Avalon(US:AWX)2020-11-12 22:05Financial Performance - Net operating revenues related to the waste management segment were $9.3 million in Q3 2020, compared to $12.8 million in Q4 2019 [172]. - Net operating revenues decreased to $16.6 million in Q3 2020 from $18.0 million in Q3 2019, primarily due to a decline in the waste management services segment [181]. - Waste management services segment revenues fell to $9.3 million in Q3 2020 from $11.6 million in Q3 2019, while golf and related operations segment revenues increased to $7.3 million from $6.4 million [181][188]. - Net operating revenues decreased to $44.1 million in the first nine months of 2020, down from $51.0 million in the same period of 2019, primarily due to a decline in the waste management services segment [203]. - Waste management services segment revenues were $29.5 million in the first nine months of 2020, compared to $35.9 million in the same period of 2019 [210]. - Net operating revenues of the golf and related operations segment were approximately $14.6 million in the first nine months of 2020, down from $15.1 million in 2019 [215]. Capital Expenditures and Loans - For the nine months ended September 30, 2020, Avalon incurred capital expenditures of $3.7 million, primarily for the renovation and expansion of The Grand Resort [159]. - The Company received approximately $2.8 million in loans under the Paycheck Protection Program to support operations during the pandemic [154]. - The New Term Loan Agreement provided for a $23.0 million term loan, with a fixed interest rate of 5.00% until the fifth anniversary [161]. - The Line of Credit Agreement allows for borrowings of up to $5.0 million, with no amounts drawn as of September 30, 2020 [166]. - The Company expects aggregate capital expenditures in 2020 to be in the range of $4.5 million to $5.0 million, funded from the project fund account [159]. Membership and Revenue Sources - Membership dues related deferred revenue increased to approximately $4.0 million at September 30, 2020, up from $3.2 million at December 31, 2019, despite a slight decrease in membership [174]. - The primary source of revenues for Avalon Golf and Country Club is derived from its members, and a significant decline in membership could adversely affect future financial performance [260]. - Avalon Field Club at New Castle, acquired in 2019, contributes revenue through membership dues, food, beverage, and merchandise sales [158]. Cost Management and Operational Efforts - The Company engaged in aggressive cost-reduction efforts during the pandemic, including hiring freezes and employee furloughs [150]. - The Company engaged in aggressive expense reduction efforts during the mandated shutdown, including hiring freezes and substantial furloughs of employees [230]. Financial Challenges and Risks - The financial impact of the COVID-19 pandemic led to significant operational restrictions, affecting revenues across multiple segments [224]. - Avalon's waste management brokerage business has experienced a decline in both continuous and project work due to government restrictions, impacting financial performance [230]. - Economic challenges may lead to customer payment defaults, adversely affecting Avalon's future financial performance [238]. - Avalon's business is significantly affected by government regulations that may restrict waste disposal and transportation, potentially impacting revenue [235]. - A significant portion of Avalon's business is generated from waste brokerage and management services that are not subject to long-term contracts, posing risks to customer retention [240]. - Avalon's captive landfill management business relies on a single customer, making it vulnerable to revenue loss if that customer is not retained [242]. Revenue and Expense Trends - Costs of operations for the waste management segment decreased to $7.4 million in Q3 2020 from $9.2 million in Q3 2019, reflecting the decrease in revenues [182]. - Costs of operations for the waste management segment decreased to $23.5 million in the first nine months of 2020 from $28.8 million in 2019, reflecting the decrease in revenues [204]. - Food, beverage, and merchandise sales increased to approximately $2.9 million in Q3 2020 from $2.6 million in Q3 2019, driven by new offerings at The Grand Resort [195]. - Food, beverage, and merchandise sales decreased to approximately $5.3 million in the first nine months of 2020, compared to $6.0 million in the same period of 2019 [216]. Income and Loss - Net income attributable to common shareholders was $0.8 million, or $0.20 per share, in Q3 2020, compared to $0.1 million, or $0.04 per share, in Q3 2019 [186]. - Net loss attributable to Avalon Holdings Corporation common shareholders was $0.5 million, or $0.12 per share, in the first nine months of 2020, compared to a net loss of less than $0.1 million, or $0.00 per share, in 2019 [209]. Interest and Debt Management - Interest expense increased to approximately $0.3 million in Q3 2020 from $0.2 million in Q3 2019, due to higher average outstanding debt [185]. - Interest expense rose to approximately $0.9 million in the first nine months of 2020, compared to $0.6 million in the same period of 2019, driven by higher average outstanding debt [208]. - Borrowings under the Term Loan Agreement bear interest at a fixed rate of 5.00% until the fifth anniversary, after which it may reset to a maximum of 7.35% [264]. - The interest rate on the Line of Credit Agreement was 3.50% as of September 30, 2020, with no amounts outstanding at that time [265]. - Borrowings under the Paycheck Protection Program convert to a loan at a fixed rate of 1.00% if not forgiven, payable in 18 equal monthly installments [265]. - Avalon does not engage in interest rate risk management transactions and does not hold any derivative financial instruments [266]. Seasonal and Regulatory Factors - Avalon's operations are seasonal, significantly affected by weather conditions during the golf season, particularly in northeastern and midwestern states [262]. - Avalon's golf course operations and The Grand Resort hold liquor licenses, and losing any of these licenses would negatively impact financial performance [261]. - As of September 30, 2020, Avalon has not attained its membership goals for the Avalon Golf and Country Club, despite an increase in the number of members [260].