DELAWARE | 001-37904 | 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 November 2, 2016 |
ADVANCED DISPOSAL SERVICES, INC. | ||
By: | /s/ Steven R. Carn | |
Name: | Steven R. Carn | |
Title: | Chief Financial Officer |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Service revenues | $ | 360.6 | $ | 361.3 | $ | 1,052.6 | $ | 1,046.8 | |||||||
Operating costs and expenses | |||||||||||||||
Operating | 220.3 | 223.5 | 652.6 | 652.4 | |||||||||||
Selling, general and administrative | 35.6 | 37.3 | 119.7 | 110.4 | |||||||||||
Depreciation and amortization | 64.0 | 67.5 | 189.4 | 194.8 | |||||||||||
Acquisition and development costs | — | 0.2 | 0.2 | 1.3 | |||||||||||
Loss on disposal of assets and asset impairments | 1.1 | 0.3 | 1.2 | 17.8 | |||||||||||
Restructuring charges | — | — | 0.8 | — | |||||||||||
Total operating costs and expenses | 321.0 | 328.8 | 963.9 | 976.7 | |||||||||||
Operating income | 39.6 | 32.5 | 88.7 | 70.1 | |||||||||||
Other income (expense) | |||||||||||||||
Interest expense | (34.1 | ) | (34.2 | ) | (102.7 | ) | (104.0 | ) | |||||||
Other income (expense), net | 0.5 | (8.5 | ) | 0.9 | (4.7 | ) | |||||||||
Total other income (expense) | (33.6 | ) | (42.7 | ) | (101.8 | ) | (108.7 | ) | |||||||
Income (loss) before income taxes | 6.0 | (10.2 | ) | (13.1 | ) | (38.6 | ) | ||||||||
Income tax expense (benefit) | 2.2 | (4.7 | ) | (2.8 | ) | (13.8 | ) | ||||||||
Net income (loss) | $ | 3.8 | $ | (5.5 | ) | $ | (10.3 | ) | $ | (24.8 | ) | ||||
Net income (loss) attributable to common stockholders per share | |||||||||||||||
Basic earnings (loss) per share | $ | 0.06 | $ | (0.09 | ) | $ | (0.16 | ) | $ | (0.38 | ) | ||||
Diluted earnings (loss) per share | $ | 0.06 | $ | (0.09 | ) | $ | (0.16 | ) | $ | (0.38 | ) | ||||
Basic average shares outstanding | 64,493,536 | 64,493,536 | 64,493,536 | 64,493,536 | |||||||||||
Diluted average shares outstanding | 64,942,500 | 64,493,536 | 64,493,536 | 64,493,536 |
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 0.5 | $ | 0.6 | |||
Accounts receivable, net of allowance for doubtful accounts of $4.2 and $4.4, respectively | 179.6 | 177.5 | |||||
Prepaid expenses and other current assets | 25.7 | 33.4 | |||||
Total current assets | 205.8 | 211.5 | |||||
Other assets | 22.8 | 22.9 | |||||
Property and equipment, net of accumulated depreciation of $1,134.1 and $1,007.5, respectively | 1,632.4 | 1,649.9 | |||||
Goodwill | 1,173.9 | 1,173.5 | |||||
Other intangible assets, net of accumulated amortization of $201.1 and $185.6, respectively | 334.9 | 364.5 | |||||
Total assets | $ | 3,369.8 | $ | 3,422.3 | |||
Liabilities and Stockholder's Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 84.2 | $ | 98.1 | |||
Accrued expenses | 132.5 | 135.7 | |||||
Deferred revenue | 60.8 | 63.1 | |||||
Current maturities of landfill retirement obligations | 30.9 | 30.2 | |||||
Current maturities of long-term debt | 34.9 | 49.1 | |||||
Total current liabilities | 343.3 | 376.2 | |||||
Other long-term liabilities | 56.4 | 55.8 | |||||
Long-term debt, less current maturities | 2,203.0 | 2,198.0 | |||||
Accrued landfill retirement obligations, less current maturities | 169.2 | 163.5 | |||||
Deferred income taxes | 134.3 | 139.0 | |||||
Total liabilities | 2,906.2 | 2,932.5 | |||||
Equity | |||||||
