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
March 31, 2019.
First Quarter Highlights:
- Revenues were $163.7 million
for the quarter, up $16.2 million, or up 11.0%, from the same
period in 2018.
- Overall solid waste pricing
for the quarter was up 5.0%, driven by strong collection pricing up
6.0%, and robust landfill pricing up 4.2%, from the same period in
2018.
- Net loss was $(1.7) million
for the quarter, an improvement of $2.2 million, up 56.2%, from the
same period in 2018.
- Adjusted EBITDA* was $26.6
million for the quarter, up $2.0 million, or up 8.1%, from the same
period in 2018.
- The Company reaffirms its
revenue, net income, Adjusted EBITDA and Normalized Free Cash Flow*
guidance ranges for the fiscal year ending December 31, 2019
(“fiscal 2019”).
- The Company completed the
acquisition of a waste collection company with approximately $7.0
million of annual revenues earlier today and remains on track to
exceed its acquisition target range for fiscal 2019.
“We are pleased with the strong start to the year, 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 prudently allocating capital for strategic
growth.”
“Our solid waste pricing programs are running ahead of budget as
we advanced 6.0% pricing in the collection line-of-business and
4.2% pricing at the landfills, for overall solid waste price of
5.0% during the first quarter,” Casella said. “Our
disciplined pricing programs are aimed at balancing volume growth
while covering inflation and expanding margins. We
accomplished both goals in our collection operations, with margins
and cash flows up as we shed unprofitable work, improved operating
efficiencies, and offset historically high inflation.”
As expected, lower disposal volumes negatively impacted revenues
by $3.4 million year-over-year due to a one-time $3.5 million soil
remediation project in the first quarter last year that did not
repeat this year,” Casella said. “Given the continued
tightening of the northeast disposal market, we worked to drive
strong pricing discipline, coupled with our goals to maintain
sufficient landfill capacity through the higher priced summer
months and to eliminate more challenging waste streams.
We expect positive disposal volume growth through the remainder of
the year.”
“Due to our efforts to restructure third-party recycling
processing contracts and off-take commodity pricing risk, we
improved operating income year-over-year in our recycling business
despite commodity prices being down roughly 18% during the same
period,” Casella said. “Our SRA fee, revenue share contracts and
contamination fees combined with our efforts to produce higher
quality materials and manage processing costs have allowed us to
improve recycling financial performance in a challenging commodity
pricing environment.”
“Earlier today we purchased substantially all of the assets of
M.C. Disposal, Inc. (“MCD”), a waste collection company with
roughly $7.0 million of annual revenues located in Maine,” Casella
said. “MCD has built a solid business through excellent
customer service, and we expect this acquisition will tuck-in well
with our existing operations and allow us to build further route
density and drive operational efficiencies. We are pleased to
welcome the hardworking MCD employees and owners to our team.”
“While there is still work ahead of us, we have made great
progress over the last several months successfully integrating and
recognizing synergies from the ten acquisitions that we completed
in 2018,” Casella said. “Our acquisition pipeline remains
robust with over $40 million of annual revenues under letter of
intent that we expect to close by the end of the third quarter. We
believe that there is additional opportunity to drive cash flow
growth across our footprint through strategic growth.”
For the quarter, revenues were $163.7 million, up $16.2 million,
or 11.0%, from the same period in 2018, with revenue growth mainly
driven by: robust collection and disposal pricing; the roll-over
impact from acquisitions; higher recycling, organics and customer
solutions volumes; and higher recycling processing fees; partially
offset by lower solid waste volumes; the closure of the Southbridge
Landfill; and lower recycling commodity prices.
Net loss was $(1.7) million for the quarter, or $(0.04) per
diluted common share for the quarter, as compared to net loss of
$(3.9) million, or $(0.09) per diluted common share for the same
period in 2018. Adjusted Net Loss* was $(0.5) million for the
quarter, or Adjusted Diluted Loss Per Common Share* of $(0.01) for
the quarter, as compared to Adjusted Net Income of $0.1 million, or
Adjusted Diluted Earnings Per Common Share of $0.00 for the same
period in 2018.
