Form 6-K GFL Environmental Inc. For: May 06

 

 

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 May 2021

 

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 x              Form 40-F ¨

 

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

 

Exhibit Number		Description
99.1		Unaudited Interim Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021
99.2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three Months Ended March 31, 2021
99.3		Certification of Chief Executive Officer
99.4		Certification of Chief Financial Officer

 

 

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:  May 6, 2021	Title:	Executive Vice President and General Counsel

 

 

Exhibit 99.1

 

GFL Environmental Inc.

 

Unaudited Interim Condensed

Consolidated Financial Statements

For the three months ended March 31, 2021

 

 

GFL Environmental Inc.

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss

(In millions of dollars except per share amounts)

  

						Three months ended March 31,
		Notes				2021				2020
Revenue			11			$	1,186.6			$	931.3
Expenses
Cost of sales							1,086.7				852.3
Selling, general and administrative expenses							133.2				155.1
Interest and other finance costs			8				92.1				269.4
Deferred purchase consideration							—				1.0
Loss on sale of property and equipment							0.8				1.6
(Gain) loss on foreign exchange							(39.0	)			106.0
Mark-to-market loss (gain) on Purchase Contracts							228.3				(88.4	)
							1,502.1				1,297.0
Loss before income taxes							(315.5	)			(365.7	)
Current income tax expense							2.0				1.7
Deferred tax recovery							(91.3	)			(89.4	)
Income tax recovery							(89.3	)			(87.7	)
Net loss							(226.2	)			(278.0	)
Items that may be subsequently reclassified to net loss
Currency translation adjustment							(76.8	)			277.8
Fair value movements on cash flow hedges, net of tax							(5.8	)			14.4
Other comprehensive (loss) income							(82.6	)			292.2
Total comprehensive (loss) income						$	(308.8	)		$	14.2
Loss per share
Basic and diluted			10			$	(0.66	)		$	(0.77	)

 

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				March 31, 2021				December 31, 2020
Assets
Cash						$	11.1			$	27.2
Trade and other receivables, net							816.1				867.3
Prepaid expenses and other assets							135.6				133.7
Current assets							962.8				1,028.2
Property and equipment, net			4				5,052.3				5,074.8
Intangible assets, net			5				2,994.5				3,093.4
Other long-term assets			6				35.8				33.2
Goodwill			5				6,463.7				6,500.4
Non-current assets							14,546.3				14,701.8
Total assets							15,509.1				15,730.0
Liabilities
Accounts payable and accrued liabilities							950.0				1,014.8
Income taxes payable							11.9				9.1
Long-term debt			7				17.0				4.6
Lease obligations							39.8				37.5
Due to related party			17				12.8				12.8
Tangible equity units			9				54.8				59.2
Landfill closure and post-closure obligations			6				61.5				55.3
Current liabilities							1,147.8				1,193.3
Long-term debt			7				6,203.6				6,161.5
Lease obligations							142.0				153.7
Other long-term liabilities							35.6				37.2
Due to related party			17				24.4				30.8
Deferred income tax liabilities							369.3				466.0
Tangible equity units			9				1,517.2				1,327.9
Landfill closure and post-closure obligations			6				677.6				680.3
Non-current liabilities							8,969.7				8,857.4
Total liabilities							10,117.5				10,050.7
Shareholders’ equity
Share capital			13				7,660.4				7,644.8
Contributed surplus			13				64.0				54.3
Deficit							(2,008.7	)			(1,778.3	)
Accumulated other comprehensive loss							(324.1	)			(241.5	)
Total shareholders’ equity							5,391.6				5,679.3
Total liabilities and shareholders’ equity						$	15,509.1			$	15,730.0

 

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)

 

																						Accumulated other comprehensive income (loss)
		Notes				Share capital - # of shares(1)				Share capital				Contributed surplus				Deficit				Cash flow hedges, net of tax				Currency translation				Total				Total shareholder equity
Balance, December 31, 2019							180,794,203			$	3,524.5			$	16.4			$	(770.3	)		$	27.6			$	(30.4	)		$	(2.7	)		$	2,767.9
Net loss and comprehensive loss							—				—				—				(278.0	)			14.4				277.8				292.2				14.2
Return of capital							—				(0.8	)			—				—				—				—				—				(0.8	)
Share capital issued upon acquisition of subsidiary							3,092,118				78.4				—				—				—				—				—				78.4
Share capital issued, net of cancelled shares							142,525,526				3,303.1				—				—				—				—				—				3,303.1
Share issuance costs							—				(45.5	)			—				—				—				—				—				(45.5	)
Share-based payments			13				—				—				15.7				—				—				—				—				15.7
Balance, March 31, 2020							326,411,847			$	6,859.7			$	32.1			$	(1,048.3	)		$	42.0			$	247.4			$	289.5			$	6,133.0
Balance, December 31, 2020							354,934,813			$	7,644.8			$	54.3			$	(1,778.3	)		$	16.3			$	(257.8	)		$	(241.5	)		$	5,679.3
Net loss and comprehensive loss							—				—				—				(226.2	)			(5.8	)			(76.8	)			(82.6	)			(308.8	)
Dividends issued and paid							—				—				—				(4.2	)			—				—				—				(4.2	)
Cancelled shares							(4,069	)			(0.1	)			—				—				—				—				—				(0.1	)
Shares issued on TEU conversion							328,951				13.7				—				—				—				—				—				13.7
Share capital issued upon acquisition of subsidiary			3				46,966				2.0				—				—				—				—				—				2.0
Share-based payments			13				—				—				9.7				—				—				—				—				9.7
Balance, March 31, 2021							355,306,661			$	7,660.4			$	64.0			$	(2,008.7	)		$	10.5			$	(334.6	)		$	(324.1	)		$	5,391.6

 

(1) Number of shares has been retrospectively adjusted for share split completed in conjunction with the pre-capital closing changes implemented as part of our IPO.

 

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 March 31,
		Notes				2021				2020
Operating activities
Net loss						$	(226.2	)		$	(278.0	)
Adjustments for non-cash items
Depreciation of property and equipment			4				203.6				122.7
Amortization of intangible assets			5				111.0				99.1
Interest and other finance costs							92.1				269.4
Share-based payments			13				9.7				15.7
(Gain) loss on unrealized foreign exchange on long-term debt and TEUs							(38.9	)			112.3
Loss on sale of property and equipment							0.8				1.6
Mark-to-market loss (gain) on Purchase Contracts							228.3				(88.4	)
Mark-to-market loss on fuel hedges							—				1.2
Current income tax expense							2.0				1.7
Deferred tax recovery							(91.3	)			(89.4	)
Interest paid in cash, net							(42.0	)			(159.7	)
Income taxes paid in cash, net							(0.2	)			(3.2	)
Changes in non-cash working capital items			14				(34.1	)			(54.0	)
Landfill closure and post-closure expenditures			6				(2.1	)			(1.2	)
							212.7				(50.2	)
Investing activities
Proceeds on disposal of assets							3.8				0.4
Purchase of property and equipment and intangible assets							(131.3	)			(100.1	)
Business acquisitions, net of cash acquired			3				(68.3	)			(1,126.0	)
							(195.8	)			(1,225.7	)
Financing activities
Repayment of lease obligations							(14.8	)			(31.3	)
Issuance of long-term debt							447.4				815.7
Repayment of long-term debt							(418.5	)			(4,317.1	)
Payment of contingent purchase consideration			3				(15.0	)			—
Issuance of share capital, net of issuance costs							—				3,257.5
Issuance of TEUs, net of issuance costs							—				1,006.9
Repayment of Amortizing Notes							(13.5	)			—
Dividends issued and paid							(4.2	)			—
Return of capital							—				(0.8	)
Payment of financing costs							(3.7	)			(0.3	)
Issuance of loan from related party							—				29.0
Repayment of loan to related party							(6.4	)			—
							(28.7	)			759.6
Decrease in cash							(11.8	)			(516.3	)
Changes due to foreign exchange revaluation of cash							(4.3	)			32.9
Cash, beginning of quarter							27.2				574.8
Cash, end of quarter						$	11.1			$	91.4

  

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

1.	DESCRIPTION OF THE BUSINESS

 

GFL Environmental Inc. (“GFL” or the “Company”) was formed on March 5, 2020 under the laws of the Province of Ontario as a result of the amalgamation of GFL Environmental Inc. and its parent company GFL Environmental Holdings Inc. The amalgamation was accounted for as a transaction between entities under common control and the net assets are recorded at historical cost retrospectively. Upon amalgamation, GFL became the financial reporting entity. Concurrently with the amalgamation, GFL completed an initial public offering of subordinate voting shares and tangible equity units (“TEUs”) (collectively, the “IPO”). GFL’s subordinate voting shares trade on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “GFL” and the TEUs trade on the New York Stock Exchange under the symbol “GFLU”.

