Avalon Holdings Corporation — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing was signed March 23, 2023. Avalon is a smaller reporting company operating in waste management services and golf and related operations.
Business context and financial performance
Waste management services include waste brokerage and disposal management, captive landfill management, and saltwater injection well operations. Golf and related operations include four golf courses, country clubs, The Grand Resort, fitness and athletic facilities, and salon and spa services.
The supplied filing text refers readers to the incorporated 2022 Annual Report to Shareholders for the financial statements and management’s discussion, but does not include their figures. Accordingly, clear values for consolidated revenue, profit or loss, cash flow, margins, cash, assets, liabilities, debt balances, and liquidity are not provided in the supplied text.
- Waste management represented approximately 61% of consolidated net operating revenue in both 2022 and 2021; golf and related operations represented approximately 39% in both years.
- In 2022, two waste-segment customers accounted for 22% of that segment’s external revenue and 14% of consolidated revenue. In 2021, one customer accounted for 13% and 8%, respectively.
- Avalon reported 796 employees at year-end 2022: 36 in waste management, 732 in golf and related operations, and 28 in financial and administrative activities.
Changes, financing, and unusual items
- The filing identifies higher commodity costs in 2022, primarily from market demand and inflation, and anticipates elevated commodity costs into 2023. It does not quantify the effect on costs, margins, or earnings.
- The New Castle clubhouse renovation was primarily completed during 2022.
- Avalon entered into a loan and security agreement with Laurel Capital Corporation dated August 5, 2022, with related mortgage and security documents. The supplied text does not state the borrowing amount, interest rate, maturity, or year-end balance. The filing also lists prior borrowing arrangements with Premier Bank.
- The basic and diluted earnings-per-share exhibit is marked “omitted—inapplicable” with a reference to the annual report’s net-loss-per-share disclosure. The amount of any net loss is not provided in the supplied text.
Outlook, risks, and contingencies
- Management anticipates continued elevated commodity costs into 2023. The filing provides no quantified revenue, earnings, cash flow, or capital-spending guidance.
- Golf and resort results are exposed to discretionary consumer spending, weather and seasonality, membership retention, labor availability and costs, inflation, and operating costs. Management notes that retaining and attracting club members has been an ongoing challenge.
- Waste operations face competition and possible increases in disposal prices, customer credit and collection risk, regulatory restrictions on waste transportation or out-of-state disposal, and dependence on customer relationships that are often not covered by long-term contracts. Two customers represented a material share of 2022 waste-segment revenue.
- Saltwater injection operations face regulatory, environmental, and seismicity risks. The filing describes long-running proceedings concerning the AWMS #2 well and operating restrictions; a September 2022 Oil and Gas Commission decision favored the Division, and Avalon was awaiting a court decision on its appeal. A separate mandamus petition was denied in December 2022 and appealed to the Supreme Court of Ohio in January 2023. The filing’s business description also characterizes injection-well operations as suspended; the text does not clearly reconcile the status of each well.
- Management says it believes cash generated from operations will be sufficient to meet obligations under the loan agreement, but warns that covenant breaches could permit accelerated repayment and that refinancing may be needed. The supplied text does not provide liquidity or covenant calculations.
- Management states that pending legal matters are not expected to have a material adverse effect on liquidity, financial position, or results of operations, while noting that outcomes cannot be predicted with certainty. Insurance limits and environmental liabilities are additional risks.
- COVID-19 restrictions had been lifted, but the filing notes possible weakened demand from consumer concerns, reduced discretionary spending, or renewed restrictions. It also identifies global conflict and higher fuel and energy costs as risks.
Important facts for investors to verify
- Review the incorporated Annual Report’s audited statements and MD&A for actual revenue, earnings, cash flow, margins, debt, liquidity, and year-over-year comparisons.
- Verify the Laurel Capital and Premier Bank facilities’ balances, interest rates, maturities, collateral, and financial covenants.
- Confirm the current operating and regulatory status of each injection well, related restrictions, and the outcomes of pending appeals.
- Assess customer concentration and contract duration in waste operations, as well as membership trends and operating costs in golf and resort operations.
- Review the Annual Report and subsequent filings for quantified 2023 outlook, contingencies, and any material developments after year-end.