2014
ANNUAL
REPORT
RECYCLING
Since 1977 we have helped to pioneer the field of resource
recovery. Led by our Zero-Sort® facilities, in 2013 we recovered
over 500,000 tons of recyclable materials.
COLLECTION
In 2013 we provided safe, reliable, and environmentally
sound waste and recycling services to over 170,000
households, businesses, and municipalities.
ORGANICS
We transform traditional organic waste streams including food
scraps, wood ash, paper mill by-products, and biosolids into
nutrient rich earthlife® soil amendments and renewable energy.
In 2013 Casella recycled 400,000 tons of organic materials.
ENERGY
Landfill gas recovery and other measures, such as our growing
compressed natural gas vehicle fleet, have reduced our overall
greenhouse gas emissions by over 50% since 2005. In 2013
our landfills also produced enough clean electricity to power
approximately 30,000 homes.
LANDFILLS
For discarded materials that cannot be renewed, our
modern disposal facilities are well-designed, well-run, and
well-equipped to accept these items in an environmentally
safe and secure manner.
CASELLA
RESOURCE SOLUTIONS
We are applying our knowledge and experience in
recycling, collection, organics, energy and landfills to
create resource solutions that provide economic and
environmental value to our customers and our communities.
Learn more at casella.com
TO OUR FELLOW SHAREHOLDERS:
Fiscal year 2014 was an important turning point for our company.
We started the year with six of the strongest months that we have ever
experienced, with financial results up significantly year-over-year and our
team focused and motivated to improve the business across many fronts.
Although we were impacted during our third and fourth
quarters by some of the worst winter weather over the last 50
years in the Northeastern United States, with extended periods
of severe cold, snow and ice storms, and several significant
freeze-thaw cycles, we continued to make excellent strategic
progress in the following key areas that we outlined last year to
improve our core operations, increase financial performance
and reduce risk:
1. Increasing landfill returns;
2. Driving additional profitability in collection operations;
3. Furthering our long-term Eastern region strategy; and
4. Driving high-return revenue growth through our
customer solutions offerings.
We believe we are well-positioned to continue to improve our
performance and free cash flow as we execute against these
same goals over the next several years.
INCREASING LANDFILL RETURNS
We executed extremely well against our goal to source
incremental landfill tons, with fiscal year 2014 volumes
up 350,000 tons year-over-year. Landfills have a high fixed
cost basis, and these incremental volumes added significant
margin, with disposal Adjusted EBITDA up $9.2 million
year-over-year. We achieved this improvement by realigning
our landfill management and sales structure, creating a new
special waste team focused on sourcing and permitting
industrial waste streams into our disposal facilities, and, most
importantly, winning a number of new customers.
Improving landfill returns remains a key strategy for the
remainder of the 8-month transition period ending December
31, 2014 and into fiscal year 2015, with our focus shifting
slightly from the past year. In addition to our efforts to source
additional landfill tons (we still have over 400,000 tons of
excess capacity at our disposal facilities in Western New York),
we believe that it is appropriate to further improve landfill
returns by balancing selective price increases and maximizing
capacity utilization.
We believe that parts of our market area are in the early
stages of a multi-year shift in competitive dynamics. Over the
last 18 months, six disposal facilities in Massachusetts, New
Hampshire, Vermont and Maine have permanently closed,
and we estimate that another six disposal facilities will close
over the next several years. We estimate that these closures
will result in the removal of approximately 2.7 million tons
of disposal capacity in these market areas. Our in-market
facilities have a transportation advantage over moving waste
to distant disposal facilities, enabling us to selectively advance
pricing and further enhance landfill returns.
DRIVING ADDITIONAL PROFITABILITY IN
COLLECTION OPERATIONS
Collection routes are the basic building block of our solid
waste business and we are focused on improving the
profitability of each route, including the optimization of
truck and container capital deployment. During fiscal year
2014, we worked to grow route profitability through selective
price increases, dynamic routing, and on-route marketing to
improve density, along with equipment optimization and
fleet standardization.
Over the last 18 months, we have replaced over 35% of our
hauling managers, and the new teams are making a big
difference in improving profitability through core operational
blocking-and-tackling to reduce our cost of service, optimizing
capital efficiency and enhancing customer satisfaction
FURTHERING OUR LONG-TERM EASTERN
REGION STRATEGY
Approximately three years ago we laid out a comprehensive
strategy to improve the operating and financial performance
of our Eastern Region. We have made significant progress,
which is readily apparent in our improved financial results in
our Eastern Region.
Our Adjusted EBITDA margins in our Eastern Region are up
from roughly 15.5% in fiscal year 2013 to roughly 21.4% in
fiscal year 2014. We have driven this dramatic improvement
through the execution of a series of key steps:
• We settled the North Country landfill litigation in January
2012, enabling us to expand the landfill footprint and drive
additional volumes to the site.
• We sold our negative cash flow Maine Energy Recovery
Company waste-to-energy facility in November 2012,
resulting in the permanent closure of the facility and
allowing us to redirect volumes to create positive returns.
• We acquired Bestway Disposal Services and BBI Waste
Services in December 2012, which included hauling and
transfer assets, gaining internalization benefits at our
landfills and recycling facilities, and synergies within
our operations.
• We received a permit to expand our Southbridge landfill in
January 2013, enabling us to increase volumes by 105,000
tons per year.
• We sold our BioFuels C&D processing facility (and its
negative cash flow) in July 2013.
• We received a permit modification at our Juniper Ridge
landfill in February 2014 to accept up to 81,800 tons per
year of in-state municipal solid waste, allowing us to
redirect volumes from our Westbrook, Maine transfer
station to this site.
Looking into the next twelve months, we have several exciting
opportunities to further grow revenues, reduce costs and
improve free cash flow in our Eastern Region, including:
• In September 2013, we were awarded a 10-year hauling,
disposal, and recycling contract by the City of Concord,
New Hampshire. The hauling portion of the contract began
on July 1, 2014 and the disposal portion begins on January
1, 2015. We expect to internalize up to 30,000 tons per year
from this municipal contract.
• In April 2014, we were awarded a 5-year contract to operate
the Brookline, Massachusetts transfer station. The contract
began on July 1, 2014 and we expect to internalize up to
30,000 tons per year into our Southbridge landfill.
• In December 2014, the out-of-market put-or-pay disposal
contract with the Ogden waste-to-energy facility expires,
which will reduce our disposal costs by roughly $3.7
million per year.
and resource solutions for industrial, municipal, institutional,
and multi-location retail customers.
By providing a broad set of resource solutions we differentiate
our services, which enable us to win new business, including
traditional solid waste collection and disposal. Our fastest
growing business segment in fiscal year 2014 was the
Customer Solutions group, mainly fueled by growth in
industrials, one of our highest-returning business lines.
CHANGING OUR FISCAL YEAR END
As I wrote earlier in this letter we got off to a great start in
the first half of fiscal year 2014, but experienced challenging
operating conditions due to severe winter weather in our
third and fourth quarters. When an extended winter, and
subsequently delayed spring occurs, it pushes our seasonal
upswing later into our fourth quarter and causes business to
shift into the next fiscal year.
The challenges we had this winter, and the unpredictability of
our seasonal upswing, illuminated the need for us to adjust
our fiscal year to better align it with our business cycle. Putting
our seasonally weak period at the beginning of our fiscal year
(rather than at the very end) gives us needed flexibility to
better manage our business in a number of areas including the
deployment of capital resources, and allows us more runway to
make adjustments through the fiscal year to deliver improved
and consistent financial performance.
Accordingly, we have implemented a plan to change our
fiscal year end from April 30th to December 31st, effective
January 1, 2015. Under this change, we will report an 8-month
transition period ending December 31, 2014, and then
subsequently our full fiscal year ending December 31, 2015.
During the 8-month transition period, we will continue to
report the quarters ending July 31, 2014 and October 31, 2014.
Beyond our financial success in fiscal year 2014, we also made
great progress in reducing the risk profile of our business
by selling and closing underperforming, cash flow negative
businesses. We expect to work through the final clean-up work
associated with these actions over the next several months.
These actions are an important part of our plan to materially
improve free cash flow and shareholder returns.
DRIVING HIGH-RETURN REVENUE
GROWTH THROUGH OUR CUSTOMER
SOLUTIONS OFFERINGS
Sincerely,
Over the last fiscal year we have worked to reshape our
former major accounts brokerage business into the Customer
Solutions group. This group is focused on leveraging our full
suite of service offerings to provide environmental
John W. Casella
Chairman and Chief Executive Officer
August 15, 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 2014
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
CASELLA WASTE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
25 Greens Hill Lane, Rutland, VT
(Address of principal executive offices)
03-0338873
(I.R.S. Employer
Identification No.)
05701
(Zip Code)
Registrant’s telephone number, including area code: (802) 775-0325
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Class A common stock, $.01 per share par value
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes x 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 Annual Report on Form 10-K or any amendment to
this Annual Report on Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer ¨
Accelerated filer
x
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the common equity held by non-affiliates of the registrant, based on the last reported sale price of the registrant’s Class A common
stock on the NASDAQ Stock Market at the close of business on October 31, 2013 was approximately $218.7 million. The registrant does not have any non-voting
common stock outstanding.
There were 39,121,079 shares of Class A common stock, $.01 par value per share, of the registrant outstanding at May 31, 2014. There were 988,200 shares of
Class B common stock, $.01 par value per share, of the registrant outstanding at May 31, 2014.
Portions of the registrant’s Proxy Statement on Schedule 14A relative to the 2014 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.
Documents Incorporated by Reference
CASELLA WASTE SYSTEMS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I.
ITEM 1.
BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
PROPERTIES
ITEM 3.
LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
PART III.
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11
EXECUTIVE COMPENSATION
ITEM 12
ITEM 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
SIGNATURES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
EXHIBIT INDEX
3
19
25
25
26
27
27
29
30
56
57
114
114
114
115
115
115
115
115
116
117
118
PART I
Unless the context requires otherwise, all references in this Annual Report on Form 10-K to “Casella Waste Systems, Inc.,”
the “Company,” “we,” “us,” and “our” refer to Casella Waste Systems, Inc. and its consolidated subsidiaries.
Forward-Looking Statements
This Annual Report on Form 10-K contains or incorporates a number of forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended
(“Exchange Act”), including statements regarding:
• expected liquidity and financing plans;
• expected future revenues, operations, expenditures and cash needs;
• fluctuations in the commodity pricing of our recyclables, increases in landfill tipping fees and fuel costs and general
economic and weather conditions;
• projected future obligations related to final capping, closure and post-closure costs of our existing landfills and any
disposal facilities which we may own or operate in the future;
• our ability to use our net operating losses and tax positions;
• our ability to service our debt obligations;
• the projected development of additional disposal capacity or expectations regarding permits for existing capacity;
• the recoverability or impairment of any of our assets or goodwill;
• estimates of the potential markets for our products and services, including the anticipated drivers for future growth;
• sales and marketing plans or price and volume assumptions;
• the outcome of any legal or regulatory matter;
• potential business combinations or divestitures; and
• projected improvements to our infrastructure and impact of such improvements on our business and operations.
In addition, any statements contained in or incorporated by reference into this report that are not statements of historical fact
should be considered forward-looking statements. You can identify these forward-looking statements by the use of the words
“believes”, “expects”, “anticipates”, “plans”, “may”, “will”, “would”, “intends”, “estimates” and other similar expressions, whether in
the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and
projections about the industry and markets in which we operate, as well as management’s beliefs and assumptions, and should
be read in conjunction with our consolidated financial statements and notes thereto. We cannot guarantee that we actually will
achieve the plans, intentions or expectations disclosed in the forward-looking statements made. The occurrence of the events
described and the achievement of the expected results depends on many events, some or all of which are not predictable or within
our control. Actual results may differ materially from those set forth in the forward-looking statements.
There are a number of important risks and uncertainties that could cause our actual results to differ materially from those
indicated by such forward-looking statements. These risks and uncertainties include, without limitation, those detailed in
Item 1A, “Risk Factors” of this Annual Report on Form 10-K. We explicitly disclaim any obligation to update any forward-looking
statements whether as a result of new information, future events or otherwise, except as otherwise required by law.
ITEM 1. BUSINESS
Overview
Founded in 1975 with a single truck, Casella Waste Systems, Inc. is a regional, vertically-integrated solid waste, recycling and
resource management services company. We provide resource management expertise and services to residential, commercial,
municipal and industrial customers, primarily in the areas of solid waste collection and disposal, transfer, recycling and organics
services. We operate in six states: Vermont, New Hampshire, New York, Massachusetts, Maine and Pennsylvania, with our
headquarters located in Rutland, Vermont. We manage our solid waste operations on a geographic basis through two regional
3
operating segments, the Eastern and Western regions, each of which provides a full range of solid waste services, and our
larger-scale recycling and commodity brokerage operations through our Recycling segment. Organics services, ancillary
operations, major customer accounts, discontinued operations, and earnings from equity method investees are included in
our Other segment.
As of May 31, 2014, we owned and/or operated 35 solid waste collection operations, 42 transfer stations, 16 recycling facilities,
nine Subtitle D landfills, four landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition
(“C&D”) materials.
Strategy
Our goal is to build a sustainable and profitable company by providing exemplary service to our customers, while operating safe
and environmentally sound facilities. In addition, over the last several years many of our customers have been seeking to reduce
their environmental footprint by increasing their recycling rates, diverting organics out of the waste stream into beneficial use
processes and exploring emerging methods to transform traditional waste streams into renewable resources. Since we first began
operating in Vermont in 1975, our business strategy has been firmly tied to creating a sustainable resource management model
and we continue to be rooted in these same tenets today. We strive to create long-term value for all stakeholders, which include
customers, employees, communities and shareholders.
Our key objective is to maximize long-term shareholder value through a combination of financial performance and strategic asset
positioning. Annually, we complete a comprehensive strategic planning process to assess and refine our strategic objectives in
the context of our asset mix and the current market environment. This process helps the management team allocate resources to
a range of business opportunities in order to maximize long-term financial returns and competitive positioning. As part of our
most recent strategic review, business activities have been classified into four categories: “Core operations”, “Catalyst activities”,
“Complementary activities”, or “Strategic non-fits.”
Core operations are the primary drivers of our long-term financial success, and include our collection, landfill, and municipal
solid waste processing operations. These are operations that we seek to expand. Catalyst activities are businesses or investments
that enhance growth in the Core operations, such as sludge processing. Complementary activities are businesses or investments
intended to leverage existing assets to improve performance, such as landfill gas-to-energy facilities. We generally do not look to
grow Complementary activities unless it is to further enhance returns on existing assets or to take advantage of existing assets
and infrastructure to support growth in our Core operations. Strategic non-fits are activities that no longer enhance or
complement the Core operations, which may be divested at the appropriate time, such as our previous investment in US
GreenFiber LLC (“GreenFiber”).
Over the last two fiscal years we have made significant progress in simplifying our business structure, improving cash flows
and reducing risk exposure by divesting and closing operations that we classified as “Strategic non-fits.” These actions included:
(a) divesting of Maine Energy Recovery Company, LP (“Maine Energy”), a low margin, negative cash flow waste-to-energy
operation, in December 2012; (b) divesting of KTI BioFuels, Inc. (“BioFuels”), a low margin, negative cash flow C&D processing
facility, in July 2013; (c) selling our 50% equity interest in GreenFiber, a negative cash flow cellulose insulation joint-venture,
in December 2013; and (d) ceasing the development of a gas-pipeline project in northern Maine, which was projected to have
returns below our cost of capital in January 2014. In fiscal year 2015, we plan to focus our efforts in four key areas: (1) increasing
landfill returns; (2) driving additional profitability at collection operations; (3) executing our Eastern region strategy; and
(4) differentiating our business by providing resource solutions.
We have updated the incentive compensation programs that we launched in fiscal year 2014 in order to further enhance alignment
of our employees’ incentives with our long-term goal to improve returns on invested capital.
Increasing landfill returns
We own and/or operate five landfills in the Western New York and Pennsylvania region (Ontario, Hyland, Hakes C&D, Chemung,
and McKean), which generally operate as an extended waste shed. We source waste volumes for these sites, from both local
markets and long-haul sources, and we work to balance waste flows across these sites to maximize site utilization. Over the last
five years we have experienced volume declines at our Western New York and Pennsylvania landfills. These declines are primarily
the result of lower C&D, environmental remediation and natural gas drilling waste volumes. These declines significantly impacted
profitability at these sites due to the high fixed costs inherent at a landfill.
We launched a strategic initiative in fiscal year 2014 to source incremental waste volumes to our landfills to maximize annual capacity
utilization and increase cash flows. Our goal was to increase waste volumes by 0.5 million tons annually to our landfills by fiscal year
2015. We made excellent progress against this goal in fiscal year 2014, with overall landfill volumes up approximately 0.4 million tons
per year compared to fiscal year 2013, excluding volumes from the Worcester landfill closure project in Massachusetts.
4
Landfill waste volume increases in fiscal year 2014 were primarily a result of: (1) our success in acquiring new transfer station and
hauling customers; (2) increasing waste volumes at our Southbridge and WasteUSA landfills in accordance with increased annual
permit limits; and (3) increasing C&D volumes as the construction market began to slowly rebound across several of our
market areas.
Our success in fiscal year 2014 is primarily attributable to: our focused landfill sales strategy; the revamping of our special waste
team to focus additional resources on sourcing additional industrial and remediation waste volumes; and our asset positioning in
several key markets that have contracting permitted capacity.
Disposal market dynamics have quickly begun to shift across our footprint due to improving macroeconomics and a challenging
regulatory environment (where a number of landfill and waste-to-energy facilities have closed in the last year and additional
facilities are expected to close in the next several years), and will continue to do so in the future as expected shifts of waste flow in
New York state will keep more waste volumes in the market for ultimate disposal over the next 20 years. Given this backdrop, we
plan to shift our landfill strategy in fiscal year 2015 to balance sourcing additional volumes against improving pricing and returns
at our landfills.
While we expect it will take several years for the capacity constraints in our markets to become acute, we do believe that pricing
elasticity will begin to tighten in our market in fiscal year 2015, which could enable us to begin increasing disposal prices in excess
of the Consumer Price Index in several of our markets.
We continue to work on strategies to source additional waste volumes to our landfills by increasing our geographic reach through
the use of rail transportation and accessing new end-markets in Canada. In March 2014, we were awarded a $7.0 million grant
from the Commonwealth of Pennsylvania to construct a rail siding and transfer station at our McKean landfill in McKean County,
Pennsylvania. This landfill is currently permitted to accept 5,000 tons per day of waste by rail and 1,000 tons per day by truck.
The grant will fund 70 percent of the total costs of the project; we expect to fund the remaining 30 percent of the total costs as the
project is built out. We are currently working on a development plan to build-out the rail siding and off-loading infrastructure to
access additional volumes at this site.
Driving additional profitability at collection operations
Over the past five fiscal years, we have undertaken an effort to streamline our local collection operations into market areas,
consolidate back-office functions to a shared services center and standardize and centralize key operating and pricing functions to
our corporate office. Our initial focus with these efforts was to reduce costs, improve our service levels and more effectively price
our services in each local market.
Our local collection teams have successfully moved pricing from an annual process to a core process that is continually reviewed
and adjusted throughout the fiscal year. The division management and sales teams use our customer profitability analytics tool to
calculate customer level profitability and increase pricing, where appropriate, to offset cost increases. We continue to yield success
from our collection pricing programs (with commercial and residential collection price growth of 1.9% in fiscal year 2014), which
remains in place going into fiscal year 2015.
Last fiscal year we successfully adjusted our sales force incentive compensation program to better support our efforts to drive
responsibility to the local operating level. We introduced a uniform commission structure tracking and payment system to help
our local teams administer customized commission structures for each sales representative, while maintaining a consistent system
to track performance.
Collection routes are the basic building blocks of our solid waste business and we believe that it is imperative to ensure that each
route is profitable and is covering the cost of truck and container capital. Last year we developed and launched a route profitability
tool to help our operating teams analyze and improve their routing productivity.
In fiscal year 2015, we plan to increase the frequency of re-routing existing customers to improve efficiencies and take trucks off
the road. We also plan to complete a company-wide evaluation (on an account by account basis) of existing customer service
levels, service types, equipment selection and truck type selection to ensure that we are maximizing profitability and asset
utilization. And as a final point, we plan to revamp our marketing and sales efforts to ensure that we are focusing on densifying
existing routes. All together, we expect these efforts will reduce our operating costs and improve our capital efficiency.
Executing Eastern region strategy
We continue to execute our comprehensive strategy to improve the profitability and cash flows of our under-performing Eastern
region. We have had success to date, demonstrated by our improved financial performance in the region, and believe that we are
well positioned to further improve key financial metrics over the next two fiscal years.
5
This strategy focused on the following key initiatives to improve the asset mix and operating performance of the region:
• In January 2012, the Town of Bethlehem, New Hampshire voters approved a zoning change and resultant settlement of
on-going litigation, allowing an expansion of approximately 1.7 million tons at our North Country Environmental Services
(“NCES”) landfill in Bethlehem, New Hampshire. We have capitalized on this expansion at our NCES landfill by shifting
waste volumes from the closed Maine Energy facility and by internalizing volumes from the Bestway Disposal Services and
BBI Waste Services (“BBI”) acquisition.
• In November 2012, we sold the low margin, capital intensive Maine Energy to the City of Biddeford, Maine for total
consideration of $6.7 million being paid over 21 years. The Maine Energy facility was then permanently closed on
December 31, 2012, and on January 2, 2013, we began transferring waste through our newly constructed transfer station
in Westbrook, Maine to other disposal facilities, including our NCES landfill and our Southbridge landfill in Southbridge,
Massachusetts.
• In December 2012, we completed the acquisition of all of the outstanding capital stock of BBI. BBI’s operations overlay well
with our footprint in New Hampshire and Maine and we expect the acquisition to drive incremental value from our existing
operations through operational synergies and internalization benefits, and to provide a growth platform in several new
market areas.
• In January 2013, the Massachusetts Department of Environmental Protection increased the annual permit limit at our
Southbridge landfill to approximately 0.4 million tons per year of municipal solid waste from the previous limit of 0.3 million
tons per year of municipal solid waste. During fiscal year 2014, we began to increase waste volumes to this site and, due to the
limited disposal capacity in the Massachusetts market, expect to continue to see improved performance at this site over the
next several fiscal years.
• In July 2013, we divested the low margin, capital intensive BioFuels C&D processing operation for total consideration of $2.0
million being paid in equal quarterly installments over five years commencing November 1, 2013.
• In September 2013, the City of Concord, New Hampshire awarded us a ten-year contract granting us collection of residential
curbside municipal solid waste and recycling, operation of the City of Concord’s transfer station, other collection services,
waste disposal and recycling processing. As part of this contract, we expect to internalize over 30,000 tons per year of
municipal solid waste and recyclables to our disposal and recycling facilities. The collection contract starts in July 2014 and
the disposal contract starts in January 2015.
• In February 2014, we received a permit from the State of Maine to accept up to approximately 0.1 million tons of in-state
municipal solid waste at the Juniper Ridge landfill. Although we are currently accepting municipal solid waste at the
Juniper Ridge landfill under the conditions of the permit, we filed an appeal of those conditions with the Maine Board of
Environmental Protection (“MEBEP”), stating that the permit provides for a smaller annual disposal limit than requested, as
well as a shorter permit term than requested. This appeal was heard and decided by MEBEP on June 19, 2014, and the permit
term was extended to March 31, 2018.
We expect to further improve operating performance in the Eastern region over the next two fiscal years as a result of the
expiration of the high-cost out-of-market Ogden put-or-pay waste disposal contract in December 2014, pricing opportunities as
the disposal market further tightens and further integration of our operations through a full suite of customer solutions.
Differentiating business with resource solutions
To complement our traditional solid waste offerings, we have developed a set of resource solutions and invested in select assets
that enhance our ability to support emerging customer and market needs. Our resource solutions strategy seeks to leverage our
core competencies in materials processing, industrial recycling, clean energy, and organics service offerings in order to generate
additional value from the waste stream for our customers.
Our Customer Solutions group works with our major customer accounts, including multi-location customers, colleges and
universities, municipalities, and industrial customers to develop customized solid waste solutions. The focus of this group is
to help these large scale organizations achieve waste reduction and diversion goals to meet their economic and environmental
objectives. We differentiate our services from our competitors by providing a personalized set of resource solutions, which enables
us to win new business, including traditional solid waste collection and disposal customers. In fiscal year 2014, the Customer
Solutions group represented our fastest growing business due primarily to growth in the high-return industrials sector.
As a key strategy to improve existing asset utilization and to advance our resource transformation strategy, we have invested in
five Zero-Sort Recycling facilities that we own or operate under long-term operating agreements. With Zero-Sort Recycling,
customers can commingle all of their recyclables (paper, cardboard, plastics, metals, and glass) into a right-sized residential
6
container or commercial dumpster. By making it easier for a customer to recycle, we increase recycling participation and yields,
thereby increasing volumes through the Zero-Sort Recycling facilities and enhancing asset utilization.
We now have landfill gas-to-energy facilities at six of our landfills, with four of the landfill gas-to-energy facilities owned and
operated by us and two owned and operated by partners. We consider the landfill gas-to-energy facilities to be complementary to
our core landfill assets because they extract additional value from the methane gas that is captured at our landfills and support our
low-emission landfill model.
Our Organics group has been working to develop and/or partner with firms that have developed innovative approaches to
deriving incremental value from the organic portion of the waste stream. Through our Earthlife® soils products, we offer a wide
array of recycled organic fertilizers, composts, and mulches that help our customers recycle organic waste streams. We have also
recently invested in and partnered with AGreen Energy, LLC and BGreen Energy, LLC, innovative firms that are building small
anaerobic digesters in the Northeast to generate electricity from farm and food waste streams.
Operational Overview
Our solid waste and recycling operations comprise a full range of non-hazardous solid waste services, including collections,
transfer stations, material recovery facilities (“MRFs”) and disposal facilities.
Collections. A majority of our commercial and industrial collection services are performed under one- to three-year service
agreements, with prices and fees determined by such factors as collection frequency, type of equipment and containers furnished,
type, volume and weight of solid waste collected, distance to the disposal or processing facility and cost of disposal or processing.
Our residential collection and disposal services are performed either on a subscription basis (with no underlying contract) with
individuals, or through contracts with municipalities, homeowner associations, apartment building owners or mobile home
park operators.
Transfer Stations. Our transfer stations receive, compact and transfer solid waste collected primarily by our various residential
and commercial collection operations, for transport to disposal facilities by larger vehicles. We believe that transfer stations benefit
us by: (1) increasing the size of the wastesheds which have access to our landfills; (2) reducing costs by improving utilization of
collection personnel and equipment; and (3) helping us build relationships with municipalities and other customers by providing
a local physical presence and enhanced local service capabilities.
Material Recovery Facilities. Our MRFs receive, sort, bale and resell recyclable materials originating from the municipal
solid waste stream, including newsprint, cardboard, office paper, glass, plastic, steel or aluminum containers and bottles. We
operate six MRFs within our Recycling region in geographic areas served by our collection divisions. Revenues are received
from municipalities and customers in the form of processing fees, tipping fees and commodity sales. These MRFs, two of which
are located in Vermont, two in Massachusetts, and two in New York, are large-scale, high-volume facilities that process over
0.4 million tons per year of recycled materials delivered to them by municipalities and commercial customers under long-term
contracts. We also operate smaller MRFs, which generally process recyclables collected from our various residential
collection operations.
Landfills. We operate nine solid waste Subtitle D landfills and one landfill permitted to accept C&D materials. Revenues are
received from municipalities and customers in the form of tipping fees. The estimated capacity at our landfills is subject to change
based on engineering factors, requirements of regulatory authorities, our ability to continue to operate our landfills in compliance
with applicable regulations and our ability to successfully renew operating permits and obtain expansion permits at our sites.
7
The following table (in thousands) reflects the aggregate landfill capacity and airspace changes, in tons, as of April 30, 2014,
2013 and 2012, for landfills we operated during the fiscal years then ended:
April 30, 2014
April 30, 2013
April 30, 2012
Estimated
Remaining
Permitted
Capacity
(1)
Estimated
Additional
Permittable
Capacity
(1)(2)
Estimated
Total
Capacity
Estimated
Remaining
Permitted
Capacity
(1)
Estimated
Additional
Permittable
Capacity
(1)(2)
Estimated
Total
Capacity
Estimated
Remaining
Permitted
Capacity
(1)
Estimated
Additional
Permittable
Capacity
(1)(2)
Estimated
Total
Capacity
34,780
75,936
110,716
39,593
78,415
118,008
41,678
79,194
120,872
—
2,594
2,594
—
(3,465)
(102)
(3,567)
(3,100)
—
—
—
—
(3,100)
(3,238)
—
—
—
(3,238)
(2,151)
2,097
(54)
(1,713)
(2,479)
(4,192)
1,153
(779)
374
29,164
80,525
109,689
34,780
75,936
110,716
39,593
78,415
118,008
Balance,
beginning
of year
New
expansions
pursued (3)
Airspace
consumed
Changes in
engineering
estimates
(4)
Balance,
end of year
1. We convert estimated remaining permitted capacity and estimated additional permittable capacity from cubic yards to tons generally 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 place a daily and/or annual limit on capacity
2. Represents capacity which we have determined to be “permittable” in accordance with the following criteria: (i) we control 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) we
have not identified any legal or political impediments which we believe will not be resolved in our favor; (iv) we are actively working on obtaining
any necessary permits and we expect that all required permits will be received; and (v) senior management has approved the project.
3. The change in airspace capacity in fiscal year 2014 relates to the determination of additional permittable airspace at our Southbridge and
Chemung landfills.
4. The change in airspace capacity in fiscal year 2014 and fiscal year 2013 is largely the result of the effect that compaction has had at our Western
region landfills, based primarily on a change in waste mix within the three year average.
NCES. The NCES landfill in Bethlehem, New Hampshire serves the wasteshed of New Hampshire and certain wastesheds of
Vermont, Maine and Massachusetts. NCES is one of only six operating permitted Subtitle D landfills in New Hampshire and
is currently permitted to accept municipal solid waste and C&D material. Since the purchase of this landfill in 1994, we had
experienced opposition from the Town of Bethlehem through the enactment of restrictive local zoning and planning ordinances.
However, based on a series of agreements reached with the Town of Bethlehem during calendar year 2011, which agreements were
approved at a town meeting on January 17, 2012, we have received all approvals from the Town of Bethlehem necessary to operate
the landfill over an expanded footprint for an extended period of time, subject to periodic approval of minor permit modifications
from the New Hampshire Department of Environmental Services. All litigation between the Town of Bethlehem and us was
dismissed with prejudice, upon joint motion of the parties.
Waste USA. The Waste USA landfill in Coventry, Vermont serves the major wastesheds throughout Vermont. The landfill is
the only operating permitted Subtitle D landfill in Vermont and is permitted to accept residential and commercially generated
municipal solid waste, pre-approved sludges, soils and C&D material. On November 19, 2013, the Vermont Agency of Natural
Resources increased the maximum annual permit limit to 0.6 million tons.
Clinton County. The Clinton County landfill in Schuyler Falls, New York serves the wastesheds of Clinton, Essex, Warren,
Washington and Saratoga Counties in New York, along with certain contiguous Vermont wastesheds. This landfill is permitted
to accept residential and commercially generated municipal solid waste, C&D material and certain special waste, which has been
approved by regulatory agencies. In fiscal year 2009, the landfill received a permit for a multi-year landfill expansion, which
provided considerable additional volume, and commenced operation of a landfill gas-to-energy facility, which has the capacity to
generate 6.4 mW/hr of energy.
8
Juniper Ridge. On February 5, 2004, we completed transactions with the State of Maine and Georgia-Pacific Corporation
(“Georgia Pacific”), pursuant to which the State of Maine took ownership of the Juniper Ridge landfill in West Old Town, Maine,
formerly owned by Georgia Pacific, and we became the operator under a 30-year operating and services agreement between us
and the State of Maine. The site is located on approximately 780 acres, with 68 acres currently dedicated for waste disposal. The
site has sufficient acreage to permit the additional airspace required for the term of the 30-year operating and services agreement.
The site was originally permitted to take waste originating from Maine, consisting of C&D material, ash from municipal solid
waste incinerators and fossil fuel boilers, front end processed residuals and bypass municipal solid waste from waste-to-energy
facilities, treatment plant sludge and biosolids, sandblast grits, oily waste and oil spill debris, and other approved special wastes
from within Maine. Effective February 27, 2014, the Maine Department of Environmental Protection approved an amendment,
with conditions, to the Juniper Ridge landfill license, for disposal of up to approximately 0.1 million tons of municipal solid waste
per year through March 31, 2016. We filed an appeal with the MEBEP as the amended permit provides for a smaller annual
disposal limit than we had requested, as well as a shorter permit term than we had requested. This appeal was heard and decided
by MEBEP on June 19, 2014, and the permit term was extended to March 31, 2018. Outside of the limitations on municipal solid
waste, there are no annual tonnage limitations at the Juniper Ridge landfill.
Southbridge. On November 25, 2003, we acquired Southbridge Recycling and Disposal Park, Inc. (“Southbridge Recycling
and Disposal”). Southbridge Recycling and Disposal owns a 13-acre recycling facility and has a contract with the Town of
Southbridge, Massachusetts to operate our Southbridge landfill, which is a 146-acre landfill currently permitted to accept residuals
from the recycling facility and municipal solid waste. In June 2008, the Southbridge, Massachusetts Board of Health modified the
Southbridge landfill site assignment to allow the site to receive municipal solid waste from communities other than Southbridge
and to eventually increase the annual disposal volume from approximately 0.2 million tons per year to approximately 0.4 million
tons per year. The Board of Health’s decision was appealed by opponents of the Southbridge landfill, but was decided in our favor
by the Massachusetts Supreme Judicial Court in February 2012. In January 2013, we received the final non-appealable permit
allowing us to receive 0.4 million tons annually of municipal solid waste or processed C&D residual.
Hyland. The Hyland landfill in Angelica, New York serves certain wastesheds located throughout western New York. Hyland
is permitted to accept residential and commercially generated municipal solid waste, C&D material and special waste. The
site consists of approximately 624 acres, which represents considerable additional expansion capabilities. A permit for future
expansion was issued in December 2006 for approximately 11.0 million cubic yards and we are currently seeking an additional
9.9 million cubic yards of permittable capacity. The landfill is currently permitted to accept approximately 0.3 million tons
annually and has a minor modification pending with the New York State Department of Environmental Conservation to increase
the annual capacity by 49%. In August 2008, the Hyland site commenced operation of a landfill gas-to-energy facility, which
has the capacity to generate 4.8 mW/hr of energy. The Hyland landfill has nearby access to a rail siding and is being marketed to
attract waste volumes shipped via rail.
Ontario. We entered into a 25-year operation, management and lease agreement with the Ontario County Board of Supervisors
for the Ontario County landfill in the Town of Seneca, New York. We commenced operations on December 8, 2003. This
landfill serves the central New York wasteshed and is strategically situated to accept long haul volume from both the eastern and
downstate New York markets. The site consists of approximately 380 total acres with additional potential expansions to allow for
acceptance of an estimated total of 12.2 million tons. During fiscal year 2008, we successfully requested and received a minor
modification to increase our annual allowance of placed tons over the original permit of 0.6 million tons to 0.9 million tons. The
Ontario site also houses a single stream recycling facility and a landfill gas-to-energy plant, which has the capacity to generate 11.2
mW/hr of energy.
Hakes. The Hakes C&D landfill in Campbell, New York is permitted to accept only C&D material. The landfill serves the rural
wastesheds of western New York. During fiscal year 2008, we successfully requested and received a minor modification to increase
our annual allowance of placed tons over the original permit of 0.3 million tons to 0.5 million tons. The Hakes landfill has nearby
access to a rail siding and is being marketed to attract waste volumes shipped via rail.
Chemung. We entered into a 25-year operation, management and lease agreement with Chemung County for certain facilities
located within the county utilized in the collection, management and disposal of solid waste, including the Chemung County
municipal solid waste landfill and Chemung County C&D landfill in the Town of Chemung, New York. We commenced
operations on September 19, 2005. Chemung serves the central and southern tier New York wastesheds and is strategically
situated to accept long haul volume from both eastern and downstate New York markets. The site consists of approximately
38 active acres permitted to accept 0.2 million tons of municipal solid waste per year and 13 active acres permitted to accept
approximately twenty thousand tons of C&D material per year. The landfill has further expansion capabilities of an additional 25
acres and an estimated 6.4 million tons. In addition, in April 2010 we successfully negotiated an amendment to the management
and lease agreement allowing the annual tonnage to be increased to 0.4 million tons per year, subject to regulatory approval. In
September 2011, we were successful in securing a minor modification to the existing permit to allow for an additional annual
increase of sixty-thousand tons of municipal solid waste resulting in the annual permitted capacity stated above.
9
McKean. We acquired the McKean landfill, which was subject to bankruptcy reorganization, in February 2011. This landfill is
located in Mount Jewett, McKean County, Pennsylvania and serves the Pennsylvania northern tier and New York southern tier
wastesheds. The facility consists of 131 acres, of which 52 acres are dedicated to landfilling, and has a daily permitted capacity to
receive one thousand tons. The site has more than 2.5 million cubic yards of remaining airspace with future expansion capacity for
an additional 30 million cubic yards (including additional acreage). In March, 2014, the Commonwealth of Pennsylvania awarded
a grant in the amount of $7.0 million to fund the construction of the rail siding at the landfill which once completed, will expand
the market reach for the landfill to other rail capable transfer facilities and will allow the site to take advantage of a five thousand
tons per day rail permit currently in effect. The landfill is well situated to provide services to the oil and gas industry currently
exploring natural gas in the Marcellus Shale in the form of disposal capacity for the residuals.
Closure Projects. In April 2005, we started closure operations at the Worcester, Massachusetts landfill. These closure
operations continued until October 2012, when the landfill was filled to its capacity. The landfill was closed from November 2012
until May 2013, when we were successful in securing a permit to accept an additional 0.2 million tons of waste at the landfill. We
started placing these 0.2 million tons in June 2013 and accepted the final tons of waste in April 2014. We began final capping and
closing the landfill in May 2014. The Worcester landfill is not included in the preceding table of landfill capacity.
We also own and/or manage five unlined landfills and three lined landfills that are not currently in operation. We have closed and
capped all of these landfills according to applicable environmental regulatory standards.
Operating Segments
We manage our solid waste operations, which include a full range of solid waste services, on a geographic basis through two
regional operating segments, which we designate as the Eastern and Western regions. Our third operating segment is Recycling,
which comprises our larger-scale recycling operations and our commodity brokerage operations. Organic services, ancillary
operations, major customer accounts, discontinued operations and earnings from equity method investees are included in
our “Other” reportable segment. Segment data for fiscal years 2013 and 2012 has been revised to properly align with internal
management reporting, which was modified in fiscal year 2014 as follows: to move Organics services from the Eastern region to
the Other segment to reflect changes in management structure as these services have become integral to service offerings across
our broader geographic solid waste footprint; and to move a smaller brokerage operation from the Eastern region to the Recycling
segment to align with the rest of our brokerage operations. See Note 20 to our consolidated financial statements included under
Item 8 of this Annual Report on Form 10-K for a summary of revenues, certain expenses, profitability, capital expenditures,
goodwill, and total assets of our operating segments.
Within each geographic region, we organize our solid waste services around smaller areas that we refer 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 landfills, some of which may be owned and or operated by third parties. We typically
operate several divisions within each wasteshed, each of which provides a particular service, such as collection, recycling, disposal
or transfer. Each division operates interdependently with the other divisions within the wasteshed. Each wasteshed generally
operates autonomously from adjoining wastesheds.
Through the six MRFs and one commodity brokerage operation comprising the Recycling segment, Recycling provides services
to our four anchor contracts, which have original terms ranging from five to twenty years and expire at various times through
calendar year end 2028. The terms of each contract vary, but all of the contracts provide that the municipality or a third-party
delivers materials to our facility. These contracts may include a minimum volume guarantee by the municipality. We also have
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 following table provides information about each operating segment (as of May 31, 2014 except revenue information, which is
for fiscal year 2014).
Revenues (in millions)
Solid waste collection operations
Transfer stations
Recycling facilities
Subtitle D landfills
Other disposal facilities
Eastern Region
Western Region
Recycling
Other
$ 147.3
$ 216.9
$ 43.8
$ 89.6
15
14
3
3
—
20
28
4
6
1
—
—
7
—
—
—
—
2
—
—
10
Eastern region
The Eastern region consists of wastesheds located in Maine, southern and central New Hampshire and central and eastern
Massachusetts. The Eastern region is vertically integrated, with transfer, landfill, processing and recycling assets serviced by our
collection operations. In February 2013, we aligned management of the NCES landfill with the Eastern region. NCES had been
historically aligned with the Western region. This move, combined with the permitting approvals at Southbridge, the opening of
our transfer station in Westbrook, Maine, and the divestiture of Maine Energy, has helped reduce our overall reliance on waste-
to-energy disposal capacity. Our December 2012 acquisition of BBI strengthened both our collection and transfer network in
New Hampshire and Maine by adding three collection operations and four, either owned or operated, transfer stations, and
contributing additional internalized solid waste and recycling volumes to our disposal facilities. In August 2013, we divested of our
BioFuels C&D processing facility in Lewiston, Maine, allowing us to focus on our higher margin core businesses.
We entered the Maine market in 1996 and have grown organically and through small acquisitions transacted in the late 1990’s
and early 2000’s. In 2004, we obtained the right to operate the Juniper Ridge landfill under a 30-year agreement with the State of
Maine. In December, 2012 we acquired BBI, which gave us additional hauling and transfer capacity in southern Maine.
We entered the eastern Massachusetts and southern New Hampshire markets in 2000 and since have grown organically and
through small acquisitions. In this market, we rely to a large extent on third-party disposal capacity, but our NCES landfill and
other assets have provided additional opportunities to internalize volumes. We believe we can continue to increase internalization
rates in eastern Massachusetts as well with the increased capacity at Southbridge landfill. In December 2013, we acquired a
transfer station in Oxford, Massachusetts, allowing greater operational flexibility for our solid waste and recycling collection
operations. The facility is permitted to accept 650 tons per day and provides a source of volume for our Southbridge landfill.
Western region
The Western region includes wastesheds located in Vermont, north and south western New Hampshire and eastern and upstate
New York. The portion of eastern New York served by the Western region includes Clinton (operation of the Clinton County
landfill), Franklin, Essex, Warren, Washington, Saratoga, Rennselaer and Albany counties.
The Western region also consists of wastesheds in upstate New York, which includes Ithaca, Elmira, Oneonta, Lowville, Potsdam,
Geneva, Auburn, Dunkirk, Jamestown and Olean counties. We entered these wastesheds in 1997 and have expanded largely
through tuck-in acquisitions and organic growth. Our Western region collection operations include leadership positions in nearly
every rural market outside of the larger metropolitan markets such as Syracuse, Rochester, Buffalo and Albany.
While we have achieved market positions in some of the New York wastesheds, we remain focused on increasing our vertical
integration through extension of our reach into new markets and managing new materials. Maximizing these logistics through the
use of rail, once implemented, long haul trucks and trailer tippers at our facilities will increase our reach.
Recycling
Our Recycling segment is one of the largest processors and marketers of recycled materials in the northeastern United States,
comprised of six MRFs that process and market recyclable materials that municipalities and commercial customers deliver
under long-term contracts. Two of the six MRFs are leased, two are owned, and two are operated by us under contracts with
third-parties. In fiscal year 2014, the Recycling segment processed and/or marketed over 0.5 million tons of recyclable materials
including tons marketed through our commodity brokerage division and our baling facilities located throughout the footprint.
Recycling’s facilities are located in Vermont, New York, Maine, and Massachusetts.
A significant portion of the material provided to Recycling is delivered pursuant to four anchor contracts. The anchor contracts
have an original term of five to twenty years and expire at various times through 2028. The terms of the recycling contracts vary,
but all of the contracts provide that the municipality or a third-party delivers the recycled materials to our facility. Under the
recycling contracts, we charge the municipality a fee for each ton of material delivered to us. Some contracts contain revenue
sharing arrangements under which the municipality receives a specified percentage of our revenues from the sale of the
recovered materials.
Our Recycling segment derives a significant portion of its revenues from the sale of recyclable materials. Since purchase and
sale prices of recyclable materials, particularly newspaper, corrugated containers, plastics, ferrous and aluminum, can fluctuate
based upon market conditions, we use long-term supply contracts with customers with floor price arrangements to reduce
the commodity risk. Under such contracts, we obtain a guaranteed minimum price for the recyclable materials along with a
commitment to receive higher prices 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. In fiscal year 2014, 30% of the revenues from the sale of residential recyclable materials were derived from sales
11
under long-term contracts which may include floor prices. We also hedge, when applicable, 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.
