Date: October 26, 2010
Source: IESI-BFC Ltd.
(All amounts are in thousands of
Management Commentary
Reported revenues increased
Excluding the impact of FX, organic gross revenue, which includes intercompany
revenues, grew 6.5% in
Strong revenue growth translated into strong adjusted EBITDA(A) and operating
income growth. Adjusted EBITDA(A) was
We also generated higher adjusted net income quarter over quarter. Adjusted
net income for the third quarter of 2010 was
Free cash flow(B) for the quarter totalled
"The third quarter brought about a significant change to our Company's operating
and financial profile with our successful acquisition of WSI," said
Mr. Carrigan continued, "The Canadian government mandated divestiture of certain WSI assets has proceeded very well. We divested of assets in two markets in the quarter and a third shortly after the quarters' end. Proceeds from the sale of these assets were used to pay down debt. We expect to complete the sale of the remaining assets prior to the end of this year".
"Our goal for the balance of 2010 is to remain focused on realizing the synergies from our acquisition of WSI and to continue to improve our combined business, which will include further strategic "tuck-in" acquisitions. We like where we are today and we like our prospects for the future. We view our blend of a strong balance sheet, strong free cash flows(B), the strategic compliment of assets and a great management team and employee base, as being the attributes necessary for continued success."
For the nine months ended
For the nine months ended
Financial and Other Highlights
For the Three Months Ended
Revenues increased
Revenues increased
Adjusted EBITDA(A) increased
Adjusted EBITDA(A) margin, on a reported basis, was 29.0%
Free cash flow(B) increased
Free cash flow(B) yield of 14.5%
Adjusted net income per diluted share,
Core price increased 2.7% in
Volumes increased 4.2% in
For the Nine Months Ended
Revenues increased
Revenues increased
Adjusted EBITDA(A) increased
Adjusted EBITDA(A) margin, on a reported basis, was 29.1%
Free cash flow(B) increased
Free cash flow(B) yield of 14.9%
Adjusted net income per diluted share,
Core price increased 3.3% in
Volumes increased 5.4% in
Other Highlights for the Three and Nine 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 of our common
shares representing 0.5833 of our shares for each WSI common stock that was
issued by WSI and outstanding on
As outlined in the "Long-term debt" section of this press release, we amended
and restated our long-term debt facilities in
On the closing of the WSI acquisition, we expected our pro forma adjusted
EBITDA(A) ratio, prepared on a combined basis and assuming FX parity, to be
approximately 2.7 times. However this ratio on closing was approximately 2.6
times. As of
Other Acquisitions
In the third quarter, we also completed six "tuck-in" acquisitions, of which
five were in our U.S. south segment and one was in our northeast segment. These
"tuck- in" acquisitions included SWDI, for which consideration was approximately
2010 Outlook
We provided our updated outlook for 2010 in our second quarter earnings release
which remains unchanged. Our outlook included the acquisition of WSI, several
"tuck-in" acquisitions completed in the first and second quarters of 2010 and
the
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 Reporting Changes
We announced that for the interim period ending
In connection with our acquisition of WSI on
Financial Highlights
(in thousands of U.S. dollars, except per weighted average share amounts,
unless otherwise stated)
Three months ended Nine months ended
September 30 September 30
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
Operating results
Revenues $ 436,262 $ 268,411 $ 999,886 $ 746,004
Operating
expenses 259,075 156,195 584,712 435,969
Selling, general
and
administration
("SG&A") 55,701 33,272 136,679 95,949
Restructuring
expenses 3,792 - 3,792 -
Amortization 62,790 41,946 145,403 120,702
Net loss (gain)
on sale of
capital and
landfill assets 50 (13) (381) (128)
----------------------------------------------------------------------------
Operating income 54,854 37,011 129,681 93,512
Interest on long-
term debt 17,783 7,851 33,964 26,246
Net foreign
exchange (gain)
loss (40) 61 14 238
Net (gain) loss
on financial
instruments (1,498) 305 (3,248) (866)
Conversion costs - 93 - 208
Other expenses 586 44 644 109
----------------------------------------------------------------------------
Income before
income tax
expense and net
loss from equity
accounted
investee 38,023 28,657 98,307 67,577
Income tax
expense 14,012 9,548 37,705 23,724
Net loss from
equity accounted
investee 70 - 116 -
