Casella Waste Systems, Inc. (NASDAQ:CWST), a regional solid waste,
recycling and resource management services company, today reported
its financial results for the three month period ended
June 30, 2017. In addition, the Company expects its revenue,
Adjusted EBITDA*, and Normalized Free Cash Flow* results to be
towards the upper-end of its previously announced guidance ranges
for the fiscal year ending December 31, 2017.
Highlights for the Three Months Ended June 30,
2017:
- Revenues were $154.0 million for the quarter, up $9.3
million, or 6.5%, from the same period in 2016.
- Net loss was $(53.7) million for the quarter, as
compared to net income of $5.2 million for the
same period in 2016. The Company recognized a $64.1 million
Southbridge landfill closure charge during the
quarter.
- Adjusted Net Income (Loss) Attributable to Common
Stockholders* was $10.8 million for the quarter, as compared to
$5.8 million for the same period in 2016.
- Adjusted EBITDA was $36.1 million for the quarter, up
$1.3 million, or 3.7%, from the same period in 2016.
- Operating loss was $(47.3) million for the quarter, as
compared to operating income of $15.6 million for
the same period in 2016.
- Adjusted Operating Income* was $16.8 million for the
quarter, up $1.2 million, or 7.9%, from the same period in
2016.
- Overall solid waste pricing for the quarter was up
2.6%, driven by strong landfill pricing up 3.0% and robust
residential and commercial collection pricing up
3.0%.
“Our team has worked hard over the last 14 years to develop an
environmentally sound disposal facility in Southbridge to serve the
needs of our customers throughout Massachusetts,” said John W.
Casella, Chairman and CEO of Casella Waste Systems, Inc. “However,
given the innumerable regulatory and political roadblocks we have
faced over the last three years as we have worked to develop
additional capacity at the site, and expect we would continue to
face, we do not believe that further development at the existing
landfill site will generate an adequate risk adjusted return. As
such, during the second quarter we adopted a plan to close the
Southbridge landfill when the current permitted airspace is fully
consumed, with the site expected to close by December 31,
2018.”
“We had a solid operational quarter, as we continued to execute
well against our key management strategies despite several
uncontrollable cost headwinds,” Casella said. “We remain focused on
creating shareholder value through increasing landfill returns,
improving collection profitability, creating incremental value
through resource solutions, improving returns in our recycling
business, and reducing leverage through strict capital discipline
and debt repayment. The progress we have made on our strategies
clearly drove positive financial results in the second quarter.
While operating loss was $(47.3) million, reflecting the impact of
the Southbridge landfill closure charge, Adjusted Operating
Income was up $1.2 million year-over-year, or up 7.9%, despite $2.2
million of higher healthcare costs and $1.0 million of higher
landfill leachate costs year-over-year as we experienced an
exceptionally rainy spring in the northeast.”
“From an operating standpoint, our disciplined solid waste
pricing programs continued to add value, driven by strong landfill
pricing which was up 3.0% and robust residential and commercial
pricing which was up 3.0%,” Casella said. “This strong pricing was
coupled with 2.1% solid waste volume growth in the second quarter,
mainly driven by 4.8% growth in landfill volumes as we continued to
source new volumes in the tightening northeastern disposal
markets.”
“Further, our efforts to reduce operating costs and drive
efficiencies continued in the second quarter, with these efforts
offset by 117% higher healthcare costs year-over-year,” Casella
said. “This substantial increase in our healthcare costs in the
second quarter was mainly due to higher than normal large claims
activity, and we believe that activity and costs should normalize
to our historical averages through the remainder of the year. We
have worked hard over the last three years to reduce healthcare
inflation and improve our healthcare offerings to our employees.
Through these efforts we have experienced roughly 1.2% per year of
healthcare inflation as compared to 5 to 7% per year
nationally.”
For the quarter, revenues were $154.0 million, up $9.3 million,
or 6.5%, from the same period in 2016, with revenue growth mainly
driven by: robust collection, disposal and recycling commodity
pricing; higher collection, disposal, recycling and customer
solutions volumes; and the roll-over impact from acquisitions.
Net loss attributable to common stockholders was $(53.7)
million, or $(1.28) per diluted common share for the quarter, as
compared to net income attributable to common stockholders of $5.2
million, or $0.12 per diluted common share for the same period in
2016. Adjusted Net Income Attributable to Common Stockholders was
$10.8 million for the quarter, or an Adjusted Diluted Earnings Per
Common Share* of $0.25 for the quarter, as compared to Adjusted Net
Income Attributable to Common Stockholders of $5.8 million, or an
Adjusted Diluted Earnings Per Common Share of $0.14 for the same
period in 2016.
Operating loss was $(47.3) million for the quarter, as compared
to operating income of $15.6 million for the same period in 2016.
Adjusted Operating Income was $16.8 million for the quarter, up
$1.2 million from the same period in 2016. Adjusted EBITDA was
$36.1 million for the quarter, up $1.3 million from the same period
in 2016, with growth mainly driven by improved performance in the
Company's disposal and recycling lines-of-business.
