PONTE VEDRA, Fla., July 30, 2019 /PRNewswire/ -- Advanced Disposal
Services, Inc. (NYSE: ADSW), (d/b/a Advanced Disposal) announced
today revenue of $419.1 million for
the three months ended June 30, 2019
versus $398.1 million in the same
period of the prior year. Net loss during the second quarter 2019
was ($1.0) million or ($0.01) per diluted share and adjusted net
income, which excludes certain gains and expenses, was $9.0 million, or $0.10 per diluted share.
"Our core business remains strong with 5.3% revenue growth
including 3.2% of pricing gains during second quarter 2019," said
Richard Burke, CEO.
"Additionally, our commitment to the customers we serve, the safety
of our employees, and the communities we operate in has never been
stronger as we continue to live out our Service First, Safety
Always culture. While we have experienced some headwinds
year-to-date largely due to recycling, interest costs, and leachate
from wet operating conditions, we are pleased that we have
generated $148.5 million of cash flow
from operations and $76.5 million of
adjusted free cash flow."
Second Quarter Financial Highlights
- Revenue of $419.1 million
represented a 5.3% increase
- Achieved total organic growth of 4.0%, which included average
yield of 3.2% and volume growth of 0.8%
- Year-over-year growth from acquisitions was 1.5%
- Net loss was ($1.0) million or
($0.01) per diluted share. This
included charges of $9.7 million for
a fee case settlement, $9.6 million
for landfill remediation expenses, and $3.6
million for merger-related costs, along with a net benefit
of $13.7 million related to a 2012
tax audit settlement
- Achieved adjusted EBITDA of $110.0
million, which included a $2.6
million year-over-year headwind related to declining
recycling prices and higher recycling processing costs
- Cash provided by operating activities was $148.5 million year-to-date 2019
- Adjusted free cash flow year-to-date was $76.5 million
Investor Communications
On April 14, 2019, Advanced Disposal entered into a
merger agreement with Waste Management, Inc. ("Waste Management")
whereby a subsidiary of Waste Management will acquire all
outstanding shares of Advanced Disposal for $33.15 per share in cash. In light of the
pending transaction, we elected to cease conducting quarterly
earnings conference calls until transaction closing, although we
will continue to provide a quarterly earnings release. We
also elected to enter into an extended quiet period related to
investor communications and are no longer providing forward-looking
guidance until the transaction is closed.
You should read the following information in conjunction with
our audited consolidated financial statements and notes thereto as
of and for the year ended December 31,
2018, appearing in our Annual Report on Form 10-K as filed
with the Securities and Exchange Commission and our unaudited
condensed consolidated financial statements and notes thereto as of
and for the three months ended June 30,
2019, appearing in our Form 10-Q, to be filed with the
Securities and Exchange Commission.
The calculation of free cash flow and adjusted free cash flow,
as well as details of charges and other expenses that are excluded
from EBITDA and net (loss) income in arriving at adjusted EBITDA
and adjusted net income, are contained in the "Reconciliation of
Certain Non-GAAP Measures" section of this press release.
SUPPLEMENTAL
UNAUDITED FINANCIAL INFORMATION AND
OPERATING DATA
|
|
Advanced Disposal
Services, Inc. Condensed Consolidated Statements of
Operations (Unaudited)
|
|
(in millions, except
share and per share data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Service
revenues
|
$
|
419.1
|
|
|
$
|
398.1
|
|
|
$
|
803.1
|
|
|
$
|
762.8
|
|
Operating costs
and expenses
|
|
|
|
|
|
|
|
Operating
|
277.2
|
|
|
250.7
|
|
|
526.6
|
|
|
486.8
|
|
