CASELLA WASTE SYSTEMS, INC. ANNOUNCES THIRD QUARTER 2021 RESULTS; AND RAISES FISCAL YEAR 2021 GUIDANCE - Form 8-K
October 28, 2021 at 04:51 pm EDT
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CASELLA WASTE SYSTEMS, INC. ANNOUNCES THIRD QUARTER 2021 RESULTS; AND RAISES FISCAL YEAR 2021 GUIDANCE
-Third quarter financial results exceeded expectations, with solid operating execution, cost efficiencies and strong cash flow growth.
-The Company raised its revenue, net income, Adjusted EBITDA, net cash provided by operating activities, and Adjusted Free Cash Flow guidance ranges for the fiscal year ending December 31, 2021 ("fiscal year 2021").
RUTLAND, VERMONT (October 28, 2021) - Casella Waste Systems, Inc. (NASDAQ: CWST), a regional solid waste, recycling and resource management services company, today reported its financial results for the three and nine month periods ended September 30, 2021.
Highlights for the Three Months and Year-to-Date Ended September 30, 2021:
•Revenues were $242.0 million for the quarter, up $39.3 million, or up 19.4%, from the same period in 2020.
•Overall solid waste pricing for the quarter was up 4.1%, driven by collection pricing, up 4.6%, and landfill pricing, up 3.7%, from the same period in 2020.
•Net income was $15.9 million for the quarter, up $0.8 million, or up 4.9%, from the same period in 2020. Provision for income taxes was $6.6 million for the quarter, up $6.2 million from the same period in 2020.
•Adjusted EBITDA, a non-GAAP measure, was $61.2 million for the quarter, up $10.0 million, or up 19.4%, from the same period in 2020.
•Net cash provided by operating activities was $134.1 million for the year-to-date period, up $22.2 million, or up 19.8%, from the same period in 2020.
•Adjusted Free Cash Flow, a non-GAAP measure, was $82.3 million for the year-to-date period, up $22.3 million, or up 37.2%, from the same period in 2020.
•Acquired nine businesses with approximately $86 million of annualized revenues year-to-date.
"We had another strong operational quarter, as we continued to execute well against our long-term strategic plan," said John W. Casella, Chairman and CEO of Casella Waste Systems, Inc. "As a result, we increased revenues by 19.4% and Adjusted EBITDA by 19.4% year-over-year in the quarter and we increased year-to-date Adjusted Free Cash Flow by 37.2% year-over-year."
"These positive results are a testament to the hard work, adaptability and dedication of our team, our asset positioning in the disposal capacity constrained northeast market, and strong execution against our operating and cost efficiency programs," Casella said. "Our solid waste pricing continued to improve sequentially as we advanced 4.1% solid waste pricing during the third quarter, with strength in both collection and disposal lines-of-business. Solid waste volumes were up 2.8% year-over-year, with much of this growth driven by the continued rebound of disposal volumes, especially in the New York markets."
"Our team did a great job controlling costs while volumes continued to ramp back online during the quarter and certain cost categories experienced heightened inflationary pressure," Casella said. "Our investments in technology, including our route optimization program, continued automation of our fleet, and real-time data analytics helped to offset these inflationary cost increases."
"We continue to execute well against our long-term growth strategy and we have acquired nine businesses with approximately $86 million of annualized revenues year-to-date through October," Casella said. "We expect to recognize roughly $50 million of revenues in 2022 from the roll-over impact of acquisitions already completed in 2021."
"We are focused on acquiring well run businesses in strategic markets that will drive long-term growth, additional vertical integration and enhance operating synergies," Casella said. "Our acquisition pipeline remains robust, and we believe that there is continued opportunity to drive additional cash flow growth across our footprint through execution of our growth strategy."
For the quarter, revenues were $242.0 million, up $39.3 million, or up 19.4%, from the same period in 2020, with revenue growth mainly driven by: the roll-over impact from acquisitions; positive collection and disposal pricing; higher solid waste volumes; higher recycling commodity prices; higher resource solutions processing volumes; and higher resource
1
solutions non-processing revenues; partially offset by lower Sustainability Recycling Adjustment (SRA) fees as we share higher commodity prices with our customers.