Other
Our Other segment derives a significant portion of its revenues from our Customer Solutions and Organics businesses. Our
resource solutions strategy seeks to leverage our core competencies in materials processing, industrial recycling, clean energy, and
organics service offerings in order to generate additional value from the waste stream for our customers.
Our Customer Solutions group works with our major customer accounts, including multi-location customers, colleges and
universities, municipalities, and industrial customers to develop customized solid waste solutions. The focus of this group is
to help these large scale organizations achieve waste reduction and diversion goals to meet their economic and environmental
objectives. We differentiate our services from our competitors by providing a personalized set of resource solutions, which enables
us to win new business, including traditional solid waste collection and disposal customers. In fiscal year 2014, the Customer
Solutions group represented our fastest growing business due primarily to growth in the high-return industrials sector.
Our Organics group has been working to develop and/or partner with firms that have developed innovative approaches to
deriving incremental value from the organic portion of the waste stream. Through our Earthlife® soils products, we offer a wide
array of recycled organic fertilizers, composts, and mulches that help our customers recycle organic waste streams. We have also
recently invested in and partnered with AGreen Energy, LLC and BGreen Energy, LLC, innovative firms that are building small
anaerobic digesters in the Northeast to generate electricity from farm and food waste streams.
Casella-Altela Regional Environmental Services, LLC
Casella-Altela Regional Environmental Services, LLC (“CARES”) is a joint venture that owns and operates a water and leachate
treatment facility for the natural gas drilling industry in Pennsylvania. Our joint venture partner in CARES is Altela, Inc. As of
April 30, 2014, our ownership interest in CARES is 51%. In accordance with Accounting Standards Codification (“ASC”) 810-10-
15, we consolidate the assets, liabilities, noncontrolling interest and results of operations of CARES into our consolidated financial
statements due to our controlling financial interest in the joint venture.
In April 2014, we initiated a plan to wind down the operations of CARES. As a result, it was determined that the carrying value of
the assets of CARES was no longer recoverable and, as a result, the carrying value of the asset group was assessed for impairment.
The impairment was measured based on the asset group’s highest and best use under the market approach. We recorded an
impairment charge of $7.5 million in fiscal year 2014 to the asset group of CARES in the Western region.
We plan to abandon the operations of CARES in fiscal year 2015, at which point it time we expect the results of operations to be
recorded in discontinued operations.
Equity Method Investments
In the third quarter of fiscal year 2014, we sold our 50% membership interest in GreenFiber and purchased the remaining 50%
membership of Tompkins County Recycling LLC (“Tompkins”), both of which were previously accounted for using the equity
method of accounting.
In December 2013, we and Louisiana Pacific Corporation (“LP”) executed a purchase and sale agreement with a limited liability
company formed by Tenex Capital Partners, L.P., pursuant to which we and LP agreed to sell our membership interests in
GreenFiber for total cash consideration of $18.0 million plus an expected working capital true-up less any indebtedness and
other unpaid transaction costs of GreenFiber as of the closing date. The transaction was completed for $19.2 million in gross cash
proceeds, including a $1.2 million working capital adjustment. After netting indebtedness of GreenFiber and transaction costs, our
50% of the net cash proceeds amounted to $3.4 million. After considering the $0.6 million impact of our unrealized losses relating
to derivative instruments in accumulated other comprehensive income (loss) on our investment in GreenFiber, we recorded a gain
on sale of equity method investment of $0.6 million in the third quarter of fiscal year 2014.
Also in December, we purchased the remaining 50% membership interest of Tompkins for total cash consideration of $0.4 million.
The acquisition-date fair value of our investment in Tompkins, which was determined using the cost approach based on an
assessment of the price to purchase the acquired assets of Tompkins prior to the acquisition date, was $0.3 million. We recognized
a gain of $0.1 million through loss from equity method investments due to the remeasurement. As a result of the purchase, we
began including the accounts of Tompkins in our consolidated financial statements.
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Competition
The solid waste services industry is highly competitive. We compete for collection and disposal volume primarily on the basis of
the quality, breadth and price of our 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 our
services or the loss of business. In addition, competition exists within the industry for potential acquisition candidates.
The larger urban markets in which we compete are served by one or more of the large national solid waste companies, including
Waste Management, Inc., Republic Services, Inc. and Waste Connections, Inc., that may be able to achieve greater economies
of scale than we can. We also compete with a number of regional and local companies that offer competitive prices and quality
service. In addition, we compete 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 over us due to the availability of user fees, charges or tax revenues and tax-exempt financing.
Marketing and Sales
We have fully integrated sales and marketing strategies with a primary focus on acquiring and retaining commercial, industrial,
municipal and residential customers. Our business strategy focuses on creating a highly differentiated sustainable resource
management model that meets customers’ unique needs and provides value “beyond the curb”.
Maintenance of a local presence and identity is an important aspect of our sales and marketing strategy, and many of our
divisional managers are involved in local governmental, civic and business organizations. Our name and logo, or, where
appropriate, that of our divisional operations, are displayed on all of our containers and trucks. We attend and make presentations
at municipal and state meetings, and we advertise in a variety of media throughout our service footprint.
The Customer Solutions team serves customers with multiple locations and is also focused on growing our share of business with
municipal, institutional and industrial customers. This group provides customers with a broader set of solutions to augment our
regional and divisional service capabilities.
Marketing activities are focused on attracting new commercial and residential customers directly on-route in order to enhance
profitability. Marketing campaigns are integrated with divisional management, sales personnel and the centralized customer
care center.
Employees
As of May 31, 2014, we employed approximately 1,800 people, including approximately 400 professionals or managers, sales,
clerical, information systems or other administrative employees and approximately 1,400 employees involved in collection,
transfer, disposal, recycling or other operations. Approximately 70 of our employees are covered by collective bargaining
agreements. We believe relations with our employees are good.
Risk Management, Insurance and Performance or Surety Bonds
We actively maintain environmental and other risk management programs that we believe are appropriate for our business. Our
environmental risk management program includes evaluating existing facilities, as well as potential acquisitions, for compliance
with environmental law requirements. We also maintain a worker safety program, which focuses on safe practices in the
workplace. Operating practices at all of our operations are intended to reduce the possibility of environmental contamination,
enforcement actions and litigation.
We carry a range of insurance intended to protect our assets and operations, including a commercial general liability policy and
a property damage policy. A partially or completely uninsured claim against us (including liabilities associated with cleanup
or remediation at our facilities), if successful and of sufficient magnitude, could have a material adverse effect on our business,
financial condition and results of operations. Any future difficulty in obtaining insurance could also impair our ability to secure
future contracts, which may be conditioned upon the availability of adequate insurance coverage.
We self-insure for automobile and workers’ compensation coverage. Our maximum exposure in fiscal year 2014 under the
workers’ compensation plan was $1.0 million per individual event, after which reinsurance takes effect. Our maximum
exposure in fiscal year 2014 under the automobile plan was approximately $1.0 million per individual event, after which
reinsurance takes effect.
Municipal solid waste collection contracts and landfill closure and post-closure obligations may require performance or surety
bonds, letters of credit or other means of financial assurance to secure contractual performance. While we have not experienced
difficulty in obtaining these financial instruments, if we are unable to obtain these financial instruments in sufficient amounts or at
13
acceptable rates we could be precluded from entering into additional municipal contracts or obtaining or retaining landfill
operating permits.
We hold a 19.9% ownership interest in Evergreen National Indemnity Company (“Evergreen”), a surety company which provides
surety bonds to us to secure our contractual obligations for certain municipal solid waste collection contracts and landfill closure
and post-closure obligations.
Customers
We provide our collection services to commercial, industrial and residential customers. A majority of our 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. Our residential collection and disposal
services are performed either on a subscription basis (with no underlying contract) with individuals, or through contracts with
municipalities, homeowners associations, apartment owners or mobile home park operators.
Our Recycling segment provides recycling services to municipalities, commercial haulers and commercial waste generators within
the geographic proximity of the processing facilities.
Seasonality and Severe Weather
Our transfer and disposal revenues historically have been higher in the late spring, summer and early fall months. This seasonality
reflects lower volumes of waste in the late fall, winter and early spring months because:
• the volume of waste relating to C&D activities decreases substantially during the winter months in the northeastern
United States; and
• 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 from the
ski industry.
Because certain of our 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.
Our operations can also be adversely affected by periods of inclement or severe weather, which could increase our operating
costs associated with the collection and disposal of waste, delay the collection and disposal of waste, reduce the volume of waste
delivered to our disposal sites, increase the volume of waste collected under our existing contracts (without corresponding
compensation), decrease the throughput and operating efficiency of our materials recycling facilities, or delay construction or
expansion of our landfill sites and other facilities. Our operations can also be favorably affected by severe weather, which could
increase the volume of waste in situations where we are able to charge for our additional services.
Our Recycling segment experiences increased volumes of fiber in November and December due to increased newspaper
advertising and retail activity during the holiday season.
Regulation
Introduction
We are subject to extensive and evolving federal, state and local environmental laws and regulations which have become
increasingly stringent in recent years. Our previously owned waste-to-energy facility, Maine Energy, which was sold in fiscal year
2013, was also subject to federal energy law. The environmental regulations affecting us 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 in this Annual Report on Form 10-K, we believe that we are currently in substantial compliance with applicable
federal, state and local environmental laws, permits, orders and regulations. Other than as disclosed herein, we do not currently
anticipate any material costs to bring our operations into environmental compliance, although there can be no assurance in this
regard for the future. We expect that our operations in the solid waste services industry will be subject to continued and increased
regulation, legislation and enforcement actions. We attempt to anticipate future legal and regulatory requirements and to keep our
operations in compliance with those requirements.
In order to transport, process, incinerate, or dispose of solid waste, it is necessary for us to possess and comply with one or more
permits from federal, state and/or local agencies. We must renew these permits periodically, and the permits may be modified or
revoked by the issuing agency.
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The principal federal statutes and regulations applicable to our operations are as follows:
The Resource Conservation and Recovery Act of 1976, as amended (“RCRA”)
The 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. The RCRA divides waste into two categories, hazardous and
non-hazardous. Wastes are generally classified as hazardous if they either (a) are specifically included on a list of hazardous wastes,
or (b) exhibit certain characteristics defined as hazardous and are not specifically designated as non-hazardous. Wastes classified
as hazardous waste 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 businesses that deal with 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 the 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 businesses which are subject to those requirements. Some state regulations impose obligations
different from and in addition to those the EPA imposes under Subtitle C.
We currently do not accept for transportation or disposal, hazardous substances (as defined in the CERCLA, discussed below)
in concentrations or volumes that would classify those materials as hazardous wastes. However, we have 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 the CERCLA are present in consumer goods and in the non-hazardous waste streams of
our customers.
Leachate generated at our landfills and transfer stations is tested on a regular basis, and generally is not regulated as a hazardous
waste under federal law. However, there is no guarantee that leachate generated from our facilities in the future will not be
classified as hazardous waste.
In October 1991, the EPA adopted the Subtitle D regulations under RCRA governing solid waste landfills. The Subtitle D
regulations, which generally became effective in October 1993, include siting 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 we operate, to
monitor 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 landfill gas (including methane) generated at landfills exceeding certain
regulatory thresholds. State landfill regulations must meet those requirements or the EPA will impose such requirements upon
landfill owners and operators in that state.
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, treated leachate from our solid waste management facilities, or distilled water from our
treatment plant, 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 or leachate is discharged to a treatment facility that is owned by
a local municipality. Almost all solid waste management facilities must comply with the EPA’s storm water regulations, which
govern the discharge of regulated storm water to surface waters.
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The Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (“CERCLA”)
The 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. The CERCLA
has been interpreted to impose retroactive strict, and under certain circumstances, joint and several, liability for the costs to
investigate and clean up 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 and certain transporters of the hazardous substances.
In addition, the CERCLA imposes liability for the costs of evaluating and addressing damage to natural resources. The costs of
the CERCLA investigation and cleanup can be substantial. Liability under the CERCLA does not depend upon the existence or
disposal of “hazardous waste” as defined by the 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 definition of “hazardous
substances” in the CERCLA incorporates substances designated as hazardous or toxic under the Federal Clean Water Act, Clean
Air Act and Toxic Substances Control Act. If we were found to be a responsible party for a CERCLA cleanup, under certain
circumstances, the enforcing agency could pursue us or any other responsible party, for all investigative and remedial costs, even if
others also were liable. The CERCLA also authorizes the 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 the property owner is liable. The 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. Our ability to obtain reimbursement for amounts we pay in excess of our allocable share of such costs would be
limited by our ability to identify and locate other responsible parties and to 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 promulgated
new source performance standards regulating air emissions of certain regulated pollutants (non-methane organic compounds)
from municipal solid waste landfills. Landfills located in areas where ambient levels of regulated pollutants exceed certain
thresholds may be subject to 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 EPA is also focusing on the emissions of greenhouse gases, or GHG, including carbon dioxide and methane. In December,
2009, the EPA issued its “endangerment finding” that carbon dioxide poses a threat to human health and welfare, providing the
basis for the EPA to regulate GHG emissions. In December 2009 the EPA’s “Mandatory Reporting of Greenhouse Gases” rule went
into effect, requiring facilities that emit twenty-five thousand metric tons or more per year of GHG emissions to submit annual
reports to the EPA.
In June 2010, the EPA issued the so-called “GHG Tailoring Rule”, which described how certain sources that emit GHG would be
subject to heightened Clean Air Act PSD / Title V regulation. In July 2011, however, the EPA promulgated a rule that, broadly,
deferred for three years the applicability of those regulations with regard to sources emitting carbon dioxide from biomass-fired
and other “biogenic” sources. In July 2013 a federal appeals court vacated the EPA’s decision to defer the applicability of those
regulations. We do not know when the EPA will put those regulations in place, or what obligations such regulations will impose on
our operations.
The adoption of other laws and regulations, which may include the imposition of fees or taxes, could adversely affect our collection
and disposal operations. Additionally, certain of the states in which we operate are contemplating air pollution control regulations
relating to GHG that may be more stringent than regulations the EPA may promulgate. Changing environmental regulations could
require us to take any number of actions, including purchasing emission allowances or installing additional pollution control
technology, and could make some operations less profitable, which could adversely affect our results of operations.
Congress also is considering various options, including a cap and trade system, which could impose a limit on and establish a
pricing mechanism for GHG emissions and emission allowances. There also is increasing pressure for the United States to join
international efforts to control GHG emissions.
The Clean Air Act regulates emissions of air pollutants from our processing facilities. The EPA has enacted standards that apply to
those emissions. It is possible that the EPA, or a state where we operate, 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”)
The OSHA establishes employer responsibilities and authorizes the Occupational Safety and Health Administration to
promulgate and enforce 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. A
variety of those promulgated standards may apply to our operations, including those standards concerning notices of hazards,
safety in excavation and demolition work, the handling of asbestos and asbestos-containing materials, and worker training and
emergency response programs.
The Public Utility Regulatory Policies Act of 1978, As Amended (“PURPA”)
The PURPA exempts qualifying facilities from most federal and state laws governing the financial organization and rate regulation
of electric utilities, and generally requires electric utilities to purchase electricity generated by qualifying facilities at a price equal
to the utility’s full “avoided cost”. Our four landfill gas-to-energy facilities are self- certified as “qualifying facilities”.
State and Local Regulations
Each state in which we now operate or may operate in the future has laws and regulations governing (1) water and air pollution,
and the generation, storage, treatment, handling, processing, transportation, incineration and disposal of solid waste and
hazardous waste; (2) in most cases, the siting, design, operation, maintenance, closure and post-closure maintenance of solid waste
management facilities; and (3) in some cases, vehicle emissions limits or fuel types, which impact our collection operations. Such
standards typically are as stringent as, and may be more stringent and broader in scope than, federal regulations. 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.
Many municipalities in which we currently operate or may operate in the future also have ordinances, laws and regulations
affecting our 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.
Some states have enacted laws that allow agencies with jurisdiction over waste management facilities to deny or revoke permits
based on the applicant’s or permit holder’s compliance status. Some states also consider the compliance history of the corporate
parent, subsidiaries and affiliates of the applicant or permit holder.
Certain permits and approvals issued under state or local law may limit the types of waste that may be accepted at a solid
waste management facility or the quantity of waste that may be accepted at a solid waste management facility during a specific
time period. In addition, certain permits and approvals, as well as certain state and local regulations, may limit a solid waste
management facility 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 similar legislation is enacted, states in which we operate solid waste management
facilities 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 our landfills within those states that receive a significant portion of
waste originating from out-of-state.
Certain states and localities may 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 privately-owned facility. However, in 2007, the U.S. Supreme Court upheld a U.S. District Court ruling that the
flow control regulations in Oneida and Herkimer counties in New York requiring trash haulers to use publicly-owned transfer
stations are constitutional, and therefore valid. Additionally, certain state and local jurisdictions continue to seek to enforce
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 solid waste management facilities in certain areas, which may materially
adversely affect our ability to operate our facilities and/or affect the prices we can charge for certain services. Those restrictions
also may result in higher disposal costs for our collection operations. In sum, flow control restrictions could have a material
adverse effect on our business, financial condition and results of operations.
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There has been an increasing trend at the 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, including yard wastes and leaves,
beverage containers, newspapers, household appliances and electronics such as computers, and batteries. Regulations reducing
the volume and types of wastes available for transport to and disposal in landfills could affect our ability to operate our landfill
facilities. Vermont, for example, enacted Act 148, containing among other things, a phased waste ban for recyclables, organics
and leaf/yard waste. The bill became effective July 1, 2012, with phased deadlines for compliance beginning 2014 through 2020.
Vermont also passed a bill requiring recycling of architectural waste from construction or demolition of a commercial project. The
law becomes effective January 2015.
Massachusetts revised its regulations governing solid waste management with a framework to encourage the re-use of organic
waste material and prohibiting such material from disposal for large-scale commercial generators by October 2014.
New York State is considering revisions to its regulations governing solid waste management, 6 NYCRR Part 360.
In September 2011, the New York State Department of Environmental Conservation (the “DEC”) released the revised draft
supplement to the Generic Environmental Impact Statement on the Oil, Gas and Solution Mining Regulatory Program. In
September 2012, the DEC referred portions of the revised draft SGEIS to the New York Commissioner of Health for review of the
health impacts associated with high-volume hydraulic fracturing. The regulations were scheduled to expire in November 2012,
and required completion of the SGEIS prior to completion of the regulations. In November 2012, the DEC extended the proposed
regulations by 90 days, moving the expiration of the proposed regulations to late February. This required republication of the
proposed regulations, as revised, and opened a new public comment period. In mid-February 2013, the New York Commissioner
of Health announced that he would not be done with his review of the health impacts associated with high-volume hydraulic
fracturing prior to the deadline for adoption of the regulations. As a consequence, the proposed regulations expired in late
February and the revised draft SGEIS is on hold until the health review is completed. However, the DEC made it clear when the
regulations lapsed in February 2013, that they did not need regulations to process permits once the SGEIS is finalized.
In a related matter, the EPA is studying potential impacts of hydraulic fracturing on drinking water and ground water. The scope
of the research includes the full lifespan of water in hydraulic fracturing; including, water acquisition, chemical mixing, injection,
flow-back and production water and wastewater treatment and waste disposal. The first progress report was released in December
2012. A final draft report is expected to be released for public comment and peer review in fiscal year 2015.
Executive Officers of the Company
Our executive officers and their respective ages as of May 31, 2014 are as follows:
Name
John W. Casella
Edwin D. Johnson
Edmond “Ned” R. Coletta
Christopher B. Heald
David L. Schmitt
Age Position
63
57
38
49
63
Chairman of the Board of Directors, Chief Executive Officer and Secretary
President and Chief Operating Officer
Senior Vice President and Chief Financial Officer
Vice President and Chief Accounting Officer
Senior Vice President and General Counsel
John W. Casella has served as Chairman of our Board of Directors since July 2001 and as our Chief Executive Officer since 1993.
Mr. Casella served as our President from 1993 to July 2001 and as Chairman of our Board of Directors from 1993 to December
1999. In addition, Mr. Casella has served as 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 commissions, including the National Recycling Coalition, Board of Directors of the Associated Industries of Vermont, The
Association of Vermont Recyclers, the Vermont State Chamber of Commerce, the Rutland Industrial Development Corporation
and Rutland Regional Medical Center. 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 College and a Bachelor of Science in Business Education from Castleton State College.
Mr. Casella is the brother of Douglas R. Casella, a member of our Board of Directors.
Edwin D. Johnson has served as our President and Chief Operating Officer since December 2012 and as our Senior Vice President
and Chief Financial Officer from July 2010 until December 2012. From March 2007 to July 2010, Mr. Johnson served as Executive
Vice President, Chief Financial Officer and Chief Accounting Officer at Waste Services, Inc, a solid waste services company. From
November 2004 to March 2007, Mr. Johnson served as Chief Financial Officer of Expert Real Estate Services, Inc., a full service
real estate brokerage company. Mr. Johnson is a Certified Public Accountant and holds an MBA from Florida International
University and a Bachelor of Science in Accounting and Administration from Washington & Lee University.
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Edmond “Ned” R. Coletta has served as our Senior Vice President, Chief Financial Officer and Treasurer since December
2012. Mr. Coletta joined us in December 2004 and has served in positions of increasing responsibility, including most recently
as our Vice President of Finance and Investor Relations. From 2002 until he joined us, Mr. Coletta served as the Chief Financial
Officer and was a member of the Board of Directors of Avedro, Inc. (FKA ThermalVision, Inc.), an early stage medical device
company that he co-founded. From 1997 to 2001, he served as a research and development engineer for Lockheed Martin
Michoud Space Systems. Mr. Coletta holds an MBA from the Tuck School of Business at Dartmouth College and a Bachelor of
Science in Materials Science Engineering from Brown University.
Christopher B. Heald has served as our Vice President of Finance and Chief Accounting Officer since January 2013. Mr. Heald
joined us in September 2001 and has served in positions of increasing responsibility, including most recently as our Director
of Financial Reporting and Analysis from July 2010 to January 2013. Mr. Heald has also served as our Accounting Manager.
Mr. Heald is a Certified Public Accountant and holds a Bachelor of Science in Business Administration from the University of
Vermont.
David L. Schmitt has served as our Senior Vice President and General Counsel since June 2012. Mr. Schmitt joined us in May
2006 as our Vice President, General Counsel. Prior to that, Mr. Schmitt served as President of a privately held consulting firm,
and further served from 2002 until 2005 as Vice President and General Counsel of BioEnergy International, LLC, (a predecessor
company to Myriant Corporation), a project development firm specializing in the recovery of methane from solid waste landfills
and the production of ethanol. He served from 1995 until 2001, as Senior Vice President, General Counsel and Secretary of
Bradlees, Inc., a retailer in the northeast United States, and from 1986 through 1990, as Vice President and General Counsel of
Wheelabrator Technologies Inc., a multi-faceted corporation specializing in the development, ownership and operation of
large-scale power facilities fueled by municipal waste and other alternative fuels. He is admitted to the Bar of Pennsylvania, and
holds a Juris Doctor, cum laude, from Duquesne University School of Law and a Bachelor of Arts degree from The Pennsylvania
State University.
Available Information
Our website is www.casella.com. We make available, free of charge through our website, our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A, and any amendments to
those materials filed pursuant to Sections 13(a) and 15(d) of the Exchange Act. We make these reports available through our
website as soon as reasonably practicable after we electronically file such materials with or furnish them to the Securities and
Exchange Commission, or SEC. The information found on our website is not part of this or any other report we file with or
furnish to the SEC.
You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC also maintains an Internet website that contains reports, proxy and information statements, and other information regarding
us and other issuers that file electronically with the SEC. The SEC’s Internet website address is www.sec.gov.
ITEM 1A. RISK FACTORS
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 risks and
uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Our
business is also subject to general risks and uncertainties that affect many other companies, including overall economic and industry
conditions, especially in the northeastern United States, where our operations and customers are principally located, changes in laws
or accounting rules or other disruptions of expected economic or business conditions. Additional risks and uncertainties not currently
known to us or that we currently believe are not material also may impair our business’s results of operations and financial condition.
Risks Related to Our Business
We face substantial competition in the solid waste services industry, and if we cannot successfully compete in the marketplace,
our business, financial condition and results of operations may be materially adversely affected.
The solid waste services industry is highly competitive, has undergone a period of consolidation and requires substantial labor and
capital resources. Some of the markets in which we compete are served by, or are adjacent to markets served by, one or more of
the large national or super regional 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 our
competitors have significantly greater financial and other resources than we do. 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 require us to
reduce the pricing of our services and may result in a loss of business.
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As is generally the case in our industry, some municipal contracts are subject to periodic competitive bidding. We may not be the
successful bidder to obtain or retain these contracts. If we are unable to compete with larger and better capitalized companies or
replace municipal contracts lost through the competitive bidding process with comparable contracts or other revenue sources
within a reasonable time period, our revenues would decrease and our operating results could be materially adversely affected.
In our solid waste disposal markets, we also compete with operators of alternative disposal and recycling facilities and with
counties, municipalities and solid waste districts that maintain their own solid waste collection, recycling and disposal operations.
We are also increasingly competing with companies which seek to use parts of the waste stream as feedstock for renewable energy
supplies. Public entities may have financial advantages because of their ability to charge user fees or similar charges, impose taxes
and apply resulting revenues, access tax-exempt financing and, in some cases, utilize government subsidies.
The waste management industry is undergoing fundamental change as traditional waste streams are increasingly viewed as
renewable resources, which may adversely impact volumes and tipping fees at our landfills.
As we have continued to develop our landfill capacity, the waste management industry has increasingly recognized the value of the
waste stream as a renewable resource, and accordingly, new alternatives to landfilling are being developed that seek to maximize
the renewable energy and other resource benefits of solid waste. These alternatives have impacted and will continue to impact the
demand for landfill space, which may affect our ability to operate our landfills at full capacity, as well as the tipping fees and prices
that waste management companies generally, and that we in particular, can charge for utilization of landfill space. As a result, our
revenues and operating margins could be materially adversely affected due to these disposal alternatives.
The waste industry is subject to extensive government regulation, and we incur substantial costs to comply with environmental
requirements. Failure to comply with these requirements, as well as enforcement actions and litigation arising from an actual
or perceived breach of such requirements, could subject us to fines, penalties, and judgments, and impose limits on our ability to
operate and expand.
We are subject to potential liability and restrictions under environmental laws, including those relating to transportation,
recycling, treatment, storage and disposal of wastes, discharges of pollutants to air and water, and the remediation of contaminated
soil, surface water and groundwater. The waste management industry has been and will continue to be subject to regulation,
including permitting and related financial assurance requirements, as well as attempts to further regulate the industry, including
efforts to regulate the emission of greenhouse gases. Our 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 we are not able to comply with the requirements
that apply to a particular facility or if we operate without the necessary approvals or permits, we could be subject to administrative
or civil, and possibly criminal, fines and penalties, and we may be required to spend substantial capital to bring an operation into
compliance, to temporarily or permanently discontinue activities, and/or take corrective actions, possibly including removal of
landfilled materials. Those costs or actions could be significant to us and impact our results of operations, cash flows, and available
capital. We may not have sufficient insurance coverage for our environmental liabilities, such coverage may not cover all of the
potential liabilities we may be subject to and/or we may not be able to obtain insurance coverage in the future at reasonable
expense, or at all.
Environmental and land use laws also impact our ability to expand and, in the case of our solid waste operations, may dictate
those geographic areas from which we must, or, from which we may not, accept solid waste. Those laws and regulations may
limit the overall size and daily solid waste volume that may be accepted by a solid waste operation. If we are not able to expand
or otherwise operate one or more of our facilities because of limits imposed under such laws, we may be required to increase our
utilization of disposal facilities owned by third-parties, which could reduce our revenues and/or operating margins. In addition,
we are required to obtain government permits to operate our facilities, including all of our landfills. Even if we were to comply
with applicable environmental laws, there is no guarantee that we would be able to obtain the requisite permits and, even if
we could, that any permit (and any existing permits we currently hold) will be renewed or modified as needed to fit our
business needs.
We have historically grown through acquisitions and may make additional acquisitions from time to time in the future, and we have
tried and will continue to try to evaluate and limit environmental risks and liabilities presented by businesses to be acquired prior
to the acquisition. 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 we anticipate. It is also possible that government officials responsible
for enforcing environmental laws may believe an issue is more serious than we expect, or that we will fail to identify or fully
appreciate an existing liability before we become legally responsible for addressing it. Some of the legal sanctions to which we could
become subject could cause the suspension or revocation of a needed permit, prevent us from, or delay us in, obtaining or renewing
permits to operate or expand our facilities, or harm our reputation. At April 30, 2014, we had recorded $5.3 million in environmental
remediation liabilities for the estimated cost of our share of work associated with a consent order issued by the State of New York
to remediate a scrap yard and solid waste transfer station owned by one of our acquired subsidiaries, including the recognition of
accretion expense. There can be no assurance that the cost of such cleanup or that our share of that cost will not exceed our estimates.
20
Our operating program depends on our ability to operate the landfills and transfer stations we own and lease. Localities where
we operate generally seek to regulate some or all landfill and transfer station operations, including siting and expansion of
operations. The laws adopted by municipalities in which our landfills and transfer stations are located may limit or prohibit the
expansion of a landfill or transfer station, as well as the amount of solid waste that we can accept at the landfill or transfer station
on a daily, quarterly or annual basis, and any effort to acquire or expand landfills and transfer stations, which typically involves a
significant amount of time and expense. We may not be successful in obtaining new landfill or transfer station sites or expanding
the permitted capacity of any of our current landfills and transfer stations. If we are unable to develop additional disposal and
transfer station capacity, our ability to achieve economies from the internalization of our waste stream will be limited. If we fail to
receive new landfill permits or renew existing permits, we may incur landfill asset impairment and other charges associated with
accelerated closure.
In addition to the costs of complying with environmental laws and regulations, we incur costs defending against environmental
litigation brought by governmental agencies and private parties. We are, and may be in the future, a defendant in lawsuits brought
by parties alleging environmental damage, personal injury, and/or property damage, or which seek to overturn or prevent the
issuance of an operating permit or authorization, all of which may result in us incurring significant liabilities.
See also Item 1, Business – Regulation, Item 3, Legal Proceedings and Note 11 to our consolidated financial statements included
under Item 8 of this Annual Report on Form 10-K.
Our results of operations could continue to be affected by fluctuating commodity prices or market requirements for
recyclable materials.
Our results of operations have been and may continue to be affected by changing purchase or resale prices or market requirements
for recyclable materials. Our recycling business involves the purchase and sale of recyclable materials, some of which are priced
on a commodity basis. The market for recyclable materials, particularly newspaper, corrugated containers, plastic and ferrous and
aluminum metals, was affected by unprecedented price decreases in October 2008, resulting in a severe impact on our results of
operations. Currently, the commodity markets expect to see ongoing negative pressure on pricing associated with the impact of
Operation Green Fence, a China government policy directed to decrease the level of trash entering the country as all shipments of
recycled materials are required to keep contaminants under a 1.5 percent level. As a result of this improved quality standard, more
marketable recyclables are being directed domestically thereby flooding the United States mills and driving prices downwards. As
such, prices will continue to be volatile due to numerous factors beyond our control. Although we may seek to limit our exposure
to fluctuating commodity prices through the use of hedging agreements, floor price contracts and long-term supply contracts with
customers and have sought to mitigate commodity price fluctuations by reducing the prices we pay for purchased materials or
increasing tip fees at our facilities, these fluctuations have in the past contributed, and may continue to contribute, to significant
variability in our period-to-period results of operations.
Our business requires a high level of capital expenditures.
Our business is capital intensive. Our capital expenditure requirements include fixed asset purchases and capital expenditures
for landfill development and cell construction, as well as site and cell closure. We use a substantial portion of our cash flows from
operating activities toward capital expenditures, which reduces our flexibility to use such cash flows for other purposes, such as
reducing our indebtedness. Our capital expenditures could increase if we make acquisitions or further expand our operations, or
as a result of factors beyond our control, such as changes in federal, state or local governmental requirements. The amount that
we spend on capital expenditures may exceed current expectations, which may require us to obtain additional funding for our
operations or impair our ability to grow our business.
Our business is geographically concentrated and is therefore subject to regional economic downturns.
Our operations and customers are concentrated principally in New England and New York. Therefore, our business, financial
condition and results of operations are susceptible to regional economic downturns and other regional factors, including state
regulations and budget constraints and severe weather conditions. In addition, as we seek to expand in our existing markets,
opportunities for growth within this region will become more limited and the geographic concentration of our business
will increase.
Our results of operations and financial condition may be negatively affected if we inadequately accrue for final capping, closure
and post-closure costs or by the timing of these costs for our waste disposal facilities.
We have material financial obligations relating to final capping, closure and post-closure costs of our existing owned or operated
landfills and will have material financial obligations with respect to any disposal facilities which we 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 we must begin post-closure maintenance. We establish accruals for the estimated costs associated with
21
such final capping, closure and post-closure obligations over the anticipated useful life of each landfill on a per ton basis. We have
provided and expect that we will in the future provide accruals for financial obligations relating to final capping, closure and
post-closure costs of our owned or operated landfills, generally for a term of 30 years after closure of a landfill. Our financial
obligations for final capping, closure or post-closure costs could exceed the amounts accrued or amounts otherwise receivable
pursuant to trust funds established for this purpose. Such a circumstance could result in significant unanticipated charges which
would have an adverse impact on our business.
In addition, the timing of any such final capping, closure or post-closure costs, which exceed established accruals, may further
negatively impact our business. Since we will be unable to control the timing and amounts of such costs, we may be forced to delay
investments or planned improvements in other parts of our business or we may be unable to meet applicable financial assurance
requirements. Any of the foregoing would negatively impact our business and results of operations.
Fluctuations in fuel costs could affect our operating expenses and results.
The price and supply of fuel is unpredictable and fluctuates based on events beyond our control, including among others,
geopolitical developments, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries
and other oil and gas producers, war and unrest in oil producing countries and regional production patterns. Because fuel
is needed to run our fleet of trucks, price escalations for fuel increase our operating expenses. In fiscal year 2014, we used
approximately 5.9 million gallons of diesel fuel in our solid waste operations. Although, we have a “fuel and oil recovery fee”
program, based on a fuel index, to help offset increases in the cost of fuel, oil and lubricants arising from price volatility, we
cannot provide assurance that we can pass this fee on to our customers where their contracts and competition conditions permit.
We could be precluded from entering into contracts or obtaining or maintaining permits or certain contracts if we are unable to
obtain third-party financial assurance to secure our contractual obligations.
Public solid waste collection, recycling and disposal contracts, and obligations associated with landfill closure typically require
performance or surety bonds, letters of credit or other means of financial assurance to secure our contractual performance. We
currently obtain performance and surety bonds from Evergreen, in which we hold a 19.9% equity interest. If we are unable to
obtain the necessary financial assurance in sufficient amounts or at acceptable rates, we could be precluded from entering into
additional municipal contracts or from obtaining or retaining landfill management contracts or operating permits. Any future
difficulty in obtaining insurance could also impair our ability to secure future contracts conditioned upon having adequate
insurance coverage.
We may be required to write-off or impair capitalized costs or intangible assets in the future or we may incur restructuring costs
or other charges, each of which could harm our earnings.
In accordance with generally accepted accounting principles in the United States, we capitalize certain expenditures and advances
relating to our acquisitions, pending acquisitions, landfills, cost method investments and development projects. In addition, we
have considerable unamortized assets. From time to time in future periods, we 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 we estimate
will be recoverable, through sale or otherwise, relating to: (1) any operation or other asset that is being sold, permanently shut
down, impaired 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.
In response to such charges and costs and other market factors, we may be required to implement restructuring plans in an effort
to reduce the size and cost of our operations and to better match our resources with our market opportunities. As a result of
such actions, we would expect to incur restructuring expenses and accounting charges which may be material. Several factors
could cause a restructuring to adversely affect our business, financial condition and results of operations. These include potential
disruption of our operations, the development of our landfill capacity and recycling technologies and other aspects of our
business. Employee morale and productivity could also suffer and result in unintended employee attrition. Any restructuring
would require substantial management time and attention and may divert management from other important work. Moreover,
we could encounter delays in executing any restructuring plans, which could cause further disruption and additional
unanticipated expense.
See Note 16 included under Item 8 of this Annual Report on Form 10-K for disclosure related to asset impairments recognized
during the reporting periods.
22
Our revenues and our operating income experience seasonal fluctuations.
Our transfer and disposal revenues historically have been higher in the late spring, summer and early fall months. This
seasonality reflects the lower volume of solid waste during the late fall, winter and early spring months primarily because:
• the volume of waste relating to C&D activities decreases substantially during the winter months in the northeastern
United States; and
• decreased tourism in Vermont, Maine and eastern New York during the winter months tends to lower the volume of solid
waste generated by commercial and restaurant customers, which is partially offset by increased volume from the ski industry.
Since certain of our operating and fixed costs remain constant throughout the fiscal year, operating income is impacted by a
similar seasonality. In addition, particularly harsh weather conditions typically result in increased operating costs.
Our Recycling business experiences increased volumes of fiber in November and December due to increased newspaper
advertising and retail activity during the holiday season.
We may, in the future, attempt to divest or sell certain parts or components of our business to third-parties, which may result in
lower than expected proceeds or losses or we may be unable to identify potential purchasers.
From time to time in the future, we may sell or divest certain other components of our business. These divestitures may be
undertaken for a number of reasons, including to generate proceeds to pay down debt, or as a result of a determination that the
specified asset will provide inadequate returns to us, or that the asset no longer serves a strategic purpose in connection with our
business or if we determine the asset may be more valuable to a third-party. The timing of such sales or divestures may not be
entirely within our control. For example, we may need to quickly divest assets to satisfy immediate cash requirements, or we may
be forced to sell certain assets prior to canvassing the market or at a time when market conditions for valuations or for financing
for buyers are unfavorable, which would result in proceeds to us in an amount less than we expect or less than our assessment
of the value of those assets. We also may not be able to identify buyers for certain of our assets, particularly given the difficulty
that potential acquirers may face in obtaining financing, or we may face opposition from municipalities or communities to a
disposition or the proposed buyer. Any sale of our assets could result in a loss on divestiture. Any of the foregoing would have an
adverse effect on our business and results of operations.
We may engage in acquisitions in the future with the goal of complementing or expanding our business, including developing
additional disposal capacity. However, we may be unable to complete these transactions and, if executed, these transactions
may not improve our business or may pose significant risks and could have a negative effect on our operations.
We have in the past, and we may in the future, make acquisitions in order to acquire or develop additional disposal capacity. These
acquisitions may include “tuck-in” acquisitions within our existing markets, assets that are adjacent to or outside of our existing
markets, or larger, more strategic acquisitions. In addition, from time to time we may acquire businesses that are complementary
to our core business strategy. We may not be able to identify suitable acquisition candidates. If we identify suitable acquisition
candidates, we may be unable to successfully negotiate the acquisition at a price or on terms and conditions acceptable to us,
including as a result of the limitations imposed by our debt obligations. Furthermore, we may be unable to obtain the necessary
regulatory approval to complete potential acquisitions.
Our ability to achieve the benefits from any potential future acquisitions, including cost savings and operating efficiencies,
depends in part on our ability to successfully integrate the operations of such acquired businesses with our operations. The
integration of acquired businesses and other assets may require significant management time and resources that would otherwise
be available for the ongoing management of our existing operations.
Any properties or facilities that we acquire may be subject to unknown liabilities, such as undisclosed environmental
contamination, for which we would have no recourse, or only limited recourse, to the former owners of such properties. As a
result, if a liability were asserted against us based upon ownership of an acquired property, we might be required to pay significant
sums to settle it, which could adversely affect our financial results and cash flow.
Efforts by labor unions to organize our employees could divert management attention and increase our operating expenses.
Labor unions regularly make attempts to organize our employees, and these efforts will likely continue in the future. Certain groups
of our employees have chosen to be represented by unions, and we have negotiated collective bargaining agreements with these
groups. The negotiation of collective bargaining agreements could divert management attention and result in increased operating
expenses and lower net income (or increased net loss). If we are unable to negotiate acceptable collective bargaining agreements, we
may be subject to union-initiated work stoppages, including strikes. Depending on the type and duration of any labor disruptions,
our revenues could decrease and our operating expenses could increase, which could adversely affect our financial condition, results
of operations and cash flows. As of May 31, 2014, approximately 4.0% of our employees were represented by unions.
23
Risks Related to Our Indebtedness
We have substantial debt and have the ability to incur additional debt. The principal and interest payment obligations of such
debt may restrict our future operations.
As of April 30, 2014, we had approximately $509.5 million of outstanding principal indebtedness (excluding approximately $34.7
million of outstanding letters of credit issued under the revolving credit and letter of credit facility due March 18, 2016 (the
“Senior Credit Facility”)) and an additional $58.9 million of unused commitments under the Senior Credit Facility. In addition,
the terms of our existing indebtedness permit us to incur additional debt. Our substantial debt, among other things:
• requires us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due
under our debt, which reduces funds available for other business purposes, including capital expenditures and acquisitions;
• places us at a competitive disadvantage compared with some of our competitors that may have less debt and better access to
capital resources; and
• limits our ability to obtain additional financing required to fund working capital and capital expenditures and for other
general corporate purposes.
Our ability to satisfy our obligations and to reduce our total debt depends on our future operating performance and on economic,
financial, competitive and other factors, many of which are beyond our control. Our business may not generate sufficient cash
flow, and future financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully
execute our business strategy.
To service our indebtedness, we will require a significant amount of cash. However, our ability to generate cash depends on
many factors beyond our control.
Our ability to make payments on, and to refinance, our indebtedness and to fund planned capital expenditures, will depend on
our ability to generate cash in the future which, in turn, is subject to general economic, financial, competitive, regulatory and other
factors, many of which are beyond our control.
Our business may not generate sufficient cash flows from operations and we may not have available to us future borrowings in an
amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. In these circumstances, we may need
to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness
on commercially reasonable terms, or at all. Without this financing, we could be forced to sell assets or secure additional financing
to make up for any shortfall in our payment obligations under unfavorable circumstances. However, we may not be able to secure
additional financing on terms favorable to us or at all and, in addition, the terms of our debt agreements limit our ability to sell
assets and also restrict the use of proceeds from such a sale. Moreover, substantially all of our assets have been pledged to secure
repayment of our indebtedness under the Senior Credit Facility. In addition, we may not be able to sell assets quickly enough or
for amounts sufficient to enable it to meet our obligations. Our Senior Credit Facility matures on March 18, 2016, and as a result
we will be required to account for it as a current liability if we do not refinance it prior to March 17, 2015. Although we expect to
complete a refinancing prior to such date, there can be no assurance that we will be able to do so on terms favorable to us or at all,
due to market or other conditions in existence at that time.
The agreements governing our various debt obligations impose restrictions on our business and adversely affect our ability to
undertake certain corporate actions.
The agreements governing our various debt obligations include covenants imposing significant restrictions on our business.
These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business
opportunities as they arise. These covenants place restrictions on our ability to, among other things:
• incur additional debt;
• create liens;
• make certain investments;
• enter into certain transactions with affiliates;
• declare or pay dividends, redeem stock or make other distributions to stockholders; and
• consolidate, merge or transfer or sell assets.
24
The Senior Credit Facility requires us to meet a number of financial ratios and covenants and restricts our ability to make
certain capital expenditures.
Our ability to comply with these agreements may be affected by events beyond our control, including prevailing economic,
financial and industry conditions. These covenants could have an adverse effect on our business by limiting our ability to take
advantage of financing, merger and acquisition or other corporate opportunities. The Senior Credit Facility also restricts our
ability to make capital expenditures. An event of default under any of our debt agreements could permit some of our lenders,
including the lenders under the Senior Credit Facility, to declare all amounts borrowed from them to be immediately due and
payable, together with accrued and unpaid interest, or, in the case of the Senior Credit Facility, terminate the commitment to make
further credit extensions thereunder, which could, in turn, trigger cross-defaults under other debt obligations. If we were unable
to repay debt to our lenders, or were otherwise in default under any provision governing our outstanding debt obligations, our
secured lenders could proceed against us and against the collateral securing that debt.
Our ability to make acquisitions may be adversely impacted by our outstanding indebtedness and by the price of our stock.
