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Casella Announces Q3 2018 Earnings, Two Acquisitions
The company had a strong quarter and just closed on the acquisitions of Boon & Sons, Inc. and Oceanside Rubbish, Inc.
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Rutland, Vt.-based Casella Waste Systems, Inc. has announced its earnings for the third quarter of 2018. For the quarter, revenues were $172.8 million, up $12.6 million, or 7.8 percent, from the same period in 2017.
According to Casella, revenue growth was mainly driven by robust collection and disposal pricing; higher organics and customer solutions volumes; and acquisition activity, which was partially offset by lower recycling commodity prices and volumes. Lower solid waste volumes due to the fire-related business interruption at a transfer station and lower collection and transportation volumes were also contributors.
“We had another strong operational quarter, as we continued to execute well against our key strategies as part of our 2021 plan,” said John W. Casella, chairman and CEO of Casella Waste Systems, Inc. in a statement. “We remain focused on driving normalized free cash flow growth by increasing landfill returns, improving collection profitability, creating incremental value through resource solutions, using technology to drive profitable growth and efficiencies and efficiently allocating capital for strategic growth.”
In addition to releasing its Q3 earnings, the company announced it has acquired the assets of Boon & Sons, Inc. and Oceanside Rubbish, Inc. The transactions closed on November 1, and Casella expects to generate approximately $16 million of annualized revenues from both acquisitions.
Boon is a provider of residential, commercial and roll-off collection services in the Rochester, N.Y., market, and Oceanside is a provider of residential, commercial and roll-off collection services and operates a transfer station in the Southern Maine marketplace.
“Boon and Oceanside are both leading operators in their respective markets and provide excellent service to their customers and the communities that they serve,” said Casella in a statement. “The Oceanside acquisition will tuck-in well with our existing operations and allow us to build further route density, drive operational efficiencies and internalize additional Maine waste into the Juniper Ridge landfill.”
“We are very excited about the acquisition of Boon, as their operations will integrate well with our operations in the Rochester market,” added Casella. “The Rochester market is an important strategic market for us, as it is a major population center that is in close proximity to three of our Western New York landfills. The Boon team is top-notch, and we are excited for their help and leadership in driving the integration of our Rochester operations.”
Other third quarter and year-to-date highlights include:
Overall solid waste pricing for the quarter was up 4.8 percent, driven by strong collection pricing, up 5.7 percent, and robust landfill pricing, up 4.1 percent, from the same period in 2017.
Net income was $22.3 million, or $0.50 per diluted common share, for the quarter, an increase in net income of $10.2 million, as compared to net income of $12.1 million, or $0.28 per diluted common share, for Q3 2017.
Adjusted net income was $13.4 million for Q3, up $0.3 million from the same period in 2017.
Adjusted EBITDA was $42.4 million, up $2.9 million, or 7.3 percent, from the same period in 2017.
Net cash provided by operating activities was $89.9 million year-to-date, up $10.8 million, or 13.7 percent, from Q3 2017.
Normalized free cash flow was $37.3 million year-to-date, up $2.9 million, or 8.5 percent, from Q3 2017.
With its two most recent acquisitions, the company has acquired approximately $70 million of annualized revenues year-to-date, exceeding its $20 million to $40 million target range for 2018.
As part of the company’s long-term, strategic 2021 plan, during the third quarter, Casella increased its average landfill price per ton by 8 percent and increased landfill tons volume year-over-year.
The third quarter included: recovery of a $10.0 million Southbridge Landfill environmental insurance settlement, partially offset by $0.5 million of legal expenses associated with the Southbridge Landfill closure; and $0.6 million of expense from acquisition activities and other items. The same period in 2017 included a $0.8 million Southbridge Landfill closure charge.
Operating income was $28.9 million for the quarter, as compared to operating income of $18.3 million for Q3 2017. Adjusted operating income was $20.0 million, up $0.9 million from the same period in 2017.
Operating income was $44.9 million year-to-date, as compared to operating loss of $22.4 million for Q3 2017. Adjusted operating income was $40.5 million year-to-date, down $2.0 million from the same period in 2017. Adjusted EBITDA was $104.2 million year-to-date, up $5.4 million from Q3 2017.
“On the operating side, outperformance in our solid waste, customer solutions and organics operations more than offset the significant commodity pricing headwinds in our recycling business,” Casella said in a statement. “Our disciplined solid waste pricing programs continue to drive significant value, with collection pricing up 5.7 percent and landfill pricing up 4.1 percent year-over-year in the third quarter. Solid waste volumes were down 1.0 percent year-over-year in the third quarter, with 0.7 percent of the decline resulting from a fire-related business interruption at a transfer station, and the remainder associated with our disciplined pricing strategy that is focused on balancing volume growth with higher pricing.”
In Q3, the company continued to face recycling headwinds. Commenting on the recycling side of the business, Casella said, “Our team has done a great job over the last several years working to off-take risk across our business, including recycling commodity pricing risk. As commodity prices stabilized in the third quarter, our trailing SRA fee and revenue share contracts, where applied, are now fully recovering lower commodity prices, albeit these programs are designed to recover costs and as a result have pressured margins. Despite this progress, operating income in the recycling line of business was down year-over-year, as we are still absorbing all of the commodity pricing risk on several legacy third-party processing contracts, and our variable processing and transportation costs are up significantly due to the market changes. Looking forward to 2019, we expect recycling results to improve even if commodity prices stay at historically low levels as several third-party recycling processing contracts will reset over the next 12 months.”
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