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, 2018.
Third Quarter and Year-To-Date Highlights:
- Revenues were $172.8 million for the quarter, up $12.6
million, or 7.8%, from the same period in 2017.
- Overall solid waste pricing for the quarter was up
4.8%, driven by strong collection pricing, up 5.7%, and robust
landfill pricing, up 4.1%, from the same period in
2017.
- Net income was $22.3 million for the quarter, an
increase of $10.2 million, or 84.6%, from the same period in
2017.
- Adjusted Net Income* was $13.4 million for the quarter,
up $0.3 million from the same period in 2017.
- Adjusted EBITDA was $42.4 million for the quarter, up
$2.9 million, or 7.3%, from the same period in 2017.
- Net cash provided by operating activities was $89.9
million year-to-date, up $10.8 million, or 13.7%, from the same
period in 2017.
- Normalized Free Cash Flow was $37.3 million
year-to-date, up $2.9 million, or 8.5%, from the same period in
2017.
- With the two acquisitions completed earlier today, the
Company has acquired approximately $70 million of annualized
revenues year-to-date, exceeding its $20 million to $40 million
target range for 2018.
“We had another strong operational quarter, as we continued to
execute well against our key strategies as part of our 2021 plan,”
said John W. Casella, Chairman and CEO of Casella Waste Systems,
Inc. “We remain focused on driving Normalized Free Cash Flow growth
by increasing landfill returns, improving collection profitability,
creating incremental value through resource solutions, using
technology to drive profitable growth and efficiencies, and
efficiently allocating capital for strategic growth.”
“We continue to make substantial progress ramping up our
strategic growth initiative, as we have acquired roughly $70
million of annualized revenues year-to-date, including the two
acquisitions that we closed on earlier today," Casella said. "We
are focused on acquiring well run businesses in strategic markets
that will drive additional internalization to our landfills and
operating synergies. We are also focused on more effectively
optimizing waste placement around the northeast as the
ever-tightening disposal market is creating additional opportunity
to source new volumes at higher prices. We expect revenue growth of
over 5.5% in 2019 including the roll-over impact of acquisitions
already completed in 2018. Further, our acquisition pipeline
remains robust, and we believe that there is additional opportunity
to drive cash flow growth across our footprint through strategic
growth.”
“On the operating side, outperformance in our solid waste,
customer solutions and organics operations more than offset the
significant commodity pricing headwinds in our recycling business,”
Casella said. “Our disciplined solid waste pricing programs
continue to drive significant value, with collection pricing up
5.7% and landfill pricing up 4.1% year-over-year in the third
quarter. Solid waste volumes were down (1.0)% year-over-year in the
third quarter, with (0.7)% of the decline resulting from a fire
related business interruption at a transfer station, and the
remainder associated with our disciplined pricing strategy that is
focused on balancing volume growth with higher pricing.”
“Our team has done a great job over the last several years
working to off-take risk across our business, including recycling
commodity pricing risk,” Casella said. “As commodity prices
stabilized in the third quarter, our trailing SRA fee and revenue
share contracts, where applied, are now fully recovering lower
commodity prices, albeit these programs are designed to recover
costs and as a result have pressured margins. Despite this
progress, operating income in the recycling line-of-business was
down year-over-year, as we are still absorbing all of the commodity
pricing risk on several legacy third-party processing contracts and
our variable processing and transportation costs are up
significantly due to the market changes. Looking forward to 2019,
we expect recycling results to improve even if commodity prices
stay at historically low levels as several third-party recycling
processing contracts will reset over the next twelve months.”
For the quarter, revenues were $172.8 million, up $12.6 million,
or 7.8%, from the same period in 2017, with revenue growth mainly
driven by: robust collection and disposal pricing; higher organics
and customer solutions volumes; and acquisition activity; partially
offset by lower recycling commodity prices and volumes; and lower
solid waste volumes due to the fire related business interruption
at a transfer station and lower collection and transportation
volumes.
Net income was $22.3 million for the quarter, or $0.50 per
diluted common share for the quarter, an increase in net income of
$10.2 million, as compared to net income of $12.1 million, or $0.28
per diluted common share for the same period in 2017. Adjusted Net
Income was $13.4 million for the quarter, or Adjusted Diluted
Earnings Per Common Share* of $0.30 for the quarter, as compared to
Adjusted Net Income of $13.1 million, or Adjusted Diluted Earnings
Per Common Share of $0.30 for the same period in 2017.
The third quarter included: our recovery of a $10.0 million
Southbridge Landfill environmental insurance settlement, partially
offset by $0.5 million of legal expenses associated with the
Southbridge Landfill closure; and $0.6 million of expense from
acquisition activities and other items. The same period in 2017
included a $0.8 million Southbridge Landfill closure charge.
Operating income was $28.9 million for the quarter, as compared
to operating income of $18.3 million for the same period in 2017.
