UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of July
2023
Commission File Number: 001-39240
GFL Environmental Inc.
(Translation of registrant’s name into
English)
100 New Park Place, Suite 500
Vaughan, Ontario, Canada L4K 0H9
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F ¨ Form 40-F x
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
EXPLANATORY NOTE
Exhibits 99.1 and 99.2 to this Report of Foreign
Private Issuer on Form 6-K are hereby incorporated by reference into the Company’s Registration Statements on Form S-8 (File No. 333-236949) and Form F-10 (File No. 333-255184).
EXHIBIT INDEX
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
GFL Environmental Inc. |
|
|
|
|
By: |
/s/ Mindy Gilbert |
|
Name: |
Mindy Gilbert |
Date: July 28, 2023 |
Title: |
Executive Vice President and Chief Legal Officer |
Exhibit 99.1
GFL Environmental Inc.
Unaudited Interim Condensed
Consolidated Financial Statements
For the three and six months ended June 30,
2023
GFL Environmental Inc.
Unaudited
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(In millions of dollars except per share
amounts)
| |
| | |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
Notes | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Revenue | |
| 11 | | |
$ | 1,943.6 | | |
$ | 1,707.5 | | |
$ | 3,742.7 | | |
$ | 3,108.9 | |
Expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of sales | |
| | | |
| 1,590.6 | | |
| 1,482.0 | | |
| 3,145.2 | | |
| 2,747.6 | |
Selling, general and administrative expenses | |
| | | |
| 234.2 | | |
| 178.4 | | |
| 448.7 | | |
| 341.1 | |
Interest and other finance costs | |
| 8 | | |
| 164.8 | | |
| 104.8 | | |
| 329.5 | | |
| 204.5 | |
Gain on sale of property and equipment | |
| | | |
| (6.5 | ) | |
| (2.6 | ) | |
| (6.4 | ) | |
| (4.4 | ) |
(Gain) loss on foreign exchange | |
| | | |
| (56.8 | ) | |
| 112.6 | | |
| (51.5 | ) | |
| 54.0 | |
Mark-to-market loss (gain) on Purchase Contracts | |
| 9 | | |
| — | | |
| (206.2 | ) | |
| 104.3 | | |
| (381.1 | ) |
Gain on divestiture | |
| 18 | | |
| (575.0 | ) | |
| — | | |
| (580.5 | ) | |
| (6.5 | ) |
Other | |
| | | |
| (2.3 | ) | |
| 9.1 | | |
| (2.3 | ) | |
| 9.1 | |
| |
| | | |
| 1,349.0 | | |
| 1,678.1 | | |
| 3,387.0 | | |
| 2,964.3 | |
Share of net (loss) income of investments accounted for using the equity method | |
| | | |
| (61.9 | ) | |
| 5.3 | | |
| (82.9 | ) | |
| 5.3 | |
Earnings before income taxes | |
| | | |
| 532.7 | | |
| 34.7 | | |
| 272.8 | | |
| 149.9 | |
Current income tax expense | |
| | | |
| 342.2 | | |
| 4.0 | | |
| 349.4 | | |
| 10.9 | |
Deferred tax recovery | |
| | | |
| (103.3 | ) | |
| (51.9 | ) | |
| (152.6 | ) | |
| (80.6 | ) |
Income tax expense (recovery) | |
| | | |
| 238.9 | | |
| (47.9 | ) | |
| 196.8 | | |
| (69.7 | ) |
Net income from continuing operations | |
| | | |
| 293.8 | | |
| 82.6 | | |
| 76.0 | | |
| 219.6 | |
Net loss from discontinued operations | |
| | | |
| — | | |
| (18.3 | ) | |
| — | | |
| (127.9 | ) |
Net income | |
| | | |
| 293.8 | | |
| 64.3 | | |
| 76.0 | | |
| 91.7 | |
Less: Net (loss) income attributable to non-controlling interests | |
| | | |
| (1.1 | ) | |
| — | | |
| 0.5 | | |
| — | |
Net income attributable to GFL Environmental Inc. | |
| | | |
| 294.9 | | |
| 64.3 | | |
| 75.5 | | |
| 91.7 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Items that may be subsequently reclassified to net income | |
| | | |
| | | |
| | | |
| | | |
| | |
Currency translation adjustment | |
| | | |
| (156.3 | ) | |
| 197.7 | | |
| (161.8 | ) | |
| 106.3 | |
Fair value movements on cash flow hedges, net of tax | |
| | | |
| 7.5 | | |
| 21.6 | | |
| 14.9 | | |
| (0.8 | ) |
Share of other comprehensive loss of investments accounted for using the equity method | |
| | | |
| (0.4 | ) | |
| — | | |
| (0.4 | ) | |
| — | |
Reclassification to net income of foreign currency differences on divestitures | |
| | | |
| 22.5 | | |
| — | | |
| 22.5 | | |
| — | |
Other comprehensive (loss) income from continuing operations | |
| | | |
| (126.7 | ) | |
| 219.3 | | |
| (124.8 | ) | |
| 105.5 | |
Comprehensive income (loss) from continuing operations | |
| | | |
| 167.1 | | |
| 301.9 | | |
| (48.8 | ) | |
| 325.1 | |
Comprehensive loss from discontinued operations | |
| 19 | | |
| — | | |
| (18.3 | ) | |
| — | | |
| (127.9 | ) |
Total comprehensive income (loss) | |
| | | |
| 167.1 | | |
| 283.6 | | |
| (48.8 | ) | |
| 197.2 | |
Less: Total comprehensive (loss) income attributable to non-controlling interests | |
| | | |
| (1.3 | ) | |
| — | | |
| 0.2 | | |
| — | |
Total comprehensive income (loss) attributable to GFL
Environmental Inc. | |
| | | |
$ | 168.4 | | |
$ | 283.6 | | |
$ | (49.0 | ) | |
$ | 197.2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Basic earnings per share | |
| 10 | | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
| | | |
$ | 0.74 | | |
$ | 0.17 | | |
$ | 0.08 | | |
$ | 0.49 | |
Discontinued operations | |
| | | |
| — | | |
| (0.05 | ) | |
| — | | |
| (0.35 | ) |
Total operations | |
| | | |
$ | 0.74 | | |
$ | 0.12 | | |
$ | 0.08 | | |
$ | 0.14 | |
Diluted earnings per share | |
| 10 | | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
| | | |
$ | 0.72 | | |
$ | 0.17 | | |
$ | 0.08 | | |
$ | 0.49 | |
Discontinued operations | |
| | | |
| — | | |
| (0.05 | ) | |
| — | | |
| (0.35 | ) |
Total operations | |
| | | |
$ | 0.72 | | |
$ | 0.12 | | |
$ | 0.08 | | |
$ | 0.14 | |
The accompanying notes are an integral part of
the unaudited interim condensed consolidated financial statements.
GFL Environmental Inc.
Unaudited
Interim Condensed Consolidated Statements of Financial Position
(In millions of dollars)
| |
Notes | | |
June 30, 2023 | | |
December 31,
2022 | |
Assets | |
| | | |
| | | |
| | |
Cash | |
| | | |
$ | 82.2 | | |
$ | 82.1 | |
Trade and other receivables, net | |
| | | |
| 1,113.2 | | |
| 1,118.1 | |
Prepaid expenses and other assets | |
| | | |
| 250.9 | | |
| 182.9 | |
Current assets | |
| | | |
| 1,446.3 | | |
| 1,383.1 | |
| |
| | | |
| | | |
| | |
Property and equipment, net | |
| 4 | | |
| 6,401.7 | | |
| 6,540.3 | |
Intangible assets, net | |
| 5 | | |
| 2,948.1 | | |
| 3,245.0 | |
Investments accounted for using the equity method | |
| | | |
| 271.9 | | |
| 326.6 | |
Other long-term assets | |
| | | |
| 59.5 | | |
| 90.2 | |
Goodwill | |
| 5 | | |
| 7,430.3 | | |
| 8,182.4 | |
Non-current assets | |
| | | |
| 17,111.5 | | |
| 18,384.5 | |
Total assets | |
| | | |
| 18,557.8 | | |
| 19,767.6 | |
| |
| | | |
| | | |
| | |
Liabilities | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
| | | |
| 1,442.4 | | |
| 1,557.7 | |
Income taxes payable | |
| | | |
| 337.3 | | |
| — | |
Long-term debt | |
| 7 | | |
| — | | |
| 17.9 | |
Lease obligations | |
| | | |
| 51.2 | | |
| 51.5 | |
Due to related party | |
| 17 | | |
| 5.8 | | |
| 9.3 | |
Tangible equity units | |
| 9 | | |
| — | | |
| 1,024.9 | |
Landfill closure and post-closure obligations | |
| 6 | | |
| 33.7 | | |
| 30.8 | |
Current liabilities | |
| | | |
| 1,870.4 | | |
| 2,692.1 | |
| |
| | | |
| | | |
| | |
Long-term debt | |
| 7 | | |
| 7,888.0 | | |
| 9,248.9 | |
Lease obligations | |
| | | |
| 341.5 | | |
| 327.3 | |
Other long-term liabilities | |
| | | |
| 40.1 | | |
| 47.5 | |
Due to related party | |
| 17 | | |
| 5.8 | | |
| 8.7 | |
Deferred income tax liabilities | |
| | | |
| 435.4 | | |
| 582.6 | |
Landfill closure and post-closure obligations | |
| 6 | | |
| 845.2 | | |
| 816.4 | |
Non-current liabilities | |
| | | |
| 9,556.0 | | |
| 11,031.4 | |
Total liabilities | |
| | | |
| 11,426.4 | | |
| 13,723.5 | |
| |
| | | |
| | | |
| | |
Shareholders’ equity | |
| | | |
| | | |
| | |
Share capital | |
| | | |
| 9,754.7 | | |
| 8,640.3 | |
Contributed surplus | |
| | | |
| 135.3 | | |
| 109.6 | |
Deficit | |
| | | |
| (2,779.6 | ) | |
| (2,843.0 | ) |
Accumulated other comprehensive income | |
| | | |
| 5.8 | | |
| 130.3 | |
Total GFL Environmental Inc.’s shareholders’ equity | |
| | | |
| 7,116.2 | | |
| 6,037.2 | |
Non-controlling interests | |
| | | |
| 15.2 | | |
| 6.9 | |
Total shareholders’ equity | |
| | | |
| 7,131.4 | | |
| 6,044.1 | |
Total liabilities and shareholders’ equity | |
| | | |
$ | 18,557.8 | | |
$ | 19,767.6 | |
The accompanying notes are an integral part of
the unaudited interim condensed consolidated financial statements.
GFL Environmental Inc.
Unaudited
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
(In millions of dollars except per share
amounts)
| |
| | |
| | |
GFL
Environmental Inc.’s Shareholders’ Equity | | |
| | |
| |
| |
Notes | | |
Share
capital -
# of shares | | |
Share
capital | | |
Contributed
surplus | | |
Deficit | | |
Cash
flow
hedges,
net
of tax | | |
Currency
translation | | |
Total
equity
attributable
to
shareholders | | |
Non-
controlling interests | | |
Total
shareholders’ equity | |
Balance,
December 31, 2021 | |
| | | |
| 375,061,066 | | |
$ | 8,462.9 | | |
$ | 77.4 | | |
$ | (2,510.5 | ) | |
$ | 13.2 | | |
$ | (266.9 | ) | |
$ | 5,776.1 | | |
$ | — | | |
$ | 5,776.1 | |
Net income
and comprehensive income | |
| | | |
| — | | |
| — | | |
| — | | |
| 91.7 | | |
| (0.8 | ) | |
| 106.3 | | |
| 197.2 | | |
| — | | |
| 197.2 | |
Dividends
issued and paid | |
| | | |
| — | | |
| — | | |
| — | | |
| (9.7 | ) | |
| — | | |
| — | | |
| (9.7 | ) | |
| — | | |
| (9.7 | ) |
Share capital
issued upon acquisition of subsidiary | |
| | | |
| 3,976,434 | | |
| 154.5 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 154.5 | | |
| — | | |
| 154.5 | |
Cancelled shares | |
| | | |
| (8,057 | ) | |
| (0.2 | ) | |
| 0.2 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share capital issued on exercise
of share options | |
| | | |
| 450,000 | | |
| 3.7 | | |
| (3.7 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share capital
issued on exercise and settlement of RSUs | |
| | | |
| 158,899 | | |
| 0.3 | | |
| (0.3 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share-based
payments | |
| 13 | | |
| — | | |
| — | | |
| 26.1 | | |
| — | | |
| — | | |
| — | | |
| 26.1 | | |
| — | | |
| 26.1 | |
Balance, June 30,
2022 | |
| | | |
| 379,638,342 | | |
$ | 8,621.2 | | |
$ | 99.7 | | |
$ | (2,428.5 | ) | |
$ | 12.4 | | |
$ | (160.6 | ) | |
$ | 6,144.2 | | |
$ | — | | |
$ | 6,144.2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31,
2022 | |
| | | |
| 380,211,030 | | |
$ | 8,640.3 | | |
$ | 109.6 | | |
$ | (2,843.0 | ) | |
$ | (52.1 | ) | |
$ | 182.4 | | |
$ | 6,037.2 | | |
$ | 6.9 | | |
$ | 6,044.1 | |
Net loss
and comprehensive (loss) income | |
| | | |
| — | | |
| — | | |
| — | | |
| 75.5 | | |
| 14.9 | | |
| (139.4 | ) | |
| (49.0 | ) | |
| 0.2 | | |
| (48.8 | ) |
Dividends
issued and paid | |
| | | |
| — | | |
| — | | |
| — | | |
| (12.1 | ) | |
| — | | |
| — | | |
| (12.1 | ) | |
| — | | |
| (12.1 | ) |
Contribution
from non-controlling interest | |
| | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 8.1 | | |
| 8.1 | |
Share capital
issued on exercise and settlement of RSUs | |
| 13 | | |
| 57,996 | | |
| 4.5 | | |
| (4.5 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share capital
issued on TEU conversion | |
| 9 | | |
| 25,666,465 | | |
| 1,109.9 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,109.9 | | |
| — | | |
| 1,109.9 | |
Share-based
payments | |
| 13 | | |
| — | | |
| — | | |
| 30.2 | | |
| — | | |
| — | | |
| — | | |
| 30.2 | | |
| — | | |
| 30.2 | |
Balance, June 30,
2023 | |
| | | |
| 405,935,491 | | |
$ | 9,754.7 | | |
$ | 135.3 | | |
$ | (2,779.6 | ) | |
$ | (37.2 | ) | |
$ | 43.0 | | |
$ | 7,116.2 | | |
$ | 15.2 | | |
$ | 7,131.4 | |
The accompanying notes are an integral part of
the unaudited interim condensed consolidated financial statements.
GFL Environmental Inc.
Unaudited
Interim Condensed Consolidated Statements of Cash Flows
(In millions of dollars)
| |
| | |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
Notes | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Operating activities | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| | | |
$ | 293.8 | | |
$ | 64.3 | | |
$ | 76.0 | | |
$ | 91.7 | |
Adjustments for non-cash items | |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation of property and equipment | |
| 4 | | |
| 237.8 | | |
| 241.1 | | |
| 477.6 | | |
| 472.8 | |
Amortization of intangible assets | |
| 5 | | |
| 134.0 | | |
| 133.4 | | |
| 272.8 | | |
| 259.1 | |
Share of net loss (income) of investments accounted for using the equity method | |
| | | |
| 61.9 | | |
| (5.3 | ) | |
| 82.9 | | |
| (5.3 | ) |
Gain on divestiture | |
| 18 | | |
| (575.0 | ) | |
| — | | |
| (580.5 | ) | |
| (6.5 | ) |
Other | |
| | | |
| (2.3 | ) | |
| 9.1 | | |
| (2.3 | ) | |
| 9.1 | |
Impairment related to discontinued operations | |
| 19 | | |
| — | | |
| 18.3 | | |
| — | | |
| 128.1 | |
Interest and other finance costs | |
| 8 | | |
| 164.8 | | |
| 104.8 | | |
| 329.5 | | |
| 208.0 | |
Share-based payments | |
| 13 | | |
| 15.2 | | |
| 13.1 | | |
| 30.2 | | |
| 26.6 | |
(Gain) loss on unrealized foreign exchange on long-term debt and TEUs | |
| | | |
| (56.8 | ) | |
| 112.0 | | |
| (50.7 | ) | |
| 53.3 | |
Gain on sale of property and equipment | |
| | | |
| (6.5 | ) | |
| (2.6 | ) | |
| (6.4 | ) | |
| (4.4 | ) |
Mark-to-market (gain) loss on Purchase Contracts | |
| 9 | | |
| — | | |
| (206.2 | ) | |
| 104.3 | | |
| (381.1 | ) |
Current income tax expense | |
| | | |
| 342.2 | | |
| 4.0 | | |
| 349.4 | | |
| 11.0 | |
Deferred tax recovery | |
| | | |
| (103.3 | ) | |
| (51.9 | ) | |
| (152.6 | ) | |
| (82.5 | ) |
Interest paid in cash on Amortizing Notes component of TEUs | |
| | | |
| — | | |
| (0.6 | ) | |
| (0.2 | ) | |
| (1.3 | ) |
Interest paid in cash, excluding interest paid on Amortizing Notes | |
| | | |
| (115.7 | ) | |
| (87.5 | ) | |
| (276.7 | ) | |
| (183.7 | ) |
Income taxes paid in cash, net | |
| | | |
| (8.9 | ) | |
| (19.1 | ) | |
| (10.9 | ) | |
| (19.5 | ) |
Changes in non-cash working capital items | |
| 14 | | |
| (116.7 | ) | |
| (90.8 | ) | |
| (182.5 | ) | |
| (160.4 | ) |
Landfill closure and post-closure expenditures | |
| 6 | | |
| (3.8 | ) | |
| (4.9 | ) | |
| (6.7 | ) | |
| (7.8 | ) |
| |
| | | |
| 260.7 | | |
| 231.2 | | |
| 453.2 | | |
| 407.2 | |
Investing activities | |
| | | |
| | | |
| | | |
| | | |
| | |
Proceeds on disposal of assets | |
| | | |
| 1,650.3 | | |
| 224.3 | | |
| 1,663.5 | | |
| 316.2 | |
Purchase of property and equipment and intangible assets | |
| | | |
| (280.6 | ) | |
| (129.0 | ) | |
| (553.5 | ) | |
| (332.2 | ) |
Insurance proceeds related to property and equipment | |
| | | |
| 2.8 | | |
| — | | |
| 2.8 | | |
| — | |
Investment in joint ventures and associates | |
| | | |
| (32.8 | ) | |
| (19.6 | ) | |
| (37.5 | ) | |
| (31.8 | ) |
Business acquisitions, net of cash acquired | |
| 3 | | |
| (21.4 | ) | |
| (880.3 | ) | |
| (238.7 | ) | |
| (947.4 | ) |
| |
| | | |
| 1,318.3 | | |
| (804.6 | ) | |
| 836.6 | | |
| (995.2 | ) |
Financing activities | |
| | | |
| | | |
| | | |
| | | |
| | |
Repayment of lease obligations | |
| | | |
| (20.8 | ) | |
| (18.4 | ) | |
| (38.6 | ) | |
| (35.0 | ) |
Issuance of long-term debt | |
| | | |
| 1,085.3 | | |
| 1,052.6 | | |
| 1,963.1 | | |
| 1,291.1 | |
Repayment of long-term debt | |
| | | |
| (2,630.6 | ) | |
| (381.0 | ) | |
| (3,184.9 | ) | |
| (547.9 | ) |
Proceeds from termination of hedged
arrangements | |
| | | |
| — | | |
| — | | |
| 17.3 | | |
| — | |
Payment of contingent purchase consideration and holdbacks | |
| 3 | | |
| (1.5 | ) | |
| — | | |
| (4.0 | ) | |
| (10.2 | ) |
Repayment of Amortizing Notes | |
| | | |
| — | | |
| (14.2 | ) | |
| (15.7 | ) | |
| (28.2 | ) |
Dividends issued and paid | |
| | | |
| (6.5 | ) | |
| (5.0 | ) | |
| (12.1 | ) | |
| (9.7 | ) |
Payment of financing costs | |
| | | |
| (0.9 | ) | |
| (1.8 | ) | |
| (15.0 | ) | |
| (1.9 | ) |
Repayment of loan to related party | |
| 17 | | |
| — | | |
| — | | |
| (6.4 | ) | |
| (6.4 | ) |
Contribution from non-controlling interest | |
| | | |
| — | | |
| — | | |
| 8.1 | | |
| — | |
| |
| | | |
| (1,575.0 | ) | |
| 632.2 | | |
| (1,288.2 | ) | |
| 651.8 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Increase in cash | |
| | | |
| 4.0 | | |
| 58.8 | | |
| 1.6 | | |
| 63.8 | |
Changes due to foreign exchange revaluation of cash | |
| | | |
| 5.2 | | |
| (17.5 | ) | |
| (1.5 | ) | |
| (23.6 | ) |
Cash, beginning of period | |
| | | |
| 73.0 | | |
| 189.3 | | |
| 82.1 | | |
| 190.4 | |
Cash, end of period | |
| | | |
$ | 82.2 | | |
$ | 230.6 | | |
$ | 82.2 | | |
$ | 230.6 | |
The accompanying notes are an integral part of
the unaudited interim condensed consolidated financial statements.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
GFL Environmental Inc. (“GFL” or
the “Company”) was formed on March 5, 2020 under the laws of the Province of Ontario. GFL’s subordinate voting
shares trade on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “GFL”.
