PONTE VEDRA, Fla., July 30, 2020 /PRNewswire/ -- Advanced Disposal
Services, Inc. (NYSE: ADSW), (d/b/a Advanced Disposal) announced
today revenue of $380.3 million for
the three months ended June 30, 2020
versus $419.1 million in the same
period of the prior year. Net income during the second quarter 2020
was $6.2 million or $0.07 per diluted share, which was an improvement
of $7.2 million or 0.08 per diluted
share compared to the prior year. Adjusted net income, which
excludes certain gains and expenses, was $17.0 million, or $0.19 per diluted share.
"We are extremely pleased with the results the team delivered,"
said Richard Burke, CEO. "The
second quarter was one of the most challenging business
environments we have ever faced with unprecedented changes to our
economy driven by the COVID-19 pandemic. We also are now
fifteen months from the original announcement of our pending merger
with Waste Management, which could have easily distracted the
team. Yet despite these headwinds, we were able to achieve
significant improvements in operating income, net income, and cash
flow from operations during the quarter. This is the
collective result of our over 6,000 team members living out our
Service First, Safety Always culture, and it underscores our team's
commitment to our customers, communities, and company."
Second Quarter Financial Highlights
- Revenue of $380.3 million
represented a (9.2%) decrease
- Achieved average yield of 3.8% but suffered volume declines of
(12.2%) primarily related to the pandemic
- Net income improved $7.2 million
to $6.2 million or $0.07 per diluted share
- Achieved adjusted EBITDA of $103.8
million
- Adjusted EBITDA margins improved 110 basis points to 27.3%
despite sharp volume declines as the company focused on managing
controllable costs
- Adjusted net income improved $8.0
million to $17.0 million
- Cash provided by operating activities improved $21.0 million during the second quarter to
$97.0 million
- Adjusted free cash flow improved $29.2
million during the second quarter to $61.8 million
Investor Communications
On June
24, 2020, Advanced Disposal, Waste Management, Inc. ("Waste
Management"), and the merger subsidiary of Waste Management entered
into Amendment No. 1 to the merger agreement. In exchange for
agreeing to reduce the per share merger consideration to
$30.30 per share in cash, Advanced
Disposal and Waste Management agreed to amend the terms of the
original merger agreement to provide increased closing certainty to
the Advanced Disposal stockholders, including by: (i) extending the
end date from July 13, 2020 to
September 30, 2020, which will be
further extended automatically to November
30, 2020, subject to certain conditions; (ii) providing for
a $250,000,000 (increased from
$150,000,000) termination fee payable
by Waste Management to Advanced Disposal in certain circumstances;
(iii) providing that Waste Management must use ''best efforts'' to
take all actions to consummate the transactions by the end date,
including using its ''best efforts'' to obtain antitrust approval;
(iv) eliminating the $200,000,000
revenue threshold on the divestiture obligation of Waste Management
as provided in the original merger agreement; and (v) providing
that each party has certified to the other that such party's
closing conditions with respect to the accuracy of its
representations and performance of its covenants, and, with respect
to Waste Management, the absence of a material adverse effect on
Advanced Disposal, would be satisfied as of the date of the merger
agreement amendment if the closing were to occur on such date (and
that Waste Management and its merger subsidiary will not assert
that any of such conditions are not satisfied at the closing as a
result of what such parties had knowledge of as of the date of the
merger agreement amendment).
