The Fill February 2008 │ Volume II, Issue 2
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The Fill February 2008 │ Volume II, Issue 2 The Fill is a monthly newsletter published by the Environmental Services Team within the Piper Jaffray Business Services Group. To subscribe/unsubscribe, please visit www.piperjaffray.com/thefill. Valuation Summary (as of January 31, 2008) Month-to-Date Performance P/E Ratios (Based on 2008 CY EPS Estimates) 4.0% 3.0% 40.0x 38.0x 2.0% Other 35.0x Solid Waste Environmental 30.4x Dow S&P 500 NASDAQ Management Services 0.0% 30.0x Hazardous 25.0x Waste 25.0x (2.0%) Management 20.8x 20.0x 17 . 0 x (4.0%) (3.4%) 15 . 7x 15. 0 x (4.6%) (4.5%) (6.0%) 10 . 0 x (6.1%) (8.0%) 5.0x 0.0x (10.0%) (9.9%) Dow S&P 500 NASDAQ Solid Waste Hazard o us Ot her Management Waste Environmental (12.0%) M anagement Services Broad Market Indices PJC Environmental Services Indices Broad Market Indices PJC Environmental Services Indices Source: Capital IQ and Bloomberg Note: Piper Jaffray Environmental Services Indices market cap weighted Indices Performance (% Change from December 31, 2007) Broad Market Indices Sector Indices Dow Jones (4.6)% Solid Waste Management (3.4)% S&P 500 (6.1)% Hazardous Waste Management 3.0% NASDAQ (9.9)% Other Environmental Services (4.5)% Source: Capital IQ Environmental Services Stocks on the Move (Largest % Changes Since December 31, 2007) Advances Declines WCA Waste Corporation 16.1% Fuel-Tech, Inc. (15.9%) Waste Services Inc. 10.4% Perma-Fix Environmental Services, Inc. (13.0%) Clean Harbors Inc. 7.3% BFI Canada Income Fund (11.2%) Source: Capital IQ ENVIRONMENTAL SERVICES INDUSTRY CONTACTS John Lonnquist Matt Stern Kevin Jakuc Jason Roudabush Mary Horan Managing Director Vice President Associate Associate Analyst 612 303-6308 612 303-0130 612 303-6211 312 920-3293 312 920-2148 [email protected] [email protected] [email protected] [email protected] [email protected] Since 1895. Member SIPC and FINRA. Securities and products are offered in the United Kingdom through Piper Jaffray Ltd., which is an affiliate of Piper Jaffray & Co., incorporated under the laws of England and Wales, authorized and regulated by the Financial Services Authority and a member of the London Stock Exchange. © 2008 Piper Jaffray & Co., 800 Nicollet Mall, Minneapolis, Minnesota 55402-7020 February 2008 │ Volume II, Issue 2 The Fill NEWS AND STREET TALK In each issue, Piper Jaffray highlights recent news and activity in the environmental services industry. Page 2 Earnings Updates and Capital Raising ¾ January 24 – Allied Waste Industries, Inc. announced its wholly owned subsidiary, Allied Waste North America, Inc. successfully completed the concurrent offering of $33.9 million in principle of California Municipal Finance Authority Solid Waste Revenue Variable Rate Demand Bonds Series 2008A due 2024. As of the date of issuance, the bonds bear variable interest rates reset weekly based on market rates. Mergers & Acquisitions ¾ January 10 – Veolia ES Solid Waste, Inc. announced it has acquired Sandman, Inc. and The Sandman of Georgia, LLC, which operates front load and roll-off solid waste collection and portable toilet services in Georgia and Alabama. This acquisition is intended to expand Veolia’s customer base and aligns with the company’s strategy of acquiring well-run companies within existing integrated markets. ¾ January 9 – Perma-Fix Environmental Services, Inc. announced it has completed the sale of Perma-Fix of Maryland, Inc., one of the company’s Baltimore, Maryland Industrial Segment facilities, to Triumvirate Environmental, Inc. for approximately $3.8 million in an all-cash transaction, subject to certain working capital adjustments in the first half of 2008. This is the first transaction in Perma-Fix’s planned divestiture of all facilities within the industrial segment. General Company News ¾ January 25 – Fuel-Tech, Inc. announced it has been awarded its first FUEL CHEM® demonstration program in India. The demonstration will be conducted on a coal-fired boiler operated by one of India’s largest industrial enterprises and is expected to commence in the second quarter of 2008. ¾ January 22 – Fuel-Tech, Inc. announced it has been awarded its first FUEL CHEM® demonstration in the People’s Republic of China. The demonstration