Net income was $15.9 million for the quarter, or $0.31 per diluted common share, up $0.8 million, or up 4.9%, as compared to net income of $15.1 million, or $0.31 per diluted common share, for the same period in 2020. The quarter included $1.9 million of expense from acquisition activities and $0.3 million of legal and other expenses associated with the closure of our landfill in Southbridge, Massachusetts ("Southbridge Landfill"). The same quarter last year included $0.2 million of expense from acquisition activities and $2.6 million of legal and other expenses associated with the Southbridge Landfill closure.
Given the reversal of the tax valuation allowance in 2020, we expect an income statement tax provision at a rate of approximately 31% in fiscal year 2021. The income tax provision was $6.6 million in the quarter, up $6.2 million from the same period in 2020.
Adjusted Net Income, a non-GAAP measure, was $17.5 million for the quarter, or $0.34 Adjusted Diluted Earnings Per Common Share, a non-GAAP measure, up $0.3 million, or up 1.9%, as compared to Adjusted Net Income of $17.2 million, or $0.35 Adjusted Diluted Earnings Per Common Share, for the same period in 2020.
Operating income was $27.4 million for the quarter, up $6.8 million, or up 32.7%, from the same period in 2020. Adjusted Operating Income, a non-GAAP measure, was $29.6 million for the quarter, up $6.1 million, or up 26.2% from the same period in 2020. Adjusted EBITDA was $61.2 million for the quarter, up $10.0 million, or up 19.4%, from the same period in 2020.
For the year-to-date period, revenues were $647.4 million, up $73.0 million, or up 12.7%, from the same period in 2020. Net income was $32.0 million, or $0.62 per diluted common share, for the year-to-date period, as compared to net income of $28.2 million, or $0.58 per diluted common share, for the same period in 2020. Adjusted Net Income was $35.3 million, or $0.68 Adjusted Diluted Earnings Per Common Share, for the year-to-date period, as compared to Adjusted Net Income of $32.1 million, or $0.66 Adjusted Diluted Earnings Per Common Share, for the same period in 2020.
Operating income was $61.3 million for the year-to-date period, up $16.3 million from the same period in 2020.Adjusted Operating Income was $65.9 million for the year-to-date period, up $15.5 million from the same period in 2020. Adjusted EBITDA was $152.2 million for the year-to-date period, up $23.4 million from the same period in 2020.
Net cash provided by operating activities was $134.1 million for the year-to-date period, as compared to $111.9 million for the same period in 2020. Adjusted Free Cash Flow was $82.3 million for the year-to-date period, as compared to $60.0 million for the same period in 2020. Adjusted Free Cash Flow for the year-to-date period included the following adjustments: $4.5 million of landfill closure, site improvement and remediation expenditures associated with the Southbridge Landfill closure; $3.4 million of cash outlays related to acquisition activities; $10.2 million of capital expenditures associated with the expansion at our landfill in Coventry, Vermont ("Waste USA Landfill"); and $11.1 million of non-recurring capital expenditures primarily related to acquisitions.
Fiscal Year 2021 Outlook
"Given our strong execution during the third quarter, the expected contribution of acquisitions already completed this year and our increased visibility of economic trends, we are updating our fiscal year 2021 guidance ranges that were first announced in mid-February," Casella said. "These guidance ranges assume a stable economic environment continuing through the remainder of the year with only a modest further rebound in solid waste volumes."
The Company raised guidance for the third time in fiscal year 2021 by estimating results in the following ranges (as compared to the fiscal year 2021 guidance ranges as updated on July 29, 2021):
•Revenues between $870 million and $880 million (as compared to between $850 million and $860 million);
•Net income between $37 million and $41 million (as compared to between $35 million and $39 million);
•Adjusted EBITDA between $200 million and $204 million (as compared to between $195 million and $199 million);
•Net cash provided by operating activities between $162 million and $166 million (as compared to between $158 million and $162 million); and
•Adjusted Free Cash Flow between $85 million and $89 million (as compared to between $79 million and $83 million).