----------------------------------------------------------------------------
Net income $ 23,941 $ 19,109 $ 60,486 $ 43,853
----------------------------------------------------------------------------
Net income per
weighted average
share, basic $ 0.20 $ 0.20 $ 0.59 $ 0.54
Net income per
weighted average
share, diluted $ 0.20 $ 0.20 $ 0.59 $ 0.53
Weighted average
number of shares
outstanding
(thousands),
basic 109,866 82,294 91,632 71,102
Weighted average
number of shares
outstanding
(thousands),
diluted 120,914 93,431 102,692 82,239
Adjusted
EBITDA(A) $ 126,300 $ 79,360 $ 290,839 $ 215,086
Adjusted
operating income $ 63,460 $ 37,427 $ 145,817 $ 94,512
Adjusted net
income $ 31,710 $ 19,819 $ 73,720 $ 44,480
Adjusted net
income per
weighted average
share, basic $ 0.26 $ 0.21 $ 0.72 $ 0.54
Adjusted net
income per
weighted average
share, diluted $ 0.26 $ 0.21 $ 0.72 $ 0.54
Replacement and
growth
expenditures
(see page 13)
Replacement
expenditures $ 25,317 $ 19,322 $ 57,159 $ 49,094
Growth
expenditures 10,690 8,839 27,452 38,781
----------------------------------------------------------------------------
Total replacement
and growth
expenditures $ 36,007 $ 28,161 $ 84,611 $ 87,875
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Free cash flow(B)
Free cash flow(B) $ 63,250 $ 38,504 $ 149,276 $ 90,604
Free cash flow(B)
per weighted
average share,
diluted $ 0.52 $ 0.41 $ 1.45 $ 1.10
Dividends
Dividends
declared
(shares) $ 13,318 $ 16,793 $ 33,225 $ 38,331
Dividends
declared
(participating
preferred shares
("PPSs")) 1,329 2,316 4,006 5,522
----------------------------------------------------------------------------
Total dividends
declared $ 14,647 $ 19,109 $ 37,231 $ 43,853
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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
September 30 $ 0.9711 $ 0.9624 $ 0.9654
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
September 30 $ 0.9327 $ 0.9113 $ 0.8547
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 nine months ended
Three months ended
----------------------------------------------------------------------------
September 30, September September 30,
2009 30, 2010 2010
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
(organic,
acquisition and (holding FX
other non- constant with
operating the comparative
(as reported) changes) period)
----------------------------------------------------------------------------
Condensed Consolidated
Statement of
Operations
Revenues $ 268,411 $ 152,757 $ 421,168
Operating expenses 156,195 94,204 250,399
SG&A 33,272 20,485 53,757
Restructuring costs - 3,409 3,409
Amortization 41,946 18,953 60,899
Net (gain) loss on
sale of capital and
landfill assets (13) 52 39
----------------------------------------------------------------------------
Operating income 37,011 15,654 52,665
Interest on long-term
debt 7,851 9,477 17,328
Net foreign exchange
loss (gain) 61 (92) (31)
Net loss (gain) on
financial instruments 305 (1,756) (1,451)
Conversion costs 93 (93) -
Other expenses 44 522 566
----------------------------------------------------------------------------
Income before net
income tax expense
and net loss from
equity accounted
investee 28,657 7,596 36,253
Net income tax expense 9,548 3,849 13,397
Net loss from equity
accounted investee - 64 64
----------------------------------------------------------------------------
Net income $ 19,109 $ 3,683 $ 22,792
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA(A) $ 79,360 $ 42,155 $ 121,515
Adjusted operating
income(A) $ 37,427 $ 23,345 $ 60,772
Adjusted net income(A) $ 19,819 $ 9,123 $ 28,942
Free cash flow(B) $ 38,504 $ 21,809 $ 60,313
Three months ended
---------------------------------------------------------
September September
30, 2010 30, 2010
---------------------------------------------------------
(unaudited) (unaudited)
---------------------------------------------------------
(FX impact) (as reported)
---------------------------------------------------------
Condensed Consolidated
Statement of
Operations
Revenues $ 15,094 $ 436,262
Operating expenses 8,676 259,075
SG&A 1,944 55,701
Restructuring costs 383 3,792
Amortization 1,891 62,790
Net (gain) loss on
sale of capital and
landfill assets 11 50
---------------------------------------------------------
Operating income 2,189 54,854
Interest on long-term
debt 455 17,783
Net foreign exchange
loss (gain) (9) (40)
Net loss (gain) on
financial instruments (47) (1,498)
Conversion costs - -
Other expenses 20 586
---------------------------------------------------------
Income before net
income tax expense
and net loss from
equity accounted
investee 1,770 38,023
Net income tax expense 615 14,012
Net loss from equity
accounted investee 6 70
