Date: July 27, 2010
Source: IESI-BFC Ltd.
(All amounts are in
Management Commentary
Reported revenues increased
Strong revenue growth translated into solid growth in adjusted EBITDA(A) and
operating income. Adjusted EBITDA(A) was
We also generated higher adjusted net income quarter over quarter. Adjusted
net income for the second quarter of 2010 was
Free cash flow(B) for the quarter totalled
"We achieved steady progress in the second quarter of 2010 as we continued
to improve price and volume growth across our operations," said
Mr. Carrigan continued, "We are very pleased with our financial and operating
progress in the quarter and look forward to building on our momentum, having
now completed the acquisition of
"While we will be focused for the balance of 2010 on completing the integration
of WSI and capturing the synergies available, we remain committed to identifying
opportunities for the creation of future shareholder value. With our growing
free cash flow(B) profile, we are well positioned to maintain the payment of
our regular quarterly dividend while continuing to pursue strategic and accretive
tuck-in and platform acquisitions. For example, following the close of the second
quarter we completed the tuck-in acquisition of southern
For the six months ended
For the six months ended
Financial and Other Highlights
For the Three Months Ended
Revenues increased
Adjusted EBITDA(A) increased
Adjusted EBITDA(A) margin increased 0.8%, to 29.6%
Free cash flow(B) increased
Adjusted net income per diluted share,
Core price increased 3.0% in
Volumes increased 7.2% in
For the Six Months Ended
Revenues increased
Adjusted EBITDA(A) increased
Adjusted EBITDA(A) margin increased 0.8%, to 29.2%
Free cash flow(B) increased
Adjusted net income per diluted share,
Core price increased 3.4% in
Volumes increased 8.0% in
Other Highlights for the Three and Six Months Ended
WSI Acquisition
On
We executed the transaction pursuant to our strategy of growth through acquisition. Specifically, we believe that the acquisition will provide us with the opportunity to diversify our business across U.S. and Canadian markets, customer segments and service lines. In addition, the transaction enables us to increase our internalization in the Canadian and U.S. northeast markets. We also believe that the acquisition of WSI will create annual synergies and free cash flow(B) and earnings per share accretion, which we expect will enhance short-term and long-term returns to shareholders. We plan to direct the expected additional cash flow resulting from the performance of the combined companies towards any combination of the following: growth, accretive acquisitions, debt reduction or dividend payments.
In connection with our acquisition of WSI, we issued 27,971 thousand of our
common shares representing 0.5833 of our shares for each WSI common stock issued
and outstanding on
In addition, we assumed WSI's unexercised and outstanding options and warrants on closing. Accordingly, we are obligated to issue a maximum of 505 thousand common shares as a result of the WSI stock option plans assumed and 194 thousand common shares on our assumption of WSI's unexercised and outstanding warrants.
As outlined in the "Long-term debt" section of this press release, we amended
and restated our long-term debt facilities in
Other Acquisitions
In the second quarter, we also completed one tuck-in acquisition in each of
our U.S. south and northeast segments. We also completed an acquisition on
2010 Outlook
We provided our updated outlook for 2010 which includes WSI, several tuck-in
acquisitions completed in the first and second quarters of 2010 and the SWDI
acquisition we completed on
The outlook provided below is forward looking. Our actual results may differ materially and are subject to risks and uncertainties which are outlined in the forward-looking statements section of this press release.
Revenue is estimated to be in a range of
Adjusted EBITDA(A) is estimated to be in a range of
Amortization expense, as a percentage of revenue, is estimated to be in a range of 14.5% to 15.0%
Capital and landfill expenditures are estimated to be in a range of
The effective tax rate is estimated to be around 37.5% to 38.5% of income before income tax expense and net loss from equity accounted investee
Cash taxes are estimated to be between
Free cash flow(B) is estimated to be in a range of
Expected annual cash dividend of
Financial Highlights
(in thousands of U.S. dollars, except per weighted average share amounts, unless otherwise stated)
Three months ended June Six months ended June
30 30
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
Operating results
Revenues $ 299,582 $ 253,700 $ 563,624 $ 477,593
Operating expenses 174,568 148,597 325,637 279,774
Selling, general and
administration ("SG&A") 41,187 32,600 80,978 62,677
Amortization 43,096 41,154 82,613 78,756
Net (gain) loss on sale of
capital and landfill assets (369) 19 (431) (115)
----------------------------------------------------------------------------
Operating income 41,100 31,330 74,827 56,501
Interest on long-term debt 8,244 8,766 16,181 18,395
Net foreign exchange loss 24 93 54 177
Net gain on financial
instruments (1,208) (1,701) (1,750) (1,171)
Conversion costs - 115 - 115
Other expenses 34 35 58 65
----------------------------------------------------------------------------
Income before income tax
expense and net loss from
equity accounted investee 34,006 24,022 60,284 38,920
Income tax expense 14,150 8,917 23,693 14,176
Net loss from equity
accounted investee 21 - 46 -
----------------------------------------------------------------------------
Net income $ 19,835 $ 15,105 $ 36,545 $ 24,744
----------------------------------------------------------------------------
Net income per weighted
average share, basic $ 0.21 $ 0.19 $ 0.39 $ 0.33
Net income per weighted
average share, diluted $ 0.21 $ 0.18 $ 0.39 $ 0.32
Weighted average number of
shares outstanding
(thousands), basic 82,383 70,809 82,363 65,414
Weighted average number of
shares outstanding
(thousands), diluted 93,431 81,946 93,431 76,551
Adjusted EBITDA(A) $ 88,598 $ 73,070 $ 164,539 $ 135,726
Adjusted operating income $ 45,871 $ 31,897 $ 82,357 $ 57,085
Adjusted net income $ 23,342 $ 14,628 $ 42,010 $ 24,661
Adjusted net income per
weighted average share,
basic $ 0.25 $ 0.18 $ 0.45 $ 0.33
Adjusted net income per
weighted average share,
diluted $ 0.25 $ 0.18 $ 0.45 $ 0.32
Replacement and growth
expenditures (see page 16)
Replacement expenditures $ 19,943 $ 16,983 $ 31,842 $ 29,772
Growth expenditures 8,578 22,234 16,762 29,942
----------------------------------------------------------------------------
Total replacement and growth
expenditures $ 28,521 $ 39,217 $ 48,604 $ 59,714
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating and free cash
flow(B)
Cash generated from
operating activities $ 81,196 $ 66,456 $ 125,236 $ 116,052
Free cash flow(B) $ 44,166 $ 21,476 $ 86,026 $ 52,100
Free cash flow(B) per
weighted average share,
diluted $ 0.47 $ 0.26 $ 0.92 $ 0.68
Dividends
Dividends declared (shares) $ 10,014 $ 17,495 $ 19,907 $ 31,014
Dividends declared
(participating preferred
shares ("PPSs")) 1,350 2,381 2,677 4,617
----------------------------------------------------------------------------
Total dividends declared $ 11,364 $ 19,876 $ 22,584 $ 35,631
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FX Rates
Our consolidated financial position and operating results have been translated