Adjusted Operating Income* was $20.0 million for the quarter, up
$0.9 million from the same period in 2017. Adjusted EBITDA was
$42.4 million for the quarter, up $2.9 million from the same period
in 2017, with growth mainly driven by improved performance in the
Company's collection, disposal and customer solutions
lines-of-business, partially offset by a decline in the recycling
line-of-business.
For the nine months ended September 30, 2018, revenues were
$485.9 million, up $37.8 million, or 8.4%, from the same period in
2017, with revenue growth mainly driven by: robust collection and
disposal pricing; higher disposal volumes; and higher volumes in
our organics and customer solutions lines-of-business; partially
offset by lower commodity pricing and volumes.
Net income was $20.1 million year-to-date, or $0.46 per diluted
common share year-to-date, an increase in net income of $61.9
million, as compared to net loss of $(41.8) million, or $(1.00) per
diluted common share for the same period in 2017.
Operating income was $44.9 million year-to-date, as compared to
operating loss of $(22.4) million for the same period in 2017.
Adjusted Operating Income was $40.5 million year-to-date, down
$(2.0) million from the same period in 2017. Adjusted EBITDA was
$104.2 million year-to-date, up $5.4 million from the same period
in 2017.
Net cash provided by operating activities was $89.9 million
year-to-date, as compared to $79.1 million for the same period in
2017. Normalized Free Cash Flow was $37.3 million year-to-date, as
compared to $34.4 million for the same period in 2017. Normalized
Free Cash Flow for the current year-to-date period included the
following adjustments: a $2.1 million contract settlement cash
outlay related to the termination of a recycling brokerage
contract; $(3.7) million of net cash proceeds related to the
planned closure of the Southbridge Landfill; $0.7 million of cash
outlays related to acquisition or other activities; and $3.6
million of capital expenditures related to acquisitions or the
assumption of new customers from a distressed market
participant.
Outlook
“Given the continued strength in our solid waste, organics, and
customer solutions operations combined with our success advancing
acquisition activity year-to-date, we have increased our revenue,
Adjusted EBITDA and Normalized Free Cash Flow guidance ranges for
the fiscal year ending December 31, 2018,” Casella said.
“Recycling commodity prices stabilized early in the third quarter
and began to modestly improve throughout the quarter. We have
forecasted commodity prices to stay flat at the current low levels
for the remainder of 2018.”
The estimated ranges are as follows:
- Revenues between $642 million and $652 million (increased from
a range of $630 million to $640 million);
- Adjusted EBITDA between $137 million and $140 million
(increased from a range of $135 million to $139 million); and
- Normalized Free Cash Flow between $44 million and $47 million
(increased from a range of $42 million to $46 million).
Adjusted EBITDA and Normalized Free Cash Flow related to the
fiscal year ending December 31, 2018 are described in the
Reconciliation of 2018 Outlook Non-GAAP Measures section of this
press release.
Conference call to discuss quarter
The Company will host a conference call to discuss these results
on Friday, November 2, 2018 at 9:00 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 the Company's
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
5491649) until 11:00 p.m. ET on November 9, 2018.
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 (settlement) charge, net, gains on
asset sales, development project charges, contract settlement
charges, legal settlement costs, tax settlement costs, bargain
purchase gains, asset impairment charges, environmental remediation
charges, severance and reorganization costs, expense from
acquisition activities and other items, gains on the settlement of
acquisition related contingent consideration, 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 (settlement) charge,
net, gains on asset sales, development project charges, contract
settlement charges, legal settlement costs, tax settlement costs,
bargain purchase gains, asset impairment charges, environmental
remediation charges, severance and reorganization costs, expense
from acquisition activities and other items, gains on the
settlement of acquisition related contingent consideration, 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), adjusted for the
U.S. tax reform impact, the Southbridge Landfill closure
(settlement) charge, net, gains on asset sales, development project
charges, contract settlement charges, legal settlement costs, tax
settlement costs, bargain purchase gains, asset impairment charges,
environmental remediation charges, severance and reorganization
costs, expense from acquisition activities and other items, gains
on the settlement of acquisition related contingent consideration,
proxy contest costs, impacts from divestiture transactions, losses
on debt modifications, as well as impairment of investments
("Adjusted Net Income"), which is a non-GAAP financial measure.
The Company also discloses Adjusted Diluted Earnings Per Common
Share, which is Adjusted Net Income divided by Adjusted Diluted
Weighted Average Shares Outstanding, which includes the dilutive
effect of options and restricted / performance stock units.
Adjusted Diluted Earnings Per Common Share is a non-GAAP financial
measure.
