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  • 1. Creating Value RBC Capital Markets’ Global Industrial Conference September 10, 2013
  • 2. Forward Looking Statements 2 Forward-Looking Statement This presentation includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," and "continue" or variations of such words, other similar words or similar expressions are intended to identify such forward-looking statements. These forward-looking statements may include, without limitation, statements relating to future financial and operating results, our financial condition and our plans, objectives, prospects, expectations and intentions. These forward-looking statements involve significant risks and uncertainties and other factors and assumptions that could cause actual results to differ materially from the forward-looking statements. Most of these factors and assumptions are outside of our control and are difficult to predict. In addition to the factors and assumptions contained in this presentation, the following factors and assumptions, among others, could cause or contribute to such material differences: downturns in the worldwide economy; our ability to realize all of the anticipated benefits of future acquisitions; our ability to obtain, renew and maintain certain permits, licenses and approvals relating to our landfill operations; and fuel cost and commodity price fluctuations. Additional factors and assumptions that could cause Progressive Waste Solutions Ltd.'s results to differ materially from those described in the forward-looking statements can be found in the most recent annual information form under the heading “Risk Factors”. Progressive Waste Solutions Ltd. cautions that the foregoing list of factors is not exclusive and that investors should not place undue reliance on such forward-looking statements. All subsequent written and oral forward-looking statements concerning Progressive Waste Solutions Ltd., or other matters attributable to Progressive Waste Solutions Ltd. or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Progressive Waste Solutions Ltd. does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this communication, except as required by law.
  • 3. Snapshot • One of the largest solid waste management companies in N.A. • Over 4 million Commercial, Industrial and Residential customers • Top 3 market share position by number of collection routes in over 80% of the markets in which we operate • Strong vertically integrated asset base in the U.S. and Canada with significant and strategic landfill internalization rates • More than 7,000 employees • Quarterly cash dividend of $0.15 per share ($0.60/share annually) • Listed on the NYSE & TSX : “BIN” 3
  • 4. Industry Dynamics • $60 billion+ industry in N.A. with scale concentrated in top four players • Essential service with multi-year contracts • Strong and predictable cash flow • Recession resistance with operating leverage to an economic recovery due to high fixed cost infrastructure (typically a late-cycle performer) • Assets are underutilized, presenting margin expansion opportunity • Competitive dynamics vary by local market and success is driven by local market customer density and asset mix • Top players represent ~36% of industry revenues with many further consolidation opportunities remaining • Industry growth driven by price and volume improvements, with recycling and waste diversion growth creating new revenue opportunities 4
  • 5. Consistent Strong Results 5 $170 $208 $257 $291 $292 $416 $535 $520 2005 2006 2007 2008 2009 2010 2011 2012 $559 $680 $854 $1,047 $1,008 $1,430 $1,840 $1,897 2005 2006 2007 2008 2009 2010 2011 2012 Revenue US $MM $48 $50 $64 $95 $119 $194 262.5 172.5 2005 2006 2007 2008 2009 2010 2011 2012 Adjusted EBITDA (A) US $MM Free Cash Flow (B) US$MM Revenue 5-year CAGR is 17.3% Adjusted EBITDA(A) 5-year CAGR is 15.2% Free Cash Flow(B) 5-year CAGR is 22.8% $199(1) (A) Please refer to the definition and explanation of (A) on slide 36. (B) Please refer to the definition and explanation of (B) on slide 38. (1) Free cash flow excluding $26.5 million on discretionary infrastructure projects in 2012 2012 includes $30 MM revenue & EBITDA impact of lower recycled commodities prices
  • 6. Q2 2013 Highlights • Strong second-quarter performance. – Growth in revenue, adjusted EBITDA and free cash flow driven by acquisitions completed in 2012 and organic growth programs – Core price increased across collection and transfer and disposal service lines in U.S. and Canadian operations – Industrial collection volumes up 8.0% on a consolidated basis – Gaining traction in U.S. northeast segment, while Canadian and U.S. south operations continue to perform as expected. • Better positioned capital structure. – Established a structure that results in a lower effective corporate tax rate – Corresponding increase to adjusted net income and free cash flow in 2013 and beyond • Increased quarterly cash dividend by 7.1% to 15 cents per share. • Quarter marks a turning point. – New management team in place, with strengthened major corporate support functions and field management leadership – Renewed commitment to execution and value creation 6
  • 7. 7 $U.S. MM Except per share amounts Q2/12 Q2/13 QoQ Canada $198.2 $198.8 0.3% U.S. South 195.5 221.0 13.0% U.S. Northeast 81.7 97.0 18.6% Total Revenues $475.4 $516.8 8.7% Adjusted Net Income(A) Reported Net Income $28.8 $28.4 $35.3 $32.3 22.3% 13.8% Adjusted EPS(A) (diluted) Reported EPS (diluted) $0.25 $0.24 $0.31 $0.28 24.0% 12.0% Adjusted Operating EBIT(A) $64.7 $67.0 3.7% Adjusted EBITDA(A) $132.7 $134.9 1.7% Adjusted EBITDA(A) Margins 27.9% 26.1% (180bps) Adjusted EBITA(A) $77.2 $76.3 (1.2%) Free Cash Flow(B) $56.5 $61.5 8.8% Weighted Average Share Count 116,416 115,167 Total Actual Outstanding Share Count 115,167 Q2 2013 Financial Highlights (A) Please refer to the definition and explanation of (A) on slide 36. (B) Please refer to the definition and explanation of (B) on slide 38.