The Company decided after due consideration of all facts and
circumstances before it, that it is no longer likely that further
development at the existing landfill site will generate an adequate
risk adjusted return at the Southbridge landfill, and that it will
accordingly cease operations at the Southbridge landfill when no
further capacity is available, expected by no later than December
31, 2018. Accordingly, in the three months ended June 30, 2017, it
recorded a charge of $64.1 million associated with the
determination that operations would cease at the Southbridge
landfill, including an asset impairment charge of $48.0 million
related to the asset group that includes Southbridge landfill; a
project development charge of $9.1 million related to the write-off
of deferred costs associated with landfill permitting activities no
longer deemed viable; an environmental remediation charge of $6.4
million associated with the future installation of a municipal
waterline; and a charge of $0.6 million for legal and transaction
costs associated with various matters as part of the Southbridge
landfill closure.
Net cash provided by operating activities was $29.3 million for
the quarter, as compared to $33.9 million for the same period in
2016. Net cash by operating activities was negatively impacted in
the quarter by $(7.9) million of higher cash outflows associated
with changes in assets and liabilities year-over-year, with the
$(7.1) million of this negative variance driven by a lower interest
accrual at June 30th this year as compared to last year. The lower
interest accrual is associated with the timing of interest
payments, combined with lower average debt balances and changes to
the Company's capitalization structure that resulted in interest
expense, net decreasing $(3.7) million from the same period in
2016.
Free Cash Flow* was $11.7 million for the quarter, as compared
to $18.0 million for the same period in 2016. Normalized Free Cash
Flow was $12.3 million for the quarter, as compared to $18.0
million for the same period in 2016.
Highlights for the Six Months Ended June 30,
2017:
- Revenues were $287.8 million year-to-date, up $17.7
million, or 6.6%, from the same period in 2016.
- Net loss was $(53.9) million year-to-date, an increase
in net loss of $(51.5) million, as compared to a
net loss of $(2.4) million for the same period in
2016.
- Adjusted Net Income (Loss) Attributable to Common
Stockholders was $11.0 million year-to-date, as compared to $(1.9)
million for the same period in 2016.
- Adjusted EBITDA was $59.2 million year-to-date, up $5.2
million, or 9.6%, from the same period in 2016.
- Operating loss was $(40.7) million year-to-date, as
compared to operating income of $17.6 million for the same period
in 2016.
- Adjusted Operating Income was $23.4 million
year-to-date, up $5.8 million, or 33.2%, from the same period in
2016.
- Net cash provided by operating activities was $40.0
million year-to-date, up $4.4 million from the same period in
2016.
- Normalized Free Cash Flow was $13.4 million
year-to-date, up $3.7 million from the same period in
2016.
For the six months ended June 30, 2017, revenues were
$287.8 million, up $17.7 million, or 6.6%, from the same period in
2016, mainly driven by robust collection, disposal and recycling
pricing; higher collection, commodity, and customer solutions
volumes; and the acquisition of two hauling companies, partially
offset by lower disposal and organics volumes.
Net loss attributable to common stockholders was $(53.9)
million, or $(1.29) per diluted common share year-to-date, as
compared to $(2.4) million, or $(0.06) per diluted common share for
the same period in 2016. Adjusted Net Income Attributable to Common
Stockholders was $11.0 million year-to-date, or an Adjusted Diluted
Earnings Per Common Share of $0.26 year-to-date, as compared to
Adjusted Net Loss Attributable to Common Stockholders of $(1.9)
million, or an Adjusted Diluted Earnings Per Common Share of
$(0.05) for the same period in 2016.
Operating loss was $(40.7) million year-to-date, as compared to
operating income of $17.6 million for the same period in 2016.
Adjusted Operating Income was $23.4 million year-to-date, up $5.8
million from the same period in 2016. Adjusted EBITDA was $59.2
million year-to-date, up $5.2 million from the same period in
2016.
Net cash provided by operating activities was $40.0 million
year-to-date, as compared to $35.6 million for the same period in
2016. Free Cash Flow was $12.8 million year-to-date, as compared to
$9.8 million for the same period in 2016. Normalized Free Cash Flow
was $13.4 million year-to-date, as compared to $9.8 million for the
same period in 2016.
Outlook
Given the Company's strong pricing and operational performance
during the first six months of the year and increased visibility
into the remainder of the year, the Company indicated that it
expects its revenue, Adjusted EBITDA, and Normalized Free Cash Flow
results to be towards the upper-end of its previously announced
guidance ranges for the fiscal year ending December 31,
2017. The estimated ranges are as follows:
- Revenues between $577 million and $587 million;
- Adjusted EBITDA between $124 million and $128 million; and
- Normalized Free Cash Flow between $32 million and $36
million.
The Company does not provide reconciling information of non-GAAP
financial measures on a forward-looking basis because such
information is not available without an unreasonable effort. The
Company believes that such information is not significant to an
understanding of its non-GAAP financial measures for
forward-looking periods because its methodology for calculating
such non-GAAP financial measures is based on sensitivity analysis
compared to budget at the business unit level rather than on
differences from Generally Accepted Accounting Principles in the
United States (“GAAP”) financial measures.
Conference call to discuss quarter
The Company will host a conference call to discuss these results
on Wednesday, August 2, 2017 at 5:00 p.m. Eastern Time.