The Company also discloses net cash provided by operating
activities, less 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 (less) certain
cash outflows (inflows) associated with landfill closure, site
improvement and remediation, plus certain cash outflows associated
with new contract and project capital expenditures, plus certain
cash outflows associated with contract settlement costs, plus
certain cash outflows associated with expense from acquisition
activities and other items, plus certain cash outflows associated
with capital expenditures related to acquisitions or assumption of
new customers from a distressed or defunct market participant, plus
(less) cash outflows inflows) 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, development
project charges, the non-cash Southbridge Landfill closure charge,
interest expense - less amortization, 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"), which are non-GAAP financial measures.
Adjusted EBITDA, Adjusted Operating Income and Adjusted Net
Income are reconciled to net income (loss); 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, 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 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, 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 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, 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, 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 our intentions, beliefs or
current expectations concerning, among other things, our financial
performance; financial condition; operations and services;
prospects; growth; strategies; and guidance for full year 2018, 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 have a material impact on the Company’s financial
results; the planned capping and closure of the Southbridge
Landfill and the pending litigation relating to the Southbridge
Landfill, and the lawsuit relating to the North Country Landfill
could result in unexpected material costs; adverse weather
conditions may negatively impact the Company’s 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 the Company’s 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 be unable to achieve its acquisition or development
targets on favorable pricing or at all; and the Company may incur
environmental charges or asset impairments in the future.
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, 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, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues |
$ |
172,832 |
|
|
$ |
160,269 |
|
|
$ |
485,936 |
|
|
$ |
448,087 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Cost of
operations |
114,118 |
|
|
103,897 |
|
|
331,527 |
|
|
300,961 |
|
General
and administration |
20,545 |
|
|
20,750 |
|
|
62,365 |
|
|
58,388 |
|
Depreciation and amortization |
18,202 |
|
|
16,591 |
|
|
51,572 |
|
|
46,307 |
|
Expense
from acquisition activities and other items |
581 |
|
|
— |
|
|
930 |
|
|
— |
|
Southbridge Landfill closure (settlement) charge, net (1) |
(9,498 |
) |
|
754 |
|
|
(7,740 |
) |
|
64,868 |
|
Contract
settlement charge |
— |
|
|
— |
|
|
2,100 |
|
|
— |
|
Development project charge |
— |
|
|
— |
|
|
311 |
|
|
— |
|
|
143,948 |
|
|
141,992 |
|
|
441,065 |
|
|
470,524 |
|
Operating income
(loss) |
28,884 |
|
|
18,277 |
|
|
44,871 |
|
|
(22,437 |
) |
Other expense
(income): |
|
|
|
|
|
|
|
Interest
expense, net |
6,371 |
|
|
6,210 |
|
|
19,186 |
|
|
18,872 |
|
Loss on
debt extinguishment |
— |
|
|
— |
|
|
7,352 |
|
|
517 |
|
Other
income |
(166 |
) |
|
(164 |
) |
|
(597 |
) |
|
(567 |
) |
Other expense, net |
6,205 |
|
|
6,046 |
|
|
25,941 |
|
|
18,822 |
|
Income (loss) before
income taxes |
22,679 |
|
|
12,231 |
|
|
18,930 |
|
|
(41,259 |
) |
Provision (benefit) for
income taxes |
377 |
|
|
151 |
|
|
(1,166 |
) |
|
561 |
|
Net income (loss) |
$ |
22,302 |
|
|
$ |
12,080 |
|
|
$ |
20,096 |
|
|
$ |
(41,820 |
) |
Basic weighted average
common shares outstanding |
42,779 |
|
|
41,951 |
|
|
42,605 |
|
|
41,783 |
|
Basic earnings per
common share |
$ |
0.52 |
|
|
$ |
0.29 |
|
|
$ |
0.47 |
|
|
$ |
(1.00 |
) |
Diluted weighted
average common shares outstanding |
44,175 |
|
|
43,295 |
|
|
43,938 |
|
|
41,783 |
|
Diluted earnings per
common share |
$ |
0.50 |
|
|
$ |
0.28 |
|
|
$ |
0.46 |
|
|
$ |
(1.00 |
) |
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands)
|
September 30, 2018 |
|
December 31, 2017 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash
equivalents |
$ |
3,083 |
|
|
$ |
1,995 |
|
Accounts
receivable - trade, net of allowance for doubtful accounts |
81,003 |
|
|
65,953 |
|
Other
current assets |
17,789 |
|
|
16,432 |
|
Total current
assets |
101,875 |
|
|
84,380 |
|
Property, plant and
equipment, net of accumulated depreciation and amortization |
387,246 |
|
|
361,547 |
|
Goodwill |
151,029 |
|
|
