PONTE VEDRA, Fla., Oct. 31, 2018 /PRNewswire/ -- Advanced
Disposal Services, Inc. (NYSE: ADSW), (d/b/a Advanced Disposal)
announced today revenue of $400.6
million for the three months ended September 30, 2018 versus $392.7 million in the same period of the prior
year. Net loss during the third quarter 2018 was $4.9 million or $0.06 per diluted share and adjusted net income,
which excludes certain gains and expenses, was $15.1 million, or $0.17 per diluted share. Third quarter 2017 net
income was $3.5 million, or
$0.04 per diluted share, and adjusted
net income was $13.9 million, or
$0.16 per diluted share, in the prior
year.
"Advanced Disposal has generated operating cash flows of
$234.4 million and adjusted free cash
flow of $119.7 million year-to-date"
said Richard Burke, CEO. "Our
commitment to disciplined pricing and cash flow generation has
resulted in a continued strengthening of our balance sheet as we
reduce leverage over time. Based on our year-to-date results,
we remain on track to be either within or above the range of our
full year guidance targets."
Third Quarter Financial Highlights
- Revenue of $400.6 million was up
2.0% overall and 4.2% excluding an $8.6
million reduction related to the adoption of the new revenue
recognition standard
- Achieved average yield of 4.3%
- Organic volume declined 1.1%, predominately due to lower
special waste disposal volume
- Year-over-year growth from acquisitions was 1.1% as the company
benefited from the rollover impact of acquisitions completed in the
second half of 2017 and nine tuck-in acquisitions completed
year-to-date 2018
- Net loss was $4.9 million or
$0.06 per diluted share
- Adjusted net income improved $1.2
million to $15.1 million and
adjusted diluted earnings per share of $0.17 was $0.01
higher than third quarter 2017
- Adjusted EBITDA was $112.3
million, which was consistent with prior year levels despite
a $4.2 million adjusted EBITDA
decline from the sale of recyclables
- Cash provided by operating activities was $234.4 million year-to-date 2018
- Adjusted free cash flow year-to-date was $8.1 million or 6.8% higher than prior year and
totaled $119.7 million
Fiscal Year 2018 Guidance
Based on actual
results for the first nine months of the year and expectations for
the remainder of the year, Advanced Disposal is making the
following updates to its 2018 guidance:
- Raising its revenue guidance to be between $1,540 and $1,550
million from its previous guidance of between $1,520 million to $1,540
million
- Narrowing its adjusted EBITDA guidance to $426 million to $430
million
- Narrowing its adjusted free cash flow guidance to $136 million to $142
million
This guidance is based on current economic conditions and
assumes no significant changes in the overall economy. Please refer
to the "Special Note Regarding Forward-Looking Statements" section
of this press release.
Advanced Disposal will conduct a quarterly earnings conference
call on November 1, 2018 at
10:00 a.m. EST. The call can be
accessed by dialing (866) 478-7805 and asking for conference ID
5795839 or the Advanced Disposal Q3 2018 earnings call. This call
will be recorded and available via replay approximately two hours
after the completion of the earnings call for thirty days. You may
access the recording by dialing (855) 859-2056 or through the link
on the investor relations page of our website at
www.AdvancedDisposal.com.
