TORONTO, ONTARIO — (Marketwired) — 05/01/13 — Progressive Waste Solutions Ltd. (the “Company”) (TSX: BIN)(NYSE: BIN) reported financial results for the three months ended March 31, 2013.
Management Commentary
(All amounts are in United States (“U.S.”) dollars, unless otherwise stated)
“We are pleased with the results of our first quarter, in which we achieved solid revenue and earnings growth,” said Joseph Quarin, Vice Chairman and Chief Executive Officer, Progressive Waste Solutions Ltd. “Consolidated revenues and adjusted EBITDA(A) both increased 11.0% in the period, while adjusted operating EBIT(A) increased 10.1%, principally on higher operating income. Our growth was driven by contributions from the strategic –tuck-in– acquisitions we completed last year, as well as by improvements in our organic base of revenues. On a consolidated basis, organic revenues increased 2.3%, if we exclude the revenue decline of 0.5% related to lower recycled commodity prices, compared with the first quarter a year ago. Core price increased by 1.2% on a consolidated basis, representing total price growth across all of our collection and transfer and disposal operations, reflecting our focused pricing initiatives. Our customer retention and sales execution programs contributed to consolidated volume growth of 0.8%, and our U.S. northeast segment also experienced higher-than-anticipated waste volumes related to Superstorm Sandy (“Sandy”) clean-up efforts, which we believe are now largely completed. The additional activity in our U.S. northeast segment offset lower volumes in Canada related to three municipal contracts that concluded in the third and fourth quarters of 2012. Against this backdrop, we remain confident that we are on track to deliver on our outlook for 2013 that we provided on February 14, 2013.”
“Therefore,” Mr. Quarin continued, “we are reaffirming our guidance for 2013 on all measures, which includes estimated revenue of $2.00 to $2.02 billion, adjusted EBITDA(A) of $545 to $555 million, and free cash flow(B) of $200 to $215 million, excluding additional internal infrastructure investment of $40 to $45 million. Our outlook reflects expected contributions from our internal infrastructure investments and several new municipal contracts we previously announced, which together will mitigate the impact of municipal contracts that concluded in Canada and the scheduled closure of our Calgary landfill in mid-2013. Our guidance for the year assumes foreign exchange at parity, no change in the current economic environment and an average price per ton of recyclable materials equal to the 2012 average price per ton that we obtained in our markets.”
First quarter ended March 31, 2013
Reported revenues increased $48.3 million or 11.0% from $438.3 million in the first quarter of 2012 to $486.6 million in the first quarter of 2013. Expressed on a reportable basis, and assuming a foreign currency exchange (“FX”) rate of parity between the Canadian and U.S. dollar (“FX parity”), revenues increased 11.3% quarter over quarter due in large part to a 9.5% increase attributable to acquisitions. Higher overall core pricing, fuel surcharges and higher volumes were offset by lower recycled commodity pricing. The impact of lower recycled commodity prices on comparative revenues was 0.5%.
Operating income was $59.2 million in the first quarter of 2013 versus $50.4 million in the first quarter of 2012. Net income was $29.3 million versus $22.1 million in the first quarter of 2013 and 2012, respectively.
Adjusted amounts
Adjusted EBITDA(A) was $129.1 million, or 11.0% higher, in the first quarter of 2013 versus $116.3 million in the same quarter a year ago. Adjusted operating EBIT(A) was $58.4 million, or 10.1% higher, in the quarter compared to $53.0 million in the same period last year. Adjusted net income(A) was $27.1 million, or $0.24 per diluted share, compared to $24.1 million, or $0.20 per diluted share in the comparative period.
Highlights for the three months ended March 31, 2013
Funded debt to EBITDA (as defined and calculated in accordance with our consolidated facility)
The ratio of funded debt to EBITDA, which includes first year pro forma EBITDA for completed acquisitions, is 3.07 times. The ratio is higher than our target threshold due in large part to our acquisition activity in 2012 and growth and infrastructure spending. Cash flows from acquisitions beyond the first year of operation will contribute to the further improvement of funded debt relative to EBITDA in subsequent periods. Cash flow contributions from growth and infrastructure spending will materialize over future periods and will also improve this relationship.
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.
Upcoming Annual General Meeting
The Company will hold its Annual General Meeting of Shareholders on May 7, 2013 at the Toronto Board of Trade in Toronto, Ontario.
Quarterly dividend declared
The Company–s Board of Directors declared a quarterly dividend of $0.14 Canadian per share to shareholders of record on June 28, 2013. The dividend will be paid on July 15, 2013. The Company has designated these dividends as eligible dividends for the purposes of the Income Tax Act (Canada).
