Progressive Waste Solutions Ltd. Reports Results for the Three and Nine Months Ended September 30, 2012

Core business continues to demonstrate stability in spite of steep declines in recycled commodity prices in the quarter

Marketwired

TORONTO, ONTARIO--(Marketwire - Oct 26, 2012) - Progressive Waste Solutions Ltd. (the "Company") (BIN.TO)(BIN) reported financial results for the three and nine months ended September 30, 2012. 

  • Consolidated core price grew 1.6% quarter-over-quarter
  • Two strategic "tuck-in" acquisitions completed in the U.S. northeast and one in Canada 
  • Excluding the quarter-over-quarter decline of $12.4 million attributable to recycled commodity prices, as well as one-time items and the impact of foreign currency exchange ("FX"), consolidated revenue and adjusted EBITDA(A) would have increased 2.5% and 6.7%
  • Adjusted earnings per share of $0.28 in the third quarter versus $0.29 in the year-ago quarter. The decline in recycled commodity prices in the third quarter reduced adjusted earnings per share by $0.07. 
  • Updated outlook for 2012
  • Completed refinancing of credit facility and received a rating upgrade from Moody''s
Management Commentary
(All amounts are in United States ("U.S.") dollars, unless otherwise stated)

"In the third quarter, our base business continued to demonstrate stability, with resilience in our commercial and residential collection service lines. We achieved consolidated revenues of $487.2 million and adjusted EBITDA(A) of $136.9 million, with core price growth of 2.2% in Canada and 1.2% in the U.S., for a combined core price increase of 1.6%. Our strong core price activity was offset by a mixed volume performance relative to the year-ago quarter and lower recycled commodity prices continued to affect our consolidated performance, as it has affected the solid waste services industry in North America throughout this year. Excluding the $12.4 million quarter-over-quarter impact of lower recycled commodity prices, at parity, as well as the impact of one-time items and FX, revenue would have increased 2.5% to $502.8 million and adjusted EBITDA(A) would have increased 6.7% to $151.8 million. Adjusted EBITDA(A) in the third quarter includes one-time charges of $1.4 million related to a tax assessment and end of collection contract retention payments," said Joseph Quarin, Vice Chairman and Chief Executive Officer, Progressive Waste Solutions Ltd.

"Our Canadian and U.S. south operations continued to perform well in the third quarter, with quarter-over-quarter revenue growth of 1.2% and 2.7%, respectively, driven by higher pricing in our collection business and contributions from strategic ''tuck-in'' acquisitions. Adjusted EBITDA(A) margins in these segments remained solid, at 36% in Canada and 28.3% in the U.S. south, in spite of lower recycled commodity prices."

Mr. Quarin continued, "In our U.S. northeast segment, on a sequential basis and as a result of our focused efforts, pricing remained stable in our collection and disposal service lines, cost controls were maintained, and adjusted EBITDA(A) margins improved to 21.8%. Weak economic conditions in this region continued to affect third-party volume at our transfer stations and landfills and delayed special waste activity as well. During the quarter, we acquired two collection companies in this region that will help increase internal waste volumes at our landfills and which will partially offset the decline in disposal volumes. We are making progress on our plan to improve our performance in our U.S. northeast operations and are committed to further development and integration of our assets in this region." 

"In addition to investing in ''tuck-in'' acquisitions in the third quarter, we continued to deploy capital towards several internal infrastructure projects that we expect will deliver attractive returns in 2013 and beyond. With our strong free cash flow(B) profile, we have the resources to enhance the strategic position of Progressive Waste Solutions, with the objective of creating long-term shareholder value. Given the current interest rate environment and the availability of attractive debt financing, we have taken the opportunity to further position Progressive Waste Solutions for future growth with a refinancing of our credit facilities, which will give us a significant source of liquidity as we continue to grow our business."

"We are updating our guidance for 2012 given the significant decline in recycled commodity prices in the third quarter, combined with lower transfer station and landfill volumes, including delayed special waste activity, in our U.S. northeast segment," Mr. Quarin added. "Our outlook for the balance of 2012 assumes recycled commodity prices in the fourth quarter will not improve from September levels."

Reported revenues decreased ($3.3) million or (0.7)% from $490.5 million in the third quarter of 2011 to $487.2 million in the third quarter of 2012. Expressed on a reportable basis, at parity, revenues were flat quarter over quarter due in large part to a 3.9% increase attributable to acquisitions, and higher overall pricing and fuel surcharges being offset by lower volumes and commodity values. The impact on comparative revenues resulting from a decline in recycled commodity prices was 2.5%.

Adjusted EBITDA(A) was $136.9 million ($138.3 million excluding one-time items), or (2.9)% lower, in the third quarter of 2012 versus $141.0 million in the same quarter a year ago. Adjusted operating income(A) was $66.8 million, or (8.0)% lower, in the quarter compared to $72.6 million in the same period last year. Adjusted net income(A) was $32.1 million, or $0.28 per weighted average diluted share ("diluted share"), compared to $35.1 million, or $0.29 per diluted share in the comparative period. 

Share repurchases in the quarter totalled $5.2 million and dividends paid to shareholders totalled $16.2 million. Together, this represents a combined $21.4 million return to shareholders in the third quarter of 2012. 

Year-to-date, reported revenues increased $18.0 million or 1.3% from $1,382.9 million in 2011 to $1,400.9 million. Expressed on a reportable basis, and assuming Canadian and U.S. dollar parity, revenues increased 2.3% on a comparative basis for the nine months ended. This increase is due in large part to a 3.9% increase attributable to acquisitions and higher overall pricing and fuel surcharges, which outpaced lower volumes and commodity values. The year-to-date impact on comparative revenues resulting from a decline in recycled commodity prices was 1.8%.

