Casella Waste Systems, Inc. (NASDAQ: CWST), a regional solid waste,
recycling and resource management services company, today reported
preliminary year-over-year revenue improvements for the first two
months of its second quarter of fiscal year 2009 and reported that
the company's risk management programs are substantially mitigating
commodity pricing impacts.
-- Operating cash flows remain strong and the company?s senior secured
credit facility maturing on April 28, 2010 provides substantial liquidity
to meet operating needs;
-- North eastern U.S. markets have strengthened over the last six months
from the initial economic downturn first experienced during the summer of
2006;
-- S-3 Registration Statement declared effective by SEC on October 28,
2008 is intended to renew and replace the existing Registration Statement,
and the company does not currently have plans to issue securities under the
existing or the renewed statement.
Revenues for the first two months of its second quarter of
fiscal year 2009 were $106.0 million, a 7.6 percent increase
compared to the same period last year. These year-over-year
improvements were driven by positive landfill volumes and continued
strength of its collection operations. During October, the solid
waste operations continued to perform well, while the recycling
operations were slightly impacted by commodity pricing.
"Our preliminary results for August and September 2008
demonstrate the inherent operating strength and stability of our
business," John W. Casella, chairman and CEO of Casella Waste
Systems, Inc., said. "We are executing well against factors that we
can control. Our efforts during the past 18 months to improve the
efficiency of our business and enhance asset mix through the
divesture of under-performing assets have positioned us to perform
at a level of stability even in a weak economic environment."
"Since the initial economic downturn over 2 years ago, the north
eastern U.S. economy has stabilized substantially during the last 6
months," Casella said. "Casella's financial results and operating
metrics clearly demonstrate this stabilization in our integrated
solid waste operations. While it is difficult to fully assess the
negative economic impacts from the financial market uncertainty,
the recession resistant qualities of our business allow us to
perform on a stable and predictable basis."
"Operating cash flows remain strong and we have a capital
structure that provides confidence for all our stakeholders in this
tenuous environment," Casella said. "Our next major debt maturity
is the senior secured credit facility which matures on April 28,
2010. This credit facility provides the flexibility to meet our
on-going operational needs and we expect to refinance the facility
in the first or second quarter of calendar year 2009."
The company generally meets its liquidity needs from operating
cash flow and its senior credit facility. As of September 30, 2008,
the company had total availability of $136.4 million under the
company's senior credit facility, subject to covenant requirements.
The company does not have plans to issue securities under the
existing or the renewed S-3 Registration Statement filed with the
SEC on October 15, 2008 until market conditions are favorable. The
purpose of the filing is to renew and replace an existing
Registration Statement set to expire on December 1, 2008. No draw
downs have been made against the existing Registration
Statement.
Fiscal year outlook
The company said that its solid waste group continues to perform
well in October, while the recycling group is facing negative
pressures from softer commodity pricing. The company's commodity
risk mitigation programs are effectively managing the majority of
commodity pricing exposure during this volatile period. The company
seeks to limit its exposure to fluctuating commodity prices through
the use of hedging agreements, floor price contracts, and long-term
supply contracts with customers.
Average commodity pricing is currently down 24 percent from our
first quarter of fiscal year 2009, and based on our present
knowledge of the commodity markets we expect November commodity
pricing to be down approximately 54 percent from our first quarter
of fiscal year 2009. Using these commodity pricing projections, the
company estimates a $3.0 to $5.0 million negative impact to
operating income for the last two quarters of our fiscal year 2009
(no impact is expected to depreciation and amortization).
Commodity Pricing Update
The company derives its recycling revenues from tipping or
processing fees and from the sale of recyclable materials. Tipping
fees, which make up approximately 10 percent of total recycling
revenues, are generally stable and do not vary with commodity
pricing. The company sells over 90 percent of its commodities to
the domestic markets, reducing exposure to international market
volatility and currencies. By selling primarily to the domestic
markets, the company has built solid long-term relationships with
domestic mills and manufacturers.
Breaking down the company's commodity stream further helps to
demonstrate the specific tactics used to mitigate risk:
-- Fibers (newspapers, cardboard, and mixed papers) make up approximately
66 to 68 percent of the company's commodity revenue stream. Approximately
50 percent of these materials are exposed to minimal commodity volatility
because we purchase the materials based off an index price less a
processing fee, and then resell the materials off the same index within a
short period of time. In addition, the company is party to 29 commodity
hedge contracts that manage pricing fluctuations on approximately 80
percent of its remaining OCC and ONP volumes. These contracts expire
between October 2008 and December 2011. The company does not use commodity
hedges for trading purposes.
-- Aluminum makes up approximately 8 to 10 percent of the company's
commodity revenue stream. The company sells the majority of its aluminum
under fixed price contracts, with current contracts extending through April
2009.
-- Plastics (PET and HDPE) make up approximately 19 to 21 percent of the
company's commodity revenue stream. The company currently sells the
majority of its plastics at spot market rates. It has floor prices in
place on most PET contracts and is working to add fixed price contracts to
help manage plastic pricing fluctuations in the future. There are no
hedging instruments available for recovered plastics because, historically,
recovered plastics are not highly correlated with market indices for virgin
plastic resin sales prices.
-- Ferrous metals make up approximately 3 to 4 percent of the company's
commodity revenue stream. The company currently sells the majority of its
ferrous metals at spot market rates.
The Company will release its full financial results for the
second quarter of fiscal year 2009 after the stock market closes on
December 3, 2008 and will host a conference call on December 4,
2008 at 10:00 a.m. ET; details of that investor call will be
announced in late November.
Casella Waste Systems, Inc., headquartered in Rutland, Vermont,
provides solid waste management services consisting of collection,
transfer, disposal, and recycling services primarily in the eastern
United States. For further information, contact Ned Coletta,
director of investor relations at (802) 772-2239, or visit the
Company's website at http://www.casella.com.
Safe Harbor Statement
Certain matters discussed in this press release 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 the company "believes," "expects,"
"anticipates," "plans," "may," "will," "would," "intends,"
"estimates" 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 we operate and management's
beliefs and assumptions. We cannot guarantee that we actually will
achieve the plans, intentions or expectations disclosed in the
forward-looking statements made. Such forward-looking statements,
and all phases of our 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 our forward-looking
statements. Such risks and uncertainties include or relate to,
among other things: the impact of the current economic downturn may
be longer or deeper than currently anticipated, commodity pricing
may continue to be adversely affected by economic conditions; we
may be unable to reduce costs or increase revenues sufficiently to
achieve estimated EBITDA and other targets; landfill operations and
permit status may be affected by factors outside our control, poor
weather conditions may affect our revenues; we may be required to
incur capital expenditures in excess of our estimates; and
fluctuations in the commodity pricing of our recyclables may make
it more difficult for us to predict our results of operations or
meet our estimates. There are a number of other important risks and
uncertainties that could cause our 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 our Form
10-K for the year ended April 30, 2008. We do not necessarily
intend to update publicly any forward-looking statements whether as
a result of new information, future events or otherwise, except as
required by law.
Contact: Ned Coletta Director of investor relations (802)
772-2239 http://www.casella.com
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