Casella Waste Systems

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CASELLA 

WASTE SYSTEMS 

IS REALLY 

CLEANING UP.

WE’RE STRENGTHENING OUR FUNDAMENTALS...WE’RE STRENGTHENING OUR FUNDAMENTALS...WE’RE STRENGTHENING OUR FUNDAMENTALS...WE’RE STRENGTHENING OUR FUNDAME

CSA-AR-02

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DAMENTALS...WE’RE STRENGTHENING OUR FUNDAMENTALS...WE’RE STRENGTHENING OUR F

With an improved balance sheet and responsible growth

strategy, Casella Waste Systems’ fundamentals have never

been stronger. For example, we’ve reduced our debt by

$147 million. We accomplished this in part by generating

$33 million of free cash flow in fiscal 2002 and by applying

more than $100 million in proceeds from a series of

strategic divestitures.

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RE BRIGHTENING OUR COMMUNITIES...WE’RE BRIGHTENING OUR COMMUNITIES...WE’RE BR

Casella Waste Systems today serves more than 250,000

customers, primarily in the northeastern U.S. For each

community, we tailor services to specific local needs. Take

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BRIGHTENING OUR COMMUNITIES...WE’RE BRIGHTENING OUR COMMUNITIES...WE’RE BRIGT

our innovative partnership with Clinton County, NY. We’re

managing the county’s entire solid waste system, signifi-

cantly brightening its financial and environmental future.

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RPENING OUR FOCUS...WE’RE SHARPENING OUR FOCUS...WE’RE SHARPENING OUR FOCUS...

During the past year, Casella Waste Systems sold 11 opera-

tions that did not fit our core strategy of offering traditional

solid waste services. As a result, we’ve freed up valuable

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S...WE’RE SHARPENING OUR FOCUS...WE’RE SHARPENING OUR FOCUS...WE’RE SHARPENING

resources that can focus on extracting additional value

from our core franchise. Additionally, we’ve paved the way

for more stable, predictable performance.

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NG NEW STANDARDS FOR EXCELLENCE...WE’RE SETTING NEW STANDARDS FOR EXCELLENCE

Casella Waste Systems

continues to raise the bar for

performance in areas such as safety

and customer service. On the safety front,

we have increased staffing for our

monitoring teams, improved employee

training, and developed better tracking

techniques. As a result, work-related

incidents fell by 34% over the past year and

accident-related costs dropped by 39%.

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NCE...WE’RE SETTING NEW STANDARDS FOR EXCELLENCE...WE’RE SETTING NEW STANDARDS

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STING IN OUR FUTURE...WE’RE INVESTING IN OUR FUTURE...WE’RE INVESTING IN OUR FUTURE...W

By focusing tightly on our core businesses, raising safety

and customer service standards, and investing in informa-

tion technology, Casella Waste Systems has developed a

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E...WE’RE INVESTING IN OUR FUTURE...WE’RE INVESTING IN OUR FUTURE...WE’RE INVESTING IN O

strong platform for growth. Moreover, an improved

balance sheet positions us to pursue a responsible acqui-

sition strategy when the time and opportunities are right.

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“WE ARE, ONCE AGAIN, A TRADITIONAL SOLID WASTE SERVICES COMPANY, ANCHORED BY

DEAR SHAREHOLDERS: 
The preceding pages have given you a sense of just
how busy and productive we’ve been during the past
year at Casella Waste Systems. 

We talk specifically about “cleaning up” on the 
cover of this report. Aside from the obvious nod to
our industry, this phrase fittingly describes how we’re
preparing for the future. We have strengthened our
balance sheet, compiled a formidable safety record,
and completed a series of strategic divestitures that
will help us focus more intently on our core business.
In short, Casella Waste Systems is back on track, ready
to tackle the opportunities that the future presents.
Allow me to begin by quickly reviewing our fiscal
2002 numbers. We met or exceeded all the financial
targets we established at the beginning of the period,
with adjusted EBITDA reaching $92 million. Revenues
rose to $421 million, while the company also
generated $33 million of free cash flow. The bound-in
Form 10-K provides complete financial results, and I
encourage you to take the time to review them fully.

WE’RE SHARPENING OUR FOCUS
The operations retained from our 1999 acquisition of
KTI, Inc., played a major role in the past year’s strong
performance. At the same time, we recognized that
many of KTI’s assets simply did not fit in with our
core operating strategy and our primary emphasis on
serving the northeastern U.S. market. After launching
an aggressive strategic divestiture program, we sold
11 operations in such areas as tire recycling, non-core
energy, plastics, and waste remediation. 

We moved quickly but prudently, ensuring that 
we would get a fair price for each of these assets. 
We expected to realize $90 million in proceeds from
these divestitures. The final tally hit $108 million,
significantly topping initial estimates. These
divestitures have removed distractions and reduced

our exposure to the more volatile portions of our
industry. We are, once again, a traditional solid waste
services company, anchored by businesses and markets
poised to deliver predictable, stable performance.

WE’RE STRENGTHENING OUR 
FUNDAMENTALS
Moreover, both the proceeds from these divestitures
and the cash flow we’ve generated have allowed us to
pay down $147 million of debt since the beginning of
our divestiture efforts. We are considering a bond
offering that would allow us to replace a portion of our
current credit facility and provide us with greater
flexibility in our capital structure. By doing so, Casella
Waste Systems will be well-positioned to pursue a
responsible new growth strategy when we decide that
the time and opportunities are right. 

In the coming year, we expect that our acquisition

program will focus on (1) tuck-in acquisitions that
offer minimal risk, are located within or adjacent to
our current coverage area, and are strategically
aligned with our core business; and (2) adding
disposal capacity in our core markets. 

While evaluating growth opportunities, we continue

to concentrate on the “blocking and tackling” that 
will extract additional value from our core franchise.
We’re already reaping valuable dividends from these
efforts. For example, we’ve reduced receivables of 
90 days or greater by $9 million over the last five
quarters. We continue to invest in ways of further
integrating information technology into the core
business. This will provide our management team with
accurate, timely information to aid in the operational
decision process.

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BUSINESSES AND MARKETS POISED TO DELIVER PREDICTABLE, STABLE PERFORMANCE.”

WE’RE SETTING NEW STANDARDS 
FOR EXCELLENCE
I’m also particularly proud of the strides we’re making
in the area of safety, having reduced the number of
work-related incidents by 34 percent over the past
year. We accomplished this by investing in, among
other things, increased staffing for our safety teams,
improved training, and development of a computer-
ized tracking database. 

I cannot overstate the benefits we reap from a
safer work environment, starting with the security it
offers our employees and their families. Financially,
our safety improvements have reduced accident-
related costs by 39 percent, helping to offset the past
year’s rise in insurance premiums. Moreover, a safer
workplace saves Casella Waste Systems money over the
long-term by making us a more attractive employer
and, thus, reducing our rate of turnover.

On the customer service front, we’re doing a better

job of tracking and anticipating issues, and we’ve
launched a comprehensive training and development
effort throughout the organization that will enhance
performance at all levels of the company. 

I should point out that our forecast for 2003
assumes that recycling commodity prices and volume
remain flat. An improvement in either of these areas
could provide an additional boost to our results. Given
the difficult environment many industries are facing,
you may be wondering just how the economic cycle
impacts Casella Waste Systems. Municipal and
residential waste generally remain at constant levels
regardless of the economy. However, the commercial
generation of waste can be impacted by a downturn.
For this reason, I would characterize our business as
“recession-resistant” rather than “recession-proof.”

WE’RE INVESTING IN OUR FUTURE
I hope that this letter has conveyed the genuine
sense of pride we feel over the past year’s
accomplishments. I want to thank the more than
2,600 Casella Waste employees who helped us meet
our targets—financial and otherwise—for their hard
work. By tightening our focus, strengthening our
fundamentals, and raising our standards in areas such
as safety and customer service, we’ve developed a
solid platform for growth. 

Looking at our financial expectations for fiscal

Thank you for investing in Casella Waste Systems. 

2003, overall revenues should come in between 
$415 million and $435 million, with EBITDA in the
range of $87 million to $91 million. We expect to
generate free cash flow of $19 million to $24 million,
with capital expenditures between $38 million and
$40 million. 

At first blush, our fiscal 2003 forecast would
appear to be flat year over year. However, we must
analyze this figure taking into account a number of
factors. They include divested EBITDA of $2 million, a
lost commodity hedge contribution of $2 million as a
result of the Enron bankruptcy, and insurance
premium increases exceeding $6 million, reflecting
the significant rise in costs following the September
11 attacks. Under the circumstances, flat EBITDA 
in fiscal 2003 is a testament to the strength of our
core franchise. 

Sincerely,

John W. Casella
Chairman and Chief Executive Officer

August 30, 2002

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FINANCIAL HIGHLIGHTS (IN THOUSANDS, EXCEPT PER SHARE DATA)

Fiscal year ended April 30,

2000

2001

2002

Revenues

$315,013

$479,816

$420,821

Operating income (loss)

39,682

(28,965)

41,752

Adjusted EBITDA (1)

Net income (loss)

Basic net income (loss) per common share

Diluted net income (loss) per common share

79,013

92,475

92,164

11,050

(101,535)

7,481

0.59

0.57

(4.46)

(4.46)

0.19

0.19

Total assets

860,470

686,293

621,041

Total stockholders’ equity

274,718

172,951

176,796

(1) Adjusted EBITDA is defined as operating income (loss) plus depreciation and amortization, impairment charges, restruc-

turing charges, legal settlements, other miscellaneous charges, and merger-related costs less minority interest. Adjusted EBITDA

does not represent, and should not be considered as, an alternative to net income or cash flows from operating activities, each

as determined in accordance with generally accepted accounting principles, known as GAAP. Moreover, Adjusted EBITDA does not

necessarily indicate whether cash flow will be sufficient for such items as working capital or capital expenditures, or to react to

changes in the Company’s industry or to the economy generally. Because Adjusted EBITDA is not calculated by all companies in

the same fashion, the Adjusted EBITDA measures presented by the Company may not be comparable to similarly titled measures

reported by other companies. Therefore, in evaluating Adjusted EBITDA data, investors should consider, among other factors: the

non-GAAP nature of Adjusted EBITDA data; actual cash flows; the actual availability of funds for debt service, capital expendi-

tures and working capital; and the comparability of the Company’s Adjusted EBITDA data to similarly titled measures reported

by other companies. For more information about the Company’s cash flows, see the consolidated statements of cash flows in the

Company’s Consolidated Financial Statements.

38657-1-casella 10K  8/21/02  2:22 PM  Page 13

UNITED STATES SECURITIES AND EXCHANGE COMMISSION                        FORM 10-K 
WASHINGTON, D.C. 20549

(cid:2) Annual Report Pursuant To Section 13 or 15(d) Of The Securities Exchange Act Of 1934 For The

Fiscal Year Ended April 30, 2002

OR

□ 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 000-23211

(Exact Name Of Registrant As Specified In Its Charter)
(State Or Other Jurisdiction Of Incorporation Or Organization): Delaware
(I.R.S. Employer Identification No.): 03-0338873
(Address Of Principal Executive Offices): 25 Greens Hill Lane, Rutland, VT
(ZIP Code): 05701
Registrant’s Telephone Number, Including Area Code: (802) 775-0325
Securities Registered Pursuant To Section 12(B) Of The Act: None.
Securities Registered Pursuant To Section 12(G) Of The Act: Class A common stock, $.01 per share par value

Indicate by checkmark 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 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 (cid:2) No □

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,

and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K (cid:2)

The aggregate value of the voting stock held by non-affiliates of the registrant, based on the last sale price of the 
registrant’s Class A common stock at the close of business on June 28, 2002 was $248,207,367. The Company does not have 
any non-voting common stock outstanding.

There were 22,701,762 shares of Class A common stock, $.01 par value per share, of the registrant outstanding as of
June 28, 2002. There were 988,200 shares of Class B common stock, $.01 par value per share, of the registrant outstanding as
of June 28, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12 and 13 of Part III (except for information required with respect to executive officers of the Company, which 
is set forth under Part I—Business—”Executive Officers and Other Key Employees of the Company” and with respect to certain
equity compensation plan information which is set forth under Part III—”Equity Compensation Plan Information”) have been
omitted from this Annual Report on Form 10-K, since the Company expects to file with the Securities and Exchange Commission,
not later than 120 days after the close of its fiscal year, a definitive proxy statement. The information required by Items 10,
11, 12 and 13 of Part III of this report, which will appear in the definitive proxy statement, is incorporated by reference into
this Annual Report on Form 10-K.

38657-1-13-casella 10K — RKC! — proof 7 (rjh) — august 14, 2002
the henderson company 222 west huron, chicago illinois 60610 (312) 951-8973 f (312) 951-6109

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PART I

ITEM 1. BUSINESS

Casella Waste Systems, Inc. (the “Company”) is a vertically-integrated regional solid waste services company that provides 
collection, transfer, disposal and recycling services to approximately 211,000 residential customers and 46,000 industrial 
and commercial customers, primarily in the eastern United States. As of June 28, 2002, the Company owned and/or operated
five Subtitle D landfills, one landfill permitted to accept construction and demolition materials, 35 solid waste collection 
operations, 32 transfer stations, 39 recycling facilities, one waste-to-energy facility and 50% interest in a joint venture that
manufactures, markets and sells cellulose insulation made from recycled fiber.

OVERVIEW OF THE COMPANY’S BUSINESS

Background. Casella was founded in 1975 as a single truck operation in Rutland, Vermont and subsequently expanded to
include operations in New Hampshire, Maine, upstate New York, northern Pennsylvania, and eastern Massachusetts. In 1993,
the Company initiated an acquisition strategy to take advantage of anticipated reductions in available landfill capacity in
Vermont and surrounding states due to increasing environmental regulation and other market forces driving consolidation in
the solid waste services industry. In 1995, the Company expanded its operations from Vermont and New Hampshire to Maine
with the acquisition of the companies comprising New England Waste Services of ME, Inc., and in January 1997 established 
a market presence in upstate New York and northern Pennsylvania through acquisition of Superior Disposal Services, Inc.’s 
business. From May 1, 1994 through December 30, 1999, the Company acquired 161 solid waste businesses, including five
Subtitle D landfills.

In 1997, the Company raised $50.2 million from the initial public offering of shares of Class A common stock. In 1998, the

Company raised an additional $41.3 million through a follow-on public offering of an additional 1.6 million shares of Class A
common stock. In August 2000, the Company sold 55,750 shares of its Series A redeemable convertible preferred stock to
Berkshire Partners LLC, an investment firm, and other investors for $55.8 million.

KTI Acquisition and Restructuring. In December 1999, the Company acquired KTI, Inc. (“KTI”) an integrated provider of waste
processing services, for aggregate consideration of $340.0 million. KTI represented a unique opportunity to acquire disposal
capacity and collection operations in a primary market area and in contiguous markets in eastern Massachusetts, as well as
other businesses which fit within the Company’s operating strategy. KTI assets which were considered core to the Company’s
operations included the following:

(cid:4) A majority interest in Maine Energy Recovery Company, Limited Partnership (“Maine Energy”), a waste-to-energy facility
which provided the Company with important additional disposal capacity in the Eastern region and which generates 
electric power for sale. The Company subsequently acquired the remaining ownership interest in this facility;

(cid:4) FCR, Inc. (“FCR”) which consisted of 18 recycling facilities (now 23) that process and market recyclable materials under
long-term contracts with municipalities and commercial customers. FCR also included a commercial brokerage business;

(cid:4) Transfer and collection operations which were “tuck-ins” to existing Maine operations; and
(cid:4) Cellulose insulation plants which manufacture cellulose insulation for use in residential dwellings and manufactured 

housing and which consume significant fiber produced from the residential recycling business of FCR.
Following the acquisition of KTI, the Company focused on the integration of KTI and the divestiture of non-core KTI
assets, which included tire recycling assets, commercial recycling facilities, mulch recycling, certain waste-to-energy facilities 
in Florida and Virginia, a waste-to-oil remediation facility and a broker and a processor of high density polyethylene. We also 
sold our majority interest in a waste-to-energy facility in Maine. As part of this divestiture program, in the fourth quarter of
fiscal year 2001 the Company incurred non-recurring charges of $111.7 million, of which $90.6 million were non-cash, relating
to the impairment of goodwill from the acquisition of KTI, the closure of certain facilities, severance payments to terminated
employees and losses on sale of non-core assets. The Company has completed the divestiture program, for aggregate considera-
tion of $107.6 million, including cash proceeds of $61.7 million which were used to reduce indebtedness.

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SOLID WASTE OPERATIONS

The solid waste operations comprise a full range of non-hazardous solid waste services, including collection operations, transfer
stations, material recycling facilities and disposal facilities.

Collections. A majority of the commercial and industrial collection services are performed under one-to-three-year service agree-
ments, with prices and fees determined by such factors as collection frequency, type of equipment and containers furnished,
the type, volume and weight of solid waste collected, distance to the disposal or processing facility and cost of disposal or pro-
cessing. The residential collection and disposal services are performed either on a subscription basis (i.e., with no underlying
contract) with individuals, or through contracts with municipalities, homeowner associations, apartment building owners or
mobile home park operators.

Transfer Stations. Transfer stations receive, compact and transfer solid waste collected primarily by various collection 
operations, for transport to disposal facilities by larger vehicles. The Company believes that transfer stations benefit it by:
(1) increasing the size of the wastesheds which have access to its landfills; (2) reducing costs by improving utilization of 
collection personnel and equipment; and (3) helping to build relationships with municipalities and other customers by 
providing a local physical presence and enhanced local service capabilities.

Material Recycling Facilities. Material recycling facilities, or MRFs, receive, sort, bale and resell recyclable materials originating
from the municipal solid waste stream, including newsprint, cardboard, office paper, containers and bottles. Through FCR, the
Company operates 23 MRFs in geographic areas not served by collection divisions or disposal facilities. Revenues are received
from municipalities and customers in the form of processing and tipping fees and commodity sales. These MRFs are large scale,
high-volume facilities that process recycled materials delivered to them by municipalities and commercial customers under long
term contracts. The Company also operates MRFs as an integral part of its core solid waste operations, which generally process
recyclables collected from various residential collection operations. This latter group is concentrated primarily in Vermont, 
as the public sector in other states within the core solid waste services market area have generally maintained primary 
responsibility for recycling efforts.

Disposal Facilities. The Company disposes of solid waste at its landfills and at its waste-to-energy facility.

38657-1-15-casella 10K — RKC! — proof 5 (rjh) — august 8, 2002
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Landfills. The following table provides certain information regarding the landfills that the Company operates. All of this 
information is provided as of April 30, 2002. Each of the landfills in the table is a Subtitle D landfill, with the exception 
of the Hakes landfill, which is permitted to accept only construction and demolition materials.

(tonnage in thousands)

Landfill
Clinton County(5)
Waste USA
Pine Tree
NCES
Hyland(8)
Hakes

Estimated
Remaining
Permitted
Capacity
in Tons(1)
1,493
1,392
2,792

408(6)

1,581
1,285

Location
Schuyler Falls, NY
Coventry, VT
Hampden, ME
Bethlehem, NH
Angelica, NY
Campbell, NY

Estimated
Annual
Tonnage(2)
175
240
295
135
227
94

Estimated
Remaining
Permitted
Life

in Years(3)
8.5
5.8
9.5
3.0
7.0
13.7

Estimated
Additional
Permittable
Capacity
in Tons(1) (4)
6,500
5,560
404
—(7)

1,455
3,266

Estimated
Additional
Permittable
Life

in Years(3)
37.1
23.2
1.4
—(7)
6.4
34.7

(1) The Company converts estimated remaining permitted capacity and estimated additional permittable capacity from cubic yards to tons by 

assuming a compaction factor equal to the historic average compaction factor applicable to the respective landfill over the last three fiscal years.

In addition to a total capacity limit, certain permits may place a daily and/or annual limit on capacity.

(2) Based on current permitted capacity, estimated future use and permit limitations.

(3) Estimated remaining permitted and additional permittable life in years at a landfill is calculated by dividing the landfill’s estimated remaining

permitted and additional permittable capacity, respectively, in tons by the estimated annual tonnage.

(4) Represents capacity determined to be “permittable” in accordance with the following criteria: (i) the Company controls the land on which the

expansion is sought; (ii) all technical siting criteria have been met or a variance has been obtained or is reasonably expected to be obtained;

(iii) the Company has not identified any legal or political impediments which it believes will not be resolved in its favor; (iv) the Company is

actively working on obtaining any necessary permits and expects that all required permits will be received within the next two to five years; 

and (v) senior management has approved the project.

(5) Operated pursuant to a lease expiring in 2021.

(6) Includes capacity which has been permitted as Stage II, Phase II and as Stage III and which has been operated under the authority of 

the New Hampshire Department of Environmental Services. The right to utilize this capacity is being contested by the Town of Bethlehem. 

See “Item 3—Legal Proceedings.”

(7) Expansion capacity requires resolution of a local dispute on land use and state technical review, 1.3 million ton expansion capacity having 

an estimated useful life of 9.9 years, is omitted.

(8) Additionally, the Company is in the final stages of a local permissive expansion referendum which if approved would authorize an additional

approximately 5.1 million tons of capacity having an estimated useful life of 22.5 years.

Clinton County. The Clinton County landfill, located in Schuyler Falls, New York, is leased from Clinton County pursuant to 
a 25 year lease which expires in 2021. The landfill serves the principal wastesheds of Clinton, Franklin, Essex, Warren and
Washington Counties in New York, and certain selected contiguous Vermont wastesheds. Permitted waste accepted includes
municipal solid waste, construction and demolition debris, and special waste which is approved by regulatory agencies. The
facility is currently in the final stages of a multi-year landfill expansion permitting process which, if successful, would provide
considerable additional volume beyond the current terms of the lease agreement. The Company has entered into extended
agreements with the town and county applicable to this additional volume and expects to receive the necessary approvals 
during the next 12 months.

Waste USA. The Waste USA landfill is located in Coventry, Vermont and serves the major wastesheds associated with the 
northern two-thirds of Vermont. The landfill is permitted to accept all residential and commercially produced municipal solid
waste, including pre-approved sludges, and construction and demolition debris. Since the purchase of this landfill in 1995, the
Company has expanded the capacity of this landfill through approximately fiscal 2007. The Company currently is in the process
of applying for approximately 5.5 million tons of additional capacity which, at the current usage rate, would add an additional
20-25 years of capacity.

Pine Tree. The Pine Tree landfill is located in Hampden, Maine and is one of only two commercial landfills serving principal
wastesheds in the State of Maine. It is permitted to accept ash, front-end processing residues from the waste-to-energy 

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facilities within the State of Maine and related sludges and special waste which is approved by regulatory agencies. In addition, 
it is permitted to accept municipal solid waste that is by-pass waste, which is non-burnable waste, from the Maine Energy 
and Penobscot Energy Recovery Company (“PERC”) waste-to-energy facilities, as well as municipal solid waste that is in excess
of the processing capacities of other waste-to-energy facilities within the State of Maine. The facility recently received final
approval for approximately 3.0 million tons of additional capacity (of which approximately 200,000 tons have been utilized)
and is currently developing its next expansion plan. See “—Regulation.”

NCES. The North Country Environmental Services (“NCES”) landfill located in Bethlehem, New Hampshire serves the northern
and central wastesheds of New Hampshire and certain contiguous Vermont and Maine wastesheds. Since the purchase of this
landfill in 1994, the Company has consistently experienced expansion opposition from the local town through enactment of
restrictive local zoning and planning ordinances. In each case, in order to access additional permittable capacity, the Company
has been required to assert its rights through litigation in the New Hampshire court system. In February, 1999, court approval
was received for approximately 600,000 tons of additional capacity, which is expected to last through June 2005. The use of
this capacity, which is ongoing, remains subject to court challenge by local authorities. The Company has recently applied for
the next expansion permit for this landfill and expects that it will be required to assert its rights through the New Hampshire
court system in order to overcome continued local opposition. See “Item 3—Legal Proceedings.”

Hyland. The Hyland landfill located in Angelica, New York, serves certain Western region wastesheds located throughout 
western New York. The facility is permitted to accept all residential and commercial municipal solid waste, construction and
demolition debris and special waste which is approved by regulatory agencies. The facility is located on a 600-acre property,
which represents considerable additional expansion capabilities. In 1999, as part of a long-term settlement with the Town of
Angelica, the Company entered into an agreement requiring a permissive referendum to expand beyond a pre-agreed footprint.
As a result, the above table reflects only that capacity which has been pre-agreed with the Town of Angelica as being permit-
table. The Company expects to seek a townwide referendum during calendar year 2002 local elections. If successful, the
Company expects to seek and receive a permit for an additional 38 acres, representing in excess of 5.0 million tons of 
additional capacity.

Hakes. The Hakes construction and demolition landfill, located in Campbell, New York, is permitted to accept only construction
and demolition material. The landfill serves the principal rural wastesheds of western New York. The Company believes that the
site has permittable capacity of over 3.0 million tons, based on existing regulatory requirements and local community support.
The Company expects to apply for this expansion during the next 18 months and does not expect substantial opposition 
from the local community. The Company recently entered into a revised long-term host community agreement related to the 
expansion of the facility.

The Company also has rights to remaining capacity at three construction and demolition landfills, in Brockton and
Woburn, Massachusetts and Cheektowaga, New York, totaling approximately 788,000 tons. Two of these landfills are expected 
to be closed in 2002 and the third (Brockton) has an expected remaining life of three years. In addition, the Company owned
and/or operated five unlined landfills which are not currently in operation. All of these landfills have been closed and 
capped to environmental regulatory standards.

Maine Energy Waste-to-Energy Facility. The Company owns a waste-to-energy facility, Maine Energy, which generates electricity
by processing non-hazardous solid waste. This waste-to-energy facility provides important additional disposal capacity and 
generates power for sale. The facility receives solid waste from municipalities under long-term waste handling agreements and
also receives raw materials from commercial and private waste haulers and municipalities with short-term contracts, as well as
from collection operations. Maine Energy is contractually required to sell all of the electricity generated at its facility to Central
Maine Power, an electric utility, and guarantees 100% of its electric generating capacity to CL Power Sales One, LLC. Maine
Energy is part of the Eastern region. The use of the facility is subject to permit conditions, some of which are opposed by 
local authorities. See “—Regulation.”

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OPERATING SEGMENTS

We manage our solid waste operations on a geographic basis through three regions, which are designated as the Central,
Eastern and Western regions and which each comprise a full range of solid waste services serving approximately an aggregate
of 257,000 customers, and FCR, which comprises larger-scale non-solid waste recycling and brokerage operations.

Within each geographic region, the Company organizes its solid waste services around smaller areas that are referred to as

“wastesheds.” A wasteshed is an area that comprises the complete cycle of activities in the solid waste services process, from
collection to transfer operations and recycling to disposal in either landfills or waste-to-energy facilities, some of which may 
be owned and operated by third parties. Typically several divisions operate within each wasteshed, each of which provides a
particular service, such as collection, recycling, disposal or transfer. Each of these divisions is managed as a separate profit 
center, but operates interdependently with the other divisions within the wasteshed. Each wasteshed generally operates
autonomously from adjoining wastesheds.

Throughout its 23 material recycling facilities, FCR services 21 anchor contracts, which are long-term commitments from a
municipality of five years or greater to guarantee the delivery of all recycled residential recyclables to FCR. These contracts may
include a minimum volume guarantee committed by the municipality. The Company also has service agreements with individual
towns and cities and commercial customers, including small solid waste companies and major competitors that do not have 
processing capacity within a specific geographic region. The 23 FCR facilities process recyclables collected from approximately
2.7 million households, representing a population of approximately 8.2 million.

The following table provides information about each operating region and FCR as of June 28, 2002.

Fiscal year 2002 revenues
Solid waste collection operations
Transfer stations
Recycling facilities
Disposal facilities(1)

Central region
$95.3 million
13
13
5
Bethlehem, NH
Coventry, VT
Schuyler Falls, NY

Eastern region
$148.7 million
10
9
9
Biddeford, ME
Hampden, ME

Western region
$65.6 million
12
10
2
Angelica, NY
Campbell, NY

FCR Recycling
$93.7 million
—
—
23
—

(1) Each of the disposal facilities in the table is a Subtitle D landfill, with the exception of the disposal facility located in Campbell, New York, 

which is a landfill permitted to accept only construction and demolition materials and the disposal facility located in Biddeford, Maine, which is a

waste-to-energy facility. In addition, the Company has rights to the remaining air space capacity at three construction and demolition landfills

located in Brockton and Woburn, Massachusetts and Cheektowaga, New York, totaling approximately 788,000 tons. The rights to use the airspace

in Woburn and Cheektowaga expire in fiscal year 2003, and Brockton has an expected remaining life of three years.

Central Region. The Central region consists of wastesheds located in Vermont, northwestern New Hampshire and eastern upstate
New York. The portion of upstate New York served by the Central Region includes Clinton, Franklin, Essex, Warren, Washington,
Saratoga, Rennselaer and Albany counties. Our Waste USA landfill in Coventry, Vermont is one of only two permitted Subtitle D
landfills in Vermont, and the NCES landfill in Bethlehem, New Hampshire is one of only six permitted Subtitle D landfills in
New Hampshire. In the Central Region, there are a total of 13 permitted Subtitle D landfills.

The Central region has become the Company’s most mature operating platform, as it has operated in this region since 

the Company’s inception in 1975. The Company has achieved a high degree of vertical integration of the wastestream in this
region, resulting in stable cash flow performance. In the Central region, the Company also has a market leadership position.
The primary competition in the Central region comes from Waste Management, Inc. in the larger population centers (primarily
southern New Hampshire), and from smaller independent operators in the more rural areas. As the Company’s most mature
region, future operating efficiencies will be driven primarily by improving core operating efficiencies and providing enhanced
customer service.

Eastern Region. The Eastern region consists of wastesheds located in Maine, southeastern New Hampshire and eastern
Massachusetts. These wastesheds generally have been affected by the regional constraints on disposal capacity imposed by 
the public policies of New Hampshire, Maine and Massachusetts which have, over the past 10 years, either limited new landfill
development or precluded development of additional capacity from existing landfills. The Pine Tree landfill is one of only two

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permitted Subtitle D commercial landfills in Maine. Consequently, the Eastern Region relies more heavily on non-landfill waste-
to-energy disposal capacity than other regions. Maine Energy is one of nine waste-to-energy facilities in the Eastern Region.

