Casella Waste Systems, Inc. (NASDAQ:CWST), a regional solid waste,
recycling and resource management services company, today reported
its financial results for the three and twelve month periods ended
December 31, 2017. The Company also provided guidance for the
next fiscal year ending December 31, 2018.
Highlights for the Three and Twelve Months Ended
December 31, 2017:
- Revenues were $151.2 million for the quarter, up $7.4
million, or 5.2%, from the same period in 2016. Revenues were
$599.3 million for the fiscal year, up $34.3 million, or 6.1%, from
fiscal year 2016.
- Net income was $20.0 million for the quarter, as
compared to a net loss of $(12.0) million for the same period in
2016. Net loss was $(21.8) million for the fiscal year, as compared
to a net loss $(6.9) million in fiscal year 2016.
- Adjusted Net Income Attributable to Common
Stockholders* was $4.6 million for the quarter, as compared to $1.9
million for the same period in 2016. Adjusted Net Income
Attributable to Common Stockholders was $28.7 million for the
fiscal year, as compared to $7.8 million in fiscal year
2016.
- Adjusted EBITDA was $30.2 million for the quarter, up
$0.8 million, or 2.8%, from the same period in 2016. Adjusted
EBITDA was $129.0 million for the fiscal year, up $8.4 million, or
7.0%, from fiscal year 2016.
- Net cash provided by operating activities was $107.5
million for the fiscal year, up $27.1 million, or 33.7%, from
fiscal year 2016.
- Normalized Free Cash Flow was $38.8 million for the
fiscal year, up $11.7 million, or 43.1%, from fiscal year
2016.
- On February 26, 2018, Standard & Poor’s increased
our Corporate Credit Rating from ‘B’ to ‘B+’ with a positive
outlook.
“We had a strong operational quarter and a great year, as we
continued to execute well against our key 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, creating incremental
value through resource solutions, driving general and
administrative efficiencies, and strong capital discipline.”
“The progress we have made on our strategies can be seen in the
positive financial results in the fourth quarter,” Casella said.
“Our disciplined solid waste pricing programs continued to add
value, with landfill pricing up 3.6% and collection pricing up
3.7%. This strong pricing was coupled with 2.0% solid waste
volume growth, mainly driven by 4.8% growth in landfill volumes as
we continued to source new volumes in the tightening northeastern
disposal markets, and 1.2% solid waste revenue growth from
acquisitions.”
“As we first announced in early August 2017, we have adjusted
our capital strategy to balance delevering with prudent acquisition
or development investments,” Casella said. “We have set a
goal to grow revenues by $20.0 million to $40.0 million per year
through acquisition or development activity for the next three
years as part of this new strategy. We are off to a great
start with this strategy, with roughly $18.0 million of acquired
revenues over the last two months. During the fourth quarter
we completed a small tuck-in hauling acquisition, and in early
January 2018 we completed the acquisition of an integrated solid
waste company in Western Massachusetts that provides us with a new
market entrance and a strategic truck and rail served transfer
station that will enable us to direct additional waste volumes to
our landfills in New York and Pennsylvania. Our acquisition
pipeline remains robust, and we believe that investing a portion of
our excess cash flows to grow our business will create additional
shareholder returns through higher cash flow growth rates driven by
new revenue streams, internalization to our disposal facilities and
cost synergies.”
For the fourth quarter, revenues were $151.2 million, up $7.4
million, or 5.2%, from the same period in 2016, with revenue growth
mainly driven by robust collection and disposal pricing, strong
solid waste volumes, the roll-over impact from acquisitions, and
higher volumes in the customer solutions line-of-business,
partially offset by lower recycling commodity pricing and
volumes.
Net income attributable to common stockholders was $20.0
million, or $0.46 per diluted common share, up $32.0 million for
the fourth quarter, as compared to net loss attributable to common
stockholders of $(12.0) million, or $(0.29) per diluted common
share for the same period in 2016. Adjusted Net income Attributable
to Common Stockholders was $4.6 million, or $0.11 of Adjusted
Diluted Earnings Per Common Share*, for the fourth quarter,
compared to Adjusted Net Income Attributable to Common Stockholders
of $1.9 million, or $0.05 of Adjusted Diluted Earnings Per Common
Share, for the same period in 2016.