 

GFL is in the business of providing non-hazardous solid waste management, infrastructure and soil remediation services and liquid waste management services. These services are provided through GFL and its wholly owned 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.

 

The unaudited interim condensed consolidated financial statements (the “Interim Financial Statements”) include the accounts of GFL and its subsidiaries as of March 31, 2021.

 

The Board of Directors approved these Interim Financial Statements on May 5, 2021.

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Statement of compliance

 

The Interim Financial Statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, within the framework of International Financial Reporting Standard (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

 

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 audited consolidated financial statements for the year ended December 31, 2020 (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, except as described below.

 

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

Changes in Accounting Policies

 

Interest Rate Benchmark Reform - Phase 2

 

The IASB has published Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) with amendments that address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates. The amendments are effective for annual reporting periods beginning on or after January 1, 2021. GFL assessed the revised impact of the amendments and concluded that they had no impact on the Interim Financial Statements.

 

Reclassification of Prior Period Presentation

 

Certain operating segment and line of business information reported in prior periods has been reclassified for consistency with the current period presentation.

 

For the three months ended June 30, 2020, GFL reclassified certain IPO related foreign exchange balances in the statement of cash flows relating to the three months ended March 31, 2020. Cash flows used in operating activities increased and changes due to foreign exchange revaluation of cash decreased by $41.1 million, respectively.

 

3.

BUSINESS COMBINATIONS

 

For the three months ended March 31, 2021, GFL acquired four solid waste management businesses, one liquid waste management business and one infrastructure business, each of which GFL considers to be individually immaterial.

 

The table below presents the purchase price allocation based on the best information available to GFL to date:

 

		Three months ended March 31, 2021
Net working capital, including cash acquired of $2.4 million		$	5.5
Property and equipment, net			9.9
Right-of-use assets			1.8
Intangible assets, net
Customer lists and municipal contracts			18.3
Non-compete agreements			9.6
Other long-term assets			0.6
Goodwill			31.3
Lease obligations			(1.8	)
Other long-term liabilities			(0.5	)
Deferred income tax liabilities			(2.0	)
Net assets acquired		$	72.7
Share consideration issued		$	2.0
Cash			70.7
Consideration		$	72.7

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

In addition to the cash consideration noted above, during the three months ended March 31, 2021, GFL paid $15.0 million in additional consideration related to acquisitions from prior years.

 

As of March 31, 2021, GFL has not completed the purchase price allocation relating to certain acquisitions completed in the previous twelve months. Information to confirm the fair value of certain assets and liabilities of certain acquisitions remains outstanding. GFL expects to finalize these amounts no later than one year from the respective acquisition dates. There may be differences between these provisional estimates and the final acquisition accounting.

 

During the three months ended March 31, 2021, GFL finalized the purchase price allocation for the acquisitions that occurred in the three months ended March 31, 2020, and revised the purchase price allocation for certain other acquisitions completed in the twelve month period ended March 31, 2021. The net adjustments resulted in an increase in property and equipment of $17.7 million, an increase in other non-current assets of $3.1 million, an increase in landfill closure and post-closure obligations of $1.6 million, and a decrease in goodwill of $19.2 million.

 

Approximately $24.5 million of the goodwill acquired in 2021 is expected to be deductible for tax purposes.

 

Since the respective acquisition dates, revenue and net income before tax of approximately $5.1 million and $1.0 million, respectively, attributable to the 2021 acquisitions are included in the Interim Financial Statements.

 

Pro forma results of operations

 

If the 2021 acquisitions had occurred on January 1, 2021, the unaudited consolidated pro forma revenue and net loss before taxes for the three months ended March 31, 2021 would have been $1,191.7 million and $314.5 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.

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed 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, building and improvements				Landfills				Vehicles				Machinery and equipment				Assets under development				Containers				Right-of-use assets				Total
Cost
Balance, December 31, 2020		$	1,246.3			$	1,706.1			$	1,631.4			$	912.7			$	83.3			$	406.7			$	203.5			$	6,190.0
Additions			13.8				8.1				64.2				29.1				13.4				13.6				58.1				200.3
Acquisitions via business combinations			0.9				—				4.9				3.0				—				1.1				1.8				11.7
Adjustments for prior year acquisitions			—				14.8				2.2				0.7				—				—				—				17.7
Disposals			(1.5	)			—				(5.8	)			(0.9	)			—				(0.5	)			—				(8.7	)
Transfers			0.5				(1.4	)			3.6				(2.2	)			(0.7	)			0.2				—				—
Changes in foreign exchange			(9.6	)			(20.1	)			(13.1	)			(5.4	)			(0.4	)			(4.7	)			(0.7	)			(54.0	)
Balance, March 31, 2021			1,250.4				1,707.5				1,687.4				937.0				95.6				416.4				262.7				6,357.0
Accumulated depreciation
Balance, December 31, 2020			58.0				265.7				411.8				226.9				—				98.6				54.2				1,115.2
Depreciation			12.5				48.9				72.2				41.0				—				19.0				10.0				203.6
Disposals			(0.2	)			—				(2.9	)			(0.2	)			—				(0.4	)			—				(3.7	)
Changes in foreign exchange			(0.4	)			(4.1	)			(3.4	)			(1.1	)			—				(1.1	)			(0.3	)			(10.4	)
Balance, March 31, 2021			69.9				310.5				477.7				266.6				—				116.1				63.9				1,304.7
Carrying amounts
At December 31, 2020		$	1,188.3			$	1,440.4			$	1,219.6			$	685.8			$	83.3			$	308.1			$	149.3			$	5,074.8
At March 31, 2021		$	1,180.5			$	1,397.0			$	1,209.7			$	670.4			$	95.6			$	300.3			$	198.8			$	5,052.3

 

During the three months ended March 31, 2021, GFL finalized and revised the preliminary purchase price allocation for certain acquisitions which resulted in an increase in property and equipment of $17.7 million.

 

For the three months ended March 31, 2021, total depreciation of property and equipment was $203.6 million ($122.7 million for the three months ended March 31, 2020). Of that amount, $196.0 million was included in cost of sales ($116.8 million for the three months ended March 31, 2020) and $7.6 million was included in selling, general and administrative expenses ($5.9 million for the three months ended March 31, 2020).

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed 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, 2020		$	6,500.4			$	641.4			$	2,844.6			$	81.8			$	397.5			$	10,465.7
Acquisitions via business combinations			31.3				—				18.3				—				9.6				59.2
Adjustments for prior year acquisitions			(19.2	)			—				—				—				—				(19.2	)
Changes in foreign exchange			(48.8	)			(0.6	)			(15.4	)			(1.0	)			(3.3	)			(69.1	)
Balance, March 31, 2021			6,463.7				640.8				2,847.5				80.8				403.8				10,436.6
Accumulated amortization
Balance, December 31, 2020			—				—				738.0				12.9				121.0				871.9
Amortization			—				—				88.7				2.0				20.3				111.0
Changes in foreign exchange			—				—				(3.5	)			(0.2	)			(0.8	)			(4.5	)
Balance, March 31, 2021			—				—				823.2				14.7				140.5				978.4
Carrying amounts
At December 31, 2020		$	6,500.4			$	641.4			$	2,106.6			$	68.9			$	276.5			$	9,593.8
At March 31, 2021		$	6,463.7			$	640.8			$	2,024.3			$	66.1			$	263.3			$	9,458.2

 

All intangible asset amortization expense is included in cost of sales.

 

During the three months ended March 31, 2021, GFL finalized and revised the preliminary purchase price allocation for certain acquisitions which resulted in a decrease in goodwill of $19.2 million.

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed 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, 2020		$	735.6
Adjustment related to prior year acquisitions (Note 3)			1.6
Provisions			7.8
Accretion			4.4
Expenditures			(2.1	)
Changes in foreign exchange			(8.2	)
Balance, March 31, 2021			739.1
Less: Current portion of landfill closure and post-closure obligations			(61.5	)
Non-current portion of landfill closure and post-closure obligations		$	677.6

 

The maturation of GFL’s landfill closure and post-closure obligations has not materially changed since December 31, 2020.

 

Funded landfill post-closure assets

 

GFL is required to deposit funds into trusts to settle post closure costs for landfills in certain jurisdictions. As at March 31, 2021, included in other long-term assets are funded landfill post closure obligations, representing the fair value of legally restricted assets, totaling $22.1 million ($19.3 million as at December 31, 2020).

 

7.