  • 8. 8 Components of Revenue Growth (Decline) CAN Q2/12 U.S. Q2/12 Total Company Q2/12 CAN Q2/13 U.S. Q2/13 Total Company Q2/13 Core Price(1) 2.7% 0.9% 1.6% 0.9% 0.5% 0.7% Fuel Surcharges 0.3% 0.4% 0.4% 0.2% (0.1%) - Recycling and Other (1.1%) (1.6%) (1.4%) (0.8%) (0.3%) (0.5%) Total Price Growth (Decline) 1.9% (0.3%) 0.6% 0.3% 0.1% 0.2% Volume Growth (Decline) 1.3% (2.8%) (1.1%) (2.9%)(2) 4.4% 1.3% Total Organic Revenue Growth (Decline) 3.2% (3.1%) (0.5%) (2.6%) 4.5% 1.5% Acquisitions 1.8% 4.7% 3.5% 4.2% 10.2% 7.7% Total Growth Excluding FX 5.0% 1.6% 3.0% 1.6% 14.7% 9.2% FX (0.5%) Total Growth Including FX 8.7% Q2 2013 Revenue Growth Q2 2013 reported revenues increased 8.7% QoQ to $516.8 MM (1) Core Price reflects organic average price change, net of rollbacks and excludes fuel surcharges, across the Company’s customer base. (2) Canadian volume decline reflects impact of (520 bps) from three municipal contracts completed in 2012 and the temporary closure of a transfer station which reopened in late June 2013. This resulted in a negative volume impact of (220 bps) to total Company volume.
  • 9. Operating Model for Continuous Improvement 9 Business model drives improvement year-over-year  Build dense collection network organically or by acquisition  Revenue/hour  Balance with franchise markets  Complement with strategic landfills  Drive internalization opportunities  Decentralized decision-making  Local market execution and accountability  Goal oriented and execution to a result  Performance driven by metrics  Commitment to year over year performance improvement  Critical mass matters  Density drives productivity  Strategic plans that drive revenue and EBITDA per asset up year over year  Year over year ROC improvement  Culture  Passion  Training  Teamwork
  • 10. Transfer station Material recovery Recycled goods Landfill Gas-to-Energy Plant Natural GasElectricity 126 non-hazardous solid waste collection operations 67 transfer stations* strategically located near many collection routes 49 material recovery facilities* process a variety of materials 30landfill sites* 5gas-to-energy systems Integrated Assets Support Operating Strategy Market focused strategy Leading collection operations in dense urban markets Strategically located landfills in close proximity to urban markets *Owned and / or operated
  • 11. Positioning Asset Base for the Future • Integrated assets are critical. – The right combinations of collection, recycling, transfer and disposal assets provide operating leverage • Acquisitions can contribute incremental operating leverage. – ‘Tuck-in’ collection companies that integrate into existing routes and assets can help achieve higher route density and landfill internalization • The right assets, at the right price, will position our company for future success. – Strategic assets, including acquisitions and internal infrastructure projects, both collection and post-collection, need to meet our measures for return on invested capital 11
  • 12. Focusing on Operational Execution • Management focused on internal execution. – Drive productive organic growth – Maintain an optimized cost structure • Sales initiatives are taking hold. – Upgraded field sales teams – Added strategic price management tools and field sales training programs • Positioned well for the longer term. – Serve higher growth, open markets that are most levered to an economic recovery – Opportunity to continue to grow in the markets we serve 12
  • 13. Committed to Improving Return on Invested Capital • Focused on the disciplined investment of free cash flow(B), with the goal of improving our return on invested capital (“ROIC”). • Deploying cash to generate the highest available returns for our shareholders. • Compensation programs directly tied to improving ROIC at the company level. 13 (B) Please refer to the definition and explanation of (B) on slide 36.
