Casella Waste Systems, Inc.
August 14, 2014
Jefferies Global Industrials
Conference
Casella Waste Systems 22
volumes sufficiently to achieve estimated Adjusted EBITDA and other
targets; landfill operations and permit status may be affected by factors
outside our control; we may be required to incur capital expenditures in
excess of our estimates; fluctuations in energy pricing or the
commodity pricing of our recyclables may make it more difficult for us
to predict our results of operations or meet our estimates; we may incur
environmental charges or asset impairments in the future; and our
change in our fiscal year may not benefit our financial performance.
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 additional risks and
uncertainties include, without limitation, those detailed in Item 1A, “Risk
Factors” in our Form 10-K for the year ended April 30, 2014.
We undertake no obligation to update publicly any forward-looking
statements whether as a result of new information, future events or
otherwise, except as required by law.
Safe harbor statementCertain matters discussed in this presentation 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 “believe,”
“expect,” “anticipate,” “plan,” “may,” “will,” “would,” “intend,” “estimate,”
“guidance” 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, expectations or guidance 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: adverse weather
conditions that have negatively impacted and may continue to negatively
impact our revenues and our operating margin; current economic
conditions that have adversely affected and may continue to adversely
affect our revenues and our operating margin; we may be unable to
increase volumes at our landfills or improve our route profitability; our
need to service our indebtedness may limit our ability to invest in our
business; we may be unable to reduce costs or increase pricing or
Casella Waste Systems 3
Casella Waste Systems - Overview
Casella provides integrated solid waste, recycling and resource services.
• $497.6mm of revenues for fiscal year ended Apr 30, 2014.
• Integrated solid waste and recycling services in 6 northeast states.
Casella’s strategy focuses on resource transformation.
• Tying economic and environmental models together to create incremental
value from traditional waste streams.
• Provide customers unique resource
solutions through Zero-Sort® recycling,
organics, and clean energy programs.
Casella Waste Systems
Company overview
4
Hakes LF462k tons/yr
4.8mm tons capacity
Chemung LF200.5k tons/yr
6.9mm tons capacity
Hyland LF312k tons/yr
15.8mm tons capacity
Clinton LF175k tons/yr
16.8mm tons capacity
WasteUSA LF600k tons/yr
15.8mm tons capacityNCES LFNo annual cap
2.3mm tons capacity
Juniper Ridge LFNo annual cap
24.9mm tons capacity
Southbridge LF405k tons/yr
7.2mm tons capacity
Ontario LF918k tons/yr
13.3mm tons capacity
Total disposal capacity includes permitted and permittable airspace estimates at each site as of April 30, 2014.1 Annual capacity does not reflect the 1.5mm ton per year rail permit at McKean LF.
McKean LF 1
312k tons/yr
2.1mm tons capacity
16 Recycling Facilities
10 Disposal Facilities
35 Collection Operations
42 Transfer Stations4 Landfill Gas-to-Energy Facilities
Casella Waste Systems 5
Casella controls valuable northeast landfill assets
10 landfills in strategic locations across the Northeast.
• Added 80.1mm tons of total long-term capacity at an avg. tipping fee over $30 per ton.
• Annual permitted capacity now at 3.9mm tons.
1 Total Disposal Capacity excludes MERC and all “Closure Projects”; Annual Disposal Volumes only include amortizable tons at active landfills.
Fiscal year ended April 30, Fiscal year ended April 30,
Total Disposal Capacity (mm Tons) (1) Annual Landfill Disposal Volumes (mm Tons) (1)
29.6
65.6
81.7 86.7
94.1 92.4 97.9 103.1
120.9 118.0 110.7 109.7
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
1.4
1.8
2.5
2.9 2.9
3.3 3.0 3.1
3.3 3.2 3.1
3.5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Casella Waste Systems
$107.9 $109.0
$100.0 $101.6
$87.8
$95.1
22.6%24.2%
22.0% 21.7%
19.3% 19.1%
2009 2010 2011 2012 2013 2014
Fisal year ending April 30,
6
Sourcing new landfill volumes is driving performance
Adjusted EBITDA up in FY14 on higher landfill tons, better collection pricing, and improved operating execution.
1 Adjusted EBITDA equals earnings before interest, taxes, depreciation and amortization, adjusted for accretion, depletion of landfill operating lease obligations, gain on sale of assets, development project charge write-offs, legal settlement costs, tax settlement costs, bargain purchase gains, asset impairment charges, environmental remediation charges, severance and reorganization costs, expenses from divestiture, acquisition and financing costs, gains on the settlement of acquisition related contingent consideration, as well as losses on divestiture. Reconciled in the Appendix.
