Progressive Waste Solutions Ltd. Reports Results for the Three Months and Year Ended December 31, 2015
OREANDA-NEWS. February 29, 2016.
Fourth quarter highlights
- Consolidated revenues of
\\$483.9 million , up 1.6% on a constant currency basis. - Organic revenue up 2.3%, including price up 1.4% and volume up 2.3%.
- Adjusted operating EBIT(A) of
\\$67.0 million up 1.9% on a constant currency basis. - Adjusted EBITDA(A) of
\\$125.6 million , down 2.6% on a constant currency basis. Adjusted EBITDA(A) margin of 26.0%. - Free cash flow(B) of
\\$38.2 million , down 10.1% on a constant currency basis. - Adjusted net income(A) per share of
\\$0.36 , or\\$0.39 in constant currency.
Fiscal year 2015 highlights
- Consolidated revenues of
\\$1.925 billion , up 1.1% on a constant currency basis. - Adjusted operating EBIT(A) of
\\$232.8 million , down 3.7% on a constant currency basis. - Adjusted EBITDA(A) of
\\$479.9 million , down 2.1% on a constant currency basis. Adjusted EBITDA(A) margin of 24.9%. - Free cash flow(B) of
\\$150.0 million , down 20.4% on a constant currency basis. - Adjusted net income(A) per share of
\\$1.25 , or\\$1.33 in constant currency. - Returned approximately
\\$150.0 million to shareholders through share repurchases and dividends.
Management Commentary
(All amounts are in
"Our performance in the fourth quarter is in line with the outlook that we provided on
Dan Pio, Chief Executive Officer. "In the quarter, we completed two acquisitions including a platform acquisition in
Mr. Pio continued, "We expect these municipal contracts combined with our recent acquisitions to contribute to a solid revenue and EBITDA(A) performance in the first quarter of 2016. We also expect to benefit from the mild winter weather, which is resulting in unseasonably strong disposal volumes at our landfills, as well as lower fuel costs which will more than offset the impact of lower recycled commodity prices."
"We are well-positioned to enter into the previously announced business combination with
Three months ended
Reported revenues decreased
Operating income was
Adjusted amounts
Adjusted EBITDA(A) was
Year ended
For the year ended
For the year ended
Adjusted amounts
For the year ended
Pending Business Combination with
On
Additionally, pursuant to the Merger Agreement, the Company will assume certain equity incentive awards of
Subject to applicable shareholder approval and approval by the
Following completion of the Merger, the Company will change its name to "Waste Connections, Inc." and it is anticipated that the Company's common shares will trade on both the
The Merger is subject to customary closing conditions, including the approval of both companies' shareholders, U.S. antitrust approval and approval from the TSX (it is not conditional on the Company's shareholders approving the share consolidation). The Merger is expected to close in the second quarter of 2016.
A copy of the Merger Agreement has been filed with the
Progressive Waste Solutions Ltd. | |||||||||||||
Consolidated Statements of Operations and Comprehensive Income or Loss ("Statement of Operations and Comprehensive Income or Loss") | |||||||||||||
For the three months (unaudited) and years ended December 31, 2015 and 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 share and net income per share amounts) | |||||||||||||
Three months ended | Year ended | ||||||||||||
2015 | 2014(C) | 2015 | 2014(C) | ||||||||||
REVENUES | \\$ | 483,894 | \\$ | 504,569 | \\$ | 1,925,592 | \\$ | 2,008,997 | |||||
EXPENSES | |||||||||||||
OPERATING | 305,766 | 316,960 | 1,231,377 | 1,281,704 | |||||||||
SELLING, GENERAL AND ADMINISTRATION | 54,106 | 57,637 | 220,693 | 218,494 | |||||||||
RESTRUCTURING | - | - | 3,682 | - | |||||||||
AMORTIZATION | 57,912 | 74,073 | 258,403 | 285,605 | |||||||||
NET LOSS (GAIN) ON SALE OF CAPITAL AND LANDFILL ASSETS | 667 | (306 | ) | (11,279 | ) | (17,905 | ) | ||||||
OPERATING INCOME | 65,443 | 56,205 | 222,716 | 241,099 | |||||||||
INTEREST ON LONG-TERM DEBT | 13,111 | 15,483 | 57,216 | 61,917 | |||||||||
NET FOREIGN EXCHANGE (GAIN) LOSS | (768 | ) | 19 | (1,012 | ) | (150 | ) | ||||||
NET (GAIN) LOSS ON FINANCIAL INSTRUMENTS | (9,155 | ) | 16,419 | 6,992 | 24,214 | ||||||||
LOSS ON EXTINGUISHMENT OF DEBT | - | - | 2,723 | - | |||||||||
RE-MEASUREMENT GAIN ON PREVIOUSLY HELD EQUITY INVESTMENT | - | - | - | (5,156 | ) | ||||||||