The Company entered the State of Maine in 1996 with the purchase of the assets comprising New England Waste Services 

of ME., Inc. in Hampden, Maine. The acquisition of KTI in 1999 significantly improved the Company’s disposal capacity in 
this region and provided an alternative internalization option for the Company’s solid waste assets in eastern Massachusetts.
The major competitor in the State of Maine is Waste Management, Inc., as well as several smaller local competitors.

The Company entered eastern Massachusetts in fiscal year 2000 with the acquisition of assets that were divested by 

Allied Waste Industries, Inc. under court order following its acquisition of Browning Ferris Industries, Inc., and through the
acquisition of smaller independent operators. In this region, the Company generally relies on third party disposal capacity.
Consequently, greater opportunity exists to increase internalization rates and operating efficiencies in the Eastern region than
in the two other regions, where the Company’s competitive position generally is stronger. The Company’s primary competitors in
eastern Massachusetts are Waste Management, Inc., Allied Waste Industries, Inc., and smaller independent operators.

Western Region. The Western region consists of wastesheds in upstate New York (which includes Ithaca, Elmira, Oneonta,
Lowville, Potsdam, Geneva, Auburn, Buffalo, Jamestown and Olean) and northern Pennsylvania (Wellsboro, PA). The Company
entered the Western Region with the acquisition of Superior Disposal Services, Inc.’s business in 1997 and have consistently
expanded in this region largely through tuck-in acquisitions and internal growth. The collection operations include leadership
positions in nearly every rural market in the Western region outside of larger metropolitan markets such as Syracuse,
Rochester, Albany and Buffalo.

While the Company has achieved strong market positions in this region, focus remains on increasing vertical integration

through the acquisition or privatization and operation of additional disposal capacity in the market. As compared to other
operating regions, the Western Region, which includes the Hyland landfill, presently contains an excess of disposal capacity as
a result of the proliferation during the 1990s of publicly-developed Subtitle D landfills. As a result, the Company believes that
opportunities exist to enter into long-term leasing arrangements and other strategic partnerships with county and municipal
governments for the operation and/or utilization of their landfills, similar to the long-term lease for the Clinton County landfill
being operated by the Central Region. The Company expects that successful implementation of this strategy will lead to
improved internalization rates.

Primary competitors in the Western region are Waste Management, Inc., Republic Services Group, Inc. and Allied Waste

Industries, Inc. in the larger urban areas and smaller independent operators in the more rural markets.

FCR Recycling. FCR Recycling is one of the largest processors and marketers of recycled materials in the eastern United States,
comprising 23 material recycling facilities that process and then market recyclable materials that municipalities and commercial
customers deliver to it under long term contracts. Ten of FCR’s facilities are leased, eight are owned and five are under operat-
ing contracts. In fiscal year 2002, FCR processed and marketed approximately 850,000 tons of recyclable materials. FCR’s facili-
ties are principally located in key urban markets, including in Connecticut; North Carolina; New Jersey; Florida; Tennessee;
Georgia; Michigan; New York; South Carolina; Virginia; New Hampshire; Massachusetts; Wisconsin; Maine; and Halifax, Canada.

A significant portion of the material provided to FCR is delivered pursuant to 21 anchor contracts, which are long-term
contracts with municipal customers. The anchor contracts generally have a term of five to ten years and expire at various times
between 2003 and 2018. The terms of each of the contracts vary, but all the contracts provide that the municipality or a third
party delivers materials to a facility. In approximately one-third of the contracts, the municipalities agree to deliver a guaran-
teed tonnage and the municipality pays a fee for the amount of any shortfall from the guaranteed tonnage. Under the terms 
of the individual contracts, the Company charges the municipality a fee for each ton of material delivered to the Company.
Some contracts contain revenue sharing arrangements under which the municipality receives a specified percentage of the 
revenues from the sale by the Company of the recovered materials.

FCR derives a significant portion of its revenues from the sale of recyclable materials. The purchase and sale prices of 
recyclable materials, particularly newspaper, corrugated containers, plastics, ferrous and aluminum, can fluctuate based upon
market conditions. The Company uses long-term supply contracts with customers with floor price arrangements to reduce the
commodity risk for certain recyclables, particularly newspaper, cardboard, plastics and aluminum metals. Under such contracts,
a guaranteed minimum price is obtained for the recyclable materials along with a commitment to receive additional amounts 
if the current market price rises above the floor price. The contracts are generally with large domestic companies that use the
recyclable materials in their manufacturing process, such as paper, packaging and consumer goods companies. The Company

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also hedges against fluctuations in the commodity prices of recycled paper and corrugated containers in order to mitigate the
variability in cash flows and earnings generated from the sales of recycled materials at floating prices. As of June 28, 2002, 
the Company has two commodity hedge contracts outstanding with designated terms effective through April 30, 2005.

The brokerage business operates out of two offices, one focused on domestic markets and the other on export markets.

Both offices are located in New Jersey. The commercial brokerage operation derives all of its revenues from the sale of 
recyclable materials, predominately old newspaper, old corrugated cardboard, mixed paper and office paper. The brokerage 
business markets in excess of 850,000 tons per year of various paper fibers both domestically and overseas. The ability to 
market volumes of this quantity allows the Company to reach more markets and receive favorable industry pricing and to 
better forecast the direction of commodity pricing. The brokers in the brokerage operation are required to identify both the
buyer and the seller of the recyclable materials before committing to broker the transaction, thereby minimizing pricing risk,
and are not permitted to enter into speculative trading of commodities.

GREENFIBER CELLULOSE INSULATION JOINT VENTURE

The Company is a 50% partner in US GreenFiber LLC (“GreenFiber”), a joint venture with Louisana-Pacific. GreenFiber, which is
one of the largest manufacturers of high quality cellulose insulation for use in residential dwellings and manufactured housing,
was formed through the combination of the Company’s cellulose operations, which were acquired in the Company’s acquisition
of KTI, with those of Louisiana-Pacific. Based in Charlotte, North Carolina, GreenFiber has a national manufacturing and distri-
bution capability and sells to contractors, manufactured home builders and retailers, including Home Depot, Inc. GreenFiber 
has ten manufacturing facilities located in Atlanta, Georgia; Charlotte, North Carolina; Delphos, Ohio; Elkwood, Virginia;
Norfolk, Nebraska; Phoenix, Arizona; Sacramento, California; Tampa, Florida; and Waco, Texas. GreenFiber utilizes a hedging
strategy to help stabilize its exposure to fluctuating newsprint costs, which generally represent approximately 30% of its 
raw material costs, and is a major purchaser of FCR recycling fiber material produced at various facilities. GreenFiber, which 
is accounted for under the equity method, had revenues of $99.0 million for the twelve months ended April 30, 2002. For 
the same period, the Company recognized equity income from GreenFiber of $4.3 million.

COMPETITION

The solid waste services industry is highly competitive. Competition is for collection and disposal volume primarily on the basis
of the quality, breadth and price of services. From time to time, competitors may reduce the price of their services in an effort
to expand market share or to win a competitively bid municipal contract. These practices may also lead to reduced pricing for
services or the loss of business. In addition, competition exists within the industry not only for collection, transportation and
disposal volume, but also for acquisition candidates.

Some of the larger urban markets in which the Company competes are served by one or more of the large national 
solid waste companies that may be able to achieve greater economies of scale, including Waste Management, Inc., Allied Waste
Industries, Inc. and Republic Services, Inc. The Company also competes with a number of regional and local companies that
offer competitive prices and quality service. In addition, the Company competes with operators of alternative disposal facilities,
including incinerators, and with certain municipalities, counties and districts that operate their own solid waste collection 
and disposal facilities. Public sector facilities may have certain advantages due to the availability of user fees, charges or tax
revenues and tax-exempt financing.

The brokerage business faces extensive competition due, in part, to the low cost of market entry, including from Jordan

Trading, International Forest Products Corp., Harmon, CellMark and Fibers International. The Company competes primarily 
on the basis of reputation, price, timeliness and quality and availability of recycled material.

The insulation industry is highly competitive and requires substantial capital and labor resources. GreenFiber, a joint ven-
ture with Louisiana-Pacific, competes primarily with manufacturers of fiberglass insulation such as Owens Corning, CertainTeed
Corporation and Johns Manville. These manufacturers have significant market shares and are substantially better capitalized
than GreenFiber.

MARKETING AND SALES

The Company has a coordinated marketing and sales strategy, which is formulated at the corporate level and implemented at
the divisional level. The Company markets its services locally through division managers and direct sales representatives who

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focus on commercial, industrial, municipal and residential customers. New customers are obtained from referral sources, general
reputation and local market print advertising. Leads are also developed from new building permits, business licenses and other
public records. Additionally, each division generally advertises in the yellow pages and other local business print media that
cover its service area.

Maintenance of a local presence and identity is an important aspect of the marketing plan, and managers are involved in

local governmental, civic and business organizations. The Company’s name and logo, or, where appropriate, that of its divisional
operations, are displayed on all containers and trucks. Additionally, the Company attends and makes presentations at munici-
pal and state conferences and advertises in governmental associations’ membership publications.

The Company markets its commercial, industrial and municipal services through sales representatives who visit customers on
a regular basis and make sales calls to potential new customers. These sales representatives receive a significant portion of their
compensation based upon meeting certain incentive targets. The Company emphasises providing quality services and customer
satisfaction and retention, as well as focuses on quality service which will help retain existing and attract additional customers.

EMPLOYEES

As of June 28, 2002, the Company employed 2,594 persons, including 552 professionals or managers, sales, clerical, data 
processing or other administrative employees and 2,042 employees involved in collection, transfer, disposal, recycling or other
operations. Certain employees are covered by collective bargaining agreements. The Company believes relations with employees
to be satisfactory.

RISK MANAGEMENT, INSURANCE AND PERFORMANCE OR SURETY BONDS

The Company actively maintains environmental and other risk management programs, which are appropriate for its business.
The environmental risk management program includes evaluating existing facilities, as well as potential acquisitions, for envi-
ronmental law compliance and operating procedures. The Company also maintains a worker safety program, which encourages
safe practices in the workplace. Operating practices at all of the operations are intended to reduce the possibility of environ-
mental contamination and litigation.

A range of insurance is carried which is intended to protect the assets and operations of the Company, including a commer-
cial general liability policy and a property damage policy. A partially or completely uninsured claim (including liabilities associated
with cleanup or remediation at the Company’s facilities), if successful and of sufficient magnitude, could have a material adverse
effect on the business, financial condition and results of operations. Any future difficulty in obtaining insurance could also
impair the ability to secure future contracts, which may be conditioned upon the availability of adequate insurance coverage.
Effective July 1, 1999, the Company established a captive insurance company, Casella Insurance Company, through which

the Company is self-insured for worker’s compensation and, effective May 1, 2000, automobile coverage. The maximum expo-
sure under the worker’s compensation plan is $500,000 per individual event with a $1,000,000 aggregate limit, after which
reinsurance takes effect. Maximum exposure under the automobile plan is $500,000 per individual event with a $3,000,000
aggregate limit, after which reinsurance takes effect.

Municipal solid waste collection contracts and landfill closure obligations may require performance or surety bonds, letters 

of credit or other means of financial assurance to secure contractual performance. The Company has not experienced difficulty
in obtaining these financial instruments and if it were unable to obtain these financial instruments in sufficient amounts or 
at acceptable rates the Company could be precluded from entering into additional municipal solid waste collection contracts 
or obtaining or retaining landfill operating permits.

CUSTOMERS

The Company provides its collection services to commercial, industrial and residential customers. A majority of the commercial
and industrial collection services are performed under one-to-three-year service agreements, and fees are determined by such
factors as collection frequency, type of equipment and containers furnished, the type, volume and weight of the solid waste
collected, the distance to the disposal or processing facility and the cost of disposal or processing. Residential collection and
disposal services are performed either on a subscription basis (i.e., with no underlying contract) with individuals, or through
contracts with municipalities, homeowners associations, apartment owners or mobile home park operators.

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Maine Energy is contractually required to sell all of the electricity generated at its facilities to Central Maine Power, an
electric utility, pursuant to a contract that expires in 2012, and guarantee 100% of its electric generating capacity to CL Power
Sales One, LLC, pursuant to a contract that expires in 2007.

FCR provides recycling services to municipalities, commercial haulers and commercial waste generators within the 
geographic proximity of the processing facilities. The Company also acts as a broker of recyclable materials, principally 
to paper and box board manufacturers in the United States, Canada, the Pacific Rim, Europe, South America and Asia.

GreenFiber sells to contractors, manufactured home builders and retailers, including Home Depot, Inc.

RAW MATERIALS

Maine Energy received approximately 27% of its solid waste in fiscal year 2002 from 19 Maine municipalities under long-term
waste handling agreements. Maine Energy also receives raw materials from commercial and private waste haulers and munici-
palities with short-term contracts, as well as from the Company’s collection operations.

FCR received approximately 62% of its material under long-term agreements with municipalities. These contracts generally 

provide that all recyclables collected from the municipal recycling programs shall be delivered to a facility that is owned 
or operated by the Company. The quantity of material delivered by these communities is dependent on the participation 
of individual households in the recycling program.

The primary raw material for the insulation joint venture is newspaper. GreenFiber received approximately 23% of the
newspaper used by it from FCR. It purchased the remaining newspaper from municipalities, commercial haulers and paper 
brokers. The chemicals used to make the newspaper fire retardant are purchased from industrial chemical manufacturers 
located in the United States and South America.

SEASONALITY

Transfer and disposal revenues have historically been lower during the months of November through March. This seasonality
reflects the lower volume of waste during the late fall, winter and early spring months primarily because:

(cid:4) the volume of waste relating to construction and demolition activities decreases substantially during the winter months 

in the eastern United States; and

(cid:4) decreased tourism in Vermont, New Hampshire, Maine and eastern New York during the winter months tends to lower the
volume of waste generated by commercial and restaurant customers, which is partially offset by increased volume in the
winter ski industry.
Since certain operating and fixed costs remain constant throughout the fiscal year, operating income is therefore impacted 

by a similar seasonality. In addition, particularly harsh weather conditions typically result in increased operating costs.

The recycling segment experiences increased volumes of newspaper in November and December due to increased news-
paper advertising and retail activity during the holiday season. The insulation business experiences lower sales in November
and December because of lower production of manufactured housing due to holiday plant shutdowns.

REGULATION

Introduction

The Company is subject to extensive and evolving federal, state and local environmental laws and regulations which have
become increasingly stringent in recent years. The environmental regulations affecting the Company are administered by the
United States Environmental Protection Agency (“EPA”) and other federal, state and local environmental, zoning, health and
safety agencies. Failure to comply with such requirements could result in substantial costs, including civil and criminal fines
and penalties. Except as described below, the Company believes that it is currently in substantial compliance with applicable
federal, state and local environmental laws, permits, orders and regulations. The Company does not currently anticipate any
material environmental costs to bring operations into compliance, although there can be no assurance in this regard in the
future. The Company expects that its operations in the solid waste services industry will be subject to continued and increased
regulation, legislation and regulatory enforcement actions. The Company attempts to anticipate future legal and regulatory
requirements and to carry out plans intended to keep its operations in compliance with those requirements.

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In order to transport, process, incinerate, or dispose of solid waste, it is necessary to possess and comply with one or more 

permits from federal, state and/or local agencies. The Company must review these permits periodically, and the permits may 
be modified or revoked by the issuing agency.

The principal federal, state and local statutes and regulations applicable to various Company operations are as follows:

THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976, AS AMENDED (“RCRA”)

RCRA regulates the generation, treatment, storage, handling, transportation and disposal of solid waste and requires states 
to develop programs to ensure the safe disposal of solid waste. RCRA divides solid waste into two groups, hazardous and non-
hazardous. Wastes are generally classified as hazardous if they (1) either (a) are specifically included on a list of hazardous
wastes, or (b) exhibit certain characteristics defined as hazardous, and (2) are not specifically designated as non-hazardous.
Wastes classified as hazardous under RCRA are subject to more extensive regulation than wastes classified as non-hazardous,
and businesses that deal with hazardous waste are subject to regulatory obligations in addition to those imposed on handlers
of non-hazardous waste.

Among the wastes that are specifically designated as non-hazardous are household waste and “special” waste, including items
such as petroleum contaminated soils, asbestos, foundry sand, shredder fluff and most non-hazardous industrial waste products.
The EPA regulations issued under Subtitle C of RCRA impose a comprehensive “cradle to grave” system for tracking the 
generation, transportation, treatment, storage and disposal of hazardous wastes. Subtitle C regulations impose obligations on
generators, transporters and disposers of hazardous wastes, and require permits that are costly to obtain and maintain for sites
where those businesses treat, store or dispose of such material. Subtitle C requirements include detailed operating, inspection,
training and emergency preparedness and response standards, as well as requirements for manifesting, record keeping and
reporting, corrective action, facility closure, post-closure and financial responsibility. Most states have promulgated regulations
modeled on some or all of the Subtitle C provisions issued by the EPA, and in many instances the EPA has delegated to those
states the principal role in regulating industries which are subject to those requirements. Some state regulations impose 
different, additional obligations.

The Company currently does not accept for transportation or disposal hazardous substances (as defined in CERCLA, 
discussed below) in concentrations or volumes that would classify those materials as hazardous wastes. However, the Company
has transported hazardous substances in the past and very likely will transport and dispose of hazardous substances in the
future, to the extent that materials defined as hazardous substances under CERCLA are present in consumer goods and in 
the non-hazardous waste streams of customers.

The Company does not accept hazardous wastes for incineration at its waste-to-energy facilities. The Company typically
tests ash produced at its waste-to-energy facilities on a regular basis; that ash generally does not contain hazardous substances
in sufficient concentrations or volumes to result in the ash being classified as hazardous waste. However, it is possible that
future waste streams accepted for incineration could contain elevated volumes or concentrations of hazardous substances or
that legal requirements will change, and that the resulting incineration ash would be classified as hazardous waste.

Leachate generated at the landfills and transfer stations is tested on a regular basis, and generally is not regulated as a 
hazardous waste under federal or state law. In the past, however, leachate generated from certain of the Company’s landfills has
been classified as hazardous waste under state law, and there is no guarantee that leachate generated from these facilities in
the future will not be classified under federal or state law as hazardous waste.

In October 1991, the EPA adopted the Subtitle D regulations under RCRA governing solid waste landfills. The Subtitle D regu-
lations, which generally became effective in October 1993, include location restrictions, facility design standards, operating criteria,
closure and post-closure requirements, financial assurance requirements, groundwater monitoring requirements, groundwater
remediation standards and corrective action requirements. In addition, the Subtitle D regulations require that new landfill sites
meet more stringent liner design criteria (typically, composite soil and synthetic liners or two or more synthetic liners) intended
to keep leachate out of groundwater and have extensive collection systems to carry away leachate for treatment prior to disposal.
Regulations generally require us to install groundwater monitoring wells at virtually all landfills operated by the Company, to moni-
tor groundwater quality and, indirectly, the effectiveness of the leachate collection systems. The Subtitle D regulations also require
facility owners or operators to control emissions of methane gas generated at landfills exceeding certain regulatory thresholds. State
landfill regulations must meet these requirements or the EPA will impose such requirements upon landfill owners and operators
in that state. Each state also must adopt and implement a permit program or other appropriate system to ensure that landfills

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within the state comply with the Subtitle D regulatory criteria. Various states in which the Company operates or in which it may
operate in the future have adopted regulations or programs as stringent as, or more stringent than, the Subtitle D regulations.

THE FEDERAL WATER POLLUTION CONTROL ACT OF 1972, AS AMENDED (“CLEAN WATER ACT”)

The Clean Water Act regulates the discharge of pollutants into the “waters of the United States” from a variety of sources,
including solid waste disposal sites and transfer stations, processing facilities and waste-to-energy facilities (collectively, “solid
waste management facilities”). If run-off or collected leachate from the Company’s solid waste management facilities, or process
or cooling waters generated at its waste-to-energy facilities, is discharged into streams, rivers or other surface waters, the Clean
Water Act would require us to apply for and obtain a discharge permit, conduct sampling and monitoring and, under certain
circumstances, reduce the quantity of pollutants in such discharge. A permit also may be required if that run-off, leachate, 
or process or cooling water is discharged to a treatment facility that is owned by a local municipality. Numerous states have
enacted regulations, which are equivalent to those issued under the Clean Water Act, but which also regulate the discharge 
of pollutants to groundwater. Finally, virtually all solid waste management facilities must comply with the EPA’s storm water
regulations, which are designed to prevent contaminated storm water from flowing into surface waters.

THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, 
AS AMENDED (“CERCLA”)

CERCLA established a regulatory and remedial program intended to provide for the investigation and remediation of facilities
where or from which a release of any hazardous substance into the environment has occurred or is threatened. CERCLA has
been interpreted to impose retroactive strict, and under certain circumstances, joint and several, liability for investigation 
and cleanup of facilities on current owners and operators of the site, former owners and operators of the site at the time of 
the disposal of the hazardous substances, as well as the generators of the hazardous substances and certain transporters of 
the hazardous substances. In addition, CERCLA imposes liability for the costs of evaluating and addressing damage to natural
resources. The costs of CERCLA investigation and cleanup can be very substantial. Liability under CERCLA does not depend
upon the existence or disposal of “hazardous waste” as defined by RCRA, but can be based on the existence of any of more
than 700 “hazardous substances” listed by the EPA, many of which can be found in household waste. In addition, the defini-
tion of “hazardous substances” in CERCLA incorporates substances designated as hazardous or toxic under the Federal Clean
Water Act, Clear Air Act and Toxic Substances Control Act. If the Company were found to be a responsible party for a CERCLA
cleanup, the enforcing agency could hold us, under certain circumstances, or any other responsible party, responsible for all
investigative and remedial costs, even if others also were liable. CERCLA also authorizes EPA to impose a lien in favor of the
United States upon all real property subject to, or affected by, a remedial action for all costs for which a party is liable. CERCLA
provides a responsible party with the right to bring a contribution action against other responsible parties for their allocable
share of investigative and remedial costs. The Company’s ability to get others to reimburse for their allocable share of such
costs would be limited by its ability to identify and locate other responsible parties and prove the extent of their responsibility
and by the financial resources of such other parties.

THE CLEAN AIR ACT OF 1970, AS AMENDED (“CLEAN AIR ACT”)

The Clean Air Act, generally through state implementation of federal requirements, regulates emissions of air pollutants 
from certain landfills based upon the date the landfill was constructed and the annual volume of emissions. The EPA has prom-
ulgated new source performance standards regulating air emissions of certain regulated pollutants (methane and non-methane
organic compounds) from municipal solid waste landfills. Landfills located in areas where levels of regulated pollutants exceed
certain thresholds may be subject to even more extensive air pollution controls and emission limitations. In addition, the EPA
has issued standards regulating the disposal of asbestos-containing materials under the Clean Air Act.

The Clean Air Act regulates emissions of air pollutants from the Company’s waste-to-energy facilities and certain of its 
processing facilities. The EPA has enacted standards that apply to those emissions. It is possible that the EPA, or a state where
the Company operates, will enact additional or different emission standards in the future.

All of the federal statutes described above authorize lawsuits by private citizens to enforce certain provisions of the
statutes. In addition to a penalty award to the United States, some of those statutes authorize an award of attorney’s fees to
private parties successfully advancing such an action.

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THE OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970, AS AMENDED (“OSHA”)

OSHA establishes employer responsibilities and authorizes the Occupational Safety and Health Administration to promulgate
occupational health and safety standards, including the obligation to maintain a workplace free of recognized hazards likely 
to cause death or serious injury, to comply with adopted worker protection standards, to maintain certain records, to provide
workers with required disclosures and to implement certain health and safety training programs. Various of those promulgated
standards may apply to the Company’s operations, including those standards concerning notices of hazards, safety in excava-
tion and demolition work, the handling of asbestos and asbestos-containing materials, and worker training and emergency
response programs. State and Local Regulations Each state in which the Company now operates or may operate in the future
has laws and regulations governing the generation, storage, treatment, handling, processing, transportation, incineration and
disposal of solid waste, water and air pollution and, in most cases, the siting, design, operation, maintenance, closure and
post-closure maintenance of solid waste management facilities. In addition, many states have adopted statutes comparable 
to, and in some cases more stringent than, CERCLA. These statutes impose requirements for investigation and remediation 
of contaminated sites and liability for costs and damages associated with such sites, and some authorize the state to impose
liens to secure costs expended addressing contamination on property owned by responsible parties. Some of those liens may
take priority over previously filed instruments. Furthermore, many municipalities also have ordinances, laws and regulations
affecting the Company’s operations. These include zoning and health measures that limit solid waste management activities 
to specified sites or conduct, flow control provisions that direct the delivery of solid wastes to specific facilities or to facilities
in specific areas, laws that grant the right to establish franchises for collection services and then put out for bid the right to
provide collection services, and bans or other restrictions on the movement of solid wastes into a municipality.

Certain permits and approvals may limit the types of waste that may be accepted at a landfill or the quantity of waste
that may be accepted at a landfill during a given time period. In addition, certain permits and approvals, as well as certain
state and local regulations, may limit a landfill to accepting waste that originates from specified geographic areas or seek to
restrict the importation of out-of-state waste or otherwise discriminate against out-of-state waste. Generally, restrictions on
importing out-of-state waste have not withstood judicial challenge. However, from time to time federal legislation is proposed
which would allow individual states to prohibit the disposal of out-of-state waste or to limit the amount of out-of-state waste
that could be imported for disposal and would require states, under certain circumstances, to reduce the amounts of waste
exported to other states. Although such legislation has not been passed by Congress, if this or similar legislation is enacted,
states in which the Company operates landfills could limit or prohibit the importation of out-of-state waste. Such actions could
materially and adversely affect the business, financial condition and results of operations of any of the Company’s landfills
within those states that receive a significant portion of waste originating from out-of-state.

Certain states and localities may, for economic or other reasons, restrict the export of waste from their jurisdiction, or
require that a specified amount of waste be disposed of at facilities within their jurisdiction. In 1994, the U.S. Supreme Court
rejected as unconstitutional, and therefore invalid, a local ordinance that sought to limit waste going out of the locality by
imposing a requirement that the waste be delivered to a particular facility. However, it is uncertain how that precedent will 
be applied in different circumstances. For example, in 2002, the U.S. Supreme Court decided not to hear an appeal of a federal
Appeals Court decision that held that the flow control ordinances directing waste to a publicly owned facility are not per se
unconstitutional and should be analyzed under a standard that is less stringent than if waste had been directed to a private
facility. The less stringent standard has not yet been applied to the facts of that case, which involves flow control regulations
in Oneida and Herkimer Counties in New York, and the outcome is uncertain. Additionally, certain state and local jurisdictions
continue to seek to enforce such restrictions and, in certain cases, may elect not to challenge such restrictions. Further, some
proposed federal legislation would allow states and localities to impose flow restrictions. Those restrictions could reduce the
volume of waste going to landfills or transfer stations in certain areas, which may materially adversely affect the Company’s
ability to operate its facilities and/or affect the prices charged for certain services. Those restrictions also may result in higher
disposal costs for the Company’s collection operations. In sum, flow control restrictions could have a material adverse effect on
its business, financial condition and results of operations.

There has been an increasing trend at the federal, state and local levels to mandate or encourage both waste reduction at the
source and waste recycling, and to prohibit or restrict the disposal in landfills of certain types of solid wastes, such as yard wastes
and leaves, beverage containers, newspapers, household appliances and batteries. Regulations reducing the volume and types of
wastes available for transport to and disposal in landfills could affect the Company’s ability to operate its landfill facilities.

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The Company’s waste-to-energy facility has been certified by the Federal Energy Regulatory Commission as a “qualifying 

small power production facility” under the Public Utility Regulatory Policies Act of 1978, as amended (“PURPA”). PURPA
exempts qualifying facilities from most federal and state laws governing electric utility rates and financial organization, 
and generally requires electric utilities to purchase electricity generated by qualifying facilities at a price equal to the 
utility’s full “avoided cost.”

The waste-to-energy business is dependent upon the Company’s ability to sell the electricity generated by its facility to an
electric utility or a third party such as an energy marketer. Maine Energy currently sells electricity to an electric utility under a
long-term power purchase agreement. When that agreement expires, or if the electric utility were to default under the agreement,
there is no guarantee that any new agreement would contain a purchase price as favorable as the one in the current agreement.
The Company has obtained approval from the Maine Department of Environmental Protection (“DEP”) for an odor control 

system at its waste-to-energy facility in Biddeford, Maine. For optimum odor control, that system involves, among other 
items, an increase in the height of its scrubber stacks and a change in its odor control chemicals. At the municipal level, the
Biddeford Planning Board has denied the Company’s request to increase scrubber stack heights and to use alternative chemicals
as part of the control system and the Company intends to appeal this decision to Superior Court and to pursue other available
remedies. The Company believes the city’s actions are preempted by state law. However, there can be no assurance that the
Company will prevail. If the Company is not able to increase its stack heights and use alternative chemicals, there is 
no assurance that its state-approved odor control system will operate optimally to control odors, or if it does not, that its 
operations would not be significantly curtailed, which could have a material adverse effect on the Company’s business, 
financial condition and results of operations.

In 2002, the Company received approval from the Maine Department of Environmental Protection to allow the Pine Tree
landfill in Hampden, Maine to accept municipal solid waste that is by-pass waste from the Maine Energy and PERC waste-to-energy
facilities, as well as municipal solid waste that is in excess of the processing capacities of other waste-to-energy facilities within
the State of Maine. The Municipal Review Committee (“MRC”) appealed that approval to the Maine Bureau of Environmental
Protection (“BEP”). MRC is a nonprofit corporation formed to review the administration of contracts for Maine municipalities,
including 136 municipalities that have long-term waste disposal contracts with PERC. MRC alleges, among other things, that
Pine Tree Landfill’s acceptance of municipal solid waste will cause substantial financial hardship to PERC and the municipalities
that rely on PERC for municipal solid waste disposal by diverting commercial municipal solid waste away from PERC. A hearing
before the BEP is scheduled for September 2002. The Company believes that MRC’s claims are without merit, although there can
be no assurance that the Company will prevail. If the Company does not prevail, however, the Company does not believe that
there will be a material adverse effect on its business, financial condition and results of operations.

