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Progressive Waste Solutions Ltd. Reports Results For The Three And Nine Months Ended September 30, 2015

The following excerpt is from the company's SEC filing.

Performance in line with preliminary announcement;

Strong volume growth of 2.1% combined with higher price of 1.7%;

Adjusted EBITDA

margin expansion in North and East regions;

Taking actions to restore higher operating margins in the West region;

Committed to targets established in the Company’s five-year strategic plan

Toronto, Ontario

Progressive Waste Solutions Ltd. (the “Company”) (NYSE, TSX: BIN)

today reported its financial results for the three and nine months ended September 30, 2015.

Third quarter highlights

Volume up 2.1% and price up 1.7%, assuming a foreign currency exchange ("FX") rate of parity (“FX parity”).

Consolidated revenues of $488.5 million (net of divestitures), up 0.3% on a constant currency basis and up 2.3% removing impact of net divestitures.

of $127.2 million, down (1.3%) on a constant currency basis, reflecting higher-than-anticipated labor and repair and maintenance costs in the West region.

margin expansion in the North and East regions, to 36.7% and 24.6%, respectively.

Adjusted net income

per share of $0.35.

Completed two acquisitions in the third quarter, and one that closed on October 1, 2015, for total consideration of more than $100 million. These are high-quality, well-maintained assets in attractive growth markets.

Remain committed to delivering on the targets established in the Company’s five-year strategic plan for adjusted EBITDA

margins, capital expenditures, free cash flow

and return on invested capital.

The Company expects to extend its tax loss carryforwards to offset income otherwise subject to tax through 2018, from the previous estimate of the fourth quarter of 2016.

Management Commentary

(All amounts are in United States (“U.S.”) dollars, unless otherwise stated)

“The results of our third quarter are in line with our preliminary announcement on October 19, and reflect a strong sales performance across our Company and adjusted EBITDA

margins in our North and East regions, as the benefits of our operational excellence program emerge,” said Joseph Quarin, President and Chief Executive Officer, Progressive Waste Solutions Ltd. “We experienced the highest revenue growth in our West region, through contributions from acquisitions as well as organic improvements in price and volume, particularly in the commercial collection segment. However, as we reported with our preliminary results earlier this month, labor and repair and maintenance costs were higher than we anticipated in this region, more than offsetting the revenue gains.”

Mr. Quarin continued, “Our North and East regions demonstrate the underlying strength in our business. We are investing in our fleet in the West region to bring it in line with our maintenance standards and strengthen its operational foundation. As we announced last week, we plan to spend an incremental $4 million on repair and maintenance in the West region in the fourth quarter. This will increase fleet reliability, reduce labor turnover and overtime hours, and improve safety in this region within the next six to nine months. Our recently installed regional leadership group and maintenance management team are taking actions to aggressively address the issues we have identified with our trucks and labor resources, setting the region on a path to achieving higher operating margins. No additional capital is required to address these issues. We remain confident in our ability to create meaningful value for shareholders by delivering on the goals established in our five-year strategic plan to significantly expand adjusted EBITDA

margins, reduce capital expenditures and increase free cash flow

as a percentage of revenue, and improve return on invested capital. In addition, the expected extension of our U.S. tax loss carryforwards will benefit free cash flow

for an additional two years.”

“As announced on October 19, our 2015 outlook has been updated to reflect the higher operating costs in the third quarter as well as our expectations for the fourth quarter of 2015,” Mr. Quarin said. “The updated outlook also reflects the actions we are taking in our West region as well as a more cautious view of special waste volumes in parts of our western Canadian operations and some costs related to a new municipal contract start-up.”

Three months ended September 30, 2015

Reported revenues decreased ($32.6)

million or (6.3)% from $521.2 million in the third quarter of 2014 to $488.5

million in the third quarter of 2015. Expressed on a reportable basis, and assuming a FX rate of parity between the Canadian and U.S. dollar, revenues increased 0.3%. This increase was due in large part to a 1.7% increase in overall pricing and higher volumes of 2.1%, partially offset by net acquisitions (2.0%), and lower fuel surcharges (1.2%).