to U.S. dollars applying the FX rates included in the table below. FX rates
are expressed as the amount of U.S. dollars required to purchase
2010
----------------------------------------------------------------------
Condensed Condensed Consolidated
Consolidated Statement of Operations and
Balance Sheet Comprehensive Income
----------------------------------------------------------------------
Cumulative
Current Average Average
----------------------------------------------------------------------
December 31
March 31 $ 0.9846 $ 0.9607 $ 0.9607
June 30 $ 0.9429 $ 0.9731 $ 0.9669
2009
-----------------------------------------------------------------------
Condensed Condensed Consolidated
Consolidated Statement of Operations and
Balance Sheet Comprehensive Income
-----------------------------------------------------------------------
Cumulative
Current Average Average
-----------------------------------------------------------------------
December 31 $ 0.9555 $ 0.8760
March 31 $ 0.7935 $ 0.8030 $ 0.8030
June 30 $ 0.8602 $ 0.8568 $ 0.8290
FX Impact on Consolidated Results
The following tables have been prepared to assist readers in assessing the
impact of FX on select consolidated results for the three and six months ended
Three months ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
June 30, June 30, June 30, June 30, June 30,
2009 2010 2010 2010 2010
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
(organic,
acquisition (holding FX
and other constant
non- with the
(as operating comparative (as
reported) changes) period) (FX impact) reported)
----------------------------------------------------------------------------
Condensed
Consolidated
Statement of
Operations
Revenues $ 253,700 $ 31,269 $ 284,969 $ 14,613 $ 299,582
Operating
expenses 148,597 18,315 166,912 7,656 174,568
SG&A 32,600 6,125 38,725 2,462 41,187
Amortization 41,154 (6) 41,148 1,948 43,096
Net loss (gain)
on sale of
capital and
landfill assets 19 (337) (318) (51) (369)
----------------------------------------------------------------------------
Operating income 31,330 7,172 38,502 2,598 41,100
Interest on
long-term debt 8,766 (726) 8,040 204 8,244
Net foreign
exchange loss 93 (69) 24 - 24
Net gain on
financial
instruments (1,701) 457 (1,244) 36 (1,208)
Conversion costs 115 (115) - - -
Other expenses 35 (1) 34 - 34
----------------------------------------------------------------------------
Income before
net income tax
expense and net
loss from
equity
accounted
investee 24,022 7,626 31,648 2,358 34,006
Net income tax
expense 8,917 4,292 13,209 941 14,150
Net loss from
equity
accounted
investee - 18 18 3 21
----------------------------------------------------------------------------
Net income $ 15,105 $ 3,316 $ 18,421 $ 1,414 $ 19,835
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted
EBITDA(A) $ 73,070 $ 10,442 $ 83,512 $ 5,086 $ 88,598
Adjusted
operating
income(A) $ 31,897 $ 10,784 $ 42,681 $ 3,190 $ 45,871
Adjusted net
income(A) $ 14,628 $ 5,830 $ 20,458 $ 2,884 $ 23,342
Free cash
flow(B) $ 21,476 $ 19,214 $ 40,690 $ 3,476 $ 44,166
Six months ended
----------------------------------------------------------------------------
June 30, June 30, June 30, June 30, June 30,
2009 2010 2010 2010 2010
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
(organic,
acquisition (holding FX
and other constant
non- with the
(as operating comparative (as
reported) changes) period) (FX impact) reported)
----------------------------------------------------------------------------
Condensed
Consolidated
Statement of
Operations
Revenues $ 477,593 $ 54,989 $ 532,582 $ 31,042 $ 563,624
Operating
expenses 279,774 29,952 309,726 15,911 325,637
SG&A 62,677 13,011 75,688 5,290 80,978
Amortization 78,756 (476) 78,280 4,333 82,613
Net gain on sale
of capital and
landfill assets (115) (263) (378) (53) (431)
----------------------------------------------------------------------------
Operating income 56,501 12,765 69,266 5,561 74,827
Interest on
long-term debt 18,395 (2,876) 15,519 662 16,181
Net foreign
exchange loss 177 (124) 53 1 54
Net gain on
financial
instruments (1,171) (662) (1,833) 83 (1,750)
Conversion costs 115 (115) - - -
Other expenses 65 (7) 58 - 58
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income before
net income tax
expense and net
loss from
equity
accounted
investee 38,920 16,549 55,469 4,815 60,284
Net income tax
expense 14,176 7,891 22,067 1,626 23,693
Net loss from
equity
accounted
investee - 39 39 7 46
----------------------------------------------------------------------------
Net income $ 24,744 $ 8,619 $ 33,363 $ 3,182 $ 36,545
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted
EBITDA(A) $ 135,726 $ 17,968 $ 153,694 $ 10,845 $ 164,539
Adjusted
operating
income(A) $ 57,085 $ 18,707 $ 75,792 $ 6,565 $ 82,357
Adjusted net
income(A) $ 24,661 $ 11,629 $ 36,290 $ 5,720 $ 42,010
Free cash
flow(B) $ 52,100 $ 27,539 $ 79,639 $ 6,387 $ 86,026
Management's Discussion
(all amounts are in thousands of U.S. dollars, unless otherwise stated)
Segment Highlights
Three months ended June 30
----------------------------------------------------------------------------
2009 2010 Change 2010 Change
---------------------------------------------------------------------------
(2010
holding FX
constant
(holding FX with the (2010 as
constant with comparative reported
the period less less 2009
(as comparative 2009 as (as as
reported) period) reported) reported) reported)
----------------------------------------------------------------------------
Revenues $ 253,700 $ 284,969 $ 31,269 $ 299,582 $ 45,882
----------------------------------------------------------------------------
Canada $ 87,188 $ 103,084 $ 15,896 $ 117,697 $ 30,509
U.S. south $ 83,899 $ 93,406 $ 9,507 $ 93,406 $ 9,507
U.S. northeast $ 82,613 $ 88,479 $ 5,866 $ 88,479 $ 5,866
Operating
expenses $ 148,597 $ 166,912 $ 18,315 $ 174,568 $ 25,971
----------------------------------------------------------------------------
Canada $ 44,987 $ 53,683 $ 8,696 $ 61,339 $ 16,352
U.S. south $ 52,015 $ 57,325 $ 5,310 $ 57,325 $ 5,310
U.S. northeast $ 51,595 $ 55,904 $ 4,309 $ 55,904 $ 4,309
SG&A (as
reported) $ 32,600 $ 38,725 $ 6,125 $ 41,187 $ 8,587
----------------------------------------------------------------------------
Canada $ 11,617 $ 17,423 $ 5,806 $ 19,885 $ 8,268
U.S. south $ 11,165 $ 11,939 $ 774 $ 11,939 $ 774
U.S. northeast $ 9,818 $ 9,363 $ (455)$ 9,363 $ (455)
EBITDA(A)(as
reported) $ 72,503 $ 79,332 $ 6,829 $ 83,827 $ 11,324
----------------------------------------------------------------------------
Canada $ 30,584 $ 31,978 $ 1,394 $ 36,473 $ 5,889
U.S. south $ 20,719 $ 24,142 $ 3,423 $ 24,142 $ 3,423
U.S. northeast $ 21,200 $ 23,212 $ 2,012 $ 23,212 $ 2,012
Adjusted SG&A $ 32,033 $ 34,545 $ 2,512 $ 36,416 $ 4,383
----------------------------------------------------------------------------
Canada $ 11,050 $ 13,485 $ 2,435 $ 15,356 $ 4,306
U.S. south $ 11,165 $ 11,825 $ 660 $ 11,825 $ 660
U.S. northeast $ 9,818 $ 9,235 $ (583)$ 9,235 $ (583)
Adjusted
EBITDA(A) $ 73,070 $ 83,512 $ 10,442 $ 88,598 $ 15,528
----------------------------------------------------------------------------
Canada $ 31,151 $ 35,916 $ 4,765 $ 41,002 $ 9,851
U.S. south $ 20,719 $ 24,256 $ 3,537 $ 24,256 $ 3,537
U.S. northeast $ 21,200 $ 23,340 $ 2,140 $ 23,340 $ 2,140
Six months ended June 30
----------------------------------------------------------------------------
2009 2010 Change 2010 Change
----------------------------------------------------------------------------
