DELAWARE | 333-191109 | 90-0875845 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | ||
99.1 | Press release of Advanced Disposal Services, Inc. dated March 3, 2016 |
Advanced Disposal Services, Inc. | ||
By: | /s/ Steven R. Carn | |
Name: | Steven R. Carn | |
Title: | Chief Financial Officer |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Service revenues | $ | 349.6 | $ | 353.7 | $ | 1,396.4 | $ | 1,403.0 | |||||||
Operating costs and expenses | |||||||||||||||
Operating expenses | 214.2 | 223.1 | 866.6 | 896.1 | |||||||||||
Selling, general and administrative | 42.2 | 39.4 | 152.6 | 154.9 | |||||||||||
Depreciation and amortization | 64.3 | 64.7 | 259.1 | 271.4 | |||||||||||
Acquisition and development costs | 0.1 | — | 1.4 | 0.1 | |||||||||||
Loss on disposal of assets and asset impairments | 3.8 | 6.2 | 21.6 | 6.5 | |||||||||||
Restructuring charges | — | 1.0 | — | 4.6 | |||||||||||
Total operating costs and expenses | 324.6 | 334.4 | 1,301.3 | 1,333.6 | |||||||||||
Operating income | 25.0 | 19.3 | 95.1 | 69.4 | |||||||||||
Other expense | |||||||||||||||
Interest expense | (34.0 | ) | (35.7 | ) | (138.0 | ) | (141.5 | ) | |||||||
Other, net | (5.4 | ) | (28.1 | ) | (10.1 | ) | (25.9 | ) | |||||||
Total other expense | (39.4 | ) | (63.8 | ) | (148.1 | ) | (167.4 | ) | |||||||
Loss from continuing operations before income taxes | (14.4 | ) | (44.5 | ) | (53.0 | ) | (98.0 | ) | |||||||
Income tax benefit | (5.6 | ) | (68.6 | ) | (19.4 | ) | (80.6 | ) | |||||||
(Loss) income from continuing operations | (8.8 | ) | 24.1 | (33.6 | ) | (17.4 | ) | ||||||||
Discontinued operations | |||||||||||||||
Loss from discontinued operations before income tax | — | — | — | (0.7 | ) | ||||||||||
Income tax benefit | — | — | — | (1.0 | ) | ||||||||||
Discontinued operations, net | — | — | — | 0.3 | |||||||||||
Net (loss) income | $ | (8.8 | ) | $ | 24.1 | $ | (33.6 | ) | $ | (17.1 | ) |
December 31, | |||||||
2015 | 2014 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 0.6 | $ | 1.0 | |||
Accounts receivable, net of allowance for doubtful accounts of $4.4 and $5.0, respectively | 177.5 | 188.0 | |||||
Prepaid expenses and other current assets | 33.4 | 34.2 | |||||
Deferred income taxes | — | 14.6 | |||||
Total current assets | 211.5 | 237.8 | |||||
Restricted cash | — | 0.2 | |||||
Other assets, net | 22.9 | 40.8 | |||||
Property and equipment, net | 1,649.9 | 1,663.9 | |||||
Goodwill | 1,173.5 | 1,166.9 | |||||
Other intangible assets, net | 364.5 | 379.9 | |||||
Total assets | $ | 3,422.3 | $ | 3,489.5 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | 98.1 | 94.7 | |||||
Accrued expenses | 135.7 | 130.7 | |||||
Deferred revenue | 63.1 | 60.0 | |||||
Current maturities of landfill retirement obligations | 30.2 | 29.2 | |||||
Current maturities of long-term debt | 49.1 | 25.3 | |||||
Total current liabilities | 376.2 | 339.9 | |||||
Other long-term liabilities | 55.8 | 61.2 | |||||
Long-term debt, less current maturities | 2,198.0 | 2,217.7 | |||||
Accrued landfill retirement obligations, less current maturities | 163.5 | 171.9 | |||||
Deferred income taxes | 139.0 | 169.9 | |||||
Total liabilities | 2,932.5 | 2,960.6 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Common stock: $.01 par value, 1,000 shares authorized, 1,000 shares issued and outstanding | — | — | |||||
Additional paid-in capital | 1,101.0 | 1,105.0 | |||||
Accumulated other comprehensive income | — | 1.5 | |||||
Accumulated deficit | (611.2 | ) | (577.6 | ) | |||
Total stockholders’ equity | 489.8 | 528.9 | |||||
Total liabilities and stockholders’ equity | $ | 3,422.3 | $ | 3,489.5 |
Year Ended December 31, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (33.6 | ) | $ | (17.1 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities | |||||||
Depreciation and amortization | 259.1 | 271.7 | |||||
Amortization of option/interest rate cap premium | 1.5 | 2.1 | |||||
Interest accretion loss contracts, other debt and long-term liabilities | 2.7 | 2.2 | |||||