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,
2019, 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 six months ended June
30, 2020, 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. and Subsidiaries Condensed Consolidated
Statements of Operations (Unaudited)
|
|
(in millions, except
share and per share data)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Service
revenues
|
$
|
380.3
|
|
|
$
|
419.1
|
|
|
$
|
767.0
|
|
|
$
|
803.1
|
|
Operating costs
and expenses
|
|
|
|
|
|
|
|
Operating (exclusive
of items shown separately below)
|
242.3
|
|
|
277.2
|
|
|
499.7
|
|
|
526.6
|
|
Selling, general and
administrative
|
45.7
|
|
|
62.2
|
|
|
96.7
|
|
|
112.0
|
|
Depreciation and
amortization
|
64.1
|
|
|
70.3
|
|
|
128.7
|
|
|
136.2
|
|
Acquisition and
development costs
|
—
|
|
|
0.2
|
|
|
—
|
|
|
1.0
|
|
Loss on disposal of
assets and asset impairments
|
0.5
|
|
|
0.5
|
|
|
0.6
|
|
|
0.7
|
|
Total operating costs
and expenses
|
352.6
|
|
|
410.4
|
|
|
725.7
|
|
|
776.5
|
|
Operating
income
|
27.7
|
|
|
8.7
|
|
|
41.3
|
|
|
26.6
|
|
Other (expense)
income
|
|
|
|
|
|
|
|
Interest
expense
|
(19.8)
|
|
|
(26.2)
|
|
|
(42.4)
|
|
|
(52.2)
|
|
Other income
(expense), net
|
0.2
|
|
|
(3.5)
|
|
|
0.9
|
|
|
(2.8)
|
|
Total other
expense
|
(19.6)
|
|
|
(29.7)
|
|
|
(41.5)
|
|
|
(55.0)
|
|
Income (loss) before
income taxes
|
8.1
|
|
|
(21.0)
|
|
|
(0.2)
|
|
|
(28.4)
|
|
Income tax expense
(benefit)
|
1.9
|
|
|
(20.0)
|
|
|
(0.1)
|
|
|
(21.4)
|
|
Net income (loss)
|
$
|
6.2
|
|
|
$
|
(1.0)
|
|
|
$
|
(0.1)
|
|
|
$
|
(7.0)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common
stockholders per share
|
|
|
|
|
|
|
|
Basic income (loss)
per share
|
$
|
0.07
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
$
|
(0.08)
|
|
Diluted income (loss)
per share
|
$
|
0.07
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
$
|
(0.08)
|
|
Basic average shares
outstanding
|
90,424,107
|
|
|
88,857,948
|
|
|
90,167,026
|
|
|
88,790,157
|
|
Diluted average
shares outstanding
|
91,557,116
|
|
|
88,857,948
|
|
|
90,167,026
|
|
|
88,790,157
|
|
Advanced Disposal
Services, Inc. and Subsidiaries Condensed Consolidated
Balance Sheets (Unaudited)
|
|
(in millions, except
share data)
|
|
|
June 30,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
31.4
|
|
|
$
|
12.5
|
|
Accounts receivable,
net of allowance for doubtful accounts of $4.8 and $4.5,
respectively
|
193.8
|
|
|
208.3
|
|
Prepaid expenses and
other current assets
|
34.6
|
|
|
44.0
|
|
Total current
assets
|
259.8
|
|
|
264.8
|
|
Other
assets
|
52.6
|
|
|
53.3
|
|
Property and
equipment, net of accumulated depreciation of $1,809.6 and
$1,720.7,
respectively
|
1,748.2
|
|
|
1,767.6
|
|
Goodwill
|
1,224.8
|
|
|
1,224.8
|
|
Other intangible
assets, net of accumulated amortization of $333.6 and $318.1,
respectively
|
217.5
|
|
|
233.0
|
|
Total
assets
|
$
|
3,502.9
|
|
|
$
|
3,543.5
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
|
121.9
|
|
|
$
|
120.7
|
|
Accrued
expenses
|
109.1
|
|
|
124.5
|
|
Deferred
revenue
|
67.5
|
|
|
71.3
|
|
Current maturities of
accrued landfill retirement obligations
|
20.2
|
|
|
28.0
|
|
Current maturities of
long-term debt
|
41.3
|
|
|
76.1
|
|
Total current
liabilities
|
360.0
|
|
|
420.6
|
|
Other long-term
liabilities
|
