collection inunincorporated areas and electing municipalities. Thecontract price of these agreements is tied to the consumerprice index.

In line with industry trends, WCN has moved toward morevertical integration by owning and/or operating disposallocations in a majority of the areas in which it providescollection services. The company owns or operates 58disposal sites and 69 transfer/intermodal sites for thetransportation and disposal of non-hazardous solid wasteand E&P waste. Revenue for these operations is collectedthrough “tipping” fees that customers must pay to transferor dispose of collected waste.

By owning or operating sites in which it also conductscollection, WCN is able to avoid paying tipping fees to 3rd

SolidWaste

Collection,1,286,313 ,

62%Solid Waste Disposal &Transfer, 381,310 , 18%

Solid WasteRecycling, 56,108 ,

3%

E&P Waste Treatment,recovery & Disposal,

310,072 , 15%

Intermodal andOther, 45,363 , 2%

WASTE CONNECTIONS 2014REVENUE

Page 3

party vendors. Industry trends, including activity by majorcompetitors Republic Services and Waste Managementare towards greater integration of collection and disposalservices.

Waste Connections Inc. 2014 Locations

Source: WCN 2014 Annual Report

The company’s MSW operations are divided between 3geographical segments: West (green), Central (blue), andEast (red).

Waste Connections does not publish a detailed breakdownof operational costs by segment, but general industrymargins are higher for disposal services (12.9%) comparedto collection (8.4%).

Recycling

The company also conducts business in the collection,processing and sale of recycled materials. The companyoperates 35 recycling processing facilities as well as thesale of collected recycled material to 3rd party processingfacilities. The majority of processed recycled materials itsells are paper products sold to customers in Asia.

Recycling in the US is increasing due to increased socialand political pressure, which usually comes at the expenseof disposal of MSW to landfills. Although WasteConnections and other major competitors are able toabsorb this shift due to operations in both areas, therecycling industry is less profitable (8.9% average margins)and more highly tied to commodity pricing.

In 2014 Waste Connections divested 2 recycling centers inCalifornia. While growth in the industry continues, wastemanagement companies are struggling to making recycling

facilities reliably profitable compared to their otherbusiness operations.

E&P Treatment, Recovery, & Disposal

E&P waste refers generally to the waste products from oiland natural gas exploration and production. The 2012acquisition of subsidiary R360 greatly expanded WCN’sbusiness in this segment, and as of 2014 it has been thefastest growing unit both in terms of revenue andoperating income. Margins in this segment are generallyhigher than the waste management industry and are morecorrelated with the environmental services.

The slowdown on E&P activity is expected to put somepressure on margins, but asset positioning remains a keypricing advantage, and Waste Connections diversifiedposition will help mitigate this pressure. We forecast a 15%drop in E&P revenue per site for 2015, driven almostentirely by volume decreases.

Source: WCN 2014 10K

Customers in the E&P segment are generally responsiblefor transporting waste to collection sites, of which WCNoperates a total of 79 sites that participate in thetreatment, recovery and disposal of customer wasteproducts.

Recently the company has entered the closed loop servicessegment in which all oil and diesel in contaminated soilsand muds are separated and sold back to the customer.This segment is viewed as a more environmentally friendlymethod of waste treatment in the E&P segment. Revenueis collected by fees charged to customers for theseservices.

5.9% 8.2%

-14.6%

23.6%

0.9%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

1

2014 Revenue Growth by Segment

MSW Collection

MSW Disposal

MSW Recycling

E&P Waste

Intermodal &Other

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2014 Waste Connections E&P Asset Locations

Source: WCN 2014 Annual Report

Company Analysis

Waste Connections operates in a niche environmentrelative to the overall waste collection industry, which hasallowed it to operate with higher margins relative to therest of the industry. In doing this WCN has focused mainlyon secondary, suburban and rural markets wherecompetition is less intense and in markets where its abilityto sign longer term and exclusive service contracts isstronger. The company’s stated strategic goals are to avoida #3 or worse position in a market and any collection areasin which disposal is competitor controlled. This strategyhas allowed it to achieve higher margins than peercorporations, however competition from privately heldand municipally operated firms make for a tougheroperational landscape.

Differentiation in the waste collection industry is difficult,and thus WCN has been best able to win business due toits knowledge of customer bidding process, waste disposalstreams, and government regulations. Price is often thekey decision factor in awarding contract within thecollection space. Relative to its peers, Waste Connectionshas a strong track record of securing long term contracts,keeping costs low, and generating larger operatingmargins.

The company has less familiarity in the E&P space but isworking to expand this business through its R360subsidiary. The E&P waste treatment industry hasexperienced a large growth period of late due to theexpansion of horizontal drilling and fracking for oil and

natural gas in the United States. Waste treatment servicesremain highly fractured and regionalized, although someconsolidation within the space is beginning to occur. Weexpect this trend to continue as low oil prices will likelyforce some players into financial distress. We forecastWCN continue its acquisition strategy in this space as thefallout from decreased E&P activity works its way throughthe industry. Direct competitors in this space includeTrinity Oilfield Services and Nuverra EnvironmentalSolutions among many other smaller companies.

This higher margin business has been a strong growth areafor WCN over the past 2 years, but the recent fall in theprice of oil has threatened this business, with explorationactivity expected to contract severely until prices rebound.

Within the solid waste disposal and E&P waste disposalsegments, site location, service options and ability toobtain site and expansion permits are important to drivingsales.

WCN has worked to vertically integrate their solid wastebusinesses by operating landfill sites in areas in which theyalso provide collection services. The fall in the price of oilis a risk to site location strategy as the low fuel costs makemore distant landfill sites economically viable.

The company operates with a decentralized managementstructure as part of a strategy to maintain loweroperational costs. Additionally, due to its avoidance ofmajor urban areas in the country, it has a lower degree oforganized labor (10%) relative to its two main competitorsWaste Management (20%) and Republic Services (27%).Pension obligations are managed through an outsourcedagreement, of which all plans are currently rated “green”and at least 80% funded.

Core operations growth at WCN are fueled by acquisitionactivity, traditionally targeted as “tuck in” that will easilyintegrate into the company’s current collection anddisposal network. This growth strategy is similar for othermajor companies within the waste management space.The company’s recent movement into the environmentalremediation services industry has seen it target morelucrative but volatile customers in the oil and gas sector.

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Recent Developments

E&P activity down sharply

Energy prices began a sharp decline in Q4 of 2014 as strongsupply from increases in global oil production proved toomuch to support recent historical price ranges. One of theindustries most impacted by this fall has been the US shaleoil and gas production, which grew significantly over thepast decade as technology improvements and oil pricesover $100/barrel made this previously difficult to extractresource economically favorable.

This recent fall in prices to below $50 has severelyimpacted growth in this industry as a minimum break-evenprice for most US production is approximately $60/barrel.US total rig count, a proxy for activity in the explorationand production sector is down 43% from one year ago.Exploration activity will be most severely impacted ascompanies forego development costs to focus on existingwells. We also forecast a decline in production activitybased on the drop in US rig counts as production costs inmost US basins are above the current market price for oil.

Source: Baker Hughes US Rig Count

Our six month forecast for oil is $53/barrel and thereforewe expect a decline of 15% for E&P segment revenue forWCN in 2015. This is expected to beat macro E&P trendsof 25-30% decline based acquisitions and stronger assetpositioning within the US basins. Over the 5 year outlookwe expect a 6.5% CAGR driven by a rise in oil prices above$70/barrel and segment acquisitions.

Share Repurchase Resumes

In 2014 WCN announced an extension of its current $1.2billion share repurchase program until December 31,2017. The company did not repurchase any shares in 2013,instead deploying cash flow to pay down debt from its2012 acquisition of R360.