Revenue ($mm) Adjusted EBITDA and Margin ($mm) 1
$476.4
$449.7 $454.7 $468.0
$455.3
$497.6
2009 2010 2011 2012 2013 2014
Fisal year ending April 30,
Casella Waste Systems
$87.8
$95.1
FY13 FY14
7
FY14 results up significantly on strategic execution
FY14 results up on strong execution:
• Revenue growth +$42.3mm (or +9.3%) YOY.
• Adj. EBITDA up +$7.3mm (or +8.3%) YOY,
with strongest growth in over 5 yrs.
• Free Cash Flow up +$13.5mm YOY.
• Improvement driven by higher landfill tons and
strategic execution.
• Landfill tons up +350k (+9.7%) YOY.2
• Residential and Commercial collection price up
+1.9% YOY.
• Recycling Commodity tons up +6.2% YOY.
1 Adjusted EBITDA defined on slide 6, and reconciled in the Appendix . 2 Excludes a +76k ton year-over-year increase in low priced soils at the Worcester landfill closure project.
Adjusted EBITDA ($mm) 1
+$7.3
Casella Waste Systems
Focus in the near term to improve free cash flow
Management focused in key areas to increase free cash flow and to reduce debt leverage:
1. Increasing landfill returns;
2. Driving additional profitability in collection operations;
3. Executing Eastern Region strategy;
4. Creating incremental value through Customer Solutions; and
5. Improving balance sheet and reducing risk.
8
Casella Waste Systems 9
(1) Increasing landfill returns
Focus in FY14 to increase volumes and capacity utilization.
• Landfill tons up +350k year-over-year in FY14.1
• Disposal Adj. EBITDA up +$9.2mm YOY in FY14.
• Volume increases primarily driven by: (1) long-term contracted MSW volumes; (2) ramp-ups
at Southbridge, NCES and WasteUSA; and (3) higher C&D volumes.
Market dynamics are beginning to shift across our footprint area.
• Disposal site closures (and expected closures) will create a supply-demand imbalance.
• Roughly 2.7mm tons/yr of disposal capacity is expected to permanently close.
• The NY/PA market has over-capacity, but NYC Dept of Sanitation contracts will shift market
dynamics in 2015-2016 (roughly +1.5mm tons/yr in NY landfills).
Shifting strategic focus in FY15 to further enhance landfill returns.
• Maximize capacity utilization – incremental tons have high margins.
• Increase pricing – pricing power returning to the disposal market in the northeast.
• Improve asset positioning – leverage $7.0mm rail grant at McKean to drive new volumes.
1 Excluding Worcester soils closure project.
Casella Waste Systems
Taunton LF
120k tons/yr
Closing 20152
3
41
Fall River LF
376k tons/yr,
Closing 2014
Disposal market dynamics are shifting
10
Hakes LF462k tons/yr
4.8mm tons capacity
Chemung LF200.5k tons/yr
6.9mm tons capacity
Hyland LF312k tons/yr
15.8mm tons capacity
Clinton LF175k tons/yr
16.8mm tons capacity
WasteUSA LF600k tons/yr
15.8mm tons capacityNCES LFNo annual cap
2.3mm tons capacity
Juniper Ridge LFNo annual cap
24.9mm tons capacity
Southbridge LF405k tons/yr
7.2mm tons capacity
Ontario LF918k tons/yr
13.3mm tons capacity
Total disposal capacity includes permitted and permittable airspace estimates at each site as of April 30, 2014.1 Annual capacity does not reflect the 1.5mm ton per year rail permit at McKean LF.
McKean LF 1
312k tons/yr
2.1mm tons capacity
16 Recycling Facilities
10 Disposal Facilities
35 Collection Operations
42 Transfer Stations4 Landfill Gas-to-Energy Facilities
Other disposal sites (closed or
potential to close)
Moretown LF
172k tons/yr, Closed 7/13
Claremont WTE
73k tons/yr, Closed 9/13
MERC WTE
300k tons/yr,
Closed 12/12
PERC WTE
300k tons/yr,
Granby LF - 235k tons/yr, Closed 3/14
S. Hadley LF – 156k tons/yr, Closed 4/14
Barre LF - 94k tons/yr, Closing 2015
Northampton LF – 50k tons/yr, Closed 5/13
Chicopee LF - 365k tons/yr
2
1
3
4
5
5
Albany LF
275k tons/yr
Closing 2016
Expected NYC waste flows
NYC Dept of Sanitation
• 10k – 12k tons per day.
• Building 4 marine transfer
stations to transload waste to rail
(expect 2 built by early 2015).
• Expect an additional 1.0m tons/yr
to be disposed in NY.
Casella Waste Systems 11
(2) Driving additional profitability in collection operations
Collection pricing programs continue to drive value.