Operating income was $59.9 million in the third quarter of 2015 versus $65.5 million in the third quarter of 2014. Net income was $22.9 million versus $40.8 million in the third quarters of 2015 and 2014, respectively.

Adjusted amounts

was $127.2 million in the third quarter of 2015 versus $139.8 million posted in the same quarter a year ago. Adjusted operating EBIT

was $62.4 million or (8.6)% lower in the quarter compared to $68.3 million in the same period last year. Adjusted net income

was $37.7 million, or $0.35 per diluted share, compared to $41.2 million, or $0.36 per diluted share in the comparative period.

Nine months ended September 30, 2015

For the nine months ended September 30, 2015, reported revenues decreased ($62.7)

million or (4.2)% from $1,504.4 million in 2014 to $1,441.7 million in 2015. Expressed on a reportable basis and at FX parity, revenues increased 1.0% on a comparative basis. The increase is due in large part to a 1.8% increase in overall pricing and higher volumes of 2.1%, partially offset by declines in fuel surcharges (1.2%) and net acquisitions (1.1%).

For the nine months ended September 30, operating income was $157.3 million in 2015 versus $184.9 million in 2014. Net income was $78.2 million versus $107.6 million for the nine months ended September 30, 2015 and 2014, respectively.

For the nine months ended September 30, adjusted EBITDA

was $354.3 million or (7.9)% lower in 2015 versus the $384.6 million posted in 2014. Adjusted operating EBIT

was $165.8 million compared to the $190.7 million recorded last year. Adjusted net income

was $98.0 million, or $0.88 per diluted share, compared to $113.2 million, or $0.98 per diluted share in the same period last year.

Expected Extension of U.S. Tax Loss Carryforwards

The Company’s U.S. business continues to utilize loss carryforwards which are available to offset income otherwise subject to tax. Based on the current rate of utilization and expected performance of its U.S. business, the Company expects that these carryforward losses will extend through 2018, from the previous estimate of the fourth quarter of 2016. The rate of use however, is subject to the actual performance of our U.S. business. Once these carryforward losses are fully utilized, current income tax expense will increase significantly.

2015 Outlook Update

The Company is updating its 2015 outlook in light of certain results realized through the third quarter this year, coupled with certain renewed expectations for the balance of 2015. Details for each of these updates are outlined in the Changes to assumptions and impact on 2015 guidance outlook section of this press release.

Our updated outlook for the fiscal year ended 2015 is as follows

(in millions of U.S. dollars, except per share amounts, Canadian dollars (“C$”) and where otherwise stated

Prior 2015 Outlook (Currency of USD 0.80/CAD)

Updated 2015 Outlook (Currency of USD 0.80/CAD)

Impact

Revenue

$1,925 to $1,945

No change

$500 to $515

$480 to $485

Decrease

26.0% to 26.5%

24.90%

Amortization expense, as a percentage of revenue

14.20%

13.80%

(A)(1)

$225 to $240

$220 to $225

Interest on long-term debt

Increase

Effective tax rate as a percentage of income before income tax expense

Cash taxes (expressed on an adjusted basis)

$1.20 to $1.34

$1.18 to $1.22

Free cash flow

$165 to $180

$144 to $149

Capital and landfill expenditures including proceeds on sale(2)

Expected annual cash dividend, payable on a quarterly basis

C$0.66 per share

Notes:

The updated 2015 outlook includes the gain on sale of our Long Island, New York operations

Excludes proceeds from the sale of Long Island, New York operations

Condensed Consolidated Statements of Operations and Comprehensive Income or Loss

(“Statement of Operations and Comprehensive Income or Loss”)

For the periods ended September 30, 2015 and 2014 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars, except share and net income or loss per share amounts)

REVENUES

488,528

521,157

1,441,698

1,504,428

EXPENSES

OPERATING

308,222

332,410

925,611

964,744

SELLING, GENERAL AND ADMINISTRATION

54,374

51,679

166,587

160,857

RESTRUCTURING

AMORTIZATION

67,039

72,256

200,491

211,532

NET GAIN ON SALE OF CAPITAL AND LANDFILL ASSETS

(2,249

(11,946

(17,599

OPERATING INCOME

59,868

65,485

157,273

184,894

INTEREST ON LONG-TERM DEBT

13,088

15,655

44,105

46,434

NET FOREIGN EXCHANGE LOSS (GAIN)