---------------------------------------------------------
Net income $ 1,149 $ 23,941
---------------------------------------------------------
---------------------------------------------------------
Adjusted EBITDA(A) $ 4,785 $ 126,300
Adjusted operating
income(A) $ 2,688 $ 63,460
Adjusted net income(A) $ 2,768 $ 31,710
Free cash flow(B) $ 2,937 $ 63,250
Nine months ended
----------------------------------------------------------------------------
September 30, September 30, September 30,
2009 2010 2010
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
(organic, (holding FX
acquisition and constant with
other non- the
operating comparative
(as reported) changes) period)
----------------------------------------------------------------------------
Condensed Consolidated
Statement of
Operations
Revenues $ 746,004 $ 207,746 $ 953,750
Operating expenses 435,969 124,156 560,125
SG&A 95,949 33,496 129,445
Restructuring costs - 3,409 3,409
Amortization 120,702 18,477 139,179
Net gain on sale of
capital and landfill
assets (128) (211) (339)
----------------------------------------------------------------------------
Operating income 93,512 28,419 121,931
Interest on long-term
debt 26,246 6,601 32,847
Net foreign exchange
loss 238 (216) 22
Net gain on financial
instruments (866) (2,418) (3,284)
Conversion costs 208 (208) -
Other expenses 109 515 624
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income before net
income tax expense
and net loss from
equity accounted
investee 67,577 24,145 91,722
Net income tax expense 23,724 11,740 35,464
Net loss from equity
accounted investee - 103 103
----------------------------------------------------------------------------
Net income $ 43,853 $ 12,302 $ 56,155
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA(A) $ 215,086 $ 60,123 $ 275,209
Adjusted operating
income(A) $ 94,512 $ 42,052 $ 136,564
Adjusted net income(A) $ 44,480 $ 21,259 $ 65,739
Free cash flow(B) $ 90,604 $ 49,312 $ 139,916
Nine months ended
---------------------------------------------------------
September 30, September 30,
2010 2010
---------------------------------------------------------
(unaudited) (unaudited)
---------------------------------------------------------
(FX impact) (as reported)
---------------------------------------------------------
Condensed Consolidated
Statement of
Operations
Revenues $ 46,136 $ 999,886
Operating expenses 24,587 584,712
SG&A 7,234 136,679
Restructuring costs 383 3,792
Amortization 6,224 145,403
Net gain on sale of
capital and landfill
assets (42) (381)
---------------------------------------------------------
Operating income 7,750 129,681
Interest on long-term
debt 1,117 33,964
Net foreign exchange
loss (8) 14
Net gain on financial
instruments 36 (3,248)
Conversion costs - -
Other expenses 20 644
---------------------------------------------------------
---------------------------------------------------------
Income before net
income tax expense
and net loss from
equity accounted
investee 6,585 98,307
Net income tax expense 2,241 37,705
Net loss from equity
accounted investee 13 116
---------------------------------------------------------
Net income $ 4,331 $ 60,486
---------------------------------------------------------
---------------------------------------------------------
Adjusted EBITDA(A) $ 15,630 $ 290,839
Adjusted operating
income(A) $ 9,253 $ 145,817
Adjusted net income(A) $ 7,981 $ 73,720
Free cash flow(B) $ 9,360 $ 149,276
Management's Discussion
(all amounts are in thousands of U.S. dollars, unless otherwise stated)
Segment Highlights
Three months ended September 30
----------------------------------------------------------------------------
2009 2010 Change
----------------------------------------------------------------------------
(2010 holding FX
(holding FX constant with
constant with the comparative
the comparative period less 2009
(as reported) period) as reported)
----------------------------------------------------------------------------
Revenues $ 268,411 $ 421,168 $ 152,757
----------------------------------------------------------------------------
Canada $ 94,644 $ 169,671 $ 75,027
U.S. south $ 89,359 $ 162,342 $ 72,983
U.S. northeast $ 84,408 $ 89,155 $ 4,747
Operating expenses $ 156,195 $ 250,399 $ 94,204
----------------------------------------------------------------------------
Canada $ 47,809 $ 94,223 $ 46,414
U.S. south $ 56,379 $ 99,902 $ 43,523
U.S. northeast $ 52,007 $ 56,274 $ 4,267
SG&A (as reported) $ 33,272 $ 53,757 $ 20,485
----------------------------------------------------------------------------
Canada $ 7,755 $ 12,854 $ 5,099
U.S. south $ 9,684 $ 15,838 $ 6,154
U.S. northeast $ 7,043 $ 7,650 $ 607
Corporate $ 8,790 $ 17,415 $ 8,625