LONG-TERM DEBT

 

The following table presents GFL’s long-term debt for the periods indicated:

 

		March 31, 2021				December 31, 2020
Revolving credit facility		$	243.9			$	148.8
Term loan facility			1,646.9				1,671.6
Notes
4.250% USD senior secured notes (“4.250% 2025 Secured Notes”)(1)			628.8				636.6
3.750% USD senior secured notes  (“3.750% 2025 Secured Notes”)(2)			943.1				954.9
5.125% USD senior secured notes  (“5.125% 2026 Secured Notes”)(3)			628.8				636.6
8.500% USD senior unsecured notes, (“8.500% 2027 Notes”)(4)			452.7				458.4
4.000% senior unsecured notes, (“4.000% 2028 Notes”)(5)			628.8				636.6
3.500% USD senior secured notes  (“3.500% 2028 Secured Notes”)(6)			943.1				954.9
Equipment loans and others at interest rates ranging from 3.02% to 4.37%			5.0				9.2
Subtotal			6,121.1				6,107.6
Fair value adjustment and premium on notes			(5.1	)			(5.4	)
Net derivative instruments on notes			163.9				122.3
Deferred finance costs			(59.3	)			(58.4	)
Total long-term debt			6,220.6				6,166.1
Less: Current portion of long-term debt			(17.0	)			(4.6	)
Total non-current long-term debt of long term-debt		$	6,203.6			$	6,161.5

 

(1) The 4.250% 2025 Secured Notes bear interest semi-annually which commenced December 1, 2020 with the principal maturing on June 1, 2025.

(2) The 3.750% 2025 Secured Notes bear interest semi-annually which commenced February 1, 2021 with the principal maturing on August 1, 2025.

(3) The 5.125% 2026 Secured Notes bear interest semi-annually which commenced on December 15, 2019 with principal maturing on December 15, 2026.

(4) The 8.500% 2027 Notes bear interest semi-annually which commenced on May 1, 2019 with principal maturing on May 1, 2027.

(5) The 4.000% 2028 Notes bear interest semi-annually which commenced February 1, 2021 with principal maturing on August 1, 2028.

(6) The 3.500% 2028 Secured Notes bear interest semi-annually commencing September 1, 2021 with principal maturing on September 1, 2028.

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

GFL has a Term Loan facility totaling US$1,309.7 million, which matures on May 31, 2025 and bears interest at a rate of LIBOR (with a floor rate at 0.500%) plus 3.000% or US prime plus 2.000%.

 

Under our Sixth Amended and Restated Credit Agreement, dated November 24, 2020 (the “Revolving Credit Agreement”), we have access to (i) a $628.0 million revolving credit facility (available in Canadian and US dollars), and (ii) an aggregate US$40.0 million in revolving credit facilities (available in US dollars) (collectively, the “Revolving Credit Facility”) as well as a $120.0 million letter of credit facility (available in Canadian and US dollars). As at March 31, 2021, we had $243.9 million drawn under the Revolving Credit Facility ($148.8 million as at December 31, 2020).

 

Our Revolving Credit Facility contains a financial maintenance covenant. The covenant (which applies only when the Revolving Credit Facility is drawn at or above 35% of the Revolving Credit Facility limit) is a ratio of Total Net Funded Debt to Adjusted EBITDA (each as defined in the Revolving Credit Agreement) equal to or less than 8.00 to 1.00. As at March 31, 2021 and December 31, 2020, we were in compliance with this covenant.

 

The Revolving Credit Facility matures on November 24, 2024. We have no other material long-term debt maturities until May 31, 2025.

 

8.	INTEREST AND OTHER FINANCE COSTS

 

The following table presents GFL’s interest and other finance costs for the periods indicated:

 

		March 31, 2021				March 31, 2020
Interest		$	77.1			$	112.2
Loss on extinguishment of debt			—				133.2
Amortization of deferred finance costs			3.4				19.7
Accretion of landfill closure and post-closure obligations			4.4				1.6
Other finance costs			7.2				2.7
Interest and other finance costs		$	92.1			$	269.4

 

9.

TANGIBLE EQUITY UNITS

 

Each TEU has a stated amount of US$50.00, is 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 are freestanding instruments and separate units of account.

 

The following table presents the respective components of the TEUs for the periods indicated:

 

		March 31, 2021				December 31, 2020
Amortizing Notes		$	108.4			$	123.4
Purchase Contracts			1,463.6				1,263.7
			1,572.0				1,387.1
Less: Current portion of Amortizing Notes			(54.8	)			(59.2	)
Non-current portion of Amortizing Notes and Purchase Contracts		$	1,517.2			$	1,327.9

 

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

10.

LOSS PER SHARE

 

The following table presents GFL’s loss per share for the periods indicated:

 

		Three months ended March 31,
		2021				2020
Net loss		$	(226.2	)		$	(278.0	)
Less amounts attributable to preferred shareholders			13.3				—
Adjusted net loss		$	(239.5	)		$	(278.0	)
Weighted and diluted weighted average number of shares outstanding(1)			360,377,813				360,412,254
Basic and diluted loss per share		$	(0.66	)		$	(0.77	)

 

(1)

Weighted and diluted weighted average number of shares outstanding includes 33,662,500 subordinate voting shares, representing the minimum conversion of the TEUs as at March 31, 2021, and 33,991,500 subordinate voting shares, representing the minimum conversion of TEUs as at March 31, 2020.

 

Diluted loss per share includes the minimum conversion of TEUs into subordinate voting shares. Diluted loss per share excludes the 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, as the effect would be anti-dilutive.

 

11.

REVENUE

 

The following table presents GFL’s revenue disaggregated by service type for the periods indicated:

 

		Three months ended March 31,
		2021				2020(1)
Residential		$	287.7			$	238.8
Commercial/industrial			424.0				307.2
Total collection			711.7				546.0
Landfill			139.9				62.8
Transfer			130.1				88.4
Material recovery			80.7				46.3
Other			55.0				52.9
Solid waste			1,117.4				796.4
Infrastructure and soil remediation			111.6				132.2
Liquid waste			104.4				105.0
Intercompany revenue			(146.8	)			(102.3	)
Revenue		$	1,186.6			$	931.3

 

(1) Includes reclassification of $0.3 million from Other into Liquid waste and $0.4 million from Other into Infrastructure and soil remediation.

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

12.

OPERATING SEGMENT REPORTING

 

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 March 31, 2021
		Gross Revenue				Intercompany Revenue				Revenue				Adjusted EBITDA
Solid waste
Canada		$	345.2			$	(42.9	)		$	302.3			$	83.0
USA			772.2				(89.8	)			682.4				222.2
Solid waste			1,117.4				(132.7	)			984.7				305.2
Infrastructure and soil remediation			111.6				(3.2	)			108.4				14.0
Liquid waste			104.4				(10.9	)			93.5				17.1
Corporate			—				—				—				(29.7	)
		$	1,333.4			$	(146.8	)		$	1,186.6			$	306.6

 

		Three months ended March 31, 2020
		Gross Revenue				Intercompany Revenue				Revenue(1)				Adjusted EBITDA(2)
Solid waste
Canada		$	313.5			$	(40.7	)		$	272.8			$	65.9
USA			482.9				(48.0	)			434.9				134.9
Solid waste			796.4				(88.7	)			707.7				200.8
Infrastructure and soil remediation			132.2				(1.5	)			130.7				21.5
Liquid waste			105.0				(12.1	)			92.9				16.9
Corporate			—				—				—				(16.4	)
		$	1,033.6			$	(102.3	)		$	931.3			$	222.8

 

 

(1) Includes reclassification of $0.3 million from Solid waste - Canada into Liquid waste.

(2) Includes reclassification of $0.1 million from Solid waste - Canada into Liquid waste and $0.9 million from Solid waste - USA into Corporate.

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

The following table presents GFL’s reconciliation of Adjusted EBITDA to net loss for the periods indicated:

 

		Three months ended March 31,
		2021				2020
Total segment Adjusted EBITDA		$	306.6			$	222.8
Less:
Depreciation of property and equipment			203.6				122.7
Amortization of intangible assets			111.0				99.1
Interest and other finance costs			92.1				269.4
(Gain) loss on foreign exchange			(39.0	)			106.0
Loss on sale of property and equipment			0.8				1.6
Mark-to-market loss on fuel hedges			—				1.2
Mark-to-market loss (gain) on Purchase Contracts			228.3				(88.4	)
Share-based payments			9.7				15.7
Transaction costs			12.1				11.2
IPO transaction costs			—				41.3
Acquisition, rebranding and other integration costs			3.5				7.7
Deferred purchase consideration			—				1.0
Income tax recovery			(89.3	)			(87.7	)
Net loss		$	(226.2	)		$	(278.0	)

 

Goodwill and indefinite life intangible assets by operating segment

 

The carrying amount of goodwill and indefinite life intangible assets allocated to the operating segments for impairment testing purposes is as follows:

 

		March 31, 2021				December 31, 2020
Solid waste
Canada		$	1,734.5			$	1,734.4
USA			4,696.7				4,738.0
Infrastructure and soil remediation			243.9				240.0
Liquid waste			429.4				429.4
		$	7,104.5			$	7,141.8

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

13.