Individuals interested in participating in the call should dial
(877) 838-4153 or for international participants
(720) 545-0037 at least 10 minutes before start time. The call
will also be webcast; to listen, participants should visit Casella
Waste Systems’ website at http://ir.casella.com and follow the
appropriate link to the webcast.
A replay of the call will be available on the Company’s website,
or by calling (855) 859-2056 or (404) 537-3406
(Conference ID 53829727) until 10:00 p.m. ET on August 9,
2017.
About Casella Waste Systems, Inc.
Casella Waste Systems, Inc., headquartered in Rutland, Vermont,
provides solid waste management services consisting of collection,
transfer, disposal, and recycling services in the northeastern
United States. For further information, investors contact Ned
Coletta, Chief Financial Officer at (802) 772-2239; media
contact Joseph Fusco, Vice President at (802) 772-2247; or
visit the Company’s website at http://www.casella.com.
*Non-GAAP Financial Measures
In addition to disclosing financial results prepared in
accordance with GAAP, the Company also discloses earnings before
interest, taxes, and depreciation and amortization, adjusted for
accretion, depletion of landfill operating lease obligations, the
Southbridge landfill closure charge, gains on asset sales,
development project charge write-offs, contract settlement charges,
legal settlement costs, tax settlement costs, bargain purchase
gains, asset impairment charges, environmental remediation charges,
severance and reorganization costs, expenses from divestiture,
acquisition and financing costs, gains on the settlement of
acquisition related contingent consideration, fiscal year-end
transition costs, proxy contest costs, as well as impacts from
divestiture transactions (“Adjusted EBITDA”), which is a non-GAAP
financial measure.
The Company also discloses earnings before interest and taxes,
adjusted for the Southbridge landfill closure charge, gains on
asset sales, development project charge write-offs, contract
settlement charges, legal settlement costs, tax settlement costs,
bargain purchase gains, asset impairment charges, environmental
remediation charges, severance and reorganization costs, expenses
from divestiture, acquisition and financing costs, gains on the
settlement of acquisition related contingent consideration, fiscal
year-end transition costs, proxy contest costs, the Southbridge
landfill closure charge, as well as impacts from divestiture
transactions (“Adjusted Operating Income”), which is a non-GAAP
financial measure.
The Company also discloses net (loss) income attributable to
common stockholders, adjusted for the Southbridge landfill closure
charge, gains on asset sales, development project charge
write-offs, contract settlement charges, legal settlement costs,
tax settlement costs, bargain purchase gains, asset impairment
charges, environmental remediation charges, severance and
reorganization costs, expenses from divestiture, acquisition and
financing costs, gains on the settlement of acquisition related
contingent consideration, fiscal year-end transition costs, proxy
contest costs, impacts from divestiture transactions, losses on
debt modifications, as well as impairment of investments ("Adjusted
Net Income (Loss) Attributable to Common Stockholders"), which is a
non-GAAP financial measure.
The Company also discloses Adjusted Diluted Earnings Per Common
Share, which is Adjusted Net Income (Loss) Attributable to Common
Stockholders divided by Adjusted Diluted Weighted Average Shares
Outstanding, which includes the dilutive effect of options and
restricted / performance stock units despite the net (loss) income
position during the period.
The Company also discloses net cash provided by operating
activities, less capital expenditures (excluding acquisition
related capital expenditures), less payments on landfill operating
lease contracts, plus proceeds from divestiture transactions, plus
proceeds from the sale of property and equipment, plus proceeds
from property insurance settlement, plus (less) contributions from
(distributions to) noncontrolling interest holders (“Free Cash
Flow”), which is a non-GAAP financial measure.
The Company also discloses Free Cash Flow plus certain cash
outflows associated with landfill closure, site improvement and
remediation expenditures, plus certain cash outflows associated
with new contract and project capital expenditures, (less) plus
cash (inflows) outflows associated with certain business
dissolutions, plus cash interest outflows associated with the
timing of refinancing transactions (“Normalized Free Cash Flow”),
which is a non-GAAP financial measure.
Adjusted EBITDA and Adjusted Operating Income are reconciled to
net (loss) income, while Adjusted Net Income (Loss) Attributable to
Common Stockholders is reconciled to net (loss) income attributable
to common stockholders, Adjusted Diluted Earnings Per Common Share
is reconciled to diluted earnings per common share, and Free Cash
Flow and Normalized Free Cash Flow are reconciled to net cash
provided by operating activities.
The Company presents Adjusted EBITDA, Adjusted Operating Income,
Adjusted Net Income (Loss) Attributable to Common Stockholders,
Adjusted Diluted Earnings Per Common Share, Free Cash Flow, and
Normalized Free Cash Flow because it considers them important
supplemental measures of its performance and believes they are
frequently used by securities analysts, investors and other
interested parties in the evaluation of the Company’s results.
Management uses these non-GAAP financial measures to further
understand its “core operating performance.” The Company believes
its “core operating performance” is helpful in understanding its
ongoing performance in the ordinary course of operations. The
Company believes that providing Adjusted EBITDA, Adjusted Operating
Income, Adjusted Net Income (Loss) Attributable to Common
Stockholders, Adjusted Diluted Earnings Per Common Share, Free Cash
Flow, and Normalized Free Cash Flow to investors, in addition to
corresponding income statement and cash flow statement measures,
affords investors the benefit of viewing its performance using the
same financial metrics that the management team uses in making many
key decisions and understanding how the core business and its
results of operations has performed. The Company further believes
that providing this information allows its investors greater
transparency and a better understanding of its core financial
performance. In addition, the instruments governing the Company’s
indebtedness use EBITDA (with additional adjustments) to measure
its compliance with covenants.