As of December 31, 2014 the company had repurchasedapproximately 40 million shares (out of a total of 164million with 124 million outstanding) at a cost of $791.4million under the program, of which $7.3 million waspurchased in FY2014 at a cost of $43.79 per share. Thereis $408 million available for repurchase of shares under thecurrent program.

We forecast moderate share repurchase activity in 2015 of$119 million, followed by $116 and $57 million in 2016 and2017 respectively. Given the company’s current positionfor capital deployment and trading levels for the stock, thisshould provide limited positive pressure on earnings andstock price.

CPI Remains Flat

The consumer price index (CPI) inflation in the UnitedStates has remained flat despite the strong US economyand low interest rate environments. Most recently, the fallin energy prices has put more downward pressure oninflation.

Source: US Bureau of Labor Statistics

The pricing in contracts for approximately 50% of WasteConnections long term collection contracts is tied to localCPI inflation rates, and therefore the company’s ability toachieve price increases in these situations is limited. Thisconstraint will partially mitigate the positive effect of

0

500

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/200

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/13/

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US Rig Count

Oil Gas Total

-1.0%

-0.5%

0.0%

0.5%

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct-1

4

Nov-

14

Dec-

14

Jan-

15

Feb-

15

Monthly % Change forAll Urban Consumers (CPI-U) - All Items

Page 6

lower fuel prices on the bottom line for 2015. Ourforecasts include 1-1.5% pricing increases, of which 1%represents inflation. This is on the lower end ofmanagement’s target 50-100 bps increase over inflationfor collection services, and reflects increased competitiveenvironment due to lower fuel prices.

INDUSTRY TRENDS

Consolidation in collection and disposal

Consolidation activity remains strong in the wastecollection and disposal industry as major players such asWaste Management (WM), Republic Services (RSG) andWaste Connections (WCN) all look to acquisitions to fuelgrowth strategies. The industry still remains highlyfragmented but the trend is towards greaterconsolidation.

In 2014 Waste Connections completed 9 acquisitions for atotal of approximately $168.7M, compared to $64.2M in2013. Recent acquisitions have been finance from cashflows from operations, and the company continued to paydown debt during this time period. The 2012 acquisition ofR360 was financed through a mixture of cash, debt andstock. Given that the company is currently operating witha BBB+ rating and debt/EBITDA of 2.7, on the lower end ofmanagement’s target range (specific range not given), weexpect future acquisitions to be financed through amixture of cash and debt.

The acquisition amount per year can vary due to the sizeand scope of deals available, however industry trends arefor major the major companies to target multipleacquisitions each year. Waste Management spent $35Mon acquisitions in 2014 compared to $724M in 2013, andRepublic Services spent $195.7M compared to $68.7M theyear prior.

These trends are forecasted to continue, as most majorpublicly traded waste collection and disposal corporationsemploy growth through acquisition strategies, andadjacent opportunities such as waste to energy andenvironmental remediation services have proven difficultto manage for the more traditional waste managementcompanies.

As competition within this space increases, both frompublicly traded companies and the emergence of private

equity into the space, acquisition multiples will threatenthe growth targets for industry players.

Guidance given by Waste Connections management in Q12015 has indicated that current acquisition multiples havebeen in the 9-11x EBITDA range, a sharp increase over the6-7x range that has been more traditionally applied for theindustry.

Management has stated 8-10% revenue growth per yearthrough a combination of organic and acquisition activitiesas a target, however given the pricing headwinds withinthe consolidation activity and increased pricing pressure,we forecast growth of approximately 5-7% per year.

Alternatives to Landfills

The amount of MSW sent to landfills has stagnated overthe past 25 years as increased pressure to reduce thisamount has started to have an effect. Most prominentlyhas been the sharp increase in the amount of MSWrecycled, which has more than doubled since 1990. Overthis time period until 2012 (most recently published data)MSW recycled has increased 157% compared to just 20%for total MSW generation.

Source: US Environmental Protection Agency 2012 report

Regulation with regards to the amount of materials thatmust be recycled is increasing, with California alreadyrequiring that 50% of the waste stream to be diverted fromlandfills and New York and Massachusetts also consideringlegislation aimed at reducing the amount of waste sent tolandfills.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

0

50

100

150

200

250

300

1990 1995 2000 2005 2010 2012

US Total MSW and Recyling(million tons)

Total MSW GenerationTotal MSW Recycling% Recycled

Page 7

There is also momentum from the corporate side toreduce landfill generation as part of companies’ efforts tomaximize efficiency and promote environmentalstewardship. In 2013 and 2014 companies such as CenturyFoods, Bridgestone Tire, and Proctor and Gambleannounced a number of facilities that had achieved zerowaste to landfill goals. The number of these facilities issmall relative to the overall industrial production in the US,but the trend towards these facilities is increasing.

The waste to energy movement has also benefited fromthis trend, although the recent fall in energy prices will putpressure on the financial impact of these projects. In 2014Waste Management divested Wheelabrator, its WTEsubsidiary, an indicator that traditional integrated wastemanagement companies will like not be moving into thisspace due to pricing volatility, but it remains a core marketfor adjacent competitors such as Covanta Holdings (CVA).

While the financial impact of this business model has beenrecently challenged, we expect continued public pressuretowards diverting solid waste away from landfills.

Prices for Recycled Materials Down

Prices for recycled commodity materials fell in 2014 due toseveral macro factors: cheap oil reducing the cost for newplastic, the strong dollar making US recycled materialsmore expenseive, and the continuation of the “greenfence” policy from China restricting the importation ofunsorted recycled materials.

Because of increasing environmental and political pressureto increase the amount of waste diverted from landfills inthe US, we do not expect this to affect the amount of MSWrecycled, however because recycling facilities in turn sellthese materials on the open market, we do expect areduction in margins for recycling facilities.

#11 PSI Grade Paper Recycling Prices per Ton

Source: SecondaryMaterialsPricing.com via Waste360.com

We forecast prices for recycled materials to remainsuppressed relative to 2010 peaks, but do expect increasesfrom 2014/2015 levels. Given the perceived benefitsresulting from China’s increased enforcement in the scrapmaterials segment and enhanced focus on domesticenvironmental policy, we expect a continuation of thepolicy that has restricted the importation of recycled scrapmaterials to China. This restriction by China, one of thelargest purchasers of US recycled materials, has boosteddomestic consumption of recycled materials anddecreased demand for international imports, thereforecontributed towards lower recycled commodity prices.

This will continue to put pressure on prices for US recycledmaterials, as supply continues increases due to support forrecycling programs domestically. Our forecast for WCNrecycling is -2% decline in 2015 due to volume reductionsfrom 2014 divestitures of two facilities and flat pricing formaterials. Beyond 2015 we project moderate growth of 1-3% driven by small increases in pricing and volumes.

Markets and Competition

Solid Waste Collection and Disposal

The waste collection industry is a highly fragmented andhighly competitive industry. Many small privately heldcompanies conduct operations in this space, as well asmunicipalities that own their own collection and disposalservices. Current trends are towards consolidation in theindustry, and municipalities divesting or outsourcing theircollection services in attempts to cut costs.

The two largest companies in the industry are WasteManagement and Republic Services. In 2008 RepublicServices merged with Allied Waste Industries to form the2nd largest publicly traded waste collection company.Other major players include Waste Connections, VeoliaEnvironmental North America, Progressive WasteSolutions (BIN), and Covanta Holdings. Veolia andProgressive are foreign companies (Canada and France)with US operations.

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Source: Ibisworld.com

Competition within the collections industry is high andfocused mainly on price. For these reasons WasteConnections has sought to differentiate by focusing onsecondary markets that offer better prospects forexclusive and long-term service contracts. WasteManagement and Republic Services operate in morecompetitive environments, but still employ verticalintegration strategies to reduce costs and improveoperating efficiencies.

