Casella Waste Systems, Inc. (CWST) Q3 2017 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to Casella Waste Systems, Inc. Q3 2017 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Joe Fusco. Please begin.

Thank you for joining us this morning, and welcome. With us today are John Casella, Chairman and Chief Executive Officer of Casella Waste Systems; Ed Johnson, our President and Chief Operating Officer; and Ned Coletta, our Senior Vice President and Chief Financial Officer. Today, we will be discussing our 2017 third quarter results. These results were released yesterday afternoon. Along with a brief review of those results and an update on the Company's activities and business environment, we will be answering your questions as well. But first, as you know, I must remind everyone that various remarks that we may make about the Company's future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on our Form 10-K which is on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. Also, during this call, we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures to the extent they are available and without unreasonable effort are available in the appendix to our Investor slide presentation, which is available in the Investor Section of our website at ir.casella.com. And with that, I'll turn it over to John Casella, who will begin today's discussion.

Thanks, Joe. And good morning everyone. We're very happy with our third quarter results. As reported in our press release, our revenues for the quarter were up 10% from last year, adjusted EBITDA for the quarter was up $2.4 million from last year and our year-to-date normalized free cash flow was up $19.5 million from last year. In addition we accomplished two exciting financial milestones in our third-quarter. Adjusted EBITDA was one of the highest quarterly amounts in the company's history and we reduced our debt leverage down to 3.71 times which gets our leverage below the 3.75 times threshold that was our last main goal as part of our 2018 plan. And it is also the interest rate step down threshold for our term loan B reducing our interest rate by another 25 basis points which will save us almost $900,000 per year in interest costs We drove year-over-year improvement through our strong pricing execution, our operating and efficiency programs and continuing strong overall execution against our key strategic initiatives These things were partially offset by headwinds in recycling business due to China's National Sword program which has net negatively impacted paper and cardboard prices the increase sorting and quality control, labor to meet emerging lower contamination standards. We've done great job over the last several years closing a series of programs to help mitigate commodity risk in recycling business. These programs include a revenue share contracts that share commodity revenues about the threshold with our customers or below the threshold our customers pay dollar per dollar processing fee. Our net average commodity rate formula that allows us to tax back increase cost to sell commodities including higher labor or equipment cost to meet new quality standards and our floating sustainability recycling adjustment or SRA fee that works like a fuel surcharge for our hauling customers where the SRA fee goes up when commodity prices drop to ensure that our customers are covering the true cost to recycle. Our risk programs generally work on a trailing one-month basis. So the rapidly foreign commodity prices from July through October are risk mitigation programs have under recovered during this period. However, as commodity prices stabilize, our programs will work to cover off the majority of the potential impacts of lower commodity prices. Given the current commodity markets for every $10 per ton move and average commodity prices, our operating income would move by roughly $800,000 per year. Over the last week we've seen mixed paper and OCC prices increased by 30% to 40%. We expect materials to be in moving to China again in the near future which should drive prices higher. The goal now is to further improve our quality of recycle fiber products. Over the last several years our team has been focused in executing a long-term strategy that we first announced back to the street in 2013 which we then refreshed in August 2015 when we laid out our 2018 financial targets. As of September 30, we have now achieved all of the financial targets that we established back in 2015 roughly one year ahead of plan. This is a great accomplishment by our team. We have achieved most of the foundational goals focused on blocking and tackling in our core operation, pricing strategy and sales execution, operational efficiency, upgrading our fleet, reducing recycling risk, improving capital discipline and reducing leverage. Underlying each of these efforts was our focused on driving enhanced process and discipline ensuring that we had the right people in the right roles, the right accountability and the right compensation programs to align success. Today we have a focused company with a strengthened foundation and exceptional team. In early August we outlined the next leg of our strategy with our new 2021 plan. With the 2021 plan we have adjusted our strategic focus and provided a financial framework to guide our decision making and strategy. Our core strategies have been working exceptionally well and we plan to continue to focus in these three key areas, increasing landfill returns, driving additional profitability within our collection operations, and creating incremental value through resource solutions. In addition, we’ve introduced two new areas of focus, reducing G&A cost and improving efficiencies and allocating capital to balance de-levering with smart growth. We have set a goal to reduce our G&A cost by 75 to 100 basis points as a percentage of revenue by 2021 and more importantly to reorganize our resources and invest intelligently to drive long-term profitable growth. Over the last two years we've been slowly but surely ramping up our efforts to improve our IT systems and technology platform drive our sales force effectiveness and increase back-office efficiencies. We have already taken a number of steps in these areas including the adoption of a five year technology plan focused on improving our core financial and operating systems, we have successfully implemented the Microsoft dynamic CRM system and we are in the process of implementing Oracle NetSuite ERP platform under a fixed price implementation contract. We believe that we're in a unique position to grow our free cash flow between 10% and 15% per year given our size, our nimbleness and the range of opportunities in our pipeline. Over the last three years we've allocated almost all of our excess cash flows to paying down debt while focusing on our efforts to refinance high cost debt to lower our interest costs. We are now in a position where we have dramatically lowered our interest rates and we've reduced our debt leverage to 3.71 times. As such, we've adjusted our capital allocation strategy to focus - solely focused on repaying debt to a balanced approach where we will continue to focus on reducing leverage but we will also selectively pursue acquisitions and strategic growth investments within our core operations. Over the last several months we've begun to reinvigorate our acquisition and development pipeline in internal resources. We believe that there is over 500 million of acquisition opportunity in our Northeast markets that could be direct tuck-ins with our existing operations or could be strategically integrated with our assets. We've developed and implemented in acquisition and development framework online strategy, financial returns and to focus resources on key targets. We're focused on acquisitions that will generate returns well above our cost of capital, enhance our vertical integration, drive operational and G&A synergies or either be immediately delevering or have a fast path to recognize synergies and cash flows to delever. Year-to-date we’ve completed three holding acquisitions for a total purchase price of $6.3 million at roughly 3 times a bigger multiples after operating synergies. Wrapping up, the financial framework for our newly adopted 2021 plan is as follows; organic revenue growth targeted at 3% to 4% per year including the headwind from the closure of Southbridge over the next two years. We've targeted 20 million to 40 million of acquisitions or development activity per year. We expect this activity to ramp up over a period of time and we don't plan to budget it. Acquisitions or development activity will be opportunistic and we will strictly adhere to disciplined capital return hurdles and process. Normalized free cash flow growth of 10% to 15% per year with the baseline target of generating more than 50 million per year of normalized cash flow by 2021. Total leverage targeted between 3 and 3.25 times debt to bank EBITDA. And with that, I’ll it over Ned.