Operating income was $9.9 million for the fourth quarter, down
$(0.1) million from the same period in 2016, whereas Adjusted
Operating Income* was $10.3 million for the fourth quarter, down
$(0.6) million from the same period in 2016.
“During the fourth quarter, operating income was down
approximately $2.0 million year-over-year in our recycling
business,” Casella said. “This decline was mainly driven by
China’s National Sword program, which imposed strict new
contamination standards for recycled commodities and significantly
reduced global demand for paper and cardboard products. This
has led to mixed paper price declines of approximately 80% from
July 2017 to January 2018, while at the same time our operating
costs are up as we have slowed sorting lines and increased labor to
produce higher quality end products. Our mature risk
mitigation programs, such as the Sustainability Recycling
Adjustment fee, have worked well to offset the majority of
commodity price declines during the quarter and we expect these
programs to continue to significantly reduce our commodity risk
exposure.”
For the fiscal year, revenues were $599.3 million, up $34.3
million, or 6.1%, from fiscal year 2016, reflecting the impact of
robust collection, disposal and recycling commodity pricing, higher
volumes in the Company's collection, disposal, and customer
solutions lines-of-business, and the roll-over impact from
acquisitions, partially offset by lower organics volumes.
Net loss attributable to common stockholders was $(21.8)
million, or $(0.52) per diluted common share, a decrease of $(15.0)
million for the fiscal year, as compared to net loss attributable
to common stockholders of $(6.8) million, or $(0.17) per diluted
common share, for fiscal year 2016. Adjusted Net Income
Attributable to Common Stockholders was $28.7 million, or $0.67 of
Adjusted Diluted Earnings Per Common Share, for the fiscal year,
compared to Adjusted Net Income Attributable to Common Stockholders
of $7.8 million, or $0.19 of Adjusted Diluted Earnings Per Common
Share, for fiscal year 2016.
Operating loss was $(12.6) million for the fiscal year, down
$(57.5) million from operating income of $44.9 million in fiscal
year 2016, whereas Adjusted Operating Income was $52.8 million for
the fiscal year, up $6.9 million from fiscal year 2016.
2018 Outlook
“Our fiscal year 2018 budget is on track with the fiscal year
2021 strategic plan that we first introduced in August 2017, and
reflects continued execution of our key strategies with the goal of
driving additional shareholder value," Casella said. “We remain
cautious about near-term headwinds from the recycling business,
however we believe that our mature risk mitigation programs will
continue to offset the vast majority of commodity price declines
and current market conditions are contemplated in our fiscal year
2018 guidance.”
The Company provided guidance for the next fiscal year ending
December 31, 2018 by estimating results in the following
ranges:
- Revenues between $618 million and $628 million (as compared to
$599.3 million in fiscal year 2017);
- Adjusted EBITDA between $135 million and $139 million (as
compared to $129.0 million in fiscal year 2017); and
- Normalized Free Cash Flow between $42 million and $46 million
(as compared to $38.8 million in fiscal year 2017).
The Company provided the following assumptions that are built
into its outlook:
- Overall the Company expects revenue growth of between 4.6% and
6.3% in fiscal year 2018. However, the Company expects that
the adoption of the new revenue recognition standard to lower our
revenues by approximately 1.5%. Given this change, the
Company expects revenue growth of between 3.1% and 4.8% in fiscal
year 2018.
- In the solid waste business, revenue growth of between 6.0% and
7.5%, with price growth from 2.5% to 3.5%, volume growth from 0.5%
to 1.0%, and 3.0% growth from acquisitions already completed.
- In the recycling business, overall revenue declines of between
15.0% and 20.0%, driven by lower commodity prices, lower volumes
and changes in revenue recognition, partially offset by higher
processing fees.
- In the Other segment, overall revenue growth of approximately
5.0%, with growth in the industrial segment for the Customer
Solutions group and higher volumes in the Organics group.
- The budget includes the roll-over impact of acquisitions
completed during fiscal year 2017 and in early fiscal year 2018,
but does not include any acquisitions that have not yet been
completed.
- Capital expenditures of approximately $65 million, and payments
on operating leases of approximately $7.5 million.
- No material changes in the regional economy from the last 12
months.