Non-GAAP financial measures are not in accordance with or an
alternative for GAAP. Adjusted EBITDA, Adjusted Operating Income,
Adjusted Net Income (Loss) Attributable to Common Stockholders,
Adjusted Diluted Earnings Per Common Share, Free Cash Flow, and
Normalized Free Cash Flow should not be considered in isolation
from or as a substitute for financial information presented in
accordance with GAAP, and may be different from Adjusted EBITDA,
Adjusted Operating Income, Adjusted Net Income (Loss)
Attributable to Common Stockholders, Adjusted Diluted Earnings Per
Common Share, Free Cash Flow, or Normalized Free Cash Flow
presented by other companies.
Safe Harbor Statement
Certain matters discussed in this press release, including, but
not limited to, the statements regarding financial results and
guidance, are “forward-looking statements” intended to qualify for
the safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such by the context of
the statements, including words such as “believe,” “expect,”
“anticipate,” “plan,” “may,” “would,” “intend,” “estimate,”
“guidance” and other similar expressions, whether in the negative
or affirmative. These forward-looking statements are based on
current expectations, estimates, forecasts and projections about
the industry and markets in which the Company operates and
management’s beliefs and assumptions. The Company cannot guarantee
that it actually will achieve the financial results, plans,
intentions, expectations or guidance disclosed in the
forward-looking statements made. Such forward-looking statements,
and all phases of the Company's operations, involve a number of
risks and uncertainties, any one or more of which could cause
actual results to differ materially from those described in its
forward-looking statements. Such risks and uncertainties include or
relate to, among other things: costs associated with the planned
capping and closure of the Southbridge landfill and the pending
litigation relating to the Southbridge landfill; adverse weather
conditions that have negatively impacted and may continue to
negatively impact its revenues and its operating margin; current
economic conditions that have adversely affected and may continue
to adversely affect its revenues and its operating margin; the
Company may be unable to increase volumes at its landfills or
improve its route profitability; the Company's need to service its
indebtedness may limit its ability to invest in its business; the
Company may be unable to reduce costs or increase pricing or
volumes sufficiently to achieve estimated Adjusted EBITDA and other
targets; landfill operations and permit status may be affected by
factors outside its control; the Company may be required to incur
capital expenditures in excess of its estimates; fluctuations in
energy pricing or the commodity pricing of its recyclables may make
it more difficult for the Company to predict its results of
operations or meet its estimates; the Company may incur
environmental charges or asset impairments in the future; and the
Company's credit facility agreement requires it to meet a number of
financial ratios and covenants. There are a number of other
important risks and uncertainties that could cause the Company's
actual results to differ materially from those indicated by such
forward-looking statements. These additional risks and
uncertainties include, without limitation, those detailed in
Item 1A, “Risk Factors” in the Company's Form 10-K for the
fiscal year ended December 31, 2016 and in other filings that
the Company may make with the Securities and Exchange Commission in
the future.
The Company undertakes no obligation to update publicly any
forward-looking statements whether as a result of new information,
future events or otherwise, except as required by law.
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(Unaudited) |
(In thousands, except for per share
data) |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues |
$ |
154,016 |
|
|
$ |
144,670 |
|
|
$ |
287,818 |
|
|
$ |
270,103 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Cost of
operations |
102,519 |
|
|
95,188 |
|
|
197,063 |
|
|
185,606 |
|
General
and administration |
