Date: March 2, 2010
Source: Casella Waste Systems, Inc.
Casella Waste Systems, Inc. (NASDAQ: CWST), a regional solid waste, recycling and resource management services company, today reported financial results for the third quarter of its 2010 fiscal year.
Highlights of the quarter include:
"We are encouraged by the overall performance of the business in the third quarter, particularly the return to measurable revenue growth," said John W. Casella, chairman and CEO of Casella Waste Systems.
"While it is still too early to say we have reached a turning point in the regional economy, the results reflect strengthening in important aspects of our business," Casella said. "Landfill volumes were up year-over-year, with the increases driven by the hard work of our sales team to attract new long-term contracted volumes to our expanded capacity. This is a key long-term driver in our strategy to harvest the value from our investments in landfill capacity across our integrated footprint."
"Our recycling group's performance improved again sequentially in the third quarter as a result of continued progress with cost efficiency programs combined with higher commodity prices," Casella said. "Average commodity revenue per ton was up 10 percent from the second quarter of our fiscal year 2010, but was still down 35 percent from the second quarter of our fiscal year 2009 when commodity prices were at multi-year highs. Our goal is to trade a portion of higher commodity prices for long-term stability and protection from commodity price volatility by implementing intelligent risk programs. The risk programs mitigate cash flow volatility through floating revenue shares, variable tipping fees, index purchases, financial hedges, floor prices, and fixed price contracts."
"Our Adjusted EBITDA margins were up by 300 basis points over the same period last year, with the gains driven by further improvement in collection pricing, increased landfill volumes, higher commodity pricing, and the successful operating efficiency initiatives," Casella said. "The margin expansion in the quarter is reflective of the operating leverage we gained during the downturn through the implementation of permanent cost controls and operating efficiency programs."
Third Quarter Financial Results
For the quarter ended January 31, 2010, the Company reported revenues of $126.1 million, up $5.2 million or 4.2 percent from the same quarter last year.
Solid waste revenues were flat over the same quarter last year with price up 1.3 percent, fuel and oil recovery fees down 1.0 percent, volume down 0.2 percent, and commodity price and volume down 0.1 percent. Solid waste collection price was up 3.8 percent as a percentage of collection revenues over the same quarter last year. The 0.2 percent decline in solid waste volumes was the result of a 2.9 percent decline in collection volume, mainly offset by a 1.9 percent increase in disposal volumes, a 0.5 percent increase in power generation, and a 0.3 percent increase in processing and recycling volumes. FCR revenues were up $4.5 million or 23.3 percent over the same quarter last year with price up 24.6 percent and volume down 1.3 percent.
The Company's net loss applicable to common shareholders was ($4.4) million, or ($0.17) per common share in the quarter, compared to net loss of ($3.8) million, or ($0.15) per share for the same quarter last year.
Operating income was $11.2 million for the quarter, up $9.2 million from the same quarter last year. FCR recycling operating income increased by $4.8 million compared to the prior period on higher commodity revenues and the non-recurrence of approximately $4.0 million of one-time costs incurred in the third quarter of fiscal year 2009 associated with the November 2008 global commodity market collapse and the commissioning of two new Zero-Sort Recycling™ facilities. Solid Waste operating income increased by $4.5 million compared to the prior period on gains in collection pricing, higher landfill volumes, lower operating costs, and the non-recurrence of the $2.8 million environmental remediation charge incurred in the third quarter of fiscal year 2009.
The Company's Adjusted EBITDA* was $29.0 million for the quarter, up $4.8 million from the same quarter last year. Adjusted EBITDA margin was 23.0 percent for the quarter up 300 basis points from the same quarter last year. Net cash provided by operating activities in the quarter was $7.5 million, down $3.9 million from the same quarter last year. The Company's free cash flow* in the quarter was ($3.1) million, up $1.6 million from the same quarter last year.
Nine Month Financial Results
For the nine months ended January 31, 2010, the company reported revenues of $391.6 million, down $43.1 million or 9.9 percent from the same period last year. The Company's net loss applicable to common shareholders was ($8.7) million, or ($0.34) per common share for the nine month period, compared to net income of $0.4 million, or $0.02 per share for the same period last year.
Operating income was $34.0 million for the nine month period, up $1.3 million from the same period last year. Adjusted EBITDA was $94.5 million for the nine month period, down $4.4 million from the same period last year. Net cash provided by operating activities for the nine month period was $47.6 million, down $2.5 million compared to the same period last year. The Company's free cash flow for nine month period was breakeven, up $18.0 million from the same period last year.