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 and fiscal year
results
The Company will host a conference call to discuss these results
on Friday, March 2, 2018 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 ID8368179) until 12:00 p.m. ET on March 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 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 U.S. tax reform impact, 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 and
Normalized Free Cash Flow 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 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 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 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”. 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(In thousands, except for per share
data) |
|
|
Three Months Ended December 31, |
|
Fiscal Year Ended December 31, |
|
|
2017 |
|
|
|
2016 |
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
|
Revenues |
$ |
151,223 |
|
|
$ |
143,795 |
|
|
$ |
599,309 |
|
|
$ |
565,030 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Cost of
operations |
104,227 |
|
|
97,565 |
|
|
405,188 |
|
|
381,973 |
|
General
and administration |
20,855 |
|
|
19,908 |
|
|
79,243 |
|
|
75,356 |
|
Depreciation and amortization |
15,795 |
|
|
15,425 |
|
|
62,102 |
|
|
61,856 |
|
Southbridge Landfill closure charge |
316 |
|
|
— |
|
|
65,183 |
|
|
— |
|
Expense
from divestiture, acquisition and financing costs |
176 |
|
|
— |
|
|
176 |
|
|
— |
|
Environmental remediation charge |
— |
|
|
900 |
|
|
— |
|
|
900 |
|
|
141,369 |
|
|
133,798 |
|
|
611,892 |
|
|
520,085 |
|
Operating income
(loss) |
9,854 |
|
|
9,997 |
|
|
(12,583 |
) |
|
44,945 |
|
Other expense
(income): |
|
|
|
|
|
|
|
Interest
expense, net |
6,015 |
|
|
9,204 |
|
|
24,887 |
|
|
38,652 |
|
Loss on
debt extinguishment |
— |
|
|
13,011 |
|
|
517 |
|
|
13,747 |
|
Other
income |
(368 |
) |
|
(394 |
) |
|
(935 |
) |
|
(1,090 |
) |
Other expense, net |
5,647 |
|
|
21,821 |
|
|
24,469 |
|
|
51,309 |
|
Income (loss) before
income taxes |
4,207 |
|
|
(11,824 |
) |
|
(37,052 |
) |
|
(6,364 |
) |
(Benefit) provision for
income taxes |
(15,814 |
) |
|
150 |
|
|
(15,253 |
) |
|
494 |
|
Net income (loss) |
20,021 |
|
|
(11,974 |
) |
|
(21,799 |
) |
|
(6,858 |
) |
Less: Net
loss attributable to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
(9 |
) |
Net income (loss)
attributable to common stockholders |
$ |
20,021 |
|
|
$ |
(11,974 |
) |
|
$ |
(21,799 |
) |
|
$ |
(6,849 |
) |
Basic weighted average
common shares outstanding |
42,033 |
|
|
41,422 |
|
|
41,846 |
|
|
41,233 |
|
Basic earnings per
common share |
$ |
0.48 |
|
|
$ |
(0.29 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.17 |
) |
Diluted weighted
average common shares outstanding |
43,394 |
|
|
41,422 |
|
|
41,846 |
|
|
41,233 |
|
Diluted earnings per
common share |
$ |
0.46 |
|
|
$ |
(0.29 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.17 |
) |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands) |
|
ASSETS |
|
December 31, 2017 |
|
December 31, 2016 |
CURRENT ASSETS: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
1,995 |
|
|
$ |
2,544 |
|
Accounts
receivable - trade, net |
|
65,953 |
|
|
61,196 |
|
Other
current assets |
|
16,432 |
|
|
14,848 |
|
Total current
assets |
|
84,380 |
|
|
78,588 |
|
Property, plant and
equipment, net |
|
361,547 |
|
|
398,466 |
|
Goodwill |
|
122,605 |
|
|
119,899 |
|
Intangible assets,