122,605 |
|
Intangible assets, net
of accumulated amortization |
26,601 |
|
|
8,149 |
|
Restricted assets |
1,229 |
|
|
1,220 |
|
Cost method
investments |
12,333 |
|
|
12,333 |
|
Deferred income
taxes |
10,024 |
|
|
11,567 |
|
Other non-current
assets |
12,511 |
|
|
13,148 |
|
Total
assets |
$ |
702,848 |
|
|
$ |
614,949 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
CURRENT
LIABILITIES: |
|
|
|
Current
maturities of long-term debt and capital leases |
$ |
1,980 |
|
|
$ |
4,926 |
|
Accounts
payable |
56,207 |
|
|
47,081 |
|
Other
accrued liabilities |
50,790 |
|
|
36,562 |
|
Total current
liabilities |
108,977 |
|
|
88,569 |
|
Long-term debt and
capital leases, less current maturities |
514,707 |
|
|
477,576 |
|
Other long-term
liabilities |
84,443 |
|
|
86,666 |
|
Total stockholders'
deficit |
(5,279 |
) |
|
(37,862 |
) |
Total
liabilities and stockholders' deficit |
$ |
702,848 |
|
|
$ |
614,949 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)(In
thousands)
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
Cash Flows from
Operating Activities: |
|
|
|
|
|
Net income (loss) |
$ |
20,096 |
|
|
$ |
(41,820 |
) |
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
51,572 |
|
|
46,307 |
|
Depletion
of landfill operating lease obligations |
7,827 |
|
|
6,834 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
4,291 |
|
|
3,205 |
|
Amortization of debt issuance costs and discount on long-term
debt |
1,875 |
|
|
2,005 |
|
Stock-based compensation |
6,366 |
|
|
4,784 |
|
Gain on
sale of property and equipment |
(414 |
) |
|
(43 |
) |
Southbridge Landfill non-cash closure charge (1) |
1,354 |
|
|
63,526 |
|
Southbridge Landfill insurance recovery for investing
activities |
(3,506 |
) |
|
— |
|
Non-cash
expense from acquisition activities and other items |
211 |
|
|
— |
|
Development project charge |
311 |
|
|
— |
|
Loss on
debt extinguishment |
7,352 |
|
|
517 |
|
Deferred
income taxes |
79 |
|
|
384 |
|
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures |
(7,497 |
) |
|
(6,599 |
) |
Net cash
provided by operating activities |
89,917 |
|
|
79,100 |
|
Cash Flows from
Investing Activities: |
|
|
|
Acquisitions, net of cash acquired |
(58,176 |
) |
|
(3,563 |
) |
Additions
to property, plant and equipment |
(51,841 |
) |
|
(43,412 |
) |
Payments
on landfill operating lease contracts |
(5,006 |
) |
|
(3,731 |
) |
Proceeds
from sale of property and equipment |
609 |
|
|
657 |
|
Proceeds
from Southbridge Landfill insurance recovery for investing
activities |
3,506 |
|
|
— |
|
Proceeds
from property insurance settlement |
992 |
|
|
— |
|
Net cash
used in investing activities |
(109,916 |
) |
|
(50,049 |
) |
Cash Flows from
Financing Activities: |
|
|
|
Proceeds
from long-term borrowings |
566,800 |
|
|
146,400 |
|
Principal
payments on long-term debt |
(540,611 |
) |
|
(175,244 |
) |
Payments
of debt issuance costs |
(5,573 |
) |
|
(1,451 |
) |
Proceeds
from the exercise of share based awards |
471 |
|
|
1,003 |
|
Net cash
provided by (used in) financing activities |
21,087 |
|
|
(29,292 |
) |
Net increase (decrease)
in cash and cash equivalents |
1,088 |
|
|
(241 |
) |
Cash and cash
equivalents, beginning of period |
1,995 |
|
|
2,544 |
|
Cash and cash
equivalents, end of period |
$ |
3,083 |
|
|
$ |
2,303 |
|
Supplemental Disclosure
of Cash Flow Information: |
|
|
|
Cash
interest |
$ |
16,950 |
|
|
$ |
19,417 |
|
Cash
income taxes, net of refunds |
$ |
84 |
|
|
$ |
248 |
|
Supplemental Disclosure
of Non-Cash Investing and Financing Activities: |
|
|
|
Non-current assets obtained through long-term obligations |
$ |
4,342 |
|
|
$ |
3,564 |
|
Contingent consideration from business combinations |
$ |
2,924 |
|
|
$ |
— |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS(Unaudited)(In
thousands)
Note 1: Southbridge Landfill Closure (Settlement)
Charge, Net
In June 2017, we initiated the plan to cease operations of our
Southbridge Landfill. Accordingly, in the three and nine months
ended September 30, 2018 and 2017, we recorded charges associated
with the closure of our Southbridge Landfill as follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Asset impairment charge
(1) |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
47,999 |
|
Project development
charge (2) |
— |
|
|
— |
|
|
— |
|
|
9,149 |
|
Environmental
remediation charge (3) |
— |
|
|
— |
|
|
— |
|
|
6,379 |
|
Charlton settlement
charge (4) |
— |
|
|
— |
|
|
1,216 |
|
|
— |
|
Legal and transaction
costs (5) |
502 |
|
|
754 |
|
|
1,044 |
|
|
1,341 |
|
Recovery on insurance
settlement (6) |
(10,000 |
) |
|
— |
|
|
(10,000 |
) |
|
— |
|
Southbridge Landfill
closure (settlement) charge, net |
$ |
(9,498 |
) |
|
$ |
754 |
|
|
$ |
(7,740 |
) |
|
$ |
64,868 |
|
- 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 the Southbridge Landfill in accordance with
FASB ASC 360.