  • 14. Capital Expenditures 14 As a % of revenue: Replacement Growth 61% 71% 74% 70% 60%- 64% 39% 29% 26% 30% 36%- 40% 0 50 100 150 200 250 2009 2010 2011 2012 2013E Growth Replacement $171 $220(2) $143 $USD (MM) 2013 Replacement CAPEX • Includes capital for construction at several landfills and utility relocation at Seneca Meadows. • Also reflects sale of redundant properties in 2013. 2013 Growth CAPEX • Includes capital related to municipal contract wins. $122 2.9%4.8% 2.4% 7.0%7.3% 6.9% (1) Does not include anticipated internal infrastructure investments of $39MM - $44MM. (2) Does not include internal infrastructure investments of $26.5MM. $208 -$218(1) 3.5% 8.2%
  • 15. 15 Internal Infrastructure Investments Key Areas Strategic Positioning Internal Infrastructure Investment Opportunities Expected  More strategic and discretionary than normal growth CAPEX  Projects span 12-24 months  Timing dependent on factors such as permitting and equipment lead times What we expect  Capital expenditures of $80MM  Roughly $26MM spent in 2012, and $39-44MM of capital outlay expected in 2013, with balance of spend in 2014. Impact  Higher internalization, incremental organic revenue and free cash flow starting in 2013 and beyond  Low-risk projects resulting in high margin, long-term free cash flow and high return on capital  Expect aggregate return in the mid-to-high teens Project Capital Allocation Total Expected EBITDA Contribution 2012 2013 2014 2012 ~$26MM ~$1MM 2013 ~$39-44MM ~$6MM Incremental 2014 $8-14MM ~$11-13 MM Incremental, on an annualized basis Total ~$80MM
  • 16. 2013 Capital Allocation • Reduced debt leverage in 1H2013. – In YTD 2013, applied approximately $40 million to debt reduction – At June 30, 2013, total funded debt to EBITDA ratio was 2.96x, down from 3.07x at March 31, 2013 – Target long-term leverage range is 2.5x to 3.0x • Focused on the optimal allocation of our cash. • Balance sheet stability combined with strong levels of free cash flow provide flexibility to direct capital where we expect to generate the most value. 16
  • 17. Progressive Waste Solutions Priorities 1. Optimization of asset base, including post-collection, to position for the future. Investments in assets will be strategic, not thematic, and need to meet our measures for return on invested capital 2. Operational execution to deliver organic growth and cost efficiency.  Continued focus on internal execution at the field level to drive productive organic growth and maintain an optimized cost structure 3. Disciplined deployment of capital to improve ROIC.  Strict oversight of replacement and growth capital  Allocation of free cash flow to generate the highest available returns for our shareholders 17
  • 18. Creating Value August 2013
  • 19. APPENDIX 19
  • 20. Q2 2013 Financial Review 20
  • 21. 21 198 199 195 221 82 97 0 100 200 300 400 500 Q2 2012 Q2 2013 U.S. Northeast U.S. South Canada Reported Revenue by Segment $U.S. (MM) $475 • CAD $ weakened vs. U.S. $ in Q2/13 impacting total company revenue by $2.5 MM on translation to U.S. dollars • At parity, total Company consolidated revenue increased 9.2% • Q2/13 Canadian revenue increased 0.3% QoQ • Q2/13 U.S. South revenue increased 13% QoQ • Q2/13 U.S. Northeast revenue increased 18.6% QoQ • OCC average price based on RISI pricing weighted to BIN regions Q2/13 = $104/ton Q1/13 = $99/ton Q2/12 = $117/ton % of Total Revenues Canada U.S. South U.S. Northeast 38.4% 42.8% 18.8% $517 41.7% 41.1% 17.2% 8.7% QoQ Growth Revenue increased in all three regional segments despite weaker commodity pricing QoQ.