(2010 holding
FX constant
(holding FX with the (2010 as
constant with comparative reported
the period less less 2009
(as comparative 2009 as as
reported) period) reported)(as reported) reported)
----------------------------------------------------------------------------
Revenues $ 477,593 $ 532,582 $ 54,989 $ 563,624 $ 86,031
----------------------------------------------------------------------------
Canada $ 158,171 $ 186,750 $ 28,579 $ 217,792 $ 59,621
U.S. south $ 163,946 $ 181,206 $ 17,260 $ 181,206 $ 17,260
U.S. northeast $ 155,476 $ 164,626 $ 9,150 $ 164,626 $ 9,150
Operating
expenses $ 279,774 $ 309,726 $ 29,952 $ 325,637 $ 45,863
----------------------------------------------------------------------------
Canada $ 81,875 $ 95,723 $ 13,848 $ 111,634 $ 29,759
U.S. south $ 99,837 $ 110,392 $ 10,555 $ 110,392 $ 10,555
U.S. northeast $ 98,062 $ 103,611 $ 5,549 $ 103,611 $ 5,549
SG&A (as
reported) $ 62,677 $ 75,688 $ 13,011 $ 80,978 $ 18,301
----------------------------------------------------------------------------
Canada $ 21,755 $ 31,824 $ 10,069 $ 37,114 $ 15,359
U.S. south $ 22,298 $ 24,491 $ 2,193 $ 24,491 $ 2,193
U.S. northeast $ 18,624 $ 19,373 $ 749 $ 19,373 $ 749
EBITDA(A)(as
reported) $ 135,142 $ 147,168 $ 12,026 $ 157,009 $ 21,867
----------------------------------------------------------------------------
Canada $ 54,541 $ 59,203 $ 4,662 $ 69,044 $ 14,503
U.S. south $ 41,811 $ 46,323 $ 4,512 $ 46,323 $ 4,512
U.S. northeast $ 38,790 $ 41,642 $ 2,852 $ 41,642 $ 2,852
Adjusted SG&A $ 62,093 $ 69,162 $ 7,069 $ 73,448 $ 11,355
----------------------------------------------------------------------------
Canada $ 21,171 $ 25,785 $ 4,614 $ 30,071 $ 8,900
U.S. south $ 22,298 $ 24,243 $ 1,945 $ 24,243 $ 1,945
U.S. northeast $ 18,624 $ 19,134 $ 510 $ 19,134 $ 510
Adjusted
EBITDA(A) $ 135,726 $ 153,694 $ 17,968 $ 164,539 $ 28,813
----------------------------------------------------------------------------
Canada $ 55,125 $ 65,242 $ 10,117 $ 76,087 $ 20,962
U.S. south $ 41,811 $ 46,571 $ 4,760 $ 46,571 $ 4,760
U.S. northeast $ 38,790 $ 41,881 $ 3,091 $ 41,881 $ 3,091
Revenues
Gross revenue by service type
Three months ended June 30, 2010
----------------------------------------------------------------------------
Canada - stated
in thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 48,895 34.8 $ 49,048 23.4
Industrial 24,081 17.1 27,881 13.3
Residential 19,687 14.0 43,406 20.7
Transfer and
disposal 40,235 28.6 76,838 36.6
Recycling and other 7,747 5.5 12,535 6.0
----------------------------------------------------------------------------
Gross revenues 140,645 100.0 209,708 100.0
Intercompany (19,579) (27,823)
----------------------------------------------------------------------------
Revenues $ 121,066 $ 181,885
----------------------------------------------------------------------------
Three months ended June 30, 2009
----------------------------------------------------------------------------
Canada - stated
in thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars ((i)) gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 41,672 35.4 $ 46,130 23.7
Industrial 20,030 17.1 26,557 13.7
Residential 17,684 15.1 38,908 20.1
Transfer and
disposal 33,899 28.9 74,192 38.3
Recycling and other 4,124 3.5 8,048 4.2
----------------------------------------------------------------------------
Gross revenues 117,409 100.0 193,835 100.0
Intercompany (15,019) (27,323)
----------------------------------------------------------------------------
Revenues $ 102,390 $ 166,512
----------------------------------------------------------------------------
((i)) amounts have been adjusted to conform to the current period
presentation.
Six months ended June 30, 2010
----------------------------------------------------------------------------
Canada - stated
in thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 94,152 36.4 $ 97,335 24.4
Industrial 43,316 16.7 51,641 13.0
Residential 36,267 14.0 87,094 21.9
Transfer and
disposal 69,965 27.0 139,434 35.0
Recycling and other 15,203 5.9 22,761 5.7
----------------------------------------------------------------------------
Gross revenues 258,903 100.0 398,265 100.0
Intercompany (33,646) (52,433)
----------------------------------------------------------------------------
Revenues $ 225,257 $ 345,832
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended June 30, 2009
----------------------------------------------------------------------------
Canada - stated
in thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars ((i)) gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 81,768 37.6 $ 92,025 24.8
Industrial 37,117 17.0 51,662 13.9
Residential 32,680 15.0 76,833 20.7
Transfer and
disposal 57,827 26.6 135,696 36.6
Recycling and other 8,360 3.8 14,631 4.0
----------------------------------------------------------------------------
Gross revenues 217,752 100.0 370,847 100.0
Intercompany (26,966) (51,425)
----------------------------------------------------------------------------
Revenues $ 190,786 $ 319,422
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross revenue growth or decline components - expressed in percentages and excluding FX
Three months ended June 30, Three months ended June 30,
2010 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Price
Core price 3.0 2.0 3.3 2.4
Fuel
surcharges 0.9 0.4 (1.1) (3.0)
Recycling
and other 0.9 1.1 (0.4) (2.4)
----------------------------------------------------------------------------
Total price
growth
(decline) 4.8 3.5 1.8 (3.0)
Volume 7.2 3.4 (1.1) (4.4)
----------------------------------------------------------------------------
Total organic
gross
revenue
growth
(decline) 12.0 6.9 0.7 (7.4)
Acquisitions 7.8 1.3 1.5 2.1
----------------------------------------------------------------------------
Total gross
revenue
growth
(decline) 19.8 8.2 2.2 (5.3)
----------------------------------------------------------------------------
Six months ended June 30, 2010 Six months ended June 30, 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Price
Core price 3.4 1.8 3.5 2.6
Fuel
surcharges 0.9 0.1 (0.8) (2.1)
Recycling
and other 1.2 1.4 (0.6) (2.5)
----------------------------------------------------------------------------
Total price
growth
(decline) 5.5 3.3 2.1 (2.0)
Volume 8.0 2.3 (1.6) (4.4)
----------------------------------------------------------------------------
Total organic
gross
revenue
growth
(decline) 13.5 5.6 0.5 (6.4)
Acquisitions 5.4 1.8 2.5 2.1
----------------------------------------------------------------------------
Total gross
revenue
growth
(decline) 18.9 7.4 3.0 (4.3)
----------------------------------------------------------------------------
Three months ended
We generated price and volume growth in all our service offerings in
We realized pricing growth in all of our service lines in our U.S. south segment, with the exception of our industrial line which was largely unchanged. Volumes were especially strong in our collection lines, which includes commercial, industrial and residential. Higher volumes in this segment's collection lines translated to strong gross revenue growth which was only slightly offset by revenue declines attributable to lower landfill and recycling volumes. As in our Canadian segment, the commodity price rebound drove the increase in recycling revenue growth. Acquisitions completed in 2009 and 2010 and higher fuel surcharges resulting from higher diesel fuel prices, contributed to the remainder of the comparative increase.