Competition in the transfer and disposal industry is lower;regulations and the difficult process for approving newlandfills make barriers to entry high. Consequently, theprofit margins for disposal (12.9%) are higher than that ofcollection (8.4%), and companies that operate bothindustries within a geography are best suited to be at orabove industry average margins.

Overall industry performance has been strong followingthe past 2 years as the market continues recovery from thedramatic decrease in construction activity following thefinancial crisis. We expect the market to remain strong butwith more tempered growth of 1-2% in the 5 year outlook.While the performance in the E&P space has negativelyimpacted stock performance of WCN as of Q4 2014, webelieve the company operates with the strongest positionamongst its peers in the core MSW collection and disposalindustry.

Source: Yahoo Finance

The business cycle in the collections industry is relativelystable, especially for residential collections. Collections inthe construction and demolition (C&D) space are moreclosely tied to US GDP growth and the housing industry.

The trend is for lower solid waste generation per capita inthe US and higher recycling per capita as consumers,businesses and governments in the US becomeincreasingly concerned about the environmental impactsof landfills.

Source: US Environmental Protection Agency 2012 Report

The Waste to Energy (WTE) market (led by Clean Harbors)is a potential growth area as communities look to convertwaste into energy to help reduce the impact on landfillsand mitigate higher energy prices.

Leading companies within this space are ones that can bestcontrol costs, have internal knowledge of wasteregulations and municipal bidding processes, and are ableto strategically align assets and integrate core services.

23.7% 17.8%16.4% 8.8%

59.9%60.8%

0.0%20.0%40.0%60.0%80.0%

100.0%120.0%

WasteCollection

WasteTreatment &

Disposal

2014 Market Share Breakdown

Other

Republic Systems

Waste Management -10.00%0.00%

10.00%20.00%30.00%40.00%50.00%60.00%

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RSG WM WCN

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196019651970197519801985199019952000200520102012

Per Capita MSW generation(lbs/person/day)

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E&P Waste Treatment and Disposal

The E&P waste treatment market is a smaller, newersegment relative to municipal solid waste in the UnitedStates. The industry has experienced rapid growth over thepast decade due to the expansion of shale oil and naturalgas industries. Waste products related to vertical andhorizontal drilling, and natural gas fracking are becominghighly regulated, and the treatment and disposal of thesewaste streams has become a major support industry.

Similar to solid waste collection and disposal, the E&Pwaste treatment industry is highly fragmented andprimarily dominated by smaller regional companies.Consolidation is becoming more prevalent in the industry,and competition for acquisition targets also becomingmore intense.

Primary differentiators in this space are location offacilities, customer and governmental approval andcompliance of facilities, and ability to accept multipletypes of waste at a single facility. Through its acquisition ofR360, Waste Connections has vastly increased its footprintin this space, however company knowledge of the E&Pwaste treatment industry is not yet a core competency.

Peer Comparisons

Industry leaders by revenue Waste Management andRepublic Services are the most direct comparisons withinthe integrated solid waste management space. Bothcompanies are considerably larger in sales and market cap,but operate with lower margins due to WCN’s focus onsecondary and exclusive markets.

The three main competitors operate with similar levels ofdebt, as integrated waste services is a strong cash flowgenerating business. Growth for all 3 companies isprimarily drive through acquisitions, and competitionbetween the industry players, as well as new entrants fromprivate equity, has the potential to drive up acquisitioncosts.

Although industry operational metrics are not published,WCN’s focus on keeping costs down through nicheoperations, low labor costs and long term contracts hasallowed it to operate with the strongest margins of the 3,however these strategies also limit expansion as themarket for companies in their preferred operating space issmaller compared to the market overall.

WCN WM RSG BINP/E 25.73 23.3 20.5 25.85P/B 2.71 4.26 1.85 2.77EPS (ttm) $1.86 $2.79 $1.53 $1.10EV/EBITA 10.39 9.22 9.6 9.53EV/Sales 3.9 2.37 2.42 2.5ROE 10.89 22.43 7 10.05ROA 4.51 5.9 2.74 3.74ROIC 5.74 10.35 4.93 6.45Total Revenue (B) 2.08 14.00 8.79 2.0Market Cap (B) 5.97 25.05 14.27 3.5Operating Margin % 21.61 16.43 14.03 12.0Net Income Margin % 11.18 9.27 6.23 6.3Total Debt/EBIT 4.59 4.1 5.73 6.46Total Debt/Total Assets

39.28 44.06 35.14 46.14

Source: Factset

Adjacent areas of operations include the waste to energy(WTE) market, of which Covanta Holdings and CleanHarbors are market leaders. Currently approximately11.7% of MSW in the US is converted to energy throughcombustion processes. Though the space is a potentialgrowth industry as communities and businesses attemptto limit the amount of waste sent to landfills, theprofitability of the business is tied to less stable energyprices.

This volatility caused Waste Management to divestWheelabrator, its WTE subsidiary, in 2014 to EnergyCapital Partners and in turn sign a long term agreement tosupply waste to a number of the facilities.

The E&P waste treatment space is served by a variety ofplayers, of which the Shaw Group, acquired by ChicagoBridge and Iron in 2013, is one of the other major players.Competition and consolidation has been increasing in thisspace in recent years, however the recent fall in energyprices has severely impacted the industry.

With E&P activity expected to fall 25-30% in 2015, theindustry could see some major shakeouts if prices do norebound above the $75/barrel threshold in the next 6-12months. We expect WCN to continue to invest in growththrough acquisitions in this space given the likelihood ofdistressed targets, however the long term viability of thebusiness unit could be called into question if prices do notbegin to rebound.

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We expect consolidation to continue given the impendingfinancial difficulties based on current market conditions,and distress could provide attractive acquisitionopportunities for Waste Connections in this space.

Overall in E&P WCN is in a stronger position relative to itsregional peers due to its strength of locations and diversityof basins served, and maintains a goal of outperformingmacro trends for 2015.

ECONOMIC OUTLOOK

The outlook for the integrated waste services industry ismoderate due to several different factors. Residentialcollection is expected to grow due to a strengthening GDPand population growth, however lower per capita wastegeneration and a trend towards decreasing waste sent tolandfills will hurt overall revenue growth. Commercial andIndustrial collection will be helped by the strong USeconomy and increased activity in the construction anddemolition sectors. We expect overall growth in the MSWindustry to average 1-2% over the 5 year horizon, whichwill predominantly be tied to the strength of the USeconomy. For WCN we expect approximately 1% growththrough pricing increases in the next 2 years growing to 3%increase in 2019 based on our 2 year inflation outlook of1.72%. In addition to pricing, we expect 1-1.5% volumeincreases in tonnage per site, and 2-3% growth throughacquisition in this space.

Source: US Census Bureau

Public aversion towards new landfills will help existinglandfills avoid new competition, however lower fuel pricesmakes more distant landfills cost competitive and couldput downward pressure on tipping rates. Given thesepressures we do not expect increases in tipping fees to beabove 3% in the 5 year horizon.

Additionally, in the recycling sector we forecast prices forrecycled commodities to rebound slightly from their2014/2015 lows as energy prices increase and the futureof Chinese policy towards recycled scrap materialsbecomes more apparent. While this will provide smallgrowth to the industry overall at 1-2%, we do not forecastthis space to be a target growth area for WCN given thevolatility in pricing and recent closures of two recyclingfacilities.

The fall in energy prices has severely impacted the outlookfor E&P activity in the United States. The industry will seedouble digit decline in 2015 and likely 2016 as well barringany turnaround in prices. We expect an eventual reboundin energy prices will return the industry to growth by 2017,but at a much more modest level than the rapid growth ofthe past 5 years.