net |
|
8,149 |
|
|
7,696 |
|
Restricted assets |
|
1,220 |
|
|
1,002 |
|
Cost method
investments |
|
12,333 |
|
|
12,333 |
|
Deferred income
taxes |
|
11,567 |
|
|
— |
|
Other non-current
assets |
|
13,148 |
|
|
13,528 |
|
Total
assets |
|
$ |
614,949 |
|
|
$ |
631,512 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
Current
maturities of long-term debt and capital leases |
|
$ |
4,926 |
|
|
$ |
4,686 |
|
Accounts
payable |
|
47,081 |
|
|
44,997 |
|
Other
accrued liabilities |
|
36,562 |
|
|
32,743 |
|
Total current
liabilities |
|
88,569 |
|
|
82,426 |
|
Long-term debt and
capital leases, less current maturities |
|
477,576 |
|
|
503,961 |
|
Other long-term
liabilities |
|
86,666 |
|
|
69,675 |
|
Total stockholders'
deficit |
|
(37,862 |
) |
|
(24,550 |
) |
Total
liabilities and stockholders' deficit |
|
$ |
614,949 |
|
|
$ |
631,512 |
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(In thousands) |
|
|
Fiscal Year Ended December 31, |
|
2017 |
|
2016 |
Cash Flows from
Operating Activities: |
|
|
|
Net loss |
$ |
(21,799 |
) |
|
$ |
(6,858 |
) |
Adjustments to
reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
62,102 |
|
|
61,856 |
|
Depletion
of landfill operating lease obligations |
9,646 |
|
|
9,295 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
4,482 |
|
|
3,606 |
|
Amortization of debt issuance costs and discount on long-term
debt |
2,692 |
|
|
3,881 |
|
Stock-based compensation |
6,432 |
|
|
3,393 |
|
Environmental remediation charge |
— |
|
|
900 |
|
Loss
(gain) on sale of property and equipment |
49 |
|
|
(574 |
) |
Southbridge Landfill non-cash closure charge |
63,526 |
|
|
— |
|
Loss on
debt extinguishment |
517 |
|
|
13,747 |
|
Deferred
income taxes |
(15,525 |
) |
|
583 |
|
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures |
(4,584 |
) |
|
(9,395 |
) |
Net cash
provided by operating activities |
107,538 |
|
|
80,434 |
|
Cash Flows from
Investing Activities: |
|
|
|
Acquisitions, net of cash acquired |
(5,056 |
) |
|
(2,839 |
) |
Acquisition related additions to property, plant and equipment |
(469 |
) |
|
(38 |
) |
Additions
to property, plant and equipment |
(64,393 |
) |
|
(54,200 |
) |
Payments
on landfill operating lease contracts |
(7,240 |
) |
|
(7,249 |
) |
Proceeds
from sale of property and equipment |
711 |
|
|
1,362 |
|
Net cash
used in investing activities |
(76,447 |
) |
|
(62,964 |
) |
Cash Flows from
Financing Activities: |
|
|
|
Proceeds
from long-term borrowings |
185,500 |
|
|
604,850 |
|
Principal
payments on long-term debt |
(216,966 |
) |
|
(608,198 |
) |
Payments
of debt issuance costs |
(1,452 |
) |
|
(8,146 |
) |
Payments
of debt extinguishment costs |
— |
|
|
(7,219 |
) |
Proceeds
from the exercise of share based awards |
1,278 |
|
|
128 |
|
Change in
restricted cash |
— |
|
|
1,347 |
|
Net cash
used in financing activities |
(31,640 |
) |
|
(17,238 |
) |
Net (decrease) increase
in cash and cash equivalents |
(549 |
) |
|
232 |
|
Cash and cash
equivalents, beginning of period |
2,544 |
|
|
2,312 |
|
Cash and cash
equivalents, end of period |
$ |
1,995 |
|
|
$ |
2,544 |
|
Supplemental Disclosure
of Cash Flow Information: |
|
|
|
Cash
interest |
$ |
25,029 |
|
|
$ |
42,712 |
|
Cash
income taxes, net of refunds |
$ |
146 |
|
|
$ |
274 |
|
Supplemental Disclosure
of Non-Cash Investing and Financing Activities: |
|
|
|
Non-current assets acquired through long-term obligations |
$ |
3,564 |
