2005 annual report 2005 annual report 2 0 0 5 a n n u a l r e p o r t c a s e l l a w a s t e s y s t e m s Ro ot s … Our mission, vision and strategy is made possible only by our commitment to honor our core values—integrity, trust, continuous improvement, responsibility, teamwork, and service—as a guide for our decisions, choices and behaviors. Every day. casella waste systems annual report 2005 3 3 To ou r fellow shareholders... 4 Last y ear, we talke d ab ou t ho w we w ou ld go ab ou t cr eat ing va lue cons is te n t w ith th e long -term approach laid ou t in ou r thr ee-t o-f iv e y ear plan; how we wo u ld co n tin u e to build assets in our core ma rkets, to foc us o n dev elo ping munic ipal par t n er s h ip s; a n d h ow we woul d continue to lev erage our do m inant was te s erv ices infr ast ruc t ur e bu ild in g a greate r concentration in our core fr an chise . 2005 was a terrific ye ar. By conti nuing to i nvest in our pe ople ; by pur suing smart , dis ciplined gr o wth a nd b y attain ing dail y operat iona l e xcellen ce ; we ’ve de liver ed on our pro mise o f p r ov idin g th e stabi lity and predictab ility th at inve s to rs v alue, wh ile b uilding t he fou n d a tio n s o f fu t ur e valu e cre ati on. And it’s quantifiable succ ess, a s in di ca ted by s ignif icant impr ovem ent s in o ur o pe r at in g marg in and intern aliza tio n r ates, a ggress iv e d evelo pm ent o f our public - p riv a te partne rship m odel, and o ur inc rease i n pe rm itable c ompany -w ide dispo sa l c a p ac ity —f ro m just u nder 30 mill ion to ns at the en d of f isca l year 2 003 t o near ly 82 millio n to n s a t Ap ril 30, 2 005 , a rem ark able indicato r o f th e valu e w e s tand po ised t o cr eat e in th e near—a nd l ong-t erm . All of th ese indicat ors cont ribu ted t o healt hy g rowt h ov er t he prev ious fis c a l y ea r — perform ance c ons iste nt with our st ra tegic pla n and, m or e im port ant ly, th e re s u lt o f ou r empl oye es—more than 2,60 0 strong —m akin g it ha pp en. Ever y da y. In fis cal 2006 w e’re aimin g to b uild o n our s ucc ess , fir mly r oot ed in a f o c u se d s t ra te g y execute d by the peo ple wh o build o ur c omp an y. We’ll c ontin ue to pu rsu e o p po r tu n itie s to de velop disposa l ca pac ity (primari l y th roug h p ublic p art ners hips), by lev e ra g in g ou r abili ty to link rec yc ling and other su sta inable e nv ir on ment al appr oache s t o th e dis po s a l need s of communities thro ughou t o u r o per at ing r eg ion—a s tr ate gy we ’re s u c c e s s fu lly purs uing in plac es like Ontario an d C hem un g, New York ; West Old To wn in Ma in e an d Southb ridge i n Ma ssachus etts. Desp ite the slownes s in our regiona l e cono my, we be lieve w e can s ust a in h ea lt hy, predi ctable grow th in fisca l 200 6 a s w e ll as s ee even gr eat er im prov em en t in o u r intern alization rate , w hil e st re ngthe ni ng our marg in. A nd w e’ll do it by co n tin u in g to build on the things t hat helpe d us to m ake 2 00 5 suc h a f antas tic year —o u r p e op le , an d an u nrele nting desi re to be t he bes t so lid wast e se rvice comp any in N or th Ame ric a . Than k you for your supp ort throu gh out the y ear. Since rely, John W. Casella Chairm an & Chief Execu tiv e Officer Augus t 8, 2005 casella waste systems annual report 2005 5 Leaders… Great companies—ones that create value and make a significant contribution to society—are built by great leaders. And, from the driver or handler to the senior manager, everyone in our company is taught and trusted to lead at some level. 6 casella waste systems annual report 2005 7 8 Every day, we b uild our people. Their sk ills. The ir commit me nt . Their h ea rt . Becaus e—ult imat ely— anyt hin g we hope t o build , any value we ho pe t o cre ate, any cont ribution we ho pe t o make comes down t o teaching our people t hat wh at t hey do matt ers immensely—to e ach ot her, our cust omer s, our communit ies, our sha rehold er s. Grea t people doing the right th ings, do ing t hem very we ll. Doing t hem every day. casella waste systems annual report 2005 9 G rea t P eople… Yo u see a landf ill… we see a so ur ce of renew able energy. Focu s… 10 The wa ste management landscape of t oday isn’t th e sa me as it was te n year s ago, five y ears ago, even las t year. Public at titudes, ne w soc ial and legislat ive mandate s, ever more rigor ous r egulation and over sight—cr eating value fo r communities