SOURCE: Casella Waste Systems, Inc.

March 05, 2008 16:02 ET

Casella Waste Systems, Inc. Announces Third Quarter Fiscal Year 2008 Results

RUTLAND, VT--(Marketwire - March 5, 2008) - Casella Waste Systems, Inc. (NASDAQ: CWST), a regional solid waste, recycling, and resource management services company, today reported financial results for the third quarter of its 2008 fiscal year and raised guidance on estimated earnings before interest, taxes, depreciation and amortization (EBITDA)* for fiscal year 2008.

Third Quarter Financial Results

For the quarter ended January 31, 2008, the company reported revenues of $141.4 million, up $12.6 million, or 9.8 percent over the same quarter last year. The company's net loss applicable to common shareholders was ($4.6) million, or ($0.18) per common share, compared to a net loss of ($1.7) million, or ($0.07) per share in the same quarter last year, driven mainly by non-recurring management reorganization charges and losses from equity method investments.

General and administration costs for the quarter include a $1.2 million non-recurring charge incurred as the result of the company's management reorganization. This reorganization charge resulted in an after tax impact of negative $0.03 per share.

Including this one-time charge, operating income for the quarter was $7.3 million, down $1.8 million over the same quarter last year. The company's EBITDA was $26.3 million, up $0.2 million from the same quarter last year. Excluding the one-time management reorganization charge, EBITDA was $27.5 million, up $1.4 million, or 5.4 percent over the same quarter last year.

Cash provided by operating activities in the quarter was $16.0 million, compared to $16.2 million for the same quarter last year.

The company said its GreenFiber unit continues to be severely impacted by the slowdown in the housing market. The company's income from equity method investments was down $1.9 million compared to the same quarter last year, with the company's share of GreenFiber's net income down $1.6 million during this period. The year-over-year losses from equity method investments resulted in an after tax impact of negative $0.05 per share.

Year-to-Date Financial Results

For the nine months ended January 31, 2008, the company reported revenues of $442.8 million, up 8.1 percent over the same period last year. Including the $1.2 million non-recurring management reorganization charge in the third quarter, the company's net income per common share for the nine month period was ($0.00), compared to a net loss per common share of ($0.05) in the same period last year. Operating income for the nine month period was $36.4 million, up $3.8 million or 11.7 percent over the same period last year. Cash provided by operating activities for the nine month period was $51.7 million, down $4.7 million compared to the same period last year. EBITDA was $95.6 million for the nine months ended January 31, 2008, up $9.3 million or 10.8% from the same period last year.

Fiscal 2008 Outlook

For fiscal year 2008, the company has updated its estimated EBITDA results to between $118.0 million and $122.0 million, from the original estimated range of between $114.0 million and $118.0 million.

Highlights of the Quarter

"In early January we made changes to our management team with the goal of improving our operating performance and reinforcing our resource optimization business strategy," John W. Casella, chairman and chief executive officer, said. "These changes are enabling us to enhance management attention on operational efficiency, while at the same time enabling the continued development of business opportunities beyond the traditional consumption model that meet the environmental sustainability needs of our customers today and tomorrow."

The company indicated that the soft economy in the northeastern U.S. continued to adversely impact solid waste volumes during the third quarter. Robust commodity pricing and cost control programs helped to offset most of the economic drag.

*Non-GAAP Financial Measures

In addition to disclosing financial results prepared in accordance with Generally Accepted Accounting Principles (GAAP), we also disclose free cash flow and earnings before interest, taxes, depreciation and amortization (EBITDA), which are non-GAAP measures.

These measures are provided because we understand that certain investors use this information when analyzing the financial position of companies in the solid waste industry, including us. Historically, these measures have been key in comparing operating efficiency of publicly traded companies in the solid waste industry, and assist investors in measuring our ability to meet capital expenditure and working capital requirements. For these reasons we utilize these non-GAAP metrics to measure our performance at all levels. These measures do not represent, and should not be considered as alternatives to cash provided by operating activities as determined in accordance with GAAP. Moreover, these measures do not necessarily indicate whether cash flow will be sufficient for such items as working capital or capital expenditures, or to react to changes in our industry or to the economy generally. Because these measures are not calculated by all companies in the same fashion, they may not be comparable to similarly titled measures reported by other companies.

