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
September 30, 2017. In addition, the Company raised its
revenue, Adjusted EBITDA*, and Normalized Free Cash Flow* guidance
ranges for the fiscal year ending December 31, 2017.
Highlights for the Three Months Ended September 30,
2017:
- Revenues were $160.3 million for the quarter, up $9.1
million, or 6.0%, from the same period in 2016.
- Net income was $12.1 million for the quarter, up $4.6
million, or 60.3%, from the same period in 2016.
- Adjusted Net Income Attributable to Common
Stockholders* was $13.1 million for the quarter, up $5.3 million,
or 69.1%, from the same period in 2016.
- Adjusted EBITDA was $39.5 million for the quarter, up
$2.4 million, or 6.5%, from the same period in 2016.
- Operating income was $18.3 million for the quarter, up
$0.9 million, or 5.2%, from the same period in 2016.
- Adjusted Operating Income* was $19.0 million for the
quarter, up $1.7 million, or 9.5%, from the same period in
2016.
- Overall solid waste pricing for the quarter was up
3.1%, driven by strong landfill pricing up 3.5% and robust
collection pricing up 3.3%.
“We had a strong operational quarter, as we continued to execute
well against our key management strategies,” said John W. Casella,
Chairman and CEO of Casella Waste Systems, Inc. “We remain
focused on creating shareholder value through increasing landfill
returns, improving collection profitability, and creating
incremental value through resource solutions. As we
announced in early August, we have adjusted our capital strategy to
balance paying down low-cost debt with prudent acquisition and
development investments. Also, we are implementing a new
strategy that focuses on driving lower general and administrative
costs and improving back office efficiencies through our multi-year
technology plan.”
“The progress we have made on our strategies clearly drove
positive financial results in the third quarter,” Casella said.
“Our disciplined solid waste pricing programs continued to add
value, with landfill pricing up 3.5%, and residential and
commercial pricing up 3.4%. This strong pricing was coupled
with 1.3% solid waste volume growth, and 1.0% solid waste revenue
growth from acquisitions, as we began to ramp up our acquisition
activity.”
“We achieved an exciting financial milestone in the third
quarter,” Casella said. “Our Consolidated Net Leverage Ratio*
as defined by our senior secured credit agreement dropped to 3.71x
on September 30, 2017. Reducing our leverage ratio
to-or-below 3.75x is important for two reasons: (1) this marks the
achievement of the final financial target that we set for our 2018
plan that was first announced in August 2015; and (2) our Term Loan
B interest rate drops by 25 basis points, which will save us
approximately another $0.9 million per year of cash interest
costs.”
For the quarter, revenues were $160.3 million, up $9.1 million,
or 6.0%, from the same period in 2016, with revenue growth mainly
driven by: robust collection, disposal and recycling commodity
pricing; higher volumes; and the roll-over impact from
acquisitions; partially offset by lower organics volumes.
Net income attributable to common stockholders was $12.1
million, or $0.28 per diluted common share for the quarter, up $4.6
million, as compared to net income attributable to common
stockholders of $7.5 million, or $0.18 per diluted common share for
the same period in 2016. Adjusted Net Income Attributable to
Common Stockholders was $13.1 million for the quarter, or an
Adjusted Diluted Earnings Per Common Share* of $0.30 for the
quarter, as compared to Adjusted Net Income Attributable to Common
Stockholders of $7.7 million, or an Adjusted Diluted Earnings Per
Common Share of $0.18 for the same period in 2016.
Operating income was $18.3 million for the quarter, as compared
to operating income of $17.4 million for the same period in 2016.
Adjusted Operating Income was $19.0 million for the quarter, up
$1.7 million from the same period in 2016. Adjusted EBITDA was
$39.5 million for the quarter, up $2.4 million from the same period
in 2016, with growth mainly driven by improved performance in the
Company's collection and disposal lines-of-business, partially
offset by higher equity and incentive compensation accruals.
Net cash provided by operating activities was $39.1 million for
the quarter, as compared to $20.5 million for the same period in
2016. Net cash provided by operating activities was
positively impacted in the quarter by $12.8 million associated with
changes in assets and liabilities year-over-year, with $7.0 million
of this positive variance driven by the change in interest accruals
year-over-year due to the changes to the Company's capitalization
structure in October 2016.
