ENP Newswire -
Release date- 14022014 -
Fourth quarter highlights
Consolidated revenues of approximately
Organic revenue growth driven by higher core price of 1.6%
Adjusted EBITDA of
Adjusted net income per share of
'With our fourth-quarter results, we achieved a solid finish to the year, in line with or better than our expectations. Organic revenues were driven by higher pricing in every service line. Our consolidated core price improvement of 1.6% reflects the focused sales execution we are applying across our collection, transfer and disposal service lines, and which helped to offset the impact of lower volumes due to the unusually harsh weather in December,' said
'2013 marked a pivotal year for
At the same time, we unified our entire organizational structure and leadership group, improving our ability to strategically manage our capital and drive cost efficiencies and best practices throughout our business. And by aligning our management team's compensation to greater asset utilization and capital efficiency, we believe we have all of the components in place to continue to improve our return on invested capital.'
We do not have operational exposure to the volatility of the Canadian dollar, but there is an impact to our reportable results which are denominated in U.S. currency. In providing our guidance for 2014, we are highlighting our sensitivity to foreign currency translation, in order to demonstrate the underlying operational strength in our performance outlook.'
Fourth quarter ended
Reported revenues increased
Operating income was
Adjusted EBITDA was
For the year ended
For the year ended
For the year ended
Other highlights for the three months ended
Consolidated core price increased 1.6%, reflecting organic average price change, net of rollbacks and excluding fuel surcharges, across the Company's customer base
Consolidated organic volume declined 1.1%. Included in the consolidated organic volume decline in the quarter was an approximately 260 basis point decrease related to Superstorm Sandy volumes we received in the prior year coupled with the completion of three municipal contracts in the Company's Canadian operations and the closure of the
The Company is providing its outlook assuming no change in the current economic environment and excluding the impact of any acquisitions we may complete in 2014. Our outlook has been prepared assuming an FX rate of
In fiscal year 2014, we expect solid improvement in revenue, adjusted EBITDA and adjusted EBITDA margins, expressed in constant currency, where constant currency refers to 2013 actual and 2014 outlook amounts translated at the same average FX rate.
Readers are reminded that the Company's 2013 financial results were translated to U.S. dollars at an average FX rate of
Should the U.S. dollar weaken by
The purpose of presenting this outlook is to provide investors and analysts with our expected results for the coming year.
Our outlook, which is forward-looking, was approved by management on
Purpose and objective
The purpose of presenting this non-GAAP measure is to provide investors and analysts with an additional measure of our value and liquidity. We use this non-GAAP measure to assess our relative performance to our peers and to assess the availability of funds for growth investment, share repurchases, debt repayment or dividend increases.
Free cash flow - adjusted EBITDA approach
We typically calculate free cash flow using an operations approach which is better reflects how we manage the business and free cash flow(B
Funded debt to EBITDA (as defined and calculated in accordance with our consolidated facility)
The ratio of funded debt to EBITDA, which includes first year pro forma EBITDA for completed acquisitions, is 2.88 times.
Quarterly dividend declared
The Company's Board of Directors declared a quarterly dividend of
All references to 'Adjusted EBITDA' in this document are to revenues less operating expense and SG&A, excluding certain SG&A expenses, on the consolidated statement of operations and comprehensive income or loss. Adjusted EBITDA excludes some or all of the following: certain SG&A expenses, restructuring expenses, goodwill impairment, amortization, net gain or loss on sale of capital assets, interest on long-term debt, net foreign exchange gain or loss, net gain or loss on financial instruments, loss on extinguishment of debt, other expenses, income taxes and 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 companies. 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 goodwill impairment, 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 investee) or non-operating.
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. The underlying reasons for the exclusion of each item are as follows:
Certain SG&A expenses - SG&A expense includes certain non-operating or non-recurring expenses. Non-operating expenses include transaction costs or recoveries related to acquisitions, fair value adjustments attributable to stock options and restricted share expense. Non-recurring expenses include certain equity based compensation, payments made to certain senior management on their departure and other non-recurring expenses from time-to-time. 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 certain operating locations with our own, exiting certain property and building and office leases, employee severance and employee relocation costs all of which were 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.
Goodwill impairment - as a non-cash item goodwill impairment has no impact on the determination of free cash flow and is not indicative of our operating profitability.
Amortization - as a non-cash item amortization has no impact on the determination of free cash flow and is not indicative of our operating profitability.
Net gain or loss on sale of capital assets - proceeds from the sale of capital assets are either reinvested in additional or replacement capital assets or used to repay revolving credit facility borrowings.