CATALYSTS FOR GROWTH

The waste collection industry is a mature, slow growthindustry that behaves similarly to the utility sector. Growthwill be tied primarily to the performance of the USeconomy and M&A activity within the space. Strong GDPgrowth above 3%, industrial and commercial developmentat or above prerecession levels, and an increase in housingstarts will provide a modest boost to the industry. Lowerfuel costs will provide a slight boost to margins, but willalso increase competition by reducing the locationadvantage for landfill and treatment sites.

A rebound in oil prices above $75/barrel would lead to aturnaround in E&P activity within the US would be a majorcatalyst for the environmental services division, short ofthis the company will work to outperform marketconditions.

An easing of China’s import restrictions on recycled scrapmaterials and a weakening of the dollar would provide aboost to recycled commodity prices in the US. We expectprices to rebound slightly but not to return to theirprevious highs of 5 years ago.

500,000

1,000,000

1,500,000

Jan-

2002

Oct-2

002

Jul-2

003

Apr-2

004

Jan-

2005

Oct-2

005

Jul-2

006

Apr-2

007

Jan-

2008

Oct-2

008

Jul-2

009

Apr-2

010

Jan-

2011

Oct-2

011

Jul-2

012

Apr-2

013

Jan-

2014

Oct-2

014

Monthly Total US Contruction Spending($ millions)

Page 11

INVESTMENT POSITIVES

WCN is an industry leader in operational performanceand focuses on high margin, long term opportunities.

Waste collection and disposal activity is increasing again,driven by resurgent US residential and commercialconstruction activity.

Company has strong balance sheet, with debt on lowerend of target range (BBB+ rating), and is well positionedto move on acquisition targets.

Movement into E&P space has opened growthopportunities, expanded services, and diversifiedrevenue streams.

INVESTMENT NEGATIVES

E&P activity is projected to contract sharply in 2015;growth in this space will be limited unless oil prices riseabove $60-$75/barrel.

Acquisition multiples in the waste collection anddisposal space are moving at a premium as increasedcompetition between major players and private equitydrive up prices.

Tighter regulations in China, low oil prices, and shippingdisruptions on the west coast ports have reducedcommodity prices for recycled materials and hurtexports.

Valuation

We project total revenues to grow only slightly at 1.4% for2015 before returning to a growth rate above 6% in 2016and beyond. Growth in the waste collection and disposalsector is forecasted to be 4-5% in the next 2 years andincreasing slightly to 6.1% and 5.1% respectively in 2019,reflecting a continuation of acquisition activity as well asincreased price increases in the back half of the 5 yearforecast due to a strong US economy and higher inflationlevels. Core pricing increases for collection and disposalare expected only to rise 1% over the next two yearsbefore increasingly to 3% for the terminal year, againreflecting increased inflation in the back half of theforecast period.

The total number of sites is expected to expand from 58 to67 over the 5 year forecast period reflecting bothacquisition activity and recently obtained landfilldevelopment permits which are expected to be developedduring the 5 year window. Continued slow growth in the

E&P sector as well as falling MSW to landfill rates couldpush these numbers out beyond the forecast period.

Recycling activity is expected to decline 2% for 2015 beforeslowly rising after 2015 based on increased commoditypricing for recycled materials. We did not forecast anymore closure of recycling facilities after 2 closures in 2014reflecting current guidance from management.

E&P revenues are expected to decline 15%, which is alower decline than macro trends of -30% for the sector,reflecting newly acquired facilities in 2014 that willcontribute to 2015 earnings. We forecast moderate pricingincreases per site in 2017 and beyond based on our 2 yearoutlook for oil at $70/barrel and increased acquisitionactivity in the still highly fragmented oilfield remediationservices industry.

Cost of operations is projected to 30 basis points for 2015and 20 basis points for 2016 from 54.75% to 55.25%, netof fuel savings due to the cost of lower diesel prices. Thiscompression is due to anticipated pricing difficulties in thesluggish E&P sector and increased competition in wastecollection and disposal sectors where low fuel costs willlikely strengthen small private competition and moredistant landfills.

Depreciation and amortization have been set tomanagement’s guidance for 2015 and forecasteddecreases beyond as no major acquisitions similar to the2012 R360 acquisition are forecasted. SG&A is forecastedto remain at the 5 year average of 11.21%.

Capital Expenditures were forecasted to be $230 million in2015 per management’s guidance, plus an increase ofanother approximately $60 million in PPE reflectingacquisition activity.

A pre-tax cost of debt of 4.64% was applied reflecting themost updated bond issuance data. A beta of 0.9 was usedwhich is a 3 year average, representing the company riskprofile following the R360 acquisition. Based on thesefactors an overall WACC of 5.81% was applied for DCFmodeling, and a cost of equity of 6.87% for DDM modeling.

DCF valuation for WCN resulted in a target price of $56.85,a premium of 23% over the current closing price. DDMmodeling resulted in a target price of $42.22, this isexpected given the company continues to pursue moreaggressive growth strategies through acquisitions. Therelative multiple valuation of $48.34 reflects the current

Page 12

closing price, suggesting the market is properly valuing thestock at this time.

Our target range of $48-$56 reflects the range betweenthe DCF and relative multiple valuations, as WCN’s abilityto achieve stronger margins relative to its peers supportshigher multiples, and the DCF forecasts continuedweakness in the E&P sector. The DDM valuation of $42 islow due to management’s deployment of capital towardsacquisitions to fuel growth over the past several years.

KEYS TO MONITOR

The consumer price index, US GDP growth, andcommercial construction and housing starts will all beleading indicators for performance of the waste collectionand disposal businesses. However, continued strength inthese areas will likely be partially offset by continueddecreases in per capita municipal waste generation andincreased diversion of MSW away from landfill sites.

Acquisition activity among the major haulers WasteManagement, Republic Services, and Waste Connectionswill also be key to monitoring the price for growth withinthe sector. If activity slows for 2015 it could represent thatprice premiums within the market have becomeovervalued, and will make growth targets for WCN andcompetitors difficult to achieve.

Finally, in the E&P sector the number one driver will be theprice of oil, which must return to at least $60/barrel toachieve break-even for at least some US land basedproducers, and above $75/barrel to maintain currentactivity levels.

REFERENCES

1. Bloomberg Terminal2. Factset.com3. Waste Connections Inc. 2014 10K4. Waste Collection Services in the US Report 56211

– IbisWorld.com, January 20155. Waste Treatment & Disposal Services in the US

Report 56221 – IbisWorld.com, January 20156. Environmental and Waste Management Industry

Survey – S&P Capital, October 20147. Waste Connections Presentation – BB&T

Industrials Conference 3/25/2015

8. Waste Connections Q4 2014 Earnings Call2/9/2015

9. EPA.gov - Municipal Solid Waste Generation,Recycling, and Disposal in the United States: Factsand Figures for 2012

10. Forbes.com 3/26/15 “Recent Trends In U.S. LandDrilling Market: Re-fracking, Growing WellInventory, Lower Rig Count”

11. Waste360.com 2/19/2015 “HDPE, PET &Corrugated Container Prices Continue toPlummet”

12. Plasticnews.com 11/14/2014, “Green Fence boonfor China, group says”

IMPORTANT DISCLAIMER

Henry Fund reports are created by student enrolled in theApplied Securities Management (Henry Fund) program atthe University of Iowa’s Tippie School of Management.These reports are intended to provide potential employersand other interested parties an example of the analyticalskills, investment knowledge, and communication abilitiesof Henry Fund students. Henry Fund analysts are notregistered investment advisors, brokers or officiallylicensed financial professionals. The investment opinioncontained in this report does not represent an offer orsolicitation to buy or sell any of the aforementionedsecurities. Unless otherwise noted, facts and figuresincluded in this report are from publicly available sources.This report is not a complete compilation of data, and itsaccuracy is not guaranteed. From time to time, theUniversity of Iowa, its faculty, staff, students, or the HenryFund may hold a financial interest in the companiesmentioned in this report.