Free Cash Flow* was $20.0 million for the quarter, as compared
to $5.1 million for the same period in 2016. Normalized Free Cash
Flow was $20.9 million for the quarter, as compared to $5.1 million
for the same period in 2016.
Highlights for the Nine Months Ended September 30,
2017:
- Revenues were $448.1 million year-to-date, up $26.9
million, or 6.4%, from the same period in 2016.
- Net loss was $(41.8) million year-to-date, as compared
to net income of $5.1 million for
the same period in 2016.
- Adjusted Net Income Attributable to Common Stockholders
was $24.1 million year-to-date, as compared to $5.9 million for the
same period in 2016.
- Adjusted EBITDA was $98.8 million year-to-date, up $7.6
million, or 8.3%, from the same period in 2016.
- Operating loss was $(22.4) million year-to-date, as
compared to operating income of $34.9 million for the same period
in 2016.
- Adjusted Operating Income was $42.4 million
year-to-date, up $7.5 million, or 21.4%, from the same period in
2016.
- Net cash provided by operating activities was $79.1
million year-to-date, up $23.0 million from the same period in
2016.
- Normalized Free Cash Flow was $34.4 million
year-to-date, up $19.5 million from the same period in
2016.
For the nine months ended September 30, 2017, revenues were
$448.1 million, up $26.9 million, or 6.4%, from the same period in
2016, mainly driven by: robust collection, disposal and recycling
commodity pricing; higher collection, commodity, and customer
solutions volumes; and the rollover impact from acquisitions;
partially offset by lower recycling tipping fees and organics
volumes.
Net loss attributable to common stockholders was $(41.8)
million, or $(1.00) per diluted common share year-to-date, as
compared to net income attributable to common stockholders of
$5.1 million, or $0.12 per diluted common share for the same period
in 2016. Adjusted Net Income Attributable to Common Stockholders
was $24.1 million year-to-date, or an Adjusted Diluted Earnings Per
Common Share of $0.56 year-to-date, as compared to Adjusted Net
Income Attributable to Common Stockholders of $5.9 million, or an
Adjusted Diluted Earnings Per Common Share of $0.14 for the same
period in 2016.
Operating loss was $(22.4) million year-to-date, as compared to
operating income of $34.9 million for the same period in 2016.
Adjusted Operating Income was $42.4 million year-to-date, up $7.5
million from the same period in 2016. Adjusted EBITDA was
$98.8 million year-to-date, up $7.6 million from the same period in
2016.
Net cash provided by operating activities was $79.1 million
year-to-date, as compared to $56.1 million for the same period in
2016. Free Cash Flow was $32.8 million year-to-date, as compared to
$14.9 million for the same period in 2016. Normalized Free Cash
Flow was $34.4 million year-to-date, as compared to $14.9 million
for the same period in 2016.
Outlook
“Year-to-date, we have continued to outperform our budget with
higher than projected pricing and operating performance,” Casella
said. “While we expect these same positive operating trends
to persist through our fourth quarter, we remain cautious about the
near-term headwinds from lower recycling commodity prices and
higher recycling labor costs associated with improving quality in
response to China's Operation Sword. Our average commodity
revenue per ton has dropped by approximately 40% from September to
October 2017. And, while we have mature commodity risk
mitigation programs in place, these programs mainly offset risk on
a trailing one-month basis that will result in a negative headwind
during the fourth quarter. Despite this impact, we have
raised our revenue, Adjusted EBITDA, and Normalized Free Cash Flow
guidance ranges for the fiscal year ending December 31,
2017.”
The estimated ranges are as follows:
- Revenues between $585 million and $595 million (increased from
a range of $577 million to $587 million);
- Adjusted EBITDA between $126 million and $129 million
(increased from a range of $124 million to $128 million; and
- Normalized Free Cash Flow between $34 million and $37 million
(increased from a range of $32 million to $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 Thursday, November 2, 2017 at 10:00 a.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 962
49 460) until 12:00 p.m. ET on November 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, as well as impacts
from divestiture transactions (“Adjusted Operating Income”), which
is a non-GAAP financial measure.
The Company also discloses net income (loss) 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 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 Attributable to Common
Stockholders divided by Adjusted Diluted Weighted Average Shares
Outstanding, which includes the dilutive effect of options and
restricted / performance stock units.