Thanks John. Now on to the quarter. Revenue for the third quarter were $160.3 million up $9.1 million or 6% year-over-year. Solid waste revenues were up $6.1 million or 5.4% year-over-year with higher collection disposal pricing, higher solid waste volumes and the rollover impact from acquisitions of $1.3 million during the period. Revenues in the collection line of business were up $4.5 million year-over-year with price up 3.3% and volumes up 1.6%. Pricing was up 3.4% in our residential and commercial lines of business and roll-off pricing was up 3.3%. We experienced volume growth in the commercial, residential and roll-off collection lines of business with the residential line of business being positively impacted by the onboarding of four new municipal contracts in the last year. Roll-off was positively impacted as we saw some Q2 activity shift to Q3 after unusually rainy spring. Revenues were up $1.5 million in the disposal line of business year-over-year with both positive pricing and volumes. We increased our reported landfill pricing by 3% year-over-year and more importantly we increased average price per ton at the landfills by 5.3% and improved the mix of our customers and volumes. We increased our average price per ton by 8.6% in our Western region as we continue to inhibit strategy to focus on advancing pricing versus capacity utilization. Our total landfill volumes were 1.2 million tons up 1.2% year-over-year. We continue to ramp down tons at the Southbridge landfill in the quarter and we continue to trade higher pricing at our site for volumes. Recycling revenues were up $1.9 million year-over-year with higher commodity pricing and volumes partially offset by lower tipping or processing fees. Average commodity revenue per ton or ACR as we say was up 22% year-over-year and higher fiber PETE and metals pricing. However commodity prices were down roughly 50% from July to October with the majority of this decline driven by lower paper and cardboard pricing as China has drastically reduced purchases increase quality standards. Organics revenues were down $600,000 year-over-year on lower volumes and land application and product sales were down. Customer solutions revenues were up $1.7 million year-over-year due to several new multisite retail customers and continued growth in the industrial services segment. Adjusted EBITDA was $39.5 million in the quarter up $2.4 million year-over-year with margins up 10 basis points to 24.7%. Solid waste adjusted EBITDA was $36.3 million in the quarter or $2.4 million year-over-year with strong pricing, higher volumes coupled with cost efficiencies partially offset by $700,000 higher landfill leachate processing expenses. Leachate expense was up 73% year-over-year on the abnormally high rainfalls we had early in the quarter. Solid waste adjusted EBITDA margins were 30.6% up 50 basis points year-over-year. The cycling adjusted EBITDA was $1.7 million in the quarter. This is down $900,000 year-over-year with the decline driven by two factors. We had $700,000 higher labor cost as we added solar and quality control personnel at reimburse in an effort to meet the tighter quality standards at the global commodities markets reacted to China's actions to reduce allowable contamination and recycle commodity sales. And two, while our commodity prices were up year-over-year, our risk mitigation programs are reset each month based on a trailing one-month net commodity price. This includes our revenue shares, our rebates, processing fees, and our hauling SRA fee. Typically the one month lag isn’t material but with a significant sequential decline the commodity prices since from July to October we experienced the headwind in the quarter as we shared revenues with customers based on last month's higher commodity rates, while we sold commodities for far lower rates. As John said, as markets begin to stabilize we will see our returns improve in the recycling business and offset the majority of the lower commodity prices. Adjusted EBITDA was $1.5 million in another segment in the quarter up $900,000 year-over-year with increased driven by improved performance in customer solutions group, and changes in intercompany management fees. Cost of operations was up $5.1 million year-over-year but down 55 basis points as a percentage of revenue with increasing cost mainly driven by higher recycling commodity, material prices and higher commodity prices year-over-year, higher labor costs driven by the recycling business, the higher leachate cost we discussed and also on our volume growth as we brought on new hauling customers where we had disposal and transportation costs. General and administrative costs were up $2 million year-over-year. This increase was driven by $1.1 million higher equity compensation accruals, and slightly higher bonus accruals. Our normalized free cash flow was $20.9 million in the quarter that's compared to $5.1 million on last year. This improvement was driven by higher operating results and by $12.8 million of lower cash outflows associated with changes in assets and liabilities year-over-year. $6.9 million of this positive variance was driven by changes in our interest accrual year-over-year. As you may recall, last year with our senior subordinated notes we paid interest two times per year on February 15 and on August 15. At such, last year we had a significant interest accrual reduction during our third quarter. With the refinancing of the senior subordinated debt to term loan B. In October 2016 our interest rate is now primarily paid on a monthly basis which in turn has normalized our accrual from month-to-month in 2017. Our normalized free cash flow is $34.4 million year-to-date, up $19.5 million from last year. This improvement was driven by improved operating performance and $14.3 million of lower cash interest cost partially offset by slightly higher capital expenditures and lower proceeds from sale of property and equipment. As John mentioned as of September 30, our consolidated net leverage ratio was at 3.71 times, this is down 1.71 times since December 31, 2014. Reducing our leverage ratio to below 3.75 times is important for two reasons as John said, this is the last financial target to achieve in our 2018 plan, so we're very excited about that. And two, our term loan B interest rate dropped by 25 basis points to LIBOR plus 250 basis points. This is going to stay that's roughly another $900,000 per year of cash interest cost. As stated in our press release yesterday, we've outperformed our budget year-to-date with higher than projected solid lease pricing and operating performance. We expect the same positive solidly for operating trends that continue to our fourth quarter. However, we remain cautious about the near-term headwinds from lower recycling commodity prices. Our average commodity revenue per ton has drooped approximately 40% from September to October and while we have mature risk programs in place, these programs mainly offset risk on a trailing one-month basis. As such, we expect the recycling adjusted EBITDA to decline about $1 million to $2 million year-over-year in the fourth quarter. Despite this negative headwind, we have raised our revenue adjusted EBITDA and normalized free cash flow guidance ranges for the fiscal year as we outlined in our press release. And with that, I'll turn it over to Ed.