The updated guidance ranges include acquisitions already completed in fiscal year 2021, but do not include the impact from any acquisitions not yet completed.
Adjusted EBITDA and Adjusted Free Cash Flow related to fiscal year 2021 are described in the Reconciliation of Fiscal Year 2021 Outlook Non-GAAP Measures section of this press release. Net income and Net cash provided by operating
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activities are provided as the most directly comparable GAAP measures to Adjusted EBITDA and Adjusted Free Cash Flow, respectively, however these forward-looking estimates for fiscal year 2021 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, October 29, 2021 at 10:00 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 546 1439 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 546 1439).
About Casella Waste Systems, Inc.
Casella Waste Systems, Inc., headquartered in Rutland, Vermont, provides resource management expertise and services to residential, commercial, municipal and industrial customers, primarily in the areas of solid waste collection and disposal, transfer, recycling and organics 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.
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; anticipated impacts from future or completed acquisitions; and guidance for fiscal year 2021, 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, the following: the Company may be unable to adequately increase prices to offset increased costs and inflationary pressures; it is challenging to predict the duration and scope of the COVID-19 pandemic and its negative effect on the economy, our operations and financial results; the capping and closure of the Southbridge Landfill and the lawsuit relating to our landfill in Bethlehem New Hampshire 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 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; the Company's insurance coverage and self-insurance reserves may be inadequate to cover all of its significant risk exposures; 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; the Company may not be able to successfully integrate acquired businesses; 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 most recently filed Form 10-K and in other filings that the Company may make with the Securities and Exchange Commission in the future.
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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 Coletta
Chief Financial Officer
(802) 772-2239
Media:
Joseph Fusco
Vice President
(802) 772-2247
http://www.casella.com
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CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except for per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Revenues
$
241,969
$
202,667
$
647,375
$
574,344
Operating expenses:
Cost of operations
153,892
130,406
419,583
382,386
General and administration
30,993
25,014
87,336
74,240
Depreciation and amortization
27,491
23,799
74,510
67,281
Expense from acquisition activities
1,904
173
3,950
1,533
Southbridge Landfill closure charge
302
2,642
653
3,815
214,582
182,034
586,032
529,255
Operating income
27,387
20,633
61,343
45,089
Other expense (income):
Interest expense, net
5,103
5,299
15,737
16,666
Other income
(178)
(157)
(825)
(606)
Other expense, net
4,925
5,142
14,912
16,060
Income before income taxes
22,462
15,491
46,431
29,029
Provision for income taxes
6,601
374
14,476
840
Net income
$
15,861
$
15,117
$
31,955
$
28,189
Basic weighted average common shares outstanding
51,389
48,370
51,312
48,241
Basic earnings per common share
$
0.31
$
0.31
$
0.62
$
0.58
Diluted weighted average common shares outstanding
51,586
48,619
51,506
48,481
Diluted earnings per common share
$
0.31
$
0.31
$
0.62
$
0.58
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CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30,
2021
December 31,
2020
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
46,481
$
154,342
Accounts receivable, net of allowance for credit losses
90,500
74,198
Other current assets
30,178
18,714
Total current assets
167,159
247,254
Property, plant and equipment, net of accumulated depreciation and amortization
617,348
510,512
Operating lease right-of-use assets
96,712
95,310
Goodwill
227,929
194,901
Intangible assets, net of accumulated amortization
92,908
58,324
Restricted assets
1,948
1,848
Cost method investments
11,264
11,264
Deferred income taxes
46,777
61,163
Other non-current assets
18,352
13,322
Total assets
$
1,280,397
$
1,193,898
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of debt
$
16,751
$
9,240
Current operating lease liabilities
7,128
8,547
Accounts payable
69,516
49,198
Other accrued liabilities
84,974
64,223
Total current liabilities
178,369
131,208
Debt, less current portion
534,752
530,411
Operating lease liabilities, less current portion
59,001
60,979
Other long-term liabilities
100,324
109,158
Total stockholders' equity