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.
The Company also discloses net cash provided by operating
activities, plus changes in assets and liabilities, net of effects
of acquisitions and divestitures, gains on sale of property and
equipment, environmental remediation charges, losses on debt
extinguishment, stock based compensation expense, the Southbridge
Landfill closure charge, interest expense, cash interest expense,
provisions for income taxes, net of deferred taxes and adjustments
as allowed by the Company's credit facility agreement
("Consolidated EBITDA") and total long-term debt and capital
leases, less unencumbered cash and cash equivalents in excess of
$2.0 million ("Consolidated Funded Debt, Net" and, divided by
Consolidated EBITDA, the "Consolidated Net Leverage Ratio").
Adjusted EBITDA and Adjusted Operating Income are reconciled to
net income (loss); while Adjusted Net Income Attributable to Common
Stockholders is reconciled to net income (loss) attributable to
common stockholders; Adjusted Diluted Earnings Per Common Share is
reconciled to diluted earnings per common share; Free Cash Flow,
Normalized Free Cash Flow and Consolidated EBITDA are reconciled to
net cash provided by operating activities; and Consolidated Funded
Debt, Net is reconciled to total long-term debt and capital
leases.
The Company presents Adjusted EBITDA, Adjusted Operating Income,
Adjusted Net Income Attributable to Common Stockholders, Adjusted
Diluted Earnings Per Common Share, Free Cash Flow, Normalized Free
Cash Flow, Consolidated EBITDA, Consolidated Funded Debt, Net and
the Consolidated Net Leverage Ratio because it considers them
important supplemental measures of its performance and liquidity.
The Company believes that these measures 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
Attributable to Common Stockholders, Adjusted Diluted Earnings Per
Common Share, Free Cash Flow, Normalized Free Cash Flow,
Consolidated EBITDA, Consolidated Funded Debt, Net and the
Consolidated Net Leverage Ratio to investors, in addition to
corresponding income statement and cash flow statement measures,
affords investors the benefit of viewing its performance and
liquidity 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.
Non-GAAP financial measures are not in accordance with or an
alternative for GAAP. Adjusted EBITDA, Adjusted Operating Income,
Adjusted Net Income Attributable to Common Stockholders, Adjusted
Diluted Earnings Per Common Share, Free Cash Flow, Normalized Free
Cash Flow, Consolidated EBITDA, Consolidated Funded Debt, Net and
the Consolidated Net Leverage Ratio 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 Attributable to Common Stockholders, Adjusted Diluted
Earnings Per Common Share, Free Cash Flow, Normalized Free Cash
Flow, Consolidated EBITDA, Consolidated Funded Debt, Net and the
Consolidated Net Leverage Ratio 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,” "will,"
“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: new policies adopted by China as
part of its “National Sword” program that will restrict imports of
recyclable materials into China and could have a material impact on
the Company’s financial results; 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 our Form 10-Q for
the quarterly period ended September 30, 2017, 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.
Investors:
Ned ColettaChief Financial Officer(802) 772-2239
Media:
Joseph FuscoVice President(802)
772-2247http://www.casella.com
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