The first quarter included: $0.7 million of expense from
acquisition activities and other items; and $0.6 million of legal
expenses associated with the Southbridge Landfill closure.
Operating income was $4.4 million for the quarter, as compared
to operating income of $0.8 million for the same period in 2018.
Adjusted Operating Income* was $5.7 million for the quarter, up
$0.8 million from the same period in 2018. Adjusted EBITDA was
$26.6 million for the quarter, up $2.0 million from the same period
in 2018, with growth mainly driven by improved performance in the
Company's collection, recycling and customer solutions
lines-of-business, partially offset by a decline in performance in
the disposal line-of-business.
Net cash provided by operating activities was $4.8 million for
the quarter, as compared to $12.8 million for the same period in
2018, with the reduction year-over-year mainly due to: (a) timing
differences in cash outflows associated with accounts payable that
are expected to normalize through the remainder of the fiscal year;
and (b) the adoption of Accounting Standards Codification ("ASC")
842 on January 1, 2019, which shifted payments on landfill
operating lease contracts from an investing activity to an
operating activity on the statement of cash flows, with this change
only impacting the financial statement positioning of this cash
outflow.
Normalized Free Cash Flow was $(6.0) million for the quarter, as
compared to $7.2 million for the same period in 2018, with the
reduction year-over-year mainly due to: (a) timing differences in
cash outflows associated with accounts payable that are expected to
normalize through the remainder of the fiscal year; and (b) higher
capital expenditures due to business growth and timing differences,
with more trucks and equipment purchased in the first quarter this
year versus last year. Normalized Free Cash Flow for the quarter
included the following adjustments: $0.6 million of landfill
closure, site improvement and remediation expenditures associated
with the Southbridge Landfill; $0.7 million of cash outlays related
to acquisition activities; $3.8 million of deposits for capital
expenditures related to development activities; and $2.4 million of
capital expenditures related to acquisitions.
Outlook
“Given the continued strength in our collection, recycling, and
customer solutions operations year-to-date and our plan to increase
volumes at our landfills (while maintaining pricing discipline)
through the remainder of the year, we are reaffirming our revenue,
net income, Adjusted EBITDA and Normalized Free Cash Flow guidance
ranges for the fiscal 2019,” Casella said. “We do not expect
the year-to-date declines in recycling commodity prices, most
notably cardboard, to significantly impact our forecast for the
remainder of the year.”
The Company reaffirmed or updated guidance for fiscal 2019 by
estimating results in the following ranges:
- Revenues between $710 million and $725 million;
- Net income between $34 million and $38 million;
- Adjusted EBITDA between $152 million and $156 million;
- Net cash provided by operating activities between $111 million
and $115 million (updated from range of $119 million and $123
million mainly due to adoption of ASC 842 that shifted payments on
landfill operating lease contracts from an investing activity to an
operating activity); and
- Normalized Free Cash Flow between $51 million and $55
million.
Adjusted EBITDA and Normalized Free Cash Flow related to fiscal
2019 are described in the Reconciliation of 2019 Outlook Non-GAAP
Measures section of this press release. Net income and Net
cash provided by operating activities are provided as the
comparable GAAP measures to Adjusted EBITDA and Normalized Free
Cash Flow, respectively, however these forward-looking estimates
for fiscal 2019 do not contemplate any unanticipated or
non-recurring impacts.
Conference call to discuss quarter
The Company will host a conference call to discuss these results
on Wednesday, May 1, 2019 at 11:00 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 Conference ID is 379
1619 for the call and the replay.
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 379 1619).
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 (Loss)"), which is a non-GAAP financial
measure.
The Company also discloses Adjusted Diluted Earnings (Loss) 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 (Loss) 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 deposits for capital expenditures related to new development
activities, 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 finance 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 (Loss) are reconciled to net income (loss); Adjusted Diluted
Earnings (Loss) 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 finance leases.
