Participants
Charlie Wohlhuter; Director – Investor Relations; Casella Waste Systems Inc
John Casella; Chairman, CEO, and Secretary; Casella Waste Systems Inc
Bradford Helgeson; Chief Financial Officer, Executive Vice President; Casella Waste Systems Inc
Ned Coletta; President; Casella Waste Systems Inc
John Mazzoni; Analyst; Wells Fargo
Tyler Brown; Analyst; Raymond James
Michael Hoffman; Analyst; Stifel
Adam Bubes; Analyst; Goldman Sachs
Presentation
Operator
Good day, and thank you for standing by, and welcome to the Casella Waste in sellout Waste Systems Fourth Quarter 2023 earnings call. (Operator Instructions) Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your first speaker today, Charlie Wohlhuter, Director of Investor Relations. Please go ahead.
Charlie Wohlhuter
Thank you, Victor. Good morning and thank you for joining us on the call today with us are John Casella, Chairman and Chief Executive Officer of Casella Waste Systems, Ned Coletta, our President, Brad Helgeson, our Chief Financial Officer, Jason Mead, our Senior Vice President of Finance and Treasurer, and Sean Steve, our Senior Vice President and Chief Operating Officer of solid waste operations.
Today, we will discuss our fourth quarter and full year 2023 results, which were released yesterday afternoon. After review of these results and an update on the Company’s activities and business environment, we will be happy to take your questions.
First, please note that various remarks 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 these 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 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 in 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, February 16th, 2024, 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. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures to the extent they are available without unreasonable effort are included in the appendix of our investor slide presentation, which will be available on the Investors section of our website at ir.casella.com.
With that, I will now turn it over to Jon Kathol to begin our discussion.
John Casella
Thanks, Charlie, and good morning, everyone, and welcome to our fourth quarter 2023 conference call, which was an exceptional year for the Company and illustrates the success that we continue to have in terms of executing against our key strategies. I’m excited about the opportunities that lie ahead. First, we will highlight our performance for the year, then I’ll pass it on to Brad and Ned, who will provide more specific comments around our results and strategy. Our performance in 2023 reflects the successful investments we made across our business, deploying capital for return driven growth of focus on our people and operations is helping us improve safety and turnover while deep delevering exceptional service, delivering exceptional service and driving more productivity. We’re also experiencing notable operating benefits from our Boston Vurv following the full equivalent upgrade this past summer. I’m also excited to announce that we have similar plans to fully upgrade the processing equipment at our romantic Connecticut recycling facility later in 2024. We continue to invest in and further modernize our sustainability infrastructure. Our disciplined approach strikes the right balance between economic returns and providing benefits to the environment. As I noted in our press release yesterday, completing seven acquisitions was an exciting and notable achievement in 2023. Given the size and the new markets we’ve entered, I’m very encouraged by the early results of our mid-Atlantic region and other acquisitions that we completed in the year. Real shout out to the Mid-Atlantic team to Kyle and his team have done a terrific job of integration, bringing the Mid-Atlantic up to speed into in terms of the facade culture. The level of engagement of our new team members is really impressive to help facilitate the transition and integration process includes implementing our strategy, developing our sales approach, the value of evaluating acquisition opportunities. We really like the growth runway we see ahead for the entire business in 2023. Our operating initiatives in our base business, combined with our growth strategy, allowed us to post double digit growth across key financial metrics. Revenues were up over 16% adjusted EBITDA growth topped 20%. And for the second consecutive year, adjusted free cash flow was growth was up 15%. We expanded our adjusted EBITDA margins 70 basis points, which was an indication of the strength of our operating and pricing programs. We closed out the year on solid footing in Q4 with 17% adjusted EBITDA growth in our base business and over 200 basis points of margin expansion.
As we look to 2024, we have strong balance sheet, ample liquidity and are in a excellent position to support further growth in our business.
Let me provide a few related comments on the execution of a few of our key strategies and some of the performance of our operations. As you know, a key part of our strategy is improving returns across our disposal assets. Our operating programs that really made this possible despite volumes being down year over year in 2023 we were able to drive higher adjusted EBITDA. This is a testament to our team and the focus on getting the right tonnes at the right price, improving the mix of our inbound streams, helping to drive our average landfill price per ton, up 9.8% in the year and helping to offset them with headwinds from lower disposal costs, lower disposal volumes. We remain committed to expanding margins and driving higher returns across our landfill assets on the collection side of the business, especially proud of what we’re doing to strengthen our employee base that is enabling us to be safer and more engaged team resulting in higher returns in this line of business.
Yes, ongoing technology investments like adding automated trucks, route optimization, software onboard computers are driving safety and operating efficiencies higher. But the direct investment in our frontline team are equally as important and valuable. John and his team have done a terrific job of supporting the field and really driving our cost of ops down over 200 students have graduated from our CDO. schools since starting the program, we’re seeing great outcomes particularly in lower turnover rates among our graduates in our CDL program. While we’re only a couple of months into our new diesel technician program, 20 students have received their certificate. So far and these people focused initiatives promote greater stability and safety. And quite frankly, the results show it. Our company wide turnover rate is down nearly 20% year over year in 2023, while key safety metrics such as TRPRI. are improved as our execution against these key metrics improve. So often does the performance as a company probably the most significant thing that I’m proud of is throughout the immense growth that we had in 2023, we were able to bring our turnover down and improve our safety record of a real tribute to the entire team.