thousands, except for per share data)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues |
$ |
160,269 |
|
|
$ |
151,133 |
|
|
$ |
448,087 |
|
|
$ |
421,236 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Cost of
operations |
103,897 |
|
|
98,803 |
|
|
300,961 |
|
|
284,409 |
|
General
and administration |
20,750 |
|
|
18,777 |
|
|
58,388 |
|
|
55,450 |
|
Depreciation and amortization |
16,591 |
|
|
16,175 |
|
|
46,307 |
|
|
46,430 |
|
Southbridge Landfill closure charge (1) |
754 |
|
|
— |
|
|
64,868 |
|
|
— |
|
|
141,992 |
|
|
133,755 |
|
|
470,524 |
|
|
386,289 |
|
Operating income
(loss) |
18,277 |
|
|
17,378 |
|
|
(22,437 |
) |
|
34,947 |
|
Other expense
(income): |
|
|
|
|
|
|
|
Interest
expense, net |
6,210 |
|
|
9,579 |
|
|
18,872 |
|
|
29,448 |
|
Loss on
debt extinguishment |
— |
|
|
191 |
|
|
517 |
|
|
736 |
|
Other
income |
(164 |
) |
|
(192 |
) |
|
(567 |
) |
|
(697 |
) |
Other expense, net |
6,046 |
|
|
9,578 |
|
|
18,822 |
|
|
29,487 |
|
Income (loss) before
income taxes |
12,231 |
|
|
7,800 |
|
|
(41,259 |
) |
|
5,460 |
|
Provision for income
taxes |
151 |
|
|
263 |
|
|
561 |
|
|
344 |
|
Net income (loss) |
12,080 |
|
|
7,537 |
|
|
(41,820 |
) |
|
5,116 |
|
Less: Net
loss attributable to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
(9 |
) |
Net income (loss)
attributable to common stockholders |
$ |
12,080 |
|
|
$ |
7,537 |
|
|
$ |
(41,820 |
) |
|
$ |
5,125 |
|
Basic weighted average
common shares outstanding |
41,951 |
|
|
41,377 |
|
|
41,783 |
|
|
41,169 |
|
Basic earnings per
common share |
$ |
0.29 |
|
|
$ |
0.18 |
|
|
$ |
(1.00 |
) |
|
$ |
0.12 |
|
Diluted weighted
average common shares outstanding |
43,295 |
|
|
42,287 |
|
|
41,783 |
|
|
41,896 |
|
Diluted earnings per
common share |
$ |
0.28 |
|
|
$ |
0.18 |
|
|
$ |
(1.00 |
) |
|
$ |
0.12 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands)
|
September 30, 2017 |
|
December 31, 2016 |
ASSETS |
(Unaudited) |
|
|
CURRENT ASSETS: |
|
|
|
Cash and
cash equivalents |
$ |
2,303 |
|
|
$ |
2,544 |
|
Accounts
receivable - trade, net of allowance for doubtful accounts |
65,083 |
|
|
61,196 |
|
Other
current assets |
17,145 |
|
|
14,848 |
|
Total current
assets |
84,531 |
|
|
78,588 |
|
Property, plant and
equipment, net of accumulated depreciation and amortization |
351,502 |
|
|
398,466 |
|
Goodwill |
122,085 |
|
|
119,899 |
|
Intangible assets,
net |
7,996 |
|
|
7,696 |
|
Restricted assets |
1,084 |
|
|
1,002 |
|
Cost method
investments |
12,333 |
|
|
12,333 |
|
Other non-current
assets |
12,889 |
|
|
13,528 |
|
Total
assets |
$ |
592,420 |
|
|
$ |
631,512 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
CURRENT
LIABILITIES: |
|
|
|
Current
maturities of long-term debt and capital leases |
$ |
6,014 |
|
|
$ |
4,686 |
|
Accounts
payable |
47,043 |
|
|
44,997 |
|
Other
accrued liabilities |
32,919 |
|
|
32,743 |
|
Total current
liabilities |
85,976 |
|
|
82,426 |
|
Long-term debt and
capital leases, less current maturities |
478,424 |
|
|
503,961 |
|
Other long-term
liabilities |
88,521 |
|
|
69,675 |
|
Total stockholders'
deficit |
(60,501 |
) |
|
(24,550 |
) |
Total
liabilities and stockholders' deficit |
$ |
592,420 |
|
|
$ |
631,512 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)(In
thousands)
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
Cash Flows from
Operating Activities: |
|
|
|
Net (loss) income |
$ |
(41,820 |
) |
|
$ |
5,116 |
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
46,307 |
|
|
46,430 |
|
Depletion
of landfill operating lease obligations |
6,834 |
|
|
