Progressive Waste Solutions Ltd. Reports Results for the Three and Nine Months Ended September 30, 2015
Performance in line with preliminary announcement; Strong volume growth of 2.1% combined with higher price of 1.7%; Adjusted EBITDA(A) margin expansion in North and East regions; Taking actions to restore higher operating margins in the West region; Committed to targets established in the Company's five-year strategic plan
/EINPresswire.com/ -- TORONTO, ONTARIO -- (Marketwired) -- 10/30/15 -- Progressive Waste Solutions Ltd. (the "Company") (NYSE: BIN) (TSX: BIN) today reported its financial results for the three and nine months ended September 30, 2015.
Third quarter highlights
-- Volume up 2.1% and price up 1.7%, assuming a foreign currency exchange
("FX") rate of parity ("FX parity").
-- Consolidated revenues of $488.5 million (net of divestitures), up 0.3%
on a constant currency basis and up 2.3% removing impact of net
divestitures.
-- Adjusted EBITDA(A) of $127.2 million, down (1.3%) on a constant currency
basis, reflecting higher-than-anticipated labor and repair and
maintenance costs in the West region.
-- Adjusted EBITDA(A) margin expansion in the North and East regions, to
36.7% and 24.6%, respectively.
-- Adjusted net income(A) per share of $0.35.
-- Completed two acquisitions in the third quarter, and one that closed on
October 1, 2015, for total consideration of more than $100 million.
These are high-quality, well-maintained assets in attractive growth
markets.
-- Remain committed to delivering on the targets established in the
Company's five-year strategic plan for adjusted EBITDA(A) margins,
capital expenditures, free cash flow(B) and return on invested capital.
-- The Company expects to extend its tax loss carryforwards to offset
income otherwise subject to tax through 2018, from the previous estimate
of the fourth quarter of 2016.
Management Commentary
(All amounts are in United States ("U.S.") dollars, unless otherwise stated)
"The results of our third quarter are in line with our preliminary announcement on October 19, and reflect a strong sales performance across our Company and adjusted EBITDA(A) margins in our North and East regions, as the benefits of our operational excellence program emerge," said Joseph Quarin, President and Chief Executive Officer, Progressive Waste Solutions Ltd. "We experienced the highest revenue growth in our West region, through contributions from acquisitions as well as organic improvements in price and volume, particularly in the commercial collection segment. However, as we reported with our preliminary results earlier this month, labor and repair and maintenance costs were higher than we anticipated in this region, more than offsetting the revenue gains."
Mr. Quarin continued, "Our North and East regions demonstrate the underlying strength in our business. We are investing in our fleet in the West region to bring it in line with our maintenance standards and strengthen its operational foundation. As we announced last week, we plan to spend an incremental $4 million on repair and maintenance in the West region in the fourth quarter. This will increase fleet reliability, reduce labor turnover and overtime hours, and improve safety in this region within the next six to nine months. Our recently installed regional leadership group and maintenance management team are taking actions to aggressively address the issues we have identified with our trucks and labor resources, setting the region on a path to achieving higher operating margins. No additional capital is required to address these issues. We remain confident in our ability to create meaningful value for shareholders by delivering on the goals established in our five-year strategic plan to significantly expand adjusted EBITDA(A) margins, reduce capital expenditures and increase free cash flow(B) as a percentage of revenue, and improve return on invested capital. In addition, the expected extension of our U.S. tax loss carryforwards will benefit free cash flow(B) for an additional two years."
"As announced on October 19, our 2015 outlook has been updated to reflect the higher operating costs in the third quarter as well as our expectations for the fourth quarter of 2015," Mr. Quarin said. "The updated outlook also reflects the actions we are taking in our West region as well as a more cautious view of special waste volumes in parts of our western Canadian operations and some costs related to a new municipal contract start-up."
Three months ended September 30, 2015
Reported revenues decreased ($32.6) million or (6.3)% from $521.2 million in the third quarter of 2014 to $488.5 million in the third quarter of 2015. Expressed on a reportable basis, and assuming a FX rate of parity between the Canadian and U.S. dollar, revenues increased 0.3%. This increase was due in large part to a 1.7% increase in overall pricing and higher volumes of 2.1%, partially offset by net acquisitions (2.0%), and lower fuel surcharges (1.2%).
Operating income was $59.9 million in the third quarter of 2015 versus $65.5 million in the third quarter of 2014. Net income was $22.9 million versus $40.8 million in the third quarters of 2015 and 2014, respectively.
Adjusted amounts
Adjusted EBITDA(A) was $127.2 million in the third quarter of 2015 versus $139.8 million posted in the same quarter a year ago. Adjusted operating EBIT(A) was $62.4 million or (8.6)% lower in the quarter compared to $68.3 million in the same period last year. Adjusted net income(A) was $37.7 million, or $0.35 per diluted share, compared to $41.2 million, or $0.36 per diluted share in the comparative period.
Nine months ended September 30, 2015
For the nine months ended September 30, 2015, reported revenues decreased ($62.7) million or (4.2)% from $1,504.4 million in 2014 to $1,441.7 million in 2015. Expressed on a reportable basis and at FX parity, revenues increased 1.0% on a comparative basis. The increase is due in large part to a 1.8% increase in overall pricing and higher volumes of 2.1%, partially offset by declines in fuel surcharges (1.2%) and net acquisitions (1.1%).
For the nine months ended September 30, operating income was $157.3 million in 2015 versus $184.9 million in 2014. Net income was $78.2 million versus $107.6 million for the nine months ended September 30, 2015 and 2014, respectively.
Adjusted amounts
For the nine months ended September 30, adjusted EBITDA(A) was $354.3 million or (7.9)% lower in 2015 versus the $384.6 million posted in 2014. Adjusted operating EBIT(A) was $165.8 million compared to the $190.7 million recorded last year. Adjusted net income(A) was $98.0 million, or $0.88 per diluted share, compared to $113.2 million, or $0.98 per diluted share in the same period last year.