isn’t just an excuse fo r mark eting or adve rtising . It’s a n ecessity. casella waste systems annual report 2005 11 12 With a focuse d str ate gy of develop ing d isposal capacity thr ough public part nerships, and using our unique abilit y t o link r ecyc ling and othe r sust ainable enviro nmen tal opport unit ies we can not only meet, but excee d, the needs and expec tat ions o f the communities we ser ve. And we’re doin g it. At Sout hbridge and Ha rdwick, at Wes t Old Town and n ow, Chemung, New Yor k— ever y day—we ’r e building s us tainable wast e management . casella waste systems annual report 2005 13 Ef ficient and prof itab le re cycling mean s lever ag ing th e value of a ll our ser vices. Innovation... 14 Being able t o ex cee d our cus tomers ’ expect atio ns means using our abilit y to innovate, a nd using te chnolog y t hat allows u s t o diff erent iate our selve s f rom th e co mpet ition. Ou r recent implementa tion of opt ical sort ing will enable us to more effe ctively and eff iciently separ at e re cyclables —dire ctly suppo rting ou r ef f or t s t o develop single s tre am re cycling and making it easier —ev ery day—fo r our cu stomers t o fu lly par ticip at e in municipal and local rec ycling pr ogr ams— ultimat ely increasing our ability t o lev era ge th ese a ssets as pa rt of a complete, indisp en sable set of solutions—colle ction , re cycling , d ispos al. And we ’r e not sto pping t he re. casella waste systems annual report 2005 15 Rethink ing landfills as su stain able res ources— cre ating s us tai nable value. 16 We’re aggres siv ely wor kin g to d eve lop our Culch rom e TM technol ogy enabling us t o turn mountains of g lass int o usab le brown bottl es. We’ re deve loping an ac tive cultur e o f inno vation acros s o ur compan y that wi ll ensure we c ontinue to d iscover and dev elop new id eas, mainta ining our c omp eti tiv e edge and keeping our pr omise to custo me rs to deliver th e ve ry be st serv ice. Gas reg eneration pro ject s, curren tly under wa y or in the p lann ing stages, are extra ctin g methan e ga s, p iping it to a generating sta tio n and lighti ng up nei ghborho ods and busi nesses—all w hile reduc in g our greenhouse gas fo otp rint . Every day, this t ype o f crea ti ve thin king i s redraw ing th e waste managem ent landsca p e, provi ding leader ship to our ind ustry, conveni ence t o o u r custo me rs and ma king us an ind ispen sable, long- te rm par tner to co mmunities w e se rve. An d we’re jus t ge ttin g started. Using technology to reclaim resources —and opportunity. casella waste systems annual report 2005 17 Foundations… You can’t grow a great company without maintaining a daily focus on the fundamentals that enable us to keep our business on track—financially and strategically. This dedication to everyday performance gives us the ability to seek out, explore, and capitalize on new opportunities. While keeping our strategic focus is crucial to our success, we’re continuing to nurture and mature best practices as well because they sustain our ability to perform at the highest levels. Hiring right. Reducing turnover. In leveraging tools and technology to measure, manage, and improve our performance. Every day. The results? In fiscal 2005 employee retention increased for the fourth year in a row and we met or exceeded the financial goals we set for the 2005 fiscal year. 18 casella waste systems annual report 2005 19 The Big Picture.. . 20 Ma king th e right choices means knowing wh at ’s go ing on outs ide of the company and mak ing sur e our comp any makes sense for t he cur r en t business environmen t. It means th at we need to look ar ound a nd take th e pulse of the wor ld we work in so we can not only meet, but also an ticipat e, meanin gf ul changes. It means doing an exc eptional job of st r ateg ic planning and c on sider ing cus tomers , technology, shar eholde rs and t heir impac t on our busin ess. And that makes us be tte r equipped t o c reate exc eptional valu e. Ever y day. casella waste systems annual report 2005 21 Smart Growth... Every day, we’re looking to pick the right opportunity at the right time— not just any strategic acquisition or tuck-in—but the opportunity that integrates with our business model and our strategic outlook. It means disciplined, thoughtful acquisition strategy. The kind that builds predictable, stable returns on the investments we all make in our company—shareholders, employees, managers, and customers alike. 22