Casella shifts focus from only reducing debt to acquisitions as well

By Devika Patel

Knoxville, Tenn., March 2 – Casella Waste Systems Inc. plans to continue reducing its leverage, after bringing its net leverage ratio down to 3.68x by the end of 2017, but will now also consider acquisitions and growth opportunities in addition to cutting leverage and still intends to get its leverage ratio to between 3x and 3.25x.

“We continued to reduce leverage, ending the year with a consolidated debt leverage ratio of 3.68x,” chairman and chief executive officer John W. Casella said on the company’s fourth quarter and year ended Dec. 31 earnings conference call on Friday.

“We believe that we are in a unique position to grow our free cash flows at 10% to 15% a year, given our size, our nimbleness and the range of opportunities in our pipeline,” Casella said.

The company has done such a good job of reducing debt and improving cash flows that it now intends to shift its focus slightly and also consider acquisitions and growth investments.

“Over the last three years, we’ve allocated almost all of our excess cash to paying down debt while focusing on efforts to refinance high-cost debt to lower our interest costs,” Casella said.

“We are now in a position where we have dramatically lowered our interest rates and we have reduced our leverage to 3.68x.

“As such, we have adjusted our capital allocation strategy from a sole focus on repaying down debt to a balanced approach where we will continue to focus on deleveraging but we will also begin to selectively pursue acquisitions and strategic growth investments within our core operation,” Casella said.

The company hopes to get its leverage down to between 3x and 3.25x.

“As we laid out in our 2021 plan, we remain focused on further reducing leverage in the business with a goal of getting leverage down to between 3x and 3.25x through continued capital discipline,” senior vice president, chief financial officer and treasurer Ned R. Coletta said on the call.

The company’s credit ratings have improved due to its recent debt reductions and improved cash flow.

“Our actions to reduce leverage, reduce debt and improve cash flows has not gone unnoticed and on Feb. 26, or just this Monday, Standard and Poor’s increased our corporate credit rating from B to a B+ with a positive outlook,” Coletta said.

Adjusted EBITDA was $30.2 million for the fourth quarter, up $800,000, or 2.8%, from the same period in 2016.

Adjusted EBITDA was $129 million for fiscal year 2017, up $8.4 million, or 7%, from fiscal year 2016.

As of Dec. 31, the company’s consolidated net leverage ratio was 3.68x, which is down 1.74x since Dec. 31, 2014.

Total debt as of Dec. 31 was $497.7 million, down over $39 million since Dec. 31, 2014.

Casella is a Rutland, Vt.-based solid waste, recycling and resource management services company.

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