For the year-to-date period, adjusted EBITDA(A) was $385.9 million ($387.3 million excluding one-time items), or (3.7)% lower, in 2012 versus $400.7 million in the same period last year. Excluding the impact of FX and the decline in recycled commodity pricing, adjusted EBITDA(A) would have been $415.7 million ($417.1 million excluding one-time items) on a year-to-date basis. Adjusted operating income(A) was $184.5 million, or (9.9)% lower, in the year-to-date period than the $204.9 million recorded in the same period last year. Adjusted net income(A) was $85.0 million, or $0.73 per diluted share, compared to $97.0 million, or $0.80 per diluted share in the comparative period. 

Share repurchases year-to-date totalled $65.6 million and dividends paid to shareholders totalled $47.2 million. For the current year-to-date period, this represents a combined $112.8 million return to shareholders compared to $85.5 million a year ago. 

Acquisitions

  • We invested $72.5 million in the third quarter and $122.6 million year-to-date on strategic "tuck-in" acquisitions in various markets.
  • In the third quarter, we completed three acquisitions, two in the U.S. northeast and one in Canada. Year-to-date, we completed a total of 12 acquisitions, five in the U.S. south, two in the U.S. northeast and five in Canada.
  • We continue to actively identify collection and transfer assets in and around the markets we serve in order to improve asset density and facilitate higher internalization at our landfills. We also evaluate new markets for growth opportunities.

Other highlights for the three and nine months ended September 30, 2012

  • In October 2012, we entered into a consolidated $2,350 million Credit Agreement and concurrently repaid all outstanding indebtedness under our U.S. and Canadian credit facilities and our series B, senior secured debenture.
  • In August 2012, we received approval to renew our normal course issuer bid for an additional 12 months.
  • In July 2012, we exercised a portion of the accordion feature on our U.S. credit facility which increased our available lending by $131.1 million to $1.25 billion.
  • In July 2012, we exercised a portion of the accordion feature on our Canadian credit facility which increased our available lending by $70.0 million to $595 million.
  • In March 2012, we received a modification to our operating permit for the Ridge landfill that increased the amount of annual waste allowable at the site from 0.9 to 1.3 million tonnes annually.
  • We repurchased and cancelled approximately 3.2 million common shares year-to-date. At the close of the period, there were 115.3 million common shares outstanding.

2012 Outlook

The Company is updating its outlook provided on July 25, 2012. The outlook assumes no change in the current economic environment and assumes recycled commodity pricing remains at September 2012 levels. Our outlook has been prepared assuming parity between the Canadian and U.S. dollar.

The outlook provided below is forward-looking. Our actual results may differ materially and are subject to risks and uncertainties.

  • Revenue continues to be estimated at approximately $1,880 million
  • Adjusted EBITDA(A) is estimated to be $515 to $520 million
  • Amortization expense, as a percentage of revenue, is estimated to be about 14.2%
  • Capital and landfill expenditures, including internal infrastructure, are estimated to be $240 to $250 million
  • The effective tax rate is estimated to be between 39% and 40% of income before income tax expense and net loss from equity accounted investee
  • Cash taxes are estimated to be $50 million
  • Adjusted net income(A) per diluted share is estimated to be $0.99 to $1.00
  • Free cash flow(B) is estimated to be at the low end of the range provided of $170 to $190 million, including additional internal infrastructure investment
  • Expected annual cash dividend of $0.56 Canadian ("C") per share, payable on a quarterly basis
 
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, 2012 and 2011 (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     Nine months ended  
    2012     2011     2012     2011  
                         
REVENUES $ 487,209   $ 490,522   $ 1,400,919   $ 1,382,884  
EXPENSES                        
  OPERATING   297,309     294,475     849,528     820,784  
  SELLING, GENERAL AND ADMINISTRATION   56,750     51,437     170,926     160,422  
  RESTRUCTURING   -     73     -     1,198  
  AMORTIZATION   70,328     69,408     202,352     198,694  
  NET GAIN ON SALE OF CAPITAL ASSETS   (225 )   (1,092 )   (975 )   (2,871 )
OPERATING INCOME   63,047     76,221     179,088     204,657  
INTEREST ON LONG-TERM DEBT   14,696     15,303     42,934     48,363  
NET FOREIGN EXCHANGE LOSS (GAIN)   5     (51 )   12     (83 )
NET GAIN ON FINANCIAL INSTRUMENTS   (3,988 )   (1,528 )   (1,816 )   (3,883 )
OTHER   -     32     105     827  
INCOME BEFORE INCOME TAX EXPENSE AND NET LOSS                        
FROM EQUITY ACCOUNTED INVESTEE   52,334     62,465     137,853     159,433  
INCOME TAX EXPENSE                        
  Current   14,219     13,729     38,312     38,424  
  Deferred   5,946     8,357     16,907     20,899  
    20,165     22,086     55,219     59,323  
NET LOSS FROM EQUITY ACCOUNTED INVESTEE   11     32     30     58  
NET INCOME   32,158     40,347     82,604     100,052  
                         
  Foreign currency translation adjustment   19,358     (44,594 )   18,024     (25,840 )
  Derivatives designated as cash flow hedges, net of income tax ($532) and $226 (2011 - $2,563 and $3,411)   989     (4,767 )   (421 )   (6,340 )
  Settlement of derivatives designated as cash flow hedges, net of income tax $72 and ($7) (2011 - ($78) and ($481))   (131 )   147     15     895  
OTHER COMPREHENSIVE INCOME (LOSS)   20,216     (49,214 )   17,618     (31,285 )
COMPREHENSIVE INCOME (LOSS) $ 52,374   $ (8,867 ) $ 100,222   $ 68,767  
                         