GFL is in the business of providing non-hazardous
solid waste management and environmental services. These services are provided through GFL and its subsidiaries and a network of facilities
across Canada and the United States. GFL’s registered office is Suite 500, 100 New Park Place, Vaughan, ON,
L4K 0H9.
These unaudited interim condensed consolidated
financial statements (the “Interim Financial Statements”) include the accounts of GFL and its subsidiaries as at June 30,
2023.
The
Board of Directors approved the Interim Financial Statements on July 26, 2023.
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
Statement of compliance
The Interim Financial Statements have been prepared
in accordance with International Accounting Standard 34, Interim Financial Reporting, within the framework of International Financial
Reporting Standards as issued by the International Accounting Standards Board.
The Interim Financial Statements do not include
all disclosures required in the annual consolidated financial statements and should be read in conjunction with GFL’s annual consolidated
financial statements for the year ended December 31, 2022 (the “Annual Financial Statements”).
Basis of measurement
The Interim Financial Statements were prepared
on the historical cost basis except for certain financial instruments that are measured at fair value at the end of the reporting period
as detailed in the Annual Financial Statements.
Presentation and functional currency
The Interim Financial Statements are presented
in Canadian dollars which is GFL’s functional currency.
Use of estimates and judgments
The preparation of the Interim Financial Statements
requires management to make estimates and use judgment that affect the reported amounts of revenue, expenses, assets, liabilities and
accompanying disclosures. Accordingly, actual results may differ from estimated amounts as future confirming events occur. Significant
estimates and judgments used in the preparation of the Interim Financial Statements are described in the Annual Financial Statements.
Accounting policies
The accounting policies adopted in the preparation
of the Interim Financial Statements are consistent with those followed in the preparation of the Annual Financial Statements.
New and amended standards adopted
A number of amended standards became applicable
for the current reporting period. GFL was not required to change its accounting policies or make retrospective adjustments as a result
of adopting the applicable amended standards.
New accounting standards issued but not yet
effective
Certain new accounting standards and interpretations
have been published that are not mandatory for the current period and have not been early adopted. The standards applicable to GFL are
not expected to have a material impact on these Interim Financial Statements.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
For the six months ended June 30, 2023, GFL
acquired 16 businesses, of which 13 were solid waste management businesses, and each of which GFL considers to be individually immaterial.
The following table presents the purchase price
allocation based on the best information available to GFL to date:
| |
Three
months ended
June 30, 2023 | | |
Six
months ended
June 30, 2023 | |
Net working capital, including cash acquired of $nil and $3.8 million, respectively | |
$ | (1.5 | ) | |
$ | 1.1 | |
Property and equipment | |
| 6.0 | | |
| 74.7 | |
Intangible assets | |
| 15.5 | | |
| 136.3 | |
Goodwill | |
| 4.2 | | |
| 42.5 | |
Lease obligations | |
| (0.3 | ) | |
| (3.7 | ) |
Other long-term liabilities | |
| — | | |
| (0.5 | ) |
Deferred income tax liabilities | |
| (2.5 | ) | |
| (7.9 | ) |
Net assets acquired | |
$ | 21.4 | | |
$ | 242.5 | |
| |
| | | |
| | |
Cash paid | |
| 21.4 | | |
| 242.5 | |
Total consideration | |
$ | 21.4 | | |
$ | 242.5 | |
In addition to the cash consideration noted above,
during the three and six months ended June 30, 2023, GFL paid $1.5 million and $4.0 million in additional consideration related to
acquisitions from prior years.
GFL finalizes purchase price allocations relating
to acquisitions within 12 months of the respective acquisition date and, as a result, there may be differences between the provisional
estimates reflected above and the final acquisition accounting. During the six months ended June 30, 2023, GFL finalized the purchase
price allocations for certain acquisitions resulting in an increase in net working capital of $0.5 million, an increase in property and
equipment of $22.9 million, an increase in intangible assets of $29.0 million, an increase in deferred income tax liabilities of $4.1
million and a decrease in goodwill of $48.3 million.
Approximately $11.1 million and $33.9 million
of the goodwill acquired during the three and six months ended June 30, 2023 ($663.2 million and $674.4 million during
the three and six months ended June 30, 2022) is expected to be deductible for tax purposes.
Since the respective acquisition dates, revenue
and net income before tax of approximately $57.7 million and $13.8 million, respectively, attributable to the 2023 acquisitions,
are included in these Interim Financial Statements.
Pro forma results of operations
If the 2023 acquisitions had occurred on January 1,
2023, the unaudited consolidated pro forma revenue and net income before taxes for the six months ended June 30, 2023 would have
been $3,759.5 million and $276.6 million, respectively. The pro forma results do not purport to be indicative of the results
of operations which would have resulted had the acquisitions occurred at the beginning of the year, nor are they necessarily indicative
of future operating results.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
4. |
PROPERTY AND EQUIPMENT |
|
The following table presents the changes in cost
and accumulated depreciation of GFL’s property and equipment for the periods indicated:
| |
Land,
buildings and
improvements | | |
Landfills | | |
Vehicles | | |
Machinery
and
equipment | | |
Assets under
development | | |
Containers | | |
Right-of-
use assets | | |
Total | |
Cost | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2022 | |
| 1,687.1 | | |
| 2,745.1 | | |
| 2,594.1 | | |
| 1,081.5 | | |
| 51.6 | | |
| 789.0 | | |
| 457.0 | | |
| 9,405.4 | |
Additions | |
| 36.9 | | |
| 98.6 | | |
| 224.5 | | |
| 77.4 | | |
| 64.4 | | |
| 54.9 | | |
| 49.4 | | |
| 606.1 | |
Acquisitions via business combinations | |
| 16.8 | | |
| 10.5 | | |
| 20.5 | | |
| 13.4 | | |
| 0.1 | | |
| 9.7 | | |
| 3.7 | | |
| 74.7 | |
Adjustments for prior year acquisitions | |
| 12.5 | | |
| — | | |
| (0.2 | ) | |
| (0.4 | ) | |
| — | | |
| — | | |
| — | | |
| 11.9 | |
Adjustments for asset retirement obligations | |
| — | | |
| 25.4 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 25.4 | |
Disposals | |
| (70.3 | ) | |
| (45.1 | ) | |
| (244.6 | ) | |
| (47.3 | ) | |
| (6.7 | ) | |
| (55.4 | ) | |
| (14.9 | ) | |
| (484.3 | ) |
Transfers | |
| 1.1 | | |
| — | | |
| 2.0 | | |
| (1.1 | ) | |
| (0.6 | ) | |
| (0.2 | ) | |
| (1.2 | ) | |
| — | |
Changes in foreign exchange | |
| (22.7 | ) | |
| (55.6 | ) | |
| (39.8 | ) | |
| (13.4 | ) | |
| (0.8 | ) | |
| (16.7 | ) | |
| (2.7 | ) | |
| (151.7 | ) |
Balance, June 30, 2023 | |
| 1,661.4 | | |
| 2,778.9 | | |
| 2,556.5 | | |
| 1,110.1 | | |
| 108.0 | | |
| 781.3 | | |
| 491.3 | | |
| 9,487.5 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated depreciation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2022 | |
| 171.0 | | |
| 804.1 | | |
| 987.3 | | |
| 468.3 | | |
| — | | |
| 272.5 | | |
| 161.9 | | |
| 2,865.1 | |
Depreciation | |
| 31.4 | | |
| 134.1 | | |
| 150.2 | | |
| 79.9 | | |
| — | | |
| 52.9 | | |
| 29.1 | | |
| 477.6 | |
Disposals | |
| (13.0 | ) | |
| (19.8 | ) | |
| (123.5 | ) | |
| (24.9 | ) | |
| — | | |
| (25.8 | ) | |
| (7.6 | ) | |
| (214.6 | ) |
Impairment | |
| — | | |
| — | | |
| 8.7 | | |
| 0.1 | | |
| — | | |
| — | | |
| — | | |
| 8.8 | |
Changes in foreign exchange | |
| (2.6 | ) | |
| (19.4 | ) | |
| (16.3 | ) | |
| (5.7 | ) | |
| — | | |
| (6.3 | ) | |
| (0.8 | ) | |
| (51.1 | ) |
Balance, June 30, 2023 | |
| 186.8 | | |
| 899.0 | | |
| 1,006.4 | | |
| 517.7 | | |
| — | | |
| 293.3 | | |
| 182.6 | | |
| 3,085.8 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Carrying amounts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
At December 31, 2022 | |
$ | 1,516.1 | | |
$ | 1,941.0 | | |
$ | 1,606.8 | | |
$ | 613.2 | | |
$ | 51.6 | | |
$ | 516.5 | | |
$ | 295.1 | | |
$ | 6,540.3 | |
At June 30, 2023 | |
$ | 1,474.6 | | |
$ | 1,879.9 | | |
$ | 1,550.1 | | |
$ | 592.4 | | |
$ | 108.0 | | |
$ | 488.0 | | |
$ | 308.7 | | |
$ | 6,401.7 | |
For the three and six months ended June 30,
2023, total depreciation of property and equipment was $237.8 million and $477.6 million ($241.1 million and $468.1 million for the three
and six months ended June 30, 2022). Of the total depreciation for the three and six months ended June 30, 2023, $230.9 million
and $464.1 million was included in cost of sales ($233.7 million and $452.8 million for the three and six months ended June 30, 2022)
and $6.9 million and $13.5 million was included in selling, general and administrative expenses ($7.4 million and $15.3 million for the
three and six months ended June 30, 2022).
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
5. |
GOODWILL AND INTANGIBLE ASSETS |
|
The following table presents the changes in cost
and accumulated amortization of GFL’s goodwill and intangible assets for the periods indicated:
| |
Goodwill | | |
Indefinite life
C of A | | |
Customer lists
and municipal
contracts | | |
Trade name,
definite life
C of A
and other
licenses | | |
Non-compete
agreements | | |
Total | |
Cost | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2022 | |
| 8,182.4 | | |
| 839.7 | | |
| 3,592.7 | | |
| 108.1 | | |
| 564.2 | | |
| 13,287.1 | |
Acquisitions via business combinations | |
| 42.5 | | |
| 0.3 | | |
| 120.9 | | |
| 5.8 | | |
| 9.3 | | |
| 178.8 | |
Adjustments for prior year acquisitions | |
| (26.1 | ) | |
| — | | |
| 17.2 | | |
| — | | |
| 1.1 | | |
| (7.8 | ) |
Other | |
| — | | |
| — | | |
| 6.2 | | |
| — | | |
| — | | |
| 6.2 | |
Disposals | |
| (650.2 | ) | |
| (9.7 | ) | |
| (254.2 | ) | |
| — | | |
| (67.0 | ) | |
| (981.1 | ) |
Changes in foreign exchange | |
| (118.3 | ) | |
| (1.5 | ) | |
| (40.8 | ) | |
| (2.1 | ) | |
| (9.6 | ) | |
| (172.3 | ) |
Balance, June 30, 2023 | |
| 7,430.3 | | |
| 828.8 | | |
| 3,442.0 | | |
| 111.8 | | |
| 498.0 | | |
| 12,310.9 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated amortization | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2022 | |
| — | | |
| — | | |
| 1,527.5 | | |
| 32.6 | | |
| 299.6 | | |
| 1,859.7 | |
Amortization | |
| — | | |
| — | | |
| 215.3 | | |
| 2.9 | | |
| 54.6 | | |
| 272.8 | |
Disposals | |
| — | | |
| — | | |
| (136.1 | ) | |
| — | | |
| (41.7 | ) | |
| (177.8 | ) |
Changes in foreign exchange | |
| — | | |
| — | | |
| (16.4 | ) | |
| (0.7 | ) | |
| (5.1 | ) | |
| (22.2 | ) |
Balance, June 30, 2023 | |
| — | | |
| — | | |
| 1,590.3 | | |
| 34.8 | | |
| 307.4 | | |
| 1,932.5 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Carrying amounts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
At December 31, 2022 | |
$ | 8,182.4 | | |
$ | 839.7 | | |
$ | 2,065.2 | | |
$ | 75.5 | | |
$ | 264.6 | | |
$ | 11,427.4 | |
At June 30, 2023 | |
$ | 7,430.3 | | |
$ | 828.8 | | |
$ | 1,851.7 | | |
$ | 77.0 | | |
$ | 190.6 | | |
$ | 10,378.4 | |
All intangible asset amortization expense is included
in cost of sales.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
6. |
LANDFILL CLOSURE AND POST-CLOSURE OBLIGATIONS |
|
The following table presents GFL’s landfill
closure and post-closure obligations for the periods indicated:
Balance, December 31, 2022 | |
$ | 847.2 | |
Disposals | |
| (15.0 | ) |
Provisions | |
| 28.0 | |
Adjustment for discount and inflation rates | |
| 25.4 | |
Accretion | |
| 16.4 | |
Expenditures | |
| (6.7 | ) |
Changes in foreign exchange | |
| (16.4 | ) |
Balance, June 30, 2023 | |
| 878.9 | |
Less: Current portion of landfill closure and post-closure obligations | |
| (33.7 | ) |
Non-current portion of landfill closure and post-closure obligations | |
$ | 845.2 | |
The maturation of GFL’s landfill closure
and post-closure obligations has not materially changed since December 31, 2022.
Funded landfill post-closure assets
GFL is required to deposit funds into trusts to
settle post-closure obligations for landfills in certain jurisdictions. As at June 30, 2023, included in other long-term assets are
funded landfill post-closure obligations, representing the fair value of legally restricted assets, totaling $26.6 million ($26.1 million
as at December 31, 2022).