  • 22. Q2 2013 Reported and Gross Revenues(1) Strong Revenue from Canadian and U.S. Operations Total Reported Revenues $516.8 million U.S. Canada $318.0 million $198.8 million (1) Gross Revenue includes intercompany revenue on a consolidated basis and includes the impact of FX. Gross Revenue From Operations(1) 000’s Consolidated $US % of Gross Revenue Commercial $176,483 34.1 Industrial 95,424 18.5 Residential 118,774 23.0 Transfer and Disposal 185,213 35.8 Recycling 14,416 2.8 Other 11,491 2.2 Gross Revenues 601,801 116.4 Intercompany (84,994) (16.4%) Revenues $516,807 100% 22
  • 23. Q2 2013 Gross Revenues by Service Line(1) in Canada and the U.S. 000’s Canada (Canadian dollars) Canada % of Revenue U.S. (U.S. dollars) U.S. % of Revenue Commercial $80,340 39.5 $97,967 30.8 Industrial 39,815 19.6 56,472 17.8 Residential 38,784 19.1 80,836 25.4 Transfer and Disposal 65,920 32.4 120,709 38.0 Recycling 7,518 3.7 7,070 2.2 Other 6,153 3.0 5,473 1.7 Gross Revenues 238,530 117.3 368,527 115.9 Intercompany (35,177) (17.3%) (50,575) (15.9%) Revenues $203,353 100% $317,952 100% 23 (1) Gross Revenue includes intercompany revenue on a consolidated basis and includes the impact of FX.
  • 24. 24 110 111 120 139 57 69 0 100 200 300 400 500 Q2 2012 Q2 2013 U.S. Northeast U.S. South Canada Q2 2013 Operating Expenses $U.S. (MM) $287 •Operating expenses increased 11.1% QoQ • Operating expenses totaled 61.7% of total revenue •Acquisitions and organic volume growth mainly contributed to higher expenses •Weather impacted revenue and expenses in Q2 2013 $319
  • 25. 25 16 18 19 22 8 8 13 15 0 10 20 30 40 50 60 70 80 90 100 Q2 2012 Q2 2013 Corporate U.S. Northeast U.S. South Canada Q2 2013 Adjusted Selling, General & Administration (“SG&A”) Expenses $U.S. (MM) $56 • Adjusted SG&A expenses up $7.3 million or 13% to $63 million QoQ •Primarily due to expenses related to acquisitions and salaries in support of organic growth initiatives •One-time items include $1.1 million related to consulting fees and implementation of a long-term financing structure and consulting fees $63
  • 26. 26 72 70 56 60 18 20 -13 -15 -20 5 30 55 80 105 130 155 180 Q2 2012 Q2 2013 Corporate U.S. Northeast U.S. South Canada Q2 2013 Adjusted EBITDA(A) $U.S. (MM) $133 • Adjusted EBITDA(A) up 1.7% to $134.9 million QoQ •Excluding FX impact, Adjusted EBITDA(A) up 2.3% to $135.7 million QoQ •Adjusted EBITDA(A) Margins down (180 bps) to 26.1% due to mix of revenue including acquisitions, higher industrial volumes, and lower special waste revenue, as well as impact of one-time expenses in Q2 2013 $135 Adjusted EBITDA(A) Margins Total Company Canada U.S. South U.S. Northeast 35.3% 26.9% 20.3% 36.3% 28.6% 21.6% Remain within Adjusted EBITDA(A) guidance range for the year, revised for change in FX (A) Please refer to the definition and explanation of (A) on slide 36. 27.9% 26.1%
  • 27. 35% 62% 65% 38% 0 10 20 30 40 50 60 70 Q1 Q2 Growth Replacement $61 $63 27 2013 YTD Replacement & Growth CAPEX $U.S. MM • Total Q2/13 CAPEX was $63.1MM in-line with plan • Includes $39.3 MM of replacement capital and $23.8 MM of growth capital spending •Of the total growth CAPEX spend in Q2/13, approx $13.7 MM was spent on infrastructure projects. •Anticipate replacement and growth expenditures of $208 MM to $218 MM including net the sale of redundant assets. • Expect $39 - $44 million of growth capital related to infrastructure projects of which we have spent $28.1 MM year-to-date.