Interest on long-term debt - interest on long-term debt reflects our debt/equity mix, interest rates and borrowing position from time to time. Accordingly, interest on long-term debt 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 and is not indicative of our operating profitability.
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 and is not indicative of our operating profitability.
Loss on extinguishment of debt - loss on extinguishment of debt is a function of our debt financing. Accordingly, it reflects our treasury/financing activities and represents 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 and amounts paid to certain executives in respect of acquisitions successfully completed. 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 and is not indicative of our operating profitability.
All references to 'Adjusted EBITA' in this document represent Adjusted EBITDA after deducting amortization of capital and landfill assets. All references to 'Adjusted operating income or adjusted operating EBIT' in this document represent Adjusted EBITDA after adjusting for net gain or loss on the sale of capital assets and all amortization expense, including amortization expense recognized on the impairment of intangible assets. All references to 'Adjusted net income' are to adjusted operating income after adjusting net gain or loss on financial instruments, loss on extinguishment of debt, other expenses and net income tax expense or recovery.
Adjusted EBITA, Adjusted operating income or adjusted operating EBIT and Adjusted net income should not be construed as measures of income or of cash flows. Collectively, these terms do not have standardized meanings prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures used by other companies. Each of these measures are important for investors and are used by management in the management of its business. Adjusted operating income or adjusted operating EBIT removes the impact of a company's capital structure and its tax rates when comparing the results of companies within or across industry sectors.
Management uses Adjusted operating EBIT as a measure of how its operations are performing and to focus attention on amortization and depreciation expense to drive higher returns on invested capital. In addition, Adjusted operating EBIT is used by management as a means to measure the performance of its operating locations and is a significant metric in the determination of compensation for certain employees. Adjusted EBITA accomplishes a similar comparative result as Adjusted operating EBIT, but further removes amortization attributable to intangible assets.
Intangible assets are measured at fair value when we complete an acquisition and amortized over their estimated useful lives. We view capital and landfill asset amortization as a proxy for the amount of capital reinvestment required to continue operating our business steady state. We believe that the replacement of intangible assets is not required to continue our operations as the costs associated with continuing operations are already captured in operating or selling, general and administration expenses.
Accordingly, we view Adjusted EBITA as a measure that eliminates the impact of a company's acquisitive nature and permits a higher degree of comparability across companies within our industry or across different sectors from an operating performance perspective.
Finally, adjusted net income is a measure of our overall earnings and profits and is further used to calculate our net income per share. Adjusted net income reflects what we believe is our 'operating' net income which excludes certain non-operating income or expenses. Adjusted net income is an important measure of a company's ability to generate profit and earnings for its shareholders which is used to compare company performance both amongst and between industry sectors.
We have adopted a measure called 'free cash flow' to supplement net income or loss as a measure of our operating performance. Free cash flow is a term which does not have a standardized meaning prescribed by U.S. GAAP, is prepared before dividends declared and shares repurchased, and may not be comparable to similar measures prepared by other companies.
The purpose of presenting this non-GAAP measure is to provide disclosure similar to the disclosure provided by other U.S. publicly listed companies in our industry and to provide investors and analysts with an additional 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, debt repayment, share repurchases or dividend increases. All references to 'free cash flow' in this document have the meaning set out in this note.
2014 outlook assumptions and factors
The Company's 2014 outlook includes a variety of assumptions and factors. The Company's 2014 outlook is the aggregation of each location's operating and financial plans for 2014. Each operating location builds its 2014 plan employing a bottom-up approach, which includes a forecast of price, volumes, new business volume, pricing growth and lost business. Each location's outlook includes assumptions around productivity, operating costs, selling, general and administrative costs and capital and landfill expenditures.
The assumptions applied at each operating location vary as a result of the environment in which it competes to provide service and the combination of assumptions is unique to each location. Accordingly, the assumptions applied in one location will differ from those applied in another, reflecting differences in the general economic environment, the locations share of the market, competition in the market, the locations operating strategy for the coming year, compensation levels, disposal rates, fuel prices, maintenance costs, to name a few.
The Company has prepared its 2014 outlook assuming the Canadian and U.S. dollars are exchanged at
The Company has assumed that there is no significant positive or negative change to the economic environment in the preparation of its outlook for 2014. Each operating location considers the economic environment in which it operates when preparing its 2014 outlook. A significant positive or negative change to the economic environment could have a significant impact on the business as a whole, or isolated locations where we operate.
Significant economic changes will have the most pronounced impact on our services which are more sensitive to changes in the economic environment, including, most notably, industrial, disposal and material recycling services. Additional information pertaining to the sensitivity of certain services we provide relative to the economic environment are outlined in greater detail in the Risk and Uncertainties section of the Company's Management Discussion and Analysis ('MD&A').
