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 November
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: November 3, 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 nine months ended September
30, 2023
GFL Environmental Inc.
Unaudited Interim Condensed Consolidated Statements
of Operations and Comprehensive Income
(In millions of dollars except per share
amounts)
| |
| |
Three months ended September
30, | | |
Nine months ended September
30, | |
| |
Notes | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Revenue | |
11 | |
$ | 1,890.0 | | |
$ | 1,831.2 | | |
$ | 5,632.7 | | |
$ | 4,940.1 | |
Expenses | |
| |
| | | |
| | | |
| | | |
| | |
Cost of sales | |
| |
| 1,526.8 | | |
| 1,591.9 | | |
| 4,672.0 | | |
| 4,339.5 | |
Selling, general and administrative expenses | |
| |
| 234.7 | | |
| 187.5 | | |
| 683.4 | | |
| 528.6 | |
Interest and other finance costs | |
8 | |
| 137.2 | | |
| 136.2 | | |
| 466.7 | | |
| 340.7 | |
Gain on sale of property and equipment | |
| |
| (6.7 | ) | |
| (5.7 | ) | |
| (13.1 | ) | |
| (10.1 | ) |
Loss (gain) on foreign exchange | |
| |
| 46.9 | | |
| 195.3 | | |
| (4.6 | ) | |
| 249.3 | |
Mark-to-market (gain) loss on Purchase Contracts | |
9 | |
| — | | |
| (10.3 | ) | |
| 104.3 | | |
| (391.4 | ) |
Loss (gain) on divestiture | |
18 | |
| — | | |
| 1.6 | | |
| (580.5 | ) | |
| (4.9 | ) |
Other | |
| |
| (15.2 | ) | |
| 3.4 | | |
| (17.5 | ) | |
| 12.5 | |
| |
| |
| 1,923.7 | | |
| 2,099.9 | | |
| 5,310.7 | | |
| 5,064.2 | |
Share of net income (loss) of investments accounted for using the equity method | |
| |
| 34.0 | | |
| 9.2 | | |
| (48.9 | ) | |
| 14.5 | |
Earnings (loss) before income taxes | |
| |
| 0.3 | | |
| (259.5 | ) | |
| 273.1 | | |
| (109.6 | ) |
Current income tax expense (recovery) | |
| |
| 18.1 | | |
| (3.4 | ) | |
| 367.5 | | |
| 7.5 | |
Deferred tax recovery | |
| |
| (36.1 | ) | |
| (72.4 | ) | |
| (188.7 | ) | |
| (153.0 | ) |
Income tax (recovery) expense | |
| |
| (18.0 | ) | |
| (75.8 | ) | |
| 178.8 | | |
| (145.5 | ) |
Net income (loss) from continuing operations | |
| |
| 18.3 | | |
| (183.7 | ) | |
| 94.3 | | |
| 35.9 | |
Net loss from discontinued operations | |
| |
| — | | |
| — | | |
| — | | |
| (127.9 | ) |
Net income (loss) | |
| |
| 18.3 | | |
| (183.7 | ) | |
| 94.3 | | |
| (92.0 | ) |
Less: Net loss attributable to non-controlling interests | |
| |
| (3.8 | ) | |
| (0.2 | ) | |
| (3.3 | ) | |
| (0.2 | ) |
Net income (loss) attributable to GFL Environmental Inc. | |
| |
| 22.1 | | |
| (183.5 | ) | |
| 97.6 | | |
| (91.8 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Items that may be subsequently reclassified to net income | |
| |
| | | |
| | | |
| | | |
| | |
Currency translation adjustment | |
| |
| 119.4 | | |
| 420.0 | | |
| (42.4 | ) | |
| 526.3 | |
Fair value movements on cash flow hedges, net of tax | |
| |
| 10.7 | | |
| (73.4 | ) | |
| 25.6 | | |
| (74.2 | ) |
Share of other comprehensive loss of investments accounted for using the equity method | |
| |
| — | | |
| — | | |
| (0.4 | ) | |
| — | |
Reclassification to net income of foreign currency differences on divestitures | |
| |
| — | | |
| — | | |
| 22.5 | | |
| — | |
Other comprehensive income from continuing operations | |
| |
| 130.1 | | |
| 346.6 | | |
| 5.3 | | |
| 452.1 | |
Comprehensive income from continuing operations | |
| |
| 148.4 | | |
| 162.9 | | |
| 99.6 | | |
| 488.0 | |
Comprehensive loss from discontinued operations | |
19 | |
| — | | |
| — | | |
| — | | |
| (127.9 | ) |
Total comprehensive income | |
| |
| 148.4 | | |
| 162.9 | | |
| 99.6 | | |
| 360.1 | |
Less: Total comprehensive loss attributable to non-controlling interests | |
| |
| (4.5 | ) | |
| — | | |
| (4.3 | ) | |
| — | |
Total comprehensive income attributable to GFL Environmental Inc. | |
| |
$ | 152.9 | | |
$ | 162.9 | | |
$ | 103.9 | | |
$ | 360.1 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted (loss) earnings per share | |
10 | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
| |
$ | — | | |
$ | (0.55 | ) | |
$ | 0.08 | | |
$ | (0.07 | ) |
Discontinued operations | |
| |
| — | | |
| — | | |
| — | | |
| (0.35 | ) |
Total operations | |
| |
$ | — | | |
$ | (0.55 | ) | |
$ | 0.08 | | |
$ | (0.42 | ) |
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 | |
September 30, 2023 | | |
December 31, 2022 | |
Assets | |
| |
| | | |
| | |
Cash | |
| |
$ | 174.2 | | |
$ | 82.1 | |
Trade and other receivables, net | |
| |
| 1,182.8 | | |
| 1,118.1 | |
Prepaid expenses and other assets | |
| |
| 248.0 | | |
| 182.9 | |
Current assets | |
| |
| 1,605.0 | | |
| 1,383.1 | |
| |
| |
| | | |
| | |
Property and equipment, net | |
4 | |
| 6,863.3 | | |
| 6,540.3 | |
Intangible assets, net | |
5 | |
| 3,056.0 | | |
| 3,245.0 | |
Investments accounted for using the equity method | |
| |
| 316.2 | | |
| 326.6 | |
Other long-term assets | |
| |
| 112.6 | | |
| 90.2 | |
Deferred income tax assets | |
| |
| 38.9 | | |
| — | |
Goodwill | |
5 | |
| 7,898.4 | | |
| 8,182.4 | |
Non-current assets | |
| |
| 18,285.4 | | |
| 18,384.5 | |
Total assets | |
| |
| 19,890.4 | | |
| 19,767.6 | |
| |
| |
| | | |
| | |
Liabilities | |
| |
| | | |
| | |
Accounts payable and accrued liabilities | |
| |
| 1,552.8 | | |
| 1,557.7 | |
Income taxes payable | |
| |
| 107.3 | | |
| — | |
Long-term debt | |
7 | |
| — | | |
| 17.9 | |
Lease obligations | |
| |
| 53.9 | | |
| 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 | |
| 36.5 | | |
| 30.8 | |
Current liabilities | |
| |
| 1,756.3 | | |
| 2,692.1 | |
| |
| |
| | | |
| | |
Long-term debt | |
7 | |
| 8,848.9 | | |
| 9,248.9 | |
Lease obligations | |
| |
| 367.6 | | |
| 327.3 | |
Other long-term liabilities | |
| |
| 39.9 | | |
| 47.5 | |
Due to related party | |
17 | |
| 2.9 | | |
| 8.7 | |
Deferred income tax liabilities | |
| |
| 550.0 | | |
| 582.6 | |
Landfill closure and post-closure obligations | |
6 | |
| 811.6 | | |
| 816.4 | |
Non-current liabilities | |
| |
| 10,620.9 | | |
| 11,031.4 | |
Total liabilities | |
| |
| 12,377.2 | | |
| 13,723.5 | |
| |
| |
| | | |
| | |
Shareholders’ equity | |
| |
| | | |
| | |
Share capital | |
| |
| 9,786.4 | | |
| 8,640.3 | |
Contributed surplus | |
| |
| 130.1 | | |
| 109.6 | |
Deficit | |
| |
| (2,763.9 | ) | |
| (2,843.0 | ) |
Accumulated other comprehensive income | |
| |
| 136.6 | | |
| 130.3 | |
Total GFL Environmental Inc.’s shareholders’ equity | |
| |
| 7,289.2 | | |
| 6,037.2 | |
Non-controlling interests | |
| |
| 224.0 | | |
| 6.9 | |
Total shareholders’ equity | |
| |
| 7,513.2 | | |
| 6,044.1 | |
Total liabilities and shareholders’ equity | |
| |
$ | 19,890.4 | | |
$ | 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 loss and comprehensive income | |
| |
| — | | |
| — | | |
| — | | |
| (91.8 | ) | |
| (74.2 | ) | |
| 526.1 | | |
| 360.1 | | |
| — | | |
| 360.1 | |
Dividends issued and paid | |
| |
| — | | |
| — | | |
| — | | |
| (15.1 | ) | |
| — | | |
| — | | |
| (15.1 | ) | |
| — | | |
| (15.1 | ) |
Share capital issued upon acquisition of subsidiary | |
| |
| 3,976,434 | | |
| 154.5 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 154.5 | | |
| — | | |
| 154.5 | |
Non-controlling interests measured upon acquisition of
subsidiary | |
| |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 6.0 | | |
| 6.0 | |
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 | |
| |
| 692,482 | | |
| 17.9 | | |
| (17.9 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share capital issued on TEU conversion | |
| |
| 297 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share-based payments | |
13 | |
| — | | |
| — | | |
| 40.0 | | |
| — | | |
| — | | |
| — | | |
| 40.0 | | |
| — | | |
| 40.0 | |
Balance, September
30, 2022 | |
| |
| 380,172,222 | | |
$ | 8,638.8 | | |
$ | 96.0 | | |
$ | (2,617.4 | ) | |
$ | (61.0 | ) | |
$ | 259.2 | | |
$ | 6,315.6 | | |
$ | 6.0 | | |
$ | 6,321.6 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
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 income and comprehensive income | |
| |
| — | | |
| — | | |
| — | | |
| 97.6 | | |
| 25.6 | | |
| (19.3 | ) | |
| 103.9 | | |
| (4.3 | ) | |
| 99.6 | |
Dividends issued and paid | |
| |
| — | | |
| — | | |
| — | | |
| (18.5 | ) | |
| — | | |
| — | | |
| (18.5 | ) | |
| — | | |
| (18.5 | ) |
Non-controlling interests measured upon acquisition of
subsidiary | |
| |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 213.3 | | |
| 213.3 | |
Contribution from non-controlling interest | |
| |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 8.1 | | |
| 8.1 | |
Cancelled shares | |
13 | |
| (260 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share capital issued on exercise and settlement of RSUs | |
13 | |
| 875,897 | | |
| 36.2 | | |
| (36.2 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Share capital issued on TEU conversion | |
9 | |
| 25,666,465 | | |
| 1,109.9 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,109.9 | | |
| — | | |
| 1,109.9 | |
Share-based payments | |
13 | |
| — | | |
| — | | |
| 56.7 | | |
| — | | |
| — | | |
| — | | |
| 56.7 | | |
| — | | |
| 56.7 | |
Balance,
September 30, 2023 | |
| |
| 406,753,132 | | |
$ | 9,786.4 | | |
$ | 130.1 | | |
$ | (2,763.9 | ) | |
$ | (26.5 | ) | |
$ | 163.1 | | |
$ | 7,289.2 | | |
$ | 224.0 | | |
$ | 7,513.2 | |
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 September 30, | | |
Nine months ended September 30, | |
| |
Notes | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Operating activities | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| |
$ | 18.3 | | |
$ | (183.7 | ) | |
$ | 94.3 | | |
$ | (92.0 | ) |
Adjustments for non-cash items | |
| |
| | | |
| | | |
| | | |
| | |
Depreciation of property and equipment | |
4 | |
| 242.3 | | |
| 264.0 | | |
| 719.9 | | |
| 736.8 | |
Amortization of intangible assets | |
5 | |
| 106.9 | | |
| 124.2 | | |
| 379.7 | | |
| 383.3 | |
Share of net (income) loss of investments accounted for using the equity method | |
| |
| (34.0 | ) | |
| (9.2 | ) | |
| 48.9 | | |
| (14.5 | ) |
Loss (gain) on divestiture | |
18 | |
| — | | |
| 1.6 | | |
| (580.5 | ) | |
| (4.9 | ) |
Other | |
| |
| (15.2 | ) | |
| 3.4 | | |
| (17.5 | ) | |
| 12.5 | |
Impairment related to discontinued operations | |
19 | |
| — | | |
| — | | |
| — | | |
| 128.1 | |