Expected Extension of U.S. Tax Loss Carryforwards
The Company's U.S. business continues to utilize loss carryforwards which are available to offset income otherwise subject to tax. Based on the current rate of utilization and expected performance of its U.S. business, the Company expects that these carryforward losses will extend through 2018, from the previous estimate of the fourth quarter of 2016. The rate of use however, is subject to the actual performance of our U.S. business. Once these carryforward losses are fully utilized, current income tax expense will increase significantly.
2015 Outlook Update
The Company is updating its 2015 outlook in light of certain results realized through the third quarter this year, coupled with certain renewed expectations for the balance of 2015. Details for each of these updates are outlined in the Changes to assumptions and impact on 2015 guidance outlook section of this press release.
Our updated outlook for the fiscal year ended 2015 is as follows (in millions of U.S. dollars, except per share amounts, Canadian dollars ("C$") and where otherwise stated):
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Prior 2015 Outlook Updated 2015
(Currency of USD Outlook (Currency
0.80/CAD) of USD 0.80/CAD) Impact
----------------------------------------------------------------------------
Revenue $1,925 to $1,945 $1,925 to $1,945 No change
Adjusted EBITDA(A) $500 to $515 $480 to $485 Decrease
Adjusted EBITDA(A)
margins 26.0% to 26.5% 24.9% Decrease
Amortization expense, as a 14.2% 13.8% Decrease
percentage of revenue
Adjusted operating $225 to $240 $220 to $225 Decrease
EBIT(A)(1)
Interest on long-term debt $59 $60 Increase
Effective tax rate as a
percentage of income before
income tax expense 22% 18% Decrease
Cash taxes (expressed on an $30 $27 Decrease
adjusted basis)
Adjusted net income(A)(1)
per diluted share $1.20 to $1.34 $1.18 to $1.22 Decrease
Free cash flow(B) $165 to $180 $144 to $149 Decrease
Capital and landfill
expenditures
including proceeds on
sale(2) $250 $250 No change
Expected annual cash C$0.66 per share C$0.66 per share No change
dividend, payable on a
quarterly basis
Notes:
(1)The updated 2015 outlook includes the gain on sale of our Long Island,
New York operations
(2)Excludes proceeds from the sale of Long Island, New York operations
Progressive Waste Solutions Ltd.
Condensed Consolidated Statements of Operations and Comprehensive Income or
Loss
("Statement of Operations and Comprehensive Income or Loss")
For the periods ended September 30, 2015 and 2014 (unaudited - stated in
accordance with accounting principles generally accepted in the U.S. and in
thousands of U.S. dollars, except share and net income or loss per share
amounts)
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Three months ended Nine months ended
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2015 2014© 2015 2014©
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REVENUES $ 488,528 $ 521,157 $1,441,698 $1,504,428
EXPENSES
OPERATING 308,222 332,410 925,611 964,744
SELLING, GENERAL AND
ADMINISTRATION 54,374 51,679 166,587 160,857
RESTRUCTURING 1,274 - 3,682 -
AMORTIZATION 67,039 72,256 200,491 211,532
NET GAIN ON SALE OF CAPITAL AND
LANDFILL ASSETS (2,249) (673) (11,946) (17,599)
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OPERATING INCOME 59,868 65,485 157,273 184,894
INTEREST ON LONG-TERM DEBT 13,088 15,655 44,105 46,434
NET FOREIGN EXCHANGE LOSS (GAIN) 200 15 (244) (169)
NET LOSS (GAIN) ON FINANCIAL
INSTRUMENTS 17,605 (2,689) 16,147 7,795
LOSS ON EXTINGUISHMENT OF DEBT - - 2,723 -
RE-MEASUREMENT GAIN ON PREVIOUSLY
HELD EQUITY INVESTMENT - - - (5,156)
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INCOME BEFORE INCOME TAX EXPENSE
AND NET LOSS FROM EQUITY
ACCOUNTED INVESTEE 28,975 52,504 94,542 135,990
INCOME TAX EXPENSE
Current 6,872 6,715 19,203 22,305
Deferred (803) 4,975 (2,818) 6,018
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6,069 11,690 16,385 28,323
NET LOSS FROM EQUITY ACCOUNTED
INVESTEE - - - 82
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NET INCOME 22,906 40,814 78,157 107,585
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OTHER COMPREHENSIVE LOSS:
Foreign currency translation
adjustment (26,184) (25,414) (60,110) (26,997)
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Settlement of derivatives
designated as cash flow hedges,
net of income tax $nil and $nil
(2014 - $nil and ($225)) - - - 418
----------------------------------------------------------------------------
- - - 418
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TOTAL OTHER COMPREHENSIVE LOSS (26,184) (25,414) (60,110) (26,579)
----------------------------------------------------------------------------
COMPREHENSIVE (LOSS) INCOME $ (3,278) $ 15,400 $ 18,047 $ 81,006
----------------------------------------------------------------------------
Net income per weighted average
share, basic and diluted $ 0.21 $ 0.36 $ 0.70 $ 0.94
Weighted average number of shares
outstanding
(thousands), basic and diluted 109,302 114,745 110,876 114,982
Progressive Waste Solutions Ltd.
