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Casella Waste Systems, Inc. Announces Second Quarter 2015 Results; Increases 2015 Revenue and Free Cash Flow Guidance

RUTLAND, Vt., July 29, 2015 (GLOBE NEWSWIRE) -- Casella Waste Systems, Inc. (NASDAQ:CWST), a regional solid waste, recycling and resource management services company, today reported its second quarter financial results for the three month period ended June 30, 2015. The company is also increasing its revenue and Free Cash Flow* guidance for the year ending December 31, 2015.

Second Quarter Financial Highlights:

  • Revenues were $143.7 million, up $6.4 million, or 4.7%, from the same period in 2014.
  • Adjusted EBITDA* was $30.7 million, up $2.4 million, or 8.4%, from the same period in 2014.
  • Adjusted Operating Income* was $10.9 million, up $3.6 million, or 50.0%, from the same period in 2014.
  • Free Cash Flow was $18.3 million, up $13.9 million from the same period in 2014.
  • Overall solid waste pricing was up 2.6%, mainly driven by strong residential and commercial collection pricing up 4.3%.
  • The Company is increasing its 2015 revenue and Free Cash Flow guidance ranges, and reaffirming its Adjusted EBITDA guidance range.

“We had a strong quarter as our team continued to execute well against our key management strategies of increasing landfill returns, improving collection route profitability, creating incremental value through resource solutions, reducing financial and operational risks, and improving our balance sheet,” said John W. Casella, Chairman and CEO of Casella Waste System. “We increased revenues by 4.7% with strong pricing growth, reduced our cost of operations, expanded Adjusted EBITDA margins by over 70 bps, and reduced debt leverage. I am pleased with these solid results across our business units, which reflect the success in the execution of these key management strategies."

“As the Northeast disposal markets continue to tighten due to the permanent closure of disposal sites, we further improved profitability and returns at our landfills during the quarter through higher pricing and volumes,” Casella continued. “Our landfill volumes were up 46,000 tons, or 4.0%, year-over-year and our average price per ton was up 4.9%. We expect these same positive trends to continue through the remainder of 2015.”

“One of the most exciting areas this quarter was our improved performance in the collection line-of-business, where we drove 3.7% higher pricing, while reducing costs through our fleet and routing efficiency programs,” Casella noted.

“Recycling commodity pricing remains an industry headwind, with commodity pricing down 15.2% year-over-year,” Casella said. “However, we moved swiftly to improve recycling performance and reduce commodity risk exposure by introducing a new Sustainability/Recycling Adjustment (“SRA”) fee to our residential and commercial collection customers. The SRA fee has been rolled out to over 65% of our collection market areas with minimal rollbacks.”

“Our Customer Solutions group also performed well during the quarter,” Casella noted. “The team continues to streamline its operations and gain operating leverage through targeted growth. As a result, the group improved its operating income in the second quarter.”

For the second quarter, revenues were $143.7 million, up $6.4 million, or 4.7%, from the same period in 2014, with revenue growth mainly driven by strong collection and disposal pricing, continued growth in solid waste and recycling volumes, partially offset by lower recycling commodity pricing and lower energy pricing.

Adjusted EBITDA was $30.7 million for the quarter, up $2.4 million, or 8.4%, from the same period in 2014 mainly driven by strong performance in the collection and disposal lines-of-business, where strong pricing and volume growth was complemented by continued cost controls and operating efficiency programs.

Operating income was $11.3 million for the quarter, up $11.8 million from the same period in 2014. The second quarter includes a $0.7 million gain on the divestiture of non-strategic collection routes, while the same period in 2014 included a $7.5 million non-cash impairment of the C.A.R.E.S water treatment facility and $0.3 million of other unusual items, primarily relating to severance and reorganization charges.

The company’s net income attributable to common stockholders was $1.0 million, or $0.03 per common share for the quarter, compared to a net loss of ($6.7) million, or ($0.17) per common share for the same period in 2014.

Free Cash Flow was $18.3 million in the quarter, as compared to $4.5 million for the same period in 2014. Free Cash Flow was higher than expected in the current quarter, primarily due to the timing of capital expenditures, which the company expects to normalize through the remainder of the year.

Additionally, as previously announced, the company continues its commitment to recruiting new independent and highly qualified directors with strong industry experience to expand the depth and breadth of the Casella Board by its appointment of industry veteran James E. O’Connor to the Casella Board.