And finally, Resource Solutions. As I mentioned before, sustainability is woven into the framework of the company is an area we continually strive to enhance similar to our upgraded Boston work, which has delivered strong results over the back half of 2023. We are reviewing other facilities where we can improve operating efficiencies and materials recovery. Our next large upgrade, as I said, we’ll be at our will remain at more slated to begin in the second half of this year.
Turning to our professional services business, hats off to Paul and laser. That entire team has done a terrific job of growing our revenues and looking at those opportunities, we want to have a significant additional business throughout 2023 and see lots of potential to continue to grow this business.
Looking ahead, a key driver of this optimism is the potential of new market entries of that, what they present for more customers for us to win different differentiation, differentiating our service offering, again, a really exciting opportunity for us to really provide those services to those industrial customers in the Mid-Atlantic. Very excited about the opportunities that present themselves in front of us.
Looking ahead in wrapping up on exiting 2023, I have to say I am so proud of our entire team, our drivers or mechanics, our division managers, particularly in those states of Vermont, New Hampshire, upstate New York, Pennsylvania, where our teams own provided service in the midst of what was a catastrophic flooding I can I can talk about for a long time. Some of those divisions that didn’t have an operating center yet they picked up their they picked up their customers and took care of the communities that depend on us for service. So a big hats off to the entire service team did just a fabulous job in 2023. And then you look across the entire organization from finance with Ned and Jason, enhancing the capital structure to continue to grow the business, Shelly and Sam and permitting compliance and legal on just a absolute on absolute unbelievable performance for the year.
Hr, again, I can’t say enough about Kelly and the HR team onboarded 1,000 people in 2023. And probably most importantly, all of the management team has been able to come through or values training and have a real understanding of what it takes to manage it to sell an extremely exciting year, very, very significant from a growth perspective, but equally as significant in our ability to bring down turnover and improve our safety record and with that, I’ll turn it over to Brad to go through more specifics on the numbers.
Bradford Helgeson
Thanks, John, and good morning, everyone. And I’ve been with the Company for a little over three months now. And I’m really thrilled to be part of the team a little bit less some big shoes to fill, but obviously he remains from our side moving on to the quarter. Revenues in the fourth quarter were $359.6 million, up $87.4 million or 32.1% year over year with $71.7 million of change driven by acquisition activity and $15.8 million of organic growth or 5.8%. Solid waste revenues were up 40.4% year over year, with acquisition growth of 34.3%, price up 6.7% and volumes down 1.4%. Revenues in the collection line of business were up 54.8% year over year, with price up 7.2% and volumes down 2%. Volume declines were primarily a result of softness in temporary roll-off activity and customer churn, driven by our efforts to improve the quality of revenue and margins in the residential line of business revenues in the disposal line of business were up 8% year over year, with landfill pricing up 6.9% from national tons, down 3.7%, reflecting softness in C&D volumes in the market, while MSW and special waste volumes were essentially flat.
Resource Solutions revenues were up 8.8% year over year, with price up 5.2% across the segment and acquisitions contributing 3.8%. Price growth was driven by an increase of 81% or $45 per ton in our average commodity revenue over the historically low prices of Q4 2022, though this was muted by lower shipping fees that adjusts to share higher commodity prices with our customers.
Stepping back recycled commodity prices have risen the roller coaster over the past two years through the multiyear peak in the first half of 2022 and trough in the second half, followed by a moderation of volatility and sequential recovery in prices over the course of 2023. Overall, commodity prices were a headwind of revenue for the year, but have now turned positive on a comparable year-over-year basis. But regardless of the direction of prices, the company’s model works to preserve return on its investment in recycling through the cycle, sharing the commodity price risk with our customers via contract structures and our SRA fee. The past two years served as a really good case study. National accounts revenue within Resource Solutions was up 4.2% year over year. Adjusted EBITDA was $82.2 million in the quarter, up $25.9 million or 46.1% year over year, with $16.3 million of the change from acquisitions and $9.7 million or 17% from organic growth at 295 million for the year. Adjusted EBITDA came in at the middle of our guidance range has increased it to three solid waste. Adjusted EBITDA was $74.8 million in the quarter, up $23.5 million year over year with acquisition, strong pricing and operating efficiencies driving this growth.
Resource Solutions.