SHAREHOLDERS' EQUITY

 

a)       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 and (iv) 28,571,428 Series A perpetual convertible preferred shares (the “Preferred Shares”).

 

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, 2020			314,300,421				12,062,964				28,571,428				354,934,813
Issued as partial consideration for acquisitions			46,966				—				—				46,966
Converted from TEUs			328,951				—				—				328,951
Cancelled during the period			(4,069	)			—				—				(4,069	)
Balance, March 31, 2021			314,672,269				12,062,964				28,571,428				355,306,661

 

Contributed surplus

 

The following table presents GFL’s contributed surplus for the periods indicated:

 

Balance, December 31, 2020		$	54.3
Share-based payments			9.7
Balance, March 31, 2021		$	64.0

 

b)       Share options, performance share units, restricted share units (“RSUs”), and deferred share units (“DSUs”)

 

Options

 

For the three months ended March 31, 2021, there were no options granted, exercised or cancelled.

 

For the three months ended March 31, 2021, the total compensation expense related to share options amounted to $3.7 million ($15.7 million for the three months ended March 31, 2020).

 

RSUs and DSUs

 

For the three months ended March 31, 2021, 75,887 RSUs were granted to eligible participants under GFL’s omnibus long-term incentive plan (“LTIP”). None of the RSUs granted have vested.

 

The fair value of the RSUs granted for the three months ended March 31, 2021 was based on the closing price of the subordinate voting shares on the day prior to the grant date. For the three months ended March 31, 2021, the total compensation expense related to RSUs amounted to $5.8 million ($nil for the three months ended March 31, 2020).

 

For the three months ended March 31, 2021, 5,424 DSUs were granted to non-employee directors for compensation under the director deferred share unit plan (“DSU Plan”). For the three months ended March 31, 2021, the total compensation expense related to DSUs amounted to $0.2 million ($nil for the three months ended March 31, 2020).

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

The following table presents GFL’s summary of the status of RSUs and DSUs granted under the LTIP and DSU Plan:

 

		March 31, 2021
		RSUs				Grant date fair value (US$)				DSUs				Grant date fair value (US$)
Outstanding, December 31, 2020			1,522,659			$	19.95				18,248			$	19.92
Granted			75,887				32.29				5,424				29.18
Outstanding, March 31, 2021			1,598,546			$	20.54				23,672			$	22.04
Expected to vest			1,556,270			$	20.54				23,672			$	22.04

 

For the three months ended March 31, 2021, there were no RSUs or DSUs exercised, expired, forfeited, or cancelled.

 

14.

SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table presents net change in non-cash working capital for the periods indicated:

 

		Three months ended March 31,
		2021				2020
Effects of changes in
Accounts payable and accrued liabilities		$	(92.6	)		$	(11.6	)
Trade and other receivables, net			60.9				(22.8	)
Prepaid expenses and other assets			(2.4	)			(19.6	)
		$	(34.1	)		$	(54.0	)

 

15.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

 

GFL’s financial instruments consist of cash and cash equivalent, trade accounts receivable, trade accounts payable, long-term debt, and TEUs.

 

Fair value measurement

 

The carrying value of GFL’s financial assets are equal to their fair values. The carrying value of GFL’s financial liabilities approximate their fair values with the exception of GFL’s outstanding USD secured and unsecured notes (“Notes”). The following tables present the fair value hierarchy for the Notes for the periods indicated:

 

		March 31, 2021
		Carrying Value				Fair Value				Level 1				Level 2				Level 3
Notes		$	4,220.2			$	4,292.8			$	—			$	4,292.8			$	—

 

		December 31, 2020
		Carrying Value				Fair Value				Level 1				Level 2				Level 3
Notes		$	4,272.6			$	4,454.3			$	—			$	4,454.3			$	—

 

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, equipment loans and other, and amounts due to related parties, do not bear interest or bear interest at an amount that is not stated at fair value.

 

Risk management

 

There are no changes in the risk management policies as disclosed in the Annual Financial Statements.

 

 

GFL Environmental Inc. - Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In millions of dollars except per share amounts or otherwise stated)

 

16.

COMMITMENTS

 

a) Letters of credit

 

We had letters of credit totaling approximately $134.5 million outstanding as of March 31, 2021 ($133.8 million as of December 31, 2020), which are not recognized in the Interim Financial Statements.

 

b) Performance bonds

 

As of March 31, 2021, we had issued performance bonds totaling $1,659.2 million ($1,697.4 million as at December 31, 2020), of which approximately $108.5 million ($108.5 million as of December 31, 2020) is secured by a charge on the assets of certain subsidiaries.

 

17.

RELATED PARTY TRANSACTIONS

 

After the payment of the semi-annual instalment of $3.5 million for the three months ended March 31, 2021, the remaining principal outstanding on the note payable to Josaud Holdings Inc. (an affiliate of Patrick Dovigi) was $14.0 million ($17.5 million as at December 31, 2020).

 

After the payment of the semi-annual instalment of $2.9 million for the three months ended March 31, 2021, the remaining principal outstanding on the note payable to Sejosa Holdings Inc. (an affiliate of Patrick Dovigi) was $23.2 million ($26.1 million as at December 31, 2020).

 

For the three months ended March 31, 2021, GFL paid $0.8 million ($0.5 million for the three months ended March 31, 2020) in aggregate lease payments to related parties.

 

18.

SUBSEQUENT EVENTS

 

On April 4, 2021, GFL announced an increase in the regular quarterly cash dividend which increased from US$0.01 per share to US$0.011 per share and was paid on April 30, 2021 to shareholders of record at the close of business on April 19, 2021.

 

Subsequent to March 31, 2021, GFL issued a total of 1,063,606 subordinate voting shares on conversion of 485,000 TEUs.

 

 

 

Exhibit 99.2

 

 

 

GFL ENVIRONMENTAL INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

For the three months ended March 31, 2021

 

The following Management’s Discussion and Analysis (“MD&A”) for GFL Environmental Inc. (“us,” “we,” “our,” “GFL” or the “Company”) is dated May 5, 2021 and provides information concerning our results of operations and financial condition for the three months ended and as at March 31, 2021. You should read this MD&A together with our unaudited interim condensed consolidated financial statements and the related notes for the three months ended March 31, 2021 (the “Interim Financial Statements”), our annual audited consolidated financial statements for the year ended December 31, 2020 (the “Annual Financial Statements”), and our MD&A for the year ended December 31, 2020 (the “Annual MD&A”).

 

Company Overview

 

GFL is the fourth largest diversified environmental services company in North America, with operations throughout Canada and the United States. GFL had more than 15,000 employees as of March 31, 2021.

 

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”. Our tangible equity units (the “TEUs”) trade on the NYSE under the symbol “GFLU”. Each TEU is composed of a prepaid stock purchase contract (a “Purchase Contract”) and a senior amortizing note (an “Amortizing Note”). On March 5, 2020, GFL completed its initial public offering (the “IPO”).

 

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 information and forward-looking statements which reflect the current view of management with respect to our objectives, plans, goals, strategies, outlook, results of operations, financial and operating performance, prospects and opportunities. In some cases, forward-looking statements 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”. 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.

 

These forward-looking statements and other forward-looking information are 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 our annual report on Form 20-F for the year ended December 31, 2020 (the “Annual Report”). There may be additional risks of which we are not presently 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 statements in order to reflect events or circumstances that may change, except where we are expressly required to do so by law.

 

Our business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements. Factors that could cause actual results to differ from those projected include, but are not limited to, the following risk factors which are described in greater detail in the section entitled “Risk Factors” in our Annual Report and under the heading entitled “Key Risk Factors” included elsewhere in this MD&A; our ability to build our market share; 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; 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; changing governmental regulation, and risks associated with failing to comply; liabilities in connection with environmental matters; loss of municipal and other contracts; potential inability to renew or obtain new landfill or organic waste facility permits and agreements, and the cost of operation and/or future construction of existing landfills or organic waste facilities; our dependence on third party landfills 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 flows to reinvest in our business; our potential inability to obtain performance or surety bonds, letters of credit, other financial assurances or insurance; operational, health and safety and environmental risks; natural disasters, weather conditions and seasonality; loss of existing customers or inability to obtain new contracts; economic downturn may adversely impact our operating results and cause exposure to credit risks; increasing dependence on technology and risk of technology failure; cybersecurity incidents or issues; damage to our reputation or our brand; introduction of new tax or accounting rules, laws or regulations; increases in insurance costs; climate change regulations that could increase cost 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; changing competitive dynamics for excess landfill capacity; litigation or regulatory or activist action; and health epidemics, pandemics and similar outbreaks, including 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 Standard (“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.

 

Reclassification of prior year presentation

 

Certain revenue disaggregation and segment reporting balances reported in prior periods have been reclassified for consistency with the current period presentation. These immaterial reclassifications had no effect on the reported consolidated results of operations.

