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
June 30, 2019.
Second Quarter and Year-To-Date Highlights:
- Revenues were $187.5 million for the quarter, up $21.8
million, or up 13.2%, from the same period in 2018.
- Overall solid waste pricing for the quarter was up
5.1%, driven by strong collection pricing, up 5.5%, and robust
landfill pricing, up 6.0%, from the same period in
2018.
- Net income was $11.9 million for the quarter, up $10.2
million, or up 599.2%, from the same period in 2018.
- Adjusted EBITDA was $40.4 million for the quarter, up
$3.3 million, or up 8.9%, from the same period in
2018.
- The Company has acquired approximately $18.5 million of
annualized revenues year-to-date, and as previously announced has
signed an asset purchase agreement for the acquisition of assets
generating approximately $30.0 million of annualized revenues,
which is expected to be completed in the third
quarter.
“We are pleased with our results in the second quarter, as we
continued to execute well against our key strategies as part of our
2021 plan,” said John W. Casella, Chairman and CEO of Casella Waste
Systems, Inc. “We remain focused on driving Normalized Free Cash
Flow growth by increasing landfill returns, improving collection
profitability, creating incremental value through resource
solutions, using technology to drive profitable growth and
efficiencies, and prudently allocating capital for strategic
growth.”
“Our solid waste pricing programs are running ahead of budget as
we advanced 5.5% pricing in the collection line-of-business and
6.0% pricing at the landfills, for overall solid waste price of
5.1% during the second quarter,” Casella said. “Solid waste volumes
were up 0.4% in the quarter, driven by growth in landfill volumes
as we began to selectively ramp up landfill volumes to take
advantage of higher priced materials through the summer months. We
expect positive disposal volumes through the remainder of the year
as we bring new expansion capacity on at one of our New York
landfills. Collection volumes were down slightly in the quarter as
we continued to focus on shedding unprofitable work and advancing
pricing in excess of heightened inflation.”
“We continued to make great progress improving recycling
contract structures and off-taking commodity risk during the second
quarter,” Casella said. “These efforts resulted in a year-over-year
improvement in our recycling operating income despite commodity
prices being down roughly 13% during the same period. 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.”
“During the second quarter we continued to focus resources on
successfully integrating and recognizing synergies from the
acquisitions we have completed over the last year,” Casella said.
“We have acquired roughly $18.5 million of annualized revenues
year-to-date and we expect to acquire another $30.0 million of
annualized revenues in the third quarter with assets in the Albany,
NY and Cheshire, MA markets. Our acquisition pipeline remains
robust, and we believe that there is continued opportunity to drive
cash flow growth across our footprint through strategic
growth.”
For the quarter, revenues were $187.5 million, up $21.8 million,
or 13.2%, from the same period in 2018, with revenue growth mainly
driven by: robust collection and disposal pricing; the roll-over
impact from acquisitions; higher disposal, recycling, organics and
customer solutions volumes; and higher recycling processing fees;
partially offset by lower collection volumes; the closure of the
Southbridge Landfill; and lower recycling commodity prices.
Net income was $11.9 million for the quarter, or $0.25 per
diluted common share for the quarter, up $10.2 million as compared
to net income of $1.7 million, or $0.04 per diluted common share
for the same period in 2018. Adjusted Net Income* was $13.2 million
for the quarter, or Adjusted Diluted Earnings Per Common Share* of
$0.27 for the quarter, up $3.7 million as compared to Adjusted Net
Income of $9.6 million, or Adjusted Diluted Earnings Per Common
Share of $0.22 for the same period in 2018.
The second quarter included: $0.5 million of expense from
acquisition activities and other items; and $0.9 million of legal
and other expenses associated with the Southbridge Landfill
closure.
Operating income was $15.5 million for the quarter, up $0.4
million from the same period in 2018. Adjusted Operating Income*
was $16.9 million for the quarter, up $1.3 million from the same
period in 2018. Adjusted EBITDA was $40.4 million for the quarter,
up $3.3 million from the same period in 2018, with growth mainly
driven by improved performance in the Company's collection,
recycling, disposal and customer solutions lines-of-business,
partially offset by a decline in performance in the landfill
gas-to-energy and organics lines-of-business.
