UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND 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 (I.R.S. Employer Identification No.)
incorporation or organization)
25 Greens Hill Lane, Rutland, Vermont 05701
- ------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (802) 775-0325
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 [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 4, 1998:
<TABLE>
<S> <C>
Class A Common Stock 13,819,473
Class B Common Stock 988,200
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------------- --------------------
April 30, October 31,
1998 1998
(Restated) (Unaudited)
- ------------------------------------------------------ ------------------- --------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $2,117 $1,960
Restricted Cash-Closure Fund Escrow 304 370
Accounts Receivable-trade, net of allowance 18,838 23,030
for doubtful accounts of $1,223 and $1,469.
Other Current Assets 3,854 2,877
------------- --------------------
Total Current Assets 25,113 28,237
------------- --------------------
Property, Plant and Equipment, net of
accumulated depreciation and amortization of
$44,962 and $54,571. 86,267 106,514
Intangible Assets, net 79,969 92,852
Restricted Funds-Closure Fund Escrow 3,865 4,263
Other Assets 1,952 1,424
------------- --------------------
$197,166 $233,290
============= ====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES and STOCKHOLDERS EQUITY
(In thousands, except for share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------------ --------------------
April 30, October 31,
1998 1998
(Restated) (Unaudited)
- ------------------------------------------------------ ------------------ --------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt $3,876 $3,032
Current Maturities of Capital Lease Obligations 481 374
Accounts Payable 11,700 15,142
Other Accrued Liabilities 5,923 6,715
------------- --------------------
Total Current Liabilities 21,980 25,263
------------- --------------------
Long-Term Debt, Less Current Maturities 78,064 51,319
------------- --------------------
Capital Lease Obligations, Less Current Maturities 1,085 1,027
------------- --------------------
Other Long-Term Liabilities 13,565 12,379
------------- --------------------
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY (DEFICIT):
Class A Common Stock - 112 138
Authorized - 100,000,000 Shares, $.01 par value
Issued and Outstanding - 11,224,848 and
13,848,581 shares.
Class B Common Stock - 10 10
Authorized - 1,000,000 Shares, $.01 par value;
10 Votes per Share.
Issued and Outstanding - 988,200 shares.
Additional Paid-In Capital 96,183 152,789
Accumulated Deficit (13,833) (9,635)
------------- --------------------
82,472 143,302
------------- --------------------
$197,166 $233,290
============== ====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------- -------------------------------
October 31, October 31, October 31, October 31,
1997 1998 1997 1998
(Restated) (Restated)
---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $33,572 $41,548 $65,052 $82,028
---------------- ---------------- ------------- -------------
Operating Expenses:
Cost of Operations 20,366 23,711 39,751 47,430
General and Administrative 4,832 5,936 9,249 11,794
Depreciation and Amortization 4,874 5,943 9,047 11,457
Merger Costs (Pooling) 0 755 0 755
---------------- ---------------- ------------- -------------
30,072 36,345 58,047 71,436
---------------- ---------------- ------------- -------------
Operating Income 3,500 5,203 7,005 10,592
---------------- ---------------- ------------- -------------
Other (Income) Expenses
Interest Income (113) (125) (163) (202)
Interest Expense 2,344 837 4,282 2,640
Other Expense (Income), net (119) (68) 5 (326)
---------------- ---------------- ------------- -------------
2,112 644 4,124 2,112
---------------- ---------------- ------------- -------------
Income Before Provision for Income Taxes and
Extraordinary Items 1,388 4,559 2,881 8,480
Provision for Income Taxes 723 1,915 1,392 3,581
---------------- ---------------- ------------- -------------
Net Income 665 2,644 1,489 4,899
================ ================ ============= =============
Accretion of Preferred Stock and Put Warrants (3,623) 0 (5,736) 0
---------------- ---------------- ------------- -------------
Net Income (Loss) Applicable to Common
Stockholders ($2,958) $2,644 ($4,247) $4,899
================ ================ ============= =============
Basic Earnings per Share of Common Stock ($0.57) $0.18 ($0.82) $0.36
================ ================ ============= =============
Basic Weighted Average Common Stock
Shares Outstanding 5,203 14,716 5,183 13,535
================ ================ ============= =============
Diluted Earnings per Share ($0.57) $0.17 ($0.82) $0.34
================ ================ ============= =============
Diluted Weighted Average Common Stock and
Common Stock Equivalent Shares Outstanding 5,203 15,576 5,183 14,497
================ ================ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1997 and 1998
(In thousands)
<TABLE>
<CAPTION>
1997 1998
(Restated) (Unaudited)
---------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $1,489 $4,899
---------- ---------------
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities-
Depreciation and Amortization 9,047 11,457
(Gain) Loss on Sale of Equipment (64) (20)
Changes in Assets and Liabilities, net of
Effects of Acquisitions -
Accounts Receivable (3,334) (3,613)
Accounts Payable 1,644 2,024
Other Current Assets/Liabilities (2,965) 2,650
---------- ---------------
4,328 12,498
---------- ---------------
Net Cash Provided by Operating Activities 5,817 17,397
---------- ---------------
Cash Flows from Investing Activities:
Acquisitions, net of Cash Acquired (5,736) (20,527)
Additions to Property and Equipment (10,012) (21,846)
Proceeds from Sale of Equipment 167 193
Other Assets/Liabilities (271) (3,224)
---------- ---------------
Net Cash Used in Investing Activities (15,852) (45,404)
---------- ---------------
Cash Flows from Financing Activities:
Call of Redeemable Stock Warrants (525) 0
Distributions to Shareholders - Pooled Entity (323) 0
Proceeds from Issuance of Common Stock 174 56,678
Proceeds from Long-Term Borrowings 93,130 35,020
Principal Payments on Long-Term Debt (81,628) (63,684)
Principal Payments on Capital Leases (759) (164)
---------- ---------------
Net Cash Provided by Financing Activities 10,069 27,850
---------- ---------------
Net Increase in Cash and Cash Equivalents 34 (157)
Cash and Cash Equivalents, Beginning of Period 1,489 2,117
---------- ---------------
Cash and Cash Equivalents, End of Period $1,523 $1,960
========== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED OCTOBER 31, 1997 and 1998
(In thousands)
<TABLE>
<CAPTION>
1997 1998
(Restated) (Unaudited)
--------------- ----------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for -
Interest $4,154 $2,837
=============== ================
Income Taxes $502 $916
=============== ================
Supplemental Disclosures of Noncash Investing and
Financing Activities:
Summary of Entities Acquired -
Fair Market Value of Assets Acquired $12,318 $23,141
Cash Paid (5,736) (20,527)
--------------- ----------------
Liabilities Assumed and Notes Payable to
Sellers $6,582 $2,614
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The condensed consolidated balance sheets of Casella Waste Systems, Inc. and
Subsidiaries (the "Company") as of April 30, 1998 and October 31, 1998, the
consolidated statements of operations for the three months and six months ended
October 31, 1997 and 1998, and the consolidated statements of cash flows for the
six months ended October 31, 1997 and 1998 are unaudited. In the opinion of
management, such financial statements include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of financial
position, results of operations, and cash flows for the periods presented. The
Company has restated the previously issued audited balance sheet dated April 30,
1998 to reflect the merger with Waste Stream (see note 1) consummated on October
29, 1998, accounted for using the pooling of interests method of accounting. The
Company has restated the previously issued consolidated statements of operations
for the three and six months ended October 31, 1997 and consolidated statement
of cash flows for the six months ended October 31, 1997 to reflect the merger
with All Cycle and Waste Stream (see note 1), consummated on December 19, 1997
and October 29, 1998, respectively, accounted for using the pooling of interests
method of accounting. The consolidated financial statements presented herein
should be read in connection with the Company's audited consolidated financial
statements as of and for the twelve months ended April 30, 1998. These were
included as part of the Company's Annual Report on Form 10-K (the "Annual
Report").