INCOME BEFORE INCOME TAX EXPENSE AND NET LOSS FROM EQUITY ACCOUNTED INVESTEE | 62,255 | 24,284 | 156,797 | 160,274 | |||||||||
INCOME TAX EXPENSE | |||||||||||||
Current | 8,103 | 11,721 | 27,306 | 34,026 | |||||||||
Deferred | 8,433 | (6,368 | ) | 5,615 | (350 | ) | |||||||
16,536 | 5,353 | 32,921 | 33,676 | ||||||||||
NET LOSS FROM EQUITY ACCOUNTED INVESTEE | - | - | - | 82 | |||||||||
NET INCOME | 45,719 | 18,931 | 123,876 | 126,516 | |||||||||
OTHER COMPREHENSIVE LOSS: | |||||||||||||
Foreign currency translation adjustment | (13,316 | ) | (14,776 | ) | (73,426 | ) | (41,773 | ) | |||||
Settlement of derivatives designated as cash flow hedges, net of income tax \\$nil and \\$nil (2014 - \\$nil and (\\$225)) | - | - | - | 418 | |||||||||
- | - | - | 418 | ||||||||||
TOTAL OTHER COMPREHENSIVE LOSS | (13,316 | ) | (14,776 | ) | (73,426 | ) | (41,355 | ) | |||||
COMPREHENSIVE INCOME | \\$ | 32,403 | \\$ | 4,155 | \\$ | 50,450 | \\$ | 85,161 | |||||
Net income per weighted average share, basic and diluted | \\$ | 0.42 | \\$ | 0.17 | \\$ | 1.12 | \\$ | 1.10 | |||||
Weighted average number of shares outstanding (thousands), basic and diluted | 109,303 | 114,346 | 110,480 | 114,822 |
Progressive Waste Solutions Ltd. | |||||||
Consolidated Balance Sheets ("Balance Sheet") | |||||||
December 31, 2015 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) | |||||||
December 31, | December 31, | ||||||
2015 | 2014 | ||||||
ASSETS | |||||||
CURRENT | |||||||
Cash and cash equivalents | \\$ | 35,780 | \\$ | 41,636 | |||
Accounts receivable | 207,636 | 216,201 | |||||
Other receivables | 118 | 47 | |||||
Prepaid expenses | 31,164 | 35,589 | |||||
Income taxes recoverable | - | 1,646 | |||||
Restricted cash | 542 | 521 | |||||
275,240 | 295,640 | ||||||
NET ASSETS HELD FOR SALE | - | 61,016 | |||||
OTHER RECEIVABLES | 2,343 | 5,460 | |||||
FUNDED LANDFILL POST-CLOSURE COSTS | 10,145 | 11,365 | |||||
INTANGIBLES | 176,973 | 165,929 | |||||
GOODWILL | 886,911 | 937,294 | |||||
LANDFILL DEVELOPMENT ASSETS | 15,067 | 14,463 | |||||
DEFERRED FINANCING COSTS | 15,017 | 14,417 | |||||
CAPITAL ASSETS | 929,111 | 928,550 | |||||
LANDFILL ASSETS | 932,595 | 936,095 | |||||
INVESTMENTS | 748 | 892 | |||||
OTHER ASSETS | 759 | 5,315 | |||||
TOTAL ASSETS | \\$ | 3,244,909 | \\$ | 3,376,436 | |||
LIABILITIES | |||||||
CURRENT | |||||||
Accounts payable | \\$ | 98,614 | \\$ | 86,825 | |||
Accrued charges | 139,988 | 174,331 | |||||
Dividends payable | 13,425 | 15,517 | |||||
Income taxes payable | 3,175 | 5,933 | |||||
Deferred revenues | 16,340 | 16,323 | |||||
Current portion of long-term debt | 494 | 5,428 | |||||
Landfill closure and post-closure costs | 10,717 | 9,519 | |||||
Other liabilities | 17,394 | 16,558 | |||||
300,147 | 330,434 | ||||||
LONG-TERM DEBT | 1,550,226 | 1,552,617 | |||||
LANDFILL CLOSURE AND POST-CLOSURE COSTS | 115,195 | 120,626 | |||||
OTHER LIABILITIES | 20,474 | 17,118 | |||||
DEFERRED INCOME TAXES | 129,970 | 126,848 | |||||
TOTAL LIABILITIES | 2,116,012 | 2,147,643 | |||||
SHAREHOLDERS' EQUITY | |||||||
Common shares (authorized - unlimited, issued and outstanding - 108,806,684 (December 31, 2014 - 112,106,839)) | 1,691,963 | 1,734,372 | |||||
Restricted shares (issued and outstanding - 496,672 (December 31, 2014 - 399,228)) | (12,461 | ) | (9,184 | ) | |||
Additional paid in capital | 7,015 | 4,023 | |||||
Accumulated deficit | (360,948 | ) | (377,172 | ) | |||
Accumulated other comprehensive loss | (196,672 | ) | (123,246 | ) | |||
Total shareholders' equity | 1,128,897 | 1,228,793 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | \\$ | 3,244,909 | \\$ | 3,376,436 |
Progressive Waste Solutions Ltd. | ||||||||||||||
Consolidated Statements of Cash Flows ("Statement of Cash Flows") | ||||||||||||||
For the three months (unaudited) and years ended December 31, 2015 and 2014 (stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars) | ||||||||||||||
Three months ended | Year ended | |||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES | ||||||||||||||
OPERATING | ||||||||||||||
Net income | \\$ | 45,719 | \\$ | 18,931 | \\$ | 123,876 | \\$ | 126,516 | ||||||
Items not affecting cash | ||||||||||||||
Restricted share expense | 860 | 728 | 3,739 | 2,759 | ||||||||||
Loss on extinguishment of debt | - | - | 2,723 | - | ||||||||||
Accretion of landfill closure and post-closure costs | 1,573 | 1,518 | 6,349 | 6,132 | ||||||||||
