Date: June 18, 2007
Source: Casella Waste Systems, Inc.
Casella Waste Systems, Inc. (Nasdaq:CWST), a regional, non-hazardous solid waste services company, today reported financial results for the fourth quarter and its 2007 fiscal year, and gave guidance on its expected performance for its 2008 fiscal year.
Fourth Quarter Results
For the quarter ended April 30, 2007, the company reported revenues of $130.3 million, up $6.1 million or 4.9 percent over the same quarter last year. The company's net loss per common share was ($0.80), versus earnings per share of $0.07 in the same quarter last year. The net loss per share reflects the following non-recurring charges: an impairment charge of $26.9 million for the closure of the Hardwick landfill, development project charges of $0.8 million for the write-off of abandoned landfill and composting acquisitions, loss on the sale of Holliston, MA transfer station amounting to $0.7 million, bad debt of $0.5 million, and $0.4 million of severance costs for the Massachusetts' market-area restructuring. Excluding these non-recurring charges, the net loss for the quarter amounted to ($1.8) million or ($0.07) per common share.
Operating loss for the quarter was ($19.9) million, reflecting the impact of the non-recurring charges noted above, versus operating income of $10.2 million in the fourth quarter last year. Cash provided by operating activities in the quarter was $25.7 million. The company's earnings before interest, taxes, depreciation and amortization, Hardwick impairment and closing charge, and development project charges (EBITDA*) were $25.2 million, unchanged from the same quarter last year.
Revenue growth for the quarter ended April 30, 2007 compared to the quarter ended April 30, 2006 was 4.9%. Revenues declined by 2.4% year over year in solid waste operations, while FCR had year over year revenue growth of 25.1%. Pricing was up 2.9% in the solid waste operations, while volumes declined 5.8% year over year. The 5.8% volume decline in solid waste operations was driven by a 5.1% reduction in lower margin hauling and transfer volumes and a 0.4% decline due to the closure of the Hardwick landfill. Over 60% of the 5.1% loss of hauling and transfer volumes is associated with the strategic realignment of assets in the South Eastern Region away from construction & demolition (C&D) business to higher margin municipal solid waste (MSW) business centered around the Southbridge landfill. Despite lower hauling and transfer volumes, solid waste gross margins were improved by keeping operating costs down.
Fiscal 2007 Results
For the fiscal year ended April 30, 2007, the company reported revenues of $547.0 million, up $31.8 million or 6.2 percent over fiscal year 2006. The fiscal year net loss per common share was ($0.85) versus earnings per share of $0.30 in the previous fiscal year. Excluding the non-recurring charges from the fourth quarter, fiscal year 2007 net loss amounted to ($3.0) million or ($0.12) per common share.
Operating income for the year was $12.2 million, reflecting the impact of the non-recurring charges noted above, versus $42.6 million for fiscal year 2006. The company's EBITDA* for the twelve-month period were $111.6 million versus $108.4 million for fiscal year 2006.
The company also announced that cash provided by operating activities for fiscal year 2007 was $81.5 million, and that the company's free cash flow* for fiscal year 2007 was ($20.0) million; as of April 30, 2007, the company had cash on hand of $12.4 million, and had an outstanding total debt level of $477.4 million.
"This past fiscal year was challenging. We faced a weakening economy in the Northeast and the broad impacts from the construction slowdown," John W. Casella, chairman and CEO of Casella Waste Systems, said. "Our people responded well in this difficult environment and the business remained stable because of our strong focus on profitable revenue growth, cost reductions, and operational improvements."
"Despite the economic slowdown, our pricing discipline remained strong," Casella said. "We have invested significant capital in developing landfill capacity during the past four years and we continue to be focused on generating appropriate returns on this investment."
"The regional economy is stronger to date this spring. We experienced a healthy seasonal increase in business during May, which we did not see in the first quarter last year," Casella said. "Our roll-off pulls increased 7.7% over last May and C&D landfill volumes are up."
More detailed financial results are contained in the tables accompanying this release.
2007 Highlights
"During fiscal year 2007, we made great progress on our long-term landfill development growth initiative," Casella said. "In light of this progress, we began to shift our business focus during the fourth quarter towards cost reductions and profitable revenue growth all aimed to improve shareholder returns and repay debt. The restructuring of operations in the Massachusetts and Maine markets to a market-area management structure is an example of our focus on improving customer service and our business model."
