Date: August 29, 2011
Source: Casella Waste Systems, Inc.
Highlights for the quarter included:
For the quarter ended
The company's net loss available to common shareholders was
"While much effort was devoted during the last year to divesting the non-core
assets and refinancing the balance sheet, we also undertook the challenge of
improving how we do business on a daily basis," said
"We have made excellent progress, and our improved collection pricing during the first quarter clearly demonstrates that these efforts are paying off," Casella said. "We have worked to move pricing from an annual event to a core process of our divisional management teams. Our teams are now effectively using our customer profitability tool to better understand the profitability of each individual customer, and more importantly, to intelligently manage yield in their markets. As a result, changes in collection pricing improved from slightly negative in January to positive 2.8 percent in July."
Fiscal 2012 Outlook
The company confirmed its fiscal year guidance in the following categories:
*Non-GAAP Financial Measures
In addition to disclosing financial results prepared in accordance with Generally Accepted Accounting Principles (GAAP), the company also discloses earnings before interest, taxes, depreciation and amortization, adjusted for accretion, depletion of landfill operating lease obligations, gain on sale of assets, as well as legal settlement charge (Adjusted EBITDA) which is a non-GAAP measure. The company also discloses Free Cash Flow, which is defined as net cash provided by operating activities, less capital expenditures, less payments on landfill operating leases, less assets acquired through financing leases, plus proceeds from the sales of assets and property and equipment, which is a non-GAAP measure. Adjusted EBITDA is reconciled to net income (loss), while Free Cash Flow is reconciled to Net Cash Provided by Operating Activities.
The company presents Adjusted EBITDA and Free Cash Flow 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 our results. Management uses these non-GAAP measures to further understand our "core operating performance." The company believes its "core operating performance" represents its on-going performance in the ordinary course of operations. The company believes that providing Adjusted EBITDA and Free Cash Flow to investors, in addition to corresponding income statement and cash flow statement measures, provides investors with 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 may look in the future. The company further believes that providing this information allows its investors greater transparency and a better understanding of its core financial performance. In addition, the instruments governing the company's indebtedness use EBITDA (with additional adjustments) to measure its compliance with covenants such as interest coverage, leverage and debt incurrence.
Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP in the U.S. Adjusted EBITDA and Free Cash Flow should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP in the U.S., and may be different from Adjusted EBITDA or Free Cash Flow presented by other companies.
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Conference call to discuss quarter
The company will host a conference call to discuss these
results on
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 "believe," "expect," "anticipate," "plan," "may," "will,"
"would," "intend," "estimate," "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 we operate and management's beliefs and assumptions. We
cannot guarantee that we actually will achieve the plans, intentions, expectations
or guidance 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: the damage to the
regional infrastructure caused by Hurricane Irene may impact our ability to
service customers; current economic conditions that have adversely affected
and may continue to adversely affect our revenues and our operating margin;
we 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 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 Form 10-K for the year ended
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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except amounts per share)
Three Months Ended
----------------------
July 31, July 31,
2011 2010
---------- ----------
Revenues $ 127,193 $ 121,992
Operating expenses:
Cost of operations 85,224 81,339
General and administration 16,207 15,916
Depreciation and amortization 14,506 15,584
Legal settlement 1,000 -
Gain on sale of assets - (3,502)
---------- ----------
116,937 109,337
---------- ----------
Operating income 10,256 12,655
Other expense/(income), net:
Interest expense, net 11,151 11,764
Loss from equity method investment 2,257 2,132
Other income (105) (94)
---------- ----------
13,303 13,802
---------- ----------
Loss from continuing operations before income taxes
and discontinued operations (3,047) (1,147)