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
The following table presents GFL’s long-term
debt for the periods indicated:
| |
June 30, 2023 | | |
December 31, 2022 | |
Revolving credit facility | |
$ | — | | |
$ | 771.8 | |
Term Loan A Facility | |
| 775.0 | | |
| 500.0 | |
Term Loan B Facility | |
| 965.2 | | |
| 1,742.7 | |
Notes(1) | |
| | | |
| | |
4.250% USD senior secured notes (“4.250% 2025 Secured Notes”)(2) | |
| 662.0 | | |
| 677.2 | |
3.750% USD senior secured notes (“3.750% 2025 Secured Notes”)(3) | |
| 993.0 | | |
| 1,015.8 | |
5.125% USD senior secured notes (“5.125% 2026 Secured Notes”)(4) | |
| 662.0 | | |
| 677.2 | |
3.500% USD senior secured notes (“3.500% 2028 Secured Notes”)(5) | |
| 993.0 | | |
| 1,015.8 | |
4.000% USD senior notes (“4.000% 2028 Notes”)(6) | |
| 993.0 | | |
| 1,015.8 | |
4.750%
USD senior notes (“4.750% 2029 Notes”)(7) | |
| 993.0 | | |
| 1,015.8 | |
4.375%
USD senior notes (“4.375% 2029 Notes”)(8) | |
| 728.2 | | |
| 744.9 | |
Other | |
| 90.0 | | |
| 75.0 | |
Subtotal | |
| 7,854.4 | | |
| 9,252.0 | |
Discount | |
| (4.9 | ) | |
| (5.5 | ) |
Derivative liability | |
| 103.8 | | |
| 79.9 | |
Deferred finance costs | |
| (65.3 | ) | |
| (59.6 | ) |
Total long-term debt | |
| 7,888.0 | | |
| 9,266.8 | |
Less: Current portion of long-term debt | |
| — | | |
| 17.9 | |
Non-current portion of long-term debt | |
$ | 7,888.0 | | |
$ | 9,248.9 | |
| |
| | | |
| | |
Total long-term debt | |
| 7,888.0 | | |
| 9,266.8 | |
Less: Derivative asset | |
| (16.2 | ) | |
| (58.3 | ) |
Total long-term debt, net of derivative asset | |
$ | 7,871.8 | | |
$ | 9,208.5 | |
| (1) | Refer to Note 15 for additional information on the hedging arrangements related to the Notes. |
| (2) | The 4.250% 2025 Secured Notes bear interest semi-annually which commenced on December 1, 2020 with
principal maturing on June 1, 2025. |
| (3) | The 3.750% 2025 Secured Notes bear interest semi-annually which commenced on February 1, 2021 with
principal maturing on August 1, 2025. |
| (4) | The 5.125% 2026 Secured Notes bear interest semi-annually which commenced on December 15, 2019 with
principal maturing on December 15, 2026. |
| (5) | The 3.500% 2028 Secured Notes bear interest semi-annually which commenced on September 1, 2021 with
principal maturing on September 1, 2028. |
| (6) | The 4.000% 2028 Notes are comprised of US$500.0 million of initial notes and US$250.0 million
of additional notes. The initial notes and additional notes bear interest semi-annually which commenced on February 1, 2021 and February 1,
2022, respectively. The total principal matures on August 1, 2028. |
| (7) | The 4.750% 2029 Notes bear interest semi-annually which commenced on December 15, 2021 with principal
maturing on June 15, 2029. |
| (8) | The 4.375% 2029 Notes bear interest semi-annually which commenced on February 15, 2022 with principal
maturing on August 15, 2029. |
Revolving credit facility and term loan facility
Under the amended and restated revolving credit
agreement dated as of January 11, 2023 (the “Revolving Credit Agreement”), GFL has access to (a) a $1,205.0 million
revolving credit facility (available in Canadian and US dollars) and an aggregate US$75.0 million in revolving credit facilities
(available in US dollars) (collectively, the “Revolving Credit Facility”) and (b) a term loan of $775.0 million (the
“Term Loan A Facility”). The Revolving Credit Facility and Term Loan A Facility mature on September 27, 2026. The Revolving
Credit Facility and Term Loan A Facility accrue interest at a rate of SOFR/Bankers Acceptance plus 1.500% to 2.250% or Canadian/US prime
plus 0.500% to 1.250%. The Revolving Credit Facility and Term Loan A Facility are secured by mortgages on certain properties, a general
security agreement over all of the assets of GFL and certain material subsidiaries and a pledge of the shares of such subsidiaries.
The Revolving Credit Agreement contains a Total
Net Funded Debt to Adjusted EBITDA and an Interest Coverage Ratio (each as defined in the Revolving Credit Agreement) financial maintenance
covenant.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
The Total Net Funded Debt to Adjusted EBITDA ratio
to be maintained is equal to or less than 6.00 to 1.00 for a period of four complete fiscal quarters following completion of a Material
Acquisition and at all other times, equal to or less than 5.75 to 1.00. The Interest Coverage Ratio must be equal to or greater than 3.00
to 1.00. As at June 30, 2023 and December 31, 2022, GFL was in compliance with these covenants.
On January 31, 2023, GFL amended its term
loan B facility to extend the maturity date by two years to May 31, 2027 and transition the remainder of the loan from a LIBOR-based
interest benchmark to a SOFR-based interest benchmark at a rate of SOFR (with a floor rate at 0.500%) plus
3.000% or US prime plus 2.000% (the “Term Loan B Facility”). The Term Loan
B Facility is secured by mortgages on certain properties, a general security agreement over all the assets of GFL and certain material
subsidiaries and a pledge of the shares of such subsidiaries.
Other
On March 20, 2023, a 51.0% owned subsidiary
amended its credit agreement to include a term loan of US$13.0 million maturing September 21, 2025. The net proceeds from this term
loan were used to fund acquisitions.
8. |
INTEREST AND OTHER FINANCE COSTS |
|
The following table presents GFL’s interest
and other finance costs for the periods indicated:
| |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Interest | |
$ | 144.4 | | |
$ | 91.6 | | |
$ | 279.1 | | |
$ | 176.4 | |
Termination of hedged arrangements | |
| — | | |
| — | | |
| 8.7 | | |
| — | |
Amortization of deferred financing costs | |
| 3.9 | | |
| 3.3 | | |
| 9.3 | | |
| 6.5 | |
Accretion of landfill closure and post-closure obligations | |
| 8.7 | | |
| 4.6 | | |
| 16.4 | | |
| 9.2 | |
Other finance costs | |
| 7.8 | | |
| 5.3 | | |
| 16.0 | | |
| 12.4 | |
Interest and other finance costs | |
$ | 164.8 | | |
$ | 104.8 | | |
$ | 329.5 | | |
$ | 204.5 | |
On March 5, 2020, GFL completed its offering
of 15,500,000 6.00% tangible equity units (“TEUs”) for total gross proceeds of $1,040.7 million (US$775.0 million). Each TEU
had a stated amount of US$50.00 and was comprised of a prepaid stock purchase contract (“Purchase Contract(s)”) and a senior
amortizing note (“Amortizing Note(s)”) due March 15, 2023, both of which were freestanding instruments and separate units
of account. Holders of the Purchase Contracts had the ability to elect to early convert such Purchase Contracts prior to the automatic
conversion date of March 15, 2023, at the then-applicable minimum conversion rate.
On March 15, 2023, GFL made the final payment
related to the Amortizing Notes and the remaining outstanding Purchase Contracts were automatically converted into subordinate voting
shares at a rate of 2.1940 subordinate voting shares per Purchase Contract. As at December 31, 2022, 11,698,543 Purchase Contracts
were outstanding.
The following table presents the respective components
of the TEUs as at the dates indicated:
| |
June 30, 2023 | | |
December 31, 2022 | |
Amortizing Notes | |
$ | — | | |
$ | 15.5 | |
Purchase Contracts | |
| — | | |
| 1,009.4 | |
| |
| — | | |
| 1,024.9 | |
Less: Current portion of TEU | |
| — | | |
| (1,024.9 | ) |
Non-current portion of TEU | |
$ | — | | |
$ | — | |
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
The following table presents GFL’s earnings
per share for the periods indicated:
| |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net income attributable to GFL Environmental Inc. | |
$ | 294.9 | | |
$ | 64.3 | | |
$ | 75.5 | | |
$ | 91.7 | |
| |
| | | |
| | | |
| | | |
| | |
Less: | |
| | | |
| | | |
| | | |
| | |
Net loss from discontinued operations | |
| — | | |
| (18.3 | ) | |
| — | | |
| (127.9 | ) |
Amounts attributable to preferred shareholders | |
| 22.6 | | |
| 20.1 | | |
| 45.3 | | |
| 40.0 | |
Adjusted net income from continuing operations | |
| 272.3 | | |
| 62.5 | | |
| 30.2 | | |
| 179.6 | |
Effect of dilutive instruments | |
| 16.1 | | |
| — | | |
| — | | |
| — | |
Adjusted net income for diluted earnings per share | |
$ | 288.4 | | |
$ | 62.5 | | |
$ | 30.2 | | |
$ | 179.6 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted and diluted weighted average number of shares outstanding | |
| 369,225,007 | | |
| 366,843,674 | | |
| 369,200,725 | | |
| 365,447,590 | |
Effect of dilutive instruments | |
| 31,993,410 | | |
| 1,863,011 | | |
| 3,578,585 | | |
| 2,224,915 | |
Diluted weighted average number of shares outstanding | |
| 401,218,417 | | |
| 368,706,685 | | |
| 372,779,310 | | |
| 367,672,505 | |
| |
| | | |
| | | |
| | | |
| | |
Basic earnings per share | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | 0.74 | | |
$ | 0.17 | | |
$ | 0.08 | | |
$ | 0.49 | |
Discontinued operations | |
| — | | |
| (0.05 | ) | |
| — | | |
| (0.35 | ) |
Total operations | |
$ | 0.74 | | |
$ | 0.12 | | |
$ | 0.08 | | |
$ | 0.14 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted earnings per share | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | 0.72 | | |
$ | 0.17 | | |
$ | 0.08 | | |
$ | 0.49 | |
Discontinued operations | |
| — | | |
| (0.05 | ) | |
| — | | |
| (0.35 | ) |
Total operations | |
$ | 0.72 | | |
$ | 0.12 | | |
$ | 0.08 | | |
$ | 0.14 | |
Basic and diluted earnings per share includes
the minimum conversion of TEUs into subordinate voting shares, which represented nil subordinate voting shares as at June 30, 2023
(25,661,050 subordinate voting shares as at June 30, 2022). Diluted earnings per share excludes anti-dilutive effects of time-based
share options, RSUs (defined below), Preferred Shares (defined below), and any amount of subordinate voting shares arising from the conversion
of TEUs in excess of the minimum conversion.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
The following table presents GFL’s revenue
disaggregated by service type for the periods indicated:
| |
Three months ended
June 30, | | |
Six months ended
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Residential | |
$ | 405.0 | | |
$ | 369.7 | | |
$ | 793.0 | | |
$ | 699.7 | |
Commercial/industrial | |
| 740.5 | | |
| 610.2 | | |
| 1,448.3 | | |
| 1,124.3 | |
Total collection | |
| 1,145.5 | | |
| 979.9 | | |
| 2,241.3 | | |
| 1,824.0 | |
Landfill | |
| 233.6 | | |
| 208.6 | | |
| 451.6 | | |
| 385.3 | |
Transfer | |
| 194.8 | | |
| 175.0 | | |
| 367.3 | | |
| 316.9 | |
Material recovery | |
| 82.2 | | |
| 94.1 | | |
| 166.0 | | |
| 183.1 | |
Other | |
| 101.3 | | |
| 106.2 | | |
| 198.7 | | |
| 176.7 | |
Solid Waste | |
| 1,757.4 | | |
| 1,563.8 | | |
| 3,424.9 | | |
| 2,886.0 | |
Environmental Services | |
| 427.0 | | |
| 347.9 | | |
| 777.0 | | |
| 599.4 | |
Intercompany revenue | |
| (240.8 | ) | |
| (204.2 | ) | |
| (459.2 | ) | |
| (376.5 | ) |
Revenue | |
$ | 1,943.6 | | |
$ | 1,707.5 | | |
$ | 3,742.7 | | |
$ | 3,108.9 | |
The following tables present GFL’s revenue
and Adjusted EBITDA by operating segment for the periods indicated. Gross revenue is calculated based on revenue before intercompany revenue
eliminations.
| |
Three months ended June 30, 2023 | |
| |
Gross Revenue | | |
Intercompany
Revenue | | |
Revenue | | |
Adjusted
EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 534.6 | | |
$ | (68.8 | ) | |
$ | 465.8 | | |
$ | 135.8 | |
USA | |
| 1,222.8 | | |
| (132.3 | ) | |
| 1,090.5 | | |
| 356.1 | |
Solid Waste | |
| 1,757.4 | | |
| (201.1 | ) | |
| 1,556.3 | | |
| 491.9 | |
Environmental Services | |
| 427.0 | | |
| (39.7 | ) | |
| 387.3 | | |
| 113.0 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (64.2 | ) |
| |
$ | 2,184.4 | | |
$ | (240.8 | ) | |
$ | 1,943.6 | | |
$ | 540.7 | |
| |
Three months ended June 30, 2022 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 498.4 | | |
$ | (63.7 | ) | |
$ | 434.7 | | |
$ | 117.8 | |
USA | |
| 1,065.4 | | |
| (116.9 | ) | |
| 948.5 | | |
| 288.9 | |
Solid Waste | |
| 1,563.8 | | |
| (180.6 | ) | |
| 1,383.2 | | |
| 406.7 | |
Environmental Services | |
| 347.9 | | |
| (23.6 | ) | |
| 324.3 | | |
| 91.5 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (44.9 | ) |
| |
$ | 1,911.7 | | |
$ | (204.2 | ) | |
$ | 1,707.5 | | |
$ | 453.3 | |
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
| |
Six months ended June 30, 2023 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 1,004.0 | | |
$ | (125.7 | ) | |
$ | 878.3 | | |
$ | 237.3 | |
USA | |
| 2,420.9 | | |
| (260.7 | ) | |
| 2,160.2 | | |
| 691.6 | |
Solid Waste | |
| 3,424.9 | | |
| (386.4 | ) | |
| 3,038.5 | | |
| 928.9 | |
Environmental Services | |
| 777.0 | | |
| (72.8 | ) | |
| 704.2 | | |
| 173.7 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (121.4 | ) |
| |
$ | 4,201.9 | | |
$ | (459.2 | ) | |
$ | 3,742.7 | | |
$ | 981.2 | |
| |
Six months ended June 30, 2022 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 906.1 | | |
$ | (115.7 | ) | |
$ | 790.4 | | |
$ | 211.5 | |
USA | |
| 1,979.9 | | |
| (217.4 | ) | |
| 1,762.5 | | |
| 544.9 | |
Solid Waste | |
| 2,886.0 | | |
| (333.1 | ) | |
| 2,552.9 | | |
| 756.4 | |
Environmental Services | |
| 599.4 | | |
| (43.4 | ) | |
| 556.0 | | |
| 137.9 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (86.6 | ) |
| |
$ | 3,485.4 | | |
$ | (376.5 | ) | |
$ | 3,108.9 | | |
$ | 807.7 | |
The following table presents GFL’s reconciliation
of Adjusted EBITDA to net income from continuing operations for the periods indicated:
| |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Adjusted EBITDA | |
$ | 540.7 | | |
$ | 453.3 | | |
$ | 981.2 | | |
$ | 807.7 | |
Less: | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 237.8 | | |
| 241.1 | | |
| 477.6 | | |
| 468.1 | |
Amortization of intangible assets | |
| 134.0 | | |
| 133.4 | | |
| 272.8 | | |
| 257.9 | |
Interest and other finance costs | |
| 164.8 | | |
| 104.8 | | |
| 329.5 | | |
| 204.5 | |
Income tax expense (recovery) | |
| 238.9 | | |
| (47.9 | ) | |
| 196.8 | | |
| (69.7 | ) |
(Gain) loss on foreign exchange | |
| (56.8 | ) | |
| 112.6 | | |
| (51.5 | ) | |
| 54.0 | |
Gain on sale of property and equipment | |
| (6.5 | ) | |
| (2.6 | ) | |
| (6.4 | ) | |
| (4.4 | ) |
Mark-to-market (gain) loss on Purchase Contracts | |
| — | | |
| (206.2 | ) | |
| 104.3 | | |
| (381.1 | ) |
Share of net loss (income) of investments accounted for using the equity method | |
| 61.9 | | |
| (5.3 | ) | |
| 82.9 | | |
| (5.3 | ) |
Share-based payments | |
| 15.2 | | |
| 13.0 | | |
| 30.2 | | |
| 24.8 | |
Gain on divestiture | |
| (575.0 | ) | |
| — | | |
| (580.5 | ) | |
| (6.5 | ) |
Transaction costs | |
| 29.6 | | |
| 11.4 | | |
| 41.6 | | |
| 23.3 | |
Acquisition, rebranding and other integration costs | |
| 5.3 | | |
| 7.3 | | |
| 10.2 | | |
| 13.4 | |
Other | |
| (2.3 | ) | |
| 9.1 | | |
| (2.3 | ) | |
| 9.1 | |
Net income from continuing operations | |
$ | 293.8 | | |
$ | 82.6 | | |
$ | 76.0 | | |
$ | 219.6 | |
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
Goodwill and indefinite life intangible assets
by operating segment
The carrying amount of goodwill and indefinite life intangible assets
allocated to the operating segments is as follows:
| |
June 30, 2023 | | |
December 31, 2022 | |
Solid Waste | |
| | | |
| | |
Canada | |
$ | 2,085.4 | | |
$ | 2,079.6 | |
USA | |
| 5,253.5 | | |
| 6,046.2 | |
Environmental Services | |
| 920.2 | | |
| 896.3 | |
| |
$ | 8,259.1 | | |
$ | 9,022.1 | |
13. |
SHAREHOLDER'S CAPITAL |
|
Authorized capital
GFL’s authorized share capital consists
of (i) an unlimited number of subordinate voting shares, (ii) an unlimited number of multiple voting shares, (iii) an unlimited
number of preferred shares, issuable in series, (iv) 28,571,428 Series A perpetual convertible preferred shares (the “Series A
Preferred Shares”) and (v) 8,196,721 Series B perpetual convertible preferred shares (the “Series B Preferred
Shares”). The Series A Preferred Shares and Series B Preferred Shares are collectively referred to as the “Preferred
Shares”.
Normal course issuer bid
On May 10, 2023, the Toronto Stock Exchange
accepted GFL’s notice of intention to renew its normal course issuer bid (“NCIB”) during the twelve-month period commencing
on May 12, 2023 and ending May 11, 2024. Under the NCIB, a maximum of 17,867,120 subordinate voting shares may be repurchased
by GFL. GFL’s previous NCIB, which expired on May 11, 2023, authorized the purchase of up to 16,510,694 subordinate voting
shares. All subordinate voting shares repurchased by GFL under the NCIB will be cancelled. During the three and six months ended June 30,
2023 and June 30, 2022, GFL did not repurchase any subordinate voting shares under the NCIB.
Share issuances and cancellations
The following table presents GFL’s share
capital for the periods indicated:
| |
Subordinate voting shares | | |
Multiple voting shares | | |
Preferred shares | | |
Total | |
Balance, December 31, 2022 | |
| 331,629,917 | | |
| 11,812,964 | | |
| 36,768,149 | | |
| 380,211,030 | |
Converted from RSUs | |
| 57,996 | | |
| — | | |
| — | | |
| 57,996 | |
Converted from TEUs | |
| 25,666,465 | | |
| — | | |
| — | | |
| 25,666,465 | |
Balance, June 30, 2023 | |
| 357,354,378 | | |
| 11,812,964 | | |
| 36,768,149 | | |
| 405,935,491 | |
Share options, restricted share units (“RSUs”),
and deferred share units (“DSUs”)
Share options
Changes in the number of share options held by
officers and employees with their average exercise price per option are summarized below:
| |
Options | | |
Weighted average
exercise price (US$) | |
Share options outstanding, December 31, 2022 and June 30, 2023 | |
| 22,128,582 | | |
$ | 32.59 | |
Vested share options, June 30, 2023 | |
| 8,229,297 | | |
$ | 28.93 | |
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
For the three and six months ended June 30,
2023, there were no options granted, exercised, cancelled, expired or forfeited.