Six Months Ended June 30, 2015 Financial Results

Highlights for the six months ended June 30, 2015 included:

  • Revenues were $260.3 million, up $9.8 million, or 3.9%, from the same six-month period in 2014.
  • Adjusted EBITDA was $45.2 million, up $3.5 million, or 8.3%, from the same six-month period in 2014.
  • Adjusted Operating Income was $9.1 million, up $5.0 million, or 123.1%, from the same six-month period in 2014.
  • Free Cash Flow was $10.8 million, up $12.7 million from the same six-month period in 2014.

For the six months ended June 30, 2015, revenues were $260.3 million, up $9.8 million, or 3.9%, from the same period in 2014, mainly driven by strong collection pricing and higher disposal and recycling volumes, partially offset by lower recycling commodity pricing and lower energy pricing.

Operating income was $14.5 million for the six month period, up $18.6 million from the same period in 2014. The company’s net loss attributable to common stockholders was ($8.2) million, or ($0.20) per common share for the six-month period, compared to ($20.1) million, or ($0.50) per share for the same period in 2014.

Outlook

Given the strong performance in the second quarter, the company is increasing its guidance for the year ending December 31, 2015 by estimating results in the following ranges:

  • Revenues between $525 million and $535 million (increased from a range of $520 million to $530 million) and
  • Free Cash Flow between $15 million and $19 million (increased from a range of $14 million to $18 million).

The company reaffirms its Adjusted EBITDA guidance between $103 million and $107 million.

Conference call to discuss quarter

The company will host a conference call to discuss these results on Thursday, July 30, 2015 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 call will also be webcast; to listen, participants should visit Casella Waste Systems’ 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 77474161) until 11:59 p.m. Eastern Time on Thursday, August 6, 2015.

About Casella Waste Systems, Inc.

Casella Waste Systems, Inc., headquartered in Rutland, Vermont, provides solid waste management services consisting of collection, transfer, disposal, and recycling services in the northeastern United States. For further information, investors should contact Ned Coletta, Chief Financial Officer at (802) 772-2239; media should contact Joseph Fusco, Vice President at (802) 772-2247; or visit the company’s website at http://www.casella.com.

*Non-GAAP Financial Measures

In addition to disclosing financial results prepared in accordance with Generally Accepted Accounting Principles in the United States (“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, development project charge write-offs, legal settlement costs, tax settlement costs, bargain purchase gains, asset impairment charges, environmental remediation charges, severance and reorganization costs, (gains) expenses from divestiture, acquisition and financing costs, gains on the settlement of acquisition related contingent consideration, fiscal year-end transition costs, proxy contest costs, as well as impacts from divestiture transactions (“Adjusted EBITDA”) which is a non-GAAP measure.

The company also discloses earnings before interest, taxes, adjusted for gain on sale of assets, development project charge write-offs, legal settlement charges, tax settlement costs, bargain purchase gains, asset impairment charges, environmental remediation charges, severance and reorganization costs, (gains) expenses from divestiture, acquisition and financing costs, gains on the settlement of acquisition related contingent consideration, fiscal year-end transition costs, proxy contest costs, as well as impacts from divestiture transactions (“Adjusted Operating Income”) which is a non-GAAP measure.

The company also discloses net cash provided by operating activities, less capital expenditures (excluding acquisition related capital expenditures), less payments on landfill operating lease contracts, less assets acquired through financing leases, plus proceeds from divestiture transactions, plus proceeds from the sale of property and equipment, plus proceeds from property insurance settlement, less distributions to noncontrolling interest holders (“Free Cash Flow”), which is a non-GAAP measure.

Adjusted EBITDA and Adjusted Operating Income are reconciled to net income (loss), while Free Cash Flow is reconciled to net cash provided by operating activities.

The company presents Adjusted EBITDA, Adjusted Operating Income, 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 the company’s results. Management uses these non-GAAP measures to further understand the company’s “core operating performance.” The company believes its “core operating performance” is helpful in understanding its ongoing performance in the ordinary course of operations. The company believes that providing Adjusted EBITDA, Adjusted Operating Income and Free Cash Flow to investors, in addition to corresponding income statement and cash flow statement measures, affords investors the benefit of viewing its performance using the same financial metrics that the management team uses in making many key decisions and understanding how the core business and its results of operations has performed. The company further believes that providing this information allows its investors greater transparency and a better understanding of its core financial performance. In addition, the instruments governing the company’s indebtedness use EBITDA (with additional adjustments) to measure its compliance with covenants.