Amortization of debt issuance costs | 14.4 | 15.1 | |||||
Accretion of original issue discount | 5.1 | 4.9 | |||||
Accretion on landfill retirement obligations | 13.1 | 13.5 | |||||
Provision for doubtful accounts | 4.0 | 4.2 | |||||
Loss on sale of property and equipment | 4.7 | 0.8 | |||||
Gain on redemption of security | (2.5 | ) | — | ||||
Share based compensation | 3.1 | 4.5 | |||||
Change in fair value of derivative instruments | (11.1 | ) | 27.3 | ||||
Amortization of other long-term assets | — | 0.3 | |||||
Deferred tax benefit | (21.6 | ) | (84.5 | ) | |||
Earnings in equity investee | (1.3 | ) | (0.1 | ) | |||
Asset impairment | 6.4 | 5.3 | |||||
Loss on disposition of business | 10.5 | — | |||||
Changes in operating assets and liabilities, net of businesses acquired | |||||||
Decrease in accounts receivable | 8.3 | 1.7 | |||||
Decrease in prepaid expenses, parts and supplies, and other current assets | 1.1 | 1.3 | |||||
Decrease in other assets | 3.9 | 2.9 | |||||
(Decrease) increase in accounts payable | (2.8 | ) | 3.8 | ||||
Increase (decrease) in accrued expenses | 3.9 | (6.6 | ) | ||||
Decrease in unearned revenue | (0.5 | ) | (1.7 | ) | |||
Decrease (increase) in other long-term liabilities | (3.5 | ) | 5.4 | ||||
Capping, closure and post-closure expenditures | (20.4 | ) | (13.8 | ) | |||
Net cash provided by operating activities | 244.5 | 243.2 | |||||
Cash flows from investing activities | |||||||
Purchases of property and equipment and construction and development | (179.7 | ) | (196.4 | ) | |||
Proceeds from sale of property and equipment | 2.6 | 3.0 | |||||
Proceeds from redemption of securities | 15.0 | — | |||||
Acquisition of businesses, net of cash acquired | (50.0 | ) | (9.9 | ) | |||
Proceeds from disposition of businesses | 14.7 | 2.1 | |||||
Net cash used in investing activities | (197.4 | ) | (201.2 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from borrowings debt instruments | 114.0 | 95.0 | |||||
Repayments on debt instruments | (153.4 | ) | (141.3 | ) | |||
Deferred financing charges | (0.2 | ) | (1.3 | ) | |||
Bank overdraft | 1.2 | 1.4 | |||||
Return of capital | (7.5 | ) | (9.0 | ) | |||
Capital contributions from parent | 0.4 | — | |||||
Other financing activities | (2.0 | ) | 2.2 | ||||
Net cash used in financing activities | (47.5 | ) | (53.0 | ) | |||
Net decrease in cash and cash equivalents | (0.4 | ) | (11.0 | ) | |||
Cash and cash equivalents, beginning of year | 1.0 | 12.0 | |||||
Cash and cash equivalents, end of year | $ | 0.6 | $ | 1.0 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||||
Collection | $ | 243.3 | 69.6 | % | $ | 240.5 | 68.0 | % | $ | 971.4 | 69.6 | % | $ | 950.8 | 67.8 | % | |||||||||||
Disposal | 126.8 | 36.3 | % | 124.1 | 35.1 | % | 499.0 | 35.7 | % | 492.8 | 35.1 | % | |||||||||||||||
Sale of recyclables | 6.0 | 1.7 | % | 7.6 | 2.1 | % | 24.8 | 1.8 | % | 33.5 | 2.4 | % | |||||||||||||||
Fuel fees and environmental fees | 21.4 | 6.1 | % | 23.7 | 6.7 | % | 85.8 | 6.1 | % | 92.8 | 6.6 | % | |||||||||||||||
Other | 19.5 | 5.6 | % | 23.9 | 6.8 | % | 82.2 | 5.9 | % | 95.5 | 6.8 | % | |||||||||||||||
Intercompany eliminations | (67.4 | ) | (19.3 | )% | (66.1 | ) | (18.7 | )% | (266.8 | ) | (19.1 | )% | (262.4 | ) | (18.7 | )% | |||||||||||
Total | $ | 349.6 | 100.0 | % | $ | 353.7 | 100.0 | % | $ | 1,396.4 | 100.0 | % | $ | 1,403.0 | 100.0 | % |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Average yield | 2.2 | % | 1.2 | % | 2.2 | % | 1.1 | % | |||
Recycling | (0.2 | )% | (0.6 | )% | (0.5 | )% | (0.4 | )% | |||
Fuel fee revenue | (1.6 | )% | 0.4 | % | (1.3 | )% | 0.4 | % | |||
Total yield | 0.4 | % | 1.0 | % | 0.4 | % | 1.1 | % | |||
Organic volume | (1.2 | )% | 4.3 | % | (0.8 | )% | 4.0 | % | |||
Acquisitions | 1.3 | % | 0.7 | % | 1.2 | % | 1.3 | % | |||
Divestitures | (1.7 | )% | — | % | (1.3 | )% | — | % | |||
Total revenue change | (1.2 | )% | 6.0 | % | (0.5 | )% | 6.4 | % |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||||