Gross revenues in our U.S. northeast segment increased. As in the first quarter of the year, core price declined at our landfills period over period. All other service lines enjoyed higher price, or pricing that was largely unchanged, over the year ago period. The return of commodity pricing also contributed to overall pricing growth for this segment. Higher comparative landfill volumes delivered strong improvements to gross revenue growth, as did volume improvements in our industrial service line, which together more than offset volume declines in all other service lines. Marginally higher fuel surcharges and acquisitions contributed to the balance of our gross revenue growth.
Six months ended
The increase in our Canadian segment gross revenues is attributable to total price, volume and acquisition growth. The reasons for these increases are consistent with those outlined above for the three months ended.
U.S. south segment gross revenues increased. On a year-to-date basis, pricing growth was strong. As outlined for the three months ended, higher pricing contributed to gross revenue growth in all service lines with the exception of industrial and residential pricing which was down slightly. Year-to-date volume improvements are consistent with those outlined for the three months ended and in total delivered a strong contribution to overall gross revenue growth. Acquisitions and recycled material prices also contributed to gross revenue growth, while fuel surcharges were principally unchanged period-to-period.
Gross revenues in our U.S. northeast segment increased. On a year-to-date basis, gross revenue growth benefited from strong year over year pricing in our northeast segment. Lower landfill pricing was the only service line that experienced a decline year-to-date. Attracting volumes at our landfills in combination with the mix of waste materials received is the primary cause for the decline. The return of commodity pricing has made a significant contribution to year-to-date revenue growth. As outlined for the three months ended, higher volumes also contributed to overall gross revenue growth. Volume growth was most pronounced in our landfill and industrial lines. Inclement weather in the first quarter of the year impacted year-to-date volume growth, however we are encouraged by the volume improvements we are realizing in our collection lines. Acquisitions and marginally higher fuel prices also contributed to year-to-date gross revenue growth.
Operating expenses
Three months ended
Excluding the impact of FX, the Canadian segment increase is attributable to higher third party disposal costs, labour and vehicle operating costs. Acquisitions and higher collected waste volumes, partially offset by higher internalized waste, are the primary contributors to the increase in disposal costs. In addition, acquisitions, general wage increases and higher collected waste volumes all contributed to the comparative increase in labour costs. Higher vehicle operating costs are attributable to acquisitions and an increase in diesel fuel consumed to collect and process higher waste volumes.
Operating costs in our U.S. south segment increased period-to-period due to higher labour and vehicle operating costs. Organic growth, including contract wins, and acquisitions are the primary reasons for the comparative increases in both expense categories. General wage increases and higher collected waste volumes also contributed to the comparative increase in labour costs. The increase in vehicle operating costs was due in part to higher diesel fuel costs. Disposal costs were also higher period over period.
In the U.S. northeast, operating costs increased. Higher labour costs are the result of acquisitions and contractual and general wage increases. Commodity rebates are also higher than the comparative period. The return of higher commodity pricing is the primary cause for the increase in rebates. Vehicle operating and disposal costs increased. Acquisitions and organic growth were the primary contributors to these increases. A rise in comparative fuel costs was also a contributing factor to the increase in vehicle operating costs.
Six months ended
As outlined above, for the three months ended, higher disposal, labour and vehicle operating costs attributable to organic and acquisition growth are the primary contributors to the year-to-date increase for our Canadian segment.
Year-to-date our U.S. south segment increases are consistent with those highlighted above for the three months ended. Our U.S. northeast segment increase is comprised of commodity rebates, labour and vehicle operating costs and the reasons for the increases are consistent with those outlined above.
SG&A expenses
Three months ended
Excluding the impact of FX, Canadian segment SG&A expense increased. The majority of the increase is due to transaction and related costs and fair value changes to stock options. The remainder of the change is due to higher salaries, resulting from a higher compliment of sales personnel and general wage increases, and higher professional fees.
Higher salaries and facility and office costs are the primary cause of the quarter over quarter increase in SG&A expense for our U.S. south segment. The comparative increase is largely attributable to acquisitions and new contract wins.
The U.S. northeast segment decline is due to a decline in other SG&A expenses none of which were significant individually or in aggregate.
Six months ended
Changes in SG&A expense for the six months ended are consistent with the reasons outlined above for the three months ended for all segments.
WSI Review of Operations - For the three and six months ended
(all amounts are in thousands of U.S. dollars, unless otherwise stated)
Readers are reminded that we completed the acquisition of WSI on
Three months ended June 30, 2010
------------------------------------------------------------------------
Canada U.S. Total
------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
Revenues $ 67,496 $ 59,867 $ 127,363
Operating expenses $ 43,340 $ 34,824 $ 78,164
SG&A (as reported) $ 12,525 $ 10,240 $ 22,765
Less: stock based
compensation (4,636) (2,604) (7,240)
Less: transaction costs (173) (1,044) (1,217)
------------------------------------------------------------------------
SG&A (adjusted) $ 7,716 $ 6,592 $ 14,308
Three months ended June 30, 2009
-------------------------------------------------------------------------
Canada U.S. Total
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
Revenues $ 56,748 $ 50,737 $ 107,485
Operating expenses $ 37,944 $ 31,540 $ 69,484
SG&A (as reported) $ 6,419 $ 6,321 $ 12,740
Less: stock based
compensation (346) (238) (584)
Less: transaction costs - - -
-------------------------------------------------------------------------
SG&A (adjusted) $ 6,073 $ 6,083 $ 12,156
Six months ended June 30, 2010
------------------------------------------------------------------------
Canada U.S. Total
------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
Revenues $ 128,322 $ 118,434 $ 246,756
Operating expenses $ 81,129 $ 69,775 $ 150,904
SG&A (as reported) $ 20,701 $ 19,322 $ 40,023
Less: stock based
compensation (5,324) (3,424) (8,748)
Less: transaction costs (260) (2,250) (2,510)
------------------------------------------------------------------------
SG&A (adjusted) $ 15,117 $ 13,648 $ 28,765
Six months ended June 30, 2009
------------------------------------------------------------------------
Canada U.S. Total
------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
Revenues $ 102,297 $ 100,980 $ 203,277
Operating expenses $ 69,177 $ 63,515 $ 132,692
SG&A (as reported) $ 13,182 $ 12,767 $ 25,949
Less: stock based
compensation (1,071) (681) (1,752)
Less: transaction costs - - -
------------------------------------------------------------------------
SG&A (adjusted) $ 12,111 $ 12,086 $ 24,197
WSI - Revenues
Gross revenues by service type
Three months ended June 30, 2010
----------------------------------------------------------------------------
Canada -
stated in
thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 27,831 35.7 $ 24,481 35.6