• Residential and commercial pricing remained strong at +1.9% for FY14.
• The roll-off market has shown early signs of rebounding, with growth in select markets.
Local market leaders matter in the hauling business.
• Driving towards a local market centric approach; “one-size-fits-all” approach is not effective.
• Shifted management of key decisions/programs to local teams – pricing, routing, marketing,
and service offerings.
• Replaced/upgraded over 35% of our local managers in last 18 months.
Team working to further improve collection profitability.
• Pricing – continued focus on pricing discipline.
• Quality of revenue – shifting focus from volumes to quality of revenue.
• Route profitability - eliminating route days to reduce cost and improve asset utilization.
• Fleet optimization – upgrading fleet for route applications and solving lingering fleet issues.
Casella Waste Systems 12
(3) Executing eastern region strategy
Significantly improved asset positioning and financial performance.• Adj. EBITDA margins improve from 15.5% in FY13 to 21.4% in FY14.
Settled North Country landfill litigation in Jan 2012.• Ramped tons to site after closing Maine Energy and acquiring BBI in Dec 2012.
Sold Maine Energy for $6.7mm in Nov 2012.1
• Facility permanently closed in Dec 2012.
• Waste redirected through newly constructed Westbrook transfer station to other
sites, including North Country and Juniper Ridge landfills
Acquired BBI in Dec 2012.
• Owned/operated 7 hauling & transfer facilities that overlap CWST’s
operations.
• +85k tons of internalization benefit to landfills and recycling facilities.
Sold BioFuels for $2.0mm in Jul 2013.2
• Capital intensive C&D processing operation with low margins.
1 Purchase price for Maine Energy to be paid over 20 years. 2 Purchase price to be paid over 5 years. 3 Adjusted EBITDA is reconciled to net income as
follows; in the second full 12 months of combined operations following closing, we estimate net income to be $2.0 million, plus estimated depreciation and
amortization of $2.9 million which equals estimated Adjusted EBITDA of $4.9 million.
Casella Waste Systems 13
(3) Executing eastern region strategy – cont’d.
Expanded Southbridge landfill in Jan 2013.• Received permit to increase annual permit limit to 405k tons per year.
• Ramped up tons to roughly 360k tons per year in FY14.
Received MSW permit at Juniper Ridge landfill in Feb 2014.• Received a permit to receive up to 82k tons per year of in-state MSW.
New Concord, NH contract started in Jul 2014. • 10 year hauling/disposal/recycling contract; with disposal contract starting in Jan 2015.
• Expect to internalize roughly 30k tons per year.
Expiration of Ogden put-or-pay contract. • Out-of-market disposal contract expires Dec 31, 2014.
• Paying $3.7mm/yr higher disposal costs than current market rates.
Casella Waste Systems 14
(4) Creating incremental value through resource solutions
Zero-Sort® Recycling
• Casella operates 5 Zero-Sort MRFs in our integrated footprint.
• Mature facilities operating at ~95% of capacity; adding a new MRF in Lewiston, ME in FY15.
• Recycling volumes up +6.2% and ACR down -3.1% in FY141.
Casella Organics
• Business model is primarily focused on transforming Biosolids into renewable products
for fertilization and landscaping.
• Working with partners to transform Source Separated Organics into energy or compost.
Customer Solutions
• Focus on creating resource solutions for Industrial, Municipal, Institutional, and multi-location
Retail customers.
• Experiencing strong growth in the Industrial segment (lower margins with high FCF).
1 Shipped tons from MRFs on a “same store basis” .
Casella Waste Systems 15
(5) Improving balance sheet and reducing risk
Divestitures reduced risk, improved cash flows and reduced leverage.
• Mar 2011 – sold non-integrated recycling facilities outside northeast for $134.1mm;
used proceeds to pay down debt and reduce leverage.
• Dec 2012 – sold Maine Energy for $6.7mm; eliminated negative cash flow operation.
• Jul 2013 – sold BioFuels for $2.0mm; eliminated negative cash flow operation.
• Dec 2013 – sold 50% stake in US GreenFiber for $3.5mm; eliminated non-integrated,
negative cash flow operation.1
• Jan 2014 – ceased development of landfill gas pipeline project; NPV negative project.
Sept 2012 equity offering reduced balance sheet risk and refinancings
improved cash flows.
• Leverage remains heightened, but maintain adequate head-room to covenants.
• Cash interest reduced by >$20.0mm/yr with refinancings & divestitures over last 3 years.
Current balance sheet provides flexibility to execute strategy.
• Next major debt maturity is Senior Secured Revolving Credit Facility in Mar 2016.