Operating | $ | 211.1 | 60.4 | % | $ | 219.0 | 61.9 | % | $ | 853.5 | 61.1 | % | $ | 882.6 | 62.9 | % | |||||||||||
Accretion of landfill retirement obligations | 3.1 | 0.9 | % | 4.1 | 1.2 | % | 13.1 | 0.9 | % | 13.5 | 1.0 | % | |||||||||||||||
Operating Expense | $ | 214.2 | 61.3 | % | $ | 223.1 | 63.1 | % | $ | 866.6 | 62.0 | % | $ | 896.1 | 63.9 | % |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||||
Labor and related benefits | $ | 72.7 | 20.8 | % | $ | 71.6 | 20.2 | % | $ | 286.7 | 20.5 | % | $ | 281.3 | 20.0 | % | |||||||||||
Transfer and disposal costs | 49.0 | 14.0 | % | 51.4 | 14.5 | % | 195.2 | 14.0 | % | 207.8 | 14.8 | % | |||||||||||||||
Maintenance and repairs | 31.0 | 8.9 | % | 29.2 | 8.3 | % | 123.7 | 8.9 | % | 114.9 | 8.2 | % | |||||||||||||||
Fuel | 13.7 | 3.9 | % | 22.0 | 6.2 | % | 66.6 | 4.8 | % | 101.3 | 7.2 | % | |||||||||||||||
Franchise fees and taxes | 16.9 | 4.8 | % | 16.9 | 4.8 | % | 67.1 | 4.8 | % | 64.8 | 4.6 | % | |||||||||||||||
Risk management | 5.7 | 1.6 | % | 7.3 | 2.1 | % | 25.9 | 1.9 | % | 28.4 | 2.0 | % | |||||||||||||||
Other | 22.1 | 6.3 | % | 20.6 | 5.8 | % | 88.3 | 6.3 | % | 84.1 | 6.0 | % | |||||||||||||||
Operating expenses, excluding accretion expense | $ | 211.1 | 60.4 | % | $ | 219.0 | 61.9 | % | $ | 853.5 | 61.1 | % | $ | 882.6 | 62.9 | % |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||||
Salaries | $ | 24.6 | 7.0 | % | $ | 21.0 | 5.9 | % | $ | 92.7 | 6.6 | % | $ | 90.1 | 6.4 | % | |||||||||||
Legal and professional | 5.9 | 1.7 | % | 3.0 | 0.8 | % | 15.1 | 1.1 | % | 10.7 | 0.8 | % | |||||||||||||||
Rebranding and integration costs | — | — | % | 3.2 | 0.9 | % | — | — | % | 7.1 | 0.5 | % | |||||||||||||||
Other | 11.7 | 3.3 | % | 12.2 | 3.4 | % | 44.8 | 3.2 | % | 47.0 | 3.3 | % | |||||||||||||||
Total selling, general and administrative expenses | $ | 42.2 | 12.1 | % | $ | 39.4 | 11.1 | % | $ | 152.6 | 10.9 | % | $ | 154.9 | 11.0 | % |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net (loss) income | $ | (8.8 | ) | $ | 24.1 | $ | (33.6 | ) | $ | (17.1 | ) | ||||
Less income from discontinued operations, net | — | — | — | 0.3 | |||||||||||
Loss (income) from continuing operations | (8.8 | ) | 24.1 | (33.6 | ) | (17.4 | ) | ||||||||
Additions/deductions | |||||||||||||||
Income tax benefit | (5.6 | ) | (68.6 | ) | (19.4 | ) | (80.6 | ) | |||||||
Interest expense | 34.0 | 35.7 | 138.0 | 141.5 | |||||||||||
Depreciation and amortization | 64.3 | 64.7 | 259.1 | 271.4 | |||||||||||
Accretion on landfill retirement obligations | 3.1 | 4.1 | 13.1 | 13.5 | |||||||||||
Accretion on loss contracts and other long-term liabilities | 0.2 | 0.2 | 0.8 | 0.9 | |||||||||||
EBITDA from continuing operations | 87.2 | 60.2 | 358.0 | 329.3 | |||||||||||
EBITDA adjustments: | |||||||||||||||
Acquisition and development costs | 0.1 | — | 1.4 | 0.1 | |||||||||||
Stock option vesting | 1.5 | 0.3 | 3.1 | 2.1 | |||||||||||
Earnings (losses) in equity investee, net | 0.8 | (0.2 | ) | 0.3 | (0.1 | ) | |||||||||
Restructuring charges | — | 1.0 | — | 4.6 | |||||||||||
Loss on sale of assets and businesses disposed and asset impairments | 3.8 | 6.2 | 21.6 | 6.5 | |||||||||||
Unrealized (gain) loss on fuel hedges | (2.4 | ) | 27.3 | (11.1 | ) | 27.3 | |||||||||
Gain on redemption of security | — | — | (2.5 | ) | — | ||||||||||
Rebranding and integration costs | — | 3.2 | — | 7.1 | |||||||||||
Write-off of share issuance and other capital market costs | 2.3 | — | 2.8 | — | |||||||||||
Realized loss on fuel derivatives | 8.2 | 1.8 | 26.4 | 1.9 | |||||||||||
Adjusted EBITDA from continuing operations | $ | 101.5 | $ | 99.8 | $ | 400.0 | $ | 378.8 | |||||||
Revenue from continuing operations | $ | 349.6 | $ | 353.7 | $ | 1,396.4 | $ | 1,403.0 | |||||||
Adjusted EBITDA margin from continuing operations | 29.0 | % | 28.2 | % | 28.6 | % | 27.0 | % |
Year Ended December 31, | |||||||
2015 | 2014 | ||||||
Net cash provided by operating activities | $ | 244.5 | $ | 243.2 | |||
Purchases of property & equipment (a) | (177.3 | ) | (166.0 | ) | |||