Selling, general and
administrative
|
62.2
|
|
|
44.5
|
|
|
112.0
|
|
|
90.1
|
|
Depreciation and
amortization
|
70.3
|
|
|
69.2
|
|
|
136.2
|
|
|
133.9
|
|
Acquisition and
development costs
|
0.2
|
|
|
0.1
|
|
|
1.0
|
|
|
0.3
|
|
Loss (gain) on
disposal of assets and asset impairments
|
0.5
|
|
|
(1.4)
|
|
|
0.7
|
|
|
(3.3)
|
|
Total operating costs
and expenses
|
410.4
|
|
|
363.1
|
|
|
776.5
|
|
|
707.8
|
|
Operating
income
|
8.7
|
|
|
35.0
|
|
|
26.6
|
|
|
55.0
|
|
Other (expense)
income
|
|
|
|
|
|
|
|
Interest
expense
|
(26.2)
|
|
|
(23.6)
|
|
|
(52.2)
|
|
|
(46.6)
|
|
Other (expense)
income, net
|
(3.5)
|
|
|
2.0
|
|
|
(2.8)
|
|
|
7.9
|
|
Total other
expense
|
(29.7)
|
|
|
(21.6)
|
|
|
(55.0)
|
|
|
(38.7)
|
|
(Loss) income before
income taxes
|
(21.0)
|
|
|
13.4
|
|
|
(28.4)
|
|
|
16.3
|
|
Income tax (benefit)
expense
|
(20.0)
|
|
|
3.7
|
|
|
(21.4)
|
|
|
4.5
|
|
Net (loss)
income
|
$
|
(1.0)
|
|
|
$
|
9.7
|
|
|
$
|
(7.0)
|
|
|
$
|
11.8
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to common
stockholders per share
|
|
|
|
|
|
|
|
Basic (loss) income
per share
|
$
|
(0.01)
|
|
|
$
|
0.11
|
|
|
$
|
(0.08)
|
|
|
$
|
0.13
|
|
Diluted (loss) income
per share
|
$
|
(0.01)
|
|
|
$
|
0.11
|
|
|
$
|
(0.08)
|
|
|
$
|
0.13
|
|
Basic average shares
outstanding
|
88,857,948
|
|
|
88,555,647
|
|
|
88,790,157
|
|
|
88,535,860
|
|
Diluted average
shares outstanding
|
88,857,948
|
|
|
89,272,966
|
|
|
88,790,157
|
|
|
89,147,337
|
|
Advanced Disposal
Services, Inc. Condensed Consolidated Balance Sheets
(Unaudited)
|
|
(in millions, except
share data)
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
10.7
|
|
|
$
|
6.8
|
|
Accounts receivable,
net of allowance for doubtful accounts of $5.1 and $4.6,
respectively
|
219.6
|
|
|
211.4
|
|
Prepaid expenses and
other current assets
|
36.7
|
|
|
44.8
|
|
Total current
assets
|
267.0
|
|
|
263.0
|
|
Other
assets
|
50.6
|
|
|
31.7
|
|
Property and
equipment, net of accumulated depreciation of $1,647.3 and
$1,540.7,
respectively
|
1,769.1
|
|
|
1,761.4
|
|
Goodwill
|
1,224.1
|
|
|
1,215.1
|
|
Other intangible
assets, net of accumulated amortization of $302.5 and $286.9,
respectively
|
249.5
|
|
|
257.1
|
|
Total
assets
|
$
|
3,560.3
|
|
|
$
|
3,528.3
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
|
139.7
|
|
|
$
|
107.8
|
|
Accrued
expenses
|
125.2
|
|
|
117.7
|
|
Deferred
revenue
|
71.5
|
|
|
72.5
|
|
Current maturities of
landfill retirement obligations
|
18.6
|
|
|
18.6
|
|
Current maturities of
long-term debt
|
74.8
|
|
|
85.9
|
|
Total current
liabilities
|
429.8
|
|
|
402.5
|
|
Other long-term
liabilities
|
85.9
|
|
|
76.7
|
|
Long-term debt, less
current maturities
|
1,809.6
|
|
|
1,817.1
|
|
Accrued landfill
retirement obligations, less current maturities
|
236.7
|
|
|
229.4
|
|
Deferred income
taxes
|
87.5
|
|
|
91.1
|
|
Total
liabilities
|
2,649.5
|
|
|
2,616.8
|
|
Equity
|
|
|
|
Common stock: $.01
par value, 1,000,000,000 shares authorized, 88,934,243 and
88,685,920 issued including shares held in treasury,
respectively
|
0.9
|
|
|
0.9
|
|
Treasury stock at
cost, 18,636 and 2,274 shares, respectively
|
(0.6)
|
|
|
—
|
|
Additional paid-in
capital
|
1,511.9
|
|
|
1,501.7
|
|
Accumulated
deficit
|
(598.5)
|
|
|
(591.1)
|
|
Accumulated other
comprehensive loss
|
(2.9)
|
|
|
—
|
|
Total stockholders'
equity
|
910.8
|
|
|
911.5
|
|
Total liabilities and
stockholders' equity
|
$
|
3,560.3
|
|
|
$
|
3,528.3
|
|
Advanced Disposal
Services, Inc. Consolidated Statements of Cash Flows
(Unaudited)
|
|
(in
millions)
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
Cash flows from
operating activities
|
|
|
|
Net (loss)
income
|
$
|
(7.0)
|
|
|
$
|
11.8
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities
|
|
|
|
Depreciation and
amortization
|
136.2
|
|
|
133.9
|
|
Change in fair value
of derivative instruments
|
4.6
|
|
|
(5.6)
|
|