Amortization of intangibles | 10,996 | 14,969 | 43,115 | 56,421 | ||||||||||
Amortization of capital assets | 36,605 | 40,698 | 145,928 | 152,895 | ||||||||||
Amortization of landfill assets | 10,311 | 18,406 | 69,360 | 76,289 | ||||||||||
Interest on long-term debt (amortization of deferred financing costs) | 784 | 831 | 3,101 | 3,418 | ||||||||||
Non-cash interest income | (24 | ) | (72 | ) | (194 | ) | (216 | ) | ||||||
Net loss (gain) on sale of capital and landfill assets | 667 | (306 | ) | (11,279 | ) | (17,905 | ) | |||||||
Net (gain) loss on financial instruments | (9,155 | ) | 16,419 | 6,992 | 24,214 | |||||||||
Re-measurement gain on previously held equity investment | - | - | - | (5,156 | ) | |||||||||
Deferred income taxes | 8,433 | (6,368 | ) | 5,615 | (350 | ) | ||||||||
Net loss from equity accounted investee | - | - | - | 82 | ||||||||||
Landfill closure and post-closure expenditures | (3,291 | ) | (1,293 | ) | (6,809 | ) | (4,696 | ) | ||||||
Changes in non-cash working capital items | (3,699 | ) | 12,056 | 22,499 | (20,677 | ) | ||||||||
Cash generated from operating activities | 99,779 | 116,517 | 415,015 | 399,726 | ||||||||||
INVESTING | ||||||||||||||
Acquisitions | (104,908 | ) | (67,781 | ) | (139,001 | ) | (77,698 | ) | ||||||
Restricted cash deposits | - | (1 | ) | (21 | ) | (23 | ) | |||||||
Investment in other receivables | (138 | ) | (164 | ) | (511 | ) | (253 | ) | ||||||
Proceeds from other receivables | (44 | ) | 19 | 4,766 | 76 | |||||||||
Funded landfill post-closure costs | (157 | ) | (409 | ) | (620 | ) | (1,569 | ) | ||||||
Purchase of capital assets | (36,355 | ) | (50,236 | ) | (197,897 | ) | (182,834 | ) | ||||||
Purchase of landfill assets | (16,777 | ) | (12,074 | ) | (57,545 | ) | (54,579 | ) | ||||||
Proceeds from the sale of capital and landfill assets | 3,579 | 3,467 | 6,355 | 28,528 | ||||||||||
Proceeds from asset divestiture | - | - | 76,190 | - | ||||||||||
Investment in landfill development assets | (87 | ) | (463 | ) | (2,844 | ) | (1,103 | ) | ||||||
Cash utilized in investing activities | (154,887 | ) | (127,642 | ) | (311,128 | ) | (289,455 | ) | ||||||
FINANCING | ||||||||||||||
Payment of deferred financing costs | - | - | (7,397 | ) | (48 | ) | ||||||||
Proceeds from long-term debt | 167,421 | 196,480 | 946,133 | 358,682 | ||||||||||
Repayment of long-term debt | (96,790 | ) | (84,559 | ) | (883,292 | ) | (305,339 | ) | ||||||
Proceeds from the exercise of stock options, net of related costs | - | 24 | (51 | ) | 123 | |||||||||
Repurchase of common shares and related costs | - | (69,827 | ) | (93,310 | ) | (80,770 | ) | |||||||
Purchase of, net of proceeds from, restricted shares | - | - | (4,534 | ) | (3,920 | ) | ||||||||
Dividends paid to shareholders | (13,907 | ) | (16,176 | ) | (56,296 | ) | (63,475 | ) | ||||||
Cash generated from (utilized in) financing activities | 56,724 | 25,942 | (98,747 | ) | (94,747 | ) | ||||||||
Effect of foreign currency translation on cash and cash equivalents | (460 | ) | (3,009 | ) | (10,996 | ) | (5,868 | ) | ||||||
NET CASH INFLOW (OUTFLOW) | 1,156 | 11,808 | (5,856 | ) | 9,656 | |||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OR YEAR | 34,624 | 29,828 | 41,636 | 31,980 | ||||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | \\$ | 35,780 | \\$ | 41,636 | \\$ | 35,780 | \\$ | 41,636 | ||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||||
Cash and cash equivalents are comprised of: | ||||||||||||||
Cash | \\$ | 35,779 | \\$ | 37,324 | \\$ | 35,779 | \\$ | 37,324 | ||||||
Cash equivalents | 1 | 4,312 | 1 | 4,312 | ||||||||||
\\$ | 35,780 | \\$ | 41,636 | \\$ | 35,780 | \\$ | 41,636 | |||||||
Cash paid during the period or year for: | ||||||||||||||
Income taxes | \\$ | 5,363 | \\$ | 6,085 | \\$ | 33,506 | \\$ | 35,333 | ||||||
Interest | \\$ | 13,486 | \\$ | 14,674 | \\$ | 56,870 | \\$ | 60,358 |
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 months and year ended
Three months ended | |||||||||||||||
December 31, 2014 |
December 31, 2015 |
December 31, 2015 |
December 31, 2015 |
December 31, 2015 |
|||||||||||
(as reported) (C)(E) |
(organic, acquisition and other non- operating changes) |
(holding FX constant with the comparative period) |
(FX impact) |
(as reported) |
|||||||||||
Consolidated Statement of Operations | |||||||||||||||