Interest and other finance costs | |
8 | |
| 137.2 | | |
| 136.2 | | |
| 466.7 | | |
| 344.2 | |
Share-based payments | |
13 | |
| 26.5 | | |
| 13.4 | | |
| 56.7 | | |
| 40.0 | |
Loss (gain) on unrealized foreign exchange on long-term debt and TEUs | |
| |
| 47.2 | | |
| 196.3 | | |
| (3.5 | ) | |
| 249.6 | |
Gain on sale of property and equipment | |
| |
| (6.7 | ) | |
| (5.7 | ) | |
| (13.1 | ) | |
| (10.1 | ) |
Mark-to-market (gain) loss on Purchase Contracts | |
9 | |
| — | | |
| (10.3 | ) | |
| 104.3 | | |
| (391.4 | ) |
Current income tax expense (recovery) | |
| |
| 18.1 | | |
| (3.4 | ) | |
| 367.5 | | |
| 7.6 | |
Deferred tax recovery | |
| |
| (36.1 | ) | |
| (72.4 | ) | |
| (188.7 | ) | |
| (154.9 | ) |
Interest paid in cash on Amortizing Notes component of TEUs | |
| |
| — | | |
| (0.4 | ) | |
| (0.2 | ) | |
| (1.7 | ) |
Interest paid in cash, excluding interest paid on Amortizing Notes | |
| |
| (134.8 | ) | |
| (113.2 | ) | |
| (411.5 | ) | |
| (296.9 | ) |
Income taxes paid in cash, net | |
| |
| (250.9 | ) | |
| (2.6 | ) | |
| (261.8 | ) | |
| (22.1 | ) |
Changes in non-cash working capital items | |
14 | |
| 12.9 | | |
| (40.8 | ) | |
| (169.6 | ) | |
| (201.2 | ) |
Landfill closure and post-closure expenditures | |
6 | |
| (5.9 | ) | |
| (11.3 | ) | |
| (12.6 | ) | |
| (19.1 | ) |
| |
| |
| 125.8 | | |
| 286.1 | | |
| 579.0 | | |
| 693.3 | |
Investing activities | |
| |
| | | |
| | | |
| | | |
| | |
Purchase of property and equipment | |
| |
| (276.3 | ) | |
| (207.6 | ) | |
| (823.6 | ) | |
| (529.5 | ) |
Proceeds from disposal of assets and other | |
| |
| 30.6 | | |
| 2.5 | | |
| 51.0 | | |
| 8.9 | |
Proceeds from divestitures | |
| |
| — | | |
| 9.9 | | |
| 1,645.9 | | |
| 319.7 | |
Business acquisitions and investments, net of cash acquired | |
3 | |
| (392.3 | ) | |
| (139.5 | ) | |
| (674.7 | ) | |
| (1,129.0 | ) |
| |
| |
| (638.0 | ) | |
| (334.7 | ) | |
| 198.6 | | |
| (1,329.9 | ) |
Financing activities | |
| |
| | | |
| | | |
| | | |
| | |
Repayment of lease obligations | |
| |
| (30.8 | ) | |
| (16.8 | ) | |
| (69.4 | ) | |
| (51.8 | ) |
Issuance of long-term debt | |
| |
| 1,069.0 | | |
| 155.0 | | |
| 3,032.1 | | |
| 1,446.1 | |
Repayment of long-term debt | |
| |
| (412.2 | ) | |
| (40.3 | ) | |
| (3,597.1 | ) | |
| (588.2 | ) |
Proceeds from termination of hedged arrangements | |
| |
| — | | |
| — | | |
| 17.3 | | |
| — | |
Payment of contingent purchase consideration and holdbacks | |
3 | |
| (0.6 | ) | |
| (2.9 | ) | |
| (4.6 | ) | |
| (13.1 | ) |
Repayment of Amortizing Notes | |
| |
| — | | |
| (14.8 | ) | |
| (15.7 | ) | |
| (43.0 | ) |
Dividends issued and paid | |
| |
| (6.4 | ) | |
| (5.4 | ) | |
| (18.5 | ) | |
| (15.1 | ) |
Payment of financing costs | |
| |
| (11.2 | ) | |
| (0.7 | ) | |
| (26.2 | ) | |
| (2.6 | ) |
Repayment of loan to related party | |
17 | |
| (2.9 | ) | |
| (6.4 | ) | |
| (9.3 | ) | |
| (12.8 | ) |
Contribution from non-controlling interest | |
| |
| — | | |
| — | | |
| 8.1 | | |
| — | |
| |
| |
| 604.9 | | |
| 67.7 | | |
| (683.3 | ) | |
| 719.5 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Increase in cash | |
| |
| 92.7 | | |
| 19.1 | | |
| 94.3 | | |
| 82.9 | |
Changes due to foreign exchange revaluation of cash | |
| |
| (0.7 | ) | |
| (12.3 | ) | |
| (2.2 | ) | |
| (35.9 | ) |
Cash, beginning of period | |
| |
| 82.2 | | |
| 230.6 | | |
| 82.1 | | |
| 190.4 | |
Cash, end of period | |
| |
$ | 174.2 | | |
$ | 237.4 | | |
$ | 174.2 | | |
$ | 237.4 | |
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 September
30, 2023.
The Board
of Directors approved the Interim Financial Statements on November 1, 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)
3. |
BUSINESS COMBINATIONS AND INVESTMENTS |
|
For the nine months ended September 30, 2023,
GFL acquired 27 businesses, of which 19 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 September 30, 2023 | | |
Nine months ended September 30, 2023 | |
Net working capital, including cash acquired of $1.7 million and $5.5 million, respectively | |
$ | (8.0 | ) | |
$ | (6.9 | ) |
Property and equipment | |
| 362.8 | | |
| 437.5 | |
Intangible assets | |
| 194.0 | | |
| 322.6 | |
Goodwill | |
| 368.7 | | |
| 418.9 | |
Lease obligations | |
| (23.6 | ) | |
| (27.1 | ) |
Long-term debt | |
| (182.5 | ) | |
| (182.5 | ) |
Other long-term liabilities | |
| (0.1 | ) | |
| (0.8 | ) |
Landfill closure and post-closure obligations | |
| (17.2 | ) | |
| (17.2 | ) |
Deferred income tax liabilities | |
| (98.2 | ) | |
| (106.1 | ) |
Net assets acquired | |
$ | 595.9 | | |
$ | 838.4 | |
| |
| | | |
| | |
Share capital in subsidiary issued | |
$ | 7.4 | | |
| 7.4 | |
Cash paid | |
| 382.6 | | |
| 625.1 | |
Contribution from non-controlling interest | |
| 205.9 | | |
| 205.9 | |
Total consideration | |
$ | 595.9 | | |
$ | 838.4 | |
In addition to the cash consideration noted above,
during the three and nine months ended September 30, 2023, GFL paid $0.6 million and $4.6 million in additional consideration related
to acquisitions from prior years.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
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 nine months ended September 30, 2023, GFL finalized the purchase
price allocations for certain acquisitions resulting in an increase in net working capital of $3.6 million, an increase in property and
equipment of $23.0 million, an increase in intangible assets of $21.3 million, an increase in deferred income tax liabilities of $4.1
million and a decrease in goodwill of $43.8 million.
Approximately $88.4 million and $122.3 million
of the goodwill acquired during the three and nine months ended September 30, 2023 ($12.5 million and $686.9 million during
the three and nine months ended September 30, 2022) is expected to be deductible for tax purposes.
Since the respective acquisition dates, revenue
and earnings before income taxes of approximately $115.3 million and $16.8 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 earnings before income taxes for the nine months ended September 30, 2023 would
have been $5,808.0 million and $292.5 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.
Investments in joint ventures and associates
During the three and nine months ended September
30, 2023, GFL made contributions of $8.8 million and $27.3 million ($11.2 million and $43.0 million for the three and nine months
ended September 30, 2022) to joint ventures.
During the three and nine months ended September
30, 2023, GFL made contributions of $nil and $19.0 million ($nil and $nil for the three and nine months ended September 30, 2022)
to associates.
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 | |
| 79.9 | | |
| 154.9 | | |
| 314.7 | | |
| 140.3 | | |
| 115.6 | | |
| 77.4 | | |
| 61.2 | | |
| 944.0 | |
Acquisitions
via business combinations | |
| 47.4 | | |
| 184.8 | | |
| 88.8 | | |
| 49.2 | | |
| 0.1 | | |
| 40.1 | | |
| 27.1 | | |
| 437.5 | |
Adjustments for
prior year acquisitions | |
| 12.5 | | |
| — | | |
| (0.2 | ) | |
| (0.4 | ) | |
| — | | |
| — | | |
| — | | |
| 11.9 | |
Adjustments for
asset retirement obligations | |
| — | | |
| (61.2 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (61.2 | ) |
Disposals | |
| (72.2 | ) | |
| (45.1 | ) | |
| (249.7 | ) | |
| (47.9 | ) | |
| (6.7 | ) | |
| (57.2 | ) | |
| (17.5 | ) | |
| (496.3 | ) |
Transfers | |
| 12.6 | | |
| 13.2 | | |
| 8.6 | | |
| 0.9 | | |
| (34.2 | ) | |
| 0.3 | | |
| (1.4 | ) | |
| — | |
Changes
in foreign exchange | |
| (2.7 | ) | |
| (3.7 | ) | |
| (6.2 | ) | |
| (1.4 | ) | |
| (0.2 | ) | |
| (2.3 | ) | |
| (0.1 | ) | |
| (16.6 | ) |
Balance,
September 30, 2023 | |
| 1,764.6 | | |
| 2,988.0 | | |
| 2,750.1 | | |
| 1,222.2 | | |
| 126.2 | | |
| 847.3 | | |
| 526.3 | | |
| 10,224.7 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated depreciation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December
31, 2022 | |
| 171.0 | | |
| 804.1 | | |
| 987.3 | | |
| 468.3 | | |
| — | | |
| 272.5 | | |
| 161.9 | | |
| 2,865.1 | |
Depreciation | |
| 52.0 | | |
| 195.9 | | |
| 213.5 | | |
| 117.4 | | |
| — | | |
| 84.2 | | |
| 52.1 | | |
| 715.1 | |
Disposals | |
| (13.3 | ) | |
| (19.8 | ) | |
| (128.9 | ) | |
| (26.0 | ) | |
| — | | |
| (26.2 | ) | |
| (8.6 | ) | |
| (222.8 | ) |
Impairment | |
| — | | |
| — | | |
| 8.7 | | |
| 0.1 | | |
| — | | |
| — | | |
| — | | |
| 8.8 | |
Changes
in foreign exchange | |
| (0.3 | ) | |
| (1.1 | ) | |
| (2.1 | ) | |
| (0.5 | ) | |
| — | | |
| (0.6 | ) | |
| (0.2 | ) | |
| (4.8 | ) |
Balance,
September 30, 2023 | |
| 209.4 | | |
| 979.1 | | |
| 1,078.5 | | |
| 559.3 | | |
| — | | |
| 329.9 | | |
| 205.2 | | |
| 3,361.4 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
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 September
30, 2023 | |
$ | 1,555.2 | | |
$ | 2,008.9 | | |
$ | 1,671.6 | | |
$ | 662.9 | | |
$ | 126.2 | | |
$ | 517.4 | | |
$ | 321.1 | | |
$ | 6,863.3 | |
For the three and nine months ended September
30, 2023, total depreciation of property and equipment was $242.3 million and $719.9 million ($264.0 million and $732.1 million for the
three and nine months ended September 30, 2022). Of the total depreciation for the three and nine months ended September 30, 2023, $236.1
million and $700.2 million was included in cost of sales ($256.9 million and $709.7 million for the three and nine months ended September
30, 2022) and $6.2 million and $19.7 million was included in selling, general and administrative expenses ($7.1 million and $22.4 million
for the three and nine months ended September 30, 2022).
Depreciation of property and equipment of $719.9
million for the nine months ended September 30, 2023 ($736.8 million for the nine months ended September 30, 2022) as presented in the
statement of cash flows was comprised of depreciation of $715.1 million ($729.0 million for the nine months ended September 30, 2022)
shown in the table above and depreciation of $4.8 million ($7.8 million for the nine months ended September 30, 2022) due to the difference
between the ARO calculated using the credit-adjusted, risk-free discount rate required for measurement of the ARO through purchase accounting,
compared to the risk-free discount rate required for annual valuations.