|
|
$ |
2,299 |
|
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
(Unaudited) |
(In thousands) |
Note 1: Southbridge Landfill Closure
Charge
In June 2017, the Company initiated its plan to cease operations
of its Subtitle D landfill in Southbridge, Massachusetts
("Southbridge Landfill"). Accordingly, in the three months ended
December 31, 2017 and the fiscal year ended December 31, 2017, the
Company recorded charges associated with the closure of its
Southbridge Landfill as follows:
|
Three Months Ended December 31, |
|
Fiscal Year Ended December 31, |
|
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) |
316 |
|
|
— |
|
|
1,656 |
|
|
— |
|
Southbridge Landfill
closure charge |
$ |
316 |
|
|
$ |
— |
|
|
$ |
65,183 |
|
|
$ |
— |
|
(1)
|
The Company
performed a test of recoverability under Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC")
360, which indicated that the carrying value of the Company's 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) |
The Company
wrote-off deferred costs associated with Southbridge Landfill
permitting activities no longer deemed viable. |
|
|
(3) |
The Company
recorded an environmental remediation charge associated with the
future installation of a municipal waterline. |
|
|
(4) |
The Company
incurred legal and other transaction costs associated with various
matters as part of the Southbridge Landfill closure. |
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES |
RECONCILIATION OF CERTAIN NON-GAAP MEASURES |
(Unaudited) |
(In thousands, except for per share data) |
Following is a reconciliation of Adjusted EBITDA and
Adjusted Operating Income from Net income (loss):
|
Three Months Ended December 31, |
|
Fiscal Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income
(loss) |
$ |
20,021 |
|
|
$ |
(11,974 |
) |
|
$ |
(21,799 |
) |
|
$ |
(6,858 |
) |
Net income
(loss) margin |
13.2 |
% |
|
(8.3 |
)% |
|
(3.6 |
)% |
|
(1.2 |
)% |
(Benefit)
provision for income taxes |
(15,814 |
) |
|
150 |
|
|
(15,253 |
) |
|
494 |
|
Other
income |
(368 |
) |
|
(394 |
) |
|
(935 |
) |
|
(1,090 |
) |
Loss on
debt extinguishment |
— |
|
|
13,011 |
|
|
517 |
|
|
13,747 |
|
Interest
expense, net |
6,015 |
|
|
9,204 |
|
|
24,887 |
|
|
38,652 |
|
Environmental remediation charge |
— |
|
|
900 |
|
|
— |
|
|
900 |
|
Expense
from divestiture, acquisition and financing costs |
176 |
|
|
— |
|
|
176 |
|
|
— |
|
Southbridge landfill closure charge |
316 |
|
|
— |
|
|
65,183 |
|
|
— |
|
Depreciation and amortization |
15,795 |
|
|
15,425 |
|
|
62,102 |
|
|
61,856 |
|
Depletion
of landfill operating lease obligations |
2,812 |
|
|
2,165 |
|
|
9,646 |
|
|
9,295 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
1,277 |
|
|
918 |
|
|
4,482 |
|
|
3,606 |
|
Adjusted
EBITDA |
$ |
30,230 |
|
|
$ |
29,405 |
|
|
$ |
129,006 |
|
|
$ |
120,602 |
|
Adjusted EBITDA
margin |
20.0 |
% |
|
20.4 |
% |
|
21.5 |
% |
|
21.3 |
% |
Depreciation and amortization |
(15,795 |
) |
|
(15,425 |
) |
|
(62,102 |
) |
|
(61,856 |
) |
Depletion
of landfill operating lease obligations |
(2,812 |
) |
|
(2,165 |
) |
|
(9,646 |
) |
|
(9,295 |
) |
Interest
accretion on landfill and environmental remediation
liabilities |
(1,277 |
) |
|
(918 |
) |
|
(4,482 |
) |
|
(3,606 |
) |
Adjusted
Operating Income |
$ |
10,346 |
|
|
$ |
10,897 |
|
|
$ |
52,776 |
|
|
$ |
45,845 |
|
Adjusted
Operating Income margin |
6.8 |
% |
|
7.6 |
% |
|
8.8 |
% |
|