18,794 |
|
|
18,084 |
|
|
37,638 |
|
|
36,672 |
|
Depreciation and amortization |
15,868 |
|
|
15,802 |
|
|
29,717 |
|
|
30,255 |
|
Southbridge landfill closure charge (1) |
64,114 |
|
|
— |
|
|
64,114 |
|
|
— |
|
|
201,295 |
|
|
129,074 |
|
|
328,532 |
|
|
252,533 |
|
Operating (loss)
income |
(47,279 |
) |
|
15,596 |
|
|
(40,714 |
) |
|
17,570 |
|
Other expense
(income): |
|
|
|
|
|
|
|
Interest
expense, net |
6,282 |
|
|
9,944 |
|
|
12,663 |
|
|
19,870 |
|
Loss on
debt extinguishment |
46 |
|
|
593 |
|
|
517 |
|
|
545 |
|
Other
income |
(326 |
) |
|
(363 |
) |
|
(405 |
) |
|
(504 |
) |
Other expense, net |
6,002 |
|
|
10,174 |
|
|
12,775 |
|
|
19,911 |
|
(Loss) income before
income taxes |
(53,281 |
) |
|
5,422 |
|
|
(53,489 |
) |
|
(2,341 |
) |
Provision for income
taxes |
394 |
|
|
230 |
|
|
411 |
|
|
81 |
|
Net (loss) income |
(53,675 |
) |
|
5,192 |
|
|
(53,900 |
) |
|
(2,422 |
) |
Less: Net
loss attributable to noncontrolling interests |
— |
|
|
(3 |
) |
|
— |
|
|
(9 |
) |
Net (loss) income
attributable to common stockholders |
$ |
(53,675 |
) |
|
$ |
5,195 |
|
|
$ |
(53,900 |
) |
|
$ |
(2,413 |
) |
Basic weighted average
common shares outstanding |
41,811 |
|
|
41,132 |
|
|
41,698 |
|
|
41,064 |
|
Basic earnings per
common share |
$ |
(1.28 |
) |
|
$ |
0.13 |
|
|
$ |
(1.29 |
) |
|
$ |
(0.06 |
) |
Diluted weighted
average common shares outstanding |
41,811 |
|
|
41,598 |
|
|
41,698 |
|
|
41,064 |
|
Diluted earnings per
common share |
$ |
(1.28 |
) |
|
$ |
0.12 |
|
|
$ |
(1.29 |
) |
|
$ |
(0.06 |
) |
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands) |
|
|
June 30, 2017 |
|
December 31, 2016 |
ASSETS |
(Unaudited) |
|
|
CURRENT ASSETS: |
|
|
|
Cash and
cash equivalents |
$ |
2,685 |
|
|
$ |
2,544 |
|
Accounts
receivable - trade, net of allowance for doubtful accounts |
65,766 |
|
|
61,196 |
|
Other
current assets |
14,202 |
|
|
14,848 |
|
Total current
assets |
82,653 |
|
|
78,588 |
|
Property, plant and
equipment, net of accumulated depreciation and amortization |
349,345 |
|
|
398,466 |
|
Goodwill |
121,700 |
|
|
119,899 |
|
Intangible assets,
net |
8,169 |
|
|
7,696 |
|
Restricted assets |
1,065 |
|
|
1,002 |
|
Cost method
investments |
12,333 |
|
|
12,333 |
|
Other non-current
assets |
13,612 |
|
|
13,528 |
|
Total
assets |
$ |
588,877 |
|
|
$ |
631,512 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
CURRENT
LIABILITIES: |
|
|
|
Current
maturities of long-term debt and capital leases |
$ |
5,016 |
|
|
$ |
4,686 |
|
Accounts
payable |
43,539 |
|
|
44,997 |
|
Other
accrued liabilities |
29,489 |
|
|
32,743 |
|
Total current
liabilities |
78,044 |
|
|
82,426 |
|
Long-term debt and
capital leases, less current maturities |
497,592 |
|
|
503,961 |
|
Other long-term
liabilities |
87,874 |
|
|
69,675 |
|
Total stockholders'
deficit |
(74,633 |
) |
|
(24,550 |
) |
Total
liabilities and stockholders' deficit |
$ |
588,877 |
|
|
$ |
631,512 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Unaudited) |
(In thousands) |
|
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
Cash Flows from
Operating Activities: |
|
|
|
Net loss |
$ |
(53,900 |
) |
|
$ |
(2,422 |
) |
Adjustments to
reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
29,717 |
|
|
30,255 |
|
Depletion
of landfill operating lease obligations |
4,173 |
|
|
4,443 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
1,939 |
|
|
1,782 |
|
Amortization of debt issuance costs and discount on long-term
debt |
1,320 |
|
|
2,079 |
|
Stock-based compensation |
2,912 |
|
|
1,622 |
|
Gain on
sale of property and equipment |
(97 |
) |
|
(520 |
) |
Southbridge landfill non-cash closure charge (1) |
63,526 |
|
|
— |
|
Loss on
debt extinguishment |
517 |
|
|
545 |
|
Deferred
income taxes |
284 |
|
|
303 |
|
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures |
(10,382 |
) |
|
(2,502 |
) |
Net cash
provided by operating activities |
40,009 |
|
|
35,585 |
|
Cash Flows from
Investing Activities: |
|
|
|
Acquisitions, net of cash acquired |
(2,694 |
) |
|
(2,439 |
) |
Acquisition related additions to property, plant and equipment |
(176 |
) |
|
(38 |
) |
Additions
to property, plant and equipment |
(24,372 |
) |
|
(23,460 |
) |
Payments