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 | |
| 418.9 | | |
| 3.3 | | |
| 298.4 | | |
| 5.8 | | |
| 15.1 | | |
| 741.5 | |
Adjustments for prior year acquisitions | |
| (29.0 | ) | |
| — | | |
| 17.2 | | |
| — | | |
| 1.1 | | |
| (10.7 | ) |
Other | |
| — | | |
| — | | |
| 9.2 | | |
| — | | |
| — | | |
| 9.2 | |
Disposals | |
| (650.2 | ) | |
| (9.7 | ) | |
| (254.2 | ) | |
| — | | |
| (67.0 | ) | |
| (981.1 | ) |
Changes in foreign exchange | |
| (23.7 | ) | |
| (0.3 | ) | |
| (7.5 | ) | |
| (0.2 | ) | |
| (2.1 | ) | |
| (33.8 | ) |
Balance, September 30, 2023 | |
| 7,898.4 | | |
| 833.0 | | |
| 3,655.8 | | |
| 113.7 | | |
| 511.3 | | |
| 13,012.2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated amortization | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2022 | |
| — | | |
| — | | |
| 1,527.5 | | |
| 32.6 | | |
| 299.6 | | |
| 1,859.7 | |
Amortization | |
| — | | |
| — | | |
| 300.8 | | |
| 4.4 | | |
| 74.5 | | |
| 379.7 | |
Disposals | |
| — | | |
| — | | |
| (136.1 | ) | |
| — | | |
| (41.7 | ) | |
| (177.8 | ) |
Changes in foreign exchange | |
| — | | |
| — | | |
| (3.0 | ) | |
| — | | |
| (0.8 | ) | |
| (3.8 | ) |
Balance, September 30, 2023 | |
| — | | |
| — | | |
| 1,689.2 | | |
| 37.0 | | |
| 331.6 | | |
| 2,057.8 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Carrying amounts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
At December 31, 2022 | |
$ | 8,182.4 | | |
$ | 839.7 | | |
$ | 2,065.2 | | |
$ | 75.5 | | |
$ | 264.6 | | |
$ | 11,427.4 | |
At September 30, 2023 | |
$ | 7,898.4 | | |
$ | 833.0 | | |
$ | 1,966.6 | | |
$ | 76.7 | | |
$ | 179.7 | | |
$ | 10,954.4 | |
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 | |
Acquisitions via business combinations | |
| 17.2 | |
Disposals | |
| (15.0 | ) |
Provisions | |
| 48.6 | |
Adjustment for discount and inflation rates | |
| (61.2 | ) |
Accretion | |
| 25.3 | |
Expenditures | |
| (12.6 | ) |
Changes in foreign exchange | |
| (1.4 | ) |
Balance, September 30, 2023 | |
| 848.1 | |
Less: Current portion of landfill closure and post-closure obligations | |
| (36.5 | ) |
Non-current portion of landfill closure and post-closure obligations | |
$ | 811.6 | |
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 September 30, 2023, included in other long-term assets are
funded landfill post-closure obligations, representing the fair value of legally restricted assets, totaling $27.5 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:
| |
September 30, 2023 | | |
December 31, 2022 | |
Revolving credit facility | |
$ | 622.0 | | |
$ | 771.8 | |
Term Loan A Facility | |
| 775.0 | | |
| 500.0 | |
Term Loan B Facility | |
| 985.6 | | |
| 1,742.7 | |
Notes(1) | |
| | | |
| | |
4.250% USD senior secured notes (“4.250% 2025 Secured Notes”)(2) | |
| 676.0 | | |
| 677.2 | |
3.750% USD senior secured notes (“3.750% 2025 Secured Notes”)(3) | |
| 1,014.0 | | |
| 1,015.8 | |
5.125% USD senior secured notes (“5.125% 2026 Secured Notes”)(4) | |
| 676.0 | | |
| 677.2 | |
3.500% USD senior secured notes (“3.500% 2028 Secured Notes”)(5) | |
| 1,014.0 | | |
| 1,015.8 | |
4.000% USD senior notes (“4.000% 2028 Notes”)(6) | |
| 1,014.0 | | |
| 1,015.8 | |
4.750% USD senior notes (“4.750% 2029 Notes”)(7) | |
| 1,014.0 | | |
| 1,015.8 | |
4.375% USD senior notes (“4.375% 2029 Notes”)(8) | |
| 743.6 | | |
| 744.9 | |
Other | |
| 321.8 | | |
| 75.0 | |
Subtotal | |
| 8,856.0 | | |
| 9,252.0 | |
Discount | |
| (4.7 | ) | |
| (5.5 | ) |
Derivative liability | |
| 69.8 | | |
| 79.9 | |
Deferred finance costs | |
| (72.2 | ) | |
| (59.6 | ) |
Total long-term debt | |
| 8,848.9 | | |
| 9,266.8 | |
Less: Current portion of long-term debt | |
| — | | |
| 17.9 | |
Non-current portion of long-term debt | |
$ | 8,848.9 | | |
$ | 9,248.9 | |
| |
| | | |
| | |
Total long-term debt | |
| 8,848.9 | | |
| 9,266.8 | |
Less: Derivative asset | |
| (51.2 | ) | |
| (58.3 | ) |
Total long-term debt, net of derivative asset | |
$ | 8,797.7 | | |
$ | 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. |
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
Revolving credit facility and term loan facility
Under the amended and restated revolving credit
agreement dated as of August 17, 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.
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 September 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”). On September
22, 2023, GFL amended its Term Loan B Facility to reduce its borrowing rate to SOFR plus 2.500% or US prime plus 1.500%. 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.
On September 1, 2023, GFL acquired a 51.0% controlling
interest in an entity that has a credit facility, under which it has access to (a) a term loan of US$170.0 million and (b) a US$100.0
million revolving credit facility. The term loan and revolving credit facility mature on August 31, 2028 and have a borrowing rate of
base or SOFR adjusted rate plus a spread between 2.00% to 3.25%. As at September 30, 2023, the entity had US$170.0 million drawn on the
term loan and US$2.5 million drawn on the revolving credit facility.
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
8. |
INTEREST AND OTHER FINANCE COSTS |
|
The following table presents GFL’s interest
and other finance costs for the periods indicated:
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Interest | |
$ | 116.4 | | |
$ | 118.9 | | |
$ | 395.5 | | |
$ | 295.3 | |
Termination of hedged arrangements | |
| — | | |
| — | | |
| 8.7 | | |
| — | |
Amortization of deferred financing costs | |
| 4.3 | | |
| 3.6 | | |
| 13.6 | | |
| 10.1 | |
Accretion of landfill closure and post-closure obligations | |
| 8.9 | | |
| 5.9 | | |
| 25.3 | | |
| 15.1 | |
Other finance costs | |
| 7.6 | | |
| 7.8 | | |
| 23.6 | | |
| 20.2 | |
Interest and other finance costs | |
$ | 137.2 | | |
$ | 136.2 | | |
$ | 466.7 | | |
$ | 340.7 | |
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:
| |
September 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)
10. |
(LOSS) EARNINGS PER SHARE |
|
The following table presents GFL’s (loss)
earnings per share for the periods indicated:
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net income (loss) attributable to GFL Environmental Inc. | |
$ | 22.1 | | |
$ | (183.5 | ) | |
$ | 97.6 | | |
$ | (91.8 | ) |
| |
| | | |
| | | |
| | | |
| | |
Less: | |
| | | |
| | | |
| | | |
| | |
Net loss from discontinued operations | |
| — | | |
| — | | |
| — | | |
| (127.9 | ) |
Amounts attributable to preferred shareholders | |
| 22.5 | | |
| 20.6 | | |
| 67.8 | | |
| 60.6 | |
Adjusted net (loss) income from continuing operations for basic and diluted (loss) earnings per share | |
| (0.4 | ) | |
| (204.1 | ) | |
| 29.8 | | |
| (24.5 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted and diluted weighted average number of shares outstanding | |
| 369,556,706 | | |
| 368,627,958 | | |
| 369,320,689 | | |
| 366,521,465 | |
Effect of dilutive instruments | |
| — | | |
| — | | |
| 2,686,903 | | |
| — | |
Diluted weighted average number of shares outstanding | |
| 369,556,706 | | |
| 368,627,958 | | |
| 372,007,592 | | |
| 366,521,465 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted (loss) earnings per share | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | — | | |
$ | (0.55 | ) | |
$ | 0.08 | | |
$ | (0.07 | ) |
Discontinued operations | |
| — | | |
| — | | |
| — | | |
| (0.35 | ) |
Total operations | |
$ | — | | |
$ | (0.55 | ) | |
$ | 0.08 | | |
$ | (0.42 | ) |
Basic and diluted (loss) earnings per share includes
the minimum conversion of TEUs into subordinate voting shares, which represented nil subordinate voting shares as at September 30, 2023
(25,663,094 subordinate voting shares as at September 30, 2022). Diluted (loss) 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 September 30, | | |
Nine months ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Residential | |
$ | 367.2 | | |
$ | 387.8 | | |
$ | 1,160.2 | | |
$ | 1,087.5 | |
Commercial/industrial | |
| 713.7 | | |
| 657.5 | | |
| 2,162.0 | | |
| 1,781.8 | |
Total collection | |
| 1,080.9 | | |
| 1,045.3 | | |
| 3,322.2 | | |
| 2,869.3 | |
Landfill | |
| 244.3 | | |
| 229.3 | | |
| 695.9 | | |
| 614.6 | |
Transfer | |
| 194.3 | | |
| 178.7 | | |
| 561.6 | | |
| 495.6 | |
Material recovery | |
| 76.5 | | |
| 85.0 | | |
| 242.5 | | |
| 268.1 | |
Other | |
| 107.7 | | |
| 120.0 | | |
| 306.4 | | |
| 296.7 | |
Solid Waste | |
| 1,703.7 | | |
| 1,658.3 | | |
| 5,128.6 | | |
| 4,544.3 | |
Environmental Services | |
| 431.1 | | |
| 390.9 | | |
| 1,208.1 | | |
| 990.3 | |
Intercompany revenue | |
| (244.8 | ) | |
| (218.0 | ) | |
| (704.0 | ) | |
| (594.5 | ) |
Revenue | |
$ | 1,890.0 | | |
$ | 1,831.2 | | |
$ | 5,632.7 | | |
$ | 4,940.1 | |
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 September 30, 2023 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 543.4 | | |
$ | (69.8 | ) | |
$ | 473.6 | | |
$ | 133.7 | |
USA | |
| 1,160.3 | | |
| (131.4 | ) | |
| 1,028.9 | | |
| 338.1 | |
Solid Waste | |
| 1,703.7 | | |
| (201.2 | ) | |
| 1,502.5 | | |
| 471.8 | |
Environmental Services | |
| 431.1 | | |
| (43.6 | ) | |
| 387.5 | | |
| 119.9 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (61.4 | ) |
| |
$ | 2,134.8 | | |
$ | (244.8 | ) | |
$ | 1,890.0 | | |
$ | 530.3 | |
| |
Three months ended September 30, 2022 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 516.3 | | |
$ | (69.0 | ) | |
$ | 447.3 | | |
$ | 122.4 | |
USA | |
| 1,142.0 | | |
| (122.5 | ) | |
| 1,019.5 | | |
| 300.8 | |
Solid Waste | |
| 1,658.3 | | |
| (191.5 | ) | |
| 1,466.8 | | |
| 423.2 | |
Environmental Services | |
| 390.9 | | |
| (26.5 | ) | |
| 364.4 | | |
| 96.5 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (46.4 | ) |
| |
$ | 2,049.2 | | |
$ | (218.0 | ) | |
$ | 1,831.2 | | |
$ | 473.3 | |
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
| |
Nine months ended September 30, 2023 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 1,547.4 | | |
$ | (195.5 | ) | |
$ | 1,351.9 | | |
$ | 371.0 | |
USA | |
| 3,581.2 | | |
| (392.1 | ) | |
| 3,189.1 | | |
| 1,029.7 | |
Solid Waste | |
| 5,128.6 | | |
| (587.6 | ) | |
| 4,541.0 | | |
| 1,400.7 | |
Environmental Services | |
| 1,208.1 | | |
| (116.4 | ) | |
| 1,091.7 | | |
| 293.6 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (182.8 | ) |
| |
$ | 6,336.7 | | |
$ | (704.0 | ) | |
$ | 5,632.7 | | |
$ | 1,511.5 | |
| |
Nine months ended September 30, 2022 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 1,422.4 | | |
$ | (184.7 | ) | |
$ | 1,237.7 | | |
$ | 333.9 | |
USA | |
| 3,121.9 | | |
| (339.9 | ) | |
| 2,782.0 | | |
| 845.7 | |
Solid Waste | |
| 4,544.3 | | |
| (524.6 | ) | |
| 4,019.7 | | |
| 1,179.6 | |
Environmental Services | |
| 990.3 | | |
| (69.9 | ) | |
| 920.4 | | |
| 234.4 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (133.0 | ) |
| |
$ | 5,534.6 | | |
$ | (594.5 | ) | |
$ | 4,940.1 | | |
$ | 1,281.0 | |
The following table presents GFL’s reconciliation
of net income (loss) from continuing operations to Adjusted EBITDA for the periods indicated:
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net income (loss) from continuing operations | |
$ | 18.3 | | |
$ | (183.7 | ) | |
$ | 94.3 | | |
$ | 35.9 | |
Add: | |
| | | |
| | | |
| | | |
| | |
Depreciation of property and equipment | |
| 242.3 | | |
| 264.0 | | |
| 719.9 | | |
| 732.1 | |
Amortization of intangible assets | |
| 106.9 | | |
| 124.2 | | |
| 379.7 | | |
| 382.1 | |
Interest and other finance costs | |
| 137.2 | | |
| 136.2 | | |
| 466.7 | | |
| 340.7 | |
Income tax (recovery) expense | |
| (18.0 | ) | |
| (75.8 | ) | |
| 178.8 | | |
| (145.5 | ) |
Loss (gain) on foreign exchange | |
| 46.9 | | |
| 195.3 | | |
| (4.6 | ) | |
| 249.3 | |
Gain on sale of property and equipment | |
| (6.7 | ) | |
| (5.7 | ) | |
| (13.1 | ) | |
| (10.1 | ) |
Mark-to-market (gain) loss on Purchase Contracts | |
| — | | |
| (10.3 | ) | |
| 104.3 | | |
| (391.4 | ) |
Share of net (income) loss of investments accounted for using the equity method | |
| (34.0 | ) | |
| (9.2 | ) | |
| 48.9 | | |
| (14.5 | ) |
Share-based payments | |
| 26.5 | | |
| 13.4 | | |
| 56.7 | | |
| 38.2 | |
Loss (gain) on divestiture | |
| — | | |
| 1.6 | | |
| (580.5 | ) | |
| (4.9 | ) |
Transaction costs | |
| 22.3 | | |
| 13.6 | | |
| 63.9 | | |
| 36.9 | |
Acquisition, rebranding and other integration costs | |
| 3.8 | | |
| 6.3 | | |
| 14.0 | | |
| 19.7 | |
Other | |
| (15.2 | ) | |
| 3.4 | | |
| (17.5 | ) | |
| 12.5 | |
Adjusted EBITDA | |
$ | 530.3 | | |
$ | 473.3 | | |
$ | 1,511.5 | | |
$ | 1,281.0 | |
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:
| |
September 30, 2023 | | |
December 31, 2022 | |
Solid Waste | |
| | | |
| | |
Canada | |
$ | 2,092.4 | | |
$ | 2,079.6 | |
USA | |
| 5,676.2 | | |
| 6,046.2 | |
Environmental Services | |
| 962.8 | | |
| 896.3 | |
| |
$ | 8,731.4 | | |
$ | 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 nine months ended September 30, 2023 and September 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 | |
| 875,897 | | |
| — | | |
| — | | |
| 875,897 | |
Converted from TEUs | |
| 25,666,465 | | |
| — | | |
| — | | |
| 25,666,465 | |
Cancelled during the year | |
| (260 | ) | |
| — | | |
| — | | |
| (260 | ) |
Balance, September 30, 2023 | |
| 358,172,019 | | |
| 11,812,964 | | |
| 36,768,149 | | |
| 406,753,132 | |
GFL Environmental Inc. - Notes to the Consolidated
Financial Statements
(In millions of dollars except per share amounts
or otherwise stated)
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 | |
| 22,128,582 | | |
$ | 32.59 | |
Granted | |
| 150,000 | | |
| 33.00 | |
Share options outstanding, September 30, 2023 | |
| 22,278,582 | | |
$ | 32.59 | |
Vested share options, September 30, 2023 | |
| 8,229,297 | | |
$ | 28.93 | |
For the three and nine months ended September
30, 2023, there were no options exercised, cancelled, expired or forfeited.