NET LOSS (GAIN) ON FINANCIAL INSTRUMENTS

17,605

(2,689

16,147

LOSS ON EXTINGUISHMENT OF DEBT

RE-MEASUREMENT GAIN ON PREVIOUSLY HELD EQUITY INVESTMENT

(5,156

INCOME BEFORE INCOME TAX EXPENSE AND NET

LOSS FROM EQUITY ACCOUNTED INVESTEE

28,975

52,504

94,542

135,990

Current

19,203

22,305

Deferred

(2,818

11,690

16,385

28,323

NET LOSS FROM EQUITY ACCOUNTED INVESTEE

NET INCOME

22,906

40,814

78,157

107,585

OTHER COMPREHENSIVE LOSS:

Foreign currency translation adjustment

(26,184

(25,414

(60,110

(26,997

Settlement of derivatives designated as cash flow hedges,

net of income tax $nil and $nil (2014 - $nil and ($225))

TOTAL OTHER COMPREHENSIVE LOSS

(26,579

COMPREHENSIVE (LOSS) INCOME

(3,278

15,400

18,047

81,006

Net income per weighted average share, basic and diluted

Weighted average number of shares outstanding

(thousands), basic and diluted

109,302

114,745

110,876

114,982

Condensed Consolidated Balance Sheets

(“Balance Sheet”)

September 30, 2015 (unaudited) and December 31, 2014 (stated in accordance with accounting principles generally accepted in the United States of America (“U.S.”) and in thousands of U.S. dollars except for issued and outstanding share amounts)

CURRENT

Cash and cash equivalents

34,624

41,636

Accounts receivable

210,546

216,201

Other receivables

Prepaid expenses

46,346

35,589

Income taxes recoverable

Restricted cash

294,100

295,640

NET ASSETS HELD FOR SALE

61,016

OTHER RECEIVABLES

FUNDED LANDFILL POST-CLOSURE COSTS

10,210

11,365

INTANGIBLES

150,953

165,929

GOODWILL

872,412

937,294

LANDFILL DEVELOPMENT ASSETS

15,360

14,463

DEFERRED FINANCING COSTS

16,169

14,417

CAPITAL ASSETS

915,832

928,550

904,788

936,095

INVESTMENTS

OTHER ASSETS

TOTAL ASSETS

3,183,016

3,376,436

LIABILITIES

Accounts payable

88,629

86,825

Accrued charges

156,325

174,331

Dividends payable

13,873

15,517

Income taxes payable

Deferred revenues

15,874

16,323

Current portion of long-term debt

Landfill closure and post-closure costs

Other liabilities

19,089

16,558

304,660

330,434

1,494,584

1,552,617

LANDFILL CLOSURE AND POST-CLOSURE COSTS

126,035

120,626

OTHER LIABILITIES

27,475

17,118

DEFERRED INCOME TAXES

121,244

126,848

TOTAL LIABILITIES

2,073,998

2,147,643

SHAREHOLDERS' EQUITY

Common shares (authorized - unlimited, issued

and outstanding - 108,794,108 (December 31, 2014 - 112,106,839))

1,691,963

1,734,372

Restricted shares (issued and outstanding - 509,248 (December 31, 2014 - 399,228))

(12,661

(9,184

Additional paid in capital

Accumulated deficit

(392,767

(377,172

Accumulated other comprehensive loss

(183,356

(123,246

Total shareholders' equity

1,109,018

1,228,793

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Condensed Consolidated Statements of Cash Flows

(“Statement of Cash Flows”)

For the periods ended September 30, 2015 and 2014 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars)

NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES

Items not affecting cash

Restricted share expense

Loss on extinguishment of debt

Accretion of landfill closure and post-closure costs

Amortization of intangibles

10,032

13,655

32,119

41,452

Amortization of capital assets

36,010

37,319

109,323

112,197

Amortization of landfill assets

20,997

21,282

59,049

57,883

Interest on long-term debt (amortization of deferred

financing costs)

Non-cash interest income

Net gain on sale of capital landfill assets

Net loss (gain) on financial...


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