Industrial 14,120 18.1 11,240 16.4
Residential 14,599 18.7 10,330 15.0
Transfer and disposal 17,340 22.2 20,585 29.9
Recycling and other 4,169 5.3 2,112 3.1
----------------------------------------------------------------------------
Gross revenues 78,059 100.0 68,748 100.0
Intercompany (8,619) (8,881)
----------------------------------------------------------------------------
Revenues $ 69,440 $ 59,867
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended June 30, 2009
----------------------------------------------------------------------------
Canada -
stated in
thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 28,178 38.1 $ 18,206 32.2
Industrial 14,961 20.2 11,183 19.8
Residential 14,342 19.4 11,635 20.6
Transfer and disposal 15,039 20.4 14,401 25.5
Recycling and other 1,435 1.9 1,099 1.9
----------------------------------------------------------------------------
Gross revenues 73,955 100.0 56,524 100.0
Intercompany (7,305) (5,787)
----------------------------------------------------------------------------
Revenues $ 66,650 $ 50,737
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended June 30, 2010
----------------------------------------------------------------------------
Canada -
stated in
thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 54,180 36.5 $ 48,715 36.0
Industrial 26,723 17.9 22,330 16.5
Residential 27,383 18.4 21,098 15.6
Transfer and disposal 33,238 22.3 39,277 28.9
Recycling and other 7,359 4.9 4,028 3.0
----------------------------------------------------------------------------
Gross revenues 148,883 100.0 135,448 100.0
Intercompany (16,182) (17,014)
----------------------------------------------------------------------------
Revenues $ 132,701 $ 118,434
----------------------------------------------------------------------------
Six months ended June 30, 2009
----------------------------------------------------------------------------
Canada -
stated in
thousands of Canada - U.S. -
Canadian percentage of percentage of
dollars gross revenue U.S. gross revenue
----------------------------------------------------------------------------
Commercial $ 55,098 40.2 $ 36,151 32.2
Industrial 27,067 19.7 22,408 20.0
Residential 26,114 19.0 23,462 20.9
Transfer and disposal 26,358 19.2 28,306 25.1
Recycling and other 2,552 1.9 1,971 1.8
----------------------------------------------------------------------------
Gross revenues 137,189 100.0 112,298 100.0
Intercompany (13,851) (11,318)
----------------------------------------------------------------------------
Revenues $ 123,338 $ 100,980
----------------------------------------------------------------------------
WSI's price, volume and total revenue growth or decline, excluding FX, expressed
as a percentage of reportable revenue for the three and six months ended
Three months ended Three months ended
June 30, 2010 June 30, 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Price
Core price 2.7 3.0 3.9 4.3
Fuel surcharges 0.5 1.4 (3.3) (6.2)
Recycling and other 0.5 1.9 (0.3) (1.1)
----------------------------------------------------------------------------
Total price growth
(decline) 3.7 6.3 0.3 (3.0)
Volume (0.7) (0.6) (2.5) (14.3)
----------------------------------------------------------------------------
Total organic revenue growth
(decline) 3.0 5.7 (2.2) (17.3)
Acquisitions 1.2 12.3 - 0.8
----------------------------------------------------------------------------
Total revenue growth
(decline) 4.2 18.0 (2.2) (16.5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended June Six months ended June
30, 2010 30, 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Price
Core price 3.9 2.8 4.0 3.9
Fuel surcharges 0.4 1.3 (2.6) (5.2)
Recycling and other 0.7 1.6 (0.4) (1.2)
----------------------------------------------------------------------------
Total price growth
(decline) 5.0 5.7 1.0 (2.5)
Volume 1.5 (0.2) (2.3) (14.8)
---------------------------------------------------------------------------
Total organic revenue growth
(decline) 6.5 5.5 (1.3) (17.3)
Acquisitions 1.1 11.8 - 0.8
----------------------------------------------------------------------------
Total revenue growth
(decline) 7.6 17.3 (1.3) (16.5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended
Gross revenues for WSI's Canadian operations increased. With the exception of collection volumes, gross revenue growth benefited from higher transfer, landfill and recycling volumes. Higher pricing, including improved commodity pricing, and acquisitions, also contributed to the increase in gross revenues.
WSI's U.S. operations delivered gross revenue gains period over period. Higher pricing and acquisitions both contributed to gross revenue growth. Lower collection volumes were partially offset by higher volumes from landfill, transfer and recycling service lines. Improvements in commodity pricing and an increase in fuel surcharges resulting from higher diesel fuel costs were also contributing factors in second quarter gross revenue growth.
Six months ended
Comparative collection volume shortfalls were partially offset by strong volume growth from WSI's transfer, landfill and recycling service lines. Higher pricing, including commodity pricing and fuel surcharges, coupled with acquisitions also drove gross revenues higher comparatively.
Year-to-date, WSI's U.S. operations realized gross revenue growth. Comparative volume declines in the collection service line were easily offset by strong growth from acquisitions, volumes in all other service lines, and pricing, including commodity pricing and fuel surcharges.
WSI - Operating expenses
Three months ended
Operating costs increased for WSI's Canadian operations. Excluding the impact of FX, operating costs were largely unchanged period-to-period. Lower third-party disposal costs resulting from higher internalized waste volumes, were partially offset by higher labour and diesel fuel costs.
WSI's U.S. operations turned in a period over period increase as a result of higher third-party disposal costs, coupled with higher labour and fuel costs. Recently completed acquisitions are the primary reason for these increases.
Six months ended
Excluding the impact of FX, operating costs increased for WSI's Canadian operations. As outlined above for the three months ended, the most significant changes are due to higher internalized waste volumes which contributed to lower third-party disposal costs, while higher labour and diesel fuel costs offset this decline. Other operating costs are the root cause for the remainder of the change and the cause of the increase. However, other operating costs are neither significant in isolation nor in total.
On a year-to-date basis, WSI's U.S. operating costs increased. Recently completed acquisitions are the primary reason for the rise in third-party disposal costs, labour and fuel costs.
WSI - SG&A
Three months ended
The accelerated vesting of share based payments incurred in connection with
WSI's sale to
SG&A expense for WSI's U.S. operations increased period over period. As
outlined in the WSI Canadian operations discussion, WSI's U.S. operations recorded
an additional expense related to the accelerated vesting of share based payments.
Transaction costs, related principally to WSI's sale to
Six months ended
Year-to-date, WSI's Canadian and U.S. operations experienced SG&A expense increases. Higher stock based compensation and transaction costs contributed to the comparative increase in Canadian and U.S. SG&A expense. FX also contributed to the rise in SG&A expense for WSI's Canadian operations.
Free cash flow(B)
Readers are further reminded that we completed the acquisition of WSI on
Purpose and objective
The purpose of presenting this non-GAAP measure is to align our disclosure with other U.S. publicly listed companies in our industry. Investors and analysts use this calculation as a 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 and debt repayment.
Our calculation of free cash flow(B) previously included transaction and related and non-recurring costs. Comparative free cash flow(B) amounts have been adjusted to conform to the current period presentation.