EBITDA(A)(as reported) $ 78,944 $ 117,012 $ 38,068
----------------------------------------------------------------------------
Canada $ 39,080 $ 62,594 $ 23,514
U.S. south $ 23,296 $ 46,602 $ 23,306
U.S. northeast $ 25,358 $ 25,231 $ (127)
Corporate $ (8,790) $ (17,415) $ (8,625)
Adjusted SG&A $ 32,856 $ 49,254 $ 16,398
----------------------------------------------------------------------------
Canada $ 7,755 $ 12,854 $ 5,099
U.S. south $ 9,684 $ 15,838 $ 6,154
U.S. northeast $ 7,043 $ 7,650 $ 607
Corporate $ 8,374 $ 12,912 $ 4,538
Adjusted EBITDA(A) $ 79,360 $ 121,515 $ 42,155
----------------------------------------------------------------------------
Canada $ 39,080 $ 62,594 $ 23,514
U.S. south $ 23,296 $ 46,602 $ 23,306
U.S. northeast $ 25,358 $ 25,231 $ (127)
Corporate $ (8,374) $ (12,912) $ (4,538)
Three months ended September 30
---------------------------------------------------------
2010 Change
---------------------------------------------------------
(2010 as
reported less
2009 as
(as reported) reported)
---------------------------------------------------------
Revenues $ 436,262 $ 167,851
---------------------------------------------------------
Canada $ 184,765 $ 90,121
U.S. south $ 162,342 $ 72,983
U.S. northeast $ 89,155 $ 4,747
Operating expenses $ 259,075 $ 102,880
---------------------------------------------------------
Canada $ 102,899 $ 55,090
U.S. south $ 99,902 $ 43,523
U.S. northeast $ 56,274 $ 4,267
SG&A (as reported) $ 55,701 $ 22,429
---------------------------------------------------------
Canada $ 13,893 $ 6,138
U.S. south $ 15,838 $ 6,154
U.S. northeast $ 7,650 $ 607
Corporate $ 18,320 $ 9,530
EBITDA(A)(as reported) $ 121,486 $ 42,542
---------------------------------------------------------
Canada $ 67,973 $ 28,893
U.S. south $ 46,602 $ 23,306
U.S. northeast $ 25,231 $ (127)
Corporate $ (18,320) $ (9,530)
Adjusted SG&A $ 50,887 $ 18,031
---------------------------------------------------------
Canada $ 13,893 $ 6,138
U.S. south $ 15,838 $ 6,154
U.S. northeast $ 7,650 $ 607
Corporate $ 13,506 $ 5,132
Adjusted EBITDA(A) $ 126,300 $ 46,940
---------------------------------------------------------
Canada $ 67,973 $ 28,893
U.S. south $ 46,602 $ 23,306
U.S. northeast $ 25,231 $ (127)
Corporate $ (13,506) $ (5,132)
Segment Highlights (continued)
Nine months ended September 30
----------------------------------------------------------------------------
2009 2010 Change
----------------------------------------------------------------------------
(2010 holding FX
(holding FX constant with
constant with the comparative
the comparative period less 2009
(as reported) period) as reported)
----------------------------------------------------------------------------
Revenues $ 746,004 $ 953,750 $ 207,746
----------------------------------------------------------------------------
Canada $ 252,815 $ 356,421 $ 103,606
U.S. south $ 253,305 $ 343,548 $ 90,243
U.S. northeast $ 239,884 $ 253,781 $ 13,897
Operating expenses $ 435,969 $ 560,125 $ 124,156
----------------------------------------------------------------------------
Canada $ 129,684 $ 189,946 $ 60,262
U.S. south $ 156,216 $ 210,294 $ 54,078
U.S. northeast $ 150,069 $ 159,885 $ 9,816
SG&A (as reported) $ 95,949 $ 129,445 $ 33,496
----------------------------------------------------------------------------
Canada $ 22,048 $ 29,613 $ 7,565
U.S. south $ 27,767 $ 35,708 $ 7,941
U.S. northeast $ 21,262 $ 22,513 $ 1,251
Corporate $ 24,872 $ 41,611 $ 16,739
EBITDA(A)(as reported) $ 214,086 $ 305,791 $ 50,094
----------------------------------------------------------------------------
Canada $ 101,083 $ 136,862 $ 35,779
U.S. south $ 69,322 $ 97,546 $ 28,224
U.S. northeast $ 68,553 $ 71,383 $ 2,830
Corporate $ (24,872) $ (41,611) $ (16,739)
Adjusted SG&A $ 94,949 $ 87,834 $ 23,467
----------------------------------------------------------------------------
Canada $ 22,048 $ 29,613 $ 7,565
U.S. south $ 27,767 $ 35,708 $ 7,941
U.S. northeast $ 21,262 $ 22,513 $ 1,251
Corporate $ 23,872 $ 30,582 $ 6,710
Adjusted EBITDA(A) $ 215,086 $ 275,209 $ 60,123
----------------------------------------------------------------------------
Canada $ 101,083 $ 136,862 $ 35,779
U.S. south $ 69,322 $ 97,546 $ 28,224
U.S. northeast $ 68,553 $ 71,383 $ 2,830
Corporate $ (23,872) $ (30,582) $ (6,710)
Nine months ended September 30
---------------------------------------------------------
2010 Change
---------------------------------------------------------
(2010 as
reported less
2009 as
(as reported) reported)
---------------------------------------------------------
Revenues $ 999,886 $ 253,882
---------------------------------------------------------
Canada $ 402,557 $ 149,742