90.1
|
|
|
82.7
|
|
Long-term debt, less
current maturities
|
1,762.7
|
|
|
1,792.1
|
|
Accrued landfill
retirement obligations, less current maturities
|
255.1
|
|
|
236.2
|
|
Deferred income
taxes
|
89.1
|
|
|
88.5
|
|
Total
liabilities
|
2,557.0
|
|
|
2,620.1
|
|
Equity
|
|
|
|
Common stock: $.01
par value, 1,000,000,000 shares authorized, 90,906,005 and
89,836,069 issued including shares held in treasury,
respectively
|
0.9
|
|
|
0.9
|
|
Treasury stock at
cost, 178,540 and 132,930 shares, respectively
|
(5.6)
|
|
|
(4.1)
|
|
Additional paid-in
capital
|
1,551.0
|
|
|
1,527.7
|
|
Accumulated
deficit
|
(598.2)
|
|
|
(598.1)
|
|
Accumulated other
comprehensive loss
|
(2.2)
|
|
|
(3.0)
|
|
Total stockholders'
equity
|
945.9
|
|
|
923.4
|
|
Total liabilities and
stockholders' equity
|
$
|
3,502.9
|
|
|
$
|
3,543.5
|
|
Advanced Disposal
Services, Inc. and Subsidiaries Consolidated Statements
of Cash Flows (Unaudited)
|
(in
millions)
|
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
|
(0.1)
|
|
|
$
|
(7.0)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
Depreciation and
amortization
|
128.7
|
|
|
136.2
|
|
Change in fair value
of derivative instruments
|
—
|
|
|
4.6
|
|
Amortization of debt
issuance costs and original issue discount
|
3.0
|
|
|
2.8
|
|
Accretion on landfill
retirement obligations
|
8.9
|
|
|
8.7
|
|
Other accretion and
amortization
|
3.5
|
|
|
3.4
|
|
Provision for
doubtful accounts
|
2.7
|
|
|
3.2
|
|
Loss on disposition
of property and equipment
|
0.6
|
|
|
0.7
|
|
Stock based
compensation
|
2.9
|
|
|
6.3
|
|
Deferred tax expense
(benefit)
|
0.3
|
|
|
(17.8)
|
|
Earnings in equity
investee
|
(0.4)
|
|
|
(1.1)
|
|
Write-off of 2012
Veolia acquisition related indemnification receivable
|
—
|
|
|
3.9
|
|
Changes in operating
assets and liabilities, net of businesses acquired
|
|
|
|
Decrease (increase)
in accounts receivable
|
11.8
|
|
|
(10.2)
|
|
Decrease in prepaid
expenses and other current assets
|
9.4
|
|
|
3.4
|
|
(Increase) decrease
in other assets
|
(1.2)
|
|
|
1.9
|
|
Increase in accounts
payable
|
8.3
|
|
|
15.4
|
|
(Decrease) increase
in accrued expenses
|
(15.4)
|
|
|
4.4
|
|
Decrease in deferred
revenue
|
(3.8)
|
|
|
(1.1)
|
|
Increase (decrease)
in other long-term liabilities
|
7.1
|
|
|
(1.7)
|
|
Capping, closure and
post-closure obligations
|
(4.6)
|
|
|
(7.5)
|
|
Net cash provided by
operating activities
|
161.7
|
|
|
148.5
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of property
and equipment and construction and development
|
(87.5)
|
|
|
(83.4)
|
|
Proceeds from sale of
property and equipment and insurance recoveries
|
0.8
|
|
|
1.7
|
|
Acquisition of
businesses, net of cash acquired
|
—
|
|
|
(27.1)
|
|
Net cash used in
investing activities
|
(86.7)
|
|
|
(108.8)
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
borrowings on debt instruments
|
70.0
|
|
|
101.0
|
|
Repayment on debt
instruments, including finance leases
|
(145.0)
|
|
|
(140.1)
|
|
Proceeds from stock
option exercises net of stock repurchases
|
18.9
|
|
|
3.3
|
|
Net cash used in
financing activities
|
(56.1)
|
|
|
(35.8)
|
|
Net increase in cash
and cash equivalents
|
18.9
|
|
|
3.9
|
|
Cash and cash
equivalents, beginning of period
|
12.5
|
|
|
6.8
|
|
Cash and cash
equivalents, end of period