Condensed Consolidated Balance Sheets ("Balance Sheet")
September 30, 2015 (unaudited) and December 31, 2014 (stated in accordance
with accounting principles generally accepted in the United States of
America ("U.S.") and in thousands of U.S. dollars except for issued and
outstanding share amounts)
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September 30, December 31,
2015 2014
----------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents $ 34,624 $ 41,636
Accounts receivable 210,546 216,201
Other receivables 101 47
Prepaid expenses 46,346 35,589
Income taxes recoverable 1,941 1,646
Restricted cash 542 521
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294,100 295,640
NET ASSETS HELD FOR SALE - 61,016
OTHER RECEIVABLES 2,307 5,460
FUNDED LANDFILL POST-CLOSURE COSTS 10,210 11,365
INTANGIBLES 150,953 165,929
GOODWILL 872,412 937,294
LANDFILL DEVELOPMENT ASSETS 15,360 14,463
DEFERRED FINANCING COSTS 16,169 14,417
CAPITAL ASSETS 915,832 928,550
LANDFILL ASSETS 904,788 936,095
INVESTMENTS 773 892
OTHER ASSETS 112 5,315
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TOTAL ASSETS $ 3,183,016 $ 3,376,436
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LIABILITIES
CURRENT
Accounts payable $ 88,629 $ 86,825
Accrued charges 156,325 174,331
Dividends payable 13,873 15,517
Income taxes payable 2,115 5,933
Deferred revenues 15,874 16,323
Current portion of long-term debt 475 5,428
Landfill closure and post-closure costs 8,280 9,519
Other liabilities 19,089 16,558
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304,660 330,434
LONG-TERM DEBT 1,494,584 1,552,617
LANDFILL CLOSURE AND POST-CLOSURE COSTS 126,035 120,626
OTHER LIABILITIES 27,475 17,118
DEFERRED INCOME TAXES 121,244 126,848
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TOTAL LIABILITIES 2,073,998 2,147,643
----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares (authorized - unlimited,
issued
and outstanding - 108,794,108 (December 31,
2014 - 112,106,839)) 1,691,963 1,734,372
Restricted shares (issued and outstanding -
509,248 (December 31, 2014 - 399,228)) (12,661) (9,184)
Additional paid in capital 5,839 4,023
Accumulated deficit (392,767) (377,172)
Accumulated other comprehensive loss (183,356) (123,246)
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Total shareholders' equity 1,109,018 1,228,793
----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,183,016 $ 3,376,436
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Progressive Waste Solutions Ltd.
Condensed Consolidated Statements of Cash Flows ("Statement of Cash Flows")
For the periods ended September 30, 2015 and 2014 (unaudited - stated in
accordance with accounting principles generally accepted in the U.S. and in
thousands of U.S. dollars)
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Three months ended Nine months ended
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES
OPERATING
Net income $ 22,906 $ 40,814 $ 78,157 $ 107,585
Items not affecting cash
Restricted share expense 839 537 2,879 2,031
Loss on extinguishment of
debt - - 2,723 -
Accretion of landfill
closure and post-closure
costs 1,573 1,537 4,776 4,614
Amortization of intangibles 10,032 13,655 32,119 41,452
Amortization of capital
assets 36,010 37,319 109,323 112,197
Amortization of landfill
assets 20,997 21,282 59,049 57,883
Interest on long-term debt
(amortization of deferred
financing costs) 780 867 2,317 2,587
Non-cash interest income (38) (144) (170) (144)
Net gain on sale of capital
landfill assets (2,249) (673) (11,946) (17,599)
Net loss (gain) on
financial instruments 17,605 (2,689) 16,147 7,795
Re-measurement gain on
previously held equity
investment - - - (5,156)
Deferred income taxes (803) 4,975 (2,818) 6,018
Net loss from equity
accounted investee - - - 82
Landfill closure and post-
closure expenditures (1,205) (1,290) (3,518) (3,403)
Changes in non-cash working
capital items 34,556 (19,969) 26,198 (32,733)
----------------------------------------------------------------------------
Cash generated from operating
activities 141,003 96,221 315,236 283,209
----------------------------------------------------------------------------
INVESTING
Acquisitions (4,122) (166) (34,093) (9,917)
Restricted cash deposits - - (21) (22)
Investment in other
receivables (169) (22) (373) (89)
Proceeds from other
receivables 4,784 20 4,810 57
Funded landfill post-closure
costs (105) (578) (463) (1,160)
Purchase of capital assets (49,071) (40,169) (161,542) (132,598)
Purchase of landfill assets (16,602) (17,754) (40,768) (42,505)
Proceeds from the sale of
capital and landfill assets 596 1,538 2,776 25,061
Proceeds from asset
divestiture - - 76,190 -
Investment in landfill
development assets (2,564) (178) (2,757) (640)
----------------------------------------------------------------------------
Cash utilized in investing
activities (67,253) (57,309) (156,241) (161,813)
----------------------------------------------------------------------------
FINANCING
Payment of deferred financing
costs (945) - (7,397) (48)
Proceeds from long-term debt 47,508 60,272 778,712 162,202
Repayment of long-term debt (105,837) (82,971) (786,502) (220,780)
Proceeds from the exercise of
stock options 3 32 (51) 99
Repurchase of common shares
and related costs - (14) (93,310) (10,943)
Purchase of, net of proceeds
from, restricted shares (1,179) 93 (4,534) (3,920)
Dividends paid to
shareholders (13,310) (15,801) (42,389) (47,299)
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Cash utilized in financing
activities (73,760) (38,389) (155,471) (120,689)
Effect of foreign currency
translation on cash and cash
equivalents (5,000) (2,637) (10,536) (2,859)
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NET CASH OUTFLOW (5,010) (2,114) (7,012) (2,152)
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CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD OR YEAR 39,634 31,942 41,636 31,980
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CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 34,624 $ 29,828 $ 34,624 $ 29,828
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SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash and cash equivalents are
comprised of:
Cash $ 34,624 $ 27,049 $ 34,624 $ 27,049
Cash equivalents - 2,779 - 2,779
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$ 34,624 $ 29,828 $ 34,624 $ 29,828
----------------------------------------------------------------------------
Cash paid during the period
for:
Income taxes $ 5,505 $ 6,047 $ 28,143 $ 29,248
Interest $ 12,741 $ 15,530 $ 43,384 $ 45,684
FX Impact on Consolidated Results
The following tables have been prepared to assist readers in assessing the
FX impact on selected results for the three and nine months ended September
30, 2015.