The Company owns a membership interest in New Heights Investor Co., LLC, through which it owns a 50% interest in the

power plant assets owned by New Heights Recovery & Power LLC. The power plant is a waste-to-energy facility using tires as fuel,
in Ford Heights, Illinois. In August 2000, the Illinois Environmental Protection Agency (“IEPA”) issued a violation notice to the
facility asserting non-compliance with its construction permit related to air emissions. The facility has undertaken certain correc-
tive measures and is working with IEPA to negotiate a new permit. While non-compliance with permitting requirements is subject
to civil penalties, the Company does not expect them to be assessed. However, there can be no assurance that, if civil penalties
were assessed, they would not have a material adverse effect on the Company’s financial position or results of operations.

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EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES OF THE COMPANY

The Company’s executive officers and other key employees and their respective ages as of June 28, 2002 are as follows:

Name
Executive Officers
John W. Casella
James W. Bohlig
Richard A. Norris
Charles E. Leonard

Other Key Employees
Michael J. Brennan
Timothy A. Cretney
Christopher M. DesRoches
Sean P. Duffy
Joseph S. Fusco
James M. Hiltner
Larry B. Lackey
Alan N. Sabino
Gary R. Simmons

Age

Position

51
56
58
48

44
38
44
42
38
38
41
42
52

Chairman, Chief Executive Officer and Secretary
President and Chief Operating Officer, Director
Senior Vice President, Chief Financial Officer and Treasurer
Senior Vice President, Solid Waste Operations

Vice President and General Counsel
Regional Vice President
Vice President, Sales and Marketing
Regional Vice President
Vice President, Communications
Regional Vice President
Vice President, Permits, Compliance and Engineering
Regional Vice President
Vice President, Fleet Management

John W. Casella has served as Chairman of the Board of Directors since July 2001 and as the Chief Executive Officer since 1993.
Mr. Casella served as President from 1993 to July 2001 and as Chairman of the Board of Directors from 1993 to December 1999.
In addition, Mr. Casella has been Chairman of the Board of Directors of Casella Waste Management, Inc. since 1977. Mr. Casella
is also an executive officer and director of Casella Construction, Inc., a company owned by Mr. Casella and Douglas R. Casella.
Mr. Casella has been a member of numerous industry-related and community service-related state and local boards and commis-
sions including the Board of Directors of the Associated Industries of Vermont, The Association of Vermont Recyclers, Vermont
State Chamber of Commerce and the Rutland Industrial Development Corporation. Mr. Casella has also served on various state
task forces, serving in an advisory capacity to the Governors of Vermont and New Hampshire on solid waste issues. Mr. Casella
holds an Associate of Science in Business Management from Bryant & Stratton University and a Bachelor of Science in Business
Education from Castleton State College. Mr. Casella is the brother of Douglas R. Casella, a member of its Board of Directors. 

James W. Bohlig has served as President since July 2001 and as Chief Operating Officer since 1993. Mr. Bohlig also served as
Senior Vice President from 1993 to July 2001. Mr. Bohlig has served as a member of the Board of Directors since 1993. From
1989 until he joined us, Mr. Bohlig was Executive Vice President and Chief Operating Officer of Russell Corporation, a general
contractor and developer based in Rutland, Vermont. Mr. Bohlig is a licensed professional engineer. Mr. Bohlig holds a Bachelor
of Science in Engineering and Chemistry from the U.S. Naval Academy, and is a graduate of the Columbia University
Management Program in Business Administration.

Richard A. Norris has served as the Senior Vice President, Chief Financial Officer and Treasurer since July 2001. He joined the
Company in July 2000 as Vice President and Corporate Controller. From 1997 to July 2000, Mr. Norris served as Vice President
and Chief Financial Officer for NexCycle, Inc., a processor of secondary materials. From 1986 to 1997, he served as Vice
President of Finance, US Operations for Laidlaw Waste Systems, Inc.

Charles E. Leonard has served as Senior Vice President, Solid Waste Operations since July 2001. From December 1999 until he
joined the Company, he acted as a consultant to several corporations, including Allied Waste Industries, Inc. From November
1997 to December 1999, he was Regional Vice President for Service Corporation International, a provider of death-care services.
From September 1988 to January 1997, he served as Senior Vice President, US Operations for Laidlaw Waste Systems, Inc. From
June 1978 to July 1988, Mr. Leonard was employed by Browning-Ferris Industries in various management positions. Mr. Leonard
is a graduate of Memphis State University with a Bachelor of Arts in Marketing.

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Michael J. Brennan has served as Vice President and General Counsel since July 2000. From January 1996 to July 2000, he
served in various capacities at Waste Management, Inc., including most recently as Associate General Counsel.

Timothy A. Cretney has served as Regional Vice President since May 2002. From January 1997 to May 2002 he served as Regional
Controller for the Western region. From August 1995 to January 1997, Mr. Cretney was Treasurer and Vice President of Superior
Disposal Services, Inc., a waste services company acquired in January 1997. From 1992 to 1995, he was General Manager of the
Binghamton, New York office of Laidlaw Waste Systems, Inc. and from 1989 to 1992 he was Central New York Controller of
Laidlaw Waste Systems. Mr. Cretney holds a B.A. in Accounting from State University of New York College at Brockport.

Christopher M. DesRoches has served as Vice President, Sales and Marketing since November 1996. From January 1989 to
November 1996, he was a regional vice president of sales for Waste Management, Inc. Mr. DesRoches is a graduate of Arizona
State University.

Sean P. Duffy has served as Regional Vice President since December 1999. Since December 1999, Mr. Duffy has also served 
as President of FCR, Inc. (“FCR”), which he co-founded in 1983 and which became a wholly-owned subsidiary of the Company
in December 1999. From May 1983 to December 1999, Mr. Duffy served in various capacities at FCR, including, most recently, 
as President. From May 1998 to May 2001, Mr. Duffy also served as President of FCR Plastics, Inc., a subsidiary of FCR.

Joseph S. Fusco has served as Vice President, Communications since January 1995. From January 1991 through January 1995,
Mr. Fusco was self-employed as a corporate and political communications consultant. Mr. Fusco is a graduate of the State
University of New York at Albany.

James M. Hiltner has served as Regional Vice President since March 1998. From 1990 to March 1998, Mr. Hiltner held various
positions at Waste Management, Inc. including serving as a region president from June 1995 to February 1998, where his
responsibilities included overseeing waste management operations in upstate New York and northwestern Pennsylvania, 
a division president from April 1992 to June 1995 and a general manager from November 1990 to April 1992.

Larry B. Lackey has served as Vice President, Permits, Compliance and Engineering since 1995. From 1993 to 1995, Mr. Lackey
served as Manager of Permits, Compliance and Engineering. From 1984 to 1993, Mr. Lackey was an Associate Engineer for
Dufresne-Henry, Inc., an engineering consulting firm. Mr. Lackey is a graduate of Vermont Technical College.

Alan N. Sabino has served as Regional Vice President since July 1996. From 1995 to July 1996, Mr. Sabino served as a Division
President for Waste Management, Inc. From 1985 to 1994, he served as Region Operations Manager for Chambers Development
Company, Inc., a waste management company. Mr. Sabino is a graduate of Pennsylvania State University.

Gary R. Simmons has served as Vice President, Fleet Management since May 1997. From December 1996 to May 1997 Mr.
Simmons was the owner of GRS Consulting, a waste industry consulting firm. From 1995 to December 1996, Mr. Simmons served
as National and Regional Fleet Service Manager for USA Waste Services, Inc., a waste management company. From 1977 to
1995, Mr. Simmons served in various fleet maintenance and management positions for Chambers Development Company, Inc. 

ITEM 2. PROPERTIES

At June 28, 2002, the Company owned and/or operated five subtitle D landfills, one landfill permitted to accept construction
and demolition materials, 32 transfer stations, 20 of which are owned, eight of which are leased and four of which are under
operating contract, 35 solid waste collection facilities, 21 of which are owned and 14 of which are leased, 39 recyclable processing
facilities, 17 of which are owned, 16 of which are leased and six of which are under operating contracts, one waste-to-energy
facility, and utilized 11 corporate office and other administrative facilities, three of which are owned and eight of which are leased.

ITEM 3. LEGAL PROCEEDINGS

The Company’s wholly owned subsidiary, NCES, was a party to an appeal against the Town of Bethlehem, New Hampshire
(“Town”) before the New Hampshire Supreme Court. The appeal arose from cross actions for declaratory and injunctive relief

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filed by NCES and the Town to determine the permitted extent of NCES’s landfill in the Town. The New Hampshire Superior
Court in Grafton ruled on February 1, 1999 that the Town could not enforce an ordinance purportedly prohibiting expansion 
of the landfill, at least with respect to 51 acres of NCES’s 87-acre parcel, based upon certain existing land-use approvals. As 
a result, NCES was able to construct and operate “Stage II, Phase II” of the landfill. In May 2001, the Supreme Court denied 
the Town’s appeal. Notwithstanding the Supreme Court’s ruling, the Town has continued to assert jurisdiction to conduct
unqualified site plan review with respect to Stage II, Phase II. Additionally, the Town has asserted such jurisdiction with
respect to Stage III and has further stated that the Town’s height ordinance and building permit process may apply to Stage III.
On September 12, 2001, the Company filed a petition for, among other things, declaratory relief. On December 4, 2001, 
the Town filed an answer to the Company’s petition asserting counterclaims seeking, among other things, authorization to
assert site plan review over Stage III, which commenced operation in December 2000 following approval by the New Hampshire
Department of Environmental Services (“DHES”), as well as the methane gas utilization/leachate handling facility operating 
in Stage III, and also an order declaring that an ordinance prohibiting landfills applies to Stage IV expansion for which the
Company has filed an application with DHES. Trial is currently scheduled to commence in December 2002. The Company
believes that the State Supreme Court’s denial of the town’s appeal last year and DHES’ approval of the Company’s landfill 
operations provide adequate authority for the Company to operate. However, there can be no guarantee the Company will 
prevail, or will be able to continue, or to expand, current operations in accordance with the Company’s plans, which could 
have a material adverse effect on the Company’s financial position or results of operations.

On May 11, 2000, the Company was granted a permit modification by the New Hampshire Department of Environmental
Services to increase the volume of solid waste processed and stored at the Company’s Gobin Disposal Systems transfer station in
Newport, New Hampshire. On or about June 12, 2000, a local environmental activist appealed the permit modification to the New
Hampshire Waste Management Council. The appeal claims that the modification will lead to adverse environmental impacts
through higher waste flows and increased levels of incineration at a nearby waste-to-energy facility, that the Company has
been the subject of “complaints” arising from its New England and New York operations, and that the Company has failed 
to demonstrate that the modification is consistent with the waste management plan of the local waste management district. 
On August 23, 2001 the New Hampshire Waste Management Council voted to dismiss the appeal due to the appellant’s lack of
standing. The Council issued its order dismissing the appeal on September 27, 2001. On October 18, 2001, the appellant filed 
a motion for reconsideration and the Company filed an objection on October 24, 2001. On March 21, 2002, the Council voted
unanimously to deny the motion.

On or about March 24, 2000, a complaint was filed in the United States District Court, District of New Jersey against 
the Company, KTI, and Ross Pirasteh, Martin J. Sergi, and Paul A. Garrett, who were KTI’s principal officers. The complaint 
purported to be on behalf of all shareholders who purchased KTI common stock from January 1, 1998 through April 14, 1999.
The complaint alleged that the defendants made unspecified misrepresentations regarding KTI’s financial condition during the
class period in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The plaintiffs seek undisclosed damages. On or about April 6, 2000, the plaintiffs filed an amended class action complaint,
which changes the class period covered by the complaint to the period including August 15, 1998 through April 14, 1999. 
The Company filed a motion to dismiss. On October 1, 2001, the court partially granted the motion, dismissing the Company,
but not KTI, Pirasteh, Sergi or Garrett as defendants. The Company is defending the claims against the remaining defendants.
During the period of November 21, 1996 to October 9, 1997, the Company performed certain closure activities and
installed a cut-off wall at the Clinton County landfill, located in Clinton County, New York. On or about April 1999, the New
York State Department of Labor alleged that the Company should have paid prevailing wages in connection with the labor asso-
ciated with such activities. The Company has disputed the allegations and the State has scheduled a hearing for August 15,
2002 on the liability issue, the result of which will determine if a hearing on damages is warranted. The Company continues 
to explore settlement possibilities with the State. The Company believes it has meritorious defenses to these claims.

On or about July 2, 2001, the Company was served with a complaint filed in New York State Supreme Court, Erie County,
as one of over twenty defendants named in a toxic tort lawsuit filed by residents surrounding three sites in Cheektowaga, New
York known as the Buffalo Crushed Stone limestone quarry, the Old Land Reclamation inactive landfill and the Schultz landfill.
The Company is alleged to have liability as a result of its airspace agreement at the Schultz landfill, which is a permitted 
construction and demolition landfill. Plaintiffs claim property damages and some personal injuries based on alleged nuisance
conditions arising out of these facilities and seek compensatory damages in excess of $3 million, punitive damages of 
$10 million and injunctive relief. The Company believes it has meritorious defenses to these claims.

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On or about November 7, 2001, the Company’s subsidiary, New England Waste Services of ME., Inc., was served with a 

complaint filed in Massachusetts Superior Court on behalf of Daniel J. Quirk, Inc. and 14 citizens against The Massachusetts
Department of Environmental Protection (“MADEP”), Quarry Hill Associates, Inc. and New England Waste Services of ME., Inc. dba
New England Organics, et al. The complaint seeks injunctive relief related to the use of MADEP-approved wastewater treatment
sludge in place of naturally occurring topsoil as final landfill cover material at the site of the Quarry Hills Recreation Complex
Project in Quincy, Massachusetts (the “Project”), including removal of the material, or placement of an additional “clean” 
cover. On February 21, 2002, the MADEP filed a motion for stay pending a litigation control schedule. Plaintiffs have filed 
a cross-motion to consolidate the case with 11 other cases they filed related to the Project. Additionally, the Company has
cross-claimed against other named defendants seeking indemnification and contribution. The Company believes it has 
meritorious defenses to these claims.

On January 10, 2002, the City of Biddeford, Maine filed a lawsuit in York County Superior Court in Maine alleging breach

of the waste handling agreement among the Biddeford-Saco Waste Handling Committee, the cities of Biddeford and Saco, Maine
and the Company’s subsidiary Maine Energy for (1) failure to pay the residual cancellation payments in connection with the
Company’s merger with KTI and (2) processing amounts of waste above contractual limits without notice to the City. On May 3,
2002, The City of Saco filed a lawsuit in York County Superior Court against the Company, Maine Energy, Fleet National Bank,
KeyBank National Association and Bank of America. The complaint seeks the residual cancellation payment, alleging that such
payment is due as a result of (1) the Company’s merger with KTI and (2) transfers of funds by KTI, the Company and the banks
that allegedly should have been used to pay off certain limited partner loans. The complaint also seeks damages for breach 
of contract, tortious interference with contract, breach of fiduciary duties, and fraudulent transfers and seeks treble damages,
punitive damages and a constructive trust upon the Company’s assets with the appointment of a trustee to operate the
Company’s business. The claims against the banks allege tortious interference with the 1991 waste handling agreement and
fraudulent transfers. The City of Saco in its Notice of Claim asserts it is entitled to a residual cancellation payment of approxi-
mately $33 million as well as treble damages of approximately $100 million. On June 6, 2002, the additional 13 municipalities
that were parties to the 1991 waste handling agreements filed a lawsuit in York County Superior Court against Maine Energy
alleging breaches of the 1991 waste handling agreements for failure to pay the residual cancellation payment which they allege
is due as a result of (1) the Company’s merger with KTI; and (2) failure to pay off the limited partner loans when funds were
allegedly available. The Company believes it has meritorious defenses to these claims.

The Company executed an assurance of discontinuance with the Vermont Attorney General’s Office, effective June 10,
2002, relating to the terms of the Company’s commercial small container hauling contracts entered into with customers in
Vermont, which requires the Company to make modifications to its commercial small container hauling contracts used within
the State of Vermont. The required modifications will not have a material adverse effect on the Company’s business, financial
condition or results of operations. Additionally, following the finalization of the assurance of discontinuance, the Company
received a letter from an attorney representing a competitor in Vermont who is threatening to file a lawsuit against the
Company alleging that the competitor was damaged as a result of the Company’s use of the earlier versions of the contracts.
The Company believes that it has meritorious defenses to any such claims that may be brought.

On June 10, 2002, the Company was served with a complaint filed in the United States District Court, District of Vermont,

by Cheryl Coletti alleging breach by the Company of the Noncompete Agreement, dated as of September 24, 2000, by and
between Ms. Coletti and the Company. The agreement provided, among other things, for certain payments to Ms. Coletti in
exchange for her agreement not to compete with the Company and for certain business development efforts provided by
Ms. Coletti on the Company’s behalf, if any. Ms. Coletti is demanding $329,400 as compensation for alleged business develop-
ment efforts, as well as attorneys fees and punitive damages. The Company believes it has meritorious defenses to these claims.

The Company is a defendant in certain other lawsuits alleging various claims incurred in the ordinary course of business,
none of which, either individually or in the aggregate, the Company believes are material to its business, financial condition,
results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the security holders during the fiscal quarter ended April 30, 2002.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company’s Class A common stock trades on the Nasdaq National Market under the symbol “CWST”. The following table sets
forth the high and low sale prices of the Company’s Class A common stock for the periods indicated as quoted on the Nasdaq
National Market.

Period
Fiscal Year 2001
First quarter
Second quarter
Third quarter
Fourth quarter

Fiscal Year 2002
First quarter
Second quarter
Third quarter
Fourth quarter

High

Low

$13.6875
$12.50
$9.35
$9.50

$14.20
$13.675
$14.89
$13.35

$7.4375
$7.9375
$3.25
$5.625

$9.00
$9.50
$11.45
$9.55

On June 28, 2002, the high and low sale prices per share of the Company’s Class A common stock as quoted on the Nasdaq
National Market were $12.25 and $11.30, respectively. As of June 28, 2002 there were approximately 437 holders of record of
the Company’s Class A common stock and two holders of record of the Company’s Class B common stock.

For purposes of calculating the aggregate market value of the shares of common stock of the Company held by non-affiliates,
as shown on the cover page of this Annual Report on Form 10-K, it has been assumed that all the outstanding shares of Class A
common stock were held by nonaffiliates except for the shares beneficially held by directors and executive officers of the
Company and funds represented by them.

No dividends have ever been declared or paid on the Company’s common stock and the Company does not anticipate paying
any cash dividends on its common stock in the foreseeable future. The Company’s credit facility restricts the payment of dividends.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following selected consolidated financial and operating data set forth below with respect to the Company’s consolidated
statements of operations and cash flows for the fiscal years 2000, 2001 and 2002, and the consolidated balance sheets as of
April 30, 2001 and 2002 are derived from the Company’s Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K. The consolidated statements of operations and cash flows data for the fiscal years ended 1998 and 1999,
and the consolidated balance sheet data as of April 30, 1998, 1999 and 2000 are derived from the Company’s Consolidated
Financial Statements. During the fiscal year 2001, the Company decided to divest or close certain operations, and accounted 
for those operations as discontinued. Accordingly, the Company’s financial and operating data for prior periods presented have
been restated. The data set forth below should be read in conjunction with the “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the Company’s Consolidated Financial Statements and Notes thereto
included elsewhere in this Annual Report on Form 10-K.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (In thousands, except per share data)

Fiscal Year

1998(1)

1999(1)

2000(1)

2001

2002

Statement of Operations Data:
Revenues
Cost of operations
General and administration
Depreciation and amortization
Impairment charge
Restructuring charge
Legal settlements
Other miscellaneous charges
Merger-related costs
Operating income (loss)
Interest expense, net
Other (income) expense, net
Income (loss) from continuing operations before income taxes, 
discontinued operations, extraordinary item and cumulative 
effect of change in accounting principle

(Provision) benefit for income taxes
(Loss) income from discontinued operations, net
Estimated loss on disposal of discontinued operations, net
Extraordinary item, net
Cumulative effect of change in accounting principle, net
Net income (loss)
Preferred stock dividend and put warrants
Net income (loss) available to common stockholders

$ 140,991
87,567
19,155
19,921
1,571
—
—
—
290
12,487
7,346
(549)

$ 179,264
106,893
26,210
25,334
—
—
—
—
1,951
18,876
5,564
(353)

$ 315,013
195,495
40,003
38,343
—
—
—
—
1,490
39,682
15,673
2,204

$ 479,816
323,703
62,612
52,883
59,619
4,151
4,209
1,604
—
(28,965)
38,647
27,360

$ 420,821
275,706
53,105
50,696
—
(438)
—
—
—
41,752
30,571
(6,533)

5,690
(3,048)
(808)
—
—
—
1,834
(5,738)
$ (3,904)

13,665
(7,315)
265
—
—
—
6,615
—
$ 6,615

21,805
(10,615)
1,884
(1,393)
(631)
—
11,050
—
$ 11,050

(94,972)
12,731
(15,448)
(3,846)
—
—
(101,535)
(1,970)
$(103,505)

17,714
(5,887)
—
(4,096)
—
(250)
7,481
(3,010)
$ 4,471

Basic net income (loss) per common share

$

(0.41)

$

0.44

$

0.59

$

(4.46)

$

0.19

Basic weighted average common shares outstanding(2)

9,547

15,145

18,731

23,189

23,496

Diluted net income (loss) per common share

$

(0.41)

$

0.41

$

0.57

$

(4.46)

$

0.19

Diluted weighted average common shares outstanding(2)

9,547

16,019

19,272

23,189

24,169

Other Operating Data:
Capital expenditures

Other Data:
Cash flows provided by operating activities

Cash flows used in investing activities

$(29,671)

$(54,118) $ (68,575) $ (61,518)

$(37,674)

$ 19,726

$ 37,462

$ 48,398

$ 63,767

$ 68,530

$(59,939)

$(95,690) $(155,088) $ (55,565)

$ (9,533)

Cash flows (used in) provided by financing activities

$ 40,564

$ 59,154

$ 116,423

$ 18,765

$(70,065)

Adjusted EBITDA(3)

Balance Sheet Data:
Cash and cash equivalents

Working capital (deficit) net(4)

Property, plant and equipment, net

Total assets

$ 34,269

$ 46,161

$ 79,013

$ 92,475

$ 92,164

$ 3,087

$ 4,195

$

7,788

$ 22,001

$ 4,298

$

685

$ (1,515) $ 106,580

$ 33,056

$

(281)

$ 88,518

$128,374

$ 369,261

$ 290,537

$287,115

$205,251

$282,228

$ 860,470

$ 686,293

$621,041

Long-term debt, less current maturities

$ 82,493

$ 86,523

$ 437,853

$ 350,511

$277,545

Redeemable preferred stock

Total stockholders’ equity

$

— $

— $

— $ 57,720

$ 60,730

$ 85,004

$148,554

$ 274,718

$ 172,951

$176,796

(1) The Company has restated its consolidated statements of operations, consolidated statements of cash flows and consolidated balance sheets to reflect
discontinuing certain operations during the fiscal years 2000, 1999 and 1998. See Note 14 of the Notes to Consolidated Financial Statements.
(2) Computed on the basis described in Note 1 (n) of Notes to Consolidated Financial Statements.
(3) Adjusted EBITDA is defined as operating income (loss) plus depreciation and amortization, impairment charges, restructuring charges, legal
settlements, other miscellaneous charges, and merger-related costs less minority interest. Adjusted EBITDA does not represent, and should not 
be considered as, an alternative to net income or cash flows from operating activities, each as determined in accordance with generally accepted
accounting principles, known as GAAP. Moreover, Adjusted EBITDA does not necessarily indicate whether cash flow will be sufficient for such items as
working capital or capital expenditures, or to react to changes in the Company’s industry or to the economy generally. Because Adjusted EBITDA is
not calculated by all companies in the same fashion, the Adjusted EBITDA measures presented by the Company may not be comparable to similarly
titled measures reported by other companies. Therefore, in evaluating Adjusted EBITDA data, investors should consider, among other factors: the
non-GAAP nature of Adjusted EBITDA data; actual cash flows; the actual availability of funds for debt service, capital expenditures and working
capital; and the comparability of the Company’s Adjusted EBITDA data to similarly titled measures reported by other companies. For more 
information about the Company’s cash flows, see the consolidated statements of cash flows in the Company’s Consolidated Financial Statements.
(4) Working capital, net is defined as current assets, excluding cash and cash equivalents, minus current liabilities.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 

AND RESULTS OF OPERATIONS

The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and Notes thereto, and other financial information, included elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but
not limited to, those described in the “Risk Factors” section of this Annual Report on Form 10-K. The Company’s actual results
may differ materially from those contained in any forward-looking statements.

Casella is a vertically-integrated regional solid waste services company that provides collection, transfer, disposal and recy-

cling services to residential, industrial and commercial customers, primarily in the eastern region of the United States. As of
June 28, 2002, the Company owned and/or operated five Subtitle D landfills, one landfill permitted to accept construction and
demolition materials, 35 solid waste collection operations, 32 transfer stations, 39 recycling facilities and one waste-to-energy
facility, as well as a 50% interest in a joint venture that manufactures, markets and sells cellulose insulation made from 
recycled fiber.

From May 1, 1994 through December 1999, the Company acquired 161 solid waste collection, transfer and disposal 
operations. In December 1999, the Company acquired KTI. KTI assets which were considered core to the Company’s operations
included interests in waste-to-energy facilities in Maine, significant residential and commercial recycling operations, transfer
and collection operations which were “tuck-ins” to existing operations and cellulose insulation manufacturing operations. 
In addition, KTI’s assets included a number of businesses that were not core to the Company’s operating strategy. Following 
the acquisition of KTI, the Company focused on the integration of KTI and the divestiture of non-core KTI assets, which has
now been completed. As part of the divestiture program, in the fourth quarter of fiscal year 2001, the Company incurred 
non-recurring charges of $111.7 million, of which $90.6 million was non-cash. The divestiture program resulted in aggregate
consideration of $107.6 million, including cash proceeds of $61.7 million which were used to reduce indebtedness. The 
divestitures reduced revenues in fiscal year 2002 by $54.9 million from fiscal year 2001.

Since December 1999, the Company has made 24 acquisitions. Eight of the acquisitions during the three years ended
April 30, 2000 were accounted for as poolings of interests. Under the rules governing poolings of interests, the financial state-
ments were restated for all years prior to the acquisitions to reflect the financial position, results of operations and cash flows
of the merged entities as if they had been one company for all prior periods presented in the accompanying financial state-
ments. All of the Company’s other acquisitions, including KTI, were accounted for under the purchase method of accounting.
Under the rules of purchase accounting, the acquired companies’ revenues and results of operations have been included
together with those of the Company’s from the actual dates of the acquisitions and materially affect the period-to-period 
comparisons of its historical results of operations. As pooling accounting has been eliminated, all future acquisitions will 
be accounted for under the purchase method.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect 
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, manage-
ment evaluates its estimates and judgments which are based on historical experience and on various other factors that are
believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about
the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and 
circumstances. The Company’s significant accounting policies are more fully discussed in the Notes to the Consolidated
Financial Statements.

Landfill Accounting — Capitalized Costs and Amortization

The Company uses life-cycle accounting and the units-of-production method to recognize certain landfill costs. Under 
life-cycle accounting, all costs related to the acquisition, construction, closure and post-closure of landfill sites are capitalized
or accrued and charged to income based on tonnage placed into each site. Capitalized landfill costs include expenditures for
land and related airspace, permitting costs and preparation costs. Landfill permitting and preparation costs represent only
direct costs related to these activities, including legal, engineering and construction. Landfill preparation costs include the

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costs of construction associated with excavation, liners, site berms and the installation of leak detection and leachate collec-
tion systems. Interest is capitalized on landfill permitting and construction projects while the assets are undergoing activities
to ready them for their intended use. Management routinely reviews its investment in operating landfills, transfer stations 
and other significant facilities to determine whether the cost of these investments are realizable. The Company’s judgments
regarding the existence of impairment indicators are based on regulatory factors, market conditions and the operational 
performance of landfills. Future events could cause the Company to conclude that impairment indicators exist and that landfill
carrying costs are impaired. Any resulting impairment charge could have a material adverse effect on the Company’s financial
condition and results of operations.

Landfill permitting, acquisition and preparation costs, excluding the estimated residual value of land, are amortized 
on the units-of-production method as landfill airspace is consumed. In determining the amortization rate for these landfills,
preparation costs include the total estimated costs to complete construction of the landfills’ permitted and permittable 
capacity. To be considered permittable, airspace must meet all of the following criteria:

(cid:4) the Company controls the land on which the expansion is sought;
(cid:4) all technical siting criteria have been met or a variance has been obtained or is reasonably expected to be obtained;
(cid:4) the Company has not identified any legal or political impediments which it believes will not be resolved in its favor;
(cid:4) the Company is actively working on obtaining any necessary permits and it expects that all required permits will be

received within the next two to five years; and
(cid:4) senior management has approved the project.

Units-of-production amortization rates are determined annually for each of the Company’s operating landfills. The rates

are based on estimates provided by the Company’s engineers and accounting personnel and consider the information provided
by surveys, which are performed at least annually. Significant changes in estimates could materially increase landfill depletion
rates, which could have a material adverse effect on the Company’s financial condition and results of operations.

Landfill Accounting — Accrued Closure and Post-Closure Costs

Accrued closure and post-closure costs represent future estimated costs related to monitoring and maintenance of a solid 
waste landfill, after a landfill facility ceases to accept waste and closes. The Company estimates, based on input from engineers,
accounting personnel and consultants, future cost requirements for closure and post-closure monitoring and maintenance based
on interpretation of the technical standards of the Subtitle D regulations and the air emissions standards under the Clean Air
Act as they are being applied on a state-by-state basis. Closure and post-closure accruals for the cost of monitoring and main-
tenance include final capping of the site, site inspection, groundwater monitoring, leachate management, methane gas control
and recovery, and operation and maintenance costs to be incurred during the period after the facility closes.