|
$
|
31.4
|
|
|
$
|
10.7
|
|
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,
2019, 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 six months ended June
30, 2020, 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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Collection
|
$
|
259.9
|
|
|
68.3
|
%
|
|
$
|
279.4
|
|
|
66.7
|
%
|
|
$
|
528.7
|
|
|
68.9
|
%
|
|
$
|
547.6
|
|
|
68.2
|
%
|
Disposal
|
129.0
|
|
|
33.9
|
%
|
|
152.5
|
|
|
36.4
|
%
|
|
252.1
|
|
|
32.9
|
%
|
|
279.6
|
|
|
34.8
|
%
|
Sale of
recyclables
|
3.8
|
|
|
1.0
|
%
|
|
2.7
|
|
|
0.6
|
%
|
|
6.6
|
|
|
0.9
|
%
|
|
6.3
|
|
|
0.8
|
%
|
Fuel and
environmental
charges
|
24.2
|
|
|
6.4
|
%
|
|
30.3
|
|
|
7.2
|
%
|
|
51.7
|
|
|
6.7
|
%
|
|
59.2
|
|
|
7.4
|
%
|
Other
revenue
|
35.7
|
|
|
9.4
|
%
|
|
34.6
|
|
|
8.3
|
%
|
|
71.2
|
|
|
9.3
|
%
|
|
62.0
|
|
|
7.7
|
%
|
Intercompany
eliminations
|
(72.3)
|
|
|
(19.0)
|
%
|
|
(80.4)
|
|
|
(19.2)
|
%
|
|
(143.3)
|
|
|
(18.7)
|
%
|
|
(151.6)
|
|
|
(18.9)
|
%
|
Total service
revenues
|
$
|
380.3
|
|
|
100.0
|
%
|
|
$
|
419.1
|
|
|
100.0
|
%
|
|
$
|
767.0
|
|
|
100.0
|
%
|
|
$
|
803.1
|
|
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Average
yield
|
3.8
|
%
|
|
3.2
|
%
|
|
3.7
|
%
|
|
3.6
|
%
|
Recycling
|
0.2
|
%
|
|
(0.2)
|
%
|
|
—
|
%
|
|
(0.2)
|
%
|
Fuel surcharge
revenue
|
(1.0)
|
%
|
|
—
|
%
|
|
(0.6)
|
%
|
|
0.2
|
%
|
Total
yield
|
3.0
|
%
|
|
3.0
|
%
|
|
3.1
|
%
|
|
3.6
|
%
|
Organic
volume
|
(12.2)
|
%
|
|
0.8
|
%
|
|
(7.8)
|
%
|
|
0.2
|
%
|
Acquisitions
|
—
|
%
|
|
1.5
|
%
|
|
0.2
|
%
|
|
1.5
|
%
|
Total revenue
change
|
(9.2)
|
%
|
|
5.3
|
%
|
|
(4.5)
|
%
|
|
5.3
|
%
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Operating
|
$
|
237.9
|
|
|
62.6
|
%
|
|
$
|
272.8
|
|
|
65.1
|
%
|
|
$
|
490.8
|
|
|
64.0
|
%
|
|
$
|
517.9
|
|
|
64.5
|
%
|
Accretion of landfill
retirement
obligations
|
4.4
|
|
|
1.1
|
%
|
|
4.4
|
|
|
1.0
|
%
|
|
8.9
|
|
|
1.1
|
%
|
|
8.7
|
|
|
1.1
|
%
|
Operating
expenses
|
$
|
242.3
|
|
|
63.7
|
%
|
|
$
|
277.2
|
|
|
66.1
|
%
|
|
$
|
499.7
|
|
|
65.1
|
%
|
|
$
|
526.6
|
|
|
65.6
|
%
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Labor and related
benefits
|
$
|
83.6
|
|
|
22.0
|
%
|
|
$
|
88.2
|
|
|
21.0
|
%
|
|
$
|
173.7
|
|
|
22.6
|
%
|
|
$
|
173.9
|
|
|
21.7
|
%
|
Transfer and disposal
costs
|
49.6
|
|
|
13.0
|
%
|
|
57.7
|
|
|
13.8
|
%
|
|
102.0
|
|
|
13.3
|
%
|
|
107.9
|
|
|
13.4
|
%
|
Maintenance and
repairs
|
40.3
|
|
|
10.6
|
%
|
|
41.7
|
|
|
9.9
|
%
|
|
80.8
|
|
|
10.5
|
%
|
|
81.6
|
|
|
10.2
|
%
|
Fuel
|
11.2
|
|
|
2.9
|
%
|
|
19.9
|
|
|
4.7
|
%
|
|
27.7
|
|
|
3.6
|
%
|
|
38.9
|
|
|
4.8
|
%
|
Franchise and host
fees
|
9.2
|
|
|
2.4
|
%
|
|
11.3
|
|
|
2.7
|
%
|
|
17.9
|
|
|
2.3
|
%
|
|
20.6
|
|
|
2.6
|
%
|
Risk
management
|
9.6
|
|
|
2.5
|
%
|
|
9.2
|
|
|
2.2
|
%
|
|
19.8
|
|
|
2.6
|
%
|
|
18.6
|
|
|
2.3
|
%
|
Other
|
34.4
|
|
|
9.2
|
%
|
|
35.2
|
|
|
8.5
|
%
|
|
68.9
|
|
|
9.1
|
%
|
|
66.8
|
|
|
8.3
|
%
|
Subtotal
|
$
|
237.9
|
|
|
62.6
|
%
|
|
$
|
263.2
|
|
|
62.8
|
%
|
|
$
|
490.8
|
|
|
64.0
|
%
|
|
$
|
508.3
|
|
|
63.3
|
%
|
Landfill remediation
expenses
|
—
|
|
|
—
|
%
|
|
9.6
|
|
|
2.3
|
%
|
|
—
|
|
|
—
|
%
|
|
9.6
|
|
|
1.2
|
%
|
Total operating
expenses,
excluding accretion expense
|
$
|
237.9
|
|
|
62.6
|
%
|
|
$
|
272.8
|
|
|
65.1