                         
Net income per weighted average share, basic $ 0.28   $ 0.33   $ 0.71   $ 0.83  
Net income per weighted average share, diluted $ 0.28   $ 0.33   $ 0.71   $ 0.83  
Weighted average number of shares outstanding (thousands), basic   115,268     120,767     116,519     121,067  
Weighted average number of shares outstanding (thousands), diluted   115,268     120,767     116,519     121,067  
   
   
Progressive Waste Solutions Ltd.  
Condensed Consolidated Balance Sheets ("Balance Sheet")  
September 30, 2012 (unaudited) and December 31, 2011 (stated in accordance with accounting principles generally accepted in the United States of America ("U.S.") and in thousands of U.S. dollars except issued and outstanding share amounts)  
  September 30,     December 31,  
    2012     2011  
ASSETS            
CURRENT            
  Cash and cash equivalents $ 15,423   $ 14,143  
  Accounts receivable   234,894     212,099  
  Other receivables   442     414  
  Prepaid expenses   36,627     31,484  
  Restricted cash   475     452  
  Other assets   2,321     1,972  
    290,182     260,564  
             
OTHER RECEIVABLES   187     376  
FUNDED LANDFILL POST-CLOSURE COSTS   9,877     9,200  
INTANGIBLES   249,407     257,731  
GOODWILL   840,437     774,409  
LANDFILL DEVELOPMENT ASSETS   19,056     15,869  
DEFERRED FINANCING COSTS   15,385     19,983  
CAPITAL ASSETS   855,593     776,058  
LANDFILL ASSETS   966,815     958,792  
INVESTMENT IN EQUITY ACCOUNTED INVESTEE   4,077     3,973  
OTHER ASSETS   918     649  
  $ 3,251,934   $ 3,077,604  
             
LIABILITIES            
CURRENT            
  Accounts payable $ 123,275   $ 115,292  
  Accrued charges   118,743     124,496  
  Dividends payable   16,390     14,540  
  Income taxes payable   1,585     10,693  
  Deferred revenues   19,105     17,645  
  Current portion of long-term debt   1,500     1,500  
  Landfill closure and post-closure costs   7,572     9,468  
  Other liabilities   3,148     3,484  
    291,318     297,118  
             
LONG-TERM DEBT   1,467,847     1,311,593  
LANDFILL CLOSURE AND POST-CLOSURE COSTS   103,662     92,034  
OTHER LIABILITIES   7,859     7,484  
DEFERRED INCOME TAXES   101,031     76,234  
    1,971,717     1,784,463  
             
             
SHAREHOLDERS'' EQUITY            
  Common shares (authorized - unlimited, issued and outstanding - 114,949,780 (December 31, 2011 - 118,040,683))   1,773,434     1,824,231  
  Restricted shares (issued and outstanding - 212,500 (December 31, 2011 - 252,150))   (4,364 )   (5,353 )
  Additional paid in capital   2,308     2,789  
  Accumulated deficit   (447,028 )   (466,775 )
  Accumulated other comprehensive loss   (44,133 )   (61,751 )
  Total shareholders'' equity   1,280,217     1,293,141  
  $ 3,251,934   $ 3,077,604  
   
   
Progressive Waste Solutions Ltd.  
Condensed Consolidated Statements of Cash Flows ("Statement of Cash Flows")  
For the periods ended September 30, 2012 and 2011 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars)  
    Three months ended     Nine months ended  
    2012     2011     2012     2011  
                         
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES            
OPERATING                        
  Net income $ 32,158   $ 40,347   $ 82,604   $ 100,052  
  Items not affecting cash                        
    Restricted share (recovery) expense   (143 )   1,028     1,215     1,381  
    Accretion of landfill closure and post-closure costs   1,313     1,271     3,927     3,816  
    Amortization of intangibles   13,391     12,877     39,206     36,977  
    Amortization of capital assets   35,215     33,145     103,351     97,745  
    Amortization of landfill assets   21,722     23,386     59,795     63,972  
    Interest on long-term debt (amortization of deferred financing costs)   1,701     1,640     5,069     4,355  
    Net gain on sale of capital assets   (225 )   (1,092 )   (975 )   (2,871 )
    Net gain on financial instruments   (3,988 )   (1,528 )   (1,816 )   (3,883 )
    Deferred income taxes   5,946     8,357     16,907     20,899  
    Net loss from equity accounted investee   11     32     30     58  
  Landfill closure and post-closure expenditures   (1,201 )   (1,102 )   (5,401 )   (3,162 )
  Changes in non-cash working capital items   (31,582 )   14,842     (41,335 )   (38,850 )
Cash generated from operating activities   74,318     133,203     262,577     280,489  
INVESTING                        
  Acquisitions   (65,300 )   (49,471 )   (113,705 )   (139,506 )
  Restricted cash deposits   (1 )   -     (23 )   (12 )
  Investment in other receivables   (148 )   -     (148 )   -  
  Proceeds from other receivables   107     122     330     356  
  Funded landfill post-closure costs   (127 )   (131 )   (287 )   (310 )
  Purchase of capital assets   (54,641 )   (28,100 )   (125,912 )   (77,033 )
  Purchase of landfill assets   (19,592 )   (18,776 )   (48,085 )   (39,659 )
  Proceeds from the sale of capital assets   540     1,754     2,107     5,204  
  Investment in landfill development assets   (693 )   (1,594 )   (3,507 )   (4,711 )
Cash utilized in investing activities   (139,855 )   (96,196 )   (289,230 )   (255,671 )
FINANCING                        
  Payment of deferred financing costs   (285 )   (3,786 )   (340 )   (4,806 )
  Proceeds from long-term debt   128,189     94,550     307,176     331,163  
  Repayment of long-term debt   (43,998 )   (86,861 )   (166,507 )   (257,630 )
  Proceeds from the exercise of stock options   54     -     364     855  
  Repurchase of common shares   (5,157 )   (15,556 )   (65,633 )   (39,056 )
  Purchase of, net of proceeds from, restricted shares   (541 )   (4,226 )   (541 )   (4,226 )
  Dividends paid to shareholders   (16,237 )   (15,408 )   (47,218 )   (46,431 )
Cash generated from (utilized in) financing activities   62,025     (31,287 )   27,301     (20,131 )
Effect of foreign currency translation on cash and cash equivalents   687     (1,735 )   632     (1,217 )
NET CASH (OUTFLOW) INFLOW   (2,825 )   3,985     1,280     3,470  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OR YEAR   18,248     12,891     14,143     13,406  
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,423   $ 16,876   $ 15,423   $ 16,876  
SUPPLEMENTAL CASH FLOW INFORMATION:                        
  Cash and cash equivalents are comprised of:                        
    Cash $ 15,418   $ 16,875   $ 15,418   $ 16,875  
    Cash equivalents   5     1     5     1  
  $ 15,423   $ 16,876   $ 15,423   $ 16,876  
  Cash paid during the period for:                        
    Income taxes $ 9,531   $ 9,206   $ 41,698   $ 40,598  
    Interest $ 13,632   $ 15,317   $ 39,939   $ 46,595  
 