407,951
362,142
Total liabilities and stockholders' equity
$
1,280,397
$
1,193,898
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CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
2021
2020
Cash Flows from Operating Activities:
Net income
$
31,955
$
28,189
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
74,510
67,281
Interest accretion on landfill and environmental remediation liabilities
5,915
5,324
Amortization of debt issuance costs
1,716
1,597
Stock-based compensation
8,712
5,345
Operating lease right-of-use assets expense
9,981
12,347
(Gain) loss on sale of property and equipment
(1)
254
Southbridge Landfill non-cash closure charge
112
2,077
Non-cash expense from acquisition activities
532
549
Deferred income taxes
12,974
1,514
Changes in assets and liabilities, net of effects of acquisitions and divestitures
(12,317)
(12,562)
Net cash provided by operating activities
134,089
111,915
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
(153,112)
(25,379)
Additions to property, plant and equipment
(81,577)
(77,271)
Proceeds from sale of property and equipment
593
430
Net cash used in investing activities
(234,096)
(102,220)
Cash Flows from Financing Activities:
Proceeds from debt borrowings
500
154,400
Principal payments on debt
(8,517)
(145,008)
Payments of debt issuance costs
-
(1,531)
Proceeds from the exercise of share based awards
163
100
Net cash (used in) provided by financing activities
(7,854)
7,961
Net (decrease) increase in cash and cash equivalents
(107,861)
17,656
Cash and cash equivalents, beginning of period
154,342
3,471
Cash and cash equivalents, end of period
$
46,481
$
21,127
Supplemental Disclosure of Cash Flow Information:
Cash interest payments
$
14,378
$
15,239
Cash income tax payments
$
597
$
(1,650)
Non-current assets obtained through long-term financing obligations
$
18,153
$
16,937
Right-of-use assets obtained in exchange for operating lease obligations
$
3,566
$
3,289
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CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
(Unaudited)
(In thousands)
Non-GAAP Performance Measures
In addition to disclosing financial results prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company also presents non-GAAP performance measures such as Adjusted EBITDA, Adjusted EBITDA as a percentage of revenues, Adjusted Operating Income, Adjusted Operating Income as a percentage of revenues, Adjusted Net Income and Adjusted Diluted Earnings Per Common Share that provide an understanding of operational performance because it considers them important supplemental measures of the Company's performance that are frequently used by securities analysts, investors and other interested parties in the evaluation of the Company's results. The Company also believes that identifying the impact of certain items as adjustments provides more transparency and comparability across periods. Management uses these non-GAAP performance measures to further understand its "core operating performance" and believes its "core operating performance" is helpful in understanding its ongoing performance in the ordinary course of operations. The Company believes that providing such non-GAAP performance measures to investors, in addition to corresponding income statement measures, affords investors the benefit of viewing the Company's 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 tables below set forth such performance measures on an adjusted basis to exclude such items:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Net income
$
15,861
$
15,117
$
31,955
$
28,189
Net income as a percentage of revenues
6.6
%
7.5
%
4.9
%
4.9
%
Provision for income taxes
6,601
374
14,476
840
Other income
(178)
(157)
(825)
(606)
Interest expense, net
5,103
5,299
15,737
16,666
Expense from acquisition activities (i)
1,904
173
3,950
1,533
Southbridge Landfill closure charge (ii)
302
2,642
653
3,815
Depreciation and amortization
27,491
23,799
74,510
67,281
Depletion of landfill operating lease obligations
2,199
2,243
5,781
5,711
Interest accretion on landfill and environmental remediation liabilities
1,953
1,782
5,915
5,324
Adjusted EBITDA
$
61,236
$
51,272
$
152,152
$
128,753
Adjusted EBITDA as a percentage of revenues
25.3
%
25.3
%
23.5
%
22.4
%
Depreciation and amortization
(27,491)
(23,799)
(74,510)
(67,281)
Depletion of landfill operating lease obligations
(2,199)
(2,243)
(5,781)
(5,711)
Interest accretion on landfill and environmental remediation liabilities
(1,953)
(1,782)
(5,915)
(5,324)
Adjusted Operating Income
$
29,593
$
23,448
$
65,946
$
50,437
Adjusted Operating Income as a percentage of revenues
12.2
%
11.6
%
10.2
%
8.8
%
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Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Net income
$
15,861
$
15,117
$
31,955
$
28,189
Expense from acquisition activities (i)
1,904
173
3,950
1,533
Southbridge Landfill closure charge (ii)
302
2,642
653
3,815
