01—Abstract
Summary
Summary of the 40-F filed April 2, 2013. Cited figures are marked; the original filing is the authoritative source.
Progressive Waste Solutions Ltd. filed this Form 40-F annual report for the fiscal year ended December 31, 2012, incorporating its Annual Information Form, MD&A, and audited consolidated financial statements.
The company reported revenues of $1,896.7 milliona for 2012, up from $1,840.1 million in 2011, and net income of $94.4 million, compared with a net loss of $196.1 million in 2011 that reflected a goodwill impairment charge of $360.6 million in the U.S. northeast segment. Adjusted EBITDA was $519.7 million versus $534.5 million in 2011, and free cash flow was $172.5 million versus $262.5 million, with higher capital and landfill purchases of $246.9 million being the largest driver of the decline. Growth in 2012 was driven mainly by 19 tuck-in acquisitions costing approximately $282.3 million in cash, along with core pricing gains, while recycled commodity prices and weakness in the U.S. northeast segment were headwinds.
Total indebtedness was approximately $1,688 millionb at year end, and the company refinanced its credit facilities in October 2012 into a $2.35 billion consolidated facility that includes a $500 million term B loan and an $1.85 billion revolver. Its funded debt to EBITDA ratio was 3.14 times against a maximum of 4.00 times under the new facility, and the company stated it expects to fund its 2013 dividends of C$0.14 per quarter from Canadian free cash flow. The filing describes a vertically integrated non-hazardous solid waste business operating 126 collection operations, 67 transfer stations, 30 landfills and 49 material recovery facilities across 13 U.S. states, the District of Columbia and six Canadian provinces.
The company had about 7,500 employees and 115,166,364 common shares outstanding at December 31, 2012. The company later became Waste Connections, Inc. (WCN).
02—Key points
Key Highlights
- Revenue rose to $1,896.7 million in 2012 from $1,840.1 million in 2011, driven primarily by 19 acquisitions and core pricing gains.
- Net income was $94.4 million in 2012, compared with a net loss of $196.1 million in 2011, which included a $360.6 million goodwill impairment in the U.S. northeast segment.
- Adjusted EBITDA was $519.7 million in 2012 versus $534.5 million in 2011; free cash flow fell to $172.5 million from $262.5 million.
- Capital and landfill asset purchases totaled $246.9 million in 2012, up about $75.9 million, the largest factor reducing free cash flow.
- Total indebtedness was approximately $1,688 million at December 31, 2012, with a funded debt to EBITDA ratio of 3.14 times under the consolidated facility, against a 4.00 times maximum.
- In October 2012 the company refinanced into a $2.35 billion consolidated credit facility, including a $500 million term B loan and a $1.85 billion revolver, with revolver maturity in 2017 and term loan maturity in 2019.
- The quarterly dividend was C$0.14 per share in 2012, and the company expects to fund all 2013 dividends from Canadian free cash flow; share repurchases were planned to be selective in 2013 to focus on debt reduction.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed April 2, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $1.90B$1.84B | +3.1% |
| SG&A Expenses | $230.74M$218.60M | +5.6% |
| Operating Income | $237.71M-$88.39M | +368.9% |
| Interest Expense | $57.43M$62.09M | −7.5% |
| Net Income | $94.36M-$196.14M | +148.1% |
| EPS (Basic) | $0.81$-1.63 | +149.7% |
| EPS (Diluted) | $0.81$-1.63 | +149.7% |
| Shares Outstanding (Basic) | 116.18M120.68M | −3.7% |
| Shares Outstanding (Diluted) | 116.18M120.68M | −3.7% |
05—Questions
Frequently Asked Questions
Why did the company report a large net loss in 2011 but net income in 2012?
The 2011 net loss of $196.1 million was driven by a goodwill impairment charge of $360.6 million related to the U.S. northeast reporting unit, which the filing attributes to deteriorating economic conditions and heightened competition in that region. The 2012 results did not include a goodwill impairment, and net income was $94.4 million.
What drove the decline in free cash flow in 2012?
Free cash flow was $172.5 million in 2012 versus $262.5 million in 2011. The filing identifies higher capital and landfill asset purchases, which totaled $246.9 million (up about $75.9 million), as the largest contributor, with lower adjusted EBITDA as the next largest factor.
How much debt does the company carry and how is it structured?
Total indebtedness was approximately $1,688 million at December 31, 2012. The consolidated facility consisted of a $500 million term B facility and a $1.85 billion revolver, of which about $1,074.7 million was drawn on the revolver. The funded debt to EBITDA ratio was 3.14 times, below the 4.00 times maximum.
What risks does the filing highlight for the U.S. northeast business?
The filing notes that the U.S. northeast segment faces economic softness, excess landfill capacity, and resilient competition, with lower recycled commodity prices as an additional headwind. It also states that if the company is not awarded a long-term contract with New York City, goodwill recorded in that reporting unit would likely be impaired. New York City municipal contracts represented 2.2% of 2012 consolidated revenue.
What dividend and share repurchase policy did the company describe?
The company paid a quarterly dividend of C$0.14 per share in each quarter of 2012, and the Board approved a C$0.14 dividend payable April 15, 2013. Management said it expects to fund 2013 dividends from Canadian free cash flow. It repurchased 3,155 thousand common shares for about $65.6 million in 2012 and said it intended to be selective in repurchases in 2013, focusing on reducing long-term debt.
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