 
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, 2012.
   
          Three months ended  
  September 30, 2011   September 30, 2012   September 30, 2012   September 30, 2012   September 30, 2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)  
    (as reported)     (organic, acquisition and other non-operating changes)     (holding FX constant with the comparative period)     (FX impact)     (as reported)  
                               
Condensed Consolidated Statement of Operations        
Revenues $ 490,522   $ (75 ) $ 490,447   $ (3,238 ) $ 487,209  
Operating expenses   294,475     4,672     299,147     (1,838 )   297,309  
Selling, general and administration   51,437     5,671     57,108     (358 )   56,750  
Restructuring expenses   73     (73 )   -     -     -  
Amortization   69,408     1,373     70,781     (453 )   70,328  
Net gain on sale of capital assets   (1,092 )   864     (228 )   3     (225 )
Operating income   76,221     (12,582 )   63,639     (592 )   63,047  
Interest on long-term debt   15,303     (523 )   14,780     (84 )   14,696  
Net foreign exchange (gain) loss   (51 )   56     5     -     5  
Net gain on financial instruments   (1,528 )   (2,473 )   (4,001 )   13     (3,988 )
Other expense   32     (34 )   (2 )   2     -  
Income before net income tax expense and net loss from equity accounted investee   62,465     (9,608 )   52,857     (523 )   52,334  
Net income tax expense   22,086     (1,790 )   20,296     (131 )   20,165  
Net loss from equity accounted investee   32     (20 )   12     (1 )   11  
Net income $ 40,347   $ (7,798 ) $ 32,549   $ (391 ) $ 32,158  
                               
Adjusted EBITDA(A) $ 140,961   $ (2,972 ) $ 137,989   $ (1,060 ) $ 136,929  
Adjusted operating income(A) $ 72,645   $ (5,208 ) $ 67,437   $ (611 ) $ 66,826  
Adjusted net income(A) $ 35,105   $ (2,586 ) $ 32,519   $ (397 ) $ 32,122  
Free cash flow(B)(*) $ 64,390   $ (28,546 ) $ 35,844   $ (251 ) $ 35,593  
 
Note:                              
(*)Prior period amounts have been adjusted to conform to the current period''s presentation.
                         
          Nine months ended  
  September 30, 2011   September 30, 2012   September 30, 2012   September 30, 2012   September 30, 2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)  
    (as reported)     (organic, acquisition and other non-operating changes)     (holding FX constant with the comparative period)     (FX impact)     (as reported)  
                               
Condensed Consolidated Statement of Operations        
Revenues $ 1,382,884   $ 32,272   $ 1,415,156   $ (14,237 ) $ 1,400,919  
Operating expenses   820,784     36,668     857,452     (7,924 )   849,528  
Selling, general and administration   160,422     12,246     172,668     (1,742 )   170,926  
Restructuring expenses   1,198     (1,198 )   -     -     -  
Amortization   198,694     5,554     204,248     (1,896 )   202,352  
Net gain on sale of capital assets   (2,871 )   1,886     (985 )   10     (975 )
Operating income   204,657     (22,884 )   181,773     (2,685 )   179,088  
Interest on long-term debt   48,363     (5,061 )   43,302     (368 )   42,934  
Net foreign exchange (gain) loss   (83 )   95     12     -     12  
Net gain on financial instruments   (3,883 )   2,084     (1,799 )   (17 )   (1,816 )
Other expense   827     (720 )   107     (2 )   105  
Income before net income tax expense and net loss from equity accounted investee   159,433     (19,282 )   140,151     (2,298 )   137,853  
Net income tax expense   59,323     (3,388 )   55,935     (716 )   55,219  
Net loss from equity accounted investee   58     (27 )   31     (1 )   30  
Net income $ 100,052   $ (15,867 ) $ 84,185   $ (1,581 ) $ 82,604  
                               
Adjusted EBITDA(A) $ 400,675   $ (10,155 ) $ 390,520   $ (4,598 ) $ 385,922  
Adjusted operating income(A) $ 204,852   $ (17,594 ) $ 187,258   $ (2,713 ) $ 184,545  
Adjusted net income(A) $ 97,008   $ (10,361 ) $ 86,647   $ (1,612 ) $ 85,035  
Free cash flow(B)(*) $ 203,183   $ (65,530 ) $ 137,653   $ (1,813 ) $ 135,840  
 
Note:
(*)Prior period amounts have been adjusted to conform to the current period''s presentation.
   