1. BUSINESS COMBINATIONS
Transactions Recorded as a Pooling of Interests
On December 19, 1997, the Company completed its merger with All Cycle Waste,
Inc. and Winters Brothers, Inc. (together - "All Cycle") in a business
combination recorded as a pooling of interests and accordingly the accompanying
consolidated statements of operations and cash flows for the three and six
months ended October 31, 1997 have been restated to include All Cycle. The two
businesses acquired were under common control, and the transaction was
considered to be and accounted for as a single acquisition. The Company issued
416,103 shares of its Class A Common Stock for all of the outstanding stock of
All Cycle Waste, Inc. and 187,244 shares of its Class A Common Stock for all of
the outstanding stock of Winters Brothers, Inc. All intercompany transactions
have been eliminated.
On September 4, 1998 the Company completed its merger with Hakes C & D Disposal,
Inc. in a business combination recorded as a pooling of interests. This facility
is a landfill in western New York State permitted to accept construction and
demolition material. As of the merger date the facility construction was not
complete and the facility had not begun accepting waste. Since there had been no
material operations activity as of the merger date, aside from construction,
prior period balance sheets and statements of operations and cash flows have not
been restated. The Company issued 67,617 shares of its class A common stock for
all of the outstanding stock of Hakes C & D Disposal, Inc. This transaction has
been accounted for as an immaterial pooling on the date of acquisition.
Accordingly, retained earnings has been adjusted to reflect the accumulated
deficit of Hakes C & D Disposal.
On October 29, 1998, the Company completed its merger with Waste Stream Inc.,
B&C Sanitation Corporation, North Country Trucking, Inc., Better Bedding Corp.,
R.A. Bronson, Inc., BBC LLC, NTC LLC and Grasslands, Inc., (together - "Waste
Stream") in a business combination recorded as a pooling of interests and
accordingly all Casella historical results have been restated to include Waste
Stream. The businesses acquired were under common control, and the transaction
was considered to be and accounted for as a single acquisition. The Company
issued 701,461 shares of its class A common stock for all of the outstanding
stock of Waste Stream.
<PAGE>
Following is a reconciliation of the amounts (in thousands) of revenues and net
income previously reported for the three and six months ended October 31, 1997:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
October 31, 1997 October 31, 1997
<S> <C> <C>
Revenues:
As previously reported $28,420 $54,850
All Cycle 3,112 6,208
Waste Stream 3,455 6,769
Elimination of intercompany (1,415) (2,775)
revenue
As restated $33,572 $65,052
Net income:
As previously reported $ 844 $ 1,603
All Cycle (207) (182)
Waste Stream 28 68
As restated $ 665 $ 1,489
</TABLE>
Transactions Recorded as Purchases
During the year ended April 30, 1998, the Company completed 33 acquisitions of
solid and liquid waste hauling operations, exclusive of the pooling transactions
described above, for approximately $35.8 million in cash, $5.2 million in notes
to sellers and liabilities assumed and 103,132 shares of class A common stock
issued. These transactions were accounted for as purchases.
During the six months ended October 31, 1998, the Company acquired 22 solid and
liquid waste hauling operations, one private solid waste landfill and one wood
processing facility in transactions accounted for as purchases. These
transactions were in exchange for consideration of approximately $20.5 million
in cash and $2.6 million in notes to sellers and liabilities assumed. The
operating results of these businesses are included in the Consolidated Statement
of Operations from the dates of acquisition. The purchase prices have been
allocated to the net assets acquired based on fair values at the dates of
acquisition with the residual amounts allocated to goodwill.
The following unaudited pro forma combined information (rounded to thousands
except for per share data) shows the results of the Company's operations as
though each of the completed acquisitions had occurred as of May 1, 1997:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
October 31, 1997 October 31, 1998
----------------- ----------------
<S> <C> <C>
Revenues $84,037 $84,074
Operating Income 7,845 10,704
Net Income 1,120 4,817
Pro forma income (loss) per share - $0.11 $0.33
diluted
Weighted average common stock 9,967 14,497
shares outstanding - diluted
</TABLE>
<PAGE>
The pro forma results have been prepared for comparative purposes only and are
not necessarily indicative of the actual results of operations had the
acquisitions taken place as of May 1, 1997 or the results of future operations
of the Company. Furthermore, the pro forma results do not give effect to all
cost savings or incremental costs that may occur as a result of the integration
and consolidation of the completed acquisitions.
2. COMMITMENTS AND CONTINGENCIES
On May 12, 1998, the Company filed suit in New York Supreme Court, Allegany
County against the Town of Angelica, New York seeking a temporary restraining
order and preliminary injunctive relief against the Town's enforcement of a
recently-enacted local law which would prohibit the expansion of the Hyland
landfill, would require the landfill and the operator thereof to receive an
additional permit from the Town of Angelica to continue to operate, would
prevent the disposal of yard waste, may preclude the disposal of certain types
of industrial waste and would impose certain other restrictions on the landfill.