For the six months ended June 30, 2019, revenues were
$351.1 million, up $38.0 million, or 12.1%, from the same period in
2018.
Net income was $10.2 million, or $0.22 per diluted common share
year-to-date, as compared to net loss of $(2.2) million, or $(0.05)
per diluted common share for the same period in 2018.
Operating income was $20.0 million year-to-date, up $4.0 million
from the same period in 2018. Adjusted Operating Income was $22.6
million year-to-date, up $2.1 million from the same period in 2018.
Adjusted EBITDA was $67.0 million year-to-date, up $5.3 million
from the same period in 2018.
Net cash provided by operating activities was $38.3 million
year-to-date, as compared to $48.1 million for the same period in
2018, with the reduction year-over-year mainly due to: timing
differences in cash outflows associated with accounts payable that
are expected to normalize through the remainder of the fiscal year;
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; and a
reduction in accrued liabilities due to cash outflows associated
with the remediation project at a former scrap yard owned by one of
our subsidiaries in Potsdam, New York and the Southbridge Landfill
closure.
Normalized Free Cash Flow was $10.0 million year-to-date, as
compared to $16.1 million for the same period in 2018.
Normalized Free Cash Flow year-to-date included the following
adjustments: $6.2 million of landfill closure, site improvement and
remediation expenditures associated with the Potsdam remediation
project and the Southbridge Landfill closure; $1.2 million of cash
outlays related to acquisition activities; $4.3 million of deposits
for capital expenditures related to development activities; and
$6.3 million of capital expenditures primarily related to
acquisitions.
Outlook
“Given the strength in our solid waste, recycling, and customer
solutions operations combined with the expected contribution from
the acquisitions we have completed year-to-date, we are raising and
reaffirming our guidance ranges for the fiscal 2019,” Casella
said. “Our fiscal 2019 guidance does not take into account
any financial contributions for acquisitions not yet completed,
including the acquisition of assets generating roughly $30.0
million of annualized revenues that is expected to be completed in
the third quarter.”
The Company raised or reaffirmed guidance for fiscal 2019 by
estimating results in the following ranges:
- Revenues between $720 million and $735 million (raised from
$710 million and $725 million);
- Net income between $35 million and $39 million (raised from $34
million and $38 million);
- Adjusted EBITDA between $153 million and $157 million (raised
from $152 million and $156 million);
- Net cash provided by operating activities between $111 million
and $115 million; 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 most
directly 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 Friday, August 2, 2019 at 9:00 a.m. Eastern Time.
Individuals interested in participating in the call should dial
(877) 838-4153 or for international participants (720) 545-0037 at
least 10 minutes before start time. The Conference ID is 847
9399 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 (Loss) 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: 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 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.
Investors:
