-- Second Quarter Revenue Increased 31.5% -- Second Quarter Operating Income Increased 29.9% -- Company Completes New Capital Plan
HOUSTON, Aug. 1, 2006 (PRIMEZONE) -- WCA Waste Corporation (Nasdaq:WCAA) announced today financial results for the second quarter ended June 30, 2006. For the second quarter of 2006, revenue increased 31.5% to $38.2 million over the $29.1 million that was reported for the same period last year. Operating income increased 29.9% to $6.8 million over the $5.3 million that was reported for the quarter ended June 30, 2005. Net income for the quarter was $3.8 million, or $0.23 per share compared to $0.9 million, or $0.06 per share for the second quarter last year. During the quarter we recognized $3.7 million ($2.2 million net of tax, or $0.13 per share) of income related to the unrealized gain on our interest rate swap that was terminated on July 5, 2006. During the same quarter last year we wrote off $1.3 million ($0.8 million net of tax, or $0.05 per share) of deferred financing costs.
For the six months ended June 30, 2006, revenue increased 40.4% to $72.9 million over the $51.9 million for the same period last year. Operating income increased 53.7% to $11.9 million over the $7.8 million for the six months ended June 30, 2005. Net income for the six months ended June 30, 2006 was $4.5 million, or $0.27 per share compared to $1.6 million, or $0.10 per share for the same period in 2005.
Tom Fatjo, Chairman of WCA Waste Corporation, stated, "We are pleased with the operational results for the second quarter of 2006. We are confident with our target forecast for 2006, which does not include the impact of potential acquisitions:
-- Revenue in excess of $140 million, a 23% increase over 2005;
-- Operating income in excess of $21 million, a 24% increase over
2005; and
-- EBITDA in excess of $40 million, a 25% increase over 2005."
We have completed our strategic review, which was a primary focus of certain members of management and the Board during the quarter. The capital plan that resulted from this review and was completed in July 2006 includes:
-- The private placement of $150 million of 9.25% senior unsecured
notes due 2014, which closed on July 5, 2006. The proceeds from
this offering were utilized to retire or pay down our existing
borrowings;
-- A new $175 million senior secured credit facility led by Comerica
Bank, which included the exercise of $75 million of the $100
million accordion on July 28, 2006, in addition to the original
$100 million underwritten commitment; and
-- The purchase by Ares Corporate Opportunities Fund II, L.P. of $75
million in convertible preferred stock. The preferred stock is
convertible into our common stock at $9.60 per share and carries
a 5% payment-in-kind (PIK) dividend. This transaction closed on
July 27, 2006.
As a result of completing this capital plan, we will write off $2.9 million (approximately $1.7 million net of tax) of deferred financing costs associated with debt under our previous capital structure during the third quarter of 2006.
Compared to financial information as of March 31, 2006, the results of the capital plan are as follows:
-- Improves ratio of debt (net of cash) to total capitalization from
66.1% to 39.5%;
-- Increases equity from $94 million to approximately $169 million;
-- Reduces interest rates on senior secured debt, when outstanding,
from LIBOR plus 300 basis points to LIBOR plus 175 basis points
at our current targeted debt levels;
-- Fixes interest rates on substantially all of our debt including:
- $150 million in senior unsecured notes at 9.25%; and
- Up to $150 million on the revolving senior credit facility
at 5.64% (plus the applicable margins), after consideration
of our previously announced new interest rate swap
agreement.
-- We will have approximately $225 million in unused available
capital.
The following tables provide more detailed information about our second quarter earnings. In these tables, EBITDA, our non-GAAP measure, is reconciled to our net income. WCA Waste Corporation will be hosting a conference call to discuss the second quarter 2006 earnings at 8:30 am Eastern Time on August 2, 2006.
WCA Waste Corporation is an integrated company engaged in the transportation, processing and disposal of non-hazardous solid waste. The Company's operations consists of twenty landfills, twenty-one transfer stations/material recovery facilities and twenty-four collection operations located throughout Alabama, Arkansas, Colorado, Florida, Kansas, Missouri, New Mexico, North Carolina, South Carolina, Tennessee and Texas. The Company's common stock is traded on the NASDAQ National Market System under the symbol "WCAA."