Common stock: $.01 par value, 1,000,000,000 shares authorized, 64,493,536 issued and outstanding | 0.6 | 0.6 | |||||
Additional paid-in capital | 1,084.5 | 1,100.4 | |||||
Accumulated deficit | (621.5 | ) | (611.2 | ) | |||
Total stockholder's equity | 463.6 | 489.8 | |||||
Total liabilities and stockholder's equity | $ | 3,369.8 | $ | 3,422.3 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (10.3 | ) | $ | (24.8 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities | |||||||
Depreciation and amortization | 189.4 | 194.8 | |||||
Change in fair value of derivative instruments | (10.5 | ) | (8.7 | ) | |||
Amortization of interest rate cap premium | 0.3 | 1.5 | |||||
Amortization of debt issuance costs and original issue discount | 14.6 | 14.5 | |||||
Accretion on landfill retirement obligations | 9.8 | 10.0 | |||||
Other accretion and amortization | 1.4 | 1.9 | |||||
Provision for doubtful accounts | 2.4 | 2.7 | |||||
Loss on disposition of property and equipment | 2.8 | 0.8 | |||||
Impairment of assets | — | 6.4 | |||||
(Gain) loss on disposition of businesses | (1.6 | ) | 10.6 | ||||
Gain on redemption of security | — | (2.5 | ) | ||||
Stock based compensation | 4.0 | 1.6 | |||||
Deferred tax benefit | (4.8 | ) | (15.8 | ) | |||
Earnings in equity investee | (1.3 | ) | (1.1 | ) | |||
Changes in operating assets and liabilities, net of businesses acquired | |||||||
(Increase) decrease in accounts receivable | (3.8 | ) | 6.8 | ||||
Decrease in prepaid expenses and other current assets | 7.5 | 7.6 | |||||
(Increase) decrease in other assets | (0.4 | ) | 0.9 | ||||
Increase (decrease) in accounts payable | 0.1 | (1.8 | ) | ||||
Increase in accrued expenses and other long term liabilities | 7.7 | 14.9 | |||||
Decrease in unearned revenue | (2.5 | ) | (2.5 | ) | |||
Capping, closure and post-closure expenditures | (13.1 | ) | (11.2 | ) | |||
Net cash provided by operating activities | 191.7 | 206.6 | |||||
Cash flows from investing activities | |||||||
Purchases of property and equipment and construction and development | (124.2 | ) | (129.7 | ) | |||
Proceeds from sale of property and equipment | 2.2 | 1.7 | |||||
Proceeds from maturity of securities | — | 15.0 | |||||
Acquisition of businesses | (5.3 | ) | (25.0 | ) | |||
Proceeds from sale of businesses | 2.4 | 11.6 | |||||
Net cash used in investing activities | (124.9 | ) | (126.4 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from borrowings on debt instruments | 102.0 | 35.0 | |||||
Repayment on debt instruments including capital leases | (149.0 | ) | (103.9 | ) | |||
Bank overdraft | — | (1.3 | ) | ||||
Other financing activities | — | (1.1 | ) | ||||
Capital contribution from parent | — | 0.5 | |||||
Return of capital to parent | (19.9 | ) | (7.5 | ) | |||
Net cash used in financing activities | (66.9 | ) | (78.3 | ) | |||
Net (decrease) increase in cash and cash equivalents | (0.1 | ) | 1.9 | ||||
Cash and cash equivalents, beginning of period | 0.6 | 1.0 | |||||
Cash and cash equivalents, end of period | $ | 0.5 | $ | 2.9 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Collection | $ | 247.7 | 68.7 | % | $ | 247.5 | 68.5 | % | $ | 734.0 | 69.7 | % | $ | 728.1 | 69.6 | % | |||||||||||
Disposal | 137.3 | 38.1 | % | 133.7 | 37.0 | % | 391.3 | 37.2 | % | 372.2 | 35.6 | % | |||||||||||||||
Sale of recyclables | 6.6 | 1.8 | % | 7.0 | 1.9 | % | 16.3 | 1.5 | % | 18.8 | 1.8 | % | |||||||||||||||