will take place under the terms of a previously disclosed teaming agreement with ITOCHU Hong Kong, Ltd. and the two companies will share the financial outcome of this an other orders secured under the arrangement. The demonstration is expected to commence in the second quarter of 2008. ¾ January 8 – Casella Waste Systems, Inc. announced that Jim Bohlig has been named president of the company’s Renewables Group and Paul Larkin has joined the company as president and chief operating officer. Larkin joined the company on January 9 from Home Depot where he most recently served as vice president for international strategy. ¾ January 2 – American Ecology Corporation announced a $0.15 per share dividend payable on January 18, 2008 to shareholders of record at the close of business on January 11, 2008. Source: Publicly available news sources Since 1895. Member SIPC and FINRA. Securities and products are offered in the United Kingdom through Piper Jaffray Ltd., which is an affiliate of Piper Jaffray & Co., incorporated under the laws of England and Wales, authorized and regulated by the Financial Services Authority and a member of the London Stock Exchange. © 2008 Piper Jaffray & Co., 800 Nicollet Mall, Minneapolis, Minnesota 55402-7020 │ The Fill February 2008 Volume II, Issue 2 SELECTED TRADING STATISTICS A listing of relevant environmental services publicly traded companies are listed below. Page 3 Valuation Multiples Market Enterprise Calendar Year Stock Price YTD Price 52-Week Cap(1) Value(2) Ent. Value / EBITDA Price/Earnings(3) PE / Debt / Debt / LTM (4) Company As of 1/31/08 Performance Hi Low ($ mil) ($ mil) LTM 2008 2009 2008 2009 Growth Total Cap EBITDA Solid Waste Management Allied Waste Industries Inc. $9.85 (10.6%) $14.10 $8.88 $3,656.3 $10,782.3 6.6x 6.6x 6.1x 12.6x 11.0x 1.1x 63.8% 4.0x BFI Canada Income Fund $24.00 (11.2%) $29.79 $23.42 $1,381.8 $2,417.4 9.0x 8.7x 7.6x 35.3x 26.3x NA 46.9% 3.0x Casella Waste Systems Inc. $12.13 (7.0%) $16.20 $8.86 $308.2 $857.1 6.9x 7.4x 6.6x NM NM NM 80.2% 4.4x Republic Services Inc. $30.00 (4.3%) $35.00 $26.22 $5,868.0 $7,501.6 8.9x 8.3x 7.7x 18.1x 16.4x 1.6x 55.9% 2.0x Waste Connections Inc. $29.16 (5.6%) $34.17 $28.05 $1,981.9 $2,703.7 10.0x 9.3x 8.4x 20.8x 18.0x 1.4x 46.4% 2.6x Waste Industries USA Inc. $36.17 (0.4%) $37.14 $24.24 $512.5 $671.5 8.3x 8.2x 7.7x 22.0x 20.8x 4.4x 49.9% 2.0x Waste Management, Inc. $32.41 (0.8%) $41.19 $27.57 $16,475.5 $24,400.5 7.1x 6.9x 6.6x 15.9x 14.4x 1.5x 57.0% 2.4x Waste Services Inc. $9.46 10.4% $12.46 $8.17 $416.0 $845.6 8.7x 7.8x 6.7x NA 33.4x NA 56.1% 4.6x WCA Waste Corporation $7.50 16.1% $9.30 $5.58 $128.1 $292.6 6.0x 5.6x 4.6x 40.0x 21.6x 2.7x 47.2% 3.5x Mean 7.9x 7.6x 6.9x 23.5x 20.2x 2.1x 55.9% 3.2x Median 8.3x 7.8x 6.7x 20.8x 19.4x 1.5x 55.9% 3.0x Hazardous Waste Management American Ecology Corp. $22.88 (2.6%) $25.21 $17.93 $417.1 $407.1 10.6x 10.2x 8.9x 21.9x 19.0x 1.2x 0.0% 0.0x Clean Harbors Inc. $55.48 7.3% $56.48 $42.52 $1,104.1 $1,124.7 9.9x 8.5x 7.4x 28.1x 22.1x 1.5x 41.0% 1.1x Perma-Fix Environmental Services Inc. $2.15 (13.0%) $3.40 $1.74 $114.1 $132.8 14.3x NA NA NA NA NA 20.8% 1.9x Mean 11.6x 9.3x 8.1x 25.0x 20.6x 1.4x 20.6% 1.0x Median 10.6x 9.3x 8.1x 25.0x 20.6x 1.4x 20.8% 1.1x Other Environmental Services Covanta Holding Corporation $25.35 (8.4%) $28.82 $20.60 $3,901.2 $6,179.9 13.5x 11.5x 11.2x 33.8x 27.6x 2.5x 71.7% 5.3x Fuel-Tech, Inc. $19.04 (15.9%) $38.20 $14.15 $426.5 $394.3 NA 40.9x 16.2x NM 34.4x NM 2.3% 0.2x Stericycle Inc. $59.26 (0.2%) $62.65 $37.80 $5,150.1 $5,703.2 22.5x 21.3x 18.8x 42.2x 36.1x 2.3x 46.1% 2.2x Mean 18.0x 24.6x 15.4x 38.0x 32.7x 2.4x 40.1% 2.6x Median 18.0x 21.3x 16.2x 38.0x 34.4x 2.4x 46.1% 2.2x Source: CapitalIQ and public company filings Note: All financial results exclude extraordinary items, one time charges, accounting changes and discontinued operations (1) Based on the closing stock price as of January 31, 2008 (2) Calculated as Market Cap plus total debt, minority interest and preferred stock, less cash & equivalents (3) EPS projections based on consensus estimates from CapitalIQ and Bloomberg and are adjusted for calendar year (4) Calculated as current 2008 P/E ratio divided by five year estimated earnings per share growth rate No password is required—visit our Web site www.piperjaffray.com/ma.