The WCA Waste Corporation logo is available athttp://www.primezone.com/newsroom/prs/?pkgid=1736
RISK FACTORS AND CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This press release and other communications, such as conference calls, presentations, statements in public filings, other press releases, include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Forward-looking statements generally include discussions and descriptions other than historical information. These statements can generally be identified as such because the context of the statement will include words such as "may," "will," "should," "outlook," "project," "intend," "seek," "plan," "believe," "anticipate," "expect," "estimate," "potential," "continue," or "opportunity," the negatives of these words, or similar words or expressions. Similarly, statements that describe our plans, objectives, goals, expectations or intentions and other statements that are not historical facts are forward-looking statements. For example, descriptions of strategy are forward-looking statements, including descriptions of our acquisition strategy and the benefits of any acquisition or potential acquisition.
The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. We caution that forward-looking statements are not guarantees, are based upon the current beliefs and expectations of WCA's management, and are subject to known and unknown risks and uncertainties. Since our business, operations and strategies are subject to a number of risks, uncertainties and other factors, actual results may differ materially from those described in the forward-looking statements.
As to acquisitions and acquisition strategies, on which our future financial performance will significantly depend, risks and uncertainties include, without limitation: we may be unable to identify, complete or integrate future acquisitions successfully; we compete for acquisition candidates with other purchasers, some of which have greater financial resources and may be able to offer more favorable terms; revenue and other synergies from acquisitions may not be fully realized or may take longer to realize than expected; we may not be able to improve internalization rates by directing waste volumes from acquired businesses to our landfills for regulatory, business or other reasons; businesses that we acquire may have unknown liabilities and require unforeseen capital expenditures; changes or disruptions associated with making acquisitions may make it more difficult to maintain relationships with customers of the acquired businesses; in connection with financing acquisitions, we may incur additional indebtedness, or may issue additional shares of our common stock which would dilute the ownership percentage of existing stockholders; rapid growth may strain our management, operational, financial and other resources; revenue and other synergies from acquisitions may not be fully realized or may take longer to realize than expected; and we may not be able to improve internalization rates by directing waste volumes from acquired businesses to our landfills for regulatory, business or other reasons.
Moreover, our results will be subject to a number of operational and other risks, including the following: we may not be successful in expanding the permitted capacity of our current or future landfills; our business is capital intensive, requiring ongoing cash outlays that may strain or consume our available capital; increases in the costs of disposal, labor and fuel could reduce operating margins; increases in costs of insurance or failure to maintain full coverage could reduce operating income; we may be unable to obtain financial assurances necessary for our operations; we are subject to environmental and safety laws, which restrict our operations and increase our costs, and may impose significant unforeseen liabilities; we compete with large companies and municipalities with greater financial and operational resources, and we also compete with alternatives to landfill disposal; covenants in our credit facilities and the instruments governing our other indebtedness may limit our ability to grow our business and make capital expenditures; changes in interest rates may affect our results of operations; a downturn in U.S. economic conditions or the economic conditions in our markets may have an adverse impact on our business and results of operations; and our success depends on key members of our senior management, the loss of any of whom could disrupt our customer and business relationships and our operations.
We describe these and other risks in greater detail in the sections entitled "Business -- Risk Factors" and "Cautionary Statement About Forward-Looking Statements" included in our Annual Report on Form 10-K for the year-ended December 31, 2005 and our Current Report on Form 8-K filed on June 20, 2006, to which we refer you for additional information.
