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Advanced Disposal Announces Fourth Quarter Results

Disciplined pricing and continued strong cash flow generation

PONTE VEDRA, Fla. , Feb. 20, 2020 /PRNewswire/ -- Advanced Disposal Services, Inc. (NYSE: ADSW), (d/b/a Advanced Disposal) announced today revenue of $400.5 million for the three months ended December 31, 2019 versus $394.8 million in the same period of the prior year. Net loss during fourth quarter 2019 was ($3.2) million or ($0.04) per diluted share, and adjusted net income, which excludes certain gains and expenses, was $7.5 million , or $0.08 per diluted share.

Advanced Disposal - Vertical 4C Logo (PRNewsFoto/Advanced Disposal Services, Inc.)

"We executed on a number of important objectives in 2019 including year-over-year improvements across all key safety metrics and continued strong cash flow generation," said Richard Burke , CEO.  "While we faced operating headwinds related to recycling and leachate costs, our team delivered on the items directly within their control, and I'm proud of the focus, dedication, and professionalism our team has exhibited throughout the year."

Fourth Quarter and Full Year 2019 Highlights

  • Fourth quarter revenue of $400.5 million represented a 1.4% increase
  • Achieved fourth quarter and full year average yield of 3.3%
  • Fourth quarter organic volume declined 2.2% due to lower disposal tonnage and full year organic volume was flat
  • Year-over-year growth from acquisitions was 1.4% for the fourth quarter and full year
  • Net loss for the fourth quarter was ($3.2) million
  • Achieved adjusted EBITDA of $103.7 million for the fourth quarter, which included a $9.4 million year-over-year headwind related to our recycling business and higher disposal facility costs.  Those costs were partially offset by a $4.5 million benefit from CNG fuel tax credits
  • Full year revenue of $1,623.0 million was up 4.2% overall versus the prior year
  • Full year cash provided by operating activities was $280.2 million
  • Achieved full year adjusted free cash flow of $136.8 million

Investor Communications
On April 14, 2019 , Advanced Disposal entered into a merger agreement with Waste Management, Inc. ("Waste Management") whereby a subsidiary of Waste Management will acquire all outstanding shares of Advanced Disposal for $33.15 per share in cash. In light of the pending transaction, we elected to cease conducting quarterly earnings conference calls until transaction closing, although we will continue to provide a quarterly earnings release. We also elected to enter into an extended quiet period related to investor communications and are no longer providing forward-looking guidance until the transaction is closed.

You should read the following information in conjunction with our audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019 , appearing in our Annual Report on Form 10-K to be filed with the Securities and Exchange Commission.

The calculation of free cash flow and adjusted free cash flow, as well as details of charges and other expenses that are excluded from EBITDA and net (loss) income in arriving at adjusted EBITDA and adjusted net income, are contained in the "Reconciliation of Certain Non-GAAP Measures" section of this press release.

 

SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION AND OPERATING DATA

Advanced Disposal Services, Inc.

Condensed Consolidated Statements of Operations

(in millions, except share and per share data)






Three Months Ended December 31,


Year Ended December 31,


2019


2018


2019


2018

Service revenues

$

400.5



$

394.8



$

1,623.0



$

1,558.2


Operating costs and expenses








Operating (exclusive of items shown separately below)

261.9



251.0



1,058.6



1,006.1


Selling, general and administrative

48.3



46.2



207.7



181.5


Depreciation and amortization

72.2



67.7



278.8



270.5


Acquisition and development costs



0.4



1.1



0.8


Loss (gain) on disposal of assets and asset impairments

(0.3)



0.3



1.7



(2.5)


Restructuring charges





0.6



0.1


Total operating costs and expenses

382.1



365.6



1,548.5



1,456.5


Operating income

18.4



29.2



74.5



101.7


Other (expense) income








Interest expense

(23.7)



(24.9)



(100.9)



(95.9)


Loss on debt extinguishments and modifications



(0.3)





(0.9)


Other income (expense), net

1.7



(0.2)



(0.6)



9.1


Total other expense

(22.0)



(25.4)



(101.5)



(87.7)