Tax effect (iii)
(568)
(766)
(1,296)
(1,456)
Adjusted Net Income
$
17,499
$
17,166
$
35,262
$
32,081
Diluted weighted average common shares outstanding
51,586
48,619
51,506
48,481
Diluted earnings per common share
$
0.31
$
0.31
$
0.62
$
0.58
Expense from acquisition activities (i)
0.03
-
0.08
0.03
Southbridge Landfill closure charge (ii)
0.01
0.06
0.01
0.08
Tax effect (iii)
(0.01)
(0.02)
(0.03)
(0.03)
Adjusted Diluted Earnings Per Common Share
$
0.34
$
0.35
$
0.68
$
0.66
(i)Expense from acquisition activities are primarily legal, consulting or other similar costs incurred during the period related to acquisition diligence, acquisition integration or select development projects as part of the Company's strategic growth initiative.
(ii)Southbridge Landfill closure charge are expenses related to the unplanned early closure of the Southbridge Landfill along with associated legal activities. The Company initiated the unplanned, premature closure of the Southbridge Landfill in the fiscal year ended December 31, 2017 due to the significant capital investment required to obtain expansion permits and for future development coupled with an uncertain regulatory environment. The unplanned closure of the Southbridge Landfill reduced the economic useful life of the assets from prior estimates by approximately ten years. The Company expects to incur certain costs through completion of the closure process.
(iii)Tax effect of the adjustments is an aggregate of the current and deferred tax impact of each adjustment, including the impact to the effective tax rate, current provision and deferred provision. The computation considers all relevant impacts of the adjustments, including available net operating loss carryforwards and the impact on the remaining valuation allowance.
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Non-GAAP Liquidity Measures
In addition to disclosing financial results prepared in accordance with GAAP, the Company also presents non-GAAP liquidity measures such as Adjusted Free Cash Flow, Bank Consolidated EBITDA, Consolidated Funded Debt, Net and Consolidated Net Leverage Ratio that provide an understanding of the Company's liquidity because it considers them important supplemental measures of its liquidity that are frequently used by securities analysts, investors and other interested parties in the evaluation of the Company's cash flow generation from its core operations that are then available to be deployed for strategic acquisitions, growth investments, development projects, unusual landfill closures, site improvement and remediation, and strengthening the Company's balance sheet through paying down debt. The Company also believes that identifying the impact of certain items as adjustments provides more transparency and comparability across periods. Management uses non-GAAP liquidity measures to understand the Company's cash flow provided by operating activities after certain expenditures along with its consolidated net leverage and believes that these measures demonstrate the Company's ability to execute on its strategic initiatives. The Company believes that providing such non-GAAP liquidity measures to investors, in addition to corresponding cash flow statement measures, affords investors the benefit of viewing the Company's liquidity using the same financial metrics that the management team uses in making many key decisions and understanding how the core business and cash flow generation has performed. The tables below, in some instances on an adjusted basis to exclude certain items, set forth such liquidity measures:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Net cash provided by operating activities
$
55,076
$
49,422
$
134,089
$
111,915
Capital expenditures
(25,508)
(25,701)
(81,577)
(77,271)
Proceeds from sale of property and equipment
190
230
593
430
Southbridge Landfill closure and Potsdam environmental remediation (i)
1,929
1,979
4,463
4,737
Cash outlays from acquisition activities (ii)
2,394
199
3,418
984
Post acquisition and development project capital expenditures (iii)
4,616
3,235
11,083
12,510
Waste USA Landfill phase VI capital expenditures (iv)
3,802
3,154
10,241
6,700
Adjusted Free Cash Flow
$
42,499
$
32,518
$
82,310
$
60,005
(i)Southbridge Landfill closure and Potsdam environmental remediation are cash outlays associated with the unplanned closure of the Southbridge Landfill and the Company's portion of costs associated with environmental remediation at Potsdam, which are added back when calculating Adjusted Free Cash Flow due to their non-recurring nature and the significance of the related cash flows. The Company initiated the unplanned closure of the Southbridge Landfill in the fiscal year ended December 31, 2017 and expects to incur cash outlays through completion of the closure and environmental remediation process. The Potsdam site was deemed a Superfund site in 2000 and is not associated with current operations.