   
Other Financial Highlights  
(all amounts are in thousands of U.S. dollars, excluding per share amounts)  
   
  Three months ended   Nine months ended  
        September 30         September 30  
    2012     2011     2012     2011  
                         
Operating income $ 63,047   $ 76,221   $ 179,088   $ 204,657  
Transaction and related costs - SG&A   675     966     2,045     1,739  
Fair value movements in stock options - SG&A   237     (5,643 )   (813 )   (4,123 )
Restricted share (recovery) expense - SG&A   (143 )   1,028     1,215     1,381  
Payment made to senior executive on departure - SG&A   3,010     -     3,010     -  
Restructuring expenses   -     73     -     1,198  
Adjusted operating income   66,826     72,645     184,545     204,852  
Net gain on sale of capital assets   (225 )   (1,092 )   (975 )   (2,871 )
Amortization   70,328     69,408     202,352     198,694  
Adjusted EBITDA $ 136,929   $ 140,961   $ 385,922   $ 400,675  
                         
Net income $ 32,158   $ 40,347   $ 82,604   $ 100,052  
Transaction and related costs - SG&A   675     966     2,045     1,739  
Fair value movements in stock options - SG&A   237     (5,643 )   (813 )   (4,123 )
Restricted share expense - SG&A   (143 )   1,028     1,215     1,381  
Payment made to senior executive on departure - SG&A   3,010     -     3,010     -  
Restructuring expenses   -     73     -     1,198  
Net gain on financial instruments   (3,988 )   (1,528 )   (1,816 )   (3,883 )
Other expenses   -     32     105     827  
Net income tax expense or (recovery)   173     (170 )   (1,315 )   (183 )
Adjusted net income $ 32,122   $ 35,105   $ 85,035   $ 97,008  
                         
Adjusted net income per weighted average share, basic(A)(*) $ 0.28   $ 0.29   $ 0.73   $ 0.80  
Adjusted net income per weighted average share, diluted(A)(*) $ 0.28   $ 0.29   $ 0.73   $ 0.80  
                         
Replacement and growth expenditures                        
Replacement expenditures $ 47,482   $ 37,006   $ 119,592   $ 88,067  
Growth expenditures   26,751     9,870     54,405     28,625  
Total replacement and growth expenditures $ 74,233   $ 46,876   $ 173,997   $ 116,692  
                         
Free cash flow(B)                        
Cash generated from operating activities (statement of cash flows) $ 74,318   $ 133,203   $ 262,577   $ 280,489  
Free cash flow(B) $ 35,593   $ 64,390   $ 135,840   $ 203,183  
Free cash flow(B) per weighted average share, diluted $ 0.31   $ 0.53   $ 1.17   $ 1.68  
                         
Dividends                        
Dividends declared (common shares) $ 16,207   $ 15,318   $ 48,551   $ 46,228  
 
Note:
(*)Prior period amounts have been adjusted to conform to the current period''s presentation.
   
   
Segment Highlights - Additional details regarding the FX impact on our comparative results can be found in the Foreign Currency sections of this report.  
(all amounts are in thousands of U.S. dollars, unless otherwise stated)  
   
                Three months ended  
                      September 30  
    2011     2012     Change     2012     Change  
    (as reported)     (holding FX constant with the comparative period)           (as reported)        
                               
Revenues $ 490,522   $ 490,447   $ (75 ) $ 487,209   $ (3,313 )
Canada $ 203,350   $ 208,934   $ 5,584   $ 205,696   $ 2,346  
U.S. south $ 190,537   $ 195,678   $ 5,141   $ 195,678   $ 5,141  
U.S. northeast $ 96,635   $ 85,835   $ (10,800 ) $ 85,835   $ (10,800 )
                               
Operating expenses $ 294,475   $ 299,147   $ 4,672   $ 297,309   $ 2,834  
Canada $ 112,389   $ 117,517   $ 5,128   $ 115,679   $ 3,290  
U.S. south $ 117,661   $ 121,738   $ 4,077   $ 121,738   $ 4,077  
U.S. northeast $ 64,425   $ 59,892   $ (4,533 ) $ 59,892   $ (4,533 )
                               
SG&A (as reported) $ 51,437   $ 57,108   $ 5,671   $ 56,750   $ 5,313  
Canada $ 15,106   $ 16,259   $ 1,153   $ 16,019   $ 913  
U.S. south $ 19,092   $ 18,586   $ (506 ) $ 18,586   $ (506 )
U.S. northeast $ 7,742   $ 7,266   $ (476 ) $ 7,266   $ (476 )
Corporate $ 9,497   $ 14,997   $ 5,500   $ 14,879   $ 5,382  
                               
EBITDA(A)(as reported) $ 144,610   $ 134,192   $ (10,418 ) $ 133,150   $ (11,460 )
Canada $ 75,855   $ 75,158   $ (697 ) $ 73,998   $ (1,857 )
U.S. south $ 53,784   $ 55,354   $ 1,570   $ 55,354   $ 1,570  
U.S. northeast $ 24,468   $ 18,677   $ (5,791 ) $ 18,677   $ (5,791 )
Corporate $ (9,497 ) $ (14,997 ) $ (5,500 ) $ (14,879 ) $ (5,382 )
                               
Adjusted SG&A $ 55,086   $ 53,311   $ (1,775 ) $ 52,971   $ (2,115 )
Canada $ 15,106   $ 16,259   $ 1,153   $ 16,019   $ 913  
U.S. south $ 19,092   $ 18,586   $ (506 ) $ 18,586   $ (506 )
U.S. northeast $ 7,742   $ 7,266   $ (476 ) $ 7,266   $ (476 )
Corporate $ 13,146   $ 11,200   $ (1,946 ) $ 11,100   $ (2,046 )
                               