on landfill operating lease contracts |
(3,177 |
) |
|
(3,326 |
) |
Proceeds
from sale of property and equipment |
382 |
|
|
957 |
|
Net cash
used in investing activities |
(30,037 |
) |
|
(28,306 |
) |
Cash Flows from
Financing Activities: |
|
|
|
Proceeds
from long-term borrowings |
117,000 |
|
|
126,000 |
|
Principal
payments on long-term debt |
(126,238 |
) |
|
(132,716 |
) |
Payments
of debt issuance costs |
(1,451 |
) |
|
(682 |
) |
Payments
of debt extinguishment costs |
— |
|
|
(310 |
) |
Proceeds
from the exercise of share based awards |
858 |
|
|
— |
|
Change in
restricted cash |
— |
|
|
499 |
|
Net cash
used in financing activities |
(9,831 |
) |
|
(7,209 |
) |
Net increase in cash
and cash equivalents |
141 |
|
|
70 |
|
Cash and cash
equivalents, beginning of period |
2,544 |
|
|
2,312 |
|
Cash and cash
equivalents, end of period |
$ |
2,685 |
|
|
$ |
2,382 |
|
Supplemental Disclosure
of Cash Flow Information: |
|
|
|
Cash
interest |
$ |
14,079 |
|
|
$ |
18,394 |
|
Cash
income taxes, net of refunds |
$ |
189 |
|
|
$ |
203 |
|
Supplemental Disclosure
of Non-Cash Investing and Financing Activities: |
|
|
|
Non-current assets obtained through long-term obligations |
$ |
2,813 |
|
|
$ |
866 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
(Unaudited) |
(In thousands) |
|
Note 1: Southbridge Landfill Closure
Charge |
|
In June
2017, we initiated the plan to cease operations of our Southbridge
landfill. Accordingly, in the three months ended June 30, 2017, we
recorded a charge associated with the closure of our Southbridge
landfill as follows: |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Asset
impairment charge (1) |
$ |
47,999 |
|
|
$ |
— |
|
|
$ |
47,999 |
|
|
$ |
— |
|
Project
development charge (2) |
9,148 |
|
|
— |
|
|
9,148 |
|
|
— |
|
Environmental remediation charge (3) |
6,379 |
|
|
— |
|
|
6,379 |
|
|
— |
|
Legal and
transaction costs (4) |
588 |
|
|
— |
|
|
588 |
|
|
— |
|
Southbridge landfill
closure charge |
$ |
64,114 |
|
|
$ |
— |
|
|
$ |
64,114 |
|
|
$ |
— |
|
(1) |
We
performed a test of recoverability under Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC")
360, which indicated that the carrying value of our asset group
that includes the Southbridge landfill was no longer recoverable
and, as a result, the asset group was assessed for impairment with
an impairment charge allocated to the long-lived assets of
Southbridge landfill in accordance with FASB ASC 360. |
(2) |
We
wrote-off deferred costs associated with landfill permitting
activities no longer deemed viable. |
(3) |
We
recorded an environmental remediation charge associated with the
future installation of a municipal waterline. |
(4) |
We
incurred legal and other transaction costs associated with various
matters as part of the Southbridge landfill closure. |
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES |
RECONCILIATION OF CERTAIN NON-GAAP
MEASURES |
(Unaudited) |
(In thousands) |
|
Following is a reconciliation of Adjusted EBITDA and
Adjusted Operating Income to Net (loss)
income: |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net (loss)
income |
$ |
(53,675 |
) |
|
$ |
5,192 |
|
|
$ |
(53,900 |
) |
|
$ |
(2,422 |
) |
Net (loss)
income as a percentage of revenues |
(34.9 |
)% |
|
3.6 |
% |
|
(18.7 |
)% |
|
(0.9 |
)% |
Provision
for income taxes |
394 |
|
|
230 |
|
|
411 |
|
|
81 |
|
Other
income |
(326 |
) |
|
(363 |
) |
|
(405 |
) |
|
(504 |
) |
Loss on
debt extinguishment |
46 |
|
|
593 |
|
|
517 |
|
|
545 |
|
Interest
expense, net |
6,282 |
|
|
9,944 |
|
|
12,663 |
|
|
19,870 |
|
Southbridge landfill closure charge |
64,114 |
|
|
— |
|
|
64,114 |
|
|
— |
|
Depreciation and amortization |
15,868 |
|
|
15,802 |
|
|
29,717 |
|
|
30,255 |
|
Depletion
of landfill operating lease obligations |
2,409 |
|
|
2,493 |
|
|
4,173 |
|
|
4,443 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
974 |
|
|
896 |
|
|
1,939 |
|
|
1,782 |
|
Adjusted
EBITDA |
$ |
36,086 |
|
|
$ |
34,787 |
|
|
$ |
59,229 |
|
|
$ |
54,050 |
|
Adjusted EBITDA
as a percentage of revenues |
23.4 |
% |
|
24.0 |
% |
|
20.6 |
% |
|
20.0 |
% |
Depreciation and amortization |
(15,868 |
) |
|
(15,802 |
) |
|
(29,717 |
) |
|
(30,255 |
) |
Depletion