Ned ColettaChief Financial Officer(802) 772-2239
Media:
Joseph FuscoVice President(802)
772-2247http://www.casella.com
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In
thousands, except for per share data)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenues |
$ |
187,459 |
|
|
$ |
165,649 |
|
|
$ |
351,123 |
|
|
$ |
313,104 |
|
Operating expenses: |
|
|
|
|
|
|
|
Cost of operations |
128,674 |
|
|
111,800 |
|
|
246,434 |
|
|
217,409 |
|
General and administration |
22,145 |
|
|
20,793 |
|
|
44,887 |
|
|
41,820 |
|
Depreciation and amortization |
19,715 |
|
|
17,386 |
|
|
37,204 |
|
|
33,370 |
|
Southbridge Landfill closure charge, net (1) |
917 |
|
|
172 |
|
|
1,472 |
|
|
1,759 |
|
Expense from acquisition activities and other items |
464 |
|
|
349 |
|
|
1,140 |
|
|
349 |
|
Contract settlement charge |
— |
|
|
— |
|
|
— |
|
|
2,100 |
|
Development project charge |
— |
|
|
— |
|
|
— |
|
|
311 |
|
|
171,915 |
|
|
150,500 |
|
|
331,137 |
|
|
297,118 |
|
Operating income |
15,544 |
|
|
15,149 |
|
|
19,986 |
|
|
15,986 |
|
Other expense (income): |
|
|
|
|
|
|
|
Interest expense, net |
6,050 |
|
|
6,390 |
|
|
12,393 |
|
|
12,814 |
|
Loss on debt extinguishment |
— |
|
|
7,352 |
|
|
— |
|
|
7,352 |
|
Other income |
(496 |
) |
|
(342 |
) |
|
(711 |
) |
|
(431 |
) |
Other expense, net |
5,554 |
|
|
13,400 |
|
|
11,682 |
|
|
19,735 |
|
Income (loss) before income
taxes |
9,990 |
|
|
1,749 |
|
|
8,304 |
|
|
(3,749 |
) |
(Benefit) provision for income
taxes |
(1,925 |
) |
|
45 |
|
|
(1,897 |
) |
|
(1,543 |
) |
Net income (loss) |
$ |
11,915 |
|
|
$ |
1,704 |
|
|
$ |
10,201 |
|
|
$ |
(2,206 |
) |
Basic weighted average common
shares outstanding |
47,464 |
|
|
42,661 |
|
|
46,693 |
|
|
42,516 |
|
Basic earnings per common
share |
$ |
0.25 |
|
|
$ |
0.04 |
|
|
$ |
0.22 |
|
|
$ |
(0.05 |
) |
Diluted weighted average common
shares outstanding |
48,221 |
|
|
43,916 |
|
|
47,424 |
|
|
42,516 |
|
Diluted earnings per common
share |
$ |
0.25 |
|
|
$ |
0.04 |
|
|
$ |
0.22 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands)
|
June 30, 2019 |
|
December 31, 2018 |
ASSETS |
(Unaudited) |
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
3,157 |
|
|
$ |
4,007 |
|
Accounts receivable - trade, net of allowance for doubtful
accounts |
85,441 |
|
|
74,937 |
|
Other current assets |
16,788 |
|
|
18,149 |
|
Total current assets |
105,386 |
|
|
97,093 |
|
Property, plant and equipment,
net of accumulated depreciation and amortization |
406,636 |
|
|
404,577 |
|
Operating lease right-of-use
assets |
103,769 |
|
|
— |
|
Goodwill |
169,866 |
|
|
162,734 |
|
Intangible assets, net of
accumulated amortization |
43,347 |
|
|
34,767 |
|
Restricted assets |
1,395 |
|
|
1,248 |
|
Cost method investments |
11,264 |
|
|
11,264 |
|
Deferred income taxes |
9,160 |
|
|
9,594 |
|
Other non-current assets |
15,137 |
|
|
11,133 |
|
Total assets |
$ |
865,960 |
|
|
$ |
732,410 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Current maturities of long-term debt and finance leases |
$ |
3,048 |
|
|
$ |
2,298 |
|
Accounts payable |
61,731 |
|
|
57,289 |
|
Current operating lease liabilities |
8,901 |
|
|
— |
|
Other accrued liabilities |
46,327 |
|
|
51,910 |
|
Total current liabilities |
120,007 |
|
|
111,497 |
|
Long-term debt and finance
leases, less current maturities |
483,892 |
|
|
542,001 |
|
Operating lease liabilities, less
current portion |
65,735 |