Three months ended
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September September September September September
30, 2014 30, 2015 30, 2015 30, 2015 30, 2015
----------------------------------------------------------------------------
(organic,
acquisition (holding FX
and other constant
(as non- with the
reported) operating comparative (FX (as
©(E) changes) period) impact) reported)
----------------------------------------------------------------------------
Condensed
Consolidated
Statement of
Operations
Revenues $ 521,157 $ 1,441 $ 522,598 $ (34,070) $ 488,528
Operating expenses 332,410 (4,820) 327,590 (19,368) 308,222
Selling, general
and
administration 51,679 6,756 58,435 (4,061) 54,374
Restructuring
expenses - 1,331 1,331 (57) 1,274
Amortization 72,256 (990) 71,266 (4,227) 67,039
Net gain on sale
of capital and
landfill assets (673) (1,855) (2,528) 279 (2,249)
----------------------------------------------------------------------------
Operating income 65,485 1,019 66,504 (6,636) 59,868
Interest on long-
term debt 15,655 243 15,898 (2,810) 13,088
Net foreign
exchange loss 15 204 219 (19) 200
Net (gain) loss on
financial
instruments (2,689) 22,818 20,129 (2,524) 17,605
----------------------------------------------------------------------------
Income before net
income tax
expense 52,504 (22,246) 30,258 (1,283) 28,975
Net income tax
expense 11,690 (5,306) 6,384 (315) 6,069
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Net income $ 40,814 $ (16,940) $ 23,874 $ (968) $ 22,906
----------------------------------------------------------------------------
Adjusted EBITDA
(A) $ 139,842 $ (1,833) $ 138,009 $ (10,815) $ 127,194
Adjusted EBITA (A)$ 81,241 $ (4,049) $ 77,192 $ (7,005) $ 70,187
Adjusted operating
income or
adjusted
operating EBIT
(A) $ 68,259 $ 1,012 $ 69,271 $ (6,867) $ 62,404
Adjusted net
income (A) $ 41,230 $ (504) $ 40,726 $ (3,006) $ 37,720
Free cash flow (B)$ 47,281 $ 13,480 $ 60,761 $ (2,093) $ 58,668
Nine months ended
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September September September September September
30, 2014 30, 2015 30, 2015 30, 2015 30, 2015
----------------------------------------------------------------------------
(organic,
acquisition (holding FX
and other constant
(as non- with the
reported) operating comparative (FX (as
©(E) changes) period) impact) reported)
----------------------------------------------------------------------------
Condensed
Consolidated
Statement of
Operations
Revenues $ 1,504,428 $ 13,251 $ 1,517,679 $ (75,981) $1,441,698
Operating
expenses 964,744 4,743 969,487 (43,876) 925,611
Selling, general
and
administration 160,857 15,187 176,044 (9,457) 166,587
Restructuring
expenses - 3,894 3,894 (212) 3,682
Amortization 211,532 (1,454) 210,078 (9,587) 200,491
Net gain on sale
of capital and
landfill assets (17,599) 5,332 (12,267) 321 (11,946)
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Operating income 184,894 (14,451) 170,443 (13,170) 157,273
Interest on
long-term debt 46,434 4,407 50,841 (6,736) 44,105
Net foreign
exchange gain (169) (112) (281) 37 (244)
Net loss on
financial
instruments 7,795 10,865 18,660 (2,513) 16,147
Loss on
extinguishment
of debt - 3,067 3,067 (344) 2,723
Re-measurement
gain on
previously held
equity investment (5,156) 5,156 - - -
----------------------------------------------------------------------------
Income before
net income tax
expense and
net loss from
equity
accounted
investee 135,990 (37,834) 98,156 (3,614) 94,542
Net income tax
expense 28,323 (11,056) 17,267 (882) 16,385
Net loss from
equity
accounted
investee 82 (82) - - -
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Net income $ 107,585 $ (26,696) $ 80,889 $ (2,732) $ 78,157
----------------------------------------------------------------------------
Adjusted
EBITDA(A) $ 384,587 $ (7,231) $ 377,356 $ (23,014) $ 354,342
Adjusted
EBITA(A) $ 214,507 $ (14,056) $ 200,451 $ (14,481) $ 185,970
Adjusted
operating
income or
adjusted
operating
EBIT(A) $ 190,654 $ (11,110) $ 179,544 $ (13,747) $ 165,797
Adjusted net
income(A) $ 113,219 $ (9,946) $ 103,273 $ (5,252) $ 98,021
Free cash
flow(B) $ 152,921 $ (35,902) $ 117,019 $ (5,173) $ 111,846
Other Financial Highlights
(all amounts are in thousands of U.S. dollars, excluding per share amounts)
Three months ended Nine months ended
September September
30 30
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Operating income $ 59,868 $ 65,485 $ 157,273 $ 184,894
Transaction and related costs
(recoveries) - SG&A 275 29 534 (913)
Fair value movements in stock
options - SG&A(i) 796 1,557 332 3,297
Restricted share expense -
SG&A(i) 225 181 1,138 1,006
Non-operating or non-recurring
expenses - SG&A (34) 1,007 2,838 2,370
Restructing expenses 1,274 - 3,682 -
----------------------------------------------------------------------------
Adjusted operating income or
adjusted operating EBIT(A) 62,404 68,259 165,797 190,654
----------------------------------------------------------------------------
Net gain on sale of capital and
landfill assets (2,249) (673) (11,946) (17,599)
Amortization 67,039 72,256 200,491 211,532
----------------------------------------------------------------------------
Adjusted EBITDA(A) 127,194 139,842 354,342 384,587
Amortization of capital and
landfill assets (57,007) (58,601) (168,372) (170,080)
----------------------------------------------------------------------------
Adjusted EBITA(A) $ 70,187 $ 81,241 $ 185,970 $ 214,507
----------------------------------------------------------------------------
Net income $ 22,906 $ 40,814 $ 78,157 $ 107,585
Transaction and related costs
(recoveries) - SG&A 275 29 534 (913)
Fair value movements in stock
options - SG&A(i) 796 1,557 332 3,297
Restricted share expense -
SG&A(i) 225 181 1,138 1,006
Non-operating or non-recurring
expenses - SG&A (34) 1,007 2,838 2,370
Restructing expenses 1,274 - 3,682 -
Net loss (gain) on financial
instruments 17,605 (2,689) 16,147 7,795
Loss on extinguishment of debt - - 2,723 -
Re-measurement gain on previously
held equity investment - - - (5,156)
Net income tax (recovery) expense (5,327) 331 (7,530) (2,765)
----------------------------------------------------------------------------
Adjusted net income(A) $ 37,720 $ 41,230 $ 98,021 $ 113,219
----------------------------------------------------------------------------
Note:
(i)Amounts exclude long-term incentive plan ("LTIP") compensation.