On August 16, 2023, 150,000 options were granted.
The options vest on August 16, 2026 and will expire on August 16, 2033. The total grant date fair value of the issued options is US$1.5
million, calculated using a Black-Scholes option valuation model to determine the total fair value of the issued options on the grant
date.
For the three and nine months ended September
30, 2023, the total compensation expense related to share options amounted to $4.2 million and $14.3 million ($5.1 million and $15.8 million
for the three and nine months ended September 30, 2022).
RSUs and DSUs
The following table presents GFL’s summary
of the RSUs and DSUs for the periods indicated:
| |
RSUs | | |
Grant date fair value (US$) | | |
DSUs | | |
Grant date fair value (US$) | |
Outstanding, December 31, 2022 | |
| 1,906,769 | | |
$ | 28.10 | | |
| 60,960 | | |
$ | 28.50 | |
Granted | |
| 2,093,490 | | |
| 31.92 | | |
| 20,466 | | |
| 33.96 | |
Settled | |
| (873,903 | ) | |
| 26.84 | | |
| — | | |
| — | |
Forfeited | |
| (80,046 | ) | |
| 29.66 | | |
| — | | |
| — | |
Cancelled | |
| (16,881 | ) | |
| 30.25 | | |
| — | | |
| — | |
Outstanding, September 30, 2023 | |
| 3,029,429 | | |
$ | 31.05 | | |
| 81,426 | | |
$ | 29.87 | |
Expected to vest, September 30, 2023 | |
| 2,838,753 | | |
$ | 30.99 | | |
| 81,426 | | |
$ | 29.87 | |
For the three and nine months ended September
30, 2023, the total compensation expense related to RSUs amounted to $22.0 million and $41.5 million ($8.0 million and $21.6 million for
the three and nine months ended September 30, 2022).
For the three and nine months ended September
30, 2023, the total compensation expense related to DSUs amounted to $0.3 million and $0.9 million ($0.3 million and $0.8 million for
the three and nine months ended September 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 September 30, | | |
Nine months ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Effects of changes in | |
| | | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 46.0 | | |
$ | 65.4 | | |
$ | (40.5 | ) | |
$ | 165.1 | |
Trade and other receivables, net | |
| (36.9 | ) | |
| (111.5 | ) | |
| (50.3 | ) | |
| (329.9 | ) |
Prepaid expenses and other assets | |
| 3.8 | | |
| 5.3 | | |
| (78.8 | ) | |
| (36.4 | ) |
Changes in non-cash working capital items | |
$ | 12.9 | | |
$ | (40.8 | ) | |
$ | (169.6 | ) | |
$ | (201.2 | ) |
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:
| |
September 30, 2023 | |
| |
Carrying Value | | |
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Notes | |
$ | 6,148.2 | | |
$ | 5,557.4 | | |
$ | — | | |
$ | 5,557.4 | | |
$ | — | |
| |
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 nine months ended September 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 September 30, 2023, GFL had letters of credit
totaling approximately $244.9 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 $3.9 million for the three
and nine months ended September 30, 2023 ($1.2 million and $3.5 million for the three and
nine months ended September 30, 2022).
Performance bonds
As at September 30, 2023, GFL had issued performance
bonds totaling $1,641.5 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 September 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 $8.7 million as at September 30, 2023 ($14.5 million as at December 31, 2022).
For the
three and nine months ended September 30, 2023, GFL paid $2.4 million and $6.4 million ($1.6
million and $4.0 million for the three and nine months
ended September 30, 2022) in aggregate lease payments to related parties.
For the three
and nine months ended September 30, 2023, GFL entered into transactions with Green Infrastructure
Partners Inc. (“GIP”) which resulted in revenue of $6.3 million and $18.3
million ($10.2 million and $13.9 million for
the three and nine months ended September 30, 2022) and net receivables of $12.8 million
as at September 30, 2023 (net payables of $3.8 million as at December 31, 2022).
During the nine months ended September 30, 2023,
GFL divested three non-core U.S. Solid Waste businesses for aggregate proceeds of $1,645.9 million, and a resulting gain on divestiture
of $575.0 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. The post-tax results of the discontinued operations for the
periods indicated are as follows:
| |
Three months ended September 30, | | |
Nine months ended September 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 | |
| — | | |
| — | | |
| — | | |
| (128.1 | ) |
Net loss and comprehensive loss from discontinued operations | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | (127.9 | ) |
Cash flow information for GFL Infrastructure is
as follows:
| |
Three months ended September 30, | | |
Nine months ended September 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 nine months
ended September 30, 2023
The following Management’s
Discussion and Analysis (“MD&A”) for GFL Environmental Inc. (“us,” “we,”
“our,” “GFL” or the “Company”) is dated November 3, 2023 and provides information
concerning our results of operations and financial condition for the three and nine months ended September 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 nine
months ended September 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”).
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 September 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 nine months ended September 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, including 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.
In the second quarter of
2023, we divested three non-core U.S. Solid Waste businesses for aggregate gross proceeds of $1,645.9 million, the net proceeds of which
were used to repay a portion of our U.S. senior secured term loan facility. The three divested U.S. Solid Waste businesses, the results
of which are included within our Solid Waste USA segment for the three and nine months ended September 30, 2022 and for the first six
months of the current period, 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.
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 240 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 nine months ended September
30, 2023 compared to the three and nine months ended September 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) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
Revenue | |
$ | 1,890.0 | | |
$ | 1,831.2 | | |
$ | 58.8 | | |
| 3.2 | % |
Expenses | |
| | | |
| | | |
| | | |
| | |
Cost of sales | |
| 1,526.8 | | |
| 1,591.9 | | |
| (65.1 | ) | |
| (4.1 | ) |
Selling, general and administrative expenses | |
| 234.7 | | |
| 187.5 | | |
| 47.2 | | |
| 25.2 | |
Interest and other finance costs | |
| 137.2 | | |
| 136.2 | | |
| 1.0 | | |
| 0.7 | |
Loss on divestiture | |
| — | | |
| 1.6 | | |
| (1.6 | ) | |
| (100.0 | ) |
Other expenses | |
| 25.0 | | |
| 182.7 | | |
| (157.7 | ) | |
| (86.3 | ) |
Share of net income of investments accounted for using the equity method | |
| (34.0 | ) | |
| (9.2 | ) | |
| (24.8 | ) | |
| (269.6 | ) |
Earnings (loss) before income taxes | |
| 0.3 | | |
| (259.5 | ) | |
| 259.8 | | |
| 100.1 | |
Income tax recovery | |
| (18.0 | ) | |
| (75.8 | ) | |
| 57.8 | | |
| 76.3 | |
Net income (loss) | |
| 18.3 | | |
| (183.7 | ) | |
| 202.0 | | |
| 110.0 | |
Less: Net loss attributable to non-controlling interests | |
| (3.8 | ) | |
| (0.2 | ) | |
| (3.6 | ) | |
| (1800.0 | ) |
Net income (loss) attributable to GFL Environmental Inc. | |
| 22.1 | | |
| (183.5 | ) | |
| 205.6 | | |
| 112.0 | |
Loss per share, basic and diluted ($) | |
| — | | |
| (0.55 | ) | |
| 0.55 | | |
| 100.0 | |
Adjusted EBITDA(1) | |
$ | 530.3 | | |
$ | 473.3 | | |
$ | 57.0 | | |
| 12.0 | % |
| |
Nine months ended | | |
Nine months ended | | |
Change | |
($ millions except per share amounts) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
Revenue | |
$ | 5,632.7 | | |
$ | 4,940.1 | | |
$ | 692.6 | | |
| 14.0 | % |
Expenses | |
| | | |
| | | |
| | | |
| | |
Cost of sales | |
| 4,672.0 | | |
| 4,339.5 | | |
| 332.5 | | |
| 7.7 | |
Selling, general and administrative expenses | |
| 683.4 | | |
| 528.6 | | |
| 154.8 | | |
| 29.3 | |
Interest and other finance costs | |
| 466.7 | | |
| 340.7 | | |
| 126.0 | | |
| 37.0 | |
Gain on divestiture | |
| (580.5 | ) | |
| (4.9 | ) | |
| (575.6 | ) | |
| (11746.9 | ) |
Other expenses (income) | |
| 69.1 | | |
| (139.7 | ) | |
| 208.8 | | |
| 149.5 | |
Share of net loss (income) of investments accounted for using the equity method | |
| 48.9 | | |
| (14.5 | ) | |
| 63.4 | | |
| 437.2 | |
Earnings (loss) before income taxes | |
| 273.1 | | |
| (109.6 | ) | |
| 382.7 | | |
| 349.2 | |
Income tax expense (recovery) | |
| 178.8 | | |
| (145.5 | ) | |
| 324.3 | | |
| 222.9 | |
Net income from continuing operations | |
| 94.3 | | |
| 35.9 | | |
| 58.4 | | |
| 162.7 | |
Net loss from discontinued operations | |
| — | | |
| (127.9 | ) | |
| 127.9 | | |
| 100.0 | |
Net income (loss) | |
| 94.3 | | |
| (92.0 | ) | |
| 186.3 | | |
| 202.5 | |
Less: Net loss attributable to non-controlling interests | |
| (3.3 | ) | |
| (0.2 | ) | |
| (3.1 | ) | |
| (1550.0 | ) |
Net income (loss) attributable to GFL Environmental Inc. | |
| 97.6 | | |
| (91.8 | ) | |
| 189.4 | | |
| 206.3 | |
Earnings (loss) per share, basic and diluted ($) | |
| 0.08 | | |
| (0.42 | ) | |
| 0.50 | | |
| 119.0 | |
Adjusted EBITDA(1) | |
$ | 1,511.5 | | |
$ | 1,281.0 | | |
$ | 230.5 | | |
| 18.0 | % |
| |
September 30, 2023 | | |
December 31, 2022 | | |
Change | |
|
|
|
|
Total assets | |
$ | 19,890.4 | | |
$ | 19,767.6 | | |
$ | 122.8 | |
|
|
|
|
Total cash | |
| 174.2 | | |
| 82.1 | | |
| 92.1 | |
|
|
|
|
Total long-term debt | |
| 8,848.9 | | |
| 9,266.8 | | |
| (417.9 | ) |
|
|
|
|
Total liabilities | |
| 12,377.2 | | |
| 13,723.5 | | |
| (1,346.3 | ) |
|
|
|
|
Total shareholders’ equity | |
$ | 7,513.2 | | |
$ | 6,044.1 | | |
$ | 1,469.1 | |
|
|
|
|
|
(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 September 30, 2023 |