The Company provides accruals for these estimated future costs on an undiscounted basis as the remaining permitted 

airspace of such facilities is consumed. Significant reductions in estimates of the remaining lives of landfills or significant
increases in estimates of the landfill closure and post-closure maintenance costs could have a material adverse effect on the
Company’s financial condition and results of operations.

Asset Impairment

In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
the Company continually reviews its long-lived assets for impairment whenever events or changes in circumstances indicate
that the remaining estimated useful life of such assets might warrant revision or that the balances may not be recoverable. 
The Company evaluates possible impairment by comparing estimated future cash flows, before interest expense and on an
undiscounted basis, with the net book value of long-term assets including goodwill and other intangible assets. If undiscounted
cash flows are insufficient to recover assets, further analysis is performed in order to determine the amount of the impairment.
An impairment loss is then recorded equal to the amount by which the carrying amount of the assets exceeds their fair market
value. Fair market value is usually determined based on the present value of estimated expected future cash flows using a 
discount rate commensurate with the risks involved. In instances where goodwill is identified with assets that are subject to 
an impairment loss, the carrying amount of the identified goodwill is reduced before making any reduction to the carrying
amounts of other long-lived assets.

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Bad Debt Allowance

Estimates are used in determining allowance for bad debts and are based on historical collection experience, current trends,
credit policy and a review of accounts receivable by aging category. The reserve is evaluated and revised on a monthly basis.

Self-Insurance Liabilities and Related Costs

The Company is self insured for vehicles and workers compensation. The liability for unpaid claims and associated expenses,
including incurred but not reported losses, is determined by a third party actuary and reflected in the consolidated balance
sheet as an accrued liability. The Company uses a third party to track and evaluate actual claims experience for consistency
with the data used in the annual actuarial valuation. The actuarially determined liability is calculated in part by past claims
experience, which considers both the frequency and settlement amount of claims.

Discontinued Operations

In April 2001, the Company adopted a formal plan to dispose of its tire processing, commercial recycling and mulch recycling
businesses. The Company has accounted for these planned dispositions in accordance with APB Opinion No. 30, Reporting 
the Effects of Disposal of a Segment of a Business, and accordingly, the discontinued businesses are carried at estimated net
realizable value less costs to be incurred through the date of disposition. Net assets of discontinued operations are stated at
their expected net realizable values and have been separately classified in the accompanying consolidated balance sheets.

Income Tax Accruals

The Company records income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109,
deferred income taxes are recognized based on the expected future tax consequences of differences between the financial
statement basis and the tax basis of assets and liabilities, calculated using currently enacted tax rates. Management judgment
is required in determining the provision for income taxes and liabilities and any valuation allowance recorded against net
deferred tax assets. Valuation allowances have been established for the possibility that tax benefits may not be realized for 
certain deferred tax assets.

Forward Looking Statements

This Annual Report on Form 10-K and other reports, proxy statements, and other communications to stockholders, as 
well as oral statements by the Company’s officers or its agents, may contain forward-looking statements within the meaning 
of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, with respect to, among other things, 
the Company’s future revenues, operating income, or earnings per share. Without limiting the foregoing, any statements 
contained in this Annual Report on Form 10-K that are not statements of historical fact may be deemed to be forward-looking
statements, and the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-
looking statements. There are a number of important factors of which the Company is aware that may cause the Company’s
actual results to vary materially from those forecasted or projected in any such forward-looking statement, certain of which 
are beyond the Company’s control. These factors include, without limitation, those outlined below in the section entitled
“Certain Factors That May Affect Future Results.” The Company’s failure to successfully address any of these factors could 
have a material adverse effect on the Company’s results of operations.

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GENERAL

Revenues

The Company’s revenues in the Eastern, Central and Western regions are attributable primarily to fees charged to customers for
solid waste disposal and collection, landfill, waste-to-energy, transfer and recycling services. The Company derives a substantial
portion of its collection revenues from commercial, industrial and municipal services that are generally performed under service
agreements or pursuant to contracts with municipalities. The majority of residential collection services are performed on a sub-
scription basis with individual households. Landfill, waste-to-energy facility and transfer customers are charged a tipping fee
on a per ton basis for disposing of their solid waste at disposal facilities and transfer stations. The majority of the Company’s
disposal and transfer customers are under one to ten year disposal contracts, with most having clauses for annual cost of 
living increases. Recycling revenues, which are included in FCR and in the Eastern, Central and Western regions, consist of 
revenues from the sale of recyclable commodities and operations and maintenance contracts of recycling facilities for municipal
customers. FCR revenues include revenues from commercial brokerage operations.

Effective August 1, 2000, the Company contributed its cellulose insulation assets to a joint venture with Louisiana-Pacific, 

and accordingly, since that date has recognized half of the joint venture’s net income/(loss) on the equity method in its 
results of operations. In the “Other” segment, the Company has ancillary revenues including residue recycling and major 
customer accounts.

Revenues are shown net of intercompany eliminations. The Company typically establishes intercompany transfer pricing
based upon prevailing market rates. The table below shows, for the periods indicated, the percentage of total revenues attribut-
able to services provided. Collection revenues increased as a percentage of total revenues in fiscal year 2002 compared to fiscal
year 2001 due to the effects of price and volume increases. The decrease in collection revenues as a percentage of total rev-
enues in fiscal year 2001 compared to fiscal year 2000 is primarily attributable to the effects of the KTI acquisition, as fiscal
year 2000 includes only a partial year of KTI collection revenues. Significant recycling and brokerage revenues were added
through that acquisition. The decrease in fiscal year 2002 landfill/disposal facilities revenues compared to fiscal year 2001 is
mainly attributable to the disposition of the majority interest in PERC, which occurred late in fiscal year 2001. Transfer rev-
enues as a percentage of total revenues has continued to increase between years due to an increase in transfer volumes. The
increase in recycling revenues as a percentage of total revenues in fiscal year 2002 compared to the prior year is due to higher
volumes partially offset by lower average prices. The increase in recycling revenues in fiscal year 2001 compared to fiscal year
2000 is due to recycling revenues added through the KTI acquisition. The decrease in brokerage revenues as a percentage of
revenues in fiscal year 2002 compared to the prior year is primarily attributable to the overall effects of commodity prices. 
The increase in brokerage revenues as a percent of total revenues in fiscal year 2001 compared to fiscal year 2000 is due to 
the brokerage revenues added through the KTI acquisition. The decrease in other revenues as a percentage of revenues during
fiscal year 2002 is primarily attributable to divestitures made during the period.

Fiscal Year 
Collection
Landfill/disposal facilities
Transfer
Recycling
Brokerage
Other
Total revenues

2000
55.8%
14.1
5.2
7.6
10.2
7.1
100.0%

2001
42.8%
16.3
7.7
11.9
14.7
6.6
100.0%

% of Revenues(1)

2002
46.9%
13.7
10.7
15.9
11.7
1.1
100.0%

(1) We restated percentages of total revenues for fiscal year 2001 and fiscal year 2000 to conform with classification of revenues attributable to

services provided in fiscal year 2002.

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Operating Expenses

Cost of operations includes labor, tipping fees paid to third party disposal facilities, fuel, maintenance and repair of vehicles and
equipment, worker’s compensation and vehicle insurance, the cost of purchasing materials to be recycled, third party transporta-
tion expense, district and state taxes, host community fees and royalties. Landfill operating expenses also include a provision
for closure and post-closure expenditures anticipated to be incurred in the future, and leachate treatment and disposal costs.
General and administration expenses include management, clerical and administrative compensation and overhead, 

professional services and costs associated with marketing, sales force and community relations efforts.

Depreciation and amortization expense includes depreciation of fixed assets over the estimated useful life of the assets

using the straight-line method, amortization of landfill airspace assets under the units-of-production method, and the amorti-
zation of goodwill and other intangible assets using the straight-line method. The amount of landfill amortization expense
related to airspace consumption can vary materially from landfill to landfill depending upon the purchase price and landfill
site and cell development costs. The Company depreciates all fixed and intangible assets, excluding non-depreciable land, down
to a zero net book value, and does not apply a salvage value to any fixed assets.

The Company capitalizes certain direct landfill development costs, such as engineering, permitting, legal, construction and
other costs associated directly with the expansion of existing landfills. Additionally, the Company also capitalizes certain third
party expenditures related to pending acquisitions, such as legal and engineering costs. The Company will have material finan-
cial obligations relating to closure and post-closure costs of its existing landfills and any disposal facilities which it may own or
operate in the future. The Company has provided and will in the future provide accruals for future financial obligations relating
to closure and post-closure costs of its landfills (generally for a term of 30 years after final closure) based on engineering 
estimates of consumption of permitted landfill airspace over the useful life of any such landfill. There can be no assurance 
that the Company’s financial obligations for closure or post-closure costs will not exceed the amount accrued and reserved or
amounts otherwise receivable pursuant to trust funds. The Company routinely evaluates all such capitalized costs, and expenses
those costs related to projects not likely to be successful. Internal and indirect landfill development and acquisition costs, such
as executive and corporate overhead, public relations and other corporate services, are expensed as incurred.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage relationship that certain items from the Company’s
Consolidated Statements of Operations bear in relation to revenues.

Fiscal Year 
Revenues
Cost of operations
General and administration
Depreciation and amortization
Impairment charge
Restructuring charge
Legal settlements
Other miscellaneous charges
Merger-related costs
Operating income (loss)
Interest expense, net
(Income) loss from equity method investments, net
Other (income)/expenses, net
(Provision) benefit for income taxes
Net income (loss) from continuing operations before discontinued operations, 
extraordinary item and cumulative effect of change in accounting principle

Adjusted EBITDA(1)

(1) See discussion and computation of Adjusted EBITDA below.

2000
100.0%
62.1
12.7
12.2
—
—
—
—
0.5
12.5
5.0
0.3
0.4
(3.4)

3.4%
25.1%

2001
100.0%
67.5
13.0
11.0
12.4
0.9
0.9
0.3
—
(6.0)
8.1
5.5
0.2
2.7

(17.1)%
19.3%

% of Revenues

2002
100.0%
65.5
12.6
12.1
—
(0.1)
—
—
—
9.9
7.3
(0.5)
(1.1)
(1.4)

2.8%
21.9%

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Fiscal Year 2002 versus Fiscal Year 2001

Revenues. Revenues decreased $59.0 million, or 12.3%, to $420.8 million in fiscal year 2002 from $479.8 million in fiscal 
year 2001. Divested businesses accounted for approximately $54.9 million of the decrease, while lower average brokerage 
commodity prices and volumes represented $32.5 million of the decrease. These decreases were partially offset by price and
volume increases in the core solid waste business amounting to $24.9 million and the positive rollover effect of acquisitions
amounting to approximately $3.5 million.

Cost of operations. Cost of operations decreased $48.0 million, or 14.8%, to $275.7 million in fiscal year 2002 from $323.7 million
in fiscal year 2001. This decrease arose mainly from lower volumes of recyclable material purchases and divestitures. Cost of
operations as a percentage of revenues decreased to 65.5% in fiscal year 2002 from 67.5% in the prior fiscal year. The decrease
in cost of operations as a percentage of revenues was primarily the result of a decreased contribution from commercial broker-
age operations, which carry a high cost of operations as a percentage of revenues of approximately 90%.

General and administration. General and administration expenses decreased $9.5 million, or 15.2%, to $53.1 million in fiscal
year 2002 from $62.6 million in fiscal year 2001. General and administration expenses decreased slightly as a percentage of
revenues to 12.6% in fiscal year 2002 from 13.0% in the prior fiscal year. The decrease in general and administration expenses
was primarily the result of divestitures as well as lower legal and bad debt expenses.

Depreciation and amortization. Depreciation and amortization expense decreased $2.2 million, or 4.1%, to $50.7 million in 
fiscal year 2002 from $52.9 million in fiscal year 2001. The decrease was attributable to lower intangible amortization due to
the impairment charge taken in fiscal year 2001 and the impact of divested entities. Depreciation and amortization expense 
as a percentage of revenues increased to 12.1% in fiscal year 2002 from 11.0% in fiscal year 2001. The increase as a percentage
of revenues resulted primarily from a lower level of revenues.

Restructuring charge. A restructuring charge of $0.4 million in fiscal year 2002 represents the reversal of certain unrealized 
fiscal year 2001 restructuring expenses, partially offset by additional restructuring charges expensed in fiscal year 2002.

Interest expense, net. Net interest expense decreased $8.1 million, or 21.0%, to $30.6 million in fiscal year 2002, from
$38.6 million in fiscal year 2001. This decrease is primarily attributable to lower average debt balances and lower interest rates
on variable debt in the current period, versus the prior period. Interest expense, as a percentage of revenues, decreased to 7.3%
in fiscal year 2002 from 8.1% in fiscal year 2001.

(Income) loss from equity method investments, net. Income from equity method investments in fiscal year 2002 of $1.9 million
reflects equity income in the Company’s 50% joint venture interest in GreenFiber amounting to $4.3 million, offset by a
$2.4 million loss related to the Company’s further investment in the New Heights tire processing business. In the prior year, the
Company recorded its share of a loss of $4.2 million, recorded at GreenFiber due to significant transitional and restructuring
expenses. In fiscal year 2001, equity method investment losses also included a $22.0 million loss attributable to impairment
charges taken to reduce the investment in Oakhurst Company, Inc. (“OCI”) and New Heights Recovery and Power, LLC 
(“New Heights”).

A portion of the Company’s 50% interest in New Heights was sold in September 2001 for consideration of $0.3 million. 

The Company retained an interest of 9.95% in the tire recycling business of New Heights, as well as financial obligations related
solely to the New Heights power plant. In addition, the Company has an interest in certain notes granted by New Heights 
collectively valued at approximately $9.0 million, payment of which is contingent upon certain events. The Company will
record the contingent consideration when the contingency is removed. The Company is accounting for its retained investment
under the equity method.

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Minority interest. At April 30, 2002, this amount represented the minority owners’ interest in the Company’s majority owned
subsidiary American Ash Recycling of Tennessee, Ltd, which recorded a loss for the period. At April 30, 2001 minority interest
reflected the minority owners’ interest in the Company’s majority owned subsidiaries Maine Energy and PERC. Effective March 1,
2001, the Company acquired the remaining 16.25% minority interest in Maine Energy and sold its majority interest in PERC.

Other (income)/expense, net. Other income was $4.5 million in fiscal year 2002 compared to $0.1 million in other expenses 
in fiscal year 2001. This increase is attributable to the divestitures of Multitrade and S&S Commercial, which resulted in a gain
of $4.8 million. Other income in fiscal year 2002 also includes a gain on the sale of Bangor Hydro warrants of $1.7 million and
gains on the sale of equipment of $0.1 million, offset by the write off of $1.7 million of commodity hedges due to the bank-
ruptcy of Enron, as well as impairment of the Company’s U.S. Plastic Lumber Corp. equity holdings, amounting to $0.4 million.

Provision (benefit) for income taxes. Provision for income taxes increased $18.6 million in fiscal year 2002 to $5.9 million from
a benefit of $12.7 million in fiscal year 2001. This increase, as well as the change in the effective tax rate to 33.2%, is prima-
rily due to the change in pretax income to a profit, the tax benefit from the sale of 80.1% of the Company’s equity interest in
New Heights in fiscal year 2002 and the write-off of non-deductible goodwill and the equity loss in OCI and in New Heights in
fiscal year 2001.

Fiscal Year 2001 versus Fiscal Year 2000

Revenues. Revenues increased approximately $164.8 million, or 52.3%, to $479.8 million in fiscal year 2001 from $315.0 million
in fiscal year 2000. The impact of businesses acquired, net of divestitures, throughout fiscal year 2000 and fiscal year 2001,
including the KTI acquisition which closed in December 1999, resulted in an increase of $154.5 million. The remaining increase
of $10.3 million was attributable to internal volume and price growth, including the negative impact of $10.0 million of lower
average recyclable commodity prices in fiscal year 2001 compared to fiscal year 2000.

Cost of operations. Cost of operations increased approximately $128.2 million, or 65.6%, to $323.7 million in fiscal year 2001
from $195.5 million in fiscal year 2000. Cost of operations as a percentage of revenues increased to 67.5% in fiscal year 2001
from 62.1% in fiscal year 2000. The increase in cost of operations as a percentage of revenues was primarily the result of acquiring
KTI’s commercial brokerage operations, which carry a high cost of operations as a percentage of revenues of approximately 90%.
The brokerage operations comprised approximately 14.7% of the Company’s revenues in fiscal year 2001, versus 10.2% in 
fiscal year 2000.

General and administration. General and administration expenses increased approximately $22.6 million, or 56.5%, to
$62.6 million in fiscal year 2001 from $40.0 million in fiscal year 2000. General and administration expenses as a percentage 
of revenues increased to 13.0% in fiscal year 2001 from 12.7% in fiscal year 2000. The increase in general and administration
expenses was primarily the result of acquisitions, principally KTI. In addition, the Company incurred high legal expenses on
outstanding litigation against KTI, which it assumed in connection with the acquisition of KTI.

Depreciation and amortization. Depreciation and amortization expenses increased $14.5 million, or 37.9%, to $52.9 million in
fiscal year 2001 from $38.3 million in fiscal year 2000. Depreciation and amortization expenses as a percentage of revenues
decreased to 11.0% in fiscal year 2001 from 12.2% in fiscal year 2000. The decrease in depreciation and amortization expenses
as a percentage of revenues was primarily attributable to the acquisition of KTI. KTI carried lower depreciation expense as a
percentage of revenues of approximately 7% than the Company’s existing operations of approximately 14.5%.

Impairment charge. In the fourth quarter of fiscal year 2001, the Company determined that certain assets (mainly goodwill)
were impaired and therefore recorded a charge of $59.6 million to reduce those assets to their estimated fair value. The assets
impaired consisted primarily of assets acquired in the acquisition of KTI.

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Restructuring charge. In April 2001, the Company incurred a restructuring charge amounting to $4.2 million. This amount was
primarily attributable to severance and facility closures. See Note 11 of the Notes to Consolidated Financial Statements included
in Item 8 of this Form 10-K.

Legal settlements. During fiscal year 2001, the Company settled five outstanding lawsuits and established a reserve for the 
settlement of four others. The amount provided includes associated legal fees.

Other miscellaneous charges. During fiscal year 2001, the Company provided for the recapping of a landfill and for a loss contract.

Interest expense, net. Net interest expense increased approximately $23.0 million, or 146.6%, to $38.6 million in fiscal year
2001 from $15.7 million in fiscal year 2000. Interest expense, net, as a percentage of revenues, increased to 8.1% in fiscal year
2001 from 5.0% in fiscal year 2000. The increase in net interest expense as a percentage of revenues is primarily attributable 
to three factors: (i) higher average debt balances in fiscal year 2001, versus fiscal year 2000; (ii) closing on $450.0 million 
senior credit facilities in December 1999 that raised the Company’s borrowing cost by approximately 200 basis points over the
previous senior credit facilities; and (iii) amending this facility twice in 2001, resulting in fees that further increased the cost
of borrowing by approximately 60 basis points.

(Income) loss from equity method investments, net. This amount comprises two items, the loss from OCI and New Heights
($22.0 million) and the loss from GreenFiber ($4.2 million). The former amount arises from the Company’s 35% ownership of
OCI, which was acquired as part of KTI. OCI owned 37.5% of New Heights. The Company also had a direct ownership interest 
in New Heights of 12.5%. The charge in the year included writing down this investment to net realizable value.

On July 3, 2001, the Company acquired OCI’s 37.5% interest in New Heights, a promissory note for $1 million and common

share purchase warrants, all in exchange for the cancellation of all amounts due from OCI and all equity interests in OCI. 
The Company’s interest in New Heights was subsequently reduced, as described above under “Fiscal Year 2002 versus Fiscal 
Year 2001—(Income) loss from equity method investments, net.”

The second item relates to GreenFiber, which was formed effective August 1, 2000 and in which the Company acquired a
50% interest. The Company’s share of GreenFiber’s income in fiscal year 2001 was more than offset by the restructuring charge
and transition costs incurred in setting up the new business and closing redundant plants, leading to a net loss for the period.

Minority interest. This amount now represents the minority owners’ interest in the Company’s majority owned subsidiary American
Ash Recycling of Tennessee, Ltd. Effective March 1, 2001, the Company acquired the remaining 16.25% minority interest in
Maine Energy and sold its majority interest in PERC. Net cash proceeds for the two transactions amounted to $12.0 million.

Other (income)/expense, net. Other (income)/expense, net decreased by $0.6 million, in fiscal year 2001. The other expenses 
in fiscal year 2001 are primarily attributable to the loss on the sale of certain assets in the fourth quarter ($2.8 million), and
the cost of early termination of a letter of credit ($1.4 million), offset by a gain on the sale of two-thirds of the Bangor Hydro
warrants held by the Company in the amount of $3.1 million.

Provision (benefit) for income taxes. Provision for income taxes decreased $23.3 million, to a benefit of $12.7 million in fiscal
year 2001 from $10.6 million in fiscal year 2000. Provision for income taxes, as a percentage of revenues, decreased to (2.7)%
in fiscal year 2001 from 3.4% in fiscal year 2000. The decrease is primarily due to the Company’s loss in fiscal year 2001 
compared to fiscal year 2000. The other primary factors causing the provision for income taxes as a percentage of pre-tax 
net income to vary were: (i) the write-off of goodwill and recording of the equity loss from OCI and New Heights, which were
non-deductible; and (ii) increased amortization of non-deductible KTI goodwill.

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ADJUSTED EBITDA

Adjusted EBITDA represents operating income (loss) plus depreciation and amortization expense, impairment charges, restruc-
turing charges, legal settlements, other miscellaneous charges and merger-related costs less minority interest. Adjusted EBITDA
is not a measure of financial performance under generally accepted accounting principles, known as GAAP.
The following table sets forth the reconciliation from operating income (loss) to Adjusted EBITDA:

(In thousands)
Fiscal Year
Operating income (loss)
Depreciation and amortization
Impairment charge(i)
Restructuring charge(ii)
Legal settlements
Other miscellaneous charges
Merger-related costs
Minority interest
Adjusted EBITDA

2000
$39,682
38,343
—
—
—
—
1,490
(502)
$79,013

2001
$(28,965)
52,883
59,619
4,151
4,209
1,604
—
(1,026)
$ 92,475

2002
$41,752
50,696
—
(438)
—
—
—
154
$92,164

EBITDA as a percentage of revenues

25.1%

19.3%

21.9%

(i) See Note 1(i) of the Notes to Consolidated Financial Statements.

(ii) See Note 11 of the Notes to Consolidated Financial Statements.

Analysis of the factors contributing to the change in Adjusted EBITDA is included in the discussion above.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s business is capital intensive. Capital requirements include acquisitions, fixed asset purchases and capital 
expenditures for landfill development and cell construction as well as site and cell closure. The Company had a net working
capital deficit of $0.3 million at April 30, 2002 compared to net working capital of $33.1 million at April 30, 2001. Working
capital, net comprises current assets, excluding cash and cash equivalents, minus current liabilities. The main factors account-
ing for the decrease were lower trade receivable balances, increases in the current portion of accrued closure and post-closure
costs, lower cash balances, recognition of the current portion of interest rate swaps and the sale of assets of discontinued 
operations and net assets held for sale.

The Company has a $399.3 million credit facility with a group of banks for which Fleet Bank, N.A. is acting as agent. This

credit facility consists of a $280 million Senior Secured Revolving Credit Facility (“Revolver”) and a Senior Secured Delayed
Draw Term “B” Loan, which had an outstanding balance of $119.3 million at April 30, 2002 (“Term Loan”). This credit facility
is secured by all assets of the Company, including its interest in the equity securities of its subsidiaries. The Revolver matures
in December 2004 and the Term Loan matures in December 2006. Funds available to the Company under the Revolver were
approximately $83.3 million at April 30, 2002.

Net cash provided by operations in fiscal year 2002 and fiscal year 2001 amounted to $68.5 million and $63.8 million, 
respectively. The increase was primarily due to the change in working capital, primarily reflecting an improvement in accounts
receivable collections and an increase in the current portion of accrued closure and post-closure costs.

Net cash used in investing activities in fiscal year 2002 and fiscal year 2001 amounted to $9.5 million and $55.6 million,
respectively. The decrease in cash used in investing activities reflected mainly lower capital expenditures, which were reduced
to $37.7 million in fiscal year 2002 from $61.5 million in fiscal year 2001. The decrease in cash used in investing activities
between years was also as a result of fewer acquisitions and higher proceeds from divestitures.

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Net cash used in financing activities was $70.1 million in fiscal year 2002 compared to $18.8 million provided by financ-

ing activities in fiscal year 2001. This increase was primarily due to paying down debt from the proceeds from divestitures.

The Company’s capital expenditures were $37.7 million in fiscal year 2002 compared to $61.5 million in fiscal year 2001.

Significant capital projects in fiscal year 2002 included the expenditure of approximately $20.0 million in connection with
landfill site development. Capital spending was significantly higher in fiscal year 2001 mainly due to capital expenditures
related to the upgrade of the truck fleet and Maine Energy, especially relating to odor control. The Company expects its 
capital spending to total approximately $39.0 million in fiscal year 2003.

During fiscal year 2002, the Company completed four acquisitions for an aggregate consideration of $7.4 million, consist-
ing of $4.6 million in cash and $2.8 million in notes payable and other consideration. In comparison, during fiscal year 2001,
it completed 13 acquisitions for an aggregate consideration of $22.6 million, consisting of $9.3 million in cash and $13.3 mil-
lion of its notes receivable. In fiscal year 2002, the Company completed its divestiture program which was announced in March
2001, from which it received total consideration of $107.6 million, including cash proceeds of $61.7 million which were used 
to reduce the Company’s indebtedness.

The Company is negotiating a new senior secured credit facility which will provide for a $150.0 million term loan and a

$175.0 million revolving credit facility, for total aggregate borrowings of up to $325.0 million. The new credit facilities will be
available to the Company contingent upon the closing of a senior subordinated note offering in the amount of $150.0 million.
The net proceeds from the senior subordinated note offering and initial borrowings under the new senior secured credit facili-
ties will be used to repay all outstanding amounts under its existing senior secured credit facilities, fees and expenses related
to the new senior secured credit facilities and for general corporate purposes. There can be no assurance that these financings
will be completed.

CONTRACTUAL OBLIGATIONS

The following table summarizes the Company’s significant contractual obligations and commitments as of April 30, 2002 
(in thousands) and the anticipated effect of these obligations on its liquidity in future years:

Fiscal Year(s)
Long-term debt
Capital lease obligations
Operating leases
Closure/post closure
Redeemable preferred securities(i)
Total contractual cash obligations(ii)

2003
$ 6,436
2,070
5,013
6,225
—
$19,744

2004–2006
$162,889
2,562
11,454
5,157
—
$182,062

2007+
$114,656
1,029
3,610
71,285
78,951
$269,531

Total
$283,981
5,661
20,077
82,667
78,951
$471,337

(i) Assumes redemption on the seventh anniversary of the closing date at the book value which includes all accrued and unpaid dividends.

(ii) Contractual cash obligations do not include accounts payable or accrued liabilities, which will be paid in fiscal year 2003.

The Company believes that its cash provided internally from operations together with its existing senior secured credit facility
should enable it to meet its working capital and other cash needs for the foreseeable future. The Company is negotiating a new
senior secured credit facility and intends to make an offering of senior subordinated notes. There can be no assurance that
these financings will be completed.

INFLATION AND PREVAILING ECONOMIC CONDITIONS

To date, inflation has not had a significant impact on the Company’s operations. Consistent with industry practice, most of 
the Company’s contracts provide for a pass-through of certain costs, including increases in landfill tipping fees and, in some
cases, fuel costs. The Company therefore believes it should be able to implement price increases sufficient to offset most cost
increases resulting from inflation. However, competitive factors may require the Company to absorb at least a portion of these
cost increases, particularly during periods of high inflation.

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The Company’s business is located mainly in the eastern United States. Therefore, the Company’s business, financial condi-
tion and results of operations are susceptible to downturns in the general economy in this geographic region and other factors
affecting the region, such as state regulations and severe weather conditions. The Company is unable to forecast or determine
the timing and/or the future impact of a sustained economic slowdown.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
These new standards significantly modify the current accounting rules related to accounting for business acquisitions, amorti-
zation of intangible assets and the method of accounting for impairments of existing goodwill. The effective date for SFAS
No. 142 is fiscal years beginning after December 15, 2001.

SFAS No. 142, among other things, eliminates the amortization of goodwill and requires an annual assessment of goodwill

impairment. SFAS No. 142 requires that any goodwill recorded in connection with an acquisition consummated on or after
July 1, 2001 not be amortized. Accordingly, during fiscal year 2002, the Company did not record goodwill amortization expense
of approximately $18.3 related to three acquisitions consummated after June 30, 2001. In connection with our adoption of
SFAS No. 142 as of May 1, 2002, goodwill was determined to be impaired and the amount of $62.8 million (net of estimated
tax benefit of $0.2 million), will be charged to earnings as a cumulative effect of a change in accounting principle. Remaining
goodwill will be tested for impairment on an annual basis and further impairment charges may result. In accordance with the
non-amortization provisions of SFAS No. 142, remaining goodwill will not be amortized going forward. As a result, it is esti-
mated that operating income will increase by approximately $6.3 million per year.

In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires entities to
record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is
initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. The liability
is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, the entity either settles the obligation for the amount recorded or incurs a gain or loss. SFAS
No. 143 is effective for fiscal years beginning after June 15, 2002. Management is evaluating the effect of this statement on
the Company’s results of operations and financial position as well as related disclosures.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets. SFAS
No. 144 supercedes SFAS No. 121, Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
Of. SFAS No. 144 addresses financial accounting and reporting for the impairment of long lived assets held for use and for 
long-lived assets that are to be disposed of by sale (including discontinued operations). SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001. Management is evaluating the effect of this statement on the Company’s results 
of operations and financial position as well as related disclosures.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

The following important factors, among others, could cause actual results to differ materially from those indicated by forward-
looking statements made in this Annual Report on Form 10-K and presented elsewhere by management from time to time.

THE COMPANY’S INCREASED LEVERAGE MAY RESTRICT ITS FUTURE OPERATIONS AND IMPACT ITS ABILITY TO
MAKE FUTURE ACQUISITIONS.