WCA Waste Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
-------- -------- -------- --------
(In thousands, except per share amounts)
Revenue $ 38,216 $ 29,052 $ 72,896 $ 51,937
Expenses:
Cost of services 24,186 17,904 46,470 33,688
Depreciation and
amortization 4,769 3,613 9,337 6,451
General and
administrative:
Stock-based
compensation charge 308 137 561 137
Other general and
administrative 2,128 2,145 4,585 3,891
-------- -------- -------- --------
31,391 23,799 60,953 44,167
-------- -------- -------- --------
Operating income 6,825 5,253 11,943 7,770
Other income (expense):
Interest expense, net (4,173) (2,527) (8,280) (3,879)
Write-off of deferred
financing costs and
debt discount -- (1,294) -- (1,294)
Unrealized gain on
interest rate swap 3,704 -- 3,704 --
Other 64 9 73 13
-------- -------- -------- --------
(405) (3,812) (4,503) (5,160)
-------- -------- -------- --------
Income before income
taxes 6,420 1,441 7,440 2,610
Income tax provision (2,581) (559) (2,989) (1,020)
-------- -------- -------- --------
Net income $ 3,839 $ 882 $ 4,451 $ 1,590
======== ======== ======== ========
PER SHARE DATA (Basic
and diluted):
Net income
- Basic $ 0.23 $ 0.06 $ 0.27 $ 0.10
======== ======== ======== ========
- Diluted(a) $ 0.23 $ 0.06 $ 0.27 $ 0.10
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING (Basic) 16,360 15,362 16,340 15,334
-------- -------- -------- --------
WEIGHTED AVERAGE SHARES
OUTSTANDING (Diluted)(a) 17,021 15,372 17,005 15,362
-------- -------- -------- --------
(a) The diluted earnings per share and the diluted weighted average
shares outstanding for the three and six months ended June 30,
2006 assume conversion of our $7 million convertible seller
notes. The interest expense related to these notes, net of tax,
for the three and six months ended June 30, 2006 was $72 and
$143, respectively. The assumed conversion of the convertible
notes added 635,728 additional shares to the diluted weighted
average shares outstanding.
Non-GAAP Financial Measures
---------------------------------------------------------------------
Our management evaluates our performance based on non-GAAP
measures, of which the primary performance measure is EBITDA.
EBITDA consists of earnings (net income) before interest expense
(including the unrealized gain on the interest rate swap and the
write-off of deferred financing costs and debt discount), income
tax expense, depreciation and amortization. We also use these
same measures when evaluating potential acquisition candidates.
We believe EBITDA is useful to an investor in evaluating our
operating performance because:
-- it is widely used by investors in our industry to measure a
company's operating performance without regard to items such as
interest expense, depreciation and amortization, which can vary
substantially from company to company depending upon accounting
methods and book value of assets, financing methods, capital
structure and the method by which assets were acquired;
-- it helps investors more meaningfully evaluate and compare the
results of our operations from period to period by removing the
impact of our capital structure (primarily interest charges from
our outstanding debt) and asset base (primarily depreciation and
amortization of our landfills and vehicles) from our operating
results; and
-- it helps investors identify items that are within operational
control. Depreciation charges, while a component of operating
income, are fixed at the time of the asset purchase in accordance
with the depreciable lives of the related asset and as such are
not a directly controllable period operating charge.
Our management uses EBITDA:
-- as a measure of operating performance because it assists us in
comparing our performance on a consistent basis as it removes the
impact of our capital structure and asset base from our operating
results;
-- as one method we use to estimate a purchase price (often
expressed as a multiple of EBITDA) for solid waste companies we
intend to acquire. The appropriate EBITDA multiple will vary from
acquisition to acquisition depending on factors such as the size
of the operation, the type of operation, the anticipated growth
in the market, the strategic location of the operation in its
market as well as other considerations;
-- in presentations to our board of directors to enable them to have
the same consistent measurement basis of operating performance
used by management;
-- as a measure for planning and forecasting overall expectations
and for evaluating actual results against such expectations;
-- in evaluations of field operations since it represents
operational performance and takes into account financial measures
within the control of the field operating units;
-- as a component of incentive cash bonuses paid to our executive
officers and other employees;
-- to assess compliance with financial ratios and covenants included
in our credit facility; and
-- in communications with investors, lenders, and others, concerning
our financial performance.