8.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Following is a reconciliation of Adjusted Net Income
Attributable to Common Stockholders from Net income (loss)
attributable to common stockholders:
|
Three Months Ended December 31, |
|
Fiscal Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income
(loss) attributable to common stockholders |
$ |
20,021 |
|
|
$ |
(11,974 |
) |
|
$ |
(21,799 |
) |
|
$ |
(6,849 |
) |
U.S. tax
reform impact |
(16,089 |
) |
|
— |
|
|
(16,089 |
) |
|
— |
|
Loss on
debt extinguishment |
— |
|
|
13,011 |
|
|
517 |
|
|
13,747 |
|
Expense
from divestiture, acquisition and financing costs |
176 |
|
|
— |
|
|
176 |
|
|
— |
|
Environmental remediation charge |
— |
|
|
900 |
|
|
— |
|
|
900 |
|
Southbridge Landfill closure charge |
316 |
|
|
— |
|
|
65,183 |
|
|
— |
|
Tax
effect (i) |
206 |
|
|
— |
|
|
752 |
|
|
— |
|
Adjusted Net
Income Attributable to Common Stockholders |
$ |
4,630 |
|
|
$ |
1,937 |
|
|
$ |
28,740 |
|
|
$ |
7,798 |
|
Diluted
weighted average common shares outstanding |
43,394 |
|
|
41,422 |
|
|
41,846 |
|
|
41,233 |
|
Dilutive effect
of options and other stock awards |
— |
|
|
1,131 |
|
|
1,182 |
|
|
901 |
|
Adjusted
diluted weighted average common shares outstanding |
43,394 |
|
|
42,553 |
|
|
43,028 |
|
|
42,134 |
|
Adjusted
diluted earnings per common share |
$ |
0.11 |
|
|
$ |
0.05 |
|
|
$ |
0.67 |
|
|
$ |
0.19 |
|
(i) |
The aggregate tax
effect of the adjustments, including the 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 December 31, |
|
Fiscal Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Diluted
earnings per common share |
$ |
0.46 |
|
|
$ |
(0.29 |
) |
|
$ |
(0.52 |
) |
|
$ |
(0.17 |
) |
U.S. tax
reform impact |
(0.36 |
) |
|
— |
|
|
(0.39 |
) |
|
— |
|
Loss on
debt extinguishment |
— |
|
|
0.32 |
|
|
0.01 |
|
|
0.34 |
|
Southbridge Landfill closure charge |
0.01 |
|
|
— |
|
|
1.55 |
|
|
— |
|
Expense
from divestiture, acquisition and financing costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
Environmental remediation charge |
— |
|
|
0.02 |
|
|
— |
|
|
0.02 |
|
Tax
effect |
— |
|
|
— |
|
|
0.02 |
|
|
— |
|
Adjusted
Diluted Earnings Per Common Share |
$ |
0.11 |
|
|
$ |
0.05 |
|
|
$ |
0.67 |
|
|
$ |
0.19 |
|
Following is a reconciliation of Free Cash Flow and
Normalized Free Cash Flow from Net cash provided by operating
activities:
|
Three Months Ended December 31, |
|
Fiscal Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net cash
provided by operating activities |
$ |
28,438 |
|
|
$ |
24,363 |
|
|
$ |
107,538 |
|
|
$ |
80,434 |
|
Capital
expenditures |
(21,163 |
) |
|
(16,765 |
) |
|
(64,393 |
) |
|
(54,200 |
) |
Payments
on landfill operating lease contracts |
(3,509 |
) |
|
(2,438 |
) |
|
(7,240 |
) |
|
(7,249 |
) |
Proceeds
from sale of property and equipment |
54 |
|
|
293 |
|
|
711 |
|
|
1,362 |
|
Free Cash
Flow |
$ |
3,820 |
|
|
$ |
5,453 |
|
|
$ |
36,616 |
|
|
$ |
20,347 |
|
Interest
payment on redemption of the senior subordinated notes (i) |
— |
|
|
6,770 |
|
|
— |
|
|
6,770 |
|
Landfill
closure, site improvement and remediation expenditures (ii) |
599 |
|
|
— |
|
|
2,182 |
|
|
— |
|
Normalized Free
Cash Flow |
$ |
4,419 |
|
|
$ |
12,223 |
|
|
$ |
38,798 |
|
|
$ |
27,117 |
|
(i) |
This includes the
interest payment required upon redemption of the senior
subordinated notes. |
|
|
(ii) |
This includes cash
outlays associated with the Southbridge Landfill closure
charge. |
|
|
