Avalon Holdings Corporation — FY2016 Form 10-K
Reporting period: Year ended December 31, 2016. The filing was signed March 16, 2017. Avalon operates waste management services and golf and related businesses, including a hotel and club facilities.
Business and financial overview
- Waste management services contributed approximately 72% of consolidated net operating revenue in both 2016 and 2015; golf and related operations contributed approximately 28% in each year.
- The supplied filing text does not provide clear values for consolidated revenue, profit or loss, cash flow, margins, total debt, cash, or liquidity. It refers readers to the incorporated 2016 Annual Report to Shareholders for the financial statements and management discussion.
- In December 2016, Avalon entered into a $12.0 million term loan and a revolving line of credit of up to $4.0 million, maturing May 31, 2017. Outstanding balances, rates, covenants, and year-end liquidity are not clear in the supplied text.
- Avalon reported 498 employees at December 31, 2016. Management concluded internal control over financial reporting was effective as of that date.
Changes versus the prior period
- Segment revenue mix was unchanged from 2015. In 2016, no customer accounted for at least 10% of consolidated revenue; in 2015, one waste-segment customer represented 8% of consolidated revenue.
- The Avalon Inn remained under renovation and expansion during 2016.
- Avalon formed Avalon Resorts and Clubs, Inc. and its subsidiaries in July 2016 to hold club and resort activities.
- The company arranged new borrowing in December 2016, including the term loan and short-term credit line described above.
Outlook, risks, and contingencies
- Injection-well operations: Both saltwater injection wells had been temporarily suspended following a 2014 seismic event and subsequent regulatory action. A December 2016 court decision vacated the commission’s ruling upholding the suspension. In February 2017, the court set conditions for restarting AWMS #2; Avalon was preparing to restart, but ODNR sought a stay. The filing does not establish whether or when operations resumed.
- Avalon also pursued a mandamus action seeking proceedings to determine damages for an alleged regulatory taking. The company intended to pursue the claim; its outcome and potential financial effect are not clear in the supplied text.
- Key risks include environmental contamination and seismic events at disposal wells; increased regulation; debt covenant compliance and refinancing; customer retention and limited long-term contracts; golf membership shortfalls; weather-related seasonality; competition; and potential uninsured liabilities.
- Management said it did not anticipate cash dividends in the foreseeable future, intending to retain earnings for operations and expansion. No numerical financial guidance is provided in the supplied text.
- The filing states that pending legal matters were not believed to result in uninsured liabilities, fines, or penalties that would materially affect liquidity, financial position, or results of operations.
Important facts for investors to verify
- Consult the incorporated annual report for 2016 and 2015 revenue, operating results, margins, cash flows, balance-sheet liquidity, and debt balances.
- Review the December 2016 loan documents for borrowing terms, collateral, financial covenants, maturities, and actual utilization of the $4.0 million credit line.
- Check subsequent filings and court records for the status of the AWMS #2 restart, ODNR’s stay request, and the related regulatory and takings litigation.
- Assess the cost and completion timing of the Avalon Inn renovation, golf-club membership trends, and the profitability of golf and related operations.