- We wrote-off deferred costs associated with Southbridge
Landfill permitting activities no longer deemed viable.
- We recorded an environmental remediation charge associated with
the future installation of a municipal waterline.
- We established a reserve associated with settlement of the Town
of Charlton's claim against us.
- We incurred legal and other transaction costs associated with
various matters as part of the Southbridge Landfill closure.
- We recorded a recovery on an environmental insurance settlement
associated with 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 from Net income
(loss):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income
(loss) |
$ |
22,302 |
|
|
$ |
12,080 |
|
|
$ |
20,096 |
|
|
$ |
(41,820 |
) |
Net income
(loss) as a percentage of revenues |
12.9 |
% |
|
7.5 |
% |
|
4.1 |
% |
|
(9.3 |
)% |
Provision
(benefit) for income taxes |
377 |
|
|
151 |
|
|
(1,166 |
) |
|
561 |
|
Other
income |
(166 |
) |
|
(164 |
) |
|
(597 |
) |
|
(567 |
) |
Loss on
debt extinguishment |
— |
|
|
— |
|
|
7,352 |
|
|
517 |
|
Interest
expense, net |
6,371 |
|
|
6,210 |
|
|
19,186 |
|
|
18,872 |
|
Expense
from acquisition activities and other items |
581 |
|
|
— |
|
|
930 |
|
|
— |
|
Southbridge Landfill closure (settlement) charge, net |
(9,498 |
) |
|
754 |
|
|
(7,740 |
) |
|
64,868 |
|
Contract
settlement charge |
— |
|
|
— |
|
|
2,100 |
|
|
— |
|
Development project charge |
— |
|
|
— |
|
|
311 |
|
|
— |
|
Depreciation and amortization |
18,202 |
|
|
16,591 |
|
|
51,572 |
|
|
46,307 |
|
Depletion
of landfill operating lease obligations |
2,834 |
|
|
2,661 |
|
|
7,827 |
|
|
6,834 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
1,429 |
|
|
1,266 |
|
|
4,291 |
|
|
3,205 |
|
Adjusted
EBITDA |
$ |
42,432 |
|
|
$ |
39,549 |
|
|
$ |
104,162 |
|
|
$ |
98,777 |
|
Adjusted EBITDA
as a percentage of revenues |
24.6 |
% |
|
24.7 |
% |
|
21.4 |
% |
|
22.0 |
% |
Depreciation and amortization |
(18,202 |
) |
|
(16,591 |
) |
|
(51,572 |
) |
|
(46,307 |
) |
Depletion
of landfill operating lease obligations |
(2,834 |
) |
|
(2,661 |
) |
|
(7,827 |
) |
|
(6,834 |
) |
Interest
accretion on landfill and environmental remediation
liabilities |
(1,429 |
) |
|
(1,266 |
) |
|
(4,291 |
) |
|
(3,205 |
) |
Adjusted
Operating Income |
$ |
19,967 |
|
|
$ |
19,031 |
|
|
$ |
40,472 |
|
|
$ |
42,431 |
|
Adjusted
Operating Income as a percentage of revenues |
11.6 |
% |
|
11.9 |
% |
|
8.3 |
% |
|
9.5 |
% |
Following is a reconciliation of Adjusted Net Income
from Net income (loss):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income
(loss) |
$ |
22,302 |
|
|
$ |
12,080 |
|
|
$ |
20,096 |
|
|
$ |
(41,820 |
) |
Loss on
debt extinguishment |
— |
|
|
— |
|
|
7,352 |
|
|
517 |
|
Development project charge |
— |
|
|
— |
|
|
311 |
|
|
— |
|
Contract
settlement charge |
— |
|
|
— |
|
|
2,100 |
|
|
— |
|
Southbridge Landfill closure (settlement) charge, net |
(9,498 |
) |
|
754 |
|
|
(7,740 |
) |
|
64,868 |
|
Expense
from acquisition activities and other items |
581 |
|
|
— |
|
|
930 |
|
|
— |
|
Tax
effect (i) |
(2 |
