Casella Waste Systems (CWST) Q4 2002 earnings summary

Executive summary

• FY02 met or exceeded targets, with Adjusted EBITDA of $92.2M, revenue of $420.8M and free cash flow of $33M.

• Completed 11 strategic divestitures, refocusing on traditional solid waste services and reducing exposure to more volatile businesses.

• Debt fell $147M since the divestiture program began; management described the core franchise as positioned for more stable, predictable performance.

Financial highlights

• FY02 revenue was $420.8M, down 12.3% YoY; divestitures reduced revenue by $54.9M and lower brokerage prices and volumes by $32.5M, partly offset by $24.9M core price and volume growth.

• Operating income was $41.8M versus a $29.0M loss in FY01; net income was $7.5M versus a $101.5M loss.

• Adjusted EBITDA was $92.2M versus $92.5M in FY01; operating cash flow was $68.5M and stated free cash flow was $33M.

• Net interest expense declined 21.0% to $30.6M, reflecting lower average debt and variable borrowing rates.

Outlook and guidance

• FY03 revenue guidance: $415M-$435M; EBITDA: $87M-$91M; free cash flow: $19M-$24M; capital expenditures: $38M-$40M.

• Flat FY03 EBITDA outlook incorporates $2M divested EBITDA, $2M lost commodity-hedge contribution after Enron's bankruptcy, and insurance premium increases exceeding $6M.

• Guidance assumes flat recycling commodity prices and volume; improvement in either could lift results.

• Acquisition priorities are low-risk tuck-ins near current markets and added disposal capacity in core markets.