Avalon(US:AWX)2024-05-08 21:02PART I. FINANCIAL INFORMATION Presents the company's unaudited Q1 2024 financial statements and management's corresponding analysis Item 1. Financial Statements Contains the unaudited condensed consolidated financial statements for the first quarter of 2024 and 2023 Condensed Consolidated Statements of Operations (Unaudited) Reports a reduced net loss of $1.1 million in Q1 2024 compared to a $1.8 million loss in Q1 2023 | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total Net Operating Revenues | $18,858 | $18,445 | | Operating Loss | $(513) | $(1,264) | | Loss Before Income Taxes | $(1,014) | $(1,768) | | Net Loss | $(1,054) | $(1,799) | | Net Loss Attributable to Avalon Holdings Corporation Common Shareholders | $(979) | $(1,677) | | Basic Net Loss Per Share | $(0.25) | $(0.43) | Condensed Consolidated Balance Sheets (Unaudited) Shows an increase in total assets to $90.6 million and total liabilities to $55.6 million as of March 31, 2024 | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $17,377 | $14,045 | | Property and Equipment, net | $56,158 | $56,630 | | Restricted Cash | $10,192 | $10,265 | | Total Assets | $90,603 | $87,965 | | Total Current Liabilities | $21,755 | $17,909 | | Long-term Debt, net of current portion | $29,080 | $29,220 | | Total Liabilities | $55,557 | $51,857 | | Total Equity | $35,046 | $36,100 | Condensed Consolidated Statements of Shareholders' Equity (Unaudited) Details the decrease in total equity to $35.0 million at March 31, 2024, primarily due to the net loss | Metric (in thousands) | March 31, 2024 | January 1, 2024 | March 31, 2023 | January 1, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Equity | $35,046 | $36,100 | $36,345 | $38,143 | | Net Loss | $(1,054) | - | $(1,799) | - | Condensed Consolidated Statements of Cash Flows (Unaudited) Highlights improved net cash from operations and reduced cash used in investing activities for Q1 2024 | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $411 | $246 | | Net Cash Used in Investing Activities | $(348) | $(1,098) | | Net Cash Provided by (Used in) Financing Activities | $(160) | $510 | | Decrease in Cash, Cash Equivalents and Restricted Cash | $(97) | $(342) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $11,355 | $11,708 | Notes to Unaudited Condensed Consolidated Financial Statements Provides context on business segments, revenue recognition, restricted cash, and ongoing legal matters - Avalon Holdings Corporation operates in two primary segments: waste management services and golf and related operations22100101 - Restricted cash of $10.2 million (March 31, 2024) and $10.3 million (December 31, 2023) is held for renovating The Grand Resort and Avalon Field Club2829 Net Operating Revenues by Segment (in thousands) | Revenue Source | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Waste Management Services | $12,470 | $12,652 | | Golf and Related Operations | $6,388 | $5,793 | | Total Net Operating Revenues | $18,858 | $18,445 | - For Q1 2024, one customer accounted for 14% of waste management services revenue and 9% of consolidated revenue; in Q1 2023, two customers accounted for 32% and 22% respectively35 - All stock options were cancelled as of March 31, 2024, as stock price targets were not met, and no options are outstanding96 - Salt water injection wells operations remain suspended due to a 2014 seismic event, with legal appeals ongoing33123124 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Offers management's perspective on financial performance, liquidity, capital resources, and operational results for Q1 2024 Liquidity and Capital Resources Details the company's funding sources, debt structure, and an increased working capital deficit - Avalon's liquidity sources include existing cash, cash from operations, and a $5.0 million line of credit, with $10.2 million in restricted cash for renovations128129134 Debt and Working Capital Summary (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | 2022 Term Loan Agreement Outstanding | $29,627 | $29,758 | | Line of Credit Outstanding | $3,200 | $3,200 | | Available under Line of Credit | $1,800 | $1,800 | | Working Capital Deficit | $(4,400) | $(3,900) | - Capital expenditures for 2024 are projected to be $3.0 million to $4.0 million, primarily for hotel renovations138 - Deferred membership dues