Progressive Waste Solutions Ltd. Reports Results for the Three and Six Months Ended June 30, 2013

July 30, 2013

TORONTO, ONTARIO--(Marketwired - Jul 30, 2013) - Progressive Waste Solutions Ltd. (the "Company") (BIN)(BIN.TO) reported financial results for the three and six months ended June 30, 2013.

Second quarter highlights

  • Consolidated revenues of $516.8 million in the second quarter, up 8.7%
  • Consolidated organic revenue growth of 1.5% or 2.0% excluding the 0.5% decline in revenues due to lower recycled commodity prices versus the same period a year ago
  • Adjusted EBITDA(A) of $134.9 million, up 1.7%, and adjusted operating income or adjusted operating EBIT(A) of $67.0 million, up 3.7%
  • Free cash flow(B) of $61.5 million, up 8.8%. Excluding internal infrastructure investments, free cash flow(B) of $75.2 million, up 25.7%
  • Reported and adjusted net income per share(A) of $0.28 and $0.31, respectively, versus $0.24 and $0.25 in the same period last year
  • Guidance for 2013 updated to reflect changes to our foreign currency exchange assumption, actual results for the six months ended June 30, 2013 and a change to our long-term financing structure
  • Board of Directors declares increase of 7.1% to quarterly cash dividend effective September 30, 2013

Management Commentary

(All amounts are in United States ("U.S.") dollars, unless otherwise stated)

"We are very pleased with the results of our second quarter, in which we achieved revenue growth of 8.7%, adjusted EBITDA(A) growth of 1.7%, and free cash flow(B) growth of 8.8%, despite the impact of weaker foreign currency exchange and recycled commodity prices relative to the year-ago period, as well as adverse weather conditions and one-time expense items in the quarter of approximately $1.1 million," said Joseph Quarin, Vice Chairman and Chief Executive Officer, Progressive Waste Solutions Ltd. "We benefited from acquisitions completed in 2012, as well as solid consolidated organic growth of 1.5%. Core price increased across our collection and transfer and disposal service lines in our U.S. and Canadian operations, and we experienced a notable improvement in industrial collection volumes, which increased 8.0% on a consolidated basis. Against this backdrop, we are focused on our value creation strategy to drive returns in our U.S. and Canadian operations and we remain confident in our expectations for our operating performance in 2013."

Mr. Quarin continued, "We are committed to creating shareholder value, both near-term and long-term, through the prioritization of free cash flow(B) growth and the disciplined deployment of capital to increase return on invested capital. To this end, during the second quarter, we better positioned our capital structure, resulting in a lower effective corporate tax rate and a corresponding increase to the amounts of adjusted net income per share(A) and free cash flow(B) that we expect to generate this year and going forward. With our strengthening free cash flow(B) profile, we are pleased to announce an increase of 7.1% to our quarterly cash dividend."

Second quarter ended June 30, 2013

Reported revenues increased $41.4 million or 8.7% from $475.4 million in the second quarter of 2012 to $516.8 million in the second 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 9.2% due in large part to a 7.7% increase attributable to acquisitions. Higher overall core pricing and volumes were partially offset by lower recycled commodity pricing. The impact of lower recycled commodity prices on comparative revenues represented a 0.5% decline.

Operating income was $64.6 million in the second quarter of 2013 versus $65.7 million in the second quarter of 2012. Net income was $32.3 million versus $28.4 million in the second quarter of 2013 and 2012, respectively.

Adjusted amounts

Adjusted EBITDA(A) was $134.9 million in the second quarter of 2013 versus $132.7 million posted in the same quarter a year ago. Adjusted operating EBIT(A) was $67.0 million or 3.7% higher in the quarter compared to $64.7 million in the same period last year. Adjusted net income(A) was $35.3 million, or $0.31 per diluted share, compared to $28.8 million, or $0.25 per diluted share in the comparative period.

Six months ended June 30, 2013

For the six months ended June 30, 2013, reported revenues increased $89.7 million or 9.8% from $913.7 million in 2012 to $1,003.4 million. Expressed on a reportable basis and at FX parity, revenues increased 10.2% on a comparative basis. The increase is due in large part to an 8.6% increase attributable to acquisitions and higher overall core pricing, volumes and fuel surcharges, which outpaced lower commodity pricing. The year-to-date impact on comparative revenues resulting from a decline in recycled commodity prices was 0.5%.

For the six months ended June 30, operating income was $123.8 million in 2013 versus $116.0 million in 2012. Net income was $61.6 million versus $50.4 million for the six months ended June 30, 2013 and 2012, respectively.

Adjusted amounts

For the six months ended June 30, adjusted EBITDA(A) was $263.9 million or 6.0% higher in 2013 versus $249.0 million in 2012. Adjusted operating EBIT(A) was $125.4 million, or 6.5% higher compared to the $117.7 million recorded last year. Adjusted net income(A) was $62.4 million, or $0.54 per diluted share, compared to $52.9 million, or $0.45 per diluted share in the same period last year.