Adjusted net income (A)
per weighted average share, basic$ 0.35 $ 0.41 $ 0.88 $ 0.63
Adjusted net income (A)
per weighted average share,
diluted $ 0.35 $ 0.41 $ 0.88 $ 0.63
Replacement and growth
expenditures (E)
Replacement expenditures $ 21,083 $ 34,007 $ 111,813 $ 107,597
Growth expenditures 29,167 38,895 73,258 81,950
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Total replacement and growth
expenditures $ 50,250 $ 72,902 $ 185,071 $ 189,547
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Cash flow
Cash generated from operating
activities (statement of cash
flows) $ 141,003 $ 96,221 $ 315,236 $ 283,209
Free cash flow(B) $ 58,668 $ 47,281 $ 111,846 $ 152,921
Free cash flow (B)
per weighted average share,
diluted $ 0.54 $ 0.41 $ 1.01 $ 1.33
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Dividends
Dividends paid (common shares) $ 13,310 $ 15,801 $ 42,389 $ 47,299
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Segment Highlights - Additional details regarding the FX impact on our
comparative results can be found in the Foreign Currency section of this
report.
(all amounts are in thousands of U.S. dollars, unless otherwise stated)
Three months ended
September 30
----------------------------------------------------------------------------
2014 2015 2015
----------------------------------------------------------------------------
(holding FX
constant
(as with the
reported) comparative (as
©(D) period) Change reported) Change
----------------------------------------------------------------------------
Revenues $ 521,157 $ 522,598 $ 1,441 $ 488,528 $ (32,629)
----------------------------------------------------------------------------
North $ 199,128 $ 203,909 $ 4,781 $ 169,839 $ (29,289)
West $ 154,316 $ 171,576 $ 17,260 $ 171,576 $ 17,260
East $ 167,713 $ 147,113 $ (20,600) $ 147,113 $ (20,600)
Operating
expenses $ 332,410 $ 327,590 $ (4,820) $ 308,222 $ (24,188)
----------------------------------------------------------------------------
North $ 115,157 $ 115,007 $ (150) $ 95,639 $ (19,518)
West $ 101,188 $ 115,343 $ 14,155 $ 115,343 $ 14,155
East $ 116,065 $ 97,240 $ (18,825) $ 97,240 $ (18,825)
SG&A (as
reported) $ 51,679 $ 58,435 $ 6,756 $ 54,374 $ 2,695
----------------------------------------------------------------------------
North $ 13,260 $ 14,237 $ 977 $ 11,805 $ (1,455)
West $ 13,196 $ 16,276 $ 3,080 $ 16,276 $ 3,080
East $ 14,194 $ 13,642 $ (552) $ 13,642 $ (552)
Corporate $ 11,029 $ 14,280 $ 3,251 $ 12,651 $ 1,622
EBITDA(A)(as
reported) $ 137,068 $ 136,573 $ (495) $ 125,932 $ (11,136)
----------------------------------------------------------------------------
North $ 70,711 $ 74,665 $ 3,954 $ 62,395 $ (8,316)
West $ 39,932 $ 39,957 $ 25 $ 39,957 $ 25
East $ 37,454 $ 36,231 $ (1,223) $ 36,231 $ (1,223)
Corporate $ (11,029) $ (14,280) $ (3,251) $ (12,651) $ (1,622)
Adjusted SG&A $ 48,905 $ 56,999 $ 8,094 $ 53,112 $ 4,207
----------------------------------------------------------------------------
North $ 13,260 $ 14,237 $ 977 $ 11,805 $ (1,455)
West $ 13,196 $ 16,276 $ 3,080 $ 16,276 $ 3,080
East $ 14,194 $ 13,642 $ (552) $ 13,642 $ (552)
Corporate $ 8,255 $ 12,844 $ 4,589 $ 11,389 $ 3,134
Adjusted
EBITDA(A) $ 139,842 $ 138,009 $ (1,833) $ 127,194 $ (12,648)
----------------------------------------------------------------------------
North $ 70,711 $ 74,665 $ 3,954 $ 62,395 $ (8,316)
West $ 39,932 $ 39,957 $ 25 $ 39,957 $ 25
East $ 37,454 $ 36,231 $ (1,223) $ 36,231 $ (1,223)
Corporate $ (8,255) $ (12,844) $ (4,589) $ (11,389) $ (3,134)
Nine months ended
September 30
----------------------------------------------------------------------------
2014 2015 2015
----------------------------------------------------------------------------
(holding FX
constant
(as with the
reported)( comparative (as
C)(D) period) Change reported) Change
----------------------------------------------------------------------------
Revenues $ 1,504,428 $ 1,517,679 $ 13,251 $ 1,441,698 $ (62,730)
----------------------------------------------------------------------------
North $ 558,933 $ 578,316 $ 19,383 $ 502,335 $ (56,598)
West $ 449,267 $ 495,582 $ 46,315 $ 495,582 $ 46,315
East $ 496,228 $ 443,781 $ (52,447) $ 443,781 $ (52,447)
Operating
expenses $ 964,744 $ 969,487 $ 4,743 $ 925,611 $ (39,133)
----------------------------------------------------------------------------
North $ 327,890 $ 333,948 $ 6,058 $ 290,072 $ (37,818)
West $ 289,364 $ 333,341 $ 43,977 $ 333,341 $ 43,977
East $ 347,490 $ 302,198 $ (45,292) $ 302,198 $ (45,292)
SG&A (as
reported) $ 160,857 $ 176,044 $ 15,187 $ 166,587 $ 5,730
----------------------------------------------------------------------------
North $ 39,148 $ 45,303 $ 6,155 $ 39,351 $ 203
West $ 38,650 $ 45,674 $ 7,024 $ 45,674 $ 7,024
East $ 39,757 $ 43,894 $ 4,137 $ 43,894 $ 4,137
Corporate $ 43,302 $ 41,173 $ (2,129) $ 37,668 $ (5,634)
EBITDA(A)(as
reported) $ 378,827 $ 372,148 $ (6,679) $ 349,500 $ (29,327)
----------------------------------------------------------------------------
North $ 191,895 $ 199,065 $ 7,170 $ 172,912 $ (18,983)
West $ 121,253 $ 116,567 $ (4,686) $ 116,567 $ (4,686)
East $ 108,981 $ 97,689 $ (11,292) $ 97,689 $ (11,292)
Corporate $ (43,302) $ (41,173) $ 2,129 $ (37,668) $ 5,634
Adjusted SG&A $ 155,097 $ 170,836 $ 15,739 $ 161,745 $ 6,648
----------------------------------------------------------------------------
North $ 39,148 $ 44,046 $ 4,898 $ 38,094 $ (1,054)
West $ 38,650 $ 45,674 $ 7,024 $ 45,674 $ 7,024
East $ 39,757 $ 43,894 $ 4,137 $ 43,894 $ 4,137
Corporate $ 37,542 $ 37,222 $ (320) $ 34,083 $ (3,459)
Adjusted
EBITDA(A) $ 384,587 $ 377,356 $ (7,231) $ 354,342 $ (30,245)
----------------------------------------------------------------------------
North $ 191,895 $ 200,322 $ 8,427 $ 174,169 $ (17,726)
West $ 121,253 $ 116,567 $ (4,686) $ 116,567 $ (4,686)
East $ 108,981 $ 97,689 $ (11,292) $ 97,689 $ (11,292)
Corporate $ (37,542) $ (37,222) $ 320 $ (34,083) $ 3,459
Revenues
Gross revenue by service type
The table below outlines gross revenue by service type prepared on a
consolidated basis and includes the impact of FX.
