TORONTO, ONTARIO — (Marketwire) — 04/27/12 — Progressive Waste Solutions Ltd. (the “Company”) (TSX: BIN)(NYSE: BIN) reported financial results for the three months ended March 31, 2012.
Management Commentary
(All amounts are in United States (“U.S.”) dollars, unless otherwise stated)
“The results of our first quarter were in line with our expectations and our performance is on track with our outlook for 2012. Our 2012 guidance anticipated lower comparative first quarter results due in large part to the rollover impact of the weak economic environment in the U.S. northeast that we faced in the latter part of 2011. As we indicated, our plans also called for a year with more back-end loaded special waste volumes compared with last year and, in fact, we are already seeing more special waste activity in the second quarter of the year,” said Joseph Quarin, Vice Chairman and Chief Executive Officer, Progressive Waste Solutions Ltd. “We achieved solid total revenue growth, with reported revenues increasing 3.6% to $438.3 million, despite the impact of lower recycled fiber pricing and less special waste activity in parts of our U.S. operations relative to the quarter a year ago. Strategic “tuck-in” acquisitions that we completed in 2011 and the first quarter of 2012 contributed to our results, as did strong results in our consolidated commercial and residential collection service lines. Consolidated core price increased 1.0% and volumes declined 0.9%. Higher core price and volume in our Canadian segment and higher core price in our U.S. south segment were offset by continued softness in our U.S. northeast segment. Transfer station and landfill volumes and collection pricing in this segment were lower in the first quarter of 2012 compared to the first quarter a year ago. However, we are pleased to see early signs of pricing stability in the U.S. northeast on a sequential basis.
“Adjusted EBITDA(A) of $116.3 million, in line with our expectations, and an adjusted EBITDA(A) margin of 26.5%, were affected most significantly by the combination of lower recycled commodity and special waste revenues, which are both high-margin contributors to adjusted EBITDA(A) and therefore affected our first quarter results disproportionately. In addition, the impact of “tuck-in” acquisitions, higher diesel fuel prices, one additional operating day in the quarter and non-recurring professional services fees also contributed to the decline in adjusted EBITDA(A) comparatively. Free cash flow(B) of $43.7 million, also in line with expectations, reflects the timing of higher capital and landfill expenditures in the period.”
Mr. Quarin continued, “We are reaffirming our outlook for 2012, which includes revenue of $1.88 to $1.91 billion, adjusted EBITDA(A) of $535 to $550 million, and free cash flow(B) of $220 to $240 million, excluding additional internal infrastructure investment of $40 to $50 million. Our outlook assumes the average pricing we are currently obtaining for recycled fiber commodities, but anticipates a higher level of special waste volumes over the balance of the fiscal year. We remain focused on our disciplined program for enhancing organic growth and our “tuck-in” acquisition program continues to be active. We look forward to executing on our plans for 2012, which will contribute meaningfully to our performance in 2013 and beyond.”
Reported revenues increased $15.4 million or 3.6% from $422.9 million in the first quarter of 2011 to $438.3 million in the first quarter of 2012. Expressed on a reportable basis, and assuming Canadian and U.S. dollar parity, revenues increased 4.3% quarter over quarter due in large part to the 4.6% increase attributable to acquisitions, while higher overall pricing and fuel surcharges were offset by lower volumes and recycled fiber prices.
Adjusted EBITDA(A) was $116.3 million, or (5.6)% lower, in the first quarter of 2012 versus $123.3 million in the same quarter a year ago. Excluding the impact of foreign currency (“FX”) and the decline in recycled fiber pricing, adjusted EBITDA(A) would have been $122.5 million in the current quarter. The first quarter of 2012 also included one additional operating day which added $2.2 million of operating expense without any additional revenue contribution in our commercial and residential service lines. Adjusted operating income(A) was $53.0 million, or (14.3)% lower, in the quarter compared to $61.9 million in the same period last year. Adjusted net income(A) was $24.1 million, or $0.20 per weighted average diluted share (“diluted share”), compared to $28.2 million, or $0.23 per diluted share in the comparative period.
Share repurchases in the quarter totalled $29.3 million and dividends paid to shareholders totalled $14.8 million. Together, this represents a combined $44.1 million return to shareholders in the first quarter of 2012 compared to $38.9 million a year ago.
Other highlights for the three months ended March 31, 2012
We have elected to report our financial results in U.S. dollars. However, we earn a significant portion of our revenues and earnings in Canada. We have provided our guidance assuming parity between the Canadian and U.S. dollar. If the U.S. dollar strengthens by 10 basis points our reported revenues will decline by approximately $7,600. EBITDA(A) is similarly impacted by approximately $2,500, assuming a strengthening U.S. dollar. The impact on net income for a similar change in FX rate, results in an approximately $1,000 decline. Should the U.S. dollar weaken by 10 basis points, our reported results will improve by similar amounts.