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 income (loss) 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Service
revenues
|
$
|
400.6
|
|
|
$
|
392.7
|
|
|
$
|
1,163.4
|
|
|
$
|
1,123.2
|
|
Operating costs
and expenses
|
|
|
|
|
|
|
|
Operating
|
268.2
|
|
|
248.0
|
|
|
755.1
|
|
|
717.1
|
|
Selling, general and
administrative
|
45.4
|
|
|
41.8
|
|
|
135.3
|
|
|
127.4
|
|
Depreciation and
amortization
|
68.9
|
|
|
68.9
|
|
|
202.8
|
|
|
197.9
|
|
Acquisition and
development costs
|
0.1
|
|
|
0.4
|
|
|
0.4
|
|
|
1.2
|
|
Loss (gain) on
disposal of assets and asset impairments
|
0.5
|
|
|
0.5
|
|
|
(2.8)
|
|
|
11.1
|
|
Restructuring
charges
|
—
|
|
|
3.4
|
|
|
0.1
|
|
|
3.4
|
|
Total operating costs
and expenses
|
383.1
|
|
|
363.0
|
|
|
1,090.9
|
|
|
1,058.1
|
|
Operating
income
|
17.5
|
|
|
29.7
|
|
|
72.5
|
|
|
65.1
|
|
Other (expense)
income
|
|
|
|
|
|
|
|
Interest
expense
|
(24.4)
|
|
|
(24.1)
|
|
|
(71.0)
|
|
|
(69.7)
|
|
Other income
(expense), net
|
0.8
|
|
|
1.3
|
|
|
8.7
|
|
|
(0.5)
|
|
Total other
expense
|
(23.6)
|
|
|
(22.8)
|
|
|
(62.3)
|
|
|
(70.2)
|
|
(Loss) income before
income taxes
|
(6.1)
|
|
|
6.9
|
|
|
10.2
|
|
|
(5.1)
|
|
Income tax (benefit)
expense
|
(1.2)
|
|
|
3.4
|
|
|
3.3
|
|
|
(1.4)
|
|
Net (loss)
income
|
$
|
(4.9)
|
|
|
$
|
3.5
|
|
|
$
|
6.9
|
|
|
$
|
(3.7)
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to common stockholders
per share
|
|
|
|
|
|
|
|
Basic (loss) income
per share
|
$
|
(0.06)
|
|
|
$
|
0.04
|
|
|
$
|
0.08
|
|
|
$
|
(0.04)
|
|
Diluted (loss) income
per share
|
$
|
(0.06)
|
|
|
$
|
0.04
|
|
|
$
|
0.08
|
|
|
$
|
(0.04)
|
|
Basic average shares
outstanding
|
88,614,747
|
|
|
88,398,924
|
|
|
88,562,445
|
|
|
88,271,406
|
|
Diluted average
shares outstanding
|
88,614,747
|
|
|
89,083,558
|
|
|
89,326,755
|
|
|
88,271,406
|
|
Advanced Disposal
Services, Inc.
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
(in millions, except
share
data)
|
|
|
September 30,
2018
|
|
December 31,
2017
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
8.3
|
|
|
$
|
6.8
|
|
Accounts receivable,
net of allowance for doubtful accounts of $4.7 and $5.4,
respectively.
|
216.8
|
|
|
199.9
|
|
Prepaid expenses and
other current assets
|
39.1
|
|
|
37.9
|
|
Total current
assets
|
264.2
|
|
|
244.6
|
|
Other
assets
|
39.2
|
|
|
23.0
|
|
Property and
equipment, net of accumulated depreciation of $1,503.2 and
$1,355.5,
respectively
|
1,722.9
|
|
|
1,728.8
|
|
Goodwill
|
1,210.2
|
|
|
1,208.2
|
|
Other intangible
assets, net of accumulated amortization of $278.1 and $247.6,
respectively
|
261.6
|
|
|
288.7
|
|
Total
assets
|
$
|
3,498.1
|
|
|
$
|
3,493.3
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
|
108.7
|
|
|
$
|
92.3
|
|
Accrued
expenses
|
120.2
|
|
|
113.0
|
|
Deferred
revenue
|
69.4
|
|
|
69.1
|
|
Current maturities of
landfill retirement obligations
|
20.2
|
|
|
20.2
|
|
Current maturities of
long-term debt
|
52.1
|
|
|
74.1
|
|
Total current
liabilities
|
370.6
|
|
|
368.7
|
|
Other long-term
liabilities, less current maturities
|
77.3
|
|
|
61.5
|
|
Long-term debt, less
current maturities
|
1,837.9
|
|
|
1,884.2
|
|
Accrued landfill
retirement obligations, less current maturities
|
211.3
|
|
|
205.7
|
|
Deferred income
taxes
|
91.8
|
|
|
88.6
|
|
Total
liabilities
|
2,588.9
|
|
|
2,608.7
|
|
Equity
|
|
|
|
Common stock: $.01
par value, 1,000,000,000 shares authorized, 88,654,572 and
88,491,194 shares outstanding, respectively
|
0.9
|
|
|
0.9
|
|
Treasury stock at
cost, 2,274 and 2,274 shares, respectively
|
—
|
|
|
—
|
|
Additional paid-in
capital
|
1,498.4
|
|
|
1,487.4
|
|
Accumulated
deficit
|
(593.6)
|
|
|
(603.3)
|
|
Accumulated other
comprehensive income (loss)
|
3.5
|
|
|
(0.4)
|
|
Total stockholders'
equity
|
909.2
|
|
|
884.6
|
|
Total liabilities and
stockholders' equity
|
$
|
3,498.1
|
|
|
$
|
3,493.3
|
|
Advanced Disposal
Services, Inc.