Casella Waste Systems, Inc., headquartered in Rutland, Vermont, provides solid waste management services consisting of collection, transfer, disposal, and recycling services primarily in the eastern United States.

For further information, contact Ned Coletta, director of investor relations at (802) 775-0325, or visit the Company's website at http://www.casella.com.

The Company will host a conference call to discuss these results on Thursday, March 6, 2008 at 10:00 a.m. ET. Individuals interested in participating in the call should dial (877) 419-6590 at least 10 minutes before start time. The call will also be webcast; to listen, participants should visit Casella Waste Systems' website at http://www.casella.com and follow the appropriate link to the webcast. A replay of the call will be available on the company's website, or by calling (719) 457-0820 or (888) 203-1112 (conference code #4733396), until 11:59 p.m. ET on Thursday, March 13, 2008.

Safe Harbor Statement

Certain matters discussed in this press release are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by the context of the statements, including words such as the company "believes," "expects," "anticipates," "plans," "may," "will," "would," "intends," "estimates" and other similar expressions, whether in the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management's beliefs and assumptions. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in the forward-looking statements made. Such forward-looking statements, and all phases of our operations, involve a number of risks and uncertainties, any one or more of which could cause actual results to differ materially from those described in our forward-looking statements. Such risks and uncertainties include or relate to, among other things: we may be unable to reduce costs or increase revenues sufficiently to achieve estimated EBITDA and other targets; landfill operations and permit status may be affected by factors outside our control, continuing weakness in general economic conditions and poor weather conditions may affect our revenues; we may be required to incur capital expenditures in excess of our estimates; and 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. 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 risks and uncertainties include, without limitation, those detailed in Item 1A, "Risk Factors" in our Form 10-K for the year ended April 30, 2007. We do not necessarily intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

               CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS

                                Unaudited
                 (In thousands, except amounts per share)


                                 Three Months Ended     Nine Months Ended
                                --------------------  --------------------
                                 January    January    January    January
                                   31,        31,        31,        31,
                                  2007       2008       2007       2008
                                ---------  ---------  ---------  ---------

Revenues                        $ 128,839  $ 141,359  $ 409,637  $ 442,799

Operating expenses:
 Cost of operations (1)            85,879     96,663    267,078    291,738
 General and administration (1)    16,862     18,362     56,223     55,472
 Depreciation and amortization     16,960     19,055     53,702     59,178
                                ---------  ---------  ---------  ---------
                                  119,701    134,080    377,003    406,388
                                ---------  ---------  ---------  ---------

Operating income                    9,138      7,279     32,634     36,411

Other expense/(income), net:
 Interest expense, net (2)          9,455     10,536     27,722     32,107
 Loss (income) from equity
  method investments                 (988)       907     (1,978)     4,545
 Other income                         (49)       (56)      (350)    (2,417)
                                ---------  ---------  ---------  ---------
                                    8,418     11,387     25,394     34,235
                                ---------  ---------  ---------  ---------

Income (loss) from continuing
 operations before income taxes
 and discontinued operations          720     (4,108)     7,240      2,176
Provision for income taxes          1,026        496      4,420        960
                                ---------  ---------  ---------  ---------

Income (loss) from continuing
 operations before discontinued
 operations                          (306)    (4,604)     2,820      1,216

Discontinued Operations:
 Loss from discontinued
  operations, net of income
  taxes (3) (4)                      (539)         -     (1,329)      (811)
 Loss on disposal of
  discontinued operations, net
  of income taxes (4)                   -          -          -       (437)
                                ---------  ---------  ---------  ---------