The Company presents Adjusted EBITDA, Adjusted Operating Income,
Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) 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 (Loss), Adjusted Diluted Earnings
(Loss) 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 (Loss), Adjusted Diluted Earnings (Loss) 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
(Loss), Adjusted Diluted Earnings (Loss) 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 fiscal 2019, 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 had 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 material unexpected 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, 2018, 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.
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Investors: |
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Ned Coletta |
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Chief Financial Officer |
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(802) 772-2239 |
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Media: |
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Joseph Fusco |
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Vice President |
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(802) 772-2247 |
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http://www.casella.com |
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CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
thousands, except for per share data)
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Revenues |
$ |
163,664 |
|
|
$ |
147,455 |
|
Operating expenses: |
|
|
|
Cost of
operations |
117,759 |
|
|
105,610 |
|
General and
administration |
22,742 |
|
|
21,027 |
|
Depreciation
and amortization |
17,489 |
|
|
15,983 |
|
Expense from
acquisition activities and other items |
677 |
|
|
— |
|
Southbridge
Landfill closure charge, net (1) |
555 |
|
|
1,586 |
|
Contract
settlement charge |
— |
|
|
2,100 |
|
Development
project charge |
— |
|
|
311 |
|
|
159,222 |
|
|
146,617 |
|
Operating income |
4,442 |
|
|
838 |
|
Other expense
(income): |
|
|
|
Interest
expense, net |
6,343 |
|
|
6,425 |
|
Other
income |
(216 |
) |
|
(89 |
) |
Other expense, net |
6,127 |
|
|
6,336 |
|
Loss before income
taxes |
(1,685 |
) |
|
(5,498 |
) |
Provision (benefit) for
income taxes |
29 |
|
|
(1,588 |
) |
Net loss |
$ |
(1,714 |
) |
|
$ |
(3,910 |
) |
Diluted weighted average
common shares outstanding |
45,913 |
|
|
42,370 |
|
Diluted earnings per
common share |
$ |
(0.04 |
) |
|
$ |
(0.09 |
) |
|
|
|
|
|
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CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands)
|
March 31, |
|
December 31, |
|
2019 |
|
2018 |
ASSETS |
(Unaudited) |
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash
equivalents |
$ |
19,936 |
|
|
$ |
4,007 |
|
Accounts
receivable - trade, net of allowance for doubtful accounts |
72,243 |
|
|
74,937 |
|
Other
current assets |
16,974 |
|
|
18,149 |
|
Total current assets |
109,153 |
|
|
97,093 |
|
Property, plant and
equipment, net of accumulated depreciation and amortization |
379,372 |
|
|
404,577 |
|
Right-of-use asset -
operating leases |
106,932 |
|
|
— |
|
Goodwill |
162,734 |
|
|
162,734 |
|
Intangible assets, net of
accumulated amortization |
33,366 |
|
|
34,767 |
|
Restricted assets |
1,345 |
|
|
1,248 |
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Cost method
investments |
11,264 |
|
|
11,264 |
|
Deferred income taxes |
9,472 |
|
|
9,594 |
|
Other non-current