Waste ConnectionsRevenue Decomposition

Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Solid Waste Collection 1,170,788 1,214,787 1,286,313 1,345,037 1,425,879 1,499,620 1,592,091 1,689,70525.4% 3.8% 5.9% 4.6% 6.0% 5.2% 6.2% 6.1%

Solid Waste Disposal & Transfer 308,990 352,482 381,310 398,718 426,867 448,943 471,999 496,075-28.9% 14.1% 8.2% 4.57% 7.06% 5.17% 5.14% 5.10%

Solid Waste Recycling 72,790 65,730 56,108 54,986 55,041 56,142 57,826 59,561549.0% -9.7% -14.6% -2.0% 0.1% 2.0% 3.0% 3.0%

E&P Waste Treatment, recovery & Disposal 59,808 250,824 310,072 263,561 281,681 312,979 319,239 361,697-28.9% 319.4% 23.6% -15.0% 6.9% 11.1% 2.0% 13.3%

Intermodal and Other 49,242 44,972 45,363 46,724 48,126 49,569 51,056 52,58817.1% -8.7% 0.9% 3.00% 3.00% 3.00% 3.00% 3.00%

Total 1,661,618 1,928,795 2,079,166 2,109,026 2,237,594 2,367,253 2,492,211 2,659,62610.4% 16.1% 7.8% 1.4% 6.1% 5.8% 5.3% 6.7%

% Recycling

Landfill SitesMSW 42 43 44 44 45 45E&P 8 8 8 9 10 11Non-MSW 8 8 9 10 10 11Total Sites 54 55 58 59 61 63 65 67Total Tons Disposed(millions) 15.9 19.5 21.00 21.74 22.82 23.53 24.25 24.99

6.71% 22.64% 7.69% 3.53% 4.96% 3.11% 3.07% 3.04%Tons/site (non E&P) 0.42 0.43 0.43 0.44 0.44 0.45Collected Revenue/Ton $73.63 $62.30 $61.25 $61.87 $62.48 $63.73 $65.65 $67.62Disposal Revenue/Ton $19.43 $18.08 $18.16 $18.34 $18.71 $19.08 $19.46 $19.85

E&P $ per site $38,759.00 $32,945.15 $31,297.89 $31,297.89 $31,923.85 $32,881.57% Change -15.00% -5.00% 0.00% 2.00% 3.00%

Waste ConnectionsIncome Statement

Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019ERevenues 1,661,618 1,928,795 2,079,166 2,109,026 2,237,594 2,367,253 2,492,211 2,659,626

Operating Expenses:Cost of Operations 956,357 1,064,819 1,138,388 1,161,064 1,236,319 1,307,958 1,377,000 1,469,501Depreciation 169,027 218,454 230,944 236,211 241,522 248,360 256,739 266,679Amortization of Intangibles 24,557 25,410 27,000 26,363 27,681 29,065 30,518 32,044Gross Income 511,677 620,112 682,834 685,388 732,073 781,870 827,954 891,403

SGA 197,454 212,637 229,474 236,422 250,834 265,369 279,377 298,144Operating Income (EBIT) 314,223 407,475 453,360 448,966 481,238 516,501 548,577 593,259

Loss on disposal of assets - - - 0 0 0 0 0Loss on prior office leases - (9,902) - 0 0 0 0 0Gain from litigation settlement 3,551 - - 0 0 0 0 0Impairments and other operating charges (1,627) (4,129) (4,091) 0 0 0 0 0Interest Expense (53,037) (73,579) (64,674) (68,724) (71,215) (73,462) (75,535) (78,642)Other income, net 1,993 1,056 1,067 1,055 1,119 1,184 1,246 1,330Income before income tax provision 265,103 320,921 385,662 381,296 411,142 444,222 474,288 515,947

Income tax provision (105,443) (124,916) (152,335) (150,612) (162,401) (175,468) (187,344) (203,799)Net Income 159,660 196,005 233,327 230,684 248,741 268,754 286,944 312,148

Less: NI attributable to noncontrolling interests (567) (350) (802) (500) (530) (561) (591) (631)NI attributable to Waste Connections 159,093 195,655 232,525 230,184 248,211 268,193 286,353 311,517

Year End Shares Outstanding (000) 121,172 123,598 124,215 121,765 119,363 118,203 118,237 118,270Net Earnings (Loss) per share - basic $1.31 $1.58 $1.87 $1.89 $2.08 $2.27 $2.42 $2.63Dividends per share $0.37 $0.42 $0.48 $0.54 $0.62 $0.71 $0.82 $0.93

Waste ConnectionsBalance Sheet

Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019EAssetsCurrent assets:Cash and equivalents 23,212 13,591 14,353 84,667 102,473 179,854 343,365 544,717Accounts Receivable Net 235,762 234,001 259,969 261,786 277,744 293,839 309,349 330,130Deferred income taxes 45,798 41,275 49,508 36,753 39,629 42,818 45,716 49,731Prepaid expenses and other current assets 57,714 39,638 42,314 53,705 56,979 60,281 63,463 67,726Total current assets 362,486 328,505 366,144 436,910 476,826 576,792 761,893 992,304

Gross Property and Equipment 3,421,223 3,596,114 3,927,171 4,221,709 4,538,337 4,878,712 5,244,616 5,637,962less: accumulated depreciation 963,617 1,145,465 1,332,966 1,569,177 1,810,699 2,059,059 2,315,798 2,582,476Property and equipment, net 2,457,606 2,450,649 2,594,205 2,652,532 2,727,638 2,819,653 2,928,818 3,055,486Goodwill 1,636,557 1,675,154 1,693,789 1,727,665 1,762,218 1,797,462 1,833,412 1,870,080Intangible assets, net 541,908 527,871 509,995 509,132 506,908 503,188 497,829 490,676Restricted assets 34,889 35,921 40,841 43,285 45,924 48,585 51,150 54,586Other assets, net 42,580 46,152 45,057 46,211 49,029 51,870 54,608 58,276Total Assets 5,076,026 5,064,252 5,250,031 5,415,736 5,568,542 5,797,550 6,127,709 6,521,408Liabilities and EquityCurrent Liabilities:Accounts payable 130,260 105,394 120,717 134,499 142,698 150,967 158,936 169,612Book overdraft 12,567 12,456 12,446 12,903 13,310 13,685 14,248 15,060Accrued liabilities 121,829 119,026 120,947 140,343 148,899 157,527 165,842 176,982Deferred revenue 69,930 71,917 80,915 85,331 90,533 95,779 100,835 107,608Current portion of contingent consideration 49,018 30,840 21,637 17,399 13,991 11,251 9,047 7,275Current portion of LT Det and NP 33,968 5,385 3,649 3,781 3,901 4,011 4,176 4,413Total current liabilities 417,572 345,018 360,311 394,256 413,331 433,219 453,083 480,951

LT debt and notes payable 2,204,967 2,067,590 1,975,916 2,047,512 2,112,137 2,171,731 2,261,045 2,389,807LT port of continent consideration 30,346 24,710 48,528 39,023 31,380 25,233 20,291 16,317other LT liabilities 75,129 77,035 92,900 84,575 89,731 94,930 99,941 106,655Deferred income taxes 464,882 501,692 538,635 570,851 585,195 608,750 639,480 672,532Total Liabilities 3,192,896 3,016,045 3,016,290 3,136,218 3,231,774 3,333,865 3,473,841 3,666,261