Three months ended
September 30
----------------------------------------------------------------------------
2015 % 2014 %
----------------------------------------------------------------------------
Commercial $ 165,392 33.9 $ 178,011 34.2
Industrial 89,416 18.3 96,309 18.5
Residential 110,595 22.6 116,375 22.3
Transfer and disposal 165,863 34.0 186,643 35.8
Recycling 13,353 2.7 15,905 3.1
Other 15,416 3.2 9,873 1.9
----------------------------------------------------------------------------
Gross revenues 560,035 114.7 603,116 115.8
Intercompany (71,507) (14.7) (81,959) (15.8)
----------------------------------------------------------------------------
Revenues $ 488,528 100.0 $ 521,157 100.0
----------------------------------------------------------------------------
Revenues
Gross revenue by service type
The table below outlines gross revenue by service type prepared on a
consolidated basis and includes the impact of FX.
Nine months ended
September 30
----------------------------------------------------------------------------
2015 % 2014 %
----------------------------------------------------------------------------
Commercial $ 501,835 34.8 $ 527,828 35.1
Industrial 261,948 18.2 272,829 18.1
Residential 332,158 23.0 341,451 22.7
Transfer and disposal 475,784 33.0 520,398 34.6
Recycling 38,087 2.6 48,998 3.3
Other 40,057 2.8 29,037 1.9
----------------------------------------------------------------------------
Gross revenues 1,649,869 114.4 1,740,541 115.7
Intercompany (208,171) (14.4) (236,113) (15.7)
----------------------------------------------------------------------------
Revenues $ 1,441,698 100.0 $ 1,504,428 100.0
----------------------------------------------------------------------------
Revenue growth or decline components by geography and consolidated -
expressed in percentages and excluding FX
The table below has been prepared assuming Canadian and U.S. dollar parity
except for percentages that include FX.
Three months ended Nine months ended
September 30 September 30
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Price
Price(1) 1.7 2.1 1.8 2.0
Fuel surcharges (1.2) (0.1) (1.2) (0.1)
Recycling and other (0.3) (0.3) (0.6) 0.1
----------------------------------------------------------------------------
Total price growth 0.2 1.7 - 2.0
Volume 2.1 0.5 2.1 (0.5)
----------------------------------------------------------------------------
Total organic growth 2.3 2.2 2.1 1.5
Net acquisitions (2.0) (0.2) (1.1) (0.2)
----------------------------------------------------------------------------
Total growth excluding FX 0.3 2.0 1.0 1.3
FX (6.6) (1.9) (5.2) (2.6)
----------------------------------------------------------------------------
Total decline including FX (6.3) 0.1 (4.2) (1.3)
----------------------------------------------------------------------------
(1)Price reflects organic average price change, net of rollbacks and
excludes fuel surcharges and recycling and other.
Free cash flow(B)
Purpose and objective
The purpose of presenting this non-GAAP measure is to provide readers with an additional measure of our value and liquidity. We use this non-GAAP measure to assess our performance relative 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
Three months ended Nine months ended
September September
30 30
----------------------------------------------------------------------------
2015 2014(E) Change 2015 2014(E) Change
----------------------------------------------------------------------------
Cash generated
from
operating
activities $ 141,003 $ 96,221 $ 44,782 $ 315,236 $ 283,209 $ 32,027
----------------------------------------------------------------------------
Operating and
investing
Stock option
expense(i) 796 1,557 (761) 332 3,297 (2,965)
LTIP portion
of restricted
share expense (614) (356) (258) (1,741) (1,025) (716)
Acquisition
and related
costs
(recoveries) 275 29 246 534 (913) 1,447
Non-operating
or non-
recurring
expenses (34) 1,007 (1,041) 2,838 2,370 468
Restructuring
expenses 1,274 - 1,274 3,682 - 3,682
Changes in
non-cash
working
capital items (34,556) 19,969 (54,525) (26,198) 32,733 (58,931)
Capital and
landfill
asset
purchases (65,673) (57,923) (7,750) (202,310) (175,103) (27,207)
Capital and
landfill
asset
working
capital
changes 15,423 (14,979) 30,402 17,239 (14,444) 31,683
Proceeds from
the sale of
capital and
landfill
assets 596 1,538 (942) 2,776 25,061 (22,285)
Financing
Purchase of
restricted
shares(i) (22) 203 (225) (298) (2,095) 1,797
Net realized
foreign
exchange loss
(gain) 200 15 185 (244) (169) (75)
----------------------------------------------------------------------------
Free cash
flow(B) $ 58,668 $ 47,281 $ 11,387 $ 111,846 $ 152,921 $(41,075)
----------------------------------------------------------------------------
Note:
(i)Amounts exclude LTIP compensation.
Free cash flow(B) - adjusted EBITDA(A) approach
We typically calculate free cash flow(B) using an operations approach which reflects how we manage the business and our free cash flow(B).