Adjusted EBITDA was $7.4 million in the quarter, up $2.8 million year over year, driven by the benefits of the Boston retrofit and higher commodity prices. Adjusted EBITDA margins were 22.8% for the quarter, which is a console a record for the fourth quarter of approximately 210 basis points year over year. Again, our pricing programs fully offset cost inflation in the quarter with consolidated price growth of 5.9%, providing 110 basis point spread over inflation, which ran at 4.8%, excluding fuel inflation, has been moderating for flat sequentially in the quarter and of course, remains elevated in historical terms. In addition to the 110 basis points from net price for the year over year, margin bridging items include 140 basis points from improved collection operating performance, reflecting labor and cost efficiencies from work from our operating programs, improved recycling processing performance, again driven by the Boston Merck retrofit and lower fuel expense net of fuel recovery fees. These were offset by a 35 basis point headwind from lower landfill volumes and higher leachate costs and a five basis point headwind from acquisitions as the acquired businesses have come in at slightly lower margin pre-synergies than the existing business. This represents margin tailwind opportunity, of course, as we execute our integration and synergy plan cost of operations in the quarter was up $54.8 million year over year, but down 120 basis points as a percentage of revenue as the Company continues to outpace inflation on the revenue line and operate more efficiently. As I mentioned, 50.1 million of the increase was was from acquisitions. So on a same-store basis, cost of operations was down over 200 basis points as a percentage of revenue year over year, which is tremendous performance. General and administrative costs in the quarter were up $7.4 million year over year, but down 110 basis points as a percentage of revenue, 5.3 million of the increase was from acquisitions. Companies investing in the G&A line to support our growth, including adding a new region to manage on our Mid-Atlantic operations. We expect to gain further leverage here over time as we grow depreciation and amortization costs were up $21.4 million year over year with $18.3 million with the increase resulting from the recent acquisition activity. As that explained last quarter, we expect heightened D&A for the first two years after each acquisition. To put this in perspective, D&A associated with acquisitions was 25.5% of acquired revenues in the quarter as compared to 12.6% for the base business. The P&L included a unique nonrecurring item in the fourth quarter, but I’d like to take a moment to explain a $3.9 million charge for an event at our Ontario County landfill, where a layer of soil slid down the veneer of a cap section of landfill nobody was hurt and overall operations were never interrupted. The charge for the write up. Costs relate to capping work and current period costs for cleanup inherent engineering analysis is currently underway. To determine root causes and responsibility for the event.
Our effective tax rate was 31.4% for the full year as certain nondeductible expenses and discrete items pushed the rates above our statutory rate of approximately 27%.
Adjusted net income was $7.5 million in the quarter, down $2 million compared to prior year, with the accelerated D&A associated with acquisitions weighing on earnings. Gaap net loss was $1.8 million in the quarter, impacted by $5.2 million of expenses related to acquisitions and a $3.9 million rental capital charge. Adjusted EPS was $0.13 in the quarter and $0.94 for the year. Gaap EPS was a loss of $0.03 in the quarter and earnings of $0.46 for the year. The company’s acquisition growth strategy is weighing on the bottom line in the near term, with costs incurred to pursue execute and integrate acquisitions and accelerated D&A impacting earnings, but it’s building significant shareholder value for the long term. And these acquisition related P&L headwinds will become tailwinds in future years. Adjusted free cash flow was $128.3 million for the full year 2023, up 15% year over year. And in the middle of our increased guidance range at Q3. Net cash provided by operating activities was $233.1 million for the full year. This was driven by the improved operating performance partially offset by the cost of higher debt to finance acquisitions and higher outflows from net changes in assets and liabilities in that line.
Dso was flat year over year at 34 days, but we faced a few headwinds from a working capital standpoint, including higher landfill capping costs relative to our expectation that Q3 capital expenditures ended up coming in a little lighter as we plan for the heaviest capital spending quarter in the Company’s history, but delays in equipment deliveries pushed some spend into 2024, which is reflected in our guidance which I’ll discuss shortly.
Going the other direction. Cash costs for acquisition related activities came in a bit higher. As of December 31st, we had $1.05 billion of debt, $221 million of cash and available liquidity of $493 million. Our consolidated net leverage ratio for purposes of bank covenants was 2.78 times. Our average cash cash interest rate was approximately 5%, and we have fixed interest rates on over 75% of our debt. So the balance sheet is in great shape. Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute on our robust M&A pipeline.
As stated in our press release yesterday, we announced we announced guidance for 2024, and those ranges and relevant underlying assumptions are laid out in our release at the midpoints of the ranges reflect 18% growth in revenue year over year, 21% growth in adjusted EBITDA and 13% growth in free cash flow regarding our guidance ranges assume a stable economic environment, but reflect a slightly cautious outlook on C. and DY. On the top line, our guidance includes $175 billion or approximately 14% of acquisition rollover with approximately 4.5% overall organic growth at the midpoint. While we expect to be acquisitive again in 2024, our guidance does not reflect any further acquisition activity organically in solid waste business. We expect pricing of 5% to 6%, again ahead of inflation, which for us is still running at approximately 4.5%. We retain pricing flexibility across approximately 70% of our collection revenue. So we’re well positioned to respond to changing conditions if necessary as the year progresses.