) |
|
228 |
|
|
(29 |
) |
|
546 |
|
Adjusted Net
Income |
$ |
13,383 |
|
|
$ |
13,062 |
|
|
$ |
23,020 |
|
|
$ |
24,111 |
|
Diluted
weighted average common shares outstanding |
44,175 |
|
|
43,295 |
|
|
43,938 |
|
|
41,783 |
|
Dilutive
effect of options and other stock awards |
— |
|
|
— |
|
|
— |
|
|
1,251 |
|
Adjusted
Diluted Weighted Average Common Shares Outstanding |
44,175 |
|
|
43,295 |
|
|
43,938 |
|
|
43,034 |
|
Adjusted
Diluted Earnings Per Common Share |
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.52 |
|
|
$ |
0.56 |
|
- 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 from Diluted earnings per common
share:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Diluted earnings
per common share |
$ |
0.50 |
|
|
$ |
0.28 |
|
|
$ |
0.46 |
|
|
$ |
(1.00 |
) |
Loss on
debt extinguishment |
— |
|
|
— |
|
|
0.17 |
|
|
0.01 |
|
Southbridge Landfill closure (settlement) charge, net |
(0.21 |
) |
|
0.01 |
|
|
(0.19 |
) |
|
1.54 |
|
Contract
settlement charge |
— |
|
|
— |
|
|
0.05 |
|
|
— |
|
Development project charge |
— |
|
|
— |
|
|
0.01 |
|
|
— |
|
Expense
from acquisition activities and other items |
0.01 |
|
|
— |
|
|
0.02 |
|
|
— |
|
Tax
effect |
— |
|
|
0.01 |
|
|
— |
|
|
0.01 |
|
Adjusted
Diluted Earnings Per Common Share |
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.52 |
|
|
$ |
0.56 |
|
Following is a reconciliation of Free Cash Flow* and
Normalized Free Cash Flow from Net cash provided by operating
activities:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net cash
provided by operating activities |
$ |
41,838 |
|
|
$ |
39,091 |
|
|
$ |
89,917 |
|
|
$ |
79,100 |
|
Capital
expenditures |
(16,349 |
) |
|
(18,864 |
) |
|
(51,841 |
) |
|
(43,412 |
) |
Payments
on landfill operating lease contracts |
(1,539 |
) |
|
(554 |
) |
|
(5,006 |
) |
|
(3,731 |
) |
Proceeds
from sale of property and equipment |
140 |
|
|
275 |
|
|
609 |
|
|
657 |
|
Proceeds
from property insurance settlement |
992 |
|
|
— |
|
|
992 |
|
|
— |
|
Free Cash
Flow |
$ |
25,082 |
|
|
$ |
19,948 |
|
|
$ |
34,671 |
|
|
$ |
32,614 |
|
Contract
settlement costs (i) |
— |
|
|
— |
|
|
2,100 |
|
|
— |
|
Landfill
closure, site improvement and remediation (ii) |
(5,402 |
) |
|
995 |
|
|
(3,739 |
) |
|
1,583 |
|
Expense
from acquisition activities and other items (iii) |
551 |
|
|
— |
|
|
689 |
|
|
— |
|
Non-recurring capital expenditures (iv) |
973 |
|
|
6 |
|
|
3,578 |
|
|
182 |
|
Normalized Free
Cash Flow |
$ |
21,204 |
|
|
$ |
20,949 |
|
|
$ |
37,299 |
|
|
$ |
34,379 |
|
- Includes a contract settlement cash outlay associated with
exiting a contract.
- Includes cash inflows and cash outlays associated with the
Southbridge Landfill closure. This includes $6,494 of the $10,000
recovery of the environmental insurance settlement and excludes
$3,506 pertaining to the recovery of cash flows from investing
activities.
- Includes cash outlays associated with acquisition
activities.
- Includes capital expenditures related to acquisitions or
assumption of new customers from a distressed or defunct market
participant.