Highlights of the fiscal year include:
"the company executed an amended contract with the Town of Southbridge, Massachusetts on May 29th that allows the company to seek approvals to convert the company's landfill from C&D residuals to MSW and to increase the annual tonnage to 405,000 tons per year of MSW from the current permitted level of 180,960 tons per year of C&D;
"the company was issued a new permit at the Hyland MSW landfill in New York to increase the annual tonnage by 76,500 tons and to add 6.3 million tons to the site airspace; in addition, the company was issued a permit to increase the airspace at the Hake's C&D landfill in New York by 3.7 million tons;
"total company-wide permitted and permittable disposal capacity is now at 94.1 million tons, up from 29.6 million tons at the end of fiscal 2003;
"our internalization rate rose 170 basis points to 58.3 percent for the fiscal year;
"we acquired 13 solid waste collection and recycling companies in fiscal 2007; and
"on April 30, 2007, we completed the sale of the assets of the Holliston transfer station for cash sale proceeds of $7.4 million; this sale is part of the plan announced during the fourth quarter of fiscal year 2007 to divest, swap, or close underperforming non- strategic operations amounting to $22.0 million of annual revenues."
Fiscal 2008 Outlook
The company also announced its guidance for its fiscal year 2008, which began May 1, 2007.
For the fiscal year 2008, the company estimates results in the following ranges:
Revenues between $560.0 million and $580.0 million;
EBITDA* between $114.0 million and $118.0 million;
Capital expenditures between $72.0 million and $76.0 million; and
Free cash flow* between $(2.0) million and $6.0 million.
The company said the following assumptions are built into its fiscal year 2008 outlook:
Zero-growth in the regional economy;
In the solid waste business, price growth of 3.0 percent, with overall volumes slightly down;
In the recycling business, positive price growth, with flat volumes;
Minor modification to Chemung County landfill permit in fourth quarter, increasing annual permitted MSW by 60,000 tons per year;
Focus on reducing costs through the following initiatives: market- area consolidations, productivity enhancements, maintenance standardization, and procurement rationalization; and
No major acquisitions.
Free cash flow of $(2.0) million to $6.0 million is based on cash provided by operating activities of $68.0 million to $72.0 million, less estimated maintenance capital expenditures of $60.0 million, growth capital expenditures of $12.0 to $16.0 million, and other balance sheet changes.
Casella Waste Systems, headquartered in Rutland, Vermont, provides solid waste management services consisting of collection, transfer, disposal and recycling services primarily in the eastern United States.
For further information, contact Richard Norris, chief financial officer; Ned Coletta, director of investor relations; or Joseph Fusco, vice president; at (802) 775-0325, or visit the company's website at www.casella.com.
The company will host a conference call to discuss these results on Tuesday, June 19, 2007 at 10:00 a.m. ET. Interested investors can participate by dialing (913) 312-6669 at least 10 minutes prior to the start of the conference call. The call will also be webcast; to listen, participants should visit Casella Waste Systems' website at www.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 719-457-0820 or 888-203-1112 (conference code #5445121), until 11:59 p.m. ET on Tuesday, June 26, 2007.
*Non-GAAP Financial Measures
In addition to disclosing financial results prepared in accordance with Generally Accepted Accounting Principles (GAAP), we also disclose free cash flow and earnings before interest, taxes, depreciation and amortization, Hardwick impairment and closing charge, and development project charges (EBITDA), which are non-GAAP measures.
These measures are provided because we understand that certain investors use this information when analyzing the financial position of the solid waste industry, including us. Historically, these measures have been key in comparing operating efficiency of publicly traded companies in the solid waste industry, and assist investors in measuring our ability to meet capital expenditure and working capital requirements. For these reasons we utilize these non- GAAP metrics to measure our performance at all levels. These measures do not represent, and should not be considered as alternatives to cash provided by operating activities as determined in accordance with GAAP. Moreover, these measures do not necessarily indicate whether cash flow will be sufficient for such items as working capital or capital expenditures, or to react to changes in our industry or to the economy generally. Because these measures are not calculated by all companies in the same fashion, they may not be comparable to similarly titled measures reported by other companies.
Safe Harbor Statement
Certain matters discussed in this press release are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by the context of the statements, including words such as the Company "believes," "estimates," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, financial guidance, objectives or goals are forward-looking statements. Such forward-looking statements, and all phases of our operations, involve a number of risks and uncertainties, any one or more of which could cause actual results to differ materially from those described in our forward-looking statements. Such risks and uncertainties include or relate to, among other things: we may be unable to make acquisitions and otherwise develop additional disposal capacity; continuing weakness in general economic conditions may affect our revenues; we may be required to incur capital expenditures in excess of our estimates; waste volumes may be below expectations, and fluctuations in the commodity pricing of our recyclables may make it more difficult for us to predict our results of operations. Other factors which could materially affect such forward-looking statements can be found in our periodic reports filed with the Securities and Exchange Commission, including risk factors in our Form 10-K for the fiscal year ended April 30.
