UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 31, 2012
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 | 03-0338873 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 25 Greens Hill Lane, Rutland, Vermont | 05701 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (802) 775-0325
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” 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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of November 30, 2012:
| Class A Common Stock, $0.01 par value per share: |
37,950,309 | |||
| Class B Common Stock, $0.01 par value per share: |
988,200 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
| October 31, 2012 |
April 30, 2012 |
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| ASSETS | ||||||||
| CURRENT ASSETS: |
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| Cash and cash equivalents |
$ | 1,901 | $ | 4,534 | ||||
| Restricted cash |
23,655 | 76 | ||||||
| Accounts receivable - trade, net of allowance for doubtful accounts of $1,213 and $740 |
50,978 | 47,472 | ||||||
| Refundable income taxes |
1,190 | 1,281 | ||||||
| Prepaid expenses |
8,063 | 6,077 | ||||||
| Inventory |
4,017 | 3,595 | ||||||
| Deferred income taxes |
3,583 | 3,712 | ||||||
| Other current assets |
642 | 609 | ||||||
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| Total current assets |
94,029 | 67,356 | ||||||
| Property, plant and equipment, net of accumulated depreciation and amortization of $622,989 and $593,206 |
424,839 | 416,717 | ||||||
| Goodwill |
102,722 | 101,706 | ||||||
| Intangible assets, net |
4,217 | 2,970 | ||||||
| Restricted assets |
521 | 424 | ||||||
| Notes receivable - related party/employee |
514 | 722 | ||||||
| Investments in unconsolidated entities |
20,729 | 22,781 | ||||||
| Other non-current assets |
21,904 | 21,067 | ||||||
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| 575,446 | 566,387 | |||||||
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| $ | 669,475 | $ | 633,743 | |||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
(in thousands, except for share and per share data)
| October 31, 2012 |
April 30, 2012 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
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| Current maturities of long-term debt and capital leases |
$ | 73,795 | $ | 1,228 | ||||
| Current maturities of financing lease obligations |
349 | 338 | ||||||
| Accounts payable |
51,326 | 46,709 | ||||||
| Accrued payroll and related expenses |
3,925 | 4,142 | ||||||
| Accrued interest |
8,328 | 9,803 | ||||||
| Current accrued capping, closure and post-closure costs |
7,069 | 4,907 | ||||||
| Other accrued liabilities |
23,582 | 21,208 | ||||||
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| Total current liabilities |
168,374 | 88,335 | ||||||
| Long-term debt and capital leases, less current maturities |
412,051 | 473,381 | ||||||
| Financing lease obligations, less current maturities |
1,640 | 1,818 | ||||||
| Accrued capping, closure and post-closure costs, less current portion |
34,220 | 34,722 | ||||||
| Deferred income taxes |
5,926 | 5,336 | ||||||
| Other long-term liabilities |
12,199 | 11,920 | ||||||
| COMMITMENTS AND CONTINGENCIES |
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| STOCKHOLDERS’ EQUITY: |
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| Casella Waste Systems, Inc. stockholders’ equity: |
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| Class A common stock - |
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| Authorized - 100,000,000 shares, $0.01 par value per share, issued and outstanding - 37,950,000 and 25,991,000 shares as of October 31, 2012 and April 30, 2012, respectively |
380 | 260 | ||||||
| Class B convertible common stock - |
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| Authorized - 1,000,000 shares, $0.01 par value per share, 10 votes per share, issued and outstanding - 988,000 shares as of October 31, 2012 and April 30, 2012, respectively |
10 | 10 | ||||||
| Additional paid-in capital |
332,008 | 288,348 | ||||||
| Accumulated deficit |
(299,573 | ) | (270,235 | ) | ||||
| Accumulated other comprehensive loss |
(746 | ) | (1,952 | ) | ||||
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| Total Casella Waste Systems, Inc. stockholders’ equity |
32,079 | 16,431 | ||||||