|
|
Three months ended September 30, 2022 |
|
|
Change |
|
($ millions) |
|
Revenue |
|
|
% |
|
|
Revenue |
|
|
% |
|
|
$ |
|
|
% |
|
Residential |
|
$ |
367.2 |
|
|
|
19.4 |
% |
|
$ |
387.8 |
|
|
|
21.2 |
% |
|
$ |
(20.6 |
) |
|
|
(5.3 |
)% |
Commercial/industrial |
|
|
713.7 |
|
|
|
37.8 |
|
|
|
657.5 |
|
|
|
35.9 |
|
|
|
56.2 |
|
|
|
8.5 |
|
Total collection |
|
|
1,080.9 |
|
|
|
57.2 |
|
|
|
1,045.3 |
|
|
|
57.1 |
|
|
|
35.6 |
|
|
|
3.4 |
|
Landfill |
|
|
244.3 |
|
|
|
12.9 |
|
|
|
229.3 |
|
|
|
12.5 |
|
|
|
15.0 |
|
|
|
6.5 |
|
Transfer |
|
|
194.3 |
|
|
|
10.3 |
|
|
|
178.7 |
|
|
|
9.8 |
|
|
|
15.6 |
|
|
|
8.7 |
|
Material recovery |
|
|
76.5 |
|
|
|
4.0 |
|
|
|
85.0 |
|
|
|
4.6 |
|
|
|
(8.5 |
) |
|
|
(10.0 |
) |
Other |
|
|
107.7 |
|
|
|
5.7 |
|
|
|
120.0 |
|
|
|
6.6 |
|
|
|
(12.3 |
) |
|
|
(10.3 |
) |
Solid Waste |
|
|
1,703.7 |
|
|
|
90.1 |
|
|
|
1,658.3 |
|
|
|
90.6 |
|
|
|
45.4 |
|
|
|
2.7 |
|
Environmental Services |
|
|
431.1 |
|
|
|
22.8 |
|
|
|
390.9 |
|
|
|
21.3 |
|
|
|
40.2 |
|
|
|
10.3 |
|
Intercompany revenue |
|
|
(244.8 |
) |
|
|
(12.9 |
) |
|
|
(218.0 |
) |
|
|
(11.9 |
) |
|
|
(26.8 |
) |
|
|
12.3 |
|
Revenue |
|
$ |
1,890.0 |
|
|
|
100.0 |
% |
|
$ |
1,831.2 |
|
|
|
100.0 |
% |
|
$ |
58.8 |
|
|
|
3.2 |
% |
| |
Nine months ended September 30, 2023 | | |
Nine months ended September 30, 2022 | | |
Change | |
($ millions) | |
Revenue | | |
% | | |
Revenue | | |
% | | |
$ | | |
% | |
Residential | |
$ | 1,160.2 | | |
| 20.6 | % | |
$ | 1,087.5 | | |
| 22.0 | % | |
$ | 72.7 | | |
| 6.7 | % |
Commercial/industrial | |
| 2,162.0 | | |
| 38.4 | | |
| 1,781.8 | | |
| 36.1 | | |
| 380.2 | | |
| 21.3 | |
Total collection | |
| 3,322.2 | | |
| 59.0 | | |
| 2,869.3 | | |
| 58.1 | | |
| 452.9 | | |
| 15.8 | |
Landfill | |
| 695.9 | | |
| 12.4 | | |
| 614.6 | | |
| 12.4 | | |
| 81.3 | | |
| 13.2 | |
Transfer | |
| 561.6 | | |
| 10.0 | | |
| 495.6 | | |
| 10.0 | | |
| 66.0 | | |
| 13.3 | |
Material recovery | |
| 242.5 | | |
| 4.3 | | |
| 268.1 | | |
| 5.4 | | |
| (25.6 | ) | |
| (9.5 | ) |
Other | |
| 306.4 | | |
| 5.4 | | |
| 296.7 | | |
| 6.1 | | |
| 9.7 | | |
| 3.3 | |
Solid Waste | |
| 5,128.6 | | |
| 91.1 | | |
| 4,544.3 | | |
| 92.0 | | |
| 584.3 | | |
| 12.9 | |
Environmental Services | |
| 1,208.1 | | |
| 21.4 | | |
| 990.3 | | |
| 20.0 | | |
| 217.8 | | |
| 22.0 | |
Intercompany revenue | |
| (704.0 | ) | |
| (12.5 | ) | |
| (594.5 | ) | |
| (12.0 | ) | |
| (109.5 | ) | |
| 18.4 | |
Revenue | |
$ | 5,632.7 | | |
| 100.0 | % | |
$ | 4,940.1 | | |
| 100.0 | % | |
$ | 692.6 | | |
| 14.0 | % |
On a consolidated basis,
revenue for the three months ended September 30, 2023 increased by $58.8 million to $1,890.0 million, compared to the three months ended
September 30, 2022. The change in revenue was impacted by divestitures that contributed $117.0 million of revenue in the prior year period.
Excluding the impact of divestitures, revenue increased by $175.8 million. The increase is partially attributable to the impact of acquisitions
completed since July 1, 2022, which accounted for approximately $93.2 million, the majority of which were in our Solid Waste segment.
Changes in foreign exchange rates increased revenue by $29.1 million. Highlights of the changes in revenue during the three months ended
September 30, 2023, excluding the impact of acquisitions and divestitures, include:
| • | Solid Waste revenue increased by 4.2%, predominantly due to core pricing of 8.8%, partially offset by
negative surcharges of 1.6%. Also offsetting this increase was negative volume of 2.4%, attributable to lower event driven volume across
our post collection operations, non-regrettable volume losses in our collection businesses and the purposeful exiting of non-core service
offerings in certain Canadian markets. Lower commodity prices also negatively contributed 0.6%. Changes in foreign exchange rates increased
revenue by 1.9%. |
| • | Environmental Services revenue decreased by 1.9%. The change
was impacted by $30.0 million of revenue contributed from an outsized amount of sub-contracting work in the prior year period. Excluding
this impact, revenue increased by 6.9%. The increase is predominantly due to higher industrial
collection and processing activity at our facilities and an increased level of emergency response activity, partially offset by
lower soil volumes processed at our facilities. Changes in foreign exchange rates increased revenue
by 0.5%. |
On a consolidated basis,
revenue for the nine months ended September 30, 2023 increased by $692.6 million to $5,632.7 million, compared to the nine months ended
September 30, 2022. The change in revenue was impacted by divestitures that contributed $157.2 million of revenue in the prior year period.
Excluding the impact of divestitures, revenue increased by $849.8 million. The increase is partially attributable to the impact of acquisitions
completed since January 1, 2022, which accounted for approximately $341.6 million of the increase,
the majority of which were in our Solid Waste segment. Changes in foreign exchange rates increased revenue by $150.3 million. Highlights
of the changes in revenue during the nine months ended September 30, 2023, excluding the impact of acquisitions and divestitures, include:
| • | Solid Waste revenue increased by 6.8%, including 10.5% from core
pricing, partially offset by negative surcharges of 0.8%. Also offsetting this increase was negative volume of 1.9%, attributable to lower
event driven volume across our post collection operations, non-regrettable volume losses in our collection business and the purposeful
exiting of non-core service offerings in certain Canadian markets. Lower commodity prices also negatively contributed 1.0%. Changes in
foreign exchange rates increased revenue by 3.5%. |
| • | Environmental Services revenue increased by 9.2%. The change was impacted by $30.0 million of revenue
contributed from an outsized amount of sub-contracting work in the prior year period. Excluding this impact, revenue
increased by 12.9%. The increase is predominantly due to higher industrial collection and processing activity at our facilities
and an increased level of emergency response activity, partially offset by lower soil volumes processed at our facilities. Changes in
foreign exchange rates increased revenue by 1.0%. |
Cost of Sales
The following tables summarize
cost of sales for the periods indicated:
| |
Three months ended September 30, 2023 | | |
Three months ended September 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Transfer and disposal costs | |
$ | 345.2 | | |
| 18.3 | % | |
$ | 381.5 | | |
| 20.8 | % | |
$ | (36.3 | ) | |
| (9.5 | )% |
Labour and benefits | |
| 422.9 | | |
| 22.4 | | |
| 407.0 | | |
| 22.2 | | |
| 15.9 | | |
| 3.9 | |
Maintenance and repairs | |
| 182.3 | | |
| 9.6 | | |
| 179.8 | | |
| 9.8 | | |
| 2.5 | | |
| 1.4 | |
Fuel | |
| 92.2 | | |
| 4.9 | | |
| 107.7 | | |
| 5.9 | | |
| (15.5 | ) | |
| (14.4 | ) |
Other cost of sales | |
| 137.4 | | |
| 7.3 | | |
| 128.5 | | |
| 7.1 | | |
| 8.9 | | |
| 6.9 | |
Subtotal | |
| 1,180.0 | | |
| 62.5 | | |
| 1,204.5 | | |
| 65.8 | | |
| (24.5 | ) | |
| (2.0 | ) |
Depreciation expense | |
| 236.1 | | |
| 12.5 | | |
| 256.9 | | |
| 14.0 | | |
| (20.8 | ) | |
| (8.1 | ) |
Amortization of intangible assets | |
| 106.9 | | |
| 5.6 | | |
| 124.2 | | |
| 6.8 | | |
| (17.3 | ) | |
| (13.9 | ) |
Acquisition, rebranding and other integration costs | |
| 3.8 | | |
| 0.2 | | |
| 6.3 | | |
| 0.3 | | |
| (2.5 | ) | |
| (39.7 | ) |
Cost of sales | |
$ | 1,526.8 | | |
| 80.8 | % | |
$ | 1,591.9 | | |
| 86.9 | % | |
$ | (65.1 | ) | |
| (4.1 | )% |
| |
Nine months ended September 30, 2023 | | |
Nine months ended September 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Transfer and disposal costs | |
$ | 1,049.4 | | |
| 18.6 | % | |
$ | 980.4 | | |
| 19.8 | % | |
$ | 69.0 | | |
| 7.0 | % |
Labour and benefits | |
| 1,275.0 | | |
| 22.6 | | |
| 1,122.3 | | |
| 22.7 | | |
| 152.7 | | |
| 13.6 | |
Maintenance and repairs | |
| 554.1 | | |
| 9.8 | | |
| 478.1 | | |
| 9.7 | | |
| 76.0 | | |
| 15.9 | |
Fuel | |
| 280.5 | | |
| 5.0 | | |
| 294.7 | | |
| 6.0 | | |
| (14.2 | ) | |
| (4.8 | ) |
Other cost of sales | |
| 419.1 | | |
| 7.5 | | |
| 352.5 | | |
| 7.1 | | |
| 66.6 | | |
| 18.9 | |
Subtotal | |
| 3,578.1 | | |
| 63.5 | | |
| 3,228.0 | | |
| 65.3 | | |
| 350.1 | | |
| 10.8 | |
Depreciation expense | |
| 700.2 | | |
| 12.4 | | |
| 709.7 | | |
| 14.4 | | |
| (9.5 | ) | |
| (1.3 | ) |
Amortization of intangible assets | |
| 379.7 | | |
| 6.7 | | |
| 382.1 | | |
| 7.7 | | |
| (2.4 | ) | |
| (0.6 | ) |
Acquisition, rebranding and other integration costs | |
| 14.0 | | |
| 0.3 | | |
| 19.7 | | |
| 0.4 | | |
| (5.7 | ) | |
| (28.9 | ) |
Cost of sales | |
$ | 4,672.0 | | |
| 82.9 | % | |
$ | 4,339.5 | | |
| 87.8 | % | |
$ | 332.5 | | |
| 7.7 | % |
Cost of sales decreased
by $65.1 million to $1,526.8 million for the three months ended September 30, 2023, compared to the three months ended September 30,
2022, primarily as a result of the impact of divestitures more than offsetting cost increases. For the three months ended September
30, 2023, increased labour cost pressure from tight labour markets drove up wage rates, training costs and overtime. 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. Fuel costs decreased by $15.5 million to
$92.2 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily as a
result of a reduction in the price of fuel. An increase in risk management costs, particularly accident claim costs, also
contributed to the increase in other cost of sales. Cost of sales as a percentage of revenue for the three months ended September
30, 2023 decreased by 610 basis points to 80.8%, compared to the three months ended September 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, the
realization of ongoing operating cost efficiencies and the reduction in the price of fuel, offset by inflationary cost pressures.