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
(in
millions)
|
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
Cash flows from
operating activities
|
|
|
|
Net income
(loss)
|
$
|
6.9
|
|
|
$
|
(3.7)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities
|
|
|
|
Depreciation and
amortization
|
202.8
|
|
|
197.9
|
|
Change in fair value
of derivative instruments
|
(4.8)
|
|
|
1.7
|
|
Amortization of debt
issuance costs and original issue discount
|
5.0
|
|
|
4.8
|
|
Accretion on landfill
retirement obligations
|
11.4
|
|
|
11.1
|
|
Other accretion and
amortization
|
3.2
|
|
|
2.9
|
|
Provision for
doubtful accounts
|
3.6
|
|
|
3.6
|
|
(Gain) loss on
disposition of property and equipment
|
(2.6)
|
|
|
1.3
|
|
Impairment of
assets
|
—
|
|
|
13.0
|
|
Gain on disposition
of businesses and assets
|
—
|
|
|
(2.8)
|
|
Stock based
compensation
|
8.5
|
|
|
8.3
|
|
Deferred tax expense
(benefit)
|
3.2
|
|
|
(2.7)
|
|
Earnings in equity
investee
|
(1.0)
|
|
|
(1.2)
|
|
Changes in operating
assets and liabilities, net of businesses acquired
|
|
|
|
Increase in accounts
receivable
|
(20.5)
|
|
|
(22.0)
|
|
Decrease in prepaid
expenses and other current assets
|
6.3
|
|
|
1.5
|
|
(Increase) decrease
in other assets
|
(9.0)
|
|
|
0.2
|
|
Increase in accounts
payable
|
16.7
|
|
|
9.9
|
|
Increase in accrued
expenses
|
8.1
|
|
|
5.2
|
|
(Decrease) increase
in deferred revenue
|
(0.4)
|
|
|
1.1
|
|
Increase (decrease)
in other long-term liabilities
|
12.3
|
|
|
(0.7)
|
|
Capping, closure and
post-closure obligations
|
(15.3)
|
|
|
(8.3)
|
|
Assumption of long
term care and closure reserve
|
—
|
|
|
24.0
|
|
Net cash provided by
operating activities
|
234.4
|
|
|
245.1
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of property
and equipment and landfill construction and development
|
(133.3)
|
|
|
(140.5)
|
|
Proceeds from sale of
property and equipment and insurance recoveries
|
7.3
|
|
|
4.1
|
|
Acquisition of
businesses, net of cash acquired
|
(6.1)
|
|
|
(112.2)
|
|
Proceeds from sale of
businesses
|
—
|
|
|
8.7
|
|
Net cash used in
investing activities
|
(132.1)
|
|
|
(239.9)
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
borrowings on debt instruments
|
84.0
|
|
|
195.0
|
|
Repayment on debt
instruments, including capital leases
|
(187.3)
|
|
|
(200.3)
|
|
Proceeds from
issuance of common stock
|
2.5
|
|
|
6.1
|
|
Net cash (used in)
provided by financing activities
|
(100.8)
|
|
|
0.8
|
|
Net increase in cash
and cash equivalents
|
1.5
|
|
|
6.0
|
|
Cash and cash
equivalents, beginning of period
|
6.8
|
|
|
1.2
|
|
Cash and cash
equivalents, end of period
|
$
|
8.3
|
|
|
$
|
7.2
|
|
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,