|
|
— |
|
Other long-term liabilities |
100,129 |
|
|
94,744 |
|
Total stockholders' equity
(deficit) |
96,197 |
|
|
(15,832 |
) |
Total liabilities and stockholders' equity (deficit) |
$ |
865,960 |
|
|
$ |
732,410 |
|
|
|
|
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)(In
thousands)
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
Cash Flows from Operating
Activities: |
|
|
|
Net income (loss) |
$ |
10,201 |
|
|
$ |
(2,206 |
) |
Adjustments to reconcile net
income (loss) to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
37,204 |
|
|
33,370 |
|
Depletion of landfill operating lease obligations |
3,623 |
|
|
4,993 |
|
Interest accretion on landfill and environmental remediation
liabilities |
3,579 |
|
|
2,862 |
|
Amortization of debt issuance costs and discount on long-term
debt |
1,149 |
|
|
1,290 |
|
Stock-based compensation |
3,320 |
|
|
4,198 |
|
Gain on sale of property and equipment |
(327 |
) |
|
(370 |
) |
Southbridge Landfill non-cash closure charge (1) |
179 |
|
|
1,273 |
|
Non-cash expense from acquisition activities and other items |
(68 |
) |
|
211 |
|
Development project charge |
— |
|
|
311 |
|
Loss on debt extinguishment |
— |
|
|
7,352 |
|
Operating lease right-of-use assets expense |
4,921 |
|
|
— |
|
Deferred income taxes |
(1,565 |
) |
|
(725 |
) |
Changes in assets and liabilities, net of effects of acquisitions
and divestitures |
(23,965 |
) |
|
(4,480 |
) |
Net cash provided by operating activities |
38,251 |
|
|
48,079 |
|
Cash Flows from Investing
Activities: |
|
|
|
Acquisitions, net of cash acquired |
(27,687 |
) |
|
(19,369 |
) |
Additions to property, plant and equipment |
(46,659 |
) |
|
(35,492 |
) |
Payments on landfill operating lease contracts |
— |
|
|
(3,467 |
) |
Proceeds from sale of property and equipment |
363 |
|
|
469 |
|
Net cash used in investing activities |
(73,983 |
) |
|
(57,859 |
) |
Cash Flows from Financing
Activities: |
|
|
|
Proceeds from long-term borrowings |
41,400 |
|
|
528,900 |
|
Principal payments on long-term debt |
(109,241 |
) |
|
(513,854 |
) |
Payments of debt issuance costs |
— |
|
|
(5,567 |
) |
Proceeds from the exercise of share based awards |
2,277 |
|
|
398 |
|
Proceeds from the issuance of Class A Common Stock |
100,446 |
|
|
— |
|
Net cash provided by financing activities |
34,882 |
|
|
9,877 |
|
Net (decrease) increase in cash
and cash equivalents |
(850 |
) |
|
97 |
|
Cash and cash equivalents,
beginning of period |
4,007 |
|
|
1,995 |
|
Cash and cash equivalents, end of
period |
$ |
3,157 |
|
|
$ |
2,092 |
|
Supplemental Disclosure of Cash
Flow Information: |
|
|
|
Cash interest |
$ |
11,672 |
|
|
$ |
11,423 |
|
Cash income taxes, net of refunds |
$ |
16 |
|
|
$ |
84 |
|
Supplemental Disclosure of
Non-Cash Investing and Financing Activities: |
|
|
|
Non-current assets obtained through long-term obligations |
$ |
9,333 |
|
|
$ |
3,267 |
|
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 and six months
ended June 30, 2019 and 2018, we recorded charges associated
with the closure of our Southbridge Landfill as follows:
|
Three Months
Ended |
|
Six Months
Ended |
|
June 30, |
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Charlton
settlement charge (i) |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,216 |
|
Legal and other costs (ii) |
917 |
|
|
172 |
|
|
1,472 |
|
|
543 |
|
Southbridge Landfill closure charge, net |
$ |
917 |
|
|
