SEC Filing | Casella Waste Systems, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-23211

CASELLA WASTE SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


Delaware			03-0338873
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


25 Greens Hill Lane,
Rutland,	Vermont	05701
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (802) 775-0325

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Class A common stock, $0.01 par value per share

CWST

The NASDAQ Stock Market LLC

(NASDAQ Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer			☒			Accelerated filer			☐


Non-accelerated filer			☐			Smaller reporting company			☐


						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the registrant’s classes of common stock, as of October 15, 2019:


Class A common stock, $0.01 par value per share:			46,792,758
Class B common stock, $0.01 par value per share:			988,200

PART I.

ITEM 1. FINANCIAL STATEMENTS

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)


	September 30, 2019		December 31, 2018
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	5,028	$	4,007
Accounts receivable, net of allowance for doubtful accounts of $1,478 and $931, respectively	89,882		74,937

Refundable income taxes	2,789		2,254
Prepaid expenses	8,423		7,345
Inventory	6,976		6,542

Other current assets	693		2,008
Total current assets	113,791		97,093
Property, plant and equipment, net of accumulated depreciation and amortization of $831,950 and $878,701, respectively	434,081		404,577
Operating lease right-of-use assets	109,604		—
Goodwill	184,295		162,734
Intangible assets, net	60,983		34,767

Restricted assets	1,410		1,248
Cost method investments	11,264		11,264
Deferred income taxes	8,840		9,594
Other non-current assets	11,512		11,133
Total assets	$	935,780	$	732,410

The accompanying notes are an integral part of these consolidated financial statements.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands, except for share and per share data)


	September 30, 2019		December 31, 2018
	(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt and finance leases	$	3,571	$	2,298
Current operating lease liabilities	9,582		—
Accounts payable	59,370		57,289
Accrued payroll and related expenses	10,116		10,969
Accrued interest	2,340		2,415
Contract liabilities	2,812		3,074
Current accrued capping, closure and post-closure costs	8,527		11,633
Other accrued liabilities	30,641		23,819
Total current liabilities	126,959		111,497
Long-term debt and finance leases, less current portion	523,975		542,001
Operating lease liabilities, less current portion	71,910		—
Accrued capping, closure and post-closure costs, less current portion	64,092		61,442
Deferred income taxes	2,637		2,519
Other long-term liabilities	35,395		30,783
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Casella Waste Systems, Inc. stockholders' equity (deficit)
Class A common stock, 0.01 par value per share; 100,000,000 shares authorized; 46,792,000 and 41,944,000 shares issued and outstanding, respectively	468		419
Class B common stock, 0.01 par value per share; 1,000,000 shares authorized; 988,000 shares issued and outstanding, respectively; 10 votes per share	10		10
Additional paid-in capital	482,987		373,716
Accumulated deficit	(366,082)		(388,669)
Accumulated other comprehensive loss	(6,571)		(1,308)


Total stockholders' equity (deficit)	110,812		(15,832)
Total liabilities and stockholders' equity (deficit)	$	935,780	$	732,410

The accompanying notes are an integral part of these consolidated financial statements.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except for per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues	$	198,547	$	172,832	$	549,670	$	485,936
Operating expenses:
Cost of operations	131,273		114,118		377,707		331,527
General and administration	22,536		20,545		67,423		62,365
Depreciation and amortization	20,940		18,202		58,144		51,572
Withdrawal costs - multiemployer pension plan	3,591		—		3,591		—
Expense from acquisition activities and other items	1,097		581		2,237		930
Southbridge landfill closure charge (settlement), net	625		(9,498)		2,097		(7,740)
Contract settlement charge	—		—		—		2,100
Development project charge	—		—		—		311






	180,062		143,948		511,199		441,065
Operating income	18,485		28,884		38,471		44,871
Other expense (income):
Interest income	(66)		(53)		(287)		(161)
Interest expense	6,235		6,424		18,849		19,347
Loss on debt extinguishment	—		—		—		7,352




Other income	(248)		(166)		(960)		(597)
Other expense, net	5,921		6,205		17,602		25,941
Income before income taxes	12,564		22,679		20,869		18,930
Provision (benefit) for income taxes	178		377		(1,718)		(1,166)
Net income	$	12,386	$	22,302	$	22,587	$	20,096


Basic earnings per share attributable to common stockholders:
Weighted average common shares outstanding	47,690		42,779		47,029		42,605
Basic earnings per common share	$	0.26	$	0.52	$	0.48	$	0.47
Diluted earnings per share attributable to common stockholders:
Weighted average common shares outstanding	48,361		44,175		47,660		43,938
Diluted earnings per common share	$	0.26	$	0.50	$	0.47	$	0.46