Equity:Common stock 781,134 797,321 812,529 813,049 813,568 814,088 814,608 815,127

Treasury Stock 0 0 0 (119,247) (236,141) (293,435) (293,435) (293,435)Accumulated other comprehensive loss (6,165) (1,869) (5,593) (5,073) (5,382) (5,694) (5,994) (6,397)Retained earnings 1,103,188 1,247,630 1,421,249 1,585,233 1,759,167 1,943,170 2,133,134 2,334,295Total Waste Connections Equity 1,878,157 2,043,082 2,228,185 2,273,962 2,331,212 2,458,129 2,648,313 2,849,591Noncontrolling interest in subsidiaries 4,973 5,125 5,556 5,834 6,125 6,432 6,753 7,091Total Equity 1,883,130 2,048,207 2,233,741 2,279,796 2,337,338 2,464,561 2,655,066 2,856,682Total Liabilities & Stockholders Equity 5,076,026 5,064,252 5,250,031 5,416,014 5,569,112 5,798,426 6,128,907 6,522,943

Waste ConnectionsCash Flow Statement

Fiscal Years Ending Dec. 31 2010 2011 2012 2013 2014Net income (loss) 136,142 166,171 159,660 196,005 233,327

Loss (gain) on disposal of assets & impairments 571 1,657 1,627 2,853 8,239Depreciation 132,874 147,036 169,027 218,454 230,944Amortization of intangibles 14,582 20,064 24,557 25,410 27,000Deferred income taxes, net of acquisitions 26,431 50,989 29,689 38,680 31,031Loss on redemption of convertible senior notes, net of make-whole payment 2,255 - - - -Amortization of debt issuance costs 1,574 1,420 1,993 3,655 3,085Amortization of debt discount 1,245 - - - -Equity-based compensation 11,331 11,879 17,289 15,397 18,446Interest income on restricted assets (511) (454) (603) (386) (446)Interest accretion 1,766 1,967 4,000 4,812 5,076Excess tax benefit associated with equity-based compensation (11,997) (4,763) (5,033) (3,765) (7,518)Payment of contingent consideration recorded in earnings - - - (5,059) (1,074)Adjustments to contingent consideration not settled in cash - - - - (4,148)Accounts receivable, net (9,321) (14,507) 1,549 1,612 (22,168)Prepaid expenses & other current assets 3,304 (4,236) (733) 1,696 (3,868)Accounts payable (853) (2,912) 2,761 (26,993) 10,173Deferred revenue 3,244 4,161 180 1,403 8,571Accrued liabilities 15,303 10,355 7,835 6,117 5,759Other long-term liabilities 456 (657) 2,529 4,170 2,791Net cash flows from operating activities 328,396 388,170 416,327 484,061 545,220

Payments for acquisitions, net of cash acquired (81,010) (258,352) (1,579,869) (64,156) (126,181)Proceeds from adjustment to acquisition consideration - - - 18,000 -Capital expenditures for property & equipment (134,829) (141,924) (153,517) (209,874) (241,277)Proceeds from disposal of assets 6,659 4,434 2,741 11,019 9,421Change in restricted assets, net of interest income (2,552) 351 2,983 (646) (4,475)Other cash flows from investing activities (2,492) (5,014) (6,185) (5,358) (896)Net cash flows from investing activities (214,224) (400,505) (1,733,847) (251,015) (363,408)

Proceeds from long-term debt 483,253 592,500 1,647,000 327,600 432,500Principal payments on notes payable & long-term debt (467,660) (421,872) (609,014) (493,560) (525,909)Payment of contingent consideration recorded at acquisition date - - (12,473) (23,941) (24,990)Change in book overdraft 279 (227) 398 (110) (11)Proceeds from option & warrant exercises 33,074 5,159 4,057 2,464 3,375Excess tax benefit asociated with equity-based compensation 11,997 4,763 5,033 3,765 7,518Payments for repurchase of common stock (166,320) (116,817) (18,597) - (7,317)Payments for cash dividends (8,561) (35,566) (44,465) (51,213) (58,906)Tax withholdings related to net share settlements of restricted stock units - (5,511) (6,062) (5,439) (6,814)Distributions to noncontrolling interests - (675) (198) (198) (371)Debt issuance costs - (6,649) (7,174) (2,035) (125)Proceeds from common stock offering, net - - 369,584 - -Net cash flows from financing activities (113,938) 15,105 1,328,089 (242,667) (181,050)

Net increase (decrease) in cash & equivalents 234 2,770 10,569 (9,621) 762Cash & equivalents at beginning of year 9,639 9,873 12,643 23,212 13,591Cash & equivalents at end of year 9,873 12,643 23,212 13,591 14,353

Waste ConnectionsForecasted Cash Flow Statement

Fiscal Years Ending Dec. 31 2015E 2016E 2017E 2018E 2019ECash Flows from Operating Activities:Net income (loss) 230,184 248,211 268,193 286,353 311,517Adjustments to reconcile net income to net cash from operating activities:

Depreciation & Amortization (PPE) 236,211 241,522 248,360 256,739 266,679Amortization of Identifiable Intangibles 26,363 27,681 29,065 30,518 32,044

Adjustment for Deferred Taxes 44,972 11,467 20,367 27,832 29,036Net Cash Flows from Operating Activities 537,730 528,880 565,985 601,442 639,276

Working CapitalAccounts receivable, net (1,817) (15,959) (16,094) (15,511) (20,781)

Prepaid expenses & other current assets (11,391) (3,274) (3,302) (3,182) (4,263)Other Assets, net (1,154) (2,817) (2,841) (2,738) (3,668)Accounts Payable 13,782 8,199 8,269 7,969 10,677

Book Overdraft 457 407 376 563 811Accrued Liabilities 19,396 8,555 8,628 8,315 11,140Deferred Revenue 4,416 5,202 5,246 5,056 6,774

Net Cash Flows from Working Capital 23,688 314 282 472 690

Capital Expenditures (294,538) (316,628) (340,375) (365,903) (393,346)Restricted Assets (2,444) (2,639) (2,661) (2,565) (3,436)

Goodwill (33,876) (34,553) (35,244) (35,949) (36,668)intangibles (25,500) (25,457) (25,345) (25,159) (24,891)

Current Portion of Contingent Consideration (4,238) (3,408) (2,740) (2,204) (1,772)LT Portion of Contingent Consideration (9,505) (7,643) (6,146) (4,942) (3,974)

Net Cash Flows from Investing Activities (370,101) (390,328) (412,513) (436,723) (464,088)

Cash flows from financing activities:Current Portion of LT Debt 132 119 110 165 238

LT Debt and Notes Payable 71,596 64,625 59,595 89,313 128,762other LT Liabilities (8,325) 5,156 5,200 5,011 6,714

Dividends (66,200) (74,277) (84,190) (96,389) (110,356)Change in Common Stock from ESOP 520 520 520 520 520

Stock Repuchares (119,247) (116,894) (57,294) 0 0Change in AOCI 520 (309) (312) (301) (403)

Net cash flows from financing activities (121,004) (121,061) (76,372) (1,681) 25,474

Net increase (decrease) in cash & cash equivalents70,314 17,806 77,382 163,511 201,352Cash & cash equivalents at beginning of year 14,353 84,667 102,473 179,854 343,365Cash & cash equivalents at end of year 84,667 102,473 179,854 343,365 544,717

Waste ConnectionsCommon Size Income Statement

Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019ERevenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Operating Expenses:Cost of Operations 57.56% 55.21% 54.75% 55.05% 55.25% 55.25% 55.25% 55.25%Depreciation 10.17% 11.33% 11.11% 11.20% 10.79% 10.49% 10.30% 10.03%Amortization of Intangibles 1.48% 1.32% 1.30% 1.25% 1.24% 1.23% 1.22% 1.20%Gross Income 30.79% 32.15% 32.84% 32.50% 32.72% 33.03% 33.22% 33.52%