Revenues | \\$ | 504,569 | \\$ | 8,081 | \\$ | 512,650 | \\$ | (28,756 | ) | \\$ | 483,894 | ||||
Operating expenses | 316,960 | 4,815 | 321,775 | (16,009 | ) | 305,766 | |||||||||
Selling, general and administration | 57,637 | (265 | ) | 57,372 | (3,266 | ) | 54,106 | ||||||||
Amortization | 74,073 | (13,412 | ) | 60,661 | (2,749 | ) | 57,912 | ||||||||
Net (gain) loss on sale of capital and landfill assets | (306 | ) | 942 | 636 | 31 | 667 | |||||||||
Operating income | 56,205 | 16,001 | 72,206 | (6,763 | ) | 65,443 | |||||||||
Interest on long-term debt | 15,483 | 36 | 15,519 | (2,408 | ) | 13,111 | |||||||||
Net foreign exchange loss (gain) | 19 | (909 | ) | (890 | ) | 122 | (768 | ) | |||||||
Net loss (gain) on financial instruments | 16,419 | (27,203 | ) | (10,784 | ) | 1,629 | (9,155 | ) | |||||||
Income before net income tax expense | 24,284 | 44,077 | 68,361 | (6,106 | ) | 62,255 | |||||||||
Net income tax expense | 5,353 | 13,133 | 18,486 | (1,950 | ) | 16,536 | |||||||||
Net income | \\$ | 18,931 | \\$ | 30,944 | \\$ | 49,875 | \\$ | (4,156 | ) | \\$ | 45,719 | ||||
Adjusted EBITDA (A) | \\$ | 138,784 | \\$ | (3,562 | ) | \\$ | 135,222 | \\$ | (9,633 | ) | \\$ | 125,589 | |||
Adjusted EBITA (A) | \\$ | 79,680 | \\$ | 6,217 | \\$ | 85,897 | \\$ | (7,224 | ) | \\$ | 78,673 | ||||
Adjusted operating income or adjusted operating EBIT (A) | \\$ | 72,546 | \\$ | 1,379 | \\$ | 73,925 | \\$ | (6,915 | ) | \\$ | 67,010 | ||||
Adjusted net income (A) | \\$ | 39,857 | \\$ | 3,059 | \\$ | 42,916 | \\$ | (3,053 | ) | \\$ | 39,863 | ||||
Free cash flow (B) | \\$ | 45,779 | \\$ | (4,638 | ) | \\$ | 41,141 | \\$ | (2,983 | ) | \\$ | 38,158 |
Year ended | |||||||||||||||
December 31, 2014 |
December 31, 2015 |
December 31, 2015 |
December 31, 2015 |
December 31, 2015 |
|||||||||||
(as reported) (C)(E) |
(organic, acquisition and other non- operating changes) |
(holding FX constant with the comparative year) |
(FX impact) |
(as reported) |
|||||||||||
Consolidated Statement of Operations | |||||||||||||||
Revenues | \\$ | 2,008,997 | \\$ | 21,332 | \\$ | 2,030,329 | \\$ | (104,737 | ) | \\$ | 1,925,592 | ||||
Operating expenses | 1,281,704 | 9,558 | 1,291,262 | (59,885 | ) | 1,231,377 | |||||||||
Selling, general and administration | 218,494 | 14,922 | 233,416 | (12,723 | ) | 220,693 | |||||||||
Restructuring expenses | - | 3,894 | 3,894 | (212 | ) | 3,682 | |||||||||
Amortization | 285,605 | (14,866 | ) | 270,739 | (12,336 | ) | 258,403 | ||||||||
Net gain on sale of capital and landfill assets | (17,905 | ) | 6,274 | (11,631 | ) | 352 | (11,279 | ) | |||||||
Operating income | 241,099 | 1,550 | 242,649 | (19,933 | ) | 222,716 | |||||||||
Interest on long-term debt | 61,917 | 4,443 | 66,360 | (9,144 | ) | 57,216 | |||||||||
Net foreign exchange gain | (150 | ) | (1,021 | ) | (1,171 | ) | 159 | (1,012 | ) | ||||||
Net loss on financial instruments | 24,214 | (16,338 | ) | 7,876 | (884 | ) | 6,992 | ||||||||
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 | 160,274 | 6,243 | 166,517 | (9,720 | ) | 156,797 | |||||||||
Net income tax expense | 33,676 | 2,077 | 35,753 | (2,832 | ) | 32,921 | |||||||||
Net loss from equity accounted investee | 82 | (82 | ) | - | - | - | |||||||||
Net income | \\$ | 126,516 | \\$ | 4,248 | \\$ | 130,764 | \\$ | (6,888 | ) | \\$ | 123,876 | ||||
Adjusted EBITDA (A) | \\$ | 523,371 | \\$ | (10,793 | ) | \\$ | 512,578 | \\$ | (32,647 | ) | \\$ | 479,931 | |||
Adjusted EBITA (A) | \\$ | 294,187 | \\$ | (7,839 | ) | \\$ | 286,348 | \\$ | (21,705 | ) | \\$ | 264,643 | |||
Adjusted operating income or adjusted operating EBIT (A) | \\$ | 263,200 | \\$ | (9,731 | ) | \\$ | 253,469 | \\$ | (20,662 | ) | \\$ | 232,807 | |||
Adjusted net income (A) | \\$ | 153,076 | \\$ | (6,887 | ) | \\$ | 146,189 | \\$ | (8,305 | ) | \\$ | 137,884 | |||
Free cash flow (B) | \\$ | 198,700 | \\$ | (40,540 | ) | \\$ | 158,160 | \\$ | (8,156 | ) | \\$ | 150,004 |
Other Financial Highlights | ||||||||||||
(all amounts are in thousands of U.S. dollars, excluding per share amounts) | ||||||||||||
Three months ended | Year ended | |||||||||||
December 31 | December 31 | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Net income | \\$ | 45,719 | \\$ | 18,931 | \\$ | 123,876 | \\$ | 126,516 | ||||
Add back the following: | ||||||||||||
Net loss from equity accounted investee | - | - | - | 82 | ||||||||