Fiscal 2010 Outlook
The Company reconfirms its June 15, 2009 estimated fiscal year guidance ranges for revenues ($510.0 million to $530.0 million), free cash flow ($0.0 million to $6.0 million), and capital expenditures ($48.0 million to $54.0 million); and reconfirms its September 2, 2009 estimated fiscal year guidance range for Adjusted EBITDA* ($120.0 million to $126.0 million).
*Non-GAAP Financial Measures
In addition to disclosing financial results prepared in accordance with Generally Accepted Accounting Principles (GAAP), we also disclose earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for accretion, depletion of landfill operating lease obligations, severance and reorganization charges, goodwill impairment, environmental remediation charge, and development project charges (Adjusted EBITDA) and free cash flow, which are non-GAAP measures. In the future we may modify items considered in defining free cash flow and adjusted EBITDA if we believe it will help the understanding of our financial performance.
These measures are provided because we understand that certain investors use this information when analyzing the financial position of companies in the solid waste industry, including us. Historically, these measures have been key in comparing the operating efficiency of publicly traded companies in the solid waste industry, and assist investors in measuring our ability to meet capital expenditures, payments on landfill operating lease contracts, and working capital requirements. For these reasons we utilize these non-GAAP metrics to measure our performance at all levels. Free cash flow, EBITDA and Adjusted EBITDA are not intended to replace "Net Cash Provided by Operating Activities," which is the most comparable GAAP financial measure. Moreover, these measures do not necessarily indicate whether cash flow will be sufficient for such items as capital expenditures, payments on landfill operating lease contracts, or working capital, 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.
For further information, contact Ned Coletta, director of finance and investor relations at (802) 772-2239, or visit the Company's website at www.casella.com.
The Company will host a conference call to discuss these results on Wednesday, March 3, 2010 at 10:00 a.m. ET. Individuals interested in participating in the call should dial (877) 548-9590 at least 10 minutes before start time. 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 (706) 645-9291 or (800) 642-1687, until 11:59 p.m. ET on Wednesday, March 10, 2010.
Safe Harbor Statement
Certain matters discussed in this press release are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by the context of the statements, including words such as the Company "believes," "expects," "anticipates," "plans," "may," "will," "would," "intends," "estimates" and other similar expressions, whether in the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management's beliefs and assumptions. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in the forward-looking statements made. Such forward-looking statements, and all phases of our operations, involve a number of risks and uncertainties, any one or more of which could cause actual results to differ materially from those described in our forward-looking statements. Such risks and uncertainties include or relate to, among other things: we may be unable to reduce costs or increase revenues sufficiently to achieve estimated Adjusted EBITDA and other targets; landfill operations and permit status may be affected by factors outside our control; we may be required to incur capital expenditures in excess of our estimates; fluctuations in the commodity pricing of our recyclables may make it more difficult for us to predict our results of operations or meet our estimates; and we may incur environmental charges or asset impairments in the future. There are a number of other important risks and uncertainties that could cause our actual results to differ materially from those indicated by such forward-looking statements. These additional risks and uncertainties include, without limitation, those detailed in Item 1A, "Risk Factors" in our Annual Report on Form 10-K/A for the year ended April 30, 2009. We undertake 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.