Provision for income taxes 661 779
---------- ----------
Loss from continuing operations before discontinued
operations (3,708) (1,926)
Discontinued operations:
Loss from discontinued operations, net of income
taxes (1) - (925)
Gain (loss) on disposal of discontinued
operations, net of income taxes (1) 646 (51)
---------- ----------
Net loss applicable to common stockholders $ (3,062) $ (2,902)
========== ==========
Common stock and common stock equivalent shares
outstanding, assuming full dilution 26,564 25,905
========== ==========
Net loss per common share $ (0.12) $ (0.11)
========== ==========
Adjusted EBITDA (2) $ 28,661 $ 27,774
========== ==========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
July 31, April 30,
ASSETS 2011 2011
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 2,904 $ 1,817
Restricted cash 76 76
Accounts receivable - trade, net of allowance for
doubtful accounts 62,461 54,914
Other current assets 12,584 15,598
----------- -----------
Total current assets 78,025 72,405
Property, plant and equipment, net of accumulated
depreciation 454,789 453,361
Goodwill 101,329 101,204
Intangible assets, net 2,619 2,455
Restricted assets 329 334
Investments in unconsolidated entities 36,478 38,263
Other non-current assets 21,303 22,559
----------- -----------
Total assets $ 694,872 $ 690,581
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital
leases $ 1,272 $ 1,217
Current maturities of financing lease obligations 321 316
Accounts payable 45,063 42,499
Other accrued liabilities 40,057 39,889
----------- -----------
Total current liabilities 86,713 83,921
Long-term debt and capital leases, less current
maturities 465,731 461,418
Financing lease obligations, less current maturities 2,074 2,156
Other long-term liabilities 48,542 49,099
Stockholders' equity 91,812 93,987
----------- -----------
Total liabilities and stockholders' equity $ 694,872 $ 690,581
=========== ===========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
----------------------
July 31, July 31,
2011 2010
---------- ----------
Cash Flows from Operating Activities:
Net loss $ (3,062) $ (2,902)
Loss from discontinued operations, net - 925
(Gain) loss on disposal of discontinued operations,
net (646) 51
Adjustments to reconcile net loss to net cash
provided by operating activities -
Gain on sale of assets - (3,502)
Gain on sale of equipment (192) (153)
Depreciation and amortization 14,506 15,584
Depletion of landfill operating lease obligations 2,030 2,192
Interest accretion on landfill and environmental
remediation liabilities 869 845
Amortization of premium on senior subordinated
notes - (191)
Amortization of discount on term loan and second
lien notes 230 222
Loss from equity method investment 2,257 2,132
Stock-based compensation 649 567
Excess tax benefit on the vesting of share based
awards (246) -
Deferred income taxes 939 659
Changes in assets and liabilities, net of effects
of acquisitions and divestitures (3,394) (5,066)
---------- ----------
17,648 13,289
---------- ----------
Net Cash Provided by Operating Activities 13,940 11,363
---------- ----------
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired (715) -
Additions to property, plant and equipment
- growth (1,143) (882)
- maintenance (13,725) (13,985)
Payments on landfill operating lease contracts (1,858) (789)
Proceeds from sale of assets - 7,533
Proceeds from sale of equipment 199 308
Investment in unconsolidated entities (650) -
---------- ----------
Net Cash Used In Investing Activities (17,892) (7,815)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 48,500 32,900
Principal payments on long-term debt (44,439) (37,230)
Payment of financing costs (90) (215)
Proceeds from exercise of share based awards 176 160
Excess tax benefit on the vesting of restricted
stock 246 -
---------- ----------
Net Cash Provided By (Used In) Financing
Activities 4,393 (4,385)
---------- ----------
Cash Provided By Discontinued Operations 646 1,097
---------- ----------
Net increase in cash and cash equivalents 1,087 260
Cash and cash equivalents, beginning of period 1,817 2,035
---------- ----------
Cash and cash equivalents, end of period $ 2,904 $ 2,295
========== ==========
Supplemental Disclosures:
Cash interest $ 11,189 $ 10,923
Cash income taxes, net of refunds $ 2,159 $ 65
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 1: Discontinued Operations
On January 23, 2011 , we entered into a purchase and sale agreement and
related agreements to sell non-integrated recycling assets and select
intellectual property assets to a new company formed by Pegasus Capital
Advisors, L.P. and Intersection LLC (the "Purchaser") for $130,400 in gross
proceeds. Pursuant to these agreements, we divested non-integrated recycling
assets located outside our core operating region of New York , Massachusetts ,
Vermont , New Hampshire , Maine and northern Pennsylvania , including 17 MRFs,
one transfer station and certain related intellectual property assets.