Definitions
(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, loss on extinguishment of debt, 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, loss on extinguishment of 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 or recoveries 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).
Loss on extinguishment of debt – loss on extinguishment of debt is a function of our debt financing; as such, it reflects our treasury/financing activities and represents a different class of expense than those included in adjusted EBITDA.
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).
All references to “Adjusted EBITA” in this document represent Adjusted EBITDA after deducting amortization of capital and landfill assets. All references to “Adjusted operating income or adjusted operating EBIT” in this document represent Adjusted EBITDA after adjusting for net gain or loss on the sale of capital assets and all amortization expense. All references to “Adjusted net income” are to adjusted operating income after adjusting for restructuring expenses and goodwill impairment, net gain or loss on financial instruments, loss on extinguishment of debt, other expenses and net income tax expense or recovery.
Adjusted EBITA, Adjusted operating income or adjusted operating EBIT, and Adjusted net income should not be construed as measures of income or of cash flows. Collectively, these terms do not have standardized meanings prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures used by other companies. Each of these measures are important for investors and are used by management in the management of its business. Adjusted operating income or adjusted operating EBIT removes the impact of a company–s capital structure and its tax rates when comparing the results of companies within or across industry sectors. Management uses Adjusted operating EBIT as a measure of how its operations are performing and to focus attention on amortization and depreciation expense to drive higher returns on invested capital. In addition, Adjusted operating EBIT is used by management as a means to measure the performance of its operating locations and is a significant metric in the determination of compensation for certain employees. Adjusted EBITA accomplishes a similar comparative result as Adjusted operating EBIT, but further removes amortization attributable to intangible assets. Intangible assets are measured at fair value when we complete an acquisition and amortized over their estimated useful lives. We view capital and landfill asset amortization as a proxy for the amount of capital reinvestment required to continue operating our business steady state. We believe that the replacement of intangible assets is not required to continue our operations as the costs associated with continuing operations are already captured in operating or selling, general and administration expenses. Accordingly, we view Adjusted EBITA as a measure that eliminates the impact of a company–s acquisitive nature and permits a higher degree of comparability across companies within our industry or across different sectors from an operating performance perspective. Finally, Adjusted net income is a measure of our overall earnings and profits and is further used to calculate our net income per share. Adjusted net income reflects what we believe is our “operating” net income which excludes certain non-operating income or expenses. Adjusted net income is an important measure of a company–s ability to generate profit and earnings for its shareholders which is used to compare company performance both amongst and between industry sectors.
(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.
Guidance Outlook
Included in our press release for the fourth quarter and year ended December 31, 2012, issued February 14, 2013, was our guidance for the fiscal year ending December 31, 2013, including our 2013 outlook assumptions and factors. This press release is available at and . As of April 30, 2013, our guidance, including the related assumptions and factors provided on February 14, 2013 for fiscal year ending December 31, 2013 remains unchanged.
Caution regarding forward looking statements
The Company–s 2013 outlook is subject to the same risks and uncertainties outlined in the Risk and Uncertainties section of the Company–s Management Discussion and Analysis, as applicable and investors are urged to fully review these sections before making an investment decision. This press release contains forward-looking statements and forward-looking information. Forward-looking statements are not based on historical facts but instead reflect our expectations, estimates or projections concerning future results or events. These statements can generally be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goals,” “intend,” “intent,” “belief,” “may,” “plan,” “foresee,” “likely,” “potential,” “project,” “seek,” “strategy,” “synergies,” “targets,” “will,” “should,” “would,” or variations of such words and other similar words. Forward-looking statements include, but are not limited to, statements relating to future financial and operating results and our plans, objectives, prospects, expectations and intentions. These statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Numerous important factors could cause our actual results, performance or achievements to differ materially from those expressed in or implied by these forward-looking statements, including, without limitation, those factors outlined in the Risks and Uncertainties section of the Company–s Management Discussion and Analysis. We caution that the list of factors is illustrative and by no means exhaustive. In addition, we cannot assure you that any of our expectations, estimates or projections will be achieved.
All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements in this press release are qualified by these cautionary statements. The forward-looking statements in this press release are made as of the date of this press release and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law.
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 Wednesday, May 1, 2013, at 8:30 a.m. (ET) to discuss results for the three months ended March 31, 2013. Participants may listen to the call by dialing 1-888-241-0394, conference ID 30455932, at approximately 8:20 a.m. (ET). International or local callers should dial 647-427-3413. 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 Tuesday, May 14, 2013, at midnight, and can be accessed by dialing 1-855-859-2056, conference ID 30455932. 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