Fuel fees and environmental fees | 24.7 | 6.8 | % | 23.4 | 6.5 | % | 64.6 | 6.1 | % | 64.4 | 6.2 | % | |||||||||||||||
Other revenue | 16.9 | 4.7 | % | 19.1 | 5.3 | % | 55.5 | 5.3 | % | 62.7 | 6.0 | % | |||||||||||||||
Intercompany eliminations | (72.6 | ) | (20.1 | )% | (69.4 | ) | (19.2 | )% | (209.1 | ) | (19.9 | )% | (199.4 | ) | (19.0 | )% | |||||||||||
Total service revenues | $ | 360.6 | 100.0 | % | $ | 361.3 | 100.0 | % | $ | 1,052.6 | 100.0 | % | $ | 1,046.8 | 100.0 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Average yield | 2.3 | % | 2.6 | % | 2.0 | % | 2.2 | % | |||
Recycling | 0.2 | % | (0.2 | )% | 0.1 | % | (0.6 | )% | |||
Fuel fee revenue | (0.6 | )% | (1.4 | )% | (0.9 | )% | (1.2 | )% | |||
Total yield | 1.9 | % | 1.0 | % | 1.2 | % | 0.4 | % | |||
Organic volume | (3.2 | )% | (2.2 | )% | (1.2 | )% | (0.5 | )% | |||
Acquisitions | 1.7 | % | 1.2 | % | 1.9 | % | 1.1 | % | |||
Divestitures | (0.6 | )% | (1.8 | )% | (1.3 | )% | (1.2 | )% | |||
Total revenue growth | (0.2 | )% | (1.8 | )% | 0.6 | % | (0.2 | )% | |||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Operating | $ | 217.0 | 60.2 | % | $ | 220.2 | 60.9 | % | $ | 642.8 | 61.1 | % | $ | 642.4 | 61.4 | % | |||||||||||
Accretion of landfill retirement obligations | 3.3 | 0.9 | % | 3.3 | 0.9 | % | 9.8 | 0.9 | % | 10.0 | 1.0 | % | |||||||||||||||
Operating expenses | $ | 220.3 | 61.1 | % | $ | 223.5 | 61.9 | % | $ | 652.6 | 62.0 | % | $ | 652.4 | 62.3 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Labor and related benefits | $ | 73.8 | 20.5 | % | $ | 72.4 | 20.0 | % | $ | 220.2 | 20.9 | % | $ | 214.0 | 20.4 | % | |||||||||||
Transfer and disposal costs | 48.4 | 13.4 | % | 51.0 | 14.1 | % | 142.0 | 13.5 | % | 146.2 | 14.0 | % | |||||||||||||||
Maintenance and repairs | 33.2 | 9.2 | % | 32.7 | 9.1 | % | 98.4 | 9.3 | % | 92.7 | 8.9 | % | |||||||||||||||
Fuel | 14.2 | 3.9 | % | 16.7 | 4.6 | % | 40.4 | 3.8 | % | 52.9 | 5.1 | % | |||||||||||||||
Franchise fees and taxes | 17.4 | 4.8 | % | 17.9 | 5.0 | % | 49.0 | 4.7 | % | 50.2 | 4.8 | % | |||||||||||||||
Risk management | 7.4 | 2.1 | % | 7.4 | 2.0 | % | 22.8 | 2.2 | % | 20.2 | 1.9 | % | |||||||||||||||
Other | 22.6 | 6.3 | % | 22.1 | 6.1 | % | 70.0 | 6.7 | % | 66.2 | 6.3 | % | |||||||||||||||
Operating expenses, excluding accretion expense | $ | 217.0 | 60.2 | % | $ | 220.2 | 60.9 | % | $ | 642.8 | 61.1 | % | $ | 642.4 | 61.4 | % | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Salaries | $ | 21.9 | 6.1 | % | $ | 22.8 | 6.3 | % | $ | 71.9 | 6.8 | % | $ | 68.1 | 6.5 | % | |||||||||||
Legal and professional | 2.2 | 0.6 | % | 3.8 | 1.1 | % | 14.3 | 1.4 | % | 9.2 | 0.9 | % | |||||||||||||||
Other | 11.5 | 3.2 | % | 10.7 | 3.0 | % | 33.5 | 3.2 | % | 33.1 | 3.2 | % | |||||||||||||||
Total selling, general and administrative expenses | $ | 35.6 | 9.9 | % | $ | 37.3 | 10.3 | % | $ | 119.7 | 11.4 | % | $ | 110.4 | 10.5 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income (loss) | $ | 3.8 | $ | (5.5 | ) | $ | (10.3 | ) | $ | (24.8 | ) | ||||
Income tax expense (benefit) | 2.2 | (4.7 | ) | (2.8 | ) | (13.8 | ) | ||||||||
Interest expense | 34.1 | 34.2 | 102.7 | 104.0 | |||||||||||
Depreciation and amortization | 64.0 | 67.5 | 189.4 | 194.8 | |||||||||||
Accretion on landfill retirement obligations | 3.3 | 3.3 | 9.8 | 10.0 | |||||||||||