assets |
14,675 |
|
|
11,133 |
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Total
assets |
$ |
828,313 |
|
|
$ |
732,410 |
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LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) |
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CURRENT LIABILITIES: |
|
|
|
Current
maturities of long-term debt and finance leases |
$ |
2,694 |
|
|
$ |
2,298 |
|
Accounts
payable |
49,385 |
|
|
57,289 |
|
Current
lease liability - operating leases |
9,968 |
|
|
— |
|
Other
accrued liabilities |
45,034 |
|
|
51,910 |
|
Total current
liabilities |
107,081 |
|
|
111,497 |
|
Long-term debt and finance
leases, less current maturities |
474,733 |
|
|
542,001 |
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Lease liability -
operating leases, less current portion |
67,656 |
|
|
— |
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Other long-term
liabilities |
95,809 |
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|
94,744 |
|
Total stockholders' equity
(deficit) |
83,034 |
|
|
(15,832 |
) |
Total
liabilities and stockholders' equity (deficit) |
$ |
828,313 |
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|
$ |
732,410 |
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CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)(In
thousands)
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Cash Flows from Operating
Activities: |
|
|
|
Net loss |
$ |
(1,714 |
) |
|
$ |
(3,910 |
) |
Adjustments to reconcile
net loss to net cash provided by operating activities: |
|
|
|
Depreciation
and amortization |
17,489 |
|
|
15,983 |
|
Depletion of
landfill operating lease obligations |
1,648 |
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|
2,392 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
1,804 |
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|
1,422 |
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Amortization
of debt issuance costs and discount on long-term debt |
575 |
|
|
689 |
|
Stock-based
compensation |
1,431 |
|
|
2,077 |
|
Gain on sale
of property and equipment |
(57 |
) |
|
(283 |
) |
Southbridge
Landfill non-cash closure charge (1) |
— |
|
|
1,403 |
|
Non-cash
expense from acquisition activities and other items |
14 |
|
|
— |
|
Development
project charge |
— |
|
|
311 |
|
Right-of-use
asset - operating lease expense |
2,579 |
|
|
— |
|
Deferred
income taxes |
188 |
|
|
(1,187 |
) |
Changes in
assets and liabilities, net of effects of acquisitions and
divestitures |
(19,180 |
) |
|
(6,103 |
) |
Net cash
provided by operating activities |
4,777 |
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|
12,794 |
|
Cash Flows from Investing
Activities: |
|
|
|
Acquisitions, net of cash acquired |
(1,222 |
) |
|
(18,958 |
) |
Additions to
property, plant and equipment |
(18,243 |
) |
|
(8,918 |
) |
Payments on
landfill operating lease contracts |
— |
|
|
(509 |
) |
Proceeds
from sale of property and equipment |
57 |
|
|
342 |
|
Net cash
used in investing activities |
(19,408 |
) |
|
(28,043 |
) |
Cash Flows from Financing
Activities: |
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Proceeds
from long-term borrowings |
10,600 |
|
|
66,700 |
|
Principal
payments on long-term debt |
(80,746 |
) |
|
(51,364 |
) |
Proceeds
from the exercise of share based awards |
260 |
|
|
310 |
|
Proceeds
from the issuance of Class A Common Stock |
100,446 |
|
|
— |
|
Net cash
provided by financing activities |
30,560 |
|
|
15,646 |
|
Net increase in cash and