SGA 11.88% 11.02% 11.04% 11.21% 11.21% 11.21% 11.21% 11.21%Operating Income (EBIT) 18.91% 21.13% 21.80% 21.29% 21.51% 21.82% 22.01% 22.31%

Interest Expense -3.19% -3.81% -3.11% -3.26% -3.18% -3.10% -3.03% -2.96%Other income, net 0.12% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%Income before income tax provision 15.95% 16.64% 18.55% 18.08% 18.37% 18.77% 19.03% 19.40%

Income tax provision -6.35% -6.48% -7.33% -7.14% -7.26% -7.41% -7.52% -7.66%Net Income 9.61% 10.16% 11.22% 10.94% 11.12% 11.35% 11.51% 11.74%

Less: NI attributable to noncontrolling interests -0.03% -0.02% -0.04% -0.02% -0.02% -0.02% -0.02% -0.02%NI attributable to Waste Connections 9.57% 10.14% 11.18% 10.91% 11.09% 11.33% 11.49% 11.71%

Waste ConnectionsCommon Size Balance Sheet

Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019EAssetsCurrent assets:Cash and equivalents 1.40% 0.70% 0.69% 4.01% 4.58% 7.60% 13.78% 20.48%Accounts Receivable Net 14.19% 12.13% 12.50% 12.41% 12.41% 12.41% 12.41% 12.41%Deferred income taxes 2.76% 2.14% 2.38% 1.74% 1.77% 1.81% 1.83% 1.87%Prepaid expenses and other current assets 3.47% 2.06% 2.04% 2.55% 2.55% 2.55% 2.55% 2.55%Total current assets 21.82% 17.03% 17.61% 20.72% 21.31% 24.37% 30.57% 37.31%

Property and equipment, net 147.90% 127.06% 124.77% 125.77% 121.90% 119.11% 117.52% 114.88%Goodwill 98.49% 86.85% 81.46% 80.31% 75.70% 71.55% 67.96% 63.69%Intangible assets, net 32.61% 27.37% 24.53% 24.14% 22.65% 21.26% 19.98% 18.45%Restricted assets 2.10% 1.86% 1.96% 2.05% 2.05% 2.05% 2.05% 2.05%Other assets, net 2.56% 2.39% 2.17% 2.19% 2.19% 2.19% 2.19% 2.19%Total Assets 305.49% 262.56% 252.51% 234.47% 224.50% 216.16% 209.70% 201.26%Liabilities and EquityCurrent Liabilities:Accounts payable 7.84% 5.46% 5.81% 6.38% 6.38% 6.38% 6.38% 6.38%Book overdraft 0.76% 0.65% 0.60% 0.61% 0.59% 0.58% 0.57% 0.57%Accrued liabilities 7.33% 6.17% 5.82% 6.65% 6.65% 6.65% 6.65% 6.65%Deferred revenue 4.21% 3.73% 3.89% 4.05% 4.05% 4.05% 4.05% 4.05%Current portion of contingent consideration 2.95% 1.60% 1.04% 0.82% 0.63% 0.48% 0.36% 0.27%Current portion of LT Det and NP 2.04% 0.28% 0.18% 0.18% 0.17% 0.17% 0.17% 0.17%Total current liabilities 25.13% 17.89% 17.33% 18.69% 18.47% 18.30% 18.18% 18.08%

LT debt and notes payable 132.70% 107.20% 95.03% 97.08% 94.39% 91.74% 90.72% 89.85%LT port of continent consideration 1.83% 1.28% 2.33% 1.85% 1.40% 1.07% 0.81% 0.61%other LT liabilities 4.52% 3.99% 4.47% 4.01% 4.01% 4.01% 4.01% 4.01%Deferred income taxes 27.98% 26.01% 25.91% 27.07% 26.15% 25.72% 25.66% 25.29%Total Liabilities 192.16% 156.37% 145.07% 130.01% 125.96% 122.53% 121.21% 119.77%

Equity:Common stock 0.00% 0.00% 0.00% 38.55% 36.36% 34.39% 32.69% 30.65%Accumulated other comprehensive loss -0.37% -0.10% -0.27% -0.24% -0.24% -0.24% -0.24% -0.24%Retained earnings 66.39% 64.68% 68.36% 75.16% 78.62% 82.09% 85.59% 87.77%Total Waste Connections Equity 113.03% 105.93% 107.17% 107.82% 104.18% 103.84% 106.26% 107.14%Noncontrolling interest in subsidiaries 0.30% 0.27% 0.27% 0.28% 0.27% 0.27% 0.27% 0.27%Total Equity 113.33% 106.19% 107.43% 108.10% 104.46% 104.11% 106.53% 107.41%

Waste ConnectionsValue Driver Estimation

Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019ENOPLATNet Sales 1,661,618 1,928,795 2,079,166 2,109,026 2,237,594 2,367,253 2,492,211 2,659,626Operating Expenses (1,153,811) (1,277,456) (1,367,862) (1,397,486) (1,487,153) (1,573,327) (1,656,377) (1,767,645)Depreciation & Amortization (193,584) (243,864) (257,944) (262,574) (269,203) (277,425) (287,257) (298,723)Implied Interest on Op Leases 5,428 5,337 4,764 4,833 5,127 5,425 5,711 6,095EBITA 319,651 412,812 458,124 453,799 486,366 521,925 554,288 599,353

Tax Provision 105,443 124,916 152,335 150,612 162,401 175,468 187,344 203,799Tax Shield on Interest Expense 20,950 29,064 25,546 27,146 28,130 29,018 29,836 31,063Tax on Other Income (787) (417) (421) (417) (442) (468) (492) (525)Tax on non-operating loss/gain (760) 5,542 1,616 0 0 0 0 0Tax Shield on Implied Lease Interest 2,144 2,108 1,882 1,909 2,025 2,143 2,256 2,407Total Adjusted Taxes 126,990 161,213 180,958 179,251 192,114 206,160 218,944 236,745

Δ In Deferred Tax Liability 42,580 41,333 28,710 44,972 11,467 20,367 27,832 29,036

NOPLAT 235,242 292,932 305,877 319,520 305,718 336,131 363,176 391,645Invested CapitalCurrent Operating Assets

Normal Cash 14,555 16,896 18,213 18,475 19,601 20,737 21,831 23,298Accounts Receivable Net 235,762 234,001 259,969 261,786 277,744 293,839 309,349 330,130Prepaid Expenses and Other Current Assets 57,714 39,638 42,314 53,705 56,979 60,281 63,463 67,726

Less Current Operating LiabilitiesAccounts Payable 130,260 105,394 120,717 134,499 142,698 150,967 158,936 169,612Book Overdraft 12,567 12,456 12,446 12,903 13,310 13,685 14,248 15,060Accrued liabilities 121,829 119,026 120,947 140,343 148,899 157,527 165,842 176,982Deferred revenue 69,930 71,917 80,915 85,331 90,533 95,779 100,835 107,608

Net Operating Working Capital (26,555) (18,258) (14,529) (39,110) (41,115) (43,102) (45,217) (48,109)

Net PPE 2,457,606 2,450,649 2,594,205 2,652,532 2,727,638 2,819,653 2,928,818 3,055,486