Accretion on loss contracts and other long-term liabilities | 0.1 | 0.2 | 0.3 | 0.6 | |||||||||||
EBITDA | 107.5 | 95.0 | 289.1 | 270.8 | |||||||||||
EBITDA adjustments: | |||||||||||||||
Acquisition and development costs | — | 0.2 | 0.2 | 1.3 | |||||||||||
Stock based compensation | 0.7 | 0.4 | 4.0 | 1.6 | |||||||||||
Earnings in equity investee, net | — | (0.1 | ) | (0.5 | ) | (0.5 | ) | ||||||||
Restructuring charges | — | — | 0.8 | — | |||||||||||
Loss on disposal of assets and asset impairments | 1.1 | 0.3 | 1.2 | 17.8 | |||||||||||
Unrealized (gain) loss on derivatives | (3.5 | ) | 2.3 | (10.5 | ) | (8.7 | ) | ||||||||
Gain on redemption of security | — | — | — | (2.5 | ) | ||||||||||
Capital market costs | (0.3 | ) | — | 7.2 | — | ||||||||||
Other | — | 0.4 | — | 0.5 | |||||||||||
Realized loss on fuel derivatives | 3.6 | 7.1 | 11.9 | 18.2 | |||||||||||
Adjusted EBITDA | $ | 109.1 | $ | 105.6 | $ | 303.4 | $ | 298.5 | |||||||
Revenue | $ | 360.6 | $ | 361.3 | $ | 1,052.6 | $ | 1,046.8 | |||||||
Adjusted EBITDA margin | 30.3 | % | 29.2 | % | 28.8 | % | 28.5 | % |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Net cash provided by operating activities | $ | 191.7 | $ | 206.6 | |||
Purchases of property & equipment (a) | (124.2 | ) | (127.3 | ) | |||
Proceeds from sale of property & equipment | 2.2 | 1.7 | |||||
Free cash flow | 69.7 | 81.0 | |||||
Restructuring payments | 1.7 | 2.8 | |||||
Capital market costs | 7.3 | — | |||||
Adjusted free cash flow | 78.7 | 83.8 | |||||
Realized loss on fuel derivatives | 11.9 | 18.2 | |||||
Adjusted free cash flow excluding realized loss on fuel derivatives | $ | 90.6 | $ | 102.0 |
• | our history of losses; |
• | operating in a highly competitive industry and the inability to compete effectively with larger and better capitalized companies and governmental service providers; |
• | results being vulnerable to a downturn in 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 landfill operating permits, obtain new landfills or expand existing ones; |
• | 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 and post-closure costs may be inadequate; |
• | our cash flow may not be sufficient to finance our high capital expenditure requirements; |
• | our acquisitions, including our ability to integrate acquired businesses, or that the acquired businesses will have unexpected risks or liabilities; |
• | the seasonal nature of our business and event-driven waste projects that could cause our results to fluctuate; |
• | we may be subject 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 that may fluctuate significantly and that we may not be able to pass on cost increases to our customers or effectively hedge such costs; |
• | fluctuations in the prices of commodities; |
• | increases in labor and disposal costs and related transportation costs could adversely impact our financial results; |
• | derivatives could adversely affect our results; |
• | efforts by labor unions to organize our workforce could 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; |
• | our substantial indebtedness and our working capital deficit; |
• | our ability to implement growth strategy as and when planned; and |
• | the other risk factors described in the "Risk Factors" section of our Prospectus filed with the Securities and Exchange Commission on October 7, 2016, pursuant to Rule 424(b). |