A temporary restraining order was granted by the court on May 14, 1998 in favor
of the Company, and by a decision dated July 13, 1998, the court granted the
Company's motion for a preliminary injunction. On September 9, 1998 the Town of
Angelica filed a Notice of Appeal but has not yet perfected that appeal. If the
Company is not successful in its lawsuit, and if the Town of Angelica seeks to
enforce the law by its terms, then the Company would be required to obtain an
additional permit from the Town of Angelica to operate the Hyland landfill, the
expansion of the landfill beyond the current permitted capacity would be
prohibited, and the Company would be unable to dispose of yard waste and may be
precluded from disposing of industrial waste at the landfill. There can be no
assurance that such limitations would not have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
began accepting waste at the Hyland facility on July 22, 1998.
The Company's wholly-owned subsidiary, North Country Environmental Services,
Inc, ("NCES"), is a party to consolidated civil actions (Case Nos. 98-E-141 and
98-E-151) against the Town of Bethlehem, New Hampshire (the "Town"), before the
Grafton Superior Court in North Haverhill, New Hampshire. On October 16, 1998,
NCES commenced an action for declaratory relief against the Town seeking, on a
variety of grounds, to invalidate a Town zoning ordinance which purports to
prohibit the expansion of NCES's Landfill beyond its currently permitted
capacity. It is the Town's position that NCES may not expand the landfill beyond
Stage II, Phase I, which NCES believes will be at capacity in January 1999. NCES
has also sought a declaration that it requires no further approvals from the
Town to expand the landfill throughout its 87-acre parcel and that certain
financial exactions imposed by a 1986 Town land-use approval are invalid. In the
alternative, NCES has sought compensation under state law for the inverse
condemnation of its property.
On October 23, 1998, the Town filed a petition for injunctive and declaratory
relief against NCES. The Town's petition sought to enjoin NCES's construction of
Stage II, Phase II of the landfill and to prevent any further expansion as
violative of the above-noted Town zoning ordinance.
NCES may not commence operations in Stage II, Phase II, until the New Hampshire
Department of Environmental Services ("NHDES") issues an operating permit. NHDES
has notified NCES that it will not issue operating approval until the litigation
with the Town is resolved. On November 30, 1998, NCES and the Town proceeded to
and concluded trial on eight of NCES's eleven claims for relief and on the
Town's claims for permanent injunctive and declaratory relief. Earlier, the
remaining three NCES
<PAGE>
claims were bifurcated for later trial, if needed. On that same day, the Town
filed two counterclaims seeking to establish the lawfulness of the financial
exactions challenged by NCES's October 16, 1998 petition. The court has taken
the claims which have been tried under advisement. NCES does not know when the
court may rule.
The Company is a party to various other litigation matters arising in the
ordinary course of business. Management believes that the ultimate resolution of
these matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
In the normal course of business and as a result of the extensive government
regulation of the solid waste industry, the Company periodically may become
subject to various judicial and administrative proceedings and investigations
involving federal, state, or local agencies. To date, the Company has not been
required to pay any material fine or had a judgment entered against it for
violation of any environmental law. From time to time, the Company also may be
subjected to actions brought by citizens groups in connection with the
permitting of landfills or transfer stations, or alleging violations of the
permits pursuant to which the Company operates. From time to time, the Company
is also subject to claims for personal injury or property damage arising out of
accidents involving its vehicles or other equipment.
3. ENVIRONMENTAL LIABILITIES
The continuing business in which the Company is engaged is intrinsically
connected with the protection of the environment. As such, a significant portion
of the Company's operating costs and capital expenditures could be characterized
as costs of environmental protection. While the Company is faced, in the normal
course of business, with the need to expend funds for environmental protection
and remediation, it does not expect such expenditures to have a material adverse
effect on its financial condition or results of operations because its business
is based upon compliance with environmental laws and regulations and its
services are priced accordingly. In addition, as part of its ongoing operations,
the Company provides for estimated closure and post-closure monitoring costs
over the life of disposal sites as airspace is consumed. While all these costs
may increase in the future as a result of legislation or regulation, the Company
believes that in general it tends to benefit when government regulation
increases, since this may increase the demand for its services. Furthermore, the
Company believes it has the resources and experience to manage environmental
risk.
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which
supercedes Accounting Principal Board opinion No. 15 and establishes new
accounting standards for the presentation of earnings per share. Primary EPS is
replaced by Basic EPS, which is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Fully Diluted EPS is replaced with Diluted EPS, which gives effect to
all common shares that would have been outstanding if all dilutive potential
common shares (relating to such things as the exercise of stock warrants and
convertible preferred stock) had been issued. The treasury stock method used to
compute the number of potentially-dilutive shares that would be repurchased with
the proceeds of potential stock issuances has been changed. The treasury stock
method now requires use of the average share price for the period instead of the
greater of the ending share price or the average share price.
The following is a reconciliation of the ending number of shares outstanding
with the number of shares used in the calculation of basic and diluted earnings
per share (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Three months Six months Three months Six months
ended 10/31/97 ended 10/31/97 ended 10/31/98 ended 10/31/98
<S> <C> <C> <C> <C>
Number of shares outstanding, end of period:
Class A common stock 4,224 4,224 13,849 13,849
Class B common stock 1,000 1,000 988 988
Effect of weighting the average shares
outstanding during the period (21) (41) (121) (1,302)
Basic shares outstanding 5,203 5,183 14,716 13,535
Impact of potentially dilutive -0- -0- 860 962
securities
Fully diluted shares outstanding: 5,203 5,183 15,576 14,497
</TABLE>
Diluted earnings per share are not presented for the three and six months ended
October 31, 1997 because they are anti-dilutive. The number of potentially
dilutive securities excluded from the earnings per share calculation for these
periods was 4,800,912 and 4,784,709, respectively.
5. RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("Statement 130").
Statement 130 establishes standards for reporting and presentation of
comprehensive income and its components. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources and includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. The Company adopted Statement 130 effective May 1, 1998
and there was no effect on the Company's financial statements upon adoption.