$ |
172 |
|
|
$ |
1,472 |
|
|
$ |
1,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) We established a reserve associated with settlement of the
Town of Charlton's claim against us. (ii) 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 income
(loss):
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss) |
$ |
11,915 |
|
|
$ |
1,704 |
|
|
$ |
10,201 |
|
|
$ |
(2,206 |
) |
Net income (loss) as a
percentage of revenues |
6.4 |
% |
|
1.0 |
% |
|
2.9 |
% |
|
(0.7 |
)% |
(Benefit) provision for income taxes |
(1,925 |
) |
|
45 |
|
|
(1,897 |
) |
|
(1,543 |
) |
Other income |
(496 |
) |
|
(342 |
) |
|
(711 |
) |
|
(431 |
) |
Loss on debt extinguishment |
— |
|
|
7,352 |
|
|
— |
|
|
7,352 |
|
Interest expense, net |
6,050 |
|
|
6,390 |
|
|
12,393 |
|
|
12,814 |
|
Expense from acquisition activities and other items |
464 |
|
|
349 |
|
|
1,140 |
|
|
349 |
|
Southbridge Landfill closure charge, net |
917 |
|
|
172 |
|
|
1,472 |
|
|
1,759 |
|
Contract settlement charge |
— |
|
|
— |
|
|
— |
|
|
2,100 |
|
Development project charge |
— |
|
|
— |
|
|
— |
|
|
311 |
|
Depreciation and amortization |
19,715 |
|
|
17,386 |
|
|
37,204 |
|
|
33,370 |
|
Depletion of landfill operating lease obligations |
1,975 |
|
|
2,601 |
|
|
3,623 |
|
|
4,993 |
|
Interest accretion on landfill and environmental remediation
liabilities |
1,775 |
|
|
1,440 |
|
|
3,579 |
|
|
2,862 |
|
Adjusted
EBITDA |
$ |
40,390 |
|
|
$ |
37,097 |
|
|
$ |
67,004 |
|
|
$ |
61,730 |
|
Adjusted EBITDA as a
percentage of revenues |
21.5 |
% |
|
22.4 |
% |
|
19.1 |
% |
|
19.7 |
% |
Depreciation and amortization |
(19,715 |
) |
|
(17,386 |
) |
|
(37,204 |
) |
|
(33,370 |
) |
Depletion of landfill operating lease obligations |
(1,975 |
) |
|
(2,601 |
) |
|
(3,623 |
) |
|
(4,993 |
) |
Interest accretion on landfill and environmental remediation
liabilities |
(1,775 |
) |
|
(1,440 |
) |
|
(3,579 |
) |
|
(2,862 |
) |
Adjusted Operating
Income |
$ |
16,925 |
|
|
$ |
15,670 |
|
|
$ |
22,598 |
|
|
$ |
20,505 |
|
Adjusted Operating Income
as a percentage of revenues |
9.0 |
% |
|
9.5 |
% |
|
6.4 |
% |
|
6.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following is a reconciliation of Adjusted Net Income
from Net income (loss):
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss) |
$ |
11,915 |
|
|
$ |
1,704 |
|
|
$ |
10,201 |
|
|
$ |
(2,206 |
) |
Loss on debt extinguishment |
— |
|
|
7,352 |
|
|
— |
|
|
7,352 |
|
Development project charge |
— |
|
|
— |
|
|
— |
|
|
311 |
|
Contract settlement charge |
— |
|
|
— |
|
|
— |
|
|
2,100 |
|
Southbridge Landfill closure charge, net |
917 |
|
|
172 |
|
|
1,472 |
|
|
1,759 |
|
Expense from acquisition activities and other items |
464 |
|
|
349 |
|
|
1,140 |
|
|
349 |
|
Tax effect (i) |
(76 |
) |
|
(23 |
) |
|
(90 |
) |
|
(27 |
) |
Adjusted Net
Income |
$ |
13,220 |
|
|
$ |
9,554 |
|
|
$ |
12,723 |
|
|
$ |
9,638 |
|
Diluted weighted average
common shares outstanding |
48,221 |
|
|
43,916 |
|
|
47,424 |
|
|
42,516 |
|
Dilutive effect of options and other stock awards |
— |
|
|
— |
|
|
— |
|
|
1,246 |
|
Adjusted Diluted Weighted
Average Common Shares Outstanding |
48,221 |
|
|
43,916 |
|
|
47,424 |
|
|
43,762 |
|
Adjusted Diluted Earnings
Per Common Share |
$ |
0.27 |
|
|
$ |
0.22 |
|
|
$ |
0.27 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) The aggregate tax effect of the adjustments, including any
impact of deferred tax adjustments.