Solid waste volumes are expected to be flat to down 1% with potential weakness in C&D volumes in the landfill and temporary roll-off business is reflected in that estimate. Bridging 2023 adjusted EBITDA to our guidance of approximately $40 million is acquisition rollover $5 million is improved performance at the Boston Mirth, net of the impact from downtime to retrofit the Lumentum work, as John discussed earlier, and $10 million to $20 million is base business organic growth. Our adjusted EBITDA guidance reflects 30 to 50 basis points of margin improvement in 2024. Bridging margin from 2023. Acquisitions are expected to weigh on margins by approximately 10 basis points to Boston versus net a little magic downtime is expected to add approximately 10 to 20 basis points in organic growth at 30 to 40 basis points in our guidance with pricing leverage and our operating programs offset somewhat by softer volumes. We expect free cash adjusted free cash flow to grow consistently with our long term rate of 10% to 15%. We anticipate another year of investing significantly in the business with capital expenditures of approximately $180 million, which includes approximately $20 million for the Willow metric, Mark retrofit, $20 million of other nonrecurring spend in connection with recent acquisitions and approximately $5 million to complete the initial start-up investment at the McKean landfill rail project in closing. This is an exciting time in the Company’s history as our growth initiatives and operating programs are bearing real fruit, and we’re well positioned to continue this momentum into 2020 for now I’ll turn it over to Ned to add some further color on our strategic initiatives.
Ned Coletta
Thanks, Brad, and good morning. Everyone. 2023 was an exciting year for Cascella as we continue to execute extremely well against our long-term strategic plan and its execution is clearly demonstrated in our financial results for the year. This growth was driven by continued execution against our operating efficiency programs for core organic revenue growth and pricing initiatives, robust acquisition activity, key development projects, and continued investment in our foundational pillars, as outlined by John earlier, we completed seven acquisitions in 2023 and acquired approximately $315 million of annualized revenues, including the expansion of our footprint into the Mid-Atlantic region, completing the acquisitions was just a starting point, and our team has worked very hard through late 2023 and into early 2024 to integrate the newly acquired businesses into our operations systems and back office. We are tracking well against pro forma for each acquisition and expect to complete the remaining systems and back-office integration work in the coming months.
Kyle Larkin and our new mid-Atlantic team are doing a great job executing against our operating plan while working tirelessly on the critical integration efforts, the GFL team has been super helpful, providing transition services and assisting us with the successful migration off their systems and thank you to their entire team.
Our Western Region team, led by Michael statement, has partnered extremely well with Scott or Al and the twin bridges team to quickly advance integration efforts to drive operating synergies and ensure top-notch customer service through that acquired region.
With the expansion of our operating footprint into the Mid-Atlantic. In 2023, we have built our acquisition pipeline to over $800 million, and we are positioned well to have another strong acquisition year in 2024.
On the development side, we continue to invest and return-driven sustainability infrastructure, including the full equipment upgrade on our Boston recycling facility completed in early Q3 23. As John mentioned, we’re tracking ahead of pro forma with a strong performance driven by higher revenues on additional material recovery, a 35% improvement in productivity. It lowered our operating costs and increased our processing throughput. A big thank you to Bob capita and Austin Ignite and the entire team for their excellent leadership managing through a very complex upgrade process. Our team also made great progress on the build-out of the rail offload infrastructure in McKean, Pennsylvania landfill, and we expect the facility to be online in mid to late 2024 in this first phase we’re bringing online capacity offload up to 5,000 tonnes a day of containerized municipal, solid waste soils and sludges. We expect this operation to ramp slowly over the next few years as this investment is less about near term volumes and more about long-term risk management and flexibility as we want to ensure viable waste disposal outlets long term in a capacity-constrained Northeast.
Finally, we expect our first RNG project at our Juniper Ridge landfill to be online in the first half of 2024. RKEA. or BP. will own and operate the facility while consolidate, generates a royalty stream from the sale of gas and rent with zero capital investment. This facility will generate roughly 700,000 MMBTUs per year. As we continue to grow as an organization, we are laser focused on maintaining our positive culture and value system by investing in and developing our people and ensuring that we have the right people in the right roles. This has been quite an undertaking with our rapid growth. Over the last year, we’ve welcomed over 1,000 new employees because selling through acquisitions, organic growth and our team did an amazing job effectively onboarding these new team members.
Further, we continue to make excellent progress on key technology efforts. Active seller, including our program to automate our residential collection fleet, introduce onboard computing in our truck fleet and improve our customers’ experience with new digital tools, currencies and the operating teams have done a top-notch job over the last year, executing against our operating plan while implementing key operating initiatives through the end of 2023, we’ve automated 56% of our residential fleet with either automated side loader or Toronto trucks. These efforts are making a positive impact on reducing our cost of service and enhancing our people safety in the field. The new Mid-Atlantic operations introduced a great additional opportunity to advance fleet automation with only 50% of the residential fleet automated. Today, we have deployed onboard computers at approximately 70% of our 1,400 truck fleet. And we expect to make additional progress in 2020 for the OBC.s and enhancing our safety profile on the road, creating additional revenue opportunities, digitizing things like route sheets and automating important data collection used for our operations teams and our customer reporting, Kevin Dreyer because AO. and keep land our new CIO. effectively partner to launch a new customer payment portal in 2023, marking an important step in our efforts to further digitize and improve our customer experience. We plan to continue to invest in this key area of strategy to ensure our customers have the right tools in the coming years to manage their services and access key data intelligence.
Looking into 2024, we believe we have a strong opportunity to continue to execute in the key areas to drive further shareholder value and profitable growth.
And with that, I’ll turn it over to the operator for questions today.