As a result of the acquisition of KTI and the increase in the Company’s credit facility, the Company’s indebtedness has increased
substantially. In addition, the Company’s indebtedness will increase further in the event of the closing of the Company’s new
credit facility and the completion of the offering of its senior subordinated notes. This increased indebtedness has resulted 
in increased borrowing costs, which have adversely impacted the Company’s operating results and may adversely affect the
Company’s operating results in the future. The payment of interest and principal due under this indebtedness has reduced, 
and may continue to reduce, funds available for other business purposes, including capital expenditures and acquisitions. 
In addition, the aggregate amount of indebtedness has limited and may continue to limit the Company’s ability to incur 
additional indebtedness, and thereby may limit its acquisition program.

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THE COMPANY MAY NOT BE SUCCESSFUL IN MAKING ACQUISITIONS OF SOLID WASTE ASSETS, INCLUDING
DEVELOPING ADDITIONAL DISPOSAL CAPACITY, OR IN INTEGRATING ACQUIRED BUSINESSES OR ASSETS, 
WHICH COULD LIMIT ITS FUTURE GROWTH.

The Company strategy envisions that a substantial part of its future growth will come from making acquisitions of traditional
solid waste assets or operations and acquiring or developing additional disposal capacity. These acquisitions may include 
tuck-in acquisitions within existing markets, assets that are adjacent to or outside existing markets, or larger, more strategic
acquisitions. In addition, from time to time the Company may acquire businesses that are complementary to its core business
strategy. The Company cannot assure that it will be able to identify suitable acquisition candidates and, once identified, to
negotiate successfully their acquisition at a price or on terms and conditions favorable to the Company. Furthermore, the
Company may be unable to obtain the necessary regulatory approval to complete potential acquisitions.

The Company’s ability to achieve the benefits it anticipates from acquisitions, including cost savings and operating effi-

ciencies, depends in part on its ability to successfully integrate the operations of such acquired businesses with its operations.
The integration of acquired businesses and other assets may require significant management time and Company resources. 
If the Company is unable to efficiently manage the integration process, the Company’s financial condition and results of 
operations could be materially adversely affected.

In addition, the process of acquiring or developing additional disposal capacity is lengthy, expensive and uncertain. 
The disposal capacity at the Company’s existing landfills is limited by the remaining available volume at landfills and annual
and/or daily disposal limits imposed by the various governmental authorities with jurisdiction over the Company’s landfills. 
The Company typically reaches or approximates its daily and annual maximum permitted disposal capacity at all of its landfills.
If the Company is unable to develop or acquire additional disposal capacity, the Company’s ability to achieve economies from
the internalization of its waste stream will be limited and it will be required to utilize the disposal facilities of its competitors.

THE COMPANY’S ABILITY TO MAKE ACQUISITIONS IS DEPENDENT ON THE AVAILABILITY OF ADEQUATE CASH
AND THE ATTRACTIVENESS OF ITS STOCK PRICE.

The Company anticipates that any future business acquisitions will be financed through cash from operations, borrowings
under credit facilities, the issuance of shares of the Company’s Class A common stock and/or seller financing. The Company
cannot assure you that it will have sufficient existing capital resources or that it will be able to raise sufficient additional 
capital resources on terms satisfactory, if at all, in order to meet its capital requirements for such acquisitions.

The Company also believes that a significant factor in its ability to close acquisitions will be the attractiveness of the

Company’s Class A common stock as consideration for potential acquisition candidates. This attractiveness may, in large 
part, be dependent upon the relative market price and capital appreciation prospects of the Company’s Class A common stock
compared to the equity securities of the Company’s competitors. The trading price of the Company’s Class A common stock on
the Nasdaq National Market has affected and could in the future materially adversely affect its acquisition program.

ENVIRONMENTAL REGULATIONS AND LITIGATION COULD SUBJECT THE COMPANY TO FINES, PENALTIES, 
JUDGMENTS AND LIMITATIONS ON ITS ABILITY TO EXPAND.

The Company is subject to potential liability and restrictions under environmental laws, including those relating to transport,
recycling, treatment, storage and disposal of wastes, discharges to air and water, and the remediation of contaminated soil,
surface water and groundwater. The waste management industry has been and likely will continue to be subject to regulation,
including permitting and related financial assurance requirements, as well as to attempts to further regulate the industry
through new legislation. For example, the Company’s waste-to-energy and manufacturing facilities are subject to regulations
limiting discharges of pollution into the air and water, and its solid waste operations are subject to a wide range of federal,
state and, in some cases, local environmental, odor and noise and land use restrictions. If the Company is not able to comply
with the requirements that apply to a particular facility or if it operates without necessary approvals, it could be subject to
civil, and possibly criminal, fines and penalties, and may be required to spend substantial capital to bring an operation into
compliance or to temporarily or permanently discontinue, and/or take corrective actions, possibly including removal of land-
filled materials, regarding an operation that is not permitted under the law. The Company may not have sufficient insurance
coverage for its environmental liabilities. Those costs or actions could have a material adverse effect upon the Company’s 
business, financial condition and results of operations.

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Environmental and land use laws may also impact the Company’s ability to expand and, in the case of its solid waste opera-
tions, may dictate those geographic areas from which it must, or, from which it may not, accept waste. Those laws and regula-
tions may also limit the overall size and daily waste volume that may be accepted by a solid waste operation. If the Company
is not able to expand or otherwise operate one or more of its facilities profitably because of limits imposed under environmen-
tal laws, the Company may be required to increase its utilization of disposal facilities owned by third parties or reduce overall
operations, and if so, its business, financial condition and results of operations could suffer a material adverse effect.

The Company has historically grown and intends to continue to grow through acquisitions, and has tried and will continue 

to try to evaluate and address environmental risks and liabilities presented by newly acquired businesses. It is possible that
some liabilities, including ones that may exist only because of the past operations of an acquired business, may prove to be
more difficult or costly to address than the Company anticipates. It is also possible that government officials responsible for
enforcing environmental laws may believe an issue is more serious than the Company expects, or that the Company will fail to
identify or fully appreciate an existing liability before it becomes legally responsible to address it. Some of the legal sanctions
to which the Company could become subject could cause it to lose a needed permit, or prevent it from or delay it in obtaining
or renewing permits to operate its facilities. The number, size and nature of those liabilities could have a material adverse
effect on the Company’s business, financial condition and results of operations.

The Company’s operating program depends on its ability to operate and expand the landfills it owns and leases and to 
develop new landfill sites. Localities where the Company operates generally seek to regulate some or all landfill operations,
including siting and expansion of operations. The Company cannot assure that the laws adopted by municipalities in which
landfills are located will not have a material adverse effect on the utilization of its landfills or that the Company will be suc-
cessful in obtaining new landfill sites or expanding the permitted capacity of any of its current landfills once their remaining
disposal capacity has been consumed. If the Company is unable to develop additional disposal capacity, its ability to achieve
economies from the internalization of its waste stream will be limited and it will be required to utilize the disposal facilities 
of its competitors.

In addition to the costs of complying with environmental laws and regulations, the Company incurs costs defending
against environmental litigation brought by governmental agencies and private parties. The Company is, and also may be in 
the future, defendants in lawsuits brought by parties alleging environmental damage, personal injury, and/or property damage.
A significant judgment against the Company could have a material adverse effect upon the Company’s business, financial 
condition and results of operations. See “Item —: Business—Regulation” and “Item 3—Legal Proceedings.”

THE COMPANY’S OPERATIONS WOULD BE ADVERSELY AFFECTED IF IT DOES NOT HAVE ACCESS TO 
SUFFICIENT CAPITAL.

The Company’s ability to remain competitive and sustain its operations depends in part on cash flow from operations and
access to capital. The Company intends to fund its cash needs primarily through cash from operations and borrowings under
credit facilities. However, the Company may require additional equity and/or debt financing for debt repayment obligations and
to fund the Company’s growth and operations. In addition, if the Company undertakes more acquisitions or further expands its
operations, the Company’s capital requirements may increase. The Company cannot assure you that it will have access to the
amount of capital that it requires from time to time, on favorable terms or at all.

THE COMPANY’S RESULTS OF OPERATIONS COULD CONTINUE TO BE ADVERSELY AFFECTED BY CHANGING
PRICES OR MARKET REQUIREMENTS FOR RECYCLABLE MATERIALS.

The Company’s results of operations have been and may continue to be materially adversely affected by changing purchase or
resale prices or market requirements for recyclable materials. The Company’s recycling business involves the purchase and sale
of recyclable materials, some of which are priced on a commodity basis. The resale and purchase prices of, and market demand
for, recyclable materials, particularly waste paper, plastic and ferrous and aluminum metals, can be volatile due to numerous
factors beyond the Company’s control. These changes have in the past contributed, and may continue to contribute, to signifi-
cant variability in the Company’s period-to-period results of operations.

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Some of the Company’s subsidiaries involved in the recycling business use long-term supply contracts with customers 
with floor price arrangements to minimize the commodity risk for recyclable materials, particularly waste paper and aluminum
metals. Under these contracts, the Company’s subsidiaries obtain a guaranteed minimum floor price for the recyclable materials
along with a commitment to receive additional amounts if the current market price rises above the minimum price. These con-
tracts are generally with large domestic companies, which use the recyclable materials in their manufacturing processes. Any
failure to continue to secure long-term supply contracts with minimum price arrangements, or a breach by customers of one or
more of these contracts could reduce recycling revenues and have a material adverse effect on the Company’s business, financial 
condition and results of operations.

THE COMPANY’S BUSINESS IS GEOGRAPHICALLY CONCENTRATED AND IS THEREFORE SUBJECT TO REGIONAL
ECONOMIC DOWNTURNS.

The Company’s operations and customers are principally located in the eastern United States. Therefore, the Company’s 
business, financial condition and results of operations are susceptible to regional economic downturns and other regional 
factors, including state regulations and severe weather conditions. In addition, as the Company expands its existing markets,
opportunities for growth within these regions will become more limited and the geographic concentration of the Company’s
business will increase. The costs and time involved in permitting and the scarcity of available landfills will make it difficult 
for the Company to expand vertically in these markets. The Company cannot assure you that it will lessen their regional 
geographic concentration through any other acquisitions.

MAINE ENERGY MAY BE REQUIRED TO MAKE A PAYMENT IN CONNECTION WITH THE PAYOFF OF THE MAINE
ENERGY BONDS AND LIMITED PARTNER LOANS EARLIER THAN THE COMPANY HAS ANTICIPATED AND WHICH MAY
EXCEED THE AMOUNT OF THE LIABILITY THE COMPANY RECORDED IN CONNECTION WITH THE KTI ACQUISITION.

Under the terms of waste handling agreements among the Biddeford-Saco Waste Handling Committee, the cities of Biddeford
and Saco, Maine, 13 other muncipalities and the Company’s subsidiary Maine Energy, Maine Energy will be required, following
the date on which the bonds financing Maine Energy and certain limited partner loans to Maine Energy are paid in full, to 
pay a residual cancellation payment to the respective municipalities party to those agreements equal to an aggregate of 18% 
of the fair market value of the equity of the partners in Maine Energy. In connection with the Company’s merger with KTI, the
Company estimated the fair market value of Maine Energy as of the date the limited partner loans are anticipated to be paid in
full, and recorded a liability equal to 18% of such amount. The Company cannot assure you that its estimate of the fair market
value of Maine Energy will prove to be accurate, and in the event the Company has underestimated the value of Maine Energy,
it could be required to recognize unanticipated charges, in which case the Company’s financial condition, results of operations
could be materially adversely affected.

In connection with these waste handling agreements, the cities of Biddeford and Saco and the additional 13 municipalities 

that were parties to the agreements have filed lawsuits in the State of Maine seeking the residual cancellation payments and
alleging, among other things, the Company’s breach of the waste handling agreement for the Company’s failure to pay the
residual cancellation payments in connection with the KTI merger and processing amounts of waste above contractual limits
without issuance of proper notice. The complaint seeks damages for breach of contract, tortious interference with contract,
breach of fiduciary duties, and fraudulent transfers as well as treble damages, punitive damages and a constructive trust upon
the Company’s assets with the appointment of a trustee to operate its business. If the plaintiffs are successful in their claims
against the Company and damages are awarded, the Company’s business, financial condition and results of operations could 
be materially adversely affected. See “Item 3—Legal Proceedings.”

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38657-1-casella 10K  8/21/02  2:22 PM  Page 47

THE COMPANY MAY NOT BE ABLE TO EFFECTIVELY COMPETE IN THE HIGHLY COMPETITIVE SOLID WASTE 
SERVICES INDUSTRY.

The solid waste services industry is highly competitive, has undergone a period of rapid consolidation and requires substantial
labor and capital resources. Some of the markets in which the Company competes or will likely compete are served by one 
or more of the large national or multinational solid waste companies, as well as numerous regional and local solid waste 
companies. Intense competition exists not only to provide services to customers, but also to acquire other businesses within
each market. Some of the Company’s competitors have significantly greater financial and other resources than the Company
does. From time to time, competitors may reduce the price of their services in an effort to expand market share or to win a
competitively bid contract. These practices may either require the Company to reduce the pricing of its services or result in 
the Company’s loss of business.

As is generally the case in the industry, some municipal contracts are subject to periodic competitive bidding. The
Company cannot assure you that it will be the successful bidder to obtain or retain these contracts. If the Company is unable
to compete with larger and better capitalized companies, or to replace municipal contracts lost through the competitive bid-
ding process with comparable contracts or other revenue sources within a reasonable time period, the Company’s business,
financial condition and results of operations could be materially adversely affected.

In the Company’s solid waste disposal markets it also competes with operators of alternative disposal and recycling facili-
ties and with counties, municipalities and solid waste districts that maintain their own waste collection, recycling and disposal
operations. These entities may have financial advantages because user fees or similar charges, tax revenues and tax-exempt
financing may be more available to them than to the Company.

The Company’s GreenFiber insulation manufacturing joint venture with Louisiana-Pacific competes with other parties, some

of which have substantially greater resources than GreenFiber does, which they could use for product development, marketing
or other purposes to the Company’s detriment.

THE COMPANY’S RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE NEGATIVELY AFFECTED IF IT
INADEQUATELY ACCRUES FOR CLOSURE AND POST-CLOSURE COSTS.

The Company has material financial obligations relating to closure and post-closure costs of its existing landfills and will 
have material financial obligations with respect to any disposal facilities which it may own or operate in the future. Once the
permitted capacity of a particular landfill is reached and additional capacity is not authorized, the landfill must be closed and
capped, and post-closure maintenance started. The Company establishes reserves for the estimated costs associated with such
closure and post-closure costs over the anticipated useful life of each landfill on a per ton basis. In addition to the landfills the
Company currently operates, it owns four unlined landfills, which are not currently in operation. The Company has provided
and will in the future provide accruals for financial obligations relating to closure and post-closure costs of its owned or oper-
ated landfills, generally for a term of 30 years after final closure of a landfill. The Company cannot assure you that its financial
obligations for closure or post-closure costs will not exceed the amount accrued and reserved or amounts otherwise receivable
pursuant to trust funds established for this purpose. Such a circumstance could result in unanticipated charges and have a
material adverse effect on the Company’s business, financial condition and results of operations.

FLUCTUATIONS IN FUEL COSTS COULD AFFECT THE COMPANY’S OPERATING EXPENSES AND RESULTS.

The price and supply of fuel is unpredictable and fluctuates based on events beyond the Company’s control, including among
others, geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war
and unrest in oil producing countries and regional production patterns. Because fuel is needed to run the Company’s fleet of
trucks, price escalations for fuel may increase its operating expenses and have a material adverse effect upon its business,
financial condition and results of operations.

38657-1-47-casella 10K — RKC! — proof 5 (rjh) — august 8, 2002
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THE COMPANY COULD BE PRECLUDED FROM ENTERING INTO CONTRACTS OR OBTAINING PERMITS IF IT IS
UNABLE TO OBTAIN THIRD PARTY FINANCIAL ASSURANCE TO SECURE ITS CONTRACTUAL OBLIGATIONS.

Municipal solid waste collection and recycling contracts, obligations associated with landfill closure and the operation and closure
of waste-to-energy facilities may require performance or surety bonds, letters of credit or other means of financial assurance to
secure the Company’s contractual performance. If the Company is unable to obtain the necessary financial assurance in sufficient
amounts or at acceptable rates, it could be precluded from entering into additional municipal solid waste collection contracts or
from obtaining or retaining landfill operating permits. Any future difficulty in obtaining insurance could also impair its ability
to secure future contracts conditioned upon the contractor having adequate insurance coverage. Accordingly, the Company’s
failure to obtain financial assurance bonds, letters of credit or other means of financial assurance or to maintain adequate
insurance could have a material adverse effect on its business, financial condition and results of operations.

THE COMPANY MAY BE REQUIRED TO WRITE-OFF CAPITALIZED CHARGES IN THE FUTURE, WHICH COULD
ADVERSELY AFFECT ITS EARNINGS.

Any charge against earnings could have a material adverse effect on the Company’s earnings and the market price of its Class A
common stock. In accordance with generally accepted accounting principles, the Company capitalizes certain expenditures 
and advances relating to its acquisitions, pending acquisitions, landfills and development projects. From time to time in future
periods, the Company may be required to incur a charge against earnings in an amount equal to any unamortized capitalized
expenditures and advances, net of any portion thereof that the Company estimates will be recoverable, through sale or 
otherwise, relating to (1) any operation that is permanently shut down or has not generated or is not expected to generate
sufficient cash flow, (2) any pending acquisition that is not consummated, (3) any landfill or development project that is not
expected to be successfully completed, and (4) any goodwill or other intangible assets that are determined to be impaired. 
The Company has incurred such charges in the past.

THE SEASONALITY OF THE COMPANY’S REVENUES COULD ADVERSELY IMPACT ITS FINANCIAL CONDITION.

The Company’s transfer and disposal revenues have historically been lower during the months of November through March. 
This seasonality reflects the lower volume of waste during the late fall, winter and early spring months primarily because:
(1) the volume of waste relating to construction and demolition activities decreases substantially during the winter months in
the northeastern United States; and (2) decreased tourism in Vermont, Maine and eastern New York during the winter months
tends to lower the volume of waste generated by commercial and restaurant customers, which is partially offset by increased
volume from the winter ski industry. Since certain of the Company’s operating and fixed costs remain constant throughout the
fiscal year, operating income is therefore impacted by a similar seasonality. In addition, particularly harsh weather conditions
typically result in increased operating costs to the Company’s operations.

The Company’s recycling business experiences increased volumes of newspaper in November and December due to increased
newspaper advertising and retail activity during the holiday season. The Company’s cellulose insulation joint venture experiences
lower sales in November and December because of lower production of manufactured housing due to holiday plant shutdowns.

THE COMPANY’S CLASS B COMMON STOCK HAS TEN VOTES PER SHARE AND IS HELD EXCLUSIVELY BY 
JOHN W. CASELLA AND DOUGLAS R. CASELLA.

The holders of Class B common stock are entitled to ten votes per share and the holders of Class A common stock are entitled to
one vote per share. At June 28, 2002, an aggregate of 988,200 shares of Class B common stock, representing 9,882,000 votes,
were outstanding, all of which were beneficially owned by John W. Casella, our Chairman and Chief Executive Officer, or by his
brother, Douglas R. Casella, a member of the Board of Directors. Based on the number of shares of common stock and Series A
redeemable convertible preferred stock outstanding on June 28, 2002, the shares of Class A common stock and Class B common
stock beneficially owned by John W. Casella and Douglas R. Casella represent approximately 31.2% of the aggregate voting
power of the Company’s stockholders. Consequently, John W. Casella and Douglas R. Casella are able to substantially influence
all matters for stockholder consideration.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

The Company is subject to interest rate fluctuation risk with regard to its variable rate revolving credit facility. To modify the
risk from these possible interest rate fluctuations, the Company enters into hedging transactions that have been authorized
pursuant to its policies and procedures. The Company does not use financial instruments for trading purposes and is not a
party to any leveraged derivatives.

As of April 30, 2002, the Company was party to six interest rate swap agreements (the “Swap Agreements”) with two

banks. The purpose was to effectively convert a portion of the Company’s interest rate exposure on advances under its existing
revolving credit facility from a floating rate to a fixed rate. The Swap Agreements effectively fix the interest rate on the
notional amount of $250.0 million, at rates from 5.194% to 6.875%. Net monthly payments or monthly receipts under the
Swap Agreements were recorded as adjustments to interest expense. In addition, in the event of non-performance by the 
counterparties, the Company would be exposed to interest rate risk on the entire balance in the event the variable interest 
rate paid was to exceed the fixed rate paid under the terms of the Swap Agreements.

Ignoring the impact of its interest rate swaps, if interest rates on the total variable rate facility as of April 30, 2002

increased or decreased by 100 basis points, the Company’s annual interest expenses would increase or decrease by approxi-
mately $2.7 million. The impact based on the balance of the facility exposed to interest rate risk at April 30, 2002 would 
result in an increase or decrease in annual interest expense of approximately $0.3 million. The fair market value of the 
swaps is estimated at a loss of $8.2 million as of April 30, 2002.

The remainder of the Company’s debt is at fixed rates and not subject to interest rate risk.
The Company is subject to commodity price fluctuations related to the portion of its sales of recyclable commodities that

are not under floor or flat pricing arrangements. To minimize its commodity exposure, the Company has entered into a com-
modity hedging agreement authorized pursuant to its policies and procedures. The Company does not use financial instruments
for trading purposes and is not a party to any leveraged derivatives. If commodity prices were to change by 10%, the impact on
the Company’s operating margin is estimated at $6.7 million as of April 30, 2002, without considering its hedging agreements.
The impact of the hedge position would reduce the impact by $0.8 million.

On December 2, 2001, Enron, the counterparty for all of the Company’s commodity hedges, filed for Chapter 11 bank-
ruptcy protection. As a result of the filing, the Company executed the early termination provisions provided under the forward 
contracts, and filed a claim with the bankruptcy court. Additionally, the Company agreed with its equity method investee,
GreenFiber, to include GreenFiber in its claim (as allowed under the applicable affiliate provisions). The Company recorded a
charge of $1.7 million in other expense to recognize the change in fair value of its commodity contracts. Subsequent changes
in the fair value of these commodity contracts ($0.3 million loss in fiscal year 2002) will be reflected in earnings until their
March 2003 termination.

Deferred gains of approximately $0.7 million, net of tax, related to the Company’s terminated contracts with Enron are included

in accumulated other comprehensive income, and will be reclassified into earnings as the original hedged transactions settle.

38657-1-49-casella 10K — RKC! — proof 5 (rjh) — august 8, 2002
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38657-1-casella 10K  8/21/02  2:22 PM  Page 50

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Casella Waste Systems, Inc.:

In our opinion, the accompanying consolidated balance sheet as of April 30, 2002 and the related consolidated statements of
operations, of redeemable convertible preferred stock and stockholders’ equity and of cash flows present fairly, in all material
respects, the financial position of Casella Waste Systems, Inc. and its subsidiaries at April 30, 2002, and the results of their
operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of the Company’s management; our responsibility 
is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States of America, which require that we plan and 
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statements of the
Company as of April 30, 2001 and for each of the years ended April 30, 2001 and 2000 were audited by other independent
accountants whose report dated July 19, 2001 expressed an unqualified opinion on those statements.

As discussed in Note 2 to the financial statements, on May 1, 2002, the Company changed its method of accounting for 

derivative instruments and hedging activities.

/S/

PricewaterhouseCoopers LLP
Boston, Massachusetts
June 29, 2002

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38657-1-casella 10K  8/21/02  2:22 PM  Page 51

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Casella Waste Systems, Inc.:

We have audited the accompanying consolidated balance sheets of Casella Waste Systems, Inc. (a Delaware Corporation) 
and subsidiaries as of April 30, 2000 and 2001, and the related consolidated statements of operations, redeemable convertible
preferred stock and stockholders’ equity and cash flows for each of the three years ended April 30, 2001. These financial 
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated finan-

cial position of Casella Waste Systems, Inc. and subsidiaries as of April 30, 2000 and 2001, and the consolidated results of their
operations and their consolidated cash flows for each of the three years ended April 30, 2001, in conformity with accounting
principles generally accepted in the United States.

/s/

Arthur Andersen LLP
Boston, Massachusetts
July 19, 2001

The above report of Arthur Andersen LLP is a copy of the previously issued report of Arthur Andersen LLP and the
report has not been reissued by Arthur Andersen LLP.

38657-1-51-casella 10K — RKC! — proof 5 (rjh) — august 8, 2002
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38657-1-casella 10K  8/21/02  2:22 PM  Page 52

CONSOLIDATED BALANCE SHEETS (In thousands)

April 30,

ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Restricted cash
Accounts receivable—trade, net of allowance for doubtful accounts of $4,904 and $786
Notes receivable—officers/employees
Prepaid expenses
Inventory
Investments
Deferred income taxes
Net assets held for sale
Net assets of discontinued operations
Other current assets

Total current assets

Property, plant and equipment, net of accumulated depreciation and 

amortization of $125,160 and $163,521

Intangible assets, net
Restricted cash
Deferred income taxes
Investments in unconsolidated entities
Other non-current assets

The accompanying notes are an integral part of these consolidated financial statements

2001

2002

$ 22,001
7,175
51,776
1,953
5,669
3,017
3,641
8,015
8,041
11,534
2,763
125,585

$ 4,298
10,286
43,130
1,105
3,156
2,410
62
8,767
—
1,619
2,267
77,100

290,537
237,573
2,902
5,259
21,844
2,593
560,708
$686,293

287,115
228,451
2
648
26,865
860
543,941
$621,041

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CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data)

April 30,

2001

2002

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:

Current maturities of long-term debt
Current maturities of capital lease obligations
Accounts payable
Accrued payroll and related expenses
Accrued interest
Accrued income taxes
Accrued closure and post-closure costs, current portion
Other accrued liabilities

Total current liabilities
Long-term debt, less current maturities
Capital lease obligations, less current maturities
Accrued closure and post-closure costs, less current maturities
Minority interest
Other long-term liabilities
COMMITMENTS AND CONTINGENCIES
Series A redeemable, convertible preferred stock, 55,750 shares authorized, 

$ 6,690
1,429
29,158
2,542
4,880
3,388
77
22,364
70,528
350,511
4,593
17,153
677
12,160

$ 6,436
1,816
23,690
5,813
1,481
3,676
6,465
23,706
73,083
277,545
3,051
18,307
523
11,006

issued and outstanding as of April 30, 2001 and 2002, liquidation preference of 
$1,000 per share plus accrued but unpaid dividends

57,720

60,730

STOCKHOLDERS’ EQUITY:
Class A common stock—

Authorized—100,000,000 shares, $0.01 par value issued and outstanding—

22,198,000 and 22,667,000 shares as of April 30, 2001 and 2002, respectively

222

227

Class B common stock—

Authorized—1,000,000 shares, $0.01 par value 10 votes per share, 

issued and outstanding—988,000 shares

Accumulated other comprehensive (loss) income
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements

10
586
271,502
(99,369)
172,951
$686,293

10
(4,250)
272,697
(91,888)
176,796
$621,041

38657-1-53-casella 10K — RKC! — proof 4 (rjh) — august 8, 2002
the henderson company 222 west huron, chicago illinois 60610 (312) 951-8973 f (312) 951-6109

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38657-1-casella 10K  8/21/02  2:22 PM  Page 54

CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)

Fiscal Year Ended April 30,

Revenues
Operating Expenses:
Cost of operations
General and administration
Depreciation and amortization
Impairment charge
Restructuring charge
Legal settlements
Other miscellaneous charges
Merger-related costs

Operating income (loss)
Other (income)/expense, net:

Interest income
Interest expense
(Income) loss from equity method investments, net
Minority interest
Other (income)/expense, net

Other expense, net
Income (loss) from continuing operations before income taxes, discontinued operations, 

extraordinary item and cumulative effect of change in accounting principle

Provision (benefit) for income taxes
Net income (loss) from continuing operations before discontinued operations, 
extraordinary item and cumulative effect of change in accounting principle

Discontinued Operations:

(Loss) income from discontinued operations 

2000

2001

2002

$315,013 $ 479,816

$420,821

195,495
40,003
38,343
—
—
—
—
1,490
275,331
39,682

(1,234)
16,907
1,062
502
640
17,877

323,703
62,612
52,883
59,619
4,151
4,209
1,604
—
508,781
(28,965)

(2,941)
41,588
26,256
1,026
78
66,007

275,706
53,105
50,696
—
(438)
—
—
—
379,069
41,752

(880)
31,451
(1,899)
(154)
(4,480)
24,038

21,805
10,615

(94,972)
(12,731)

17,714
5,887

11,190

(82,241)

11,827

(net of income taxes of $1,471 in 2000 and tax benefit of $8,781 in 2001)

1,884

(15,448)

—

Estimated loss on disposal of discontinued operations 
(net of income tax benefit of $891, $1085 and $157)

Extraordinary item—early extinguishment of debt, (net of income tax benefit of $448)

Cumulative effect of change in accounting principle (net of income tax benefit of $170)
Net income (loss)
Preferred stock dividend
Net income (loss) available to common stockholders

The accompanying notes are an integral part of these consolidated financial statements.

(1,393)
(631)
—
11,050
—

(4,096)
—
(250)
7,481
3,010
$ 11,050 $(103,505) $ 4,471

(3,846)
—
—
(101,535)
1,970

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CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)

Fiscal Year Ended April 30,

Earnings Per Share:
Basic:

Income (loss) from continuing operations before income taxes, discontinued operations, 

extraordinary item and cumulative effect of change in accounting principle

(Income) loss from discontinued operations, net
Estimated loss on disposal of discontinued operations, net
Extraordinary item, net
Cumulative effect of change in accounting principle, net

Net income (loss) per common share

Basic weighted average common shares outstanding

Diluted:

Income (loss) from continuing operations before income taxes, discontinued operations, 

extraordinary item and cumulative effect of change in accounting principle

(Income) loss from discontinued operations, net
Estimated loss on disposal of discontinued operations, net
Extraordinary item, net
Cumulative effect of change in accounting principle, net

Net income (loss) per common share

Diluted weighted average common shares outstanding

The accompanying notes are an integral part of these consolidated financial statements.