(ii)Cash outlays from acquisition activities are cash outlays for transaction and integration costs relating to specific acquisition transactions and include legal, environmental, valuation and consulting as well as asset, workforce and system integration costs as part of the Company's strategic growth initiative.
(iii)Post acquisition and development project capital expenditures are (x) acquisition related capital expenditures that are necessary to optimize strategic synergies associated with integrating newly acquired operations as contemplated by the discounted cash flow return analysis conducted by management as part of the acquisition investment decision; and (y) non-routine development investments that are expected to provide long-term returns. Acquisition related capital expenditures include the following costs required to achieve initial operating synergies: trucks, equipment and machinery; and facilities, land, IT infrastructure or related upgrades to integrate operations.
(iv)Waste USA Landfill phase VI capital expenditures are capital expenditures related to Waste USA Landfill phase VI construction and development that are added back when calculating Adjusted Free Cash Flow due to the specific nature of this investment in the development of long-term infrastructure which is different from landfill construction investments in the normal course of operations. This investment at the Waste USA Landfill is unique because the Company is investing in long-term infrastructure over an estimated four year period that will not yield a positive economic benefit until 2023 and extending over approximately 20 years.
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Following is the Consolidated Net Leverage Ratio and the reconciliations of Consolidated Funded Debt, Net from debt and Bank Consolidated EBITDA from Net cash provided by operating activities:
Twelve Months Ended September 30, 2021
Covenant Requirement at September 30, 2021
Consolidated Net Leverage Ratio (i)
2.34
4.00
(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 debt, net of unencumbered cash and cash equivalents in excess of $2,000 and up to $50,000 ("Consolidated Funded Debt, Net", calculated at $514,075 as of September 30, 2021, or $558,556 of consolidated debt, less $44,481 of cash and cash equivalents in excess of $2,000 and up to $50,000 as of September 30, 2021), divided by consolidated EBITDA as defined by our credit agreement ("Bank Consolidated EBITDA"). Bank Consolidated EBITDA is based on operating results for the twelve months preceding the measurement date of September 30, 2021. A reconciliation of Bank Consolidated EBITDA from Net cash provided by operating activities is as follows:
Twelve Months Ended September 30, 2021
Net cash provided by operating activities
$
162,096
Changes in assets and liabilities, net of effects of acquisitions and divestitures
24,921
Loss on sale of property and equipment
(681)
Non-cash expense from acquisition activities
(537)
Southbridge Landfill non-cash closure charge
1,702
Operating lease right-of-use assets expense
(6,041)
Stock-based compensation
(11,586)
Interest expense, less amortization of debt issuance costs
19,142
Provision for income taxes, net of deferred income taxes
1,659
Adjustments as allowed by the credit agreement
28,847
Bank Consolidated EBITDA
$
219,522
Non-GAAP financial measures are not in accordance with or an alternative for GAAP. Adjusted EBITDA, Adjusted EBITDA as a percentage of revenues, Adjusted Operating Income, Adjusted Operating Income as a percentage of revenues, Adjusted Net Income, Adjusted Diluted Earnings Per Common Share, Adjusted Free Cash Flow, Bank Consolidated EBITDA, Consolidated Funded Debt, Net and 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 EBITDA as a percentage of revenues, Adjusted Operating Income, Adjusted Operating Income as a percentage of revenues, Adjusted Net Income, Adjusted Diluted Earnings Per Common Share, Adjusted Free Cash Flow, Bank Consolidated EBITDA, Consolidated Funded Debt, Net and Consolidated Net Leverage Ratio presented by other companies.