For the three and six months ended June 30,
2023, the total compensation expense related to share options amounted to $4.9 million and $10.1 million ($5.1 million and $10.7 million
for the three and six months ended June 30, 2022).
RSUs and DSUs
The following table presents GFL’s summary
of the RSUs and DSUs for the periods indicated:
| |
RSUs | | |
Grant date fair
value (US$) | | |
DSUs | | |
Grant date fair
value (US$) | |
Outstanding, December 31, 2022 | |
| 1,906,769 | | |
$ | 28.10 | | |
| 60,960 | | |
$ | 28.50 | |
Granted | |
| 197,251 | | |
| 30.37 | | |
| 14,045 | | |
| 31.74 | |
Settled | |
| (57,944 | ) | |
| 29.42 | | |
| — | | |
| — | |
Forfeited | |
| (18,730 | ) | |
| 30.02 | | |
| — | | |
| — | |
Cancelled | |
| (16,881 | ) | |
| 30.25 | | |
| — | | |
| — | |
Outstanding, June 30, 2023 | |
| 2,010,465 | | |
$ | 28.25 | | |
| 75,005 | | |
$ | 29.11 | |
Expected to vest, June 30, 2023 | |
| 1,912,737 | | |
$ | 28.33 | | |
| 75,005 | | |
$ | 29.11 | |
For the three and six months ended June 30,
2023, the total compensation expense related to RSUs amounted to $10.0 million and $19.5 million ($7.6 million and $13.6 million for the
three and six months ended June 30, 2022).
For the three and six months ended June 30,
2023, the total compensation expense related to DSUs amounted to $0.3 million and $0.6 million ($0.3 million and $0.5 million for the
three and six months ended June 30, 2022).
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
14. |
SUPPLEMENTAL CASH FLOW INFORMATION |
|
The following table presents net change in non-cash
working capital of GFL for the periods indicated:
| |
Three months ended
June 30, | | |
Six months ended
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Effects of changes in | |
| | | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 23.5 | | |
$ | 141.2 | | |
$ | (86.5 | ) | |
$ | 99.7 | |
Trade and other receivables, net | |
| (85.0 | ) | |
| (198.2 | ) | |
| (13.4 | ) | |
| (218.4 | ) |
Prepaid expenses and other assets | |
| (55.2 | ) | |
| (33.8 | ) | |
| (82.6 | ) | |
| (41.7 | ) |
Changes in non-cash working capital items | |
$ | (116.7 | ) | |
$ | (90.8 | ) | |
$ | (182.5 | ) | |
$ | (160.4 | ) |
15. |
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
|
GFL’s financial instruments consist of cash,
trade accounts receivable, trade accounts payable, long-term debt, including related hedging instruments, and, prior to the automatic
conversion on March 15, 2023, the TEUs.
Fair value measurement
The carrying value of GFL’s financial assets
approximate their fair values. The carrying value of GFL’s financial liabilities approximate their fair values with the exception
of GFL’s outstanding U.S. dollar secured and unsecured notes (the “Notes”) and prior to maturity on March 15, 2023,
the Amortizing Notes. The fair value hierarchy for these instruments are as follows for the periods indicated:
| |
June 30, 2023 | |
| |
Carrying Value | | |
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Notes | |
$ | 6,020.6 | | |
$ | 5,556.2 | | |
$ | — | | |
$ | 5,556.2 | | |
$ | — | |
| |
December 31, 2022 | |
| |
Carrying Value | | |
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Notes | |
$ | 6,157.0 | | |
$ | 5,568.6 | | |
$ | — | | |
$ | 5,568.6 | | |
$ | — | |
Amortizing Notes | |
| 15.5 | | |
| 15.5 | | |
| 15.5 | | |
| — | | |
| — | |
GFL uses a discounted cash flow model incorporating
observable market data, such as foreign currency forward rates, to estimate the fair value of its Notes. Certain leases, other loans and
amounts due to related parties do not bear interest or bear interest at an amount that is not stated at fair value.
Net derivative instruments are recorded at fair
value and classified within Level 2. Prior to the automatic conversion on March 15, 2023, Purchase Contracts were recorded at fair
value and classified within Level 1.
Financial risk management objectives
On March 29, 2023, GFL terminated the cross
currency swap relating to the Term Loan B Facility. For the three and six months ended June 30, 2023 there were no other changes
to the financial risk management policies disclosed in the Annual Financial Statements.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
Letters of credit
As at June 30, 2023, GFL had letters of credit
totaling approximately $220.0 million outstanding ($233.0 million as at December 31, 2022), which are not recognized in the Interim
Financial Statements. Interest expense in connection with these letters of credit was $1.3 million and $2.6 million for the three
and six months ended June 30, 2023 ($1.2 million and $2.3 million for the three and
six months ended June 30, 2022).
Performance bonds
As at June 30, 2023, GFL had issued performance
bonds totaling $1,570.1 million ($1,560.7 million as at December 31, 2022).
17. |
RELATED PARTY TRANSACTIONS |
|
After the final payment of the semi-annual instalment
of $3.5 million, the remaining principal outstanding on the note payable to Josaud Holdings
Inc. (an entity controlled by Patrick Dovigi) was $nil as at June 30, 2023 ($3.5 million as at December 31, 2022).
After the payment of the semi-annual instalment
of $2.9 million, the remaining principal outstanding on the note payable to Sejosa Holdings Inc. (an entity controlled by Patrick Dovigi)
was $11.6 million as at June 30, 2023 ($14.5 million as at December 31, 2022).
For
the three and six months ended June 30, 2023, GFL paid $2.1 million and $4.0 million ($1.3
million and $2.4 million for the three and six months
ended June 30, 2022) in aggregate lease payments to related parties.
For the three
and six months ended June 30, 2023, GFL entered into transactions with Green Infrastructure
Partners Inc. (“GIP”) which resulted in revenue of $6.7 million and $12.0
million ($3.7 million for both the three and six months
ended June 30, 2022) and net receivables of $11.4 million as at June 30,
2023 (net payables of $3.8 million as at December 31, 2022).
During the six months ended June 30, 2023,
GFL divested certain assets and three non-core U.S. Solid Waste businesses for aggregate proceeds of $1,656.1 million, and
a resulting gain on divestiture of $580.5 million.
The three non-core U.S. Solid Waste businesses, which
were included within GFL’s Solid Waste USA segment, did not meet the criteria to be classified as discontinued operations as they
do not represent a major line of business or geographical area of operations.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
19. |
DISCONTINUED OPERATIONS |
On April 25,
2022, GFL announced the completion of the divestiture of GFL’s Infrastructure services division (“GFL Infrastructure”)
for cash consideration of $224.0 million and an approximate 45% non-controlling equity interest in GIP, an entity that is controlled by
funds managed by HPS Investment Partners Inc. through a majority equity interest. An affiliate controlled by Patrick Dovigi holds a minority
equity interest in GIP.
The results of GFL Infrastructure are presented
as a single amount on the statement of operations and comprehensive income (loss). The post-tax results of the discontinued operations
for the periods indicated are as follows:
|
|
Three months ended
June 30, |
|
|
Six months ended
June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenue |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
96.8 |
|
Expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
98.4 |
|
Loss before income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.6 |
) |
Income tax recovery |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.8 |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
Impairment |
|
|
— |
|
|
|
(18.3 |
) |
|
|
— |
|
|
|
(128.1 |
) |
Net loss and comprehensive loss from discontinued operations |
|
$ |
— |
|
|
$ |
(18.3 |
) |
|
$ |
— |
|
|
$ |
(127.9 |
) |
Cash flow information for GFL Infrastructure is
as follows:
| |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Operating cash flows from discontinued operations | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | (35.4 | ) |
Investing cash flows from discontinued operations | |
| — | | |
| — | | |
| — | | |
| (7.2 | ) |
Financing cash flows from discontinued operations | |
| — | | |
| — | | |
| — | | |
| (1.0 | ) |
Decrease in cash from discontinued operations | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | (43.6 | ) |
Exhibit 99.2
GFL ENVIRONMENTAL INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the three and six months ended June 30,
2023
The following Management’s
Discussion and Analysis (“MD&A”) for GFL Environmental Inc. (“us,” “we,”
“our,” “GFL” or the “Company”) is dated July 28, 2023 and provides information
concerning our results of operations and financial condition for the three and six months ended June 30, 2023. You should read this
MD&A together with our unaudited interim condensed consolidated financial statements and the related notes for the three and six months
ended June 30, 2023 (the “Interim Financial Statements”), our annual audited consolidated financial statements
for the year ended December 31, 2022 (the “Annual Financial Statements”), and our MD&A for the year ended
December 31, 2022 (the “Annual MD&A”).
1. Company Overview
GFL is the fourth largest
diversified environmental services company in North America, with operations throughout Canada and in more than half of the U.S. states.
GFL had more than 20,000 employees as of June 30, 2023.
GFL was formed on March 5,
2020 under the laws of the Province of Ontario. Our subordinate voting shares trade on the New York Stock Exchange (the “NYSE”)
and the Toronto Stock Exchange (the “TSX”) under the symbol “GFL”. In connection with our initial public
offering, we issued 6.00% tangible equity units (each a “TEU”), with each TEU being comprised of a senior amortizing
note (each, an “Amortizing Note”) and a stock purchase contract (each, a “Purchase Contract”). On
March 15, 2023, we made the final payment related to the Amortizing Notes and the remaining outstanding Purchase Contracts were automatically
converted into subordinate voting shares at a rate of 2.1940 subordinate voting shares per Purchase Contract.
Forward-Looking Information
This MD&A, including,
in particular, the sections below entitled “Summary of Factors Affecting Performance” and “Liquidity and Capital Resources”,
contains forward-looking statements and forward-looking information (collectively, “forward-looking information”) within
the meaning of applicable U.S. and Canadian securities laws, respectively. Forward-looking information includes all statements that do
not relate solely to historical or current facts, may relate to anticipated events or results and may include statements regarding our
objectives, plans, goals, strategies, outlook, results of operations, financial and operating performance, prospects and opportunities.
In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”,
“expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”,
“scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”,
“strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or
variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”,
“might”, “will”, “will be taken”, “occur” or “be achieved”, although not all
forward-looking information includes those words or phrases. In addition, any statements that refer to expectations, intentions, projections
or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking
information are not historical facts nor assurances of future performance but instead represent management’s expectations, estimates
and projections regarding future events or circumstances.
Forward-looking information
contained in this MD&A is based on our opinions, estimates and assumptions in light of our experience and perception of historical
trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable
in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that
the underlying opinions, estimates and assumptions will prove to be correct.
Factors that could cause
actual results to differ from those projected include, but are not limited to, those listed below and in the section entitled “Risk
Factors” included in the Company’s annual information form for the year ended December 31, 2022 (the “AIF”).
There may be additional risks of which we are not currently aware or that we currently believe are immaterial which could have an adverse
impact on our business. We make no commitment to revise or update any forward-looking information in order to reflect events or circumstances
that may change, except where we are expressly required to do so by law.
Forward-looking information
is subject to a number of known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the
forward-looking information. Factors that could cause actual results to differ from those projected include, but are not limited to, the
following, and the risk factors described in greater detail under the section entitled “Risk Factors” in the AIF: our ability
to build our market share; our ability to continue to grow our revenue and improve operating margins; our ability to retain key personnel;
our ability to maintain and expand geographic scope; our ability to maintain good relationships with our customers; our ability to execute
on our expansion plans; our ability to execute on additional acquisition opportunities and successfully integrate acquired businesses;
adverse effects of acquisitions on our operations; potential liabilities from past and future acquisitions; dependence on the integration
and success of acquired businesses; our ability to continue investing in infrastructure to support our growth; our ability to obtain and
maintain existing financing on acceptable terms; our ability to implement price increases or offset increasing costs; currency exchange
and interest rates; the impact of competition; the changes and trends in our industry or the global economy; the changes in laws, rules,
regulations, and global standards; our ability to respond to changing customer and legal requirements with respect to sustainable solutions
or other matters; our potential liability, if any, in connection with environmental matters; governmental regulation, changes thereto
and risks associated with failure to comply; loss of municipal and other contracts; potential inability to renew or obtain new permits,
approvals and agreements, and the cost of operation and/or future construction of existing facilities; our dependence on third party landfills,
material recovery facilities (“MRF”), liquid waste processing facilities and transfer stations; our access to equity
or debt capital markets is not assured; increases in labour, disposal, and related transportation costs; fuel supply and fuel price fluctuations;
we require sufficient cash flow to reinvest in our business; our potential inability to obtain performance or surety bonds, letters of
credit, other financial assurances or insurance; operational, health, safety and environmental risks; natural disasters, weather conditions
and seasonality; economic downturn may adversely impact our operating results and cause exposure to credit risk; increasing dependence
on technology and risk of technology failure; cybersecurity incidents or issues; damage to our reputation or our brand; increases in insurance
costs; climate change regulations that could increase our costs to operate; risks associated with failing to comply with U.S., Canadian
or foreign anti-bribery or anti-corruption laws or regulations; landfill site closure and post-closure costs and contamination-related
costs; increasing efforts by provinces, states and municipalities to reduce landfill disposal; litigation or regulatory or activist action;
and public health outbreaks, epidemics or pandemics, such as the COVID-19 pandemic.
Basis of Presentation
Our Interim Financial Statements
have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, within the framework of
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Unless
the context indicates otherwise, references in this MD&A to “GFL”, the “Company”, “we”, “us”
and “our” mean GFL and its consolidated subsidiaries.
This MD&A is presented
in millions of Canadian dollars unless otherwise indicated.
Summary of Factors Affecting Performance
We believe that our performance and future success
depend on a number of factors that present significant opportunities for us. These factors are also subject to a number of inherent risks
and challenges discussed elsewhere in this MD&A and in the AIF.
Our results for the three
and six months ended June 30, 2023 were impacted by acquisitions, divestitures, as well as organic growth during the period as a
result, in part, from the pricing strategies that we implemented and changes in volume, partially offset by the impact of inflationary
pressures and certain labour and supply chain constraints that continue to persist, most notably, maintenance and repair costs. Our ability
to leverage our scalable network to drive operational cost efficiencies also impacted our performance for the period. Our results are
influenced by seasonality and tend to be lower in the first quarter of the year, primarily due to winter weather conditions which are
pronounced in Canada, and higher in the second and third quarters of the year, due to the higher volume of waste generated during the
summer months in many of our solid waste markets.
We intend to continue to
grow our business and generate improvements in our financial performance by expanding our service offerings into new geographic markets
and extending our geographic footprint to increase regional density across our business lines, thereby increasing margins. Our success
in achieving these goals is dependent on our ability to execute on our three-pronged strategy of (i) continuing to generate strong,
stable organic revenue growth, (ii) successfully executing strategic, accretive acquisitions and (iii) continuing to drive operating
cost efficiencies across our platform.
Strong, Stable Organic Revenue Growth
Our ability to generate strong,
stable organic revenue growth across macroeconomic cycles depends on our ability to increase the breadth and depth of services that we
provide to our existing customers, realize on cross-selling opportunities between our complementary service capabilities, obtain price
and surcharge increases, win new contracts, realize renewals or extensions of existing contracts and expand into new or adjacent markets.
We believe that executing on this strategy will continue to drive our organic revenue growth and free cash flow generation.
Our business is well-diversified
across business lines, geographies and customers. We believe that our continued success depends on our ability to further enhance and
leverage this diversification, a key component of which is our ability to offer our customers a comprehensive service offering across
our business lines backed by an extensive geography across Canada and the United States. The majority of the revenue we generate
in our solid waste business is derived from secondary markets, with revenue derived from major metropolitan centres representing the majority
of our residential solid waste revenue.
We also believe we are well
positioned to respond to changing customer needs and regulatory demands in order to maintain our success. This includes being able to
respond to legal requirements and customer demands to divert waste away from landfill disposal by continuing to expand our ability to
collect and process multiple streams of material.
Our diversified business
model also complements our acquisition strategy. Multiple business lines allow us to source acquisitions from a broader pool of potential
targets. Maintaining a diversified model is therefore critical to capitalizing on accretive acquisition opportunities and helping to reduce
execution and business risk inherent in single-market and single-service offering strategies.
Executing Strategic, Accretive Acquisitions
Our ability to identify,
execute and integrate accretive acquisitions is a key driver of our growth. Given the significant fragmentation that exists in the North
American environmental services industry, our growth and success depend on our ability to realize on consolidation opportunities in our
business lines.
Since 2007, we have completed
over 230 acquisitions across our lines of business. We focus on selectively acquiring
premier independent regional operators to create platforms in new markets, followed by tuck-in acquisitions to help increase density and
scale. Integration of these acquisitions with our existing platform is a key factor to our success, along with continuing to identify
and act upon these attractive consolidation opportunities.
In addition, successful execution
of acquisitions opens new markets to us, provides us with new opportunities to realize cross-selling opportunities and drives procurement
and cost synergies across our operations.
Driving Operating Cost Efficiencies
We provide our services through
a strategically-located network of facilities in Canada and in the United States. In each of our geographic markets, our strong competitive
position is supported by and depends on the significant capital investment required to replicate our network infrastructure and asset
base, as well as by stringent permitting and regulatory compliance requirements. Our continued success also depends on our ability to
leverage our scalable network to attract and retain customers across service lines, realize operational efficiencies and extract procurement
and cost synergies.
It is also key that we continue
to leverage our scalable capabilities to drive operating margin expansion and realize cost synergies. This includes using the capacity
of our existing facilities, technology processes and people to support future growth and provide economies of scale, as well as increasing
route density and servicing new contract wins with our existing network of assets and fleet to enhance the profitability of each of our
business lines.
Our success also depends
on our ability to continue to make strategic investments in our business, including substantial capital investments in our facilities,
technology processes and administrative capabilities to support our future growth. Our ability to improve our operating margins and our
selling, general and administrative expense margins by maintaining strong discipline in our cost structure and regularly reviewing our
practices to manage expenses and increase efficiency will also impact our operating results.