Following is the Consolidated Net Leverage Ratio* and
the reconciliations of Consolidated Funded Debt, Net* from
long-term debt and capital leases and Consolidated EBITDA* from Net
cash provided by operating activities:
|
Twelve Months Ended
September 30, 2018 |
|
Covenant Requirement at
September 30, 2018 |
Consolidated Net Leverage Ratio (i) |
3.54 |
|
|
4.75 |
|
- Our credit agreement requires us to maintain a maximum
consolidated net 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 $527,128 as of September 30, 2018, or
$528,211 of consolidated long-term debt and capital leases, less
$1,083 of cash and cash equivalents in excess of $2,000 as of
September 30, 2018), divided by consolidated EBITDA as defined
by our credit agreement ("Consolidated EBITDA"). Consolidated
EBITDA is based on operating results for the twelve months
preceding the measurement date of September 30, 2018. A
reconciliation of Consolidated EBITDA from Net cash provided by
operating activities is as follows:
|
Twelve Months Ended September 30,
2018 |
Net cash
provided by operating activities |
$ |
118,355 |
|
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures |
5,482 |
|
Gain on
sale of property and equipment |
322 |
|
Non-cash
expense from acquisition activities and other items |
(211 |
) |
Developmental project charge |
(311 |
) |
Loss on
debt extinguishment |
(7,352 |
) |
Southbridge Landfill non-cash closure (settlement) charge, net |
(1,354 |
) |
Southbridge Landfill insurance recovery for investing
activities |
3,506 |
|
Stock
based compensation |
(8,014 |
) |
Interest
expense, less amortization of debt issuance costs and discount on
long-term debt |
22,893 |
|
Provision
for income taxes, net of deferred taxes |
(1,150 |
) |
Adjustments as allowed by the credit agreement |
16,916 |
|
Consolidated
EBITDA |
$ |
149,082 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESRECONCILIATION OF 2018 OUTLOOK
NON-GAAP MEASURES(Unaudited)(In
thousands)
Following is a reconciliation of the Company's
anticipated Adjusted EBITDA from anticipated Net income for the
fiscal year ending December 31, 2018:
|
(Anticipated) Fiscal Year Ending
December 31, 2018 |
Net income |
$26,000 - $29,000 |
Benefit for income taxes |
(800) |
Other income |
(600) |
Loss on derivative instruments |
7,352 |
Interest expense, net |
26,000 |
Expense from acquisition activities and other
items |
930 |
Southbridge Landfill closure (settlement) charge,
net |
(7,740) |
Contract settlement charge |
2,100 |
Development project charge |
311 |
Depreciation and amortization |
67,000 |
Depletion of landfill operating lease
obligations |
10,947 |
Interest accretion on landfill and environmental
remediation liabilities |
5,500 |
Adjusted EBITDA |
$137,000 - $140,000 |
Following is a reconciliation of the Company's
anticipated Free Cash Flow and Normalized Free Cash Flow from
anticipated Net cash provided by operating activities for the
fiscal year ending December 31, 2018:
|
(Anticipated) Fiscal Year Ending
December 31, 2018 |
Net cash provided by operating activities |
$121,500 - $124,500 |
Capital expenditures |
(75,000) |
Payments on landfill operating lease contracts |
(7,500) |
Proceeds from property insurance settlement |
992 |
Proceeds from sale of property and equipment |
708 |
Free Cash Flow |
$40,700 - $43,700 |
Contract settlement costs (i) |
2,100 |
Landfill closure, site improvement and remediation
(ii) |
(6,800) |
Expense from acquisition activities and other items
(iii) |
1,000 |
Non-recurring capital expenditures (iv) |
7,000 |
Normalized Free Cash Flow |
$44,000 - $47,000 |
- Includes a contract settlement cash outlay associated with
exiting a contract.
- Includes cash inflows and cash outlays associated with the
Southbridge Landfill closure.
- Includes cash outlays associated with acquisition
activities.
- Includes capital expenditures related to acquisitions or
assumption of new customers from a distressed or defunct market
participant.et participant.
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,
2018 and 2017 are as follows:
|
Three Months Ended September 30, |
|
2018 |
|
% of TotalRevenue |
|
2017 |
|
% of TotalRevenue |
Collection |
$ |
79,611 |
|
|
46.1 |
% |
|
$ |
70,040 |
|
|
43.7 |
% |
Disposal |
48,737 |
|
|
28.2 |