2017, 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 and nine months ended September 30, 2018, 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Collection
|
$
|
262.7
|
|
65.6
|
%
|
|
$
|
259.1
|
|
66.0
|
%
|
|
$
|
776.2
|
|
66.7
|
%
|
|
$
|
753.1
|
|
67.0
|
%
|
Disposal
|
146.8
|
|
36.6
|
%
|
|
145.3
|
|
37.0
|
%
|
|
418.9
|
|
36.0
|
%
|
|
407.8
|
|
36.3
|
%
|
Sale of
recyclables
|
4.0
|
|
1.0
|
%
|
|
10.0
|
|
2.5
|
%
|
|
13.9
|
|
1.2
|
%
|
|
27.6
|
|
2.5
|
%
|
Fuel charges and
environmental
charges
|
31.6
|
|
7.9
|
%
|
|
26.9
|
|
6.9
|
%
|
|
90.1
|
|
7.7
|
%
|
|
76.0
|
|
6.8
|
%
|
Other
revenue
|
34.5
|
|
8.6
|
%
|
|
28.0
|
|
7.1
|
%
|
|
94.9
|
|
8.2
|
%
|
|
78.8
|
|
7.0
|
%
|
Intercompany
eliminations
|
(79.0)
|
|
(19.7)
|
%
|
|
(76.6)
|
|
(19.5)
|
%
|
|
(230.6)
|
|
(19.8)
|
%
|
|
(220.1)
|
|
(19.6)
|
%
|
Total service
revenues
|
$
|
400.6
|
|
100.0
|
%
|
|
$
|
392.7
|
|
100.0
|
%
|
|
$
|
1,163.4
|
|
100.0
|
%
|
|
$
|
1,123.2
|
|
100.0
|
%
|
The table set forth below reflects changes in revenue, as
compared to the prior year:
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Average
yield
|
4.3
|
%
|
|
0.2
|
%
|
|
3.2
|
%
|
|
1.4
|
%
|
Recycling
|
(1.3)
|
%
|
|
0.9
|
%
|
|
(1.1)
|
%
|
|
1.0
|
%
|
Fuel fee
revenue
|
1.2
|
%
|
|
0.2
|
%
|
|
1.0
|
%
|
|
0.4
|
%
|
Total
yield
|
4.2
|
%
|
|
1.3
|
%
|
|
3.1
|
%
|
|
2.8
|
%
|
Organic
volume
|
(1.1)
|
%
|
|
3.4
|
%
|
|
0.8
|
%
|
|
0.8
|
%
|
Acquisitions
|
1.1
|
%
|
|
4.8
|
%
|
|
2.4
|
%
|
|
3.4
|
%
|
Divestitures
|
—
|
%
|
|
(0.6)
|
%
|
|
(0.4)
|
%
|
|
(0.3)
|
%
|
Impact of revenue
recognition standard adoption
|
(2.2)
|
%
|
|
—
|
%
|
|
(2.3)
|
%
|
|
—
|
%
|
Total revenue
change
|
2.0
|
%
|
|
8.9
|
%
|
|
3.6
|
%
|
|
6.7
|
%
|
OPERATING EXPENSES
The following table summarizes our operating expenses for the
periods presented (in millions and as a percentage of revenue):
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating
|
$
|
264.4
|
|
66.0
|
%
|
|
$
|
244.2
|
|
62.2
|
%
|
|
$
|
743.7
|
|
63.9
|
%
|
|
$
|
706.0
|
|
62.9
|
%
|
Accretion of landfill
retirement obligations
|
3.8
|
|
0.9
|
%
|
|
3.8
|
|
1.0
|
%
|
|
11.4
|
|
1.0
|
%
|
|
11.1
|
|
1.0
|
%
|
Operating
expenses
|
$
|
268.2
|
|
66.9
|
%
|
|
$
|
248.0
|
|
63.2
|
%
|
|
$
|
755.1
|
|
64.9
|
%
|
|
$
|
717.1
|
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Labor and related
benefits
|
$
|
84.0
|
|
|
21.0
|
%
|
|
$
|
80.2
|
|
|
20.4
|
%
|
|
$
|
249.2
|
|
|
21.4
|
%
|
|
$
|
233.2
|
|
|
20.8
|
%
|
Transfer and disposal
costs
|
52.9
|
|
|
13.2
|
%
|
|
53.1
|
|
|
13.5
|
%
|
|
155.0
|
|
|
13.3
|
%
|
|
154.8
|
|
|
13.8
|
%
|
Maintenance and
repairs
|
40.8
|
|
|
10.2
|
%
|
|
36.7
|
|
|
9.3
|
%
|
|
116.5
|
|
|
10.0
|
%
|
|
104.5
|
|
|
9.3
|
%
|
Fuel
|
20.7
|
|
|
5.2
|
%
|
|
17.0
|
|
|
4.3
|
%
|
|
60.1