Thanks Ned, good morning everyone. As Ned laid out we finished the quarter ahead of plan. As you can see in the numbers we are enjoying a strengthening economic environment with good pricing dynamics, good demand for roll-off and other another services, and a tightening disposal market that benefits our unique and irreplaceable asset base. Last quarter we were talking about the excessive rain which effects roll-off activity and our leachate cost and landfill construction schedules and we are also talking about an unusual uptick in our healthcare cost. I am happy to say that these things normalized, precipitation went back to normal and our healthcare cost returned to the actuarial trend lines and we had a very strong quarter. Cost of ops improved another 55 basis points as compared to the third quarter of last year, that's 340 basis points from the same quarter the year before last. Despite our recycling cost of ops jumping up over 5% to the extreme volatility and commodity prices. This improvement was led by a strong performance in our collection line of business which improved cost of ops by 158 basis points on strong price and our ability to hold the line on labor and maintenance costs. And from our disposal operations where we experienced a 152 basis points improvement, driven both by price and actual reductions in labor and maintenance costs. Collection price was up 3.3% with a 1.6% volume increase while disposal pricing was up 3.5% on the reported basis. The average price per ton received at the landfills was up 5.3% on flat volumes. There has been a lot of focus on the market disruption for recycling commodities caused by China’s attempts to improve the quality of material they are willing to accept. As a major market participant in the Northeast, we have led the industry with our SRA fee, price adjustment mechanisms and our municipal contracts and with agile tipping fees structure for third-party hours that utilize our fills. So we effectively pass the commodity price risk to the consumer. Although this is a good risk mitigation system it is not perfectly matched. There is material taken in one month, is sold on the ROC pricing the next month. So rapid rising prices temporarily benefit us and rapid declining prices go against us. This hurt us in September and will probably hurt us in October. But in the long run the system is pretty effective. So now we are in budget season, with a positive improvement of over a 100 basis points year-to-date, we are continuing to improve but there are plenty of opportunities ahead. For our disposals side the focus is on airspace utilization, improving turn times for our customers and more efficient life of asset planning for heavy equipment. This means better compaction through standardized practices and operating training and the continued upgrading of our compaction equipment to the larger units. Improving turn times is accomplished through better expansion planning and build schedules where we are making a lot of progress, and through creative operational solutions available at some of the sites. On the collection side we are so focused on the fundamentals, increased automation, improve routing and more effective live dispatching for our roll out services. We are also implementing better training and career development structures for our drivers and mechanics offering them a path to improve their position overtime, reducing costly internal while improving labor efficiency and safety. In the recycling area, the focus is on product quality through both processing technology and customer education. So another good quarter and we look forward to continue progressed. With that I’d like to turn it back to John.