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:
|
Fiscal Year Ended December 31,
2017 |
Consolidated
Net Leverage Ratio (i) |
3.68 |
|
(i) |
The
Company's credit facility agreement requires it 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
$497,680 as of December 31, 2017, or $497,680 of consolidated
funded debt less $0 of cash and cash equivalents in excess of $2.0
million as of December 31, 2017), divided by Consolidated
EBITDA. Consolidated EBITDA is based on operating results for the
twelve months preceding the measurement date of December 31,
2017. A reconciliation of Net cash provided by operating activities
to Consolidated EBITDA is as follows: |
|
Twelve Months Ended December 31,
2017 |
Net cash
provided by operating activities |
$ |
107,538 |
|
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures |
4,584 |
|
Loss on
sale of property and equipment |
(49 |
) |
Loss on
debt extinguishment |
(517 |
) |
Stock
based compensation |
(6,432 |
) |
Southbridge Landfill non-cash charge |
(63,526 |
) |
Interest
expense, less amortization of debt issuance costs and discount on
long-term debt |
22,468 |
|
Provision
for income taxes, net of deferred taxes |
272 |
|
Adjustments as allowed by the senior secured credit agreement |
71,025 |
|
Consolidated
EBITDA |
$ |
135,363 |
|
|
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES |
RECONCILIATION 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 |
$28,000 - $32,000 |
Interest
expense, net |
25,500 |
Depreciation and amortization |
65,000 |
Depletion
of landfill operating lease obligations |
11,000 |
Interest
accretion on landfill and environmental remediation
liabilities |
5,500 |
Adjusted
EBITDA |
$135,000 - $139,000 |
Following is a reconciliation of Free Cash Flow and
Normalized Free Cash Flow from Net cash provided by operating
activities:
|
(Anticipated) Fiscal Year Ending December 31,
2018 |
Net cash
provided by operating activities |
$109,000 - $113,000 |
Capital
expenditures |
(65,000) |
Payments
on landfill operating lease contracts |
(7,500) |
Free Cash
Flow |
$36,500 - $40,500 |
Contract
settlement charge (i) |
2,000 |
Landfill
closure, site improvement and remediation expenditures (ii) |
3,500 |
Normalized Free
Cash Flow |
$42,000 - $46,000 |
(i) |
This includes a
contract settlement charge associated with exiting a contract. |
|
|
(ii) |
This includes cash
outlays associated with the Southbridge Landfill closure
charge. |
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES |
SUPPLEMENTAL DATA TABLES |
(Unaudited) |
(In thousands) |
Amounts of total revenues attributable to services
provided for the three and twelve months ended December 31,
2017 and 2016 are as follows:
|
Three Months Ended December 31, |
|
2017 |
|
% of TotalRevenues |
|
2016 |
|
% of TotalRevenues |
Collection |
$ |
67,502 |
|
|
44.6 |
% |
|
$ |
62,524 |
|
|
43.5 |
% |
Disposal |
41,739 |
|
|
27.6 |
% |
|
39,161 |
|
|
27.2 |
% |
Power generation |
1,254 |
|
|
0.8 |
% |
|
1,143 |
|
|
0.8 |
% |
Processing |
1,699 |
|
|
1.1 |
% |
|
1,589 |
|
|
1.1 |
% |
Solid waste operations |
112,194 |
|
|
74.1 |
% |
|
104,417 |
|
|
72.6 |
% |
Organics |
9,934 |
|
|
6.6 |
% |
|
10,215 |
|
|
7.1 |
% |
Customer
solutions |
15,994 |
|
|
10.6 |
% |
|
14,117 |
|
|
9.8 |
% |
Recycling |
13,101 |
|
|
8.7 |
% |
|
15,046 |
|
|
10.5 |
% |
Total
revenues |
$ |
151,223 |
|
|
100.0 |
% |
|
$ |
143,795 |
|
|
100.0 |
% |
|
Fiscal Year Ended December 31, |