|
|
|
5.2
|
%
|
|
49.0
|
|
|
4.4
|
%
|
Franchise fees and
taxes
|
11.0
|
|
|
2.7
|
%
|
|
18.2
|
|
|
4.6
|
%
|
|
30.7
|
|
|
2.6
|
%
|
|
50.7
|
|
|
4.5
|
%
|
Risk
management
|
10.4
|
|
|
2.6
|
%
|
|
7.8
|
|
|
2.1
|
%
|
|
27.0
|
|
|
2.3
|
%
|
|
24.6
|
|
|
2.2
|
%
|
Other
|
28.3
|
|
|
7.0
|
%
|
|
28.8
|
|
|
7.4
|
%
|
|
83.4
|
|
|
7.3
|
%
|
|
81.4
|
|
|
7.2
|
%
|
Subtotal
|
$
|
248.1
|
|
|
61.9
|
%
|
|
$
|
241.8
|
|
|
61.6
|
%
|
|
$
|
721.9
|
|
|
62.1
|
%
|
|
$
|
698.2
|
|
|
62.2
|
%
|
Greentree expenses,
net of insurance
recoveries
|
—
|
|
|
—
|
%
|
|
2.4
|
|
|
0.6
|
%
|
|
0.1
|
|
|
—
|
%
|
|
7.8
|
|
|
0.7
|
%
|
Landfill remediation
expenses
|
16.3
|
|
|
4.1
|
%
|
|
—
|
|
|
—
|
%
|
|
21.7
|
|
|
1.8
|
%
|
|
—
|
|
|
—
|
%
|
Total operating
expenses,
excluding accretion expense
|
$
|
264.4
|
|
|
66.0
|
%
|
|
$
|
244.2
|
|
|
62.2
|
%
|
|
$
|
743.7
|
|
|
63.9
|
%
|
|
$
|
706.0
|
|
|
62.9
|
%
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Salaries
|
$
|
27.6
|
|
|
6.9
|
%
|
|
$
|
26.4
|
|
|
6.7
|
%
|
|
$
|
84.9
|
|
|
7.3
|
%
|
|
$
|
81.3
|
|
|
7.2
|
%
|
Legal and
professional
|
3.4
|
|
|
0.8
|
%
|
|
2.8
|
|
|
0.7
|
%
|
|
10.6
|
|
|
0.9
|
%
|
|
8.7
|
|
|
0.8
|
%
|
Other
|
14.4
|
|
|
3.6
|
%
|
|
12.6
|
|
|
3.2
|
%
|
|
39.8
|
|
|
3.4
|
%
|
|
37.4
|
|
|
3.3
|
%
|
Total selling,
general and administrative
expenses
|
$
|
45.4
|
|
|
11.3
|
%
|
|
$
|
41.8
|
|
|
10.6
|
%
|
|
$
|
135.3
|
|
|
11.6
|
%
|
|
$
|
127.4
|
|
|
11.3
|
%
|
ADDITIONAL STATISTICS
The following table reflects cash interest and cash taxes for
the periods presented (in millions):
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cash paid for
interest
|
$
|
16.7
|
|
|
$
|
16.2
|
|
|
$
|
60.0
|
|
|
$
|
58.6
|
|
Cash paid for
taxes
|
$
|
1.0
|
|
|
$
|
0.4
|
|
|
$
|
2.0
|
|
|
$
|
1.0
|
|
Internalization for the three months ended September 30, 2018: 64%
Days Sales Outstanding for the three months ended September 30, 2018: 50 (34 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 income (loss) 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 income (loss) 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, to the extent they are effective,
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net (loss)
income
|
$
|
(4.9)
|
|
|
$
|
3.5
|
|
|
$
|
6.9
|
|
|
$
|
(3.7)
|
|
Income tax (benefit)
expense
|
(1.2)
|
|
|
3.4
|
|
|
3.3
|
|
|
(1.4)
|
|
Interest
expense
|
24.4
|
|
|
24.1
|
|
|
71.0
|
|
|
69.7
|
|
Depreciation and
amortization
|
68.9
|
|
|
68.9
|
|
|
202.8
|
|
|
197.9
|
|
Accretion on landfill
retirement obligations
|
3.8
|
|
|
3.8
|
|
|
11.4
|
|
|
11.1
|
|
Accretion on loss
contracts and other long-term liabilities
|
0.1
|
|
|
0.1
|
|
|
0.3
|
|
|
0.3
|
|
EBITDA
|
91.1
|
|
|
103.8
|
|
|
295.7
|
|
|
273.9
|
|
EBITDA