Amortization of debt
issuance costs and original issue discount
|
2.8
|
|
|
3.3
|
|
Accretion on landfill
retirement obligations
|
8.7
|
|
|
7.6
|
|
Other accretion and
amortization
|
3.4
|
|
|
2.3
|
|
Write-off of 2012
Veolia acquisition related indemnification receivable
|
3.9
|
|
|
—
|
|
Provision for
doubtful accounts
|
3.2
|
|
|
1.8
|
|
Loss (gain) on
disposition of property and equipment
|
0.7
|
|
|
(3.4)
|
|
Stock based
compensation
|
6.3
|
|
|
4.9
|
|
Deferred tax
(benefit) expense
|
(17.8)
|
|
|
4.8
|
|
Earnings in equity
investee
|
(1.1)
|
|
|
(0.9)
|
|
Changes in operating
assets and liabilities, net of businesses acquired
|
|
|
|
Increase in accounts
receivable
|
(10.2)
|
|
|
(10.5)
|
|
Decrease in prepaid
expenses and other current assets
|
3.4
|
|
|
5.5
|
|
Decrease in other
assets
|
1.9
|
|
|
0.5
|
|
Increase in accounts
payable
|
15.4
|
|
|
26.9
|
|
Increase (decrease)
in accrued expenses
|
4.4
|
|
|
(6.1)
|
|
(Decrease) increase
in deferred revenue
|
(1.1)
|
|
|
0.5
|
|
Decrease in other
long-term liabilities
|
(1.7)
|
|
|
(5.8)
|
|
Capping, closure and
post-closure obligations
|
(7.5)
|
|
|
(8.3)
|
|
Net cash provided by
operating activities
|
148.5
|
|
|
163.2
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of property
and equipment and landfill construction and development
|
(83.4)
|
|
|
(86.5)
|
|
Proceeds from sale of
property and equipment and insurance recoveries
|
1.7
|
|
|
4.2
|
|
Acquisition of
businesses, net of cash acquired
|
(27.1)
|
|
|
(5.9)
|
|
Net cash used in
investing activities
|
(108.8)
|
|
|
(88.2)
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
borrowings on debt instruments
|
101.0
|
|
|
53.0
|
|
Repayment on debt
instruments, including finance leases
|
(140.1)
|
|
|
(128.9)
|
|
Proceeds from
issuance of common stock net of stock repurchases
|
3.3
|
|
|
1.0
|
|
Net cash used in
financing activities
|
(35.8)
|
|
|
(74.9)
|
|
Net increase in cash
and cash equivalents
|
3.9
|
|
|
0.1
|
|
Cash and cash
equivalents, beginning of period
|
6.8
|
|
|
6.8
|
|
Cash and cash
equivalents, end of period
|
$
|
10.7
|
|
|
$
|
6.9
|
|
You should read the following information in conjunction with
our audited consolidated financial statements and notes thereto as
of and for the year ended December 31,
2018, appearing in our Annual Report on Form 10-K as filed
with the Securities and Exchange Commission and our unaudited
condensed consolidated financial statements and notes thereto as of
and for the three months ended June 30,
2019, appearing in our Form 10-Q, to be filed with the
Securities and Exchange Commission. The information presented
is considered unaudited.
REVENUE
The following table reflects our revenue by line of business for
the periods presented (in millions and as a percentage of
revenue):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Collection
|
$
|
279.4
|
|
|
66.7
|
%
|
|
$
|
269.9
|
|
|
67.8
|
%
|
|
$
|
547.6
|
|
|
68.2
|
%
|
|
$
|
530.4
|
|
|
69.5
|
%
|
Disposal
|
152.5
|
|
|
36.4
|
%
|
|
148.0
|
|
|
37.2
|
%
|
|
279.6
|
|
|
34.8
|
%
|
|
272.1
|
|
|
35.7
|
%
|
Sale of
recyclables
|
2.7
|
|
|
0.6
|
%
|
|
4.4
|
|
|
1.1
|
%
|
|
6.3
|
|
|
0.8
|
%
|
|
9.8
|
|
|
1.3
|
%
|
Fuel and
environmental
charges
|
30.3
|
|
|
7.2
|
%
|
|
30.5
|
|
|
7.7
|
%
|
|
59.2
|
|
|
7.4
|
%
|
|
58.5
|
|
|
7.7
|
%
|
Other
revenue
|
34.6
|
|
|
8.3
|
%
|
|
25.1
|
|
|
6.3
|
%
|
|
62.0
|
|
|
7.7
|
%
|
|
43.6
|
|
|
5.7
|
%
|
Intercompany
eliminations
|
(80.4)
|
|
|
(19.2)
|
%
|
|
(79.8)
|
|
|
(20.1)
|
%
|
|
(151.6)
|
|
|
(18.9)
|
%
|
|
(151.6)
|
|
|
(19.9)
|
%
|
Total service
revenues
|
$
|
419.1
|
|
|
100.0
|
%
|
|
$
|
398.1
|
|
|
100.0
|
%
|
|
$
|
803.1
|
|
|
100.0
|
%
|
|
$
|
762.8
|
|
|
100.0
|
%
|
The table set forth below reflects changes in revenue, as
compared to the prior year:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Average
yield
|
3.2