Following the transaction, we retained four integrated MRFs located in our
core operating regions. As a part of the disposition, we also entered into a
ten year commodities marketing agreement with the Purchaser to market 100%
of the tonnage from three of our remaining integrated MRFs.
We completed the transaction on March 1, 2011 for $134,195 in gross cash
proceeds. This included an estimated $3,795 working capital and other
purchase price adjustment, which was subject to further adjustment, as
defined in the purchase and sale agreement. The final working capital
adjustment, along with additional legal expenses related to the transaction,
of $646 (net of tax) was recorded to gain (loss) on disposal of discontinued
operations in the quarter ended July 31, 2011 .
During the third quarter of fiscal year 2011, we also completed the sale of
the assets of the Trilogy Glass business for cash proceeds of $1,840 . This
operation has been treated as a discontinued operation.
The operating results of these operations, including those related to prior
years, have been reclassified from continuing to discontinued operations in
the accompanying condensed consolidated financial statements. Revenues and
loss before income tax provision attributable to discontinued operations for
the three months ended July 31, 2011 and 2010 were $0 , $17,849 , $0 and
($925) , respectively.
We allocate interest expense to discontinued operations. We have also
eliminated certain immaterial inter-company activity associated with
discontinued operations.
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, adjusted for
accretion, depletion of landfill operating lease obligations, gain on sale
of assets, as well as a legal settlement charge (Adjusted EBITDA) which is a
non-GAAP measure. We also disclose Free Cash Flow, which is defined as net
cash provided by operating activities, less capital expenditures, less
payments on landfill operating leases, less assets acquired through
financing leases, plus proceeds from the sales of assets and property and
equipment, which is a non-GAAP measure. Adjusted EBITDA is reconciled to net
income (loss), while Free Cash Flow is reconciled to Net Cash Provided by
Operating Activities.
We present Adjusted EBITDA and Free Cash Flow because we consider them
important supplemental measures of our performance and believe they are
frequently used by securities analysts, investors and other interested
parties in the evaluation of our results. Management uses these non-GAAP
measures to further understand our "core operating performance." We believe
our "core operating performance" represents our on-going performance in the
ordinary course of operations. We believe that providing Adjusted EBITDA and
Free Cash Flow to investors, in addition to corresponding income statement
and cash flow statement measures, provides investors the benefit of viewing
our 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 may look in the future. We further believe
that providing this information allows our investors greater transparency
and a better understanding of our core financial performance. In addition,
the instruments governing our indebtedness use EBITDA (with additional
adjustments) to measure our compliance with covenants such as interest
coverage, leverage and debt incurrence.
Non-GAAP financial measures are not in accordance with, or an alternative
for, GAAP in the U.S. Adjusted EBITDA and Free Cash Flow should not be
considered in isolation from or as a substitute for financial information
presented in accordance with GAAP in the U.S., and may be different from
Adjusted EBITDA or Free Cash Flow presented by other companies.