Other highlights for the three months ended June 30, 2013

  • Consolidated core price increased 0.7%, reflecting organic average price change, net of rollbacks and excluding fuel surcharges, across the Company's customer base
  • Consolidated organic volume growth of 1.3%. Of the consolidated organic volume growth in the quarter, there was a decline of 220 basis points related to the completion of three municipal contracts and the temporary closure of a transfer station in the Company's Canadian operations
  • The Company made an investment in TerraCycle Canada ULC, a specialty recycling firm, to broaden the Company's range of recycling services available to its customers
  • The Company reduced its total funded debt to EBITDA ratio to 2.96 times from a total funded debt to EBITDA ratio of 3.07 times at March 31, 2013, as defined and calculated in accordance with its consolidated credit facility
  • The Company returned nearly $16.0 million to shareholders through its quarterly dividend. On July 29, 2013, the Company's Board of Directors declared a 7.1% increase in the quarterly cash dividend. The regular quarterly cash dividend, which increases from $0.14 per share to $0.15 per share, is payable on October 15, 2013, to shareholders of record on the close of business on September 30, 2013

2013 Outlook - Guidance Update

The Company is revising its 2013 guidance in light of the weaker Canadian dollar relative to its U.S. counterpart from parity to 97 cents U.S. for each Canadian dollar, the "FX revision". In addition, our full year guidance has been adjusted for net gains on disposal of capital assets and lower current, and higher deferred, income tax expense recorded in the six months ended June 30, 2013 relative to our expectations, the "Q2 revision". The Company is also revising its 2013 full year guidance for its implementation of a long-term financing structure effective June 28, 2013 and the Company's intention to enter into interest rate swaps to fix a portion of the variable rate interest borne on amounts drawn under its consolidated credit facility, collectively the "FS revision".

Our revised guidance for the fiscal year ending 2013 is as follows (in millions of U.S. dollars, except for per share amounts and where otherwise stated):