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("Statement 131"). Statement 131 establishes standards for
reporting information about operating segments in annual financial statements
that requires that those enterprises report selected information about operating
segments in the interim financial reports issued to shareholders. Statement 131
is effective for fiscal years beginning after December 15, 1997. Adoption is not
required for interim periods in the initial year of application. The Company
believes that the adoption of Statement 131 will not have a material effect on
the Company's Financial Statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("Statement 133"). Statement 133 establishes accounting,
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
Statement 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement Statement 133 as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). The Company has yet to quantify the impacts of adopting Statement
133 on its financial statements and has not determined the timing or method of
adoption. However, Statement 133 could increase volatility in earnings and other
comprehensive income.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company is a regional, integrated solid waste services company that provides
collection, transfer, disposal and recycling services in Vermont, New Hampshire,
Maine, northern Massachusetts, upstate New York and northern Pennsylvania. The
Company's objective is to continue to grow by expanding its services in markets
where it can be one of the largest and most profitable fully-integrated solid
waste services companies.
The Company's revenues have increased from $33.6 million for the three months
ended October 31, 1997 to $41.5 million for the three months ended October 31,
1998. For the six-month periods ending on these dates revenues increased from
$65.1 million to $82.0 million respectively. From May 1, 1997 through April 30,
1998, the Company acquired 34 solid waste collection, transfer and disposal
operations. Between May 1, 1998 and October 31, 1998, the Company acquired an
additional 26 such businesses, including the Hyland Landfill, a Subtitle D
landfill in western upstate New York, and Hakes C & D Landfill, a C & D disposal
facility in western New York State. All but three of these acquisitions were
accounted for under the purchase method of accounting for business combinations.
Under the rules of purchase accounting, the acquired companies' revenues and
results of operations have been included together with those of Casella Waste
Systems, Inc. from the actual dates of the acquisitions and will materially
affect the period-to-period comparisons of the Company's historical results of
operations. In December 1997 and October 1998 the Company acquired waste
collection and transfer operations in transactions recorded as poolings of
interests. In September 1998 the Company acquired the Hakes C & D landfill in a
transaction recorded as a pooling of interests. This transaction has been
accounted for as an immaterial pooling on the date of acquisition. Accordingly,
retained earnings has been adjusted to reflect the accumulated deficit of the
C & D facility.
This Quarterly Report and other reports, proxy statements, and other
communications to stockholders, as well as oral statements by the Company's
officers or its agents, may contain forward-looking statements within the
meaning of Section 27A of the Securities Act, with respect to, among other
things, the Company's future revenues, operating income, or earnings per share.
Without limiting the foregoing, any statements contained in this Quarterly
Report that are not statements of historical fact may be deemed to be
forward-looking statements, and the words "believes", "anticipates", "plans",
"expects", and similar expressions are intended to identify forward-looking
statements. There are a number of factors of which the Company is aware that may
cause the Company's actual results to vary materially from those forecast or
projected in any such forward-looking statement, certain of which are beyond the
Company's control. These factors include, without limitation, those outlined
below in the section entitled `Certain Factors That May Affect Future Results'.
The Company's failure to successfully address any of these factors could have a
material adverse effect on the Company's results of operations.
General
The Company's revenues are attributable primarily to fees charged to customers
for solid and liquid waste collection, landfill, transfer and recycling
services. The Company derives a substantial portion of its collection revenues
from commercial, industrial and municipal services that are generally performed
under service agreements or pursuant to contracts with municipalities. The
majority of the Company's residential collection services are performed on a
subscription basis with individual households. Landfill and transfer customers
are charged a tipping fee on a per ton basis for disposing of their solid waste
at the Company's disposal facilities and transfer stations. The majority of the
Company's landfill and transfer customers are under one-year to ten-year
disposal contracts, with most having clauses for annual cost of living
increases. Recycling revenues consist of revenues from the sale of recyclable
commodities and from the sale of tire derived fuel. Other revenues consist
primarily of revenue from septic/liquid waste operations and other sources. The
Company's revenues are shown net of intercompany eliminations. The Company
typically establishes its intercompany transfer pricing based upon prevailing
market rates.
The table below shows, for the periods indicated, the percentage of the
Company's revenues attributable to services provided. The increase in the
Company's collection revenues as a percentage of revenues in the current fiscal
quarter is primarily attributable to the impact of the Company's acquisition of
collection businesses during fiscal 1998 and during the first two quarters of
fiscal 1999, as well as to internal growth through price and business volume
<PAGE>
increases. The decrease in the Company's landfill revenues and in the Company's
transfer revenues as a percentage of revenues in the current fiscal year is
mainly due to a proportionately greater increase in collection revenues
occurring as the result of acquisitions in that area; also, as the Company
acquires collection businesses from which it previously had derived transfer or
disposal revenues, the acquired revenues are recorded by the Company as
collection revenues. The decrease in recycling revenue is due primarily to
decreased prices received from the sale of recycled commodities. The increase in
liquid waste and other revenues as a percentage of revenues in the current
fiscal year is primarily due to the impact of acquisitions of septic/liquid
waste operations since the first quarter of fiscal 1999.
<TABLE>
<CAPTION>
% of Revenue
------------
Three months ended Six months ended
------------------ ----------------
10/31/97 10/31/98 10/31/97 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Collection 73.4% 76.3% 72.6% 76.5%
Landfill 12.6 9.5 12.8 9.3
Transfer 5.5 5.2 6.1 5.0
Recycling 6.4 5.7 5.9 5.8
Liquid Waste & Other 2.1 3.3 2.6 3.4
Total Revenue 100.0% 100.0% 100.0% 100.0%
</TABLE>
Cost of operations includes labor, tipping fees paid to third party disposal
facilities, fuel, maintenance and repair of vehicles and equipment, worker's
compensation and vehicle insurance, the cost of purchasing materials to be
recycled, third party transportation expense, district and state taxes, host
community fees and royalties. Landfill operating expenses also include a
provision for closure and post-closure expenditures anticipated to be incurred
in the future, and leachate treatment and disposal costs.
General and administrative expenses include management, clerical and
administrative compensation and overhead, professional services and costs
associated with the Company's marketing and sales force and community relations
expense.
Depreciation and amortization expense includes depreciation of fixed assets over
the estimated useful life of the assets using the straight line method,
amortization of landfill airspace assets under the units-of-production method,
and the amortization of goodwill and other intangible assets using the straight
line method. The amount of landfill amortization expense related to airspace
consumption can vary materially from landfill to landfill depending upon the
purchase price and landfill site and cell development costs. The Company
depreciates all fixed and intangible assets, excluding non-depreciable land,
down to a $0 net book value, and does not apply a salvage value to any of its
fixed assets.