adjustments:
|
|
|
|
|
|
|
|
Acquisition and
development costs
|
0.1
|
|
|
0.4
|
|
|
0.4
|
|
|
1.2
|
|
Stock based
compensation
|
3.6
|
|
|
1.6
|
|
|
8.5
|
|
|
7.9
|
|
Greentree expenses,
net of estimated insurance recoveries
|
—
|
|
|
2.4
|
|
|
0.1
|
|
|
7.8
|
|
Landfill remediation
expenses and related impacts
|
16.3
|
|
|
—
|
|
|
22.0
|
|
|
—
|
|
Earnings in equity
investee, net
|
0.1
|
|
|
(0.1)
|
|
|
(0.3)
|
|
|
—
|
|
Restructuring
charges
|
—
|
|
|
3.4
|
|
|
0.1
|
|
|
3.4
|
|
Loss (gain) on
disposal of assets and asset impairments
|
0.5
|
|
|
0.5
|
|
|
(2.8)
|
|
|
11.1
|
|
Unrealized loss
(gain) on derivatives
|
0.8
|
|
|
(0.6)
|
|
|
(4.8)
|
|
|
1.7
|
|
Realized loss (gain)
on derivatives
|
(1.2)
|
|
|
0.5
|
|
|
(2.2)
|
|
|
1.5
|
|
Capital market and
debt extinguishment costs
|
0.2
|
|
|
—
|
|
|
0.9
|
|
|
0.4
|
|
Withdrawal costs from
a multi-employer pension fund
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
Other
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
Adjusted
EBITDA
|
$
|
112.3
|
|
|
$
|
112.3
|
|
|
$
|
318.4
|
|
|
$
|
309.3
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
400.6
|
|
|
$
|
392.7
|
|
|
$
|
1,163.4
|
|
|
$
|
1,123.2
|
|
Adjusted EBITDA
margin
|
28.0
|
%
|
|
28.6
|
%
|
|
27.4
|
%
|
|
27.5
|
%
|
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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net cash provided by
operating activities
|
$
|
71.2
|
|
|
74.3
|
|
|
234.4
|
|
|
245.1
|
|
Purchases of property
and equipment and landfill construction and
development (a)
|
(46.8)
|
|
|
(51.9)
|
|
|
(133.3)
|
|
|
(128.7)
|
|
Proceeds from sale of
property and equipment and insurance recoveries
|
3.1
|
|
|
1.1
|
|
|
7.3
|
|
|
4.1
|
|
Free cash
flow
|
27.5
|
|
|
23.5
|
|
|
108.4
|
|
|
120.5
|
|
Assumptions of
long-term care and closure reserve (b)
|
1.4
|
|
|
2.0
|
|
|
3.0
|
|
|
(22.0)
|
|
Restructuring
payments
|
0.1
|
|
|
0.4
|
|
|
0.5
|
|
|
0.4
|
|
Payment to retired
executives
|
—
|
|
|
—
|
|
|
—
|
|
|
6.2
|
|
Greentree costs, net
of insurance recoveries
|
4.3
|
|
|
2.1
|
|
|
3.4
|
|
|
4.7
|
|
Landfill remediation
expenses and related impacts (c)
|
6.1
|
|
|
—
|
|
|
6.2
|
|
|
—
|
|
Capital market
costs
|
0.2
|
|
|
0.1
|
|
|
0.4
|
|
|
0.3
|
|
Adjusted free cash
flow
|
39.6
|
|
|
28.1
|
|
|
121.9
|
|
|
110.1
|
|
Realized (gain) loss
on derivatives
|
(1.2)
|
|
|
0.5
|
|
|
(2.2)
|
|
|
1.5
|
|
Adjusted free cash
flow excluding realized (gain) loss on derivatives
|
$
|
38.4
|
|
|
$
|
28.6
|
|
|
$
|
119.7
|
|
|
$
|
111.6
|
|
|
(a) Excludes the
impact of land purchased for future airspace of $3.1 million during
the first quarter of 2017 and the purchase of a facility related to
a municipal contract of $8.7 million during third quarter
2017.