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 September 30, 2023
decreased by 330 basis points to 62.5%, compared to the three months ended September 30, 2022.
Cost of sales increased
by $332.5 million to $4,672.0 million for the nine months ended September 30, 2023, compared to the nine months ended September 30,
2022, partially attributable to the impact of acquisitions offset by divestitures. For the
nine months ended September 30, 2023, increased labour cost as a result of pressure from tight labour markets drove up wage rates,
training costs and overtime. Labour 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. Fuel costs
decreased by $14.2 million to $280.5 million for the nine months ended September 30, 2023 compared to the nine months ended
September 30, 2022, primarily as a result of a reduction in the price of fuel. An increase in risk management costs, particularly
accident claim costs, also contributed to the increase in other cost of sales. Cost of sales as a percentage of total revenue
for the nine months ended September 30, 2023 decreased by 490 basis points to 82.9%, compared to the nine months ended September 30,
2022. Changes in the individual cost categories as a percentage of revenue were the result of the impact of changes in business mix,
our pricing strategies, the realization of ongoing operating cost efficiencies and the reduction in the price of fuel, offset by
inflationary cost pressures. Excluding depreciation expenses, amortization of
intangible assets and acquisition rebranding and other integration costs, cost of sales as a percentage of total revenue for the
nine months ended September 30, 2023 decreased by 180 basis points to 63.5%, compared to the nine months ended September
30, 2022.
Selling, General and Administrative Expenses (“SG&A”)
The following tables summarize SG&A for the
periods indicated:
| |
Three months ended September 30, 2023 | | |
Three months ended September 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Salaries and benefits | |
$ | 110.2 | | |
| 5.8 | % | |
$ | 90.9 | | |
| 5.0 | % | |
$ | 19.3 | | |
| 21.2 | % |
Share-based payments | |
| 26.5 | | |
| 1.4 | | |
| 13.4 | | |
| 0.7 | | |
| 13.1 | | |
| 97.8 | |
Other | |
| 69.5 | | |
| 3.7 | | |
| 62.5 | | |
| 3.4 | | |
| 7.0 | | |
| 11.2 | |
Subtotal | |
| 206.2 | | |
| 10.9 | | |
| 166.8 | | |
| 9.1 | | |
| 39.4 | | |
| 23.6 | |
Depreciation expense | |
| 6.2 | | |
| 0.3 | | |
| 7.1 | | |
| 0.4 | | |
| (0.9 | ) | |
| (12.7 | ) |
Transaction costs | |
| 22.3 | | |
| 1.2 | | |
| 13.6 | | |
| 0.7 | | |
| 8.7 | | |
| 64.0 | |
Selling, general and administrative expenses | |
$ | 234.7 | | |
| 12.4 | % | |
$ | 187.5 | | |
| 10.2 | % | |
$ | 47.2 | | |
| 25.2 | % |
| |
Nine months ended September 30, 2023 | | |
Nine months ended September 30, 2022 | | |
Change | |
($ millions) | |
Cost | | |
% of Revenue | | |
Cost | | |
% of Revenue | | |
$ | | |
% | |
Salaries and benefits | |
$ | 338.4 | | |
| 6.0 | % | |
$ | 267.0 | | |
| 5.4 | % | |
$ | 71.4 | | |
| 26.7 | % |
Share-based payments | |
| 56.7 | | |
| 1.0 | | |
| 38.2 | | |
| 0.8 | | |
| 18.5 | | |
| 48.4 | |
Other | |
| 204.7 | | |
| 3.6 | | |
| 164.1 | | |
| 3.3 | | |
| 40.6 | | |
| 24.7 | |
Subtotal | |
| 599.8 | | |
| 10.6 | | |
| 469.3 | | |
| 9.5 | | |
| 130.5 | | |
| 27.8 | |
Depreciation expense | |
| 19.7 | | |
| 0.4 | | |
| 22.4 | | |
| 0.5 | | |
| (2.7 | ) | |
| (12.1 | ) |
Transaction costs | |
| 63.9 | | |
| 1.1 | | |
| 36.9 | | |
| 0.7 | | |
| 27.0 | | |
| 73.2 | |
Selling, general and administrative expenses | |
$ | 683.4 | | |
| 12.1 | % | |
$ | 528.6 | | |
| 10.7 | % | |
$ | 154.8 | | |
| 29.3 | % |
SG&A increased by $47.2
million to $234.7 million for the three months ended September 30, 2023, compared to the three months ended September 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 July 1, 2022. The increase in transaction costs was predominantly associated with acquisitions.
For the three months ended September 30, 2023, there was also an increase in discretionary costs such as travel expenses and share-based
payments. SG&A as a percentage of revenue for the three months ended September 30, 2023 increased by 220 basis points to 12.4%, compared
to the three months ended September 30, 2022. Excluding depreciation expense and transaction costs, SG&A as a percentage of revenue
was 10.9% for the three months ended September 30, 2023, compared to 9.1% for the three months ended September 30, 2022.
SG&A increased by $154.8
million to $683.4 million for the nine months ended September 30, 2023, compared to the nine
months ended September 30, 2022. The increase was predominantly attributable to incremental salaries,
benefits and other third party costs associated with information technology infrastructure investments, to facilitate moving from on-premise
infrastructure to cloud-based infrastructure, and other costs related to the number and size of businesses acquired since January 1, 2022.
The increase in transaction costs was predominantly associated with acquisitions and divestitures. For the nine months ended September
30, 2023, there was also an increase in discretionary costs such as travel expenses and share-based payments. SG&A as a percentage
of revenue for the nine months ended September 30, 2023 increased by 140 basis points to 12.1% compared to the nine months ended
September 30, 2022. Excluding depreciation expense and transaction costs, SG&A as a percentage of revenue was 10.6% for the nine months
ended September 30, 2023, compared to 9.5% for the nine months ended September 30, 2022.
Interest and Other Finance Costs
The following tables summarize interest and other
finance costs for the periods indicated:
| |
Three months ended | | |
Three months ended | | |
Change | |
($ millions) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
Interest | |
$ | 116.4 | | |
$ | 118.9 | | |
$ | (2.5 | ) | |
| (2.1 | )% |
Amortization of deferred financing costs | |
| 4.3 | | |
| 3.6 | | |
| 0.7 | | |
| 19.4 | |
Accretion of landfill closure and post-closure obligations | |
| 8.9 | | |
| 5.9 | | |
| 3.0 | | |
| 50.8 | |
Other finance costs | |
| 7.6 | | |
| 7.8 | | |
| (0.2 | ) | |
| (2.6 | ) |
Interest and other finance costs | |
$ | 137.2 | | |
$ | 136.2 | | |
$ | 1.0 | | |
| 0.7 | % |
| |
Nine months ended | | |
Nine months ended | | |
Change | |
($ millions) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
Interest | |
$ | 395.5 | | |
$ | 295.3 | | |
$ | 100.2 | | |
| 33.9 | % |
Termination of hedged arrangements | |
| 8.7 | | |
| — | | |
| 8.7 | | |
| — | |
Amortization of deferred financing costs | |
| 13.6 | | |
| 10.1 | | |
| 3.5 | | |
| 34.7 | |
Accretion of landfill closure and post-closure obligations | |
| 25.3 | | |
| 15.1 | | |
| 10.2 | | |
| 67.5 | |
Other finance costs | |
| 23.6 | | |
| 20.2 | | |
| 3.4 | | |
| 16.8 | |
Interest and other finance costs | |
$ | 466.7 | | |
$ | 340.7 | | |
$ | 126.0 | | |
| 37.0 | % |
Interest and other finance
costs increased by $1.0 million to $137.2 million for the three months ended September 30, 2023, compared to the three months ended September
30, 2022. The increase is predominantly due to a $3.0 million increase in accretion of landfill closures and post-closure obligations.
The increase was partially offset by a $2.5 million decrease in interest expense. Interest expense on debt obligations was lower as a
result of lower usage on the Revolving Credit Facility (defined below) compared to the prior year period and the repayment of a portion
of our U.S senior secured term loan facility with the proceeds from divestitures, offset by rising interest rates in Canada and the U.S.
and higher long-term debt obligations on the Term Loan A Facility (defined below).
Interest and other finance
costs increased by $126.0 million to $466.7 million for the nine months ended September 30, 2023, compared to the nine months ended
September 30, 2022. The increase was predominantly due to an increase in interest expense of $100.2 million to $395.5 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 and a non-recurring
$8.7 million loss on extinguishment of hedged arrangements for the nine months ended September 30, 2023.
Other Income and Expenses
The following tables summarize
other income and expenses for the periods indicated:
| |
Three months ended | | |
Three months ended | | |
Change | |
($ millions) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
Loss on foreign exchange | |
$ | 46.9 | | |
$ | 195.3 | | |
$ | (148.4 | ) | |
| (76.0 | )% |
Mark-to-market gain on Purchase Contracts | |
| — | | |
| (10.3 | ) | |
| 10.3 | | |
| 100.0 | |
Gain on sale of property and equipment | |
| (6.7 | ) | |
| (5.7 | ) | |
| (1.0 | ) | |
| (17.5 | ) |
Other | |
| (15.2 | ) | |
| 3.4 | | |
| (18.6 | ) | |
| (547.1 | ) |
Other expenses | |
$ | 25.0 | | |
$ | 182.7 | | |
$ | (157.7 | ) | |
| (86.3 | )% |
| |
Nine months ended | | |
Nine months ended | | |
Change | |
($ millions) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
(Gain) loss on foreign exchange | |
$ | (4.6 | ) | |
$ | 249.3 | | |
$ | (253.9 | ) | |
| (101.8 | )% |
Mark-to-market loss (gain) on Purchase Contracts | |
| 104.3 | | |
| (391.4 | ) | |
| 495.7 | | |
| 126.6 | |
Gain on sale of property and equipment | |
| (13.1 | ) | |
| (10.1 | ) | |
| (3.0 | ) | |
| (29.7 | ) |
Other | |
| (17.5 | ) | |
| 12.5 | | |
| (30.0 | ) | |
| (240.0 | ) |
Other expenses (income) | |
$ | 69.1 | | |
$ | (139.7 | ) | |
$ | 208.8 | | |
| 149.5 | % |
For the three months ended
September 30, 2023, other expenses were $25.0 million, compared to $182.7 million for the three months ended September 30, 2022. This
decrease was primarily due to a $148.4 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 September 30, 2023. Partially
offsetting this decrease was a $10.3 million non-cash change on the revaluation of the Purchase Contracts in the prior year.
For
the nine months ended September 30, 2023, other expenses were $69.1 million, compared to
other income of $139.7 million for the nine months ended September 30, 2022. The change was primarily due to a $495.7 million non-cash
change on the revaluation of the Purchase Contracts. Partially offsetting this increase was a $253.9 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 September 30, 2023.
Divestitures
During the nine
months ended September 30, 2023, we completed divestitures of certain assets and operations
in three non-core U.S. Solid Waste businesses for aggregate proceeds of $1,645.9 million, and a resulting gain on divestiture of $575.0
million.
The three non-core U.S. Solid
Waste businesses, 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 recovery decreased
by $57.8 million to $18.0 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.
The decrease was predominantly due to lower tax losses, partially attributable to a lower non-cash foreign exchange loss and the utilization
of prior year net operating losses as a result of the divestitures.
Income tax expense increased
by $324.3 million to $178.8 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.
