TORONTO, ONTARIO — (Marketwire) — 07/25/12 — Progressive Waste Solutions Ltd. (the “Company”) (TSX: BIN)(NYSE: BIN) reported financial results for the three and six months ended June 30, 2012.
Management Commentary
(All amounts are in United States (“U.S.”) dollars, unless otherwise stated)
“In the second quarter, I am pleased that our core business continued to demonstrate resilience in the face of this challenging economic environment. We achieved consolidated revenue growth of 1.3% to $475.4 million and generated adjusted EBITDA(A) of $132.7 million and free cash flow(B) of $56.5 million. Excluding the quarter-over-quarter impact of FX and a $6.4 million decline to revenues resulting from lower recycled commodity prices, revenue would have increased 4.4% to $490.1 million and adjusted EBITDA(A) would have increased 4.0% to $141.8 million,” said Joseph Quarin, Vice Chairman and Chief Executive Officer, Progressive Waste Solutions Ltd. “We had core price growth of 2.7% in Canada and 0.9% in the U.S., for a combined improvement of 1.6%. We achieved our objective of increasing pricing for our consolidated collection and transfer services, and our disposal services in Canada and U.S. south operations.”
Mr. Quarin continued, “Our Canadian and U.S. south operations both delivered another strong and stable performance in the quarter. These two segments combined represent 83% of our total revenue and 88% of our total adjusted EBITDA(A), with adjusted EBITDA(A) margins of 36.3% in Canada and 28.6% in the U.S. south. These segments grew in the period as a result of organic improvement and contributions from acquisitions and we are pleased with the performance. In our U.S. northeast segment, our core commercial collection business remained solid in the second quarter, and we achieved higher adjusted EBITDA(A) margins on a sequential basis. However, economic conditions continue to affect the pricing of recycled commodities as well as transfer and landfill volumes in this region. We are executing on plans that we expect will improve our financial results in our U.S. northeast segment going forward.
“We are on track to achieve the lower end of our revenue and adjusted EBITDA(A) guidance for 2012, assuming there is no further deterioration in the economic environment affecting recycled commodity pricing or waste volumes,” Mr. Quarin added. “We expect to deliver consolidated revenue of about $1.88 billion, with adjusted EBITDA(A) of approximately $535 million, at parity. We estimate free cash flow(B) will be at the higher end of our 2012 guidance of $170 to $190 million. We expect to achieve these results even with the significant decline in recycled commodity prices since May of this year. With our high levels of free cash flow(B) and our balance sheet strength, we have significant resources to deploy to continue to create value for our shareholders.”
Reported revenues increased $5.9 million or 1.3% from $469.5 million in the second quarter of 2011 to $475.4 million in the second quarter of 2012. Expressed on a reportable basis, at parity, revenues increased 3.0% quarter over quarter due in large part to a 3.5% increase attributable to acquisitions, and higher overall pricing and fuel surcharges which outpaced lower volumes and commodity values. The impact on comparative revenues resulting from a decline in recycled commodity prices was 1.4%.
Adjusted EBITDA(A) was $132.7 million, or (2.8)% lower, in the second quarter of 2012 versus $136.4 million in the same quarter a year ago. Adjusted operating income(A) was $64.7 million, or (8.0)% lower, in the quarter compared to $70.3 million in the same period last year. Adjusted net income(A) was $28.8 million, or $0.25 per weighted average diluted share (“diluted share”), compared to $33.7 million, or $0.28 per diluted share in the comparative period.
Share repurchases in the quarter totalled $31.2 million and dividends paid to shareholders totalled $16.2 million. Together, this represents a combined $47.4 million return to shareholders in the second quarter of 2012 compared to $15.6 in the same quarter last year.
Year-to-date, reported revenues increased $21.3 million or 2.4% from $892.4 million in 2011 to $913.7 million. Expressed on a reportable basis, and assuming Canadian and U.S. dollar parity, revenues increased 3.6% on a comparative basis for the six months ended which is due in large part to a 4.0% increase attributable to acquisitions, and higher overall pricing and fuel surcharges which outpaced lower volumes and commodity values. The year-to-date impact on comparative revenues resulting from a decline in recycled commodity prices was 1.5%.
For the year-to-date period, adjusted EBITDA(A) was $249.0 million, or (4.1)% lower, in 2012 versus $259.7 million in the same period last year. Excluding the impact of FX and the decline in recycled commodity pricing, adjusted EBITDA(A) would have been $265.4 million on a year-to-date basis. Adjusted operating income(A) was $117.7 million, or (11.0)% lower, in the year-to-date period than the $132.2 million recorded in the same period last year. Adjusted net income(A) was $52.9 million, or $0.45 per diluted share, compared to $61.9 million, or $0.51 per diluted share in the comparative period.
Share repurchases year-to-date totalled $60.5 million and dividends paid to shareholders totalled $31.0 million. For the current year-to-date period, this represents a combined $91.5 million return to shareholders compared to $54.5 million a year ago.
Other highlights for the three and six months ended June 30, 2012
2012 Outlook
The Company is updating its outlook assuming no change in the current economic environment affecting recycled commodity pricing or waste volumes for the balance of 2012. Our outlook has been prepared assuming parity between the Canadian and U.S. dollar.
The outlook provided below is forward-looking. Our actual results may differ materially and are subject to risks and uncertainties.
Free cash flow(B)
Purpose and objective
The purpose of presenting this non-GAAP measure is to provide similar disclosures presented 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 relative performance to our peers and to assess the availability of funds for growth investment, share repurchases, debt repayment or dividend increases.
Free cash flow(B) – cash flow approach
Long-term debt to adjusted EBITDA(A)
Our adjusted EBITDA(A) ratio prepared on a combined basis, assuming FX parity, is 2.61 times.
Foreign Currency
(in thousands of U.S. dollars unless otherwise stated)
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 one cent 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 one cent, 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 September 28, 2012. The dividend will be paid on October 15, 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 .
Management will hold a conference call on Wednesday, July 25, 2012, at 8:30 a.m. (ET) to discuss results for the three and six months ended June 30, 2012. Participants may listen to the call by dialing 1-888-300-0053, conference ID 92969161, at approximately 8:20 a.m. (ET). International or local callers should dial 647-427-3420. The call will also be webcast live at and at . A supplemental slide presentation will be available at .
A replay will be available after the call until Wednesday, August 8, 2012, at midnight, and can be accessed by dialing 1-855-859-2056, conference ID 92969161. International or local callers can access the replay by dialing 404-537-3406. The audio webcast will also be archived at and .
Contacts:
Progressive Waste Solutions Ltd.
Chaya Cooperberg
VP, Investor Relations and Corporate Communications
(905) 532-7517