Free cash flow(B) - cash flow approach
Three months ended June 30 Six months ended June 30
----------------------------------------------------------------------------
2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Cash generated
from operating
activities (from
statement of
cash flows) $ 81,196 $ 66,456 $14,740 $125,236 $116,052 $ 9,184
----------------------------------------------------------------------------
Operating
Stock option
expense 2,679 567 2,112 3,440 584 2,856
Acquisition and
related costs 2,092 - 2,092 4,090 - 4,090
Conversion costs - 115 (115) - 115 (115)
Other expenses 34 35 (1) 58 65 (7)
Changes in non-
cash working
capital items (13,338) (6,324) (7,014) 1,752 (4,930) 6,682
Capital and
landfill asset
purchases (28,521) (39,217) 10,696 (48,604) (59,714) 11,110
Financing
Financing and
landfill
development
costs (net of
non-cash
portion) - (77) 77 - (77) 77
Purchase of
restricted
shares - (172) 172 - (172) 172
Net realized
foreign exchange
loss 24 93 (69) 54 177 (123)
----------------------------------------------------------------------------
Free cash flow(B) $ 44,166 $ 21,476 $22,690 $ 86,026 $ 52,100 $ 33,926
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Free cash flow(B) - adjusted EBITDA(A) approach
Three months ended June 30 Six months ended June 30
----------------------------------------------------------------------------
2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Adjusted
EBITDA(A) $ 88,598 $ 73,070 $15,528 $164,539 $135,726 $ 28,813
----------------------------------------------------------------------------
Restricted share
expense 417 359 58 830 691 139
Purchase of
restricted
shares - (172) 172 - (172) 172
Capital and
landfill asset
purchases (28,521) (39,217) 10,696 (48,604) (59,714) 11,110
Landfill closure
and post-closure
expenditures (1,167) (1,129) (38) (1,552) (2,355) 803
Landfill closure
and post-closure
cost accretion
expense 882 775 107 1,762 1,517 245
Interest on long-
term debt (8,244) (8,766) 522 (16,181) (18,395) 2,214
Non-cash interest
expense 716 795 (79) 1,425 1,545 (120)
Current income
tax expense (8,515) (4,239) (4,276) (16,193) (6,743) (9,450)
----------------------------------------------------------------------------
Free cash flow(B) $ 44,166 $ 21,476 $22,690 $ 86,026 $ 52,100 $ 33,926
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended
Free cash flow(B) increased period over period. We generated significant improvements
to adjusted EBITDA(A) resulting from strong revenue growth. Lower interest rates
and lower total debt levels also contributed to the increase in free cash flow(B)
period over period as did lower capital and landfill asset purchases. These
contributions were partially offset by higher cash taxes in
Six months ended
For the six months ended, free cash flow(B) increased. As outlined above for the three months ended, strong revenue growth contributed to the increase in adjusted EBITDA(A), which in combination with lower capital and landfill expenditures and lower interest expense, partially offset by higher current income tax expense, represent the primary contributors to the improvement.
Capital and landfill purchases
Capital and landfill purchases characterized as replacement and growth expenditures are as follows:
Three months ended June 30 Six months ended June 30
----------------------------------------------------------------------------
2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Replacement $ 19,943 $ 16,983 $ 2,960 $ 31,842 $ 29,772 $ 2,070
Growth 8,578 22,234 (13,656) 16,762 29,942 (13,180)
----------------------------------------------------------------------------
Total $ 28,521 $ 39,217 $ (10,696) $ 48,604 $ 59,714 $ (11,110)
----------------------------------------------------------------------------
Capital and landfill purchases - replacement
Capital and landfill purchases characterized as "replacement" expenditures represent cash outlays to sustain current cash flows and are funded from free cash flow(B). Replacement expenditures include the replacement of existing capital assets and all construction spending at our landfills.
Three months ended
Excluding the impact of FX, replacement expenditures increased. The U.S. and Canadian segments both contributed to the increase. The U.S. segment increase is a function of higher capital asset spending for vehicles and containers, partially offset by a decline in replacement spending at our landfills. The timing of landfill cell construction is the primary reason for this decline. The increase in our U.S. segment capital asset spend is due to a combination of timing, a larger comparative compliment of capital assets, and targeting the purchase of more capital assets in light of lower landfill spending. The Canadian segment increase is due to capital asset spending attributable to a larger compliment of assets and the timing of spend, partially offset by a decline in landfill assets spending which is due to the timing of landfill construction.
Six months ended
Excluding the impact of FX, replacement expenditures increased. The U.S. segment contributed to the increase, partially offset by the Canadian segment decline. The U.S. segment increase is a function of higher capital asset spending for vehicles and containers, partially offset by a decline in replacement spending at our U.S. landfills. The timing of landfill cell construction is the primary reason for this decline. The increase in our U.S. segment capital asset spend is due to a combination of timing, a larger comparative compliment of capital assets, and targeting the purchase of more capital assets in light of lower landfill spending. The Canadian segment decrease is due to the timing of landfill construction, partially offset by an increase in capital asset spending attributable to a larger compliment of assets and the timing of spend.
Capital and landfill purchases - growth
Capital and landfill purchases characterized as "growth" expenditures represent cash outlays to generate new or future cash flows and are generally funded from free cash flow(B). Growth expenditures include capital assets, including facilities (new or expansion), to support new contract wins and organic business growth.
Three months ended
Excluding the impact of FX, growth expenditures decreased. The decline in current period growth spending is the result of lower vehicle and equipment purchases to service new contracts commencing in the current quarter than those incurred in the comparative quarter a year ago.
Six months ended
Net of foreign currency exchange, growth expenditures in total declined. Growth expenditures in the U.S. declined on a year-to-date basis due to fewer contract wins. Canadian growth expenditures also contributed to the comparative decline. Residential contract wins in the comparative period and the purchase of vehicles to service those contracts, is the primary reason for the Canadian decline in growth expenditures.
Readers are reminded that revenue, adjusted EBITDA(A), and cash flow contributions derived from growth expenditures will materialize over future periods.
Long-term debt
(all amounts are in thousands of U.S. dollars, unless otherwise stated)
Summary details of our long-term debt facilities at
Letters of
credit (not
reported as
long-term debt
on the
Condensed
Available Facility Consolidated Available
lending drawn Balance Sheet) capacity
----------------------------------------------------------------------------
Canadian long-term debt
facilities - stated in
Canadian dollars
Senior secured
debenture, series B $ 58,000 $ 58,000 $ - $ -
Revolving credit
facility $ 305,000 $ 213,000 $ 39,872 $ 52,128
U.S. long-term debt
facilities - stated in
U.S. dollars
Term loan $ 195,000 $ 195,000 $ - $ -
Revolving credit
facility $ 588,500 $ 97,500 $ 128,088 $ 362,912
Variable rate demand
solid waste disposal
revenue bonds
("IRBs")(1) $ 194,000 $ 109,000 $ - $ 85,000
----------------------------------------------------------------------------
Note:
(1) Drawings on IRB availability at floating rates of interest, will, under
the terms of the underlying agreement, typically be used to repay revolving
credit advances on our U.S. facility and requires us to issue letters of
credit for an amount equal to the IRB amounts drawn.
Funded debt to EBITDA (as defined and calculated in accordance with our Canadian and U.S. long-term debt facilities)
At
June 30, 2010 December 31, 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Funded debt
to EBITDA 1.93 2.34 1.92 2.56
Funded debt
to EBITDA
maximum 2.75 4.00 2.75 4.00
Changes to long-term debt occurring in conjunction with the acquisition of WSI
Closing Agreements
On
On
Canadian facility
On
Pricing on advances drawn under the facility increased by 125 basis points when our funded debt to EBITDA ratio is in excess of 2.0 times, and by 100 basis points when our funded debt to EBITDA ratio is below 2.0 times. The Canadian facility also introduced new pricing layers for funded debt to EBITDA positions below 1.0 times and in excess of 2.5 times. Pricing ranges from 112.5 to 237.5 basis points over bank prime for borrowings on prime and 212.5 to 337.5 basis points over bankers' acceptances ("BAs") for borrowings on BAs. Pricing on financial letters of credit increased by similar amounts and pricing ranges from 212.5 basis points to 337.5 basis points. Standby fees increased by 32.5 basis points, and range from 55 to 85 basis points, while non-financial letters of credit increased by approximately 82.5 basis points.
