01—Abstract
Summary
Summary of the 40-F filed March 3, 2016. Cited figures are marked; the original filing is the authoritative source.
Progressive Waste Solutions Ltd. filed its Form 40-F annual report for fiscal 2015 on March 2, 2016, with a pending all-stock merger with Waste Connections, Inc. announced January 18, 2016.
Under the merger, Waste Connections stockholders would receive 2.076843 common shares for each WCI share, with Progressive shareholders and WCI stockholders holding approximately 30% and 70% of the combined company, respectively, and the merger is expected to close in the second quarter of 2016. The company would be renamed Waste Connections, Inc. and trade under WCN. For 2015, the company reported revenues of $1,925.6 milliona (down from $2,008.997 million in 2014, a decline of about $83.4 million, which includes an FX impact of about $104.7 million), net income of $123.9 million, adjusted EBITDA of $479.9 million and adjusted net income of $137.9 million.
Free cash flow was $150.0 millionb versus $198.7 million in 2014. Total indebtedness was approximately $1,551 million, with a funded debt-to-EBITDA ratio of 3.22 times against a covenant maximum of 4.00. Moody's rated the credit facility Ba1 (stable) and S&P rated it BBB (stable).
Management also disclosed a Florida putative class action filed in October 2015, which was voluntarily withdrawn without prejudice on February 29, 2016. The company operates 118 collection operations, 63 transfer stations, 31 landfills and 34 material recovery facilities across the U.S. and Canada, with about 7,900 employees.
Several executive changes occurred in January 2016, including Dan Pio being named CEO effective January 29, 2016, and Joseph Quarin stepping down. Quarterly dividends were C$0.17c per share, and the Board declared a dividend payable April 15, 2016.
02—Key points
Key Highlights
- Pending all-stock merger with Waste Connections, Inc.: WCI stockholders to receive 2.076843 Progressive common shares per WCI share; combined ownership about 30% Progressive shareholders / 70% WCI stockholders; expected close in Q2 2016.
- 2015 revenues of $1,925.6 million, down from $2,008.997 million in 2014, with FX impact of about $104.7 million; at FX parity, consolidated revenues increased approximately $23.8 million per the MD&A.
- Net income of $123.9 million in 2015 versus $126.5 million in 2014; adjusted net income of $137.9 million versus $153.1 million.
- Adjusted EBITDA of $479.9 million in 2015 versus $523.4 million in 2014; free cash flow of $150.0 million versus $198.7 million.
- Total indebtedness of approximately $1,551 million; funded debt to EBITDA of 3.22 times versus a 4.00 covenant maximum; credit facility rated Ba1 (Moody's, stable) and BBB (S&P, stable).
- Vertically integrated footprint of 118 collection operations, 63 transfer stations, 31 landfills and 34 MRFs, with about 57% of landfill tonnage from third-party disposal customers.
- Leadership changes in January 2016: Dan Pio named CEO effective January 29, 2016; Joseph Quarin departed; Ian Kidson and Kevin Walbridge stepped down; William Herman appointed interim CFO.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2015, Waste Connections lost $0.05.
- Revenue$2.12B100.0%
- Cost of revenue−$1.18B55.6%
- Gross profit$939.9M44.4%
- Operating costs−$1.00B47.3%
- Operating income−$61.5M2.9%
- Interest, other & tax−$34.2M1.6%
- Net income−$95.8M4.5%
04—Financials
Financial Highlights
Figures from 10-KFY2015filed March 3, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $2.12B$2.08B | +1.8% |
| Cost of Revenue | $1.18B$1.14B | +3.4% |
| Gross Profit | $939.88M$940.78M | −0.1% |
| SG&A Expenses | $237.48M$229.47M | +3.5% |
| Operating Income | -$61.53M$449.27M | −113.7% |
| Interest Expense | $64.24M$64.67M | −0.7% |
| Net Income | -$95.76M$232.53M | −141.2% |
| EPS (Basic) | $-0.52$1.87 | −127.8% |
| EPS (Diluted) | $-0.52$1.86 | −128.0% |
| Shares Outstanding (Basic) | 185.24M124.22M | +49.1% |
| Shares Outstanding (Diluted) | 185.24M124.79M | +48.4% |
05—Questions
Frequently Asked Questions
What is the status of the Waste Connections merger?
The Merger Agreement was signed January 18, 2016 and unanimously approved by both boards. Closing requires approval by both companies' shareholders, U.S. antitrust clearance (the HSR waiting period was terminated early on February 25, 2016), and TSX approval. The merger is expected to close in the second quarter of 2016. Following completion, the company will be renamed Waste Connections, Inc. and trade under the symbol WCN, and a share consolidation of 0.4815 is expected to follow the merger, subject to shareholder and TSX approval.
How did revenue and profitability change in 2015?
Revenues were $1,925.6 million, a decline of about $83.4 million from $2,009.0 million, which includes an FX impact of about $104.7 million. Net income was $123.9 million versus $126.5 million in 2014. Adjusted EBITDA fell to $479.9 million from $523.4 million, of which about $32.6 million was attributed to FX. Management reported that at FX parity, consolidated revenues increased about $23.8 million.
What is the company's debt and liquidity position?
Total indebtedness was approximately $1,551 million at December 31, 2015. The consolidated facility includes a $1,850 million revolver with about $692.1 million of available capacity and a $500 million term A facility, both maturing June 30, 2020. The funded debt to EBITDA ratio was 3.22 times against a covenant maximum of 4.00 times. The merger agreement triggers a change-of-control event of default under the consolidated facility, which management believes lenders are unlikely to pursue.
What dividends and share repurchases did the company make?
The company paid quarterly dividends of C$0.16 to C$0.17 per share through 2015, totaling C$0.66 for the year. The Board declared a C$0.17 dividend payable April 15, 2016 to shareholders of record March 31, 2016. The company repurchased 3,208 thousand common shares in 2015 for $93.3 million under its normal course issuer bid, and no further repurchases had been made since the merger was announced.
What legal and regulatory risks were disclosed?
A putative class action filed in October 2015 in Florida alleged improper fuel and environmental surcharges under Florida's Deceptive and Unfair Trade Practices Act; the plaintiff voluntarily withdrew the claim without prejudice on February 29, 2016, but it could be refiled. Revenues under New York City municipal contracts represented 2.1% of 2015 consolidated revenue, and those contracts can be terminated on 10 days' notice. The company also disclosed that it expects to lose foreign private issuer status following the merger.
06—Continue