01—Abstract
Summary
Summary of the 40-F filed March 20, 2012. Cited figures are marked; the original filing is the authoritative source.
Progressive Waste Solutions Ltd. filed its Form 40-F annual report for the fiscal year ended December 31, 2011, incorporating an Annual Information Form, MD&A and audited consolidated financial statements.
The company reported revenues of $1,840.1 milliona for 2011, up from $1,429.8 million in 2010, and adjusted EBITDA of $534.5 million, compared with $415.8 million in 2010. Adjusted net income was $135.0 million, but the company posted a net loss of $196.1 million (loss per share of $1.63) because of a $360.6 million goodwill impairment charge in its U.S. northeast reporting unit. Revenue growth was driven largely by the acquisition of Waste Services, Inc. (WSI) in July 2010 and by tuck-in acquisitions, with pricing and volume gains across most segments, though the U.S. northeast segment remained weak.
Leverage and liquidity were central investor considerations. Total indebtedness was approximately $1,313 millionb at December 31, 2011, funded debt to EBITDA was 1.81 times in Canada and 3.21 times in the U.S., and the company reported a working capital deficit of approximately $36.6 million. Free cash flow was $262.5 million for 2011.
The company repurchased 2,622 thousand common shares for about $55.8 millionc under its normal course issuer bid during the period from August 19 to December 31, 2011, and management intends to purchase roughly $75 million to $100 million of stock in 2012. The quarterly dividend was C$0.125 in 2011 and the Board approved a C$0.14 quarterly dividend for 2012.
The company's internal control over financial reporting was reported as effective as of December 31, 2011, with no material weaknesses identified and an unqualified auditor opinion from Deloitte & Touche LLP. The filing also notes that the company is a foreign private issuer filing under the multi-jurisdictional disclosure system, that it reports in U.S. dollars under U.S. GAAP, and that its audit committee has no designated financial expert, relying instead on the Canadian "financially literate" standard.
02—Key points
Key Highlights
- Revenues rose to $1,840.1 million in 2011 from $1,429.8 million in 2010, with Canada at $757.6 million, U.S. south at $723.3 million and U.S. northeast at $359.2 million.
- Adjusted EBITDA was $534.5 million in 2011 versus $415.8 million in 2010; adjusted net income was $135.0 million versus $102.4 million.
- Net loss of $196.1 million (basic loss per share $1.63) driven by a $360.6 million goodwill impairment in the U.S. northeast reporting unit, following deteriorating economic conditions and heightened competition.
- Total indebtedness of approximately $1,313 million at December 31, 2011; funded debt to EBITDA of 1.81 times (Canada) and 3.21 times (U.S.) versus maximums of 3.00 and 4.00 times.
- Free cash flow of $262.5 million in 2011 versus $194.3 million in 2010, with capital and landfill purchases of $171.0 million.
- Shareholder returns: $79.3 million of common share repurchases in 2011 under the NCIB, a planned $75 million to $100 million of repurchases in 2012, and a C$0.14 quarterly dividend for 2012 versus C$0.125 in 2011.
- Credit ratings: DBRS BBB low on the Canadian senior secured debenture; S&P BB+ positive and Moody's Ba2 stable on the U.S. facility.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed March 20, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $1.84B$1.43B | +28.7% |
| SG&A Expenses | $218.60M$192.87M | +13.3% |
| Operating Income | -$88.39M$184.50M | −147.9% |
| Interest Expense | $62.09M$48.79M | +27.3% |
| Net Income | -$196.14M$74.11M | −364.7% |
| EPS (Basic) | $-1.63$0.77 | −311.7% |
| EPS (Diluted) | $-1.63$0.76 | −314.5% |
| Shares Outstanding (Basic) | 120.68M96.45M | +25.1% |
| Shares Outstanding (Diluted) | 120.68M107.48M | +12.3% |
05—Questions
Frequently Asked Questions
Why did the company report a net loss in 2011 when adjusted net income was positive?
The net loss of $196.1 million reflected a $360.6 million goodwill impairment charge recorded in the U.S. northeast reporting unit in the fourth quarter of 2011, after continued economic weakness and competitive pressure in that region. The company's adjusted net income of $135.0 million excludes this non-cash charge along with transaction costs, stock option fair value movements, restricted share expense, the non-renewal of an executive agreement and other non-operating items.
How leveraged is the company and how is it managing debt?
Total indebtedness was approximately $1,313 million at December 31, 2011. Funded debt to EBITDA was 1.81 times in Canada and 3.21 times in the U.S., both within covenant maximums of 3.00 and 4.00 times. The company stated a long-term strategy to maintain a consolidated total debt to adjusted EBITDA ratio in the range of 2.3 to 2.7 times, and it expects to refinance its facilities on or before maturity.
What drove revenue growth in 2011?
The filing attributes revenue growth to the full-year effect of the WSI acquisition completed July 2, 2010, to tuck-in acquisitions, and to higher pricing across most service lines, along with volume improvements in Canada. Higher fuel surcharges also contributed. The U.S. northeast segment grew only $15.9 million, as pricing and volume weakened there.
What is the company's capital return policy?
The company repurchased 2,622 thousand common shares for approximately $55.8 million under its normal course issuer bid between August 19 and December 31, 2011, and bought 1,000 thousand shares from underwriters in a March 2011 secondary offering for $23.5 million. Management intends to repurchase approximately $75 million to $100 million of stock in 2012, subject to market conditions, and the Board approved a C$0.14 quarterly dividend payable April 16, 2012.
Are there risks investors should watch in the coming periods?
Key risks cited include the economic weakness and competition in the U.S. northeast, where the goodwill impairment was recorded; the New York City municipal contracts, which represented 2.7% of 2011 consolidated revenue and can be terminated on 10 days' notice; fuel and commodity price volatility; and the expected increase in cash income taxes as U.S. loss carryforwards are fully utilized, potentially as early as the fourth quarter of 2013. The filing also notes the replacement Calgary landfill site as a possible $15 million EBITDA impact if not operational when the current site closes.
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