Net (loss) income                    (845)    (4,604)     1,491        (32)

Preferred stock dividend              902          -      2,674          -
                                ---------  ---------  ---------  ---------

Net loss applicable to common
 stockholders                   $  (1,747) $  (4,604) $  (1,183) $     (32)
                                =========  =========  =========  =========

Common stock and common stock
 equivalent shares outstanding,
 assuming full dilution            25,273     25,415     25,257     25,362
                                =========  =========  =========  =========

Net loss per common share       $   (0.07) $   (0.18) $   (0.05) $       -
                                =========  =========  =========  =========

EBITDA (5)                      $  26,098  $  26,334  $  86,336  $  95,589
                                =========  =========  =========  =========


               CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                Unaudited
                              (In thousands)


                                                        April 30,  Jan 31,
                  ASSETS                                   2007      2008
                                                        --------- ---------

CURRENT ASSETS:
  Cash and cash equivalents                             $  12,366 $   2,898
  Restricted cash                                              73        95
  Accounts receivable - trade, net of allowance for
   doubtful accounts                                       61,246    61,652
  Other current assets                                     21,115    29,443
                                                        --------- ---------
Total current assets                                       94,800    94,088

Property, plant and equipment, net of accumulated
 depreciation                                             483,277   488,845
Goodwill                                                  171,735   171,385
Intangible assets, net                                      2,217     2,778
Restricted cash                                            12,734    13,587
Investments in unconsolidated entities                     49,969    46,060
Other non-current assets                                   19,361    13,398
                                                        --------- ---------

Total assets                                            $ 834,093 $ 830,141
                                                        ========= =========

     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current maturities of long-term debt                  $   1,215 $   2,156
  Current maturities of capital lease obligations           1,104       633
  Series A redeemable, convertible preferred stock (2)     74,018         -
  Accounts payable                                         51,440    43,783
  Other accrued liabilities                                60,375    60,060
                                                        --------- ---------
Total current liabilities                                 188,152   106,632

Long-term debt, less current maturities                   476,225   546,188
Capital lease obligations, less current maturities            650     4,789
Other long-term liabilities                                39,570    41,459

Stockholders' equity                                      129,496   131,073
                                                        --------- ---------

Total liabilities and stockholders' equity              $ 834,093 $ 830,141
                                                        ========= =========


              CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                Unaudited
                              (In thousands)

                                                        Nine Months Ended
                                                        ------------------
                                                        January   January
                                                          31,       31,
                                                          2007      2008
                                                        --------  --------
 Cash Flows from Operating Activities:
 Net (loss) income                                      $  1,491  $    (32)
 Loss from discontinued operations, net                    1,329       811
 Loss on disposal of discontinued operations, net              -       437
 Adjustments to reconcile net (loss) income
  to net cash provided by operating activities -
  Depreciation and amortization                           53,702    59,178
  Depletion of landfill operating lease obligations        5,543     4,815
  Income from assets under contractual obligation              -    (1,463)
  Preferred stock dividend                                     -     1,038
  Maine Energy settlement                                      -    (2,142)
  Loss (income) from equity method investments            (1,978)    4,545
  Gain on sale of equipment                                 (591)      (54)
  Stock-based compensation                                   511     1,022
  Excess tax benefit on the exercise of stock options       (145)     (111)
  Deferred income taxes                                      464    (1,311)
  Changes in assets and liabilities, net of
   effects of acquisitions and divestitures               (3,878)  (15,055)
                                                        --------  --------
                                                          53,628    50,462
                                                        --------  --------
   Net Cash Provided by Operating Activities              56,448    51,678
                                                        --------  --------
Cash Flows from Investing Activities:
  Acquisitions, net of cash acquired                      (2,087)     (745)
  Additions to property, plant and equipment - growth    (25,757)  (14,281)
                                          - maintenance  (50,939)  (44,834)
  Payments on landfill operating lease contracts          (4,500)   (6,735)
  Proceeds from divestitures                                   -     2,154
  Restricted cash from revenue bond issuance               5,535         -
  Other                                                     (110)    3,343
                                                        --------  --------
   Net Cash Used In Investing Activities                 (77,858)  (61,098)
                                                        --------  --------
Cash Flows from Financing Activities:
  Proceeds from long-term borrowings                     239,950   260,700
  Principal payments on long-term debt                  (213,459) (187,049)
  Redemption of Series A redeemable, convertible
   preferred stock                                             -   (75,057)
  Proceeds from exercise of stock options                  1,572     1,216
  Excess tax benefit on the exercise of stock options        145       111
                                                        --------  --------
   Net Cash (Used in) Provided by Financing Activities    28,208       (79)
                                                        --------  --------
Cash Provided by (Used in) Discontinued Operations        (2,298)       31
                                                        --------  --------
Net (decrease) increase in cash and cash equivalents       4,500    (9,468)
Cash and cash equivalents, beginning of period             7,429    12,366
                                                        --------  --------
Cash and cash equivalents, end of period                $ 11,929  $  2,898
                                                        ========  ========



              CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
                                Unaudited
                              (In thousands)

Note 1: The Company has made reclassifications in the Company’s Statements
of Operations to conform prior year information with the Company’s current
period presentation.  During the fourth quarter of fiscal year 2007, the
Company began recording personnel costs associated with engineering and
permitting activities as a cost of operations where previously these costs
had been recorded as general and administration.  This resulted in costs
reclassified amounting to $460 and $1,385 for the three months and nine
months ended January 31, 2007, respectively.

Note 2: The Company's Series A redeemable, convertible preferred stock
("Series A preferred") contained a mandatory redemption provision effective
August 11, 2007.  As the Company did not anticipate that the Series A
preferred would be converted to Class A Common Stock by the redemption
date, the Company reflected the redemption value of the Series A preferred
as a current liability at April 30, 2007.  Consistent with this
presentation, the Company has recorded the Series A preferred dividend as
interest expense in the nine months ended January 31, 2008.  The Series A
preferred was redeemed effective August 11, 2007 at an aggregate
redemption price of $75,057.

Note 3: The company divested the assets of the Holliston Transfer Station
("Holliston Transfer") during the quarter ended April 30, 2007.  The
transaction required discontinued operations treatment under SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets ("SFAS No.144"),
therefore the operating results of Holliston Transfer have been
reclassified from continuing to discontinued operations for the three and
nine months ended January 31, 2007.

Note 4: The company divested its Buffalo, N.Y. transfer station, hauling
operation and related equipment during the quarter ended October 31, 2007.
The transaction required discontinued operations treatment under SFAS No.
144, therefore the operating results of these operations have been
reclassified from continuing to discontinued operations for the three and
nine months ended January 31, 2007.

Note 5: 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 and depreciation and amortization (EBITDA)
and Free Cash Flow, which are non-GAAP measures.

     These measures are provided because we understand that certain
investors use this information when analyzing the financial position of
the solid waste industry, including us. Historically, these measures have
been key in comparing operating efficiency of publicly traded companies
within the industry, and assist investors in measuring our ability to meet
capital expenditure and working capital requirements. For these reasons,
we utilize these non-GAAP metrics to measure our performance at all
levels. These measures do not represent, and should not be considered as
alternatives to net cash provided by operating activities as determined in
accordance with GAAP.  Moreover, these measures do not necessarily
indicate whether cash flow will be sufficient for such items as working
capital or capital expenditures, or to react to changes in our industry or
to the economy generally. Because these measures are not calculated by all
companies in the same fashion, they may not be comparable to similarly
titled measures reported by other companies.