|
%
|
|
3.2
|
%
|
|
3.6
|
%
|
|
2.5
|
%
|
Recycling
|
(0.2)
|
%
|
|
(1.2)
|
%
|
|
(0.2)
|
%
|
|
(0.9)
|
%
|
Fuel surcharge
revenue
|
—
|
%
|
|
0.9
|
%
|
|
0.2
|
%
|
|
0.9
|
%
|
Total
yield
|
3.0
|
%
|
|
2.9
|
%
|
|
3.6
|
%
|
|
2.5
|
%
|
Organic
volume
|
0.8
|
%
|
|
1.2
|
%
|
|
0.2
|
%
|
|
1.7
|
%
|
Acquisitions
|
1.5
|
%
|
|
2.6
|
%
|
|
1.5
|
%
|
|
3.1
|
%
|
Divestitures
|
—
|
%
|
|
(0.5)
|
%
|
|
—
|
%
|
|
(0.6)
|
%
|
Impact of revenue
recognition standard adoption
|
—
|
%
|
|
(2.3)
|
%
|
|
—
|
%
|
|
(2.3)
|
%
|
Total revenue
change
|
5.3
|
%
|
|
3.9
|
%
|
|
5.3
|
%
|
|
4.4
|
%
|
OPERATING EXPENSES
The following table summarizes our operating expenses for the
periods presented (in millions and as a percentage of revenue):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Operating
|
$
|
272.8
|
|
|
65.1
|
%
|
|
$
|
246.9
|
|
|
62.0
|
%
|
|
$
|
517.9
|
|
|
64.5
|
%
|
|
$
|
479.2
|
|
|
62.8
|
%
|
Accretion of landfill
retirement
obligations
|
4.4
|
|
|
1.0
|
%
|
|
3.8
|
|
|
1.0
|
%
|
|
8.7
|
|
|
1.1
|
%
|
|
7.6
|
|
|
1.0
|
%
|
Operating
expenses
|
$
|
277.2
|
|
|
66.1
|
%
|
|
$
|
250.7
|
|
|
63.0
|
%
|
|
$
|
526.6
|
|
|
65.6
|
%
|
|
$
|
486.8
|
|
|
63.8
|
%
|
The following table summarizes the major components of our
operating expenses, excluding accretion expense on landfill
retirement obligations for the periods presented (in millions and
as a percentage of revenue):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Labor and related
benefits
|
$
|
88.2
|
|
|
21.0
|
%
|
|
$
|
83.2
|
|
|
20.9
|
%
|
|
$
|
173.9
|
|
|
21.7
|
%
|
|
$
|
165.2
|
|
|
21.7
|
%
|
Transfer and disposal
costs
|
57.7
|
|
|
13.8
|
%
|
|
54.3
|
|
|
13.6
|
%
|
|
107.9
|
|
|
13.4
|
%
|
|
102.2
|
|
|
13.4
|
%
|
Maintenance and
repairs
|
41.7
|
|
|
9.9
|
%
|
|
38.7
|
|
|
9.7
|
%
|
|
81.6
|
|
|
10.2
|
%
|
|
75.7
|
|
|
9.9
|
%
|
Fuel
|
19.9
|
|
|
4.7
|
%
|
|
21.2
|
|
|
5.3
|
%
|
|
38.9
|
|
|
4.8
|
%
|
|
39.4
|
|
|
5.2
|
%
|
Franchise and host
fees
|
11.3
|
|
|
2.7
|
%
|
|
11.0
|
|
|
2.8
|
%
|
|
20.6
|
|
|
2.6
|
%
|
|
19.7
|
|
|
2.6
|
%
|
Risk
management
|
9.2
|
|
|
2.2
|
%
|
|
8.1
|
|
|
2.0
|
%
|
|
18.6
|
|
|
2.3
|
%
|
|
16.4
|
|
|
2.1
|
%
|
Other
|
35.2
|
|
|
8.5
|
%
|
|
28.7
|
|
|
7.3
|
%
|
|
66.8
|
|
|
8.3
|
%
|
|
55.1
|
|
|
7.2
|
%
|
Subtotal
|
$
|
263.2
|
|
|
62.8
|
%
|
|
$
|
245.2
|
|
|
61.6
|
%
|
|
$
|
508.3
|
|
|
63.3
|
%
|
|
$
|
473.7
|
|
|
62.1
|
%
|
Greentree expenses,
net of
insurance recoveries
|
—
|
|
|
—
|
%
|
|
(3.7)
|
|
|
(0.9)
|
%
|
|
—
|
|
|
—
|
%
|
|
0.1
|
|
|
—
|
%
|
Landfill remediation
expenses
|
9.6
|
|
|
2.3
|
%
|
|
5.4
|
|
|
1.3
|
%
|
|
9.6
|
|
|
1.2
|
%
|
|
5.4
|
|
|
0.7
|
%
|
Total operating
expenses,
excluding accretion expense
|
$
|
272.8
|
|
|
65.1
|
%
|
|
$
|
246.9
|
|
|
62.0
|
%
|
|
$
|
517.9
|
|
|
64.5
|
%
|
|
$
|
479.2
|
|
|
62.8
|
%
|
SELLING, GENERAL AND ADMINISTRATIVE
The following table summarizes our selling, general and
administrative expenses for the periods presented (in millions and
as a percentage of revenue):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Salaries
|
$
|
30.6
|
|
|
7.3
|
%
|
|
$
|
28.8
|
|
|
7.2
|
%
|
|
$
|
62.4
|
|
|
7.8
|
%
|
|
$
|
57.4
|
|
|
7.5
|
%
|
Legal and
professional
|
15.8
|
|
|
3.8
|
%
|
|
3.4
|
|
|
0.9
|
%
|
|
20.1
|
|
|
2.5
|
%
|
|
7.2
|
|
|
0.9
|
%
|
Other
|
15.8
|
|
|
3.7
|
%
|
|
12.3
|
|
|
3.1
|
%
|
|
29.5
|
|
|
3.6
|
%
|
|
25.5
|
|
|
3.4
|
%
|
Total selling,
general and administrative
expenses
|
$
|
62.2
|
|
|
14.8
|
%
|
|
$
|
44.5
|
|
|
11.2
|
%
|
|
$
|
112.0
|
|
|
13.9
|
%
|
|
$
|
90.1
|
|
|
11.8
|
%
|
ADDITIONAL STATISTICS
The following table reflects cash interest and cash taxes for
the periods presented (in millions):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cash paid for
interest
|
$
|
30.0
|
|
|
$
|
28.0
|
|
|
$
|
48.3
|
|
|
$
|
43.2
|
|
Cash paid for
taxes
|
$
|
0.4
|
|
|
$
|
0.9
|
|
|
$
|
1.5
|
|
|
$
|
1.0
|
|
