01—Abstract
Summary
Summary of the 40-F filed March 30, 2015. 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, 2014, incorporating its Annual Information Form, MD&A and audited consolidated financial statements.
The company reported revenues of $2,008,997 thousanda (about $2.01 billion) for 2014, down from $2,026,039 thousand in 2013, with net income of $126,516 thousand and adjusted EBITDA of $523,371 thousand, compared with $530,775 thousand the prior year. Revenue declined mainly due to foreign exchange, which reduced reported revenue by approximately $54,000 thousand, while at FX parity consolidated revenues increased approximately $37,900 thousand, driven by pricing and volume gains in Canada and the U.S. south, partly offset by lower U.S. northeast volumes. Free cash flow was $221,086 thousand in 2014 versus $191,031 thousand in 2013.
The company repurchased 2,681 thousand common shares for $80,770 thousandb during 2014, and total long-term debt was approximately $1,558 million at year end, with a funded debt to EBITDA ratio of 2.95 against a covenant maximum of 4.00. The company also disclosed a goodwill impairment test on its U.S. northeast reporting unit, which passed step two with a fair value exceeding carrying amount by approximately $42,900 thousand, and it noted that the New York City long-term contract remains a key assumption. For investors, the filing highlights a leveraged, vertically integrated waste business with stable contractual revenue, rising dividends (C$0.16 quarterly for 2015), an expected rise in current income tax of roughly $30,000 to $35,000 thousand annually once U.S. loss carryforwards are used up by 2016, and ongoing exposure to commodity, fuel and foreign exchange movements.
02—Key points
Key Highlights
- Revenues of $2,008,997 thousand in 2014, down from $2,026,039 thousand in 2013; management attributes the decline mainly to foreign exchange, with FX-neutral revenue growth in both Canada and the U.S. south.
- Net income of $126,516 thousand in 2014 versus $117,970 thousand in 2013; adjusted net income of $153,076 thousand versus $127,152 thousand.
- Adjusted EBITDA of $523,371 thousand, down from $530,775 thousand, with the company citing higher insurance and claims costs and transportation costs.
- Free cash flow of $221,086 thousand, up from $191,031 thousand, supported by lower capital and landfill asset purchases.
- Share repurchases totaling $80,770 thousand in 2014 under a normal course issuer bid, and a quarterly dividend increased to C$0.16 per share.
- Total indebtedness of approximately $1,558 million, with funded debt to EBITDA of 2.95 times against a covenant maximum of 4.00 times.
- Expected rise in current income tax expense of approximately $30,000 to $35,000 thousand per year after U.S. carryforward losses are fully utilized, expected by the fourth quarter of 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Waste Connections kept $0.11.
- Revenue$2.08B100.0%
- Cost of revenue−$1.14B54.8%
- Gross profit$940.8M45.2%
- Operating costs−$491.5M23.6%
- Operating income$449.3M21.6%
- Interest, other & tax−$216.7M10.4%
- Net income$232.5M11.2%
Where FY2014 revenue went
$2.08B- Cost of revenue: $1.14B, 55% of revenue
- Other operating costs: $262.0M, 13% of revenue
- Net income: $232.5M, 11% of revenue
- SG&A: $229.5M, 11% of revenue
- Interest, other & tax: $216.7M, 10% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed March 30, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $2.08B$2.03B | +2.6% |
| Cost of Revenue | $1.14B— | — |
| Gross Profit | $940.78M— | — |
| SG&A Expenses | $229.47M$255.17M | −10.1% |
| Operating Income | $449.27M$232.92M | +92.9% |
| Interest Expense | $64.67M$60.75M | +6.5% |
| Net Income | $232.53M$117.97M | +97.1% |
| EPS (Basic) | $1.25$0.68 | +83.3% |
| EPS (Diluted) | $1.24$0.68 | +82.4% |
| Shares Outstanding (Basic) | 186.32M172.75M | +7.9% |
| Shares Outstanding (Diluted) | 187.18M172.75M | +8.4% |
05—Questions
Frequently Asked Questions
Why did reported revenue decline in 2014?
Consolidated revenues fell about $17,000 thousand to $2,008,997 thousand, which includes a negative FX impact of about $54,000 thousand. At FX parity, revenues increased about $37,900 thousand, driven by price increases of about $42,700 thousand, partly offset by lower U.S. northeast volumes of about $35,200 thousand.
How did the company's leverage and liquidity look at year end?
Total indebtedness was approximately $1,558 million at December 31, 2014. The funded debt to EBITDA ratio was 2.95 against a covenant maximum of 4.00, and available capacity under the revolving facility, excluding the accordion, was approximately $650,900 thousand.
What is the outlook for income taxes?
The company expects its U.S. carryforward losses to be fully utilized by the fourth quarter of 2016, after which current income tax expense is estimated to rise by approximately $30,000 to $35,000 thousand annually. Its estimated effective tax rate is about 25% for 2015 and beyond.
What risks did the filing highlight for the U.S. northeast business?
The U.S. northeast reporting unit had goodwill that required a step one impairment test to fail in October 2014 after the New York City long-term contract became uncertain. The step two test supported the carrying amount, with fair value exceeding carrying amount by approximately $42,900 thousand, and the company stated that losing the contract would reduce fair value.
What dividend and share repurchase activity did the company disclose?
The company paid dividends totaling C$0.62 per share in 2014 and declared C$0.16 per share quarterly for 2015. It repurchased 2,681 thousand common shares for $80,770 thousand in 2014 and intends to repurchase shares opportunistically in 2015 if no significant acquisitions occur.
06—Continue