7,130 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
3,205 |
|
|
2,688 |
|
Amortization of debt issuance costs and discount on long-term
debt |
2,005 |
|
|
3,106 |
|
Stock-based compensation |
4,784 |
|
|
2,377 |
|
Gain on
sale of property and equipment |
(43 |
) |
|
(541 |
) |
Southbridge Landfill non-cash closure charge (1) |
63,526 |
|
|
— |
|
Loss on
debt extinguishment |
517 |
|
|
736 |
|
Deferred
income taxes |
384 |
|
|
528 |
|
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures |
(6,599 |
) |
|
(11,499 |
) |
Net cash provided by operating activities |
79,100 |
|
|
56,071 |
|
Cash Flows from
Investing Activities: |
|
|
|
Acquisitions, net of cash acquired |
(3,563 |
) |
|
(2,439 |
) |
Acquisition related additions to property, plant and equipment |
(182 |
) |
|
(38 |
) |
Additions
to property, plant and equipment |
(43,230 |
) |
|
(37,435 |
) |
Payments
on landfill operating lease contracts |
(3,731 |
) |
|
(4,811 |
) |
Proceeds
from sale of property and equipment |
657 |
|
|
1,069 |
|
Net cash used in investing activities |
(50,049 |
) |
|
(43,654 |
) |
Cash Flows from
Financing Activities: |
|
|
|
Proceeds
from long-term borrowings |
146,400 |
|
|
140,700 |
|
Principal
payments on long-term debt |
(175,244 |
) |
|
(152,123 |
) |
Payments
of debt issuance costs |
(1,451 |
) |
|
(682 |
) |
Payments
of debt extinguishment costs |
— |
|
|
(410 |
) |
Proceeds
from the exercise of share based awards |
1,003 |
|
|
— |
|
Change in
restricted cash |
— |
|
|
1,347 |
|
Net cash used in financing activities |
(29,292 |
) |
|
(11,168 |
) |
Net (decrease) increase
in cash and cash equivalents |
(241 |
) |
|
1,249 |
|
Cash and cash
equivalents, beginning of period |
2,544 |
|
|
2,312 |
|
Cash and cash
equivalents, end of period |
$ |
2,303 |
|
|
$ |
3,561 |
|
Supplemental Disclosure
of Cash Flow Information: |
|
|
|
Cash
interest |
$ |
19,417 |
|
|
$ |
33,723 |
|
Cash
income taxes, net of refunds |
$ |
248 |
|
|
$ |
242 |
|
Supplemental Disclosure
of Non-Cash Investing and Financing Activities: |
|
|
|
Non-current assets obtained through long-term obligations |
$ |
3,564 |
|
|
$ |
1,841 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESNOTES 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 and nine months
ended September 30, 2017, we recorded charges associated with the
closure of our Southbridge Landfill as follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Asset impairment charge
(1) |
$ |
— |
|
|
$ |
— |
|
|
$ |
47,999 |
|
|
$ |
— |
|
Project development
charge (2) |
— |
|
|
— |
|
|
9,149 |
|
|
— |
|
Environmental
remediation charge (3) |
— |
|
|
— |
|
|
6,379 |
|
|
— |
|
Legal and transaction
costs (4) |
754 |
|
|
— |
|
|
1,341 |
|
|
— |
|
Southbridge Landfill
closure charge |
$ |
754 |
|
|
$ |
— |
|
|
$ |
64,868 |
|
|
$ |
— |
|
(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 Southbridge
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
SUBSIDIARIESRECONCILIATION OF CERTAIN NON-GAAP
MEASURES(Unaudited)(In
thousands)
Following is a reconciliation of Adjusted EBITDA and
Adjusted Operating Income to Net income
(loss):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income
(loss) |
$ |
12,080 |
|
|
$ |
7,537 |
|
|
$ |
(41,820 |
) |
|
$ |
5,116 |
|
Net income
(loss) as a percentage of revenues |
7.5 |
% |
|
5.0 |
% |
|
(9.3 |
)% |
|
1.2 |
% |
Provision
for income taxes |
151 |
|
|
263 |
|
|
561 |
|
|
344 |
|
Other
income |
(164 |
) |
|
(192 |
) |
|
(567 |
) |
|
(697 |
) |
Loss on
debt extinguishment |
— |
|
|
191 |
|
|
517 |
|
|
736 |
|
Interest
expense, net |
6,210 |
|
|