Our ability to make future business acquisitions, particularly those that would be financed solely or in part through cash from
operations, will be curtailed due to our obligations to make payments of principal and interest on our outstanding indebtedness.
We may not have sufficient capital resources, now or in the future, and may be unable to raise sufficient additional capital
resources on terms satisfactory to us, if at all, in order to meet our capital requirements for such acquisitions. In addition, the
terms of our indebtedness include covenants that directly restrict, or have the effect of restricting, our ability to make certain
acquisitions while this indebtedness remains outstanding. To the extent that the amount of our outstanding indebtedness
continues to have a negative impact on our stock price, using our Class A common stock as consideration will be less attractive for
potential acquisition candidates. In the past, the trading price of our Class A common stock on the NASDAQ Global Select Market
has limited our willingness to use our equity as consideration and the willingness of sellers to accept our shares and as a result has
limited, and could continue to limit, the size and scope of our acquisition program. If we are unable to pursue acquisitions that
would enhance our business or operations, the potential growth of our business and revenues may be adversely affected.
Risks Related to Our Common Stock
Our Class B common stock is entitled to ten votes per share and is held exclusively by John W. Casella and Douglas R. Casella.
The holders of our Class B common stock are entitled to ten votes per share and the holders of our Class A common stock are
entitled to one vote per share. At April 30, 2014, an aggregate of 988,200 shares of our 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, and his brother, Douglas R. Casella, a member of our Board of Directors. Based on the number of shares of common stock
outstanding on May 31, 2014, the shares of our Class A common stock and Class B common stock beneficially owned by John W.
Casella and Douglas R. Casella represent approximately 22.3% of the aggregate voting power of our stockholders. Consequently,
John W. Casella and Douglas R. Casella may be able to substantially influence certain matters submitted to stockholders for
approval, including proposed amendments to our certificate of incorporation and bylaws requiring an affirmative vote of shares
representing at least 75% of the votes that all holders of our Class A common stock and our Class B common stock would be
entitled to cast.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
At May 31, 2014, we operated nine subtitle D landfills, four of which we own and five of which we lease; one landfill permitted
to accept C&D materials that we own; 42 transfer stations, 24 of which we own, eight of which we lease and ten of which we
operate under a contract; 35 solid waste collection facilities, 21 of which we own and 14 of which we lease; 16 recycling processing
facilities, nine of which we own, five of which we lease and two of which we operate under a contract; four landfill gas-to-energy
facilities that we own; and 20 corporate office and other administrative facilities, three of which we own and 17 of which we lease
(See Item 1, Business, of this Annual Report on Form 10-K for property information by operating segment).
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ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of our business and as a result of the extensive governmental regulation of the solid waste industry, we are
subject to various judicial and administrative proceedings involving state and local agencies. In these proceedings, an agency may
seek to impose fines or to revoke or deny renewal of an operating permit held by us. From time to time, we may also be subject
to actions brought by special interest or other groups, adjacent landowners or residents in connection with the permitting and
licensing of landfills and transfer stations, or alleging environmental damage or violations of the permits and licenses pursuant
to which we operate. In addition, we have been named defendants in various claims and suits pending for alleged damages to
persons and property, alleged violations of certain laws and alleged liabilities arising out of matters occurring during the ordinary
operation of the waste management business.
In accordance with Financial Accounting Standards Board (“FASB”) ASC 450-20, we accrue for legal proceedings when losses
become probable and reasonably estimable. As of the end of each applicable reporting period, we review each of our legal
proceedings to determine whether it is probable, reasonably possible or remote that a liability has been incurred and, if it is at least
reasonably possible, whether a range of loss can be reasonably estimated under the provisions of FASB ASC 450-20. In instances
where we determine that a loss is probable and we can reasonably estimate a range of losses we may incur with respect to such
a matter, we record an accrual for the amount within the range that constitutes our best estimate of the possible loss. If we are
able to reasonably estimate a range, but no amount within the range appears to be a better estimate than any other, we record an
accrual in the amount that is the low end of such range. When a loss is reasonably possible, but not probable, we will not record an
accrual, but we will disclose our estimate of the possible range of loss where such estimate can be made in accordance with ASC
450-20.
Environmental Liability
We are subject to liability for environmental damage, including personal injury and property damage, that our 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 we acquired the facilities.
We may also be subject to liability for similar claims arising from off-site environmental contamination caused by pollutants or
hazardous substances if we or our predecessors arrange or arranged to transport, treat or dispose of those materials. The following
matters represent our potential or outstanding material claims.
Potsdam Environmental Liability
On December 20, 2000, the State of New York Department of Environmental Conservation (“DEC”) issued an Order on Consent
(“Order”) which named Waste-Stream, Inc. (“WSI”), our subsidiary, General Motors Corporation (“GM”) and Niagara Mohawk
Power Corporation (“NiMo”) as Respondents. The Order required that the Respondents undertake certain work on a 25-acre
scrap yard and solid waste transfer station owned by WSI, including the preparation of a Remedial Investigation and Feasibility
Study (“Study”). A draft of the Study was submitted to the DEC in January 2009 (followed by a final report in May 2009). The
Study estimated that the undiscounted costs associated with implementing the preferred remedies would be approximately $10.2
million. On February 28, 2011, the DEC issued a Proposed Remedial Action Plan for the site and accepted public comments
on the proposed remedy through March 29, 2011. We submitted comments to the DEC on this matter. In April 2011, the DEC
issued the final Record of Decision (“ROD”) for the site. The ROD was subsequently rescinded by the DEC for failure to respond
to all submitted comments. The preliminary ROD, however, estimated that the present cost associated with implementing the
preferred remedies would be approximately $12.1 million. The DEC issued the final ROD in June 2011 with proposed remedies
consistent with its earlier ROD. An Order on Consent and Administrative Settlement naming WSI and NiMo as Respondents was
executed by the Respondents and the DEC with an effective date of October 25, 2013. It is unlikely that any costs relating to onsite
remediation will be incurred until fiscal year 2016.
WSI is jointly and severally liable for the total cost to remediate and we initially expected to be responsible for approximately 30%
of such costs pursuant to a cost-sharing agreement with NiMo and GM. Based on these estimates, we recorded an environmental
remediation charge of $2.8 million in the third quarter of fiscal year 2009. In the fourth quarter of fiscal year 2009, we recognized
an additional charge of $1.5 million, representing an additional 15% of the estimated costs, in recognition of the deteriorating
financial condition and eventual bankruptcy filing of GM. In the fourth quarter of fiscal year 2010, we recognized an additional
charge of $0.3 million based on changes in the expected timing of cash outflows. Based on the estimated costs in the ROD, and
changes in the estimated timing of cash flows, we recorded an environmental remediation charge of $0.5 million in the fourth
quarter of fiscal year 2011. Such charges could be significantly higher if costs exceed estimates. We inflate these estimated costs
in current dollars until the expected time of payment and discount the total cost to present value using a risk free interest rate of
2.0%. As of April 30, 2014 and 2013, we have recorded liabilities of $5.3 million, including the recognition of less than $0.1 million
and $0.1 million of accretion expense in fiscal years 2014 and 2013, respectively.
26
In September 2011, the DEC settled its environmental claim against the estate of the former GM (known as “Motors Liquidation
Trust”) for future remediation costs relating to the WSI site for face value of $3.0 million. In addition, in November 2011 we
settled our own claim against the Motors Liquidation Trust for face value of $0.1 million. These claims will be paid by GM in
warrants to obtain stock of the reorganized GM. We began receiving the warrants in May 2013 and at this time there is no way to
accurately estimate when the remainder of these claims will be paid. We have not assumed that any future proceeds from the sale
of securities received in payment of these claims will reduce our exposure.
Southbridge Landfill Environmental Liability
On or about August 24, 2013, we experienced the movement of stockpiled earth at our Southbridge landfill in Southbridge,
Massachusetts. The stockpiled materials consisted of soil removed and relocated to create space for the construction of
additional landfill airspace at our Southbridge landfill. The earth had been relocated and stored during the fall, winter and spring
construction season of fiscal year 2013.
The movement caused some of the stockpiled earth to enter wetlands on property owned by us. On or about August 29, 2013, we
notified the Massachusetts Department of Environmental Protection (“MADEP”), and the Towns of Southbridge and Charlton,
Massachusetts, of the occurrence of the movement. On or about September 6, 2013, MADEP issued a “Unilateral Administrative
Order” (“UAO”) requiring us to provide MADEP with a plan to remove any materials deposited in the wetlands as a result of the
movement (“Plan”). On or about October 3, 2013, we submitted the Plan to MADEP, and on or about October 15, 2013, MADEP
approved the Plan and verbally issued permission for us to implement the Plan. We are currently implementing the Plan under the
supervision of MADEP.
In January 2014, we received correspondence from the Massachusetts’ Office of the Attorney General (“MAAG”), advising us
that the MAAG intends to schedule a meeting with us to discuss this incident, and to possibly file suit against us for violation of
the Massachusetts Wetlands Protection, Clean Air and Solid Waste Acts. We met with the MAAG in March 2014 to discuss our
ongoing remediation effort and the parties have initiated discussions regarding the resolution of this matter.
We anticipate that execution of the Plan and related matters will involve remediation costs of $2.1 million and such costs could
be higher if actual costs exceed estimates. We have provided our insurer with notice of the Plan, and the costs expended by us to
date to comply with the Plan. We have also provided notice to certain of our contractors and technical advisors that the movement
has occurred, that significant remediation costs will be incurred in executing the Plan and related matters, and that we expect
our contractors and technical advisors to assist in the execution of the Plan and related matters, to share in the remediation costs
as responsible parties, and to provide notice to their own insurers. We believe that a loss in the range of $0.4 million to $2.1
million, after taking into account amounts we expect to be reimbursed by our insurer and other third-parties, is probable and have
therefore recorded a charge of $0.4 million in fiscal year 2014 as an environmental remediation charge.
On or about April 25, 2014, we notified MADEP and other interested parties that areas of sloughing had occurred in a plateau
created as part of new cell construction at our Southbridge landfill. Some of the same contractors and technical advisors that
were involved in the initial movement of stockpiled earth are also involved in the new cell construction that includes this area of
sloughing. We repaired the areas of sloughing on April 25, 2014 and no damage occurred in the abutting wetlands. On May 9,
2014, MADEP issued a UAO directing us to ensure that the areas of sloughing at the plateau were repaired and to take steps
to ensure that there would be no incursion into the wetlands, and requiring that we undertake corrective actions to ensure the
stability of the plateau. Prior to MADEP’s issuance of the latest UAO, we were in the process of awarding a contract to a soil
remediation company to undertake and ensure such stability at the plateau. We needed MADEP to issue permits in order for
this work to be finalized. We filed a written notice of claim for an adjudicatory hearing with respect to the efficacy of MADEP’s
issuance of the latest UAO, but the parties have reached a tentative resolution of the issues raised by MADEP’s issuance of the
latest UAO, and the parties are finalizing a Stipulation that will include the withdrawal by us of our notice of claim for an
adjudicatory hearing.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A common stock trades on the NASDAQ Global Select Market (“NASDAQ Stock Market”) under the symbol “CWST”.
There is no established trading market for our Class B common stock. The following table sets forth the high and low sale prices of
our Class A common stock for the periods indicated as quoted on the NASDAQ Stock Market.
27
Period
Fiscal Year Ending April 30, 2013
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal Year Ending April 30, 2014
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$ 6.17
$ 5.55
$ 4.74
$ 4.74
$ 4.79
$ 6.03
$ 6.09
$ 5.65
$ 4.81
$ 4.05
$ 3.76
$ 3.87
$ 3.92
$ 4.68
$ 5.13
$ 4.91
On May 30, 2014, the high and low sale prices per share of our Class A common stock as quoted on the NASDAQ Stock Market
were $5.55 and $5.45, respectively. As of May 31, 2014 there were approximately 500 holders of record of our Class A common
stock and two holders of record of our Class B common stock.
For purposes of calculating the aggregate market value of the shares of common stock held by non-affiliates, as shown on the cover
page of this Annual Report on Form 10-K, we have assumed that all the outstanding shares of Class A common stock were held by
non-affiliates except for the shares beneficially held by directors and executive officers and funds represented by them.
Dividends
No dividends have ever been declared or paid on our common stock and we do not anticipate paying any cash dividends on our
common stock in the foreseeable future. Our credit facility and indentures restrict the payment of dividends on common stock.
The information required by Item 201(d) of Regulation S-K is included in Part III of this Annual Report on Form 10-K.
Stock Performance Graph
The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and
Exchange Commission (“SEC”), nor shall such information be incorporated by reference into any future filing under the Securities Act
of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference
into such filing.
The stock performance graph below compares the percentage change in cumulative stockholder return on our Class A common
stock for the period from April 30, 2009 through April 30, 2014, with the cumulative total return on the NASDAQ Stock Market
(U.S. & Foreign) Index and our Industry Peer Group on the NASDAQ Stock Market. The stock performance graph assumes the
investment on April 30, 2009 of $100.00 in our Class A common stock at the closing price on such date, in the NASDAQ Stock
Market (U.S. & Foreign) Index and our Industry Peer Group, and that dividends are reinvested. No dividends have been declared
or paid on our Class A common stock.
28
April 30,
2009
April 30,
2010
April 30,
2011
April 30,
2012
April 30,
2013
April 30,
2014
Casella Waste Systems, Inc.
NASDAQ Composite
Peer Group (1)
$ 100.00
$ 100.00
$ 100.00
$ 250.49
$ 144.71
$ 162.98
$ 328.16
$ 171.15
$ 212.77
$ 292.72
$ 184.61
$ 211.65
$ 198.57
$ 206.98
$ 235.66
$ 247.57
$ 249.28
$ 274.95
1. The peer group is comprised of securities of Waste Connections, Inc. and Progressive Waste Solutions.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial and operating data set forth below with respect to our consolidated statements of
operations and cash flows for fiscal years 2014, 2013 and 2012, and the consolidated balance sheets as of April 30, 2014 and 2013
are derived from the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The consolidated
statements of operations and cash flows data for fiscal years 2011 and 2010, and the consolidated balance sheet data as of April 30,
2012, 2011 and 2010 are derived from previously filed consolidated financial statements after giving effect to discontinued
operations. 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 our consolidated financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K.
Statement of Operations Data:
Revenues
Cost of operations
General and administration
Depreciation and amortization
Asset impairment charge
Development project charge
Severance and reorganization costs
Environmental remediation charge
Expense from divestiture, acquisition and financing costs
Gain on settlement of acquisition related contingent consideration
Legal settlement
Bargain purchase gain
Gain on sale of assets
Operating income (loss)
Interest expense, net
Other (income) expense, net
Fiscal Year Ended April 30,
(in thousands, except per share data)
2014
2013
2012
2011
2010
$ 497,633
$ 455,335
$ 467,950 $ 454,685 $ 449,678
354,592
323,014
318,068
306,014
294,416
61,865
60,339
7,455
1,394
586
400
144
(1,058)
—
—
—
11,916
37,863
(436)
58,205
56,576
—
—
3,709
—
1,410
—
—
—
—
60,264
63,396
56,654
58,415
40,746
58,121
3,654
63,509
—
—
185
335
—
—
—
—
—
34,579
44,108
2,355
131
—
—
—
—
1,359
—
—
—
—
549
—
—
—
(2,975)
(3,502)
29,428
45,489
10,626
12,421
41,429
23,501
(11,033)
44,966
20,111
Loss from continuing operations before income taxes and
discontinued operations
Provision (benefit) for income taxes
(25,511)
(52,509)
(76,110)
(26,687)
(11,884)
1,799
(2,526)
1,593
(23,723)
3,016
Loss from continuing operations before discontinued operations
(27,310)
(49,983)
(77,703)
(2,964)
(14,900)
Income (loss) from discontinued operations, net
(Loss) gain on disposal of discontinued operations, net
Net (loss) income
284
(378)
(4,480)
—
(614)
725
(2,198)
43,590
(138)
1,180
(27,404)
(54,463)
(77,592)
38,428
(13,858)
Less: Net loss attributable to noncontrolling interests
(4,309)
(321)
(6)
—
—
Net (loss) income attributable to common stockholders
$ (23,095)
$ (54,142)
$ (77,586)
$ 38,428
$ (13,858)
Basic and diluted weighted average common shares outstanding
39,820
34,015
26,749
26,105
25,731
Basic and diluted net (loss) income per common share (1)
$ (0.58)
$ (1.59)
$ (2.90)
$ 1.47
$ (0.54)
29
Other Operating Data:
Capital expenditures
Other Data:
Fiscal Year Ended April 30,
(in thousands)
2014
2013
2012
2011
2010
$ 45,959
$ 55,027
$ 58,363
$ 54,728
$ 52,501
Cash flows provided by operating activities
$49,642
$43,906
$ 64,171
$ 48,209
$ 65,171
Cash flows used in investing activities
$(57,910)
$(89,455)
$ (70,634)
$ (55,242)
$ (62,725)
Cash flows provided by (used in) financing activities
$9,008
$44,947
$ 10,229
$ (117,895)
$ (7,281)
Balance Sheet Data:
Cash and cash equivalents
Working capital, net (2)
$ 2,464
$1,755
$ 4,534
$ 1,817
$ (21,405)
$(25,308)
$ (18,424)
$ (5,362)
Property, plant and equipment, net
$ 403,424
$422,502
$ 414,666
$ 452,536
$ 2,035
$ (2,729)
$ 457,103
Goodwill
Total assets
$ 119,139
$ 649,897
$115,928
$663,119
$ 101,706
$ 101,204
$ 100,526
$ 633,743
$ 690,581
$ 754,814
Long-term debt and capital leases, less current maturities
$ 507,134
$494,987
$ 475,199
$ 463,574
$ 564,032
Total stockholders’ (deficit) equity
$ (8,537)
$15,451
$ 18,231
$ 93,987
$ 50,296
1. Computed as described in Note 3 to the consolidated financial statements included in Item 8 of this Annual Report on
Form 10-K.
2. Working capital, net is defined as current assets, excluding cash and cash equivalents, minus current liabilities.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our 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. Our actual results may differ
materially from those contained in any forward-looking statements.
Company Overview
Founded in 1975 with a single truck, Casella Waste Systems, Inc. is a regional, vertically-integrated solid waste, recycling and resource
management services company. We provide resource management expertise and services to residential, commercial, municipal
and industrial customers, primarily in the areas of solid waste collection and disposal, transfer, recycling and organics services. We
operate in six states: Vermont, New Hampshire, New York, Massachusetts, Maine and Pennsylvania, with our headquarters located
in Rutland, Vermont. We manage our solid waste operations on a geographic basis through two regional operating segments, the
Eastern and Western regions, each of which provides a full range of solid waste services, and our
larger-scale recycling and commodity brokerage operations through our Recycling segment. Organics services, ancillary operations,
major customer accounts, discontinued operations, and earnings from equity method investees are included in our Other segment.
As of May 31, 2014, we owned and/or operated 35 solid waste collection operations, 42 transfer stations, 16 recycling facilities,
nine Subtitle D landfills, four landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition
(“C&D”) materials
Acquisitions and Divestitures
Acquisitions
In fiscal year 2013, we established a dedicated business development team that identifies acquisition candidates, categorizes the
opportunity by strategic fit and perceived level of financial accretion, establishes contact with the appropriate representative of the
acquisition candidate and gathers further information on the acquisition candidate.
We have made in the past, and we may make in the future, acquisitions in order to acquire or develop additional disposal
capacity. These acquisitions may include “tuck-in” acquisitions within our existing markets, assets that are adjacent to or outside
of our existing markets, or larger, more strategic acquisitions. In addition, from time to time, we may acquire businesses that are
30
complementary to our core business strategy. We face considerable competition for acquisition targets, particularly the larger and
more meaningful targets, due to among other things our limited access to and weighted average cost of capital, but we believe that
our strong relationships and reputation in the New England and upstate New York areas help to offset these factors.
We acquired various businesses during fiscal year 2014, including several solid waste hauling operations, a transfer station, a
material recovery facility (“MRF”) and an industrial service management business (included in the Other segment) for total
consideration of $10.1 million, including $7.9 million in cash, $1.7 million in contingent consideration and holdbacks to the
sellers and $0.5 million of other non-cash considerations. In the fourth quarter of fiscal year 2014, we recovered $0.2 million of the
purchase price holdback amount we had previously paid and were relieved of any potential contingent consideration obligation
associated with the acquisition of an industrial service management business earlier in fiscal year 2014. As a result, we recorded a
$1.1 million gain on settlement of acquisition related contingent consideration in fiscal year 2014.
We acquired various solid waste hauling operations during fiscal year 2013, including the acquisition of all of the outstanding
capital stock of Bestway Disposal Services and BBI Waste Services (“BBI”) in the Eastern region, for total consideration of $27.9
million in cash and approximately 0.6 million shares of our Class A common stock, valued at an aggregate of $2.7 million. We
recorded an additional $5.1 million to goodwill for the increased deferred tax liability related to the BBI acquisition based on the
impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and
such amount recognized for income tax purposes. See Note 15 to the consolidated financial statements included in Item 8 of this
Annual Report on Form 10-K for further discussion. The acquisition of BBI, a provider of solid waste collection, transfer and
liquid waste services in New Hampshire and Maine, provided us the opportunity to internalize additional waste and recyclables
and to consolidate operations, routes and transportation within the Eastern region.
We acquired various solid waste hauling operations during fiscal year 2012 and completed the acquisition of the McKean County
landfill business in Pennsylvania by acquiring additional equipment not included in the original transaction. These entities and
assets were acquired for total consideration of $2.2 million, including $2.1 million in cash and $0.1 million in holdbacks to
the sellers.
Divestitures
From time to time, we may sell or divest certain investments or other components of our business. These divestitures may be
undertaken for a number of reasons, including to generate proceeds to pay down debt; as a result of a determination that the
specified asset will provide inadequate returns to us or that the asset no longer serves a strategic purpose in connection with our
business; or if we determine the asset may be more valuable to a third-party. We will continue to look to divest certain activities
and investments that no longer enhance or complement our core business if the right opportunity presents itself.
In fiscal year 2014, we and Louisiana Pacific Corporation (“LP”) executed a purchase and sale agreement with a limited liability
company formed by Tenex Capital Partners, L.P., pursuant to which we and LP agreed to sell our membership interests in US
GreenFiber LLC (“GreenFiber”) for total cash consideration of $18.0 million plus an expected working capital true up less
any indebtedness and other unpaid transaction costs of GreenFiber as of the closing date. The transaction was completed on
December 5, 2013 for $19.2 million in gross cash proceeds, including a $1.2 million working capital adjustment. After netting
indebtedness of GreenFiber and transaction costs, our 50% of the net cash proceeds amounted to $3.4 million. After considering
the $0.6 million impact of our unrealized losses relating to derivative instruments in accumulated other comprehensive income
(loss) on our investment in GreenFiber, we recorded a gain on sale of equity method investment of $0.6 million in the third
quarter of fiscal year 2014. As a result of the sale, we and LP no longer guarantee up to $0.8 million in support of GreenFiber’s
term loan associated with an amended loan and security agreement, and are no longer committed to fund any liquidity shortfalls,
if any such shortfalls exist, of GreenFiber related to covenant compliance as defined in GreenFiber’s amended loan and security
agreement. We had previously accounted for our 50% membership interest in GreenFiber using the equity method of accounting.
In the fourth quarter of fiscal year 2013, we initiated a plan to dispose of KTI BioFuels, Inc. (“BioFuels”), a construction and
demolition material processing facility located in Lewiston, Maine, and as a result, the assets associated with BioFuels were
classified as held-for-sale and the results of operations were recorded as loss from discontinued operations. Assets of the disposal
group previously classified as held-for-sale, and included in discontinued operations as of April 30, 2013, include certain inventory
along with plant and equipment. In the first quarter of fiscal year 2014, we executed a purchase and sale agreement with ReEnergy
Lewiston LLC (“ReEnergy”), pursuant to which we agreed to sell certain assets of BioFuels, which was located in our Eastern
region, to ReEnergy. We agreed to sell the BioFuels assets for undiscounted purchase consideration of $2.0 million, which is being
paid to us in equal quarterly installments over five years commencing November 1, 2013, subject to the terms of the purchase and
sale agreement. We recognized a $0.4 million loss on disposal of discontinued operations in the first quarter of fiscal year 2014
associated with the disposition.
In the first quarter of fiscal year 2013, we executed a purchase and sale agreement with the City of Biddeford, Maine, pursuant to
which we agreed to sell the real property of Maine Energy to the City of Biddeford, subject to satisfaction of conditions precedent
31
and closing. We agreed to sell Maine Energy for undiscounted purchase consideration of $6.7 million, which is being paid to
us in equal installments over the 21 years following the close date, subject to the terms of the purchase and sale agreement.
The transaction closed in November 2012, and we waived certain conditions precedent not satisfied at that time. In December
2012, we closed the Maine Energy facility and initiated the decommissioning process in accordance with the provisions of the
agreement. Following the decommissioning of the Maine Energy facility, it was our responsibility to demolish the facility, at our
cost, within twelve months of the closing date and in accordance with the terms of the purchase and sale agreement. On June 2,
2014, the United States Environmental Protection Agency provided final approval of the work plans to complete the last phase
of the decommissioning process. The time for completion has been consensually extended by Maine Energy and the City of
Biddeford and we expect to complete the decommissioning process within the current agreed upon time frame. We will continue
to finalize estimates and obtain additional information regarding the estimated costs associated with the divestiture. Due to the
inherent judgments and estimates regarding the remaining costs to fulfill our obligation under the purchase and sale agreement
to demolish the facility and remediate the site, recognition of a loss on divestiture, which we do not expect, or a potential gain on
divestiture is possible.
There were no divestitures in fiscal year 2012.
Results of Operations
The following table summarizes our revenues and operating expenses for fiscal year 2014, 2013 and 2012 (in millions and as a
percentage of revenue):
Fiscal Year Ended April 30,
2014
$ 497.6
% of
Revenue
2013
% of
Revenue
2012
% of
Revenue
100.0%
$ 455.3
100.0%
$ 468.0
100.0%
354.6
61.9
60.3
7.5
1.4
0.6
0.4
0.1
(1.1)
—
485.7
$ 11.9
71.3%
12.4%
12.1%
1.5%
0.3%
0.1%
0.1%
0.0%
(0.2)%
0.0%
97.6%
2.4%
323.0
58.2
56.6
—
—
3.7
—
1.4
—
—
442.9
$ 12.4
70.9%
12.8%
12.4%
0.0%
0.0%
0.9%
0.0%
0.3%
0.0%
0.0%
97.3%
2.7%
318.1
60.3
58.4
40.7
0.1
—
—
—
—
1.4
479.0
$ (11.0)
68.0%
12.9%
12.5%
8.7%
0.0%
0.0%
0.0%
0.0%
0.0%
0.3%
102.4%
(2.4)%
Revenues
Operating expenses:
Cost of operations
General and administration
Depreciation and amortization
Asset impairment charge
Development project charge
Severance and reorganization costs
Environmental remediation charge
Expense from divestiture, acquisition and
financing costs
Gain on settlement of acquisition related
contingent consideration
Legal settlement
Operating income (loss)
Revenues
We manage our solid waste operations, which include a full range of solid waste services, on a geographic basis through two
regional operating segments, which we designate as the Eastern and Western regions. Revenues in our Eastern and Western
regions consist primarily of fees charged to customers for solid waste collection and disposal, landfill, landfill gas-to-energy,
transfer and recycling services. We derive a substantial portion of our collection revenues from commercial, industrial and
municipal services that are generally performed under service agreements or pursuant to contracts with municipalities. The
majority of our residential collection services are performed on a subscription basis with individual households. Landfill
and transfer customers are charged a tipping fee on a per ton basis for disposing of their solid waste at our disposal facilities
and transfer stations. We also generate and sell electricity at certain of our landfill facilities. In addition, revenues from our
Recycling segment consist of revenues derived from municipalities and customers in the form of processing fees, tipping fees and
commodity sales. Organics services, ancillary operations, major customer accounts, discontinued operations, and earnings from
equity method investees are included in our “Other” reportable segment.
32
Our revenues are shown net of inter-company eliminations. The table below shows the percentages and dollars (in millions) of
revenue attributable to services provided for fiscal years 2014, 2013 and 2012:
Collection
Disposal
Power generation
Processing
Solid waste operations
Organics
Customer solutions
Recycling
Total revenues
Fiscal Year Ended April 30,
2014
45.3%
25.9%
1.9%
1.8%
$ 209.0
115.0
11.3
6.9
74.9%
342.2
7.6%
8.7%
8.8%
35.3
35.5
42.3
2013
45.9%
25.3%
2.4%
1.5%
75.1%
7.8%
7.8%
9.3%
$ 205.4
123.6
11.9
5.8
346.7
30.8
38.3
52.2
2012
43.9%
26.4%
2.6%
1.2%
74.1%
6.5%
8.2%
11.2%
$ 225.4
128.8
9.5
8.9
372.6
37.8
43.4
43.8
$ 497.6
100.0%
$ 455.3
100.0%
$ 468.0
100.0%
Our revenues increased $42.3 million, or 9.3%, and decreased $12.7 million, or 2.7%, for fiscal years 2014 and 2013 when
compared to the respective prior fiscal year. The following table provides details associated with the period-to-period change in
revenues (dollars in millions) attributable to services provided:
Period-to-Period
Change for the Fiscal Years Ended
2014 vs. 2013
Period-to-Period
Change for the Fiscal Years Ended
2013 vs. 2012
Amount
% of Growth
Amount
% of Growth
Solid Waste Operations:
Price
Volume
Commodity price & volume
Acquisitions & divestitures
Closed landfill
Fuel oil and recovery fee
Total solid waste
Organics
Customer solutions
Recycling Operations:
Commodity price
Commodity volume
Acquisitions
Total recycling
Total
Solid waste revenues
Price
$ 2.5
19.0
0.7
9.3
(0.5)
(0.6)
30.4
2.5
7.9
0.1
1.0
0.4
1.5
$ 42.3
0.5%
4.2%
0.2%
2.0%
(0.1)%
(0.1)%
6.7%
0.5%
1.7%
0.0%
0.3%
0.1%
0.4%
9.3%
$ 1.5
(9.8)
(2.1)
10.0
(4.1)
—
(4.5)
4.5
(2.8)
(11.6)
1.7
—
(9.9)
$ (12.7)
0.3%
(2.1)%
(0.4)%
2.2%
(0.9)%
0.0%
(0.9)%
0.9%
(0.6)%
(2.5)%
0.4%
0.0%
(2.1)%
(2.7)%
• The price change component in total solid waste revenues growth for fiscal year 2014 is the result of $2.9 million from
favorable collection pricing, partially offset by $0.4 million from unfavorable disposal pricing associated with our landfills.
• The price change component in total solid waste revenues decline for fiscal year 2013 is the result of $2.1 million from
favorable collection pricing, partially offset by $0.6 million from unfavorable disposal pricing, of which $0.4 million relates
to landfills.
33
Volume
• The volume change component in total solid waste revenues growth for fiscal year 2014 is the result of $15.1 million from
disposal volume increases (of which $7.3 million relates to landfills, $5.3 million relates to transfer stations and $2.5 million
relates to transportation), $3.1 million from collection volume increases and $0.8 million from processing volume increases.
• The volume change component in total solid waste revenues decline for fiscal year 2013 is the result of $7.5 million from
lower collection volumes, $4.1 million from lower disposal volumes associated with our landfills, partially offset by $1.8
million from higher processing volumes.
Commodity price and volume
• The commodity price and volume change component in total solid waste revenues growth for fiscal year 2014 is the result of
$2.5 million from favorable commodity pricing within power generation, partially offset by $1.4 million from lower power
generation and processing volumes and $0.4 million from unfavorable commodity pricing within processing.
• The commodity price and volume change component in total solid waste revenues decline for fiscal year 2013 is the result
of $1.4 million from unfavorable commodity pricing within processing and $1.7 million from lower power generation and
processing commodity volumes, partially offset by $1.0 million from favorable commodity pricing within power generation.
Acquisitions and divestitures
• The acquisitions and divestitures change component in total solid waste revenue growth for fiscal year 2014 is the result of
$16.7 million in increased revenues from acquisitions, primarily associated with our acquisition of BBI in December 2012,
and our acquisition of four solid waste hauling operations and a transfer station in fiscal year 2014. Increased revenues were
partially offset by $7.4 million in decreased revenues associated with the Maine Energy divestiture.
• The acquisitions and divestitures change component in total solid waste revenues decline for fiscal year 2013 is the result of
$11.5 million in increased revenues from acquisitions, primarily associated with our acquisition of BBI in December 2012,
partially offset by $1.5 million in decreased revenues associated with the Maine Energy divestiture.
Closed landfill
• The closed landfill change component in total solid waste revenue growth for fiscal year 2014 and revenue decline for fiscal
year 2013 is the result of a landfill in the Eastern region that stopped accepting waste in the second quarter of fiscal year 2013
based on the attainment of its permitted capacity. The impact of the closure was limited in fiscal year 2014 as we were granted
a permit in May 2013 to accept an additional 0.2 million tons of waste at this landfill. We began placing additional waste at
this landfill pursuant to the permit at the end of June 2013 and ceased placing tons in April 2014.
Fuel and oil recovery fee
• Solid waste revenues in fiscal year 2014 generated by our fuel and oil recovery fee program, which is based on a fuel index,
decreased when compared to the prior fiscal year as our floating rate recovery fee declined in response to lower diesel fuel
index prices on which the surcharge is based.
Organics revenues
• The increase in Organics revenues for fiscal years 2014 and 2013 when compared to the respective prior fiscal year is primarily
the result of higher volumes.
Customer Solutions revenues
• The increase in Customer Solutions revenues for fiscal year 2014 from the prior fiscal year is the result of $2.6 million from
higher volumes and $5.3 million from the acquisition of an industrial service management business.
• The decrease in Customer Solutions revenues for fiscal year 2013 from the prior fiscal year is due to volume declines.
Recycling revenues
• The increase in recycling revenues for fiscal year 2014 from the prior fiscal year is primarily the result of higher commodity
volumes and the acquisition of the remaining 50% membership interest of Tompkins County Recycling LLC (“Tompkins”).
• The decrease in recycling revenues for fiscal year 2013 from the prior fiscal year is from unfavorable commodity prices in the
marketplace, partially offset by higher commodity volumes.
34
Operating Expenses
Cost of Operations
Cost of operations includes labor costs, tipping fees paid to third-party disposal facilities, fuel costs, maintenance and repair
costs of vehicles and equipment, workers’ compensation and vehicle insurance costs, the cost of purchasing materials to be
recycled, third-party transportation costs, district and state taxes, host community fees and royalties. Cost of operations also
includes accretion expense related to final capping, closure and post-closure obligations, leachate treatment and disposal costs and
depletion of landfill operating lease obligations.
Our cost of operations increased $31.6 million, or 0.4% as a percentage of revenues, and $4.9 million, or 2.9% as a percentage of
revenues, for fiscal years 2014 and 2013 when compared to the respective prior fiscal year.
The change in our cost of operations during fiscal year 2014 can largely be attributed to the following:
• Third-party direct costs increased $17.4 million due to: organic and acquisition growth in our Customer Solutions business;
higher volumes in our Organics business; higher collection and disposal volumes from organic customer growth and the
acquisition of BBI and other tuck-in acquisitions; and an increase in state, local and other disposal fees associated with higher
disposal volumes and higher taxes due to a shift in mix type.
• Direct operational costs increased $5.6 million due to: higher costs at our landfills (including increases in leachate treatment
costs due to the timing of cell development, landfill gas treatment costs and maintenance costs); higher equipment rental
costs associated with an increase in fleet and landfill equipment rentals; an increase in host and royalty fees and higher
depletion of landfill operating lease obligations due to increased volumes received at our landfills; and an increase in vehicle
insurance costs.
• Maintenance costs increased $4.8 million due to: higher vehicle maintenance costs associated with the integration of the BBI
vehicle fleet; higher facility costs associated with unplanned maintenance activities within the Recycling segment; and higher
container repair costs.
• Labor and related benefit costs increased $2.3 million due to: the acquisition of BBI; processing higher volumes of
commodities through our Recycling segment; and lower productivity as a result of prolonged inclement winter weather.
The change in our cost of operations during fiscal year 2013 can largely be attributed to the following:
• Labor and related benefit costs increased $2.3 million due to additional employees from the acquisition of BBI and an increase
in healthcare costs.
• Direct operational costs increased $1.7 million due to: higher equipment rental costs associated with an increase in fleet and
landfill equipment rentals; higher depletion of landfill operating lease obligations; and a decrease in the gain related to the sale
of fixed assets in the normal course of business.
• Maintenance and repair costs increased $0.5 million due to increased fleet maintenance costs, the timing of various vehicle
maintenance projects within our Western region and higher container repair costs.
• Third-party direct costs decreased, noting the following significant fluctuations: disposal cost increased $3.4 million due to
an increase in landfill disposal costs associated with higher volumes from the acquisition of BBI and an increase in waste-to-
energy disposal costs associated with a diversion of tons to a third-party incinerator from one of our landfills; hauling costs
increased $0.8 million due to an increase in transportation costs associated with higher volumes from the acquisition of BBI
and a higher volume of organic materials being processed, partially offset by cost reductions associated with lower solid waste
collection volumes and the divestiture of Maine Energy; and purchased material costs decreased $5.2 million due to lower
commodity prices within the marketplace.
General and Administration
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.
Our general and administration expense increased $3.7 million, or (0.4%) as a percentage of revenues, and decreased $2.1 million,
or 0.1% as a percentage of revenues, for fiscal years 2014 and 2013 when compared to the respective prior fiscal year.
35
The change in our general and administration expense during fiscal year 2014 can largely be attributed to the following:
• Labor and related benefit costs increased $5.7 million due to additional personnel costs associated with acquisitions, growth
in Customer Solutions, recruitment and relocation, and an increase in incentive compensation costs.
• Professional fees decreased $1.3 million due to lower legal costs associated with fewer ongoing legal proceedings and lower
consulting costs.
The change in our general and administration expense during fiscal year 2013 can largely be attributed to the following:
• Labor and related benefit costs decreased $0.6 million due to a reduction of salaries and wages associated with the
realignment and streamlining of functions to improve our cost structure in the second quarter of fiscal year 2013. Cost
savings were partially offset by increased equity compensation costs, an increase in healthcare costs and additional personnel
costs associated with the BBI acquisition.
• Professional fees decreased $0.7 million due to lower legal costs associated with fewer ongoing legal proceedings, despite $0.8
million of legal costs associated with the New York State Tax Litigation matter that was resolved in fiscal year 2013.
• Other costs decreased $1.5 million due to additional cost savings in various areas, including travel and entertainment,
telephone and advertising costs, associated with the realignment and streamlining of functions to improve our cost structure
in the second quarter of fiscal year 2013.
Depreciation and Amortization
Depreciation and amortization includes (i) depreciation of property and equipment, including assets recorded for capital leases,
on a straight-line basis over the estimated useful life of the assets; (ii) amortization of landfill costs, including those incurred
and all estimated future costs for landfill development, construction and asset retirement costs arising from closure and post-
closure, on a units-of-consumption method as landfill airspace is consumed over the total estimated remaining capacity of a site,
which includes both permitted capacity and unpermitted expansion capacity that meets our criteria for amortization purposes;
(iii) amortization of landfill asset retirement costs arising from final capping obligations on a units-of-consumption method as
airspace is consumed over the estimated capacity associated with each final capping event and (iv) amortization of intangible
assets with a definite life, using either a economic benefit provided approach or a straight-line basis over the definitive terms of the
related agreements.
The table below shows, for the periods indicated, the components of depreciation and amortization expense (in millions of dollars
and as a percentage of revenues).
Depreciation expense
Landfill amortization expense
Other amortization expense
Fiscal Year Ended April 30,
2014
2013
2012
$ 33.1
24.7
2.5
$ 60.3
6.6%
5.0%
0.5%
12.1%
$ 34.1
21.2
1.3
$ 56.6
7.5%
4.6%
0.3%
12.4%
$ 37.9
19.9
0.6
$ 58.4
8.1%
4.3%
0.1%
12.5%
The change in the components of depreciation and amortization expense during fiscal year 2014 can largely be attributed
to the following:
• Depreciation expense decreased $1.0 million due to the divestiture of Maine Energy in the third quarter of fiscal year 2013,
which reduced our depreciable asset base for all of fiscal year 2014.
• Landfill amortization expense increased $3.5 million due to: an increase in landfill volumes in the Eastern region and at
certain of our landfills within the Western region; an increase in estimated costs associated with a landfill in closure status in
the Eastern region; and additional post-closure costs associated with the extension of our post-closure commitment at various
closed landfills.
• Other amortization expense increased $1.3 million associated with an increase in our intangible assets due to acquisitions
made in fiscal year 2014 and the acquisition of BBI in December 2012.
36
The change in the components of depreciation and amortization expense during fiscal year 2013 can largely be attributed
to the following:
• Depreciation expense decreased $3.8 million due to the Maine Energy impairment in the fourth quarter of fiscal year 2012
and Maine Energy’s ultimate divestiture in the third quarter of fiscal year 2013, which reduced our depreciable asset base.
• Landfill amortization expense increased $1.3 million due to higher landfill volumes within the Eastern region, primarily at
our Southbridge landfill.
• Other amortization expense increased $0.7 million due to an increase in our intangible assets due primarily to the
BBI acquisition.
Development Project Charge
In fiscal year 2014, we recorded a charge of $1.4 million for deferred costs associated with a gas pipeline development project
no longer deemed viable. In fiscal year 2012, we recorded a charge of $0.1 million for deferred costs associated with certain
development projects no longer deemed viable.
As of April 30, 2014 and 2013, we had $0.0 million and $1.6 million of deferred costs associated with development projects
included in other non-current assets within our consolidated balance sheets.
Severance and Reorganization Costs
In fiscal year 2014, we recorded a charge of $0.6 million for severance costs associated with various planned reorganization efforts
including the divestiture of Maine Energy Recovery Company, LP (“Maine Energy”). In fiscal 2013, we recorded a charge of $3.7
million for severance costs associated primarily with the realignment of our operations in order to streamline functions and
improve our cost structure, the closure of Maine Energy and a reorganization of senior management. Through the realignment
of our operations we improved certain aspects of the sales function to better facilitate customer service and retention, pricing
growth, and support of strategic growth initiatives; better aligned transportation, route management and maintenance functions at
the local level; and reduced corporate overhead and staff to match organizational needs and reduce costs.
We have liabilities associated with severance and reorganization as of April 30, 2014 and 2013, which are recorded in other
accrued liabilities, of $0.5 million and $0.7 million.
Environmental Remediation Charge
The $0.4 million environmental remediation charge recorded in fiscal year 2014 is associated with the remediation at our
Southbridge landfill as discussed in Legal Proceedings included under Part I, Item 3 of this Annual Report on Form 10-K.
Expense from Divestiture, Acquisition and Financing Costs
The $0.1 million expense from divestiture, acquisition and financing costs recorded in fiscal year 2014 is primarily associated with
legal costs related to the acquisition of the remaining 50% membership interest of Tompkins.
The $1.4 million expense from divestiture, acquisition and financing costs recorded in fiscal year 2013 is associated with the
following fiscal year 2013 events: a $0.3 million write-off of costs associated with the attempted refinancing of 11.0% senior second
lien notes (“Second Lien Notes”) in the first quarter of fiscal year 2013, $0.6 million of legal costs associated with the Maine Energy
divestiture transaction, and $0.5 million of costs associated with the BBI acquisition.
Asset Impairment Charge
In April 2014, we initiated a plan to wind down the operations of CARES. As a result, it was determined that the carrying value of
the assets of CARES was no longer recoverable and, as a result, the carrying value of the asset group was assessed for impairment.
The impairment was measured based on the asset group’s highest and best use under the market approach. We recorded an
impairment charge of $7.5 million in fiscal year 2014 to the asset group of CARES in the Western region.
We plan to abandon the operations of CARES in fiscal year 2015, at which point we expect to record the results of operations of
CARES in discontinued operations.
In fiscal year 2012, we entered into negotiations regarding the sale of Maine Energy. Based on the proposed purchase
consideration, we recorded a $40.7 million impairment charge to the asset group within the Eastern region segment. The
impairment was measured based on the asset group’s highest and best use under the market approach, utilizing the discounted
present cash flows associated with the purchase consideration, adjusted for costs to demolish the facility. We used a discount rate
of 3.5%, which approximates the buyer’s borrowing rate.
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Legal Settlement
In fiscal year 2012, our legal settlement expense increased $1.4 million due to legal settlements with Town of Seneca, New York
and the Vermont Attorney General’s Office.