 

For the three months ended June 30, 2020, GFL reclassified certain IPO related foreign exchange balances in the statement of cash flows relating to the three months ended March 31, 2020. Cash flows used in operating activities increased and changes due to foreign exchange revaluation of cash decreased by $41.1 million, respectively.

 

 

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 our Annual Report.

 

Our results for the three months ended March 31, 2021 were impacted by acquisitions as well as organic growth during the period as a result, in part, from the pricing initiatives that we implemented. Our ability to leverage our scalable network to drive operational cost efficiencies also impacted our performance for the periods. During the three months ended March 31, 2021, our performance was affected by the reduction in commercial activity as a result of the various measures primarily taken by the Canadian provincial and municipal governments in response to COVID-19. Finally, our results are influenced by seasonality and tend to be lower in the first quarter of the year, primarily due to winter weather conditions which are pronounced in Canada, and higher in the second and third quarters of the year, due to the higher volume of waste generated during the summer months in many of our solid waste markets.

 

We intend to continue to grow our business and generate improvements in our financial performance by expanding our service offerings into new geographic markets and extending our geographic footprint to increase regional density across our business lines, thereby increasing margins. Our success in achieving these goals is dependent on our ability to execute on our three-pronged strategy of: (i) continuing to generate strong, stable organic revenue growth, (ii) successfully executing strategic, accretive acquisitions, and (iii) continuing to drive operating cost efficiencies across our platform.

 

Strong, Stable Organic Revenue Growth

 

Our ability to generate strong, stable organic revenue growth across macroeconomic cycles depends on our ability to increase the breadth and depth of services that we provide to our existing customers, realize on cross-selling opportunities between our complementary service capabilities, obtain prices 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 three 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 all three of our business lines.

 

Since 2007, we have completed over 140 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 multiple 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.

 

Impact of COVID-19

 

Since the outbreak of the COVID-19 pandemic in March 2020, the U.S. and Canadian governments, as well as numerous state, provincial and local governments, implemented certain measures to slow the spread of the virus, including shelter-in-place and physical distancing orders as well as closure restrictions or requirements. In the first quarter of 2021, we saw these measures lifted or scaled back in many U.S. states resulting in an accelerated economic recovery. In Canada, many provincial governments, including those in Ontario and Quebec, and municipal governments in major metropolitan areas, introduced new increased measures and re-introduced former measures, resulting in a slower recovery in Canada.

 

Our overall revenue remains heavily weighted to our solid waste business, which is our most resilient business line and is also diversified across geographies and customers. The majority of the revenue we generate in our solid waste business is from secondary markets. The solid waste revenue we generate in major metropolitan centres or primary markets is predominately derived from municipal residential contracts. For the three months ended March 31, 2021, we experienced lower volumes in our solid and liquid waste commercial and industrial collection businesses due to a decrease in service levels attributable to COVID-19, primarily in the major metropolitan centres that we serve. While construction projects in certain jurisdictions have been deemed essential services, due to the protracted duration of the COVID-19 pandemic, we experienced lower volumes in our infrastructure and soil remediation business in the three months ended March 31, 2021. In addition, we experienced an adverse impact on our infrastructure and soil remediation margins due to the change in revenue mix resulting from fewer low volume high-frequency projects.

 

The impact of the COVID-19 pandemic on our business and future results of operations, financial condition and cash flows will depend largely on future developments, which are uncertain and continue to evolve, including the duration and spread of the virus in Canada and the United States, the introduction, execution and effectiveness of vaccination programs, particularly in Canada, the severity of and actions taken to limit the spread of COVID-19, including variants, and the pace and extent to which normal economic and operating conditions resume in the markets that we serve.

 

 

2. Operating Results

 

Analysis of results for the three months ended March 31, 2021 compared to the three months ended March 31, 2020

 

The following table summarizes certain operating results and other financial data for the periods indicated, which have been derived from our Interim Financial Statements and related notes:

 

($ millions except per share amounts)		Three months ended March 31, 2021				Three months ended March 31, 2020				Change				%
Revenue		$	1,186.6			$	931.3				255.3				27.4	%
Expenses
Cost of sales			1,086.7				852.3				234.4				27.5
Selling, general and administrative expenses			133.2				155.1				(21.9	)			(14.1	)
Interest and other finance costs			92.1				269.4				(177.3	)			(65.8	)
Other expenses			190.1				20.2				169.9				841.1
Loss before income taxes			(315.5	)			(365.7	)			50.2				13.7
Income tax recovery			(89.3	)			(87.7	)			(1.6	)			(1.8	)
Net loss			(226.2	)			(278.0	)			51.8				18.6
Loss per share, basic and diluted ($)			(0.66	)			(0.77	)			0.11				14.3
Adjusted EBITDA(1)			306.6				222.8				83.8				37.6

 

			March 31, 2021				December 31, 2020				Change
Total assets		$	15,509.1			$	15,730.0				(220.9	)
Total cash			11.1				27.2				(16.1	)
Total long-term debt			6,220.6				6,166.1				54.5
Total liabilities			10,117.5				10,050.7				66.8
Total shareholders’ equity		$	5,391.6			$	5,679.3			$	(287.7	)

 

 

(1) Adjusted EBITDA is a non-IFRS measure. Refer to section entitled “Non-IFRS Financial Measures and Key Performance Indicators”.

 

 

Revenue

 

The following table summarizes revenue by service type for the periods indicated:

 

		Three months ended March 31, 2021						Three months ended March 31, 2020(1)
($ millions)		Revenue			%			Revenue				%			Change				%
Residential		$	287.7		24.2	%		$	238.8			25.6	%		$	48.9			20.5	%
Commercial/industrial		424.0			35.8			307.2				33.0			116.8				38.0
Total collection		711.7			60.0			546.0				58.6			165.7				30.3
Landfill		139.9			11.8			62.8				6.7			77.1				122.8
Transfer		130.1			11.0			88.4				9.5			41.7				47.2
Material recovery		80.7			6.8			46.3				5.0			34.4				74.3
Other		55.0			4.6			52.9				5.7			2.1				4.0
Solid waste		1,117.4			94.2			796.4				85.5			321.0				40.3
Infrastructure and soil remediation		111.6			9.4			132.2				14.2			(20.6		)		(15.6	)
Liquid waste		104.4			8.8			105.0				11.3			(0.6		)		(0.6	)
Intercompany revenue		(146.8		)	(12.4	)		(102.3		)		(11.0	)		(44.5		)		(43.5	)
Revenue		$	1,186.6		100.0	%		$	931.3			100.0	%		$	255.3			27.4	%

 

(1) Includes reclassification of $0.3 million from Other into Liquid waste and $0.4 million from Other into Infrastructure and soil remediation.

 

On a consolidated basis, revenue for the three months ended March 31, 2021 increased by $255.3 million to $1,186.6 million compared to the three months ended March 31, 2020. The increase is primarily attributable to the impact of acquisitions completed since January 1, 2020 which accounted for approximately $278.3 million of the increase, as well as price increases. Offsetting these increases were negative volumes in our infrastructure and soil remediation and liquid waste lines of business and the impact of changes in foreign exchange rates. Highlights of the changes in revenue during the three months ended March 31, 2021 excluding the impact of acquisitions include:

 

•

Solid waste revenue increased by 4.7% from core pricing, surcharge and commodity price increases and 0.4% from positive volume, which was driven by higher volume in our material recovery facility (“MRF”) operations, partially offset by declines in collection and post collection volumes. The collection and post collection volume declines varied by region and were greatest in markets that saw the continuation or reintroduction of COVID-19 closure restrictions. Changes in foreign exchange rates decreased revenue by 3.6%.

 

•

Infrastructure and soil remediation revenue decreased by 17.9%, a decline predominantly attributable to a reduction in soil volumes processed at our facilities. The substantial majority of our infrastructure and soil remediation revenues are generated in Eastern Canada and the U.S. North East, two regions that continue to be significantly impacted by measures implemented by governments to limit the spread of COVID-19. We believe these measures have delayed the commencement of new large projects and reduced the level of activity from lower volume high frequency soil remediation customers, both of which have temporarily reduced the volume of contaminated soils in the markets that we serve.

 

•

Liquid waste revenue decreased organically by 8.0%, a decline primarily due to lower sales volume associated with industrial collection and processing activity in Eastern Canada and the U.S. Mid West, two regions that continue to be significantly impacted by measures implemented by governments to limit the spread of COVID-19.