The following presents a reconciliation of net income to our
total EBITDA (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
-------- -------- -------- --------
Net income $ 3,839 $ 882 $ 4,451 $ 1,590
Depreciation and
amortization 4,769 3,613 9,337 6,451
Interest expense, net 4,173 2,527 8,280 3,879
Write-off of
deferred financing
costs and debt
discount -- 1,294 -- 1,294
Unrealized gain on
interest rate swap (3,704) -- (3,704) --
Income tax provision 2,581 559 2,989 1,020
-------- -------- -------- --------
Total EBITDA $ 11,658 $ 8,875 $ 21,353 $ 14,234
======== ======== ======== ========
As a percentage of
revenue 30.5% 30.5% 29.3% 27.4%
Our EBITDA, as we define it, may not be comparable to similarly
titled measures employed by other companies and are not measures
of performance calculated in accordance with GAAP. EBITDA should
not be considered in isolation or as substitutes for operating
income, net income or loss, cash flows provided by operating,
investing and financing activities, or other income or cash flow
statement data prepared in accordance with GAAP.
The following table presents a reconciliation of net income to
adjusted net income after excluding the write-off of deferred
financing costs and debt discount, the unrealized gain on our
interest rate swap (in thousands). These items are excluded
because they are not representative of our on-going operational
performance. Per share information of the adjusted net income is
also shown below:
Adjusted net income
to exclude
write-off of
deferred financing
costs and debt Three Months Ended Six Months Ended
discount, June 30, June 30,
unrealized gain on ----------------- -----------------
interest rate swap: 2006 2005 2006 2005
------ ------ ------ ------
Net income in
accordance with
GAAP $ 3,839 $ 882 $ 4,451 $ 1,590
Write-off of
deferred financing
costs and debt
discount, net of
tax -- 841 -- 841
Unrealized gain on
interest rate swap,
net of tax (2,239) -- (2,239) --
------ ------ ------ ------
Adjusted net income $1,600 $1,723 $ 2,212 $ 2,431
====== ====== ======= =======
PER SHARE DATA
(Basic and
diluted):
Adjusted net income
to exclude
write-off of
deferred financing
costs and debt
discount, unrealized
gain on interest
rate swap:
-- Basic $ 0.10 $ 0.11 $ 0.14 $ 0.16
====== ====== ======= =======
-- Diluted $ 0.10 $ 0.11 $ 0.14 $ 0.16
====== ====== ======= =======
WEIGHTED AVERAGE
SHARES
OUTSTANDING
(Basic) 16,360 15,362 16,340 15,334
------ ------ ------ ------
WEIGHTED AVERAGE
SHARES
OUTSTANDING
(Diluted) 16,385 15,372 16,370 15,362
------ ------ ------ ------
Supplemental Disclosures
----------------------------------------------------------------------
(Dollars in millions)
Six Months Ended
June 30, 2006
------------------
Revenue Breakdown:
Collection $ 41.8 46.3%
Disposal 30.0 33.3%
Transfer 14.4 16.0%
Other 4.0 4.4%
------ ------
Total 90.2 100.0%
Intercompany eliminations (17.3)
------
Total reported revenue $ 72.9
======
Internalization of Disposal:
Six months ended June 30, 2006 76.7%
Debt to Capitalization:
Long-term debt including
current maturities $182.7
Total equity 96.6
------
Total capitalization $279.3
======
Debt-to-total capitalization 65.4%
---------------------------------------------------------------------
Net Debt to Capitalization after Issuance of $150 million Senior
Notes and $75 million Preferred Stock:
Senior notes $150.0
Other long-term debt including
current maturities 17.8
Cash on hand and restricted cash (b) (57.5)
------
Net debt 110.3
Total equity 169.1
------
Total capitalization $279.4
======
Net debt-to-total capitalization 39.5%
(b) Total restricted cash of $6.7 million includes $1.4 million
associated with long-term tax-exempt bonds and $5.3 million
collateralizing certain letters of credit anticipated to be
released during the third quarter of 2006.