  • 28. 28 $57 $61 55 56 57 58 59 60 61 62 Q2 2012 Q2 2013 $75(1) $60(1) Q2 2013 Free Cash Flow(B) $U.S. (MM) • Free cash flow(B) was $61.5 million up 8.8% QoQ • Free cash flow(B) as a percentage of revenue was 11.9% • Excluding spending on discretionary infrastructure investments, free cash flow(B) was $75.2 MM or 14.6% of revenues • Free cash flow(B) guidance increased for 2013 (B) Please refer to the definition and explanation of (B) on slide 36. (1) Free cash flow(B) excluding discretionary infrastructure expenditures of $3.3MM in Q2 2012 and $13.7 MM in Q2 2013 , respectively.
  • 29. Long-Term Debt Summary at June 30, 2013 • Total long-term debt is $1.62B at June 30, 2013 vs. $1.66B at March 31, 2013 • Funded debt to EBITDA, as defined and calculated in accordance with our consolidated facility,was 2.96x compared with 3.07x as at March 31, 2013 • Comfortable with current leverage level and believe optimal long-term leverage range for the Company is between 2.5x and 3.0x. • Interest expense on total outstanding debt was $15.2 million for the three months ended June 30, 2013 Long-Term Debt Facilities $U.S. MM Available Lending Accordion Facility Drawn Letters of Credit Available Capacity Ratings Senior Secured Term B Facility $497.5 _ $497.5 _ _ Moody’s Ba1 October 1, 2012 S&P BBB- October 3, 2012 Senior Secured Revolving Facility $1,850.0 $750.0 $1,010.8 $189.2 $650.0 IRBs(1) $194.0 $109.0 _ $85.0 Other Notes $1.4 $1.4 _ _ (1) Variable Rate Demand Solid Waste Disposal Revenue Bonds. 29
  • 30. 30 2013 Guidance(1) 1. Guidance assumes no change in the current economic environment and excludes the impact of any acquisitions we may complete in 2013. 2. Assumes foreign exchange rate of $0.97 U.S. for each Canadian dollar (“FX revision”), reflects long-term internal financing structure and expected interest rate swaps (“FS revision”) and Q2 performance (“Q2 revision”). 3. Assumes an average recycled commodity price for the year that is equal to our average price for 2012. (1) Included in our press release for the second quarter and six months ended June 30, 2013, originally issued July 30, 2013 and corrected August 7, 2013, was our updated guidance for the fiscal year ending December 31, 2013, including our 2013 outlook assumptions and factors. This press release is filed on SEDAR and EDGAR. (A) Please refer to the definition and explanation of (A) on slide 36. (B) Please refer to the definition and explanation of (B) on slide 38. Prior guidance Revised guidance Impact Reason Revenue $2.00B to $2.02B $1.977B to $1.997B Decline FX revision Adjusted EBITDA(A) $545M to $555M $538M to $548M Decline FX revision Effective tax rate as a % of income before income tax expense and net loss from equity accounted investee 40% 35% Decline FS revision Cash taxes $52M to $54M $32M to $35M Decline FX , FS and Q2 revisions Adjusted net income(A) per diluted share $1.02 to $1.06 $1.09 to $1.14 Increase FX , FS and Q2 revisions Free cash flow(B) excluding internal infrastructure investments $200M to $215M $211M to $225M Increase FX , FS and Q2 revisions Capital and landfill expenditures excluding internal infrastructure investment $210M to $220M $208M to $218M Decline FX revision Internal infrastructure investment $40M to $45M $39M to $44M Decline FX revision Expected annual cash dividend, payable on a quarterly basis C0.56 per share C$0.58 per share Increase Board of directors approved increase
  • 31. 31 Q2/12 Q2/13 Adjusted EBITDA(A) $132.7 $134.9 $U.S. (MM) $U.S. (MM) Purchase of restricted shares - ($1.3) Capital and landfill asset purchases ($49.7) ($63.1) Proceeds from sale of capital assets $0.9 $13.3 Landfill closure/post-closure expenditures ($2.7) ($1.4) Landfill closure/post-closure cost accretion expense $1.3 $1.4 Interest on long-term debt ($14.0) ($15.2) Non-cash interest expense $1.7 $0.8 Current income tax expense ($13.7) ($7.9) Free cash flow(B) $56.5 $61.5 Reconciliation of Adjusted EBITDA(A) to Free Cash Flow(B) (A) Please refer to the definition and explanation of (A) on slide 36. (B) Please refer to the definition and explanation of (B) on slide 38.