Following is a reconciliation of EBITDA to Net Cash Provided by
Operating Activities:
                                    Three Months Ended  Nine Months Ended
                                    ------------------  ------------------
                                    January   January   January   January
                                      31,       31,       31,       31,
                                      2007      2008      2007      2008
                                    --------  --------  --------  --------

Net Cash Provided by Operating
 Activities                         $ 16,159  $ 16,040  $ 56,448  $ 51,678

Changes in assets and liabilities,
 net of effects
 of acquisitions and divestitures        610      (527)    3,878    15,055
Deferred income taxes                    613     2,002      (464)    1,311
Stock-based compensation                (190)     (517)     (511)   (1,022)
Excess tax benefit on the exercise
 of stock options                          4        95       145       111
Provision for income taxes             1,026       496     4,420       960
Interest expense, net                  9,455    10,536    27,722    32,107
Preferred stock dividend                   -         -         -    (1,038)
Depletion of landfill operating
 lease obligations                    (1,682)   (1,467)   (5,543)   (4,815)
Income from assets under
 contractual obligation                    -        96         -     1,463
Gain (loss) on sale of equipment         152      (364)      591        54
Other income                             (49)      (56)     (350)     (275)
                                    --------  --------  --------  --------
EBITDA                              $ 26,098  $ 26,334  $ 86,336  $ 95,589
                                    ========  ========  ========  ========

               CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
                                Unaudited
                              (In thousands)

  Following is a reconciliation of Free Cash Flow to Net Cash Provided by
                          Operating Activities:


                                    Three Months Ended  Nine Months Ended
                                    ------------------  ------------------
                                    January   January   January   January
                                      31,       31,       31,       31,
                                      2007      2008      2007      2008
                                    --------  --------  --------  --------


EBITDA                              $ 26,098  $ 26,334  $ 86,336  $ 95,589
 Add (deduct):
             Cash interest            (4,515)   (7,803)  (20,094)  (27,129)
             Capital expenditures    (17,294)  (16,125)  (76,696)  (59,115)
             Cash taxes                 (648)      (81)   (2,241)   (1,851)
             Depletion of landfill
              operating lease
              obligations              1,682     1,467     5,543     4,815
             Change in working
              capital, adjusted for
              non-cash items          (6,348)   (3,631)  (11,493)  (13,513)
                                    --------  --------  --------  --------

FREE CASH FLOW                        (1,025)      161   (18,645)   (1,204)

Add (deduct):
            Capital expenditures      17,294    16,125    76,696    59,115
            Other                       (110)     (246)   (1,603)   (6,233)
                                    --------  --------  --------  --------
Net Cash Provided by Operating
 Activities                         $ 16,159  $ 16,040  $ 56,448  $ 51,678
                                    ========  ========  ========  ========


               CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
                         SUPPLEMENTAL DATA TABLES
                                (Unaudited)
                              (In thousands)

Amounts of the Company's total revenues attributable to services provided
                              are as follows:


                                 Three Months Ended  Nine Months Ended
                                     January 31,         January 31,
                                ------------------- -------------------
                                   2007 (1)    2008    2007 (1)    2008
                                --------- --------- --------- ---------
Collection                      $  62,132 $  64,649 $ 198,983 $ 202,981
Landfill / disposal facilities     24,183    23,979    82,590    82,147
Transfer                            4,948     5,606    18,774    20,644
Recycling                          37,576    47,125   109,290   137,027
                                --------- --------- --------- ---------
Total revenues                  $ 128,839 $ 141,359 $ 409,637 $ 442,799
                                ========= ========= ========= =========

(1) Revenue attributable to services provided for the three and nine
months ended January 31, 2007 has been revised to conform with the
classification of revenue attributable to services provided in the current
fiscal year.

Components of revenue growth for the three months ended January 31, 2008
compared to the three months ended January 31, 2007:

                                                               Percentage
                                                               ----------
Solid Waste Operations (1) Price                                      0.7%
                           Volume                                     0.4%
                           Solid waste commodity price and
                            volume                                    0.7%
                                                               ----------
Total growth - Solid Waste Operations                                 1.8%
                                                               ==========

FCR  Operations (1) Price                                            26.9%
                    Volume                                            5.2%
                                                               ----------
Total growth - FCR Operations                                        32.1%
                                                               ==========

Rollover effect of acquisitions (as a percentage of total
 revenues)                                                            0.7%

Total revenue growth                                                  9.7%

(1) - Calculated as a percentage of segment revenues.