Following is a reconciliation of Adjusted Diluted
Earnings Per Common Share from Diluted earnings per common
share:
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Diluted earnings per common share |
$ |
0.25 |
|
|
$ |
0.04 |
|
|
$ |
0.22 |
|
|
$ |
(0.05 |
) |
Loss on debt extinguishment |
— |
|
|
0.17 |
|
|
— |
|
|
0.17 |
|
Southbridge Landfill closure charge, net |
0.01 |
|
|
— |
|
|
0.03 |
|
|
0.03 |
|
Contract settlement charge |
— |
|
|
— |
|
|
— |
|
|
0.05 |
|
Development project charge |
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
Expense from acquisition activities and other items |
0.01 |
|
|
0.01 |
|
|
0.02 |
|
|
0.01 |
|
Adjusted Diluted Earnings
Per Common Share |
$ |
0.27 |
|
|
$ |
0.22 |
|
|
$ |
0.27 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following is a reconciliation of Free Cash Flow* and
Normalized Free Cash Flow from Net cash provided by operating
activities:
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net cash provided by operating activities (i) |
$ |
33,474 |
|
|
$ |
35,285 |
|
|
$ |
38,251 |
|
|
$ |
48,079 |
|
Capital expenditures |
(28,416 |
) |
|
(26,574 |
) |
|
(46,659 |
) |
|
(35,492 |
) |
Payments on landfill operating lease contracts (i) |
— |
|
|
(2,958 |
) |
|
— |
|
|
(3,467 |
) |
Proceeds from sale of property and equipment |
306 |
|
|
127 |
|
|
363 |
|
|
469 |
|
Free Cash
Flow |
$ |
5,364 |
|
|
$ |
5,880 |
|
|
$ |
(8,045 |
) |
|
$ |
9,589 |
|
Contract settlement costs (ii) |
— |
|
|
— |
|
|
— |
|
|
2,100 |
|
Landfill closure, site improvement and remediation (iii) |
4,230 |
|
|
1,237 |
|
|
6,220 |
|
|
1,663 |
|
Expense from acquisition activities and other items (iv) |
546 |
|
|
138 |
|
|
1,209 |
|
|
138 |
|
Deposits on developmental capital (v) |
546 |
|
|
— |
|
|
4,314 |
|
|
— |
|
Non-recurring capital expenditures (vi) |
3,880 |
|
|
1,607 |
|
|
6,259 |
|
|
2,605 |
|
Normalized Free Cash
Flow |
$ |
14,566 |
|
|
$ |
8,862 |
|
|
$ |
9,957 |
|
|
$ |
16,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 and the Potsdam,
New York environmental site remediation. The six months ended June
30, 2019 includes $1,378 for Southbridge landfill closure costs in
the three months ended March 31, 2019 that were not previously
reflected in landfill closure, site improvement and remediation.
(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 and other non-recurring
items.
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 Ended June 30, 2019 |
|
Covenant Requirement at June 30, 2019 |
Consolidated Net Leverage
Ratio (i) |
3.18 |
|
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 $495,584 as of June 30, 2019, or $496,741
of consolidated long-term debt and finance leases, less $1,157 of
cash and cash equivalents in excess of $2,000 as of June 30,
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 June 30, 2019. A reconciliation of Consolidated EBITDA
from Net cash provided by operating activities is as follows:
|
Twelve Months Ended June 30, 2019 |
Net cash provided by
operating activities |
$ |
111,006 |
|
Changes in assets and liabilities, net of effects of acquisitions
and divestitures |
24,825 |
|
Gain on sale of property and equipment |
449 |
|
Non-cash expense from acquisition activities and other items |
(478 |