Three months ended Nine months ended
September September
30 30
----------------------------------------------------------------------------
2015 2014(E) Change 2015 2014(E) Change
----------------------------------------------------------------------------
Adjusted
EBITDA(A) $ 127,194 $ 139,842 $(12,648) $ 354,342 $ 384,587 $(30,245)
----------------------------------------------------------------------------
Purchase of
restricted
shares(i) (22) 203 (225) (298) (2,095) 1,797
Capital and
landfill
asset
purchases (65,673) (57,923) (7,750) (202,310) (175,103) (27,207)
Capital and
landfill
asset non-
cash working
capital
changes 15,423 (14,979) 30,402 17,239 (14,444) 31,683
Proceeds from
the sale of
capital and
landfill
assets 596 1,538 (942) 2,776 25,061 (22,285)
Landfill
closure and
post-closure
expenditures (1,205) (1,290) 85 (3,518) (3,403) (115)
Landfill
closure and
post-closure
cost
accretion
expense 1,573 1,537 36 4,776 4,614 162
Interest on
long-term
debt (13,088) (15,655) 2,567 (44,105) (46,434) 2,329
Non-cash
interest
expense, net 742 723 19 2,147 2,443 (296)
Current income
tax expense (6,872) (6,715) (157) (19,203) (22,305) 3,102
----------------------------------------------------------------------------
Free cash
flow(B) $ 58,668 $ 47,281 $ 11,387 $ 111,846 $ 152,921 $(41,075)
----------------------------------------------------------------------------
Note:
(i)Amounts exclude LTIP compensation.
Funded debt to EBITDA (as defined and calculated in accordance with our consolidated facility)
At September 30, 2015, the ratio of funded debt to EBITDA is 3.03 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 income in Canada. Based on our 2015 guidance outlook, if the U.S. dollar strengthens by one cent our reported revenues will decline by approximately $8,600. Adjusted EBITDA(A) is similarly impacted by approximately $2,800, assuming a strengthening U.S. dollar. The impact on adjusted net income(A) and free cash flow(B) for a similar change in FX rate, results in an approximately $1,000 decline for each. Should the U.S. dollar weaken by one cent, our reported revenues, adjusted EBITDA(A), adjusted net income(A) and free cash flow(B) will improve by similar amounts.
2015 2014
----------------------------------------------------------------------------
Consolidated Consolidated
Statement of Statement of
Consolidated Operations and Consolidated Operations and
Balance Comprehensive Income Balance Comprehensive Income
Sheet or Loss Sheet or Loss
----------------------------------------------------------------------------
Cumulative Cumulative
Current Average Average Current Average Average
----------------------------------------------------------------------------
December
31 $ 0.8620 $ 0.9052
March 31 $ 0.7885 $ 0.8057 $ 0.8057 $ 0.9047 $ 0.9062 $ 0.9062
June 30 $ 0.8017 $ 0.8134 $ 0.8095 $ 0.9367 $ 0.9170 $ 0.9116
September
30 $ 0.7466 $ 0.7637 $ 0.7937 $ 0.8922 $ 0.9180 $ 0.9137
Quarterly dividend declared
The Company's Board of Directors declared a quarterly dividend of $0.17 Canadian per share payable to shareholders of record on December 31, 2015. The dividend will be paid on January 15, 2016. The Company has designated these dividends as eligible dividends for the purposes of the Income Tax Act (Canada).
Definitions and Notes
(A) All references to "Adjusted EBITDA" in this document are to revenues less operating expense and SG&A, excluding certain SG&A expenses, on the 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 and landfill assets, interest on long-term debt, net foreign exchange gain or loss, net gain or loss on financial instruments, loss on extinguishment of debt, re-measurement gain on previously held equity investment, 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 sale of capital and landfill assets, net foreign exchange gain or loss, net gain or loss on financial instruments, loss on extinguishment of debt, re-measurement gain on previously held equity investment, 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, interest on long-term debt 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. Non-operating expenses include transaction costs or recoveries related to acquisitions, fair value adjustments attributable to stock options and restricted share expense. Non-recurring expenses include certain equity based compensation amounts, payments made to certain senior management on their departure and other non-recurring expenses from time-to-time, including branding costs. 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 certain operating locations with our own, exiting certain property and building and office leases, employee severance, including legal costs related thereto, and employee relocation. 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) and is not indicative of our operating profitability.
Amortization - as a non-cash item, amortization has no impact on the determination of free cash flow(B) and is not indicative of our operating profitability.
Net gain or loss on sale of capital and landfill assets - as a non-cash item, the net gain or loss on sale of capital and landfill assets has no impact on the determination of free cash flow(B). In addition, the sale of capital and landfill assets does not reflect a primary operating activity and therefore represents a different class of income or expense than those included in adjusted EBITDA.
Interest on long-term debt - interest on long-term debt reflects our debt/equity mix, interest rates and borrowing position from time to time. Accordingly, interest on long-term debt 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) and is not indicative of our operating profitability.
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) and is not indicative of our operating profitability.
Loss on extinguishment of debt - as a non-cash item, loss on debt extinguishment is not indicative of our operating profitability and reflects a resulting charge from a change in our debt financing. Accordingly, it reflects our treasury/financing activities and represents a different class of expense than those included in adjusted EBITDA.
Re-measurement gain on previously held equity investment - as a non-cash item, the re-measurement gain on previously held equity investment has no impact on the determination of free cash flow(B) and is not indicative of our operating profitability.
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) and is not indicative of our operating profitability.
All references to "Adjusted EBITA" in this document represent Adjusted EBITDA after deducting amortization attributable to capital and landfill assets. All references to "Adjusted operating income or adjusted operating EBIT" in this document represent Adjusted EBITDA after adjusting for goodwill impairment, net gain or loss on the sale of capital and landfill assets and all amortization expense, including amortization expense recognized on the impairment of intangible assets. All references to "Adjusted net income" are to adjusted operating income after adjusting for, as applicable, net gain or loss on financial instruments, re-measurement gain on previously held equity investment, loss on extinguishment of debt 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 is important for investors and is used by management to manage 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 are 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 adjusted 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.