2000

2001

2002

$ 0.59
0.10
(0.07)
(0.03)
—
$ 0.59

$(3.63)
(0.66)
(0.17)
—
—
$(4.46)

$ 0.38
—
(0.18)
—
(0.01)
$ 0.19

18,731

23,189

23,496

$ 0.57
0.10
(0.07)
(0.03)
—
$ 0.57

$(3.63)
(0.66)
(0.17)
—
—
$(4.46)

$ 0.37
—
(0.17)
—
(0.01)
$ 0.19

19,272

23,189

24,169

38657-1-55-casella 10K — RKC! — proof 4 (rjh) — august 8, 2002
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CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY (In thousands)

Series A
Redeemable
Convertible
Preferred Stock

Stockholders’ Equity

Class A
Common
Stock

Class B
Common
Stock

Additional

# of
Shares

Amount

# of
Shares

Par
Value

# of
Shares

Par
Value

Paid-In Accumulated
Deficit
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders’
Equity

Total
Comprehensive
Income (Loss)

— $ — 14,869

$149

988

$10 $ 154,733 $ (6,914)

$ — $147,978

—

— 7,152

72 —

— 113,788

—

— 113,860

—

—
—
—
—
—

—

194

1 —

—
—
—
—
—
—
—
—
— 22,215

— —
— —
— —
— —
988

222

—

—
—
—
—
10

859

—

—

860

1,275

—
— 11,050
—
—
—
—
4,136
270,655

1,275

—
— 11,050 $

(305)
—

(305)

— $

(305) 274,718

11,050
(305)
10,745

— —

—

258

— —

— (1,009)

—

—

—

—

56

55,750

— 1,970

—
—
—
—

—

—
—
—
—

—
56

—

32

—

—

—
—
—
—

— —

— —
— —
— —
— —

57,720 22,198

(49) — —
988
222

—

12

— —

—

—
—
—
—

—
10

—

— (1,970)

1,506

—
— (101,535)
—
—
—
—

92
271,502

—
(99,369)

138

—

—

—

—

258

(1,009)

(1,970)

1,506

—
— (101,535) $ (101,535)
891
891
— $(100,644)
—

891

—
586

—

92
172,951

138

—

—

457

5 —

—

4,063

—

— 3,010
—
—

—
—

— —
— —

— (3,010)
—
—

—
7,481

—

—
—

4,068

(3,010)
7,481 $

7,481

—

—

—

— —

—

—

—

(586)

(586)

(586)

—
—

—
—

—
—

— —
— —

—
—

—
—

—
—

(4,250)
—

(4,250)

— $

(4,250)
2,645

Balance, April 30, 1999
Issuance of Class A common 
stock and stock options—
KTI acquisition

Issuance of Class A common 
stock from the exercise of 
stock warrants/options 
and employee stock 
purchase plan

Equity transactions of 

majority-owned subsidiary

Net income
Unrealized loss on securities
Total comprehensive income
Balance, April 30, 2000
Issuance of Class A common 
stock from the exercise of 
stock options and employee 
stock purchase plan

Issuance of Series A redeemable 
convertible preferred stock

Accrual of preferred 
stock dividend

Equity transactions of 

majority-owned subsidiary

Net loss
Unrealized gain on securities
Total comprehensive loss

Other
Balance, April 30, 2001
Issuance of Class A 
common stock

Issuance of Class A common 
stock from the exercise of 
stock warrants, options 
and employee stock 
purchase plan
Accrual of preferred 
stock dividend

Net income
Unrealized gain/(loss) 
on securities, net of 
reclassification adjustments

Change in fair value of 

interest rate swaps and 
commodity hedges, net of 
reclassification adjustments

Total comprehensive income

Other
Balance, April 30, 2002

—
—
—
56 $60,730 22,667

— —
988

$227

—

—
4
$10 $272,697 $(91,888)

—

4
$(4,250) $176,796

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

Fiscal Year Ended April 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities—

Depreciation and amortization
Loss (income) from discontinued operations, net
Estimated loss on disposal of discontinued operations, net
Extraordinary item, net
(Income) loss from equity method investments
Impairment charge
Loss from commodity hedge contracts, net
Gain on investments, net
(Gain) loss on sale of equipment
Gain on sale of assets
Minority interest
Deferred income taxes
Changes in assets and liabilities, net of effects of acquisitions and divestitures—

Accounts receivable
Accounts payable
Other assets and liabilities

Net Cash Provided by Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions, net of cash acquired
Proceeds from divestitures, net of cash divested
Additions to property, plant and equipment
Proceeds from sale of equipment
Proceeds from sale of investments
Advances to unconsolidated entities
Other

Net Cash Used In Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings
Principal payments on long-term debt
Proceeds from equity transactions of majority-owned subsidiary
Proceeds from exercise of stock options
Proceeds from the issuance of Series A redeemable, convertible preferred stock, net

Net Cash (Used In) Provided by Financing Activities

Cash used in discontinued operations
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the year for

Interest
Income taxes, net of refunds

Supplemental disclosures of non-cash investing and financing activities:
Summary of entities acquired in purchase business combinations

Fair market value of assets acquired
Notes receivable exchanged for assets
Common stock and stock options issued
Cash paid, net
Liabilities Assumed, Notes Payable and Notes Receivable Forgiven to Seller

Common Stock and Stock Options Issued as Compensation

$

— $

The accompanying notes are an integral part of these consolidated financial statements.

38657-1-57-casella 10K — RKC! — proof 5 (kw) — august 14, 2002
the henderson company 222 west huron, chicago illinois 60610 (312) 951-8973 f (312) 951-6109

2000

2001

2002

$ 11,050 $(101,535) $

7,481

38,343
(1,884)
1,393
631
1,062
—
—
—
840
—
502
11,939

(17,320)
1,433
409
37,348
48,398

(81,838)
—
(68,575)
1,317
—
(5,580)
(412)
(155,088)

52,883
15,448
3,846
—
26,256
59,619
—
(3,131)
1,101
—
1,026
(10,866)

16,692
(6,643)
9,071
165,302
63,767

(9,331)
15,814
(61,518)
2,298
6,718
(9,546)
—
(55,565)

50,696
—
4,096
—
(1,899)
—
1,289
(1,216)
(76)
(4,848)
(154)
5,593

8,055
(5,564)
5,077
61,049
68,530

(4,601)
31,216
(37,674)
1,938
3,530
(3,942)
—
(9,533)

423,955
(309,667)
1,275
860
—
116,423
(6,140)
3,593
4,195
7,788 $ 22,001 $

49,590
(87,331)
1,506
259
54,741
18,765
(12,754)
14,213
7,788

73,384
(147,009)
—
3,560
—
(70,065)
(6,635)
(17,703)
22,001
4,298

$

$ 12,514 $ 37,484 $ 32,887
1,876 $ (1,773) $ (1,267)
$

$ 519,054 $ 22,602 $

— (13,263)
—
(9,335)

(113,860)
(81,838)
$ 323,356 $

4 $

— $

7,377
—
—
(4,601)
2,776

650

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except for per share data)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Casella Waste Systems, Inc. (“the Company”) is a regional, integrated solid waste services company, that provides collection,
transfer, disposal and recycling services, primarily in the eastern United States. The Company markets recyclable metals, alu-
minum, plastics, paper and corrugated cardboard which has been processed at its facilities as well as recyclables purchased
from third parties. The Company also generates and sells electricity under a long-term contract at a waste-to-energy facility,
Maine Energy Recovery Company LP (“Maine Energy”) (see Note 9).

A summary of the Company’s significant accounting policies follows:

(A) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned 
subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

(B) USE OF ESTIMATES AND ASSUMPTIONS

The Company’s preparation of its financial statements in conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts 
of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. The 
estimates and assumptions will also affect the reported amounts for certain revenues and expenses during the reporting 
period. Listed below are the estimates and assumptions that the Company considers to be significant in the preparation 
of its financial statements.

Landfill Accounting — Capitalized Costs and Amortization

The Company uses life-cycle accounting and the units-of-production method to recognize certain landfill costs. Under life-cycle
accounting, all costs related to acquisition, construction, closure and post-closure of landfill sites are capitalized or accrued
and charged to income based on tonnage placed into each site. The Company routinely reviews its investment in operating
landfills, transfer stations and other significant facilities to determine whether the costs of these investments is realizable. 
The Company’s judgments regarding the existence of impairment indicators are based on regulatory factors, market conditions
and operational performance of its landfills.

Units-of-production amortization rates are determined annually for each of the Company’s operating landfills, and such
rates are based on estimates provided by its engineers and accounting personnel and consider the information provided by 
surveys, which are performed at least annually.

Landfill Accounting — Accrued Closure and Post-Closure Costs

Accrued closure and post-closure costs represent future estimated costs related to monitoring and maintenance of a solid waste
landfill, after a landfill facility ceases to accept waste and closes. The Company provides accruals for these estimated future
costs on an undiscounted basis as the remaining permitted airspace of such facilities is consumed.

Recovery of Long-Lived Assets

In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
the Company continually reviews its long-lived assets for impairment whenever events or changes in circumstances indicate
that the remaining estimated useful life of such assets might warrant revision or that the balances may not be recoverable. 
An impairment loss is recorded if the amount by which the carrying amount of the assets exceeds their fair market value. Fair
market value is usually determined based on the present value of estimated expected future cash flows using a discount rate
commensurate with the risks involved. In instances where goodwill is identified with assets that are subject to an impairment
loss, the carrying amount of the identified goodwill is reduced before making any reduction to the carrying amounts of other
long-lived assets.

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Allowance for Doubtful Accounts

The Company estimates allowance for bad debts based on historical collection experience, current trends, credit policy and a
review of accounts receivable by aging category.

Self Insurance Reserves

The Company is self insured for vehicles and worker’s compensation. Through the use of actuarial calculations, the Company
estimates the amounts required to settle insurance claims. The actuarially determined liability is calculated in part by past
claims experience, which considers both frequency and settlement of claims.

Discontinued Operations

Discontinued businesses are carried at estimated net realizable value less costs to be incurred through the date of disposition.
Net assets of discontinued operations are stated at their expected net realizable values and have been separately classified in
the accompanying consolidated balance sheets.

Income Taxes

The Company uses estimates to determine its provision for income taxes and liabilities and any valuation allowance recorded
against its net deferred tax assets. Valuation allowances have been established for the possibility that tax benefits may not be
realized for certain deferred tax assets.

(C) REVENUE RECOGNITION

The Company recognizes collection, transfer, recycling and disposal revenues as the services are provided. Certain customers are
billed in advance and, accordingly, recognition of the related revenues is deferred until the services are provided.

Revenues from the sale of electricity to local utilities by the Company’s waste-to-energy facility (see Note 9) are recorded

at the contract rate specified by its power purchase agreement as the electricity is delivered.

Revenues from the sale of recycled materials are recognized upon shipment. Rebates to certain municipalities based on
sales of recyclable materials are recorded upon the sale of such recyclables to third parties and are included as a reduction to
revenues. Revenues for processing of recyclable materials are recognized when the related service is provided.

Revenues from brokerage are recognized at the time of shipment.

(D) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, investments in closure
trust funds, trade payables and debt instruments. The carrying values of these financial instruments approximate their 
respective fair values. See Note 8 for the terms and carrying values of the Company’s various debt instruments.

(E) CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents.

(F) INVENTORY

Inventory includes secondary fibers, recyclables ready for sale and supplies and is stated at the lower of cost (first-in, first-out)
or market. Inventory consisted of finished goods and supplies of approximately $2,651 and $2,410 at April 30, 2001 and 2002,
respectively, and raw materials of $366 and $0 at April 30, 2001 and 2002, respectively.

(G) INVESTMENTS

In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company classifies its
investment in equity securities as “available for sale.” Accordingly, the carrying value of the securities is adjusted to fair value
through other comprehensive (loss) income.

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In October, 2001, the Company sold its remaining Bangor Hydro Warrants for $3,530. The resulting gain of $1,654 is
included in other income. $1,038 (net of taxes of $707) of the gain was reclassified from other comprehensive (loss) income.
The Company used the specific identification method as a basis for calculating the gain on sale.

At April 30, 2002, the Company wrote down to fair value certain equity security investments. The write down, which was

reclassified from other comprehensive (loss) income, amounted to $438 and was due to a decline in the fair value which, in the
opinion of management, was considered to be other than temporary. The write down is included in other (income)/expense in
the accompanying statement of operations.

As of April 30, 2001 and 2002, the fair value of investments was approximately $3,641 and $62, respectively, which is

included in investments in the accompanying consolidated balance sheets. Unrealized holdings gains/(losses) on such securi-
ties, which are included net of tax in stockholders’ equity as of April 30, 2001 and 2002, amounted to $586 (net of taxes of
$399) and $0, respectively.

(H) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost, less accumulated depreciation and amortization. The Company provides for
depreciation and amortization using the straight-line method by charges to operations in amounts that allocate the cost of the
assets over their estimated useful lives as follows (See Note 5):

Asset Classification
Buildings and improvements
Machinery and equipment
Rolling stock
Containers

Estimated Useful Life
10-35 years
2-15 years
1-12 years
2-12 years

The cost of maintenance and repairs is charged to operations as incurred.

Capitalized landfill costs include expenditures for land and related airspace, permitting costs and preparation costs.

Landfill permitting and preparation costs represent only direct costs related to these activities, including legal, engineering and
construction. Landfill preparation costs include the costs of construction associated with excavation, liners, site berms and the
installation of leak detection and leachate collection systems. Interest is capitalized on landfill permitting and construction
projects while the assets are undergoing activities to ready them for their intended use. The interest capitalization rate is 
based on the Company’s weighted average cost of indebtedness. Interest capitalized for the years ended April 30, 2000, 2001
and 2002 was $640, $373 and $437, respectively. Management routinely reviews its investment in operating landfills, transfer
stations and other significant facilities to determine whether the costs of these investments are realizable.

Landfill permitting, acquisition and preparation costs, excluding the estimated residual value of land, are amortized 

as landfill airspace is consumed. In determining the amortization rate for these landfills, preparation costs include the total
estimated costs to complete construction of the landfills’ permitted and permittable capacity. To be considered permittable, 
airspace must meet all of the following criteria: the Company must control the land on which the expansion is sought; all 
technical siting criteria have been met or a variance has been obtained or is reasonably expected to be obtained; no legal 
or political impediments have been identified which the Company believes will not be resolved in its favor; the Company is
actively working on obtaining any necessary permits and expects that all required permits will be received within the next 
two to five years; and senior management has approved the project. Units-of-production amortization rates are determined
annually for each of the Company’s operating landfills. The rates are based on estimates provided by the Company’s engineers
and accounting personnel and consider the information provided by surveys, which are performed at least annually.

(I) INTANGIBLE ASSETS

Covenants not to compete and customer lists are amortized using the straight-line method over their estimated useful lives,
typically no more than 10 years. Deferred debt acquisition costs are capitalized and amortized over the life of the related debt
using the effective interest method (See Note 6).

Goodwill is the cost in excess of fair value of identifiable assets of acquired businesses and has been amortized through
April 30, 2002 using the straight-line method over periods not exceeding 40 years. In July 2001, the FASB issued SFAS No. 141,

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Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. These standards, among other things, significantly modify the current accounting rules related to 
accounting for business acquisitions, amortization of intangible assets and the method of accounting for impairments. Under
the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to
annual impairment tests. Other intangible assets will continue to be amortized over their useful lives (see Note 1(o)).

In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, the Company continually reviews its long-lived assets for impairment whenever events or changes in circumstances indicate
that the remaining estimated useful life of such assets might warrant revision or that the balances may not be recoverable.

As a result of the factors discussed in Note 14, during 2001, the Company recorded a charge of $59,619 to reduce certain

assets (mainly goodwill arising from the acquisition of KTI, see Note 3), to their estimated fair value.

(J) INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company entered into an agreement in July 2000 with Louisiana-Pacific to combine their respective cellulose insulation
businesses into a single operating entity, US GreenFiber LLC (“GreenFiber”) under a joint venture agreement effective August 1,
2000. The Company contributed the operating assets of its cellulose insulation manufacturing business together with $1,000 in
cash. There was no gain or loss recognized on this transaction. The Company’s investment in GreenFiber amounted to $17,881
and $21,672 at April 30, 2001 and 2002, respectively.

A portion of the Company’s 50% interest in New Heights was sold in September 2001 for consideration of $250. The
Company retained an interest of 9.95% in the tire assets of New Heights, as well as financial obligations related solely to 
the New Heights power plant. In addition, the Company has an interest in certain notes granted by New Heights collectively
valued at approximately $9,000, payment of which is contingent upon certain events. The Company will record the contingent
consideration when the contingency is removed. The Company’s investment in New Heights amounted to $3,963 and $2,113 at
April 30, 2001 and 2002, respectively.

The Company sold 80.1% of Recovery Technologies Group, Inc. (“RTG”) in September, 2001 as part of the sale of the tire 
processing business. The Company retained a 19.9% indirect interest in the RTG tire collection and processing business which 
is valued at $3,080 at April 30, 2002.

The Company accounts for its 50% ownership in GreenFiber as well as its retained investment in the New Heights project

under the equity method of accounting.

(K) INCOME TAXES

The Company records income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109,
deferred income taxes are recognized based on the expected future tax consequences of differences between the financial
statement basis and the tax basis of assets and liabilities, calculated using currently enacted tax rates.

(L) ACCRUED CLOSURE AND POST-CLOSURE COSTS

Accrued closure and post-closure costs include the current and non-current portion of accruals associated with obligations 
for closure and post-closure of the Company’s operating and closed landfills. The Company, based on input from its engineers,
accounting personnel and consultants, estimates its future cost requirements for closure and post-closure monitoring and main-
tenance for solid waste landfills based on its interpretation of the technical standards of the U.S. Environmental Protection
Agency’s Subtitle D regulations and the air emissions standards under the Clean Air Act as they are being applied on a state-by-
state basis. Closure and post-closure monitoring and maintenance costs represent the costs related to cash expenditures yet to
be incurred when a landfill facility ceases to accept waste and closes.

Accruals for closure and post-closure monitoring and maintenance requirements consider final capping of the site, site
inspection, groundwater monitoring, leachate management, methane gas control and recovery, and operation and maintenance 
costs to be incurred during the period after the facility closes. Certain of these environmental costs, principally capping and
methane gas control costs, are also incurred during the operating life of the site in accordance with the landfill operation
requirements of Subtitle D and the air emissions standards. Reviews of the future cost requirements for closure and post-closure
monitoring and maintenance for the Company’s operating landfills by the Company’s engineers, accounting personnel and con-
sultants are performed at least annually and are the basis upon which the Company’s estimates of these future costs and the

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related accrual rates are revised. The Company provides accruals for these estimated costs as the remaining permitted airspace
of such facilities is consumed.

The Company operates in states which require a certain portion of landfill closure and post-closure obligations to be
secured by financial assurance, which may take the form of restricted cash, surety bonds and letters of credit. Surety bonds
securing closure and post-closure obligations at April 30, 2001 and 2002 totaled $14,424 and $13,654, respectively.

(M) COMPREHENSIVE (LOSS) INCOME

Comprehensive (loss) income is defined as the change in net assets of a business enterprise during a period from transactions
generated from non-owner sources. It includes all changes in equity during a period except those resulting from investments
by owners and distributions to owners. Accumulated other comprehensive (loss) income included in the accompanying balance
sheets consists of unrealized gains and losses on the Company’s available for sale securities, change in the fair market value 
of the Company’s interest swap and commodity hedge agreements as well as the cumulative effect of the change in accounting
principle relative to the adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (See Note 2).

(N) EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is based on the combined weighted average number of common shares and com-
mon share equivalents outstanding, which include, where appropriate, the assumed exercise of employee stock options and the
conversion of convertible debt and convertible preferred stock. In computing diluted earnings per share, the Company utilizes
the treasury stock method with regard to employee stock options and the “if converted” method with regard to its convertible
debt and preferred stock.

(O) NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets.
These new standards significantly modify the current accounting rules related to accounting for business acquisitions, 
amortization of intangible assets and the method of accounting for impairments of existing goodwill. The effective date 
for SFAS No. 142 is fiscal years beginning after December 15, 2001.

SFAS No. 142, among other things, eliminates the amortization of goodwill and requires an annual assessment of goodwill
impairment by applying a fair value based test. SFAS No. 142 requires that any goodwill recorded in connection with an acqui-
sition consummated on or after July 1, 2001 not be amortized. Accordingly, during the fiscal year ended April 30, 2002, the
Company did not record goodwill amortization expense of approximately $18 related to three acquisitions consummated after
June 30, 2001. In connection with our adoption of SFAS No. 142 as of May 1, 2002, goodwill was determined to be impaired
and the amount of $62,826 (net of estimated tax benefit of $187), was charged to earnings as a cumulative effect of a change
in accounting principle. Remaining goodwill will be tested for impairment on an annual basis and further impairment charges
may result. In accordance with the non-amortization provisions of SFAS No. 142, remaining goodwill will not be amortized
going forward. As a result, it is estimated that operating income will increase by approximately $6,285 per year.

In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires entities to
record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is
initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. The liability
is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, the entity either settles the obligation for the amount recorded or incurs a gain or loss. 
SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management is evaluating the effect of this statement
on the Company’s results of operations and financial position as well as related disclosures.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets. SFAS
No. 144 supercedes SFAS No. 121, Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
Of. SFAS No. 144 addresses financial accounting and reporting for the impairment of long lived assets held for use and for 
long-lived assets that are to be disposed of by sale (including discontinued operations). SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001. Management is evaluating the effect of this statement on the Company’s results 
of operations and financial position as well as related disclosures.

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(P) CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts 
receivable. Concentration of credit risk with respect to accounts receivable is limited because a large number of geographically
diverse customers comprise the Company’s customer base, thus spreading the trade credit risk. For the years ended April 30,
2001 and 2002, no single group or customer represents greater than 2.0% of total accounts receivable. The Company controls
credit risk through credit evaluations, credit limits, and monitoring procedures. The Company performs credit evaluations for
commercial and industrial customers and performs ongoing credit evaluations of its customers, but generally does not require
collateral to support accounts receivable. Credit risk related to derivative instruments results from the fact the Company enters
into interest rate and commodity price swap agreements with various counterparties. However, the Company monitors its 
derivative positions by regularly evaluating positions and the credit worthiness of the counterparties.

2. ADOPTION OF NEW ACCOUNTING STANDARD

The Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, on May 1, 2001. SFAS
No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair
value. SFAS No. 133 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company’s objective for utilizing derivative instruments is to reduce its exposure to 
fluctuations in cash flows due to changes in the variable interest rates under its credit facility and changes in the commodity
prices of recycled paper.

The Company’s strategy to hedge against fluctuations in variable interest rates involves entering into interest rate swaps
that are specifically designated to existing interest payments under the credit facility and accounted for as cash flow hedges
pursuant to SFAS No. 133. The Company has six interest rate swaps outstanding, expiring at various times between January
and April 2003 with an aggregate notional amount of $250,000. The Company has evaluated these swaps and believes these
instruments qualify for hedge accounting pursuant to SFAS No. 133.

Upon adoption of SFAS No. 133, the Company recorded the fair value of these interest rate swaps as an obligation of
$6,900, with the offset (net of taxes of $2,796) recorded as an unrealized loss in other comprehensive (loss) income (see
Note 8). Because the relevant terms of the interest rate swaps and the specific debts they have been designated to hedge are
not identical, the swaps are not perfectly effective, and could result in ineffectiveness being recorded in earnings. Accordingly, 
the ineffective portion of the hedge amounting to $250 (net of taxes of $170) has been recorded as a cumulative effect of
change in accounting principle in the accompanying financial statements.

As of April 30, 2002 the fair value of these swaps was an obligation of $8,225, with the net amount (net of taxes of
$3,312) recorded as an unrealized loss in other comprehensive (loss) income. The estimated net amount of the existing losses
as of April 30, 2002 included in accumulated other comprehensive income expected to be reclassified into earnings as payments 
are either made or received under the terms of the interest rate swaps within the next 12 months is approximately $8,225. 
The actual amounts reclassified into earnings are dependent on future movements in interest rates.

The Company’s strategy to hedge against fluctuations in the commodity prices of recycled paper is to enter into hedges 

to mitigate the variability in cash flows generated from the sales of recycled paper at floating prices, resulting in a fixed price
being received from these sales. The Company had entered into 10 commodity hedges, which expired at various times between
December 2001 and February 2003. The Company had evaluated these hedges and believed that these instruments qualified 
for hedge accounting pursuant to SFAS No. 133. Because the relevant terms of the hedges and the transactions they were 
designated to hedge were identical, there was no ineffectiveness required to be recognized in earnings. Upon adoption of 
SFAS No. 133, the Company recorded the fair value of these hedges as an asset of $1,800, with the net amount (net of taxes 
of $729) recorded as an unrealized gain in other comprehensive (loss) income.

On December 2, 2001, Enron Corporation (Enron), the counterparty for all of the Company’s commodity hedges, filed for
Chapter 11 bankruptcy protection. As a result of the filing, the Company executed the early termination provisions provided
under the forward contracts, and filed a claim with the bankruptcy court. Additionally, the Company agreed with its equity
method investee, GreenFiber, to include GreenFiber in its claim (as allowed under the applicable affiliate provisions). The
Company recorded a charge of $1,688 in other expense to recognize the change in fair value of its commodity contracts.
Subsequent changes in the fair value of these commodity contracts (currently $319 in fiscal year 2002) will be reflected in
earnings until their March 2003 termination.

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Deferred gains of approximately $661, net of tax, related to the Company’s terminated contracts with Enron are included
in accumulated other comprehensive income, and will be reclassified into earnings as the original hedged transactions settle.

3. BUSINESS COMBINATIONS

(A) TRANSACTIONS RECORDED AS PURCHASES

On December 14, 1999, the Company consummated its acquisition of KTI, a publicly traded solid waste handling company. 
KTI specializes in solid waste disposal and recycling, and operates manufacturing facilities utilizing recycled materials. 
All of KTI’s common stock was acquired in exchange for 7,152,157 shares of Class A Common Stock.

In addition to the above, the Company also acquired 38, 13 and four solid waste hauling operations in fiscal years 2000,
2001 and 2002, respectively, in transactions accounted for as purchases. Accordingly, the operating results of these businesses
are included in the accompanying consolidated statements of operations from the dates of acquisition, and the purchase prices
have been allocated to the net assets acquired based on fair values at the dates of acquisition, with the residual amounts 
allocated to goodwill. Management does not believe the final purchase price allocation will produce materially different 
results than reflected herein.

The purchase prices allocated to those net assets acquired (including KTI) were as follows:

April 30,
Current assets
Property, plant and equipment
Intangible assets (including goodwill)
Other non-current assets
Current liabilities
Other non-current liabilities
Total Consideration

2000
$ 107,457
220,830
190,178
589
(41,647)
(281,709)
$ 195,698

$

2001
644
2,671
19,287
—
(4)
—
$22,598

$

2002
60
5,821
1,496
—
—
—
$7,377

The following unaudited pro forma combined information shows the results of the Company’s operations for the fiscal years
2000 and 2001 as though each of the acquisitions completed in the two years occurred as of May 1, 1999. For the fiscal year
2002, unaudited pro forma combined information shows the results of the Company’s operations as though each of the acquisi-
tions completed in 2002 had occurred as of May 1, 2001.

Fiscal Year
Revenues
Operating income (loss)
Net income (loss) available to common stockholders
Diluted pro forma net income (loss) per common share
Weighted average diluted shares outstanding

2000
$562,462
$ 53,912
$ 11,345
0.51
$
22,346

2001
$ 482,759
$ (28,474)
$(103,446)
(4.46)
$
23,189

2002
$427,139
$ 41,879
$ 4,762
0.20
$
24,169

The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results
of operations had the acquisitions taken place or the results of future operations of the Company. Furthermore, the pro forma
results do not give effect to all cost savings or incremental costs that may occur as a result of the integration and consolida-
tion of the completed acquisitions.

(B) TRANSACTIONS RECORDED AS POOLINGS OF INTERESTS

The Company has completed several mergers and business acquisitions accounted for as poolings of interests. For the year
ended April 30, 2000 the Company merged with two businesses and issued 362,973 Class A common shares. There were no
acquisitions accounted for as poolings of interests in the fiscal years ended 2001 and 2002.

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4. RESTRICTED CASH

Restricted cash consists of cash held in trust on deposit with various banks as collateral for the Company’s financial obligations
relative to its self-insurance claims liability as well as landfill closure and post-closure costs and other facilities’ closure costs.
Cash is also restricted by specific agreement for facilities’ maintenance and other purposes.

A summary of restricted cash is as follows:

April 30, 2001

April 30, 2002

Insurance
Landfill closure
Other facilities closure
Facility maintenance 
and operations

Other
Total

Short Term
$6,872
—
—

—
303
$7,175

Long Term
$ —
2,498
301

—
103
$2,902

Total
$ 6,872
2,498
301

—
406
$10,077

Short Term
$10,144
91
—

50
1
$10,286

5. PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment at April 30, 2001 and 2002 consist of the following:

April 30,
Land
Landfills
Buildings and improvements
Machinery and equipment
Rolling stock
Containers

Less—Accumulated depreciation and amortization

Long Term
$—
2
—

—
—
$ 2

2001
$ 11,813
90,173
50,597
139,921
84,076
39,117
415,697
125,160
$290,537

Total
$10,144
93
—

50
1
$10,288

2002
$ 13,289
112,506
51,690
147,838
84,825
40,488
450,636
163,521
$287,115

Depreciation expense for the fiscal years 2000, 2001 and 2002 was $23,246, $35,033 and $32,382, respectively.

6. INTANGIBLE ASSETS

Intangible assets at April 30, 2001 and 2002 consist of the following:

April 30,
Goodwill
Covenants not to compete
Customer lists
Deferred debt acquisition costs and other

Less: accumulated amortization

2001
$241,181
14,206
562
8,040
263,989
26,416
$237,573

2002
$239,836
14,447
420
8,490
263,193
34,742
$228,451

Amortization expense for the fiscal years 2000, 2001 and 2002 was $15,097, $17,850 and $18,314, respectively.