Gain on Settlement of Acquisition Related Contingent Consideration
In the fourth quarter of fiscal year 2014, we recovered a portion of the purchase price holdback amount we had previously paid
and were relieved of any potential contingent consideration obligation associated with the acquisition of an industrial service
management business earlier in fiscal year 2014. As a result, we recorded a $1.1 million gain on settlement of acquisition related
contingent consideration in fiscal year 2014.
Other Expenses
Interest Expense, net
Our interest expense, net decreased $3.5 million and $3.6 million for fiscal years 2014 and 2013 when compared to the respective
prior fiscal year. The decrease in interest expense, net during fiscal year 2014 can largely be attributed to lower interest rates
associated with the refinancing in October and November 2012 of $180.0 million in aggregate principal balance Second Lien
Notes. Interest savings were partially offset by an increase in interest expense associated with higher average debt balances in fiscal
year 2014, associated primarily with borrowings under our amended and restated senior secured revolving credit facility (the
“2011 Revolver”) to help fund operations and meet cash flow needs.
The decrease in interest expense, net during fiscal year 2013 can largely be attributed to lower interest rates associated with the
redemption in October and November of 2012 of the Second Lien Notes. The interest savings related to the redemption were
partially offset by an increase in interest expense associated with higher average debt balances in fiscal year 2013, associated
primarily with borrowings under the 2011 Revolver to redeem the Second Lien Notes and help fund operations and meet cash
flow needs, and the conversion from a variable rate to a five year fixed term interest rate of 6.25% per annum on the $21.4 million
Finance Authority of Maine (the “Authority”) Solid Waste Disposal Revenue Bonds Series 2005R-2 (“FAME Bonds 2005R-2”).
Loss from Equity Method Investment and Gain on Sale of Equity Method Investment
In fiscal year 2014, we sold our 50% membership interest in GreenFiber and purchased the remaining 50% membership interest of
Tompkins, both of which were previously accounted for using the equity method of accounting.
As a result of the sale of our 50% membership interest in GreenFiber, we recorded a gain on sale of equity method investment of
$0.6 million in fiscal year 2014. Additionally, as a result of the sale, we and LP no longer guarantee up to $0.8 million in support
of GreenFiber’s term loan associated with an amended loan and security agreement, and are no longer committed to fund any
liquidity shortfalls, if any such shortfalls exist, of GreenFiber related to covenant compliance as defined in GreenFiber’s amended
loan and security agreement.
As a result of the purchase of the remaining 50% membership interest of Tompkins, we no longer account for our investment
in Tompkins using the equity method of accounting and began including the accounts of Tompkins in our consolidated
financial statements.
Prior to these transactions, we recorded a loss from our equity method investments of $0.9 million in fiscal year 2014.
The improvement in fiscal year 2013 from fiscal year 2012 was largely due to GreenFiber impairing the entire amount of their
goodwill in December 2011. We recorded our $5.1 million portion of the impairment charge in fiscal year 2012. The operational
performance of GreenFiber, although improved from fiscal year 2012, had continued to be negatively impacted by the depressed
manufactured home market and lack of new home construction.
Impairment of Equity Method Investment
In fiscal year 2012, GreenFiber performed a test for goodwill impairment and based on the analysis performed, we determined
that the current book value of our investment in GreenFiber exceeded its fair value. The analysis calculated GreenFiber’s fair value
based on the income approach using discounted cash flows taking into account current expectations for asset utilization, housing
starts and the remaining useful life of related assets. We recorded a charge of $10.7 million as impairment on equity method
investment in fiscal year 2012.
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Loss on Derivative Instruments
In fiscal year 2012, we entered into two forward starting interest rate derivative agreements that were previously being used
to hedge the interest rate risk associated with the forecasted financing transaction to redeem our Second Lien Notes effective
January 15, 2013. The total notional amount of these agreements is $150.0 million, and the agreements require us to receive
interest based on changes in the London Interbank Offered Rate index and pay interest at a rate of approximately 1.40%. The
agreements mature on March 15, 2016.
During fiscal year 2013, we dedesignated both of these $75.0 million forward starting interest rate derivative agreements and
discontinued hedge accounting in accordance with FASB ASC 815-30 because the interest payments associated with the forecasted
financing transaction were no longer deemed probable. We recognized a $3.6 million loss, reclassified from accumulated other
comprehensive loss, as loss on derivative instruments in fiscal year 2013 and recognize the change in fair value of the interest rate
swaps along with any cash settlements through earnings as a (gain) or loss on derivative instruments.
Loss on Debt Extinguishment
In fiscal year 2013, we recorded a charge of $15.6 million as a loss on debt extinguishment related to the full refinancing of our
Second Lien Notes. The loss on debt extinguishment consisted of a $2.8 million non-cash write off of deferred financing costs, a
$2.1 million non-cash write off of the unamortized original issue discount and a $10.7 million charge associated with the early
tender premium and tender fees associated with the redemption of the Second Lien Notes.
In fiscal year 2012, we recorded a charge of $0.3 million as a loss on debt extinguishment related to the non-cash write off of
unamortized deferred financing costs associated with the original issuance by the Authority of $25.0 million aggregate principal
amount of its Solid Waste Disposal Revenue Bonds Series 2005 (the “Bonds”). On February 1, 2012, we converted the interest
rate to a fixed rate through January 31, 2017 using a conversion option, and remarketed, $21.4 million aggregate principal of
the Bonds.
Provision (Benefit) for Income Taxes
Our provision (benefit) for income taxes from continuing operations increased $4.3 million in fiscal year 2014 to $1.8 million
from ($2.5) million in fiscal year 2013, and decreased $4.1 million in fiscal year 2013 to ($2.5) million from $1.6 million in fiscal
year 2012. The change in the provisions between the fiscal years is primarily related to a ($5.1) million deferred tax benefit in
2013 due to a reduction of the valuation allowance in connection with the recording of deferred tax liabilities related to the BBI
acquisition, offset by $0.8 million in current provision in 2013 related to a settlement with the State of New York for corporate
franchise tax for tax years April 30, 2004 through April 30, 2010. The provision (benefit) for income taxes for fiscal years 2014 and
2013 includes deferred tax provisions of $1.6 million and $1.5 million, respectively, due mainly to the increase in the deferred tax
liability for indefinite lived assets. Since we cannot determine when the deferred tax liability related to indefinite lived assets will
reverse, this amount cannot be used as a future source of taxable income against which to benefit deferred tax assets.
Discontinued Operations
Income (Loss) from Discontinued Operations, net
Discontinued operations in fiscal years 2014, 2013 and 2012 represents the result of operations related to the business disposition
of BioFuels. In the first quarter of fiscal year 2014, we executed a purchase and sale agreement with ReEnergy, pursuant to which
we agreed to sell certain assets of BioFuels, which is located in our Eastern region, to ReEnergy.
Our loss from discontinued operations, net in fiscal year 2013 includes a $3.3 million loss associated with the adjustment to the
carrying value of BioFuels to its fair value as a result of the planned business disposition of BioFuels.
The operating results of the operations discussed above have been included in discontinued operations in the accompanying
consolidated financial statements.
(Loss) Gain on Disposal of Discontinued Operations
We recognized a $0.4 million loss on disposal of discontinued operations in the first quarter of fiscal year 2014 associated with
the BioFuels disposition.
Our gain on disposal of discontinued operations in fiscal year 2012 was the result of an additional working capital adjustment of
$0.1 million (net of tax), which related to our subsequent collection of receivable balances that were released to us for collection,
and a working capital adjustment combined with other legal expenses totaling $0.6 million (net of tax) related to the sale of
non-integrated recycling assets and select intellectual property assets.
39
Segment Reporting
The following table provides revenues and operating (loss) income (in millions) based on our segments for fiscal years 2014,
2013 and 2012:
Segment
Eastern
Western
Recycling
Other
Total
Eastern Region
Revenues
Operating Income (Loss)
Fiscal Year Ended April 30,
2014
2013
2012
2014
2013
2012
$ 147.3
216.9
43.8
89.6
$ 129.9
205.7
42.3
77.4
$ 127.9
212.3
52.2
75.6
$ 497.6
$ 455.3
$ 468.0
$ (1.1)
13.3
(2.4)
2.1
$ 11.9
$ (5.3)
$ (43.6)
20.1
(0.7)
(1.7)
29.7
5.1
(2.2)
$ 12.4
$ (11.0)
Our Eastern region revenues increased $17.4 million, or 13.4%, and $2.0 million, or 1.6%, for fiscal years 2014 and 2013 when
compared to the respective prior fiscal year. The following table provides details associated with the period-to-period change in
revenues (dollars in millions) attributable to services provided:
Eastern Region
Amount
% of Growth
Amount
% of Growth
Period-to-Period
Change for the Fiscal Years Ended
2014 vs. 2013
Period-to-Period
Change for the Fiscal Years Ended
2013 vs. 2012
Price
Volume
Fuel oil and recovery fee
Commodity price & volume
Acquisitions & divestitures
Closed landfill
Total solid waste
Price
$ —
11.0
(0.2)
0.1
7.0
(0.5)
$ 17.4
0.0%
8.5%
(0.2)%
0.1%
5.4%
(0.4)%
13.4%
$ 0.7
0.9
—
(1.1)
5.6
(4.1)
$ 2.0
0.5%
0.7%
0.0%
(0.8)%
4.4%
(3.2)%
1.6%
• The price change component in Eastern region solid waste revenue growth for fiscal year 2014 is the result of $0.6 million
from favorable collection pricing, offset by $0.6 million from unfavorable disposal pricing related primarily to landfills.
• The price change component in Eastern region solid waste revenue growth for fiscal year 2013 is primarily the result of $1.1
million from favorable collection pricing, partially offset by $0.4 million from unfavorable disposal pricing.
Volume
• The volume change component in Eastern region solid waste revenue growth for fiscal year 2014 is the result of $7.9 million
from higher disposal volumes (of which $7.2 million relates to higher landfill volumes and $3.6 million relates to higher
transfer station volumes, partially offset by $2.9 million in volumes that were not retained after the divestiture of Maine
Energy), $2.8 million from higher collection volumes and $0.3 million from higher processing volumes.
• The volume change component in Eastern region solid waste revenue growth for fiscal year 2013 is the result of $3.5 million
from higher disposal volumes (of which $6.1 million relates to higher landfill volumes and $1.2 million relates to higher
transfer station volumes, partially offset by $3.8 million in volumes that were not retained after the divestiture of Maine
Energy), partially offset by $2.6 million from lower collection volumes.
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Commodity price and volume
• The commodity price and volume change component in Eastern region solid waste revenue growth for fiscal year 2014
remained consistent year over year with increased revenues from higher commodity volumes slightly eclipsing decreased
revenues from unfavorable pricing.
• The commodity price and volume change component in Eastern region solid waste revenue growth for fiscal year 2013 is the
result of lower commodity volumes associated with power generation.
Acquisitions and divestitures
• The acquisitions and divestitures change component in Eastern region solid waste revenue growth for fiscal year 2014 is the
result of $14.4 million from the acquisition of BBI, partially offset by $7.4 million from the divestiture of Maine Energy.
• The acquisitions and divestitures change component in Eastern region solid waste revenue growth for fiscal year 2013 is the
result of $7.1 million from the acquisition of BBI, partially offset by $1.5 million from the divestiture of Maine Energy.
Closed landfill
• The closed landfill change component in total solid waste revenue growth for fiscal years 2014 and 2013 is the result of
a landfill that stopped accepting waste in the second quarter of fiscal year 2013 based on the attainment of its permitted
capacity. The impact of the closure was limited in fiscal year 2014 as we were granted a permit in May 2013 to accept an
additional 0.2 million tons of waste at this landfill. We began placing additional waste at this landfill pursuant to the permit
at the end of June 2013 and ceased placing tons in April 2014.
Eastern region operating loss for fiscal year 2014 decreased by $4.2 million. The change to operating loss in fiscal year 2014 is
largely attributable to the following:
• Cost of operations: Cost of operations increased by $19.1 million in fiscal year 2014 when compared to fiscal year 2013
due primarily to: an increase in third-party direct costs associated with higher disposal volumes from organic customer
growth and the acquisition of BBI and other operations, partially offset by a reduction of transportation costs associated with
the divestiture of Maine Energy; and an increase in direct operational costs including labor, fuel, equipment rentals, landfill
gas treatment costs at one of our landfills and fleet maintenance and repair costs associated with the integration of the BBI
vehicle fleet, partially offset by a reduction of facility costs associated with the divestiture of Maine Energy.
• General and administration: General and administration costs increased $0.9 million in fiscal year 2014 when
compared to fiscal year 2013 due primarily to additional personnel costs associated with the BBI acquisition and an increase
in estimated incentive compensation costs.
• Depreciation and amortization: Depreciation and amortization costs increased $1.4 million in fiscal year 2014
when compared to fiscal year 2013 due to the following: an increase in landfill amortization costs associated with higher
landfill volumes; an increase in estimated costs associated with a landfill in closure status; and depreciation expense savings
associated with the divestiture of Maine Energy.
• Other: Other charges impacting operating loss in fiscal year 2014 when compared to fiscal year 2013 include: a $1.4 million
write off of deferred costs in fiscal year 2014 associated with a gas pipeline development project no longer deemed to be
viable; a $0.4 million environmental remediation charge recorded in fiscal year 2014 associated with the remediation of our
Southbridge landfill; severance costs associated primarily with realignment and the streamlining of functions to improve
our cost structure and the divestiture of Maine Energy in the third quarter of fiscal year 2013; legal costs associated with the
Maine Energy divestiture transaction; and costs associated directly with the BBI acquisition.
Eastern region operating loss for fiscal year 2013 decreased $38.3 million. The change to operating loss in fiscal year 2013 is largely
attributable to the following:
• Cost of operations: Cost of operations increased by $1.0 million in fiscal year 2013 when compared to fiscal year
2012 due primarily to: an increase in third-party direct costs associated with higher disposal volumes associated with the
acquisition of BBI; and an increase in direct operational, integration and compliance costs associated with the acquisition of
BBI, partially offset by a reduction of facility costs associated with the divestiture of Maine Energy.
• Depreciation and amortization: Depreciation and amortization costs decreased $1.7 million in fiscal year 2013 when
compared to fiscal year 2012 due to the impairment and ultimate divestiture of Maine Energy in fiscal year 2013, which
reduced the depreciable asset base. This was partially offset by increased landfill amortization expense due to increased
landfill volumes, primarily at our Southbridge landfill.
41
• Other: Other charges impacting operating loss in fiscal year 2013 when compared to fiscal year 2012 include: a $40.7
million impairment charge to the Maine Energy asset group recorded in fiscal year 2012 and a $1.3 million severance charge
associated with the divestiture of Maine Energy and the realignment recorded in the second quarter of fiscal year 2013.
Western Region
Our Western region revenues increased $11.1 million, or 5.4%, and decreased $6.6 million, or 3.1%, for fiscal years 2014 and 2013
when compared to the respective prior fiscal year. The following table provides details associated with the period-to-period change
in revenues (dollars in millions) attributable to services provided:
Western Region
Amount
% of Growth
Amount
% of Growth
Period-to-Period
Change for the Fiscal Years Ended
2014 vs. 2013
Period-to-Period
Change for the Fiscal Years Ended
2013 vs. 2012
Price
Volume
Fuel and oil recovery fee
Commodity price & volume
Acquisitions & divestitures
Total solid waste
Price
$ 2.4
6.3
(0.4)
0.5
2.3
$ 11.1
1.2%
3.1%
(0.2)%
0.2%
1.1%
5.4%
$ 0.7
(10.8)
—
(0.8)
4.3
$ (6.6)
0.3%
(5.1)%
0.0%
(0.4)%
2.1%
(3.1)%
• The price change component in Western region solid waste revenue growth for fiscal year 2014 is the result of $2.3 million
from favorable collection pricing and $0.1 million from favorable disposal pricing related primarily to transfer stations.
• The price change component in Western region solid waste revenue decline for fiscal year 2013 is the result of $0.9 million
from favorable collection pricing, partially offset by $0.2 million from unfavorable disposal pricing largely related to landfills.
• Volume.
• The volume change component in Western region solid waste revenue growth for fiscal year 2014 is the result of $5.6 million
from higher disposal volumes (of which $3.0 million relates to landfill volumes, $1.6 million relates to transfer station
volumes and $0.9 million relates to transportation volumes), $0.5 million from higher processing volumes and $0.2 million
from higher collection volumes.
• The volume change component in Western region solid waste revenue decline for fiscal year 2013 is primarily the result of
$7.7 million from lower disposal volumes, of which $7.0 million relates to landfill volumes, and $4.9 million from lower
collection volumes, partially offset by $1.8 million from higher processing volumes.
Fuel and oil recovery fee
• Solid waste revenues in fiscal year 2014 generated by our fuel and oil recovery fee program in the Western region, which is
based on a fuel index, decreased when compared to the prior fiscal year as our floating rate recovery fee declined in response
to lower diesel fuel index prices on which the surcharge is based.
Commodity price and volumes
• The commodity price and volume change component in Western region solid waste revenue growth for fiscal year 2014 is the
result of $2.2 million from favorable commodity pricing, primarily within power generation, partially offset by $1.7 million
from lower volumes within power generation and processing.
• The commodity price and volume change component in Western region solid waste revenue decline for fiscal year 2013 is the
result of $1.4 million from unfavorable commodity pricing within processing, $0.3 million from lower processing volumes
and $0.1 million from lower power generation volumes, partially offset by $1.0 million from favorable commodity pricing
within power generation.
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Acquisitions and divestitures
• The acquisitions and divestitures change component in Western region solid waste revenue growth for fiscal year 2014 is the
result of $2.3 million in higher collection revenues from the acquisition of various tuck-in collection operations.
• The acquisitions and divestitures change component in Western region solid waste revenue decline for fiscal year 2013 is the
result of $4.3 million in increased revenues due to acquisitions.
Western region operating income for fiscal year 2014 decreased by $6.8 million. The change to operating income in fiscal year
2014 is largely attributable to the following:
• Cost of operations: Cost of operations increased by $12.0 million in fiscal year 2014 when compared to fiscal year 2013
due primarily to: an increase in third-party direct costs related to increased collection and transfer station volumes, a shift in
volumes to external haulers, and an increase in state, local and other disposal fees associated with higher taxes due to a shift
in mix type; an increase in direct operational costs associated with higher labor, equipment rentals and leases, depletion of
landfill operating lease obligations and host community fees; and an increase in vehicle and facility maintenance costs.
• General and administration: General and administration costs increased by $2.0 million in fiscal year 2014 when
compared to fiscal year 2013 due primarily to: an increase in personnel costs, including recruitment and relocation costs, and
an increase in bad debt expense due primarily to collectability issues associated with two disposal customers.
• Depreciation and amortization: Depreciation and amortization costs increased by $2.2 million in fiscal year 2014
when compared to fiscal year 2013 due to primarily to increased landfill amortization associated with the allocation of landfill
volumes within the Western region.
• Other: Other charges impacting operating income in fiscal year 2014 when compared to fiscal year 2013 include the CARES
impairment, severance costs associated with realignment and streamlining of functions to improve our cost structure in fiscal
year 2013.
Western region operating income for fiscal year 2013 decreased by $9.6 million. The change to operating income in fiscal year
2013 is largely attributable to the following:
• Cost of operations: Cost of operations increased by $1.9 million when comparing fiscal year 2013 to fiscal year 2012 due
primarily to: an increase in direct operational costs associated with higher labor and related benefit costs related to healthcare
and equipment rental and lease costs; an increase in vehicle maintenance costs due to fleet maintenance; a decrease in the gain
related to the sale of fixed assets; and a decrease in third-party direct costs related to lower collection and disposal volumes.
• General and administration: General and administration costs decreased by $1.5 million when comparing fiscal year
2013 to fiscal year 2012 due primarily to additional cost savings associated with the realignment and streamlining of functions
to improve our cost structure in the second quarter of fiscal year 2013.
• Depreciation and amortization: Depreciation and amortization costs increased slightly when comparing fiscal year
2013 to fiscal year 2012 due to an increase in depreciation expense associated with timing and an increase in the Western
region depreciable asset base associated with acquisitions and capital expenditures, partially offset by a decrease in landfill
amortization associated with a decrease in volumes at our landfills.
• Other: Other charges impacting operating income when comparing fiscal year 2013 to fiscal year 2012 include severance
costs associated primarily with realignment and streamlining of functions to improve our cost structure in fiscal year 2013
and a legal settlement reached with the Town of Seneca, New York.
Recycling
Recycling revenues increased $1.5 million, or 3.5%, and decreased $9.9 million, or 19.0%, for fiscal years 2014 and 2013 when
compared to the respective prior fiscal year. The increase in Recycling revenues for fiscal year 2014 is due to higher commodity
volumes and the acquisition of the remaining 50% membership interest of Tompkins. The decrease in Recycling revenues for fiscal
year 2013 is due to lower commodity prices in the marketplace, partially offset by higher commodity volumes.
Recycling operating loss for fiscal year 2014 increased by $1.7 million when compared to the respective prior fiscal year due
to extended inclement weather that resulted in lower operating productivity and reduced processing throughput, along with
unplanned maintenance activities.
Recycling operating loss for fiscal year 2013 increased by $5.8 million when compared to the respective prior fiscal year due to
lower revenues associated primarily with declining commodity prices in the marketplace, partially offset by a reduction in cost of
operations related primarily to lower recycled material costs.
43
Other
Other revenues increased $12.2 million, or 15.8%, and $1.8 million, or 2.4%, for fiscal years 2014 and 2013 when compared to the
respective prior fiscal year. The increase in Other revenues for fiscal year 2014 was primarily the result of higher volumes within
our Organics business and organic growth and the acquisition of an industrial service management business within our Customer
Solutions business in fiscal year 2014. The increase in Other revenues for fiscal year 2013 was the result of higher volumes within
our Organics business, partially offset by lower volumes through our Customer Solutions business.
Other operating income for fiscal year 2014 increased by $3.8 million as increased revenues, combined with cost savings
associated with a change in our organizational and management structure and the head count reduction that took place as a part
of the reorganization fiscal year 2013, more than offset increased hauling and transportation costs associated with our Organics
business and transportation services and increased third-party direct costs associated with the acquisition of an industrial service
management business within our Customer Solutions business.
Other operating loss for fiscal year 2013 decreased by $0.6 million as increased revenues, combined with cost savings related to:
lower labor, benefits and other personnel costs associated with the realignment and head count reduction in fiscal year 2013; lower
maintenance costs; lower depreciation expense; and a legal settlement associated with the Vermont Attorney General matter in fiscal
year 2012. This more than offset increased third-party direct costs associated with higher commodity volumes within our Organics
business, severance costs associated with the reorganization of senior management and increased equity compensation costs.
Liquidity and Capital Resources
We continually monitor our actual and forecasted cash flows, our liquidity and our capital requirements in order to properly
manage our cash needs based on the capital intensive nature of our business. Our capital requirements include acquisitions, fixed
asset purchases and capital expenditures for vehicles, debt service costs, landfill development and cell construction, as well as site
and cell closure. We generally meet our liquidity needs from operating cash flows or from our 2011 Revolver.
Fiscal Year 2014 Financing Activities
Amendment of Senior Credit Facility
We entered into a third amendment under our revolving credit and letter of credit facility due March 18, 2016 (‘Senior Credit
Facility”) on June 25, 2013. The amendment adjusted our financial covenants, loosening our minimum interest coverage ratio
and our maximum consolidated total funded debt to consolidated EBITDA ratio and tightening our maximum senior funded
debt to consolidated EBITDA ratio and maximum allowed capital expenditures. As of April 30, 2014, these covenants restrict
capital expenditures to 1.1 times our consolidated depreciation expense, depletion expense and landfill amortization expense, set
a minimum interest coverage ratio of 2.15, a maximum consolidated total funded debt to consolidated EBITDA ratio of 5.85 and a
maximum senior funded debt to consolidated EBITDA ratio of 2.50.
Fiscal Year 2013 Financing Activities
Amendment of Senior Credit Facility
We entered into a second amendment and consent under our Senior Credit Facility on September 20, 2012. The amendment
provided us the ability to redeem our Second Lien Notes and adjusted our financial covenants.
Redemption of Second Lien Notes
We initiated a cash tender and consent solicitation on September 24, 2012 for our then outstanding $180.0 million Second Lien
Notes (“Tender Offer”). On October 9, 2012 we repurchased $107.3 million of our then outstanding Second Lien Notes through
the Tender Offer. Holders who tendered the Second Lien Notes prior to the early tender date received $1,060 for each $1,000 in
principal amount of Second Lien Notes repurchased, which included an early tender premium of $30 per $1,000 in principal
amount of Second Lien Notes, plus accrued and unpaid interest to, but not including the early tender offer settlement date. On
November 8, 2012, we repurchased the remaining $72.7 million aggregate principal amount of our then outstanding Second Lien
Notes. The remaining holders who tendered the Second Lien Notes received $1,055 for each $1,000 in principal amount of Second
Lien Notes repurchased, plus accrued and unpaid interest to, but not including the redemption date.
On October 3, 2012, in a registered public offering we sold 11.5 million shares of Class A common stock at an average price of
$4.00 per share. On October 9 2012, we completed the offering of an additional $125.0 million aggregate principal amount of
our 7.75% senior subordinated notes due 2019 (“2019 Notes”). The 2019 Notes were issued at a discount of $1.9 million, which is
amortized to interest expense over the life of the 2019 Notes commencing February 15, 2013. The net proceeds from the offering
of additional 2019 Notes were used to pay for the early tender of our Second Lien Notes and, together with $50.0 million of 2011
44
Revolver borrowings, the $42.2 million of net equity proceeds from the registered public offering and sale of Class A common
stock referenced above and other available funds, to redeem our remaining Second Lien Notes and to pay related transaction costs.
Vermont Bonds
In the fourth quarter of fiscal year 2013, we completed a financing transaction involving the issuance, by the Vermont Economic
Development Authority, of $16.0 million aggregate principal amount of its Solid Waste Disposal Long-Term Revenue Bonds
Series 2013 (“Vermont Bonds”). The Vermont Bonds were issued pursuant to an indenture dated as of March 1, 2013. We
borrowed the proceeds of the Vermont Bonds to repay borrowings under our 2011 Revolver for qualifying property, plant and
equipment assets purchased in Vermont since October 5, 2011. The Vermont Bonds, which are guaranteed by certain of our
subsidiaries, accrue interest at 4.75% per annum through April 4, 2019, at which time they may be converted from a fixed rate to a
variable rate. The Vermont Bonds mature on April 1, 2036.
New Hampshire Bonds
In the fourth quarter of fiscal year 2013, we completed a financing transaction involving the issuance, by the Business Finance
Authority of the State of New Hampshire, of $5.5 million aggregate principal amount of its Solid Waste Disposal Revenue Bonds
Series 2013 (“New Hampshire Bonds”). The New Hampshire Bonds were issued pursuant to an indenture dated as of March 1,
2013. We borrowed the proceeds of the New Hampshire Bonds to repay borrowings under our 2011 Revolver for qualifying
property, plant and equipment assets purchased in New Hampshire since October 5, 2011. The New Hampshire Bonds are
variable rate bonds secured by a letter of credit issued by our administrative agent bank. The New Hampshire Bonds also contain
a drawdown structure that allows us to issue up to an additional $5.5 million of bonds at a future date. The New Hampshire Bonds
mature on April 1, 2029.
Fiscal Year 2012 Financing Activities
Amendment of Senior Credit Facility
On April 27, 2012, we entered into the first amendment to our Senior Credit Facility. As a part of the amendment, we modified
the financial covenants that the Senior Credit Facility is subject to; we amended the agreement to use proceeds of a term loan
B or other subordinated financings which we may obtain to refinance our redeemed Second Lien Notes; and we provided for
adjustments to the financial covenants in the event that we undertake future financing activities.
Refinancing of Maine Bonds
On February 1, 2012, we converted the interest rate period on, and remarketed, $21.4 million aggregate principal amount of
the original $25.0 million Bonds. The mandatorily tendered Bonds were converted from a variable rate to a five year fixed term
interest rate of 6.25% per annum on the FAME Bonds 2005R-2 and included additional covenants and credit support for the
benefit of the holders of those FAME Bonds 2005R-2, including guarantees by certain of our subsidiaries. The FAME Bonds
2005R-2 are no longer secured by a letter of credit issued by our administrative agent bank. The remaining $3.6 million of
outstanding Bonds (“FAME Bonds 2005R-1”) will remain as variable rate bonds secured by a letter of credit issued by a bank.
The FAME Bonds 2005R-1 and 2005R-2 mature on January 1, 2025. We recorded a charge of $0.3 million as a loss on debt
extinguishment in the fourth quarter of fiscal year 2012 related primarily to the non-cash write off of unamortized deferred
financing costs associated with the original issuance of the Bonds.
We borrowed the proceeds of the Bonds to pay for certain costs relating to landfill development and construction, vehicle,
container and related equipment acquisition for solid waste collection and transportation services, improvements to existing solid
waste disposal, hauling, transfer station and other facilities, other infrastructure improvements, and machinery and equipment for
solid waste disposal operations owned and operated by us, or a related party, all located in Maine.
Outstanding Long-Term Debt
2011 Senior Secured Revolving Credit Facility. The 2011 Revolver is a $227.5 million component of our Senior Credit
Facility. We have the right to request, at our discretion, an increase in the amount of the Senior Credit Facility by an aggregate
amount of $100.0 million, subject to certain conditions set forth in the Senior Credit Facility agreement. The Senior Credit Facility
is guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries.
45
As of April 30, 2014, we were in compliance with all financial covenants contained in the Senior Credit Facility as follows:
Senior Secured Credit Facility Covenant
Interest coverage
Total funded debt / Bank-defined cash flow metric (1)
Senior funded debt / Bank-defined cash flow metric (1)
Capital expenditures
Twelve Months Ended
April 30, 2014
Covenant
Requirements at
April 30, 2014
2.82
5.04
1.82
2.25 Min.
5.85 Max.
2.50 Max.
$ 46.0
$ 74.5 Million Max.
1. Bank-defined cash flow metric is based on operating results for the twelve months preceding the measurement date, April 30, 2014.
A reconciliation of net cash provided by operating activities to bank-defined cash flow metric is as follows (in millions):
Net cash provided by operating activities
Changes in assets and liabilities, net of effects of acquisitions and divestitures
Gain on sale of property and equipment
Gain on sale of equity method investment
Asset impairment charge
Stock based compensation and related severance expense, net of excess tax benefit
Development project charge
Loss on derivative instruments
Interest expense, less discount on second lien notes and senior subordinated notes
Benefit for income taxes, net of deferred taxes
Gain on settlement of acquisition related contingent consideration
EBITDA adjustment as allowed by senior credit facility agreement
Other adjustments as allowed by senior credit facility agreement
Bank-defined cash flow metric
Twelve Months Ended
April 30, 2014
$ 49.6
9.2
0.8
0.6
(7.5)
(2.4)
(1.4)
(0.3)
37.9
0.2
1.1
4.0
9.3
$ 101.1
In addition to the financial covenants described above, the Senior Credit Facility, as amended, also contains a number of
important customary affirmative and negative covenants which restrict, among other things, our ability to sell assets, pay
dividends, invest in non-wholly owned entities, repurchase stock, incur debt, grant liens and issue preferred stock. As of April 30,
2014, we were in compliance with all covenants under the indenture governing the Senior Credit Facility. We do not believe
that these restrictions impact our ability to meet future liquidity needs except that they may impact our ability to increase our
investments in non-wholly owned entities, including the joint ventures to which we are already party.
Further advances were available under the 2011 Revolver in the amount of $58.9 million as of April 30, 2014. The available
amount is net of outstanding irrevocable letters of credit totaling $34.7 million as of April 30, 2014, at which date no amount had
been drawn.
2019 Notes. As of April 30, 2014, we had outstanding $325.0 million aggregate principal amount of 2019 Notes due
February 15, 2019. The 2019 Notes accrue interest at the rate of 7.75% per annum. Interest is payable semiannually in arrears on
February 15 and August 15 of each year.
The indenture governing the 2019 Notes contains certain negative covenants which restrict, among other things, our ability to sell
assets, make investments in joint ventures, pay dividends, repurchase stock, incur debt, grant liens and issue preferred stock. As
of April 30, 2014, we were in compliance with all covenants under the indenture governing the 2019 Notes and we do not believe
that these restrictions impact our ability to meet future liquidity needs except that they may impact our ability to increase our
investments in non-wholly owned entities, including the joint ventures to which we are already party.
The 2019 Notes are fully and unconditionally guaranteed on a senior subordinated basis by substantially all of our existing and
future domestic restricted subsidiaries that guarantee our Senior Credit Facility.
Maine Bonds. As of April 30, 2014, we had outstanding $21.4 million aggregate principal amount of the FAME Bonds 2005R-
2. The FAME Bonds 2005R-2, which are guaranteed by certain of our subsidiaries, accrue interest at 6.25% per annum through
46
January 31, 2017, at which time they may be converted from a fixed to a variable rate. The FAME Bonds 2005R-2 mature on
January 1, 2025.
As of April 30, 2014, we had outstanding $3.6 million aggregate principal amount of the FAME Bonds 2005R-1. The FAME Bonds
2005R-1 are variable rate bonds secured by a letter of credit issued by our administrative agent bank. The FAME Bonds 2005R-1
mature on January 1, 2025.
Vermont Bonds. As of April 30, 2014, we had outstanding $16.0 million aggregate principal amount of the Vermont Bonds.
The Vermont Bonds, which are guaranteed by certain of our subsidiaries, accrue interest at 4.75% per annum through April 4,
2019, at which time they may be converted from a fixed rate to a variable rate. The Vermont Bonds mature on April 1, 2036.
New Hampshire Bonds. As of April 30, 2014, we had outstanding $5.5 million aggregate principal amount of the New
Hampshire Bonds. The New Hampshire Bonds are variable rate bonds secured by a letter of credit issued by our administrative
agent bank. The New Hampshire Bonds also contain a drawdown structure that allows us to issue up to an additional $5.5 million
of bonds at a future date. The New Hampshire Bonds mature on April 1, 2029.
Summary of Cash Flow Activity
The following table summarizes our cash flows for fiscal years 2014, 2013 and 2012, respectively (in millions):
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net cash used in discontinued operations
Fiscal Year Ended April 30,
2014
$ 49.6
$ (57.9)
$ 9.0
$ —
2013
$ 43.9
$ (89.5)
$ 44.9
$ (2.2)
2012
$ 64.2
$ (70.6)
$ 10.2
$ (1.0)
Net cash flows provided by operating activities. Cash flows provided by operating activities increased by $5.7 million and decreased
by $20.3 million for fiscal years 2014 and 2013 when compared to the respective prior fiscal year.
The most significant items affecting the change in our operating cash flows for fiscal years 2014 and 2013 when compared to the
respective prior fiscal year are summarized below (in millions):
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
(Income) loss from discontinued operations, net of tax
Loss (gain) on disposal of discontinued operations, net of tax
Gain on sale of property and equipment
Depreciation and amortization
Depletion of landfill operating lease obligations
Interest accretion on landfill and environmental remediation liabilities
Asset impairment charge
Development project charge
Gain on settlement of acquisition related contingent consideration
Amortization of discount on senior subordinated notes and second lien notes
Loss from equity method investments
Impairment of equity method investment
Gain on sale of equity method investment
Loss on derivative instruments
Loss on debt extinguishment
47
Fiscal Year Ended April 30,
2014
2013
2012
$ (27.4)
$ (54.5)
$ (77.6)
(0.3)
0.4
(0.8)
60.3
9.9
4.0
7.5
1.4
(1.1)
0.2
0.9
—
(0.6)
0.3
—
4.5
—
(0.4)
56.6
9.4
3.7
—
—
—
0.6
4.4
—
—
4.5
15.6
0.6
(0.7)
(1.0)
58.4
8.5
3.5
40.7
0.1
—
1.0
10.0
10.7
—
—
0.3
Stock-based compensation and related severance expense
Excess tax benefit on the vesting of share based awards
Deferred income taxes
Adjusted net loss before changes in assets and liabilities, net
Changes in assets and liabilities, net
Net cash provided by operating activities
Cash interest payments.
Fiscal Year Ended April 30,
2014
2013
2012
2.4
—
1.6
58.7
(9.1)
2.5
(0.1)
(3.5)
43.3
0.6
1.9
(0.3)
1.8
57.9
6.3
$ 49.6
$ 43.9
$ 64.2
• Interest payments decreased $6.2 million in fiscal year 2014 when compared to the prior fiscal year due to the timing of
payments, as well as lower interest rates as a result of the refinancing in October and November of 2012 of $180.0 million
in aggregate principal balance of 11.0% Second Lien Notes. This reduction was partially offset by an increase in interest
payments associated with higher average debt balances.
• Interest payments increased $0.6 million in fiscal year 2013 when compared to the prior fiscal year due to increased debt
levels, the conversion of our Bonds from a variable rate to a five year fixed term interest rate of 6.25% per annum in February
2012 and the timing of payments.
Changes in assets and liabilities, net of effects from business acquisitions and divestitures.
• Our cash flows from operating activities were unfavorably impacted $9.1 million in fiscal year 2014 by changes in our assets
and liabilities. This was due to unfavorable impacts related to accrued expenses and other liabilities (which are affected
primarily by cost changes such as interest, the timing of payments, and changes related to accrued final capping, closure,
and post-closure costs), accounts receivable (which are affected by both revenue changes and timing of payments received),
accounts payable (which are affected by both cost changes and timing of payments) and prepaid expenses, inventories and
other assets (which were affected primarily by the timing of payments and expense recognition). This is compared to fiscal
year 2013, when our cash flows from operating activities were favorably impacted $0.6 million by changes in our assets and
liabilities. The unfavorable change of $9.7 million is due to the unfavorable $4.3 million impact associated with the change
in accounts payable, the unfavorable $4.5 million impact associated with the change in prepaid expenses, inventories and
other assets and the unfavorable $3.6 million impact associated with the change in accounts receivable, partially offset by the
favorable $2.7 million impact associated with the change in accrued expenses and other liabilities.
• Our cash flows from operating activities were favorably impacted $0.6 million in fiscal year 2013 by changes in our assets
and liabilities. This was due to favorable impacts related to our accounts payable (which were affected by both cost changes
and timing of payments), prepaid expenses, inventories and other assets (which were affected primarily by the timing
of payments, expense recognition) and accounts receivable (which were affected by both revenue changes and timing of
payments received). This was partially offset by the unfavorable impact related to accrued expenses and other liabilities
(which were affected primarily by cost changes such as interest, the timing of payments, and changes related to accrued final
capping, closure, and post-closure costs). This is compared to fiscal year 2012, when our cash flows from operating activities
were favorably impacted $6.3 million by changes in our assets and liabilities. The unfavorable change of $5.7 million is largely
due to the unfavorable $7.3 million impact associated with the change in accounts receivable and the unfavorable $2.0 million
impact associated with the change in accrued expenses and other liabilities, partially offset by the favorable $3.7 million
impact associated with the change in prepaid expenses, inventories and other assets.
Net cash used in investing activities. Cash flows used in investing activities decreased by $31.6 million and increased by
$18.9 million for fiscal years 2014 and 2013 when compared to the respective prior fiscal year.
The most significant items affecting the change in our investing cash flows for fiscal year 2014 when compared to the prior fiscal
year are summarized below:
• Acquisitions, net of cash acquired. During fiscal year 2014, we acquired various businesses including several solid
waste hauling operations, a transfer station, a MRF and an industrial service management business (included in the Other
segment) for total consideration of $10.1 million, of which we have made $8.5 million in cash payments. In the fourth quarter
of fiscal year 2014, we recovered $0.2 million of the purchase price holdback amount we had previously paid and were relieved
of any potential contingent consideration obligation associated with the acquisition of an industrial service management
business in fiscal year 2014. This is compared to fiscal year 2013, when we acquired six solid waste hauling operations in the
Western region and acquired all of the outstanding capital stock of BBI in the Eastern region for total consideration of $28.0
million, of which we paid $24.8 million in cash and made $0.5 million in holdback payments in fiscal year 2013.
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• Investments in unconsolidated entities. During fiscal year 2014, we made investments in unconsolidated entities
totaling $2.1 million compared to $3.2 million in fiscal year 2013.
• Capital expenditures. Lower capital expenditures of $9.1 million in fiscal year 2014 related primarily to the timing of
landfill development projects and a decrease in spending related to facilities.
The most significant items affecting the change in our investing cash flows for fiscal year 2013 when compared to the prior fiscal
year are summarized below:
• Acquisitions, net of cash acquired. During fiscal year 2013, we acquired six solid waste hauling operations in the
Western region and acquired all of the outstanding capital stock of BBI in the Eastern region for total consideration of
$28.0 million, of which we paid $24.8 million in cash and made $0.5 million in holdback payments. During fiscal year 2012,
we acquired five solid waste hauling operations and completed the acquisition of the McKean County landfill business in
Pennsylvania by acquiring additional equipment not included in the original transaction for total consideration of $2.2
million, of which we paid $2.1 million in cash.
• Investments in unconsolidated entities. During fiscal year 2013, we made investments in unconsolidated entities
totaling $3.2 million compared to $5.0 million in fiscal year 2012.
• Capital expenditures. Lower capital expenditures of $3.4 million in fiscal year 2013 related primarily to the timing of
projects and a decrease in spending related to the divestiture of Maine Energy.
Net cash provided by financing activities. Cash flows provided by financing activities decreased $35.9 million and increased $34.7
million, respectively, for fiscal years 2014 and 2013 when compared to the respective prior fiscal year.
The most significant items affecting the change in our financing cash flows for fiscal year 2014 when compared to the prior fiscal
year are summarized below:
• Stock issuance. We sold 11.5 million shares of Class A common stock in fiscal year 2013 and received net proceeds from
the registered public offering of $42.2 million, after deducting underwriting discounts, commissions and offering expenses.
• Debt activity. We experienced a reduction in both debt payments, by $208.5 million, due largely to the full redemption of
the Second Lien Notes in fiscal year 2013, and debt borrowings, by $214.7 million, due largely to the offering of $125.0 million
in additional 2019 Notes in fiscal year 2013, resulting in a $6.2 million decrease in cash flows related to debt activity compared
to the prior fiscal year.
• Payment of financing costs. We made lower payments of financing costs of $4.2 million in fiscal year 2014 due largely
to the offering of $125.0 million in additional 2019 Notes in fiscal year 2013.
• Tender premium and costs. We paid a tender premium and tender costs of $10.7 million in fiscal year 2013 in
connection with the redemption of the Second Lien Notes.
The most significant items affecting the change in our financing cash flows for fiscal year 2013 when compared to the prior fiscal
year are summarized below:
• Stock issuance. We sold 11.5 million shares of Class A common stock in fiscal year 2013 through a registered
public offering and received net proceeds of $42.2 million after deducting underwriting discounts, commissions and
offering expenses.
• Debt activity. We increased debt borrowings by $212.8 million, associated primarily with the following fiscal year 2013
activity: the offering of $125.0 million in additional 2019 Notes; the issuance of $16.0 million in Vermont Bonds; the issuance
of $5.5 million in New Hampshire Bonds; and additional 2011 Revolver borrowings. This more than offset the $208.1 million
in increased debt payments associated primarily with the full redemption of the Second Lien Notes and the pay down of the
2011 Revolver with proceeds from the issuance of the New Hampshire Bonds and Vermont Bonds in fiscal year 2013.
• Payment of financing costs. We made higher payments of financing costs of $3.0 million in fiscal year 2013 associated
primarily with the offering of $125.0 million in additional 2019 Notes.
• Tender premium and costs. We paid a tender premium and tender costs of $10.7 million in fiscal year 2013 in
connection with the redemption of the Second Lien Notes.
Net cash used in discontinued operations. Cash flows used in discontinued operations decreased $2.2 million and
increased $1.2 million, respectively, for fiscal years 2014 and 2013 when compared to the respective prior fiscal year. These
49
fluctuations in net cash flows from discontinued operations are the result of the business disposition of BioFuels in exchange
for a $2.0 million note receivable, which is being paid to us in equal quarterly installments over five years commencing
November 1, 2013.