Quarterly dividend declared
The Company–s Board of Directors declared a quarterly dividend of $0.14 Canadian per share to shareholders of record June 29, 2012. The dividend will be paid on July 16, 2012. The Company has designated these dividends as eligible dividends for the purposes of the Income Tax Act (Canada).
Definitions of Adjusted EBITDA and Free cash flow
(A) All references to “Adjusted EBITDA” in this document are to revenues less operating expense and SG&A, excluding certain non-operating or non-recurring SG&A expense, on the consolidated statement of operations and comprehensive income or loss. Adjusted EBITDA excludes some or all of the following: certain SG&A expenses, restructuring expenses, goodwill impairment, amortization, net gain or loss on sale of capital assets, interest on long-term debt, net foreign exchange gain or loss, net gain or loss on financial instruments, other expenses, income taxes and income or loss from equity accounted investee. Adjusted EBITDA is a term used by us that does not have a standardized meaning prescribed by U.S. GAAP and is therefore unlikely to be comparable to similar measures used by other companies. Adjusted EBITDA is a measure of our operating profitability, and by definition, excludes certain items as detailed above. These items are viewed by us as either non-cash (in the case of goodwill impairment, amortization, net gain or loss on financial instruments, net foreign exchange gain or loss, deferred income taxes and net income or loss from equity accounted investee) or non-operating (in the case of certain SG&A expenses, restructuring expenses, net gain or loss on sale of capital assets, interest on long-term debt, other expenses, and current income taxes). Adjusted EBITDA is a useful financial and operating metric for us, our Board of Directors, and our lenders, as it represents a starting point in the determination of free cash flow(B). The underlying reasons for the exclusion of each item are as follows:
Certain SG&A expenses – SG&A expense includes certain non-operating or non-recurring expenses. These expenses include transaction costs related to acquisitions, fair value adjustments attributable to stock options, restricted share expense and a non-recurring one-time charge resulting from the non-renewal of the Company–s former Vice Chairman and Chief Executive Officer–s agreement. These expenses are not considered an expense indicative of continuing operations. Certain SG&A costs represent a different class of expense than those included in adjusted EBITDA.
Restructuring expenses – restructuring expenses includes costs to integrate various operating locations with our own, exiting certain property and building and office leases, employee severance and employee relocation costs incurred in connection with our acquisition of WSI. These expenses are not considered an expense indicative of continuing operations. Accordingly, restructuring expenses represent a different class of expense than those included in adjusted EBITDA.
Goodwill impairment – as a non-cash item goodwill impairment has no impact on the determination of free cash flow(B).
Amortization – as a non-cash item amortization has no impact on the determination of free cash flow(B).
Net gain or loss on sale of capital assets – proceeds from the sale of capital assets are either reinvested in additional or replacement capital assets or used to repay revolving credit facility borrowings.
Interest on long-term debt – interest on long-term debt is a function of our debt/equity mix and interest rates; as such, it reflects our treasury/financing activities and represents a different class of expense than those included in adjusted EBITDA.
Net foreign exchange gain or loss – as non-cash items, foreign exchange gains or losses have no impact on the determination of free cash flow(B).
Net gain or loss on financial instruments – as non-cash items, gains or losses on financial instruments have no impact on the determination of free cash flow(B).
Other expenses – other expenses typically represent amounts paid to certain management of acquired companies who are retained by us post acquisition and amounts paid to certain executives in respect of acquisitions successfully completed. These expenses are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included in adjusted EBITDA.
Income taxes – income taxes are a function of tax laws and rates and are affected by matters which are separate from our daily operations.
Net income or loss from equity accounted investee – as a non-cash item, net income or loss from our equity accounted investee has no impact on the determination of free cash flow(B).
(B) We have adopted a measure called “free cash flow” to supplement net income or loss as a measure of our operating performance. Free cash flow is a term which does not have a standardized meaning prescribed by U.S. GAAP, is prepared before dividends declared and shares repurchased, and may not be comparable to similar measures prepared by other companies. The purpose of presenting this non-GAAP measure is to provide disclosure similar to the disclosure provided by other U.S. publicly listed companies in our industry and to provide investors and analysts with an additional measure of our value and liquidity. We use this non-GAAP measure to assess our performance relative to other U.S. publicly listed companies and to assess the availability of funds for growth investment, debt repayment, share repurchases or dividend increases. All references to “free cash flow” in this document have the meaning set out in this note.
About Progressive Waste Solutions Ltd.
As North America–s third largest full-service waste management company, we provide non-hazardous solid waste collection, recycling and disposal services to commercial, industrial, municipal and residential customers in 12 U.S. states and the District of Columbia and six Canadian provinces. We serve our customers with vertically integrated collection and disposal assets. Progressive Waste Solutions Ltd.–s shares are listed on the New York and Toronto Stock Exchanges under the symbol BIN.
To find out more about Progressive Waste Solutions, visit our website at .
Contacts:
Progressive Waste Solutions Ltd.
Chaya Cooperberg
VP, Investor Relations and Corporate Communications
(905) 532-7517