2. Operating Results
Analysis of results for the three and six months ended June 30,
2023 compared to the three and six months ended June 30, 2022
The following tables summarize
certain operating results from continuing operations and other financial data for the periods indicated, which have been derived from
our Interim Financial Statements and related notes:
| |
Three
months ended | | |
Three
months ended | | |
Change | |
($ millions except per share amounts) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
Revenue | |
$ | 1,943.6 | | |
$ | 1,707.5 | | |
$ | 236.1 | | |
13.8 | % |
Expenses | |
| | | |
| | | |
| | | |
| |
Cost of sales | |
| 1,590.6 | | |
| 1,482.0 | | |
| 108.6 | | |
7.3 | |
Selling, general and administrative expenses | |
| 234.2 | | |
| 178.4 | | |
| 55.8 | | |
31.3 | |
Interest and other finance costs | |
| 164.8 | | |
| 104.8 | | |
| 60.0 | | |
57.3 | |
Gain on divestiture | |
| (575.0 | ) | |
| — | | |
| (575.0 | ) | |
— | |
Other income | |
| (65.6 | ) | |
| (87.1 | ) | |
| 21.5 | | |
24.7 | |
Share of net loss (income) of investments accounted for using the equity method | |
| 61.9 | | |
| (5.3 | ) | |
| 67.2 | | |
1,267.9 | |
Earnings before income taxes | |
| 532.7 | | |
| 34.7 | | |
| 498.0 | | |
1435.2 | |
Income tax expense (recovery) | |
| 238.9 | | |
| (47.9 | ) | |
| 286.8 | | |
598.7 | |
Net income from continuing operations | |
| 293.8 | | |
| 82.6 | | |
| 211.2 | | |
255.7 | |
Net income from discontinued operations | |
| — | | |
| (18.3 | ) | |
| 18.3 | | |
100.0 | |
Net income | |
| 293.8 | | |
| 64.3 | | |
| 229.5 | | |
356.9 | |
Less: Net loss attributable to non-controlling interests | |
| (1.1 | ) | |
| — | | |
| (1.1 | ) | |
— | |
Net income attributable to GFL Environmental Inc. | |
| 294.9 | | |
| 64.3 | | |
| 230.6 | | |
358.6 | |
Earnings per share, basic ($) | |
| 0.74 | | |
| 0.12 | | |
| 0.62 | | |
516.7 | |
Earnings per share, diluted ($) | |
| 0.72 | | |
| 0.12 | | |
| 0.60 | | |
500.0 | |
Adjusted EBITDA(1) | |
$ | 540.7 | | |
$ | 453.3 | | |
$ | 87.4 | | |
19.3 | % |
| |
Six
months ended | | |
Six
months ended | | |
Change | |
($ millions except per share amounts) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
Revenue | |
$ | 3,742.7 | | |
$ | 3,108.9 | | |
$ | 633.8 | | |
20.4 | % |
Expenses | |
| | | |
| | | |
| | | |
| |
Cost of sales | |
| 3,145.2 | | |
| 2,747.6 | | |
| 397.6 | | |
14.5 | |
Selling, general and administrative expenses | |
| 448.7 | | |
| 341.1 | | |
| 107.6 | | |
31.5 | |
Interest and other finance costs | |
| 329.5 | | |
| 204.5 | | |
| 125.0 | | |
61.1 | |
Gain on divestiture | |
| (580.5 | ) | |
| (6.5 | ) | |
| (574.0 | ) | |
(8830.8 | ) |
Other expenses (income) | |
| 44.1 | | |
| (322.4 | ) | |
| 366.5 | | |
113.7 | |
Share of net loss (income) of investments accounted for using the equity method | |
| 82.9 | | |
| (5.3 | ) | |
| 88.2 | | |
1,664.2 | |
Earnings before income taxes | |
| 272.8 | | |
| 149.9 | | |
| 122.9 | | |
82.0 | |
Income tax expense (recovery) | |
| 196.8 | | |
| (69.7 | ) | |
| 266.5 | | |
382.4 | |
Net income from continuing operations | |
| 76.0 | | |
| 219.6 | | |
| (143.6 | ) | |
(65.4 | ) |
Net loss from discontinued operations | |
| — | | |
| (127.9 | ) | |
| 127.9 | | |
100.0 | |
Net income | |
| 76.0 | | |
| 91.7 | | |
| (15.7 | ) | |
(17.1 | ) |
Less: Net income attributable to non-controlling interests | |
| 0.5 | | |
| — | | |
| 0.5 | | |
— | |
Net income attributable to GFL Environmental Inc. | |
| 75.5 | | |
| 91.7 | | |
| (16.2 | ) | |
(17.7 | ) |
Earnings per share, basic and diluted ($) | |
| 0.08 | | |
| 0.14 | | |
| (0.06 | ) | |
(42.9 | ) |
Adjusted EBITDA(1) | |
$ | 981.2 | | |
$ | 807.7 | | |
$ | 173.5 | | |
21.5 | % |
| |
June 30, 2023 | | |
December 31, 2022 | | |
Change | |
Total assets | |
$ | 18,557.8 | | |
$ | 19,767.6 | | |
$ | (1,209.8 | ) |
Total cash | |
| 82.2 | | |
| 82.1 | | |
| 0.1 | |
Total long-term debt | |
| 7,888.0 | | |
| 9,266.8 | | |
| (1,378.8 | ) |
Total liabilities | |
| 11,426.4 | | |
| 13,723.5 | | |
| (2,297.1 | ) |
Total shareholders’ equity | |
$ | 7,131.4 | | |
$ | 6,044.1 | | |
$ | 1,087.3 | |
| (1) | Adjusted EBITDA is a non-IFRS measure. Refer to the section entitled “Non-IFRS Financial Measures
and Key Performance Indicators”. |
Revenue
The following tables summarize
revenue by service type for the periods indicated:
| |
Three months ended
June 30, 2023 | | |
Three months ended
June 30, 2022 | | |
Change | |
($ millions) | |
Revenue | | |
% | | |
Revenue | | |
% | | |
$ | | |
% | |
Residential | |
$ | 405.0 | | |
| 20.8 | % | |
$ | 369.7 | | |
| 21.7 | % | |
$ | 35.3 | | |
| 9.5 | % |
Commercial/industrial | |
| 740.5 | | |
| 38.1 | | |
| 610.2 | | |
| 35.7 | | |
| 130.3 | | |
| 21.4 | |
Total collection | |
| 1,145.5 | | |
| 58.9 | | |
| 979.9 | | |
| 57.4 | | |
| 165.6 | | |
| 16.9 | |
Landfill | |
| 233.6 | | |
| 12.0 | | |
| 208.6 | | |
| 12.2 | | |
| 25.0 | | |
| 12.0 | |
Transfer | |
| 194.8 | | |
| 10.0 | | |
| 175.0 | | |
| 10.2 | | |
| 19.8 | | |
| 11.3 | |
Material recovery | |
| 82.2 | | |
| 4.2 | | |
| 94.1 | | |
| 5.5 | | |
| (11.9 | ) | |
| (12.6 | ) |
Other | |
| 101.3 | | |
| 5.3 | | |
| 106.2 | | |
| 6.2 | | |
| (4.9 | ) | |
| (4.6 | ) |
Solid Waste | |
| 1,757.4 | | |
| 90.4 | | |
| 1,563.8 | | |
| 91.5 | | |
| 193.6 | | |
| 12.4 | |
Environmental Services | |
| 427.0 | | |
| 22.0 | | |
| 347.9 | | |
| 20.4 | | |
| 79.1 | | |
| 22.7 | |
Intercompany revenue | |
| (240.8 | ) | |
| (12.4 | ) | |
| (204.2 | ) | |
| (11.9 | ) | |
| (36.6 | ) | |
| 17.9 | |
Revenue | |
$ | 1,943.6 | | |
| 100.0 | % | |
$ | 1,707.5 | | |
| 100.0 | % | |
$ | 236.1 | | |
| 13.8 | % |
| |
Six months ended
June 30, 2023 | | |
Six months ended
June 30, 2022 | | |
Change | |
($ millions) | |
Revenue | | |
% | | |
Revenue | | |
% | | |
$ | | |
% | |
Residential | |
$ | 793.0 | | |
| 21.2 | % | |
$ | 699.7 | | |
| 22.5 | % | |
$ | 93.3 | | |
| 13.3 | % |
Commercial/industrial | |
| 1,448.3 | | |
| 38.7 | | |
| 1,124.3 | | |
| 36.2 | | |
| 324.0 | | |
| 28.8 | |
Total collection | |
| 2,241.3 | | |
| 59.9 | | |
| 1,824.0 | | |
| 58.7 | | |
| 417.3 | | |
| 22.9 | |
Landfill | |
| 451.6 | | |
| 12.1 | | |
| 385.3 | | |
| 12.4 | | |
| 66.3 | | |
| 17.2 | |
Transfer | |
| 367.3 | | |
| 9.8 | | |
| 316.9 | | |
| 10.2 | | |
| 50.4 | | |
| 15.9 | |
Material recovery | |
| 166.0 | | |
| 4.4 | | |
| 183.1 | | |
| 5.9 | | |
| (17.1 | ) | |
| (9.3 | ) |
Other | |
| 198.7 | | |
| 5.3 | | |
| 176.7 | | |
| 5.7 | | |
| 22.0 | | |
| 12.5 | |
Solid Waste | |
| 3,424.9 | | |
| 91.5 | | |
| 2,886.0 | | |
| 92.9 | | |
| 538.9 | | |
| 18.7 | |
Environmental Services | |
| 777.0 | | |
| 20.8 | | |
| 599.4 | | |
| 19.3 | | |
| 177.6 | | |
| 29.6 | |
Intercompany revenue | |
| (459.2 | ) | |
| (12.3 | ) | |
| (376.5 | ) | |
| (12.2 | ) | |
| (82.7 | ) | |
| 22.0 | |
Revenue | |
$ | 3,742.7 | | |
| 100.0 | % | |
$ | 3,108.9 | | |
| 100.0 | % | |
$ | 633.8 | | |
| 20.4 | % |
On a consolidated basis,
revenue for the three months ended June 30, 2023 increased by $236.1 million to $1,943.6 million, compared to the three months ended
June 30, 2022. The increase is partially attributable to the impact of acquisitions completed since April 1, 2022, net of divestitures,
which accounted for approximately $81.5 million of the increase, the majority of which were in our Solid Waste segment. Changes in foreign
exchange rates increased revenue by $55.2 million. Highlights of the changes in revenue during the three months ended June 30, 2023,
excluding the impact of acquisitions, include:
| ● | Solid Waste revenue increased by 4.8%, predominantly due to core pricing of 10.4%, partially offset by
negative surcharges of 1.0%. Also offsetting this increase was negative volume of 3.5%. Lower volume across our collection and post collection
operations was driven by a milder winter and early spring in certain markets which pulled forward volume from the second quarter into
the first quarter of 2023. In addition, there were non-regrettable volume losses in our collection businesses and purposeful exiting
of non-core service offerings in certain Canadian markets. Lower commodity prices also negatively contributed 1.1%. Changes in foreign exchange rates increased revenue
by 3.7%. |
| ● | Environmental Services revenue increased by 10.2%, predominantly
due to higher industrial collection and processing activity at our facilities and an increased
level of emergency response activity. Changes in foreign exchange rates increased revenue by 1.0%. |
On a consolidated basis,
revenue for the six months ended June 30, 2023 increased by $633.8 million to $3,742.7 million, compared to the six months ended
June 30, 2022. The increase is partially attributable to the impact of acquisitions completed since January 1, 2022, net of
divestitures, which accounted for approximately $208.1 million of the increase, the majority of
which were in our Solid Waste segment. Changes in foreign exchange rates increased revenue by $121.3 million. Highlights
of the changes in revenue during the six months ended June 30, 2023, excluding the impact of acquisitions, include:
| ● | Solid Waste revenue increased by 8.3%, including 11.4% from core pricing, partially offset by
negative surcharges of 0.3%. Also offsetting this increase was negative volume of 1.6%, driven by lower event driven volume across
our post collection operations, non-regrettable volume losses in our collection business and purposeful
exiting of non-core service offerings in certain Canadian markets. Lower commodity prices also negatively contributed 1.2%. Changes in foreign exchange rates
increased revenue by 4.5%. |
| ● | Environmental Services revenue increased by 16.5%, predominantly due to higher industrial collection and
processing activity at our facilities, an increased level of emergency response activity and higher soil volumes processed at our facilities.
Changes in foreign exchange rates increased revenue by 1.3%. |
Cost of Sales
The following tables summarize
cost of sales for the periods indicated:
| |
Three months ended
June 30, 2023 | | |
Three months ended
June 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Transfer and disposal costs | |
$ | 361.2 | | |
| 18.6 | % | |
$ | 336.2 | | |
| 19.7 | % | |
$ | 25.0 | | |
| 7.4 | % |
Labour and benefits | |
| 443.2 | | |
| 22.8 | | |
| 384.2 | | |
| 22.5 | | |
| 59.0 | | |
| 15.4 | |
Maintenance and repairs | |
| 187.8 | | |
| 9.7 | | |
| 159.3 | | |
| 9.3 | | |
| 28.5 | | |
| 17.9 | |
Fuel | |
| 88.8 | | |
| 4.6 | | |
| 109.1 | | |
| 6.4 | | |
| (20.3 | ) | |
| (18.6 | ) |
Other cost of sales | |
| 139.4 | | |
| 7.2 | | |
| 118.8 | | |
| 7.0 | | |
| 20.6 | | |
| 17.3 | |
Subtotal | |
| 1,220.4 | | |
| 62.9 | | |
| 1,107.6 | | |
| 64.9 | | |
| 112.8 | | |
| 10.2 | |
Depreciation expense | |
| 230.9 | | |
| 11.9 | | |
| 233.7 | | |
| 13.7 | | |
| (2.8 | ) | |
| (1.2 | ) |
Amortization of intangible assets | |
| 134.0 | | |
| 6.9 | | |
| 133.4 | | |
| 7.8 | | |
| 0.6 | | |
| 0.4 | |
Acquisition, rebranding and other integration costs | |
| 5.3 | | |
| 0.1 | | |
| 7.3 | | |
| 0.4 | | |
| (2.0 | ) | |
| (27.4 | ) |
Cost of sales | |
$ | 1,590.6 | | |
| 81.8 | % | |
$ | 1,482.0 | | |
| 86.8 | % | |
$ | 108.6 | | |
| 7.3 | % |
| |
Six months ended
June 30, 2023 | | |
Six months ended
June 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Transfer and disposal costs | |
$ | 704.2 | | |
| 18.8 | % | |
$ | 598.9 | | |
| 19.3 | % | |
$ | 105.3 | | |
| 17.6 | % |
Labour and benefits | |
| 852.1 | | |
| 22.8 | | |
| 715.3 | | |
| 23.0 | | |
| 136.8 | | |
| 19.1 | |
Maintenance and repairs | |
| 371.8 | | |
| 9.9 | | |
| 298.3 | | |
| 9.6 | | |
| 73.5 | | |
| 24.6 | |
Fuel | |
| 188.3 | | |
| 5.0 | | |
| 187.0 | | |
| 6.0 | | |
| 1.3 | | |
| 0.7 | |
Other cost of sales | |
| 281.7 | | |
| 7.5 | | |
| 224.0 | | |
| 7.2 | | |
| 57.7 | | |
| 25.8 | |
Subtotal | |
| 2,398.1 | | |
| 64.0 | | |
| 2,023.5 | | |
| 65.1 | | |
| 374.6 | | |
| 18.5 | |
Depreciation expense | |
| 464.1 | | |
| 12.4 | | |
| 452.8 | | |
| 14.6 | | |
| 11.3 | | |
| 2.5 | |
Amortization of intangible assets | |
| 272.8 | | |
| 7.3 | | |
| 257.9 | | |
| 8.3 | | |
| 14.9 | | |
| 5.8 | |
Acquisition, rebranding and other integration costs | |
| 10.2 | | |
| 0.3 | | |
| 13.4 | | |
| 0.4 | | |
| (3.2 | ) | |
| (23.9 | ) |
Cost of sales | |
$ | 3,145.2 | | |
| 84.0 | % | |
$ | 2,747.6 | | |
| 88.4 | % | |
$ | 397.6 | | |
| 14.5 | % |
Cost of sales increased by
$108.6 million to $1,590.6 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022,
partially attributable to the impact of acquisitions. Cost of sales as a percentage of revenue for the three months ended June 30,
2023 decreased by 500 basis points to 81.8%, compared to the three months ended June 30, 2022. Changes in the individual cost categories
as a percentage of revenue were the result of the impact of changes in business mix, our pricing strategies and inflationary cost pressures.
For the three months ended June 30, 2023, increased labour cost pressure from tight labour markets drove up wage
rates, training costs and overtime. Fuel costs decreased by $20.3 million to $88.8 million for the three months ended June 30, 2023
compared to the three months ended June 30, 2022, primarily as a result of a reduction in the price of fuel. Labour cost pressure
also increased our transfer and disposal costs, driven by inflationary cost increases from third party haulers, and our maintenance and
repair costs, as technician labour shortages drove higher overtime and reliance on higher cost third party repair facilities and technicians.
Maintenance and repair costs also increased as a result of additional fleet and container maintenance driven by delays in receiving new
trucks and equipment due to supply chain constraints. An increase in risk management costs, particularly accident claim costs, also contributed
to the increase in other cost of sales. Excluding depreciation expense, amortization of intangible assets and acquisition, rebranding
and other integration costs, cost of sales as a percentage of total revenue for the three months
ended June 30, 2023 decreased by 200 basis points to 62.9%, compared to the three months ended June 30, 2022.
Cost of sales increased by
$397.6 million to $3,145.2 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, partially
attributable to the impact of acquisitions. Cost of sales as a percentage of total revenue for the six months ended June 30, 2023
decreased by 440 basis points to 84.0%, compared to the six months ended June 30, 2022. Changes in the individual cost categories
as a percentage of revenue were the result of the impact of changes in business mix, our pricing strategies and inflationary cost pressures.
For the six months ended June 30, 2023, increased labour cost as a result of pressure from tight labour markets in the prior year
drove up wage rates, training costs and overtime. Fuel costs increased by $1.3 million to $188.3 million for the six months ended June 30,
2023 compared to the six months ended June 30, 2022, primarily as a result of growth in the business and businesses acquired since
January 1, 2022, partially offset by a reduction in the price of fuel. Labour and fuel cost pressure increased our transfer and disposal
costs, driven by inflationary cost increases from third party haulers, and our maintenance and repair costs, as technician labour shortages
drove higher overtime and reliance on higher cost third party repair facilities and technicians. Maintenance and repair costs also increased
as a result of additional fleet and container maintenance driven by delays in receiving new trucks and equipment due to supply chain constraints.