Hedging
Our strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements to
hedge against adverse movements in interest rates. In fiscal year 2012, we entered into two forward starting interest rate derivative
agreements that were initially being used to hedge the interest rate risk associated with the forecasted financing transaction
to redeem our Second Lien Notes effective January 15, 2013. The total notional amount of these agreements is $150.0 million
and require us to receive interest based on changes in the London Interbank Offered Rate index and pay interest at a rate of
approximately 1.40%. The agreements mature on March 15, 2016. During fiscal year 2013, we dedesignated both of the $75.0
million forward starting interest rate derivative agreements and discontinued hedge accounting in accordance with ASC 815-
30 because the interest payments associated with the forecasted financing transaction were no longer deemed probable. We
recognized a $3.6 million loss, reclassified from accumulated other comprehensive loss, as loss on derivative instruments in fiscal
year 2013 and recognize the change in fair value of the interest rate swaps along with any cash settlements through earnings as
gain or loss on derivative instruments. As of April 30, 2014, we are not party to any interest rate swaps designated as effective cash
flow or fair value hedges.
We use a variety of strategies to mitigate the impact of fluctuations in commodity prices including entering into fixed price
contracts and entering into hedges which 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. As of April 30, 2014, we are not party to any commodity
hedging agreements. For further discussion on commodity price volatility, see “Item 7A – Quantitative and Qualitative
Disclosures about Market Risk – Commodity Price Volatility” below.
We have filed a universal shelf registration statement with the SEC pursuant to which we may from time to time issue securities
in an amount of up to $250.0 million. Our ability and willingness to issue securities pursuant to this registration statement will
depend on market conditions at the time of any such desired offering and therefore we may not be able to issue such securities on
favorable terms, if at all.
Contractual Obligations
The following table summarizes our significant contractual obligations and commitments as of April 30, 2014 (in thousands) and
the anticipated effect of these obligations on our liquidity in future years:
Long-term debt and capital leases
Interest obligations (1)
Non-cancellable operating leases (2)
Capping / closure / post-closure
Fiscal Year(s) ending April 30,
2015
2016-2017 2018-2019 Thereafter
Total
$ 885
33,589
11,279
7,312
$ 135,551
$ 325,446
$ 47,628
$ 509,510
60,616
19,627
5,819
51,266
21,402
12,251
23,902
98,562
104,485
169,373
150,870
129,867
Total contractual cash obligations (3)
$ 53,065
$ 221,613
$ 410,365
$ 274,577
$ 959,620
1. Interest obligations based on debt and capital lease balances as of April 30, 2014. Interest obligations related to variable rate debt were calculated
using variable rates in effect at April 30, 2014.
2. Includes obligations related to landfill operating lease contracts.
3. Contractual cash obligations do not include accounts payable or accrued liabilities, which will be paid in fiscal year 2015.
In addition to the above obligations, we have unrecognized tax benefits at April 30, 2014 of approximately $0.8 million. Due to the
uncertainty with respect to the timing of future cash flows associated with the unrecognized tax benefits at April 30, 2014, we are
unable to make reasonably reliable estimates as to the timing of cash settlements.
Inflation
Although inflationary increases in costs have affected our historical operating margins, we believe that inflation generally has not
had a significant impact on our operations. Consistent with industry practice, most of our contracts provide for a pass-through
of certain costs to our customers, including increases in landfill tipping fees and, in some cases, fuel costs. We have implemented
a fuel and oil recovery fee, which is designed to recover escalating fuel price fluctuations above an expected floor. We therefore
believe we should be able to implement price increases sufficient to offset most cost increases resulting from inflation. However,
50
competitive factors may require us to absorb at least a portion of these cost increases. Additionally, management’s estimates
associated with inflation have had and will continue to have, an impact on our accounting for landfill and environmental
remediation liabilities.
Regional Economic Conditions
Our business is located in the northeastern United States. Therefore, our business, financial condition 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. We are unable to forecast or determine the timing and/or the future impact of a
sustained economic slowdown.
Limitations on Ownership of Notes
Pursuant to Section 2.19 of the indenture governing the 2019 Notes and the provisions of the FAME Bonds 2005R-2 and Vermont
Bonds, no beneficial holder of the 2019 Notes, FAME Bonds 2005R-2 and/or Vermont Bonds is permitted to knowingly acquire
2019 Notes, FAME Bonds 2005R-2 and/or Vermont Bonds if such person would own 10% or more of the consolidated debt for
which relevant subsidiaries of ours are obligated (and must dispose of 2019 Notes, FAME Bonds 2005R-2 and/or Vermont Bonds
or other debt of ours to the extent such person becomes aware of exceeding such threshold), if such ownership would require
consent of any regulatory authority under applicable law or regulation governing solid waste operators and such consent has not
been obtained. We will furnish to the holders of the 2019 Notes, FAME Bonds 2005R-2 and Vermont Bonds, in each quarterly and
annual report, the dollar amount of our debt that would serve as the threshold for evaluating a beneficial holder’s compliance with
these ownership restrictions. As of April 30, 2014, that dollar amount was $49.6 million.
Critical Accounting Estimates and Assumptions
The preparation of our 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, as applicable, at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management
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. Our
significant accounting policies are more fully discussed in Note 3 of our consolidated financial statements included in Item 8 of
this Annual Report on Form 10-K.
Landfills
The cost estimates for final capping, closure and post-closure activities at landfills for which we have responsibility are estimated
based on our interpretations of current requirements and proposed or anticipated regulatory changes. We also estimate additional
costs based on the amount a third-party would charge us to perform such activities even when we expect to perform these
activities internally. We estimate the airspace to be consumed related to each final capping event and the timing of construction
related to each final capping event and of closure and post-closure activities. Because landfill final capping, closure and post-
closure obligations are measured at estimated fair value using present value techniques, changes in the estimated timing of
construction of future landfill final capping and closure and post-closure activities would have an effect on these liabilities, related
assets and results of operations.
Landfill Development Costs
We estimate the total cost to develop each of our landfill sites to its remaining permitted and expansion capacity. This estimate of
landfill development costs include costs to develop each of our landfill sites, including such costs related to landfill liner material
and installation, excavation for airspace, landfill leachate collection systems, landfill gas collection systems, environmental
monitoring equipment for groundwater and landfill gas, directly related engineering, capitalized interest, on-site road construction
and other capital infrastructure. Additionally, landfill development costs include all land purchases within the landfill footprint
and the purchase of any required landfill buffer property. The projection of these landfill costs is dependent, in part, on future
events. The remaining amortizable basis of each landfill includes costs to develop a site to its remaining permitted and expansion
capacity and includes amounts previously expended and capitalized, net of accumulated airspace amortization, and projections of
future purchase and development costs including capitalized interest.
Under life-cycle accounting, all costs related to acquisition and construction of landfill sites are capitalized and charged to expense
based on tonnage placed into each site. Landfill permitting, acquisition and preparation costs are amortized on the units-of-
consumption method as landfill airspace is consumed. In determining the amortization rate for our landfills, preparation costs
include the total estimated costs to complete construction of the landfills’ permitted and expansion capacity.
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Final Landfill Capping Costs
Final capping activities include the installation of liners, drainage, compacted soil layers and topsoil over areas of a landfill where
total airspace has been consumed and waste is no longer being received. Final capping activities occur throughout the life of
the landfill. Our engineering personnel estimate the cost for each final capping event based on the acreage to be capped and the
final capping materials and activities required. The estimates also consider when these costs would actually be paid and factor
in inflation and discount rates. The engineers then quantify the landfill capacity associated with each final capping event and the
costs for each event are amortized over that capacity as waste is received at the landfill.
Landfill Closure and Post-Closure
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. We estimate, based on input from our engineers, lawyers, accounting
personnel and consultants, our future cost requirements for closure and post-closure monitoring and maintenance based on our
interpretation of the technical standards of the Subtitle D regulations and the air emissions standards under the Clean Air Act of
1970, as amended, as they are being applied on a state-by-state basis. Closure and post-closure accruals for the cost of monitoring
and maintenance include site inspection, groundwater monitoring, leachate management, methane gas control and recovery,
and operation and maintenance costs to be incurred for a period which is generally for a term of 30 years after final closure
of a landfill. In determining estimated future closure and post-closure costs, we consider costs associated with permitted and
permittable airspace.
Remaining Permitted Airspace
Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining
permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is then used to
compare the existing landfill topography to the expected final landfill topography.
Expansion Airspace
We currently include unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain
circumstances. To be considered expansion airspace all of the following criteria must be met:
• we 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;
• we have not identified any legal or political impediments which we believe will not be resolved in our favor;
• we are actively working on obtaining any necessary permits and we expect that all required permits will be received; and
• senior management has approved the project.
For unpermitted airspace to be included in our estimate of remaining permitted and expansion airspace, the expansion effort
must meet all of the criteria listed above. These criteria are evaluated annually by our engineers, accountants, lawyers, managers
and others to identify potential obstacles to obtaining the permits. Once the remaining permitted and expansion airspace is
determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion
capacity in tons. The AUF is established using the measured density obtained from previous annual surveys. When we include
the expansion airspace in our calculation of remaining permitted and expansion airspace, we include the projected costs for
development, as well as the projected asset retirement costs related to final capping, closure and post-closure of the expansion
airspace in the amortization basis of the landfill.
After determining the costs and the remaining permitted and expansion capacity at each of our landfills, we determine the per ton
rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of
tons. We calculate per ton amortization rates for assets associated with each final capping event, for assets related to closure and
post-closure activities and for all other costs capitalized or to be capitalized in the future for each landfill. These rates per ton are
updated annually, or more frequently, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure
activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different
from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different
than actual results, lower profitability may be experienced due to higher amortization rates, higher final capping, closure or post-
closure rates, or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that
52
the expansion capacity should no longer be considered in calculating the recoverability of the landfill asset, we may be required
to recognize an asset impairment. If it is determined that the likelihood of receiving an expansion permit has become remote, the
capitalized costs related to the expansion effort are expensed immediately.
Environmental Remediation Liabilities
We have recorded environmental remediation liabilities representing our estimate of the most likely outcome of the matters
for which we have determined that a liability is probable. These liabilities include potentially responsible party investigations,
settlements, certain legal and consultant fees, as well as costs directly associated with site investigation and clean up, such as
materials and incremental internal costs directly related to the remedy. We provide for expenses associated with environmental
remediation obligations when such amounts are probable and can be reasonably estimated. We estimate costs required to
remediate sites where it is probable that a liability has been incurred based on site-specific facts and circumstances. Estimates of
the cost for the likely remedy are developed using third-party environmental engineers or other service providers.
Accounts Receivable – Trade, Net of Allowance for Doubtful Accounts
Accounts receivable – trade represent receivables from customers for collection, transfer, recycling, disposal and other services.
Our accounts receivable – trade are recorded when billed or when related revenue is earned, if earlier, and represent claims against
third-parties that will be settled in cash. The carrying value of our accounts receivable – trade, net of allowance for doubtful
accounts, represents its estimated net realizable value. Estimates are used in determining our allowance for doubtful accounts and
are based on our historical collection experience, current trends, credit policy and a review of our accounts receivable – trade by
aging category. Our reserve is evaluated and revised on a monthly basis. Past-due receivables are written off when deemed to
be uncollectible.
Goodwill and Other Intangibles
We do not amortize goodwill. We annually assess goodwill impairment at the end of the fourth quarter of our fiscal year, or more
frequently if events or circumstances indicate that impairment may exist.
We assess whether a goodwill impairment exists using both qualitative and quantitative assessments. Our qualitative assessment
involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting
unit is less than its carrying amount, including goodwill. If based on this qualitative assessment we determine it is not more likely
than not that the fair value of a reporting unit is less than its carrying amount, we will not perform a quantitative assessment.
If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying
amount, or if we elect not to perform a qualitative assessment, we perform a quantitative assessment, or a two-step impairment
test, to determine whether goodwill impairment exists at the reporting unit.
In the first step (defined as “Step 1”) of testing for goodwill impairment, we estimate the fair value of each reporting unit, which
we have determined to be our geographic operating segments, and our Recycling segment, and compare the fair value with the
carrying value of the net assets of each reporting unit. If the fair value is less than its carrying value, then we would perform a
second step (defined as “Step 2”) and determine the fair value of the goodwill. In Step 2, the fair value of goodwill is determined by
deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as
if that reporting unit had just been acquired and the purchase price were being initially allocated.
To determine the fair value of each of our reporting units as a whole we use discounted cash flow analyses, which require
significant assumptions and estimates about the future operations of each reporting unit. Significant judgments inherent in this
analysis include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth
rates. The cash flows employed in our discounted cash flow analyses are based on financial forecasts developed internally by
management. Our discount rate assumptions are based on an assessment of our risk adjusted discount rate, applicable for each
reporting unit. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate our results against
our current market capitalization.
If the fair value of the goodwill is less than its carrying value for a reporting unit, an impairment charge would be recorded to
earnings. The loss recognized cannot exceed the carrying amount of goodwill. After a goodwill impairment loss is recognized, the
adjusted carrying amount of goodwill becomes its new accounting basis.
53
In addition to an annual goodwill impairment assessment, we would evaluate a reporting unit for impairment if events or
circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include
the following:
• a significant adverse change in legal status or in the business climate;
• an adverse action or assessment by a regulator;
• a more likely than not expectation that a segment or a significant portion thereof will be sold; or
• the testing for recoverability of a significant asset group within the segment.
We elected not to perform a qualitative analysis as part of our annual goodwill impairment test in fiscal year 2014. As of April 30,
2014, the Step 1 testing for goodwill impairment performed for the Eastern, Western, Recycling and Customer Solutions reporting
units indicated that the fair value of each reporting unit exceeded its carrying amount, including goodwill. Furthermore, the
Step 1 test indicated that the fair value of the Eastern, Western, Recycling and Customer Solutions reporting units exceeded their
carrying values by 25.8%, 34.3%, 8.2% and 74.0%, respectively. The fair value of the Recycling reporting unit, which is allocated
$12.3 million of goodwill at April 30, 2014, exceeded its carrying amount by $4.1 million. We incurred no impairment of goodwill
as a result of our annual fourth quarter goodwill impairment tests in fiscal years 2014, 2013 or 2012. However, there can be no
assurance that goodwill will not be impaired at any time in the future.
Covenants not-to-compete and customer lists are amortized based on the economic benefit provided or the straight-line method
over their estimated useful lives, typically no more than 10 years.
Recovery of Long-Lived Assets
We continually assess whether events or changes in circumstances have occurred that may warrant revision of the estimated
useful lives of our long-lived assets (other than goodwill) or whether the remaining balances of those assets should be evaluated
for possible impairment. Long-lived assets include, for example, capitalized landfill costs, other property and equipment, and
identifiable intangible assets. Events or changes in circumstances that may indicate that an asset may be impaired include
the following:
• a significant decrease in the market price of an asset or asset group;
• a significant adverse change in the extent or manner in which an asset or asset group is being used or in its physical condition;
• a significant adverse change in legal factors or in the business climate that could affect the value of an asset or asset group,
including an adverse action or assessment by a regulator;
• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a
long-lived asset;
• a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or
forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group;
• a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of
significantly before the end of its previously estimated useful life; or
• an impairment of goodwill at a reporting unit.
There are certain indicators listed above that require significant judgment and understanding of the waste industry when applied
to landfill development or expansion. For example, a regulator may initially deny a landfill expansion permit application although
the expansion permit is ultimately granted. In addition, management may periodically divert waste from one landfill to another to
conserve remaining permitted landfill airspace. Therefore, certain events could occur in the ordinary course of business and not
necessarily be considered indicators of impairment due to the unique nature of the waste industry.
If an impairment indicator occurs, we perform a test of recoverability by comparing the carrying value of the asset or asset group
to its undiscounted expected future cash flows. We group our long-lived assets for this purpose at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets or asset groups. If the carrying values are in excess
of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset group to
its carrying value.
To determine fair value, we use discounted cash flow analyses and estimates about the future cash flows of the asset or asset group.
54
This analysis includes a determination of an appropriate discount rate, the amount and timing of expected future cash flows and
growth rates. The cash flows employed in our discounted cash flow analyses are typically based on financial forecasts developed
internally by management. The discount rate used is commensurate with the risks involved. We may also rely on third-party
valuations and or information available regarding the market value for similar assets.
If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment
in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires
significant judgment and projections may vary from the cash flows eventually realized.
See Note 16 to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K for
further disclosure.
Investments in Unconsolidated Entities
Investments in unconsolidated entities over which we have significant influence over the investees’ operating and financing
activities are accounted for under the equity method of accounting. Investments in affiliates in which we do not have the
ability to exert significant influence over the investees’ operating and financing activities are accounted for under the cost method
of accounting.
We monitor and assess the carrying value of our investments throughout the year for potential impairment and write them down
to their fair value when other-than-temporary declines exist. Fair value is generally based on (i) other third-party investors’ recent
transactions in the securities; (ii) other information available regarding the current market for similar assets and/or (iii) a market
or income approach, as deemed appropriate.
When we assess the carrying value of our investments for potential impairment, determining the fair value or our investments
is reliant upon the availability of market information and/or other information provided by third-parties to be able to develop
an estimate of fair value. Additionally, considerable judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or other holders of these investments,
could realize in a current market exchange. The use of different assumptions and/or estimation methodologies could have a
significant effect on the estimated fair values. The current estimates of fair value could differ significantly from the
amounts presented.
Self-Insurance Liabilities and Related Costs
We are self-insured for vehicles and workers’ compensation. Our maximum exposure in fiscal year 2014 under the workers’
compensation plan is $1.0 million per individual event, after which reinsurance takes effect. Our maximum exposure in fiscal year
2014 under the automobile plan is $1.0 million per individual event, after which reinsurance takes effect. The liability for unpaid
claims and associated expenses, including incurred but not reported losses, is determined by management with the assistance
of a third-party actuary and reflected in our consolidated balance sheet as an accrued liability. We use 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 based on historical data, which considers both the frequency and settlement amount of claims. Our estimated
accruals for these liabilities could be significantly different than our ultimate obligations if variables such as the frequency or
severity of future events differ significantly from our assumptions.
Income Taxes
We use estimates to determine our provision for income taxes and related assets and liabilities and any valuation allowance
recorded against our net deferred tax assets. Valuation allowances have been established for the possibility that tax benefits
may not be realized for certain deferred tax assets. 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. We record net deferred tax assets to the extent we believe these assets will more likely than not be
realized. In making this determination, we consider all available positive and negative evidence, including scheduled reversals of
deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event we
determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we
will make an adjustment to the valuation allowance which would reduce the provision for income taxes.
We account for income tax uncertainties according to guidance on the recognition, de-recognition and measurement of potential
tax benefits associated with tax positions. We recognize interest and penalties relating to income tax matters as a component of
income tax expense. See Note 15 to our consolidated financial statements included under Item 8 of this Annual Report on Form
10-K for further disclosure.
55
Contingent Liabilities
We are subject to various legal proceedings, claims and regulatory matters, the outcomes of which are subject to significant
uncertainty. We determine whether to disclose or accrue for loss contingencies based on an assessment of whether the risk
of loss is remote, reasonably possible or probable, and whether it can be reasonably estimated. We analyze our litigation and
regulatory matters based on available information to assess the potential liabilities. Management’s assessment is developed based
on an analysis of possible outcomes under various strategies. We accrue for loss contingencies when such amounts are probable
and reasonably estimable. If a contingent liability is only reasonably possible, we will disclose the potential range of the loss, if
estimable. We record losses related to contingencies in cost of operations or general and administration expenses, depending on
the nature of the underlying transaction leading to the loss contingency. See Note 11 to our consolidated financial statements
included under Item 8 of this Annual Report on Form 10-K for further disclosure.
Stock-Based Compensation
All share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized
as expense over the employee’s requisite service period. Stock-based compensation expense is based on the number of awards
ultimately expected to vest and is therefore reduced for an estimate of the awards that are expected to be forfeited prior to vesting.
The fair value of each stock option is estimated using a Black-Scholes option pricing model, which requires extensive use of
accounting judgment and financial estimation, including estimates of the expected term option holders will retain their vested
stock options before exercising them and the estimated volatility of our common stock price over the expected term. See Note 12
to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K for further disclosure.
New Accounting Standards
For a description of the new accounting standards that may affect us, see Note 2 to our consolidated financial statements included
in Item 8 of this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Volatility
We had interest rate risk relating to approximately $143.0 million of long-term debt at April 30, 2014. The weighted average
interest rate on the variable rate portion of long-term debt was approximately 3.9% at April 30, 2014. Should the average interest
rate on the variable rate portion of long-term debt change by 100 basis points, our annual interest expense would increase or
decrease by $1.4 million.
The remainder of our long-term debt is at fixed rates and not subject to interest rate risk.
We are currently party to two forward starting interest rate derivative agreements, which we initially entered into to hedge the
interest rate risk associated with the forecasted financing transaction to redeem our Second Lien Notes effective January 15, 2013.
The total notional amount of these agreements is $150.0 million and require us to receive interest based on changes in the London
Interbank Offered Rate index and pay interest at a rate of approximately 1.40%. The agreements mature on March 15, 2016. In
fiscal year 2013, we dedesignated both of the $75.0 million forward starting interest rate derivative agreements and discontinued
hedge accounting in accordance with ASC 815-30 because the interest payments associated with that portion of the forecasted
financing transaction were no longer deemed probable. We recognized a $3.6 million loss, reclassified from accumulated other
comprehensive loss, as loss on derivative instruments in fiscal year 2013.
Commodity Price Volatility
Through our Recycling operation, we market a variety of materials, including fibers such as old corrugated cardboard and old
newsprint, plastics, glass, ferrous and aluminum metals. We use a number of strategies to mitigate impacts from commodity price
fluctuations, such as indexed purchases, floor prices, fixed price agreements, and revenue share arrangements. As of April 30,
2014, we were not party to any commodity hedge contracts. We do not use financial instruments for trading purposes and are not
a party to any leveraged derivatives.
If commodity prices were to have changed by 10% on May 1, 2013, the impact on our operating income in fiscal year 2014 is
estimated by management to have been approximately $1.5 million based on the observed impact of commodity price changes
on operating income margin during fiscal year 2014. Our sensitivity to changes in commodity prices is complex because each
customer contract is unique relative to revenue sharing, tipping or processing fees and other arrangements. The above estimated
ranges of operating income impact may not be indicative of future operating results and actual results may vary materially.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined
in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control
over financial reporting as of April 30, 2014. In making this assessment, our management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework in 1992. Based
on its assessment, management concluded that, as of April 30, 2014, our internal control over financial reporting is effective
based on those criteria. The effectiveness of our internal control over financial reporting as of April 30, 2014 has been audited
by McGladrey LLP, an independent registered public accounting firm. McGladrey LLP has issued an attestation report on our
internal control over financial reporting, which is included herein.
57
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Casella Waste Systems, Inc.:
We have audited the accompanying consolidated balance sheets of Casella Waste Systems, Inc. and subsidiaries (the “Company”)
as of April 30, 2014 and 2013, and the related consolidated statement(s) of operations, comprehensive loss, stockholders’ (deficit)
equity, and cash flows for each of the three years in the period ended April 30, 2014, and the financial statement schedule of
Casella Waste Systems, Inc. listed in Item 15(a)(2). We also have audited the Company’s internal control over financial reporting as
of April 30, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 1992. The Company’s management is responsible for these financial statements
and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on these financial statements and the financial statement
schedule and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was maintained
in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (c) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Casella Waste Systems, Inc. and subsidiaries as of April 30, 2014 and 2013, and the results of their operations and their cash
flows for each of the years in the three-year period ended April 30, 2014, in conformity with accounting principles generally
accepted in the United States of America, and in our opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth
therein. Also in our opinion, Casella Waste Systems, Inc. and subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of April 30, 2014, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992.
/s/ McGladrey LLP
Boston, Massachusetts
June 26, 2014
58
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
ASSETS
Accounts receivable – trade, net of allowance for doubtful accounts of $1,672 and $1,332
Refundable income taxes
Prepaid expenses
Inventory
Deferred income taxes
Other current assets
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net of accumulated depreciation and amortization of $695,935 and $645,567
Goodwill
Intangible assets, net
Restricted assets
Notes receivable – related party
Investments in unconsolidated entities
Other non-current assets
Non-current assets of discontinued operations
Total assets
April 30,
2014
April 30,
2013
$ 2,464
76
52,603
465
7,176
3,905
2,502
1,255
359
70,805
403,424
119,139
13,420
681
—
16,752
24,205
1,471
$ 1,755
76
48,689
128
5,711
3,494
3,730
901
61
64,545
422,502
115,928
11,674
545
147
20,252
27,526
—
$ 649,897
$ 663,119
The accompanying notes are an integral part of these consolidated financial statements.
59
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except for share and per share data)
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital leases
Accounts payable
Accrued payroll and related expenses
Accrued interest
Current accrued capping, closure and post-closure costs
Other accrued liabilities
Total current liabilities
Long-term debt and capital leases, less current maturities
Accrued capping, closure and post-closure costs, less current portion
Deferred income taxes
Other long-term liabilities
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ (DEFICIT) EQUITY:
Casella Waste Systems, Inc. stockholders’ (deficit) equity:
Class A common stock, $0.01 par value per share;
100,000,000 shares authorized; 39,086,000 and 38,662,000 shares issued and outstanding as of
April 30, 2014 and April 30, 2013, respectively
Class B convertible common stock, $0.01 par value per share;
1,000,000 shares authorized; 988,000 shares issued and outstanding, 10 votes per share, as of
April 30, 2014 and April 30, 2013, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income (loss)
Total Casella Waste Systems, Inc. stockholders’ (deficit) equity
Noncontrolling interests
Total stockholders’ (deficit) equity
April 30,
2014
April 30,
2013
$ 885
51,788
6,062
6,087
7,312
17,612
$ 1,218
51,974
3,983
6,074
3,835
21,014
89,746
88,098
507,134
494,987
37,342
6,954
17,258
39,335
6,798
18,450
391
10
387
10
338,625
335,857
(347,472)
(324,377)
39
(8,407)
(130)
(8,537)
(592)
11,285
4,166
15,451
Total liabilities and stockholders’ (deficit) equity
$ 649,897
$ 663,119
The accompanying notes are an integral part of these consolidated financial statements.
60
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Revenues
Operating expenses:
Cost of operations
General and administration
Depreciation and amortization
Asset impairment charge
Development project charge
Severance and reorganization costs
Environmental remediation charge
Expense from divestiture, acquisition and financing costs
Gain on settlement of acquisition related contingent consideration
Legal settlement
Operating income (loss)
Other expense (income):
Interest income
Interest expense
Loss from equity method investments
Gain on sale of equity method investment
Impairment of equity method investment
Loss on derivative instruments
Loss on debt extinguishment
Other income
Other expense, net
Fiscal Year Ended April 30,
2014
2013
2012
$ 497,633
$ 455,335
$ 467,950
354,592
61,865
60,339
7,455
1,394
586
400
144
(1,058)
—
485,717
11,916
(312)
38,175
936
(593)
—
280
—
(1,059)
37,427
323,014
58,205
56,576
—
—
3,709
—
1,410
—
—
442,914
12,421
(141)
41,570
4,441
—
—
4,512
15,584
(1,036)
64,930
318,068
60,264
58,415
40,746
131
—
—
—
—
1,359
478,983
(11,033)
(42)
45,008
9,994
—
10,680
—
300
(863)
65,077
(76,110)
1,593
Loss from continuing operations before income taxes and discontinued operations
Provision (benefit) for income taxes
(25,511)
(52,509)
1,799
(2,526)
Loss from continuing operations before discontinued operations
(27,310)
(49,983)
(77,703)
Discontinued operations:
Income (loss) from discontinued operations (net of income tax benefit of $0, $0 and $412)
(Loss) gain on disposal of discontinued operations (net of income tax provision of $0, $0 and $489)
Net loss
Less: Net loss attributable to noncontrolling interests
Net loss attributable to common stockholders
284
(378)
(4,480)
—
(614)
725
(27,404)
(54,463)
(77,592)
(4,309)
(321)
(6)
$ (23,095)
$ (54,142)
$ (77,586)
The accompanying notes are an integral part of these consolidated financial statements.
61
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(in thousands, except for per share data)
Net loss attributable to common stockholders:
Continuing operations, net of tax
Discontinued operations, net of tax
Net loss
Weighted average common shares outstanding:
Basic and diluted
Basic and diluted earnings per share:
Continuing operations, net of tax
Discontinued operations, net of tax
Net loss per common share
Fiscal Year Ended April 30,
2014
2013
2012
$ (23,001)
$ (49,662)
$ (77,697)
(94)
(4,480)
111
$ (23,095)
$ (54,142)
$ (77,586)
39,820
34,015
26,749
$ (0.58)
$ (0.00)
$ (0.58)
$ (1.46)
(0.13)
(2.90)
0.00
$ (1.59)
$ (2.90)
The accompanying notes are an integral part of these consolidated financial statements.
62
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Net loss
Other comprehensive income (loss), net of taxes:
Unrealized loss resulting from changes in fair value of derivative instruments
Realized loss (gain) on derivative instruments reclassified into earnings
Unrealized gain (loss) resulting from changes in fair value of marketable securities
Other comprehensive income (loss)
Comprehensive loss
Less: Comprehensive loss attributable to noncontrolling interests
Fiscal Year Ended April 30,
2014
2013
2012
$ (27,404)
$ (54,463)
$ (77,592)
(36)
655
12
631
(26,773)
(4,309)
(2,910)
4,247
23
1,360
(53,103)
(321)
(1,749)
(578)
(3)
(2,330)
(79,922)
(6)
Comprehensive loss attributable to common stockholders
$ (22,464)
$ (52,782)
$ (79,916)
The accompanying notes are an integral part of these consolidated financial statements.
63
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64
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
(Income) loss from discontinued operations, net of tax
Loss (gain) on disposal of discontinued operations, net of tax
Gain on sale of property and equipment
Depreciation and amortization
Depletion of landfill operating lease obligations
Interest accretion on landfill and environmental remediation liabilities
Asset impairment charge
Development project charge
Gain on settlement of acquisition related contingent consideration
Amortization of discount on senior subordinated notes and second lien notes
Loss from equity method investments
Impairment of equity method investment
Gain on sale of equity method investment
Loss on derivative instruments
Loss on debt extinguishment
Stock-based compensation and related severance expense
Excess tax benefit on the vesting of share based awards
Deferred income taxes
Changes in assets and liabilities, net of effects of
acquisitions and divestitures:
Accounts receivable
Accounts payable
Prepaid expenses, inventories and other assets
Accrued expenses and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
Acquisition related additions to property, plant and equipment
Additions to property, plant and equipment
Payments on landfill operating lease contracts
Payment for capital related to divestiture
Investments in unconsolidated entities
Proceeds from sale of equity method investment
Proceeds from sale of property and equipment
Net cash used in investing activities
Fiscal Year Ended April 30,
2014
2013
2012
$ (27,404)
$ (54,463)
$ (77,592)
(284)
378
(840)
60,339
9,948
3,985
7,455
1,394
(1,058)
243
936
—
(593)
280
—
2,404
—
1,579
(3,418)
(186)
(463)
(5,053)
49,642
(8,305)
(2,633)
(43,326)
(6,505)
—
(2,107)
3,442
1,524
4,480
—
(407)
56,576
9,372
3,675
—
—
—
626
4,441
—
—
4,512
15,584
2,516
(96)
(3,543)
139
4,152
4,056
(7,714)
43,906
(25,225)
(1,746)
(53,281)
(6,261)
(618)
(3,207)
—
883
614
(725)
(1,004)
58,415
8,482
3,479
40,746
131
—
964
9,994
10,680
—
—
300
1,855
(254)
1,824
7,442
4,210
336
(5,726)
64,171
(2,102)
(529)
(57,834)
(6,616)
—
(5,045)
—
1,492
(57,910)
(89,455)
(70,634)
The accompanying notes are an integral part of these consolidated financial statements.
65
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings
Principal payments on long-term debt
Payment of tender premium and costs on second lien notes
Payments of financing costs
Net proceeds from the sale of Class A common stock
Proceeds from the exercise of share based awards
Excess tax benefit on the vesting of share based awards
Contributions from noncontrolling interest holders
Net cash provided by financing activities
Discontinued Operations:
Net cash used in operating activities
Net cash provided by (used in) investing activities
Net cash used in discontinued operations
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Fiscal Year Ended April 30,
2014
2013
2012
161,650
376,346
163,500
(152,380)
(360,858)
(152,806)
—
(405)
—
143
—
—
9,008
(201)
170
(31)
709
1,755
$ 2,464
(10,743)
(4,609)
42,184
—
96
2,531
44,947
(1,037)
(1,140)
(2,177)
(2,779)
4,534
$ 1,755
—
(1,592)
—
337
254
536
10,229
(396)
(653)
(1,049)
2,717
1,817
$ 4,534
The accompanying notes are an integral part of these consolidated financial statements.
66
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest
Income taxes, net of refunds
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Property, plant and equipment acquired through lease obligations
Equipment contributed by noncontrolling interest holder
Fiscal Year Ended April 30,
2014
2013
2012
$ 35,162
$ 41,348
$ 40,710
$ 532
$ (253)
$ 5,048
$ 2,301
$ —
$ —
$ —
$ —
$ 1,270
The accompanying notes are an integral part of these consolidated financial statements.
67
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for per share data)
1. BASIS OF PRESENTATION
Casella Waste Systems, Inc. (“Parent”), its wholly-owned subsidiaries and certain partially owned entities over which it has a
controlling financial interest (collectively, “we”, “us” or “our”), is a regional, vertically-integrated solid waste services company that
provides collection, transfer, disposal, landfill, landfill gas-to-energy, recycling and organics services in the northeastern United
States. We market recyclable metals, aluminum, plastics, paper and corrugated cardboard, which have been processed at our
recycling facilities, as well as recyclables purchased from third-parties. We manage our solid waste operations on a geographic
basis through two regional operating segments, the Eastern and Western regions, each of which provides a full range of solid waste
services, and our larger-scale recycling and commodity brokerage operations through our Recycling segment. Organics services,
ancillary operations, major customer accounts, discontinued operations and earnings from equity method investees are included
in our Other segment.
The accompanying consolidated financial statements, which include the accounts of the Parent, its wholly-owned subsidiaries and
certain partially owned entities over which it has a controlling financial interest, have been prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange
Commission ( “SEC”). All significant intercompany accounts and transactions are eliminated in consolidation. Investments in
entities in which we do not have a controlling financial interest are accounted for under either the equity method or cost method
of accounting, as appropriate. Assets and liabilities of discontinued operations and assets held-for-sale are segregated from those
of continuing operations and reported in separate captions in the balance sheet, as applicable. The results of operations that have
been disposed of or classified as held-for-sale and qualify for discontinued operations accounting are reported in discontinued
operations, as applicable. See Note 17 for disclosure over discontinued operations.
2. ACCOUNTING CHANGES AND RECLASSIFICATIONS
Adoption of New Accounting Pronouncements
Comprehensive Income
In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update for the reporting
of reclassifications out of accumulated other comprehensive income (loss). This guidance requires an entity to report the effect of
significant reclassifications out of accumulated other comprehensive income (loss) on the respective line items in net income (loss)
or in the notes to consolidated financial statements if the amount being reclassified is required under GAAP to be reclassified in
its entirety to net income (loss). For other amounts not required under GAAP to be reclassified in their entirety to net income
(loss) in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide
additional detail about those amounts. This guidance is effective prospectively for annual and interim reporting periods within
those years, beginning after December 15, 2012. We adopted this guidance effective May 1, 2013 and it has not had, and we believe
it will not have, a material impact on our consolidated financial statements. See Note 12 for presentation of the information
required by this accounting standards update.
Indefinite-Lived Intangible Assets Impairment Testing
In July 2012, the FASB issued an accounting standards update on indefinite-lived intangible assets impairment testing. This
guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of
a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative
impairment test. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not
that the indefinite-lived intangible assets are impaired, then the entity will not need to perform the quantitative impairment test
in accordance with FASB Accounting Standards Codification (“ASC”) 350-30. This guidance is effective for annual and interim
indefinite-lived intangible assets impairment tests performed for annual reporting periods beginning after September 15, 2012,
with early adoption permitted. We adopted this guidance effective May 1, 2013 and it has not had, and we believe it will not have, a
material impact on our consolidated financial statements as we currently do not carry any indefinite-lived intangible assets on our
consolidated balance sheet.
Disclosures About Offsetting Assets and Liabilities
In December 2011, the FASB issued an accounting standards update regarding the disclosure of offsetting assets and liabilities
in financial statements. This guidance requires an entity to disclose both gross information and net information about both
instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to
an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparison between those
entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on
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the basis of International Financial Reporting Standards. In January 2013, the FASB issued an accounting standards update to
address implementation issues about the December 2011 accounting standards update by clarifying the scope of the offsetting
disclosures. This guidance is effective for annual and interim reporting periods within those years, beginning on or after January 1,
2013. We adopted this guidance effective May 1, 2013 and it has not had, and we believe it will not have, a material impact on our
consolidated financial statements.
New Accounting Pronouncements Pending Adoption
Discontinued Operations
In April 2014, the FASB issued an accounting standards update for the requirements of reporting discontinued operations. The
update provides that an entity or a group of components of an entity is required to be reported in discontinued operations once
the component of an entity meets the held for sale criteria, is disposed of by sale or is disposed of other than by sale only if the
disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. The update
also requires that additional disclosures about discontinued operations be made. This guidance is effective prospectively for annual
periods, and interim reporting periods within those years, beginning after December 15, 2014, with early adoption permitted,
but only for disposals, or classifications as held for sale, that have not been reported in financial statements previously issued
or available for issuance. Adopting this standard may impact the presentation of, and disclosures in, our consolidated financial
statements and notes thereto.
Income Taxes
In July 2013, the FASB issued an accounting standards update for the reporting of an unrecognized tax benefit, or portion thereof,
as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The
update provides an exception, requiring the unrecognized tax benefit to be presented in the financial statements as a liability when
the carryforward is not available at the reporting date under the tax laws to settle additional income taxes that would result for the
disallowance of a tax provision or the tax laws do not require the entity to use, and the entity does not intend to use, the deferred
tax asset for such purpose. This guidance is effective prospectively, with retrospective application permitted, for annual periods,
and interim reporting periods within those years, beginning after December 15, 2013, with early adoption permitted. We do not
expect a material impact on our consolidated financial statements as a result of adopting this standard.
Reclassifications
We have made reclassifications to amounts recorded in our audited consolidated financial statements included in our Annual
Report on Form 10-K for the year ended April 30, 2013, including a reclassification to properly state the current deferred income
tax asset and the non-current deferred income tax liability. The reclassifications had no effect on the previously reported results of
operations or retained earnings.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management’s Estimates and Assumptions
Preparation of our consolidated financial statements in accordance with GAAP requires management to make certain estimates
and assumptions. These estimates and assumptions affect the accounting for and recognition and disclosure of assets, liabilities,
equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is
dependent on future events, cannot be calculated with a high degree of precision given the available data or simply cannot
be readily calculated. In some cases, these estimates are difficult to determine, and we must exercise significant judgment. In
preparing our consolidated financial statements, the estimates and assumptions that we consider to be significant and present the
greatest amount of uncertainty relate to our accounting for landfills, environmental remediation liabilities, asset impairments,
accounts receivable valuation allowance, self insurance reserves, deferred taxes and uncertain tax positions, estimates of the
fair values of assets acquired and liabilities assumed in any acquisition, contingent liabilities and stock-based compensation.
Each of these items is discussed in additional detail elsewhere in these notes to consolidated financial statements. In the
opinion of management, these consolidated financial statements include all adjustments, which include normal recurring and
nonrecurring adjustments, necessary for a fair presentation of the financial position, results of operations, and cash flows for the
periods presented. Actual results may differ materially from the estimates and assumptions that we use in the preparation of our
consolidated financial statements.
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Cash and Cash Equivalents
We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents, accounts
receivable-trade and derivative instruments. We maintain cash and cash equivalents with banks that at times exceed applicable
insurance limits. We reduce our exposure to credit risk by maintaining such deposits with high quality financial institutions.
Concentration of credit risk with respect to accounts receivable-trade is limited because a large number of geographically diverse
customers comprise our customer base, thus spreading the trade credit risk. At April 30, 2014 and 2013, no single group or
customer represented greater than 5% of total accounts receivable-trade. We manage credit risk through credit evaluations, credit
limits and monitoring procedures. We may also use credit insurance from time to time. We perform ongoing credit evaluations
of our customers, but generally do not require collateral to support accounts receivable-trade. Credit risk related to derivative
instruments results from the fact we at times enter into interest rate derivative and commodity price hedge agreements with
various counterparties. We monitor our derivative positions by regularly evaluating positions and the creditworthiness of
the counterparties.
Accounts Receivable – Trade, Net of Allowance for Doubtful Accounts
Accounts receivable – trade represent receivables from customers for collection, transfer, recycling, disposal and other services.
Our accounts receivable – trade are recorded when billed or when related revenue is earned, if earlier, and represent claims against
third-parties that will be settled in cash. The carrying value of our accounts receivable – trade, net of allowance for doubtful
accounts, represents its estimated net realizable value. Estimates are used in determining our allowance for doubtful accounts and
are based on our historical collection experience, current trends, credit policy and a review of our accounts receivable – trade by
aging category. Our reserve is evaluated and revised on a monthly basis. Past-due receivables are written off when deemed to
be uncollectible.
Inventory
Inventory includes secondary fibers, recyclables ready for sale and parts and supplies. Inventory is stated at the lower of cost (first-
in, first-out) or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost, less accumulated depreciation and amortization. We provide 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:
Asset Classification
Buildings and improvements
Machinery and equipment
Rolling stock
Containers
Furniture and Fixtures
Estimated Useful Life
10-30 years
5-10 years
5-10 years
5-12 years
3-8 years
The cost of maintenance and repairs is charged to operations as incurred.
Landfill development costs are also included in property, plant and equipment. Landfill development costs include costs to develop
each of our landfill sites, including such costs related to landfill liner material and installation, excavation for airspace, landfill
leachate collection systems, landfill gas collection systems, environmental monitoring equipment for groundwater and landfill gas,
directly related engineering, capitalized interest, on-site road construction and other capital infrastructure. Additionally, landfill
development costs include all land purchases within the landfill footprint and the purchase of any required landfill buffer property.
Under life-cycle accounting, these costs are capitalized and charged to expense based on tonnage placed into each site. See the
“Landfill Accounting” accounting policy below for disclosure over the amortization of landfill development costs and Note 6 for
disclosure over property, plant and equipment.
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Landfill Accounting
Life Cycle Accounting
Under life-cycle accounting, all costs related to acquisition and construction of landfill sites are capitalized and charged to expense
based on tonnage placed into each site. Landfill permitting, acquisition and preparation costs are amortized on the units-of-
consumption method as landfill airspace is consumed. In determining the amortization rate for our landfills, preparation costs
include the total estimated costs to complete construction of the landfills’ permitted and expansion capacity.
Landfill Development Costs
We estimate the total cost to develop each of our landfill sites to its remaining permitted and expansion capacity (see landfill
development costs discussed within the “Property, Plant and Equipment” accounting policy above). The projection of these landfill
costs is dependent, in part, on future events. The remaining amortizable basis of each landfill includes costs to develop a site to
its remaining permitted and expansion capacity and includes amounts previously expended and capitalized, net of accumulated
airspace amortization, and projections of future purchase and development costs including capitalized interest. The interest
capitalization rate is based on our weighted average interest rate incurred on borrowings outstanding during the period. Interest
capitalized for fiscal years 2014, 2013 and 2012 was $256, $368 and $407, respectively.
Landfill Airspace
We apply the following guidelines in determining a landfill’s remaining permitted and expansion airspace:
Remaining Permitted Airspace. Our engineers, in consultation with third-party engineering consultants and surveyors, are
responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an
annual survey, which is then used to compare the existing landfill topography to the expected final landfill topography.
Expansion Airspace. We currently include unpermitted expansion airspace in our estimate of remaining permitted and
expansion airspace in certain circumstances. To be considered expansion airspace all of the following criteria must be met:
• we 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;
• we have not identified any legal or political impediments which we believe will not be resolved in our favor;
• we are actively working on obtaining any necessary permits and we expect that all required permits will be received; and
• senior management has approved the project.
For unpermitted airspace to be included in our estimate of remaining permitted and expansion airspace, the expansion effort
must meet all of the criteria listed above. These criteria are evaluated annually by our engineers, accountants, lawyers, managers
and others to identify potential obstacles to obtaining the permits. Once the remaining permitted and expansion airspace is
determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion
capacity in tons. The AUF is established using the measured density obtained from previous annual surveys. When we include
the expansion airspace in our calculation of remaining permitted and expansion airspace, we include the projected costs for
development, as well as the projected asset retirement costs related to final capping, closure and post-closure of the expansion
airspace in the amortization basis of the landfill.