I think operator, we will open it up for questions.

[Operator Instructions] Your first question comes from the line of Corey Greendale with First Analysis. Your line is open.

So just you might have hit on a couple of these things, I just want to make sure I am understanding that. Ned I think you talked about the lower EBITDA year-over-year in the recycling business. Can you just dig in why was EBITDA down in -- I'd say it's going to be down in Q4, why was it down in Q3?

Yes so, two different things really happen in Q3, one we started to add a lot more labor to our processing facilities to ensure that we can meet emerging quality standards. So our labor costs were up $700,000 year-over-year in the third quarter. These new standards from China were really put out in the July timeframe and in order to continue to move materials domestically and internationally we want to clean up the quality further of our materials and start to move towards standard. The second is, year-over-year commodity prices are almost less rather than the sequential commodity prices, because as we described we are almost always paying our customers or charging our customers based on last month's rates. So as prices decline very, very rapidly we can get a dip behind. Now our programs work well over an average number of months but over a singular month or rapidly declining period we can get behind. So on those two factors that’s where we got hit year-over-year on EBITDA in the recycle business. We will see the same thing in Q4 as I said, we expect a $1 million to $2 million of negative variance in the recycling business in Q4. It kind of depends on what happens here over the next couple of weeks. In October, we know we have a negative variance year-over-year. As John mentioned, recycling prices are beginning to go up and stabilize and there is a lot unknowns still here.

I think the other thing with regard to the quality issues, our quality was pretty high quality materials that we were selling. And we’re bringing that quality down even more. So if we were at say 3% or 4% residue, we want to bring it down lower -- I’m sorry -- contamination lower. We’re trying to bring it down even lower. I think that the quality standards that have been set by China are not going to be met by anyone. So I think that there is potential that that’s going to have to change, but nonetheless, we are -- as Ned said additional labor to increase quality standards from a position of -- pretty strong position in terms of the quality that we’re selling into the marketplace currently.

I apologize, on the limit the number of questions here but the 700K from higher labor, was that a full quarter impact, and should we assume there is something like that every quarter, until that anniversaries?

Yes and no, I don’t us to be [flippant] here but John talked about our three risk mitigation programs. One is our revenue share, where we share revenues above our threshold. So we look at our fully loaded processing cost in that facility. Above that threshold, we share revenues with our customers, we also increase profitability. Below that we actually get paid dollar-for-dollar processing fees. We of course have that rate fee, that’s off-taking risk from our hauling customers. We also have one other risk mitigation program, and it’s what we call our net ACR. So we adjust our commodity revenue price that we sell, based upon any changes in the market to meet quality standards, and this can be higher labor, higher equipment cost. So as the market place is changed and standards are changing, we’re now adjusting our net ACR to reflect those changes. So while in the period, our labor cost were up and we under recovered on that higher labor cost. We expect our labor -- yeah, we still expect our labor cost to be up next year. But we actually will be pushing that back to all of our customers in higher shipping fees.