Security under the Canadian facility remained largely unchanged, and represents a first priority perfected security interest over all personal and real property of the Canadian operating companies and a pledge of the Canadian operating entities equity held by the Canadian parent.
On
Canadian Trust Indenture
On
U.S. facility
On
Pricing on advances drawn under the facility increased by 125 basis points for LIBOR rate advances at all pricing levels and by 150 to 200 basis points for bank prime advances. Pricing ranges from 250 to 325 basis points over LIBOR for borrowings on LIBOR and 150 to 225 basis points over bank prime for prime rate advances. Pricing on financial letters of credit increased by similar amounts and pricing ranges from 212.5 basis points to 337.5 basis points. Standby fees were largely unchanged and range from 37.5 to 62.5 basis points, while letters of credit increased by approximately 125 basis points.
Security under the U.S. facility remained relatively unchanged, and represents a first priority perfected security interest over all personal and real property of the U.S. operating companies and a pledge of the U.S. operating entities equity held by the U.S. parent.
On
Long-term debt to pro forma adjusted EBITDA(A)
On the closing of the WSI acquisition, and including other completed acquisitions, our pro forma adjusted EBITDA(A) ratio prepared on a combined basis, assuming FX parity, is approximately 2.6 times.
Changes to long-term debt in the period ended
Canadian long-term debt facilities
In the first quarter of 2010, we borrowed
U.S. long-term debt facilities
In the first and second quarters, we repaid
Long-term debt to adjusted EBITDA(A)
At
Definitions of Adjusted EBITDA and Free cash flow
(A) All references to "Adjusted EBITDA" in this press release are to revenues less operating expense and SG&A, excluding certain non-operating or non-recurring SG&A expense, on the condensed consolidated statement of operations and comprehensive income. Adjusted EBITDA excludes some or all of the following: "certain SG&A expenses, 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, conversion costs, other expenses, income taxes and net 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 issuers. 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 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 for investee) or non-operating (in the case of certain SG&A expenses, net gain or loss on sale of capital and landfill assets, interest on long-term debt, conversion costs, 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, or non-recurring, expenses. These expenses include transaction costs related to acquisitions and fair value adjustments attributable to stock options. 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.
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 and landfill assets - proceeds from the sale of capital and landfill assets are either reinvested in additional or replacement capital or landfill 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).
Conversion costs - conversion costs represent professional fees incurred on the Fund's conversion from an income trust to a corporation and its eventual wind-up. These expenses are not considered an expense indicative of continuing operations. Conversion costs represent a different class of expense than those included in adjusted EBITDA.
Other expenses - other expenses typically represent amounts paid to certain management of acquired companies who are retained by us post acquisition. 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).
Adjusted EBITDA should not be construed as a measure of income or of cash flows. The reconciling items between adjusted EBITDA and net income are detailed in the condensed consolidated statement of operations and comprehensive income or loss beginning with operating income before amortization and net gain on sale of capital and landfill assets and ending with net income and includes certain adjustments for expenses recorded to SG&A which management views as not being indicative of continuing operations. The reconciliation between operating income and adjusted EBITDA is provided below. Adjusted operating income and adjusted net income are also presented in the reconciliation below.
Three months ended June
30 Six months ended June 30
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Operating
income $ 41,100 $ 31,330 $ 74,827 $ 56,501
Transaction and related
costs - SG&A 2,092 - 4,090 -
Fair value movements in
stock options - SG&A 2,679 567 3,440 584
----------------------------------------------------------------------------
Adjusted operating income 45,871 31,897 82,357 57,085
----------------------------------------------------------------------------
Net gain or loss on sale
of capital and landfill
assets (369) 19 (431) (115)
Amortization 43,096 41,154 82,613 78,756
----------------------------------------------------------------------------
Adjusted
EBITDA $ 88,598 $ 73,070 $ 164,539 $ 135,726
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income $ 19,835 $ 15,105 $ 36,545 $ 24,744
Transaction and related
costs - SG&A 2,092 - 4,090 -
Conversion
costs - 115 - 115
Fair value movements in
stock options - SG&A 2,679 567 3,440 584
Net gain or loss on
financial instruments (1,208) (1,701) (1,750) (1,171)
Net income tax expense or
recovery (56) 542 (315) 389
----------------------------------------------------------------------------
Adjusted net income $ 23,342 $ 14,628 $ 42,010 $ 24,661
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(B) We have adopted a measure called "free cash flow" to supplement net income or loss as a measure of operating performance. Free cash flow is a term which does not have a standardized meaning prescribed by U.S. GAAP, is prepared before dividends and or distributions declared, and is therefore unlikely to be comparable to similar measures used by other issuers. The objective of presenting this non-GAAP measure is to provide similar disclosures to other U.S. publicly listed companies in the waste industry. We use this non-GAAP measure to assess our performance relative to other publicly listed companies and to assess the availability of funds for growth investment and debt repayment. All references to "free cash flow" in this press release have the meaning set out in this note.
Forward-Looking Statements
This communication includes "forward-looking statements" within the meaning
of the safe harbor provisions of the United States Private Securities Litigation
Reform Act of 1995 and applicable Canadian securities legislation. Words such
as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend,"
"plan," "may," "will," "could," "should," "believes," "predicts," "potential,"
"continue," and similar expressions are intended to identify such forward-looking
statements. These forward-looking statements may include, without limitation,
These forward-looking statements involve significant risks and uncertainties
that could cause actual results to differ materially from the expected results.