Non-GAAP financial measures are not in accordance with or an alternative for GAAP. Adjusted EBITDA, Adjusted Operating Income, and Free Cash Flow should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP, and may be different from Adjusted EBITDA, Adjusted Operating Income or Free Cash Flow presented 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 “believe,” “expect,” “anticipate,” “plan,” “may,” “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: adverse weather conditions that have negatively impacted and may continue to negatively impact our revenues and our operating margin; current economic conditions that have adversely affected and may continue to adversely affect our revenues and our operating margin; we may be unable to increase volumes at our landfills or improve our route profitability; our need to service our indebtedness may limit our ability to invest in our business; 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 energy pricing or the commodity pricing of our recyclables may make it more difficult for us to predict our results of operations or meet our estimates; we may incur environmental charges or asset impairments in the future; and actions of activist investors and the cost and disruption of responding to those actions;. 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-KT for the transition period ended December 31, 2014 and in our Form 10-Q for the quarterly period ended March 31, 2015.

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
(Unaudited)
(In thousands, except amounts per share)
Three Months Ended
June 30,
Six Months Ended
June 30,
2015 2014 2015 2014
Revenues $ 143,714 $ 137,279 $ 260,292 $ 250,476
Operating expenses:
Cost of operations 98,737 97,218 186,569 183,622
General and administration 18,071 15,594 34,876 31,981
Depreciation and amortization 16,241 17,167 29,990 30,775
Divestiture transactions (677) 7,455 (5,611) 7,455
Development project charge - (46) - 1,394
Severance and reorganization costs - 350 - 430
Expense from divestiture, acquisition and financing costs - 14 - 24
Gain on settlement of acquisition related contingent consideration - - - (1,058)
132,372 137,752 245,824 254,623
Operating income (loss) 11,342 (473) 14,468 (4,147)
Other expense/(income):
Interest expense, net 10,080 9,503 20,065 18,999
Loss on debt extinguishment - - 521 -
Loss on derivative instruments 47 298 198 448
Income from equity method investments - (63) - (90)
Loss on sale of equity method investment - - - 221
Other income (46) (361) (209) (568)
Other expense, net 10,081 9,377 20,575 19,010
Income (loss) before income taxes 1,261 (9,850) (6,107) (23,157)
Provision for income taxes 318 528 914 831
Net income (loss) 943 (10,378) (7,021) (23,988)
Less: Net (loss) income attributable to noncontrolling interests (82) (3,723) 1,226 (3,910)
Net income (loss) attributable to common stockholders $ 1,025 $ (6,655) $ (8,247)$ (20,078)
Basic weighted average common shares outstanding 40,447 39,995 40,432 39,952
Basic earnings per common share $ 0.03 $ (0.17) $ (0.20)$ (0.50)
Diluted weighted average common shares outstanding 40,846 39,995 40,432 39,952
Diluted earnings per common share $ 0.03 $ (0.17) $ (0.20)$ (0.50)
Adjusted EBITDA $ 30,715 $ 28,322 $ 45,194 $ 41,737

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS June 30,
2015
December 31,
2014
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,158 $ 2,205
Restricted cash - 76
Accounts receivable - trade, net of allowance for doubtful accounts 63,509 55,750
Other current assets 18,169 20,638
Total current assets 84,836 78,669
Property, plant and equipment, net of accumulated depreciation and amortization 399,022 414,542
Goodwill 118,976 119,170
Intangible assets, net 10,438 11,808
Restricted assets 968 6,632
Cost method investments 14,115 14,432
Other non-current assets 29,173 24,542
Total assets $ 657,528 $ 669,795
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt and capital leases $ 1,437 $ 1,656
Accounts payable 48,147 48,518
Other accrued liabilities 36,475 36,258
Total current liabilities 86,059 86,432
Long-term debt and capital leases, less current maturities 526,853 534,055
Other long-term liabilities 63,466 61,328
Total stockholders' deficit (18,850) (12,020)
Total liabilities and stockholders' deficit $ 657,528 $ 669,795