U.S. south $ 343,548 $ 90,243
U.S. northeast $ 253,781 $ 13,897
Operating expenses $ 584,712 $ 148,743
---------------------------------------------------------
Canada $ 214,533 $ 84,849
U.S. south $ 210,294 $ 54,078
U.S. northeast $ 159,885 $ 9,816
SG&A (as reported) $ 136,679 $ 40,730
---------------------------------------------------------
Canada $ 33,446 $ 11,398
U.S. south $ 35,708 $ 7,941
U.S. northeast $ 22,513 $ 1,251
Corporate $ 45,012 $ 20,140
EBITDA(A)(as reported) $ 278,495 $ 64,409
---------------------------------------------------------
Canada $ 154,578 $ 53,495
U.S. south $ 97,546 $ 28,224
U.S. northeast $ 71,383 $ 2,830
Corporate $ (45,012) $ (20,140)
Adjusted SG&A $ 124,335 $ 29,386
---------------------------------------------------------
Canada $ 33,446 $ 11,398
U.S. south $ 35,708 $ 7,941
U.S. northeast $ 22,513 $ 1,251
Corporate $ 32,668 $ 8,796
Adjusted EBITDA(A) $ 290,839 $ 75,753
---------------------------------------------------------
Canada $ 154,578 $ 53,495
U.S. south $ 97,546 $ 28,224
U.S. northeast $ 71,383 $ 2,830
Corporate $ (32,668) $ (8,796)
Revenues
Gross revenue by service type
The following tables compare gross revenues for the three and nine months
ended
Three months ended September 30, 2010
----------------------------------------------------------------------------
Canada -
stated in Canada - U.S. -
thousands of percentage percentage
Canadian of gross of gross
dollars revenue U.S. revenue
----------------------------------------------------------------------------
Commercial $ 76,926 34.9 $ 75,613 26.0
Industrial 38,345 17.4 42,178 14.5
Residential 34,464 15.6 60,713 20.9
Transfer and disposal 59,497 26.9 96,910 33.3
Recycling and other 11,574 5.2 15,494 5.3
----------------------------------------------------------------------------
Gross revenues 220,806 100.0 290,908 100.0
Intercompany (29,066) (39,411)
----------------------------------------------------------------------------
Revenues $ 191,740 $ 251,497
----------------------------------------------------------------------------
Three months ended September 30, 2009
----------------------------------------------------------------------------
Canada - U.S. -
stated in Canada - percentage
thousands of percentage of
Canadian of gross gross
dollars ((i)) revenue U.S. revenue
----------------------------------------------------------------------------
Commercial $ 42,560 35.0 $ 46,789 23.1
Industrial 20,680 17.0 26,708 13.2
Residential 18,015 14.8 43,711 21.6
Transfer and disposal 34,739 28.6 74,670 36.9
Recycling and other 5,562 4.6 10,424 5.2
----------------------------------------------------------------------------
Gross revenues 121,556 100.0 202,302 100.0
Intercompany (16,560) (28,535)
----------------------------------------------------------------------------
Revenues $ 104,996 $ 173,767
----------------------------------------------------------------------------
Nine months ended September 30, 2010
----------------------------------------------------------------------------
Canada - Canada - U.S. -
stated in percentage percentage
thousands of of
of Canadian gross gross
dollars revenue U.S. revenue
----------------------------------------------------------------------------
Commercial $ 171,078 35.7 $ 172,948 25.1
Industrial 81,661 17.0 93,819 13.6
Residential 70,731 14.7 147,807 21.4
Transfer and disposal 129,462 27.0 236,344 34.3
Recycling and other 26,777 5.6 38,255 5.6
----------------------------------------------------------------------------
Gross revenues 479,709 100.0 689,173 100.0
Intercompany (62,712) (91,844)
----------------------------------------------------------------------------
Revenues $ 416,997 $ 597,329
----------------------------------------------------------------------------
Nine months ended September 30, 2009
----------------------------------------------------------------------------
Canada - Canada - U.S. -
stated in percentage percentage
thousands of of of
Canadian gross gross
dollars ((i)) revenue U.S. revenue
----------------------------------------------------------------------------
Commercial $ 124,328 36.7 $ 138,814 24.2
Industrial 57,796 17.0 78,370 13.7
Residential 50,696 14.9 120,544 21.0
Transfer and disposal 92,566 27.3 210,366 36.7
Recycling and other 13,922 4.1 25,055 4.4
----------------------------------------------------------------------------
Gross revenues 339,308 100.0 573,149 100.0
Intercompany (43,526) (79,960)
----------------------------------------------------------------------------
Revenues $ 295,782 $ 493,189
----------------------------------------------------------------------------
((i)) amounts have been adjusted to conform to the current period presentation.