Certain direct landfill development costs, such as engineering, permitting,
legal, construction and other costs directly associated with expansion of
existing landfills, are capitalized by the Company. Additionally, the Company
also capitalizes certain third party expenditures related to pending
acquisitions, such as legal and engineering. The Company will have material
financial obligations relating to closure and post-closure costs of its existing
landfills and any disposal facilities which it may own or operate in the future.
The Company has provided and will in the future provide accruals for future
financial obligations relating to closure and post-closure costs of its
landfills (generally for a term of 30 years after final closure of a landfill)
based on engineering estimates of consumption of permitted landfill airspace
over the useful life of any such landfill. There can be no assurance that the
Company's financial obligations for closure or post-closure costs will not
exceed the amount accrued and reserved or amounts otherwise receivable pursuant
to trust funds. The Company routinely evaluates all such capitalized costs, and
expenses those costs related to projects not likely to be successful. Internal
and indirect landfill development and acquisition costs, such as executive and
corporate overhead, public relations and other corporate services, are expensed
as incurred.
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage
relationship that certain items from the Company's Consolidated Financial
Statements bear in relation to revenues.
<TABLE>
<CAPTION>
% of Revenue
------------
Three months ended Six months ended
------------------ ----------------
10/31/97 10/31/98 10/31/97 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of operations 60.7 57.1 61.1 57.8
General and administrative 14.4 14.3 14.2 14.4
Depreciation and amortization 14.5 14.3 13.9 14.0
Merger-related costs -0- 1.8 -0- 0.9
Operating income 10.4 12.5 10.8 12.9
Interest expense, net 6.7 1.7 6.4 3.0
Other (income) expense (0.4) (0.2) (0.1) (0.4)
Provision for income taxes 2.1 4.6 2.2 4.3
Net income 2.0 6.4 2.3 6.0
EBITDA* 24.9 26.8 24.7 26.9
</TABLE>
* See discussion and computation of EBITDA below.
Revenues. Revenues increased $8.0 million, or 23.8%, to $41.5 million in the
quarter ended October 31, 1998 from $33.6 in the quarter ended October 31, 1997.
For the six months ended October 31, 1998 revenue increased $17.0 million or
26.1% to $82.0 million from $65.1 in revenues in the six months ended October
31, 1997. Of this increase, $5.6 million of the second quarter growth and $12.3
million of the year-to-date growth was due to the impact of businesses acquired
during the year ended April 30, 1998 and during the current fiscal year. The
balance of the increase was due to internal volume and price growth.
Cost of Operations. Cost of operations increased approximately $3.3 million, or
16.4%, to $23.7 million in the quarter ended October 31, 1998 from $20.4 million
in the same quarter of the prior fiscal year. For the six month periods ended
October 31, cost of operations increased $7.7 million or 19.3% from $39.8
million to $47.4 million. Cost of operations as a percentage of revenues
decreased to 57.8% in the current fiscal year from 61.1% in the prior year. In
the quarter ended October 31, 1998, cost of operations was 57.1% of revenue
compared to 60.7% in the same quarter of the prior fiscal year. The decrease was
primarily the result of: (i) productivity improvements in the Company's
collection operations as a result of better route density from acquisitions,
routing efficiencies through route audits and front-end loader vehicle
conversions completed throughout fiscal 1998 and the first two quarters of
fiscal 1999; and (ii) margin improvements because of price increases in fiscal
1998 and the first two quarters of fiscal 1999.
General and Administrative. General and administrative expenses increased
approximately $1.1 million, or 22.8%, to $5.9 million in the second quarter of
fiscal 1999 from $4.8 million in the same quarter of fiscal 1998. Year to date,
general and administrative expenses have increased $2.5 million or 27.5% to
$11.8 million compared to prior year expenses of $9.2 million. General and
administrative expenses decreased as a percentage of revenues for the three
month periods but increased as a percentage of revenues for the six month
periods. However, certain general and administrative expenses were previously
classified by the Company as costs of operations in fiscal 1998. This amounted
to approximately $475,000 of reclassified expenses during the first two quarters
of fiscal 1999. If the Company had not made this reclassification, general and
administrative expense as a percentage of revenues would have decreased for both
the quarter ended October 31, 1998 and for the six months ended October 31, 1998
compared with the same periods in the prior year.
<PAGE>
Depreciation and Amortization. Depreciation and amortization expense increased
$1.1 million, or 21.9%, to $5.9 million in the second quarter of fiscal 1999
from $4.9 million in the same quarter of the prior fiscal year. During the six
months ended October 31, 1998, depreciation and amortization increased $2.4
million or 26.6% to $11.5 million from $9.0 million in the same period of the
prior year. As a percentage of revenues, depreciation and amortization expense
have remained approximately level in the periods under discussion. During the
prior fiscal year, the Company benefited from low cost landfill airspace at
Clinton County's unlined landfill which significantly lowered landfill
amortization expense in the first quarter of fiscal 1998. Clinton County's
unlined landfill was permanently closed on July 15, 1997. The increase in
depreciation and amortization resulting from this change has been offset in part
by the increased concentration of revenues in collections activities, which
typically have lower depreciation and amortization charges relative to revenues
compared to landfill revenues.
Merger Costs. The merger related costs of $755 thousand recorded in the second
quarter of the current fiscal year were incurred in association with the Hakes
and Waste Stream mergers, accounted for as poolings of interests. The
transactions are discussed above under 'Notes to Consolidated Financial
Statements'.
Interest expense, net. Net interest expense decreased approximately $1.5
million, or 68.1% to $0.7 million in the quarter ended October 31, 1998 from
$2.2 million in the same quarter of the prior fiscal year. For the year to date,
net interest decreased $1.7 or 40.8% to $2.4 million from $4.1 million during
the same period last year. This decrease primarily reflects the reduction of the
outstanding balance under the Company's acquisition line of credit and other
notes payable from the proceeds of the Company's public stock offerings in
November, 1997 and July, 1998.
Other (income) expense, net. Net other (income) expense has not historically
been material to the Company's results of operations.