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands, except amounts per share)
Three Months Ended Nine Months Ended
-------------------- --------------------
January January January January
31, 31, 31, 31,
2009 2010 2009 2010
--------- --------- --------- ---------
Revenues $ 120,945 $ 126,056 $ 434,673 $ 391,607
Operating expenses:
Cost of operations 85,254 84,764 292,829 258,690
General and administration 13,885 15,104 50,463 46,084
Depreciation and amortization 16,995 15,016 55,896 52,817
Environmental remediation
charge 2,823 - 2,823 -
Development project charge (20) - (20) -
--------- --------- --------- ---------
118,937 114,884 401,991 357,591
--------- --------- --------- ---------
Operating income 2,008 11,172 32,682 34,016
Other expense/(income), net:
Interest expense, net 9,595 14,863 29,822 39,654
Loss on debt modification - - - 511
Loss (income) from equity
method investments (263) (73) 1,911 1,305
Other income (396) (195) (549) (487)
--------- --------- --------- ---------
8,936 14,595 31,184 40,983
--------- --------- --------- ---------
(Loss) income from continuing
operations before income taxes
and discontinued operations (6,928) (3,423) 1,498 (6,967)
Provision (benefit) for income
taxes (3,174) 1,179 1,489 2,231
--------- --------- --------- ---------
(Loss) income from continuing
operations before discontinued
operations (3,754) (4,602) 9 (9,198)
Discontinued Operations:
Income (loss) from
discontinued operations, net
of income taxes (1) (63) (13) 396 213
Income on disposal of
discontinued operations, net
of income taxes (1) - 239 20 280
--------- --------- --------- ---------
Net (loss) income available to
common stockholders $ (3,817) $ (4,376) $ 425 $ (8,705)
========= ========= ========= =========
Common stock and common stock
equivalent shares outstanding,
assuming full dilution 25,606 25,844 25,632 25,755
========= ========= ========= =========
Net (loss) income per common
share $ (0.15) $ (0.17) $ 0.02 $ (0.34)
========= ========= ========= =========
Adjusted EBITDA (2) $ 24,153 $ 28,967 $ 98,858 $ 94,515
========= ========= ========= =========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands)
April 30, January 31,
ASSETS 2009 2010
--------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 1,838 $ 2,171
Restricted cash 508 76
Accounts receivable - trade, net of allowance for
doubtful accounts 51,296 56,676
Other current assets 23,093 21,092
--------- ----------
Total current assets 76,735 80,015
Property, plant and equipment, net of accumulated
depreciation 490,360 482,567
Goodwill 125,709 125,709
Intangible assets, net 2,635 2,433
Restricted cash 127 220
Investments in unconsolidated entities 41,798 42,405
Other non-current assets 13,598 19,728
--------- ----------
Total assets $ 750,962 $ 753,077
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital
leases $ 1,718 $ 1,888
Current maturities of financing lease obligations 1,344 1,422
Accounts payable 34,623 31,401
Other accrued liabilities 39,350 45,852
--------- ----------
Total current liabilities 77,035 80,563
Long-term debt and capital leases, less current
maturities 547,145 559,178
Financing lease obligations, less current maturities 12,281 11,205
Other long-term liabilities 48,191 47,341
Stockholders' equity 66,310 54,790
--------- ----------
Total liabilities and stockholders' equity $ 750,962 $ 753,077
========= ==========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
Nine Months Ended
------------------------
January 31, January 31,
2009 2010
----------- -----------
Cash Flows from Operating Activities:
Net (loss) income $ 425 $ (8,705)
Income from discontinued operations, net (396) (213)
Income on disposal of discontinued operations, net (20) (280)
Adjustments to reconcile net (loss) income
to net cash provided by operating activities -
Gain on sale of equipment (274) (1,087)
Depreciation and amortization 55,896 52,817
Depletion of landfill operating lease
obligations 5,018 4,936
Interest accretion on landfill and
environmental remediation liabilities 2,414 2,668
Environmental remediation charge 2,823 -
Income from assets under contractual obligation (25) (81)
Amortization of premium on senior notes (501) (540)
Amortization of discount on term loan and
second lien notes - 1,141
Loss from equity method investments 1,911 1,305
Loss on debt modification - 511
Stock-based compensation 1,383 1,727
Excess tax benefit on the exercise of stock
options (157) -
Deferred income taxes 1,494 2,380
Changes in assets and liabilities, net of
effects of acquisitions and divestitures (19,842) (8,963)
----------- -----------
50,140 56,814
----------- -----------
Net Cash Provided by Operating Activities 50,149 47,616
----------- -----------
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired (2,196) -
Additions to property, plant and equipment
- growth (10,165) (2,973)
- maintenance (39,415) (36,346)
Payments on landfill operating lease
obligations (4,401) (7,803)
Proceeds from divestitures 670 -
Other (1,554) 2,843
----------- -----------
Net Cash Used In Investing Activities (57,061) (44,279)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 105,400 450,644
Principal payments on long-term debt (100,559) (440,444)
Payment of financing costs - (14,072)
Proceeds from exercise of stock options 1,462 260
Excess tax benefit on the exercise of stock
options 157 -
----------- -----------
Net Cash (Used in) Provided by Financing
Activities 6,460 (3,612)
----------- -----------
Cash Provided by Discontinued Operations 620 608
----------- -----------
Net increase in cash and cash equivalents 168 333
Cash and cash equivalents, beginning of period 2,814 1,838
----------- -----------
Cash and cash equivalents, end of period $ 2,982 $ 2,171
=========== ===========
Supplemental Disclosures:
Cash interest $ 25,982 $ 31,775
Cash income taxes, net of refunds $ 361 $ 345
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
(In thousands)
Note 1: The Company completed the divestiture of its FCR Greenville
operation in the three months ended July 31, 2008 for cash proceeds of
$670. The company recorded a loss on disposal of discontinued operations
(net of tax) of $34 in the nine months ended January 31, 2009.