Gross revenue growth or decline components - expressed in percentages and excluding FX
(prepared on a comparable basis for 2010)
As a result of our acquisition of WSI, we have prepared the table below on a "comparable basis", which includes WSI's results as if WSI's operations were combined with ours in the current and previously comparable quarter. However, component percentages presented for 2009 have not been prepared on a comparable basis and accordingly do not include WSI's results.
Three months ended Three months ended
September 30, 2010 September 30, 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Price
Core price 2.7 1.5 3.0 2.0
Fuel surcharges 0.5 0.5 (1.9) (3.8)
Recycling and other 0.4 0.7 0.2 (1.6)
----------------------------------------------------------------------------
Total price growth (decline) 3.6 2.7 1.3 (3.4)
Volume 4.2 1.2 0.3 (0.5)
----------------------------------------------------------------------------
Total organic gross revenue
growth (decline) 7.8 3.9 1.6 (3.9)
Acquisitions 4.0 8.1 0.7 1.5
----------------------------------------------------------------------------
Total gross revenue growth
(decline) 11.8 12.0 2.3 (2.4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended Nine months ended
September 30, 2010 September 30, 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Price
Core price 3.3 1.9 3.3 2.5
Fuel surcharges 0.7 0.4 (1.2) (2.7)
Recycling and other 0.6 1.2 (0.3) (2.2)
----------------------------------------------------------------------------
Total price growth (decline) 4.6 3.5 1.8 (2.4)
Volume 5.4 2.0 (0.9) (3.1)
----------------------------------------------------------------------------
Total organic gross revenue
growth (decline) 10.0 5.5 0.9 (5.5)
Acquisitions 3.8 5.6 1.8 1.9
----------------------------------------------------------------------------
Total gross revenue growth
(decline) 13.8 11.1 2.7 (3.6)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended
The increase in Canadian segment gross revenues is due in large part to the acquisition of WSI. On a "comparable basis", prepared as if WSI's operations were combined with ours in the current and previously comparable quarter, our Canadian segment delivered solid price and volume growth in almost every service offering. Higher organic gross revenue growth delivered by BFI Canada's Canadian operations was partially offset by a lower comparable performance from WSI's Canadian operations. The divestiture of certain assets in the quarter resulted in a comparable decline in commercial volumes, as expected. However, we enjoyed healthier comparable pricing that more than compensated for the divested volume decline. Comparable volume gains are the result of higher landfill volumes, new contract wins and strong organic growth. Other "tuck-in" acquisitions, FX, and higher fuel surcharges also contributed to the comparable increase.
Similar to our Canadian segment, gross revenues in our U.S. south segment benefited from the acquisition of WSI. With the exception of our industrial service line and pricing in our material recovery facilities, all other service lines delivered pricing and volume growth on a comparable basis. Lower pricing in our industrial service line and material recovery facilities was more than offset by comparable volume gains. Higher fuel surcharges and acquisitions contributed to the balance of this segments comparable gross revenue growth.
Gross revenues in our U.S. northeast segment increased as well. Excluding landfill pricing, all of our service lines enjoyed higher price, or pricing that was largely unchanged, over the year ago period. The mix of waste materials lowered comparative landfill pricing period over period. Higher comparative landfill, industrial and recycling and other volumes contributed to the increase in gross revenues, which together more than offset declines in our other service offerings. Marginally higher fuel surcharges and acquisitions contributed to the balance of this segments gross revenue growth.
Nine months ended
The increase in Canadian segment gross revenues is attributable to the acquisition of WSI and organic and other "tuck-in" acquisition growth. Similar to the three months ended, higher organic gross revenue delivered by BFI Canada's Canadian operations was partially offset by a lower comparable performance from WSI's Canadian operations. On a comparable basis, year-to-date residential pricing was down slightly, but contract wins boosted volumes resulting in a strong contribution to gross revenues from this service line. As mentioned above, divestitures have impacted comparable commercial volumes, but stronger year-to-date pricing far outpaced the comparable impact divested volumes had on gross revenues. All other service lines contributed to higher comparable pricing and volumes. Fuel surcharges, FX, and commodity pricing has also contributed to the year-to-date increase.
On a year-to-date basis, U.S. south segment gross revenues increased on the back of pricing growth. Pricing growth is the result of growth in most service lines. Our industrial line was our only service line where comparative pricing was largely unchanged. All of this segments service lines delivered volume growth on a comparable basis to the year ago period. Other "tuck-in" acquisitions, recycled material prices and fuel surcharges also contributed to gross revenue growth period-to-period.