Provision for income taxes. Provision for income taxes increased approximately
$2.2 million to $3.6 million in the current fiscal year from $1.4 million in
fiscal 1998. For the current quarter the increase was $1.2 million to $1.9
million from $723 thousand for the quarter ended October 31, 1997. This increase
reflects the Company's increase in profits in the current fiscal year over to
the prior year. The combined effective tax rate used by the Company in recording
taxes for interim periods has been decreased from 48.3% in fiscal 1998 to 42.2%
in the current fiscal year. This reflects the decreased relative effect of
various fixed non-deductible expenses compared to the Company's increased
pre-tax income.
Liquidity and Capital Resources
The Company's business is capital intensive. The Company's capital requirements
include acquisitions, fixed asset purchases and capital expenditures for
landfill development, cell construction, and site and cell closure. The Company
had positive net working capital of $3.1 million at April 30, 1998 and positive
net working capital of $2.9 million at October 31, 1998.
The Company has a $150 million revolving line of credit with a group of banks
for which BankBoston, N.A. is acting as agent. This line of credit is secured by
all assets of the Company, including the Company's interest in the equity
securities of its subsidiaries. This revolving line of credit matures in
January, 2003. Funds available to the Company under this line of credit were
$105.7 million at October 31, 1998.
The Company believes that its cash provided internally from operations together
with the Company's available credit facilities should enable it to meet its
needs for working capital for the next twelve months.
Net cash provided by operating activities for the first six months of fiscal
1998 and fiscal 1999 was $5.8 million and $17.4 million, respectively. The
increase was primarily due to the increase in the Company's net income for the
six months ended October 31, 1998 over the prior fiscal year, an increase in
depreciation and amortization and increased closure/post closure accruals.
Cash used in investing activities increased $29.6 million from $15.9 million to
$45.4 million in the six months ended October 31, 1998 over the same period of
the prior fiscal year. The increase in investing activities reflects the
Company's capital expenditures and capital needs for acquisitions, reflecting
the Company's rapid growth by
<PAGE>
acquisition and development of revenue producing assets. The Company's cash
needs to fund investing activities are expected to increase further as the
Company continues to complete acquisitions.
Net cash provided by financing activities was $27.9 million in the six months
ended October 31, 1998 compared to $10.1 million for the same period of the
prior year. The net cash provided by financing activities in the current fiscal
year reflects the net proceeds of the follow-on offering and borrowings on the
Company's credit facility, offset by repayments. Net cash provided by financing
activities in the comparable period of the prior year reflects primarily bank
borrowings and seller subordinated notes, less principal payments on debt.
Seasonality
The Company's revenues have historically been lower during the months of
November through March. This seasonality reflects the lower volume of waste
during the late fall, winter and early spring months primarily because: (i) the
volume of waste relating to construction and demolition activities decreases
substantially during the winter months in the northeastern United States; and
(ii) decreased tourism in Vermont, Maine and eastern New York during the winter
months tends to lower the volume of waste generated by commercial and restaurant
customers, which is partially offset by the winter ski industry. Since certain
of the Company's operating and fixed costs remain constant throughout the fiscal
year, operating income results are therefore impacted by a similar seasonality.
In addition, particularly harsh weather conditions could result in increased
operating costs to certain of the Company's operations.
The Company's quarterly revenues and operating results have varied significantly
in the past and are likely to vary substantially from quarter to quarter in the
future. The Company establishes its expenditure levels based on its expectations
as to future revenues, and, if revenue levels are below expectations, expenses
can be disproportionately high. Due to a variety of factors including general
economic conditions, governmental regulatory action, acquisitions, capital
expenditures and other costs related to the expansion of operations and services
and pricing changes, it is possible that in some future quarter, the Company's
operating results will be below the expectations of public market analysts and
investors. In such events, the Company's Class A Common Stock price would likely
be materially and adversely affected.
Inflation and Prevailing Economic Conditions
To date, inflation has not had a significant impact on the Company's operations.
Consistent with industry practice, most of the Company's contracts provide for a
pass through of certain costs, including increases in landfill tipping fees and,
in some cases, fuel costs. The Company therefore believes it should be able to
implement price increases sufficient to offset most cost increases resulting
from inflation. However, competitive factors may require the Company to absorb
at least a portion of these cost increases, particularly during periods of high
inflation.
The Company's business is located in the northeastern United States. Therefore,
the Company's business, financial condition and results of operations are
susceptible to downturns in the general economy in this geographic region and
other factors affecting the region such as state regulations and severe weather
conditions. The Company is unable to forecast or determine the timing and/or the
future impact of a sustained economic slowdown.
Year 2000 Issues
The Year 2000 concern concerns the inability of information and non-information
systems, primarily computer software programs, to properly recognize and process
date sensitive information as the Year 2000 approaches. The Company has
completed numerous acquisitions in recent years, and the information systems of
some of the acquired operations have not been fully integrated with the
Company's information systems. System database modifications and/or
implementation modifications will be required to enable such information and
non-information systems to distinguish between 21st and 20th century dates. The
Company cannot reasonably estimate Year 2000 implementation costs at this point,
but expects to have reasonable estimates by the end of the current fiscal year.
While some non-critical systems may not be addressed until after the current
fiscal year, the Company believes such systems will not disrupt the Company's
operations in a material manner. The Company expects to have formulated any
contingency plans by the end of the current fiscal year.
<PAGE>
The Company uses well-regarded nationally known software vendors for both its
general accounting applications and industry-specific customer information and
billing systems. The Company has been informed that the general accounting
package which the Company uses is fully Year 2000 compatible, and the provider
of the solid waste industry customer information and billing system has made
available a Year 2000 compatible version of its software at no charge to the
Company which the Company has installed and tested.
The Company's banking arrangements are with an international banking institution
which has informed the Company that it is taking all necessary steps to insure
its customers' uninterrupted service throughout applicable Year 2000 time
frames. The Company's payroll is performed out-of-house by the largest provider
of 3rd party payroll services in the country, which has made a commitment of
uninterrupted service to their customers throughout applicable Year 2000 time
frames.
The Company is currently in the early stages of reviewing and evaluating the
potential effect of this issue on its personal computer applications, including
weight-measurement applications, and on its equipment and suppliers of data
communications and other services. No material issues have been identified.
None of the Company's customers individually represents a large enough share of
the Company's revenues to materially affect overall Company revenues in the
event of an individual customer experiencing Year 2000 problems. The Company
believes that the same is true of any of the Company's suppliers of goods and
services, aside from those discussed above. However, the Company is continuing
to evaluate its exposure to Year 2000 issues, including on its information
technologies and non-information technology systems.
