awx20240331_10q.htm

2024

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from _______________ to ________________

Commission file number 1-14105

AVALON HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	34-1863889
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One American Way, Warren, Ohio	44484-5555
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (330) 856-8800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value	AWX	NYSE American

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☑ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The registrant had 3,287,647 shares of its Class A Common Stock and 611,784 shares of its Class B Common Stock outstanding as of May 8, 2024.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

INDEX

	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (Unaudited)	1

Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 (Unaudited)	2

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (Unaudited)	3

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (Unaudited)	4

Notes to Unaudited Condensed Consolidated Financial Statements	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3. Quantitative and Qualitative Disclosures about Market Risk	31

Item 4. Controls and Procedures	31


PART II. OTHER INFORMATION

Item 1. Legal Proceedings	32

Item 2. Changes in Securities and Use of Proceeds	32

Item 3. Defaults upon Senior Securities	32

Item 4. Mine Safety Disclosures	32

Item 5. Other Information	32

Item 6. Exhibits and Reports on Form 8-K	32

SIGNATURE	33

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share amounts)

	Three Months Ended
	March 31,
	2024			2023

Net operating revenues:
Waste management services	$	12,470		$	12,652
Food, beverage and merchandise sales		2,011			1,974
Other golf and related operations		4,377			3,819
Total golf and related operations		6,388			5,793
Total net operating revenues		18,858			18,445

Costs and expenses:
Waste management services operating costs		9,897			10,380
Cost of food, beverage and merchandise		1,025			1,023
Golf and related operations operating costs		4,873			4,836
Depreciation and amortization expense		980			940
Selling, general and administrative expenses		2,596			2,530
Operating loss		(513	)		(1,264	)

Other income (expense):
Interest expense, net		(508	)		(504	)
Other income, net		7			-
Loss before income taxes		(1,014	)		(1,768	)

Provision for income taxes		40			31
Net loss		(1,054	)		(1,799	)

Less net loss attributable to non-controlling interest in subsidiaries		(75	)		(122	)
Net loss attributable to Avalon Holdings Corporation common shareholders	$	(979	)	$	(1,677	)

Loss per share attributable to Avalon Holdings Corporation common shareholders:
Basic net loss per share	$	(0.25	)	$	(0.43	)

Weighted average shares outstanding - basic		3,899			3,899

See accompanying notes to unaudited condensed consolidated financial statements.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share amounts)

	March 31,			December 31,
	2024			2023
Assets
Current Assets:
Cash and cash equivalents	$	1,163		$	1,187
Accounts receivable, less allowance for credit losses		12,265			9,499
Unbilled membership dues receivable		790			567
Inventories		1,861			1,662
Prepaid expenses		1,282			1,116
Other current assets		16			14
Total current assets		17,377			14,045

Property and equipment, net		56,158			56,630
Property and equipment under finance leases, net		5,580			5,711
Operating lease right-of-use assets		1,254			1,270
Restricted cash		10,192			10,265
Noncurrent deferred tax asset		8			8
Other assets, net		34			36
Total assets	$	90,603		$	87,965

Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	547		$	538
Current portion of obligations under finance leases		197			198
Current portion of obligations under operating leases		417			432
Accounts payable		11,316			9,657
Accrued payroll and other compensation		1,753			1,277
Accrued taxes		504			539
Deferred membership dues revenue		5,158			3,443
Other liabilities and accrued expenses		1,863			1,825
Total current liabilities		21,755			17,909

Long-term debt, net of current portion		29,080			29,220
Line of credit		3,200			3,200
Obligations under finance leases, net of current portion		585			598
Obligations under operating leases, net of current portion		837			838
Asset retirement obligation		100			100
Commitments and contingencies (Note 15)

Equity:
Avalon Holdings Corporation Shareholders' Equity:
Class A Common Stock, $.01 par value		33			33
Class B Common Stock, $.01 par value		6			6
Paid-in capital		59,206			59,206
Accumulated deficit		(23,508	)		(22,529	)
Total Avalon Holdings Corporation Shareholders' Equity		35,737			36,716
Non-controlling interest in subsidiaries		(691	)		(616	)
Total equity		35,046			36,100
Total liabilities and equity	$	90,603		$	87,965

See accompanying notes to unaudited condensed consolidated financial statements.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

(in thousands, except for share data)

	For the Three Months Ended March 31, 2024

														Total
	Common Stock													Avalon			Non-controlling
	Shares				Amount				Paid-in		Accumulated			Shareholders'			Interest in
	Class A		Class B		Class A		Class B		Capital		Deficit			Equity			Subsidiaries			Total

Balance at January 1, 2024		3,287,647		611,784	$	33	$	6	$	59,206	$	(22,529	)	$	36,716		$	(616	)	$	36,100

Net loss		-		-		-		-		-		(979	)		(979	)		(75	)		(1,054	)

Balance at March 31, 2024		3,287,647		611,784	$	33	$	6	$	59,206	$	(23,508	)	$	35,737		$	(691	)	$	35,046

	For the Three Months Ended March 31, 2023

														Total
	Common Stock													Avalon			Non-controlling
	Shares				Amount				Paid-in		Accumulated			Shareholders'			Interest in
	Class A		Class B		Class A		Class B		Capital		Deficit			Equity			Subsidiary			Total