11
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF FISCAL YEAR 2021 OUTLOOK NON-GAAP MEASURES
(Unaudited)
(In thousands)
Following is a reconciliation of the Company's estimated Adjusted EBITDA (i) from estimated Net income for fiscal year 2021:
(Estimated) Fiscal Year Ending December 31, 2021
Net income
$37,000 - $41,000
Provision for income taxes
18,000
Other income
(1,000)
Interest expense, net
22,000
Expense from acquisition activities
4,000
Southbridge Landfill closure charge
1,000
Depreciation and amortization
104,000
Depletion of landfill operating lease obligations
7,500
Interest accretion on landfill and environmental remediation liabilities
7,500
Adjusted EBITDA
$200,000 - $204,000
Following is a reconciliation of the Company's estimated Adjusted Free Cash Flow (i) from estimated Net cash provided by operating activities for fiscal year 2021:
(Estimated) Fiscal Year Ending December 31, 2021
Net cash provided by operating activities
$162,000 - $166,000
Capital expenditures
(117,000)
Proceeds from sale of property and equipment
500
Southbridge Landfill closure and Potsdam environmental remediation
6,500
Cash outlays from acquisition activities
4,000
Post acquisition and development project capital expenditures
16,000
Waste USA Landfill phase VI capital expenditures
13,000
Adjusted Free Cash Flow
$85,000 - $89,000
(i)See footnotes for Non-GAAP Performance Measures and Non-GAAP Liquidity Measures included in the Reconciliation of Certain Non-GAAP Measures for further disclosure over the nature of the various adjustments to estimated Adjusted EBITDA and estimated Adjusted Free Cash Flow.
12
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA TABLES
(Unaudited)
(In thousands)
Amounts of total revenues attributable to services provided for the three and nine months ended September 30, 2021 and 2020 are as follows:
Three Months Ended September 30,
2021
% of Total
Revenues
2020
% of Total
Revenues
Collection
$
118,872
49.1
%
$
102,270
50.5
%
Disposal
55,593
23.0
%
47,600
23.5
%
Power generation
1,253
0.5
%
987
0.5
%
Processing
2,959
1.2
%
2,194
1.0
%
Solid waste operations
178,677
73.8
%
153,051
75.5
%
Processing
27,418
11.3
%
15,701
7.7
%
Non-processing
35,874
14.8
%
33,915
16.7
%
Resource solutions operations
63,292
26.2
%
49,616
24.5
%
Total revenues
$
241,969
100.0
%
$
202,667
100.0
%
Nine Months Ended September 30,
2021
% of Total
Revenues
2020
% of Total
Revenues
Collection
$
323,667
50.0
%
$
290,837
50.6
%
Disposal
142,618
22.0
%
129,971
22.6
%
Power generation
3,657
0.6
%
2,931
0.5
%
Processing
6,754
1.0
%
5,282
1.0
%
Solid waste operations
476,696
73.6
%
429,021
74.7
%
Processing
65,721
10.2
%
45,724
8.0
%
Non-processing
104,958
16.2
%
99,599
17.3
%
Resource solutions operations
170,679
26.4
%
145,323
25.3
%
Total revenues
$
647,375
100.0
%
$
574,344
100.0
%
13
Components of revenue growth for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 are as follows:
Amount
% of
Related
Business
% of
Operations
% of Total
Company
Solid waste operations:
Collection
$
4,672
4.6
%
3.1
%
2.3
%
Disposal
1,559
3.3
%
1.0
%
0.8
%
Solid waste price
6,231
4.1
%
3.1
%
Collection
455
0.3
%
0.2
%
Disposal
3,562
2.3
%
1.8
%
Processing
337
0.2
%
0.1
%
Solid waste volume
4,354
2.8
%
2.1
%
Fuel surcharge and other fees
(223)
(0.2)
%
(0.2)
%
Commodity price and volume
531
0.3
%
0.3
%
Acquisitions, net divestitures
14,773
9.7
%
7.3
%
Closed operations
(40)
-
%
-
%
Total solid waste operations
25,626
16.7
%
12.6
%
Resource solutions operations:
Processing - price
6,099
12.3
%
3.0
%
Processing - volume
1,462
2.9
%
0.7
%
Processing - acquisition
4,156
8.6
%
2.1
%
Non-processing
1,959
3.9
%
1.0
%
Total resource solutions operations
13,676
27.7
%
6.8
%
Total company
$
39,302
19.4
%