The Company completed the divestiture of its FCR Great Northern
Recycling Canadian operation in the three months ended January 31, 2010 for
a settlement amount of $400 in cash. The Company had previously accounted
for this transaction as an asset under contractual obligation. This
resulted in a gain on disposal of discontinued operations (net of tax)
amounting to $0, $239, $54 and $280 for the three and nine months ended
January 31, 2009 and 2010.
The Company's contract with its FCR Cape May operation expired in
the quarter ended January 31, 2010. Accordingly, this operation has been
treated as a discontinued operation.
The operating results of these operations for the three and nine
months ended January 31, 2009 and 2010 have been reclassified from
continuing to discontinued operations in the the Company's consolidated
financial statements. Revenues attributable to discontinued operations for
the three and nine months ended January 31, 2009 and 2010 was $207, $274,
$2,202 and $1,557, respectively. Income (loss) before income taxes
attributable to discontinued operations for the three and nine months ended
January 31, 2009 and 2010 was ($107), ($22), $668 and $356, respectively.
Note 2: Non - GAAP Financial Measures
In addition to disclosing financial results prepared in accordance with
Generally Accepted Accounting Principles (GAAP), we also disclose earnings
before interest, taxes, depreciation and amortization (EBITDA), adjusted
for accretion, depletion of landfill operating lease obligations, severance
and reorganization charges, goodwill impairment charge, environmental
remediation charge as well as development project charges (Adjusted EBITDA)
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
expenditures, payments on landfill operating lease contracts and working
capital requirements. For these reasons, we utilize these non-GAAP metrics
to measure our performance at all levels. EBITDA, Adjusted EBITDA and Free
Cash Flow are not intended to replace "Net Cash Provided by Operating
Activities", which is the most comparable GAAP financial measure. Moreover,
these measures do not necessarily indicate whether cash flow will be
sufficient for such items as working capital, payments on landfill
operating lease contracts 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.
Following is a reconciliation of Adjusted EBITDA and EBITDA to Net Cash
Provided by Operating Activities:
Three Months Ended Nine Months Ended
-------------------- --------------------
January January January January
31, 31, 31, 31,
2009 2010 2009 2010
--------- --------- --------- ---------
Net Cash Provided by Operating
Activities $ 11,442 $ 7,503 $ 50,149 $ 47,616
Changes in assets and
liabilities, net of effects of
acquisitions and divestitures 4,079 7,844 19,842 8,963
Stock-based compensation, net
of excess tax benefit on
exercise of options (429) (687) (1,226) (1,727)
Provision for income taxes, net
of deferred taxes (22) (278) (5) (149)
Net interest expense plus
amortization of
premium/discount 9,765 14,533 30,323 39,053
Severance and reorganization
charges 38 78 45 78
Development project charge (20) - (20) -
Gain on sale of equipment and
other (700) (26) (250) 681
--------- --------- --------- ---------
Adjusted EBITDA (2) 24,153 28,967 98,858 94,515
Interest accretion on landfill
and environmental remediation
liabilities (811) (930) (2,414) (2,668)
Depletion of landfill operating
lease obligations (1,498) (1,771) (5,018) (4,936)
Severance and reorganization
charges (38) (78) (45) (78)
--------- --------- --------- ---------
EBITDA (2) $ 21,806 $ 26,188 $ 91,381 $ 86,833
========= ========= ========= =========
Following is a reconciliation of Free Cash Flow to Net Cash Provided by
Operating Activities:
Three Months Ended Nine Months Ended
-------------------- --------------------
January January January January
31, 31, 31, 31,
2009 2010 2009 2010
--------- --------- --------- ---------
Net Cash Provided by Operating
Activities $ 11,442 $ 7,503 $ 50,149 $ 47,616
Capital expenditures (11,384) (6,919) (49,580) (39,319)
Payments on landfill operating