The accompanying notes are an integral part of these consolidated financial statements.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(Unaudited)

(in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Net income	$	12,386	$	22,302	$	22,587	$	20,096
Other comprehensive (loss) income, before tax:
Hedging activity:
Interest rate swap settlements	(120)		(147)		(187)		(217)
Interest rate swap amounts reclassified into interest expense	147		156		216		247
Unrealized (loss) gain resulting from changes in fair value of derivative instruments	(774)		863		(5,292)		1,503

Other comprehensive (loss) income, before tax	(747)		872		(5,263)		1,533
Income tax provision related to items of other comprehensive (loss) income	—		235		—		413
Other comprehensive (loss) income, net of tax	(747)		637		(5,263)		1,120
Comprehensive income	$	11,639	$	22,939	$	17,324	$	21,216

The accompanying notes are an integral part of these consolidated financial statements.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF

STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

(in thousands)



			Class A Common Stock				Class B Common Stock						Additional Paid-In Capital		Accumulated Deficit	Accumulated Other Comprehensive Loss
	Total		Shares	Amount		Shares	Amount
Balance, December 31, 2018	$	(15,832)	41,944	$	419	988	$	10	$	373,716	$	(388,669)	$	(1,308)
Issuance of Class A common stock - equity offering	100,446		3,565	36		—	—		100,410		—		—
Issuance of Class A common stock - acquisition	—		67	1		—	—		(1)		—		—
Issuances of Class A common stock	260		676	7		—	—		253		—		—
Stock-based compensation	1,431		—	—		—	—		1,431		—		—
Comprehensive loss:
Net loss	(1,714)		—	—		—	—		—		(1,714)		—
Other comprehensive loss:
Hedging activity	(1,557)		—	—		—	—		—		—		(1,557)
Balance, March 31, 2019	83,034		46,252	463		988	10		475,809		(390,383)		(2,865)


Issuances of Class A common stock	2,318		347	3		—	—		2,315		—		—
Stock-based compensation	1,889		—	—		—	—		1,889		—		—
Comprehensive income:
Net income	11,915		—	—		—	—		—		11,915		—
Other comprehensive loss:
Hedging activity	(2,959)		—	—		—	—		—		—		(2,959)
Balance, June 30, 2019	96,197		46,599	466		988	10		480,013		(378,468)		(5,824)


Issuances of Class A common stock	1,078		193	2		—	—		1,076		—		—
Stock-based compensation	1,898		—	—		—	—		1,898		—		—
Comprehensive income:
Net income	12,386		—	—		—	—		—		12,386		—
Other comprehensive loss:
Hedging activity	(747)		—	—		—	—		—		—		(747)









Balance, September 30, 2019	$	110,812	46,792	$	468	988	$	10	$	482,987	$	(366,082)	$	(6,571)

The accompanying notes are an integral part of these consolidated financial statements.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF

STOCKHOLDERS' EQUITY (DEFICIT) (Continued)

(Unaudited)

(in thousands)


			Class A Common Stock				Class B Common Stock						Additional Paid-In Capital		Accumulated Deficit	Accumulated Other Comprehensive Income
	Total		Shares	Amount		Shares	Amount
Balance, December 31, 2017	$	(37,862)	41,298	$	413	988	$	10	$	356,638	$	(395,107)	$	184
Cumulative effect of new accounting principle	—		—	—		—	—		—		18		(18)
Issuances of Class A common stock	310		402	4		—	—		306		—		—
Stock-based compensation	2,077		—	—		—	—		2,077		—		—
Comprehensive loss:
Net loss	(3,910)		—	—		—	—		—		(3,910)		—
Other comprehensive income:
Hedging activity	568		—	—		—	—		—		—		568
Balance, March 31, 2018	(38,817)		41,700	417		988	10		359,021		(398,999)		734

Issuances of Class A common stock	361		65	1		—	—		360		—		—
Stock-based compensation	2,121		—	—		—	—		2,121		—		—
Comprehensive income:
Net income	1,704		—	—		—	—		—		1,704		—
Other comprehensive loss:
Hedging activity	(85)		—	—		—	—		—		—		(85)
Balance, June 30, 2018	(34,716)		41,765	418		988	10		361,502		(397,295)		649

Issuance of Class A common stock - acquisition	4,258		150	1		—	—		4,257		—		—
Issuances of Class A common stock	72		17	—		—	—		72		—		—
Stock-based compensation	2,168		—	—		—	—		2,168		—		—
Comprehensive income:
Net income	22,302		—	—		—	—		—		22,302		—
Other comprehensive income:
Hedging activity	637		—	—		—	—		—		—		637
Balance, September 30, 2018	$	(5,279)	41,932	$	419	988	$	10	$	367,999	$	(374,993)	$	1,286