- Advanced Disposal Services finished 2019 with adjusted EBITDA of $425.2 million and adjusted free cash flow of $136.8 million, per its latest earnings report. Average annual yield stayed relatively steady from the prior year at 3.3%.
- The company noted a $9.4 million headwind for adjusted EBITDA in Q4, as compared to the prior year, "related to our recycling business and higher disposal facility costs." A $4.5 million benefit from CNG tax credits helped offset that.
- Advanced reported no acquisition activity during Q4 due to its pending sale to Waste Management. Full-year acquisition spending was $27.1 million, related to two deals in Q1 and a $2.2 million deferred purchase price payment for a 2018 deal.
Advanced entered 2019 with plans for heightened M&A activity in the range of $50-75 million, but that all changed following the April announcement of its pending sale to Waste Management for $4.9 billion. A proxy filing later revealed that Advanced had been discussing a potential sale to multiple companies since the summer of 2018, with Waste Management CEO Jim Fish contacting Advanced CEO Richard Burke in October of that year to begin discussions.
Shareholders approved the sale in June 2019 and the U.S. Department of Justice (DOJ) has been conducting an antitrust review in the months since. Regulators are expected to require divestitures in multiple states and, per recent comments from Waste Management executives, could approve the deal by late March. Advanced spent $9.6 million on merger expenses and $8.5 million on retention bonuses as part of this process last year, according to its earnings release.
Sentiment from competitors and customers has been largely neutral on the sale, according to sources, though one local official in Chicago did raise concerns with a new resolution this week. Alderman Raymond Lopez called for a committee hearing about the issue, as well as greater scrutiny from state and federal regulators. Lopez has not responded to questions from Waste Dive for further clarification. The Chicago market is one potential area where divestitures could be required due to overlap between the two companies.
Beyond updates on the pending acquisition, insight into Advanced's current operations has been limited and no earnings calls have been held since February 2019. The company has not released its annual 10-K filing as of publication.
Burke's latest press release statement was brief, noting "strong cash flow generation" amid broader challenges. "While we faced operating headwinds related to recycling and leachate costs, our team delivered on the items directly within their control," he said.
Recycling revenues have been down across the industry due to multi-year commodity market challenges and Advanced always had a smaller recycling business than its larger competitors. Recycling sales reportedly declined even further – $10.3 million in 2019 as compared to $18.1 million in 2018 – to now account for just 0.6% of annual revenue. Details on overall leachate costs weren't specified in the earnings release, but Advanced has previously reported expenses such as a consent order at a Georgia landfill last year.
On a more positive front, the company reported $26.3 million in capital spending for two new municipal collection contracts in Florida. Local activity includes deals in Osceola County and Palm Beach County, with the latter worth an estimated $10 million per year. Other recent activity for Advanced includes an expansion proposal for its Seven Mile Creek Landfill in Wisconsin, another likely divestiture market.