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30,
2015 2014
Cash Flows from Operating Activities:
Net loss $ (7,021) $ (23,988)
Adjustments to reconcile net loss to net cash provided by operating activities -
Gain on sale of property and equipment (93) (333)
Depletion of landfill operating lease obligations 4,359 5,038
Interest accretion on landfill and environmental remediation liabilities 1,704 1,826
Stock-based compensation expense 1,435 1,113
Depreciation and amortization 29,990 30,775
Divestiture transactions (5,611) 7,455
Development project charge - 1,394
Gain on settlement of acquisition related contingent consideration - (1,058)
Amortization of discount of long-term debt 174 125
Loss on debt extinguishment 521 -
Loss on derivative instruments 198 448
Income from equity method investments - (90)
Loss on sale of equity method investment - 221
Excess tax benefit on the vesting of share based awards (153) (60)
Deferred income taxes 416 736
Changes in assets and liabilities, net of effects of acquisitions and divestitures (2,030) (1,156)
Net Cash Provided by Operating Activities 23,889 22,446
Cash Flows from Investing Activities:
Proceeds from settlement of contingent consideration - 214
Acquisition related additions to property, plant and equipment - (266)
Additions to property, plant and equipment (16,311) (23,305)
Payments on landfill operating lease contracts (1,425) (1,526)
Proceeds from divestiture transactions 5,335 -
Proceeds from sale of property and equipment 259 448
Proceeds from property insurance settlement 546 -
Payments related to investments - (84)
Net Cash Used In Investing Activities (11,596) (24,519)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 231,728 89,760
Principal payments on long-term debt (239,340) (87,258)
Change in restricted cash 5,677 -
Payments of financing costs (8,063) (18)
Excess tax benefit on the vesting of share based awards 153 60
Proceeds from the exercise of share based awards - 286
Distribution to noncontrolling interest holder (1,495) -
Net Cash (Used In) Provided By Financing Activities (11,340) 2,830
Net Cash Provided By Discontinued Operations - 174
Net increase in cash and cash equivalents 953 931
Cash and cash equivalents, beginning of period 2,205 2,695
Cash and cash equivalents, end of period $ 3,158 $ 3,626
Supplemental Disclosures of Cash Flow Information:
Cash interest $ 17,063 $ 17,551
Cash income taxes, net of refunds $ 55 $ 3
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Receivable due from noncontrolling interest holder $ - $ 152

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
(Unaudited)
(In thousands)
Following is a reconciliation of Adjusted EBITDA and Adjusted Operating Income to Net Income (Loss):
Three Months Ended
June 30,
Six Months Ended
June 30,
2015 2014 2015 2014
Net Income (Loss) $ 943 $ (10,378) $ (7,021) $ (23,988)
Provision for income taxes 318 528 914 831
Other expense (income), net 1 (126) 510 11
Interest expense, net 10,080 9,503 20,065 18,999
Gain on settlement of acquisition related contingent consideration - - - (1,058)
Expense from divestiture, acquisition and financing costs - 14 - 24
Severance and reorganization costs - 350 - 430
Development project charge - (46) - 1,394
Divestiture transactions (677) 7,455 (5,611) 7,455
Depreciation and amortization 16,241 17,167 29,990 30,775
Proxy contest costs 284 - 284 -
Depletion of landfill operating lease obligations 2,669 3,046 4,359 5,038
Interest accretion on landfill and environmental remediation liabilities 856 809 1,704 1,826
Adjusted EBITDA $30,715 $28,322 $45,194 $41,737
Depreciation and amortization (16,241) (17,167) (29,990) (30,775)
Depletion of landfill operating lease obligations (2,669) (3,046) (4,359) (5,038)
Interest accretion on landfill and environmental remediation liabilities (856) (809) (1,704) (1,826)
Adjusted Operating Income $10,949 $7,300 $9,141 $4,098
Following is a reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities:
Three Months Ended
June 30,
Six Months Ended
June 30,
2015 2014 2015 2014
Net Cash Provided By Operating Activities $ 29,584 $ 21,085 $ 23,889 $ 22,446
Capital expenditures (i) (11,867) (15,828) (16,311) (23,305)
Payments on landfill operating lease contracts (947) (963) (1,425) (1,526)
Proceeds from divestiture transactions 785 - 5,335 -
Proceeds from sale of property and equipment 170 232 259 448
Proceeds from property insurance settlement 546 - 546 -
Distribution to noncontrolling interest holder - - (1,495) -
Free Cash Flow $ 18,271 $ 4,526 $ 10,798 $ (1,937)