Internalization for the three months ended June 30, 2019: 62%
Days Sales Outstanding for the three months ended June 30, 2019: 48 (32 net of deferred
revenue)
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow,
adjusted free cash flow and adjusted net income are not defined
terms under U.S. generally accepted accounting principles
("non-GAAP measures"). Non-GAAP measures should not be
considered in isolation or as a substitute for net income, income
per diluted share or cash flow data prepared in accordance with
GAAP and may not be comparable to calculations of similarly titled
measures by other companies.
We define EBITDA as net (loss) income from continuing operations
adjusted for interest, taxes, depreciation and amortization and
accretion. We define adjusted EBITDA as EBITDA adjusted to
exclude non-cash and non-recurring items as well as other
adjustments permitted in calculating covenant compliance under the
agreements governing our outstanding debt securities and credit
facilities. We believe adjusted EBITDA is useful to investors
in evaluating our performance compared to other companies in our
industry because it eliminates the effect of financing, income
taxes and the accounting effects of capital spending, as well as
certain items that are not indicative of our performance on an
ongoing basis. Management uses adjusted EBITDA to measure the
performance of our core operations at the consolidated, segment and
business unit levels and as a metric for a significant portion of
our management incentive plans.
We define free cash flow as net cash provided by operating
activities less capital expenditures (purchases of property and
equipment, excluding expenditures for significant new municipal
contracts and significant purchases of land for future landfill
airspace), net of proceeds from the sale of property and
equipment. We define adjusted free cash flow as free cash
flow excluding restructuring payments, capital markets costs, and
non-recurring items. Management uses adjusted free cash flow
to evaluate the Company's ability to generate cash to fund its
activities on an ongoing basis, and we believe adjusted free cash
flow is useful to investors in evaluating our performance compared
to other companies in our industry because it eliminates the effect
of restructuring payments, capital market costs, and other
non-recurring items, which are not indicative of our ability to
generate cash on an ongoing basis.
We define adjusted net income and adjusted earnings per share as
net (loss) income from continuing operations and diluted earnings
per share adjusted to exclude non-cash and non-recurring items. We
believe adjusted net income and adjusted earnings per share provide
an understanding of operational activities before the financial
impact of certain items. We believe that these measures are
useful in evaluating our operations as these measures are adjusted
for items that affect comparability between periods.
In fiscal 2016, we entered into interest rate caps as economic
hedges of a rise in interest rates for fiscal 2017, fiscal 2018 and
the nine months ended September 30, 2019. We believe that
excluding realized and unrealized gains and losses from interest
rate derivatives from our adjusted EBITDA provides useful
additional information in evaluating ongoing financial performance
of the business as these derivatives represent a risk management
tool to reduce our exposure to rising interest rates and are viewed
by management as a financing cost similar to interest
expense. We also purchased additional interest rate caps in
fiscal 2017 to hedge the risk of rising interest rates from
October 1, 2019 to September 30, 2021. These interest rate caps
qualify for hedge accounting and realized gains and losses will
flow through interest expense, which is excluded from adjusted
EBITDA.