  • 32. 32 Q2/13 Reported Net Income and EPS (diluted) $32.3 $0.28 Items of note $U.S.(MM) EPS Segment Revenue/ Expense Line Item Transaction and related costs $0.4 - Corporate SG&A Fair value movements in stock options $1.8 $0.02 Corporate SG&A Restricted share expense $0.2 - Corporate SG&A Net gain on financial instruments $1.2 $0.01 All Net income tax (recovery) ($0.6) - Adjusted net income(A) and Adjusted EPS(A) (diluted) $35.3 $0.31 Q2 2013 Reconciliation of Reported Net Income and EPS to Adjusted (A) Please refer to the definition and explanation of (A) on slide 36. • Adjusted net income(A) up 22.3% to $35.3 million QoQ.
  • 33. 33 Recycled Fiber Sensitivity • Revenues and earnings are impacted by changes in recycled commodity prices, which principally include old corrugated cardboard (“OCC”) and other paper fibers, including newsprint, sorted office paper and mixed paper • Other commodities we receive include wood, plastics, aluminum and metals • Our results of operations may be affected by changing prices or market requirements for recyclable materials. The resale and purchase price of, and market demand for, recyclable materials can be volatile due to changes in economic conditions and numerous other factors beyond our control • These fluctuations may affect our consolidated financial condition, results of operations and cash flows • Based on current volumes, a $10 change in the price of an average basket of commodities results in an ~$8.0 million change to revenues and an approximately $0.04 change to net income per share on an annual basis • Our outlook provided for 2013 assumes an average price per ton for OCC of $106.00, which is equal to the 2012 average price per ton based on our market weighting of the RISI index
  • 34. 34 FX Sensitivity • We have provided our guidance assuming $0.97 cents U.S. for each Canadian dollar • If the U.S. dollar strengthens one cent our reported revenues will decline by approximately $7,800 • EBITDA(A) is similarly impacted by approximately $2,500, assuming a strengthening U.S. dollar • The impact on net income for a similar change in FX rate, results in an approximately $700 decline • Should the U.S. dollar weaken by one cent, our reported results will improve by similar amounts
  • 35. Geographical Distribution 35 Serve more than 4 million customers in North America Revenue Adjusted EBITDA(A) % Margin $723.3 $211.4 29.2% US$ millions FY 2011 FY 2012 Revenue Adjusted EBITDA(A) % Margin $359.2 $89.5 24.9% US$ millions FY 2011 FY 2012 Revenue Adjusted EBITDA(A) % Margin $757.6 $280.4 37.0% US$ millions FY 2011 FY 2012 Canada South Northeast Note: Corporate Adjusted EBITDA(A) of ($47.4) million and ($46.8) million in 2012 and 2011, respectively, are not shown. $776.8 $278.5 35.1% $780.3 $217.1 27.8% $339.6 $71.5 21.1% (A) Please refer to the definition and explanation of (A) on slide 40.