The increase was predominantly due the gain on divestiture, partially offset by increased depreciation expense for the nine months ended
September 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 nine months ended September
30, 2023 compared to the three and nine months ended September 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 September 30, 2023 | |
| |
Gross
Revenue | | |
Intercompany
Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 543.4 | | |
$ | (69.8 | ) | |
$ | 473.6 | | |
$ | 133.7 | |
USA | |
| 1,160.3 | | |
| (131.4 | ) | |
| 1,028.9 | | |
| 338.1 | |
Solid Waste | |
| 1,703.7 | | |
| (201.2 | ) | |
| 1,502.5 | | |
| 471.8 | |
Environmental Services | |
| 431.1 | | |
| (43.6 | ) | |
| 387.5 | | |
| 119.9 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (61.4 | ) |
| |
$ | 2,134.8 | | |
$ | (244.8 | ) | |
$ | 1,890.0 | | |
$ | 530.3 | |
| |
Three months ended September 30, 2022 | |
| |
Gross
Revenue | | |
Intercompany
Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 516.3 | | |
$ | (69.0 | ) | |
$ | 447.3 | | |
$ | 122.4 | |
USA | |
| 1,142.0 | | |
| (122.5 | ) | |
| 1,019.5 | | |
| 300.8 | |
Solid Waste | |
| 1,658.3 | | |
| (191.5 | ) | |
| 1,466.8 | | |
| 423.2 | |
Environmental Services | |
| 390.9 | | |
| (26.5 | ) | |
| 364.4 | | |
| 96.5 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (46.4 | ) |
| |
$ | 2,049.2 | | |
$ | (218.0 | ) | |
$ | 1,831.2 | | |
$ | 473.3 | |
| (1) | Adjusted EBITDA is a non-IFRS measure. Refer to the section entitled “Non-IFRS Financial Measures
and Key Performance Indicators”. |
| |
Nine months ended September 30, 2023 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 1,547.4 | | |
$ | (195.5 | ) | |
$ | 1,351.9 | | |
$ | 371.0 | |
USA | |
| 3,581.2 | | |
| (392.1 | ) | |
| 3,189.1 | | |
| 1,029.7 | |
Solid Waste | |
| 5,128.6 | | |
| (587.6 | ) | |
| 4,541.0 | | |
| 1,400.7 | |
Environmental Services | |
| 1,208.1 | | |
| (116.4 | ) | |
| 1,091.7 | | |
| 293.6 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (182.8 | ) |
| |
$ | 6,336.7 | | |
$ | (704.0 | ) | |
$ | 5,632.7 | | |
$ | 1,511.5 | |
| |
Nine months ended September 30, 2022 | |
| |
Gross Revenue | | |
Intercompany Revenue | | |
Revenue | | |
Adjusted EBITDA(1) | |
Solid Waste | |
| | | |
| | | |
| | | |
| | |
Canada | |
$ | 1,422.4 | | |
$ | (184.7 | ) | |
$ | 1,237.7 | | |
$ | 333.9 | |
USA | |
| 3,121.9 | | |
| (339.9 | ) | |
| 2,782.0 | | |
| 845.7 | |
Solid Waste | |
| 4,544.3 | | |
| (524.6 | ) | |
| 4,019.7 | | |
| 1,179.6 | |
Environmental Services | |
| 990.3 | | |
| (69.9 | ) | |
| 920.4 | | |
| 234.4 | |
Corporate | |
| — | | |
| — | | |
| — | | |
| (133.0 | ) |
| |
$ | 5,534.6 | | |
$ | (594.5 | ) | |
$ | 4,940.1 | | |
$ | 1,281.0 | |
| (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 $26.3
million to $473.6 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase
was due to acquisitions completed since July 1, 2022, net of divestitures, which contributed approximately $5.3 million of revenue, and
$33.1 million from price increases. Price increases were higher than the three months ended
September 30, 2022, as a result of the continued execution of our pricing strategies and strong consumer price index (“CPI”)
adjustments on certain municipal contracts. The increase was partially offset by $8.0 million from
lower surcharges and lower selling prices for the saleable commodities generated from our MRF operations. Volume
decreased revenue by $3.5 million for the three months ended September 30, 2023, compared to the three months ended September 30,
2022, predominantly from lower event driven volumes in our post collection businesses, non-regrettable
volume losses in our collection businesses as well as the impact of the purposeful exiting of non-core service offerings.
Revenue increased by $114.2
million to $1,351.9 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase
was due to acquisitions completed since January 1, 2022, net of divestitures, which contributed approximately $39.3 million of revenue,
and $107.8 million from price increases. Price increases were higher than the nine months ended September 30, 2022, as a result of the
continued execution of our pricing strategies and strong CPI adjustments on certain municipal contracts. The increase was partially offset
by $18.5 million from lower surcharges and lower selling prices for the saleable commodities generated from our MRF operations. Volume
decreased revenue by $13.8 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022,
predominantly from lower event driven volumes in our post collection businesses, non-regrettable
volume losses in our collection businesses as well as the impact of the purposeful exiting of non-core service offerings.
Adjusted EBITDA increased
by $11.3 million to $133.7 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022,
predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin was 28.2% for the three months ended
September 30, 2023, an increase of 80 basis points compared to the three months ended September 30, 2022. The increase was attributable
to organic margin expansion resulting from pricing strategies, the 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.
Adjusted
EBITDA increased by $37.1 million to $371.0 million for the nine months ended September 30, 2023, compared to the nine months ended September
30, 2022, predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin for the nine months ended September
30, 2023 was 27.4%, an increase of 40 basis points compared to the nine months ended September
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 $9.4
million to $1,028.9 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The
change in revenue was impacted by divestitures that contributed $110.8 million of revenue in the prior year period. Excluding the impact
of divestitures, revenue increased by $120.2 million. The increase was predominantly due to acquisitions completed since July 1, 2022,
which contributed approximately $53.4 million, and $95.7 million from price increases. Price increases were higher than the three months
ended September 30, 2022, as a result of the continued execution of our pricing strategies and strong CPI adjustments. The increase was
partially offset by $24.3 million from lower surcharges and lower selling prices for the saleable commodities generated from our MRF operations.
Volume decreased revenue by $31.8 million for the three months ended September 30, 2023,
compared to the three months ended September 30, 2022, predominantly from non-regrettable volume
losses in our collection businesses. Revenue increased by $27.2 million for the three months
ended September 30, 2023 compared to the three months ended September 30, 2022, as a result of changes in the foreign exchange
rate.
Revenue increased by $407.1
million to $3,189.1 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The change
in revenue was impacted by divestitures that contributed $137.1 million of revenue in the prior year period. Excluding the impact of divestitures,
revenue increased by $544.2 million. The increase was predominantly due to acquisitions completed since January 1, 2022, which contributed
approximately $205.0 million of revenue, and $313.2 million from price increases. Price increases were higher than the nine months ended
September 30, 2022, as a result of the continued execution of our pricing strategies and strong CPI adjustments. The increase was partially
offset by $53.3 million from lower surcharges and lower selling prices for the saleable commodities generated from our MRF operations.
Volume decreased revenue by $61.7 million for
the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, predominantly from non-regrettable volume
losses in our collection businesses. Revenue increased by $141.0 million for the nine months
ended September 30, 2023 compared to the nine months ended September 30, 2022, as a result of changes
in the foreign exchange rate.
Adjusted EBITDA increased
by $37.3 million to $338.1 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022,
predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin was 32.9% for the three months ended
September 30, 2023, an increase of 340 basis points compared to the three months ended September 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 negatively impacted by increased accident claim costs. The net impact on revenue from acquisitions and divestitures
contributed Adjusted EBITDA margin lower than the existing base business, negatively impacting the overall Adjusted EBITDA margin.
Adjusted EBITDA increased
by $184.0 million to $1,029.7 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022,
predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin was 32.3% for the nine months ended September
30, 2023, an increase of 190 basis points compared to the nine months ended September 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 negatively impacted by increased travel expenses
and accident claim costs. The net impact on revenue from acquisitions and divestitures contributed Adjusted EBITDA margin lower than existing
base business, negatively impacting the overall Adjusted EBITDA margin.
Environmental Services Operating Segment
Revenue increased by $23.1
million to $387.5 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The change
in revenue was impacted by $33.0 million contributed from divestitures and an outsized amount of sub-contracting work in the prior year period. Excluding this impact, revenue increased by $56.1 million.
Acquisitions completed since July 1, 2022 contributed approximately $31.2 million in revenue. In addition to the contribution from
acquisitions, revenue organically grew by $23.0 million as a result of increased industrial collection and processing activity and an
increased level of emergency response activity, partially offset by lower soil volumes processed at our facilities. Revenue increased
by $1.9 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, as a result of changes
in the foreign exchange rate.
Revenue increased by
$171.3 million to $1,091.7 million for the nine months ended September 30, 2023, compared to the nine months ended September 30,
2022. The change in revenue was impacted by $39.0 million contributed from divestitures and an outsized amount of sub-contracting work in the prior
year period. Excluding this impact, revenue increased by $210.3 million. Acquisitions completed
since January 1, 2022 contributed approximately $86.1 million in increased revenue. In addition to the contribution from acquisitions,
revenue grew organically by $115.0 million as a result of increased industrial collection and processing activity and an increased level
of emergency response activity, partially offset by lower soil volumes processed at our facilities due to one time volumes in the prior
year. Revenue increased by $9.3 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022,
as a result of changes in the foreign exchange rate.
Adjusted EBITDA increased
by $23.4 million to $119.9 million for the three months ended September 30, 2023, compared
to the three months ended September 30, 2022. Adjusted EBITDA margin was 30.9% for the three months ended September 30, 2023, an increase
of 440 basis points as compared to the three months ended September 30, 2022. Pricing strategies, variable cost controls, and the reduction
in the price of fuel favourably impacted Adjusted EBITDA margin for the three months ended September 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 and disposal
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 $59.2 million to $293.6 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022,
predominantly attributable to the previously described change in revenue. Adjusted EBITDA margin was 26.9% for the nine months ended September
30, 2023, an increase of 140 basis points as compared to the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2023. The incremental revenue
from acquisitions contributed Adjusted EBITDA margins lower than the existing base business, negatively impacting the overall Adjusted
EBITDA margin.
Corporate
Corporate costs increased
by $15.0 million to $61.4 million for the three months ended September 30, 2023, compared to the three months ended September 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 3.2% for the three months ended September 30, 2023, an increase of 70 basis points compared to the
three months ended September 30, 2022.
Corporate
costs increased by $49.8 million to $182.8 million for the nine months ended September 30, 2023 compared to the nine months
ended September 30, 2022. The increase was primarily attributable to information technology infrastructure investments, including salaries,
benefits and third party costs required to facilitate moving from on-premise infrastructure to cloud-based infrastructure. Additional
headcount and overhead costs to support the growth in the business also contributed to the increase. Corporate costs as a percentage
of total revenue were 3.2% for the nine months ended September 30, 2023, an increase of 50 basis points compared to the nine months ended
September 30, 2022.
4. Liquidity and Capital Resources
We intend to meet our currently
anticipated capital requirements through cash flows from operations and borrowing capacity under our Revolving Credit Facility (defined
below). We expect that these sources will be sufficient to meet our current operating capital needs, pay our dividends and fund certain
tuck-in acquisitions consistent with our strategy.
Cash Flows
Cash flows for the three and nine months ended September 30,
2023 compared to the three and nine months ended September 30, 2022
| |
Three months ended | | |
Three months ended | | |
Change | |
($ millions) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
Cash flows from operating activities | |
$ | 125.8 | | |
$ | 286.1 | | |
$ | (160.3 | ) | |
| (56.0 | )% |
Cash flows used in investing activities | |
| (638.0 | ) | |
| (334.7 | ) | |
| (303.3 | ) | |
| (90.6 | ) |
Cash flows from financing activities | |
| 604.9 | | |
| 67.7 | | |
| 537.2 | | |
| 793.5 | |
Increase in cash | |
| 92.7 | | |
| 19.1 | | |
| | | |
| | |
Changes due to foreign exchange revaluation of cash | |
| (0.7 | ) | |
| (12.3 | ) | |
| | | |
| | |
Cash, beginning of period | |
| 82.2 | | |
| 230.6 | | |
| | | |
| | |
Cash, end of period | |
$ | 174.2 | | |
$ | 237.4 | | |
| | | |
| | |
| |
Nine months ended | | |
Nine months ended | | |
Change | |
($ millions) | |
September 30, 2023 | | |
September 30, 2022 | | |
$ | | |
% | |
Cash flows from operating activities | |
$ | 579.0 | | |
$ | 693.3 | | |
$ | (114.3 | ) | |
| (16.5 | )% |
Cash flows from (used in) investing activities | |
| 198.6 | | |
| (1,329.9 | ) | |
| 1,528.5 | | |
| 114.9 | |
Cash flows (used in) from financing activities | |
| (683.3 | ) | |
| 719.5 | | |
| (1,402.8 | ) | |
| (195.0 | ) |
Increase in cash | |
| 94.3 | | |
| 82.9 | | |
| | | |
| | |
Changes due to foreign exchange revaluation of cash | |
| (2.2 | ) | |
| (35.9 | ) | |
| | | |
| | |
Cash, beginning of period | |
| 82.1 | | |
| 190.4 | | |
| | | |
| | |
Cash, end of period | |
$ | 174.2 | | |
$ | 237.4 | | |
| | | |
| | |
Operating Activities
Cash flows from operating
activities decreased by $160.3 million to $125.8 million for the three months ended September 30, 2023, compared to $286.1 million for
the three months ended September 30, 2022. This decrease was predominantly attributable to $248.6 million of incremental cash taxes paid
as a result of the divestitures and $21.6 million of incremental cash interest paid on outstanding long-term debt due largely to the cadence
of cash interest payments. Partially offsetting this decrease was an increase in EBITDA for the three months ended September 30, 2023
and improved working capital of $53.7 million.