Following is a reconciliation of Adjusted EBITDA to Net Loss:
Three Months Ended
----------------------
July 31, July 31,
2011 2010
---------- ----------
Net Loss Applicable to Common Stockholders $ (3,062) $ (2,902)
Loss from discontinued operations, net - 925
(Gain) loss on disposal of discontinued
operations, net (646) 51
Provision for income taxes 661 779
Interest expense, net 11,151 11,764
Depreciation and amortization 14,506 15,584
Other expense, net 2,152 2,038
Legal settlement 1,000 -
Gain on sale of assets - (3,502)
Depletion of landfill operating lease obligations 2,030 2,192
Interest accretion on landfill and environmental
remediation liabilities 869 845
---------- ----------
Adjusted EBITDA (2) $ 28,661 $ 27,774
========== ==========
Following is a reconciliation of Free Cash Flow to
Net Cash Provided by Operating Activities:
Three Months Ended
----------------------
July 31, July 31,
2011 2010
---------- ----------
Net Cash Provided by Operating Activities $ 13,940 $ 11,363
Capital expenditures (14,868) (14,867)
Payments on landfill operating lease contracts (1,858) (789)
Proceeds from sale of assets and property and
equipment 199 7,841
---------- ----------
Free Cash Flow (2) $ (2,587) $ 3,548
========== ==========
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA TABLES
(Unaudited)
(In thousands)
Amounts of our total revenues attributable to services provided for the
three months ended July 31, 2011 and 2010 are as follows:
Three Months Ended July 31,
----------------------------------------------
% of Total % of Total
2011 Revenue 2010 Revenue
----------- ---------- ----------- ----------
Collection $ 53,626 42.2% $ 52,501 43.0%
Disposal 29,318 23.1% 29,554 24.3%
Power/LFGTE 5,897 4.6% 5,714 4.7%
Processing and recycling 14,738 11.6% 13,247 10.9%
----------- ---------- ----------- ----------
Solid waste operations 103,579 81.5% 101,016 82.9%
Major accounts 10,711 8.4% 10,402 8.4%
Recycling 12,903 10.1% 10,574 8.7%
----------- ---------- ----------- ----------
Total revenues $ 127,193 100.0% $ 121,992 100.0%
=========== ========== =========== ==========
Components of revenue growth for the three months ended July 31, 2011
compared to the three months ended July 31, 2010 are as follows:
% of % of Solid
Related Waste % of Total
Amount Business Operations Company
---------- ---------- ---------- ----------
Solid Waste Operations:
Collection $ 1,238 2.4% 1.2% 1.0%
Disposal 119 0.4% 0.1% 0.1%
Power/LFGTE 59 1.0% 0.1% 0.0%
Processing and recycling 119 0.9% 0.1% 0.1%
---------- ---------- ----------
Solid Waste Yield 1,535 1.5% 1.2%
Volume 203 0.2% 0.2%
Commodity price & volume 968 1.0% 0.8%
Acquisitions & divestitures (166) -0.2% -0.1%
Closed landfill 23 0.0% 0.0%
---------- ---------- ----------
Total Solid Waste 2,563 2.5% 2.1%
---------- ========== ==========
Major Accounts 310 0.3%
---------- ----------
% of
Recycling
Recycling Operations: Operations
----------
Commodity price 3,586 33.9% 2.9%
Commodity volume (1,257) -11.9% -1.0%
---------- ---------- ----------
Total Recycling 2,329 22.0% 1.9%
---------- ========== ==========
Total Company $ 5,202 4.3%
========== ==========
Solid Waste Internalization Rates by
Region:
Three Months Ended July 31,
----------------------------
2011 2010
------------- -------------
Eastern region 54.1% 50.9%
Western region 76.1% 76.3%
Solid waste internalization 65.6% 64.1%
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA TABLES
(Unaudited)
(In thousands)
GreenFiber Financial Statistics - as reported (1):
Three Months Ended July 31,
----------------------------
2011 2010
------------- -------------
Revenues $ 16,016 $ 17,438
Net loss (4,515) (4,264)
Cash flow (used in) from operations (1,278) 375
Net working capital changes 906 2,163
Adjusted EBITDA $ (2,184) $ (1,788)
As a percentage of revenues:
Net loss -28.2% -24.5%
Adjusted EBITDA -13.6% -10.3%
(1) We hold a 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 Ended July 31,
---------------------------
2011 2010
------------- -------------
Growth capital expenditures:
Landfill development $ 41 $ 227
Landfill gas to energy project 367 -
MRF equipment upgrades 509 -
Other 226 655
------------- -------------
Total Growth Capital Expenditures 1,143 882
------------- -------------
Maintenance capital expenditures:
Vehicles, machinery / equipment and containers 6,440 6,402
Landfill construction & equipment 6,997 7,052
Facilities 175 172
Other 113 359
------------- -------------
Total Maintenance Capital Expenditures 13,725 13,985
------------- -------------
Total Capital Expenditures $ 14,868 $ 14,867
============= =============
(1) Our 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, 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
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:
Vice President of Finance and Investor Relations
(802) 772-2239
Chief Financial Officer
(802) 772-2241
www.casella.com.
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