Income tax expense | 16,536 | 5,353 | 32,921 | 33,676 | ||||||||
Re-measurement gain on previously held equity investment | - | - | - | (5,156 | ) | |||||||
Loss on extinguishment of debt | - | - | 2,723 | - | ||||||||
Net foreign exchange (gain) loss | (768 | ) | 19 | (1,012 | ) | (150 | ) | |||||
Net (gain) loss on financial instruments | (9,155 | ) | 16,419 | 6,992 | 24,214 | |||||||
Interest on long-term debt | 13,111 | 15,483 | 57,216 | 61,917 | ||||||||
Net loss (gain) on sale of capital and landfill assets | 667 | (306 | ) | (11,279 | ) | (17,905 | ) | |||||
Amortization | 57,912 | 74,073 | 258,403 | 285,605 | ||||||||
Transaction and related costs (recoveries) - SG&A | 566 | 322 | 1,100 | (591 | ) | |||||||
Fair value movements in stock options - SG&A* | (235 | ) | 6,398 | 97 | 9,695 | |||||||
Restricted share expense - SG&A* | 235 | 395 | 1,373 | 1,401 | ||||||||
Non-operating or non-recurring expenses - SG&A | 1,001 | 1,697 | 3,839 | 4,067 | ||||||||
Restructuring expenses | - | - | 3,682 | - | ||||||||
Adjusted EBITDA (A) | 125,589 | 138,784 | 479,931 | 523,371 | ||||||||
Less the following: | ||||||||||||
Amortization of capital and landfill assets | 46,916 | 59,104 | 215,288 | 229,184 | ||||||||
Adjusted EBITA (A) | 78,673 | 79,680 | 264,643 | 294,187 | ||||||||
Less the following: | ||||||||||||
Net loss (gain) on sale of capital and landfill assets | 667 | (306 | ) | (11,279 | ) | (17,905 | ) | |||||
Amortization of intangibles | 10,996 | 14,969 | 43,115 | 56,421 | ||||||||
Impairment of capital and intangible assets - Amortization | - | (7,529 | ) | - | (7,529 | ) | ||||||
Adjusted operating income or adjusted operating EBIT (A) | \\$ | 67,010 | \\$ | 72,546 | \\$ | 232,807 | \\$ | 263,200 | ||||
Net income | \\$ | 45,719 | \\$ | 18,931 | \\$ | 123,876 | \\$ | 126,516 | ||||
Transaction and related costs (recoveries) - SG&A | 566 | 322 | 1,100 | (591 | ) | |||||||
Fair value movements in stock options - SG&A* | (235 | ) | 6,398 | 97 | 9,695 | |||||||
Restricted share expense - SG&A* | 235 | 395 | 1,373 | 1,401 | ||||||||
Non-operating or non-recurring expenses - SG&A | 1,001 | 1,697 | 3,839 | 4,067 | ||||||||
Restructuring expenses | - | - | 3,682 | - | ||||||||
Impairment of capital and intangible assets - Amortization | - | 7,529 | - | 7,529 | ||||||||
Net (gain) loss on financial instruments | (9,155 | ) | 16,419 | 6,992 | 24,214 | |||||||
Loss on extinguishment of debt | - | - | 2,723 | - | ||||||||
Re-measurement gain on previously held equity investment | - | - | - | (5,156 | ) | |||||||
Net income tax expense (recovery) | 1,732 | (11,834 | ) | (5,798 | ) | (14,599 | ) | |||||
Adjusted net income (A) | \\$ | 39,863 | \\$ | 39,857 | \\$ | 137,884 | \\$ | 153,076 | ||||
Note: | ||||||||||||
* Amounts exclude long-term incentive plan ("LTIP") compensation. |
Adjusted net income (A) | ||||||||||||
per weighted average share, basic | \\$ | 0.36 | \\$ | 0.35 | \\$ | 1.25 | \\$ | 1.33 | ||||
Adjusted net income (A) | ||||||||||||
per weighted average share, diluted | \\$ | 0.36 | \\$ | 0.35 | \\$ | 1.25 | \\$ | 1.33 | ||||
Replacement and growth expenditures (E) | ||||||||||||
Replacement expenditures | \\$ | 46,245 | \\$ | 44,295 | \\$ | 158,058 | \\$ | 151,892 | ||||
Growth expenditures | 22,593 | 25,957 | 95,851 | 107,907 | ||||||||
Total replacement and growth expenditures | \\$ | 68,838 | \\$ | 70,252 | \\$ | 253,909 | \\$ | 259,799 | ||||
Cash flow | ||||||||||||
Cash generated from operating activities (statement of cash flows) | \\$ | 99,779 | \\$ | 116,517 | \\$ | 415,015 | \\$ | 399,726 | ||||
Free cash flow(B) | \\$ | 38,158 | \\$ | 45,779 | \\$ | 150,004 | \\$ | 198,700 | ||||
Free cash flow (B) | ||||||||||||
per weighted average share, diluted | \\$ | 0.35 | \\$ | 0.40 | \\$ | 1.36 | \\$ | 1.73 | ||||
Dividends | ||||||||||||
Dividends paid (common shares) | \\$ | 13,907 | \\$ | 16,176 | \\$ | 56,296 | \\$ | 63,475 |
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 | |||||||||||||||
December 31 | |||||||||||||||
2014 | 2015 | 2015 | |||||||||||||
(as reported) (C)(D) |
(holding FX constant with the comparative period) |
Change |
(as reported) |
Change | |||||||||||
Revenues | \\$ | 504,569 | \\$ | 512,650 | \\$ | 8,081 | \\$ | 483,894 | \\$ | (20,675 | ) | ||||
North | \\$ | 186,867 | \\$ | 191,259 | \\$ | 4,392 | \\$ | 162,503 | \\$ | (24,364 | ) | ||||