9,579 |
|
|
18,872 |
|
|
29,448 |
|
Southbridge Landfill closure charge |
754 |
|
|
— |
|
|
64,868 |
|
|
— |
|
Depreciation and amortization |
16,591 |
|
|
16,175 |
|
|
46,307 |
|
|
46,430 |
|
Depletion
of landfill operating lease obligations |
2,661 |
|
|
2,687 |
|
|
6,834 |
|
|
7,130 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
1,266 |
|
|
906 |
|
|
3,205 |
|
|
2,688 |
|
Adjusted
EBITDA |
$ |
39,549 |
|
|
$ |
37,146 |
|
|
$ |
98,777 |
|
|
$ |
91,195 |
|
Adjusted EBITDA
as a percentage of revenues |
24.7 |
% |
|
24.6 |
% |
|
22.0 |
% |
|
21.6 |
% |
Depreciation and amortization |
(16,591 |
) |
|
(16,175 |
) |
|
(46,307 |
) |
|
(46,430 |
) |
Depletion
of landfill operating lease obligations |
(2,661 |
) |
|
(2,687 |
) |
|
(6,834 |
) |
|
(7,130 |
) |
Interest
accretion on landfill and environmental remediation
liabilities |
(1,266 |
) |
|
(906 |
) |
|
(3,205 |
) |
|
(2,688 |
) |
Adjusted
Operating Income |
$ |
19,031 |
|
|
$ |
17,378 |
|
|
$ |
42,431 |
|
|
$ |
34,947 |
|
Adjusted
Operating Income as a percentage of revenues |
11.9 |
% |
|
11.5 |
% |
|
9.5 |
% |
|
8.3 |
% |
Following is a reconciliation of Adjusted Net Income
Attributable to Common Stockholders to Net income (loss)
attributable to common stockholders:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income
(loss) attributable to common stockholders |
$ |
12,080 |
|
|
$ |
7,537 |
|
|
$ |
(41,820 |
) |
|
$ |
5,125 |
|
Loss on
debt extinguishment |
— |
|
|
191 |
|
|
517 |
|
|
736 |
|
Southbridge Landfill closure charge |
754 |
|
|
— |
|
|
64,868 |
|
|
— |
|
Tax
effect (i) |
228 |
|
|
(4 |
) |
|
546 |
|
|
— |
|
Adjusted Net
Income Attributable to Common Stockholders |
$ |
13,062 |
|
|
$ |
7,724 |
|
|
$ |
24,111 |
|
|
$ |
5,861 |
|
Diluted
weighted average common shares outstanding |
43,295 |
|
|
42,287 |
|
|
41,783 |
|
|
41,896 |
|
Dilutive
effect of options and other stock awards |
— |
|
|
— |
|
|
1,251 |
|
|
— |
|
Adjusted
Diluted Weighted Average Common Shares Outstanding |
43,295 |
|
|
42,287 |
|
|
43,034 |
|
|
41,896 |
|
Adjusted
Diluted Earnings Per Common Share |
$ |
0.30 |
|
|
$ |
0.18 |
|
|
$ |
0.56 |
|
|
$ |
0.14 |
|
(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 September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Diluted
earnings per common share |
$ |
0.28 |
|
|
$ |
0.18 |
|
|
$ |
(1.00 |
) |
|
$ |
0.12 |
|
Loss on
debt extinguishment |
— |
|
|
— |
|
|
0.01 |
|
|
0.02 |
|
Southbridge Landfill closure charge |
0.01 |
|
|
— |
|
|
1.54 |
|
|
— |
|
Tax
effect |
0.01 |
|
|
— |
|
|
0.01 |
|
|
— |
|
Adjusted
Diluted Earnings Per Common Share |
$ |
0.30 |
|
|
$ |
0.18 |
|
|
$ |
0.56 |
|
|
$ |
0.14 |
|
Following is a reconciliation of Free Cash Flow and
Normalized Free Cash Flow to Net cash provided by operating
activities:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net cash
provided by operating activities |
$ |
39,091 |
|
|
$ |
20,486 |
|
|
$ |
79,100 |
|
|
$ |
56,071 |
|
Capital
expenditures |
(18,858 |
) |
|
(13,975 |
) |
|
(43,230 |
) |
|
(37,435 |
) |
Payments
on landfill operating lease contracts |
(554 |
) |
|
(1,485 |
) |
|
(3,731 |
) |
|
(4,811 |
) |
Proceeds
from sale of property and equipment |
275 |
|
|
112 |
|
|
657 |
|
|
1,069 |
|
Free Cash
Flow |
$ |
19,954 |
|
|
$ |
5,138 |
|
|
$ |
32,796 |
|
|
$ |
14,894 |
|
Landfill
closure, site improvement and remediation expenditures (i) |
995 |
|
|
— |
|
|
1,583 |
|
|
— |
|
Normalized Free
Cash Flow |
$ |
20,949 |
|
|
$ |
5,138 |
|
|
$ |
34,379 |
|
|
$ |
14,894 |
|
(i) Includes cash outlays associated with the Southbridge
Landfill closure.