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7. OTHER ACCRUED LIABILITIES

Other accrued liabilities at April 30, 2001 and 2002 consist of the following:

April 30,
Interest rate swap obligation
Self insurance reserve
Accrued restructuring liability
Other accrued liabilities
Total other accrued liabilities

8. LONG-TERM DEBT

Long-term debt as of April 30, 2001 and 2002 consists of the following:

April 30,
Advances on senior secured revolving credit facility (the “Revolver”) which provides for 

advances of up to $280,000, due December 14, 2004, bearing interest at LIBOR plus 2.50%, 
(approximately 4.50% at April 30, 2002 based on 3 month LIBOR), and decreasing to 
$275,000 and $250,000 in fiscal 2003 and 2004, respectively, collateralized by substantially 
all of the assets of the Company

Advances on senior secured delayed draw term “B” Loan (the “Term Loan”) due December 14, 2006, 
bearing interest at LIBOR plus 3.75% (approximately 5.75% at April 30, 2002 based on 3 month 
LIBOR), and calling for principal payments of $1,500 per year, beginning in fiscal 2001 with 
the remaining principal balance due at maturity. This loan is collateralized by substantially all 
of the assets of the Company

Notes payable in connection with businesses acquired, bearing interest at rates of 0%–12.5%, due 
in monthly or annual installments varying to $22, expiring December 2002 through May 2009
Subordinated, convertible notes payable in connection with business acquired, bearing interest at 

7.5%, due in monthly installments varying to $48, expiring on March 15, 2003. Convertible into 
Class A common stock of the Company, at the note holder’s election, at the rate of one share 
of common stock for each $15.375 of the principal amount surrendered for conversion

Notes payable in connection with businesses acquired, bearing interest at 0%, discounted at 4.74% 

to 5.5%, due in monthly and quarterly installments varying to $375 through April 2005

Less—Current Portion

2001
$ —
5,341
4,151
12,872
$22,364

2002
$ 8,225
5,491
37
9,953
$23,706

2001

2002

$208,415

$156,800

137,500

119,300

4,329

1,797

4,110

2,419

2,847
357,201
6,690
$350,511

3,665
283,981
6,436
$277,545

The Revolver and the Term Loan credit facility agreements contain covenants that restrict dividends and stock repurchases,
limit capital expenditures and annual operating lease payments, set minimum fixed charges, interest coverage and leverage
ratios and positive quarterly profitable operations, as defined. For the year ended April 30, 2002, the Company considered its
quarterly profitable operations measure to be the most restrictive. For the quarter ended April 30, 2001, the Company’s compli-
ance with the covenants was waived. The Revolver credit agreement requires the Company to pay a quarterly commitment fee
of 0.50% on the full amount of the facility.

Further advances were available under the Revolver in the amount of $44,985 and $83,276 as of April 30, 2001 and 2002,

respectively. These available amounts are net of outstanding irrevocable letters of credit totaling $26,600 and $39,923 as of
April 30, 2001 and 2002. As of April 30, 2001 and 2002 no amounts had been drawn under the outstanding letters of credit.

The Company has entered into interest rate swap agreements to balance fixed and floating rate debt interest risk in accor-
dance with management’s criteria. The agreements are contracts to exchange fixed and floating interest rate payments periodi-
cally over a specified term without the exchange of the underlying notional amounts. The agreements provide only for the
exchange of interest on the notional amounts at the stated rates, with no multipliers or leverage. Differences paid or received
over the life of the agreements are recorded in the consolidated financial statements as additions to or reductions of interest

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expense on the underlying debt. The fair market value of the swaps is estimated at a loss of $6,900 and $8,225 as of April 30,
2001 and 2002, respectively.

As of April 30, 2002, interest rate agreements in notional amounts and with terms as set forth in the following table were 

outstanding:

Bank
Bank A
Bank B

Notional Amounts
$130,000
$120,000

Receive
LIBOR
LIBOR

Pay
5.43–6.74%
5.19–6.875%

Range of Agreement
January 2001 to March 2003
April 2000 to April 2003

As of April 30, 2002, debt matures as follows:

Fiscal Year
2003
2004
2005
2006
2007
Thereafter

$ 6,436
2,365
159,072
1,452
114,512
144
$283,981

The Company is negotiating a new senior secured credit facility which will provide for a $150,000 term loan and a $175,000
revolving credit facility, for total aggregate borrowings of up to $325,000. The new credit facilities will be available to the
Company contingent upon the closing of a senior subordinated note offering in the amount of $150,000. The net proceeds
from the senior subordinated note offering and initial borrowings under the new senior secured credit facilities will be used to
repay all outstanding amounts under its existing senior secured credit facilities, fees and expenses related to the new senior
secured credit facilities and for general corporate purposes. There can be no assurance that these financings will be completed.

9. COMMITMENTS AND CONTINGENCIES

(A) LEASES

The following is a schedule of future minimum lease payments, together with the present value of the net minimum lease 
payments under capital leases, as of April 30, 2002.

Fiscal Year
2003
2004
2005
2006
2007
Thereafter
Total Minimum Lease Payments

Less—amount representing interest

Current maturities of capital lease obligations
Present value of long term capital lease obligations

Operating
Leases

$ 5,013
4,260
3,844
3,350
2,158
1,452
$20,077

Capital
Leases

$2,070
1,297
730
535
494
535
5,661

794
4,867
1,816
$3,051

The Company leases real estate, compactors and hauling vehicles under leases that qualify for treatment as capital leases. The
assets related to these leases have been capitalized and are included in property and equipment at April 30, 2001 and 2002.
The Company leases operating facilities and equipment under operating leases with monthly payments varying to $63.
Total rent expense under operating leases charged to operations was $1,979, $2,649 and $5,787 for each of the fiscal years

2000, 2001 and 2002, respectively.

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(B) INVESTMENT IN WASTE TO ENERGY FACILITIES

Effective March 1, 2001, the Company acquired the remaining 16.25% minority interest in its majority owned subsidiary, Maine
Energy, and sold all of its majority interest in the Penobscot Energy Recovery Company LP. Net proceeds for these transactions
amounted to $12,011. Therefore, the Company now owns a 100% interest in Maine Energy, which utilizes non-hazardous solid
waste as the fuel for the generation of electricity.

Maine Energy sells the electricity it produces to Central Maine Power (“Central Maine”) pursuant to a long-term power pur-

chase agreement. Under this agreement, Maine Energy has agreed to sell energy to Central Maine through May 31, 2007 at an
initial rate of 7.18 cents (determined in 1996) per kilowatt-hour (“kWh”), which escalates annually by 2% (8.32 cents per kWh
as of April 30, 2002). From June 1, 2007 until December 31, 2012, Maine Energy is to be paid the then current market value
for both its energy and capacity by Central Maine.

If, in any year, Maine Energy fails to produce 100,000,000 kWh of electricity and Maine Energy does not have a force
majeure defense, such as physical damage to the plant or other similar events, Maine Energy must pay approximately $3,750 to
Central Maine as liquidated damages. This payment obligation is secured by a letter of credit with a bank. Additionally, if, in
any year, Maine Energy fails to produce 15,000,000 kWh of electricity and Maine Energy does not have a force majeure defense,
Maine Energy must pay the balance of the letter of credit to Central Maine as liquidated damages. The balance of the letter of
credit at April 30, 2002 was $22,500.

The Company has met all of its kWh requirements under the power purchase agreement for the fiscal years 2000, 2001 and 2002.
Under the terms of a waste handling agreement between certain municipalities and Maine Energy, the latter is obligated

to make a payment at the point in time that Maine Energy pays off its debt obligations (as defined), currently estimated to
occur between 2003 and 2005, or upon the consummation of an outright sale of Maine Energy. The estimated obligation has
been recorded in other long-term liabilities as of April 30, 2002.

Additionally, the Company owned 100% of Timber Energy Resources, Inc. (“Timber Energy”). Timber Energy uses biomass
waste as its source of fuel to be combusted for the generation of electricity. Timber Energy also operates two wood processing
facilities. Timber Energy sells the electricity that it generates to Florida Power Corporation (“Florida Power”), a local electric
utility, under a power purchase agreement. Under the terms of the power purchase agreement, Florida Power has agreed to 
purchase all of the electricity generated by Timber Energy. Timber Energy was sold effective July 31, 2001.

(C) LEGAL PROCEEDINGS

In the normal course of its business and as a result of the extensive governmental regulation of the waste industry, the
Company may periodically become subject to various judicial and administrative proceedings involving Federal, state or local
agencies. In these proceedings, an agency may seek to impose fines on the Company or to revoke, or to deny renewal of, an
operating permit held by the Company. In addition, the Company may become party to various claims and suits pending for
alleged damages to persons and property, alleged violation of certain laws and for alleged liabilities arising out of matters
occurring during the normal operation of the waste management business.

During fiscal year 2002, the Company settled four lawsuits all of which had been previously provided for, thus having no

effect on the Company’s financial position.

The Company is a defendant in certain other lawsuits alleging various claims incurred in the ordinary course of business, 

none of which, either individually or in the aggregate, the Company believes are material to its financial condition, results 
of operations or cash flows.

(D) ENVIRONMENTAL LIABILITY

The Company is subject to liability for any environmental damage, including personal injury and property damage, that its
solid waste, recycling and power generation facilities may cause to neighboring property owners, particularly as a result of 
the contamination of drinking water sources or soil, possibly including damage resulting from conditions existing before the
Company acquired the facilities. The Company may also be subject to liability for similar claims arising from off-site environ-
mental contamination caused by pollutants or hazardous substances if the Company or its predecessors arrange to transport,
treat or dispose of those materials. Any substantial liability incurred by the Company arising from environmental damage 
could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company 
is not presently aware of any situations that it expects would have a material adverse impact on the results of operations 
or financial condition.

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(E) EMPLOYMENT CONTRACTS

The Company has entered into employment contracts with four of its senior officers. Two contracts are dated December 8, 1999,
while the other two are dated June 18, 2001 and July 20, 2001, respectively. Each contract has a three-year term and a two-
year covenant not to compete from the date of termination. Total annual commitments for salaries under these contracts are
$1,033. In the event of a change in control of the Company, or in the event of involuntary termination without cause, the
employment contracts provide for the payment of from one to three years of salary and bonuses.

10. STOCKHOLDERS’ EQUITY

(A) PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of preferred stock in one or more series. As of April 30, 2001 and
2002, the Company had 55,750 shares outstanding of Series A Redeemable Convertible Preferred Stock issued at $1,000 per
share. These shares are convertible into Class A common stock, at the option of the Holders, at $14 per share. Dividends are
cumulative at a rate of 5%, compounded quarterly. The Company has the option to redeem the preferred stock for cash at any
time after three years at a price giving the holder a defined yield, but must redeem the shares by the seventh anniversary date
at liquidation value, which equals original cost, plus accrued but unpaid dividends, if any. Pursuant to the stock agreement,
acceleration of the liquidation provisions would occur upon change in control of the Company.

During the fiscal years 2001 and 2002, the Company accrued $1,970 and $3,010 of dividends, respectively, which are

included in the carrying value of the preferred stock in the accompanying consolidated balance sheet.

(B) COMMON STOCK

The holders of the Class A Common Stock are entitled to one vote for each share held. The holders of the Class B Common
Stock are entitled to ten votes for each share held, except for the election of one director, who is elected by the holders of the
Class A Common Stock exclusively. The Class B Common Stock is convertible into Class A Common Stock on a share-for-share
basis at the option of the shareholder.

(C) STOCK WARRANTS

At April 30, 2001 and 2002, the Company had outstanding warrants to purchase 250,880 and 227,530 shares, respectively, of
the Company’s Class A Common Stock at exercise prices between $0.01 and $43.63 per share, based on the fair market value 
of the underlying common stock at the time of the warrants’ issuance. The warrants are exercisable and expire at varying times
through November 2008.

(D) STOCK OPTION PLANS

During 1993, the Company adopted an incentive stock option plan for officers and other key employees. The 1993 Incentive
Stock Option Plan (the “1993 Option Plan”) provided for the issuance of a maximum of 300,000 shares of Class A Common
Stock. As of April 30, 2001, options to purchase 17,000 shares of Class A common stock were outstanding at a weighted aver-
age exercise price of $4.61. As of April 30, 2002, options to purchase 15,000 shares of Class A common stock were outstanding
at a weighted average exercise price of $4.61. No further options may be granted under this plan.

During 1994, the Company adopted a non-statutory stock option plan for officers and other key employees. The 1994
Stock Option Plan (the “1994 Option Plan”) provided for the issuance of a maximum of 150,000 shares of Class A Common
Stock. As of April 30, 2001 and 2002, options to purchase 15,000 shares of Class A common stock at a weighted average 
exercise price of $0.60 were outstanding under the 1994 Option Plan. No further options may be granted under this plan.

In May 1994, the Company also established a nonqualified stock option pool for certain key employees. The plan, which 
was not approved by stockholders, established 338,000 stock options to purchase Class A common stock. As of April 30, 2001,
options to purchase 302,656 shares of Class A common stock were outstanding at a weighted average exercise price of $2.00.
As of April 30, 2002, options to purchase 264,000 shares of Class A common stock were outstanding at a weighted average
exercise price of $2.00. No further options may be granted under this plan.

During 1996, the Company adopted a stock option plan for employees, officers and directors of, and consultants and 

advisors to the Company. The 1996 Stock Option Plan (the “1996 Option Plan”) provided for the issuance of a maximum of 

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918,135 shares of Class A Common Stock pursuant to the grant of either incentive stock options or non-statutory options. 
As of April 30, 2001, a total of 363,707 options to purchase Class A Common Stock were outstanding at a weighted average
exercise price of $11.98. As of April 30, 2002, a total of 320,238 options to purchase Class A common Stock were outstanding
at an average exercise price of $11.76. No further options may be granted under this plan.

On July 31, 1997, the Company adopted a stock option plan for employees, officers and directors of, and consultants 
and advisors to the Company. The Board of Directors has the authority to select the optionees and determine the terms of the
options granted. The 1997 Stock Option Plan (the “1997 Option Plan”) provides for the issuance of 5,328,135 shares of Class A
Common Stock pursuant to the grant of either incentive stock options or non-statutory options, which includes all authorized,
but unissued options under previous plans. As of April 30, 2001, options to purchase 4,066,020 shares of Class A Common
Stock at an average exercise price of $11.41 were outstanding under the 1997 Option Plan. As of April 30, 2002, options to
purchase 3,404,628 shares of Class A Common Stock at a weighted average exercise price of $13.81 were outstanding under the
1997 Option Plan. As of April 30, 2002, 2,007,534 options were available for future grant under the 1997 Option Plan.

Additionally, options outstanding under the assumed KTI Stock Option Plan totaled 588,769 and 123,992 at April 30, 2001 

and 2002, respectively, at weighted average exercise prices of $26.31 and $23.18, respectively. Upon assumption of this plan,
entitled optionees under the KTI plan received one option to acquire one share of the Company’s stock for every option held.
The exercise price of the converted options was increased by 96.1% based on relative fair values of the underlying stock at the
date of the KTI acquisistion.

On July 31, 1997, the Company adopted a stock option plan for non-employee directors of the Company. The 1997
Non-Employee Director Stock Option Plan provides for the issuance of a maximum of 100,000 shares of Class A Common Stock
pursuant to the grant of non-statutory options. As of April 30, 2001 and 2002, options to purchase 56,500 shares of Class A
Common Stock at a weighted average exercise price of $16.00 and 94,000 shares of Class A Common Stock at a weighted 
average exercise price of $14.12, respectively, were outstanding under the 1997 Non-Employee Director Stock Option Plan. 
As of April 30, 2002, 6,000 options were available for future grant under the 1997 Non-Employee Director Stock Option Plan.
On July 2, 2001, the Company offered its employees, other than executive officers, the opportunity to ask the Company 

to exchange options having an exercise price of $12.00 or more per share. For every two eligible options surrendered, the 
participating option holders received one new option on February 4, 2002 at an exercise price of $12.75, which was equal 
to the closing price of a common share as quoted by NASDAQ on that day.

Options generally vest over a one to three year period from the date of grant and are granted at prices at least equal to

the prevailing fair market value at the issue date. In general, options are issued with a life not to exceed ten years.

Stock option activity for the fiscal years 2000, 2001 and 2002 is as follows:

Outstanding, April 30, 1999
Granted
Issued in Connection with the Acquisition of KTI
Terminated
Exercised
Outstanding, April 30, 2000
Granted
Terminated
Exercised
Outstanding, April 30, 2001
Granted
Surrendered under Exchange Program
Terminated
Exercised
Outstanding, April 30, 2002

Exercisable, April 30, 2001

Exercisable, April 30, 2002

70

Number of
Options
1,969,559
1,402,000
930,417
(216,335)
(168,901)
3,916,740
1,929,060
(433,148)
(3,000)
5,409,652
710,565
(666,315)
(802,009)
(415,035)
4,236,858

4,071,188

3,811,775

Weighted Average
Exercise Price
$ 17.65
16.27
26.59
(20.56)
(2.05)
19.78
9.26
(24.62)
(8.69)
15.65
13.09
(27.77)
(20.56)
(7.87)
$ 13.09

$ 16.44

$ 13.27

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Set forth below is a summary of options outstanding and exercisable as of April 30, 2002:

Range of
Exercise Price
$ .60–$ 2.00
$ 4.61–$ 8.78
$10.00–$18.00
$18.01–$27.00
Over $27.00
Totals

Number of
Outstanding
Options
279,000
1,205,127
2,110,674
406,310
235,747
4,236,858

Weighted
Average
Remaining
Contractual
Life (Years)
2.1
6.2
6.9
6.6
2.0
6.1

Options Outstanding

Options Exercisable

Weighted
Average
Exercise
Price
$ 1.92
8.29
13.46
22.60
31.13
$13.09

Number of
Exercisable
Options
279,000
1,173,794
1,735,700
390,954
232,327
3,811,775

Weighted
Average
Exercise
Price
$ 1.92
8.32
13.91
22.75
31.11
$13.27

During fiscal 1996, the FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, which defines a fair value based
method of accounting for stock-based employee compensation and encourages all entities to adopt that method of accounting
for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation
costs for those plans using the intrinsic method of accounting prescribed by APB Opinion No. 25. Entities electing to remain
with the accounting in APB Opinion No. 25 must make pro forma disclosures of net income and earnings per share as if the fair
value based method of accounting defined in SFAS No. 123 had been applied.

The Company has elected to account for its stock-based compensation plans under APB Opinion No. 25. However, the
Company has computed, for pro forma disclosure purposes, the value of all options granted during the fiscal years 2000, 2001
and 2002 using the Black-Scholes option pricing model as prescribed by SFAS No. 123, using the following weighted average
assumptions for grants in the fiscal years ended 2000, 2001 and 2002.

April 30,
Risk free interest rate
Expected dividend yield
Expected life
Expected volatility

2000

2001

2002

5.81%–6.69%

4.85%–6.76%

4.03%–5.05%

N/A
5 Years

67.37%

N/A
7 Years

84.20%

N/A
5 Years

65.00%

The total value of options granted during the years ended April 30, 2000, 2001 and 2002 would be amortized on a pro forma
basis over the vesting period of the options. Options generally vest over a one to three year period. If the Company had
accounted for these plans in accordance with SFAS No. 123, the Company’s net income (loss) and net income (loss) per share
would have changed as reflected in the following pro forma amounts:

Fiscal Year
Net income (loss) available to common stockholders

As reported
Pro forma

Diluted net income (loss) per share of common stock

As reported
Pro forma

2000

2001

2002

$11,050
$ 4,379

$ 0.57
$ 0.23

$(103,505)
$(116,594)

$
$

(4.46)
(5.03)

$4,471
$ 667

$ 0.19
$ 0.03

The weighted average grant date fair value of options granted during the fiscal years 2000, 2001 and 2002 is $3.30, $7.28 and
$7.06, respectively.

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11. RESTRUCTURING

In April 2001, the Company’s Board of Directors approved a reorganization of certain of the Company’s operations. This reorgan-
ization consisted of the elimination of various positions and the closure of certain facilities. The following items were charged
to earnings during 2001:

Severance
Facility closures

$3,786
365
$4,151

Severance relates to the termination of 19 employees, primarily in management and administration, as well as three officers of
the Company. Facility closures include the costs of closing two transfer stations.

During the fiscal year 2002, $3,676 was charged against the accrual. At April 30, 2002, the reversal of various prior year 
unrealized restructuring expenses netted with current year restructuring charges of $254, amounted to ($438). The remaining
balance included in other accrued liabilities in the accompanying April 30, 2002 balance sheet amounts to $37.

12. EMPLOYEE BENEFIT PLANS

The Company offers its eligible employees the opportunity to contribute to a 401(k) plan. The Company may contribute up 
to $500 dollars per individual per calendar year. Participants vest in employer contributions ratably over a three-year period.
Employer contributions for the fiscal years 2000, 2001 and 2002 amounted to $387, $434 and $406, respectively.

In January 1998, the Company implemented its Employee Stock Purchase Plan. Under this plan, qualified employees may

purchase shares of Class A Common Stock by payroll deduction at a 15% discount from the market price. 600,000 shares of
Class A Common Stock have been reserved for this purpose. During the fiscal years 2000, 2001 and 2002, 6,616, 29,287 and
30,904 shares, respectively, of Class A Common Stock were issued under this plan.

13. INCOME TAXES

The provision (benefit) for income taxes from continuing operations for the fiscal years 2000, 2001 and 2002 consists of the
following:

April 30,
Federal—
Current
Deferred
Deferred benefit of loss carryforwards

State—

Current
Deferred
Deferred benefit of loss carryforwards

Total

2000

2001

2002

$ 4,912
3,079
—
7,991

1,791
833
—
2,624
$10,615

$ (1,036)
(2,935)
(5,721)
(9,692)

(829)
(1,068)
(1,142)
(3,039)
$(12,731)

$(1,639)
9,071
(4,049)
3,383

565
2,966
(1,027)
2,504
$ 5,887

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The differences in the provision for income taxes and the amounts determined by applying the Federal statutory rate to income
before provision for income taxes for the years ended April 30, 2000, 2001 and 2002 are as follows:

Fiscal Year
Federal statutory rate

Tax at statutory rate
State income taxes, net of federal benefit
Non-deductible impairment charge
Non-deductible goodwill
Losses on business dispositions
Equity in loss of unconsolidated entities
Other, net

2000

35%

2001

35%

2002

35%

$ 7,632
1,706
—
205
—
295
777
$10,615

$(32,978)
(1,975)
12,825
1,155
—
6,390
1,852
$(12,731)

$ 6,200
1,628
—
1,052
(2,072)
(390)
(531)
$ 5,887

Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for income tax purposes.

Deferred tax assets and liabilities consist of the following at April 30, 2001 and 2002:

April 30,
Deferred tax assets:

Accrued expenses and reserves
Basis difference in partnership interests
Amortization of intangibles
Unrealized loss on securities
Capital loss carryforward
Net operating loss carryforwards
Alternative minimum tax credit carryforwards
Other tax carryforwards
Other

Total deferred tax assets
Less: valuation allowance
Total deferred tax assets after valuation allowance

Deferred tax liabilities:

Accelerated depreciation of property and equipment
Other

Total deferred tax liabilities
Net deferred tax asset (liability)

2001

2002

$ 16,293
428
13,562
—
—
35,931
1,442
235
875
68,766
(24,134)
44,632

(28,980)
(2,378)
(31,358)
$ 13,274

$ 14,291
5,532
8,833
3,727
1,900
38,672
672
—
1,534
75,161
(28,512)
46,649

(35,495)
(1,739)
(37,234)
$ 9,415

At April 30, 2002, the Company has for income tax purposes Federal net operating loss carryforwards of approximately $90,255
that expire in years 2005 through 2022 and state net operating loss carryforwards of approximately $88,897 that expire in
years 2003 through 2022. Substantial limitations restrict the Company’s ability to utilize certain Federal and state loss carry-
forwards. Due to uncertainty of the utilization of the carryforwards, no tax benefit has been recognized for approximately
$38,386 of the Federal net operating loss carryforwards and $76,560 of the state net operating loss carryforwards. In addition,
the Company has approximately $672 minimum tax credit carryforward available that is not subject to limitation.

The $4,378 net increase in the valuation allowance is due to the addition of a valuation allowance for a capital loss carry-

forward generated in the current year and the increase in the basis difference for the investment in New Heights, less the 
expiration of certain state loss carryforwards and $3,156 reduction in Federal losses acquired through acquisitions and recorded
as a reduction of goodwill. The Company reduced the valuation allowance for Federal losses due to higher estimates of future
taxable income and due to a reduction of the limitation on a portion of the losses upon the sale of certain operations.

The valuation allowance includes $15,690 related to losses acquired through acquisitions. To the extent that future 

realization of such carryforwards exceeds the Company’s current estimates, additional benefits received will be recorded as 
a reduction of goodwill. In assessing the realizability of carryforwards and other deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company adjusts

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the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will
not be realized.

14. DISCONTINUED OPERATIONS, ASSETS HELD FOR SALE, DIVESTITURES AND EXTRAORDINARY ITEM

DISCONTINUED OPERATIONS:

At the end of fiscal year 2001, the Company adopted a formal plan to dispose of its tire processing, commercial recycling and
mulch recycling businesses (herein “discontinued businesses”). The Company is accounting for these planned dispositions in
accordance with APB Opinion No. 30, and accordingly the discontinued businesses are carried at estimated net realizable value
less costs to be incurred through date of disposition.

For the fiscal year 2001, the estimated loss on the disposal of the discontinued operations of $3,846, net of income tax
benefit of $1,085, represents the estimated loss on the disposal of the assets of the discontinued operations and includes costs
to sell, estimated loss on sale and a provision for losses during the phase-out period.

The mulch recycling business was sold effective June 30, 2001. The Company’s tire processing business was sold in
September 2001 for cash consideration of $13,745. The Company retained a 19.9% interest in the new venture, which was 
valued at $3,080. The Company is accounting for its retained investment under the cost method. The commercial recycling 
center in Newark, New Jersey was sold effective April 18, 2002.

Actual operating results of discontinued businesses for the fiscal year 2002 exceeded the original estimate by $599 (net 

of income tax provision of $408), and the actual loss on the sale of assets exceeded the estimate by $4,695 (net of income tax
benefit of $565). Accordingly, the accompanying income statement for the year ended April 30, 2002 includes an additional
loss on disposal of discontinued operations of $4,096.

Net assets of discontinued operations at April 30, 2002 represent a commercial recycling facility that the company expects

to sell in fiscal year 2003. Net assets of discontinued operations are stated at their expected net realizable values and have
been separately classified in the accompanying balance sheets at April 30, 2001 and 2002 and consist of the following:

April 30,
Current assets
Non-current assets
Total assets

Current liabilities
Non-current liabilities
Total liabilities

Net assets of discontinued operations

A summary of the operating results of the discontinued operations is as follows:

Fiscal Year
Revenues
(Loss) income before income taxes
(Benefit) provision for income taxes
(Loss) income from discontinued operations, net of income taxes

2001
$ 8,407
18,949
$27,356

$ 9,690
6,132
$15,822

$11,534

2000
$23,129
3,355
1,471
$ 1,884

2002
$ 243
2,204
$2,447

$ 828
0
$ 828

$1,619

2001
$ 48,607
(24,229)
(8,781)
$(15,448)

The Company has included approximately $13,957 and $27,921 of intercompany sales of recyclables from the commercial recy-
cling business to the brokerage business in loss on discontinued operations for the fiscal years 2000, and 2001, respectively.
Intercompany sales of recyclables from the commercial recycling business to the brokerage business amounted to $13,259 for
the year ended April 30, 2002.

Net Assets Held for Sale:

The Company had identified for sale certain other businesses which were classified as net assets held for sale as of April 30,
2001. These included its Timber Energy business and its one remaining plastics recycling facility.

On May 17, 2001, the plastics recycling business was sold for approximately $998 in total consideration. The consideration 

consisted of $406 in cash and $592 in notes.

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On July 31, 2001, the Timber Energy business was sold for approximately $15,000 in total consideration. The considera-

tion comprised the buyer’s assumption of debt, reimbursement of restricted cash funds, and a working capital adjustment,
resulting in $10,691 cash.

Consolidated net assets held for sale primarily consisted of cash, accounts receivable, inventories, property, plant and 
equipment, trade payables and bonds payable. At April 30 2001, assets and liabilities of the assets held for sale consisted 
of the following:

Current assets
Non-current assets
Total assets

Current liabilities
Non-current liabilities
Total liabilities

Net assets held for sale

Net assets held for sale was $0 at April 30, 2002.

Other Divestitures:

April 30, 2001
$ 4,361
12,508
$16,869

$ 4,165
4,663
$ 8,828

$ 8,041

A portion of the Company’s 50% interest in New Heights was sold in September 2001 for consideration of $250. The Company
retained an interest of 9.95% in the tire assets of New Heights, as well as financial obligations related solely to the New
Heights power plant. In addition, the Company has an interest in certain notes granted by New Heights collectively valued at
approximately $9,000, payment of which is contingent upon certain events. The Company will record the contingent considera-
tion when the contingency is removed. The Company is accounting for its retained investment under the equity method.

In October, 2001, the Company sold its Multitrade division for consideration of $6,893. The transaction resulted in a gain

of $4,156 which is included in other income.

In July, 2001, the Company sold its S&S Commercial division for consideration of $887. The transaction resulted in a gain

of $692 which is included in other income.

Extraordinary Item:

During fiscal year 2000, the Company paid off its existing revolving credit facility with a bank and incurred an extraordinary
loss of $631 (net of tax benefit of $448), resulting from the write-off of related debt acquisition costs.

15. EARNINGS PER SHARE

The following table sets forth the numerator and denominator used in the computation of earnings per share:

Fiscal Year
Numerator:

Net income (loss) from continuing operations
Less: preferred dividends
Net income (loss) available to common stockholders

Denominator:

Number of shares outstanding, end of period:

2000

2001

2002

$11,190
—
$11,190

$(82,241)
(1,970)
$(84,211)

$11,827
(3,010)
$ 8,817

Class A common stock
Class B common stock
Effect of weighted average shares outstanding during period
Weighted average number of common shares used in basic EPS
Impact of potentially dilutive securities:
Dilutive effect of options, warrants and contingent stock
Weighted average number of common shares used in diluted EPS

22,215
988
(4,472)
18,731

541
19,272

22,198
988
3
23,189

—
23,189

22,667
988
(159)
23,496

673
24,169

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For the fiscal years 2000, 2001 and 2002, 2,033, 5,389 and 6,653, respectively, of common stock equivalents related to options,
convertible debt, warrants and redeemable convertible preferred stock, respectively, were excluded from the calculation of 
dilutive shares since the inclusion of such shares would be anti-dilutive as the Company had reported a net loss.