|
2017 |
|
% of
TotalRevenues |
|
2016 |
|
% of
TotalRevenues |
Collection |
$ |
263,688 |
|
|
44.0 |
% |
|
$ |
249,640 |
|
|
44.2 |
% |
Disposal |
160,073 |
|
|
26.7 |
% |
|
154,211 |
|
|
27.3 |
% |
Power generation |
5,375 |
|
|
0.9 |
% |
|
5,921 |
|
|
1.0 |
% |
Processing |
7,994 |
|
|
1.3 |
% |
|
6,282 |
|
|
1.1 |
% |
Solid waste operations |
437,130 |
|
|
72.9 |
% |
|
416,054 |
|
|
73.6 |
% |
Organics |
39,815 |
|
|
6.7 |
% |
|
41,587 |
|
|
7.4 |
% |
Customer
solutions |
60,057 |
|
|
10.0 |
% |
|
54,478 |
|
|
9.6 |
% |
Recycling |
62,307 |
|
|
10.4 |
% |
|
52,911 |
|
|
9.4 |
% |
Total
revenues |
$ |
599,309 |
|
|
100.0 |
% |
|
$ |
565,030 |
|
|
100.0 |
% |
Components of revenue growth for the three months ended
December 31, 2017 compared to the three months ended
December 31, 2016 are as follows:
|
Amount |
|
%
ofRelatedBusiness |
|
% of
SolidWasteOperations |
|
% of TotalCompany |
Solid Waste
Operations: |
|
|
|
|
|
|
|
Collection |
$ |
2,322 |
|
|
3.7 |
% |
|
2.2 |
% |
|
1.6 |
% |
Disposal |
1,177 |
|
|
3.0 |
% |
|
1.2 |
% |
|
0.8 |
% |
Processing |
— |
|
|
— |
% |
|
— |
% |
|
— |
% |
Solid
Waste Price |
3,499 |
|
|
|
|
3.4 |
% |
|
2.4 |
% |
Collection |
630 |
|
|
|
|
0.6 |
% |
|
0.4 |
% |
Disposal |
1,399 |
|
|
|
|
1.3 |
% |
|
1.0 |
% |
Processing |
36 |
|
|
|
|
0.1 |
% |
|
— |
% |
Solid
Waste Volume |
2,065 |
|
|
|
|
2.0 |
% |
|
1.4 |
% |
Fuel
surcharge and other fees |
728 |
|
|
|
|
0.6 |
% |
|
0.6 |
% |
Commodity
price & volume |
186 |
|
|
|
|
0.2 |
% |
|
0.1 |
% |
Acquisitions, net divestitures |
1,299 |
|
|
|
|
1.2 |
% |
|
0.9 |
% |
Total Solid
Waste |
7,777 |
|
|
|
|
7.4 |
% |
|
5.4 |
% |
Organics |
(280 |
) |
|
|
|
|
|
(0.2 |
)% |
Customer
Solutions |
1,877 |
|
|
|
|
|
|
1.4 |
% |
Recycling
Operations: |
|
|
|
|
% of Recycling
Operations |
|
|
Price |
(497 |
) |
|
|
|
(3.3 |
)% |
|
(0.4 |
)% |
Volume |
(1,448 |
) |
|
|
|
(9.6 |
)% |
|
(1.0 |
)% |
Total
Recycling |
(1,945 |
) |
|
|
|
(12.9 |
)% |
|
(1.4 |
)% |
Total
Company |
$ |
7,429 |
|
|
|
|
|
|
5.2 |
% |
Solid Waste Internalization Rates by Region for the
three and twelve months ended December 31, 2017 and 2016 are
as follows:
|
Three Months Ended December 31, |
|
Fiscal Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Eastern region |
58.1 |
% |
|
56.4 |
% |
|
56.2 |
% |
|
53.8 |
% |
Western region |
76.2 |
% |
|
73.6 |
% |
|
73.7 |
% |
|
74.4 |
% |
Solid waste
internalization |
66.5 |
% |
|
64.3 |
% |
|
64.3 |
% |
|
63.4 |
% |
Components of capital expenditures for the three and
twelve months ended December 31, 2017 and 2016 are as follows
(v):
|
Three Months Ended December 31, |
|
Fiscal Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total Growth
Capital Expenditures |
$ |
901 |
|
|
$ |
1,082 |
|
|
$ |
3,552 |
|
|
$ |
5,373 |
|
Replacement
Capital Expenditures: |
|
|
|
|
|
|
|
Landfill
development |
7,536 |
|
|
8,019 |
|
|
33,697 |
|
|
29,666 |
|
Vehicles,
machinery, equipment and containers |
10,327 |
|
|
5,832 |
|
|
21,581 |
|
|
15,512 |
|
Facilities |
1,447 |
|
|
1,449 |
|
|
3,155 |
|
|
2,581 |
|
Other |
952 |
|
|
383 |
|
|
2,408 |
|
|
1,068 |
|
Total
Replacement Capital Expenditures |
$ |
20,262 |
|
|
$ |
15,683 |
|
|
$ |
60,841 |
|
|
$ |
48,827 |
|
Total Growth
and Replacement Capital Expenditures |
$ |
21,163 |
|
|
$ |
16,765 |
|
|
$ |
64,393 |
|
|
$ |
54,200 |
|
(v) |
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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