|
|
(b) The Company
received a cash payment of $24.0 million during the first quarter
of 2017 that is included in net cash provided by operating
activities in exchange for assuming certain post-closure
liabilities of a closed portion of a landfill and became
responsible for expenditures related to a gas infrastructure
system. The assumed post-closure liabilities and expenditures
related to the gas infrastructure system approximate the amount of
the cash payment. The Company paid $3.0 million and $2.0
million of these costs during the first nine months of 2018 and
2017, respectively.
|
|
(c) The Company has
incurred $6.2 million of cash payments for landfill remediation
costs during the first nine months of 2018 related to an enhanced
de-watering system and the removal, treatment, and disposal of
leachate at one of its landfills. We have recognized $21.7
million of total operating expenses year-to-date, and those costs
are reflected in our consolidated financial statements.
|
ADJUSTED NET INCOME
The following table calculates adjusted net income (in millions
except share and per share data):
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net (loss)
income
|
$
|
(4.9)
|
|
|
$
|
3.5
|
|
|
$
|
6.9
|
|
|
$
|
(3.7)
|
|
Amortization of
intangibles
|
9.8
|
|
|
10.3
|
|
|
30.5
|
|
|
31.2
|
|
Acquisition and
development costs
|
0.1
|
|
|
0.4
|
|
|
0.4
|
|
|
1.2
|
|
Greentree expenses,
net of estimated insurance recoveries
|
—
|
|
|
2.4
|
|
|
0.1
|
|
|
7.8
|
|
Landfill remediation
expenses and related impacts
|
16.3
|
|
|
—
|
|
|
22.0
|
|
|
—
|
|
Restructuring
charges
|
—
|
|
|
3.4
|
|
|
0.1
|
|
|
3.4
|
|
Loss (gain) on
disposal of assets and asset impairments
|
0.5
|
|
|
0.5
|
|
|
(2.8)
|
|
|
11.1
|
|
Unrealized loss
(gain) on derivatives
|
0.8
|
|
|
(0.6)
|
|
|
(4.8)
|
|
|
1.7
|
|
Realized loss (gain)
on derivatives
|
(1.2)
|
|
|
0.5
|
|
|
(2.2)
|
|
|
1.5
|
|
Capital market and
debt extinguishment costs
|
0.2
|
|
|
—
|
|
|
0.9
|
|
|
0.4
|
|
Withdrawal costs from
a multi-employer pension fund
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
Other
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
Tax effect
|
(7.3)
|
|
|
(6.9)
|
|
|
(11.8)
|
|
|
(23.6)
|
|
Adjusted net
income
|
$
|
15.1
|
|
|
$
|
13.9
|
|
|
$
|
40.1
|
|
|
$
|
31.4
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share:
|
|
|
|
|
|
|
|
Adjusted
average shares outstanding
|
89,685,591
|
|
|
89,083,558
|
|
|
89,326,755
|
|
|
88,787,995
|
|
Adjusted
earnings per common share
|
$
|
0.17
|
|
|
$
|
0.16
|
|
|
$
|
0.45
|
|
|
$
|
0.35
|
|
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This report 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 subsequent Quarterly
Report 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
2017 Annual Report on Form 10-K.
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.
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SOURCE Advanced Disposal Services, Inc.