EBITDA
EBITDA represents operating income (earnings before interest and taxes, or
"EBIT") plus depreciation and amortization expense. EBITDA is not a measure of
financial performance under generally accepted accounting principles, but is
provided because the Company understands that certain investors use this
information when analyzing the financial position and performance of the
Company.
Amounts in thousands:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
10/31/97 10/31/98 10/31/97 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating income $3,500 $ 5,203 $ 7,005 $10,592
Depreciation and amortization 4,874 5,943 9,047 11,457
EBITDA $8,374 $11,146 $16,052 $22,049
EBITDA as a percentage of revenue 24.9% 26.8% 24.7% 26.9%
</TABLE>
Analysis of the factors contributing to the change in EBITDA is included in the
discussions above.
Certain Factors That May Affect Future Results
The following important factors, among others, could cause actual results to
differ materially from those indicated by forward-looking statements made in
this Quarterly Report and presented elsewhere by management from time to time.
The Company's objective is to continue to grow by expanding its services in
markets where it can be one of the largest and most profitable fully-integrated
solid waste services companies. Such growth, if it were to occur, could place a
significant strain on the Company's management and operational, financial and
other resources.
The Company has incurred net losses in the past. There can be no assurance that
the Company will be profitable in the future.
<PAGE>
The Company's strategy envisions that a substantial part of the Company's future
growth will come from making acquisitions consistent with its strategy. There
can be no assurance that the Company will be able to identify suitable
acquisition candidates and, once identified, to negotiate successfully their
acquisition at a price or on terms and conditions favorable to the Company, or
to integrate the operations of such acquired businesses with the Company.
Certain of these acquisitions may be of significant size and may include assets
that are outside the Company's geographic territories or are ancillary to the
Company's core business strategy.
The Company is highly dependent upon the services of the members of its senior
management team, the loss of any of whom may have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, the Company's future success depends on its continuing ability to
identify, hire, train, motivate and retain highly trained personnel.
The Company anticipates that any future business acquisitions will be financed
through cash from operations, borrowings under its bank line of credit, the
issuance of shares of the Company's Class A Common Stock and/or seller
financing. There can be no assurance that the Company will have sufficient
existing capital resources or will be able to raise sufficient additional
capital resources on terms satisfactory to the Company, if at all, in order to
meet its capital requirements.
The Company's operating program depends on its ability to operate and expand the
landfills it owns and leases and to develop new landfill sites. Several of the
Company's landfills are subject to local laws purporting to regulate their
expansion and other aspects of their operations. There can be no assurance that
the laws adopted by municipalities in which the Company's landfills are located
will not have a material adverse effect on the Company's utilization of its
landfills or that the Company will be successful in obtaining new landfill sites
or expanding the permitted capacity of any of its current landfills once its
remaining disposal capacity has been consumed.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 12, 1998, the Company filed suit in New York Supreme Court, Allegany
County against the Town of Angelica, New York seeking a temporary restraining
order and preliminary injunctive relief against the Town's enforcement of a
recently-enacted local law which would prohibit the expansion of the Hyland
landfill, would require the landfill and the operator thereof to receive an
additional permit from the Town of Angelica to continue to operate, would
prevent the disposal of yard waste, may preclude the disposal of certain types
of industrial waste and would impose certain other restrictions on the landfill.
A temporary restraining order was granted by the court on May 14, 1998 in favor
of the Company, and by a decision dated July 13, 1998, the court granted the
Company's motion for a preliminary injunction. On September 9, 1998, the Town of
Angelica filed a Notice of Appeal but has not yet perfected that appeal. If the
Company is not successful in its lawsuit, and if the Town of Angelica seeks to
enforce the law by its terms, then the Company would be required to obtain an
additional permit from the Town of Angelica to operate the Hyland landfill, the
expansion of the landfill beyond the current permitted capacity would be
prohibited, and the Company would be unable to dispose of yard waste and may be
precluded from disposing of industrial waste at the landfill. There can be no
assurance that such limitations would not have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
began accepting waste at the Hyland facility on July 22, 1998.
The Company's wholly-owned subsidiary, North Country Environmental Services,
Inc, ("NCES"), is a party to consolidated civil actions (Case Nos. 98-E-141 and
98-E-151) against the Town of Bethlehem, New Hampshire (the "Town"), before the
Grafton Superior Court in North Haverhill, New Hampshire. On October 16, 1998,
NCES
<PAGE>
commenced an action for declaratory relief against the Town seeking, on a
variety of grounds, to invalidate a Town zoning ordinance which purports to
prohibit the expansion of NCES's Landfill beyond its currently permitted
capacity. It is the Town's position that NCES may not expand the landfill beyond
Stage II, Phase I, which NCES believes will be at capacity in late December 1998
or early January 1999. NCES has also sought a declaration that it requires no
further approvals from the Town to expand the landfill throughout its 87-acre
parcel and that certain financial exactions imposed by a 1986 Town land-use
approval are invalid. In the alternative, NCES has sought compensation under
state law for the inverse condemnation of its property.
On October 23, 1998, the Town filed a petition for injunctive and declaratory
relief against NCES. The Town's petition sought to enjoin NCES's construction of
Stage II, Phase II of the landfill and to prevent any further expansion as
violative of the above-noted Town zoning ordinance.
NCES may not commence operations in Stage II, Phase II, until the New Hampshire
Department of Environmental Services ("NHDES") issues an operating permit. NHDES
has notified NCES that it will not issue operating approval until the litigation
with the Town is resolved. On November 30, 1998, NCES and the Town proceeded to
and concluded trial on eight of NCES's eleven claims for relief and on the
Town's claims for permanent injunctive and declaratory relief. Earlier, the
remaining three NCES claims were bifurcated for later trial, if needed. On that
same day, the Town filed two counterclaims seeking to establish the lawfulness
of the financial exactions challenged by NCES's October 16, 1998 petition. The
court has taken the claims which have been tried under advisement. NCES does not
know when the court may rule.
The Company is not aware of any other non-routine or incidental material legal
proceedings.
ITEM 2. CHANGES IN SECURITIES
Changes in Rights and Classes of Stock
None.
