Casella Waste Systems Inc. Reports Operating Results (10-Q)
Casella Waste Systems Inc. has a market cap of $114.2 million; its shares were traded at around $4.4 with and P/S ratio of 0.2. Casella Waste Systems Inc. had an annual average earning growth of 8% over the past 5 years.CWST is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: Operating income for the quarter ended July 31, 2010 was $14.6 million compared to $9.1 million in the prior year comparable period and increased as a percentage of revenue to 10.4% from 6.9%. Western region operating income increased $1.8 million compared to the prior year period due to higher disposal revenues associate with higher volume. Eastern region operating income increased $4.8 million
Revenues - Revenues increased $7.3 million, or 5.6%, to $139.8 million in the quarter ended July 31, 2010 from $132.5 million in the quarter ended July 31, 2009. Solid waste revenues, increased $1.6 million, with $5.3 million coming from volume increases in our disposal and processing and recycling operations, $0.3 million from higher collection prices, $1.4 million from higher processing and recycling commodity prices and volumes, and $0.6 million from an increase in fuel surcharges. These increases were partially offset by lower disposal, waste to energy, and processing and recycling prices amounting to $0.3 million, volume declines of $1.6 million for collection and power generation, $0.4 million from lower power generation commodity price and volume, $3.4 million related to the closure of a landfill in the Eastern region, and $0.4 million related to a divestiture in the collection and disposal segments. Major accounts revenues increased $0.6 million with $0.9 million coming from volume increases offset by $0.3 million price decline. FCR recycling revenues increased $5.2 million mainly due to increases in commodity prices and higher volumes.
Cost of operations - Cost of operations increased $7.2 million, or 8.2%, to $94.8 million in the quarter ended July 31, 2010 from $87.6 million in the quarter ended July 31, 2009 and increased as a percentage of revenue between periods to 67.8% from 66.2%. The dollar increase in cost of operations is attributable to higher costs of purchased materials associated with increased revenues and higher direct labor costs in the FCR recycling segment along with higher solid waste operating costs including host and royalty fees and fuel costs. The percentage of revenue increase in cost of operations is attributable to higher fuels costs and purchased materials costs in the FCR recycling segment.
Depreciation and amortization - Depreciation and amortization expense decreased $2.8 million, or 14.4%, to $16.7 million in the quarter ended July 31, 2010 from $19.5 million in the quarter ended July 31, 2009. Landfill amortization expense decreased by $2.4 million in the quarter ended July 31, 2010 associated with the closure of the Pine Tree landfill which ceased operations in the quarter ended January 31, 2010, offset by higher amortization at other sites due to higher volumes. Depreciation expense was relatively flat between periods. Depreciation and amortization expense as a percentage of revenue decreased to 12.0% in the quarter ended July 31, 2010 from 14.7% in the quarter ended July 31, 2009.
Provision for income taxes Provision for income taxes increased $0.2 million to $0.8 million in the quarter ended July 31, 2010 from $0.6 million in the quarter ended July 31, 2009. The effective tax rate changed to (36.7)% for the quarter ended July 31, 2010 from (23.6)% for the quarter ended July 31, 2009. The provision for income taxes in the quarter ended July 31, 2010 includes $0.7 million in deferred tax provision, primarily related to an increase in the valuation allowance against deferred tax assets, and $0.1 million in current tax provision. The deferred tax provision for the current period and the change in the effective tax rate between periods are primarily a result of an increase in the valuation allowance related to the book loss projected for the year and the provision of deferred tax liabilities related to indefinite lived intangible asset amortization for tax purposes.
On July 9, 2009, we completed the refinancing of our then existing senior credit facility with a Senior Secured Credit Facility, consisting of a $177.5 million revolving credit facility (the New Revolver), a $130.0 million aggregate principal term loan (the New Term Loan) and the offering of $180.0 million aggregate principal amount of Second Lien Notes. The net proceeds from the Senior Secured Credit Facility and Second Lien Notes offering were used to refinance the borrowings under our $525.0 million then existing senior credit facility due April 2010.
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