Question and Answer Session
Operator
(Operator Instructions) John Mazzoni, Wells Fargo.
John Mazzoni
Morning. Maybe could just let me touch on. Yes, thanks, guys. Can you just quickly touch on some of the trends you’re seeing within the disposal line and specifically around the volumes?
I think we have kind of understood a lot of the Northeast dynamics here but as we think about pricing on that kind of line item, what are you seeing in terms of tipping fees and other types of kind of early indicators for 24 and how should we kind of think about not only the cadence, but also any kind of step-downs or other types of items that might kind of impact the model?
Yes. So overall unit, same trends are going to continue in the Northeast. We’ve had sites closed and we expect additional sites to permanently close over the coming years. But what’s happening and what’s happened over the last several months and into early 24 is Pheno at certain sites approach the end of their life. They wanted to fill them up and you know, they might even hold price steady or look for additional lines. And we see this a bit with one of the large construction demo debris sites that’s going to close in the next year plus, and they’re kind of sprinting to the end of the line. As such, we’ve seen a little pressure on the construction and demo side of volumes, but things are stable to positive both in MSW contaminated soils.
On the pricing side, we’ve entered 2024 with a robust pricing plan at the landfills kind of high single digits again, and it’s been well received in the marketplace on the price increases are well justified or inflation continues to run time.
On the landfill development side, capping closing on the regulatory environment continues to get more and more complex and we need to get those costs back to the marketplace that softness in C and D, it’s probably a little bit less about the economy in the Northeast than it is about just that rush for someone to close their site, get it buttoned up.
And then you’ll see the other side of that with some additional tightening in the market and coming in 25, clearly bodes well for the next three to five years in terms of how we’re looking at pricing for disposal capacity and that disposal capacity is really worth more on a year-over-year basis. So we’re pretty excited in terms of the position that we set over the next three to five years from landfill pricing perspective, and also in addition to that, we also, as many people know, have invested the capital to make sure that our on the McKean facility is up and operational. We don’t anticipate a significant ramping in 2024 at all. But that facility is up and will be up and operational at the end of this quarter.
Electric car.
Thank you. And maybe just a quick one on that inflationary kind of trend or helpful or can it get that base rate, but as we think about the price cost spread in 24, could you just outline some of the main drivers between kind of what you’re seeing on the inflation side and outside of kind of fleet, other types of kind of one-time items and also if you could quantify any potential kind of up tick or kind of headwind from the commodity prices. And I think we kind of understand that you guys have less exposure on that side, but just anything in terms of kind of those inflationary buckets would be very helpful.
Thanks.
Yes, it’s Brad. So on your inflation remains stubbornly high. The Company reported inflation north of 5% last year, we’ve seen that kind of trend down, but gradually in the fourth quarter, we were running just under 5%. If you’re looking at 4.5%. It really is up across the board. We’re seeing particular, particularly stubborn inflation is in outside repairs on net alluded to this a second ago on the costs of relating to the landfills. Those are up really across the board of tires that that’s a that’s a notable one. Labor labor is probably pretty consistent with our overall inflation rate. So we’re not really taking a view at this point on on further material moderating of that number. We kind of assume more or less where we are for the balance of the year based on that inflation number were, um, targeting 5% to 6% price growth, as we said earlier on, that’s across collection and disposal and solid waste business.
So looking to plus or minus maintain that 100 basis point spread, if I can and commodities you asked about commodity are and you mentioned our model is such that the commodity prices don’t impact us actually that much either way. But on commodity prices look like they’re going to be up certainly year over year end. And the beginning of the year is bearing that out so far.
Great. Thank you.
Operator
Tyler Brown, Raymond James.
Tyler Brown
Hey, good morning.
Good morning, Mike.
Either a first off, Brad, great to hear your voice again on a conference call on. But hey, I just wanted to get a little bit more color on the near failure. So kind of a multipart question, but one, John, have you have you had a slide like this before to I may have missed it, but what was the determined root cause? Was it too much larger precipitation and then three, it happened later in the quarter.
So should we expect a spillover effect of expense into Q1 and only the I’ll talk a little bit about the on the veneer failure on the veneer failure on really was stopped by the transportation roads that we had in the facility and again, as Brad said, no one was hurt. It was a nonissue is all done by third parties. We’re going through that from a practical standpoint with a third party contract contractor with the engineers to make a determination as to what caused it could very well be gas. And there’s a couple of different perspectives at this point in time, Tyler, but we haven’t had the report yet on and we’ll we’ll obviously go through that in detail and trying to make sure that we understand on a go-forward basis what additional steps we need to take to make sure that we are precluded from happening in the future.
And maybe, Brad, I think there was one additional plant.
Yes, it’s some it’s a soil on top of the synthetic cap that slid down a slope basically. So there is nothing exposed inside the landfill, but no damage. So landfill itself, but to be pulled down. And then rebuild.
Okay.
No lingering costs.
We know we don’t believe so at this point in time, that’s correct, and we’re doing it. We’re doing more evaluation, Tyler, but at this point in time, we don’t believe there will be any additional any additional costs or any additional work that we’re going to need to do.
Okay. Okay, great.