West | \\$ | 153,112 | \\$ | 166,487 | \\$ | 13,375 | \\$ | 166,487 | \\$ | 13,375 | |||||
East | \\$ | 164,590 | \\$ | 154,904 | \\$ | (9,686 | ) | \\$ | 154,904 | \\$ | (9,686 | ) | |||
Operating expenses | \\$ | 316,960 | \\$ | 321,775 | \\$ | 4,815 | \\$ | 305,766 | \\$ | (11,194 | ) | ||||
North | \\$ | 105,500 | \\$ | 106,069 | \\$ | 569 | \\$ | 90,060 | \\$ | (15,440 | ) | ||||
West | \\$ | 97,988 | \\$ | 108,975 | \\$ | 10,987 | \\$ | 108,975 | \\$ | 10,987 | |||||
East | \\$ | 113,472 | \\$ | 106,731 | \\$ | (6,741 | ) | \\$ | 106,731 | \\$ | (6,741 | ) | |||
SG&A (as reported) | \\$ | 57,637 | \\$ | 57,372 | \\$ | (265 | ) | \\$ | 54,106 | \\$ | (3,531 | ) | |||
North | \\$ | 12,015 | \\$ | 12,598 | \\$ | 583 | \\$ | 10,685 | \\$ | (1,330 | ) | ||||
West | \\$ | 13,004 | \\$ | 16,130 | \\$ | 3,126 | \\$ | 16,130 | \\$ | 3,126 | |||||
East | \\$ | 11,907 | \\$ | 14,949 | \\$ | 3,042 | \\$ | 14,949 | \\$ | 3,042 | |||||
Corporate | \\$ | 20,711 | \\$ | 13,695 | \\$ | (7,016 | ) | \\$ | 12,342 | \\$ | (8,369 | ) | |||
EBITDA (A) (as reported) | \\$ | 129,972 | \\$ | 133,503 | \\$ | 3,531 | \\$ | 124,022 | \\$ | (5,950 | ) | ||||
North | \\$ | 69,352 | \\$ | 72,592 | \\$ | 3,240 | \\$ | 61,758 | \\$ | (7,594 | ) | ||||
West | \\$ | 42,120 | \\$ | 41,382 | \\$ | (738 | ) | \\$ | 41,382 | \\$ | (738 | ) | |||
East | \\$ | 39,211 | \\$ | 33,224 | \\$ | (5,987 | ) | \\$ | 33,224 | \\$ | (5,987 | ) | |||
Corporate | \\$ | (20,711 | ) | \\$ | (13,695 | ) | \\$ | 7,016 | \\$ | (12,342 | ) | \\$ | 8,369 | ||
Adjusted SG&A | \\$ | 48,825 | \\$ | 55,653 | \\$ | 6,828 | \\$ | 52,539 | \\$ | 3,714 | |||||
North | \\$ | 12,015 | \\$ | 12,598 | \\$ | 583 | \\$ | 10,685 | \\$ | (1,330 | ) | ||||
West | \\$ | 13,004 | \\$ | 16,130 | \\$ | 3,126 | \\$ | 16,130 | \\$ | 3,126 | |||||
East | \\$ | 11,907 | \\$ | 14,949 | \\$ | 3,042 | \\$ | 14,949 | \\$ | 3,042 | |||||
Corporate | \\$ | 11,899 | \\$ | 11,976 | \\$ | 77 | \\$ | 10,775 | \\$ | (1,124 | ) | ||||
Adjusted EBITDA (A) | \\$ | 138,784 | \\$ | 135,222 | \\$ | (3,562 | ) | \\$ | 125,589 | \\$ | (13,195 | ) | |||
North | \\$ | 69,352 | \\$ | 72,592 | \\$ | 3,240 | \\$ | 61,758 | \\$ | (7,594 | ) | ||||
West | \\$ | 42,120 | \\$ | 41,382 | \\$ | (738 | ) | \\$ | 41,382 | \\$ | (738 | ) | |||
East | \\$ | 39,211 | \\$ | 33,224 | \\$ | (5,987 | ) | \\$ | 33,224 | \\$ | (5,987 | ) | |||
Corporate | \\$ | (11,899 | ) | \\$ | (11,976 | ) | \\$ | (77 | ) | \\$ | (10,775 | ) | \\$ | 1,124 | |
Year ended | |||||||||||||||
December 31 | |||||||||||||||
2014 | 2015 | 2015 | |||||||||||||
(as reported) (C)(D) |
(holding FX constant with the comparative year) |
Change |
(as reported) |
Change | |||||||||||
Revenues | \\$ | 2,008,997 | \\$ | 2,030,329 | \\$ | 21,332 | \\$ | 1,925,592 | \\$ | (83,405 | ) | ||||
North | \\$ | 745,800 | \\$ | 769,575 | \\$ | 23,775 | \\$ | 664,838 | \\$ | (80,962 | ) | ||||
West | \\$ | 602,379 | \\$ | 662,069 | \\$ | 59,690 | \\$ | 662,069 | \\$ | 59,690 | |||||
East | \\$ | 660,818 | \\$ | 598,685 | \\$ | (62,133 | ) | \\$ | 598,685 | \\$ | (62,133 | ) | |||
Operating expenses | \\$ | 1,281,704 | \\$ | 1,291,262 | \\$ | 9,558 | \\$ | 1,231,377 | \\$ | (50,327 | ) | ||||
North | \\$ | 433,390 | \\$ | 440,017 | \\$ | 6,627 | \\$ | 380,132 | \\$ | (53,258 | ) | ||||
West | \\$ | 387,352 | \\$ | 442,316 | \\$ | 54,964 | \\$ | 442,316 | \\$ | 54,964 | |||||
East | \\$ | 460,962 | \\$ | 408,929 | \\$ | (52,033 | ) | \\$ | 408,929 | \\$ | (52,033 | ) | |||
SG&A (as reported) | \\$ | 218,494 | \\$ | 233,416 | \\$ | 14,922 | \\$ | 220,693 | \\$ | 2,199 | |||||
North | \\$ | 51,163 | \\$ | 57,918 | \\$ | 6,755 | \\$ | 50,036 | \\$ | (1,127 | ) | ||||
West | \\$ | 51,654 | \\$ | 61,804 | \\$ | 10,150 | \\$ | 61,804 | \\$ | 10,150 | |||||
East | \\$ | 51,664 | \\$ | 58,843 | \\$ | 7,179 | \\$ | 58,843 | \\$ | 7,179 | |||||
Corporate | \\$ | 64,013 | \\$ | 54,851 | \\$ | (9,162 | ) | \\$ | 50,010 | \\$ | (14,003 | ) | |||
EBITDA (A) (as reported) | \\$ | 508,799 | \\$ | 505,651 | \\$ | (3,148 | ) | \\$ | 473,522 | \\$ | (35,277 | ) | |||
North | \\$ | 261,247 | \\$ | 271,640 | \\$ | 10,393 | \\$ | 234,670 | \\$ | (26,577 | ) | ||||
West | \\$ | 163,373 | \\$ | 157,949 | \\$ | (5,424 | ) | \\$ | 157,949 | \\$ | (5,424 | ) | |||
East | \\$ | 148,192 | \\$ | 130,913 | \\$ | (17,279 | ) | \\$ | 130,913 | \\$ | (17,279 | ) | |||
Corporate | \\$ | (64,013 | ) | \\$ | (54,851 | ) | \\$ | 9,162 | \\$ | (50,010 | ) | \\$ | 14,003 | ||