© Rent, property taxes, insurance, utility, building maintenance and repair costs and other facility costs, collectively "facility costs", incurred at our operating locations have been reclassified from SG&A expense to operating expenses. Facility costs incurred by our corporate, region and area offices remain in SG&A expense. The reclassification better reflects these costs as costs of operations and aligns the classification of these costs on a basis consistent with our peers. Prior period amounts have been reclassified to conform to the current period presentation and the reclassification had no impact on operating income and our results.
(D) Effective with the release of our first quarter 2015 results, we announced the reorganization of our regional management structure. Our previously reported U.S. northeast segment was joined by a portion of our previously reported U.S. south segment, and combined became our East segment. The remainder of our previously reported U.S. south segment was renamed our West segment. Our previously reported Canadian segment was renamed the North segment. These segment changes were made to align with our reorganized management structure. The objective of the reorganization was to satisfy our profitability and shareholder return goals outlined in our five year plan, which includes the optimization of our area management teams and the streamlining of certain corporate office functions. In connection with this reorganization, all previously reported segment amounts and discussions have been adjusted to conform to the current period segment information, comprising the North, East and West.
(E) We manage our capital and landfill spending based on the goods and services we receive in a particular period or year and our outlook is presented on a similar basis. Accordingly, to align our reporting of free cash flow(B) with our management of capital and landfill spending, we have adjusted our reported amounts of free cash flow(B) to include the working capital adjustment for both expenditures, thereby reflecting our receipt of capital and landfill assets in a reporting period. The prior period presentation of free cash flow(B) reflects this change and conforms with the current period presentation.
Guidance Outlook
Included in our press release for the fourth quarter and year ended December 31, 2014, issued February 26, 2015, was our outlook for the fiscal year ending December 31, 2015, including our 2015 outlook assumptions and factors. On July 30, 2015, we refined our guidance for the fiscal year ending December 31, 2015. All press releases are available at www.sec.gov and www.sedar.com. Our updated outlook provided on July 30, 2015 has been further refined for the fiscal year ending December 31, 2015.
Changes to assumptions and impact on 2015 guidance outlook
(All amounts are in thousands of U.S. dollars, unless otherwise stated)
Adjusted EBITDA(A) and Adjusted EBITDA(A) margin
Our outlook for adjusted EBITDA(A) has declined. In the third quarter this year, we incurred higher employee training and onboarding costs and higher overtime hours due to a shortage of vehicle operators and equipment downtime. We expect to correct these issues over the next six to nine months. We also expect to see softer volumes in our western Canadian operations in the fourth quarter of this year and incur start-up costs in our East segment for a new residential contract win. For these reasons, we expect to deliver adjusted EBITDA(A) of approximately $480,000 to $485,000 in 2015, which compares to our updated second quarter outlook of $500,000 to $515,000 for 2015, both of which are translated at eighty cents U.S. With no change to our revenue expectation for the year, we expect lower adjusted EBITDA(A) margins of just under 25%.
Amortization expense, as a percentage of revenue
Our outlook for amortization expense declined 40 basis points from 14.2% to 13.8% of revenue. This reduction reflects a slower pace of capital receipt than we had originally expected for 2015, coupled with softer volumes in the last quarter this year for our western Canadian operations, including lower landfill volumes, and lower landfill amortization resulting from the year-to-date mix of volumes received across our sites, partially offset by higher amortization expense resulting from acquisitions completed in the year.
Adjusted operating EBIT(A)
Adjusted operating EBIT(A) reflects lower adjusted EBITDA(A), partially offset by a decline in amortization expense and the inclusion of gains on sale of capital and landfill assets, which includes the gain we realized on the disposal of our Long Island, New York operations. The change in adjusted EBITDA(A) and amortization expense are outlined above.
Interest on long-term debt
Our updated outlook reflects interest expense we expect to incur on borrowings made for an acquisition completed October 1, 2015, for cash consideration of approximately $109,500. In addition, our expectation for a weaker operating performance will result in higher debt levels, which we further expect will contribute to higher interest expense in 2015.
Effective tax rate as a percentage of income before income tax expense
Based on our year-to-date results, our updated outlook reflects a lower expected effective tax rate for 2015. This change reflects the mix of income generated by our Canadian and U.S. operations relative to our updated second quarter guidance outlook.
Cash taxes (expressed on an adjusted basis)
Based on our year-to-date results, our updated outlook reflects lower expected cash taxes for 2015. This change reflects lower expected withholding taxes due to share repurchases being financed from Canadian source, coupled with a weaker fourth quarter outlook for our operations in western Canada due to economic softness.
Adjusted net income(A) per diluted share
Adjusted net income(A) per diluted share reflects lower adjusted EBITDA(A), partially offset by lower amortization, higher gains on the sale of capital and landfill assets, lower amortization expense and lower income tax expense. Each of these changes is outlined above.
Free cash flow(B) and items impacting free cash flow(B)
We expect free cash flow(B) to be lower than expected, due to higher operating and interest costs, outlined above, partially offset by lower cash taxes.
Other assumptions and factors
All other assumptions and factors remain unchanged and are consistent with those outlined in our July 30, 2015 press release.
Caution regarding forward looking statements
The Company's 2015 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 Ltd., visit our website at www.progressivewaste.com.
Management will hold a conference call on Friday, October 30, 2015, at 8:30 a.m. (ET) to discuss results for the three and nine months ended September 30, 2015. Participants may listen to the call by dialing 1-888-300-0053, conference ID 49756725, at approximately 8:20 a.m. (ET). International or local callers should dial 647-427-3420. The call will also be webcast live at www.streetevents.com and at www.progressivewaste.com. A supplemental slide presentation will be available at www.progressivewaste.com.
A replay will be available after the call until Friday, November 13, 2015, at midnight, and can be accessed by dialing 1-855-859-2056, conference ID 49756725. International or local callers can access the replay by dialing 404-537-3406. The audio webcast will also be archived at www.streetevents.com and www.progressivewaste.com.
Contacts:
Progressive Waste Solutions Ltd.
Chaya Cooperberg
VP, Investor Relations and Corporate Communications
(905) 532-7517
chaya.cooperberg@progressivewaste.com
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