Adjusted EBITDA(A) $ 140,961   $ 137,989   $ (2,972 ) $ 136,929   $ (4,032 )
Canada $ 75,855   $ 75,158   $ (697 ) $ 73,998   $ (1,857 )
U.S. south $ 53,784   $ 55,354   $ 1,570   $ 55,354   $ 1,570  
U.S. northeast $ 24,468   $ 18,677   $ (5,791 ) $ 18,677   $ (5,791 )
Corporate $ (13,146 ) $ (11,200 ) $ 1,946   $ (11,100 ) $ 2,046  
                   
                   
          Nine months ended  
              September 30  
    2011     2012     Change     2012     Change  
    (as reported)     (holding FX constant with the comparative period)           (as reported)        
                               
Revenues $ 1,382,884   $ 1,415,156   $ 32,272   $ 1,400,919   $ 18,035  
Canada $ 572,004   $ 592,030   $ 20,026   $ 577,793   $ 5,789  
U.S. south $ 537,889   $ 578,606   $ 40,717   $ 578,606   $ 40,717  
U.S. northeast $ 272,991   $ 244,520   $ (28,471 ) $ 244,520   $ (28,471 )
                               
Operating expenses $ 820,784   $ 857,452   $ 36,668   $ 849,528   $ 28,744  
Canada $ 313,841   $ 329,488   $ 15,647   $ 321,564   $ 7,723  
U.S. south $ 326,771   $ 358,133   $ 31,362   $ 358,133   $ 31,362  
U.S. northeast $ 180,172   $ 169,831   $ (10,341 ) $ 169,831   $ (10,341 )
                               
SG&A (as reported) $ 160,422   $ 172,668   $ 12,246   $ 170,926   $ 10,504  
Canada $ 46,339   $ 49,029   $ 2,690   $ 47,850   $ 1,511  
U.S. south $ 53,562   $ 57,470   $ 3,908   $ 57,470   $ 3,908  
U.S. northeast $ 23,503   $ 22,959   $ (544 ) $ 22,959   $ (544 )
Corporate $ 37,018   $ 43,210   $ 6,192   $ 42,647   $ 5,629  
                               
EBITDA(A)(as reported) $ 401,678   $ 385,036   $ (16,642 ) $ 380,465   $ (21,213 )
Canada $ 211,824   $ 213,513   $ 1,689   $ 208,379   $ (3,445 )
U.S. south $ 157,556   $ 163,003   $ 5,447   $ 163,003   $ 5,447  
U.S. northeast $ 69,316   $ 51,730   $ (17,586 ) $ 51,730   $ (17,586 )
Corporate $ (37,018 ) $ (43,210 ) $ (6,192 ) $ (42,647 ) $ (5,629 )
                               
Adjusted SG&A $ 161,425   $ 167,184   $ 5,759   $ 165,469   $ 4,044  
Canada $ 46,339   $ 49,029   $ 2,690   $ 47,850   $ 1,511  
U.S. south $ 53,562   $ 57,470   $ 3,908   $ 57,470   $ 3,908  
U.S. northeast $ 23,503   $ 22,959   $ (544 ) $ 22,959   $ (544 )
Corporate $ 38,021   $ 37,726   $ (295 ) $ 37,190   $ (831 )
                               
Adjusted EBITDA(A) $ 400,675   $ 390,520   $ (10,155 ) $ 385,922   $ (14,753 )
Canada $ 211,824   $ 213,513   $ 1,689   $ 208,379   $ (3,445 )
U.S. south $ 157,556   $ 163,003   $ 5,447   $ 163,003   $ 5,447  
U.S. northeast $ 69,316   $ 51,730   $ (17,586 ) $ 51,730   $ (17,586 )
Corporate $ (38,021 ) $ (37,726 ) $ 295   $ (37,190 ) $ 831  
 
 
Revenues
Gross revenue by service type
The table below presents gross revenue by service type prepared on a consolidated basis and includes the impact of FX.
   
    Three months ended               Nine months ended  
              September 30               September 30  
    2012   %     2011   %     2012   %     2011   %  
                                         
Commercial $ 167,223   34.3   $ 164,452   33.5   $ 494,331   35.3   $ 480,381   34.7  
Industrial   87,149   17.9     89,520   18.2     248,060   17.7     252,708   18.3  
Residential   113,773   23.4     102,989   21.0     323,458   23.1     293,322   21.2  
Transfer and disposal   168,160   34.5     178,844   36.5     472,605   33.7     491,551   35.5  
Recycling   15,531   3.2     22,586   4.6     49,752   3.6     57,425   4.2  
Other   6,950   1.4     5,942   1.2     19,000   1.4     16,576   1.2  
Gross revenues   558,786   114.7     564,333   115.0     1,607,206   114.8     1,591,963   115.1  
                                         
Intercompany   (71,577 ) (14.7 )   (73,811 ) (15.0 )   (206,287 ) (14.8 )   (209,079 ) (15.1 )
Revenues $ 487,209   100.0   $ 490,522   100.0   $ 1,400,919   100.0   $ 1,382,884   100.0  

Revenue growth or decline components - expressed in percentages and excluding FX

The table below has been prepared using reported revenues for 2012 and gross revenues for 2011. The table has also been prepared assuming Canadian and U.S. dollar parity. For 2011, the amounts are presented as if Waste Services, Inc.''s operations were combined with ours for the six months ended June 30, 2010. 