And then I got a few kind of another multipart question on cash flow. So I think you mentioned on you only have 5 million slated for McKean. So is that spend based it basically winding down at this point, number two, there was a $6 million legal settlement payment that you’re expecting in 24. What was that? And then three, when does the Southbridge and possible remediation start to sunset. I know that’s a multi-part question.
Sorry about that.
But yes, those questions show on in regards to McKean, and we are nearly wrapped up with this first phase on, we’ve put in almost a mile worth of spur track switches and a gantry crane offload infrastructure to take off containerized solid waste and containerized soils and sludges. So we’re building out the infrastructure to be able to turn on facility up to 5 to 6,000 tonnes a day. As I said earlier, we don’t expect to ramp rapidly, and this is long term risk management for the Northeast. As if we look at the risk of other sites potentially closing over time, we’ll look to kind of slowly ramp this up. It’s not going to be material in our numbers in 2024 to 5 million kind of stepping into 24 who some of the remaining track were a little bit more switch where some of the heavy equipment showing our articulated trucks with rail systems to I’ll take the containers onto the working face of the landfill. So it’s mainly wrapped up if we were to ever invest to take construction demo waste at the landfill. We would have additional investment at this point in time. It’s not really in the near term game plan for our strategy at that site on that the CAD6 million charge that we took back in, I think the second quarter or second quarter in relation to the Fair Labor Standards action class action lawsuit that money we expect to go out the door in the first quarter of 2024. And what happened here was on the class action lawyers who contested that certain of our employees worked through their DOT mandated lunch breaks. We have clear policies, clear standards in the organization that that wasn’t supposed to ever happen. Our employees do truly need to take lunch breaks. But in retrospect, our documentation, our systems maybe weren’t as great as they could have been for a court of law. So we decided to settle with such attorney and much of that money will go to our employees, our drivers who were on part of the class. So on, we’ve done a lot of interest faction in change processes and procedures to ensure that our people truly are taking those breaks and we have the right documentation in place into the future.
So it’s a culmination of and it’s also a cause also consistent and the class action attorneys really have targeted the industry.
Yes, this is not to sell a one off situation, John, you’re right on. Yes, it’s at a place where remediation is complete on the there’s some kind of continuous monitoring into the future, but that Superfund site was fully cleaned up and other joint parties, you’ve made investments as well. We’re really at the end of that Southbridge, painfully. We from working on the final closure approval with the state of Massachusetts for several years now the sites in great shape and we’re ready to enter the post closure phase. We’ve done a vast majority of investment at the site to get it to that phase. And we just haven’t gotten that final regulatory approval, and we’re working hard to get that, Tyler.
Okay, great.
Yes, thank you so much. And I know that’s a multipart question on.
Yes.
Okay.
I want to I want to turn to New York. So I know you don’t haul in New York, but I’m just curious if you have any thoughts on the recent zone awards there. Do you think that that impacts you at all, and I know there was some zone and you likely won’t hole in that market. Would it ever make sense to possibly open rail access transfer station in that market to maybe help clear some of those tons to McKean?
Yes. So on the New York City completed the waste zone tomato awards. And as you correctly, point out, we do not directly participate in New York City. We have historically had some customers that transfer waste out of New York City to our landfills in upstate, and we continue to have some great customers in that market. We didn’t enter. You know, it’s not a market, it’s a real focus for us. However, we will continue to work with some of the transfer stations have won awards, and there may be some opportunity to railways to McKean those awards where we were 10 years with 10 year of renewals at the discretion of New York City, and we have a lot of close to sites to the city with a lot of capacity. So it is a great opportunity for us.
And I would only add the color when you look at that on, I think 14 of the 20 franchises were awarded to interstate action interstate and they have their own facilities and their rail serves. So it’s very likely that a very large portion of that waste will go to their facilities. I think we will be we will have an opportunity as an alternative in terms of the overall disposal capacity in the city and certainly their transfer stations that we’re working with right now that we’ll be able to continue into the future. But again, got to keep in mind that a good portion of that franchise waste is with Interstate.
Yes, a very interesting. My last one, it’s kind of in the same vein and you talked about it a little bit on the first question, but it does feel like rail capacity continues to ramp in the Northeast. Are you seeing any measurable impact on disposal price pricing broadly?
Yes. Well, one of the things we’ve seen, I mentioned it with the one construction and demo debris site that’s reaching end of life in Long Island and also with some of the ramp up in rail activity in the Northeast, it kind of ebbs and flows, right? So a site comes offline in the Northeast as a capacity crunch, then some new capacity comes through rail or other alternatives. You see a little bit of a tailing off of volumes. But frankly, that really hasn’t impacted our view on pricing or maybe even other market participants because of the inflationary backdrop and just some of the complexity around new and emerging regulations and costs at site. So you see that a little bit with the volumes as we said, with construction and demo right now, but it doesn’t change our outlook on how we’re going to run these sites for those long-term returns. We have to be laser focused on 10 year returns at these sites?
Yes, no.
Okay, perfect.
Thank you guys so much for the time.
Thanks.
Operator
Michael Hoffman, Stifel.
Michael Hoffman
How are you doing out there?
Good, Michael.
How are you can’t complain over?