cash equivalents |
15,929 |
|
|
397 |
|
Cash and cash equivalents,
beginning of period |
4,007 |
|
|
1,995 |
|
Cash and cash equivalents,
end of period |
$ |
19,936 |
|
|
$ |
2,392 |
|
Supplemental Disclosure of
Cash Flow Information: |
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Cash
interest |
$ |
5,718 |
|
|
$ |
5,547 |
|
Cash income
taxes, net of refunds |
$ |
51 |
|
|
$ |
36 |
|
Supplemental Disclosure of
Non-Cash Investing and Financing Activities: |
|
|
|
Non-current
assets obtained through long-term obligations |
$ |
2,699 |
|
|
$ |
1,444 |
|
|
|
|
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS(Unaudited)(In
thousands)
Note 1: Southbridge Landfill Closure Charge,
Net
In June 2017, we initiated the plan to cease operations of our
Southbridge Landfill. Accordingly, in the three months ended
March 31, 2019 and 2018, we recorded charges associated with
the closure of our Southbridge Landfill as follows:
|
|
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Charlton settlement
charge (1) |
$ |
— |
|
|
$ |
1,216 |
|
Legal and other costs
(2) |
555 |
|
|
370 |
|
Southbridge Landfill
closure charge, net |
$ |
555 |
|
|
$ |
1,586 |
|
|
(1) |
|
|
|
|
We
established a reserve associated with settlement of the Town of
Charlton's claim against us. |
|
|
|
|
|
|
(2) |
|
|
|
|
We incurred
legal costs as well as other costs associated with various matters
as part of the Southbridge Landfill closure. |
|
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESRECONCILIATION OF CERTAIN NON-GAAP
MEASURES(Unaudited)(In
thousands)
Following is a reconciliation of Adjusted EBITDA and
Adjusted Operating Income from Net
loss:
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Net
loss |
$ |
(1,714 |
) |
|
$ |
(3,910 |
) |
Net loss as a
percentage of revenues |
(1.0 |
)% |
|
(2.7 |
)% |
Provision
(benefit) for income taxes |
29 |
|
|
(1,588 |
) |
Other
income |
(216 |
) |
|
(89 |
) |
Interest
expense, net |
6,343 |
|
|
6,425 |
|
Expense
from acquisition activities and other items |
677 |
|
|
— |
|
Southbridge Landfill closure charge, net |
555 |
|
|
1,586 |
|
Contract
settlement charge |
— |
|
|
2,100 |
|
Development project charge |
— |
|
|
311 |
|
Depreciation and amortization |
17,489 |
|
|
15,983 |
|
Depletion
of landfill operating lease obligations |
1,648 |
|
|
2,392 |
|
Interest
accretion on landfill and environmental remediation
liabilities |
1,804 |
|
|
1,422 |
|
Adjusted
EBITDA |
$ |
26,615 |
|
|
$ |
24,632 |
|
Adjusted EBITDA
as a percentage of revenues |
16.3 |
% |
|
16.7 |
% |
Depreciation
and amortization |
(17,489 |
) |
|
(15,983 |
) |
Depletion of
landfill operating lease obligations |
(1,648 |
) |
|
(2,392 |
) |
Interest
accretion on landfill and environmental remediation
liabilities |
(1,804 |
) |
|
(1,422 |
) |
Adjusted Operating
Income |
$ |
5,674 |
|
|
$ |
4,835 |
|
Adjusted Operating
Income as a percentage of revenues |
3.5 |
% |
|
3.3 |
% |
|
|
|
|
|
|
Following is a reconciliation of Adjusted Net (Loss)
Income from Net loss:
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Net
loss |
$ |
(1,714 |
) |
|
$ |
(3,910 |
) |
Development project charge |
— |
|
|
311 |
|
Contract
settlement charge |
— |
|
|
2,100 |
|
Southbridge Landfill closure charge, net |
555 |
|
|
1,586 |
|
Expense
from acquisition activities and other items |
677 |
|
|
— |
|
Tax
effect (i) |
(14 |
) |
|
(4 |
) |
Adjusted Net
(Loss) Income |
$ |
(496 |
) |
|
$ |
83 |
|
Diluted
weighted average common shares outstanding |
45,913 |
|
|
42,370 |
|
Dilutive