 

 

 

Cost of Sales

 

The following table summarizes cost of sales for the periods indicated:

 

		Three months ended March 31, 2021								Three months ended March 31, 2020(1)
($ millions)		Cost				% of Revenue				Cost				% of Revenue				Change				%
Transfer and disposal costs		$	249.1				21.0	%		$	206.5				22.2	%		$	42.6				20.6	%
Labour and benefits			278.1				23.4				233.2				25.0				44.9				19.3
Maintenance and repairs			110.9				9.3				85.4				9.2				25.5				29.9
Fuel			47.9				4.0				39.3				4.2				8.6				21.9
Other cost of sales			90.2				7.7				64.3				6.9				25.9				40.3
Subtotal			776.2				65.4				628.7				67.5				147.5				23.5
Depreciation expense			196.0				16.5				116.8				12.6				79.2				67.8
Amortization of intangible assets			111.0				9.4				99.1				10.6				11.9				12.0
Acquisition rebranding and other integration costs			3.5				0.3				7.7				0.8				(4.2	)			(54.5	)
Cost of sales		$	1,086.7				91.6	%		$	852.3				91.5	%		$	234.4				27.5	%

 

(1) Includes reclassification of $2.5 million from Fuel and $1.1 million from Other cost of sales into Maintenance and repairs in the amount of $3.6 million.

 

Cost of sales increased by $234.4 million to $1,086.7 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase is primarily attributable to the impact of acquisitions. Changes in the individual cost categories as a percentage of revenue were primarily the result of the impact of business mix. For depreciation expense, the increase in the expense as a percentage of revenue is attributable to the impact of purchase accounting for recent acquisitions and the organic revenue decreases realized in the current period. Additional costs of risk management related to insurance and COVID-19 also contributed to the increase in cost of sales as compared to the three months ended March 31, 2020. Partially offsetting the cost increases were cost savings from our continued focus on cost management and enhancing efficiency. Cost of sales as a percentage of total revenue for the three months ended March 31, 2021 increased by 10 basis points to 91.6% compared to the three months ended March 31, 2020. 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 March 31, 2021, decreased by 210 basis points to 65.4% compared to the three months ended March 31, 2020.

 

Selling, General and Administrative Expenses (“SG&A”)

 

The following table summarizes SG&A for the periods indicated:

 

($ millions)		Three months ended March 31, 2021			Three months ended March 31, 2020				Change				%
Salaries and benefits		$	68.5		$	53.2			$	15.3			28.8	%
Share-based payments		9.7			15.7				(6.0		)		(38.2	)
Other		35.3			27.8				7.5				27.0
Subtotal		113.5			96.7				16.8				17.4
Depreciation expense		7.6			5.9				1.7				28.8
Transaction costs		12.1			11.2				0.9				8.0
IPO transaction costs		—			41.3				(41.3		)		—
Selling, general & administrative expenses		$	133.2		$	155.1			$	(21.9	)		(14.1	)%

 

For the three months ended March 31, 2021, SG&A decreased by $21.9 million to $133.2 million compared to the three months ended March 31, 2020. The decrease was primarily attributable to transaction costs associated with the IPO and

 

 

higher share-based payments related to options issued in connection with the IPO that were incurred for the three months ended March 31, 2020. This was partially offset by incremental salaries, benefits, information technology infrastructure investments and other costs related to the number and size of businesses acquired since January 1, 2020. There was also increased costs of risk management associated with being a public company for the three months ended March 31, 2021. SG&A as a percentage of revenue was 11.2% for the three months ended March 31, 2021 compared to 16.7% for the three months ended March 31, 2020. Excluding depreciation expenses and transaction costs, SG&A as a percentage of revenue was 9.6% for the three months ended March 31, 2021, compared to 10.4% for the three months ended March 31, 2020.

 

Interest and Other Finance Costs

 

The following table summarizes interest and other finance costs for the periods indicated:

 

($ millions)		Three months ended March 31, 2021				Three months ended March 31, 2020				Change				%
Interest		$	77.1			$	112.2			$	(35.1	)		(31.3	)%
Loss on extinguishment of debt		—				133.2				(133.2		)		—
Amortization of deferred finance costs		3.4				19.7				(16.3		)		(82.7	)
Accretion of landfill closure and post-closure obligations		4.4				1.6				2.8				175.0
Other finance costs		7.2				2.7				4.5				166.7
Interest and other finance costs		$	92.1			$	269.4			$	(177.3	)		(65.8	)%

 

Interest and other finance costs decreased by $177.3 million to $92.1 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. In the prior period a loss of $133.2 million was realized on the extinguishment of long-term debt that was repaid at the time of our IPO. No loss on extinguishment of debt was realized during the three months ended March 31, 2021. Additionally, interest expense of $77.1 million for the three months ended March 31, 2021 was $35.1 million lower than for the three months ended March 31, 2020. The decrease in interest expense was driven primarily by a lower average interest rate and a lower average long-term debt balance outstanding during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

 

Other Income and Expenses

 

The following table summarizes other income and expense for the periods indicated:

 

($ millions)		Three months ended March 31, 2021				Three months ended March 31, 2020				Change				%
(Gain) loss on foreign exchange		$	(39.0	)		$	106.0			$	(145.0	)		(136.8	)%
Mark-to-market loss (gain) on Purchase Contracts		228.3				(88.4		)		316.7				(358.3	)
Loss on sale of property and equipment		0.8				1.6				(0.8		)		(50.0	)
Deferred purchase consideration		—				1.0				(1.0		)		—
Other expenses		$	190.1			$	20.2			$	169.9			841.1	%

 

Other expenses increased to $190.1 million for the three months ended March 31, 2021 compared to $20.2 million for the three months ended March 31, 2020. This change was predominately due to $228.3 million of non-cash loss on the revaluation of Purchase Contracts for the three months ended March 31, 2021. This was partially offset by a non-cash foreign exchange gain of $39.0 million from the revaluation of the TEUs and the unhedged portion of our U.S. dollar denominated debt to Canadian dollar based on the foreign exchange rate as at March 31, 2021.

 

 

Income Tax Recovery

 

Net income tax recovery increased by $1.6 million to $89.3 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. The increase is due to a higher blended tax rate as a result of our US acquisitions made in late 2020. Our basis for recording income tax recoveries is due to the offsetting of deferred tax liabilities on our balance sheet.

 

3. Operating Segment Results

 

Our main lines of business are the transporting, managing and recycling of solid and liquid waste and infrastructure and soil remediation services. Our operating segments are: Solid waste, which includes hauling, landfill, transfers and material recovery facilities; Infrastructure and soil remediation; and Liquid waste.

 

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 months ended March 31, 2021 compared to the three months ended March 31, 2020

 

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 eliminations.

 

		Three months ended March 31, 2021
		Gross Revenue				Intercompany Revenue				Revenue				Adjusted EBITDA(1)
Solid waste
Canada		$	345.2			$	(42.9	)		$	302.3			$	83.0
USA		772.2				(89.8		)		682.4				222.2
Solid waste		1,117.4				(132.7		)		984.7				305.2
Infrastructure and soil remediation		111.6				(3.2		)		108.4				14.0
Liquid waste		104.4				(10.9		)		93.5				17.1
Corporate		—				—				—				(29.7		)
		$	1,333.4			$	(146.8	)		$	1,186.6			$	306.6

 

		Three months ended March 31, 2020
		Gross Revenue				Intercompany Revenue				Revenue(2)				Adjusted EBITDA(1)(3)
Solid waste
Canada		$	313.5			$	(40.7	)		$	272.8			$	65.9
USA		482.9				(48.0		)		434.9				134.9
Solid waste		796.4				(88.7		)		707.7				200.8
Infrastructure and soil remediation		132.2				(1.5		)		130.7				21.5
Liquid waste		105.0				(12.1		)		92.9				16.9
Corporate		—				—				—				(16.4		)
		$	1,033.6			$	(102.3	)		$	931.3			$	222.8

 

(1) Adjusted EBITDA is a non-IFRS measure. Refer to section entitled “Non-IFRS Financial Measures and Key Performance Indicators”.

(2) Includes reclassification of $0.3 million from Solid waste - Canada into Liquid waste.

(3) Includes reclassification of $0.1 million from Solid waste - Canada into Liquid waste and $0.9 million from Solid waste - USA into Corporate.

 

 

Solid Waste — Canada Operating Segment

 

Revenue increased by $29.5 million to $302.3 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase was due in part to acquisitions completed since January 1, 2020, which contributed approximately $4.5 million of revenue, $9.7 million from price and surcharge increases and $3.0 million from higher selling prices for the saleable commodities generated from our MRF operations. The amount of price and surcharge increases were relatively lower than the three months ended March 31, 2020, a decrease attributable to lower commercial and industrial volumes during the current period combined with the effect of negative consumer price index adjustments on certain municipal contracts. Volume increased revenue by $12.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily from volumes in MRF operations as a result of the commencement of new MRF processing contracts in both Eastern and Western Canada and positive landfill volumes. Partially offsetting these increases were lower volumes in our commercial and industrial collection, transfer station and organic waste businesses due to a decrease in service levels attributable to COVID-19. The volume decreases were greatest in our primary markets.