Prior
guidance
Revised
guidance
Impact Reason
Revenue (in billions) $2.00 to $2.02 $1.977 to $1.997 Decline FX revision
Adjusted EBITDA(A) $545 to $555 $538 to $543 Decline FX revision
Amortization expense, as a percentage of revenue 14.4 % 14.4 % No change -
Effective tax rate as a percentage of income before income tax expense and net loss from equity accounted investee 40 % 35 % Decline FS revision
Cash taxes $52 to $54 $32 to $35 Decline FX, FS and Q2 revisions
Adjusted net income(A) per diluted share $1.02 to $1.06 $1.09 to $1.14 Increase FX, FS and Q2 revisions
Free cash flow(B) excluding additional internal infrastructure investment $200 to $215 $211 to $225 Increase FX, FS and Q2 revisions
Capital and landfill expenditures excluding internal infrastructure investment $210 to $220 $208 to $218 Decline FX revision
Internal infrastructure investment $40 to $45 $39 to $44 Decline FX revision
Expected annual cash dividend, payable on a quarterly basis C$0.56
per share
C$0.58
per share
Increase Board of directors approved increase
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 June 30, 2013 and 2012 (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)
Three months ended Six months ended
2013 2012 2013 2012
REVENUES $ 516,807 $ 475,435 $ 1,003,367 $ 913,710
EXPENSES
OPERATING 318,779 286,878 615,667 552,219
SELLING, GENERAL AND ADMINISTRATION 65,538 54,884 125,354 114,176
AMORTIZATION 73,642 68,370 144,941 132,024
NET GAIN ON SALE OF CAPITAL ASSETS (5,788 ) (366 ) (6,405 ) (750 )
OPERATING INCOME 64,636 65,669 123,810 116,041
INTEREST ON LONG-TERM DEBT 15,214 13,974 30,457 28,238
NET FOREIGN EXCHANGE (GAIN) LOSS (2,968 ) - (2,969 ) 7
NET LOSS (GAIN) ON FINANCIAL INSTRUMENTS 1,205 2,717 (1,060 ) 2,172
OTHER - 52 - 105
INCOME BEFORE INCOME TAX EXPENSE AND NET LOSS FROM EQUITY ACCOUNTED INVESTEE 51,185 48,926 97,382 85,519
INCOME TAX EXPENSE
Current 7,858 13,668 17,657 24,093
Deferred 11,028 6,866 18,052 10,961
18,886 20,534 35,709 35,054
NET LOSS FROM EQUITY ACCOUNTED INVESTEE 6 15 39 19
NET INCOME 32,293 28,377 61,634 50,446
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustment (18,525 ) (10,957 ) (29,821 ) (1,334 )
Derivatives designated as cash flow hedges, net of income tax $242 and $530 (2012 - $1,146 and $758) (451 ) (2,131 ) (986 ) (1,410 )
Settlement of derivatives designated as cash flow hedges, net of income tax ($78) and ($227) (2012 - $58 and ($79)) 146 (110 ) 422 146
(305 ) (2,241 ) (564 ) (1,264 )
TOTAL OTHER COMPREHENSIVE LOSS (18,830 ) (13,198 ) (30,385 ) (2,598 )
COMPREHENSIVE INCOME $ 13,463 $ 15,179 $ 31,249 $ 47,848
Net income per weighted average share, basic and diluted $ 0.28 $ 0.24 $ 0.54 $ 0.43
Weighted average number of shares outstanding (thousands), basic and diluted 115,167 116,416 115,167 117,152
Progressive Waste Solutions Ltd.
Condensed Consolidated Balance Sheets
("Balance Sheet")
June 30, 2013 (unaudited) and December 31, 2012 (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)
June 30, December 31,
2013 2012
ASSETS
CURRENT
Cash and cash equivalents $ 34,983 $ 29,940
Accounts receivable 247,961 238,958
Other receivables 314 440
Prepaid expenses 34,073 38,762
Income taxes recoverable 7,549 2,928
Restricted cash 497 476
Other assets 598 1,573
325,975 313,077
OTHER RECEIVABLES 31 72
FUNDED LANDFILL POST-CLOSURE COSTS 9,955 9,885
INTANGIBLES 252,673 287,847
GOODWILL 909,184 929,114
LANDFILL DEVELOPMENT ASSETS 20,771 19,715
DEFERRED FINANCING COSTS 18,322 20,060
CAPITAL ASSETS 909,988 927,518
LANDFILL ASSETS 948,327 963,720
INVESTMENTS 4,792 4,062
OTHER ASSETS 339 491
$ 3,400,357 $ 3,475,561
LIABILITIES
CURRENT
Accounts payable $ 96,527 $ 120,341
Accrued charges 133,416 131,528
Dividends payable 15,338 16,206
Income taxes payable 986 1,986
Deferred revenues 17,519 19,002
Current portion of long-term debt 6,968 6,907
Landfill closure and post-closure costs 7,180 8,871
Other liabilities 2,563 2,527
280,497 307,368
LONG-TERM DEBT 1,615,478 1,681,370
LANDFILL CLOSURE AND POST-CLOSURE COSTS 110,418 104,281
OTHER LIABILITIES 5,731 6,166
DEFERRED INCOME TAXES 119,560 103,795
2,131,684 2,202,980
SHAREHOLDERS' EQUITY
Common shares (authorized - unlimited, issued and outstanding - 114,817,886 (December 31, 2012 - 114,993,864)) 1,773,539 1,773,530
Restricted shares (issued and outstanding - 348,867 (December 31, 2012 - 172,500)) (7,218 ) (3,460 )
Additional paid in capital 2,493 2,166
Accumulated deficit (421,640 ) (451,539 )
Accumulated other comprehensive loss (78,501 ) (48,116 )
Total shareholders' equity 1,268,673 1,272,581
$ 3,400,357 $ 3,475,561
...
Progressive Waste Solutions Ltd.
Condensed Consolidated Statements of Cash Flows
("Statement of Cash Flows")
For the periods ended June 30, 2013 and 2012 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars)
Three months ended Six months ended
2013 2012 2013 2012
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES
OPERATING
Net income $ 32,293 $ 28,377 $ 61,634 $ 50,446
Items not affecting cash
Restricted share expense 447 624 937 1,358
Accretion of landfill closure and post-closure costs 1,406 1,306 2,815 2,614
Amortization of intangibles 15,018 12,887 30,378 25,815
Amortization of capital assets 38,371 34,237 76,447 68,136
Amortization of landfill assets 20,253 21,246 38,116 38,073
Interest on long-term debt (amortization of deferred financing costs) 849 1,678 1,705 3,368
Net gain on sale of capital assets (5,788 ) (366 ) (6,405 ) (750 )
Net loss (gain) on financial instruments 1,205 2,717 (1,060 ) 2,172
Deferred income taxes 11,028 6,866 18,052 10,961
Net loss from equity accounted investee 6 15 39 19
Landfill closure and post-closure expenditures (1,434 ) (2,666 ) (2,229 ) (4,200 )
Changes in non-cash working capital items (8,145 ) 15,990 (20,144 ) (9,753 )
Cash generated from operating activities 105,509 122,911 200,285 188,259
INVESTING
Acquisitions (1,544 ) (41,861 ) (1,639 ) (48,405 )
Purchase of investment (1,018 ) - (1,018 ) -
Restricted cash deposits (20 ) (20 ) (21 ) (22 )
Investment in other receivables - - (134 ) -
Proceeds from other receivables