effect of options and other stock awards |
464 |
|
|
1,220 |
|
Adjusted
Diluted Weighted Average Common Shares Outstanding |
46,377 |
|
|
43,590 |
|
Adjusted
Diluted (Loss) Earnings Per Common Share |
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
|
The
aggregate tax effect of the adjustments, including any impact of
deferred tax adjustments. |
|
|
|
|
|
|
Following is a reconciliation of Adjusted Diluted (Loss)
Earnings Per Common Share from Diluted earnings per common
share:
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Diluted earnings
per common share |
$ |
(0.04 |
) |
|
$ |
(0.09 |
) |
Southbridge Landfill closure charge, net |
0.01 |
|
|
0.03 |
|
Contract
settlement charge |
— |
|
|
0.05 |
|
Development project charge |
— |
|
|
0.01 |
|
Expense
from acquisition activities and other items |
0.02 |
|
|
0.00 |
|
Tax
effect |
0.00 |
|
|
0.00 |
|
Adjusted
Diluted (Loss) Earnings Per Common Share |
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
Following is a reconciliation of Free Cash Flow* and
Normalized Free Cash Flow from Net cash provided by operating
activities:
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Net cash
provided by operating activities (i) |
$ |
4,777 |
|
|
$ |
12,794 |
|
Capital
expenditures |
(18,243 |
) |
|
(8,918 |
) |
Payments
on landfill operating lease contracts (i) |
— |
|
|
(509 |
) |
Proceeds
from sale of property and equipment |
57 |
|
|
342 |
|
Free Cash
Flow |
$ |
(13,409 |
) |
|
$ |
3,709 |
|
Contract
settlement costs (ii) |
— |
|
|
2,100 |
|
Landfill
closure, site improvement and remediation (iii) |
612 |
|
|
426 |
|
Expense
from acquisition activities and other items (iv) |
663 |
|
|
— |
|
Deposits
on developmental capital (v) |
3,768 |
|
|
— |
|
Non-recurring capital expenditures (vi) |
2,379 |
|
|
998 |
|
Normalized Free
Cash Flow |
$ |
(5,987 |
) |
|
$ |
7,233 |
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
|
Effective
January 1, 2019, as a part of implementing ASC Topic 842, Leases,
cash payments on landfill operating lease contracts, which
historically were capitalized as property, plant and equipment and
presented in the Condensed Consolidated Statements of Cash Flows as
cash outflows from investing activities, are classified as cash
flows from operating activities that reduce net cash provided by
operating activities. |
|
|
|
|
|
|
|
|
(ii) |
|
|
Includes a
contract settlement cash outlay associated with exiting a
contract. |
|
|
|
|
|
|
|
|
(iii) |
|
|
Includes
cash outlays associated with the Southbridge Landfill closure. |
|
|
|
|
|
|
|
|
(iv) |
|
|
Includes
cash outlays associated with acquisition activities. |
|
|
|
|
|
|
|
|
(v) |
|
|
Includes
deposits for capital expenditures related to new development
activities. |
|
|
|
|
|
|
|
|
(vi) |
|
|
Includes
capital expenditures related to acquisitions. |
|
|
|
|
|
|
Following is the Consolidated Net Leverage Ratio* and
the reconciliations of Consolidated Funded Debt, Net* from
long-term debt and finance leases and Consolidated EBITDA* from Net
cash provided by operating activities:
|
Twelve Months |
|
Covenant |
|
Ended March |
|
Requirement at |
|
31, 2019 |
|
March 31, 2019 |
Consolidated Net
Leverage Ratio (i) |
3.10 |
|
|
4.50 |
|
|
|
|
|
|
|
|
|
(i) |
|
|
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 finance
leases, net of unencumbered cash and cash equivalents in excess of
$2,000 ("Consolidated Funded Debt, Net", calculated at $469,866 as
of March 31, 2019, or $487,802 of consolidated long-term debt