Balance at January 1, 2023		3,287,647		611,784	$	33	$	6	$	59,205	$	(20,754	)	$	38,490		$	(347	)	$	38,143

Stock options - compensation costs		-		-		-		-		1		-			1			-			1

Net loss		-		-		-		-		-		(1,677	)		(1,677	)		(122	)		(1,799	)

Balance at March 31, 2023		3,287,647		611,784	$	33	$	6	$	59,206	$	(22,431	)	$	36,814		$	(469	)	$	36,345

See accompanying notes to unaudited condensed consolidated financial statements.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2024			2023

Cash flows from operating activities:
Net loss	$	(1,054	)	$	(1,799	)
Reconciliation of net loss to cash used in operating activities:
Depreciation and amortization expense		980			940
Amortization of debt issuance costs		15			10
Compensation costs - stock options		-			1
Provision for losses on accounts receivable		8			3
Gain on disposal of equipment		(7	)		-
Change in operating assets and liabilities:
Accounts receivable		(2,774	)		(2,303	)
Unbilled membership dues receivable		(223	)		(148	)
Inventories		(199	)		(270	)
Prepaid expenses		(166	)		(284	)
Other assets, net		-			67
Accounts payable		1,637			2,131
Accrued payroll and other compensation		476			392
Accrued taxes		(35	)		(141	)
Deferred membership dues revenue		1,715			1,257
Other liabilities and accrued expenses		38			390
Net cash provided by operating activities		411			246

Cash flows from investing activities:
Capital expenditures		(355	)		(1,098	)
Proceeds from disposal of equipment		7			-
Net cash used in investing activities		(348	)		(1,098	)

Cash flows from financing activities:
Principal payments on term loan facilities		(146	)		(138	)
Borrowings under line of credit facility		-			650
Principal payments on finance lease obligations		(14	)		(2	)
Net cash provided by (used in) financing activities		(160	)		510

Decrease in cash, cash equivalents and restricted cash		(97	)		(342	)
Cash, cash equivalents and restricted cash at beginning of period		11,452			12,050
Cash, cash equivalents and restricted cash at end of period	$	11,355		$	11,708

Supplemental disclosure of cash flow information:

Significant non-cash operating and investing activities:
Capital expenditures included in accounts payable	$	22		$	76
Significant non-cash investing and financing activities:
Operating lease right-of-use assets in exchange for lease obligations	$	-		$	35
Finance lease obligations incurred	$	-		$	154

Cash paid during the period for interest	$	558		$	498
Cash paid during the period for income taxes	$	-		$	38

See accompanying notes to unaudited condensed consolidated financial statements.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2024

Note 1. Description of Business

Avalon Holdings Corporation (“Avalon” or the “Company”) was formed on April 30, 1998 as a subsidiary of American Waste Services, Inc. (“AWS”). On June 17, 1998, AWS distributed, as a special dividend, all of the outstanding shares of capital stock of Avalon to the holders of AWS common stock on a pro rata and corresponding basis.

Avalon provides waste management services to industrial, commercial, municipal and governmental customers in selected northeastern and midwestern U.S. markets, captive landfill management services and salt water injection well operations. In addition, Avalon owns Avalon Resorts and Clubs, Inc. (“ARCI”), which includes the operation and management of four golf courses and associated clubhouses, athletic and fitness centers, tennis courts, salon and spa services, dining and banquet facilities. ARCI also owns and operates a hotel and its related resort amenities including dining, banquet and conference facilities, salon and spa services, fitness center, outdoor resort pool, Roman Bath, indoor junior Olympic size swimming pool and tennis courts.

Note 2. Basis of Presentation

The unaudited condensed consolidated financial statements of Avalon and related notes included herein have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted consistent with such rules and regulations. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in Avalon’s 2023 Annual Report to Shareholders.

The unaudited condensed consolidated financial statements include the accounts of Avalon, its wholly owned subsidiaries and those companies in which Avalon has managerial control. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of March 31, 2024, and the results of its operations and cash flows for the interim periods presented.

The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated financial statements presented herein reflect our current estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods presented.

Approximately $0.1 million of other income on the unaudited condensed consolidated statement of operations for 2023 has been reclassified to conform to the presentation for 2024. Such reclassifications had no effect on changes in operations.

Note 3. Recent Accounting Pronouncements

As of March 31, 2024, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial statements.

Note 4. Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents for purposes of the Condensed Consolidated Balance Sheets. Avalon maintains its cash balances in various financial institutions. These balances may, at times, exceed federal insured limits. Avalon has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk relating to its cash and cash equivalents.

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are recorded in restricted cash on the Condensed Consolidated Balance Sheets. Restricted cash consists of loan proceeds deposited into a project fund account to fund costs associated with the renovation and expansion of The Grand Resort and Avalon Field Club at New Castle in accordance with the provisions of the loan and security agreement (See Note 9).

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows. Cash, cash equivalents and restricted cash consist of the following at March 31, 2024 and December 31, 2023 (in thousands):

		March 31,				December 31,
		2024				2023

SEC Form 10-Q filed by Avalon Holdings Corporation