Income (loss) before income taxes

(3.6)



3.8



(27.0)



14.0


Income tax (benefit) expense

(0.4)



1.3



(20.4)



4.6


Net (loss) income

$

(3.2)



$

2.5



$

(6.6)



$

9.4










Net (loss) income attributable to common stockholders per share








Basic (loss) income per share

$

(0.04)



$

0.03



$

(0.07)



$

0.11


Diluted (loss) income per share

$

(0.04)



$

0.03



$

(0.07)



$

0.11


Basic average shares outstanding

89,482,391



88,673,714



89,022,531



88,590,491


Diluted average shares outstanding

89,482,391



89,807,857



89,022,531



89,446,917


 

 

Advanced Disposal Services, Inc.

Consolidated Balance Sheets

(in millions, except shares)




December 31,


2019


2018

Assets




Current assets




Cash and cash equivalents

$

12.5



$

6.8


Accounts receivable, net of allowance for doubtful accounts of $4.5 and $4.6, respectively

208.3



211.4


Prepaid expenses and other current assets

44.0



44.8


Total current assets

264.8



263.0


Other assets

53.3



31.7


Property and equipment, net of accumulated depreciation of $1,720.7 and $1,540.7, respectively

1,767.6



1,761.4


Goodwill

1,224.8



1,215.1


Other intangible assets, net of accumulated amortization of $318.1 and $286.9, respectively

233.0



257.1


Total assets

$

3,543.5



$

3,528.3


Liabilities and Stockholders' Equity




Current liabilities




Accounts payable

$

120.7



$

107.8


Accrued expenses

124.5



117.7


Deferred revenue

71.3



72.5


Current maturities of accrued landfill retirement obligations

28.0



18.6


Current maturities of long-term debt

76.1



85.9


Total current liabilities

420.6



402.5


Other long-term liabilities

82.7



76.7


Long-term debt, less current maturities

1,792.1



1,817.1


Accrued landfill retirement obligations, less current maturities

236.2



229.4


Deferred income taxes

88.5



91.1


Total liabilities

2,620.1



2,616.8


Equity




Common stock: $.01 par value, 1,000,000,000 shares authorized, 89,836,069 and 88,685,920 issued including shares held in treasury, respectively

0.9



0.9


Additional paid-in capital

1,527.7



1,501.7


Accumulated other comprehensive loss

(3.0)




Accumulated deficit

(598.1)



(591.1)


Treasury stock at cost, 132,930 and 2,274 shares, respectively

(4.1)




Total stockholders' equity

923.4



911.5


Total liabilities and stockholders' equity

$

3,543.5



$

3,528.3


 

 

Advanced Disposal Services, Inc.

Consolidated Statements of Cash Flows



(in millions)

Year Ended December 31,


2019


2018

Cash flows from operating activities




Net (loss) income

$

(6.6)



$

9.4


Adjustments to reconcile net (loss) income to net cash provided by operating activities




Depreciation and amortization

278.8



270.5


Change in fair value of derivative instruments

5.8



(2.7)


Amortization of debt issuance costs and original issue discount

5.7



6.1


Loss on debt extinguishments and modifications



0.9


Accretion on landfill retirement obligations

18.0



17.0


Other accretion and amortization

6.7



4.0


Provision for doubtful accounts

6.1



5.1


Loss (gain) on disposition of property and equipment

1.7



(2.5)


Stock based compensation

10.0



11.2


Deferred tax (benefit) expense

(1.4)



4.6


Earnings in equity investee

(2.4)



(1.2)


Write off of 2012 Veolia acquisition related indemnification receivable

3.9




Changes in operating assets and liabilities, net of businesses acquired




Increase in accounts receivable

(1.8)



(15.2)


Increase in prepaid expenses and other current assets

(5.2)



(0.7)


Decrease (increase) in other assets

2.4



(6.5)


Increase in accounts payable

0.4



19.7


Increase in accrued expenses

3.5



2.7


(Decrease) increase in deferred revenue

(1.2)



1.8


(Decrease) increase in other long-term liabilities

(25.3)



6.6


Capping, closure and post-closure expenditures

(18.9)