We’re going to get the snowstorm that you were supposed going to get now, could you take a business?
That’s not good.
We’re much more prepared to take that snow than you are down there for sure.
So if we could dig into some, I’d like to talk about buying from a perspective of good volume versus bad volume and purposeful shedding and good volume to me is MSW, small container business, large container permanent versus bed volume is low quality margins. How do you frame your outlook about those trends? Because I think that’s better story than we might be negative volume in the aggregate?
Yes, it’s a great point, Michael. I mean, we didn’t get too much into the weeds on that. Brad mentioned it where, if you look at our volume decline in the fourth quarter, it really was highlighted in two areas on construction and demo degree at the landfills that we just discussed. And then on the hauling side, there’s a little bit of a roll-off on the CMG side, a little bit of residential work. And yes, when we look at that, it was some of our lower-margin work, especially in the residential side. We’ve been laser focused on making sure we have the right customers right price. You know, labor has been a challenge the last couple of years truck availability. So we’re really focused on making sure we get the right return on each stop we have. So some of it’s purposeful shedding. You know, we’re trying to get customer segments up to a certain margin point, and we’re not willing to except lower than that. And the construction and demo side, probably a little bit of slowing into Q4. We only see that on I think I think in the Northeast, a little bit more slowing there than maybe some other parts of the country. I’m starting out 2024 in a pretty solid area in that regard. You know, nothing nothing with further sequential declines.
Okay. So the other part of volume and tying into Tyler’s rail commentary from two big competitors on the collection size moved a lot of volume out of the market away from the burners in the fourth quarter. And there was a temporary and impact of spot prices as the burner scramble to fill because they’re basically their volume is an airplane seat. If they don’t get it, they can’t backfill it.
What is the state of the spot market today? My my impression, our surveys say the spot markets recovered, but they figured this out even in the seasonally weak period. And that’s another statement about the quality underlying unit pricing in the disposal market regardless of volumes?
Yes. So we don’t we don’t take a lot of tonnes at our landfills per se, but spot price on. We definitely have pretty long-term strategic relationships with various haulers where we have our own flows of waste. So we take advantage.
On the other side. We do a lot of work with the burn plants in the Northeast and we fail to renew some great contracts across our footprint and also take advantage of some of those lower spot prices. And we’ll always be in the camp of if we can bring waste at the right price point to a third party site and maybe take advantage of our price point, would that save our long-term landfill capacity for later, we’ll make that decision.
We you know, there’s no extension long-term renewal has historically also, Michael, as you know, we and we’re more than happy to fill that spot capacity and would enter into those agreements to fill that spot capacity for the incinerators in the wintertime. And we have a little bit of that ongoing, but it could be more significant on in terms of our ability to to help stabilize that through the course of the winter in round numbers, a script protection important there.
So Brad, on our average price per ton at the landfills was up. Thank you.
Especially close to 10% and 10% in the quarter.
So that mean that it shows and that’s the average across our tons going into third parties not going to move how we’re managing the disposal and the mix of weeks going in, right, so that we’re not lowering for another spot Itopride.
Okay.
Okay. That’s good to know and then I think we can all agree that probably inflation’s going to end at a higher low than it was the prior 15 years. And no, none of that should frighten you on because you can price the more important comment. And it’s a question at the same time, there’s no risk to unit prices and you can manage your underlying cost inflation and you can price accordingly. So whether we stay with structurally higher, you’re going to be able to price it through and there’s no risk to unit price?
That’s correct.
Okay.
No, no risk, no refugee.
And then just to be clear on the Lincoln, we have a particularly good, particularly with our book of business with low, particularly with our book of business because of the small amount of municipal contracts that we have, we have the capability to offset inflation.
You have a high percent that is open market access to progress and then yes, the landfill liner failure is not a slope failure like no other was not a liner, Mike or whatnot, aligner failure.
So on when you cap a facility, you put a cap over the top of the existing waste and then synthetic cap. And then on top of that goes the soils on and that’s where the veneer fairly was. It wasn’t a failure of a liner, it was just simply a failure of the cap and the synthetic cap, the dirt over the synthetic cap slid, right?
It says one very clear reason or yes, there was a peer company out there that had a true slope failure Advanced Disposal had one several years ago. This is not a slope failure. That’s just to be clear not everybody. It’s not disrupting yet revenue Viva.
Okay.
And no, not at all in didn’t disrupt the operations of the facility.
Okay.
And there was no no action from a from a regulatory standpoint.
Okay. And then lastly, the New York City, I think we have to talk about that in two different types of waste. There’s a commercial waste, which is what the franchisee has about and then there’s residential. What are you most sensitive to as an opportunity? Because I think that commercial lines pretty much had homes before they were franchised and maybe maybe there’s a little bit movement, but for the most part, it all had a home where the residential line, it seems like there’s more opportunity there. Take advantage of where they want to move that?
Yes. As we’ve said before, I mean, we’ve had a number of commercial customers coming out of city to our sites in New York for years, Michael, and those flows are pretty steady. And several of those partners have won, you know, contract in this wave as well. So we don’t see anything that’s a major plus or minus here for Cascella in our interactions. It may be on maybe a little bit new rail capacity is getting looked at in this city that could be an opportunity. But that’s that’s about it from our vantage point.