Proceeds from the sale of property & equipment | 2.6 | 3.0 | |||||
Free cash flow | 69.8 | 80.2 | |||||
Restructuring and rebranding and integration payments | 3.2 | 9.9 | |||||
Write-off of share issuance and other capital market costs | 2.7 | — | |||||
Adjusted free cash flow | $ | 75.7 | $ | 90.1 | |||
Realized loss on fuel derivatives | 26.4 | 1.9 | |||||
Adjusted free cash flow excluding realized loss on fuel derivatives | $ | 102.1 | $ | 92.0 |
• | risks relating to our history of losses; |
• | risks relating to operating in a highly competitive industry and the inability to compete effectively with larger and |
• | risks relating to results being vulnerable to economic conditions; |
• | risks that we may lose contracts through competitive bidding, early termination or governmental action; |
• | risks that some of our customers, including governmental entities, have suffered financial difficulties affecting their credit risk, which could negatively impact our operating results; |
• | risks that our financial and operating performance may be affected by the inability in some instances to renew landfill operating permits, obtain new landfills or expand existing ones; |
• | risks that the cost of operation and/or future construction of our existing landfills may become economically unfeasible causing us to abandon or cease operations; |
• | risks that we could be precluded from entering into or maintaining permits or certain contracts if we are unable to obtain sufficient third-party financial assurance or adequate insurance coverage; |
• | risks that our accruals for our landfill site closure and post-closure costs may be inadequate; |
• | risks that our business requires a high level of capital expenditures; |
• | risks relating to our acquisitions, including our ability to integrate acquired businesses, or that the acquired businesses will have unexpected risks or liabilities; |
• | risks relating to the seasonal nature of our business and "event-driven" waste projects that could cause our results to fluctuate; |
• | risks that 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; |
• | risks relating to fuel supply and prices that may fluctuate significantly and that we may not be able to pass on cost increases to our customers or effectively hedge such costs; |
• | risks relating to fluctuations in the prices of commodities; |
• | risks that increases in labor and disposal and related transportation costs could adversely impact our financial results; |
• | risks that commodity derivatives could adversely affect our results; |
• | risks that efforts by labor unions to organize our workforce could divert management attention and adversely affect operating results; |
• | risks that we depend significantly on the services of the members of our senior, regional and local management teams, and that the departure of any of those persons could cause our operating results to suffer; |
• | risks that we are increasingly dependent on technology in our operations and, if our technology fails our business could be adversely affected; |
• | risks relating to operational and safety risks, including the risk of personal injury to employees and others; |
• | risks that 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; |
• | risks from our operations being subject to environmental, health and safety laws and regulations, as well as contractual obligations that may result in significant liabilities; |
• | risks that future changes in laws or renewed enforcement of laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results; |
• | risks relating to 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; |
• | risks that alternatives to landfill disposal may cause our revenues and operating results to decline; |
• | risks relating to our substantial indebtedness; |
• | risks relating to our ability to implement growth strategy as and when planned; and |
• | the other risks described in "Item 1A. Risk Factors" in Forms 10-Q and 10-K. |