and finance leases, less $17,936 of cash and cash equivalents in
excess of $2,000 as of March 31, 2019), 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
March 31, 2019. A reconciliation of Consolidated EBITDA from
Net cash provided by operating activities is as follows: |
|
|
|
|
|
|
|
Twelve Months Ended |
|
March 31, 2019 |
Net cash
provided by operating activities |
$ |
112,817 |
|
Changes in
assets and liabilities, net of effects of acquisitions and
divestitures |
18,417 |
|
Gain on sale
of property and equipment |
266 |
|
Non-cash
expense from acquisition activities and other items |
(771 |
) |
Loss on debt
extinguishment |
(7,352 |
) |
Southbridge
Landfill non-cash closure charge, net |
(14,776 |
) |
Impairment
of investment |
(1,069 |
) |
Southbridge
Landfill insurance recovery for investing activities |
3,506 |
|
Stock based
compensation |
(10,378 |
) |
Interest
expense, less amortization of debt issuance costs |
23,965 |
|
Provision
for income taxes, net of deferred taxes |
(1,392 |
) |
Adjustments
as allowed by the credit agreement |
28,380 |
|
Consolidated
EBITDA |
$ |
151,613 |
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESRECONCILIATION OF 2019 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, 2019:
|
(Anticipated) |
|
Fiscal Year Ending |
|
December 31, 2019 |
Net
income |
$34,000 - $38,000 |
Provision
for income taxes |
1,000 |
Other
income |
(300) |
Interest
expense, net |
26,000 |
Expense
from acquisition activities and other items |
700 |
Southbridge Landfill closure charge, net |
1,000 |
Depreciation and amortization |
76,000 |
Depletion
of landfill operating lease obligations |
8,600 |
Interest
accretion on landfill and environmental remediation
liabilities |
5,000 |
Adjusted
EBITDA |
$152,000 - $156,000 |
|
|
Following is a reconciliation of the Company's
anticipated Free Cash Flow and anticipated Normalized Free Cash
Flow from anticipated Net cash provided by operating
activities:
|
(Anticipated) |
|
Fiscal Year Ending |
|
December 31, 2019 |
Net cash
provided by operating activities (i) |
$111,000 - $115,000 |
Capital
expenditures |
(85,000) |
Proceeds
from sale of property and equipment |
100 |
Free Cash
Flow |
$26,100 - $30,100 |
Landfill
closure, site improvement and remediation expenditures (ii) |
12,500 |
Expense
from acquisition activities and other items (iii) |
700 |
Deposits
on developmental capital (iv) |
3,800 |
Non-recurring capital expenditures (v) |
7,900 |
Normalized Free
Cash Flow |
$51,000 - $55,000 |
|
|
|
|
i. |
|
|
Effective
January 1, 2019, as a part of implementing ASC Topic 842, Leases,
cash payments on landfill operating lease contracts, which
historically were capitalized as property, plant and equipment and
presented in the Condensed Consolidated Statements of Cash Flows as
cash outflows from investing activities, are classified as cash
flows from operating activities that reduce net cash provided by
operating activities. |
|
|
|
|
|
|
|
|
ii. |
|
|
Includes
cash outlays associated with the Southbridge Landfill closure and
the Potsdam, New York environmental site remediation. |
|
|
|
|
|
|
|
|
iii. |
|
|
Includes
cash outlays associated with acquisition activities. |
|
|
|
|
|
|
|
|
iv. |
|
|
Includes
deposits for capital expenditures related to new development
activities. |
|
|
|
|
|
|
|
|
v. |
|
|
Includes
capital expenditures related to acquisitions and certain
developmental capital expenditures. |
|
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESSUPPLEMENTAL DATA
TABLES(Unaudited)(In