After determining the costs and the remaining permitted and expansion capacity at each of our landfills, we determine the per ton
rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of
tons. We calculate per ton amortization rates for assets associated with each final capping event, for assets related to closure and
post-closure activities and for all other costs capitalized or to be capitalized in the future for each landfill. These rates per ton are
updated annually, or more frequently, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure
activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different
from our estimates and assumptions. To the extent that such estimates or related assumptions prove to be significantly different
than actual results, lower profitability may be experienced due to higher amortization rates, higher final capping, closure or post-
closure rates, or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that
the expansion capacity should no longer be considered in calculating the recoverability of the landfill asset, we may be required
to recognize an asset impairment. If it is determined that the likelihood of receiving an expansion permit has become remote, the
capitalized costs related to the expansion effort are expensed immediately.
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Final Capping, Closure and Post-Closure Costs
The following is a description of our landfill asset retirement activities and our related accounting:
Final Capping Costs. Final capping activities include the installation of liners, drainage, compacted soil layers and topsoil
over areas of a landfill where total airspace has been consumed and waste is no longer being received. Final capping activities
occur throughout the life of the landfill. Our engineering personnel estimate the cost for each final capping event based on the
acreage to be capped and the final capping materials and activities required. The estimates also consider when these costs would
actually be paid and factor in inflation and discount rates. The engineers then quantify the landfill capacity associated with each
final capping event and the costs for each event are amortized over that capacity as waste is received at the landfill.
Closure and Post-Closure Costs. 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. We estimate, based on input
from our engineers, lawyers, accounting personnel and consultants, our future cost requirements for closure and post-closure
monitoring and maintenance based on our interpretation of the technical standards of the Subtitle D regulations and the air
emissions standards under the Clean Air Act of 1970, as amended, as they are being applied on a state-by-state basis. Closure
and post-closure accruals for the cost of monitoring and maintenance include site inspection, groundwater monitoring, leachate
management, methane gas control and recovery, and operation and maintenance costs to be incurred for a period which is
generally for a term of 30 years after final closure of a landfill. In determining estimated future closure and post-closure costs, we
consider costs associated with permitted and permittable airspace.
Our estimated future closure and post-closure costs, based on our interpretation of current requirements and proposed regulatory
changes, are intended to approximate fair value. Absent quoted market prices, our cost estimates are based on historical
experience, professional engineering judgment and quoted or actual prices paid for similar work. Our estimate of costs to
discharge final capping, closure and post-closure asset retirement obligations for landfills are developed in today’s dollars. These
costs are then inflated to the period of performance using an estimate of inflation, which is updated annually (2.6% and 2.7%
for fiscal years 2014 and 2013, respectively). Final capping, closure and post-closure liabilities are discounted using the credit
adjusted risk-free rate in effect at the time the obligation is incurred. The weighted average rate applicable to our asset retirement
obligations at April 30, 2014 is between approximately 9.0% and 9.5%, the range of the credit adjusted risk free rates effective
since the adoption of guidance associated with asset retirement obligations in fiscal year 2004. Accretion expense is necessary to
increase the accrued final capping, closure and post-closure liabilities to the future anticipated obligation. To accomplish this, we
accrete our final capping, closure and post-closure accrual balances using the same credit-adjusted risk-free rate that was used to
calculate the recorded liability. Accretion expense on recorded landfill liabilities is recorded to cost of operations from the time the
liability is recognized until the costs are paid. Accretion expense on recorded landfill liabilities amounted to $3,967, $3,538 and
$3,341 in fiscal years 2014, 2013 and 2012, respectively.
We provide for the accrual and amortization of estimated future obligations for closure and post-closure based on tonnage
placed into each site. With regards to final capping, the liability is recognized and the costs are amortized based on the airspace
related to the specific final capping event. See Note 8 for disclosure over final capping, closure and post-closure costs asset
retirement obligations.
We operate in states which require a certain portion of landfill final capping, closure and post-closure obligations to be secured by
financial assurance, which may take the form of surety bonds, letters of credit and restricted cash. Surety bonds securing closure
and post-closure obligations at April 30, 2014 and 2013 totaled $133,847 and $128,551, respectively. Letters of credit securing
closure and post-closure obligations at April 30, 2014 and 2013 totaled $1,104 and $1,752, respectively. See Note 5 for disclosure
over restricted cash securing closure and post-closure obligations.
Landfill Operating Lease Contracts
We entered into three landfill operation and management agreements in fiscal year 2004 and one landfill operation and
management agreement in fiscal year 2006. These agreements are long-term landfill operating contracts with government bodies
whereby we receive tipping revenue, pay normal operating expenses and assume future final capping, closure and post-closure
liabilities. The government body retains ownership of the landfill. There is no bargain purchase option and title to the property
does not pass to us at the end of the lease term. We allocate the consideration paid to the landfill airspace rights and underlying
land lease based on the relative fair values.
In addition to up-front or one-time payments, the landfill operating agreements require us to make future minimum rental
payments, including success/expansion fees, other direct costs and final capping, closure and post-closure costs. The value of all
future minimum lease payments is amortized and charged to cost of operations over the life of the contract. We amortize the
consideration allocated to airspace rights as airspace is utilized on a units-of-consumption basis and such amortization is charged
to cost of operations as airspace is consumed (e.g., as tons are placed into the landfill). The underlying value of any land lease is
amortized to cost of operations on a straight-line basis over the estimated life of the operating agreement. See Note 6 for disclosure
over depletion of landfill operating lease contracts.
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Leases
We lease property and equipment in the ordinary course of our business. Our most significant lease obligations are for property
and equipment specific to our industry. Our leases have varying terms. Some may include renewal or purchase options, escalation
clauses, restrictions, lease concessions, capital project funding, penalties or other obligations that we consider in determining
minimum lease payments. Leases are classified as either operating leases or capital leases, as appropriate.
Operating Leases. Many of our leases are operating leases. This classification generally can be attributed to either (i) relatively
low fixed minimum lease payments or (2) minimum lease terms that are much shorter than the assets’ economic useful lives. We
expect that, in the normal course of business, our operating leases will be replaced by other leases, or replaced with fixed asset
expenditures. See Note 11 for disclosure over future minimum lease payments related to our operating leases.
Capital Leases. We capitalize assets acquired under capital leases at the inception of each lease and amortize them to
depreciation expense over the lesser of the useful life of the asset or the lease term, as appropriate. The present value of the related
lease payments is recorded as a debt obligation. See Note 10 for disclosure over our future maturities of debt, which includes
capital lease payments.
Goodwill and Intangible Assets
Goodwill. Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not
amortize goodwill, but as discussed in the “Asset Impairments” accounting policy below, we assess our goodwill for impairment at
least annually. See Note 7 for disclosure over goodwill.
Intangible Assets. Intangible assets consist primarily of covenants not-to-compete and customer lists. Intangible assets are
recorded at fair value and are amortized based on the economic benefit provided or using the straight-line method over their
estimated useful lives. Covenants not-to-compete and customer lists are typically amortized over a term of no more than 10 years.
See Note 7 for disclosure over intangible assets.
Investments in Unconsolidated Entities
Investments in unconsolidated entities over which we have significant influence over the investees’ operating and financing
activities are accounted for under the equity method of accounting. Investments in affiliates in which we do not have the ability
to exert significant influence over the investees’ operating and financing activities are accounted for under the cost method of
accounting. The following table summarizes our equity and cost method investments as of April 30, 2014 and 2013:
Equity method investments
Cost method investments
Investments in unconsolidated entities
April 30, 2014
April 30, 2013
$ —
16,752
$ 16,752
$ 3,766
16,486
$ 20,252
We monitor and assess the carrying value of our investments throughout the year for potential impairment and write them down
to their fair value when other-than-temporary declines exist. Fair value is generally based on (i) other third-party investors’ recent
transactions in the securities; (ii) other information available regarding the current market for similar assets and/or (iii) a market
or income approach, as deemed appropriate.
When we assess the carrying value of our investments for potential impairment, determining the fair value or our investments
is reliant upon the availability of market information and/or other information provided by third-parties to be able to develop
an estimate of fair value. Additionally, considerable judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or other holders of these investments,
could realize in a current market exchange. The use of different assumptions and/or estimation methodologies could have a
significant effect on the estimated fair values. The current estimates of fair value could differ significantly from the
amounts presented.
Equity Method Investments
GreenFiber. In fiscal year 2001, we entered into a joint venture agreement with Louisiana-Pacific Corporation (“LP”) to combine
our respective cellulose insulation businesses into a single operating entity, US GreenFiber LLC (“GreenFiber”). On December 5,
2013, we and LP executed a purchase and sale agreement with a limited liability company formed by Tenex Capital Partners, L.P.,
pursuant to which we and LP agreed to sell our membership interests in GreenFiber for total cash consideration of $18,000 plus
an expected working capital true up less any indebtedness and other unpaid transaction costs of GreenFiber as of the closing
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date. The transaction was completed on December 5, 2013 for $19,194 in gross cash proceeds, including a $1,194 working capital
adjustment. After netting indebtedness of GreenFiber and transaction costs, our 50% of the net cash proceeds amounted to $3,442.
After considering the $593 impact of our unrealized losses relating to derivative instruments in accumulated other comprehensive
loss on our investment in GreenFiber, we recorded a gain on sale of equity method investment of $593 in the third quarter of fiscal
year 2014. We had previously accounted for our 50% membership interest in GreenFiber using the equity method of accounting.
Tompkins. In May 2011, we finalized the terms of a joint venture agreement with FCR, LLC (“FCR”) to form Tompkins County
Recycling LLC (“Tompkins”), a joint venture that operates a material recovery facility (“MRF”) located in Tompkins County, New
York and processes and sells commodities delivered to the Tompkins MRF. On December 31, 2013, we purchased the remaining
50% membership interest of Tompkins for total cash consideration of $425. The acquisition-date fair value of our investment in
Tompkins, which was determined using the cost approach based on an assessment of the price to purchase the acquired assets of
Tompkins, prior to the acquisition date was $300.We recognized a $106 gain through loss from equity method investments due to
the remeasurement in fiscal year 2014. As a result of the purchase, we no longer account for our investment in Tompkins using the
equity method of accounting and began including the results of Tompkins in our consolidated financial statements.
Fair Value of Financial Instruments
Our financial instruments include cash and cash equivalents, accounts receivable-trade, restricted trust and escrow accounts,
interest rate derivatives, trade payables and long-term debt. Accounting standards include disclosure requirements around fair
values used for certain financial instruments and establish a fair value hierarchy. The three-tier hierarchy prioritizes valuation
inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair
value measurement is reported in one of three levels: Level 1, defined as quoted market prices in active markets for identical assets
or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for
similar assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data. See Note 10 and
Note 13 for fair value disclosure over long-term debt and financial instruments, respectively. See the “Derivatives and Hedging”
accounting policy below for the fair value disclosure over interest rate derivatives.
Business Combinations
We acquire businesses in the waste industry, including non-hazardous waste collection, transfer station, material recovery facilities
and disposal operations, as part of our growth strategy. Businesses are included in the consolidated financial statements from the
date of acquisition.
We recognize, separately from goodwill, the identifiable assets acquired and liabilities assumed at their estimated acquisition-date
fair values. We measure and recognize goodwill as of the acquisition date as the excess of: (a) the aggregate of the fair value of
consideration transferred, the fair value of any noncontrolling interest in the acquiree (if any) and the acquisition date fair value
of our previously held equity interest in the acquiree (if any), over (b) the fair value of net assets acquired and liabilities assumed.
If information about facts and circumstances existing as of the acquisition date is incomplete by the end of the reporting period
in which a business combination occurs, we will report provisional amounts for the items for which the accounting is incomplete.
The measurement period ends once we receive the information we were seeking; however, this period will not extend beyond
one year from the acquisition date. Any material adjustments recognized during the measurement period will be recognized
retrospectively in the consolidated financial statements of the current period. All acquisition related transaction and restructuring
costs are to be expensed as incurred. See Note 4 for disclosure over business acquisitions.
Environmental Remediation Liabilities
We have recorded environmental remediation liabilities representing our estimate of the most likely outcome of the matters
for which we have determined that a liability is probable. These liabilities include potentially responsible party investigations,
settlements, certain legal and consultant fees, as well as costs directly associated with site investigation and clean up, such as
materials and incremental internal costs directly related to the remedy. We provide for expenses associated with environmental
remediation obligations when such amounts are probable and can be reasonably estimated. We estimate costs required to
remediate sites where it is probable that a liability has been incurred based on site-specific facts and circumstances. Estimates
of the cost for the likely remedy are developed using third-party environmental engineers or other service providers. Where we
believe that both the amount of a particular environmental remediation liability and timing of payments are reliably determinable,
we inflate the cost in current dollars until the expected time of payment and discount the cost to present value. See Note 11 for
disclosure over environmental remediation liabilities.
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Self-Insurance Liabilities and Related Costs
We are self-insured for vehicles and workers’ compensation. Our maximum exposure in fiscal year 2014 under the workers’
compensation plan is $1,000 per individual event, after which reinsurance takes effect. Our maximum exposure in fiscal year 2014
under the automobile plan is $1,000 per individual event, after which reinsurance takes effect. The liability for unpaid claims and
associated expenses, including incurred but not reported losses, is determined by management with the assistance of a third-
party actuary and reflected in our consolidated balance sheet as an accrued liability. We use 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 based on historical data, which considers both the frequency and settlement amount of claims. Our self-insurance
reserves totaled $10,280 and $11,362 at April 30, 2014 and 2013, respectively. Our estimated accruals for these liabilities could be
significantly different than our ultimate obligations if variables such as the frequency or severity of future events differ significantly
from our assumptions.
Income Taxes
We use estimates to determine our provision for income taxes and related assets and liabilities and any valuation allowance
recorded against our net deferred tax assets. Valuation allowances have been established for the possibility that tax benefits
may not be realized for certain deferred tax assets. 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. We record net deferred tax assets to the extent we believe these assets will more likely than not be
realized. In making this determination, we consider all available positive and negative evidence, including scheduled reversals of
deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event we
determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we
will make an adjustment to the valuation allowance which would reduce the provision for income taxes.
We account for income tax uncertainties according to guidance on the recognition, de-recognition and measurement of potential
tax benefits associated with tax positions. We recognize interest and penalties relating to income tax matters as a component of
income tax expense. See Note 15 for disclosure related to income taxes.
Derivatives and Hedging
We account for derivatives and hedging activities in accordance with derivatives and hedging accounting guidance that 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. The guidance
also requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria
are met. Our objective for utilizing derivative instruments is to reduce our exposure to fluctuations in cash flows due to changes in
the commodity prices of recycled paper and adverse movements in interest rates.
Our 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. We evaluate the hedges and ensure that these instruments qualify for hedge accounting pursuant to derivative and
hedging guidance. Designated as effective cash flow hedges, the change in the fair value of these derivatives is recognized in other
comprehensive income (loss) until the hedged item is settled and recognized as part of commodity revenue.
If the price per short ton of the underlying commodity, as reported on the Official Board Market, is less than the contract price
per short ton, we receive the difference between the average price and the contract price (multiplied by the notional tons) from the
respective counter-party. If the price per short ton of the underlying commodity exceeds the contract price per short ton, we pay
the calculated difference to the counter-party.
The fair value of commodity hedges are obtained or derived from our counter-parties using valuation models that take into
consideration market price assumptions for commodities based on underlying active markets. We were not party to any
commodity hedge contracts as of April 30, 2014 and 2013.
Our strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements to
hedge against adverse movements in interest rates. For interest rate derivatives deemed to be effective cash flow hedges, the change
in fair value is recorded in our stockholders’ (deficit) equity as a component of accumulated other comprehensive income (loss)
and included in interest expense at the same time as interest expense is affected by the hedged transaction. Differences paid or
received over the life of the agreements are recorded as additions to or reductions of interest expense on the underlying debt. We
were not party to any interest rate derivative agreements deemed to be effective cash flow hedges as of April 30, 2014 and 2013.
For interest rate derivatives deemed to be ineffective cash flow hedges, the change in fair value is recorded through earnings and
included in loss on derivative instruments. We are party to two interest rate derivative agreements, which we entered into in fiscal
year 2012, that are deemed to be ineffective cash flow hedges.
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We entered into these two interest rate derivative agreements to hedge the interest rate risk associated with a forecasted financing
transaction to redeem our previously outstanding 11% senior second lien notes (“Second Lien Notes”) effective January 15, 2013.
The total notional amount of these interest rate derivative agreements is $150,000. The agreements require us to receive interest
based on changes in the London Interbank Offered Rate (“LIBOR”) index and pay interest at a rate of approximately 1.40%. The
agreements mature on March 15, 2016. We dedesignated both of the $75,000 interest rate derivative agreements in fiscal year 2013
and discontinued hedge accounting in accordance with ASC 815-30 because the interest payments associated with the forecasted
financing transaction were no longer deemed probable due to the redemption of our Second Lien Notes as discussed in Note 10.
We reclassified a $3,626 loss from accumulated other comprehensive income (loss) to earnings as a loss on derivative instruments
in fiscal year 2013.
The fair value of these two interest rate derivatives are calculated based on the three month LIBOR yield curve that is observable
at commonly quoted intervals for the full term of the swaps, adjusted by the credit risk of our counter-parties and us based on
observable credit default swap rates. We recognize all derivatives on the balance sheet at fair value.
Contingent Liabilities
We are subject to various legal proceedings, claims and regulatory matters, the outcomes of which are subject to significant
uncertainty. We determine whether to disclose or accrue for loss contingencies based on an assessment of whether the risk
of loss is remote, reasonably possible or probable, and whether it can be reasonably estimated. We analyze our litigation and
regulatory matters based on available information to assess the potential liabilities. Management’s assessment is developed based
on an analysis of possible outcomes under various strategies. We accrue for loss contingencies when such amounts are probable
and reasonably estimable. If a contingent liability is only reasonably possible, we will disclose the potential range of the loss, if
estimable. We record losses related to contingencies in cost of operations or general and administration expenses, depending
on the nature of the underlying transaction leading to the loss contingency. See Note 11 for disclosure over loss contingencies.
Contingent liabilities recorded in purchase accounting are recorded at their fair values. These fair values may be different from the
values we would have otherwise recorded, had the contingent liability not been assumed as part of an acquisition of a business. See
Note 4 for disclosure over a contingent liability assumed as part of the acquisition of a business.
Revenue Recognition
We recognize 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 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 of revenues.
Revenues for processing of recyclable materials are recognized when the related service is provided. Revenues from the brokerage
of recycled materials are recognized on a net basis at the time of shipment.
Asset Impairments
Recovery of Long-Lived Assets. We continually assess whether events or changes in circumstances have occurred that may
warrant revision of the estimated useful lives of our long-lived assets (other than goodwill) or whether the remaining balances of
those assets should be evaluated for possible impairment. Long-lived assets include, for example, capitalized landfill costs, other
property and equipment, and identifiable intangible assets. Events or changes in circumstances that may indicate that an asset may
be impaired include the following:
• a significant decrease in the market price of an asset or asset group;
• a significant adverse change in the extent or manner in which an asset or asset group is being used or in its physical condition;
• a significant adverse change in legal factors or in the business climate that could affect the value of an asset or asset group,
including an adverse action or assessment by a regulator;
• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a
long-lived asset;
• a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or
forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group;
• a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of
significantly before the end of its previously estimated useful life; or
• an impairment of goodwill at a reporting unit.
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There are certain indicators listed above that require significant judgment and understanding of the waste industry when applied
to landfill development or expansion. For example, a regulator may initially deny a landfill expansion permit application although
the expansion permit is ultimately granted. In addition, management may periodically divert waste from one landfill to another to
conserve remaining permitted landfill airspace. Therefore, certain events could occur in the ordinary course of business and not
necessarily be considered indicators of impairment due to the unique nature of the waste industry.
If an impairment indicator occurs, we perform a test of recoverability by comparing the carrying value of the asset or asset group
to its undiscounted expected future cash flows. We group our long-lived assets for this purpose at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets or asset groups. If the carrying values are in excess
of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset group to
its carrying value.
To determine fair value, we use discounted cash flow analyses and estimates about the future cash flows of the asset or asset group.
This analysis includes a determination of an appropriate discount rate, the amount and timing of expected future cash flows and
growth rates. The cash flows employed in our discounted cash flow analyses are typically based on financial forecasts developed
internally by management. The discount rate used is commensurate with the risks involved. We may also rely on third-party
valuations and or information available regarding the market value for similar assets.
If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment
in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires
significant judgment and projections may vary from the cash flows eventually realized.
See Note 16 for disclosure related to asset impairments recognized during the reporting periods.
Goodwill. We annually assess goodwill impairment at the end of the fourth quarter of our fiscal year, or more frequently if
events or circumstances indicate that impairment may exist.
We assess whether a goodwill impairment exists using both qualitative and quantitative assessments. Our qualitative assessment
involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting
unit is less than its carrying amount, including goodwill. If based on this qualitative assessment we determine it is not more likely
than not that the fair value of a reporting unit is less than its carrying amount, we will not perform a quantitative assessment.
If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying
amount, or if we elect not to perform a qualitative assessment, we perform a quantitative assessment, or two-step impairment test,
to determine whether goodwill impairment exists at the reporting unit.
In the first step (defined as “Step 1”) of testing for goodwill impairment, we estimate the fair value of each reporting unit, which
we have determined to be our geographic operating segments, our Recycling segment and our Customer Solutions operations,
which is included in the Other segment, and compare the fair value with the carrying value of the net assets of each reporting unit.
If the fair value is less than its carrying value, then we would perform a second step (defined as “Step 2”) and determine the fair
value of the goodwill. In Step 2, the fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable
assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the
purchase price were being initially allocated.
To determine the fair value of each of our reporting units as a whole we use discounted cash flow analyses, which require
significant assumptions and estimates about the future operations of each reporting unit. Significant judgments inherent in this
analysis include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth
rates. The cash flows employed in our discounted cash flow analyses are based on financial forecasts developed internally by
management. Our discount rate assumptions are based on an assessment of our risk adjusted discount rate, applicable for each
reporting unit. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate our results against
our current market capitalization
If the fair value of the goodwill is less than its carrying value for a reporting unit, an impairment charge would be recorded to
earnings. The loss recognized cannot exceed the carrying amount of goodwill. After a goodwill impairment loss is recognized, the
adjusted carrying amount of goodwill becomes its new accounting basis.
77
In addition to an annual goodwill impairment assessment, we would evaluate a reporting unit for impairment if events or
circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include
the following:
• a significant adverse change in legal status or in the business climate;
• an adverse action or assessment by a regulator;
• a more likely than not expectation that a segment or a significant portion thereof will be sold; or
• the testing for recoverability of a significant asset group within the segment.
We elected not to perform a qualitative analysis as part of our annual goodwill impairment test in fiscal year 2014. As of April 30,
2014, the Step 1 testing for goodwill impairment performed for the Eastern, Western, Recycling and Customer Solutions reporting
units indicated that the fair value of each reporting unit exceeded its carrying amount, including goodwill. Furthermore, the
Step 1 test indicated that the fair value of the Eastern, Western, Recycling and Customer Solutions reporting units exceeded their
carrying values by 25.8%, 34.3%, 8.2% and 74.0%, respectively. The fair value of the Recycling reporting unit, which is allocated
$12,315 of goodwill at April 30, 2014, exceeded its carrying amount by $4,110. We incurred no impairment of goodwill as a result
of our annual fourth quarter goodwill impairment tests in fiscal years 2014, 2013 or 2012. However, there can be no assurance that
goodwill will not be impaired at any time in the future.
Equity Method Investments. In fiscal year 2012, our loss on equity method investment associated with GreenFiber includes a $5,090
goodwill impairment charge as GreenFiber performed a goodwill impairment analysis that indicated the carrying value
of their reporting unit exceeded the fair value of their reporting unit and determined that the entire amount of their goodwill
was impaired.
Based on the goodwill impairment analysis performed by GreenFiber in fiscal year 2012, we determined that the book value of our
investment in GreenFiber exceeded its fair value. The analysis calculated GreenFiber’s fair value based on the income approach
using discounted cash flows taking into account current expectations for asset utilization, housing starts and the remaining useful
life of related assets. We recorded a charge of $10,680 as impairment on equity method investment in fiscal year 2012.
Stock-Based Compensation
All share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized
as expense over the employee’s requisite service period. Stock-based compensation expense is based on the number of awards
ultimately expected to vest and is therefore reduced for an estimate of the awards that are expected to be forfeited prior to vesting.
The fair value of each stock option is estimated using a Black-Scholes option pricing model, which requires extensive use of
accounting judgment and financial estimation, including estimates of the expected term option holders will retain their vested
stock options before exercising them and the estimated volatility of our common stock price over the expected term. See Note 12
for disclosure over stock-based compensation.
Earnings per Share
Basic earnings per share is computed by dividing the net loss from continuing operations attributable to common stockholders
by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based
on the combined weighted average number of common shares and potentially dilutive shares, which include, where appropriate,
the assumed exercise of employee stock options, unvested restricted stock awards, unvested restricted stock units and unvested
performance stock units. In computing diluted earnings per share, we utilize the treasury stock method. See Note 18 for disclosure
over the calculation of earnings per share.
Discontinued Operations
We analyze our operations that have been divested or classified as held-for-sale to determine if they qualify for discontinued
operations accounting. Only operations that qualify as a component of an entity, as defined by the ASC, can be classified as a
discontinued operation. In addition, only components where the cash flows of the component have been or will be eliminated
from ongoing operations by the end of the assessment period and where we do not have a significant continuing involvement
with the divested operations would qualify for discontinued operations accounting. See Note 17 for disclosure over
discontinued operations.
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Change in Fiscal Year
On June 24, 2014, our Board of Directors approved the change of our fiscal year-end from April 30th to December 31st,
effective January 1, 2015. Under this change, we will report an 8-month transition period ending December 31, 2014, and then
subsequently our full fiscal year ending December 31, 2015. During the 8-month transition period, we will report for the quarters
ending July 31, 2014 and October 31, 2014.
Subsequent Events
Except as disclosed, no material subsequent events have occurred since April 30, 2014 through the date of this filing that require
recognition or disclosure in our current period consolidated financial statements.
4. BUSINESS COMBINATIONS
We acquired various businesses during fiscal years 2014 and 2013, including several solid waste hauling operations, a transfer
station, a material recovery facility and an industrial service management business (included in the Other segment). The operating
results of these businesses are included in the accompanying audited consolidated statements of operations from each date of
acquisition, and the purchase price has been allocated to the net assets acquired based on fair values at each date of acquisition,
with the residual amounts recorded as goodwill. Acquired intangible assets other than goodwill that are subject to amortization
include client lists and non-compete covenants. These are amortized over a five to ten year period from the date of acquisition.
All amounts recorded to goodwill, except amounts related to the acquisition of Bestway Disposal Services and BBI Waste
Services (“BBI”) in fiscal year 2013, are expected to be deductible for tax purposes. See Note 15 for disclosure over the tax impact
associated with the acquisition of BBI.
The purchase price paid for these acquisitions during fiscal years 2014 and 2013 and the allocation of the purchase price is
as follows:
Purchase Price:
Cash used in acquisitions, net of cash acquired
Common stock issued
Other non-cash considerations
Contingent consideration and holdbacks (1)
Total
Current assets
Equipment
Other liabilities, net
Intangible assets
Fair value of assets acquired and liabilities assumed
Excess purchase price to be allocated to goodwill
Fiscal Year Ended April 30,
2014
2013
$ 7,860
—
555
1,653
10,068
814
2,010
(241)
4,302
6,885
$ 3,183
$ 25,225
2,650
—
33
27,908
1,422
9,423
(7,009)
9,850
13,686
$ 14,222
1. In the fourth quarter of fiscal year 2014, we recovered a portion of the purchase price holdback amount we had previously paid and were relieved
of any potential contingent consideration obligation associated with the acquisition of an industrial service management business completed
earlier in fiscal year 2014. As a result, we recorded a $1,058 gain on settlement of acquisition related contingent consideration in fiscal year 2014.
The following unaudited pro forma combined information shows the results of our continuing operations for fiscal years 2014 and
2013 as though each of the acquisitions completed in fiscal years 2014 and 2013 had occurred as of May 1, 2012.
Revenue
Operating income
Net loss attributable to common stockholders
Basic and diluted loss per common share attributable to common stockholders
Basic and diluted weighted average shares outstanding
79
Fiscal Year Ended April 30,
2014
2013
$ 501,713
$ 478,039
$ 12,698
$ 14,748
$ (22,779)
$ (53,763)
$ (0.57)
$ (1.58)
39,820
34,015
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 as of May 1, 2012 or the results of our future operations. 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 consolidation of
the completed acquisitions.
5. RESTRICTED CASH / RESTRICTED ASSETS
Restricted cash / restricted assets consist of cash and investments held in trust on deposit with various banks as collateral for our
obligations relative to our landfill final capping, closure and post-closure costs. A summary of restricted cash / restricted assets as
of April 30, 2014 and 2013 is as follows:
Current:
Landfill closure
Non Current:
Landfill closure
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of April 30, 2014 and 2013 consists of the following:
Land
Landfills
Landfill operating lease contracts
Buildings and improvements
Machinery and equipment
Rolling stock
Containers
Less: accumulated depreciation and amortization
April 30,
2014
2013
$ 76
$ 76
$ 681
$ 545
April 30,
2014
2013
$ 21,445
496,515
115,867
134,787
117,193
128,155
85,397
1,099,359
695,935
$ 403,424
$ 20,722
475,855
109,363
133,330
120,314
128,038
80,447
1,068,069
645,567
$ 422,502
Depreciation expense for fiscal years 2014, 2013 and 2012 was $33,094, $34,065 and $37,829, respectively. Landfill amortization
expense for fiscal years 2014, 2013 and 2012 was $24,689, $21,206 and $19,957, respectively. Depletion expense on landfill
operating lease contracts for fiscal years 2014, 2013 and 2012 was $9,948, $9,372 and $8,482, respectively, and was recorded in cost
of operations.
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7. GOODWILL AND INTANGIBLE ASSETS
The following tables show the activity and balances related to goodwill from April 30, 2012 through April 30, 2014:
Eastern region
Western region
Recycling
Other
Total
Eastern region
Western region
Recycling
Total
April 30, 2013
Acquisitions
Other (1)
April 30, 2014
$ 16,858
86,880
12,190
—
$ 115,928
$ 539
790
125
1,729
$ 3,183
$ 32
(4)
—
—
$ 28
$ 17,429
87,666
12,315
1,729
$ 119,139
April 30, 2012
Acquisitions
Other (2)
April 30, 2013
$ 58
89,458
12,190
$ 12,939
1,283
—
$ 101,706
$ 14,222
$ 3,861
(3,861)
—
$ —
$ 16,858
86,880
12,190
$ 115,928
1. Goodwill adjustments related to prior year acquisition activity, including the finalization of the deferred tax liability associated with the
December 5, 2012 BBI acquisition.
2. Goodwill reclassification between the Eastern and Western regions is associated with the realignment of certain operations between the reporting
units during fiscal year 2013.
Intangible assets as of April 30, 2014 and 2013 consist of the following:
Balance, April 30, 2014
Intangible assets
Less accumulated amortization
Balance, April 30, 2013
Intangible assets
Less accumulated amortization
Covenants
Not-to-Compete
Client Lists
Total
$ 17,245
(15,363)
$ 1,882
$ 15,760
(4,222)
$ 11,538
$ 33,005
(19,585)
$ 13,420
Covenants
Not-to-Compete
Client Lists
Total
$ 17,043
(14,800)
$ 2,243
$ 11,660
(2,229)
$ 9,431
$ 28,703
(17,029)
$ 11,674
Intangible amortization expense for fiscal years 2014, 2013 and 2012 was $2,556, $1,306 and $629, respectively.
The intangible amortization expense estimated as of April 30, 2014 for the five fiscal years following fiscal year 2014 and thereafter
is as follows:
2015
$ 2,925
2016
$ 2,314
2017
$ 1,874
2018
$ 1,652
2019
Thereafter
$ 1,449
$ 3,206
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8. FINAL CAPPING, CLOSURE AND POST-CLOSURE COSTS
Accrued final capping, closure and post-closure costs include the current and non-current portion of costs associated with
obligations for final capping closure and post-closure of our landfills. We estimate our future final capping, closure and post-
closure costs in order to determine the final capping, closure and post-closure expense per ton of waste placed into each landfill
as further described in Note 3 to these consolidated financial statements. The anticipated timeframe for paying these costs varies
based on the remaining useful life of each landfill, as well as the duration of the post-closure monitoring period. The changes to
accrued final capping, closure and post-closure liabilities for fiscal years 2014 and 2013 are as follows:
Beginning balance
Obligations incurred
Revisions in estimates (1)
Accretion expense
Payments
Ending balance
Fiscal Year Ended April 30,
2014
$ 43,170
3,621
(3,728)
3,967
(2,376)
$ 44,654
2013
$ 39,629
3,188
(694)
3,538
(2,491)
$ 43,170
1. The revisions in estimates for final capping, closure and post-closure for fiscal years 2014 and 2013 consist of changes in cost estimates and the
timing of final capping and closure events, as well as changes to expansion airspace and tonnage placement assumptions.
9. OTHER ACCRUED LIABILITIES
Other accrued liabilities, classified as current liabilities, as of April 30, 2014 and 2013 consist of the following:
Maine Energy remediation reserve
Other accrued liabilities
Total other accrued liabilities
April 30,
2014
2013
$ 2,932
14,680
$ 17,612
$ 4,500
16,514
$ 21,014
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10. LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt and capital leases as of April 30, 2014 and 2013 consist of the following:
Senior subordinated notes due February 15, 2019, bearing interest at 7.75%, interest payable semiannually,
unsecured and unconditionally guaranteed (including unamortized discount of $1,491 and $1,735)
Senior secured revolving credit facility, which provides for advances or letters of credit of up to $227,500, due
March 18, 2016, bearing interest at LIBOR plus 3.75%, (approximately 3.90% at April 30, 2014 based on one
month LIBOR), secured by substantially all of our assets
Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-1 due January 1, 2025, dated
December 1, 2005, bearing interest at BMA Index (approximately 0.18% at April 30, 2014) enhanced by an
irrevocable, transferable direct-pay letter of credit (3.875% at April 30, 2014)
Finance authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-2 due January 1, 2025, dated
February 1, 2012, bearing interest at 6.25% through January 31, 2017, unsecured and guaranteed by our significant
wholly-owned subsidiaries
Vermont Economic Development Authority Solid Waste Disposal Long-Term Revenue Bonds Series 2013 due
April 1, 2036, dated March 1, 2013, bearing interest at 4.75% through April 4, 2019, unsecured and guaranteed by
our significant wholly-owned subsidiaries
Business Finance Authority of the State of New Hampshire Solid Waste Disposal Revenue Bonds Series 2013 due
April 1, 2029, dated March 1, 2013, bearing interest at BMA Index (approximately 0.18% at April 30, 2014) enhanced
by an irrevocable, transferable direct-pay letter of credit (3.875% at April 30, 2014)
Notes payable, bearing interest at rates of up to 6.00%, due in monthly or annual installments varying to $120,
maturing through April 2017
Capital leases for facilities and equipment, bearing interest at rates of up to 7.70%, due in monthly or annual
installments varying to $935, maturing through April 2023
Less – current maturities
Senior Secured Revolving Credit Facility
April 30,
2014
2013
$ 323,509
$ 323,265
133,860
123,200
3,600
3,600
21,400
21,400
16,000
16,000
5,500
5,500
440
3,710
1,228
2,012
508,019
496,205
885
1,218
$ 507,134
$ 494,987
The senior secured revolving credit facility (“2011 Revolver”) is a $227,500 component of our revolving credit and letter of credit
facility due March 18, 2016 (“Senior Credit Facility”). We have the right to request, at our discretion, an increase in the amount of
the Senior Credit Facility by an aggregate amount of $100,000, subject to certain conditions set forth in the Senior Credit Facility
agreement. The Senior Credit Facility is guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-
owned subsidiaries. We entered into a second amendment and consent under our Senior Credit Facility on September 20, 2012.
The amendment provided us the ability to redeem our Second Lien Notes and adjusted our financial covenants.
The Senior Credit Facility, as amended, is subject to customary affirmative, negative and financial covenants. We entered into a
third amendment under our Senior Credit Facility on June 25, 2013 to further adjust our financial covenants. The amendment
loosened our minimum interest coverage ratio and our maximum consolidated total funded debt to consolidated EBITDA ratio
and tightened our maximum senior funded debt to consolidated EBITDA ratio and maximum allowed capital expenditures. As of
April 30, 2014, these covenants restrict capital expenditures to 1.1 times our consolidated depreciation expense, depletion expense
and landfill amortization expense, set a minimum interest coverage ratio of 2.25, a maximum consolidated total funded debt to
consolidated EBITDA ratio of 5.85 and a maximum senior funded debt to consolidated EBITDA ratio of 2.50.
In addition to the financial covenants described above, the Senior Credit Facility, as amended, also contains a number of
important negative covenants which restrict, among other things, our ability to sell assets, pay dividends, invest in non-wholly
owned entities, repurchase stock, incur debt, grant liens and issue preferred stock. As of April 30, 2014, we were in compliance
with all covenants under the indenture governing the Senior Credit Facility and we do not believe that these restrictions impact
our ability to meet future liquidity needs except that they may impact our ability to increase our investments in non-wholly owned
entities, including the joint ventures to which we are already party.
Further advances were available under the 2011 Revolver in the amount of $58,922 as of April 30, 2014. The available amount is
net of outstanding irrevocable letters of credit totaling $34,718 as of April 30, 2014, at which date no amount had been drawn.
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Senior Subordinated Notes
In fiscal year 2012, we completed the offering of $200,000 of senior subordinated notes due February 15, 2019 (“2019 Notes”).
The net proceeds from the 2019 Notes, together with other available funds, were used to refinance our then outstanding senior
subordinated notes due February 1, 2013 (“2013 Notes”) and to pay related transaction costs.
In fiscal year 2013, we completed the offering of an additional $125,000 of 2019 Notes. The 2019 Notes were issued at a discount
of $1,863, which is amortized to interest expense over the life of the 2019 Notes. The net proceeds from the offering of additional
2019 Notes, along with $50,000 of 2011 Revolver borrowings, $42,184 of net equity proceeds from the offering and sale of Class A
common stock and other available funds were used to redeem our Second Lien Notes in full and to pay related transaction costs.
As of April 30, 2014, we had outstanding $325,000 aggregate principal amount of the 2019 Notes, which will mature on
February 15, 2019. The 2019 Notes accrue interest at the rate of 7.75% per annum and interest is payable semiannually in arrears
on February 15 and August 15 of each year.
The indenture governing the 2019 Notes contains certain negative covenants which restrict, among other things, our ability to sell
assets, make investments in joint ventures, pay dividends, repurchase stock, incur debt, grant liens and issue preferred stock. As
of April 30, 2014, we were in compliance with all covenants under the indenture governing the 2019 Notes and we do not believe
that these restrictions impact our ability to meet future liquidity needs except that they may impact our ability to increase our
investments in non-wholly owned entities, including the joint ventures to which we are already party.
The 2019 Notes are fully and unconditionally guaranteed on a senior subordinated basis by substantially all of our existing and
future domestic restricted subsidiaries that guarantee our Senior Credit Facility.
Tax-Exempt Financings
Maine Bonds
As of April 30, 2014, we had outstanding $21,400 aggregate principal amount of the Finance Authority of Maine Solid Waste
Disposal Revenue Bonds Series 2005R-2 (“FAME Bonds 2005R-2”). The FAME Bonds 2005R-2, which are guaranteed by certain of
our subsidiaries, accrue interest at 6.25% per annum through January 31, 2017, at which time they may be converted from a fixed
to a variable rate. The FAME Bonds 2005R-2 mature on January 1, 2025.
As of April 30, 2014, we had outstanding $3,600 aggregate principal amount of the Finance Authority of Maine Solid Waste
Disposal Revenue Bonds Series 2005R-1 (“FAME Bonds 2005R-1”). The FAME Bonds 2005R-1 are variable rate bonds secured by
a letter of credit issued by our administrative agent bank. The FAME Bonds 2005R-1 mature on January 1, 2025.
We borrowed the proceeds of the FAME Bonds 2005R-1 and 2005R-2 to pay for certain costs relating to landfill development
and construction, vehicle, container and related equipment acquisition for solid waste collection and transportation services,
improvements to existing solid waste disposal, hauling, transfer station and other facilities, other infrastructure improvements, and
machinery and equipment for solid waste disposal operations owned and operated by us, or a related party, all located in Maine.
Vermont Bonds
In the fourth quarter of fiscal year 2013, we completed a financing transaction involving the issuance, by the Vermont Economic
Development Authority, of $16,000 aggregate principal amount of its Solid Waste Disposal Long-Term Revenue Bonds Series 2013
(“Vermont Bonds”). The Vermont Bonds were issued pursuant to an indenture, dated as of March 1, 2013. We borrowed the
proceeds of the Vermont Bonds to repay borrowings under our 2011 Revolver for qualifying property, plant and equipment assets
purchased in Vermont since October 5, 2011. The Vermont Bonds, which are guaranteed by certain of our subsidiaries, accrue
interest at 4.75% per annum through April 4, 2019, at which time they may be converted from a fixed rate to a variable rate. The
Vermont Bonds mature on April 1, 2036.
New Hampshire Bonds
In the fourth quarter of fiscal year 2013, we completed a financing transaction involving the issuance, by the Business Finance
Authority of the State of New Hampshire, of $5,500 aggregate principal amount of its Solid Waste Disposal Revenue Bonds
Series 2013 (“New Hampshire Bonds”). The New Hampshire Bonds were issued pursuant to an indenture, dated as of March 1,
2013. We borrowed the proceeds of the New Hampshire Bonds to repay borrowings under our 2011 Revolver for qualifying
property, plant and equipment assets purchased in New Hampshire since October 5, 2011. The New Hampshire Bonds are
variable rate bonds secured by a letter of credit issued by our administrative agent bank. The New Hampshire Bonds also contain a
drawdown structure that allows us to issue up to an additional $5,500 of bonds at a future date. The New Hampshire Bonds mature
on April 1, 2029.
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Loss on Debt Extinguishment
In fiscal year 2013, we recorded a charge of $15,584 as a loss on debt extinguishment related to the full refinancing of the Second
Lien Notes. The loss on debt extinguishment consisted of a $2,767 non-cash write off of deferred financing costs, a $2,074 non-
cash write off of the unamortized original issue discount and a $10,743 charge associated with the early tender premium and
tender fees associated with the redemption of the Second Lien Notes.
In fiscal year 2012, we recorded a charge of $300 as a loss on debt extinguishment related to the non-cash write off of unamortized
deferred financing costs associated with the original issuance of $25,000 Finance Authority of Maine Solid Waste Disposal
Revenue Bonds Series 2005 following the mandatory tender of $21,400 of the aggregate principal amount then outstanding.
Interest Expense
The components of interest expense for fiscal years 2014, 2013 and 2012 are as follows:
Interest expense on debt and capital lease obligations
Amortization of debt financing costs
Amortization of debt discounts
Letter of credit fees
Less: capitalized interest
Total interest expense
Fair Value of Debt
Fiscal Year Ended April 30,
2014
2013
2012
$ 34,216
$ 36,955
$ 40,156
2,757
243
1,215
(256)
3,325
626
1,032
(368)
3,307
964
988
(407)
$ 38,175
$ 41,570
$ 45,008
As of April 30, 2014, the fair value of our fixed rate debt, including our 2019 Notes, FAME Bonds 2005R-2 and Vermont Bonds,
was approximately $375,974 and the carrying value was $362,400. The fair value of the 2019 Notes is considered to be Level 1
within the fair value hierarchy as the fair value is based off of a quoted market price in an active market. The fair value of the
FAME Bonds 2005R-2 and the Vermont Bonds are considered to be Level 2 within the fair value hierarchy as the fair values are
determined using a discounted cash flow analysis based on current market rates for similar types of instruments taking into
account our credit risk. The valuation methodologies used to calculate fair value of the FAME Bonds 2005R-2 and the Vermont
Bonds changed in the fourth quarter of fiscal year 2014 due to information no longer being made available to us to continue use of
the previous valuation methodologies. As of April 30, 2014, the fair value of our 2011 Revolver approximated its carrying value of
$133,860 based on current borrowing rates for similar types of borrowing arrangements, or Level 2 inputs. The carrying value of
our remaining material variable rate debt, including the FAME Bonds 2005R-1 and the New Hampshire Bonds, approximates fair
value because interest rates are variable and, accordingly, approximate current market rates for instruments with similar risk
and maturities.