Most of these factors are outside our control and difficult to predict. The
following factors, among others, could cause or contribute to such material
differences: the ability to realize the expected synergies resulting from the
transaction in the amounts or in the timeframe anticipated; and the ability
to integrate WSI's businesses into those of
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Condensed Consolidated Balance Sheets
June 30, 2010 (unaudited) andDecember 31, 2009 (stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars) ---------------------------------------------------------------------------- June 30, 2010 December 31, 2009 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents $ 8,212 $ 4,991 Accounts receivable 131,127 111,839 Other receivables 478 546 Prepaid expenses 17,922 18,276 Restricted cash 425 382 Other assets - 770 ---------------------------------------------------------------------------- 158,164 136,804 OTHER RECEIVABLES 982 1,213 FUNDED LANDFILL POST-CLOSURE COSTS 8,180 8,102 INTANGIBLES 109,465 100,917 GOODWILL 640,308 630,470 LANDFILL DEVELOPMENT ASSETS 8,510 7,677 DEFERRED FINANCING COSTS 9,962 9,358 CAPITAL ASSETS 448,867 439,734 LANDFILL ASSETS 644,936 661,738 INVESTMENT IN EQUITY ACCOUNTED INVESTEE 3,155 - OTHER ASSETS 80 1,574 ---------------------------------------------------------------------------- $ 2,032,609 $ 1,997,587 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES CURRENT Accounts payable $ 59,607 $ 62,753 Accrued charges 76,044 70,572 Dividends payable 11,012 11,159 Income taxes payable 14,370 6,278 Deferred revenues 13,443 13,156 Landfill closure and post- closure costs 5,248 6,622 Other liabilities 6,412 8,312 ---------------------------------------------------------------------------- 186,136 178,852 LONG-TERM DEBT 657,016 654,992 LANDFILL CLOSURE AND POST- CLOSURE COSTS 68,559 63,086 OTHER LIABILITIES 6,152 3,611 DEFERRED INCOME TAXES 88,275 81,500 ---------------------------------------------------------------------------- 1,006,138 982,041 ---------------------------------------------------------------------------- EQUITY NON-CONTROLLING INTEREST 230,302 230,014 SHAREHOLDERS' EQUITY Common shares 1,083,839 1,082,950 Restricted shares (3,928) (3,928) Paid in capital 2,948 2,118 Deficit (202,582) (214,898) Accumulated other comprehensive loss (84,108) (80,710) ---------------------------------------------------------------------------- Total shareholders' equity 796,169 785,532 ---------------------------------------------------------------------------- Total equity 1,026,471 1,015,546 ---------------------------------------------------------------------------- $ 2,032,609 $ 1,997,587 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Condensed Consolidated Statements of Operations and Comprehensive Income
For the three and six months endedJune 30, 2010 and 2009 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars, except net income per share amounts) ---------------------------------------------------------------------------- Three months ended Six months ended ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- REVENUES $ 299,582 $ 253,700 $ 563,624 $ 477,593 EXPENSES OPERATING 174,568 148,597 325,637 279,774 SG&A 41,187 32,600 80,978 62,677 AMORTIZATION 43,096 41,154 82,613 78,756 NET (GAIN) LOSS ON SALE OF CAPITAL AND LANDFILL ASSETS (369) 19 (431) (115) ---------------------------------------------------------------------------- OPERATING INCOME 41,100 31,330 74,827 56,501 INTEREST ON LONG-TERM DEBT 8,244 8,766 16,181 18,395 NET FOREIGN EXCHANGE LOSS 24 93 54 177 NET GAIN ON FINANCIAL INSTRUMENTS (1,208) (1,701) (1,750) (1,171) CONVERSION COSTS - 115 - 115 OTHER EXPENSES 34 35 58 65 ---------------------------------------------------------------------------- INCOME BEFORE INCOME TAX EXPENSE AND NET LOSS FROM EQUITY ACCOUNTED INVESTEE 34,006 24,022 60,284 38,920 INCOME TAX EXPENSE Current 8,515 4,239 16,193 6,743 Deferred 5,635 4,678 7,500 7,433 ---------------------------------------------------------------------------- 14,150 8,917 23,693 14,176 NET LOSS FROM EQUITY ACCOUNTED INVESTEE 21 - 46 - ---------------------------------------------------------------------------- NET INCOME 19,835 15,105 36,545 24,744 ---------------------------------------------------------------------------- OTHER COMPREHENSIVE (LOSS) INCOME Foreign currency translation adjustment (7,752) 12,525 (2,405) 7,643 Commodity swaps designated as cash flow hedges, net of income tax (1,506) 755 (1,339) 903 Settlement of commodity swaps designated as cash flow hedges, net of income tax (14) (21) (110) (21) ---------------------------------------------------------------------------- COMPREHENSIVE INCOME $ 10,563 $ 28,364 $ 32,691 $ 33,269 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- NET INCOME - CONTROLLING INTEREST $ 17,489 $ 13,267 $ 32,223 $ 21,538 NET INCOME - NON- CONTROLLING INTEREST $ 2,346 $ 1,838 $ 4,322 $ 3,206 COMPREHENSIVE INCOME - CONTROLLING INTEREST $ 9,313 $ 24,749 $ 28,825 $ 28,958 COMPREHENSIVE INCOME - NON-CONTROLLING INTEREST$ 1,250 $ 3,615 $ 3,866 $ 4,311 Net income per weighted average share, basic $ 0.21 $ 0.19 $ 0.39 $ 0.33 Net income per weighted average share, diluted $ 0.21 $ 0.18 $ 0.39 $ 0.32 Weighted average number of shares outstanding (thousands), basic 82,383 70,809 82,363 65,414 Weighted average number of shares outstanding (thousands), diluted 93,431 81,946 93,431 76,551 - IESI-BFC Ltd. - Condensed Consolidated Statements of Cash Flows - - For the three and six months endedJune 30, 2010 and 2009 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars) ---------------------------------------------------------------------------- Three months ended Six months ended ---------------------------------------------------------------------------- 2010 2009 2010 2009 ---------------------------------------------------------------------------- NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES OPERATING Net income $ 19,835 $ 15,105 $ 36,545 $ 24,744 Items not affecting cash Restricted share expense 417 359 830 691 Write-off of landfill development assets - 77 - 77 Accretion of landfill closure and post-closure costs 882 775 1,762 1,517 Amortization of intangibles 6,225 7,275 13,282 14,509 Amortization of capital assets 19,972 18,693 39,039 37,004 Amortization of landfill assets 16,899 15,186 30,292 27,243 Interest on long-term debt (deferred financing costs) 716 795 1,425 1,545 Net (gain) loss on sale of capital and landfill assets (369) 19 (431) (115) Net gain on financial instruments (1,208) (1,701) (1,750) (1,171) Deferred income taxes 5,635 4,678 7,500 7,433 Net loss from equity accounted investee 21 - 46 - Landfill closure and post- closure expenditures (1,167) (1,129) (1,552) (2,355) Changes in non-cash working capital items 13,338 6,324 (1,752) 4,930 ---------------------------------------------------------------------------- Cash generated from operating activities 81,196 66,456 125,236 116,052 ---------------------------------------------------------------------------- INVESTING Acquisitions (1,488) (20,406) (53,935) (20,640) Restricted cash deposits (43) - (43) - Restricted cash withdrawals - - - 82 Investment in other receivables - (41) - (1,278) Proceeds from other receivables 145 113 284 225 Funded landfill post-closure costs (75) (302) (85) (381) Purchase of capital assets (20,757) (25,181) (34,659) (37,840) Purchase of landfill assets (7,764) (14,036) (13,945) (21,874) Proceeds from the sale of capital and landfill assets 626 188 690 3,603 Investment in landfill development assets (678) (192) (942) (439) ---------------------------------------------------------------------------- Cash utilized in investing activities (30,034) (59,857) (102,635) (78,542) ---------------------------------------------------------------------------- FINANCING Payment of deferred financing costs (2,064) (190) (2,065) (498) Proceeds from long-term debt 19,097 90,365 99,865 116,774 Repayment of long-term debt (55,134) (218,423) (94,025) (346,384) Common shares issued, net of issue costs (6) 138,726 (12) 209,684 Purchase of restricted shares or trust units - (172) - (172) Dividends paid to share and participating preferred shareholders (11,364) (16,714) (22,584) (18,640) ---------------------------------------------------------------------------- Cash utilized in financing activities (49,471) (6,408) (18,821) (39,236) Effect of foreign currency translation on cash and cash equivalents (901) 1,419 (559) 918 ---------------------------------------------------------------------------- NET CASH INFLOW (OUTFLOW) 790 1,610 3,221 (808) ---------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OR YEAR 7,422 9,520 4,991 11,938 ---------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,212 $ 11,130 $ 8,212 $ 11,130 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- SUPPLEMENTAL CASH FLOW INFORMATION: Cash and cash equivalents are comprised of: Cash $ 7,269 $ 10,046 $ 7,269 $ 10,046 Cash equivalents 943 1,084 943 1,084 ---------------------------------------------------------------------------- $ 8,212 $ 11,130 $ 8,212 $ 11,130 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Cash paid during the period for: Income taxes $ 2,581 $ 2,927 $ 6,421 $ 2,562 Interest $ 7,456 $ 10,102 $ 15,857 $ 19,613
For more information, contact:
Director, Investor Relations and Corporate Communications
(416) 401-7729
chaya.cooperberg@bficanada.com.
www.iesi-bfc.com.
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