ADJUSTED EBITDA
The following table calculates adjusted earnings before
interest, taxes, depreciation, amortization and accretion adjusted
for certain other costs (in millions except percentages):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net (loss)
income
|
$
|
(1.0)
|
|
|
$
|
9.7
|
|
|
$
|
(7.0)
|
|
|
$
|
11.8
|
|
Income tax (benefit)
expense
|
(20.0)
|
|
|
3.7
|
|
|
(21.4)
|
|
|
4.5
|
|
Interest
expense
|
26.2
|
|
|
23.6
|
|
|
52.2
|
|
|
46.6
|
|
Depreciation and
amortization
|
70.3
|
|
|
69.2
|
|
|
136.2
|
|
|
133.9
|
|
Accretion on landfill
retirement obligations
|
4.4
|
|
|
3.8
|
|
|
8.7
|
|
|
7.6
|
|
Accretion on loss
contracts and other long-term liabilities
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
EBITDA
|
80.0
|
|
|
110.1
|
|
|
168.9
|
|
|
204.6
|
|
EBITDA
adjustments:
|
|
|
|
|
|
|
|
Acquisition and
development costs
|
0.2
|
|
|
0.1
|
|
|
1.0
|
|
|
0.3
|
|
Stock based
compensation
|
2.2
|
|
|
2.4
|
|
|
6.3
|
|
|
4.9
|
|
Greentree expenses,
net of estimated insurance recoveries
|
—
|
|
|
(3.7)
|
|
|
—
|
|
|
0.1
|
|
Landfill remediation
expenses and related impacts
|
9.6
|
|
|
5.7
|
|
|
9.6
|
|
|
5.7
|
|
Earnings in equity
investee, net
|
(0.1)
|
|
|
(0.2)
|
|
|
(0.7)
|
|
|
(0.4)
|
|
Restructuring
charges
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.1
|
|
Loss (gain) on
disposal of assets and asset impairments
|
0.5
|
|
|
(1.4)
|
|
|
0.7
|
|
|
(3.3)
|
|
Unrealized loss
(gain) on derivatives
|
2.1
|
|
|
(0.3)
|
|
|
4.6
|
|
|
(5.6)
|
|
Realized (gain) loss
on derivatives
|
(1.7)
|
|
|
(1.1)
|
|
|
(3.7)
|
|
|
(1.0)
|
|
Capital market
cost
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.7
|
|
Fee case settlement
and related expenses
|
9.7
|
|
|
—
|
|
|
9.7
|
|
|
—
|
|
Merger related
expenses
|
3.6
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
Write-off of
acquisition related indemnification receivable
|
3.9
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
Adjusted
EBITDA
|
$
|
110.0
|
|
|
$
|
112.0
|
|
|
$
|
205.0
|
|
|
$
|
206.1
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
419.1
|
|
|
$
|
398.1
|
|
|
$
|
803.1
|
|
|
$
|
762.8
|
|
Adjusted EBITDA
margin
|
26.2
|
%
|
|
28.1
|
%
|
|
25.5
|
%
|
|
27.0
|
%
|
FREE CASH FLOW AND ADJUSTED FREE CASH FLOW
The following table calculates free cash flow and adjusted free
cash flow (in millions):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net cash provided by
operating activities
|
$
|
76.0
|
|
|
$
|
84.7
|
|
|
$
|
148.5
|
|
|
$
|
163.2
|
|
Purchases of property
and equipment and landfill construction and
development
|
(50.9)
|
|
|
(51.7)
|
|
|
(83.4)
|
|
|
(86.5)
|
|
Proceeds from sale of
property and equipment and insurance recoveries
|
0.7
|
|
|
2.6
|
|
|
1.7
|
|
|
4.2
|
|
Free cash
flow
|
25.8
|
|
|
35.6
|
|
|
66.8
|
|
|
80.9
|
|
Assumptions of
long-term care and closure reserve
|
2.2
|
|
|
1.1
|
|
|
3.4
|
|
|
1.6
|
|
Restructuring
payments
|
0.1
|
|
|
—
|
|
|
0.8
|
|
|
0.4
|
|
Greentree costs, net
of insurance recoveries
|
0.3
|
|
|
(3.9)
|
|
|
0.8
|
|
|
(0.9)
|
|
Landfill remediation
expenses
|
2.6
|
|
|
0.1
|
|
|
5.1
|
|
|
0.1
|
|
Fee case settlement
and related expenses
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
Merger related
expenses
|
3.0
|
|
|
—
|
|
|
3.0
|
|
|
—
|
|
Capital market
costs
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Adjusted free cash
flow
|
34.3
|
|
|
33.1
|
|
|
80.2
|
|
|
82.3
|
|
Realized (gain) loss
on derivatives
|
(1.7)
|
|
|
(1.1)
|
|
|
(3.7)
|
|
|
(1.0)
|
|
Adjusted free cash
flow excluding realized (gain) loss on derivatives
|
$
|
32.6
|
|
|
$
|
32.0
|
|
|
$
|
76.5
|
|
|
$
|
81.3
|
|
ADJUSTED NET INCOME