 

Adjusted EBITDA increased by $17.1 million to $83.0 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, which is predominately attributable to the previously described change in revenue. Adjusted EBITDA margin was 27.5% for the three months ended March 31, 2021, an increase of 330 basis points as compared to the three months ended March 31, 2020. The increase is predominantly attributable to the continued realization of organic margin expansion resulting from pricing initiatives, cost controls and overall operating leverage. The contribution from acquisitions did not materially impact the overall Adjusted EBITDA margin. Additionally, the impact of one less day in the current quarter on account of 2020 being a leap year and the net benefit of the higher selling prices for saleable commodities partially offset by the higher volume of lower margin MRF processing activity, also contributed to the margin expansion.

 

Solid Waste — USA Operating Segment

 

Revenue increased by $247.5 million to $682.4 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. The increase was predominately due to acquisitions completed since January 1, 2020 which contributed approximately $262.5 million of revenue, $18.4 million from price and surcharge increases and $1.8 million from higher selling prices for the saleable commodities generated from our MRF operations. Volume decreased revenue by $9.4 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020 primarily from lower volumes in our commercial and industrial collection businesses, due to a decrease in service levels attributable to COVID-19. The volume decreases were greatest in our primary markets. Strengthening of the Canadian dollar against the U.S. dollar for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, decreased revenue by $25.8 million.

 

Adjusted EBITDA increased by $87.3 million to $222.2 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, predominately attributable to the previously described change in revenue. Adjusted EBITDA margin was 32.6% for the three months ended March 31, 2021, an increase of 160 basis points compared to the three months ended March 31, 2020. The increase is predominantly attributable to organic margin expansion resulting from pricing initiatives, cost controls, and overall operating leverage. The incremental revenue from acquisitions contributed Adjusted EBITDA margins lower than the existing base business, negatively impacting the overall Adjusted EBITDA margin. Additionally, the impact of one less day in the current quarter on account of 2020 being a leap year and the benefit of the higher selling prices for saleable commodities also contributed to the margin expansion. Partially offsetting these increases were volume declines attributable to COVID-19 which negatively impacted the Adjusted EBITDA margin for the three months ended March 31, 2021, compared to the three months ended March 31, 2020.

 

Infrastructure and Soil Remediation Operating Segment

 

Revenue decreased by $22.3 million to $108.4 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, a decline predominantly attributable to a reduction in soil volumes processed at our facilities, partially offset by acquisitions completed since January 1, 2020 which contributed approximately $1.8 million in revenue. The substantial majority of our infrastructure and soil remediation revenues are generated in Eastern Canada and the U.S. North East, two regions that continue to be significantly impacted by measures implemented by governments to limit the spread of COVID-19. We believe these measures have delayed the commencement of new large projects and reduced the level of

 

 

activity from lower volume high frequency soil remediation customers, both of which have temporarily reduced the volume of contaminated soils in the markets that we serve.

 

Adjusted EBITDA decreased by $7.5 million to $14.0 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, predominately attributable to the previously described change in revenue. Adjusted EBITDA margin was 12.9% for the three months ended March 31, 2021, a decrease of 350 basis points compared to the three months ended March 31, 2020. The decrease in Adjusted EBITDA margin is primarily attributable to the impact of the change in revenue volume and mix.

 

Liquid Waste Operating Segment

 

Revenue increased by $0.6 million to $93.5 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Acquisitions completed since January 1, 2020, drove approximately $9.6 million in increased revenue. Offsetting the contribution from acquisitions was an organic revenue decrease of $7.5 million, due primarily to reduced industrial collection and processing activity resulting from the temporary suspension of certain customers’ operations in response to COVID-19. Strengthening of the Canadian dollar against the U.S. dollar for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, decreased revenue by $1.5 million.

 

Adjusted EBITDA increased by $0.2 million to $17.1 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, predominately attributable to the previously described change in revenue. Adjusted EBITDA margin was 18.3% for the three months ended March 31, 2021, an increase of 10 basis points compared to the three months ended March 31, 2020. Pricing initiatives, variable cost controls, as well as higher pricing of used motor oil favourably impacted the Adjusted EBITDA margin for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Offsetting these increases was the incremental revenue from acquisitions which contributed Adjusted EBITDA margins lower than the existing base business.

 

Corporate

 

Corporate costs increased by $13.3 million to $29.7 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase was attributable to additional headcount and overhead costs to support the growth in the business, including additional cost of risk management and professional costs associated with being a public company. Corporate costs as a percentage of total revenue were 2.5% for the three months ended March 31, 2021, an increase of 70 basis points compared to the three months ended March 31, 2020.

 

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 dividend and fund certain tuck in acquisitions consistent with our strategy.

 

Cash Flows

 

Cash Flows for the three months ended March 31, 2021 compared to the three months ended March 31, 2020

 

($ millions)		Three months ended March 31, 2021				Three months ended March 31, 2020(1)				Change				%
Cash flows from (used in) operating activities		$	212.7			$	(50.2	)		$	262.9			523.7	%
Cash flows used in investing activities		(195.8		)		(1,225.7		)		1,029.9				84.0
Cash flows (used in) from financing activities		(28.7		)		759.6				(788.3		)		(103.8	)
Decrease in cash		(11.8		)		(516.3		)
Changes due to foreign exchange revaluation of cash		(4.3		)		32.9
Cash, beginning of period		27.2				574.8
Cash, end of period		$	11.1			$	91.4

 

(1) Refer to the section entitled “Basis of Presentation” in this MD&A for additional details on this reclassification.

 

 

Operating Activities

 

Cash from operating activities increased by $262.9 million to $212.7 million for the three months ended March 31, 2021, compared to cash used of $50.2 million for the three months ended March 31, 2020. This increase was predominantly attributable to an increase in Adjusted EBITDA, reduced interest expense, and improved working capital during the three months ended March 31, 2021.

 

Changes in non-cash working capital items resulted in a use of cash of $34.1 million for the three months ended March 31, 2021 compared to a use of cash of $54.0 million for the three months ended March 31, 2020. The period on period change was primarily attributable to a source of cash of $83.7 million in accounts receivable due to improved collection results, a source of cash of $17.2 million in prepaid and other assets, partially offset by a use of cash of $81.0 million in accounts payable and accrued liabilities due to timing of payments to vendors.

 

Investing Activities

 

Cash used in investing activities decreased by $1,029.9 million, to $195.8 million for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. The decrease is predominately related to acquisition expenditures of $68.3 million for the three months ended March 31, 2021, as compared to acquisition expenditures of $1,126.0 million for the three months ended March 31, 2020. Capital expenditures increased by $31.2 million to $131.3 million for the three months ended March 31, 2021, compared to capital expenditures of $100.1 million for the three months ended March 31, 2020.

 

Financing Activities

 

Changes in financing activities resulted in a use of cash of $28.7 million for the three months ended March 31, 2021, compared to cash inflows of $759.6 million for the three months ended March 31, 2020. The use of cash for the three months ended March 31, 2021 is primarily a result of the repayment of long-term debt of $418.5 million, payments of the Amortizing Notes of $13.5 million, payments of contingent purchase consideration of $15.0 million and dividends of $4.2 million, partially offset by the issuance of long-term debt of $447.4 million. Cash inflows for the three months ended March 31, 2020 related to the issuance of $3,257.5 million of share capital and $1,006.9 million of TEUs, which was partially offset by the repayment of long-term debt of $4,317.1 million.

 

Available Sources of Liquidity

 

Under our Sixth Amended and Restated Credit Agreement, dated November 24, 2020 (the “Revolving Credit Agreement”), we have access to (i) a $628.0 million revolving credit facility (available in Canadian and US dollars), and (ii) an aggregate US$40.0 million in revolving credit facilities (available in US dollars) (collectively, the “Revolving Credit Facility”) as well as a $120.0 million letter of credit facility (available in Canadian and US dollars). As at March 31, 2021, we had $243.9 million drawn under the Revolving Credit Facility ($148.8 million as at December 31, 2020).

 

Our Revolving Credit Facility contains a financial maintenance covenant. The covenant (which applies only when the Revolving Credit Facility is drawn at or above 35% of the Revolving Credit Facility limit) is a ratio of Total Net Funded Debt to Adjusted EBITDA (each as defined in the Revolving Credit Agreement) equal to or less than 8.00 to 1.00. As at March 31, 2021 and December 31, 2020, we were in compliance with this covenant.

 

The Revolving Credit Facility matures on November 24, 2024. We have no other material long-term debt maturities until May 31, 2025.