  • 36. Non-GAAP Disclosure 36 (A) All references to “Adjusted EBITDA” in this document are to revenues less operating expense and SG&A, excluding certain non-operating or non-recurring SG&A expense, on the consolidated statement of operations and comprehensive income or loss. Adjusted EBITDA excludes some or all of the following: certain SG&A expenses, restructuring expenses, goodwill impairment, amortization, net gain or loss on sale of capital assets, interest on long-term debt, net foreign exchange gain or loss, net gain or loss on financial instruments, loss on extinguishment of debt, other expenses, income taxes and income or loss from equity accounted investee. Adjusted EBITDA is a term used by us that does not have a standardized meaning prescribed by U.S. GAAP and is therefore unlikely to be comparable to similar measures used by other companies. Adjusted EBITDA is a measure of our operating profitability, and by definition, excludes certain items as detailed above. These items are viewed by us as either non-cash (in the case of goodwill impairment, amortization, net gain or loss on financial instruments, net foreign exchange gain or loss, deferred income taxes and net income or loss from equity accounted investee) or non-operating (in the case of certain SG&A expenses, restructuring expenses, net gain or loss on sale of capital assets, interest on long-term debt, loss on extinguishment of debt, other expenses, and current income taxes). Adjusted EBITDA is a useful financial and operating metric for us, our Board of Directors, and our lenders, as it represents a starting point in the determination of free cash flow(B). The underlying reasons for the exclusion of each item are as follows: – Certain SG&A expenses – SG&A expense includes certain non-operating or non-recurring expenses. These expenses include transaction costs or recoveries related to acquisitions, fair value adjustments attributable to stock options, restricted share expense and payments made to senior executives on their departure. These expenses are not considered an expense indicative of continuing operations. Certain SG&A costs represent a different class of expense than those included in adjusted EBITDA. – Restructuring expenses – restructuring expenses includes costs to integrate various operating locations with our own, exiting certain property and building and office leases, employee severance and employee relocation costs incurred in connection with our acquisition of WSI. These expenses are not considered an expense indicative of continuing operations. Accordingly, restructuring expenses represent a different class of expense than those included in adjusted EBITDA. – Goodwill impairment – as a non-cash item goodwill impairment has no impact on the determination of free cash flow(B). – Amortization – as a non-cash item amortization has no impact on the determination of free cash flow(B). – Net gain or loss on sale of capital assets – proceeds from the sale of capital assets are either reinvested in additional or replacement capital assets or used to repay revolving credit facility borrowings. – Interest on long-term debt – interest on long-term debt is a function of our debt/equity mix and interest rates; as such, it reflects our treasury/financing activities and represents a different class of expense than those included in adjusted EBITDA. – Net foreign exchange gain or loss – as non-cash items, foreign exchange gains or losses have no impact on the determination of free cash flow(B). – Net gain or loss on financial instruments – as non-cash items, gains or losses on financial instruments have no impact on the determination of free cash flow(B). – Loss on extinguishment of debt – loss on extinguishment of debt is a function of our debt financing; as such, it reflects our treasury/financing activities and represents a different class of expense than those included in adjusted EBITDA. – Other expenses – other expenses typically represent amounts paid to certain management of acquired companies who are retained by us post acquisition and amounts paid to certain executives in respect of acquisitions successfully completed. These expenses are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included in adjusted EBITDA. – Income taxes – income taxes are a function of tax laws and rates and are affected by matters which are separate from our daily operations. – Net income or loss from equity accounted investee – as a non-cash item, net income or loss from our equity accounted investee has no impact on the determination of free cash flow(B). Continued on next slide.
  • 37. Non-GAAP Disclosure – continued 37 All references to “Adjusted EBITA” in this document represent Adjusted EBITDA after deducting amortization of capital and landfill assets. All references to “Adjusted operating income or adjusted operating EBIT” in this document represent Adjusted EBITDA after adjusting for net gain or loss on the sale of capital assets and all amortization expense. All references to “Adjusted net income” are to adjusted operating income after adjusting for restructuring expenses and goodwill impairment, net gain or loss on financial instruments, loss on extinguishment of debt, other expenses and net income tax expense or recovery. Adjusted EBITA, Adjusted operating income or adjusted operating EBIT, and Adjusted net income should not be construed as measures of income or of cash flows. Collectively, these terms do not have standardized meanings prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures used by other companies. Each of these measures are