|
%
|
|
$
|
490.8
|
|
|
64.0
|
%
|
|
$
|
517.9
|
|
|
64.5
|
%
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Salaries
|
$
|
29.1
|
|
|
7.7
|
%
|
|
$
|
30.6
|
|
|
7.3
|
%
|
|
$
|
59.7
|
|
|
7.8
|
%
|
|
$
|
62.4
|
|
|
7.8
|
%
|
Legal and
professional
|
5.6
|
|
|
1.5
|
%
|
|
15.8
|
|
|
3.8
|
%
|
|
10.7
|
|
|
1.4
|
%
|
|
20.1
|
|
|
2.5
|
%
|
Other
|
11.0
|
|
|
2.8
|
%
|
|
15.8
|
|
|
3.7
|
%
|
|
26.3
|
|
|
3.4
|
%
|
|
29.5
|
|
|
3.6
|
%
|
Total selling,
general and administrative
expenses
|
$
|
45.7
|
|
|
12.0
|
%
|
|
$
|
62.2
|
|
|
14.8
|
%
|
|
$
|
96.7
|
|
|
12.6
|
%
|
|
$
|
112.0
|
|
|
13.9
|
%
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash paid for
interest
|
$
|
23.7
|
|
|
$
|
30.0
|
|
|
$
|
38.7
|
|
|
$
|
48.3
|
|
Cash paid for taxes
(net of refunds)
|
$
|
0.8
|
|
|
$
|
0.4
|
|
|
$
|
0.9
|
|
|
$
|
1.5
|
|
Internalization for the three months ended June 30, 2020: 60%
Days Sales Outstanding for the three months ended June 30, 2020: 46 (30 net of deferred
revenue)
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow,
adjusted free cash flow, adjusted net income, and adjusted earnings
per share 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, 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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
(loss)
|
$
|
6.2
|
|
|
$
|
(1.0)
|
|
|
$
|
(0.1)
|
|
|
$
|
(7.0)
|
|
Income tax expense
(benefit)
|
1.9
|
|
|
(20.0)
|
|
|
(0.1)
|
|
|
(21.4)
|
|
Interest
expense
|
19.8
|
|
|
26.2
|
|
|
42.4
|
|
|
52.2
|
|
Depreciation and
amortization
|
64.1
|
|
|
70.3
|
|
|
128.7
|
|
|
136.2
|
|
Accretion on landfill
retirement obligations
|
4.4
|
|
|
4.4
|
|
|
8.9
|
|
|
8.7
|
|
Accretion on loss
contracts and other long-term liabilities
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
EBITDA
|
96.5
|
|
|
80.0
|
|
|
180.0
|
|
|
168.9
|
|
EBITDA
adjustments:
|
|
|
|
|
|
|
|
Acquisition and
development costs
|
—
|
|
|
0.2
|
|
|
—
|
|
|
1.0
|
|
Stock based
compensation
|
1.3
|
|
|
2.2
|
|
|
2.9
|
|
|
6.3
|
|
Landfill remediation
expenses
|
—
|
|
|
9.6
|
|
|
—
|
|
|
9.6
|
|
Earnings in equity
investee, net
|
0.3
|
|
|
(0.1)
|
|
|
0.6
|
|
|
(0.7)
|
|
Restructuring
charges
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
Loss on disposal of
assets and asset impairments
|
0.5
|
|
|
0.5
|
|
|
0.6
|
|
|
0.7
|
|
Unrealized loss on
derivatives
|
—
|
|
|
2.1
|
|
|
—
|
|
|
4.6
|
|
Realized gain on
derivatives
|
—
|
|
|
(1.7)
|
|
|
—
|
|
|
(3.7)
|
|
Fee case settlement
and related expenses
|
—
|
|
|
9.7
|
|
|
—
|
|
|
9.7
|
|
Merger related
expenses
|
2.9
|
|
|
3.6
|
|
|
6.0
|
|
|
4.1
|
|
Merger retention
bonus
|
2.2
|
|
|
—
|
|
|
4.5
|
|
|
—
|
|
Write-off of
acquisition related indemnification receivable
|
—
|
|
|
3.9
|
|
|
—
|
|
|
3.9
|
|
Other
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
Adjusted
EBITDA
|
$
|
103.8
|
|
|
$
|
110.0
|
|
|
$
|
194.8
|
|
|
$
|
205.0
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
380.3
|
|
|
$
|
419.1
|
|
|
$
|
767.0
|
|
|
$
|
803.1
|
|
Adjusted EBITDA
margin
|
27.3
|
%
|
|
26.2
|
%
|
|
25.4
|
%
|
|
25.5
|
%
|
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
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net cash provided by
operating activities
|
$
|
97.0
|
|
|
$
|
76.0
|
|
|
$
|
161.7
|
|
|
$
|
148.5
|
|