% |
|
44,881 |
|
|
28.0 |
% |
Power generation |
920 |
|
|
0.5 |
% |
|
1,215 |
|
|
0.8 |
% |
Processing |
2,079 |
|
|
1.2 |
% |
|
2,499 |
|
|
1.5 |
% |
Solid waste operations |
131,347 |
|
|
76.0 |
% |
|
118,635 |
|
|
74.0 |
% |
Organics |
13,413 |
|
|
7.8 |
% |
|
9,662 |
|
|
6.1 |
% |
Customer
solutions |
17,195 |
|
|
9.9 |
% |
|
15,612 |
|
|
9.7 |
% |
Recycling |
10,877 |
|
|
6.3 |
% |
|
16,360 |
|
|
10.2 |
% |
Total
revenues |
$ |
172,832 |
|
|
100.0 |
% |
|
$ |
160,269 |
|
|
100.0 |
% |
|
Nine Months Ended September 30, |
|
2018 |
|
% of TotalRevenue |
|
2017 |
|
% of TotalRevenue |
Collection |
$ |
220,650 |
|
|
45.4 |
% |
|
$ |
196,185 |
|
|
43.8 |
% |
Disposal |
136,217 |
|
|
28.0 |
% |
|
118,334 |
|
|
26.4 |
% |
Power generation |
4,014 |
|
|
0.8 |
% |
|
4,121 |
|
|
0.9 |
% |
Processing |
5,847 |
|
|
1.3 |
% |
|
6,296 |
|
|
1.4 |
% |
Solid waste operations |
366,728 |
|
|
75.5 |
% |
|
324,936 |
|
|
72.5 |
% |
Organics |
40,259 |
|
|
8.3 |
% |
|
29,881 |
|
|
6.7 |
% |
Customer
solutions |
48,315 |
|
|
9.9 |
% |
|
44,064 |
|
|
9.8 |
% |
Recycling |
30,634 |
|
|
6.3 |
% |
|
49,206 |
|
|
11.0 |
% |
Total
revenues |
$ |
485,936 |
|
|
100.0 |
% |
|
$ |
448,087 |
|
|
100.0 |
% |
Components of revenue growth for the three months ended
September 30, 2018 compared to the three months ended
September 30, 2017 are as follows:
|
Amount |
|
%
ofRelatedBusiness |
|
% of
SolidWasteOperations |
|
% of TotalCompany |
Solid Waste
Operations: |
|
|
|
|
|
|
|
Collection |
$ |
4,026 |
|
|
5.7 |
% |
|
3.4 |
% |
|
2.5 |
% |
Disposal |
1,621 |
|
|
3.6 |
% |
|
1.4 |
% |
|
1.0 |
% |
Solid
Waste Price |
5,647 |
|
|
|
|
4.8 |
% |
|
3.5 |
% |
Collection |
(293 |
) |
|
|
|
(0.2 |
)% |
|
(0.2 |
)% |
Disposal |
(18 |
) |
|
|
|
— |
% |
|
— |
% |
Disposal
- Interruption |
(791 |
) |
|
|
|
(0.7 |
)% |
|
(0.5 |
)% |
Processing |
(121 |
) |
|
|
|
(0.1 |
)% |
|
(0.1 |
)% |
Solid
Waste Volume |
(1,223 |
) |
|
|
|
(1.0 |
)% |
|
(0.8 |
)% |
Fuel
surcharge and other fees |
2,431 |
|
|
|
|
2.0 |
% |
|
1.6 |
% |
Commodity
price and volume |
(594 |
) |
|
|
|
(0.5 |
)% |
|
(0.4 |
)% |
Acquisitions, net divestitures |
6,451 |
|
|
|
|
5.4 |
% |
|
4.0 |
% |
Total Solid
Waste |
12,712 |
|
|
|
|
10.7 |
% |
|
7.9 |
% |
Organics |
3,751 |
|
|
|
|
|
|
2.3 |
% |
Customer
Solutions |
1,583 |
|
|
|
|
|
|
1.0 |
% |
Recycling
Operations: |
|
|
|
|
% of Recycling
Operations |
|
|
Price |
(3,167 |
) |
|
|
|
(19.4 |
)% |
|
(2.0 |
)% |
Volume |
(2,316 |
) |
|
|
|
(14.1 |
)% |
|
(1.4 |
)% |
Total
Recycling |
(5,483 |
) |
|
|
|
(33.5 |
)% |
|
(3.4 |
)% |
Total
Company |
$ |
12,563 |
|
|
|
|
|
|
7.8 |
% |
Solid waste internalization rates by region for the
three and nine months ended September 30, 2018 and 2017 are as
follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Eastern region |
54.3 |
% |
|
62.0 |
% |
|
51.9 |
% |
|
55.6 |
% |
Western region |
70.8 |
% |
|
75.9 |
% |
|
73.4 |
% |
|
72.8 |
% |
Solid waste
internalization |
61.6 |
% |
|
68.5 |
% |
|
61.5 |
% |
|
63.6 |
% |
Components of capital expenditures (i) for the three and
nine months ended September 30, 2018 and 2017 are as
follows:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Growth Capital
Expenditures |
$ |
919 |
|
|
$ |
696 |
|
|
$ |
1,879 |
|
|
$ |
2,651 |
|
Non-Recurring
Capital Expenditures |
973 |
|
|
6 |
|
|
3,578 |
|
|
182 |
|
Replacement
Capital Expenditures: |
|
|
|
|
|
|
|
Landfill
development |
8,115 |
|
|
14,071 |
|
|
21,340 |
|
|
26,161 |
|
Vehicles,
machinery, equipment and containers |
5,150 |
|
|
2,913 |
|
|
21,837 |
|
|
11,254 |
|
Facilities |
952 |
|
|
543 |
|
|
2,208 |
|
|
1,708 |
|
Other |
240 |
|
|
635 |
|
|
999 |
|
|
1,456 |
|
Replacement
Capital Expenditures |
14,457 |
|
|
18,162 |
|
|
46,384 |
|
|
40,579 |
|
Capital
Expenditures |
$ |
16,349 |
|
|
$ |
18,864 |
|
|
$ |
51,841 |
|
|
$ |
43,412 |
|
- The Company's capital expenditures are broadly defined as
pertaining to either growth, replacement or non-recurring
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.
Non-recurring capital expenditures are defined as costs of
equipment added directly as a result of new business growth related
to an acquisition or assumption of significant new customers from a
distressed or defunct market participant.
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