Adjusted SG&A | \\$ | 203,922 | \\$ | 226,489 | \\$ | 22,567 | \\$ | 214,284 | \\$ | 10,362 | |||||
North | \\$ | 51,163 | \\$ | 56,661 | \\$ | 5,498 | \\$ | 48,779 | \\$ | (2,384 | ) | ||||
West | \\$ | 51,654 | \\$ | 61,804 | \\$ | 10,150 | \\$ | 61,804 | \\$ | 10,150 | |||||
East | \\$ | 51,664 | \\$ | 58,843 | \\$ | 7,179 | \\$ | 58,843 | \\$ | 7,179 | |||||
Corporate | \\$ | 49,441 | \\$ | 49,181 | \\$ | (260 | ) | \\$ | 44,858 | \\$ | (4,583 | ) | |||
Adjusted EBITDA (A) | \\$ | 523,371 | \\$ | 512,578 | \\$ | (10,793 | ) | \\$ | 479,931 | \\$ | (43,440 | ) | |||
North | \\$ | 261,247 | \\$ | 272,897 | \\$ | 11,650 | \\$ | 235,927 | \\$ | (25,320 | ) | ||||
West | \\$ | 163,373 | \\$ | 157,949 | \\$ | (5,424 | ) | \\$ | 157,949 | \\$ | (5,424 | ) | |||
East | \\$ | 148,192 | \\$ | 130,913 | \\$ | (17,279 | ) | \\$ | 130,913 | \\$ | (17,279 | ) | |||
Corporate | \\$ | (49,441 | ) | \\$ | (49,181 | ) | \\$ | 260 | \\$ | (44,858 | ) | \\$ | 4,583 |
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 | Year ended | |||||||||||||||||||
December 31 | December 31 | |||||||||||||||||||
2015 | % | 2014 | % | 2015 | % | 2014 | % | |||||||||||||
Commercial | \\$ | 166,695 | 34.4 | \\$ | 176,188 | 34.9 | \\$ | 668,530 | 34.7 | \\$ | 704,016 | 35.0 | ||||||||
Industrial | 88,288 | 18.2 | 89,476 | 17.7 | 350,236 | 18.2 | 362,305 | 18.0 | ||||||||||||
Residential | 111,190 | 23.0 | 114,556 | 22.7 | 443,348 | 23.0 | 456,007 | 22.7 | ||||||||||||
Transfer and disposal | 159,711 | 33.0 | 170,607 | 33.8 | 635,495 | 33.0 | 691,005 | 34.4 | ||||||||||||
Recycling | 12,285 | 2.5 | 14,647 | 2.9 | 50,372 | 2.6 | 63,645 | 3.2 | ||||||||||||
Other | 15,669 | 3.2 | 13,013 | 2.6 | 55,726 | 2.9 | 42,050 | 2.1 | ||||||||||||
Gross revenues | 553,838 | 114.3 | 578,487 | 114.6 | 2,203,707 | 114.4 | 2,319,028 | 115.4 | ||||||||||||
Intercompany | (69,944 | ) | (14.3 | ) | (73,918 | ) | (14.6 | ) | (278,115 | ) | (14.4 | ) | (310,031 | ) | (15.4 | ) | ||||
Revenues | \\$ | 483,894 | 100.0 | \\$ | 504,569 | 100.0 | \\$ | 1,925,592 | 100.0 | \\$ | 2,008,997 | 100.0 |
Revenue growth or decline components - expressed in percentages and excluding FX
Three months ended December 31, 2015 |
Three months ended December 31, 2014 |
||||||||||||
Canada | U.S. | Consolidated | Canada | U.S. | Consolidated | ||||||||
Price | |||||||||||||
Price | 2.1 | 0.9 | 1.4 | 3.0 | 1.8 | 2.3 | |||||||
Fuel surcharges | (1.9 | ) | (0.6 | ) | (1.1 | ) | 0.1 | (0.2 | ) | (0.1 | ) | ||
Recycling and other | 0.1 | (0.6 | ) | (0.3 | ) | (0.3 | ) | (0.5 | ) | (0.4 | ) | ||
Total price growth (decline) | 0.3 | (0.3 | ) | - | 2.8 | 1.1 | 1.8 | ||||||
Volume | 2.1 | 2.5 | 2.3 | 2.2 | 1.2 | 1.6 | |||||||
Total organic revenue growth | 2.4 | 2.2 | 2.3 | 5.0 | 2.3 | 3.4 | |||||||
Net acquisitions | - | (1.0 | ) | (0.7 | ) | 0.2 | 0.2 | 0.2 | |||||
Total revenue growth | 2.4 | 1.2 | 1.6 | 5.2 | 2.5 | 3.6 | |||||||
Year ended December 31, 2015 |
Year ended December 31, 2014 |
||||||||||||
Canada | U.S. | Consolidated | Canada | U.S. | Consolidated | ||||||||
Price | |||||||||||||
Price | 2.3 | 1.3 | 1.7 | 2.7 | 1.7 | 2.1 | |||||||
Fuel surcharges | (1.5 | ) | (1.0 | ) | (1.2 | ) | - | (0.1 | ) | (0.1 | ) | ||
Recycling and other | (0.1 | ) | (0.8 | ) | (0.5 | ) | 0.2 | (0.2 | ) | - | |||
Total price growth (decline) | 0.7 | (0.5 | ) | - | 2.9 | 1.4 | 2.0 | ||||||
Volume | 2.5 | 1.9 | 2.1 | 0.9 | (0.6 | ) | (0.1 | ) | |||||
Total organic revenue growth | 3.2 | 1.4 | 2.1 | 3.8 | 0.8 | 1.9 | |||||||
Net acquisitions | - | (1.6 | ) | (1.0 | ) | 0.2 | (0.3 | ) | (0.1 | ) | |||
Total revenue growth (decline) | 3.2 | (0.2 | ) | 1.1 | 4.0 | 0.5 | 1.8 |
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 | Year ended | |||||||||||||||||
December 31 | December 31 | |||||||||||||||||
2015 | 2014(E) | Change | 2015 | 2014(E) | Change | |||||||||||||
Cash generated from operating activities | \\$ | 99,779 | \\$ | 116,517 | \\$ | (16,738 | ) | \\$ | 415,015 | \\$ | 399,726 | \\$ | 15,289 | |||||
Operating and investing | ||||||||||||||||||
Stock option expense* | (235 | ) | 6,398 | (6,633 | ) | 97 | 9,695 | (9,598 | ) | |||||||||
LTIP portion of restricted share expense | (625 | ) | (333 | ) | (292 | ) | (2,366 | ) | (1,358 | ) | (1,008 | ) | ||||||
Acquisition and related costs (recoveries) | 566 | 322 | 244 | 1,100 | (591 | ) | 1,691 | |||||||||||