Purchases of property
and equipment and landfill construction
and development
|
(40.4)
|
|
|
(50.9)
|
|
|
(87.5)
|
|
|
(83.4)
|
|
Proceeds from sale of
property and equipment and insurance
recoveries
|
0.5
|
|
|
0.7
|
|
|
0.8
|
|
|
1.7
|
|
Free cash
flow
|
57.1
|
|
|
25.8
|
|
|
75.0
|
|
|
66.8
|
|
Assumptions of
long-term care and closure reserve
|
0.8
|
|
|
2.2
|
|
|
2.3
|
|
|
3.4
|
|
Restructuring
payments
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.8
|
|
Greentree costs, net
of insurance recoveries
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.8
|
|
Landfill remediation
expenses
|
1.1
|
|
|
2.6
|
|
|
2.9
|
|
|
5.1
|
|
Fee case settlement
and related expenses
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
Merger related
expenses
|
2.8
|
|
|
3.0
|
|
|
4.9
|
|
|
3.0
|
|
Merger retention
bonus
|
—
|
|
|
—
|
|
|
8.5
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
Adjusted free cash
flow
|
61.8
|
|
|
34.3
|
|
|
93.8
|
|
|
80.2
|
|
Realized gain on
derivatives
|
—
|
|
|
(1.7)
|
|
|
—
|
|
|
(3.7)
|
|
Adjusted free cash
flow excluding realized gain on derivatives
|
$
|
61.8
|
|
|
$
|
32.6
|
|
|
$
|
93.8
|
|
|
$
|
76.5
|
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
(loss)
|
$
|
6.2
|
|
|
$
|
(1.0)
|
|
|
$
|
(0.1)
|
|
|
$
|
(7.0)
|
|
Amortization of
intangibles
|
7.8
|
|
|
7.8
|
|
|
15.5
|
|
|
15.6
|
|
Acquisition and
development costs
|
—
|
|
|
0.2
|
|
|
—
|
|
|
1.0
|
|
Landfill remediation
expenses
|
—
|
|
|
9.6
|
|
|
—
|
|
|
9.6
|
|
Restructuring
charges
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
Loss on disposal of
assets and asset impairments
|
0.5
|
|
|
0.5
|
|
|
0.6
|
|
|
0.7
|
|
Unrealized loss on
derivatives
|
—
|
|
|
2.1
|
|
|
—
|
|
|
4.6
|
|
Realized gain on
derivatives
|
—
|
|
|
(1.7)
|
|
|
—
|
|
|
(3.7)
|
|
Fee case settlement
and related expenses
|
—
|
|
|
9.7
|
|
|
—
|
|
|
9.7
|
|
Merger related
expenses
|
2.9
|
|
|
3.6
|
|
|
6.0
|
|
|
4.1
|
|
Merger retention
bonus
|
2.2
|
|
|
—
|
|
|
4.5
|
|
|
—
|
|
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)
|
|
Other
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
Tax effect
|
(2.7)
|
|
|
(8.1)
|
|
|
(5.6)
|
|
|
(10.7)
|
|
Adjusted net
income
|
$
|
17.0
|
|
|
$
|
9.0
|
|
|
$
|
21.1
|
|
|
$
|
10.8
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share:
|
|
|
|
|
|
|
|
Adjusted
average shares outstanding
|
91,557,116
|
|
|
90,717,523
|
|
|
91,415,381
|
|
|
90,322,546
|
|
Adjusted
earnings per common share
|
$
|
0.19
|
|
|
$
|
0.10
|
|
|
$
|
0.23
|
|
|
$
|
0.12
|
|
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:
- significant public health crises, epidemics or pandemics,
including the novel strain of coronavirus ("COVID-19"), may
adversely affect our business, results of operations and financial
condition;
- 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
2019 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, including obtaining
stockholder approval; (2) the effects that any termination of the
merger agreement may have on Advanced Disposal or its business,
including the risk that Advanced Disposal's stock price may decline
significantly if the merger is not completed; (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 press
release. 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.