Sales of Unregistered Securities
During the quarter ended October 31, 1998 the Company had the following sales of
unregistered securities:
On August 3, 1998, Robert Lynch exercised nonstatutory stock options to purchase
4,000 shares of the Company's Class A Common Stock in a cashless transaction.
Mr. Lynch surrendered 317 warrants with an exercise price of $2.00 per share to
consummate this transaction. The shares of Class A Common Stock were offered and
issued in reliance upon the exemption from registration set forth in section
4(2) under the Securities Act of 1933.
On August 17, 1998, Robert Lynch exercised nonstatutory stock options to
purchase 4,312 shares of the Company's Class A Common Stock in a cashless
transaction. Mr. Lynch surrendered 371 warrants with an exercise price of $2.00
per share to consummate this transaction. The shares of Class A Common Stock
were offered and issued in reliance upon the exemption from registration set
forth in section 4(2) under the Securities Act of 1933.
On September 9, 1998, Stephen Houghton exercised warrants to purchase 10,000
shares of the Company's Class A Common Stock in exchange for cash consideration
of $15,000. The shares of Class A Common Stock were offered and issued in
reliance upon the exemption from registration set forth in section 4(2) under
the Securities Act of 1933.
No underwriters were involved in the foregoing issuances of securities.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
<PAGE>
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on October 14, 1998, four
proposals were submitted to a vote of the Company's stockholders. The proposals
and results of voting were as follows:
PROPOSAL I.
Proposal to elect, as Class I Directors, Messrs. Douglas R. Casella, Michael F.
Cronin and Kenneth H. Mead. Messrs. Casella, Cronin and Mead are currently
directors of the Company. Mr. Cronin is the designee of the holders of the Class
A Common Stock.
<TABLE>
<S> <C> <C>
Douglas R. Casella: Votes For: 18,757,788
Withheld: 1,944,769
Michael F. Cronin: Votes For: 10,813,537
Withheld: 7,020
Kenneth H. Mead: Votes For: 20,695,537
Withheld: 7,020
</TABLE>
Other Directors whose terms of office continued in effect after the Annual
Meeting are John W. Casella (Chairman of the Board of Directors), James W.
Bohlig, Gregory B. Peters and John F. Chapple III. On November 20, 1998,
Kenneth H. Mead resigned as a director of the Company.
PROPOSAL II.
Proposal to adopt an amendment to the Company's Restated Certificate of
Incorporation pursuant to which the number of authorized shares of Class A
Common Stock would be increased from 30,000,000 to 100,000,000.
<TABLE>
<S> <C>
Votes For: 18,083,012
Votes Against: 2,617,862
Abstentions: 1,683
Broker Non-votes -0-
</TABLE>
PROPOSAL III.
Proposal to adopt an amendment to the Company's 1997 Stock Incentive Plan (the
"Incentive Plan") pursuant to which the number of authorized shares of Class A
Common Stock subject to purchase under the Incentive Plan would be increased by
1,000,000 shares, to the sum of 2,308,500 shares of Class A Common Stock, plus
such additional number of shares of Class A Common Stock (up to 1,019,635
shares) as are currently subject to options granted under the 1993 Incentive
Stock Option Plan, 1994 Non-statutory Stock Option Plan and 1996 Stock Option
Plan (the "Terminated Plans") which are not actually issued under the Terminated
Plans because such options expire or otherwise result in shares not being
issued.
<TABLE>
<S> <C>
Votes For: 16,604,990
Votes Against: 3,426,706
Abstentions: 1,660
Broker Non-votes 669,201
</TABLE>
PROPOSAL IV.
Proposal to ratify the selection of Arthur Andersen LLP as the Company's
auditors for fiscal 1999.
<TABLE>
<S> <C>
Votes For: 20,697,606
Votes Against: 275
Abstentions: 4,676
Broker Non-votes -0-
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule for Period Ended October 31, 1998
Restated Financial Data Schedule for Period Ended October 31, 1997
(b) Reports on Form 8-K: None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Casella Waste Systems, Inc.
Date: December 15, 1998 By: /s/ Jerry Cifor
Jerry Cifor
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer
and
Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE OCTOBER
31, 1998 CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE SIX-MONTH PERIOD ENDED OCTOBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE FOOTNOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 1,960
<SECURITIES> 0
<RECEIVABLES> 23,030
<ALLOWANCES> 1,469
<INVENTORY> 718
<CURRENT-ASSETS> 28,337
<PP&E> 106,514
<DEPRECIATION> 54,571
<TOTAL-ASSETS> 233,290
<CURRENT-LIABILITIES> 25,263
<BONDS> 0
0
0
<COMMON> 148
<OTHER-SE> 143,154
<TOTAL-LIABILITY-AND-EQUITY> 233,290
<SALES> 0
<TOTAL-REVENUES> 82,028
<CGS> 0
<TOTAL-COSTS> 47,430
<OTHER-EXPENSES> 24,006
<LOSS-PROVISION> 643
<INTEREST-EXPENSE> 2,640
<INCOME-PRETAX> 8,480
<INCOME-TAX> 3,581
<INCOME-CONTINUING> 4,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,899
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE OCTOBER
31, 1997 CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE SIX-MONTH PERIOD ENDED OCTOBER 31, 1997, AS RESTATED TO REFLECT ACQUISITIONS
ACCOUNTED FOR AS POOLINGS OF INTERESTS, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE FOOTNOTES THERETO.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 1,523
<SECURITIES> 0
<RECEIVABLES> 19,489
<ALLOWANCES> 1,079
<INVENTORY> 730
<CURRENT-ASSETS> 23,409
<PP&E> 76,331
<DEPRECIATION> 38,622
<TOTAL-ASSETS> 162,783
<CURRENT-LIABILITIES> 23,177
<BONDS> 0
0
36,939
<COMMON> 46
<OTHER-SE> (2,582)
<TOTAL-LIABILITY-AND-EQUITY> 162,783
<SALES> 0
<TOTAL-REVENUES> 65,052
<CGS> 0
<TOTAL-COSTS> 39,751
<OTHER-EXPENSES> 18,296
<LOSS-PROVISION> 335
<INTEREST-EXPENSE> 4,343
<INCOME-PRETAX> 2,881
<INCOME-TAX> 1,392
<INCOME-CONTINUING> 1,489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,489
<EPS-PRIMARY> (0.82)
<EPS-DILUTED> (0.82)
</TABLE>