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands, except amounts per share)
Three Months Ended Twelve Months Ended
------------------- -------------------
April 30, April 30,
2006 2007 2006 2007
-------- -------- -------- --------
Revenues $124,125 $130,255 $515,172 $546,990
Operating expenses:
Cost of operations (a) 83,748 87,090 339,945 360,652
General and
administration (a) 15,194 17,973 66,880 74,730
Depreciation and
amortization 14,971 17,431 64,383 71,740
Hardwick impairment and
closing charge -- 26,892 -- 26,892
Development project charges -- 752 1,329 752
-------- -------- -------- --------
113,913 150,138 472,537 534,766
-------- -------- -------- --------
Operating income (loss) 10,212 (19,883) 42,635 12,224
Other expense/(income), net:
Interest expense, net 8,401 10,135 31,287 38,859
(Income) loss from equity
method investments (980) 927 (5,742) (1,051)
Other income (a) (216) (221) (1,880) (572)
-------- -------- -------- --------
7,205 10,841 23,665 37,236
-------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes and discontinued
operations 3,007 (30,724) 18,970 (25,012)
(Benefit) provision for
income taxes 146 (12,313) 7,306 (8,481)
-------- -------- -------- --------
(Loss) income from continuing
operations before
discontinued operations 2,861 (18,411) 11,664 (16,531)
Discontinued Operations:
Loss from discontinued
operations, net of income
taxes (b) (309) (246) (560) (635)
Loss on disposal of
discontinued operations,
net of income taxes (b) -- (717) -- (717)
-------- -------- -------- --------
Net (loss) income 2,552 (19,374) 11,104 (17,883)
Preferred stock dividend 870 914 3,432 3,588
-------- -------- -------- --------
Net (loss) income available
to common stockholders $ 1,682 $(20,288) $ 7,672 $(21,471)
======== ======== ======== ========
Common stock and common
stock equivalent shares
outstanding, assuming full
dilution 25,681 25,318 25,368 25,272
======== ======== ======== ========
Net (loss) income per
common share $ 0.07 $ (0.80) $ 0.30 $ (0.85)
======== ======== ======== ========
------------------------ ------------------- -------------------
EBITDA (c) $ 25,183 $ 25,192 $108,347 $111,608
======== ======== ======== ========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)
April 30,
2006 2007
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,425 $ 12,363
Restricted cash 72 73
Accounts receivable - trade, net of allowance
for doubtful accounts 55,359 60,517
Other current assets 16,118 20,320
-------- --------
Total current assets 78,974 93,273
Property, plant and equipment, net of
accumulated depreciation 474,292 487,621
Goodwill 171,258 173,350
Intangible assets, net 2,762 2,217
Restricted cash 17,887 12,734
Investments in unconsolidated entities 44,491 49,969
Other non-current assets 21,447 13,402
-------- --------
$811,111 $832,566
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 527 $ 1,215
Current maturities of capital lease obligations 1,061 1,104
Series A redeemable, convertible preferred
stock (d) -- 74,018
Accounts payable 45,770 52,371
Other accrued liabilities 47,407 57,917
-------- --------
Total current liabilities 94,765 186,625
Long-term debt, less current maturities 452,720 476,225
Capital lease obligations, less current maturities 1,747 650
Other long-term liabilities 41,959 39,570
Series A redeemable, convertible preferred stock 70,430 --
Stockholders' equity 149,490 129,496
-------- --------
$811,111 $832,566
======== ========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
Twelve Months Ended
---------------------
April 30,
2006 2007
--------- ---------
Cash Flows from Operating Activities:
Net (loss) income $ 11,104 $ (17,883)
Loss from discontinued operations, net 560 635
Loss on disposal of discontinued operations, net -- 717
Adjustments to reconcile net (loss) income
to net cash provided by operating activities -
Depreciation and amortization 64,383 71,740
Depletion of landfill operating lease
obligations 6,284 7,021
Hardwick impairment and closing charge -- 26,892
Development project charges 1,329 752
Income from equity method investments (5,742) (1,051)
Gain on sale of equipment (105) (806)
Stock-based compensation -- 702
Deferred income taxes 4,984 (11,246)
Changes in assets and liabilities, net of
effects of acquisitions and divestitures (7,147) 4,059
--------- ---------
63,986 98,063
--------- ---------
Net Cash Provided by Operating Activities 75,650 81,532
--------- ---------
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired (19,691) (2,750)
Additions to property, plant
and equipment - growth (47,474) (36,738)
- maintenance (65,369) (65,435)
Payments on landfill operating lease contracts (10,539) (4,995)
Proceeds from divestitures -- 7,383
Restricted cash from revenue bond issuance (5,469) 5,535
Other (508) (1,788)
--------- ---------
Net Cash Used In Investing Activities (149,050) (98,788)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 208,997 267,525
Principal payments on long-term debt (136,411) (244,750)
Deferred financing costs (768) (582)
Proceeds from exercise of stock options 2,200 1,608
--------- ---------
Net Cash Provided by Financing Activities 74,018 23,801
--------- ---------
Cash Used in Discontinued Operations (1,771) (1,607)
--------- ---------
Net increase in cash and cash equivalents (1,153) 4,938
Cash and cash equivalents, beginning of period 8,578 7,425
--------- ---------
Cash and cash equivalents, end of period $ 7,425 $ 12,363
========= =========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
Unaudited
(In thousands)
Note a: The Company has made reclassifications in the Company's
Statements of Operations to conform prior year information with the
Company's current period presentation.
