Avalon Holdings Corporation — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. Avalon operates waste management services and golf and related businesses. The filing incorporates its 2021 Annual Report to Shareholders, but the supplied text does not include the financial statements or detailed MD&A figures.
Business context and key metrics
- Segments: Waste management services include waste brokerage and management, captive landfill management, and saltwater injection well operations. Golf and related operations include four golf courses, country clubs, a resort hotel, recreation facilities, and related services.
- Revenue mix: Waste management represented approximately 61% of consolidated net operating revenues in 2021, versus 69% in 2020. Golf and related operations represented approximately 39%, versus 31% in 2020. Dollar revenues and segment profits are not stated clearly in the supplied filing text.
- Profit, cash flow, and margins: The supplied text does not provide clear values for revenue, operating income, net income or loss, cash flow, or margins. The exhibit index refers to basic and diluted net loss per share, but does not state the amount.
- Debt and liquidity: The filing identifies a loan and security agreement with lender covenants and possible early repayment upon default. Debt balances, maturities, interest rates, cash, and liquidity measures are not provided clearly in the supplied text.
- Scale: Avalon had 611 employees at year-end: 33 in waste management, 557 in golf and related operations, and 21 in financial and administrative activities.
Material changes versus 2020
- Golf and related operations increased to 39% of consolidated revenues from 31%, while waste management declined to 61% from 69%. The filing text does not provide clear dollar amounts or explain the full drivers of the mix change.
- COVID-19 had a limited impact on 2021 results, according to management, after materially disrupting 2020 operations through dining restrictions, event limitations, and room and event cancellations.
- Avalon formed Avalon Med Spa, LLC in 2021; it raised $358,000 from accredited investors and Avalon owns 50.1%. The entity is consolidated as a variable interest entity.
- A customer, Environmental Restoration LLC, accounted for 13% of waste-segment external revenues and 8% of consolidated revenues in 2021. No customer accounted for 10% or more of either measure in 2020.
- The Avalon Field Club at New Castle clubhouse was being renovated during 2021.
Outlook, risks, and contingencies
- Management said the pandemic’s future effects remain uncertain; renewed restrictions, weaker travel demand, consumer caution, or reduced discretionary spending could harm results and cash flows.
- Membership retention and new-member acquisition remain ongoing challenges. Golf operations are also seasonal and weather-dependent.
- Much of the waste brokerage business is not under long-term contracts. The captive landfill management business depends on one customer, and disposal-industry consolidation may increase costs.
- Two saltwater injection wells were suspended following a 2014 seismic event. In May 2021, the state regulator issued restart conditions for well #2, including an indefinite shutdown after a nearby seismic event of magnitude 2.1 or greater absent regulator concurrence. Avalon appealed; a February 2022 hearing had occurred, and the Company was awaiting a decision. Related litigation over alleged regulatory taking was also awaiting judgment after a 2021 trial.
- Environmental contamination, increased regulation of injection wells, uninsured liabilities, loss of liquor licenses, and compliance with debt covenants are identified risks. Management stated it did not believe pending ordinary-course proceedings would materially affect liquidity, financial position, or results, but outcomes cannot be predicted with certainty.
- Avalon does not anticipate cash dividends in the foreseeable future. Management reported disclosure controls were effective at a reasonable assurance level and no material fourth-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Review the incorporated 2021 Annual Report for exact revenue, earnings, cash-flow, margin, balance-sheet, debt, and liquidity figures, and the detailed year-over-year drivers.
- Check debt balances, covenant compliance, maturity and repayment terms, collateral, and available borrowing capacity.
- Monitor the well #2 appeal and related court matters, restart conditions, and any resulting operating or impairment effects.
- Assess the concentration and renewal risk of the Environmental Restoration LLC relationship, the captive landfill customer, and golf-club memberships.
- Confirm the status and financial contribution of the medical spa and New Castle clubhouse renovation, and any continuing effects from COVID-19 or weather.