I think the real unknown at this point in time Corey is where that standard's going to settle out…

So, maybe the easiest way to kind of say this is, if everything stayed exactly the same as October for the next year, and we saw the 40% drop from September, October, we'd see about $3 million headwind year-over-year to operating income.

And your next question comes from the line of Tyler Brown of Raymond James. Your line is open.

Ned, quick question on incentive comp. So I think this is the second year in a row where we had the heightened incentive and equity comp, which is great. I mean, you guys have been beating budget. I’m sure it’s great for internal morale. But I’m just curious what’s the delta between the current incentive comp accrual and maybe what would be a normal 100% accrual?

So, we’re tracking to about 87%, 88% right now in calendar year ’17 on the cash incentive comp. We did about 90% last year. There’s a few things going on in the numbers. If you just checkout any changes in cash flow and this equity compensation year-over-year, our G&A cost were up $700,000 year-over-year, or down 10 basis points as a percentage of revenue. So you’re right, changes in the timing and the expected amounts of incentive comp are skewing overall G&A numbers a little bit. But overall, it is not a huge change in the quarter. One of the reasons that comp -- G&A was up a bit, really how to do with equity compensation expense. As you may know, our Board adopted a program two years ago, where more of our compensation was at risk, especially on long-term incentive comp. We moved away from just a time vested RSU program to a perform share program, where 75% of our stock is in performance share units. And we tried our long-term models in the third quarter to reflect our projected performance for 2018 and 2019 as such, and we had some true up to equity expense in the quarter, that caused our equity incentive comp expense to go up roughly $1.1 million year-over-year in the quarter. One other kind of small factor's happening here. We have some great initiatives in the back office right now in IT systems and the like and we’ve got a little double pounding that’s happening. We had to ramp up the resources, we’ve got double hanged for some software licensed and what not. But we’re on schedule, on budget with our next implementation in over the next couple of years there maybe investments that help us to reduce our cost.

So on that, I'm a little unclear on the G&A side. So when you talk about 75 to a 100 basis points what is the base that you’re comping that off of, is it 13% or is it 13.3% or what’s the number?

So we did 13.3% last year. We’ll probably come out around there 13.2% or so. So we want to reduce that by 75 to 100 basis points.

Okay, all right that’s helpful. And then I'm a little confused -- sorry go ahead.

Sorry, we’re not playing to make that based on incentive comp changes or what not. We’re playing to make that goal based upon fundamental changes in our back office.

Right okay and then I'm a little confused on the free cash flow. So I think year-to-date you’re at 34.5. You’re guidance is effectively at the mid-point for 35.5. What am I missing are you really guiding to $1 million of free cash in Q4 and if so is that just conservatism or is it a working capital or what’s the delta there?

So it’s two things. One, it’s CapEx this changes in timing year-over-year in CapEx. We’re looking at -- we have a really ramp for construction here this year. We’re building 8 out of 10 landfills. So we expect our CapEx to be $16 million or so in the fourth quarter. Such part of it and part of it is working capital. So this will be the last year that we’ll have this problem 2017. But if you think about it, when you used to have the subnotes we build accruals in two quarters and reduced accrual, cash interest accrual and this year we’re paying flat each quarter, cash interest. So our comparisons change, [indiscernible] changes of assets and liability is compared to previous year. So we have this yo-yoing effect. In our second quarter we had about negative $7 million working capital hit due to the interest accrual, in the third quarter we had a positive $7 million impact. In the fourth quarter we’ll have the headwind as well. So we normalized this out through year-over-year, okay. But this yo-yoing that's happening has been skewing the quarter slightly. It won’t happen next year though. So those are the big issues really.

And then maybe my last one here, John, thanks for the color on the M&A pipeline but I'm curious, has the cadence of the incoming calls or just the deals that you’re seeing come across your desk really pick up in the last maybe quarter or so since you made your announcements. And then how should we think about that M&A activity, do we expect it to pick up here in short order? Is it maybe too hard to tell, or is it more of an ’18 story just anything there would be helpful. Thank you.