Following is the Consolidated Net Leverage Ratio and the
reconciliations of Consolidated Funded Debt, Net to long-term debt
and capital leases and Consolidated EBITDA to Net cash provided by
operating activities:
|
Twelve Months Ended September 30,
2017 |
Consolidated
Net Leverage Ratio (i) |
3.71 |
|
(i) Our senior secured credit agreement requires us to maintain
a maximum leverage ratio, to be measured at the end of each fiscal
quarter ("Consolidated Net Leverage Ratio"). The Consolidated Net
Leverage Ratio is calculated as consolidated long-term debt and
capital leases, net of unencumbered cash and cash equivalents in
excess of $2,000 ("Consolidated Funded Debt, Net", calculated at
$499,999 as of September 30, 2017, or $500,302 of consolidated
long-term debt and capital leases, less $303 of cash and cash
equivalents in excess of $2,000 as of September 30, 2017),
divided by Consolidated EBITDA. Consolidated EBITDA is based on
operating results for the twelve months preceding the measurement
date of September 30, 2017. A reconciliation of Net cash
provided by operating activities to Consolidated EBITDA is as
follows:
|
Twelve Months Ended September 30,
2017 |
Net cash
provided by operating activities |
$ |
103,463 |
|
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures |
4,495 |
|
Gain on
sale of property and equipment |
76 |
|
Environmental remediation charge |
(900 |
) |
Loss on
debt extinguishment |
(13,528 |
) |
Stock
based compensation |
(5,800 |
) |
Southbridge Landfill non-cash charge |
(63,526 |
) |
Interest
expense, less amortization of debt issuance costs and discount on
long-term debt |
25,537 |
|
Provision
for income taxes, net of deferred taxes |
272 |
|
Adjustments as allowed by the senior secured credit agreement |
84,591 |
|
Consolidated
EBITDA |
$ |
134,680 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESSUPPLEMENTAL DATA
TABLES(Unaudited)(In
thousands)
Amounts of total revenues attributable to services
provided for the three and nine months ended September 30,
2017 and 2016 are as follows:
|
Three Months Ended September 30, |
|
2017 |
|
% of TotalRevenue |
|
2016 |
|
% of TotalRevenue |
Collection |
$ |
70,040 |
|
|
43.7 |
% |
|
$ |
65,581 |
|
|
43.4 |
% |
Disposal |
44,881 |
|
|
28.0 |
% |
|
43,412 |
|
|
28.7 |
% |
Power generation |
1,215 |
|
|
0.8 |
% |
|
1,610 |
|
|
1.1 |
% |
Processing |
2,499 |
|
|
1.5 |
% |
|
1,974 |
|
|
1.3 |
% |
Solid waste operations |
118,635 |
|
|
74.0 |
% |
|
112,577 |
|
|
74.5 |
% |
Organics |
9,662 |
|
|
6.1 |
% |
|
10,266 |
|
|
6.8 |
% |
Customer
solutions |
15,612 |
|
|
9.7 |
% |
|
13,878 |
|
|
9.2 |
% |
Recycling |
16,360 |
|
|
10.2 |
% |
|
14,412 |
|
|
9.5 |
% |
Total
revenues |
$ |
160,269 |
|
|
100.0 |
% |
|
$ |
151,133 |
|
|
100.0 |
% |
|
Nine Months Ended September 30, |
|
2017 |
|
% of TotalRevenue |
|
2016 |
|
% of TotalRevenue |
Collection |
$ |
196,185 |
|
|
43.8 |
% |
|
$ |
187,117 |
|
|
44.4 |
% |
Disposal |
118,334 |
|
|
26.4 |
% |
|
115,050 |
|
|
27.3 |
% |
Power generation |