Non-operating or non-recurring expenses | 1,001 | 1,697 | (696 | ) | 3,839 | 4,067 | (228 | ) | ||||||||||
Restructuring expenses | - | - | - | 3,682 | - | 3,682 | ||||||||||||
Changes in non-cash working capital items | 3,699 | (12,056 | ) | 15,755 | (22,499 | ) | 20,677 | (43,176 | ) | |||||||||
Capital and landfill asset purchases | (53,132 | ) | (62,310 | ) | 9,178 | (255,442 | ) | (237,413 | ) | (18,029 | ) | |||||||
Capital and landfill asset change in non-cash working capital | (15,706 | ) | (7,942 | ) | (7,764 | ) | 1,533 | (22,386 | ) | 23,919 | ||||||||
Proceeds from the sale of capital and landfill assets | 3,579 | 3,467 | 112 | 6,355 | 28,528 | (22,173 | ) | |||||||||||
Financing | ||||||||||||||||||
Purchase of restricted shares* | - | - | - | (298 | ) | (2,095 | ) | 1,797 | ||||||||||
Net realized foreign | ||||||||||||||||||
exchange (gain) loss | (768 | ) | 19 | (787 | ) | (1,012 | ) | (150 | ) | (862 | ) | |||||||
Free cash flow(B) | \\$ | 38,158 | \\$ | 45,779 | \\$ | (7,621 | ) | \\$ | 150,004 | \\$ | 198,700 | \\$ | (48,696 | ) | ||||
Note: | ||||||||||||||||||
* Amounts exclude LTIP compensation. |
Free cash flow (B) - adjusted EBITDA (A) approach
We typically calculate free cash flow(B) using an operations approach because it best reflects how we manage the business and our free cash flow(B).
Three months ended | Year ended | |||||||||||||||||
December 31 | December 31 | |||||||||||||||||
2015 | 2014(E) | Change | 2015 | 2014(E) | Change | |||||||||||||
Adjusted EBITDA(A) | \\$ | 125,589 | \\$ | 138,784 | \\$ | (13,195 | ) | \\$ | 479,931 | \\$ | 523,371 | \\$ | (43,440 | ) | ||||
Purchase of restricted shares* | - | - | - | (298 | ) | (2,095 | ) | 1,797 | ||||||||||
Capital and landfill asset purchases | (53,132 | ) | (62,310 | ) | 9,178 | (255,442 | ) | (237,413 | ) | (18,029 | ) | |||||||
Capital and landfill asset change in non-cash working capital | (15,706 | ) | (7,942 | ) | (7,764 | ) | 1,533 | (22,386 | ) | 23,919 | ||||||||
Proceeds from the sale of capital and landfill assets | 3,579 | 3,467 | 112 | 6,355 | 28,528 | (22,173 | ) | |||||||||||
Landfill closure and post-closure expenditures | (3,291 | ) | (1,293 | ) | (1,998 | ) | (6,809 | ) | (4,696 | ) | (2,113 | ) | ||||||
Landfill closure and post-closure cost accretion expense | 1,573 | 1,518 | 55 | 6,349 | 6,132 | 217 | ||||||||||||
Interest on long-term debt | (13,111 | ) | (15,483 | ) | 2,372 | (57,216 | ) | (61,917 | ) | 4,701 | ||||||||
Non-cash interest expense, net | 760 | 759 | 1 | 2,907 | 3,202 | (295 | ) | |||||||||||
Current income tax expense | (8,103 | ) | (11,721 | ) | 3,618 | (27,306 | ) | (34,026 | ) | 6,720 | ||||||||
Free cash flow(B) | \\$ | 38,158 | \\$ | 45,779 | \\$ | (7,621 | ) | \\$ | 150,004 | \\$ | 198,700 | \\$ | (48,696 | ) | ||||
Note: | ||||||||||||||||||
* Amounts exclude LTIP compensation. |
Funded debt to EBITDA (as defined and calculated in accordance with our consolidated facility)
At
Foreign Currency
(in thousands of U.S. dollars unless otherwise stated)
2015 | 2014 | |||||||||||
Consolidated Balance Sheet |
Consolidated Statement of Operations and Comprehensive Income or Loss |
Consolidated Balance Sheet |
Consolidated Statement of Operations and Comprehensive Income or Loss |
|||||||||
Current | Average |
Cumulative Average |
Current | Average | Cumulative Average |
|||||||
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 |
December 31 | \\$ | 0.7225 | \\$ | 0.7489 | \\$ | 0.7820 | \\$ | 0.8620 | \\$ | 0.8805 | \\$ | 0.9052 |
Quarterly dividend declared
The Company's Board of Directors declared a quarterly dividend of
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.
(C) 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.
Caution regarding forward looking statements
Certain statements in this press release constitute "forward-looking statements" of
Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are the following: the ability to consummate the proposed transactions; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other conditions to the consummation of the proposed combination of
All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements in this document are qualified by these cautionary statements. The forward-looking statements in this document are made as of the date of this document and
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