Although we have determined the estimated fair value amounts of the FAME Bonds 2005R-2 and Vermont Bonds using available
market information and a commonly accepted valuation methodology, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or
holders of these instruments, could realize in a current market exchange. The use of different assumptions and/or estimation
methodologies could have a material effect on the estimated fair values. These amounts have not been revalued, and current
estimates of fair value could differ significantly from the amounts presented.
Future Maturities of Debt
Aggregate principal maturities of debt and capital leases as of April 30, 2014 are as follows:
2015
2016
2017
2018
2019 (1)
Thereafter
1. Includes unamortized discount of $1,491 on 2019 Notes.
85
$ 885
135,324
227
215
323,740
47,628
$ 508,019
11. COMMITMENTS AND CONTINGENCIES
Lease Commitments
We lease operating facilities and equipment in the ordinary course of our business under various operating leases with monthly
payments varying up to $26. Future minimum lease payments are recognized on a straight-line basis over the minimum lease
term. Total rent expense under operating leases charged to operations was $5,651, $5,372 and $5,213 in fiscal years 2014, 2013 and
2012, respectively.
Future minimum lease payments under non-cancellable operating leases as of April 30, 2014 are as follows:
2015
2016
2017
2018
2019
Thereafter
Total minimum lease payments
Legal Proceedings
$ 11,279
10,175
9,453
9,678
11,723
98,562
$ 150,870
In the ordinary course of our business and as a result of the extensive governmental regulation of the solid waste industry, we are
subject to various judicial and administrative proceedings involving state and local agencies. In these proceedings, an agency may
seek to impose fines or to revoke or deny renewal of an operating permit held by us. From time to time, we may also be subject
to actions brought by special interest or other groups, adjacent landowners or residents in connection with the permitting and
licensing of landfills and transfer stations, or alleging environmental damage or violations of the permits and licenses pursuant
to which we operate. In addition, we have been named defendants in various claims and suits pending for alleged damages to
persons and property, alleged violations of certain laws and alleged liabilities arising out of matters occurring during the ordinary
operation of the waste management business.
In accordance with FASB ASC 450-20, we accrue for legal proceedings when losses become probable and reasonably estimable.
As of the end of each applicable reporting period, we review each of our legal proceedings to determine whether it is probable,
reasonably possible or remote that a liability has been incurred and, if it is at least reasonably possible, whether a range of loss can
be reasonably estimated under the provisions of FASB ASC 450-20. In instances where we determine that a loss is probable and we
can reasonably estimate a range of loss we may incur with respect to such a matter, we record an accrual for the amount within the
range that constitutes our best estimate of the possible loss. If we are able to reasonably estimate a range, but no amount within the
range appears to be a better estimate than any other, we record an accrual in the amount that is the low end of such range. When a
loss is reasonably possible, but not probable, we will not record an accrual, but we will disclose our estimate of the possible range
of loss where such estimate can be made in accordance with ASC 450-20.
Environmental Remediation Liability
We are subject to liability for environmental damage, including personal injury and property damage, that our 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 we acquired the facilities.
We may also be subject to liability for similar claims arising from off-site environmental contamination caused by pollutants or
hazardous substances if we or our predecessors arrange or arranged to transport, treat or dispose of those materials. The following
matters represent our potential or outstanding material claims.
Potsdam Environmental Remediation Liability
On December 20, 2000, the State of New York Department of Environmental Conservation (“DEC”) issued an Order on Consent
(“Order”) which named Waste-Stream, Inc. (“WSI”), our subsidiary, General Motors Corporation (“GM”) and Niagara Mohawk
Power Corporation (“NiMo”) as Respondents. The Order required that the Respondents undertake certain work on a 25-acre
scrap yard and solid waste transfer station owned by WSI, including the preparation of a Remedial Investigation and Feasibility
Study (“Study”). A draft of the Study was submitted to the DEC in January 2009 (followed by a final report in May 2009). The
Study estimated that the undiscounted costs associated with implementing the preferred remedies would be approximately
$10,219. On February 28, 2011, the DEC issued a Proposed Remedial Action Plan for the site and accepted public comments on
the proposed remedy through March 29, 2011. We submitted comments to the DEC on this matter. In April 2011, the DEC issued
the final Record of Decision (“ROD”) for the site. The ROD was subsequently rescinded by the DEC for failure to respond to all
86
submitted comments. The preliminary ROD, however, estimated that the present cost associated with implementing the preferred
remedies would be approximately $12,130. The DEC issued the final ROD in June 2011 with proposed remedies consistent with
its earlier ROD. An Order on Consent and Administrative Settlement naming WSI and NiMo as Respondents was executed by the
Respondents and the DEC with an effective date of October 25, 2013. It is unlikely that any costs relating to onsite remediation
will be incurred until fiscal year 2016.
WSI is jointly and severally liable for the total cost to remediate and we initially expected to be responsible for approximately 30%
of such costs pursuant to a cost-sharing agreement with NiMo and GM. Based on these estimates, we recorded an environmental
remediation charge of $2,823 in the third quarter of fiscal year 2009. In the fourth quarter of fiscal year 2009, we recognized an
additional charge of $1,532, representing an additional 15% of the estimated costs, in recognition of the deteriorating financial
condition and eventual bankruptcy filing of GM. In the fourth quarter of fiscal year 2010, we recognized an additional charge
of $335 based on changes in the expected timing of cash outflows. Based on the estimated costs in the ROD, and changes in the
estimated timing of cash flows, we recorded an environmental remediation charge of $549 in the fourth quarter of fiscal year 2011.
Such charges could be significantly higher if costs exceed estimates. We inflate these estimated costs in current dollars until the
expected time of payment and discount the total cost to present value using a risk free interest rate of 2.0%. As of April 30, 2014
and 2013, we have recorded liabilities of $5,320 and $5,297, including the recognition of $19 and $138 of accretion expense in
fiscal years 2014 and 2013, respectively.
In September 2011, the DEC settled its environmental claim against the estate of the former GM (known as “Motors Liquidation
Trust”) for future remediation costs relating to the WSI site for face value of $3,000. In addition, in November 2011 we settled
our own claim against the Motors Liquidation Trust for face value of $100. These claims will be paid by GM in warrants to obtain
stock of the reorganized GM. We began receiving the warrants in May 2013 and at this time there is no way to accurately estimate
when the remainder of these claims will be paid. We have not assumed that any future proceeds from the sale of securities received
in payment of these claims will reduce our exposure.
Southbridge Landfill Environmental Remediation Liability
On or about August 24, 2013, we experienced the movement of stockpiled earth at our Southbridge landfill in Southbridge,
Massachusetts. The stockpiled materials consisted of soil removed and relocated to create space for the construction of
additional landfill airspace at our Southbridge landfill. The earth had been relocated and stored during the fall, winter and spring
construction season of fiscal year 2013.
The movement caused some of the stockpiled earth to enter wetlands on property owned by us. On or about August 29, 2013, we
notified the Massachusetts Department of Environmental Protection (“MADEP”), and the Towns of Southbridge and Charlton,
Massachusetts, of the occurrence of the movement. On or about September 6, 2013, MADEP issued a “Unilateral Administrative
Order” (“UAO”) requiring us to provide MADEP with a plan to remove any materials deposited in the wetlands as a result of the
movement (“Plan”). On or about October 3, 2013, we submitted the Plan to MADEP, and on or about October 15, 2013, MADEP
approved the Plan and verbally issued permission for us to implement the Plan. We are currently implementing the Plan under the
supervision of MADEP.
In January 2014, we received correspondence from the Massachusetts’ Office of the Attorney General (“MAAG”), advising us
that the MAAG intends to schedule a meeting with us to discuss this incident, and to possibly file suit against us for violation of
the Massachusetts Wetlands Protection, Clean Air and Solid Waste Acts. We met with the MAAG in March 2014 to discuss our
ongoing remediation effort and the parties have initiated discussions regarding the resolution of this matter.
We anticipate that execution of the Plan and related matters will involve remediation costs of $2,100 and such costs could be
higher if actual costs exceed estimates. We have provided our insurer with notice of the Plan, and the costs expended by us to date
to comply with the Plan. We have also provided notice to certain of our contractors and technical advisors that the movement
has occurred, that significant remediation costs will be incurred in executing the Plan and related matters, and that we expect our
contractors and technical advisors to assist in the execution of the Plan and related matters, to share in the remediation costs as
responsible parties, and to provide notice to their own insurers. We believe that a loss in the range of $400 to $2,100, after taking
into account amounts we expect to be reimbursed by our insurer and other third-parties, is probable and have therefore recorded
a charge of $400 in fiscal year 2014 as an environmental remediation charge.
On or about April 25, 2014, we notified MADEP and other interested parties that areas of sloughing had occurred in a plateau
created as part of new cell construction at our Southbridge landfill. Some of the same contractors and technical advisors that
were involved in the initial movement of stockpiled earth are also involved in the new cell construction that includes this area of
sloughing. We repaired the areas of sloughing on April 25, 2014 and no damage occurred in the abutting wetlands. On May 9,
2014, MADEP issued a UAO directing us to ensure that the areas of sloughing at the plateau were repaired and to take steps
to ensure that there would be no incursion into the wetlands, and requiring that we undertake corrective actions to ensure the
stability of the plateau. Prior to MADEP’s issuance of the latest UAO, we were in the process of awarding a contract to a soil
87
remediation company to undertake and ensure such stability at the plateau. We needed MADEP to issue permits in order for
this work to be finalized. We filed a written notice of claim for an adjudicatory hearing with respect to the efficacy of MADEP’s
issuance of the latest UAO, but the parties have reached a tentative resolution of the issues raised by MADEP’s issuance of the
latest UAO, and the parties are finalizing a Stipulation that will include the withdrawal by us of our notice of claim for an
adjudicatory hearing.
The total expected environmental remediation payments, in today’s dollars, for each of the five succeeding fiscal years and the
aggregate amount thereafter are as follows:
2015
2016
2017
2018
2019
Thereafter
Total
$ 45
3,399
1,029
27
42
750
$ 5,292
A reconciliation of the expected aggregate uninflated, undiscounted environmental remediation liability to the amount recognized
in the statement of financial position as of April 30, 2014 is as follows:
Undiscounted liability
Plus inflation / (discount)
Liability balance – April 30, 2014
$ 5,292
28
$ 5,320
Any substantial liability incurred by us arising from environmental damage could have a material adverse effect on our business,
financial condition and results of operations. We are not presently aware of any other situations that would have a material adverse
impact on our business, financial condition, results of operations or cash flows.
Employment Contracts
We have entered into employment contracts with four of our executive officers. Contracts are dated June 18, 2001, March 31, 2006,
July 6, 2010 and September 1, 2012. Each contract had an initial term between one and three years and a covenant not-to-compete
ranging from one to two years from the date of termination. These contracts automatically extend for a one year period at the end
of the initial term and any renewal period. Total annual commitments for salaries under these contracts are $1,397. In the event
of a change in control of us, or in the event of involuntary termination without cause, the employment contracts provide for a
payment ranging from one to three years of salary and bonuses. We also have other employment contracts or arrangements with
employees who are not executive officers.
12. STOCKHOLDERS’ (DEFICIT) EQUITY
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.
In fiscal year 2013, we sold 11,500 shares of Class A common stock at an average price of $4.00 per share in a registered public
offering. The net proceeds received from the registered public offering, after deducting underwriting discounts, commissions and
offering expenses, were $42,184 and were used to refinance our Second Lien Notes.
Preferred Stock
We are authorized to issue up to 944 shares of preferred stock in one or more series. As of April 30, 2014 and 2013, we had no
shares issued.
88
Stock Based Compensation
Stock Incentive Plans
1997 Stock Option Plan. In fiscal year 1998, we adopted the 1997 Stock Option Plan (“1997 Plan”) a stock option plan for
employees, officers and directors of, and consultants and advisors to us. The 1997 Plan terminated as of July 31, 2007 and as a
result no additional awards may be made pursuant to the 1997 Plan.
1997 Non-Employee Director Stock Option Plan. In fiscal year 1998, we adopted a stock option plan for our non-employee
directors. The 1997 Non-Employee Director Stock Option Plan (“Non-Employee Director Plan”) provided for the issuance of a
maximum of 200 shares of Class A common stock pursuant to the grant of non-statutory options. The Non-Employee Director
Plan terminated as of July 31, 2007.
2006 Stock Incentive Plan. In fiscal year 2007, we adopted the 2006 Stock Incentive Plan (“2006 Plan”). The 2006 Plan was
subsequently amended in fiscal year 2010. Up to an aggregate amount equal to the sum of: (i) 2,475 shares of Class A common
stock (subject to adjustment in the event of stock splits and other similar events), plus (ii) such additional number of shares
of Class A common stock as are currently subject to options granted under our 1993 Incentive Stock Option Plan, 1994 Non-
statutory Stock Option Plan, 1996 Option Plan, and 1997 Plan (“Prior Plans”) which are not actually issued under the Prior Plans
because such options expire or otherwise result in shares not being issued, may be issued pursuant to awards granted under the
2006 Plan. As of April 30, 2014, there were 1,414 Class A common stock equivalents available for future grant under the 2006 Plan,
inclusive of additional Class A common stock equivalents which were previously issued under our terminated plans and have
since become available for grant because such awards expired or otherwise resulted in shares not being issued.
Options granted under the 2006 Plan are granted at a price equal to the prevailing fair market value of our Class A common stock
at the date of grant. Generally, options granted have a term not to exceed ten years and vest over a one to four year period from the
date of grant.
We grant restricted stock awards, restricted stock units and performance stock units under the 2006 Plan at a price equal to the
fair market value of our Class A common stock at the date of grant. Restricted stock awards granted to non-employee directors
vest incrementally over a three year period beginning on the first anniversary of the date of grant. Restricted stock units vest
incrementally over an identified service period beginning on the grant date based on continued employment. Performance stock
units vest on April 30 of the third fiscal year-end following the grant date and are based on our attainment of a targeted average
return on net assets as of the vesting date.
Stock Options
The following table summarizes stock option activity for fiscal year 2014.
Stock
Options
Weighted
Average
Exercise Price
Weighted Average
Remaining Contractual
Term (years)
Aggregate
Intrinsic Value
Outstanding, April 30, 2013
Granted
Exercised
Forfeited
Outstanding, April 30, 2014
Exercisable, April 30, 2014
Expected to vest, April 30, 2014
1,442
157
(33)
(198)
1,368
1,027
1,368
$ 8.48
$ 5.65
$ 4.30
$ 7.03
$ 8.65
$ 10.02
$ 8.65
4.8
3.4
4.8
$ 543
$ 294
$ 543
During fiscal years 2014, 2013 and 2012, stock-based compensation expense for stock options was $464, $528,
and $258, respectively.
During fiscal years 2014, 2013 and 2012, the aggregate intrinsic value of stock options exercised was $23.
As of April 30, 2014, total unrecognized stock-based compensation expense related to outstanding stock options was
$754, which will be recognized over a weighted average period of 1.8 years.
89
Our calculation of stock-based compensation expense associated with stock options granted in fiscal years 2014, 2013 and 2012
was made using the Black-Scholes valuation model. The weighted average fair value of stock options granted during fiscal years
2014, 2013 and 2012 were $4.22, $3.03 and $4.14 per option, respectively, which were calculated assuming no expected dividend
yield using the following weighted average assumptions:
Expected life
Risk-free interest rate
Expected volatility
Fiscal Year Ended April 30,
2014
2013
2012
6.79 years
6.82 years
5.50 years
2.22%
83.96%
1.14%
84.40%
0.82%
91.54%
Expected life is calculated based on the weighted average historical life of the vested stock options, giving consideration to vesting
schedules and historical exercise patterns. Risk-free interest rate is based on the U.S. Treasury yield curve for the period of the
expected life of the stock option. Expected volatility is calculated using the weekly historical volatility of our Class A common
stock over the expected life.
The Black-Scholes valuation model requires extensive use of accounting judgment and financial estimation, including estimates
of the expected term option holders will retain their vested stock options before exercising them, the estimated volatility of our
Class A common stock price over the expected term and the number of stock options that will be forfeited prior to the completion
of their vesting requirements. Application of alternative assumptions could produce significantly different estimates of the fair
value of stock-based compensation and consequently, the related amounts recognized in the unaudited consolidated statements
of operations.
Other Stock Awards
The following table summarizes restricted stock, restricted stock unit and performance stock unit activity for fiscal year 2014.
Restricted Stock,
Restricted Stock Units,
and Performance
Stock Units (1)
Weighted
Average
Grant Price
Weighted Average
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value
Outstanding, April 30, 2013
Granted
Class A Common Stock Vested
Forfeited
Outstanding, April 30, 2014
Expected to vest, April 30, 2014
1,088
542
(327)
(226)
1,077
947
$ 5.28
$ 4.28
$ 4.89
$ 5.86
$ 4.77
$ 4.82
1.5
1.5
$ 500
$ 409
1. Performance stock units are included at the 100% attainment level. Attainment of maximum annual returns on net assets could result in the
issuance of an additional 255 shares of Class A common stock.
90
The following table summarizes the grant activity for other stock awards for fiscal years 2014, 2013 and 2012, respectively:
Granted
Weighted Average
Grant Date Fair Value
Unissued at
April 30, 2014
Fiscal year 2012 grants
Restricted stock units
Performance stock units
Restricted stock awards
Total
Fiscal year 2013 grants
Restricted stock units
Performance stock units
Restricted stock awards
Total
Fiscal year 2014 grants
Restricted stock units
Restricted stock awards
Total
305
255
51
611
340
316
79
735
482
60
542
$ 6.12
$ 6.06
$ 5.83
$ 5.15
$ 5.17
$ 4.45
$ 4.09
$ 5.81
62
—
—
62
176
255
—
431
454
—
454
During fiscal years 2014, 2013 and 2012, stock-based compensation expense related to restricted stock, restricted stock units and
performance stock units was $1,861, $1,609 and $1,485, respectively. There was no tax benefit in the provision for income taxes
associated with stock-based compensation expense for fiscal years 2014, 2013 and 2012, respectively.
During fiscal years 2014, 2013 and 2012, the total fair value of other stock awards vested was $1,458, $2,475 and
$2,056, respectively.
As of April 30, 2014, total unrecognized stock-based compensation expense related to restricted stock and restricted stock
units was $2,044, which will be recognized over a weighted average period of 1.6 years. Maximum unrecognized stock-based
compensation expense as of April 30, 2014 related to outstanding performance stock units, and subject to the attainment of
targeted maximum annual returns on net assets, was $2,390 to be recognized over a weighted average period of 1.0 years. We do
not expect to recognize any stock-based compensation expense as of April 30, 2014 related to our outstanding performance stock
units based on our expected attainment levels.
We recorded a tax benefit of $0, $96 and $254 to additional paid-in-capital related to the exercise of various share based awards in
fiscal years 2014, 2013 and 2012, respectively. Tax savings from stock-based compensation resulting from tax deductions in excess
of expense are reflected as a financing cash flow in our consolidated financial statements.
We also recorded $79, $99 and $113 of stock-based compensation expense related to our Employee Stock Purchase Plan during
fiscal years 2014, 2013 and 2012, respectively.
Noncontrolling interests
Casella-Altela Regional Environmental Services, LLC (“CARES”) is a joint venture that owns and operates a water and leachate
treatment facility for the natural gas drilling industry in Pennsylvania. Our joint venture partner in CARES is Altela, Inc. As of
April 30, 2014, our ownership interest in CARES was 51%, compared to 49% for Altela, Inc. In accordance with ASC 810-10-15,
we consolidate the assets, liabilities and results of operations of CARES into our consolidated financial statements due to our
controlling financial interest in the joint venture.
In fiscal year 2014, we determined that certain water treatment assets (“Equipment”) of CARES were no longer operational or
were not operating within product performance parameters. In April 2014, we initiated a plan to abandon and shut down the
operations of CARES. See Note 16 for disclosure over the asset impairment charge associated with CARES.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is a component of stockholders’ (deficit) equity included in the accompanying
consolidated balance sheets and includes, as applicable, the effective portion of changes in the fair value of our cash flow hedges
that consist of commodity hedges and interest rate swaps, the changes in fair value of our marketable securities, as well as our
portion of the changes in the fair value of GreenFiber’s commodity hedges.
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The changes in the balances of each component of accumulated other comprehensive income (loss) for fiscal years 2014, 2013 and
2012 are as follows:
Balance as of April 30, 2011
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other comprehensive income
Net current-period other comprehensive (loss) income
Balance as of April 30, 2012
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income (loss)
Balance as of April 30, 2013
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income
Balance as of April 30, 2014
Marketable
Securities
Commodity
Hedges
Interest
Rate Swaps
$ 8
(4)
—
(4)
4
23
—
23
27
12
—
12
$ 39
$ 370
621
(578)
43
413
(1,653)
621
(1,032)
(619)
(36)
655
619
$ —
$ —
(2,369)
—
(2,369)
(2,369)
(1,257)
3,626
2,369
—
—
—
—
$ —
Total
$ 378
(1,752)
(578)
(2,330)
(1,952)
(2,887)
4,247
1,360
(592)
(24)
655
631
$ 39
A summary of reclassifications out of accumulated other comprehensive income (loss) for fiscal year 2014, 2013 and 2012 is
as follows:
Fiscal Year Ended April 30,
2014
2013
2012
Details about Accumulated Other
Comprehensive Income (Loss)
Components
Amount Reclassified Out of
Accumulated Other
Comprehensive Income (Loss)
Affected Line Item in the Consolidated
Statements of Operations
Loss on derivative instruments:
Comodity Hedges
GreenFiber Commodity hedges
Interest rate contracts
$ —
(405)
$ —
$ 130
Revenues
(621)
547
Loss from equity method investments
—
(3,626)
—
Loss on derivative instruments
(405)
(250)
(4,247)
—
677
(99)
Loss from continuing operations before income
taxes and discontinued operations
Provision (benefit) for income taxes
$ (655)
$ (4,247)
$ 578
Loss from continuing operations
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis,
as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.
These tiers include: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as
inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, and
Level 3, defined as unobservable inputs that are not corroborated by market data.
We use valuation techniques that maximize the use of market prices and observable inputs and minimize the use of unobservable
inputs. In measuring the fair value of our financial assets and liabilities, we rely on market data or assumptions which we believe
market participants would use in pricing an asset or a liability.
Our financial instruments include cash and cash equivalents, accounts receivable-trade, restricted trust and escrow accounts,
interest rate derivatives, trade payables and long-term debt. The carrying values of cash and cash equivalents, restricted cash, trade
receivables and trade payables approximate their respective fair values. See Note 10 for disclosure over the fair value of debt.
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As of April 30, 2014, our financial assets and liabilities that are measured at fair value on a recurring basis include the following:
Assets:
Restricted assets
Liabilities:
Interest rate derivatives
Fair Value Measurement at April 30, 2014 Using:
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
$ 681
$ —
$ —
$ 2,770
$ —
$ —
As of April 30, 2013, our financial assets and liabilities that are measured at fair value on a recurring basis include the following:
Assets:
Restricted assets
Liabilities:
Interest rate derivatives
Fair Value Measurement at April 30, 2013 Using:
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
$ 545
$ —
$ —
$ 4,229
$ —
$ —
As of April 30, 2014, our assets and liabilities that are measured at fair value on a non-recurring basis include the following:
Assets:
Asset group – CARES
Fair Value Measurement at April 30, 2014 Using:
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
$ —
$ —
$ 650
As of April 30, 2014, our financial assets and liabilities recorded at fair value on a non-recurring basis include our assets related
to CARES, a joint venture that owns and operates a water and leachate treatment facility for the natural gas drilling industry in
Pennsylvania. The fair value of our remaining CARES asset group was measured using an in-exchange valuation premise under
the market approach derived from quoted prices of similar assets, adjusted based on qualitative factors specific to the asset.
As of April 30, 2013, our assets and liabilities that are measured at fair value on a non-recurring basis include the following:
Fair Value Measurement at April 30, 2013 Using:
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
$ —
$ —
$ —
$ —
$ 61
$ 2,073
Assets:
Asset group held-for-sale – Bio Fuels
Liabilities:
Guaranty
93
As of April 30, 2013, our financial assets and liabilities recorded at fair value on a non-recurring basis include our guaranty of
GreenFiber’s modified and restated loan and security agreement and our assets related to BioFuels, a construction and demolition
material processing facility located in Lewiston, Maine, which was classified as held-for-sale as of April 30, 2013. The fair value
of our guaranty was determined based on the value of the contribution required to satisfy the guaranty and pay off the term loan
in May 2013. The fair value of our BioFuels asset group was measured based on the asset group’s highest and best use using an
in-exchange valuation premise under the market approach, utilizing the estimated purchase consideration of the asset group and
consideration of costs to be incurred to sell.
14. EMPLOYEE BENEFIT PLANS
Defined Contribution Plan
We offer our eligible employees the opportunity to contribute to a 401(k) plan (“401(k) Plan”). Under the provisions of the
401(k) Plan participants may direct us to defer a portion of their compensation to the 401(k) Plan, subject to Internal Revenue
Code limitations. We provide an employer matching contribution equal to fifty cents for every dollar an employee invests in
the 401(k) Plan up to our maximum match of one thousand dollars per calendar year, subject to revision. Participants vest in
employer contributions ratably over a three year period. Employer contributions for fiscal years 2014, 2013, and 2012 amounted to
$784, $645 and $603, respectively.
Employee Stock Purchase Plan
In fiscal year 1998, we implemented our 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. 900 shares of Class A common stock have
been reserved for this purpose. During fiscal years 2014, 2013 and 2012, 70, 76 and 65 shares, respectively, of Class A common
stock were issued under this plan. As of April 30, 2014, 113 shares of Class A common stock were available for distribution under
this plan.
15. INCOME TAXES
The provision (benefit) for income taxes from continuing operations for fiscal years 2014, 2013 and 2012 consists of the following:
Federal –
Current
Deferred
Deferred benefit of loss carryforwards
State –
Current
Current benefit of loss carryforwards
Deferred
Deferred benefit of loss carryforwards
Fiscal Year Ended April 30,
2014
2013
2012
$ —
1,262
—
1,262
219
—
318
—
537
$ —
(2,827)
—
(2,827)
1,040
(22)
(717)
—
301
$ 121
1,468
—
1,589
(352)
—
372
(16)
4
$ 1,799
$ (2,526)
$ 1,593
Included in the current state tax provision for year ending April 30, 2013 is an $800 settlement with New York State, comprised
of $430 of tax and $370 of interest. New York State had alleged that we were not permitted to file a single combined corporation
franchise tax return with our subsidiaries. On January 18, 2011, the State had assessed a liability of $3,852, comprising $2,220
tax and $1,632 penalties and interest, for tax years ending April 30, 2004 through April 30, 2006. We had filed Petitions of
Redetermination with the State of New York Division of Tax Appeals and had been scheduled for an administrative hearing on
April 18-19, 2013. Tax years ending April 30, 2007 through April 30, 2009 were also being audited for the same tax matter. The
settlement, which represented less than 8% of the potential cumulative liability for the years settled, was a monetary settlement
without any change to our filing combined returns in New York and it closed years ending April 30, 2004 through April 30, 2010.
An audit has been initiated for tax years 2011 through 2013. We had not provided a reserve for the previously settled audit, since
we believed that it was more likely than not that we would be successful in contesting the proposed deficiency. We continue to
believe that our position related to the 2011-2013 years is appropriate and no reserve has been established for these years.
94
The differences in the provision (benefit) for income taxes and the amounts determined by applying the Federal statutory rate to
income before provision (benefit) for income taxes for the years ended April 30, 2014, 2013 and 2012 are as follows:
Federal statutory rate
Tax at statutory rate
State income taxes, net of federal benefit
Decrease in valuation allowance due to BBI acquisition
Other increase (decrease) in valuation allowance
Tax over book basis in GreenFiber on sale
Non-deductible impairment of investment in GreenFiber
Non-deductible GreenFiber goodwill impairment and equity income in subsidiaries
Tax credits
Non-deductible expenses
Non-deductible stock option charges
Other, net
Fiscal Year Ended April 30,
2014
2013
2012
35%
35%
35%
$ (8,929)
$ (18,378)
$ (26,638)
(1,271)
—
13,605
(2,570)
—
1,548
(598)
505
—
(491)
$ 1,799
(1,076)
(5,084)
22,510
—
—
180
(660)
494
—
(512)
$ (2,526)
(3,050)
—
27,247
—
3,738
1,182
(650)
823
73
(1,132)
$ 1,593
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, 2014 and 2013:
Deferred tax assets:
Net operating loss carryforwards
Accrued expenses and reserves
Book over tax depreciation of property and equipment
Alternative minimum tax credit carryforwards
General business tax credit carryforwards
Capital loss carryforwards
Stock awards
Unrealized loss on commodity hedges
Other
Total deferred tax assets
Less: valuation allowance
Total deferred tax assets after valuation allowance
Deferred tax liabilities:
Amortization of intangibles
Other
Total deferred tax liabilities
Net deferred tax liability
April 30,
2014
2013
$ 36,594
30,690
28,868
3,330
2,666
2,510
1,315
1,115
1,496
108,584
(84,540)
24,044
(28,210)
(286)
(28,496)
$ (4,452)
$ 34,217
29,884
19,881
3,330
2,095
—
1,177
1,852
964
93,400
(70,352)
23,048
(25,973)
(143)
(26,116)
$ (3,068)
At April 30, 2014 we have, for federal income tax purposes, net operating loss carryforwards of approximately $73,772 that expire
in fiscal years 2024 through 2034 and state net operating loss carryforwards of approximately $93,680 that expire in fiscal years
2015 through 2034. The net operating loss carryforwards include approximately $383 for which a benefit will be recorded in
additional paid-in capital when realized. In addition, we have $3,330 minimum tax credit carryforwards available that are not
subject to a time limitation, $2,666 general business credit carryforwards which expire in fiscal years 2023 through 2034 and
$6,235 capital loss carryforward which expires in fiscal year 2019. Sections 382 and 383 of the Internal Revenue Code can limit
95
the amount of net operating loss and credit carryforwards which may be used in a tax year in the event of certain stock ownership
changes. We are not currently subject to these limitations but could become subject to them if there were significant changes in the
ownership of our stock.
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. We adjust the valuation allowance in the period
management determines it is more likely than not that deferred tax assets will or will not be realized.
For fiscal year 2014, the net increase in the valuation allowance was $14,188. For fiscal year 2013, the valuation allowance
decreased by $5,084 due to the recognition of additional reversing temporary differences from the deferred tax liability recorded
through goodwill related to the BBI acquisition. The $5,084 deferred tax liability related to the BBI acquisition resulted from
temporary differences related to the amounts of assets and liabilities recognized for financial reporting purposes and such
amounts recognized for income tax purposes.
In determining the need for a valuation allowance, we have assessed the available means of recovering deferred tax assets,
including the ability to carryback net operating losses, the existence of reversing temporary differences, the availability of tax
planning strategies, and available sources of future taxable income. We have also considered the ability to implement certain
strategies, such as a potential sale of assets that would, if necessary, be implemented to accelerate taxable income and use expiring
deferred tax assets. We believe we are able to support the deferred tax assets recognized as of the end of the year based on all of
the available evidence. The net deferred tax liability as of April 30, 2014 includes deferred tax liabilities related to amortizable
goodwill, which are anticipated to reverse in an indefinite future period and which are not currently available as a source of
taxable income.
The provisions of ASC 740-10-25-5 prescribe the minimum recognition threshold that a tax position is required to meet before
being recognized in the financial statements. Additionally, ASC 740-10-25-5 provides guidance on de-recognition, measurement,
classification, interest and penalties, accounting in interim periods, disclosure and transition. Under ASC 740-10-25-5, an entity
may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. A reconciliation of the
beginning and ending amount of gross unrecognized tax benefits for fiscal years 2014 and 2013 are as follows:
Unrecognized tax benefits at beginning of period
Gross increases for tax positions of prior years
Gross decreases for tax positions of prior years
Reductions resulting from lapse of statute of limitations
Settlements
Unrecognized tax benefits at end of period
Fiscal Year Ended April 30,
2014
$ 3,879
22
(229)
(611)
—
$ 3,061
2013
$ 4,447
543
(26)
(655)
(430)
$ 3,879
The gross increases for tax positions of prior years for 2013 includes $430 tax from the settlement with New York State, which is
offset by the ($430) settlements for 2013. Included in the balances at April 30, 2014 and 2013 are $0 of unrecognized tax benefits
(net of the federal benefit on state issues) that, if recognized, would favorably affect the effective income tax rate in future periods.
We anticipate that $0 of unrecognized tax benefits may be reversed within the next 12 months due to the expiration of the
applicable statute of limitations.
Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. Related to
uncertain tax positions, we have accrued interest of $116 and penalties of $8 during fiscal year 2014, including $40 accrued in
income tax expense during the year ended April 30, 2014. We accrued interest of $76 and penalties of $9 related to uncertain tax
positions during fiscal year 2013, including $41 accrued in income tax expense during fiscal year 2013. To the extent interest and
penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of
the overall income tax provision.
We are subject to U.S. federal income tax, as well as income tax of multiple state jurisdictions. Due to Federal and state net
operating loss carryforwards, income tax returns from fiscal years 1998 through 2014 remain open for examination, with
limited exceptions.
96
16. ASSET IMPAIRMENTS AND OTHER ITEMS
Asset Impairment Charge
In April 2014, we initiated a plan to wind down the operations of CARES and to abandon the operations of CARES in fiscal year
2015. As a result, it was determined that the carrying value of the assets of CARES was no longer recoverable and, as a result, the
carrying value of the asset group was assessed for impairment. The impairment was measured based on the asset group’s highest
and best use under the market approach. We recorded an impairment charge of $7,455 in fiscal year 2014 to the asset group of
CARES in the Western region.
In the fourth quarter of fiscal year 2012, we entered into negotiations regarding the sale of Maine Energy. Based on the proposed
purchase consideration, we reviewed the asset group for impairment and recorded a $40,746 impairment charge to the asset group
located within the Eastern region. The impairment was measured based on the asset group’s highest and best use under the market
approach, utilizing the discounted present cash flows associated with the purchase consideration of the facility, adjusted for costs
to demolish the facility. We used a discount rate of 3.5%, which approximates the buyers borrowing rate. See Note 17 for disclosure
over the Maine Energy divestiture transaction.
Development Project Charge
In fiscal year 2014 and 2012, we recorded charges of $1,394 and $131 for deferred costs associated with a gas pipeline development
project in Maine no longer deemed viable in fiscal year 2014 and certain development projects no longer deemed viable in fiscal
year 2012.
As of April 30, 2014 and April 30, 2013, we had $0 and $1,644 of deferred costs associated with development projects included in
other non-current assets within our consolidated balance sheets.
Severance and Reorganization
In fiscal year 2014, we recorded a charge of $586 for severance costs associated with various planned reorganization efforts
including the divestiture of Maine Energy Recovery Company, LP (“Maine Energy”).
In fiscal year 2013, we recorded a charge of $3,709 for severance costs associated primarily with the realignment of our operations
in order to streamline functions and improve our cost structure, the closure of Maine Energy and a reorganization of senior
management. Through the realignment of our operations we improved certain aspects of the sales function to better facilitate
customer service and retention, pricing growth, and support of strategic growth initiatives; better aligned transportation, route
management and maintenance functions at the local level; and reduced corporate overhead and staff to match organizational
needs and reduce costs.
We have liabilities associated with severance and reorganization as of April 30, 2014 and 2013, which are recorded in other
accrued liabilities, of $478 and $680.
Expense from Divestiture, Acquisition and Financing Costs
In fiscal year 2014, we incurred $144 of expenses primarily associated with legal costs for the acquisition of the remaining 50%
membership interest of Tompkins. See Note 2 for disclosure over the acquisition of Tompkins.
In fiscal year 2013, we incurred $1,410 of expenses attributable to a $303 write-off of costs associated with the attempted
refinancing of our Second Lien Notes, $602 of legal costs associated with the Maine Energy divestiture transaction, as discussed in
Note 17, and $505 of costs associated with the BBI acquisition.
Legal Settlement
In fiscal year 2012, we recorded expenses totaling $1,359 attributable to a $359 legal settlement with the Town of Seneca, New York
and a $1,000 legal settlement with the Vermont Attorney General’s Office.
17. DIVESTITURE TRANSACTIONS AND DISCONTINUED OPERATIONS
We review planned business dispositions based on available information and events that have occurred to determine whether
or not a business or disposal group qualifies for discontinued operations treatment. The review consists of evaluating whether
the business qualifies as a component of an entity for which the operations and cash flows are clearly distinguishable; whether it
is anticipated that the cash flows of the component have been or will be eliminated from ongoing operations after the disposal
transaction and by the end of the assessment period; and whether we will have any significant continuing involvement in
the operations of the component after the disposal transaction. Planned business dispositions are presented as discontinued
97
operations when all three criteria are met. Additionally, we evaluate whether the component has met the criteria to be classified
as held-for-sale. To be classified as held-for-sale, the criteria established by FASB ASC 360-10 must be met as of the reporting
date, including an active program to market the business and the disposition of the business within one year. A business that has
not been disposed of may not be classified as discontinued operations until the held-for-sale criteria are met. No depreciation is
recorded during the periods in which a disposal group is classified as held-for-sale.
Businesses that qualify as held-for-sale are carried at the lower of their carrying value or fair value less costs to sell in the period
the held-for-sale criteria are met. For a business that is classified as held-for-sale and meets the discontinued operations criteria, all
initial or subsequent adjustments to the carrying value of the component are classified in discontinued operations.
Discontinued Operations
In the fourth quarter of fiscal year 2013, we initiated a plan to dispose of KTI BioFuels, Inc. (“BioFuels”), a construction and
demolition material processing facility located in Lewiston, Maine, and as a result, the assets associated with BioFuels were
classified as held-for-sale and the results of operations were recorded as loss from discontinued operations. Assets of the disposal
group previously classified as held-for-sale, and included in discontinued operations as of April 30, 2013, include certain inventory
along with plant and equipment. In the first quarter of fiscal year 2014, we executed a purchase and sale agreement with ReEnergy
Lewiston LLC (“ReEnergy”), pursuant to which we agreed to sell certain assets of BioFuels, which was located in our Eastern
region, to ReEnergy. We agreed to sell the BioFuels assets for undiscounted purchase consideration of $2,000, which is being paid
to us in equal quarterly installments over five years commencing November 1, 2013, subject to the terms of the purchase and sale
agreement. We recognized a $378 loss on disposal of discontinued operations in the first quarter of fiscal year 2014 associated with
the disposition.
The operating results of these operations, including those related to prior years, have been reclassified from continuing to
discontinued operations in the accompanying consolidated financial statements. Revenues and loss before income taxes
attributable to discontinued operations for fiscal year 2014, 2013 and 2012, respectively, are as follows:
Revenues
Income (loss) before income taxes
Fiscal Year Ended April 30,
2014
2013
2012
$ 3,316
$ 284
$ 12,033
$ (4,480)
$ 12,865
$ (1,025)
We allocate interest expense to discontinued operations. We have also eliminated inter-company activity associated with
discontinued operations.
Divestiture Transactions
In the first quarter of fiscal year 2013, we executed a purchase and sale agreement with the City of Biddeford, Maine, pursuant to
which we agreed to sell the real property of Maine Energy to the City of Biddeford, subject to satisfaction of conditions precedent
and closing. We agreed to sell Maine Energy for undiscounted purchase consideration of $6,650, which is being paid to us in equal
installments over 21 years, subject to the terms of the purchase and sale agreement. The transaction closed in November 2012,
and we waived certain conditions precedent not satisfied at that time. In December 2012, we closed the Maine Energy facility
and initiated the decommissioning process in accordance with the provisions of the agreement. Following the decommissioning
of the Maine Energy facility, it is our responsibility to demolish the facility, at our cost, within twelve months of the closing
date and in accordance with the terms of the purchase and sale agreement. On June 2, 2014, the United States Environmental
Protection Agency provided final approval of the work plans to complete the last phase of the decommissioning process. The
time for completion has been consensually extended by Maine Energy and the City of Biddeford and we expect to complete the
decommissioning process within the current agreed upon timeframe. We will continue to finalize estimates and obtain additional
information regarding the estimated costs associated with the divestiture. Due to the inherent judgments and estimates regarding
the remaining costs to fulfill our obligation under the purchase and sale agreement to demolish the facility and remediate the site,
recognition of a loss on divestiture, which we do not expect, or a potential gain on divestiture is possible.
As a part of the closure and decommissioning of the Maine Energy facility, we have withdrawn from a multiemployer pension plan
to which we have made contributions for the benefit of Maine Energy employees covered under a collective bargaining agreement.
In the fourth quarter of fiscal year 2014, based on information provided by the fund administrator, we determined that we have no
obligation associated with the plan’s unfunded vested benefit based on our withdrawal.
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18. EARNINGS PER SHARE
The following table sets forth the numerator and denominator used in the computation of earnings per share:
Numerator:
Loss from continuing operations before discontinued operations
attributable to common stockholders
Denominator:
Number of shares outstanding, end of period:
Class A common stock
Class B common stock
Unvested restricted stock
Effect of weighted average shares outstanding during period
Weighted average number of common shares used in basic and diluted EPS
Fiscal Year Ended April 30,
2014
2013
2012
$ (23,001)
$ (49,662)
$ (77,697)
39,086
38,662
25,991
988
(130)
(124)
39,820
988
(134)
(5,501)
34,015
988
(127)
(103)
26,749
For fiscal years 2014, 2013 and 2012, 2,190, 2,074 and 2,445 shares, respectively, of potential common stock related to restricted
stock, restricted stock units, performance stock units, and stock options were excluded from the calculation of dilutive shares
since we experienced a loss from continuing operations in each fiscal year period and the inclusion of potential shares would be
anti-dilutive.
19. RELATED PARTY TRANSACTIONS
Services
During fiscal years 2014, 2013 and 2012, we retained the services of a related party, a company wholly owned by John Casella, our
Chairman and Chief Executive Officer, and Douglas Casella, a member of our Board of Directors, as a contractor in developing or
closing certain landfills owned by us. Total purchased services charged to operations or capitalized to landfills for fiscal years 2014,
2013 and 2012 were $7,816, $6,577 and $2,612, respectively, of which $890 and $1,189 were outstanding and included in either
accounts payable or other current liabilities at April 30, 2014 and 2013, respectively.
Leases
In fiscal year 1994, we entered into two leases for operating facilities with a partnership of which John Casella, our Chairman and
Chief Executive Officer, and Douglas Casella, a member of our Board of Directors are the general partners. The leases have since
been extended through April 2023 and according to the terms of the agreements called for monthly payments of approximately
$27. Total expense charged to operations for fiscal years 2014, 2013 and 2012 under these agreements was $386, $286 and
$300, respectively.
Landfill Post-closure
We have agreed to pay the cost of post-closure on a landfill owned by two of our major stockholders and members of the Board
of Directors (one of whom is also an officer). We paid the cost of closing this landfill in 1992, and the post-closure maintenance
obligations are expected to last until 2024. In fiscal years 2014, 2013 and 2012, we paid $8, $8 and $8 respectively, pursuant to this
agreement. As of April 30, 2014 and 2013, we have accrued $94 and $100, respectively, for costs associated with its
post-closure obligations.
Employee Loan
In fiscal year 2014, we entered into an agreement with an employee to amend a promissory note, whereas the outstanding balance
of $149, which had been included in Notes receivable – related party in the accompanying consolidated balance sheet, shall be
deemed paid in full in exchange for continued employment and the employee forgoing participation in the annual cash incentive
plan and restricted stock program for a period of time specified in the amended note. Upon entering into the amended note,
interest ceased accruing on the note and we recorded a charge of $149 in general and administration to reserve for the note.
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20. SEGMENT REPORTING
We report selected information about operating segments in a manner consistent with that used for internal management
reporting. We classify our solid waste operations on a geographic basis through regional operating segments. Revenues are derived
mainly from collection, transfer, disposal, landfill, landfill-gas-to-energy and recycling services in the northeastern United States.
Our revenues in the Recycling segment are derived from municipalities and customers in the form of processing fees, tipping fees
and commodity sales. Organics services, ancillary operations, major customer accounts, discontinued operations, and earnings
from equity method investees are included in our Other segment. Segment data for fiscal years 2013 and 2012 has been revised to
properly align with internal management reporting, which was modified in fiscal year 2014 as follows: to move Organics services
from the Eastern region to the Other segment to reflect changes in management structure as these services have become integral
to service offerings across our broader geographic solid waste footprint; and to move a smaller brokerage operation from the
Eastern region to the Recycling segment to align with the rest of our brokerage operations.