4,121 |
|
|
0.9 |
% |
|
4,777 |
|
|
1.1 |
% |
Processing |
6,296 |
|
|
1.4 |
% |
|
4,694 |
|
|
1.2 |
% |
Solid waste operations |
324,936 |
|
|
72.5 |
% |
|
311,638 |
|
|
74.0 |
% |
Organics |
29,881 |
|
|
6.7 |
% |
|
31,372 |
|
|
7.4 |
% |
Customer
solutions |
44,064 |
|
|
9.8 |
% |
|
40,361 |
|
|
9.6 |
% |
Recycling |
49,206 |
|
|
11.0 |
% |
|
37,865 |
|
|
9.0 |
% |
Total
revenues |
$ |
448,087 |
|
|
100.0 |
% |
|
$ |
421,236 |
|
|
100.0 |
% |
Components of revenue growth for the three months ended
September 30, 2017 compared to the three months ended
September 30, 2016 are as follows:
|
Amount |
|
%
ofRelatedBusiness |
|
% of
SolidWasteOperations |
|
% of TotalCompany |
Solid Waste
Operations: |
|
|
|
|
|
|
|
Collection |
$ |
2,160 |
|
|
3.3 |
% |
|
1.9 |
% |
|
1.4 |
% |
Disposal |
1,297 |
|
|
3.0 |
% |
|
1.2 |
% |
|
0.9 |
% |
Solid
Waste Price |
3,457 |
|
|
|
|
3.1 |
% |
|
2.3 |
% |
Collection |
1,067 |
|
|
|
|
0.9 |
% |
|
0.7 |
% |
Disposal |
169 |
|
|
|
|
0.2 |
% |
|
0.1 |
% |
Processing |
177 |
|
|
|
|
0.2 |
% |
|
0.1 |
% |
Solid
Waste Volume |
1,413 |
|
|
|
|
1.3 |
% |
|
0.9 |
% |
Fuel
surcharge and other fees |
(28 |
) |
|
|
|
— |
% |
|
— |
% |
Commodity
price and volume |
(47 |
) |
|
|
|
— |
% |
|
— |
% |
Acquisitions, net divestitures |
1,263 |
|
|
|
|
1.0 |
% |
|
0.8 |
% |
Total Solid
Waste |
6,058 |
|
|
|
|
5.4 |
% |
|
4.0 |
% |
Organics |
(604 |
) |
|
|
|
|
|
(0.4 |
)% |
Customer
Solutions |
1,734 |
|
|
|
|
|
|
1.1 |
% |
Recycling
Operations: |
|
|
|
|
% of Recycling
Operations |
|
|
Price |
1,824 |
|
|
|
|
12.7 |
% |
|
1.2 |
% |
Volume |
124 |
|
|
|
|
0.8 |
% |
|
0.1 |
% |
Total
Recycling |
1,948 |
|
|
|
|
13.5 |
% |
|
1.3 |
% |
Total
Company |
$ |
9,136 |
|
|
|
|
|
|
6.0 |
% |
Solid waste internalization rates by region for the
three and nine months ended September 30, 2017 and 2016 are as
follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Eastern region |
62.0 |
% |
|
59.6 |
% |
|
55.6 |
% |
|
52.9 |
% |
Western region |
75.9 |
% |
|
75.2 |
% |
|
72.8 |
% |
|
74.6 |
% |
Solid waste
internalization |
68.5 |
% |
|
67.1 |
% |
|
63.6 |
% |
|
63.1 |
% |
Components of capital expenditures (ii) for the three
and nine months ended September 30, 2017 and 2016 are as
follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total Growth
Capital Expenditures |
$ |
696 |
|
|
$ |
829 |
|
|
$ |
2,651 |
|
|
$ |
4,291 |
|
Replacement
Capital Expenditures: |
|
|
|
|
|
|
|
Landfill
development |
14,071 |
|
|
10,190 |
|
|
26,161 |
|
|
21,647 |
|
Vehicles,
machinery, equipment and containers |
2,913 |
|
|
2,336 |
|
|
11,254 |
|
|
9,680 |
|
Facilities |
543 |
|
|
452 |
|
|
1,708 |
|
|
1,132 |
|
Other |
635 |
|
|
168 |
|
|
1,456 |
|
|
685 |
|
Total
Replacement Capital Expenditures |
18,162 |
|
|
13,146 |
|
|
40,579 |
|
|
33,144 |
|
Total Growth
and Replacement Capital Expenditures |
$ |
18,858 |
|
|
$ |
13,975 |
|
|
$ |
43,230 |
|
|
$ |
37,435 |
|
(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.
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