of landfill operating lease obligations |
(2,409 |
) |
|
(2,493 |
) |
|
(4,173 |
) |
|
(4,443 |
) |
Interest
accretion on landfill and environmental remediation
liabilities |
(974 |
) |
|
(896 |
) |
|
(1,939 |
) |
|
(1,782 |
) |
Adjusted
Operating Income |
$ |
16,835 |
|
|
$ |
15,596 |
|
|
$ |
23,400 |
|
|
$ |
17,570 |
|
Adjusted
Operating Income as a percentage of revenues |
10.9 |
% |
|
10.8 |
% |
|
8.1 |
% |
|
6.5 |
% |
Following is a reconciliation of Adjusted Net Income (Loss)
Attributable to Common Stockholders to Net (loss) income
attributable to common stockholders: |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net (loss)
income attributable to common stockholders |
$ |
(53,675 |
) |
|
$ |
5,195 |
|
|
$ |
(53,900 |
) |
|
$ |
(2,413 |
) |
Loss on
debt extinguishment |
46 |
|
|
593 |
|
|
517 |
|
|
545 |
|
Southbridge landfill closure charge |
64,114 |
|
|
— |
|
|
64,114 |
|
|
— |
|
Tax
effect (i) |
316 |
|
|
4 |
|
|
318 |
|
|
4 |
|
Adjusted Net
Income (Loss) Attributable to Common Stockholders |
$ |
10,801 |
|
|
$ |
5,792 |
|
|
$ |
11,049 |
|
|
$ |
(1,864 |
) |
Diluted
weighted average common shares outstanding |
41,811 |
|
|
41,598 |
|
|
41,698 |
|
|
41,064 |
|
Dilutive
effect of options and restricted / performance stock units |
1,137 |
|
|
— |
|
|
1,132 |
|
|
— |
|
Adjusted
Diluted Weighted Average Common Shares Outstanding |
42,948 |
|
|
41,598 |
|
|
42,830 |
|
|
41,064 |
|
Adjusted
Diluted Earnings Per Common Share |
$ |
0.25 |
|
|
$ |
0.14 |
|
|
$ |
0.26 |
|
|
$ |
(0.05 |
) |
|
(i) The aggregate tax effect of the adjustments, including any
impact of deferred tax adjustments. |
Following is a reconciliation of Adjusted Diluted Earnings
Per Common Share to Diluted earnings per common
share: |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Diluted
earnings per common share |
$ |
(1.28 |
) |
|
$ |
0.12 |
|
|
$ |
(1.29 |
) |
|
$ |
(0.06 |
) |
Loss on
debt extinguishment |
— |
|
|
0.02 |
|
|
0.01 |
|
|
0.01 |
|
Southbridge landfill closure charge |
1.52 |
|
|
— |
|
|
1.53 |
|
|
— |
|
Tax
effect |
0.01 |
|
|
— |
|
|
0.01 |
|
|
— |
|
Adjusted
Diluted Earnings Per Common Share |
$ |
0.25 |
|
|
$ |
0.14 |
|
|
$ |
0.26 |
|
|
$ |
(0.05 |
) |
Following is a reconciliation of Free Cash Flow and
Normalized Free Cash Flow to Net cash provided by operating
activities: |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net cash
provided by operating activities |
$ |
29,333 |
|
|
$ |
33,861 |
|
|
$ |
40,009 |
|
|
$ |
35,585 |
|
Capital
expenditures |
(15,738 |
) |
|
(13,612 |
) |
|
(24,372 |
) |
|
(23,460 |
) |
Payments
on landfill operating lease contracts |
(2,200 |
) |
|
(2,826 |
) |
|
(3,177 |
) |
|
(3,326 |
) |
Proceeds
from sale of property and equipment |
298 |
|
|
598 |
|
|
382 |
|
|
957 |
|
Free Cash
Flow |
$ |
11,693 |
|
|
$ |
18,021 |
|
|
$ |
12,842 |
|
|
$ |
9,756 |
|
Landfill
closure, site improvement and remediation expenditures (i) |
588 |
|
|
— |
|
|
588 |
|
|
— |
|
Normalized Free
Cash Flow |
$ |
12,281 |
|
|
$ |
18,021 |
|
|
$ |
13,430 |
|
|
$ |
9,756 |
|
|
(i) Includes cash outlays associated with the Southbridge
landfill closure. |
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES |
SUPPLEMENTAL DATA TABLES |
(Unaudited) |
(In thousands) |
|
Amounts of total revenues attributable to services provided
for the three and six months ended June 30, 2017 and 2016 are
as follows: |
|
|
Three Months Ended June 30, |
|
2017 |
|
% of TotalRevenue |
|
2016 |
|
% of TotalRevenue |
Collection |
$ |
66,308 |
|
|
43.1 |
% |
|
$ |
63,685 |
|
|
44.0 |
% |
Disposal |
42,172 |
|
|
27.4 |
% |
|
39,384 |
|
|
27.2 |
% |
Power generation |
1,554 |
|
|
1.0 |
% |
|
1,460 |
|
|
1.0 |
% |
Processing |
2,137 |
|
|
1.3 |
% |
|
1,747 |
|
|
1.3 |
% |
Solid waste operations |
112,171 |
|
|
72.8 |
% |
|
106,276 |
|
|
73.5 |
% |
Organics |
11,005 |
|
|
7.2 |
% |
|
12,171 |
|
|
8.4 |
% |
Customer
solutions |
14,629 |
|
|
9.5 |
% |
|
13,407 |
|
|
9.3 |
% |
Recycling |
16,211 |
|
|
10.5 |
% |
|
12,816 |
|
|
8.8 |
% |
Total
revenues |
$ |
154,016 |
|
|
100.0 |
% |
|
$ |
144,670 |
|
|
100.0 |
% |
|
Six Months Ended June 30, |
|
2017 |
|
% of TotalRevenue |
|
2016 |
|
% of TotalRevenue |
Collection |
$ |
126,145 |
|
|
43.8 |