Note b: The company divested the assets of the Holliston Transfer
Station ("Holliston Transfer") during the quarter ended April 30,
2007. The transaction required discontinued operations treatment
under SFAS No. 144, therefore the operating results of Holliston
Transfer have been reclassified from continuing to discontinued
operations for the fiscal years ended April 30, 2006 and 2007.
Note c: Non - GAAP Financial Measures
In addition to disclosing financial results prepared in
accordance with Generally Accepted Accounting Principles (GAAP), we
also disclose EBITDA (earnings before interest, taxes, depreciation
and amortization, Hardwick impairment and closing charge and
development project charges) and Free Cash Flow, which are non-GAAP
measures.
These measures are provided because we understand that certain
investors use this information when analyzing the financial position
of the solid waste industry, including us. Historically, these
measures have been key in comparing operating efficiency of publicly
traded companies within the industry, and assist investors in
measuring our ability to meet capital expenditure and working capital
requirements. For these reasons, we utilize these non-GAAP metrics to
measure our performance at all levels. These measures do not
represent, and should not be considered as alternatives to net cash
provided by operating activities as determined in accordance with
GAAP. Moreover, these measures do not necessarily indicate whether
cash flow will be sufficient for such items as working capital or
capital expenditures, or to react to changes in our industry or to
the economy generally. Because these measures are not calculated by
all companies in the same fashion, they may not be comparable to
similarly titled measures reported by other companies.
Note d: The Company's Series A redeemable, convertible preferred
stock ("Series A preferred) contains a mandatory redemption provision
effective August 11, 2007. As the Company does not anticipate that
the Series A preferred will be converted to Class A Common Stock by
the redemption date, the Company has reflected the redemption value
of the Series A preferred as a current liability at April 30, 2007.
Following is a reconciliation of EBITDA to Net Cash Provided
by Operating Activities:
Three Months Ended Twelve Months Ended
----------------- -------------------
April 30, April 30,
2006 2007 2006 2007
------- ------- -------- --------
Net Cash Provided by
Operating Activities $13,207 $25,729 $ 75,650 $ 81,532
Changes in assets and liabilities,
net of effects of acquisitions
and divestitures 5,912 (8,249) 7,147 (4,059)
Deferred income taxes (972) 11,710 (4,984) 11,246
Stock-based compensation -- (191) -- (702)
Excess tax benefit on the
exercise of stock options -- (145) -- --
Provision for income taxes 146 (12,313) 7,306 (8,481)
Interest expense, net 8,401 10,135 31,287 38,859
Depletion of landfill operating
lease obligations (1,633) (1,478) (6,284) (7,021)
Gain on sale of equipment 338 215 105 806
Other income (216) (221) (1,880) (572)
------- ------- -------- --------
EBITDA $25,183 $25,192 $108,347 $111,608
======= ======= ======== ========
Following is a reconciliation of Free Cash Flow to Net Cash
Provided by Operating Activities:
Three Months Ended Twelve Months Ended
------------------- -------------------
April 30, April 30,
2006 2007 2006 2007
-------- -------- -------- --------
EBITDA $ 25,183 $ 25,192 $108,347 $111,608
Add
(deduct):
Cash interest (13,657) (14,943) (29,563) (36,040)
Capital expenditures (25,325) (24,972) (112,843) (102,173)
Cash taxes 13 (468) (1,286) (2,708)
Depletion of landfill
operating lease
obligations 1,633 1,478 6,284 7,021
Change in working capital,
adjusted for non-cash
items (1,585) 13,855 (9,131) 2,252
-------- -------- -------- --------
FREE CASH FLOW (13,738) 142 (38,192) (20,040)
Add
(deduct):
Capital expenditures 25,325 24,972 112,843 102,173
Other 1,620 615 999 (601)
-------- -------- -------- --------
Net Cash Provided by
Operating Activities $ 13,207 $ 25,729 $ 75,650 $ 81,532