The Company has included forward looking information pertaining to revenues, specific events, selling, general and administrative expense, interest expense, taxation, share repurchases, our liquidity, withholding taxes and amortization expense in the Outlook section of its MD&A. Readers are cautioned that some or all of the forward looking information may not occur as we expect which could result in a significant difference between our 2014 outlook and our the results we actually achieve.
We historically complete several acquisitions in an operating year. However, our outlook does not contemplate us acquiring any companies in 2014. The timing, nature, size and contribution of each acquisition to our financial performance is not known until the acquisition is consummated. Accordingly, we have specifically excluded any acquisitions from our 2014 outlook for these reasons.
Readers are cautioned that our actual 2014 results may include acquisitions, which if completed will impact our 2014 results. Acquisitions will contribute additional revenues, earnings, additional capital requirements, and typically increase our long-term debt levels. Contributions from acquisitions completed in the prior year are included in our 2014 outlook.
Our estimate for capital and landfill expenditures follows the same bottom-up approach outlined above. Our capital and landfill estimate is subject to many factors and uncertainties, some of which are out of our control, including availability, timing of receipt and cost. Management may also withhold or advance capital at a pace inconsistent with its 2014 outlook due to factors that it deems necessary to best manage the Company's financial resources which could impact the Company's levels of debt and the interest expense expected in its 2014 outlook.
Management may also withhold capital and landfill expenditures from its 2014 outlook or accelerate expenditures which are not otherwise contemplated in its 2014 plan. Finally, capital expenditures in respect of infrastructure projects may be delayed or advanced which could impact the projects contribution to our planned revenues, EBITDA and net income for 2014.
Cash taxes are derived from estimated levels of income subject to tax across each of the Company's locations and jurisdictions we operate in. We have assumed that losses remain available at current levels to shield income otherwise subject to tax and our estimate of cash tax reflects posted Federal, Provincial or State tax rates, as applicable. A significant change in either Federal, Provincial or State tax rates, or our availability of losses available to shield income otherwise subject to tax could result in a significant change in our cash tax estimate for 2014.
Additionally, our operating performance could have a significant impact on our 2014 outlook for cash taxes. Cash taxes are predominantly incurred by the Company from its Canadian operations. A failure of the Canadian operations to deliver on its 2014 outlook would result in a reduction in cash taxes. Outperforming our 2014 outlook will result in higher cash tax amounts. Additionally, our cash tax estimates assume that we will continue to have available to us a similar level of tax deduction that was available to us in the prior year. Changes to either the availability or amount of deduction could result in a significant change to income subject to tax and ultimately cash taxes.
Free cash flow is the result of aggregating each locations performance, capital spend and landfill closure and post-closure cost accretion, coupled with cash taxes and interest expense. As noted above, each of these items is subject to its own set of assumptions and uncertainties. Accordingly, a change in any one or all of these assumptions could have a positive or negative impact on our ability to generate our projected free cash flow amounts for 2014.
Caution regarding forward looking statements
The Company's 2014 outlook is subject to the same risks and uncertainties outlined in the Risk and Uncertainties section of the Company's Management Discussion and Analysis, as applicable and investors are urged to fully review these sections before making an investment decision. This press release contains forward-looking statements and forward-looking information. Forward-looking statements are not based on historical facts but instead reflect our expectations, estimates or projections concerning future results or events.
These statements can generally be identified by the use of forward-looking words or phrases such as 'anticipate,' 'believe,' 'budget,' 'continue,' 'could,' 'estimate,' 'expect,' 'forecast,' 'goals,' 'intend,' 'intent,' 'belief,' 'may,' 'plan,' 'foresee,' 'likely,' 'potential,' 'project,' 'seek,' 'strategy,' 'synergies,' 'targets,' 'will,' 'should,' 'would,' or variations of such words and other similar words.
Forward-looking statements include, but are not limited to, statements relating to future financial and operating results and our plans, objectives, prospects, expectations and intentions. These statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors.
Numerous important factors could cause our actual results, performance or achievements to differ materially from those expressed in or implied by these forward-looking statements, including, without limitation, those factors outlined in the Risks and Uncertainties section of the Company's Management Discussion and Analysis. We caution that the list of factors is illustrative and by no means exhaustive. In addition, we cannot assure you that any of our expectations, estimates or projections will be achieved.
All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements in this press release are qualified by these cautionary statements. The forward-looking statements in this press release are made as of the date of this press release and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law.
As one of
Management will hold a conference call on
A replay will be available after the call until
Tel: (905) 532-7517
Tel: (905) 532-7519
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