Solid waste internalization rates by region for the three and nine months ended September 30, 2021 and 2020 are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Eastern region
47.6
%
47.3
%
50.1
%
47.8
%
Western region
63.8
%
61.4
%
61.8
%
61.3
%
Solid waste internalization
56.4
%
54.9
%
56.3
%
54.9
%
14
Components of capital expenditures (i) for the three and nine months ended September 30, 2021 and 2020 are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Growth capital expenditures:
Post acquisition and development project
$
4,616
$
3,235
$
11,083
$
12,510
Waste USA Landfill phase VI
3,802
3,154
10,241
6,700
Other
819
930
5,024
1,910
Growth capital expenditures
9,237
7,319
26,348
21,120
Replacement capital expenditures:
Landfill development
7,525
10,100
16,290
29,920
Vehicles, machinery, equipment and containers
5,369
6,455
31,112
20,824
Facilities
1,684
995
3,353
2,559
Other
1,693
832
4,474
2,848
Replacement capital expenditures
16,271
18,382
55,229
56,151
Capital expenditures
$
25,508
$
25,701
$
81,577
$
77,271
(i)The Company's capital expenditures are broadly defined as pertaining to either growth or replacement activities. Growth capital expenditures are defined as costs related to development projects, organic business growth, and the integration of newly acquired operations. Growth capital expenditures include costs related to the following: 1) post acquisition and development projects that are necessary to optimize strategic synergies associated with integrating newly acquired operations as contemplated by the discounted cash flow return analysis conducted by management as part of the acquisition investment decision as well as non-routine development investments that are expected to provide long-term returns and includes the following capital expenditures required to achieve initial operating synergies: trucks, equipment and machinery; and facilities, land, IT infrastructure or related upgrades to integrate operations; 2) Waste USA Landfill phase VI construction and development for long-term infrastructure, which is unique and different from landfill construction investments in the normal course of operations because the Company is investing in long-term infrastructure over an estimated four year period that will not yield a positive economic benefit until 2023 and extending over approximately 20 years; and 3) development of new airspace, permit expansions, and new recycling contracts, equipment added directly as a result of organic business growth and infrastructure added 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.
15
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Casella Waste Systems Inc. published this content on 28 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 October 2021 20:43:33 UTC.
Casella Waste Systems, Inc. is a regional, vertically integrated solid waste services company. The Company manages its solid waste operations on a geographic basis through three regional operating segments: the Eastern, Western and Mid-Atlantic regions. It manages its resource renewal operations through the Resource Solutions operating segment, which leverages its core competencies in materials processing, industrial recycling, organics and resource management service offerings to deliver a solution for its commercial, municipal, institutional and industrial customers. It operates approximately 64 solid waste collection operations, 71 transfer stations, 29 recycling and processing facilities, eight Subtitle D landfills, three landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition materials. It provides integrated solid waste services in Vermont, New Hampshire, New York, Massachusetts, Connecticut, Maine, Pennsylvania, Delaware and Maryland.