(22.5)


Net cash provided by operating activities

280.2



308.3


Cash flows from investing activities




Purchases of property and equipment and construction and development

(203.8)



(188.6)


Proceeds from sale of property and equipment and insurance recoveries

4.8



8.1


Acquisition of businesses, net of cash acquired

(27.1)



(26.3)


Net cash used in investing activities

(226.1)



(206.8)


Cash flows from financing activities




Proceeds from borrowings on debt instruments

201.0



136.0


Repayments on debt instruments, including finance/capital leases

(261.3)



(240.6)


Proceeds from stock option exercises net of stock repurchases

11.9



3.1


Net cash used in financing activities

(48.4)



(101.5)


Net increase in cash and cash equivalents

5.7




Cash and cash equivalents, beginning of year

6.8



6.8


Cash and cash equivalents, end of year

$

12.5



$

6.8



You should read the following information in conjunction with our audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2019 appearing in our Annual Report on Form 10-K to be filed with the Securities and Exchange Commission.

 

 

REVENUE


The following table reflects our revenue by line of business for the periods presented (in millions and as a percentage of revenue):






Three Months Ended December 31,


Year Ended December 31,


2019


2018


2019


2018

Collection

$

269.7



67.3

%


$

259.6



65.8

%


$

1,073.6



66.1

%


$

1,035.8



66.5

%

Disposal

137.2



34.3

%


139.9



35.4

%


569.2



35.1

%


558.8



35.9

%

Sale of recyclables

2.0



0.5

%


4.2



1.1

%


10.3



0.6

%


18.1



1.2

%

Fuel and environmental charges

27.9



7.0

%


30.6



7.8

%


116.9



7.2

%


120.7



7.7

%

Other revenue

39.2



9.8

%


37.6



9.5

%


160.0



9.9

%


132.5



8.5

%

Intercompany eliminations

(75.5)



(18.9)

%


(77.1)



(19.6)

%


(307.0)



(18.9)

%


(307.7)



(19.8)

%

Total service revenues

$

400.5



100.0

%


$

394.8



100.0

%


$

1,623.0



100.0

%


$

1,558.2



100.0

%

 

 

The following table reflects changes in revenue, as compared to the prior year:






Three Months Ended December 31,


Year Ended December 31,


2019


2018


2019


2018

Average yield

3.3

%


4.0

%


3.3

%


3.4

%

Recycling

(0.5)

%


(0.3)

%


(0.4)

%


(0.9)

%

Fuel surcharge revenue

(0.6)

%


1.0

%


(0.1)

%


1.0

%

Total yield

2.2

%


4.7

%


2.8

%


3.5

%

Organic volume

(2.2)

%


(0.3)

%


%


0.5

%

Acquisitions

1.4

%


0.4

%


1.4

%


1.9

%

Divestitures

%


%


%


(0.3)

%

Impact of revenue recognition standard adoption

%


(2.1)

%


%


(2.2)

%

Total revenue change

1.4

%


2.7

%


4.2

%


3.4

%

 

 

OPERATING EXPENSES


The following table summarizes our operating expenses for the periods presented (in millions and as a percentage of revenue):






Three Months Ended December 31,


Year Ended December 31,


2019


2018


2019


2018

Operating

$

257.1



64.2

%


$

245.5



62.2

%


$

1,040.6



64.1

%


$

989.1



63.5

%

Accretion of landfill retirement obligations

4.8



1.2

%


5.5



1.4

%


18.0



1.1

%


17.0



1.1

%

Operating expenses

$

261.9



65.4

%


$

251.0



63.6

%


$

1,058.6



65.2

%


$

1,006.1



64.6

%

 

 

...

The following table summarizes the major components of our operating expenses, excluding accretion expense on landfill retirement obligations for the periods presented (in millions and as a percentage of revenue):






Three Months Ended December 31,


Year Ended December 31,


2019


2018


2019


2018

Labor and related benefits

$

88.9



22.2

%


$

84.3



21.4

%


$

351.7



21.7

%


$

333.5



21.4

%

Transfer and disposal costs

57.5