revenue increased to $5.2 million at March 31, 2024, from $3.4 million, as membership count rose to 5,050141 Growth Strategy Outlines strategies for internal growth in waste management and leveraging The Grand Resort for the golf segment - Waste Management Segment strategy focuses on internal growth, customer retention, and geographic expansion through enhanced sales and marketing143144 - Golf and Related Operations Segment strategy leverages The Grand Resort to provide a self-contained vacation experience and grow memberships147 Results of Operations Analyzes the increase in Q1 2024 revenues and the significant reduction in net loss compared to Q1 2023 Key Financial Performance Indicators (in thousands, except per share) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total Net Operating Revenues | $18,858 | $18,445 | | Waste Management Services Net Operating Revenues | $12,470 | $12,652 | | Golf and Related Operations Net Operating Revenues | $6,388 | $5,793 | | Operating Loss | $(513) | $(1,264) | | Net Loss Attributable to Avalon Holdings Corporation Common Shareholders | $(979) | $(1,677) | | Basic Net Loss Per Share | $(0.25) | $(0.43) | - Waste management services segment's gross margin increased to approximately 21% in Q1 2024 from 18% in Q1 2023157 - Golf and related operations segment's loss before income taxes improved to $0.8 million in Q1 2024 from $1.3 million in Q1 2023 due to higher revenue and cost-cutting164 - Depreciation and amortization expense increased to $1.0 million in Q1 2024 from $0.9 million in Q1 2023 due to a higher depreciable asset base150 Trends and Uncertainties Discusses key risks including legal proceedings, economic conditions, labor challenges, and customer concentration - Ongoing legal proceedings related to the suspension of salt water injection wells continue to pose uncertainty123124169 - Economic conditions, including inflation and potential recession, can impact consumer discretionary spending and increase operating costs172175196 - Labor challenges in recruiting and retaining qualified individuals could negatively impact operating margins and profitability173174 - A significant portion of business is not subject to long-term contracts, and the captive landfill management business depends on a single customer177 Item 3. Quantitative and Qualitative Disclosures about Market Risk States the company has limited interest rate risk due to its fixed-rate term loan and does not use derivatives - Avalon has limited exposure to changing interest rates and does not use derivative financial instruments197198 - The 2022 Term Loan Agreement has a fixed interest rate of 6.00% until its seventh anniversary197 - The Line of Credit Agreement bears interest at Prime Rate plus 0.25%, with an interest rate of 8.75% at March 31, 2024, on $3.2 million outstanding197 Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of March 31, 2024199 - No material changes in internal controls over financial reporting occurred during the fiscal quarter ended March 31, 2024200 PART II. OTHER INFORMATION Covers legal proceedings, securities changes, defaults, safety disclosures, and filed exhibits Item 1. Legal Proceedings Refers to the company's 2023 Annual Report on Form 10-K for details on legal proceedings - For a description of legal proceedings, refer to Item 3 in Avalon's Annual Report on Form 10-K for the year ended December 31, 2023201 Item 2. Changes in Securities and Use of Proceeds Reports no changes in securities or use of proceeds during the period - No changes in securities or use of proceeds to report201 Item 3. Defaults upon Senior Securities Confirms no defaults upon senior securities occurred - No defaults upon senior securities201 Item 4. Mine Safety Disclosures States there are no mine safety disclosures to report - No mine safety disclosures201 Item 5. Other Information Indicates no other information was required to be disclosed - No other information to report201 Item 6. Exhibits and Reports on Form 8-K Lists filed exhibits, including Sarbanes-Oxley certifications and a Form 8-K on a legal ruling - Includes certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002201 - Includes Inline XBRL documents202 - A Form 8-K was filed on January 24, 2024, reporting the Supreme Court of Ohio's decision to overturn a prior ruling on the salt water injection well appeal203