I think it’s more of an ’18 story. We’re gearing up now. We obviously put the structure in place. And historically over the last four or five years there hasn’t been a real focus on it. So we kind of reorganized that whole process just to make sure that we have got the right kind of discipline in terms of our due diligence, everything that we need to do to be really proficient in terms of acquisitions. So it’s going to -- I think it's going to be more of an ’18 story but we’re beginning to see activity. I think it’s fair to say Tyler that we’re seeing there’s pressure from the disposal inflation standpoint to third party haulers, there’s also inflation from the recycling standpoint. So I think that we’re beginning to see activity. I think once we start being more active from a deal flow standpoint it’s going to bring momentum to that whole aspect of our strategy.

And your next question comes from the line of Brian Butler of Stifel. Your line is open.

I think Corey asked most of my recycling questions, but I just wanted to follow up on one or two. When you talk about price being down 40% kind of over the last month or so, where that translates on a average commodity dollar basis like on per ton, so I can kind of like trace it back to that sensitivity of $10 million move equal to 800,000?

Yes, so, we just saw our ACR down by about $40 a ton as well, for about September we’re little bit over a 100, and we’re little bit over 60 right now.

And then on the split, I guess the floors. Can you talk about just kind of on average, how much above the floors you are? I don’t know if that’s a number you have but -- and then think about, how do you share that going on the up and down. I mean, I guess the sensitivity is there. But, I just wonder if you just put little bit more color on that.

So we’re now below the floors, at all of our contracts, and we’re in a position, where charging customers. So it’s always a little bit hard for us to answer a question of what is a $10 move in commodity price mean to you, because it really depends on what the starting and ending prices are. So if you think about it, if we have threshold price say $80 a ton, for our threshold, when we’re above that, we typically are sharing say $0.50 on the $1 with the customer, and keeping $0.50 profitability. So if our prices our $100, and they dropped to $80, that first $20 is pretty painful. I mean, we’re losing $0.50 on the $1 to the bottom line. But when you fall below the $80, we then start charging a dollar-for-dollar tipping fee. So we almost flatten out and we eliminate much of our risk. Now this isn't a 100% across our portfolio. We have one larger customer, who does in sharing that downside, that contract rolls over in 2019, so that's hitting our downsize. And as we talked about our program’s lag, but they’re pretty well situated, and as we look out for next year with our current program we are estimating that will cover up 85% plus of the risk.

And last one on just the volume growth was strong this quarter. When you think about going to fourth quarter and ’18, can you just kind of update what the kind of headwinds from South Bridge is in the quarter? Because I mean, I think we’re looking for a little less volume, but on the expectation that South Bridge was a headwind, but maybe it’s just less going forward.

It’s interesting, if you look at our volumes in the quarter, there is one thing we’re guide to is we won a few new municipal contracts, and they rolled on. So our collection line of business, we had great growth there, 1.6%. You break it down, front load we’re slightly positive. At the rolled off we’re couple percent positive, partly this is probably some Q2 work showing up in Q3 with the rain, and then a real benefit is we are very positive. We had four new contracts, that comp year-over-year. Great contract win in July with York Main. So we had some good movement there. On the disposal side of the business, we’re just actually slightly positive overall. But we’re up about 11% in our West region and down about 11% on Eastern region, as South Bridge ramp downs. Things are getting tight in the Northeast. Waste is moving further distances, and as you know, we’ve got about 900,000 tons a year of excess capacity on our landfills, mainly out of Western New York, and Pennsylvania. It’s all about price over the last year. We’ve been slowly metering in some volumes, but as Massachusetts and the eastern part of our franchise gets tighter, we’ve opportunity to move more tons southwest at the price points we want. So you starting to see some of that into the numbers right now.

I think it’s also, important to recognize that price in the western regions still hasn't Gotten back to levels of where it was in ’09 and ’10, before the collapse of the financial markets and the economy. So we still have quite a bit of runway from a price standpoint over the next three or four years.

[Operator Instructions] Your next question comes from the line of Jordan Gregov with Federated Investors. Please go ahead your line is open.

Just one quick question, you guys have outlined the interest coverage ratio for 9/30 for your credit facility requirement?

Yes, give me one second. We’ll have this is in our Q that will be put out later today as well. interest coverage ratio at Q3 was 5.68 times. It is the minimum ratio of 2.50 times.

[Operator Instructions] I am showing no further questions at this time. I would like to turn the call back over for closing remarks to John Casella. Please go ahead.

Thanks for your attention this morning. We look forward to discuss our fourth quarter 2017 earnings and our 2018 guidance with you in early March 2018. Thanks everyone. Have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you for participation and have a wonderful day. You may now all disconnect.