The following table calculates adjusted net income (in millions
except share and per share data):
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net (loss)
income
|
$
|
(1.0)
|
|
|
$
|
9.7
|
|
|
$
|
(7.0)
|
|
|
$
|
11.8
|
|
Amortization of
intangibles
|
7.8
|
|
|
10.3
|
|
|
15.6
|
|
|
20.7
|
|
Acquisition and
development costs
|
0.2
|
|
|
0.1
|
|
|
1.0
|
|
|
0.3
|
|
Greentree expenses,
net of estimated insurance recoveries
|
—
|
|
|
(3.7)
|
|
|
—
|
|
|
0.1
|
|
Landfill remediation
expenses and related impacts
|
9.6
|
|
|
5.7
|
|
|
9.6
|
|
|
5.7
|
|
Restructuring
charges
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.1
|
|
Loss (gain) on
disposal of assets and asset impairments
|
0.5
|
|
|
(1.4)
|
|
|
0.7
|
|
|
(3.3)
|
|
Unrealized loss
(gain) on derivatives
|
2.1
|
|
|
(0.3)
|
|
|
4.6
|
|
|
(5.6)
|
|
Realized (gain) loss
on derivatives
|
(1.7)
|
|
|
(1.1)
|
|
|
(3.7)
|
|
|
(1.0)
|
|
Capital market
cost
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.7
|
|
Fee case settlement
and related expenses
|
9.7
|
|
|
—
|
|
|
9.7
|
|
|
—
|
|
Merger related
expenses
|
3.6
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
Write-off of 2012
Veolia acquisition related indemnification
receivable
|
3.9
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
Net benefit from 2012
Veolia acquisition related tax audit settlement
|
(17.6)
|
|
|
—
|
|
|
(17.6)
|
|
|
—
|
|
Tax effect
|
(8.1)
|
|
|
(2.4)
|
|
|
(10.7)
|
|
|
(4.5)
|
|
Adjusted net
income
|
$
|
9.0
|
|
|
$
|
17.3
|
|
|
$
|
10.8
|
|
|
$
|
25.0
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share:
|
|
|
|
|
|
|
|
Adjusted
average shares outstanding
|
90,717,523
|
|
|
89,272,966
|
|
|
90,322,546
|
|
|
89,147,337
|
|
Adjusted
earnings per common share
|
$
|
0.10
|
|
|
$
|
0.19
|
|
|
$
|
0.12
|
|
|
$
|
0.28
|
|
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This press release contains forward-looking statements within
the meaning of the U.S. federal securities laws. All statements
other than statements of historical facts in this document,
including, without limitation, those regarding our business
strategy, financial position, results of operations, plans,
prospects and objectives of management for future operations
(including development plans and objectives relating to our
activities), are forward-looking statements. Many, but not all, of
these statements can be found by looking for words like "expect,"
"anticipate," "goal," "project," "plan," "believe," "seek," "will,"
"may," "forecast," "estimate," "intend," "future" and similar
words. Statements that address activities, events or developments
that we intend, expect or believe may occur in the future are
forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and section 21E of the
Securities Exchange Act of 1934, as amended and are subject to safe
harbor created by those sections. Forward-looking statements do not
guarantee future performance and may involve risks, uncertainties
and other factors which could cause our actual results, performance
or achievements to differ materially from the future results,
performance or achievements expressed or implied in those
forward-looking statements.
There are a number of risks, uncertainties and other important
factors, many of which are beyond our control, which could cause
actual results to differ materially from the forward-looking
statements contained in this release. Such risks, uncertainties and
factors include those set forth under the heading Risk Factors in
our most recent Annual Report on Form 10-K and any subsequent
Quarterly Reports on Form 10-Q filed with the Securities and
Exchange Commission.