) |
Southbridge Landfill non-cash closure charge, net |
(15,085 |
) |
Impairment of investment |
(1,069 |
) |
Southbridge Landfill insurance recovery for investing
activities |
3,506 |
|
Stock based compensation |
(12,488 |
) |
Interest expense, less amortization of debt issuance costs |
23,679 |
|
Benefit for income taxes, net of deferred taxes |
(1,148 |
) |
Adjustments as allowed by the credit agreement |
22,759 |
|
Consolidated
EBITDA |
$ |
155,956 |
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESRECONCILIATION OF 2019 OUTLOOK
NON-GAAP MEASURES(Unaudited)(In
thousands)
Following is a reconciliation of the Company's estimated
Adjusted EBITDA from estimated Net income for the fiscal year
ending December 31, 2019:
|
(Estimated) Fiscal Year Ending December 31,
2019 |
Net
income |
$35,000 - $39,000 |
Benefit for income taxes |
(700) |
Other income |
(800 |
Interest expense, net |
26,000 |
Expense from acquisition activities and other items |
1,500 |
Southbridge Landfill closure charge, net |
1,500 |
Depreciation and amortization |
77,000 |
Depletion of landfill operating lease obligations |
7,500 |
Interest accretion on landfill and environmental remediation
liabilities |
6,000 |
Adjusted
EBITDA |
$153,000 - $157,000 |
|
|
Following is a reconciliation of the Company's estimated
Free Cash Flow and estimated Normalized Free Cash Flow from
estimated Net cash provided by operating activities:
|
(Estimated) Fiscal Year Ending December 31,
2019 |
Net cash provided by
operating activities (i) |
$111,000 - $115,000 |
Capital expenditures |
(88,000) |
Proceeds from sale of property and equipment |
400 |
Free Cash
Flow |
$23,400 - $27,400 |
Landfill closure, site improvement and remediation expenditures
(ii) |
12,500 |
Expense from acquisition activities and other items (iii) |
1,500 |
Deposits on developmental capital (iv) |
4,400 |
Non-recurring capital expenditures (v) |
9,200 |
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
other non-recurring items.
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESSUPPLEMENTAL DATA
TABLES(Unaudited)(In
thousands)
Amounts of total revenues attributable to services
provided for the three and six months ended June 30, 2019 and
2018 are as follows:
|
Three Months Ended June 30, |
|
|
|
|
|
% of Total |
|
|
|
|
|
% of Total |
|
2019 |
|
Revenues |
|
2018 |
|
Revenues |
Collection |
$ |
92,066 |
|
|
49.1 |
% |
|
$ |
74,564 |
|
|
45.0 |
% |
Disposal |
48,139 |
|
|
25.7 |
% |
|
47,246 |
|
|
28.5 |
% |
Power generation |
711 |
|
|
0.4 |
% |
|
1,295 |
|
|
0.8 |
% |
Processing |
1,908 |
|
|
1.0 |
% |
|
2,347 |
|
|
1.4 |
% |
Solid waste operations |
142,824 |
|
|
76.2 |
% |
|
125,452 |
|
|
75.7 |
% |
Organics |
14,905 |
|
|
7.9 |
% |
|
14,647 |
|
|
8.9 |
% |
Customer solutions |
19,216 |
|
|
10.3 |
% |
|
15,950 |
|
|
9.6 |
% |
Recycling |
10,514 |
|
|
5.6 |
% |
|
9,600 |
|
|
5.8 |
% |
Total
revenues |
$ |
187,459 |
|
|
100.0 |
% |
|
$ |
165,649 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
% of Total |
|
|
|
|
|
% of Total |
|
2019 |
|
Revenues |
|
2018 |
|
Revenues |
Collection |
$ |
175,145 |
|
|
49.9 |
% |
|
$ |
141,039 |
|
|
45.0 |
% |
Disposal |
84,194 |
|
|
24.0 |
% |
|
87,480 |
|
|
27.9 |
% |
Power generation |
1,847 |
|
|
0.5 |
% |