Delays in receiving new trucks also increased equipment rental costs and contributed to the increase in other cost of sales. An increase
in risk management costs, particularly accident claim costs, also contributed to the increase in other cost of sales. Excluding
depreciation expenses, amortization of intangible assets and acquisition, rebranding and other integration costs, cost of sales as a percentage
of total revenue for the six months ended June 30, 2023 decreased by 110 basis points to 64.0% compared to 65.1% for the six months
ended June 30, 2022.
Selling, General and Administrative Expenses (“SG&A”)
The following tables summarize SG&A for the
periods indicated:
| |
Three months ended
June 30, 2023 | | |
Three months ended
June 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Salaries and benefits | |
$ | 122.5 | | |
| 6.3 | % | |
$ | 92.2 | | |
| 5.4 | % | |
$ | 30.3 | | |
| 32.9 | % |
Share-based payments | |
| 15.2 | | |
| 0.8 | | |
| 13.0 | | |
| 0.8 | | |
| 2.2 | | |
| 16.9 | |
Other | |
| 60.0 | | |
| 3.1 | | |
| 54.4 | | |
| 3.2 | | |
| 5.6 | | |
| 10.3 | |
Subtotal | |
| 197.7 | | |
| 10.2 | | |
| 159.6 | | |
| 9.4 | | |
| 38.1 | | |
| 23.9 | |
Depreciation expense | |
| 6.9 | | |
| 0.4 | | |
| 7.4 | | |
| 0.4 | | |
| (0.5 | ) | |
| (6.8 | ) |
Transaction costs | |
| 29.6 | | |
| 1.5 | | |
| 11.4 | | |
| 0.7 | | |
| 18.2 | | |
| 159.6 | |
Selling, general and administrative expenses | |
$ | 234.2 | | |
| 12.1 | % | |
$ | 178.4 | | |
| 10.5 | % | |
$ | 55.8 | | |
| 31.3 | % |
| |
Six months ended
June 30, 2023 | | |
Six months ended
June 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Salaries and benefits | |
$ | 228.2 | | |
| 6.1 | % | |
$ | 176.1 | | |
| 5.7 | % | |
$ | 52.1 | | |
| 29.6 | % |
Share-based payments | |
| 30.2 | | |
| 0.8 | | |
| 24.8 | | |
| 0.8 | | |
| 5.4 | | |
| 21.8 | |
Other | |
| 135.2 | | |
| 3.6 | | |
| 101.6 | | |
| 3.3 | | |
| 33.6 | | |
| 33.1 | |
Subtotal | |
| 393.6 | | |
| 10.5 | | |
| 302.5 | | |
| 9.8 | | |
| 91.1 | | |
| 30.1 | |
Depreciation expense | |
| 13.5 | | |
| 0.4 | | |
| 15.3 | | |
| 0.5 | | |
| (1.8 | ) | |
| (11.8 | ) |
Transaction costs | |
| 41.6 | | |
| 1.1 | | |
| 23.3 | | |
| 0.7 | | |
| 18.3 | | |
| 78.5 | |
Selling, general and administrative expenses | |
$ | 448.7 | | |
| 12.0 | % | |
$ | 341.1 | | |
| 11.0 | % | |
$ | 107.6 | | |
| 31.5 | % |
SG&A increased by
$55.8 million to $234.2 million for the three months ended June 30, 2023, compared to the three months ended June 30,
2022. The increase was predominantly attributable to incremental salaries, benefits, and other third party costs associated with
information technology infrastructure investments, to facilitate moving from on-premise infrastructure to cloud-based infrastructure
and other costs related to the number and size of businesses acquired since April 1, 2022. The increase in transaction costs
was predominantly attributable to the divestitures completed during the period. For the three months ended June 30, 2023, there
was also an increase in discretionary costs, such as travel expenses. SG&A as a percentage of revenue for the three months ended
June 30, 2023 increased by 160 basis points to 12.1%, compared to the three months ended June 30, 2022. Excluding
depreciation expense and transaction costs, SG&A as a percentage of revenue was 10.2% for the three months ended June 30,
2023, compared to 9.4% for the three months ended June 30, 2022 .
SG&A increased by
$107.6 million to $448.7 million for the six months ended June 30, 2023, compared
to the six months ended June 30, 2022. The increase was predominantly attributable to
incremental salaries, benefits, and other third party costs associated with information technology infrastructure investments, to
facilitate moving from on-premise infrastructure to cloud-based infrastructure and other costs related to the number and size of
businesses acquired since January 1, 2022. The increase in transaction costs was predominantly attributable to the divestitures
completed during the period. For the six months ended June 30, 2023, there was also an increase in discretionary costs, such as
travel expenses. SG&A as a percentage of revenue for the six months ended June 30, 2023 increased by 100 basis
points to 12.0% compared to the six months ended June 30, 2022. Excluding depreciation expense and transaction costs, SG&A
as a percentage of revenue was 10.5% for the six months ended June 30, 2023, compared to 9.8% for the six months ended
June 30, 2022.
Interest and Other Finance Costs
The following tables summarize interest and other
finance costs for the periods indicated:
| |
Three
months ended | | |
Three
months ended | | |
Change | |
($ millions) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
Interest | |
$ | 144.4 | | |
$ | 91.6 | | |
$ | 52.8 | | |
57.6 | % |
Amortization of deferred financing costs | |
| 3.9 | | |
| 3.3 | | |
| 0.6 | | |
18.2 | |
Accretion of landfill closure and post-closure obligations | |
| 8.7 | | |
| 4.6 | | |
| 4.1 | | |
89.1 | |
Other finance costs | |
| 7.8 | | |
| 5.3 | | |
| 2.5 | | |
47.2 | |
Interest and other finance costs | |
$ | 164.8 | | |
$ | 104.8 | | |
$ | 60.0 | | |
57.3 | % |
| |
Six
months ended | | |
Six
months ended | | |
Change | |
($ millions) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
Interest | |
$ | 279.1 | | |
$ | 176.4 | | |
$ | 102.7 | | |
58.2 | % |
Termination of hedged arrangements | |
| 8.7 | | |
| — | | |
| 8.7 | | |
— | |
Amortization of deferred financing costs | |
| 9.3 | | |
| 6.5 | | |
| 2.8 | | |
43.1 | |
Accretion of landfill closure and post-closure obligations | |
| 16.4 | | |
| 9.2 | | |
| 7.2 | | |
78.3 | |
Other finance costs | |
| 16.0 | | |
| 12.4 | | |
| 3.6 | | |
29.0 | |
Interest and other finance costs | |
$ | 329.5 | | |
$ | 204.5 | | |
$ | 125.0 | | |
61.1 | % |
Interest and other finance
costs increased by $60.0 million to $164.8 million for the three months ended June 30, 2023, compared to the three months ended June 30,
2022. The increase was predominantly due to an increase in interest expense of $52.8 million to $144.4 million as a result of rising interest
rates in Canada and the U.S.
Interest and other finance
costs increased by $125.0 million to $329.5 million for the six months ended June 30, 2023, compared to the six months ended
June 30, 2022. The increase was predominantly due to an increase in interest expense of $102.7 million to $279.1 million as a result
of rising interest rates in Canada and the U.S., increased long-term debt outstanding under the Term Loan A Facility (defined below) and
a non-recurring $8.7 million loss on extinguishment of hedged arrangements for the six months ended June 30, 2023.
Other Income and Expenses
The following tables summarize
other income and expenses for the periods indicated:
| |
Three
months ended | | |
Three
months ended | | |
Change | |
($ millions) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
(Gain) loss on foreign exchange | |
$ | (56.8 | ) | |
$ | 112.6 | | |
$ | (169.4 | ) | |
(150.4 | )% |
Mark-to-market gain on Purchase Contracts | |
| — | | |
| (206.2 | ) | |
| 206.2 | | |
100.0 | |
Gain on sale of property and equipment | |
| (6.5 | ) | |
| (2.6 | ) | |
| (3.9 | ) | |
(150.0 | ) |
Other | |
| (2.3 | ) | |
| 9.1 | | |
| (11.4 | ) | |
(125.3 | ) |
Other income | |
$ | (65.6 | ) | |
$ | (87.1 | ) | |
$ | 21.5 | | |
24.7 | % |
| |
Six
months ended | | |
Six
months ended | | |
Change | |
($ millions) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
(Gain) loss on foreign exchange | |
$ | (51.5 | ) | |
$ | 54.0 | | |
$ | (105.5 | ) | |
(195.4 | )% |
Mark-to-market loss (gain) on Purchase Contracts | |
| 104.3 | | |
| (381.1 | ) | |
| 485.4 | | |
127.4 | |
Gain on sale of property and equipment | |
| (6.4 | ) | |
| (4.4 | ) | |
| (2.0 | ) | |
(45.5 | ) |
Other | |
| (2.3 | ) | |
| 9.1 | | |
| (11.4 | ) | |
(125.3 | ) |
Other expenses (income) | |
$ | 44.1 | | |
$ | (322.4 | ) | |
$ | 366.5 | | |
113.7 | % |
For the three months ended
June 30, 2023, other income was $65.6 million, compared to $87.1 million for the three months ended June 30, 2022. This
decrease was primarily due to a $206.2 million non-cash change on the revaluation of the Purchase Contracts in the prior year. Partially
offsetting this decrease was a $169.4 million change in non-cash foreign exchange gain arising from the revaluation of TEUs and the unhedged
portion of our U.S. dollar denominated debt to Canadian dollars based on the foreign exchange rate as at June 30, 2023.
For
the six months ended June 30, 2023, other expenses were $44.1 million, compared to other
income of $322.4 million for the six months ended June 30, 2022. The change was primarily due to a $485.4 million non-cash
change on the revaluation of the Purchase Contracts. Partially offsetting this increase was a $105.5 million change in non-cash foreign
exchange loss arising from the revaluation of TEUs and the unhedged portion of our U.S. dollar denominated
debt to Canadian dollars based on the foreign exchange rate as at June 30, 2023.
Divestitures
During the six
months ended June 30, 2023, we completed divestitures of certain assets and operations
in three distinct U.S. Solid Waste regions for aggregate proceeds of $1,656.1 million, and a resulting gain on divestiture of $580.5 million.
The three distinct U.S. Solid
Waste regions, which are included within our Solid Waste USA segment, did not meet the criteria to be classified as discontinued operations
as they do not represent a major line of business or geographical area of operations.
Income Tax Expense (Recovery)
Income tax expense increased
by $286.8 million to $238.9 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The increase was predominantly due to the gain on divestiture, partially offset by increased depreciation expense for the three months
ended June 30, 2023.
Income tax expense increased
by $266.5 million to $196.8 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
The increase was predominantly due the gain on divestiture, partially offset by increased depreciation expense for the six months ended
June 30, 2023.
Our
basis for recording deferred income tax assets for these losses is the availability of deferred income tax liabilities, which will offset
these deferred income tax assets in the future.
3. Operating Segment Results
Our main lines of business
are the transporting, managing and recycling of solid and liquid waste and soil remediation services. Our operating segments are: Solid
Waste, which includes hauling, landfill, transfers and MRFs; and Environmental Services, which includes liquid waste management and soil
remediation services.
The results for our operating
segments are presented in accordance with the same criteria used for the internal report prepared for the chief operating decision maker
(“CODM”) who is responsible for allocating the resources and assessing the performance of the operating segments. The
CODM assesses the performance of the operating segments based on several factors, including revenue and Adjusted EBITDA.
Analysis of results for the three and six months ended June 30,
2023 compared to the three and six months ended June 30, 2022
The following tables present
revenue and Adjusted EBITDA by operating segment for the periods indicated. Gross revenue is calculated based on revenue before intercompany
eliminations.
| |
Three months ended June 30, 2023 | |
| |
Gross Revenue | | |
Intercompany
Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 534.6 | | |
$ | (68.8 | ) | |
$ | 465.8 | | |
$ | 135.8 | |
USA | |
| 1,222.8 | | |
| (132.3 | ) | |
| 1,090.5 | | |
| 356.1 | |
Solid Waste | |
| 1,757.4 | | |
| (201.1 | ) | |
| 1,556.3 | | |
| 491.9 | |
Environmental Services | |
| 427.0 | | |
| (39.7 | ) | |
| 387.3 | | |
| 113.0 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (64.2 | ) |
| |
$ | 2,184.4 | | |
$ | (240.8 | ) | |
$ | 1,943.6 | | |
$ | 540.7 | |
| |
Three months ended June 30, 2022 | |
| |
Gross Revenue | | |
Intercompany
Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 498.4 | | |
$ | (63.7 | ) | |
$ | 434.7 | | |
$ | 117.8 | |
USA | |
| 1,065.4 | | |
| (116.9 | ) | |
| 948.5 | | |
| 288.9 | |
Solid Waste | |
| 1,563.8 | | |
| (180.6 | ) | |
| 1,383.2 | | |
| 406.7 | |
Environmental Services | |
| 347.9 | | |
| (23.6 | ) | |
| 324.3 | | |
| 91.5 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (44.9 | ) |
| |
$ | 1,911.7 | | |
$ | (204.2 | ) | |
$ | 1,707.5 | | |
$ | 453.3 | |
| (1) | Adjusted EBITDA is a non-IFRS measure. Refer to the section entitled “Non-IFRS Financial Measures
and Key Performance Indicators”. |
| |
Six months ended June 30, 2023 | |
| |
Gross Revenue | | |
Intercompany
Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 1,004.0 | | |
$ | (125.7 | ) | |
$ | 878.3 | | |
$ | 237.3 | |
USA | |
| 2,420.9 | | |
| (260.7 | ) | |
| 2,160.2 | | |
| 691.6 | |
Solid Waste | |
| 3,424.9 | | |
| (386.4 | ) | |
| 3,038.5 | | |
| 928.9 | |
Environmental Services | |
| 777.0 | | |
| (72.8 | ) | |
| 704.2 | | |
| 173.7 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (121.4 | ) |
| |
$ | 4,201.9 | | |
$ | (459.2 | ) | |
$ | 3,742.7 | | |
$ | 981.2 | |
| |
Six months ended June 30, 2022 | |
| |
Gross Revenue | | |
Intercompany
Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 906.1 | | |
$ | (115.7 | ) | |
$ | 790.4 | | |
$ | 211.5 | |
USA | |
| 1,979.9 | | |
| (217.4 | ) | |
| 1,762.5 | | |
| 544.9 | |
Solid Waste | |
| 2,886.0 | | |
| (333.1 | ) | |
| 2,552.9 | | |
| 756.4 | |
Environmental Services | |
| 599.4 | | |
| (43.4 | ) | |
| 556.0 | | |
| 137.9 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (86.6 | ) |
| |
$ | 3,485.4 | | |
$ | (376.5 | ) | |
$ | 3,108.9 | | |
$ | 807.7 | |
| (1) | Adjusted EBITDA is a non-IFRS measure. Refer to the section entitled “Non-IFRS Financial Measures
and Key Performance Indicators”. |
Solid Waste — Canada Operating Segment
Revenue increased by
$31.1 million to $465.8 million for the three months ended June 30, 2023, compared to the three months ended June 30,
2022. The increase was due in part to acquisitions completed since April 1, 2022, which contributed approximately $16.3 million
of revenue, and $35.8 million from price increases. The increase was partially offset by $2.0
million from lower surcharges and lower selling prices for the saleable commodities generated from our MRF operations. Price
increases were higher than the three months ended June 30, 2022, as a result of the continued execution of our pricing
strategies and strong consumer price index (“CPI”) adjustments on certain municipal contracts. Volume
decreased revenue by $12.6 million for the three months ended June 30, 2023, compared to the three months ended
June 30, 2022, predominantly from lower event driven volumes in our post collection
businesses as well as the impact of purposeful exiting of non-core service offerings.
Revenue increased by
$87.9 million to $878.3 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
The increase was due in part to acquisitions, net of divestitures, completed since January 1, 2022, which contributed
approximately $34.0 million of revenue and $75.9 million from price and surcharge increases. Price and surcharge increases were
higher than the six months ended June 30, 2022, as a result of the continued execution of our pricing strategies, increased
surcharge revenues and strong CPI adjustments on certain municipal contracts. Partially offsetting these increases were lower
selling prices for the saleable commodities generated from our MRF operations and the impact of lower MRF volumes in the period.
Volume, excluding MRF volumes, decreased revenue by $9.2 million for the six months ended June 30, 2023, compared to the six
months ended June 30, 2022, predominantly from lower event driven volumes in our post collection businesses as well as the
impact of purposeful exiting of non-core service offerings.
Adjusted EBITDA
increased by $18.0 million to $135.8 million for the three months ended June 30, 2023, compared to the three months ended
June 30, 2022, predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin was 29.2% for
the three months ended June 30, 2023, an increase of 210 basis points compared to the three months ended June 30, 2022.
The increase was attributable to organic margin expansion resulting from pricing strategies, the realization of ongoing operating
cost efficiencies, the reduction in the price of fuel and the impact of insurance proceeds received in respect of business interruption costs arising from two MRF fires that occurred in the
prior year. Partially offsetting this increase was the impact of lower commodity prices,
increased labour costs from tight labour markets which drove up wage rates, training costs and overtime, as well as increased
transfer, disposal, and maintenance and repairs costs driven by inflationary cost pressures and delays associated with supply chain
constraints. The incremental revenue from acquisitions contributed Adjusted EBITDA margin lower than the existing base business,
negatively impacting the overall Adjusted EBITDA margin.
Adjusted
EBITDA increased by $25.8 million to $237.3 million for the six months ended June 30, 2023, compared to the six months ended June 30,
2022, predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin for the six months ended June 30,
2023 was 27.0%, an increase of 20 basis points compared to the six months ended June 30,
2022. The increase was predominantly attributable to organic margin expansion resulting from pricing strategies and realization
of ongoing operating cost efficiencies, in addition to the reduction in the price of fuel. Partially offsetting this increase was the
impact of lower commodity prices, increased labour costs from tight labour markets which drove up wage rates, training costs and overtime,
as well as increased transfer, disposal, and maintenance and repairs costs driven by inflationary cost pressures and delays associated
with supply chain constraints. The incremental revenue from acquisitions contributed Adjusted EBITDA margin lower than the existing base business,
negatively impacting the overall Adjusted EBITDA margin.