16. RELATED PARTY TRANSACTIONS

(A) SERVICES

During fiscal years 2000, 2001 and 2002, the Company retained the services of a related party, a company wholly owned 
by two of the Company’s major stockholders and members of the Board of Directors (one of whom is also an officer), as a 
contractor in developing or closing certain landfills owned by the Company. Total purchased services charged to operations 
or capitalized to landfills for the fiscal years 2000, 2001 and 2002 were $5,338, $3,780 and $2,559, respectively, of which 
$23 and $0 were outstanding and included in accounts payable at April 30, 2001 and 2002, respectively.

(B) LEASES

On August 1, 1993, the Company entered into two leases for operating facilities with a partnership in which two of the
Company’s major stockholders and members of the Board of Directors (one of whom is also an officer) are the general partners.
The leases are classified as capital leases in the accompanying consolidated balance sheets. The leases call for monthly pay-
ments of approximately $18 and expire in April 2003. Total interest and amortization expense charged to operations for fiscal
years 2000, 2001 and 2002 under these agreements was $179, $236 and $204, respectively.

(C) POST-CLOSURE LANDFILL

The Company has agreed to pay the cost of post-closure on a landfill owned by certain principal shareholders. The Company
paid the cost of closing this landfill in 1992, and the post-closure maintenance obligations are expected to last until 2012. In
the fiscal years 2000, 2001 and 2002, the Company paid $5, $7 and $6 respectively, pursuant to this agreement. As of April 30,
2001 and 2002, the Company has accrued $89 and $83 respectively, for costs associated with its post-closure obligations.

(D) TRANSFER STATION LEASE

In June 1994, the Company entered into a transfer station lease for a term of 10 years. The transfer station is owned by a 
current member of the Company’s Board of Directors, who became a director upon the execution of the lease. Under the terms
of the lease the Company agreed to pay monthly rent for the first five years at a rate of five dollars per ton of waste disposed
of at the transfer station, with a minimum rent of $7 per month. Since June 1999, the monthly rent was lowered to a rate of
two dollars per ton of waste disposed, with a minimum rent of $3 per month. Total lease payments for the fiscal years 2000,
2001 and 2002 were $54, $55 and $64, respectively.

(E) EMPLOYEE LOANS

As of April 30, 2001 and 2002, the Company has recourse loans to officers and employees outstanding in the amount of $1,953
and $1,105, respectively. The interest on these notes is payable upon demand by the company. The notes have no fixed repay-
ment terms. Interest is at the Wall Street Journal Prime Rate (4.75% at April 30, 2002). Notes from officers consisted of $1,866
and $1,016 at April 30, 2001 and 2002, respectively, with the remainder being from employees of the Company.

(F)

The Company sells recycled paper products to its equity method investee, GreenFiber. Revenue from sales to GreenFiber since
the inception of the joint venture in July 2001 amounted to $2,513 and $2,303 for fiscal years 2001 and 2002, respectively.

17. SEGMENT REPORTING

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting informa-
tion about operating segments in financial statements. In general, SFAS No. 131 requires that business entities report selected
information about operating segments in a manner consistent with that used for internal management reporting.

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The Company classifies its operations into Eastern, Central, Western and FCR Recycling. The Company’s revenues in the
Eastern, Central and Western segments are derived mainly from one industry segment, which includes the collection, transfer,
recycling and disposal of non-hazardous solid waste. The Eastern Region also includes Maine Energy, which generates electricity
from non-hazardous solid waste. The Company’s revenues in the FCR Recycling and brokerage segment are derived from inte-
grated waste handling services, including processing and recycling of wood, paper, metals, aluminum, plastics and glass and
brokerage of recycled materials. Ancillary operations, mainly residue recycling, major customer accounts and earnings from
equity method investees, are included in Other.

Year Ended April 30, 2000

Outside revenues
Inter-segment revenues
Net income (loss) from continuing 
operations before discontinued 
operations, extraordinary item 
and cumulative effect of change 
in accounting principle
Depreciation & amortization
Merger-related costs
Interest expense (net)
Capital expenditures
Total assets

Year Ended April 30, 2001

Outside revenues
Inter-segment revenues
Net income (loss) from continuing 
operations before discontinued 
operations, extraordinary item 
and cumulative effect of change 
in accounting principle
Depreciation & amortization
Impairment charge
Interest expense (net)
Capital expenditures
Total assets

Year Ended April 30, 2002

Outside revenues
Inter-segment revenues
Net income (loss) from continuing 
operations before discontinued 
operations, extraordinary item 
and cumulative effect of change 
in accounting principle
Depreciation & amortization
Interest expense (net)
Capital expenditures
Total assets

Eastern
Region

Central
Region

Western
Region

FCR
Recycling

Other

Eliminations

Total

$ 84,353
13,999

$ 97,807
32,657

$ 60,671
12,776

$ 46,034
9,242

$ 26,148 $
4,978

— $315,013
—

(73,652)

1,259
11,692
1,101
4,315
18,092
377,724

14,793
13,992
—
3,491
15,806
127,749

5,227
7,847
389
3,116
17,422
112,237

3,190
1,228
—
1,569
9,169
91,870

(13,279)
3,584
—
3,182
8,086
150,890

11,190
—
38,343
—
1,490
—
15,673
—
—
68,575
— 860,470

$158,754
38,267

$ 99,305
40,498

$ 66,473
14,995

$108,903
18,463

$ 46,381 $
1,273

— $479,816
—

(113,496)

(3,876)
20,349
1,948
10,346
25,843
283,967

3,706
14,330
7,765
3,564
20,545
126,617

4,152
9,855
49
4,321
16,445
112,882

(49,780)
3,955
49,857
6,923
7,750
80,984

(36,443)
4,394
—
13,493
(9,065)
81,843

— (82,241)
52,883
—
59,619
—
38,647
—
—
61,518
— 686,293

$148,726
30,494

$ 95,305
45,171

$ 65,628
14,626

$ 93,703
6,402

$ 17,459 $

58

— $420,821
—

(96,751)

1,944
20,825
8,708
15,850
265,388

18,744
13,073
3,096
11,856
115,140

1,125
10,192
7,434
6,490
104,479

(8,501)
4,105
10,044
2,573
69,788

(1,485)
2,501
1,289
905
66,246

11,827
—
50,696
—
30,571
—
37,674
—
— 621,041

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18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of certain items in the Consolidated Statements of Operations by quarter for fiscal years 2001 
and 2002.

Fiscal Year 2001
Revenues
Operating (loss) income
(Loss) income from continuing operations before income 

taxes, discontinued operations, extraordinary item and 
cumulative effect of change in accounting principle

Net (loss) income available to common stockholders
Basic net (loss) income per common share
Diluted net (loss) income per common share

Fiscal Year 2002
Revenues
Operating income
Income from continuing operations before income taxes, 
discontinued operations, extraordinary item and 
cumulative effect of change in accounting principle

Net (loss) income available to common stockholders
Basic net (loss) income per common share
Diluted net (loss) income per common share

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$141,080
14,056

$126,448
14,135

$112,705
10,788

$ 99,583
(67,944)

3,630
3,319
0.14
0.14

First
Quarter

3,101
364
0.02
0.01

Second
Quarter

(13,419)
(13,620)
(0.58)
(0.58)

(88,284)
(93,568)
(4.04)
(4.04)

Third
Quarter

Fourth
Quarter

$112,341
11,517

$109,785
12,441

$101,189
8,228

$ 97,506
9,566

4,574
1,474
0.06
0.06

9,261
3,789
0.16
0.16

883
(732)
(0.03)
(0.03)

2,996
(60)
—
—

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 

FINANCIAL DISCLOSURE

The information required with respect to changes in the Company’s accountants was previously reported in the Current Report
on Form 8-K of the Company filed on May 22, 2002 and in the Current Report on Form 8-K of the Company filed on June 18,
2002, and is incorporated by reference into this Annual Report on Form 10-K.

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PART III

Items 10, 11, 12 and 13 of Part III (except for information required with respect to executive officers of the Company which 
is set forth under “Executive Officers and Other Key Employees of the Company” in Item 1 of Part I of this Annual Report on
Form 10-K and with respect to equity compensation plan information which is set forth under “Equity Compensation Plan
Information” below) have been omitted from this Annual Report on Form 10-K, since the Company expects to file with the
Securities and Exchange Commission, not later than 120 days after the close of its fiscal year, a definitive proxy statement. 
The information required by Items 10, 11, 12 and 13 of this Annual Report on Form 10-K, which will appear in the definitive
proxy statement, is incorporated by reference into Part III of this Annual Report on Form 10-K.

EQUITY COMPENSATION PLAN INFORMATION

The following table shows information about the securities authorized for issuance under the Company’s equity compensation
plans as of April 30, 2002:

Plan Category
Equity compensation plans 

approved by security holders
Equity compensation plans not 
approved by security holders

Total

(a)

(b)

(c)

Number of securities to be
issued upon exercise of
outstanding options and

warrants(1)

Weighted-average exercise
price of outstanding options
and warrants

Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities

reflected in column (a))(2)

3,921,866

264,000
4,185,866

$13.36

$ 2.00
$12.64

2,546,727(3)

—

2,546,727(3)

(1) This table excludes an aggregate of 123,992 shares issuable upon exercise of outstanding options assumed by the Company in connection with

its acquisition of KTI, Inc. The weighted average exercise price of the excluded options is $23.18.

(2) In addition to being available for future issuance upon exercise of options that may be granted after April 30, 2002, 2,007,534 shares under

the Company’s Amended and Restated 1997 Stock Incentive Plan, of the 2,546,727 reflected in column (c), may instead be issued in the form of

restricted stock or other equity-based awards.

(3) Includes 533,193 shares issuable under the Company’s 1997 Employee Stock Purchase Plan, of which up to 50,000 are issuable in connection

with the current offering period, which ended on June 30, 2002.

A description of the material terms of the equity compensation plans not approved by the Company’s security holders is
included in Note 10 “Stockholders’ Equity” to the Consolidated Financial Statements included in Item 8 of this Annual Report
on Form 10-K.

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Consolidated Financial Statements included under Item 8:

Report of Independent Public Accountants
Consolidated Balance Sheets as of April 30, 2001 and 2002
Consolidated Statements of Operations for the fiscal years 2000, 2001 and 2002.
Consolidated Statements of Redeemable Convertible Preferred Stock, and Stockholders’ Equity for the fiscal years 2000,

2001 and 2002.

Consolidated Statements of Cash Flows for the fiscal years 2000, 2001 and 2002.
Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules:

Schedule II—Valuation and Qualifying Accounts

(a)(3) Exhibits:

The Exhibits that are filed as part of this Annual Report on Form 10-K or that are incorporated by reference herein are

set forth in the Exhibit Index hereto.

(b)

Reports on Form 8-K

During the quarter ended April 30, 2002 the Company filed no reports on Form 8-K. On May 22, 2002 and on June 14,
2002, the Company filed reports on Form 8-K under Item 4 thereof, relating to a change in the Company’s account-
ants. On July 3, 2002, the Company filed a report on Form 8-K under Item 5 thereof, announcing: (i) its intention to
sell $175.0 million of senior subordinated notes due 2012; (ii) its expectation of obtaining a new credit facility; and
(iii) its financial results for the fourth quarter and the 2002 fiscal year and guidance on its expected performance for
its 2003 fiscal year.

(c)

The Exhibits that are filed as part of this Annual Report on Form 10-K or that are incorporated by reference herein are
set forth in the Exhibit Index hereto.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Casella Waste Systems, Inc.

By:

/s/ JOHN W. CASELLA

John W. Casella
Chairman and Chief Executive Officer

Date: July 11, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following 
persons on behalf of the registrant and in the capacities and on the date indicated.

Signature

Title

/s/ JOHN W. CASELLA

John W. Casella

Chairman of the Board of Directors and 
Chief Executive Officer (Principal Executive Officer)

Date

July 11, 2002

/s/ JAMES W. BOHLIG

President and Chief Operating Officer, Director

July 11, 2002

James W. Bohlig

/s/ RICHARD A. NORRIS

Richard A. Norris

Senior Vice President and Chief Financial Officer 
(Principal Accounting and Financial Officer)

/s/ DOUGLAS R. CASELLA

Director

Douglas R. Casella

/s/ JOHN F. CHAPPLE III

Director

John F. Chapple III

/s/ GREGORY B. PETERS

Director

Gregory B. Peters

/s/ GEORGE J. MITCHELL

Director

George J. Mitchell

/s/ WILBUR L. ROSS, JR.

Director

Wilbur L. Ross, Jr.

/s/ D. RANDOLPH PEELER

Director

D. Randolph Peeler

July 11, 2002

July 11, 2002

July 11, 2002

July 11, 2002

July 11, 2002

July 11, 2002

July 11, 2002

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EXHIBIT INDEX

Description
Agreement and Plan of Merger dated as of January 12, 1999 and as amended by Amendments No. 1, 2 and 3 thereto,
among Casella Waste Systems, Inc. (“Casella”), KTI, Inc. (“KTI”) and Rutland Acquisition Sub, Inc. (incorporated herein
by reference to Annex A to the registration statement on Form S-4 as filed November 12, 1999 (file no. 333-90913)).

Amended and Restated Certificate of Incorporation of Casella (incorporated herein by reference to Exhibit 4.1 to the
registration statement on Form S-8 of Casella as filed November 18, 1998 (file no. 333-67487)).

Second Amended and Restated By-Laws of Casella (incorporated herein by reference to Exhibit 3.1 to the current report
on Form 8-K of Casella as filed August 18, 2000 (file no. 000-23211)).

Form of stock certificate of Casella Class A common stock (incorporated herein by reference to Exhibit 4 to Amendment
No. 2 to the registration statement on Form S-1 of Casella as filed October 9, 1997 (file no. 333-33135)).

Certificate of Designation creating Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 4.1
to the current report on Form 8- K of Casella as filed August 18, 2000 (file no. 000-23211)).

1993 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on
Form S-1 of Casella as filed August 7, 1997 (file no. 333-33135)).

1994 Nonstatutory Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to the registration statement
on Form S-1 of Casella as filed August 7, 1997 (file no. 333-33135)).

1996 Stock Option Plan (incorporated herein by reference to Exhibit 10.3 to the registration statement on Form S-1 of
Casella as filed August 7, 1997 (file no. 333-33135)).

1997 Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.5 to Amendment No. 1
to the registration statement on Form S-1 of Casella as filed September 24, 1997 (file no. 333-33135)).

Amended and Restated 1997 Stock Incentive Plan (incorporated herein by reference to the Definitive Proxy Statement
on Schedule 14A of Casella as filed September 21, 1998).

1995 Registration Rights Agreement between Casella and the stockholders who are a party thereto, dated as of
December 22, 1995 (incorporated herein by reference to Exhibit 10.8 to the registration statement on Form S-1 of
Casella as filed August 7, 1997 (file no. 333-33135)).

Warrant to Purchase Common Stock of Casella granted to John W. Casella, dated as of July 26, 1993 (incorporated
herein by reference to Exhibit 10.11 to Amendment No. 1 to the registration statement on Form S-1 of Casella as filed
September 24, 1997 (file no. 333-33135)).

Warrant to Purchase Common Stock of Casella granted to Douglas R. Casella, dated as of July 26, 1993 (incorporated
herein by reference to Exhibit 10.12 to Amendment No. 1 to the registration statement on Form S-1 of Casella as filed
September 24, 1997 (file no. 333-33135)).

Amended and Restated Revolving Credit and Term Loan Agreement between the Registrant and BankBoston, dated as
of January 12, 1998 (incorporated herein by reference to Exhibit 10.13 to the registration statement on Form S-1 of
Casella as filed June 3, 1998 (file no. 333-55879)).

Exhibit
No.

2.1

3.1

3.3

4.1

4.2

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

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Exhibit
No.

Description

10.10 Lease Agreement, as Amended, between Casella Associates and Casella Waste Management, Inc., dated December 9,

1994 (Rutland lease) (incorporated herein by reference to Exhibit 10.17 to the registration statement on Form S-1 of
Casella as filed August 7, 1997 (file no. 333-33135)).

10.11 Lease Agreement, as Amended, between Casella Associates and Casella Waste Management, Inc., dated December 9,

1994 (Montpelier lease) (incorporated herein by reference to Exhibit 10.18 to the registration statement on Form S-1 of
Casella as filed August 7, 1997 (file no. 333-33135)).

10.13 Lease, Operations and Maintenance Agreement between CV Landfill, Inc. and the Registrant dated June 30, 1994

(incorporated herein by reference to Exhibit 10.20 to the registration statement on Form S-1 of Casella as filed
August 7, 1997 (file no. 333-33135)).

10.14 Restated Operation and Management Agreement by and between Clinton County (N.Y.) and the Registrant dated

September 9, 1996 (incorporated herein by reference to Exhibit 10.21 to the registration statement on Form S-1 of
Casella as filed August 7, 1997 (file no. 333-33135)).

10.15 Labor Utilization Agreement by and between Clinton County (N.Y.) and the Registrant dated August 7, 1996 

(incorporated herein by reference to Exhibit 10.22 to the registration statement on Form S-1 of Casella as filed
August 7, 1997 (file no. 333-33135)).

10.16 Lease and Option Agreement by and between Waste U.S.A., Inc. and New England Waste Services of Vermont, Inc.,

dated December 14, 1995 (incorporated herein by reference to Exhibit 10.23 to the registration statement on Form S-1
of Casella as filed August 7, 1997 (file no. 333-33135)).

10.17 Amendment No. 2 to Lease Agreement, by and between Casella Associates and Casella Waste Management, Inc., 

dated as of November 20, 1997 (Rutland lease). (incorporated herein by reference to Exhibit 10.25 to the registration
statement on Form S-1 of Casella as filed on June 25, 1998 (file no. 333-57745)).

10.18 Amendment No. 1 to Stock Option Agreement, dated as of May 12, 1999, by and between KTI, Inc. and the Registrant
(incorporated herein by reference to the current report on Form 8-K of Casella as filed May 13, 1999 (file no.
000-23211)).

10.19 Power Purchase Agreement between Maine Energy Recovery Company and Central Maine Power Company dated

January 12, 1984, as amended (incorporated herein by reference to Exhibit 10.8 to the registration statement on
Form S-4 of KTI as filed October 18, 1994 (file no. 33-85234)).

10.20 Host Municipalities’ Waste Handling Agreement among Biddeford-Saco Solid Waste Committee, City of Biddeford, City 
of Saco and Maine Energy Recovery Company dated June 7, 1991 (incorporated herein by reference to Exhibit 10.10 
to the registration statement on Form S-4 of KTI as filed October 18, 1994 (file no. 33-85234)).

10.21 Form of Maine Energy Recovery Company Waste Handling Agreement (Town of North Berwick) dated June 7, 1991 and

Schedule of Substantially Identical Waste Disposal Agreements (incorporated herein by reference to Exhibit 10.11 to
the registration statement on Form S-4 of KTI as filed October 18, 1994 (file no. 33-85234)).

10.22 Third Amendment to Power Purchase Agreement between Maine Energy Recovery Company, L.P. and Central Maine

Power Company dated November 6, 1995. (incorporated herein by reference to Exhibit 10.38 to the registration 
statement on Form S-4 as filed November 12, 1999 (file no. 333-90913)).

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Exhibit
No.

Description

10.23 Non-Exclusive License to Use Technology between KTI and Oakhurst Technology, Inc. dated December 29, 1998 

(incorporated herein by reference to Exhibit 4.5 to the current report on Form 8-K of KTI as filed January 15, 1999
(file no. 000-25490)).

10.24 Management Compensation Agreement between Casella Waste Systems, Inc. and John W. Casella dated December 8,

1999 (incorporated herein by reference to Exhibit 10.43 to the annual report on Form 10-K of Casella as filed August 4,
2000 (file no. 000-23211)).

10.25 Management Compensation Agreement between Casella Waste Systems, Inc. and James W. Bohlig dated December 8,

1999 (incorporated herein by reference to Exhibit 10.44 to the annual report on Form 10-K of Casella as filed August 4,
2000 (file no. 000-23211)).

10.26 Management Compensation Agreement between Casella Waste Systems, Inc. and Jerry S. Cifor dated December 8, 1999

(incorporated herein by reference to Exhibit 10.45 to the annual report on Form 10-K of Casella as filed August 4, 2000
(file no. 000-23211)).

10.27 Management Compensation Agreement between Casella Waste Systems, Inc. and Martin J. Sergi dated December 8,

1999 (incorporated herein by reference to Exhibit 10.46 to the annual report on Form 10-K of Casella as filed August 4,
2000 (file no. 000-23211)).

10.28 Management Compensation Agreement between Casella Waste Systems, Inc. and Ross Pirasteh dated December 8, 1999
(incorporated herein by reference to Exhibit 10.47 to the annual report on Form 10-K of Casella as filed August 4, 2000
(file no. 000-23211)).

10.29 Preferred Stock Purchase Agreement, dated as of June 28, 2000, by and among the Company and the Purchasers 

identified therein (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K of Casella as
filed August 18, 2000 (file no. 000-23211)).

10.30 Registration Rights Agreement, dated as of August 11, 2000, by and among the Company and the Purchasers identified
therein (incorporated herein by reference to Exhibit 10.2 to the current report on Form 8-K of Casella as filed
August 18, 2000 (file no. 000-23211)).

10.31 First Amendment to Amended and Restated Revolving Credit and Term Loan Agreement, dated December 14, 1999,

between the Company and Fleet National Bank (f/k/a BankBoston, N.A.) (incorporated herein by reference to
Exhibit 10.3 to the current report on Form 8-K of Casella as filed August 18, 2000 (file no. 000-23211)).

10.32 Second Amendment to Amended and Restated Revolving Credit and Term Loan Agreement and Consent, dated

December 14, 1999, between the Company and Fleet National Bank (f/k/a BankBoston, N.A.) (incorporated herein by
reference to Exhibit 10.4 to the current report on Form 8-K of Casella as filed August 18, 2000 (file no. 000-23211)).

10.33 Third Amendment to Amended and Restated Revolving Credit and Term Loan Agreement and Consent, dated

December 14, 1999, between the Company and Fleet National Bank (f/k/a BankBoston, N.A.) (incorporated herein by
reference to Exhibit 10.5 to the current report on Form 8-K of Casella as filed August 18, 2000 (file no. 000-23211)).

10.34 Fourth Amendment to Amended and Restated Revolving Credit and Term Loan Agreement and Consent, dated

December 14, 1999, between the Company and Fleet National Bank (f/k/a BankBoston, N.A.) (incorporated herein by
reference to Exhibit 10.6 to the current report on Form 8-K of Casella as filed August 18, 2000 (file no. 000-23211)).

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Exhibit
No.

Description

10.35 Fifth Amendment to Amended and Restated Revolving Credit and Term Loan Agreement and Consent, dated

February 22, 2001, between the Company and Fleet National Bank (f/k/a BankBoston, N.A.) (incorporated herein 
by reference to Exhibit 10.54 to the annual report on Form 10-K of Casella for the year ended April 30, 2001 
(file no. 000-23211)).

10.36 Sixth Amendment to Amended and Restated Revolving Credit and Term Loan Agreement and Consent, dated June 4,
2001, between the Company and Fleet National Bank (f/k/a BankBoston, N.A.) (incorporated herein by reference to
Exhibit 10.55 to the annual report on Form 10-K of Casella for the year ended April 30, 2001 (file no. 000-23211)).

10.37 KTI, Inc. 1994 Long-Term Incentive Award Plan (incorporated herein by reference to Exhibit (d)(3) to the Schedule TO

of Casella as filed July 2, 2001 (file no. 000-23211)).

10.38 KTI, Inc. Non-Plan Stock Option Terms and Conditions (incorporated herein by reference to Exhibit (d)(4) to the

Schedule TO of Casella as filed July 2, 2001 (file no. 000-23211)).

10.39 Management Compensation Agreement between Casella Waste Systems, Inc. and Charles E. Leonard dated 

June 18, 2001.

10.40 Management Compensation Agreement between Casella Waste Systems, Inc. and Richard Norris dated July 20, 2001.

10.41 US GreenFiber LLC Limited Liability Company Agreement, dated June 26, 2000, between U.S. Fiber, Inc. and Greenstone

Industries, Inc.

10.42 Purchase Agreement, dated August 17, 2001, by and among Crumb Rubber Investors Co., LLC, Casella Waste

Systems, Inc. and KTI Environmental Group, Inc.

10.43 Purchase Agreement, dated August 17, 2001, by and among New Heights Holding Corporation, KTI, Inc., KTI

Operations, Inc. and Casella Waste Systems, Inc.

10.44 Form of Non-Plan Non-Statutory Stock Option Agreement as issued by Casella Waste Systems, Inc. to certain individuals

as of May 25, 1994.

21.1

Subsidiaries of Casella Waste Systems, Inc.

23.1

Consent of PricewaterhouseCoopers LLP.

After reasonable efforts, the Company has not been able to obtain the consent of Arthur Andersen LLP to the incorporation 
by reference of their report in this Form 10-K and the Company has dispensed with the requirement under Section 7 of the
Securities Act to file their consent in reliance on Rule 437(a) promulgated under the Securities Act. Because Arthur Andersen
LLP has not consented to the incorporation by reference of their report in this Form 10-K, you will not be able to recover
against Arthur Andersen LLP under Section 11 of the Securities Act for any untrue statements of a material fact contained in
the financial statements audited by Arthur Andersen LLP incorporated by reference or any omissions to state a material fact
required to be stated therein.

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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of Casella Waste Systems, Inc.:

Our audit of the consolidated financial statements referred to in our report dated June 29, 2002 appearing in this Annual
Report on Form 10-K also included an audit of the financial statement schedule as of and for the year ended April 30, 2002
listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the related consolidated financial statements. 
The financial statement schedule of the Company as of and for the years ended April 30, 2001 and 2000 was audited by other
independent accountants whose report dated July 19, 2001 stated that the schedule presented fairly, in all material respects,
the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ 

PricewaterhouseCoopers LLP
Boston, Massachusetts
June 29, 2002

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FINANCIAL STATEMENT SCHEDULES

Schedule II

VALUATION ACCOUNTS

Allowance for Doubtful Accounts

(In thousands)
April 30,
Balance at beginning of period
Additions—Charged to expense
Acquisition related
Deductions—Bad debts written off, net of recoveries
Balance at end of period

Restructuring

(In thousands)
April 30,
Balance at beginning of period
Additions—Charged to expense
Deductions—Amounts paid
Balance at end of period

2000
$1,430
1,790
2,894
(743)
$5,371

2000
$—
—
—
$—

2001
$ 5,371
3,105
—
(3,572)
$ 4,904

2001
$ —
4,151
—
$4,151

2002
$ 4,904
(930)
—
(3,188)
786

$

2002
$ 4,151
(438)
(3,676)
37

$

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File No. 333-31022, 
File No. 333-40267, File No. 333-43537, File No. 333-43539, File No. 333-43541, File No. 333-43543, File No. 333-43635, 
File No. 333-67487, File No. 333-92735), and on Form S-3 (File No. 333-31268, File No. 333-85279, File No. 333-88097 and 
File No. 333-95841) of Casella Waste Systems, Inc. of our reports dated June 29, 2002 relating to the financial statements 
and financial statement schedule as of and for the fiscal year ended April 30, 2002, which appear in this Form 10-K.

/s/

PricewaterhouseCoopers LLP
Boston, MA
July 9, 2002

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BOARD OF DIRECTORS

John W. Casella
Chairman, Chief Executive Officer and Secretary

Hon. George J. Mitchell
Chairman, Verner Liipfert Bernhard McPherson & Hand

Douglas R. Casella
Vice Chairman, President, Casella Construction, Inc.

D. Randolph Peeler
Managing Director, Berkshire Partners LLC

James W. Bohlig
President and Chief Operating Officer

Gregory B. Peters
Managing Partner, Lake Champlain Capital Management LLC

John F. Chapple III
President, Marlin Management Services

Wilbur L. Ross
Chairman and CEO, W.L. Ross & Co. LLC

OFFICERS

John W. Casella
Chairman, Chief Executive Officer and Secretary

Sean P. Duffy
Regional Vice President

James W. Bohlig
President and Chief Operating Officer, Director

Joseph S. Fusco
Vice President, Communications

Richard A. Norris
Senior Vice President, Chief Financial Officer and Treasurer

Gerald P. Gormley
Vice President, Human Resources

Charles E. Leonard
Senior Vice President, Solid Waste Operations

James M. Hiltner
Regional Vice President

Michael J. Brennan
Vice President and General Counsel

Larry B. Lackey
Vice President, Permits, Compliance and Engineering

Timothy A. Cretney
Regional Vice President

Alan N. Sabino
Regional Vice President

Christopher M. DesRoches
Vice President, Sales and Marketing

Gary R. Simmons
Vice President, Fleet Management

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SHAREHOLDER INFORMATION

COMPANY OFFICES
25 Greens Hill Lane
Rutland, VT 05701
Telephone: (802) 775-0325
www.casella.com

DIRECT INQUIRIES TO:
Joseph Fusco, Vice President, Communications
Telephone: (802) 775-0325
E-mail: joe.fusco@casella.com

ANNUAL MEETING OF SHAREHOLDERS
Killington Grand Hotel
Killington, VT
October 15, 2002
10:00 a.m.

AUDITORS
PricewaterhouseCoopers LLP
One International Place
Boston, MA 02110

LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109

TRANSFER AGENT & REGISTRAR
EquiServe
150 Royal Street
Boston, MA 02021
www.equiserve.com

STOCK EXCHANGE
Casella Waste Systems, Inc., is traded on the NASDAQ
National Market under the ticker symbol “CWST.”

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CA_dilux2_081302.js  8/14/02  9:19 AM  Page 2

CASELLA WASTE SYSTEMS

25 Greens Hill Lane
Rutland, Vermont 05701
1-800-CASELLA
www.casella.com

ABOUT THE COMPANY: Casella Waste Systems,
headquartered in Rutland, Vermont, is a regional,
integrated, non-hazardous solid waste services
company providing collection, transfer, disposal, 
and recycling services primarily in the northeastern
United States.