Examples of these risks, uncertainties and other factors
include, but are not limited to:
- our ability to achieve future profitability will depend on us
executing our strategy and controlling costs;
- future results may be impacted by the expiration of net
operating losses (NOLs);
- our tax position may be affected by recent changes in U.S. tax
law;
- Operating in a highly competitive industry and the inability to
compete effectively with larger and better capitalized companies
and governmental service providers;
- our results are vulnerable to economic conditions;
- we may lose contracts through competitive bidding, early
termination or governmental action;
- some of our customers, including governmental entities, have
suffered financial difficulties affecting their credit risk, which
could negatively impact our operating results;
- our financial and operating performance may be affected by the
inability, in some instances, to renew or expand existing landfill
permits or acquire new landfills. Further, the cost of operation
and/or future construction of our existing landfills may become
economically unfeasible causing us to abandon or cease
operations;
- we could be precluded from maintaining permits or entering into
certain contracts if we are unable to obtain sufficient third-party
financial assurance or adequate insurance coverage;
- our accruals for our landfill site closure, post-closure and
contamination related costs may be inadequate;
- our cash flow may not be sufficient to finance our high level
of capital expenditures;
- our acquisitions, including our ability to integrate acquired
businesses, or that acquired businesses may have unexpected risks
or liabilities;
- the seasonal nature of our business and "event-driven" waste
projects that could cause our results to fluctuate;
- adverse and destructive weather conditions that could result in
higher fuel costs, higher labor costs, reduced municipal contract
productivity and higher disposal costs;
- we may be subject in the normal course of business to judicial,
administrative or other third-party proceedings that could
interrupt or limit our operations, result in adverse judgments,
settlements or fines and create negative publicity;
- fuel supply and prices may fluctuate significantly and we may
not be able to pass on cost increases to our customers;
- fluctuations in the prices of commodities may adversely affect
our financial condition, results of operations and cash flows;
- increases in labor and disposal costs and related
transportation costs could adversely impact our financial
results;
- efforts by labor unions could divert management attention and
adversely affect operating results;
- we depend significantly on the services of the members of our
senior, regional and local management teams, and the departure of
any of those persons could cause our operating results to
suffer;
- we are increasingly dependent on technology in our operations
and, if our technology fails, our business could be adversely
affected;
- a cybersecurity incident could negatively impact our business
and our relationships with customers;
- operational and safety risks, including the risk of personal
injury to employees and others;
- we are subject to substantial governmental regulation and
failure to comply with these requirements, as well as enforcement
actions and litigation arising from an actual or perceived breach
of such requirements, could subject us to fines, penalties and
judgments, and impose limits on our ability to operate and
expand;
- our operations being subject to environmental, health and
safety laws and regulations, as well as contractual obligations
that may result in significant liabilities;
- future changes in laws or renewed enforcement of laws
regulating the flow of solid waste in interstate commerce could
adversely affect our operating results;
- fundamental change in the waste management industry as
traditional waste streams are increasingly viewed as renewable
resources and changes in laws and environmental policies may limit
the items that enter the waste stream, any of which may adversely
impact volumes and tipping fees at our landfills. Alternatives to
landfill disposal may cause our revenues and operating results to
decline;
- risks associated with our substantial indebtedness and working
capital deficit;
- risks associated with our ability to implement our growth
strategy as and when planned; and
- the other risks described in the "Risk Factors" section of our
2018 Annual Report on Form 10-K and any subsequent Quarterly
Reports on Form 10-Q.
In addition, actual results may vary materially from those
expressed or implied by forward-looking statements based on a
number of factors related to the pending acquisition of Advanced
Disposal, including, without limitation (1) risks related to the
consummation of the merger, including the risks that (a) the merger
may not be consummated within the anticipated time period, or at
all, (b) the parties may fail to secure the termination or
expiration of any waiting period applicable under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and (c) other conditions to the consummation of the merger under
the merger agreement may not be satisfied; (2) the effects that any
termination of the merger agreement may have on Advanced Disposal
or its business, including the risks that (a) Advanced Disposal's
stock price may decline significantly if the merger is not
completed, (b) the merger agreement may be terminated in
circumstances requiring Advanced Disposal to pay Waste Management a
termination fee, or (c) the circumstances of the termination,
including the possible imposition of a 12-month tail period during
which the termination fee could be payable upon certain subsequent
transactions, may have a chilling effect on alternatives to the
merger; (3) the effects that the announcement or pendency of the
merger may have on Advanced Disposal and its business, including
the risks that as a result (a) Advanced Disposal's business,
operating results or stock price may suffer, (b) Advanced
Disposal's current plans and operations may be disrupted, (c)
Advanced Disposal's ability to retain or recruit key employees may
be adversely affected, (d) Advanced Disposal's business
relationships (including, customers and suppliers) may be adversely
affected, or (e) Advanced Disposal's management's or employees'
attention may be diverted from other important matters; (4) the
effect of limitations that the merger agreement places on Advanced
Disposal's ability to operate its business, return capital to
stockholders or engage in alternative transactions; (5) the nature,
cost and outcome of pending and future litigation and other legal
proceedings, including any such proceedings related to the merger
and instituted against Advanced Disposal and others; (6) the risk
that the merger and related transactions may involve unexpected
costs, liabilities or delays; and (7) other economic, business,
competitive, legal, regulatory, and/or tax factors.
The above examples are not exhaustive and new risks may emerge
from time to time. Except as required by law, we undertake no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Such forward-looking statements are based on our
current beliefs, assumptions, expectations, estimates and
projections regarding our present and future business strategies
and the environment in which we will operate in the future. These
forward-looking statements speak only as of the date of this
report. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statement contained herein to reflect any change in our
expectations with regard thereto or any change of events,
conditions or circumstances on which any such statement was
based.
About Advanced Disposal
Advanced Disposal (NYSE: ADSW) brings fresh ideas and solutions to
the business of a clean environment. We provide integrated,
non-hazardous solid waste collection, recycling and disposal
services to residential, commercial, industrial and construction
customers across 16 states and the Bahamas. Our team is dedicated to finding
effective, sustainable solutions to preserve the environment for
future generations. We welcome you to learn more at
AdvancedDisposal.com or follow us on Facebook.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/advanced-disposal-announces-second-quarter-results-300893552.html
SOURCE Advanced Disposal Services, Inc.