Fiscal Year Ended April 30, 2014
Segment
Eastern
Western
Recycling
Other
Outside
revenues
$ 147,330
216,911
43,825
89,567
Inter-company
revenue
Depreciation and
amortization
Operating
income (loss)
Interest
expense (net)
Capital
expenditures
Goodwill
Total assets
$ 38,946
70,809
(139)
2,019
$ 24,961
28,693
4,262
2,423
—
$ (1,105)
$ (272)
$ 19,870
$ 17,429
$ 200,235
13,298
(2,435)
2,158
—
112
—
38,023
—
20,471
1,111
4,507
87,666
331,304
12,315
1,729
49,652
68,706
—
—
—
Eliminations
—
(111,635)
Total
$ 497,633
$ —
$ 60,339
$ 11,916
$ 37,863
$ 45,959
$ 119,139
$ 649,897
Fiscal Year Ended April 30, 2013
Segment
Eastern
Western
Recycling
Other
Outside
revenues
$ 129,889
205,747
42,273
77,426
$ 30,933
65,390
116
3,933
Eliminations
—
(100,372)
Inter-company
revenue
Depreciation and
amortization
Operating
income (loss)
Interest
expense (net)
Capital
expenditures
$ 23,518
26,446
4,303
2,309
—
$ (5,291)
$ 27,054
$ 20,383
20,058
(697)
(1,649)
(1,311)
5,553
10,133
30,384
935
3,325
—
—
—
Goodwill
$ 16,858
Total assets
$ 198,710
86,880
12,190
—
—
348,455
50,921
65,033
—
Total
$ 455,335
$ —
$ 56,576
$ 12,421
$ 41,429
$ 55,027
$ 115,928
$ 663,119
Fiscal Year Ended April 30, 2012
Segment
Eastern
Western
Recycling
Other
Outside
revenues
$ 127,930
212,227
52,195
75,598
Inter-company
revenue
Depreciation and
amortization
Operating
income (loss)
Interest
expense (net)
Capital
expenditures
Goodwill
Total assets
$ 33,559
$ 25,179
$ (43,640)
$ 31,637
$ 19,734
$ 58
$ 166,938
67,776
57
4,466
26,168
4,130
2,938
29,715
5,088
(2,196)
80
6,795
6,454
27,467
5,494
5,668
89,458
12,190
—
—
333,381
55,434
77,990
—
Eliminations
—
(105,858)
—
—
—
—
Total
$ 467,950
$ —
$ 58,415
$ (11,033)
$ 44,966
$ 58,363
$ 101,706
$ 633,743
100
Amounts of our total revenue attributable to services provided are as follows:
Collection
Disposal
Power generation
Processing
Solid waste operations
Organics
Customer solutions
Recycling
Total revenues
Fiscal Year Ended April 30,
2014
$ 225,441
128,778
9,512
8,852
372,583
37,829
43,396
43,825
45.3%
25.9%
1.9%
1.8%
74.9%
7.6%
8.7%
8.8%
2013
$ 208,973
115,049
11,354
6,901
342,277
35,330
35,455
42,273
45.9%
25.3%
2.4%
1.5%
75.1%
7.8%
7.8%
9.3%
2012
$ 205,296
123,620
11,894
5,772
346,582
30,871
38,302
52,195
43.9%
26.4%
2.6%
1.2%
74.1%
6.6%
8.2%
11.1%
$ 497,633
100.0%
$ 455,335
100.0%
$ 467,950
100.0%
We have revised our table of revenue by source to more closely align the types of revenue generated by our operating segments.
Amounts for fiscal years 2013 and 2012 have been revised to conform to this presentation.
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of certain items in the consolidated statements of operations by quarter for fiscal years 2014, 2013 and
2012. The impact of discontinued operations, as described in Note 17, is included in all periods in the table below.
Fiscal Year 2014
Revenues
Operating income (loss)
Loss from continuing operations before discontinued operations
Net loss attributable to common stockholders
Loss per common share:
Basic and diluted:
Loss from continuing operations before discontinued operations
Net loss attributable to common stockholders
Fiscal Year 2013
Revenues
Operating income
Loss from continuing operations before discontinued operations
Net loss attributable to common stockholders
Loss per common share:
Basic and diluted:
Loss from continuing operations before discontinued operations
Net loss attributable to common stockholders
Fiscal Year 2012
Revenues
Operating income (loss)
$ 9,737
$ (114)
$ (191)
$ (0.00)
$ (0.00)
First Quarter Second Quarter Third Quarter Fourth Quarter
$ 128,558
$ 132,296
$ 9,450
$ (530)
$ (339)
$ 117,852
$ (1,298)
$ (11,033)
$ (10,750)
$ 118,927
$ (5,973)
$ (15,633)
$ (11,815)
$ (0.01)
$ (0.01)
$ (0.28)
$ (0.27)
$ (0.39)
$(0.30)
First Quarter Second Quarter Third Quarter Fourth Quarter
$ 117,638
$ 5,807
$ (8,163)
$ (8,371)
$ (0.30)
$ (0.31)
$ 116,836
$ 4,426
$ (20,857)
$ (20,967)
$ 112,167
$ 78
$ (11,146)
$ (11,407)
$ 108,694
$ 2,110
$ (9,817)
$ (13,397)
$ (0.68)
$ (0.68)
$ (0.28)
$ (0.29)
$ (0.25)
$ (0.34)
First Quarter Second Quarter Third Quarter Fourth Quarter
$ 124,066
$ 10,468
$ 125,989
$ 11,730
$ (693)
$ (765)
$ 111,520
$ 4,448
$ (24,517)
$ (24,635)
$ 106,375
$ (37,679)
$ (48,991)
$ (49,124)
Loss from continuing operations before discontinued operations
$ (3,502)
Net loss attributable to common stockholders
$ (3,062)
Loss per common share:
Basic and diluted:
Loss from continuing operations before discontinued operations
Net loss attributable to common stockholders
$ (0.13)
$ (0.12)
$ (0.03)
$ (0.03)
$ (0.91)
$ (0.92)
$ (1.82)
$ (1.83)
101
Our transfer and disposal revenues historically have 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. Since certain of our operating and fixed
costs remain constant throughout fiscal year, operating income is impacted by a similar seasonality. In addition, particularly harsh
weather conditions typically result in increased operating costs.
Our recycling business experiences increased volumes of newspaper in November and December due to increased newspaper
advertising and retail activity during the holiday season.
22. SUBSIDIARY GUARANTORS
Our 2019 Notes are guaranteed jointly and severally, fully and unconditionally, by our significant wholly-owned subsidiaries.
The Parent is the issuer and a non-guarantor of the 2019 Notes and the Parent has no independent assets or operations. The
information which follows presents the condensed consolidating financial position as of April 30, 2014 and April 30, 2013, the
consolidating results of operations and comprehensive loss for fiscal years 2014, 2013 and 2012, and the condensed consolidating
statements of cash flows for fiscal years 2014, 2013 and 2012 of (a) the Parent company only, (b) the combined guarantors (the
“Guarantors”) , each of which is 100% wholly-owned by the Parent, (c) the combined non-guarantors (the “Non-Guarantors”) ,
(d) eliminating entries and (e) the consolidated total.
102
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF APRIL 30, 2014
(in thousands, except for share and per share data)
Parent Guarantors Non-Guarantors Elimination Consolidated
$ 2,151
—
534
465
2,617
—
2,502
312
—
8,581
4,104
—
159
—
16,752
(36,006)
13,874
—
$ 271
76
51,983
—
4,557
3,852
—
936
359
62,034
398,670
119,139
13,261
681
1,932
—
10,331
1,471
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Accounts receivable – trade, net
Refundable income taxes
Prepaid expenses
Inventory
Deferred income taxes
Other current assets
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets, net
Restricted assets
Investments in unconsolidated entities
Investments in subsidiaries
Other non-current assets
Non-current assets of discontinued operations
Intercompany receivable
LIABILITIES AND STOCKHOLDERS’
(DEFICIT) EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital leases
Accounts payable
Accrued payroll and related expenses
Accrued interest
$ 84
22,678
1,212
6,084
$ 801
28,286
4,849
3
7,309
10,081
51,329
2,298
Current accrued capping, closure and post-closure costs
—
Other accrued liabilities
Total current liabilities
7,289
37,347
Long-term debt and capital leases, less current maturities
504,836
Accrued capping, closure and post-closure costs, less
current portion
Deferred income taxes
Other long-term liabilities
STOCKHOLDERS’ (DEFICIT) EQUITY:
—
37,306
6,954
10,025
—
7,149
$ 42
$ —
$ 2,464
—
86
—
2
53
—
7
—
190
650
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,932)
36,006
—
—
34,074
1,932
76
52,603
465
7,176
3,905
2,502
1,255
359
70,805
403,424
119,139
13,420
681
16,752
—
24,205
1,471
579,092
—
$ —
824
1
—
3
242
1,070
—
36
—
84
$ —
—
—
—
—
—
—
—
—
—
—
$ 885
51,788
6,062
6,087
7,312
17,612
89,746
507,134
37,342
6,954
17,258
(8,407)
(130)
(8,537)
(1,117)
545,485
543,291
(506,348)
650
(38,875)
$ 550,755
$ 101,171
$ (38,035)
$ 36,006
$ 649,897
Parent Guarantors Non-Guarantors Elimination Consolidated
Casella Waste Systems, Inc. stockholders (deficit)’ equity
(8,407)
3,089
(39,095)
36,006
Noncontrolling interests
—
—
(130)
—
Total stockholders’ (deficit) equity
(8,407)
3,089
(39,225)
36,006
$ 550,755
$ 101,171
$ (38,035)
$ 36,006
$ 649,897
103
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF APRIL 30, 2013
(in thousands, except for share and per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Accounts receivable – trade, net
Refundable income taxes
Prepaid expenses
Inventory
Deferred income taxes
Other current assets
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets, net
Restricted assets
Investments in unconsolidated entities
Investments in subsidiaries
Other non-current assets
Non-current assets of discontinued operations
Parent Guarantors Non-Guarantors Elimination Consolidated
$ 1,260
—
571
128
1,471
—
3,730
366
—
7,526
2,771
—
249
—
147
16,486
(59,759)
15,774
(24,332)
$ 253
76
47,644 474
—
4,240
3,440
—
528
61
56,242
411,284
115,928
11,425
545
—
2,189
—
11,752
553,123
$ 242
—
—
—
54
—
7
—
777
8,447
—
—
—
—
3,509
—
—
11,956
(42,508)
$ (29,775)
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,932)
59,759
—
57,827
1,932
$ 59,759
$ 1,755
76
48,689
128
5,711
3,494
3,730
901
61
64,545
422,502
115,928
11,674
545
147
20,252
—
27,526
598,574
—
$ 663,119
Parent Guarantors Non-Guarantors Elimination Consolidated
Intercompany receivable
580,328
(539,752)
$ 563,522
$ 69,613
LIABILITIES AND STOCKHOLDERS’
(DEFICIT) EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital leases
Accounts payable
Accrued payroll and related expenses
Accrued interest
Current accrued capping, closure and post-closure costs
Other accrued liabilities
Total current liabilities
$ —
23,492
538
6,071
—
10,001
40,102
$ 1,218
27,847
3,445
3
3,832
10,896
47,241
2,022
Long-term debt and capital leases, less current maturities
492,965
Accrued capping, closure and post-closure costs, less
current portion
Deferred income taxes
Other long-term liabilities
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
—
39,298
6,798
12,372
—
6,078
$ —
635
—
—
3
117
755
—
37
—
—
$ —
—
—
—
—
—
—
—
—
—
—
$ 1,218
51,974
3,983
6,074
3,835
21,014
88,098
494,987
39,335
6,798
18,450
11,285
4,166
15,451
Casella Waste Systems, Inc. stockholders’ equity
11,285
(25,026)
Noncontrolling interests
Total stockholders’ equity
—
—
11,285
(25,026)
(34,733)
4,166
(30,567)
59,759
—
59,759
$ 563,522
$ 69,613
$ (29,775)
$ 59,759
$ 663,119
104
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FISCAL YEAR ENDED APRIL 30, 2014
(in thousands)
Parent Guarantors Non-Guarantors Elimination Consolidated
$ —
$ 495,391
$ 2,242
$ —
$ 497,633
354,592
61,865
60,339
7,455
1,394
586
400
(1,058)
485,717
11,916
(312)
38,175
936
(593)
280
(1,059)
37,427
(25,511)
1,799
(27,310)
284
(378)
Expense from divestiture, acquisition and financing costs
—
144
Revenues
Operating expenses:
Cost of operations
General and administration
Depreciation and amortization
Asset impairment charge
Development project charge
Severance and reorganization costs
Environmental remediation charge
Change in fair value of acquisition related
contingent consideration
Operating income (loss)
Other expense (income), net:
Interest income
Interest expense
(Income) loss from equity method investments
(Gain) loss on sale of equity method investment
(Gain) loss on derivative instruments
Other income
Other expense, net
Income (loss) from continuing operations
before income taxes
(23)
1,377
935
—
—
4
—
—
2,293
(2,293)
(4)
38,095
(18,811)
—
280
(557)
19,003
351,829
60,446
58,651
—
1,394
582
400
(1,058)
472,388
23,003
(308)
80
(169)
—
—
(501)
(898)
2,786
42
753
7,455
—
—
—
—
—
11,036
(8,794)
—
—
1,105
(593)
—
(1)
511
—
—
—
—
—
—
—
—
144
—
—
—
—
—
—
18,811
—
—
—
18,811
(21,296)
23,901
(9,305)
(18,811)
Provision (benefit) for income taxes
1,799
—
—
—
Income (loss) from continuing operations
(23,095)
23,901
(9,305)
(18,811)
Discontinued operations:
Income (loss) from discontinued operations, net
Gain (loss) on disposal of discontinued operations, net
—
—
284
(378)
—
—
—
—
Net income (loss)
(23,095)
23,807
(9,305)
(18,811)
(27,404)
Less: Net income (loss) attributable to
noncontrolling interests
—
—
(4,309)
—
(4,309)
Net income (loss) attributable to common stockholders
$ (23,095)
$ 23,807
$ (4,996)
$ (18,811)
$ (23,095)
105
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FISCAL YEAR ENDED APRIL 30, 2013
(in thousands)
Revenues
Operating expenses:
Cost of operations
General and administration
Depreciation and amortization
Severance and reorganization costs
Expense from divestiture, acquisition and
financing costs
Operating income (loss)
Other expense (income), net:
Interest income
Interest expense
Loss (income) from equity method investments
Loss on derivative instruments
Loss on debt extinguishment
Other income
Other expense, net
Income (loss) from continuing operations
before income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
Discontinued operations:
Parent Guarantors Non-Guarantors Elimination Consolidated
$ —
$ 453,589
$ 1,746
$ —
$ 455,335
(295)
220
1,017
1,766
303
3,011
(3,011)
(32,896)
42,405
24,723
4,512
15,584
(671)
53,657
(56,668)
(2,526)
(54,142)
321,382
57,898
55,142
1,943
1,107
437,472
16,117
(113)
32,033
36
—
—
(365)
31,591
(15,474)
—
(15,474)
1,927
87
417
—
—
2,431
(685)
—
—
4,405
—
—
—
—
—
—
—
—
—
—
32,868
(32,868)
(24,723)
—
—
—
4,405
(24,723)
323,014
58,205
56,576
3,709
1,410
442,914
12,421
(141)
41,570
4,441
4,512
15,584
(1,036)
64,930
(5,090)
24,723
—
—
(5,090)
24,723
(52,509)
(2,526)
(49,983)
Income (loss) from discontinued operations, net
Gain (loss) on disposal of discontinued operations, net
—
—
(4,480)
—
—
—
—
—
(4,480)
—
Net income (loss)
(54,142)
(19,954)
(5,090)
24,723
(54,463)
Less: Net income (loss) attributable to
noncontrolling interest
—
—
(321)
—
(321)
Net income (loss) attributable to common stockholders
$ (54,142)
$ (19,954)
$ (4,769)
$ 24,723
$ (54,142)
106
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FISCAL YEAR ENDED APRIL 30, 2012
(in thousands)
Parent Guarantors Non-Guarantors Elimination Consolidated
$ —
$ 467,950
$ —
$ —
$ 467,950
318,068
60,264
58,415
40,746
1,359
131
478,983
(11,033)
(42)
45,008
9,994
10,680
300
(863)
65,077
(76,110)
1,593
(77,703)
(614)
725
Revenues
Operating expenses:
Cost of operations
General and administration
Depreciation and amortization
Asset impairment charge
Legal settlement
Development project charge
Operating income (loss)
Other expense/(income), net:
Interest income
Interest expense
Loss (income) from equity method investments
Impairment of equity method investment
Loss on debt extinguishment
Other income
Other expense, net
Income (loss) from continuing operations
before income taxes
16
576
1,568
—
1,000
—
3,160
(3,160)
(39,871)
46,058
66,832
—
300
(486)
72,833
318,047
59,677
56,850
40,746
359
131
475,810
(7,860)
(34)
38,813
(7)
—
—
(377)
38,395
5
11
(3)
—
—
—
13
(13)
—
—
10,001
10,680
—
—
—
—
—
—
—
—
—
—
39,863
(39,863)
(66,832)
—
—
—
20,681
(66,832)
(75,993)
(46,255)
(20,694)
66,832
Provision (benefit) for income taxes
1,593
—
—
—
Income (loss) from continuing operations
(77,586)
(46,255)
(20,694)
66,832
Discontinued operations:
Income (loss) from discontinued operations, net
—
(614)
Gain (loss) on disposal of discontinued operations, net
of tax
—
725
—
—
—
—
Net income (loss)
(77,586)
(46,144)
(20,694)
66,832
(77,592)
Less: Net income (loss) attributable to
noncontrolling interest
—
—
(6)
—
(6)
Net income (loss) attributable to common stockholders
$ (77,586)
$ (46,144)
$ (20,688)
$ 66,832
$ (77,586)
107
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
FISCAL YEAR ENDED APRIL 30, 2014
(in thousands)
Net income (loss)
$ (23,095)
$ 23,807
$ (9,305)
$ (18,811)
$ (27,404)
Parent Guarantors Non-Guarantors Elimination Consolidated
Other comprehensive income (loss), net of taxes:
Unrealized gain (loss) resulting from changes in fair
value of derivative instruments
Realized loss (gain) on derivative instruments
reclassified into earnings
Unrealized gain (loss) resulting from changes in fair
value of marketable securities
Other comprehensive income (loss)
—
—
—
—
—
—
12
12
(36)
655
—
619
—
—
—
—
(36)
655
12
631
Comprehensive income (loss)
(23,095)
23,819
(8,686)
(18,811)
(26,773)
Less: Comprehensive income (loss) attributable to
noncontrolling interests
Comprehensive income (loss) attributable to
common stockholders
—
—
(4,309)
—
(4,309)
$ (23,095)
$ 23,819
$ (4,377)
$ (18,811)
$ (22,464)
108
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
FISCAL YEAR ENDED APRIL 30, 2013
(in thousands)
Net income (loss)
$ (54,142)
$ (19,954)
$ (5,090)
$ 24,723
$ (54,463)
Parent Guarantors Non-Guarantors Elimination Consolidated
Other comprehensive income (loss), net of taxes:
Unrealized gain (loss) resulting from changes in fair
value of derivative instruments, net of tax
Realized loss (gain) on derivative instruments
reclassified into earnings, net of tax
Unrealized gain (loss) resulting from changes in fair
value of marketable securities
Other comprehensive income (loss)
Comprehensive income (loss)
Less: Comprehensive income (loss) attributable to
noncontrolling interest
Comprehensive income (loss) attributable to
common stockholders
(1,257)
3,626
—
2,369
(51,773)
—
—
23
23
(19,931)
(1,653)
621
—
(1,032)
(6,122)
—
—
—
—
(2,910)
4,247
23
1,360
24,723
(53,103)
—
—
(321)
—
(321)
$ (51,773)
$ (19,931)
$ (5,801)
$ 24,723
$ (52,782)
109
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
FISCAL YEAR ENDED APRIL 30, 2012
(in thousands)
Net income (loss)
$ (77,586)
$ (46,144)
$ (20,694)
$ 66,832
$ (77,592)
Parent Guarantors Non-Guarantors Elimination Consolidated
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) resulting from changes in fair
value of derivative instruments, net of tax
Realized loss (gain) on derivative instruments
reclassified into earnings, net of tax
Unrealized gain (loss) resulting from changes in fair
value of marketable securities
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
Less: Comprehensive income (loss) attributable to
noncontrolling interest
Comprehensive income (loss) attributable to
common stockholders
(2,253)
(77)
—
(2,330)
(79,916)
—
—
(3)
(3)
504
(501)
—
3
—
—
—
—
(46,147)
(20,691)
66,832
(1,749)
(578)
(3)
(2,330)
(79,922)
—
—
(6)
—
(6)
$ (79,916)
$ (46,147)
$ (20,685)
$ 66,832
$ (79,916)
110
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED APRIL 30, 2014
(in thousands)
Net cash provided by (used in) operating activities
$ (40,365)
$ 89,792
$ 215
$ —
$ 49,642
Parent
Guarantors Non-Guarantors Elimination Consolidated
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
Acquisition related additions to property, plant and
equipment
Additions to property, plant and equipment
Payments on landfill operating lease contracts
Investments in unconsolidated entities
Proceeds from sale of equity method investment
Proceeds from sale of property and equipment
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Proceeds from long-term borrowings
Principal payments on long-term debt
Payments of financing costs
Proceeds from the exercise of share based awards
Intercompany borrowings
Net cash provided by (used in) financing activities
Net cash provided by (used in) discontinued
operations
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
—
—
(1,675)
—
(2,107)
3,442
—
(340)
161,650
(151,074)
(405)
—
31,425
41,596
—
891
1,260
$ 2,151
(8,305)
(2,633)
(41,236)
(6,505)
—
—
1,524
(57,155)
—
(1,306)
—
143
(31,425)
(32,588)
(31)
18
253
$ 271
—
—
(415)
—
—
—
—
(415)
—
—
—
—
—
—
—
(200)
242
$ 42
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(8,305)
(2,633)
(43,326)
(6,505)
(2,107)
3,442
1,524
(57,910)
161,650
(152,380)
(405)
143
—
9,008
(31)
709
1,755
$ —
$ 2,464
111
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED APRIL 30, 2013
(in thousands)
Net cash provided by (used in) operating activities
$ (5,319)
$ 50,527
$ (1,302)
$ —
$ 43,906
Parent Guarantors Non-Guarantors Elimination Consolidated
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
Acquisition related additions to property, plant and equipment
Additions to property, plant and equipment
Payments on landfill operating lease contracts
Payment for capital related to divestiture
Investments in unconsolidated entities
Proceeds from sale of property and equipment
—
—
(203)
—
—
(4,166)
—
(25,225)
(1,746)
(48,058)
(6,261)
(618)
(2,707)
883
Net cash provided by (used in) investing activities
(4,369)
(83,732)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings
Principal payments on long-term debt
Change in restricted cash
334,497
(359,342)
—
Payment of tender premium on second lien notes
(10,743)
Net proceeds from the issuance of class
A common stock
Contributions from nonctonrolling interest holder
Other
Intercompany borrowings
Net cash provided by (used in) financing activities
Discontinued Operations:
42,184
—
(4,513)
5,066
7,149
41,849
(1,516)
—
—
—
—
—
(5,066)
35,267
Net cash provided by (used in) discontinued operations
—
(2,177)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(2,539)
3,799
$ 1,260
(115)
368
$ 253
—
—
(5,020)
—
—
3,666
—
(1,354)
—
—
—
—
—
2,531
—
—
2,531
—
(125)
367
$ 242
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
(25,225)
(1,746)
(53,281)
(6,261)
(618)
(3,207)
883
(89,455)
376,346
(360,858)
—
(10,743)
42,184
2,531
(4,513)
—
44,947
(2,177)
(2,779)
4,534
$ 1,755
112
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED APRIL 30, 2012
(in thousands)
Net cash provided by (used in) operating activities
$ 4,552
$ 59,088
$ 531
$ —
$ 64,171
Parent
Guarantors Non-Guarantors Elimination Consolidated
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
Acquisition related additions to property, plant
and equipment
Additions to property, plant and equipment
Payments on landfill operating lease contracts
Investments in unconsolidated entities
Proceeds from sale of property and equipment
—
—
(574)
—
(2,740)
—
(2,102)
(529)
(54,681)
(6,616)
(4,184)
1,492
Net cash provided by (used in) investing activities
(3,314)
(66,620)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings
Principal payments on long-term debt
Payments of financing costs
Contributions from nonctonrolling interest holder
Other
Intercompany borrowings
Net cash provided by (used in) financing activities
Net cash provided by (used in) discontinued
operations
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
163,500
(151,390)
(1,592)
591
(10,079)
1,030
—
(1,416)
—
—
—
10,079
8,663
—
(1,049)
2,268
1,531
$ 3,799
82
286
$ 368
—
—
(2,579)
—
1,879
—
(700)
—
—
—
536
—
—
536
—
367
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,102)
(529)
(57,834)
(6,616)
(5,045)
1,492
(70,634)
163,500
(152,806)
(1,592)
536
591
—
10,229
(1,049)
2,717
1,817
$ 367
$ —
$ 4 ,534
113
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness
of our disclosure controls and procedures as of April 30, 2014. The term “disclosure controls and procedures,” as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed
by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as
of April 30, 2014, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and
procedures were effective at the reasonable assurance level.
Management’s report on our internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f) under the
Exchange Act) and the independent registered public accounting firm’s related audit report are included in Item 8 of this Annual
Report on Form 10-K and are incorporated herein by reference.
No change in our internal control over financial reporting occurred during the fiscal quarter ended April 30, 2014 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10 of Part III (except for information required with respect to our executive officers which is set forth under “Executive
Officers 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) has been omitted from this Annual Report
on Form 10-K, and is incorporated by reference from the information in the Company’s definitive proxy statement for the 2014
Annual Meeting of Stockholders (the “Proxy Statement”) which the Company intends to file with the Securities and Exchange
Commission within 120 days of the end of fiscal year to which this report relates.
Equity Compensation Plan Information
The following table shows information about the securities authorized for issuance under our equity compensation plans as of
April 30, 2014:
Plan Category
(a)
(b)
Number of securities
to be issued upon exercise
of outstanding
options (1)
Weighted-average
exercise price of
outstanding options
(c)
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a) (2)
Equity compensation plans approved by security holders
1,368,165
Equity compensation plans not approved by
security holders
—
$ 8.65
—
1,526,941
—
1. In addition to being available for future issuance in the form of options, 1,414,023 shares of our Class A common stock under our
2006 Stock Incentive Plan may instead be issued in the form of restricted stock or other equity-based awards.
2. Includes 112,918 shares of our Class A common stock issuable under our 1997 Employee Stock Purchase Plan.
114
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the Proxy Statement under the sections captioned
“Executive Compensation” and “Compensation of Directors.”
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from the Proxy Statement under the section captioned
“Beneficial Ownership of Voting Stock.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference from the Proxy Statement under the sections captioned
“Certain Relationships and Related Party Transactions” and “Board Determination of Independence.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference from the Proxy Statement under “Audit Fees and Other
Matters” and “Pre-Approval Policies and Procedures.”
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Consolidated Financial Statements included under Item 8.
Report of Independent Registered Public Accounting Firm – McGladrey LLP
Consolidated Balance Sheets as of April 30, 2014 and 2013.
Consolidated Statements of Operations for fiscal years 2014, 2013, and 2012.
Consolidated Statements of Comprehensive Loss for fiscal years 2014, 2013, and 2012.
Consolidated Statements of Stockholders’ (Deficit) Equity for fiscal years 2014, 2013, and 2012.
Consolidated Statements of Cash Flows for fiscal years 2014, 2013, and 2012.
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules:
Schedule II – Valuation and Qualifying Accounts.
All other schedules have been omitted because the required information is not significant or is included in the
consolidated financial statements or notes thereto, or is not applicable.
(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.
115
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.
Dated: June 26, 2014
By:
/s/ John W. Casella
John W. Casella
Chairman of the Board of Directors and Chief Executive
Officer (Principal Executive Officer)
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
/s/ John W. Casella
John W. Casella
/s/ Edmond R. Coletta
Edmond R. Coletta
/s/ Christopher B. Heald
Christopher B. Heald
Title
Chairman of the Board of Directors and Chief
Executive Officer (Principal Executive Officer)
Date
June 26, 2014
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
June 26, 2014
Vice President and Chief Accounting
Officer (Principal Accounting Officer)
June 26, 2014
/s/ Douglas R. Casella
Director
June 26, 2014
Douglas R. Casella
/s/ John F. Chapple III
Director
June 26, 2014
John F. Chapple III
/s/ Gregory B. Peters
Director
June 26, 2014
Gregory B. Peters
/s/ James F. Callahan, Jr.
Director
James F. Callahan, Jr.
/s/ Joseph G. Doody
Joseph G. Doody
/s/ James P. McManus
James P. McManus
/s/ Michael K. Burke
Michael K. Burke
/s/ Emily Nagle Green
Emily Nagle Green
Director
Director
Director
Director
June 26, 2014
June 26, 2014
June 26, 2014
June 26, 2014
June 26, 2014
116
FINANCIAL STATEMENT SCHEDULES
Schedule II
Valuation Accounts
Allowance for Doubtful Accounts
(in thousands)
Balance at beginning of period
Additions – Charged to expense
Deductions – Bad debts written off, net of recoveries
Balance at end of period
Fiscal Year Ended April 30,
2014
2013
2012
$ 1,332
1,586
(1,246)
$ 1,672
$ 740
1,682
(1,090)
$ 1,332
$ 920
730
(910)
$ 740
117
EXHIBIT INDEX
Exhibit No.
2.1
2.2
2.3
2.4
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8+
4.9
4.10
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 of Casella as filed November 12, 1999 (file
no. 333-90913)).
Purchase and Sale Agreement dated as of January 23, 2011 among Casella, KTI, CE Holdings II, LLC and CE
Holding Company, LLC (incorporated herein by reference to Exhibit 2.1 to the quarterly report on Form 10-Q of
Casella as filed March 3, 2011 (file no. 000-23211)).
Stock Purchase Agreement dated as of December 6, 2012 among Casella, Blow Bros., the stockholders of Blow Bros.
named therein, Arthur E. St. Hilaire (solely in his capacity as the Representative), and Trash Lady, LLC and Trash
Lady NH, LLC (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K of Casella as filed
December 10, 2012 (file no. 000-23211)).
Membership Interest Purchase Agreement dated December 5, 2013, by and among Casella Waste Systems, Inc. and
the other parties named therein (incorporated herein by reference to Exhibit 10.1 to the current report on Form
8-K of Casella as filed on December 12, 2013 (file no. 000-23211)).
Second Amended and Restated Certificate of Incorporation of Casella Waste Systems, Inc., as amended
(incorporated herein by reference to Exhibit 3.1 to the quarterly report on Form 10-Q of Casella as filed December
7, 2007 (file no. 000-23211)).
Third Amended and Restated By-Laws of Casella Waste Systems, Inc., as amended (incorporated herein by reference
to Exhibit 3.1 to the current report on Form 8-K of Casella as filed February 27, 2009 (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)).
Indenture, dated February 7, 2011, by and among Casella, the Guarantors named therein and U.S. Bank National
Association, as Trustee, governing the 7.75% Senior Subordinated Notes due 2019 (incorporated herein by reference
to Exhibit 4.2 to the current report on Form 8-K of Casella as filed on February 8, 2011 (file no. 000-23211)).
Registration Rights Agreement, dated as of February 7, 2011, by and among Casella, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, J.P. Morgan Securities LLC, Credit Agricole Securities (USA) Inc. and Comerica Securities,
Inc., relating to the 7.75% Senior Subordinated Notes due 2019 (incorporated herein by reference to Exhibit 99.1
to the current report on Form 8-K of Casella as filed on February 8, 2011 (file no. 000-23211)).
Registration Rights Agreement, dated October 9, 2012, by and among Casella, the Guarantors named therein and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, Comerica Securities, Inc. and
KeyBanc Capital Markets Inc., governing the 7.75% Senior Subordinated Notes due 2019 (incorporated herein by
reference to Exhibit 10.1 to the current report on Form 8- K of Casella as filed on October 9, 2012 (file no. 000-
23211)).
Form of 7.75% Senior Subordinated Notes due 2019 (incorporated herein by reference to Exhibit A to Exhibit 4.2 to
the current report on Form 8-K of Casella as filed on February 8, 2011 (file no. 000-23211)).
Financing Agreement dated as of March 1, 2013 between Casella and the Vermont Economic Development
Authority, relating to issuance of Vermont Economic Development Authority Solid Waste Disposal Revenue Bonds
(incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K of Casella as filed April 5, 2013
(file no. 000-23211)).
VEDA Guaranty Agreement, dated as of March 1, 2013, by and among U.S. Bank National Association, as Trustee,
and the guarantors identified therein.
Financing Agreement dated as of March 1, 2013 between Casella and the Business Finance Authority of the State
of New Hampshire, relating to issuance of Business Finance Authority of the State of New Hampshire Solid Waste
Disposal Revenue Bonds (incorporated herein by reference to Exhibit 10.2 to the current report on Form 8-K of
Casella as filed April 5, 2013 (file no. 000-23211)).
Financing Agreement between Casella and Finance Authority of Maine, dated as of December 1, 2005, relating to
issuance of Finance Authority of Maine Solid Waste Disposal Revenue Bonds (Casella Waste Services, Inc. Project)
Series 2005 (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K of Casella as filed
on January 4, 2006 (file no. 000-23211)).
118
Exhibit No.
4.11
4.12
10.1*
10.2*
10.3*
10.4*
10.5
10.6
10.7+
10.8
10.9+
10.10
10.11*
10.12*
Description
First Amendment dated as of February 1, 2012 to Financing Agreement dated as of December 1, 2005, by and
among Finance Authority of Maine, U.S. Bank National Association, as Trustee, Bank of America, as Credit
Provider, and Casella (incorporated herein by reference to Exhibit 10.1 to the quarterly report on Form 10-Q of
Casella as filed on March 2, 2012 (file no. 000-23211)).
FAME Guaranty Agreement, dated as of February 1, 2012, by and among U.S. Bank National Association, as
Trustee, and the guarantors identified therein (incorporated herein by reference to Exhibit 10.2 to the quarterly
report on Form 10-Q of Casella as filed on March 2, 2012 (file no. 000-23211)).
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)).
Form of Nonstatutory Stock Option Agreement granted under the Amended and Restated 1997 Non-Employee
Director Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to the quarterly report on Form 10-Q
of Casella as filed September 9, 2004 (file no. 000-23211)).
Amended and Restated 1997 Stock Incentive Plan (incorporated herein by reference to Appendix 1 to the
Definitive Proxy Statement on Schedule 14A of Casella as filed September 21, 1998).
Form of Incentive Stock Option Agreement granted under the Amended and Restated 1997 Stock Incentive
Plan (incorporated herein by reference to Exhibit 10.1 to the quarterly report on Form 10-Q of Casella as filed
September 9, 2004 (file no. 000-23211)).
Lease Agreement, as Amended, between Casella Associates and Casella Waste Management, Inc., dated August 1,
1993 (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)).
Second Amendment 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)).
Amendment to Lease Agreement dated as of March 13, 2008, between Casella Associates and Casella, amending
Lease Agreement dated August 1, 1993, as amended (Rutland lease).
Lease Agreement, as Amended, between Casella Associates and Casella Waste Management, Inc., dated August 1,
1993 (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)).
Amendment to Lease Agreement dated as of March 13, 2008, between Casella Associates and Casella, amending
Lease Agreement dated August 1, 1993, as amended (Montpelier lease).
Lease, Operations and Maintenance Agreement between CV Landfill, Inc. and Casella Waste Systems, Inc. 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)).
Employment Agreement between Casella 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)).
Amendment to Employment Agreement by and between Casella and John W. Casella dated as of December 30,
2008 (incorporated herein by reference to Exhibit 10.3 to the quarterly report on Form 10-Q of Casella as filed on
March 6, 2009 (file no. 000-23211)).
10.13*
2006 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit 99.1 to the current report on
Form 8-K of Casella as filed on October 19, 2009 (file no. 000-23211)).
10.14*+
Form of Incentive Stock Option Agreement granted under 2006 Stock Incentive Plan.
10.15*+
Form of Restricted Stock Agreement granted under 2006 Stock Incentive Plan.
Form of Restricted Share Unit Agreement granted under 2006 Stock Incentive Plan (employee with
employment contract).
Form of Restricted Share Unit Agreement granted under 2006 Stock Incentive Plan (employee with no
employment contract).
Form of Restricted Stock Unit Agreement granted under 2006 Stock Incentive Plan (employee with
employment contract).
Form of Restricted Stock Unit Agreement granted under 2006 Stock Incentive Plan (employee with no
employment contract).
10.16*+
10.17*+
10.18*+
10.19*+
119
Exhibit No.
10.20*
10.21
10.22
10.23
10.24
Description
Form of Performance Share Unit Agreement granted under 2006 Stock Incentive Plan (incorporated herein by
reference to Exhibit 10.2 to the quarterly report on Form 10-Q of Casella as filed on September 4, 2008
(file no. 000-23211)).
Amended and Restated Credit Agreement, dated as of March 18, 2011, by and among Bank of America, N.A., as
Administrative Agent, Bank of America, N.A., as Lender, and the other lenders party thereto, Casella and Casella’s
subsidiaries identified therein (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K
of Casella as filed on March 24, 2011 (file no. 000-23211)).
First Amendment to Amended and Restated Credit Agreement and Consent, dated as of April 27, 2012, by and
among Casella, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the
Lenders party thereto (incorporated herein by reference to Exhibit 10.50 to the annual report on Form 10-K of
Casella as filed on June 28, 2012 (file no. 000-23211)).
Second Amendment to Amended and Restated Credit Agreement and Consent, dated as of September 20,2012, by
and among Casella, Bank of America, N.A., as Administrative Agent, Swing Line Lender and LIC Issuer, and the
Lenders party thereto (incorporated herein by reference to Exhibit 10.3 to the quarterly report on Form 10-Q of
Casella as filed on December 4, 2012 (file no. 000-23211)).
Third Amendment to Amended and Restated Credit Agreement, dated as of June 25, 2013, by and among Casella,
Bank of America, N.A., as Administrative Agent, Swing Line Lender and LIC Issuer, and the Lenders party thereto
(incorporated herein by reference to Exhibit 10.1 to the current report on Form 8- K of Casella as filed on June 26,
2013 (file no. 000-23211)).
10.25*
Employment Agreement between Casella and Edwin D. Johnson dated as of July 6, 2010 (incorporated herein by
reference to Exhibit 10.1 to the quarterly report on Form 10-Q of Casella as filed on September 3, 2010
(file no. 000-23211)).
10.26*+
Letter Agreement between Casella and Edwin D. Johnson dated as of February 12, 2013.
10.27*+
Employment Agreement between Casella and David L. Schmitt dated as of May 31, 2006, as amended.
10.28*+
Employment Agreement between Casella and Edmond Coletta dated as of September 1, 2012.
10.29+
12.1 +
21.1 +
23.1 +
31.1 +
31.2 +
32.1 +
Extension of Lease Agreements dated as of April 23, 2013, between Casella Associates and Casella, amending (i)
Lease Agreement dated August 1, 1993, as amended (Montpelier lease) and (ii) Lease Agreement dated August 1,
1993, as amended (Rutland lease).
Statement of Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
Subsidiaries of Casella Waste Systems, Inc.
Consent of McGladrey LLP
Certification of Principal Executive Officer required by Rule 13a-15(e) or Rule 15d-15(e) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer required by Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS
XBRL Instance Document.**
101.SCH XBRL Taxonomy Extension Schema Document.**
101.CAL
XBRL Taxonomy Calculation Linkbase Document.**
101.LAB
XBRL Taxonomy Label Linkbase Document.**
101.PRE
XBRL Taxonomy Presentation Linkbase Document.**
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.**
+ Filed herewith
* This is a management contract or compensatory plan or arrangement.
** Submitted Electronically Herewith. Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language):
(i) Consolidated Balance Sheets as of April 30, 2014 and 2013, (ii) Consolidated Statements of Operations for fiscal years 2014, 2013 and 2012, (iii) Consolidated
Statements of Comprehensive Loss for fiscal years 2014, 2013 and 2012, (iv) Consolidated Statement of Stockholders’ Equity for fiscal years 2014, 2013 and
2012, (v) Consolidated Statements of Cash Flows for fiscal years 2014, 2013 and 2012, and (vi) Notes to Consolidated Financial Statements.
120
COMPANY OFFICERS
BOARD OF DIRECTORS
John W. Casella
Chairman, Chief Executive Officer & Secretary
John W. Casella
Chairman, Chief Executive Officer & Secretary
Edwin D. Johnson
President & Chief Operating Officer
Edmond “Ned” R. Coletta
Senior Vice President,
Chief Financial Officer & Treasurer
David L. Schmitt
Senior Vice President & General Counsel
Christopher B. Heald
Vice President & Chief Accounting Officer
Michael K. Burke
Senior Financial Executive
James F. Callahan, Jr.
Retired Partner, Arthur Andersen, LLP
Douglas R. Casella
Vice Chairman, President, Casella Construction, Inc.
John F. Chapple III
Retired President, Marlin Management Services
Joseph G. Doody
Vice Chairman, Staples, Inc.
Emily N. Green
President & Chief Executive Officer, Smart Lunches, Inc.
James P. McManus
President & Chief Executive Officer, The Hinckley Company
Gregory B. Peters
Managing General Partner,
Lake Champlain Capital Management, LLC
SHAREHOLDER INFORMATION
Annual Meeting of Shareholders
Killington Grand Hotel
Killington, VT
Tuesday, October 7, 2014
10:00 a.m.
Casella Waste Systems, Inc.
25 Greens Hill Lane
Rutland, VT 05701
Telephone: (802) 775-0325
Direct inquiries to:
Ned Coletta
Telephone: (802) 772-2239
E-mail: ned.coletta@casella.com
Auditors
McGladrey & Pullen, LLP
80 City Square
Boston, MA 02129
Legal Counsel
Wilmer Cutler Pickering Hale
and Dorr LLP
60 State Street
Boston, MA 02109
Transfer Agent & Registrar
Computershare
PO Box 43078
Providence, RI 02940-3078
Shareholder Inquiries:
(781) 575-2879
Stock Exchange
Casella Waste System, Inc.
is traded on the NASDAQ
Global Select Market under
the ticker symbol “CWST.”
SAFE HARBOR STATEMENT
Certain matters discussed in this press release are “forward-looking statements” intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be
identified as such by the context of the statements, including words such as “believe,” “expect,” “anticipate,” “plan,” “may,” “will,”
“would,” “intend,” “estimate,” “guidance” and other similar expressions, whether in the negative or affirmative. These forward-
looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which
we operate and management’s beliefs and assumptions. We cannot guarantee that we actually will achieve the plans, intentions,
expectations or guidance disclosed in the forward-looking statements made. Such forward-looking statements, and all phases of
our operations, involve a number of risks and uncertainties, any one or more of which could cause actual results to differ materially
from those described in our forward-looking statements. Such risks and uncertainties include or relate to, among other things:
adverse weather conditions that have negatively impacted and may continue to negatively impact our revenues and our operating
margin; current economic conditions that have adversely affected and may continue to adversely affect our revenues and our
operating margin; we may be unable to increase volumes at our landfills or improve our route profitability; our need to service
our indebtedness may limit our ability to invest in our business; we may be unable to reduce costs or increase pricing or volumes
sufficiently to achieve estimated Adjusted EBITDA and other targets; landfill operations and permit status may be affected by factors
outside our control; we may be required to incur capital expenditures in excess of our estimates; fluctuations in energy pricing or the
commodity pricing of our recyclables may make it more difficult for us to predict our results of operations or meet our estimates; we
may incur environmental charges or asset impairments in the future; and our change in our fiscal year may not benefit our financial
performance. There are a number of other important risks and uncertainties that could cause our actual results to differ materially
from those indicated by such forward-looking statements. These additional risks and uncertainties include, without limitation, those
detailed in Item 1A, “Risk Factors” in our Form 10-K for the year ended April 30, 2014.
We undertake no obligation to update publicly any forward-looking statements whether as a result of new information, future events
or otherwise, except as required by law.
25 Greens Hill Lane • Rutland, Vermont 05701
p. 802.775.0325 • f. 802.775.6198
casella.com