On a year-to-date basis, gross revenue growth in our U.S. northeast segment benefited from stronger year over year pricing. Landfill pricing was the only service line that experienced a year-to-date decline. Attracting volumes at our landfills in combination with the mix of waste materials received is the primary cause for the pricing decline. The return of commodity pricing has made a significant contribution to year-to-date revenue growth as did an increase in the volume of materials processed. Volume growth was most pronounced in our landfill and recycling lines and was partially offset by declines in all other service offerings. Acquisitions and marginally higher fuel prices also contributed to year-to-date gross revenue growth.
Operating expenses
Three months ended
The comparative increase in operating expenses is due to FX, our acquisition of WSI, other "tuck-in" acquisitions, and higher collected waste volumes in our pre-existing business. In total, higher disposal, labour, and vehicle operating and maintenance expenses, represent the bulk of the comparative increase. We also incurred higher commodity rebates due to higher comparative commodity pricing. The increase in commodity rebates was most notable in our U.S. northeast and Canadian segments.
We continue to integrate WSI into our operations and improve the operating effectiveness of the assets we acquired. We are satisfied that we are realizing the synergies we expected.
Nine months ended
As outlined above, the acquisition of WSI, other "tuck-in" acquisitions, and organic growth in our pre-existing business are the primary reasons for the increase in disposal, labour, and vehicle operating and maintenance costs. Foreign currency exchange was also a contributor to the year-to-date increase.
SG&A expenses
Three months ended
Excluding the impact of FX, the increase in SG&A expense is due to the acquisition of WSI, other "tuck-in" acquisitions and organic growth. The increase is primarily attributable to higher salaries, facility, and other SG&A costs.
Corporate SG&A includes certain executive costs, accounting, internal audit, treasury, investor relations, corporate development, environmental management, information technology, human resources and other administrative support functions. Corporate SG&A also includes transaction and related costs and fair value changes to stock options. The acquisition of WSI is the primary contributor to the increase in corporate SG&A expense.
Nine months ended
Changes in SG&A expense for the nine months ended are consistent with the reasons outlined above for the three months ended.
Free cash flow(B)
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.
In 2009, our calculation of free cash flow(B) did not deduct for acquisition and related, and non-recurring, costs. Accordingly, comparative free cash flow(B) amounts have been adjusted to conform to the current period's presentation.
Free cash flow(B) - adjusted EBITDA(A) approach
Three months ended September 30
----------------------------------------------------------------------------
2010 2009 Change
----------------------------------------------------------------------------
Adjusted EBITDA(A) $ 126,300 $ 79,360 $ 46,940
----------------------------------------------------------------------------
Restricted share expense 568 390 178
Purchase of restricted
shares (1,241) - (1,241)
Capital and landfill asset
purchases (36,007) (28,161) (7,846)
Landfill closure and post-
closure expenditures (1,609) (2,609) 1,000
Landfill closure and post-
closure cost accretion
expense 1,030 805 225
Interest on long-term debt (17,783) (7,851) (9,932)
Interest on long-term debt -
high yield defeasance
interest 1,663 - 1,663
Non-cash interest expense 1,985 676 1,309
Current income tax expense (11,656) (4,106) (7,550)
----------------------------------------------------------------------------
Free cash flow(B) $ 63,250 $ 38,504 $ 24,746
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended September 30
----------------------------------------------------------------------------
2010 2009 Change
----------------------------------------------------------------------------
Adjusted EBITDA(A) $ 290,839 $ 215,086 $ 75,753
----------------------------------------------------------------------------
Restricted share expense 1,398 1,081 317
Purchase of restricted
shares (1,241) (172) (1,069)
Capital and landfill asset
purchases (84,611) (87,875) 3,264
Landfill closure and post-
closure expenditures (3,161) (4,964) 1,803
Landfill closure and post-
closure cost accretion
expense 2,792 2,322 470
Interest on long-term debt (33,964) (26,246) (7,718)
Interest on long-term debt -
high yield defeasance
interest 1,663 - 1,663
Non-cash interest expense 3,410 2,221 1,189
Current income tax expense (27,849) (10,849) (17,000)
----------------------------------------------------------------------------
Free cash flow(B) $ 149,276 $ 90,604 $ 58,672
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended
Free cash flow(B) increased period over period which is due in large part
to the acquisition of WSI. We enjoyed significant improvements to adjusted EBITDA(A)
resulting from the acquisition of WSI, other "tuck-in" acquisitions and strong
organic revenue growth as detailed in the "Revenue" section of this press release.