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA TABLES
(Unaudited)
(In thousands)
Amounts of our total revenues attributable to services provided for the three and six months ended June 30, 2015 and 2014 are as follows:
Three Months Ended June 30,
2015 % of Total
Revenue
2014 % of Total
Revenue
Collection $ 60,636 42.2% $ 58,368 42.5%
Disposal 44,064 30.6% 38,128 27.8%
Power generation 1,564 1.1% 1,998 1.5%
Processing 1,665 1.2% 2,817 2.0%
Solid waste operations 107,929 75.1% 101,311 73.8%
Organics 10,847 7.5% 10,715 7.8%
Customer solutions 13,476 9.4% 13,274 9.7%
Recycling 11,462 8.0% 11,979 8.7%
Total revenues $ 143,714 100.0% $ 137,279 100.0%
Six Months Ended June 30,
2015 % of Total
Revenue
2014 % of Total
Revenue
Collection $ 113,962 43.8% $ 110,911 44.3%
Disposal 71,831 27.6% 62,203 24.8%
Power generation 3,612 1.4% 5,347 2.1%
Processing 2,785 1.0% 4,525 1.8%
Solid waste operations 192,190 73.8% 182,986 73.0%
Organics 19,867 7.6% 19,991 8.0%
Customer solutions 26,479 10.2% 25,159 10.1%
Recycling 21,756 8.4% 22,340 8.9%
Total revenues $ 260,292 100.0% $ 250,476 100.0%
Components of revenue growth for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 are as follows:
Amount % of Related
Business
% of Solid Waste
Operations
% of Total
Company
Solid Waste Operations:
Collection $ 2,141 3.7% 2.2% 1.6%
Disposal 450 1.2% 0.4% 0.3%
Solid Waste Yield 2,591 2.6% 1.9%
Collection 640 0.6% 0.4%
Disposal 5,300 5.2% 3.9%
Processing (797) -0.8% -0.6%
Solid Waste Volume 5,143 5.0% 3.7%
Fuel surcharge (474) -0.5% -0.4%
Commodity price & volume (740) -0.7% -0.5%
Acquisitions, net divestitures 357 0.4% 0.3%
Closed landfill (259) -0.3% -0.2%
Total Solid Waste 6,618 6.5% 4.8%
Organics 132 0.1%
Customer Solutions 202 0.2%
Recycling Operations: % of Recycling
Operations
Commodity price (1,817) -15.2% -1.3%
Commodity volume 1,300 10.9% 0.9%
Total Recycling (517) -4.3% -0.4%
Total Company $ 6,435 4.7%
Solid Waste Internalization Rates by Region for the three and six months ended June 30, 2015 and 2014 are as follows:
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
Eastern region 48.1% 53.0% 46.5% 52.7%
Western region 74.0% 78.5% 73.0% 77.6%
Solid waste internalization 60.4% 65.6% 59.1% 64.8%
Components of Capital Expenditures for the three and six months ended June 30, 2015 and 2014 are as follows (i):
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
Total Growth Capital Expenditures $ 1,711 $ 4,314 $ 2,449 $ 4,678
Replacement Capital Expenditures:
Landfill development $ 4,380 $ 6,048 $ 5,618 $ 9,803
Vehicles, machinery, equipment and containers 4,994 4,781 6,707 7,566
Facilities 334 535 503 834
Other 448 150 1,034 424
Total Replacement Capital Expenditures $ 10,156 $ 11,514 $ 13,862 $ 18,627
Total Growth and Replacement Capital Expenditures$ 11,867 $ 15,828 $ 16,311 $ 23,305
(i) Our capital expenditures are broadly defined as pertaining to either growth, replacement or acquisition activities. Growth capital expenditures are defined as costs related to development of new airspace, permit expansions, and new recycling contracts along with incremental costs of equipment and infrastructure added to further such activities. Growth capital expenditures include the cost of equipment added directly as a result of organic business growth as well as expenditures associated with adding infrastructure to increase throughput at transfer stations and recycling facilities. Replacement capital expenditures are defined as landfill cell construction costs not related to expansion airspace, costs for normal permit renewals, and replacement costs for equipment due to age or obsolescence. Acquisition capital expenditures, which are not included in the table above, are defined as costs of equipment added directly as a result of new business growth related to an acquisition.



Investors: Ned Coletta Chief Financial Officer (802) 772-2239 Media: Joseph Fusco Vice President (802) 772-2247 http://www.casella.com

Source:Casella Waste Systems, Inc.