  Three months ended Nine months ended
    September 30   September 30
  2012   2011 (*) 2012   2011 (*)
             
Price            
  Core price 1.6   1.4 1.5   1.6
  Fuel surcharges 0.2   1.1 0.4   1.1
  Recycling and other (2.5 ) 0.8 (1.8 ) 0.6
  Total price growth (0.7 ) 3.3 0.1   3.3
             
Volume (3.2 ) 1.0 (1.7 ) 0.6
Total organic (decline) growth (3.9 ) 4.3 (1.6 ) 3.9
             
Acquisitions 3.9   5.4 3.9   6.2
Total growth excluding FX -   9.7 2.3   10.1
             
FX (0.7 )   (1.0 )  
Total growth including FX (0.7 )   1.3    
 
Note:
(*)Prior period amounts have been adjusted to conform to the current period''s presentation.

Free cash flow(B)

Purpose and objective

The purpose of presenting this non-GAAP measure is to provide similar disclosures presented by other U.S. publicly listed companies in our industry and to provide investors and analysts with an additional measure of our value and liquidity. We use this non-GAAP measure to assess our relative performance to our peers and to assess the availability of funds for growth investment, share repurchases, debt repayment or dividend increases.

Free cash flow(B) - cash flow approach

    Three months ended     Nine months ended  
              September 30               September 30  
    2012 (*)     2011     Change     2012 (*)     2011     Change  
                                     
Cash generated from operating activities $ 74,318   $ 133,203   $ (58,885 ) $ 262,577   $ 280,489   $ (17,912 )
                                     
Operating and investing                                    
Stock option expense (recovery)   237     (5,643 )   5,880     (813 )   (4,123 )   3,310  
Acquisition and related costs   675     966     (291 )   2,045     1,739     306  
Payment made to senior executive on departure   3,010     -     3,010     3,010     -     3,010  
Restructuring expenses   -     73     (73 )   -     1,198     (1,198 )
Other expenses   -     32     (32 )   105     827     (722 )
Changes in non-cash working capital items   31,582     (14,842 )   46,424     41,335     38,850     2,485  
Capital and landfill asset purchases   (74,233 )   (46,876 )   (27,357 )   (173,997 )   (116,692 )   (57,305 )
Proceeds from the sale of capital assets   540     1,754     (1,214 )   2,107     5,204     (3,097 )
                                     
Financing                                    
Purchase of restricted shares   (541 )   (4,226 )   3,685     (541 )   (4,226 )   3,685  
Net realized foreign exchange loss (gain)   5     (51 )   56     12     (83 )   95  
Free cash flow(B) $ 35,593   $ 64,390   $ (28,797 ) $ 135,840   $ 203,183   $ (67,343 )
 
Note:
(*)Capital and landfill asset purchases include infrastructure expenditures of approximately $6,900 and $13,800, for the three and nine months ended September 30, 2012, respectively.

Free cash flow(B) - adjusted EBITDA(A) approach

We typically calculate free cash flow(B) using an operations approach which is similar to the calculation required by our Canadian and U.S. facilities in place at September 30, 2012.

    Three months ended     Nine months ended  
    September 30     September 30  
    2012 (*)     2011     Change     2012 (*)     2011     Change  
                                     
Adjusted EBITDA(A) $ 136,929   $ 140,961   $ (4,032 ) $ 385,922   $ 400,675   $ (14,753 )
                                     
Purchase of restricted shares   (541 )   (4,226 )   3,685     (541 )   (4,226 )   3,685  
Capital and landfill asset purchases   (74,233 )   (46,876 )   (27,357 )   (173,997 )   (116,692 )   (57,305 )
Proceeds from the sale of capital assets   540     1,754     (1,214 )   2,107     5,204     (3,097 )
Landfill closure and post- closure expenditures   (1,201 )   (1,102 )   (99 )   (5,401 )   (3,162 )   (2,239 )
Landfill closure and post- closure cost accretion expense   1,313     1,271     42     3,927     3,816     111  
Interest on long-term debt   (14,696 )   (15,303 )   607     (42,934 )   (48,363 )   5,429  
Non-cash interest expense   1,701     1,640     61     5,069     4,355     714  
Current income tax expense   (14,219 )   (13,729 )   (490 )   (38,312 )   (38,424 )   112  
Free cash flow(B) $ 35,593   $ 64,390   $ (28,797 ) $ 135,840   $ 203,183   $ (67,343 )
 
Note:
(*)Capital and landfill asset purchases include infrastructure expenditures of approximately $6,900 and $13,800, for the three and nine months ended September 30, 2012, respectively.

Long-term debt to adjusted EBITDA(A)

Our adjusted EBITDA(A) ratio prepared on a combined basis, assuming FX parity, is 2.80 times.

Foreign Currency

(in thousands of U.S. dollars unless otherwise stated)

We have elected to report our financial results in U.S. dollars. However, we earn a significant portion of our revenues and earnings in Canada. We have provided our guidance assuming parity between the Canadian and U.S. dollar. If the U.S. dollar strengthens one cent our reported revenues will decline by approximately $7,600. EBITDA(A) is similarly impacted by approximately $2,500, assuming a strengthening U.S. dollar. The impact on net income for a similar change in FX rate, results in an approximately $1,000 decline. Should the U.S. dollar weaken by one cent, our reported results will improve by similar amounts.

    2012   2011
    Condensed
Consolidated
Balance
Sheet
  Condensed Consolidated
Statement of Operations and
 Comprehensive Income or Loss
  Condensed
Consolidated
Balance
Sheet
  Condensed Consolidated
Statement of Operations and
 Comprehensive Income or Loss
    Current   Average   Cumulative Average   Current   Average   Cumulative Average
                         
December 31             $ 0.9833     $ 1.0109
March 31 $ 1.0009 $ 0.9988 $ 0.9988 $ 1.0290 $ 1.0142 $ 1.0142
June 30 $ 0.9813 $ 0.9899 $ 0.9943 $ 1.0370 $ 1.0334 $ 1.0237
September 30 $ 1.0166 $ 1.0052 $ 0.9979 $ 0.9626 $ 1.0202 $ 1.0225

Quarterly dividend declared

The Company''s Board of Directors declared a quarterly dividend of $0.14 Canadian per share to shareholders of record December 31, 2012. The dividend will be paid on January 16, 2013. The Company has designated these dividends as eligible dividends for the purposes of the Income Tax Act (Canada).