Higher debt levels resulting from the acquisition of WSI and higher interest
rates in
Nine months ended
For the nine months ended, free cash flow(B) increased. The WSI acquisition, other "tuck-in" acquisitions, organic growth and FX all contributed to the increase in free cash flow(B). Strong revenue growth contributed to the increase in adjusted EBITDA(A), which was partially offset by higher interest expense and higher current income tax expense and the reasons for these changes are largely consistent with those outlined above for the three months ended.
Capital and landfill purchases
Capital and landfill purchases characterized as replacement and growth expenditures are as follows:
Three months ended Nine months ended
September 30 September 30
----------------------------------------------------------------------------
2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Replacement $ 25,317 $ 19,322 $ 5,995 $ 57,159 $ 49,094 $ 8,065
Growth 10,690 8,839 1,851 27,452 38,781 (11,329)
----------------------------------------------------------------------------
Total $ 36,007 $ 28,161 $ 7,846 $ 84,611 $ 87,875 $ (3,264)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 and the acquisition of WSI, replacement expenditures increased. The 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 the decline in landfill spending. The increase in capital asset replacement spending 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.
Nine months ended
The reasons for the increase in year-to-date replacement spending are consistent with those outlined above for the three months ended.
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 WSI and FX growth, expenditures increased. The increase is attributable to our U.S. segment as our Canadian segment recognized a comparative quarterly decline. The U.S. segment increase is due in large part to spending on equipment and infrastructure, while the Canadian segment decline is due to fewer comparative contract wins resulting in lower vehicle and equipment purchases versus the comparative quarter a year ago.
Nine months ended
Fewer comparative contract wins is the primary reason for the decline in year-to-date growth expenditures.
Readers are reminded that revenue, adjusted EBITDA(A), and cash flow contributions realized 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 $ 525,000 $ 325,000 $ 53,390 $ 146,610
U.S. long-term debt
facilities - stated
in U.S. dollars
Revolving credit
facility $ 950,000 $ 637,500 $ 139,682 $ 172,818
Variable rate demand
solid waste disposal
revenue bonds
("IRBs")(1) $ 194,000 $ 109,000 $ - $ 85,000
Other notes $ 4,862 $ 4,862 $ - $ -
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
September 30, 2010 December 31, 2009
----------------------------------------------------------------------------
Canada U.S. Canada U.S.
----------------------------------------------------------------------------
Funded debt to EBITDA 1.92 3.05 1.92 2.56
Funded debt to EBITDA maximum 3.00 4.00 2.75 4.00
Changes to long-term debt occurring in conjunction with the WSI acquisition
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
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
On
Other notes
In connection with the WSI acquisition, we assumed various notes which included
a secured note payable to
In addition, we assumed a note payable with an original issue date of
We also assumed a note payable under a financing arrangement for a piece of
equipment purchased in 2006. At closing, the total remaining payments under
this note amount to
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 2.4 times.
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, restructuring 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, restructuring 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.
Restructuring expenses - restructuring expenses includes costs to integrate various operating locations with our own, exiting certain property and building and office leases, employee severance and employee relocation costs incurred in connection with our acquisition of WSI. These expenses are not considered an expense indicative of continuing operations. Accordingly, restructuring expenses represent a different class of expense than those included in adjusted EBITDA.
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 restructuring expenses, 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 Nine months ended
September 30 September 30
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
Operating income $ 54,854 $ 37,011 $ 129,681 $ 93,512
Transaction and
related costs -
SG&A 2,084 - 6,174 -
Fair value
movements in
stock options -
SG&A 2,730 416 6,170 1,000
Restructuring
expenses 3,792 - 3,792 -
----------------------------------------------------------------------------
Adjusted
operating income 63,460 37,427 145,817 94,512
----------------------------------------------------------------------------
Net gain or loss
on sale of
capital and
landfill assets 50 (13) (381) (128)
Amortization 62,790 41,946 145,403 120,702
----------------------------------------------------------------------------
Adjusted EBITDA $ 126,300 $ 79,360 $ 290,839 $ 215,086
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income $ 23,941 $ 19,109 $ 60,486 $ 43,853
Transaction and
related costs -
SG&A 2,084 - 6,174 -
Fair value
movements in
stock options -
SG&A 2,730 416 6,170 1,000
Restructuring
expenses 3,792 - 3,792 -
Interest on long-
term debt 2,409 - 2,409 -
Net gain or loss
on financial
instruments (1,498) 305 (3,248) (866)
Conversion costs - 93 - 208
Net income tax
expense or
recovery (1,748) (104) (2,063) 285
----------------------------------------------------------------------------
Adjusted net
income $ 31,710 $ 19,819 $ 73,720 $ 44,480
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 publically 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
About
To find out more about
Management will hold a conference call on
A replay will be available after the call until
For more information, contact:
Vice President,
(416) 401-7750
andrea.rudnick@bficanada.com.
www.iesi-bfc.com.
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