======== ======== ======== ========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA TABLES
(Unaudited)
(In thousands)
Amounts of the Company's total revenues attributable to
services provided are as follows:
Three Months Ended Twelve Months Ended
April 30, April 30,
------------------ ------------------
2006 2007 2006 2007
-------- -------- -------- --------
Collection $ 60,552 $ 61,202 $253,282 $260,951
Landfill / disposal facilities 23,874 23,875 97,801 106,465
Transfer 7,708 5,785 33,638 30,892
Recycling 31,991 39,393 130,451 148,682
-------- -------- -------- --------
Total revenues $124,125 $130,255 $515,172 $546,990
======== ======== ======== ========
Components of revenue growth for the three months ended April 30, 2007
compared to the three months ended April 30, 2006:
Percentage
----------
Solid Waste Operations (1) Price 2.9%
Volume -5.8%
Solid waste commodity
price and volume 0.5%
----
Total growth - Solid Waste Operations -2.4%
====
FCR Operations (1) Price 23.3%
Volume 1.8%
----
Total growth - FCR Operations 25.1%
====
Rollover effect of acquisitions (as a percentage
of total revenues) 0.7%
Total revenue growth 4.9%
(1) - Calculated as a percentage of segment revenues
Solid Waste Internalization Rates by Region:
Three Months Ended Twelve Months Ended
April 30, April 30,
-------------- --------------
2006 2007 2006 2007
---- ---- ---- ----
North Eastern region 59.2% 57.8% 57.8% 56.5%
South Eastern region 38.6% 41.4% 40.4% 42.1%
Central region 79.8% 78.5% 79.2% 77.7%
Western region 50.7% 53.3% 44.2% 49.8%
---- ---- ---- ----
Solid Waste Operations 58.8% 60.2% 56.6% 58.3%
==== ==== ==== ====
US GreenFiber (50% owned) Financial Statistics:
Three Months Ended Twelve Months Ended
April 30, April 30,
----------------- -------------------
2006 2007 2006 2007
------- ------- -------- --------
Revenues $46,722 $40,758 $178,744 $186,284
Net income (loss) 2,079 (1,191) 11,714 4,227
Cash flow from operations 16,579 1,435 29,190 14,511
Net working capital changes 12,301 (348) 10,027 (406)
EBITDA $ 4,278 $ 1,783 $ 19,163 $ 14,917
As a percentage of revenue:
Net income 4.4% -2.9% 6.6% 2.3%
EBITDA 9.2% 4.4% 10.7% 8.0%
Components of Growth versus Maintenance Capital Expenditures (1):
Three Months Ended Twelve Months Ended
April 30, April 30,
---------------- ------------------
2006 2007 2006 2007
------- ------- -------- --------
Growth Capital Expenditures:
Landfill Development $ 5,868 $ 8,084 $ 33,202 $ 22,849
Boston MRF Building -- -- 5,998 --
MRF Equipment Upgrades 3,290 1,971 3,290 8,209
Other 1,764 1,537 4,984 5,680
------- ------- -------- --------
Total Growth Capital
Expenditures 10,922 11,592 47,474 36,738
------- ------- -------- --------
Maintenance Capital
Expenditures:
Vehicles, Machinery/Equipment
and Containers 2,250 5,688 25,228 27,075
Landfill Construction
& Equipment 9,043 5,649 31,812 32,500
Facilities 2,220 1,597 6,480 4,224
Other 890 446 1,849 1,636
------- ------- -------- --------
Total Maintenance Capital
Expenditures 14,403 13,380 65,369 65,435
------- ------- -------- --------
Total Capital Expenditures $25,325 $24,972 $112,843 $102,173
======= ======= ======== ========
(1) The Company's capital expenditures are broadly defined as
pertaining to either growth or maintenance activities. Growth
capital expenditures are defined as costs related to development
of new airspace, permit expansions, 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 new business as
well as expenditures associated with increasing infrastructure to
increase throughput at transfer stations and recycling
facilities. Growth capital expenditures also include those
outlays associated with acquiring landfill operating leases,
which do not meet the operating lease payment definition, but
which were included as a commitment in the successful bid.
Maintenance 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.
For more information, contact:
Casella Waste Systems, Inc.
Richard Norris
Chief Financial Officer
Ned Coletta
Director of Investor Relations
Joseph Fusco
Vice President
(802) 775-0325
www.casella.com.
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