Solid Waste — USA Operating Segment
Revenue increased by $142.0
million to $1,090.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The
increase was predominantly due to acquisitions completed since April 1, 2022, net of divestitures, which contributed approximately
$38.8 million of revenue, and $108.6 million from price increases, partially offset by $12.2 million from lower surcharges and by lower
selling prices for the saleable commodities generated from our MRF operations. Volume decreased
revenue by $36.1 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022,
predominantly from lower volumes in our collection and post collection businesses driven by a milder
winter and early spring in certain markets which pulled forward volumes from the second quarter into the first quarter of 2023. In addition,
there were non-regrettable volume losses in our collection businesses. Revenue increased
by $51.8 million for the three months ended June 30, 2023 compared to the three
months ended June 30, 2022, as a result of changes in the foreign exchange rate.
Revenue increased by
$397.7 million to $2,160.2 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
The increase was predominantly due to acquisitions completed since January 1, 2022, net of divestitures, which contributed
approximately $125.3 million of revenue, and $217.5 million from price increases, partially offset by $9.5 million from lower
surcharges and by lower selling prices for the saleable commodities generated from our MRF operations. Volume
decreased revenue by $29.9 million for the six months ended June 30, 2023, compared to the six months ended
June 30, 2022, predominantly from lower event driven volumes in our post collection businesses and non-regrettable
volume losses in our collection businesses. Revenue increased by $113.8 million for the six months ended June 30, 2023 compared
to the six months ended June 30, 2022, as a result of changes in the foreign exchange
rate.
Adjusted EBITDA increased
by $67.2 million to $356.1 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022,
predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin was 32.7% for the three months ended
June 30, 2023, an increase of 220 basis points compared to the three months ended June 30, 2022. The increase is predominantly
attributable to organic margin expansion resulting from pricing strategies and realization of ongoing operating cost efficiencies, in
addition to the reduction in the price of fuel. Partially offsetting this increase was the impact of lower commodity prices, increased
labour costs from tight labour markets which drove up wage rates, training costs and overtime, as well as increased transfer, disposal
and maintenance and repairs costs driven by inflationary cost pressures and delays associated with supply chain constraints. Adjusted
EBITDA margin was also negatively impacted by increased accident claim costs. The incremental revenue from acquisitions contributed Adjusted
EBITDA margin lower than the existing base business, negatively impacting the overall Adjusted EBITDA margin.
Adjusted EBITDA increased
by $146.7 million to $691.6 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022,
predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin was 32.0% for the six months ended June 30,
2023, an increase of 110 basis points compared to the six months ended June 30, 2022. The increase was predominantly attributable
to organic margin expansion resulting from pricing strategies and realization of ongoing operating cost efficiencies. Partially offsetting
this increase was the impact of lower commodity prices, increased labour costs from tight labour markets which drove up wage rates, training
costs and overtime, as well as increased transfer, disposal and maintenance and repairs costs driven by inflationary cost pressures and
delays associated with supply chain constraints. In addition, Adjusted EBITDA margin was also negatively impacted by increased travel
expenses and accident claim costs. The incremental revenue from acquisitions contributed Adjusted EBITDA margin lower than existing base
business, negatively impacting the overall Adjusted EBITDA margin.
Environmental Services Operating Segment
Revenue increased by $63.0
million to $387.3 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. Acquisitions
completed since April 1, 2022 contributed approximately $26.4 million in increased revenue. In addition to the contribution from
acquisitions, revenue organically grew by $33.2 million as a result of increased industrial collection and processing activity and an
increased level of emergency response activity. Revenue increased by $3.4 million for the three months ended June 30, 2023 compared
to the three months ended June 30, 2022, as a result of changes in the foreign exchange rate.
Revenue increased by
$148.2 million to $704.2 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
Acquisitions completed since January 1, 2022 contributed approximately $48.8 million in increased revenue. In addition to the contribution
from acquisitions, revenue grew organically by $91.9 million as a result of increased industrial collection and processing activity, an
increased level of emergency response activity and higher soil selling prices. Revenue increased by $7.5 million for the six months ended
June 30, 2023 compared to the six months ended June 30, 2022, as a result of changes in
the foreign exchange rate.
Adjusted EBITDA increased
by $21.5 million to $113.0 million for the three months ended June 30, 2023, compared
to the three months ended June 30, 2022. Adjusted EBITDA margin was 29.2% for the three months ended June 30, 2023, an increase
of 100 basis points as compared to the three months ended June 30, 2022. Pricing strategies, variable cost controls, the reduction
in the price of fuel and the operating leverage associated with increased volumes, favourably impacted Adjusted EBITDA margin for the
three months ended June 30, 2023. Offsetting this was increased labour costs from tight labour markets which drove up wage rates,
training costs and overtime, as well as increased transfer, disposal and maintenance and repairs costs driven by inflationary cost pressures
and delays associated with supply chain constraints. The incremental revenue from acquisitions contributed Adjusted EBITDA margin lower
than the existing base business, negatively impacting the overall Adjusted EBITDA margin.
Adjusted EBITDA increased
by $35.8 million to $173.7 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, predominantly
attributable to the previously described change in revenue. Adjusted EBITDA margin was 24.7% for the six months ended June 30, 2023,
a decrease of 10 basis points as compared to the six months ended June 30, 2022. Pricing strategies, variable cost controls, the
reduction in the price of fuel and the operating leverage associated with volume recovery favourably impacted Adjusted EBITDA margin for
the six months ended June 30, 2023. Offsetting these increases were increased labour costs from tight labour markets which drove
up wage rates, training costs and overtime, as well as increased transfer, disposal and maintenance and repairs costs driven by inflationary
cost pressures and delays associated with supply chain constraints. In addition, increased sub-contracting costs associated with increased
emergency response activity negatively impacted Adjusted EBITDA margin for the six months ended June 30, 2023. The incremental revenue
from acquisitions contributed Adjusted EBITDA margins higher than the existing base business, positively impacting the overall Adjusted
EBITDA margin.
Corporate
Corporate costs increased
by $19.3 million to $64.2 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The increase was primarily attributable to information technology infrastructure investments, including
additional salaries, benefits and third party costs required to facilitate moving from on-premise infrastructure to cloud-based infrastructure.
Additional headcount and overhead costs to support the growth in the business also contributed to the increase. Corporate costs
as a percentage of total revenue were 3.3% for the three months ended June 30, 2023, an increase of 70 basis points compared to the
three months ended June 30, 2022.
Corporate
costs increased by $34.8 million to $121.4 million for the six months ended June 30, 2023 compared to the six months ended
June 30, 2022. The increase was primarily attributable to information technology infrastructure investments, including salaries,
benefits and third party costs required to facilitate moving from on-premise infrastructure to cloud-based infrastructure. Additional
headcount and overhead costs to support the growth in the business also contributed to the increase. Corporate costs as a percentage
of total revenue were 3.2% for the six months ended June 30, 2023, an increase of 40 basis points compared to the six months ended
June 30, 2022.
4. Liquidity and Capital Resources
We intend to meet our currently
anticipated capital requirements through cash flows from operations and borrowing capacity under our Revolving Credit Facility (defined
below). We expect that these sources will be sufficient to meet our current operating capital needs, pay our dividends and fund certain
tuck-in acquisitions consistent with our strategy.
Cash Flows
Cash flows for the three and six months ended June 30, 2023
compared to the three and six months ended June 30, 2022
| |
Three
months ended | | |
Three months ended | | |
Change | |
($ millions) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
Cash flows from operating activities | |
$ | 260.7 | | |
$ | 231.2 | | |
$ | 29.5 | | |
12.8 | % |
Cash flows from (used in) investing activities | |
| 1,318.3 | | |
| (804.6 | ) | |
| 2,122.9 | | |
263.8 | |
Cash flows (used in) from financing activities | |
| (1,575.0 | ) | |
| 632.2 | | |
| (2,207.2 | ) | |
(349.1 | ) |
Increase in cash | |
| 4.0 | | |
| 58.8 | | |
| | | |
| |
Changes due to foreign exchange revaluation of cash | |
| 5.2 | | |
| (17.5 | ) | |
| | | |
| |
Cash, beginning of period | |
| 73.0 | | |
| 189.3 | | |
| | | |
| |
Cash, end of period | |
$ | 82.2 | | |
$ | 230.6 | | |
| | | |
| |
| |
Six months ended | | |
Six
months ended | | |
Change | |
($ millions) | |
June 30, 2023 | | |
June 30, 2022 | | |
$ | | |
% | |
Cash flows from operating activities | |
$ | 453.2 | | |
$ | 407.2 | | |
$ | 46.0 | | |
11.3 | % |
Cash flows from (used in) investing activities | |
| 836.6 | | |
| (995.2 | ) | |
| 1,831.8 | | |
184.1 | |
Cash flows (used in) from financing activities | |
| (1,288.2 | ) | |
| 651.8 | | |
| (1,940.0 | ) | |
(297.6 | ) |
Increase in cash | |
| 1.6 | | |
| 63.8 | | |
| | | |
| |
Changes due to foreign exchange revaluation of cash | |
| (1.5 | ) | |
| (23.6 | ) | |
| | | |
| |
Cash, beginning of period | |
| 82.1 | | |
| 190.4 | | |
| | | |
| |
Cash, end of period | |
$ | 82.2 | | |
$ | 230.6 | | |
| | | |
| |
Operating Activities
Cash flows from operating
activities increased by $29.5 million to $260.7 million for the three months ended June 30, 2023, compared to $231.2 million for
the three months ended June 30, 2022. This increase was predominantly attributable to an increase in EBITDA for the three months
ended June 30, 2023. Partially offsetting this increase was $28.2 million of incremental cash interest paid on outstanding long-term
debt due largely to the cadence of cash interest payments and an incremental investment in working capital of $25.9 million.
Changes in non-cash working
capital items resulted in a use of cash of $116.7 million for the three months ended June 30, 2023, compared to a use of cash of
$90.8 million for the three months ended June 30, 2022. Refer to Note 14 in our Interim Financial Statements for details.
Cash
flows from operating activities increased by $46.0 million to $453.2 million for the six months ended
June 30, 2023, compared to $407.2 million for the six months ended June 30, 2022.
This increase was predominantly attributable to an increase in EBITDA for the six months ended June 30,
2023. Partially offsetting this increase was $93.0 million of incremental cash interest paid on outstanding long-term debt due
to higher interest rates in Canada and the U.S., increased long-term debt outstanding under the Term Loan A Facility (defined below),
the cadence of cash interest payments and an incremental investment in working capital of $22.1 million.
Changes in non-cash working
capital items resulted in a use of cash of $182.5 million for the six months ended June 30, 2023, compared to a use of cash of $160.4
million for the six months ended June 30, 2022. Refer to Note 14 in our Interim Financial Statements for details.
Investing Activities
Cash flows from investing
activities increased by $2,122.9 million to $1,318.3 million for the three months ended June 30, 2023, compared to the three months
ended June 30, 2022. The increase was predominantly related to proceeds on disposal of assets which increased by $1,426.0 million
to $1,650.3 million and acquisition expenditures which decreased by $858.9 million to $21.4 million. Partially offsetting the increase
was an increase in capital expenditures of $151.6 million to $280.6 million, primarily driven by timing of payments, and an increase of
$13.2 million in our investment in joint ventures and associates.
Cash flows from investing
activities increased by $1,831.8 million to $836.6 million for the six months ended June 30, 2023, compared to the six months ended
June 30, 2022. The increase was predominantly related to proceeds on disposal of assets which increased by $1,347.3 million to $1,663.5
million and acquisition expenditures which decreased by $708.7 million to $238.7 million. Partially offsetting the increase was an increase
in capital expenditures of $221.3 million to $553.5 million, primarily driven by timing of payments, and an increase of $5.7 million in
our investment in joint ventures and associates.
Financing Activities
Cash flows used in
financing activities increased by $2,207.2 million to $1,575.0 million for the three months ended June 30, 2023, compared to
the three months ended June 30, 2022. The increase was primarily the result of a $2,216.9 million decrease in the net change in
long term debt, as a result of the proceeds of divestitures that were used to repay long-term debt, partially offset by a $14.2 million repayment of Amortizing Notes in
the prior period.
Cash flows used in
financing activities increased by $1,940.0 million to $1,288.2 million for the six months ended June 30, 2023, compared to cash
flows from financing activities of $651.8 million for the six months ended June 30, 2022. The increase was primarily the result
of a $1,965.0 million increase in the net change in long-term debt, as a result of the proceeds of divestitures that were used to
repay long-term debt. Partially offsetting the increase was $17.3 million of proceeds from the termination of hedged arrangements,
an $8.1 million contribution from a non-controlling interest and decreased deferred financing costs of $13.1 million.
Available Sources of Liquidity
Under our amended and restated
revolving credit agreement dated as of January 11, 2023 (the “Revolving Credit Agreement”), as at June 30,
2023, we had access to (a) a $1,205.0 million revolving credit facility (available in Canadian and US dollars) and an aggregate
US$75.0 million in revolving credit facilities (available in US dollars) (collectively, the “Revolving Credit Facility”)
and (b) a term loan of up to $775.0 million (the “Term Loan A Facility”).
As at June 30, 2023,
we had $nil drawn under the Revolving Credit Facility ($771.8 million as at December 31, 2022) and $775.0 million drawn under the
Term Loan A Facility ($500.0 million as at December 31, 2022).
Our Revolving Credit Agreement
contains a Total Net Funded Debt to Adjusted EBITDA and an Interest Coverage Ratio (each as defined in the Revolving Credit Agreement)
financial maintenance covenant.
The Total Net Funded Debt
to Adjusted EBITDA ratio to be maintained is equal to or less than 6.00 to 1.00 for a period of four complete fiscal quarters following
completion of a Material Acquisition and at all other times, equal to or less than 5.75 to 1.00. The Interest Coverage Ratio must be equal
to or greater than 3.00 to 1.00. As at June 30, 2023 and December 31, 2022, we were in compliance with these covenants.
The following table summarizes
our cash and amounts available under our Revolving Credit Facility as of the dates indicated:
| |
As at June 30, 2023 | | |
As at December 31, 2022 | |
Cash on hand | |
$ | 82.2 | | |
$ | 82.1 | |
Amounts available under our Revolving Credit Facility(1) | |
| 1,084.3 | | |
| 301.8 | |
| |
$ | 1,166.5 | | |
$ | 383.9 | |
| (1) | Amounts available under our Revolving Credit Facility are comprised of the aggregate total capacity available
under the Revolving Credit Facility, less amounts drawn and letters of credit. |
Contractual Obligations
Our contractual obligations
consist of principal repayments and interest on long-term debt, lease obligations and other. Our contractual obligations and commitments
as at June 30, 2023 are shown in the following table.
($ millions) | |
Total | | |
Less than
1 year | | |
1-3 year | | |
4-5 year | | |
Thereafter | |
Long-term debt | |
$ | 7,764.4 | | |
$ | — | | |
$ | 1,655.0 | | |
$ | 2,402.2 | | |
$ | 3,707.2 | |
Interest on long-term debt | |
| 1,641.6 | | |
| 401.6 | | |
| 732.2 | | |
| 417.0 | | |
| 90.8 | |
Lease obligations | |
| 534.8 | | |
| 71.1 | | |
| 161.1 | | |
| 89.1 | | |
| 213.5 | |
Other | |
| 90.0 | | |
| — | | |
| — | | |
| 90.0 | | |
| — | |
| |
$ | 10,030.8 | | |
$ | 472.7 | | |
$ | 2,548.3 | | |
$ | 2,998.3 | | |
$ | 4,011.5 | |
Other Commitments
We had letters of credit
totaling approximately $220.0 million outstanding as at June 30, 2023 ($233.0 million as at December 31, 2022), which are not
recognized in our Interim Financial Statements. These letters of credit primarily relate to performance-based requirements under our municipal
contracts and financial assurances issued to government agencies for our operating permits.
As at June 30, 2023,
we had issued performance bonds totaling $1,570.1 million ($1,560.7 million as at December 31, 2022).
5. Summary of Quarterly Results
The following table summarizes
the results of our operations for the eight most recently completed quarters:
| |
30-Jun | |
31-Mar | |
31-Dec | |
30-Sep | |
30-Jun | |
31-Mar | |
31-Dec | |
30-Sep | |
($ millions except per share amounts) | |
2023 | |
2023 | |
2022 | |
2022 | |
2022 | |
2022 | |
2021 | |
2021 | |
Financial Summary | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Revenue | |
$ | 1,943.6 | |
$ | 1,799.1 | |
$ | 1,821.2 | |
$ | 1,831.2 | |
$ | 1,707.5 | |
$ | 1,401.4 | |
$ | 1,439.6 | |
$ | 1,381.3 | |
Adjusted EBITDA(1) | |
| 540.7 | |
| 440.5 | |
| 439.8 | |
| 473.3 | |
| 453.3 | |
| 354.4 | |
| 375.8 | |
| 399.6 | |
Net income (loss) from continuing operations(2) | |
| 293.8 | |
| (217.8 | ) |
| (219.1 | ) |
| (183.7 | ) |
| 82.6 | |
| 137.0 | |
| (81.7 | ) |
| (316.1 | ) |
Earnings (loss) per share, basic(2) | |
| 0.74 | |
| (0.66 | ) |
| (0.66 | ) |
| (0.55 | ) |
| 0.17 | |
| 0.32 | |
| (0.26 | ) |
| (0.91 | ) |
Earnings (loss) per share, diluted(2) | |
| 0.72 | |
| (0.66 | ) |
| (0.66 | ) |
| (0.55 | ) |
| 0.17 | |
| 0.32 | |
| (0.26 | ) |
| (0.91 | ) |
| (1) | Adjusted EBITDA is a non-IFRS measure. Refer to section entitled “Non-IFRS Financial Measures and
Key Performance Indicators” |
| (2) | Subsequent to the original issuance of our interim consolidated financial statements for the first three
quarters of 2021, GFL determined the mark-to-market loss on Purchase Contracts should not be treated as a temporary difference for deferred
income tax purposes. As a result, to correct these immaterial errors, for the quarter ended September 30, 2021 deferred income tax
liabilities increased by $64.7 million, with a corresponding decrease to income tax recovery, resulting in a $64.7 million increase to
net loss from continuing operations and an increase of $0.18 to net loss per share. |
Over the last eight quarters
our results were primarily impacted by our pricing initiatives, cost controls and overall operating leverage as volumes recovered were
offset by inflationary cost pressures, as well as from acquisitions, divestitures and associated financing activities. Additionally, our
results are influenced by seasonality and tend to be lower in the first quarter of the year, primarily due to winter weather conditions,
which are pronounced in Canada, and higher in the second and third quarters of the year, due to the higher volume of waste generated during
the summer months in many of our solid waste markets.
