TORONTO, ONTARIO — (Marketwire) — 10/26/12 — Progressive Waste Solutions Ltd. (the “Company”) (TSX: BIN)(NYSE: BIN) reported financial results for the three and nine months ended September 30, 2012.
“In the third quarter, our base business continued to demonstrate stability, with resilience in our commercial and residential collection service lines. We achieved consolidated revenues of $487.2 million and adjusted EBITDA(A) of $136.9 million, with core price growth of 2.2% in Canada and 1.2% in the U.S., for a combined core price increase of 1.6%. Our strong core price activity was offset by a mixed volume performance relative to the year-ago quarter and lower recycled commodity prices continued to affect our consolidated performance, as it has affected the solid waste services industry in North America throughout this year. Excluding the $12.4 million quarter-over-quarter impact of lower recycled commodity prices, at parity, as well as the impact of one-time items and FX, revenue would have increased 2.5% to $502.8 million and adjusted EBITDA(A) would have increased 6.7% to $151.8 million. Adjusted EBITDA(A) in the third quarter includes one-time charges of $1.4 million related to a tax assessment and end of collection contract retention payments,” said Joseph Quarin, Vice Chairman and Chief Executive Officer, Progressive Waste Solutions Ltd.
“Our Canadian and U.S. south operations continued to perform well in the third quarter, with quarter-over-quarter revenue growth of 1.2% and 2.7%, respectively, driven by higher pricing in our collection business and contributions from strategic –tuck-in– acquisitions. Adjusted EBITDA(A) margins in these segments remained solid, at 36% in Canada and 28.3% in the U.S. south, in spite of lower recycled commodity prices.”
Mr. Quarin continued, “In our U.S. northeast segment, on a sequential basis and as a result of our focused efforts, pricing remained stable in our collection and disposal service lines, cost controls were maintained, and adjusted EBITDA(A) margins improved to 21.8%. Weak economic conditions in this region continued to affect third-party volume at our transfer stations and landfills and delayed special waste activity as well. During the quarter, we acquired two collection companies in this region that will help increase internal waste volumes at our landfills and which will partially offset the decline in disposal volumes. We are making progress on our plan to improve our performance in our U.S. northeast operations and are committed to further development and integration of our assets in this region.”
“In addition to investing in –tuck-in– acquisitions in the third quarter, we continued to deploy capital towards several internal infrastructure projects that we expect will deliver attractive returns in 2013 and beyond. With our strong free cash flow(B) profile, we have the resources to enhance the strategic position of Progressive Waste Solutions, with the objective of creating long-term shareholder value. Given the current interest rate environment and the availability of attractive debt financing, we have taken the opportunity to further position Progressive Waste Solutions for future growth with a refinancing of our credit facilities, which will give us a significant source of liquidity as we continue to grow our business.”
“We are updating our guidance for 2012 given the significant decline in recycled commodity prices in the third quarter, combined with lower transfer station and landfill volumes, including delayed special waste activity, in our U.S. northeast segment,” Mr. Quarin added. “Our outlook for the balance of 2012 assumes recycled commodity prices in the fourth quarter will not improve from September levels.”
Reported revenues decreased ($3.3) million or (0.7)% from $490.5 million in the third quarter of 2011 to $487.2 million in the third quarter of 2012. Expressed on a reportable basis, at parity, revenues were flat quarter over quarter due in large part to a 3.9% increase attributable to acquisitions, and higher overall pricing and fuel surcharges being offset by lower volumes and commodity values. The impact on comparative revenues resulting from a decline in recycled commodity prices was 2.5%.
Adjusted EBITDA(A) was $136.9 million ($138.3 million excluding one-time items), or (2.9)% lower, in the third quarter of 2012 versus $141.0 million in the same quarter a year ago. Adjusted operating income(A) was $66.8 million, or (8.0)% lower, in the quarter compared to $72.6 million in the same period last year. Adjusted net income(A) was $32.1 million, or $0.28 per weighted average diluted share (“diluted share”), compared to $35.1 million, or $0.29 per diluted share in the comparative period.
Share repurchases in the quarter totalled $5.2 million and dividends paid to shareholders totalled $16.2 million. Together, this represents a combined $21.4 million return to shareholders in the third quarter of 2012.
Year-to-date, reported revenues increased $18.0 million or 1.3% from $1,382.9 million in 2011 to $1,400.9 million. Expressed on a reportable basis, and assuming Canadian and U.S. dollar parity, revenues increased 2.3% on a comparative basis for the nine months ended. This increase is due in large part to a 3.9% 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 1.8%.
For the year-to-date period, adjusted EBITDA(A) was $385.9 million ($387.3 million excluding one-time items), or (3.7)% lower, in 2012 versus $400.7 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 $415.7 million ($417.1 million excluding one-time items) on a year-to-date basis. Adjusted operating income(A) was $184.5 million, or (9.9)% lower, in the year-to-date period than the $204.9 million recorded in the same period last year. Adjusted net income(A) was $85.0 million, or $0.73 per diluted share, compared to $97.0 million, or $0.80 per diluted share in the comparative period.
Share repurchases year-to-date totalled $65.6 million and dividends paid to shareholders totalled $47.2 million. For the current year-to-date period, this represents a combined $112.8 million return to shareholders compared to $85.5 million a year ago.
Acquisitions
Other highlights for the three and nine months ended September 30, 2012
2012 Outlook
The Company is updating its outlook provided on July 25, 2012. The outlook assumes no change in the current economic environment and assumes recycled commodity pricing remains at September 2012 levels. 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.
Revenue growth or decline components – expressed in percentages and excluding FX
The table below has been prepared using reported revenues for 2012 and gross revenues for 2011. The table has also been prepared assuming Canadian and U.S. dollar parity. For 2011, the amounts are presented as if Waste Services, Inc.–s operations were combined with ours for the six months ended June 30, 2010.
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
Free cash flow(B) – adjusted EBITDA(A) approach
We typically calculate free cash flow(B) using an operations approach which is similar to the calculation required by our Canadian and U.S. facilities in place at September 30, 2012.
Long-term debt to adjusted EBITDA(A)
Our adjusted EBITDA(A) ratio prepared on a combined basis, assuming FX parity, is 2.80 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 December 31, 2012. The dividend will be paid on January 16, 2013. 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 payments made to senior executives on their departure. 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 one of North America–s largest full-service waste management companies, we provide non-hazardous solid waste collection, recycling and disposal services to commercial, industrial, municipal and residential customers in 13 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 Friday, October 26, 2012, at 8:30 a.m. (ET) to discuss results for the three and nine months ended September 30, 2012. Participants may listen to the call by dialing 1-888-300-0053, conference ID 35210439, 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, November 9, 2012, at midnight, and can be accessed by dialing 1-855-859-2056, conference ID 35210439. 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