|
3,094 |
|
|
1.0 |
% |
Processing |
2,786 |
|
|
0.8 |
% |
|
3,768 |
|
|
1.3 |
% |
Solid waste operations |
263,972 |
|
|
75.2 |
% |
|
235,381 |
|
|
75.2 |
% |
Organics |
28,501 |
|
|
8.1 |
% |
|
26,847 |
|
|
8.6 |
% |
Customer solutions |
37,370 |
|
|
10.6 |
% |
|
31,119 |
|
|
9.9 |
% |
Recycling |
21,280 |
|
|
6.1 |
% |
|
19,757 |
|
|
6.3 |
% |
Total
revenues |
$ |
351,123 |
|
|
100.0 |
% |
|
$ |
313,104 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of revenue growth for the three months ended
June 30, 2019 compared to the three months ended June 30,
2018 are as follows:
|
Amount |
|
%
ofRelatedBusiness |
|
% of
SolidWasteOperations |
|
% of TotalCompany |
Solid Waste
Operations: |
|
|
|
|
|
|
|
Collection |
$ |
4,071 |
|
|
5.5 |
% |
|
3.2 |
% |
|
2.5 |
% |
Disposal |
2,309 |
|
|
4.9 |
% |
|
1.9 |
% |
|
1.4 |
% |
Solid Waste Price |
6,380 |
|
|
|
|
5.1 |
% |
|
3.9 |
% |
Collection |
(684 |
) |
|
|
|
(0.5 |
)% |
|
(0.4 |
)% |
Disposal |
1,274 |
|
|
|
|
1.0 |
% |
|
0.8 |
% |
Processing |
(52 |
) |
|
|
|
(0.1 |
)% |
|
(0.1 |
)% |
Solid Waste Volume |
538 |
|
|
|
|
0.4 |
% |
|
0.3 |
% |
Fuel surcharge and other fees |
1,059 |
|
|
|
|
0.8 |
% |
|
0.6 |
% |
Commodity price and volume |
(1,662 |
) |
|
|
|
(1.3 |
)% |
|
(1.0 |
)% |
Acquisitions, net divestitures |
14,764 |
|
|
|
|
11.8 |
% |
|
8.9 |
% |
Closed operations |
(3,707 |
) |
|
|
|
(3.0 |
)% |
|
(2.2 |
)% |
Total Solid
Waste |
17,372 |
|
|
|
|
13.8 |
% |
|
10.5 |
% |
Organics |
258 |
|
|
|
|
|
|
0.2 |
% |
Customer
Solutions |
3,266 |
|
|
|
|
|
|
1.9 |
% |
Recycling
Operations: |
|
|
|
|
% of Recycling Operations |
|
|
Commodity price |
(1,280 |
) |
|
|
|
(13.3 |
)% |
|
(0.8 |
)% |
Processing price |
1,559 |
|
|
|
|
16.2 |
% |
|
0.9 |
% |
Volume |
635 |
|
|
|
|
6.6 |
% |
|
0.5 |
% |
Total Recycling |
914 |
|
|
|
|
9.5 |
% |
|
0.6 |
% |
Total Company |
$ |
21,810 |
|
|
|
|
|
|
13.2 |
% |
Solid waste internalization rates by region for the
three and six months ended June 30, 2019 and 2018 are as
follows:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Eastern region |
50.4 |
% |
|
50.6 |
% |
|
48.6 |
% |
|
50.5 |
% |
Western region |
59.0 |
% |
|
75.0 |
% |
|
60.2 |
% |
|
74.8 |
% |
Solid waste
internalization |
54.4 |
% |
|
61.5 |
% |
|
54.0 |
% |
|
61.5 |
% |
Components of capital expenditures (i) for the three and
six months ended June 30, 2019 and 2018 are as
follows:
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Growth Capital
Expenditures |
$ |
388 |
|
|
$ |
399 |
|
|
$ |
889 |
|
|
$ |
960 |
|
Non-Recurring Capital
Expenditures |
3,924 |
|
|
1,607 |
|
|
6,303 |
|
|
2,605 |
|
Replacement Capital
Expenditures: |
|
|
|
|
|
|
|
Landfill development |
11,808 |
|
|
11,087 |
|
|
14,053 |
|
|
13,225 |
|
Vehicles, machinery, equipment and containers |
10,797 |
|
|
12,720 |
|
|
22,642 |
|
|
16,687 |
|
Facilities |
1,042 |
|
|
650 |
|
|
2,118 |
|
|
1,256 |
|
Other |
457 |
|
|
111 |
|
|
654 |
|
|
759 |
|
Replacement Capital
Expenditures |
24,104 |
|
|
24,568 |
|
|
39,467 |
|
|
31,927 |
|
Capital
Expenditures |
$ |
28,416 |
|
|
$ |
26,574 |
|
|
$ |
46,659 |
|
|
$ |
35,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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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