Okay.
Thank you very much.
Thank you.
Operator
(Operator Instructions) Adam Bubes, Goldman Sachs.
Adam Bubes
Thanks for taking my question on. I think you mentioned the acquired businesses in 2023 have come in at slightly lower margin pre-synergies, then the existing stand-alone business. Can you just elaborate that on that a little more, how much lower margins coming in and can you just update us on progress integrating twin bridges and NGFL. assets? Any major surprises?
Yes, Mike, on spreads and so on. I mentioned as they’re coming in at a lower margin, if I’m really talking a slightly lower margin to the tune of, I think a week, five basis points on margins in the fourth quarter. So yes, I think really, we view this as very quickly on an opportunity as we start to integrate the businesses, continue to integrate the businesses and capture the synergies.
This will become a margin tailwind pretty quickly then I think the probably the most significant on no aspect of those transactions and both of them GFL and twin bridges, no real surprises, Adam, we were able to amend and the relationship that Ned has built with the GFL And Jason, the entire team, the transition has gone well from Scarborough, as Ned said earlier, working with our folks to really rethink routing and do the things from an integration standpoint that we need to do as quickly as we can.
So we’re really excited about it. No surprises.
I mean, if anything, the surprises are on the upside in terms of the participation from both companies and also from Scott, in terms of looking at rerouting and the opportunity to really create the value that Brad’s talking about that, that is going to be a tailwind for us shortly.
And rate and margins to margins also were not a surprise for us either.
So they were a little bit lower, but that’s not a surprise either.
And then can you just talk about how much of the targeted synergies and are you are you expecting that realize in 2024. So can you just help us understand the margin ramp of these assets from here?
Yes. So we had in the mid-Atlantic, about $8 million of synergies being recognized over three years, and we’re looking at about we’ll get about a third of that from thereabouts in the 1st year in the mid Atlantic and with our twin bridges in the capital district, we had about $4 million of synergies recognized over three years, and we’re tracking more like 50% of that in the 1st year where we’ve had some really excellent progress on some early consolidations, and we’re feeling great about that and probably a little upside there as well over the three year period.
Yes. And that’s baked into the margin expansion that’s reflected in our guidance.
And kind of stepping back, if you add up the synergies for all the deals that were done last year and talked about the opportunities we go forward, it’s about 100 basis points in total over time. So we’ll get some of that this year.
And during the GFL and twin bridges, asset integration period, how are you thinking about the level of M&A you folks can sustain over the next 12 mindset?
And how do higher interest rates change, how you’re thinking about the funding M&A a little part of that we add and I think that from an integration standpoint, we couldn’t be more happy with it. The mid-Atlantic team that Kyle Larkin has put up and keep in mind, he ran those assets for some of our competitors before coming onboard with the cross-sell. So he’s built out an entire team for the Mid-Atlantic. The integration is going extremely well, same thing with Twin bridges that’s going extremely well as well. So I don’t think that the integration of GFL or twin bridges is going to have any impact on us on a go-forward in 2024.
From a M&A standpoint, we still have significant work to do from an integration standpoint, but we’re from a from a practical standpoint, we have very significant opportunities for continued growth. We’ve been able to demonstrate the capabilities to integrate those businesses, very significant amount of M&A and at the same time, bring down a lower safety record lower turnover. So I think that we did a lot of work on and over the last year, really looking at where our weaknesses.
I feel we’ve approach most of those weaknesses.
We’ve hired the people that we needed to in terms of some of the back office challenges of the growth that we’ve had.
So we’re pretty excited about where we sit and looking forward to 2024 in the interest rate side?
Brad, you want to hop in? I mean, it’s not a concern for us, Kevin?
Yes, we’re over 75% fixed. So and I think I can do that.
The only thing that it does do is it may change on how that looks at the financials and how we’re looking at it, it may may have some impact in terms of our power modeling acquisitions. It’ll probably not probably has more of an impact in terms of creating more pressure on independents to sell their businesses.
And we’ve got close to 500 million of liquidity right now, both through cash rate. That $220 million of cash is about liquidity. On our revolver. So we’re in a really good position to put money to work for shareholders with positive returns.
And to John’s point, I mean, we’ve got a lot of work we’re doing on integration. So it really causes you to look towards quality, strategic fit and on everything that’s in our near-term pipeline. This year’s super high quality, great overlaps, great fit we’re excited about the near term pipeline.
Yes, I think that quite honestly, Adam, we’ve stayed very disciplined in terms of making sure that it’s a high quality on a high-quality acquisition to integrate into the company and you don’t really hear much about it, the M&A that we pass on.
Great.
Appreciate the color.
Thanks so much.
Operator
Well, I think you can as of now there’s no one left in the queue, but we’ll take a brief pause for anyone.
Cool And showing no one in the queue. I will turn it back to John Casella for any closing remarks.
John Casella
Thanks, everyone, for joining us this morning. I hope you all have a great holiday weekend and look forward to discussing our first quarter 2024 earnings in April. Thanks, everybody.
Have a great day and a great holiday weekend. Thank you.
Operator
Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect, and everyone have a great day.