Definitions of Adjusted EBITDA and Free cash flow

(A) All references to "Adjusted EBITDA" in this document are to revenues less operating expense and SG&A, excluding certain non-operating or non-recurring SG&A expense, on the consolidated statement of operations and comprehensive income or loss. Adjusted EBITDA excludes some or all of the following: certain SG&A expenses, restructuring expenses, goodwill impairment, amortization, net gain or loss on sale of capital assets, interest on long-term debt, net foreign exchange gain or loss, net gain or loss on financial instruments, other expenses, income taxes and income or loss from equity accounted investee. Adjusted EBITDA is a term used by us that does not have a standardized meaning prescribed by U.S. GAAP and is therefore unlikely to be comparable to similar measures used by other companies. Adjusted EBITDA is a measure of our operating profitability, and by definition, excludes certain items as detailed above. These items are viewed by us as either non-cash (in the case of goodwill impairment, amortization, net gain or loss on financial instruments, net foreign exchange gain or loss, deferred income taxes and net income or loss from equity accounted investee) or non-operating (in the case of certain SG&A expenses, restructuring expenses, net gain or loss on sale of capital assets, interest on long-term debt, other expenses, and current income taxes). Adjusted EBITDA is a useful financial and operating metric for us, our Board of Directors, and our lenders, as it represents a starting point in the determination of free cash flow(B). The underlying reasons for the exclusion of each item are as follows:

Certain SG&A expenses - SG&A expense includes certain non-operating or non-recurring expenses. These expenses include transaction costs related to acquisitions, fair value adjustments attributable to stock options, restricted share expense and payments made to senior executives on their departure. These expenses are not considered an expense indicative of continuing operations. Certain SG&A costs represent a different class of expense than those included in adjusted EBITDA.

Restructuring expenses - restructuring expenses includes costs to integrate various operating locations with our own, exiting certain property and building and office leases, employee severance and employee relocation costs incurred in connection with our acquisition of WSI. These expenses are not considered an expense indicative of continuing operations. Accordingly, restructuring expenses represent a different class of expense than those included in adjusted EBITDA.

Goodwill impairment - as a non-cash item goodwill impairment has no impact on the determination of free cash flow(B).

Amortization - as a non-cash item amortization has no impact on the determination of free cash flow(B).

Net gain or loss on sale of capital assets - proceeds from the sale of capital assets are either reinvested in additional or replacement capital assets or used to repay revolving credit facility borrowings.

Interest on long-term debt - interest on long-term debt is a function of our debt/equity mix and interest rates; as such, it reflects our treasury/financing activities and represents a different class of expense than those included in adjusted EBITDA.

Net foreign exchange gain or loss - as non-cash items, foreign exchange gains or losses have no impact on the determination of free cash flow(B).

Net gain or loss on financial instruments - as non-cash items, gains or losses on financial instruments have no impact on the determination of free cash flow(B).

Other expenses - other expenses typically represent amounts paid to certain management of acquired companies who are retained by us post acquisition and amounts paid to certain executives in respect of acquisitions successfully completed. These expenses are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included in adjusted EBITDA.

Income taxes - income taxes are a function of tax laws and rates and are affected by matters which are separate from our daily operations.

Net income or loss from equity accounted investee - as a non-cash item, net income or loss from our equity accounted investee has no impact on the determination of free cash flow(B).

(B) We have adopted a measure called "free cash flow" to supplement net income or loss as a measure of our operating performance. Free cash flow is a term which does not have a standardized meaning prescribed by U.S. GAAP, is prepared before dividends declared and shares repurchased, and may not be comparable to similar measures prepared by other companies. The purpose of presenting this non-GAAP measure is to provide disclosure similar to the disclosure provided by other U.S. publicly listed companies in our industry and to provide investors and analysts with an additional measure of our value and liquidity. We use this non-GAAP measure to assess our performance relative to other U.S. publicly listed companies and to assess the availability of funds for growth investment, debt repayment, share repurchases or dividend increases. All references to "free cash flow" in this document have the meaning set out in this note. 

About Progressive Waste Solutions Ltd.

As one of North America''s largest full-service waste management companies, we provide non-hazardous solid waste collection, recycling and disposal services to commercial, industrial, municipal and residential customers in 13 U.S. states and the District of Columbia and six Canadian provinces. We serve our customers with vertically integrated collection and disposal assets. Progressive Waste Solutions Ltd.''s shares are listed on the New York and Toronto Stock Exchanges under the symbol BIN. 

To find out more about Progressive Waste Solutions, visit our website at www.progressivewaste.com.

Management will hold a conference call on Friday, October 26, 2012, at 8:30 a.m. (ET) to discuss results for the three and nine months ended September 30, 2012. Participants may listen to the call by dialing 1-888-300-0053, conference ID 35210439, at approximately 8:20 a.m. (ET). International or local callers should dial 647-427-3420. The call will also be webcast live at 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 Wednesday, November 9, 2012, at midnight, and can be accessed by dialing 1-855-859-2056, conference ID 35210439. International or local callers can access the replay by dialing 404-537-3406. The audio webcast will also be archived at www.streetevents.com and www.progressivewaste.com.

Contact:
Progressive Waste Solutions Ltd.
Chaya Cooperberg
VP, Investor Relations and Corporate Communications
(905) 532-7517
chaya.cooperberg@progressivewaste.com
www.progressivewaste.com

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