6. Key Risk Factors
We are exposed to a number
of risks through the pursuit of our strategic objectives and the nature of our operations which are outlined in the “Risk Factors”
section of our AIF. We are also subject to the following financial risks.
Financial Instruments and Financial Risk
Our financial instruments
consist of cash, trade accounts receivable, trade accounts payable, long-term debt, including related hedging instruments, and prior to
the automatic conversion on March 15, 2023, the TEUs. The carrying value of our financial assets are equal to their fair values.
The carrying value of our
financial liabilities approximate their fair values with the exception of our outstanding Notes and, prior to maturity on March 15,
2023, the Amortizing Notes. The following table summarizes the fair value hierarchy for these instruments for the periods indicated:
| |
Fair Value as at June 30, 2023 | | |
Fair Value as at December 31, 2022 | |
($ millions) | |
Quoted prices
in active
market
(Level 1) | | |
Significant
observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | | |
Quoted prices
in active
market
(Level 1) | | |
Significant
observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | |
Notes | |
$ | — | | |
$ | 5,556.2 | | |
$ | — | | |
$ | — | | |
$ | 5,568.6 | | |
$ | — | |
Amortizing Notes | |
| — | | |
| — | | |
| — | | |
| 15.5 | | |
$ | — | | |
| — | |
Net derivative instruments
are recorded at fair value and classified within Level 2. Prior to the automatic conversion on March 15, 2023, Purchase Contracts
were recorded at fair value and classified within Level 1.
For more information on our
financial instruments, including hedging arrangements, and related financial risk factors, see our Interim Financial Statements, our Annual
Financial Statements, and our Annual MD&A.
7. Internal Control over Financial Reporting
All control systems, no matter
how well designed, have inherent limitations. Accordingly, even disclosure controls and procedures and internal controls over financial
reporting determined to be effective can only provide reasonable assurance of achieving their control objectives with respect to financial
statement preparation and presentation. Management, under the supervision of the Chief Executive Officer and Chief Financial Officer,
is responsible for establishing and maintaining adequate internal control over GFL’s financial reporting, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. During
the three and six months ended June 30, 2023, there were no changes in GFL’s internal control over financial reporting that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
8. Other
Related Party Transactions
After the final payment of
the semi-annual instalment of $3.5 million, the remaining principal outstanding on the note
payable to Josaud Holdings Inc. (an entity controlled by Patrick Dovigi) was $nil as at June 30, 2023 ($3.5 million as at December 31,
2022).
After the payment of the
semi-annual instalment of $2.9 million, the remaining principal outstanding on the note payable to Sejosa Holdings Inc. (an entity controlled
by Patrick Dovigi) was $11.6 million as at June 30, 2023 ($14.5 million as at December 31, 2022).
For
the three and six months ended June 30, 2023, we paid $2.1 million and $4.0 million ($1.3
million and $2.4 million for the three and six months ended June 30, 2022) in aggregate
lease payments to related parties.
For the three
and six months ended June 30, 2023, we entered into transactions with GIP which
resulted in revenue of $6.7 million and $12.0 million ($3.7
million and $3.7 million for the three and six months
ended June 30, 2022) and net receivables of $11.4 million as at June 30,
2023 (net payables of $3.8 million as at December 31, 2022).
Current Share Information
Our current authorized share
capital consists of (i) an unlimited number of subordinate voting shares, (ii) an unlimited number of multiple voting shares,
and (iii) an unlimited number of preferred shares.
As at June 30, 2023,
we had 357,354,378 subordinate voting shares, 11,812,964 multiple voting shares, 28,571,428 Series A perpetual convertible preferred
shares (“Series A Preferred Shares”), and 8,196,721 Series B perpetual convertible preferred shares (“Series B
Preferred Shares”) issued and outstanding. The Series A Preferred Shares and Series B Preferred Shares are collectively
referred to as the “Preferred Shares”. All of the issued and outstanding multiple voting shares are, directly or indirectly,
held or controlled by entities controlled by Patrick Dovigi.
As at June 30, 2023,
(a) the Series A Preferred Shares are convertible into 28,829,718 subordinate voting shares, at a conversion price of US$25.19,
representing 7.3% of the issued and outstanding subordinate voting shares and 5.6% of the aggregate outstanding voting rights, and (b) the
Series B Preferred Shares are convertible into 7,489,300 subordinate voting shares, at a conversion price of US$43.91, representing
1.9% of the issued and outstanding subordinate voting shares and 1.5% of the aggregate outstanding voting rights. The holders of the Preferred
Shares are entitled to vote on an as-converted basis on all matters on which holders of subordinate voting shares and multiple voting
shares vote, and to the greatest extent possible, will vote with the holders of subordinate voting shares and multiple voting shares as
a single class. Each holder of Preferred Shares shall be deemed to hold, for the sole purpose of voting at any meeting of shareholders
of GFL at which such holder is entitled to vote, the number of Preferred Shares equal to the number of subordinate voting shares into
which such holder’s registered Preferred Shares are convertible as of the record date for the determination of shareholders entitled
to vote at such shareholders meeting. The liquidation preference of the Series A Preferred Shares and Series B Preferred Shares
accrete at a rate of 7.000% and 6.000% per annum, respectively, compounded quarterly. From and after December 31, 2024 (in the case
of the Series A Preferred Shares) or December 31, 2025 (in the case of the Series B Preferred Shares), GFL will have the
option each quarter to redeem a number of Preferred Shares in an amount equal to the increase in the liquidation preference for the quarter.
This optional redemption amount can be satisfied in either cash or subordinate voting shares at the election of GFL. If GFL elects to
pay the optional redemption amount for a particular quarter in cash, the accretion rate for that quarter for the Series A Preferred
Shares and Series B Preferred Shares will be 6.000% and 5.000% per annum, respectively. The Preferred Shares are subject to transfer
restrictions, but can be converted into subordinate voting shares by the holder at any time. GFL may also require the conversion or redemption
of the Preferred Shares at an earlier date in certain circumstances.
On March 15, 2023, the
remaining outstanding Purchase Contracts were automatically converted into subordinate voting shares at the then minimum rate of 2.1940
subordinate voting shares per Purchase Contract. As at December 31, 2022, 11,698,543 Purchase Contracts were outstanding.
Normal Course Issuer Bid
On May 10, 2023,
the TSX accepted our notice of intention to renew our normal course issuer bid (“NCIB”) during the twelve-month
period commencing on May 12, 2023 and ending May 11, 2024. Under the NCIB, a maximum of 17,867,120 subordinate voting
shares may be repurchased by GFL representing approximately 5.0% of the issued and outstanding subordinate voting shares as at
May 2, 2023. Our previous NCIB, which expired on May 11, 2023, authorized the purchase of up to 16,510,694 subordinate
voting shares. Purchases will be made by means of open market transactions on both the TSX and NYSE or alternative trading systems,
if eligible, or by such other means as a securities regulatory authority may permit. Under the NCIB, GFL will be allowed to purchase
daily, through the facilities of the TSX, a maximum of 66,937 subordinate voting shares, representing 25% of the average daily
trading volume, as calculated per the TSX rules for the six month period starting on November 1, 2022 to April 30,
2023. All subordinate voting shares repurchased by GFL under the NCIB will be cancelled. For the three and six months ended
June 30, 2023 and June 30, 2022, we did not repurchase any subordinate voting shares under the NCIB. A copy of GFL’s
notice of intention to commence a normal course issuer bid through the facilities of the TSX may be obtained, without charge, by
contacting GFL.
Additional Information
Additional information relating
to GFL, including our most recent annual and quarterly reports, are available on SEDAR at www.sedar.com and on Edgar at www.sec.gov/edgar.
9. Accounting Policies, Critical
Accounting Estimates and Judgments
We prepare our consolidated
financial statements in accordance with IFRS. Our significant accounting policies and significant accounting estimates, assumptions and
judgments are contained in the Annual Financial Statements.
Significant Accounting Estimates, Assumptions and Judgments
The preparation of our Interim
Financial Statements requires management to make estimates and use judgment that affect the reported amounts of revenue, expenses, assets,
liabilities and accompanying disclosures. Accordingly, actual results may differ from estimated amounts as future confirming events occur.
Significant estimates and judgments used in the preparation of our Interim Financial Statements are described in our Annual Financial
Statements.
Since the date of our Annual
MD&A, there were no material changes to the significant accounting estimates, assumptions and judgments. See the section entitled
“Significant Accounting Estimates, Assumptions and Judgments” in our Annual MD&A.
Landfill Asset
The following table summarizes
landfill amortization expense for the periods indicated:
| |
Three months ended
June 30, 2023 | | |
Six months ended
June 30, 2023 | | |
Year ended
December 31, 2022 | |
Amortization of landfill airspace ($ millions) | |
$ | 68.4 | | |
$ | 134.1 | | |
$ | 294.6 | |
Tonnes received (millions of tonnes) | |
| 5.2 | | |
| 10.2 | | |
| 22.2 | |
Average landfill amortization per tonne | |
$ | 13.2 | | |
$ | 13.1 | | |
$ | 13.3 | |
Landfill Capacity and Depletion
As of June 30, 2023,
we had 309.0 million tonnes (323.4 million tonnes for the year ended December 31, 2022) of remaining permitted capacity at the landfills
we own and at the landfill in Quebec where we have designated access to a fixed level of capacity. As of June 30, 2023, eighteen
of our landfills satisfied the criteria for inclusion of probable expansion capacity, resulting in additional expansion capacity of 176.7
million tonnes (171.5 million tonnes as of December 31, 2022), and together with remaining permitted capacity, our total remaining
capacity is 485.7 million tonnes (494.9 million tonnes as of December 31, 2022). Based on total capacity as of June 30, 2023
and projected annual disposal volumes, the weighted average remaining life of the landfills we own and at the landfill in Quebec where
we have designated access to a fixed level of capacity is approximately 24.4 years (24.8 years as of December 31, 2022). We have
other expansion opportunities that could extend the weighted average remaining life of our landfills.
10. Non-IFRS Financial Measures
and Key Performance Indicators
Non-IFRS Measures
This MD&A makes reference
to certain non-IFRS measures, including EBITDA, Adjusted EBITDA and Adjusted EBITDA margin. These measures are not recognized measures
under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented
by other companies. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial
information reported under IFRS. Rather, these non-IFRS measures are used to provide investors with supplemental measures of our operating
performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We
also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers.
Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare
annual operating budgets and forecasts and to determine components of management compensation.
EBITDA
EBITDA represents, for the
applicable period, net income (loss) from continuing operations plus (a) interest and other finance costs, plus (b) depreciation
and amortization of property and equipment, landfill assets and intangible assets, plus (less) (c) the provision (recovery)
for income taxes, in each case to the extent deducted or added to/from net income (loss) from continuing operations. We present EBITDA
to assist readers in understanding the mathematical development of Adjusted EBITDA. Management does not use EBITDA as a financial performance
metric.
Adjusted EBITDA
Adjusted EBITDA is a supplemental
measure used by management and other users of our financial statements including, our lenders and investors, to assess the financial performance
of our business without regard to financing methods or capital structure. Adjusted EBITDA is also a key metric that management uses
prior to execution of any strategic investing or financing opportunity. For example, management uses Adjusted EBITDA as a measure in determining
the value of acquisitions, expansion opportunities, and dispositions. In addition, Adjusted EBITDA is utilized by financial institutions
to measure borrowing capacity. Adjusted EBITDA is calculated by adding and deducting, as applicable from EBITDA, certain expenses, costs,
charges or benefits incurred in such period which in management’s view are either not indicative of underlying business performance
or impact the ability to assess the operating performance of our business, including: (a) (gain) loss on foreign exchange, (b) (gain)
loss on sale of property and equipment, (c) mark-to-market (gain) loss on Purchase Contracts, (d) share of net (income) loss
of investments accounted for using the equity method, (e) share-based payments, (f) gain (loss) on divestiture, (g) transaction
costs, (h) acquisition, rebranding and other integration costs (included in cost of sales related to acquisition activity) and (i) other.
We use Adjusted EBITDA to facilitate a comparison of our operating performance on a consistent basis reflecting factors and trends affecting
our business. As we continue to grow our business, we may be faced with new events or circumstances that are not indicative of our
underlying business performance or that impact the ability to assess our operating performance.
Adjusted EBITDA Margin
Adjusted EBITDA margin represents
Adjusted EBITDA divided by revenue. Management and other users of our financial statements including our lenders and investors use Adjusted
EBITDA margin to facilitate a comparison of the operating performance of each of our operating segments on a consistent basis reflecting
factors and trends affecting our business.
Adjusted EBITDA to Net Income from Continuing
Operations Reconciliation
The tables below provide
the reconciliation of our net income from continuing operations to EBITDA and Adjusted EBITDA for the periods indicated:
($ millions) | |
Three months ended June 30, 2023 | | |
Three months ended
June 30, 2022 | |
Net income from continuing operations | |
$ | 293.8 | | |
$ | 82.6 | |
Add: | |
| | | |
| | |
Interest and other finance costs | |
| 164.8 | | |
| 104.8 | |
Depreciation of property and equipment | |
| 237.8 | | |
| 241.1 | |
Amortization of intangible assets | |
| 134.0 | | |
| 133.4 | |
Income tax expense (recovery) | |
| 238.9 | | |
| (47.9 | ) |
EBITDA | |
| 1,069.3 | | |
| 514.0 | |
Add: | |
| | | |
| | |
(Gain) loss on foreign exchange(1) | |
| (56.8 | ) | |
| 112.6 | |
Gain on sale of property and equipment | |
| (6.5 | ) | |
| (2.6 | ) |
Mark-to-market gain on Purchase Contracts(2) | |
| — | | |
| (206.2 | ) |
Share of net loss (income) of investments accounted for using the equity method | |
| 61.9 | | |
| (5.3 | ) |
Share-based payments(3) | |
| 15.2 | | |
| 13.0 | |
Gain on divestiture(4) | |
| (575.0 | ) | |
| — | |
Transaction costs(5) | |
| 29.6 | | |
| 11.4 | |
Acquisition, rebranding and other integration costs(6) | |
| 5.3 | | |
| 7.3 | |
Other | |
| (2.3 | ) | |
| 9.1 | |
Adjusted EBITDA | |
$ | 540.7 | | |
$ | 453.3 | |
($ millions) | |
Six months ended June 30, 2023 | | |
Six months ended June 30, 2022 | |
Net income from continuing operations | |
| 76.0 | | |
| 219.6 | |
Add: | |
| | | |
| | |
Interest and other finance costs | |
| 329.5 | | |
| 204.5 | |
Depreciation of property and equipment | |
| 477.6 | | |
| 468.1 | |
Amortization of intangible assets | |
| 272.8 | | |
| 257.9 | |
Income tax expense (recovery) | |
| 196.8 | | |
| (69.7 | ) |
EBITDA | |
| 1,352.7 | | |
| 1,080.4 | |
Add: | |
| | | |
| | |
(Gain) loss on foreign exchange(1) | |
| (51.5 | ) | |
| 54.0 | |
Gain on sale of property and equipment | |
| (6.4 | ) | |
| (4.4 | ) |
Mark-to-market loss (gain) on Purchase Contracts(2) | |
| 104.3 | | |
| (381.1 | ) |
Share of net loss (income) of investments accounted for using the equity method | |
| 82.9 | | |
| (5.3 | ) |
Share-based payments(3) | |
| 30.2 | | |
| 24.8 | |
Gain on divestiture(4) | |
| (580.5 | ) | |
| (6.5 | ) |
Transaction costs(5) | |
| 41.6 | | |
| 23.3 | |
Acquisition, rebranding and other integration costs(6) | |
| 10.2 | | |
| 13.4 | |
Other | |
| (2.3 | ) | |
| 9.1 | |
Adjusted EBITDA | |
$ | 981.2 | | |
$ | 807.7 | |
| (1) | Consists of (i) non-cash gains and losses on foreign exchange and interest rate swaps entered into
in connection with our debt instruments and (ii) gains and losses attributable to foreign exchange rate fluctuations. |
| (2) | This is a non-cash item that consists of the fair value “mark-to-market” adjustment on the
Purchase Contracts. |
| (3) | This is a non-cash item and consists of the amortization of the estimated fair value of share-based options
granted to certain members of management under share-based option plans. |
| (4) | Consists of loss or gain resulting from the divestiture of certain assets and three non-core U.S.
Solid Waste businesses. |
| (5) | Consists of acquisition, integration and other costs such as legal, consulting and other fees and expenses
incurred in respect of acquisitions and financing activities completed during the applicable period. We expect to incur similar costs
in connection with other acquisitions in the future and, under IFRS, such costs relating to acquisitions are expensed as incurred and
not capitalized. This is part of SG&A. |
| (6) | Consists of costs related to the rebranding of equipment acquired through business acquisitions. We expect
to incur similar costs in connection with other acquisitions in the future. This is part of cost of sales. |
Exhibit 99.3
Form 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Patrick Dovigi, certify the following:
| 1. | Review: I have reviewed the interim financial statements and interim MD&A (together,
the “interim filings”) of GFL Environmental Inc. (the “issuer”) for the interim period ended June 30, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial statements together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in the interim filings. |
| 4. | Responsibility: The issuer's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are
defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's
other certifying officer and I have, as at the end of the period covered by the interim filings |
| a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| i. | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| ii. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's
GAAP. |
|
| 5.1 Control Framework: The control framework the issuer's other certifying officer and I used
to design the issuer's ICFR is the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on January 1, 2023 and ended on June 30, 2023 that has materially
affected, or is reasonably likely to materially affect, the issuer's ICFR. |
Date: July 28, 2023
By: |
/s/ Patrick Dovigi |
|
|
Patrick Dovigi |
|
|
Chief Executive Officer |
|
Exhibit 99.4
Form 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Luke Pelosi, certify the following:
| 1. | Review: I have reviewed the interim financial statements and interim MD&A (together,
the “interim filings”) of GFL Environmental Inc. (the “issuer”) for the interim period ended June 30, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial statements together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in the interim filings. |
| 4. | Responsibility: The issuer's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are
defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's
other certifying officer and I have, as at the end of the period covered by the interim filings |
| a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| i. | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| ii. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's
GAAP. |
| | 5.1 Control Framework: The control framework the issuer's
other certifying officer and I used to design the issuer's ICFR is the Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on January 1, 2023 and ended on June 30, 2023 that has materially
affected, or is reasonably likely to materially affect, the issuer's ICFR. |
Date: July 28, 2023
By: |
/s/ Luke Pelosi |
|
|
Luke Pelosi |
|
|
Chief Financial Officer |
|
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