Solid Waste Internalization Rates by Region:

                                          Three Months      Nine Months
                                          Ended January     Ended January
                                              31,               31,
                                        ----------------  ----------------
                                          2007     2008     2007     2008
                                        -------  -------  -------  -------
North Eastern region                       52.8%    61.4%    56.1%    59.8%
South Eastern region                       30.4%    29.0%    29.0%    28.3%
Central region                             77.1%    80.1%    77.4%    79.3%
Western region                             54.4%    62.2%    56.5%    61.0%
Solid Waste internalization                57.5%    61.7%    58.2%    60.6%

(1)  Internalization rates for the three and nine months ended January 31,
2007 have been revised to exclude the activity associated with the
Holliston Transfer Station as well as Buffalo Hauling and Buffalo Transfer.
The Company divested the assets of the Holliston Transfer Station during
the quarter ended April 30, 2007.  The Company divested the Buffalo
operations during the quarter ended October 31, 2007.


               CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
                         SUPPLEMENTAL DATA TABLES
                                (Unaudited)
                              (In thousands)

US GreenFiber (50% owned) Financial Statistics:


                                 Three Months Ended     Nine Months Ended
                                    January 31,           January 31,
                                --------------------  --------------------
                                  2007       2008       2007       2008
                                ---------  ---------  ---------  ---------
Revenues                        $  48,999  $  44,432  $ 145,525  $ 119,926
Net (loss) income                   2,634       (618)     5,418     (6,027)
Cash flow from operations           3,833      1,615     13,076      7,344
Net working capital changes        (1,439)      (810)       (58)     4,570
EBITDA                          $   5,272  $   2,425  $  13,134  $   2,774

As a percentage of revenue:

Net (loss) income                     5.4%      -1.4%       3.7%      -5.0%
EBITDA                               10.8%       5.5%       9.0%       2.3%

Components of Growth versus Maintenance Capital Expenditures (1):


                                          Three Months    Nine Months Ended
                                        Ended January 31,   January 31,
                                        ----------------- -----------------
                                          2007     2008     2007     2008
                                        -------- -------- -------- --------
Growth Capital Expenditures:
 Landfill Development                   $  3,282 $  5,502 $ 14,765 $ 10,625
 MRF Equipment Upgrades                    2,982      443    6,239      771
 Other                                     1,273      371    4,753    2,885
                                        -------- -------- -------- --------
Total Growth Capital Expenditures          7,537    6,316   25,757   14,281

Maintenance Capital Expenditures:
 Vehicles, Machinery / Equipment and
  Containers                               1,466    1,366   19,979    9,517
 Landfill Construction & Equipment         7,300    5,019   26,851   25,741
 Facilities                                  900    3,044    2,921    8,297
 Other                                        91      380    1,188    1,279
                                        -------- -------- -------- --------
Total Maintenance Capital Expenditures     9,757    9,809   50,939   44,834
                                        -------- -------- -------- --------

Total Capital Expenditures              $ 17,294 $ 16,125 $ 76,696 $ 59,115
                                        ======== ======== ======== ========

(1) The Company’s capital expenditures are broadly defined as pertaining to
either growth or maintenance activities.  Growth capital expenditures are
defined as costs related to development of new airspace, permit expansions,
new recycling contracts along with incremental costs of equipment and
infrastructure added to further such activities.  Growth capital
expenditures include the cost of equipment added directly as a result of
new business as well as expenditures associated with increasing
infrastructure to increase throughput at transfer stations and recycling
facilities.  Growth capital expenditures also include those outlays
associated with acquiring landfill operating leases, which do not meet the
operating lease payment definition, but which were included as a commitment
in the successful bid.  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.

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