% |
|
$ |
121,536 |
|
|
45.0 |
% |
Disposal |
73,454 |
|
|
25.5 |
% |
|
71,637 |
|
|
26.5 |
% |
Power generation |
2,906 |
|
|
1.0 |
% |
|
3,167 |
|
|
1.2 |
% |
Processing |
3,796 |
|
|
1.4 |
% |
|
2,720 |
|
|
1.0 |
% |
Solid waste operations |
206,301 |
|
|
71.7 |
% |
|
199,060 |
|
|
73.7 |
% |
Organics |
20,219 |
|
|
7.0 |
% |
|
21,106 |
|
|
7.8 |
% |
Customer
solutions |
28,452 |
|
|
9.9 |
% |
|
26,483 |
|
|
9.8 |
% |
Recycling |
32,846 |
|
|
11.4 |
% |
|
23,454 |
|
|
8.7 |
% |
Total
revenues |
$ |
287,818 |
|
|
100.0 |
% |
|
$ |
270,103 |
|
|
100.0 |
% |
Components of revenue growth for the three months ended
June 30, 2017 compared to the three months ended June 30,
2016 are as follows: |
|
|
Amount |
|
%
ofRelatedBusiness |
|
% of
SolidWasteOperations |
|
% of TotalCompany |
Solid Waste
Operations: |
|
|
|
|
|
|
|
Collection |
$ |
1,794 |
|
|
2.8 |
% |
|
1.7 |
% |
|
1.2 |
% |
Disposal |
1,015 |
|
|
2.6 |
% |
|
0.9 |
% |
|
0.7 |
% |
Solid
Waste Price |
2,809 |
|
|
|
|
2.6 |
% |
|
1.9 |
% |
Collection |
464 |
|
|
|
|
0.4 |
% |
|
0.3 |
% |
Disposal |
1,772 |
|
|
|
|
1.7 |
% |
|
1.2 |
% |
Processing |
36 |
|
|
|
|
— |
% |
|
0.1 |
% |
Solid
Waste Volume |
2,272 |
|
|
|
|
2.1 |
% |
|
1.6 |
% |
Fuel
surcharge |
(170 |
) |
|
|
|
(0.1 |
)% |
|
(0.1 |
)% |
Commodity
price & volume |
449 |
|
|
|
|
0.4 |
% |
|
0.3 |
% |
Acquisitions, net divestitures |
535 |
|
|
|
|
0.5 |
% |
|
0.4 |
% |
Total Solid
Waste |
5,895 |
|
|
|
|
5.5 |
% |
|
4.1 |
% |
Organics |
(1,166 |
) |
|
|
|
|
|
(0.8 |
)% |
Customer
Solutions |
1,222 |
|
|
|
|
|
|
0.9 |
% |
Recycling
Operations: |
|
|
|
|
% of Recycling
Operations |
|
|
Price |
2,277 |
|
|
|
|
17.8 |
% |
|
1.6 |
% |
Volume |
1,118 |
|
|
|
|
8.7 |
% |
|
0.7 |
% |
Total
Recycling |
3,395 |
|
|
|
|
26.5 |
% |
|
2.3 |
% |
Total
Company |
$ |
9,346 |
|
|
|
|
|
|
6.5 |
% |
Solid waste internalization rates by region for the three
and six months ended June 30, 2017 and 2016 are as
follows: |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Eastern region |
55.8 |
% |
|
53.0 |
% |
|
52.0 |
% |
|
49.2 |
% |
Western region |
73.2 |
% |
|
75.6 |
% |
|
71.0 |
% |
|
74.3 |
% |
Solid waste
internalization |
63.7 |
% |
|
63.7 |
% |
|
60.8 |
% |
|
60.9 |
% |
Components of capital expenditures (ii) for the three and
six months ended June 30, 2017 and 2016 are as
follows: |
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total Growth
Capital Expenditures |
$ |
973 |
|
|
$ |
2,116 |
|
|
$ |
1,955 |
|
|
$ |
3,462 |
|
Replacement
Capital Expenditures: |
|
|
|
|
|
|
|
Landfill
development |
9,276 |
|
|
7,670 |
|
|
12,090 |
|
|
11,457 |
|
Vehicles,
machinery, equipment and containers |
4,370 |
|
|
3,150 |
|
|
8,341 |
|
|
7,344 |
|
Facilities |
585 |
|
|
526 |
|
|
1,165 |
|
|
680 |
|
Other |
534 |
|
|
150 |
|
|
821 |
|
|
517 |
|
Total
Replacement Capital Expenditures |
14,765 |
|
|
11,496 |
|
|
22,417 |
|
|
19,998 |
|
Total Growth
and Replacement Capital Expenditures |
$ |
15,738 |
|
|
$ |
13,612 |
|
|
$ |
24,372 |
|
|
$ |
23,460 |
|
(ii) |
The Company's capital
expenditures are broadly defined as pertaining to either growth,
replacement or acquisition activities. Growth capital expenditures
are defined as costs related to development of new airspace, permit
expansions, and new recycling contracts along with incremental
costs of equipment and infrastructure added to further such
activities. Growth capital expenditures include the cost of
equipment added directly as a result of organic business growth as
well as expenditures associated with adding infrastructure to
increase throughput at transfer stations and recycling facilities.
Replacement capital expenditures are defined as landfill cell
construction costs not related to expansion airspace, costs for
normal permit renewals, and replacement costs for equipment due to
age or obsolescence. Acquisition capital expenditures, which are
not included in the table above, are defined as costs of equipment
added directly as a result of new business growth related to an
acquisition. |
Investors:
Ned Coletta
Chief Financial Officer
(802) 772-2239
Media:
Joseph Fusco
Vice President
(802) 772-2247
http://www.casella.com
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