 

 

 

Contractual Obligations

 

The following table summarizes our contractual obligations as of March 31, 2021:

($ millions)		Total				Less than 1 year				1-3 year				4-5 year				Thereafter
Long-term debt		$	6,116.1			$	12.3			$	32.4			$	3,418.0			$	2,653.4
Interest on long-term debt			1,524.6				206.5				550.6				474.8				292.7
Lease obligations			227.9				30.3				75.4				68.5				53.7
Equipment loans and other			5.0				0.4				0.8				0.4				3.4
Amortizing Notes			111.8				40.9				70.9				—				—
		$	7,985.4			$	290.4			$	730.1			$	3,961.7			$	3,003.2

 

Other Commitments

 

We had letters of credit totaling approximately $134.5 million outstanding as of March 31, 2021 ($133.8 million as of December 31, 2020), 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 of March 31, 2021, we had issued performance bonds totaling $1,659.2 million ($1,697.4 million as of December 31, 2020), of which approximately $108.5 million ($108.5 million as of December 31, 2020) is secured by a charge on the assets of certain subsidiaries.

 

5. Summary of Quarterly Results

 

The following table summarizes the results of our operations for the last eight most recently completed quarters:

 

		31-Mar				31-Dec				30-Sep				30-Jun				31-Mar				31-Dec				30-Sep				30-Jun
($ millions except per share amounts)		2021				2020				2020				2020				2020				2019				2019				2019
Financial Summary
Revenue		$	1,186.6			$	1,235.6			$	1,036.0			$	993.3			$	931.3			$	896.5			$	898.0			$	831.4
Adjusted EBITDA(1)			306.6				311.2				281.2				261.5				222.8				208.9				225.7				211.9
Net loss			(226.2	)			(486.7	)			(114.7	)			(115.5	)			(278.0	)			(182.0	)			(109.9	)			(68.0	)
Net loss per share, basic & diluted			(0.66	)			(1.39	)			(0.32	)			(0.32	)			(0.77	)			(1.01	)			(0.61	)			(0.38	)

 

(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 acquisitions 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. For each quarter in 2019 and the first quarter in 2020, net loss per share, basic and diluted has been recalculated to retrospectively adjust the number of shares for the share split completed in conjunction with the pre-capital closing changes implemented as part of our IPO.

 

 

6. Key Risk Factors

 

We are exposed to a number of risk factors through the pursuit of our strategic objectives and the nature of our operations which are outlined in the “Risk Factors” section of our Annual Report. We are also subject to the following financial risks.

 

Financial Instruments and Financial Risk

 

Our financial instruments consist of cash and cash equivalents, trade accounts receivable, trade accounts payable, long-term debt, and our 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 USD secured and unsecured notes (“Notes”). The following table summarizes the fair value hierarchy for our Notes for the periods indicated:

 

		Fair Value as at March 31, 2021												Fair Value as at December 31, 2020
($ 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		$	—			$	4,292.8			$	—			$	—			$	4,454.3			$	—

 

For more information on our financial instruments, including hedging arrangements, and related financial risk factors, see our Interim Financial Statements, our Annual Financial Statements, our Annual MD&A.

 

7. Other

 

Related Party Transactions

 

After the payment of the semi-annual instalment of $3.5 million for the three months ended March 31, 2021, the remaining principal outstanding on the note payable to Josaud Holdings Inc. (an affiliate of Patrick Dovigi) was $14.0 million ($17.5 million as at December 31, 2020).

 

After the payment of the semi-annual instalment of $2.9 million for the three months ended March 31, 2021, the remaining principal outstanding on the note payable to Sejosa Holdings Inc. (an affiliate of Patrick Dovigi) was $23.2 million ($26.1 million as at December 31, 2020).

 

For the three months ended March 31, 2021, we paid $0.8 million ($0.5 million for the three months ended March 31, 2020) in aggregate lease payments to related parties.

 

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, (iii) an unlimited number of preferred shares, issuable in series and (iv) 28,571,428 Series A perpetual convertible preferred shares (the “Preferred Shares”).

 

As of March 31, 2021, we had 314,672,269 subordinate voting shares, 12,062,964 multiple voting shares and 28,571,428 Preferred Shares issued and outstanding. As at March 31, 2021, the Preferred Shares are convertible into 24,650,148 subordinate voting shares of the Company, representing approximately 7.3% of the issued and outstanding subordinate voting shares and 5.4% of the outstanding voting rights attached to the Company’s shares and based on a conversion price of US$25.20 per share.

 

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.

 

 

8. Accounting Policies, Critical Accounting Estimates and Judgements

 

We prepare our Interim Financial Statements in accordance with IFRS. Our significant accounting policies and significant accounting estimates, assumptions and judgements are contained in our Annual Financial Statements.

 

Significant Accounting Estimates, Assumptions and Judgements

 

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 Judgements” in our Annual Report.

 

Landfill Asset

 

The following table summarizes landfill amortization expense on a per tonne basis for the periods indicated: 

 

		Three months ended March 31, 2021				Year ended December 31, 2020
Amortization of landfill airspace ($ millions)		$	48.9			$	111.8
Tonnes received (millions of tonnes)			3.9				8.3
Average landfill amortization per tonne ($)		$	12.5			$	13.5

 

Landfill Capacity

 

As of March 31, 2021, we had 324.6 million tonnes (328.5 million tonnes as at December 31, 2020) 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 March 31, 2021, fourteen of our landfills satisfied the criteria for inclusion of probable expansion capacity, resulting in additional expansion capacity of 140.6 million tonnes, and together with remaining permitted capacity, our total remaining capacity is 465.2 million tonnes (469.1 million tonnes as at December 31, 2020). Based on total capacity as of March 31, 2021 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 24.7 years (25.0 years as at December 31, 2020). We have other expansion opportunities that could extend the weighted average remaining life of our landfills.

 

9. Non-IFRS Financial Measures and Key Performance Indicators

 

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) plus (a) interest and other finance costs, plus (b) depreciation of property and equipment, plus (c) amortization of intangible assets, less (d)  income tax recovery, in each case to the extent deducted or added to/from net income (loss). 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 our borrowing capacity. Adjusted EBITDA is calculated by adding and deducting, as applicable, 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) loss (gain) on foreign exchange, (b) loss (gain) on sale of property and equipment, (c) mark-to-market loss (gain) on fuel hedge, (d) mark-to-market loss (gain) on Purchase Contracts, (e) share-based payments, (f) IPO transaction costs, (g) transaction costs (included in SG&A related to acquisition activity) (h) acquisition, rebranding and other integration costs (included in cost of sales related to acquisition activity), and (i) deferred purchase consideration. We use Adjusted EBITDA to facilitate a comparison of our operating performance on a consistent basis reflecting factors and trends affecting our business.

 

Adjusted EBITDA Margin

 

Adjusted EBITDA margin represents Adjusted EBITDA divided by revenue. We 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 Loss Reconciliation

 

The table below provides the reconciliation of our net loss to EBITDA and Adjusted EBITDA for the periods presented:

 

($ millions)		Three months ended March 31, 2021				Three months ended March 31, 2020
Net loss		$	(226.2	)		$	(278.0	)
Add:
Interest and other finance costs			92.1				269.4
Depreciation of property and equipment			203.6				122.7
Amortization of intangible assets			111.0				99.1
Income tax recovery			(89.3	)			(87.7	)
EBITDA			91.2				125.5
Add:
(Gain) loss on foreign exchange(1)			(39.0	)			106.0
Loss on sale of property and equipment			0.8				1.6
Mark-to-market loss on fuel hedges			—				1.2
Mark-to-market loss (gain) on Purchase Contracts(2)			228.3				(88.4	)
Share-based payments(3)			9.7				15.7
Transaction costs(4)			12.1				11.2
IPO transaction costs5)			—				41.3
Acquisition, rebranding and other integration costs(6)			3.5				7.7
Deferred purchase consideration			—				1.0
Adjusted EBITDA		$	306.6			$	222.8

 

(1)

Consists of (i) non-cash gains and losses on foreign exchange and interest rate swaps entered into in connection with our debt instruments, (ii) and 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 market value of share-based options granted to certain members of management under share-based option plans.

 

(4)

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.

 

(5)

Consists of costs associated with the IPO, such as legal, audit, regulatory and other fees and expenses incurred in connection with the IPO, as well as underwriting fees related to the offering of our TEUs that were expensed as incurred.

 

(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

CERTIFICATION

 

I, Patrick Dovigi, certify that:

 

1.

I have reviewed the financial statements and MD&A for the three months ended March 31, 2021 of GFL Environmental Inc.

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.

The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the company and we have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

c)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: May 5, 2021

 

By:	/s/ Patrick Dovigi
	Patrick Dovigi
	Chief Executive Officer

 

 

 

Exhibit 99.4

CERTIFICATION

 

I, Luke Pelosi, certify that:

 

1.

I have reviewed the financial statements and MD&A for the three months ended March 31, 2021 of GFL Environmental Inc.

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

 

4.

The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the company and we have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

c)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

Date: May 5, 2021

 

By:	/s/ Luke Pelosi
	Luke Pelosi
	Chief Financial Officer