leases (2,576) (3,265) (4,401) (7,803)
Assets acquired through
financing leases (2,175) (404) (14,115) (404)
--------- --------- --------- ---------
Free Cash Flow $ (4,693) $ (3,085) $ (17,947) $ 90
========= ========= ========= =========
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 Nine Months Ended
January 31, January 31,
-------------------- --------------------
2009 2010 2009 2010
--------- --------- --------- ---------
Collection $ 50,748 $ 49,127 $ 169,466 $ 155,588
Disposal 23,181 23,992 89,232 82,367
Power/LFGTE 7,291 7,314 21,390 20,842
Processing and recycling 11,825 12,602 47,514 36,378
--------- --------- --------- ---------
Solid waste operations 93,045 93,035 327,602 295,175
Major accounts 8,750 9,414 26,369 28,901
FCR recycling 19,150 23,607 80,702 67,531
--------- --------- --------- ---------
Total revenues $ 120,945 $ 126,056 $ 434,673 $ 391,607
========= ========= ========= =========
Components of revenue growth for the three months ended January 31, 2010
compared to the three months ended January 31, 2009:
Solid waste operations (1) Core price 1.3%
Fuel recovery fee -1.0%
Volume -0.2%
Commodity price and
volume -0.1%
---------
Total growth - Solid waste operations 0.0%
=========
FCR operations (1) Price 24.6%
Volume -1.3%
---------
Total growth - FCR operations 23.3%
=========
Acquisitions 0.0%
Total revenue growth (2) 4.2%
(1) - Calculated as a percentage of segment revenues.
(2) - Calculated as a percentage of total revenues.
Solid Waste Internalization Rates by Region (1):
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------- --------------------
2009 2010 2009 2010
--------- --------- --------- ---------
Eastern region 53.5% 61.0% 67.6% 52.2%
Central region 81.4% 78.7% 79.3% 77.5%
Western region 62.7% 65.1% 65.8% 68.4%
Solid waste internalization 64.9% 66.8% 64.0% 65.0%
(1) In the quarter ended July 31, 2009, the Company revised its
internalization rate calulation to include third party waste received at
its transfer facilities and disposed at its own landfills. The prior year
internalization rates have been revised accordingly.
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA TABLES
(Unaudited)
(In thousands)
GreenFiber Financial Statistics - as reported (1):
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------- --------------------
2009 2010 2009 2010
--------- --------- --------- ---------
Revenues $ 36,424 $ 32,528 $ 102,153 $ 82,545
Net (loss) income 525 146 (3,822) (2,610)
Cash flow from operations 10,863 (749) 9,391 5,241
Net working capital changes 7,713 (3,719) 4,693 (1,092)
Adjusted EBITDA $ 3,150 $ 2,970 $ 4,698 $ 6,333
As a percentage of revenue:
Net loss 1.4% 0.4% -3.7% -3.2%
Adjusted EBITDA 8.6% 9.1% 4.6% 7.7%
(1) The Company holds 50% interest in US Green Fiber, LLC ("GreenFiber"),
a joint venture that manufactures, markets and sells cellulose insulation
made from recycled fiber.
Components of Growth and Maintenance Capital Expenditures (1):
Three Months Nine Months
Ended January 31, Ended January 31,
----------------- -----------------
2009 2010 2009 2010
-------- -------- -------- --------
Growth Capital Expenditures:
Landfill Development $ - $ - $ 6,642 $ 1,026
MRF Equipment Upgrades 856 - 1,310 -
Other 1,078 330 2,213 1,947
-------- -------- -------- --------
Total Growth Capital Expenditures 1,934 330 10,165 2,973
-------- -------- -------- --------
Maintenance Capital Expenditures:
Vehicles, Machinery / Equipment and
Containers 3,887 1,361 12,945 9,795
Landfill Construction & Equipment 4,518 4,179 22,724 23,130
Facilities 635 823 2,290 2,722
Other 410 226 1,456 699
-------- -------- -------- --------
Total Maintenance Capital Expenditures 9,450 6,589 39,415 36,346
-------- -------- -------- --------
Total Capital Expenditures $ 11,384 $ 6,919 $ 49,580 $ 39,319
======== ======== ======== ========
(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. 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:
Ned Coletta
director of finance and investor relations
(802) 772-2239
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