important for investors and are used by management in the management of its business. Adjusted operating income or adjusted operating EBIT removes the impact of a company’s capital structure and its tax rates when comparing the results of companies within or across industry sectors. Management uses Adjusted operating EBIT as a measure of how its operations are performing and to focus attention on amortization and depreciation expense to drive higher returns on invested capital. In addition, Adjusted operating EBIT is used by management as a means to measure the performance of its operating locations and is a significant metric in the determination of compensation for certain employees. Adjusted EBITA accomplishes a similar comparative result as Adjusted operating EBIT, but further removes amortization attributable to intangible assets. Intangible assets are measured at fair value when we complete an acquisition and amortized over their estimated useful lives. We view capital and landfill asset amortization as a proxy for the amount of capital reinvestment required to continue operating our business steady state. We believe that the replacement of intangible assets is not required to continue our operations as the costs associated with continuing operations are already captured in operating or selling, general and administration expenses. Accordingly, we view Adjusted EBITA as a measure that eliminates the impact of a company’s acquisitive nature and permits a higher degree of comparability across companies within our industry or across different sectors from an operating performance perspective. Finally, Adjusted net income is a measure of our overall earnings and profits and is further used to calculate our net income per share. Adjusted net income reflects what we believe is our “operating” net income which excludes certain non-operating income or expenses. Adjusted net income is an important measure of a company’s ability to generate profit and earnings for its shareholders which is used to compare company performance both amongst and between industry sectors. Three months ended Six months ended June 30 June 30 2013 2012 2013 2012 Operating income $ 64,636 $ 65,669 $ 123,810 $ 116,041 Transaction and related costs (recoveries) - SG&A 390 1,082 (175) 1,370 Fair value movements in stock options - SG&A(*) 1,755 (2,694) 1,250 (1,050) Restricted share expense - SG&A(*) 261 624 526 1,358 Adjusted operating income or adjusted operating EBIT 67,042 64,681 125,411 117,719 Net gain on sale of capital assets (5,788) (366) (6,405) (750) Amortization 73,642 68,370 144,941 132,024 Adjusted EBITDA 134,896 132,685 263,947 248,993 Amortization of capital and landfill assets (58,624) (55,483) (114,563) (106,209) Adjusted EBITA $ 76,272 $ 77,202 $ 149,384 $ 142,784 Net income $ 32,293 $ 28,377 $ 61,634 $ 50,446 Transaction and related costs (recoveries) - SG&A 390 1,082 (175) 1,370 Fair value movements in stock options - SG&A(*) 1,755 (2,694) 1,250 (1,050) Restricted share expense - SG&A(*) 261 624 526 1,358 Net loss (gain) on financial instruments 1,205 2,717 (1,060) 2,172 Other expenses - 52 - 105 Net income tax expense or (recovery) (614) (1,311) 212 (1,488) Adjusted net income $ 35,290 $ 28,847 $ 62,387 $ 52,913 Note: (*)Amounts exclude LTIP compensation.
  • 38. Non-GAAP Disclosure – continued 38 (B) We have adopted a measure called “free cash flow” to supplement net income or loss as a measure of our operating performance. Free cash flow is a term which does not have a standardized meaning prescribed by U.S. GAAP, is prepared before dividends declared and shares repurchased, and may not be comparable to similar measures prepared by other companies. The purpose of presenting this non-GAAP measure is to provide disclosure similar to the disclosure provided by other U.S. publicly listed companies in our industry and to provide investors and analysts with an additional measure of our value and liquidity. We use this non-GAAP measure to assess our performance relative to other U.S. publicly listed companies and to assess the availability of funds for growth investment, debt repayment, share repurchases or dividend increases. All references to “free cash flow” in this document have the meaning set out in this note. Three months ended Six months ended June 30 June 30 2013 (*) 2012 (*) Change 2013 (*) 2012 (*) Change Adjusted EBITDA(A) $ 134,896 $ 132,685 $ 2,211 $ 263,947 $ 248,993 $ 14,954 Purchase of restricted shares(*)(*) (1,334) - (1,334) (1,692) - (1,692) Capital and landfill asset purchases (63,090) (49,673) (13,417) (124,476) (99,764) (24,712) Proceeds from the sale of capital assets 13,263 848 12,415 14,384 1,567 12,817 Landfill closure and post- closure expenditures (1,434) (2,666) 1,232 (2,229) (4,200) 1,971 Landfill closure and post- closure cost accretion expense 1,406 1,306 100 2,815 2,614 201 Interest on long-term debt (15,214) (13,974) (1,240) (30,457) (28,238) (2,219) Non-cash interest expense 849 1,678 (829) 1,705 3,368 (1,663) Current income tax expense (7,858) (13,668) 5,810 (17,657) (24,093) 6,436 Free cash flow(B) $ 61,484 $ 56,536 $ 4,948 $ 106,340 $ 100,247 $ 6,093 Note: (*)Capital and landfill asset purchases include infrastructure expenditures of approximately $13,700 and $3,300 for the three months ended and $28,100 and $6,900 for the six months ended June 30, 2013 and 2012, respectively. (*)(*)Amounts exclude LTIP compensation.
  • 39. Chaya Cooperberg, VP Investor Relations Tel: 905-532-7517 chaya.cooperberg@progressivewaste.com Laura Lepore, Manager Investor Relations Tel: 905-532-7519 laura.lepore@progressivewaste.com