PV of Operating Leases 116,991 115,015 102,681 104,990 107,963 111,605 115,925 120,939Intangible assets, net 541,908 527,871 509,995 509,132 506,908 503,188 497,829 490,676Other assets, net 42,580 46,152 45,057 46,211 49,029 51,870 54,608 58,276Net Other Operating Assets 701,479 689,038 657,733 660,333 663,899 666,662 668,362 669,891

other LT liabilities 75,129 77,035 92,900 84,575 89,731 94,930 99,941 106,655Net Other Operating Liabilities 75,129 77,035 92,900 84,575 89,731 94,930 99,941 106,655

Invested Capital 3,057,401 3,044,394 3,144,509 3,189,180 3,260,691 3,348,283 3,452,021 3,570,613

DriversNOPLAT 235,242 292,932 305,877 319,520 305,718 336,131 363,176 391,645Beginning Invested Capital 1,891,581 3,057,401 3,044,394 3,144,509 3,189,180 3,260,691 3,348,283 3,452,021Return on Invested Capital (ROIC) 12.44% 9.58% 10.05% 10.16% 9.59% 10.31% 10.85% 11.35%Change in Invested Capital 1,165,820 (13,007) 100,115 44,671 71,511 87,592 103,738 118,591Free Cash Flow (FCF) (930,579) 305,939 205,762 274,850 234,207 248,539 259,438 273,053Economic Profit (EP) 125,343 115,300 129,001 136,828 120,431 146,689 168,645 191,086

Net Income 159,093 195,655 232,525 230,184 248,211 268,193 286,353 311,517Average Equity 1,641,409 1,965,669 2,140,974 2,256,769 2,308,567 2,400,949 2,559,813 2,755,874ROE (Net Income/Average Equity) 9.69% 9.95% 10.86% 10.20% 10.75% 11.17% 11.19% 11.30%

Waste ConnectionsWeighted Average Cost of Capital (WACC) EstimationCost of Equity 6.87%Weight of Equity 73.97%Cost of Debt 2.81%Weight of Debt 26.03%WACC 5.81% Equity Weight

Market Cap 5,953,700

Pre-tax Cost of Debt 4.64% PV of ST & LT Debt 1,992,011PV of Op Lease 102,681

Bloomberg WeeklyRisk Free Rate 2.49% Term BetaBeta 0.90 1 yr 0.84Market Premium 4.85% 2 yr 0.996Cost of Equity 6.87% 3 yr 0.871

4 yr 0.6915 yr 0.6913 yr Ave 0.90

Cost of Debt

Cost Of Equity

Waste ConnectionsDiscounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth 3.00% CV ROIC 11.35% WACC 5.81% Cost of Equity 6.87%

Fiscal Years Ending Dec. 31 2015E 2016E 2017E 2018E 2019E

DCF Model 1 2 3 4 5NOPLAT 319,520 305,718 336,131 363,176 391,645Begin IC 3,144,509 3,189,180 3,260,691 3,348,283 3,452,021Ending IC 3,189,180 3,260,691 3,348,283 3,452,021 3,570,613Δ Invested Capital 44,671 71,511 87,592 103,738 118,591Free Cash Flow 274,850 234,207 248,539 259,438 273,053ROIC 10.16% 9.59% 10.31% 10.85% 11.35%

FCF 274,850 234,207 248,539 259,438 273,053Continuing Value 10,252,526PV of FCF 259,758 209,193 209,805 206,980 8,179,485

Value of Operating Assets 9,065,222- Total Debt 1,992,011- Continent Liabilities 70,165-PV of Operating Leases 102,681-PV of ESOP 1,199+restricted assets 40,841Value of Equity 6,940,007Shares Outstanding 124,215Intrinsic Value (12/31/14) $55.87Price Today $56.85

EP ModelNOPLAT 319,520 305,718 336,131 363,176 391,645Beginning IC 3,144,509 3,189,180 3,260,691 3,348,283 3,452,021ROIC 10.16% 9.59% 10.31% 10.85% 11.35%Economic Profit 136,828 120,431 146,689 168,645 191,086Continuing Value 6,800,505

129,315 107,569 123,828 134,545 5,425,456

PV of EP 5,920,713Beginning IC 3,144,509Value of Operating Assets 9,065,222- Total Debt 1,992,011- Continent Liabilities 70,165-PV of Operating Leases 102,681-PV of ESOP 1,199+restricted assets 40,841Value of Equity 6,940,007Shares Outstanding 124,215Intrinsic Value (12/31/14) $55.87Price Today $56.85

Present Value of EP discounted byWACC

Waste ConnectionsDividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Dec. 31 2015E 2016E 2017E 2018E 2019E

EPS 1.89$ 2.08$ 2.27$ 2.42$ 2.63$

Key Assumptions CV growth 3.00% CV ROE 11.30% Cost of Equity 6.87%

Future Cash Flows P/E Multiple (CV Year) 19.00004 EPS (CV Year) 2.63$ Future Stock Price $50.05 Dividends Per Share Future Cash Flows $1.06 $1.17 $1.28 $1.36 $1.48

Discounted Cash Flows $1.00 $1.03 $1.05 $1.05 $38.37

Intrinsic Value (12/31/14) 41.49$Price Today 42.22$

Waste ConnectionsRelative Valuation Models

EPS EPS Est. 5yrTicker Company Price 2015E 2016E P/E 15 P/E 16 EPS gr. PEG 15 PEG 16WM Waste Management $53.90 $2.47 $2.71 21.8 19.9 5.6 3.92 3.57RSG Republic Services $40.12 $2.02 $2.24 19.9 17.9 5.9 3.37 3.04SRCL Stericycle $140.14 $4.63 $5.21 30.3 26.9 14.8 2.05 1.82CLH Clean Harbors $57.33 $1.89 $2.28 30.3 25.1 14.8 2.06 1.70

Average 25.6 22.5 2.8 2.5

WCN Waste Connections $48.00 $1.89 $2.08 25.4 23.1 6.9 3.7 3.4

Implied Value: Relative P/E (EPS15) $ 48.34 Relative P/E (EPS16) 46.71$ PEG Ratio (EPS15) 36.93$ PEG Ratio (EPS16) 36.14$

Waste ConnectionsKey Management Ratios

Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Liquidity RatiosCash Ratio (Cash + ST)/Current L 5.56% 3.94% 3.98% 21.48% 24.79% 41.52% 75.78% 113.26%Current Ratio 86.81% 95.21% 101.62% 110.82% 115.36% 133.14% 168.16% 206.32%Operating Cash Flows/Current L 99.70% 140.30% 151.32% 136.39% 127.96% 130.65% 132.74% 132.92%

Activity or Asset-Management RatiosAsset Turnover Ratio (sales/ave assets) 5.43 5.58 5.99 5.25 4.90 4.49 3.72 3.03Receivables Turnover (sales/ave rec) 8.07 8.21 8.42 8.08 8.29 8.28 8.26 8.32Fixed Asset Turnover (Sales/ave PPE) 0.85 0.79 0.82 0.80 0.83 0.85 0.87 0.89

Financial Leverage RatiosDebt/Equity Ratio (Total liabilities/total equity) 137.77% 169.55% 147.25% 135.03% 137.57% 138.27% 135.27% 130.84%

592.46% 553.79% 700.99% 653.29% 675.76% 703.08% 726.25% 754.38%

Profitability RatiosEBIT Margin 18.91% 21.13% 21.80% 21.29% 21.51% 21.82% 22.01% 22.31%ROA (NI/Ave Assets) 3.79% 3.86% 4.51% 4.32% 4.52% 4.72% 4.80% 4.93%ROE (NI/Ave Equity) 9.69% 9.95% 10.86% 10.20% 10.75% 11.17% 11.19% 11.30%

Payout Policy RatiosPayout Ratio 28.18% 26.22% 25.37% 80.56% 77.02% 52.75% 33.66% 35.43%

Interest Coverage Ratio (operatingincome/interest expense)