Changes in non-cash working
capital items resulted in a source of cash of $12.9 million for the three months ended September 30, 2023, compared to a use of cash of
$40.8 million for the three months ended September 30, 2022. Refer to Note 14 in our Interim Financial Statements for details.
Cash
flows from operating activities decreased by $114.3 million to $579.0 million for the nine months ended
September 30, 2023, compared to $693.3 million for the nine months ended September 30, 2022.
This decrease was predominantly attributable to $248.6 million of incremental cash taxes paid as a result of the divestitures and $114.6
million of incremental cash interest paid on outstanding long-term debt due to the cadence of cash interest payments. Partially offsetting
this decrease was an increase in EBITDA for the nine months ended September 30, 2023 and improved working capital of $31.6 million.
Changes in non-cash working
capital items resulted in a use of cash of $169.6 million for the nine months ended September 30, 2023, compared to a use of cash of $201.2
million for the nine months ended September 30, 2022. Refer to Note 14 in our Interim Financial Statements for details.
Investing Activities
Cash flows used in investing
activities increased by $303.3 million to $638.0 million for the three months ended September 30, 2023, compared to the three months ended
September 30, 2022. The increase was predominantly related to acquisition expenditures which increased by $252.8 million to $392.3 million
and an increase in capital expenditures of $68.7 million to $276.3 million. Partially offsetting this was proceeds on disposal of assets
which increased by $28.1 million to $30.6 million.
Cash flows from investing
activities increased by $1,528.5 million to $198.6 million for the nine months ended September 30, 2023, compared to cash flows used in
investing activities of $1,329.9 million for the nine months ended September 30, 2022. The increase was predominantly related to proceeds
from divestitures which increased by $1,326.2 million to $1,645.9 million, proceeds of disposals of assets and other which increased by
$42.1 million to $51.0 million and acquisition expenditures which decreased by $454.3 million to $674.7 million. Partially offsetting
this was an increase in capital expenditures of $294.1 million to $823.6 million, primarily driven by timing of payments.
Financing Activities
Cash flows from financing
activities increased by $537.2 million to $604.9 million for the three months ended September 30, 2023, compared to the three months ended
September 30, 2022. The increase was primarily the result of a $542.1 million increase in the net change in long-term debt and a decrease
of $14.8 million due to a repayment of Amortizing Notes in the prior period. Partially offsetting this was an incremental $10.5 million
of financing costs.
Cash flows used in financing
activities increased by $1,402.8 million to $683.3 million for the nine months ended September 30, 2023, compared to cash flows from financing
activities of $719.5 million for the nine months ended September 30, 2022. The increase was primarily the result of a $1,422.9 million
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 and an $8.1 million contribution from a non-controlling
interest.
Available Sources of Liquidity
Under our amended and restated
revolving credit agreement dated as of August 17, 2023 (the “Revolving Credit Agreement”), as at September 30, 2023,
we have 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 September 30, 2023,
we had $622.0 million 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 September 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 September 30, 2023 | | |
As at December 31, 2022 | |
Cash on hand | |
$ | 174.2 | | |
$ | 82.1 | |
Amounts available under our Revolving Credit Facility(1) | |
| 439.5 | | |
| 301.8 | |
| |
$ | 613.7 | | |
$ | 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 September 30, 2023 are shown in the following table.
($ millions) | |
Total | | |
Less than 1 year | | |
1-3 year | | |
4-5 year | | |
Thereafter | |
Long-term debt | |
$ | 8,534.2 | | |
$ | — | | |
$ | 3,087.0 | | |
$ | 3,689.6 | | |
$ | 1,757.6 | |
Interest on long-term debt | |
| 1,694.4 | | |
| 451.3 | | |
| 811.7 | | |
| 369.4 | | |
| 62.0 | |
Lease obligations | |
| 583.0 | | |
| 76.4 | | |
| 200.1 | | |
| 69.6 | | |
| 236.9 | |
Other | |
| 321.8 | | |
| — | | |
| — | | |
| 321.8 | | |
| — | |
| |
$ | 11,133.4 | | |
$ | 527.7 | | |
$ | 4,098.8 | | |
$ | 4,450.4 | | |
$ | 2,056.5 | |
Other Commitments
We had letters of credit
totaling approximately $244.9 million outstanding as at September 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 September 30, 2023,
we had issued performance bonds totaling $1,641.5 million ($1,560.7 million as at December 31, 2022).
5. Summary of Quarterly Results
The following table summarizes
the results of our operations for the eight most recently completed quarters:
| |
30-Sep | | |
30-Jun | | |
31-Mar | | |
31-Dec | | |
30-Sep | | |
30-Jun | | |
31-Mar | | |
31-Dec | |
($ millions except per share amounts) | |
2023 | | |
2023 | | |
2023 | | |
2022 | | |
2022 | | |
2022 | | |
2022 | | |
2021 | |
Financial Summary | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenue | |
$ | 1,890.0 | | |
$ | 1,943.6 | | |
$ | 1,799.1 | | |
$ | 1,821.2 | | |
$ | 1,831.2 | | |
$ | 1,707.5 | | |
$ | 1,401.4 | | |
$ | 1,439.6 | |
Adjusted EBITDA(1) | |
| 530.3 | | |
| 540.7 | | |
| 440.5 | | |
| 439.8 | | |
| 473.3 | | |
| 453.3 | | |
| 354.4 | | |
| 375.8 | |
Net income (loss) from continuing operations | |
| 18.3 | | |
| 293.8 | | |
| (217.8 | ) | |
| (219.1 | ) | |
| (183.7 | ) | |
| 82.6 | | |
| 137.0 | | |
| (81.7 | ) |
Earnings (loss) per share, basic | |
| — | | |
| 0.74 | | |
| (0.66 | ) | |
| (0.66 | ) | |
| (0.55 | ) | |
| 0.17 | | |
| 0.32 | | |
| (0.26 | ) |
Earnings (loss) per share, diluted | |
| — | | |
| 0.72 | | |
| (0.66 | ) | |
| (0.66 | ) | |
| (0.55 | ) | |
| 0.17 | | |
| 0.32 | | |
| (0.26 | ) |
| (1) | Adjusted EBITDA is a non-IFRS measure. Refer to section entitled “Non-IFRS Financial Measures and
Key Performance Indicators” |
Over the last eight quarters
our results were primarily impacted by our pricing initiatives, cost controls and overall operating leverage 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 September 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 | |
$ | — | | |
$ | 5,557.4 | | |
$ | — | | |
$ | — | | |
$ | 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 nine months ended September 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 September 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 $8.7 million as at September 30, 2023 ($14.5 million as at December 31, 2022).
For
the three and nine months ended September 30, 2023, we paid $2.4 million and $6.4 million ($1.6
million and $4.0 million for the three and nine months ended September 30, 2022) in aggregate
lease payments to related parties.
For the three
and nine months ended September 30, 2023, we entered into transactions with GIP which
resulted in revenue of $6.3 million and $18.3 million ($10.2
million and $13.9 million for the three and nine months
ended September 30, 2022) and net receivables of $12.8 million as at September 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 September 30, 2023,
we had 358,172,019 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 September 30, 2023,
(a) the Series A Preferred Shares are convertible into 29,336,547 subordinate voting shares, at a conversion price of US$25.19, representing
7.4% of the issued and outstanding subordinate voting shares and 5.7% of the aggregate outstanding voting rights, and (b) the Series B
Preferred Shares are convertible into 7,602,238 subordinate voting shares, at a conversion price of US$43.90, 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 nine months
ended September 30, 2023 and September 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 September 30, 2023 | | |
Nine months ended September 30, 2023 | | |
Year ended December 31, 2022 | |
Amortization of landfill airspace ($ millions) | |
$ | 61.8 | | |
$ | 195.9 | | |
$ | 294.6 | |
Tonnes received (millions of tonnes) | |
| 5.1 | | |
| 15.3 | | |
| 22.2 | |
Average landfill amortization per tonne | |
$ | 12.1 | | |
$ | 12.8 | | |
$ | 13.3 | |
The amortization of landfill
airspace for the three and nine months ended September 30, 2023 did not include the $4.8 million ($7.8 million for the year ended December
31, 2022) of amortization related to the difference between the ARO calculated using the credit-adjusted, risk-free discount rate required
for measurement of the ARO through purchase accounting, compared to the risk-free discount rate required for annual valuations. The accounting
adjustment does not impact the economics of the average landfill amortization per tonne.
Landfill Capacity and Depletion
As of September 30, 2023,
we had 330.0 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 September 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 506.7 million tonnes (494.9 million tonnes as of December 31, 2022). Based on total capacity as of September 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 (loss) from continuing operations to EBITDA and Adjusted EBITDA for the periods indicated:
($ millions) | |
Three months ended September 30, 2023 | | |
Three months ended September 30, 2022 | |
Net income (loss) from continuing operations | |
$ | 18.3 | | |
$ | (183.7 | ) |
Add: | |
| | | |
| | |
Interest and other finance costs | |
| 137.2 | | |
| 136.2 | |
Depreciation of property and equipment | |
| 242.3 | | |
| 264.0 | |
Amortization of intangible assets | |
| 106.9 | | |
| 124.2 | |
Income tax recovery | |
| (18.0 | ) | |
| (75.8 | ) |
EBITDA | |
| 486.7 | | |
| 264.9 | |
Add: | |
| | | |
| | |
Loss on foreign exchange(1) | |
| 46.9 | | |
| 195.3 | |
Gain on sale of property and equipment | |
| (6.7 | ) | |
| (5.7 | ) |
Mark-to-market gain on Purchase Contracts(2) | |
| — | | |
| (10.3 | ) |
Share of net income of investments accounted for using the equity method | |
| (34.0 | ) | |
| (9.2 | ) |
Share-based payments(3) | |
| 26.5 | | |
| 13.4 | |
Loss on divestiture(4) | |
| — | | |
| 1.6 | |
Transaction costs(5) | |
| 22.3 | | |
| 13.6 | |
Acquisition, rebranding and other integration costs(6) | |
| 3.8 | | |
| 6.3 | |
Other | |
| (15.2 | ) | |
| 3.4 | |
Adjusted EBITDA | |
$ | 530.3 | | |
$ | 473.3 | |
($ millions) | |
Nine months ended September 30, 2023 | | |
Nine months ended September 30, 2022 | |
Net income from continuing operations | |
| 94.3 | | |
| 35.9 | |
Add: | |
| | | |
| | |
Interest and other finance costs | |
| 466.7 | | |
| 340.7 | |
Depreciation of property and equipment | |
| 719.9 | | |
| 732.1 | |
Amortization of intangible assets | |
| 379.7 | | |
| 382.1 | |
Income tax expense (recovery) | |
| 178.8 | | |
| (145.5 | ) |
EBITDA | |
| 1,839.4 | | |
| 1,345.3 | |
Add: | |
| | | |
| | |
(Gain) loss on foreign exchange(1) | |
| (4.6 | ) | |
| 249.3 | |
Gain on sale of property and equipment | |
| (13.1 | ) | |
| (10.1 | ) |
Mark-to-market loss (gain) on Purchase Contracts(2) | |
| 104.3 | | |
| (391.4 | ) |
Share of net loss (income) of investments accounted for using the equity method | |
| 48.9 | | |
| (14.5 | ) |
Share-based payments(3) | |
| 56.7 | | |
| 38.2 | |
Gain on divestiture(4) | |
| (580.5 | ) | |
| (4.9 | ) |
Transaction costs(5) | |
| 63.9 | | |
| 36.9 | |
Acquisition, rebranding and other integration costs(6) | |
| 14.0 | | |
| 19.7 | |
Other | |
| (17.5 | ) | |
| 12.5 | |
Adjusted EBITDA | |
$ | 1,511.5 | | |
$ | 1,281.0 | |
| (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 payments
granted to certain members of management under share-based payment 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 September 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).
5.2 N/A
5.3 N/A
| 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 September 30, 2023 that has materially
affected, or is reasonably likely to materially affect, the issuer's ICFR. |
Date: November 3, 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 September 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).
5.2 N/A
5.3 N/A
| 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 September 30, 2023 that has materially
affected, or is reasonably likely to materially affect, the issuer's ICFR. |
Date: November 3, 2023
By: |
/s/ Luke Pelosi |
|
|
Luke Pelosi |
|
|
Chief Financial Officer |
|
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