thousands)
Amounts of total revenues attributable to services
provided for the three months ended March 31, 2019 and 2018
are as follows:
|
Three Months Ended March 31, |
|
2019 |
|
% of TotalRevenue |
|
2018 |
|
% of TotalRevenue |
Collection |
$ |
83,080 |
|
|
50.8 |
% |
|
$ |
66,475 |
|
|
45.1 |
% |
Disposal |
36,054 |
|
|
22.0 |
% |
|
40,234 |
|
|
27.3 |
% |
Power generation |
1,136 |
|
|
0.7 |
% |
|
1,799 |
|
|
1.2 |
% |
Processing |
878 |
|
|
0.5 |
% |
|
1,420 |
|
|
1.0 |
% |
Solid waste operations |
121,148 |
|
|
74.0 |
% |
|
109,928 |
|
|
74.6 |
% |
Organics |
13,596 |
|
|
8.3 |
% |
|
12,200 |
|
|
8.2 |
% |
Customer
solutions |
18,154 |
|
|
11.1 |
% |
|
15,170 |
|
|
10.3 |
% |
Recycling |
10,766 |
|
|
6.6 |
% |
|
10,157 |
|
|
6.9 |
% |
Total
revenues |
$ |
163,664 |
|
|
100.0 |
% |
|
$ |
147,455 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of revenue growth for the three months ended
March 31, 2019 compared to the three months ended
March 31, 2018 are as follows:
|
|
|
% of |
|
% of Solid |
|
|
|
|
|
Related |
|
Waste |
|
% of Total |
|
Amount |
|
Business |
|
Operations |
|
Company |
Solid Waste
Operations: |
|
|
|
|
|
|
|
Collection |
$ |
3,995 |
|
|
6.0 |
% |
|
3.6 |
% |
|
2.7 |
% |
Disposal |
1,479 |
|
|
3.7 |
% |
|
1.4 |
% |
|
1.0 |
% |
Solid Waste
Price |
5,474 |
|
|
|
|
5.0 |
% |
|
3.7 |
% |
Collection |
(288 |
) |
|
|
|
(0.3 |
)% |
|
(0.2 |
)% |
Disposal |
(3,429 |
) |
|
|
|
(3.1 |
)% |
|
(2.4 |
)% |
Disposal -
Interruption |
(639 |
) |
|
|
|
(0.6 |
)% |
|
(0.4 |
)% |
Processing |
(16 |
) |
|
|
|
— |
% |
|
— |
% |
Solid Waste
Volume |
(4,372 |
) |
|
|
|
(4.0 |
)% |
|
(3.0 |
)% |
Fuel
surcharge and other fees |
1,570 |
|
|
|
|
1.5 |
% |
|
1.1 |
% |
Commodity
price and volume |
(1,203 |
) |
|
|
|
(1.1 |
)% |
|
(0.8 |
)% |
Acquisitions, net divestitures |
11,908 |
|
|
|
|
10.8 |
% |
|
8.1 |
% |
Closed
operations |
(2,157 |
) |
|
|
|
(2.0 |
)% |
|
(1.5 |
)% |
Total Solid
Waste |
11,220 |
|
|
|
|
10.2 |
% |
|
7.6 |
% |
Organics |
1,396 |
|
|
|
|
|
|
0.9 |
% |
Customer
Solutions |
2,984 |
|
|
|
|
|
|
2.1 |
% |
|
|
|
|
|
% of Recycling |
|
|
Recycling
Operations: |
|
|
|
|
Operations |
|
|
Commodity
price |
(1,866 |
) |
|
|
|
(18.4 |
)% |
|
(1.3 |
)% |
Processing
price |
2,013 |
|
|
|
|
19.8 |
% |
|
1.4 |
% |
Volume |
462 |
|
|
|
|
4.6 |
% |
|
0.3 |
% |
Total Recycling |
609 |
|
|
|
|
6.0 |
% |
|
0.4 |
% |
Total Company |
$ |
16,209 |
|
|
|
|
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Solid waste internalization rates by region for the
three months ended March 31, 2019 and 2018 are as
follows:
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Eastern region |
46.3 |
% |
|
50.4 |
% |
Western region |
61.5 |
% |
|
74.5 |
% |
Solid waste
internalization |
53.5 |
% |
|
61.5 |
% |
|
|
|
|
|
|
Components of capital expenditures (i) for the three
months ended March 31, 2019 and 2018 are as
follows:
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Growth Capital
Expenditures |
$ |
501 |
|
|
$ |
561 |
|
Non-Recurring
Capital Expenditures |
2,379 |
|
|
998 |
|
Replacement
Capital Expenditures: |
|
|
|
Landfill
development |
2,245 |
|
|
2,138 |
|
Vehicles,
machinery, equipment and containers |
11,845 |
|
|
3,967 |
|
Facilities |
1,076 |
|
|
606 |
|
Other |
197 |
|
|
648 |
|
Replacement
Capital Expenditures |
15,363 |
|
|
7,359 |
|
Capital
Expenditures |
$ |
18,243 |
|
|
$ |
8,918 |
|
|
|
|
|
|
|
|
|
|
(i) |
|
|
|
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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