1 US GreenFiber sold for $18.0mm gross proceeds, with $3.5mm net proceeds for Casella’s 50% equity interest.
Casella Waste Systems 16
Fiscal year end change better matches business cycle
Moving fiscal year end to Dec 31st better matches our business cycle.
• New fiscal year will begin with slow winter months; allowing “catch-up” if necessary.
• Revenues ramp during spring (not at year end), enabling more effective forecasting.
• Strongest months will occur during summer months and early fall.
• Budgeting in late fall enables capital purchases in Dec through Jan; allowing for new
assets to be in place before seasonally strong periods.
Fiscal year change effective on Jan 1, 2015.
• Plan to report an 8-month transition period ending Dec 31, 2014.
• Plan to report current Q1 (7/31/14) & Q2 (10/31/14) during 8-month transition period.
Casella Waste Systems
$87.8
$95.1
19.3% 19.1%19.9%
FY2013 FY2014 CY2015 $(12.2)
$1.3
FY2013 FY2014 CY2015
$455.3
$497.6
FY2013 FY2014 CY2015
Adj EBITDA & Margin ($mm) 1,2
17
Free Cash Flow projected to be materially higher in CY2015
Expect to complete balance sheet clean-up and asset repositioning
during the 8-month transition period ending Dec 31, 2014.
• $9.0mm of environmental remediation and closure payments at 3 sites.
• $13.0mm of capital spending on new contracts/facilities, rail siding at McKean landfill,
and gas treatment facility to reduce operating costs.
1 Reflects guidance provided on June 25, 2014; FY2013 and FY2014 are for the 12-months ended April 30, 2013 and 2014, respectively; while CY2015 reflects our new reporting period for the 12-months ending December 31, 2015 (effective Jan 1, 2015). 2 Adjusted EBITDA defined on slide 6, and reconciled in the Appendix. 3 Free Cash Flow equals net cash provided by operating activities, less capital expenditures (excluding acquisition related capital expenditures), less payments on landfill operating leases, less assets acquired through financing leases, plus proceeds from the sale of property and equipment, plus contributions from non-controlling interest holders.
Revenue ($mm) 1 Free Cash Flow ($mm) 1,3
Guidance
$530.0
to
$520.0
Guidance
$18.0
to
$14.0
Guidance
$107.0
to
$103.0
Casella Waste Systems 18
Casella’s value drivers…
Valuable integrated solid waste assets in
disposal limited Northeast markets.
Management focused on increasing Free
Cash Flow and reducing debt.
FY14 results demonstrate strong
execution of plan.
Near term focus of team:
Improving landfill returns;
Driving profitability of collection operations;
Executing Eastern Region strategy;
Creating value through Resource Solutions.
Casella Waste Systems
Appendix
19
Casella Waste Systems 20
Non-GAAP reconciliation of Adjusted EBITDA
Non-GAAP Reconciliation of Adjusted EBITDA to Net Income (Loss)($ in thousands)
2014 2013 2012 2011 2010 2009
Net (loss) income (27,404)$ (54,463)$ (77,592)$ 38,428$ (13,858)$ (68,024)$ Loss (income) from discontinued operations, net (284) 4,480 614 2,198 138 (2,476) Gain on disposal of discontinued operations, net 378 - (725) (43,590) (1,180) (63)
Loss from continuing operations before discontinued operations (27,311)$ (49,983)$ (77,703)$ (2,964)$ (14,900)$ (70,563)$
(Benefit) provision for income taxes 1,799 (2,526) 1,593 (23,723) 3,016 6,212 Other expense (income), net (436) 23,501 20,110 10,626 2,355 1,366 Interest expense, net 37,863 41,429 44,966 45,489 44,108 33,083 Expense from divestiture, acquisition and financing costs 144 1,410 - - - - Depreciation and amortization 60,339 56,576 58,415 58,121 63,509 68,342 Severance and reorganization charges 586 3,709 - - 185 1,370 Tax settlement costs - 679 - - - - Asset impairment charge 7,455 - 40,746 3,654 - 54,036 Legal settlement - - 1,359 - - - Gain on settlement of acquisition related contingent consideration (1,058) - - - - - Development project charges 1,394 - 131 - - - Bargain purchase gain - - - (2,975) - - Gain on sale of assets - - - (3,502) - - Environmental remediation charges 400 - - 549 335 4,356 One-time discretionary bonus charge - - - 3,550 - - Depletion of landfill operating lease obligations 9,948 9,372 8,482 7,878 6,867 6,416 Interest accretion on landfill and environmental remediation liabilities 3,985 3,675 3,479 3,331 3,506 3,262
Adjusted EBITDA 95,109$ 87,842$ 101,578$ 100,033$ 108,980$ 107,880$
Fiscal Year Ended April 30