| Noncontrolling interest |
2,986 | 1,800 | ||||||
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| Total stockholders’ equity |
35,065 | 18,231 | ||||||
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| $ | 669,475 | $ | 633,743 | |||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
| Three Months Ended October 31, |
Six Months Ended October 31, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenues |
$ | 120,335 | $ | 129,866 | $ | 241,529 | $ | 257,059 | ||||||||
| Operating expenses: |
||||||||||||||||
| Cost of operations |
85,474 | 86,627 | 170,251 | 171,851 | ||||||||||||
| General and administration |
13,985 | 16,062 | 29,307 | 32,268 | ||||||||||||
| Depreciation and amortization |
14,632 | 15,061 | 29,388 | 29,567 | ||||||||||||
| Severance and reorganization costs |
1,793 | — | 1,827 | |||||||||||||
| Expense from divestiture and financing costs |
77 | — | 631 | — | ||||||||||||
| Legal settlement |
— | 359 | — | 1,359 | ||||||||||||
| Development project charge |
— | 131 | — | 131 | ||||||||||||
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| 115,961 | 118,240 | 231,404 | 235,176 | |||||||||||||
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| Operating income |
4,374 | 11,626 | 10,125 | 21,883 | ||||||||||||
| Other expense (income): |
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| Interest income |
(10 | ) | (3 | ) | (18 | ) | (12 | ) | ||||||||
| Interest expense |
11,699 | 11,210 | 23,551 | 22,369 | ||||||||||||
| Loss from equity method investments |
109 | 1,523 | 1,875 | 3,781 | ||||||||||||
| Loss on derivative instruments |
3,896 | — | 3,896 | — | ||||||||||||
| Loss on debt extinguishment |
9,670 | — | 9,670 | — | ||||||||||||
| Other income |
(311 | ) | (327 | ) | (441 | ) | (432 | ) | ||||||||
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| Other expense, net |
25,053 | 12,403 | 38,533 | 25,706 | ||||||||||||
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| Loss from continuing operations before income taxes and discontinued operations |
(20,679 | ) | (777 | ) | (28,408 | ) | (3,823 | ) | ||||||||
| Provision for income taxes |
413 | 67 | 1,063 | 728 | ||||||||||||
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| Loss from continuing operations before discontinued operations |
(21,092 | ) | (844 | ) | (29,471 | ) | (4,551 | ) | ||||||||
| Discontinued operations: |
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| Gain on disposal of discontinued operations (net of income tax provision of $0, $53, $0 and $489) |
— | 79 | — | 725 | ||||||||||||
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| Net loss |
(21,092 | ) | (765 | ) | (29,471 | ) | (3,826 | ) | ||||||||
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| Less: Net loss attributable to noncontrolling interest |
(125 | ) | — | (133 | ) | — | ||||||||||
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| Net loss attributable to common stockholders |
$ | (20,967 | ) | $ | (765 | ) | $ | (29,338 | ) | $ | (3,826 | ) | ||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Unaudited)
(in thousands, except for per share data)
| Three Months Ended October 31, |
Six Months Ended October 31, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Basic and diluted earnings per share: |
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| Loss from continuing operations before discontinued operations |
$ | (0.68 | ) | $ | (0.03 | ) | $ | (1.01 | ) | $ | (0.17 | ) | ||||
| Gain on disposal of discontinued operations, net of tax |
— | — | — | 0.03 | ||||||||||||
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| Net loss per common share |
$ | (0.68 | ) | $ | (0.03 | ) | $ | (1.01 | ) | $ | (0.14 | ) | ||||
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| Weighted average common shares outstanding: |
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| Basic and diluted |
30,872 | 26,759 | 28,932 | 26,661 | ||||||||||||
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| Amounts attributable to common stockholders: |
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| Loss from continuing operations, net of tax |
$ | (20,967 | ) | $ | (844 | ) | $ | (29,338 | ) | $ | (4,551 | ) | ||||
| Discontinued operations, net of tax |
— | 79 | — | 725 | ||||||||||||
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| Net loss |
$ | (20,967 | ) | $ | (765 | ) | $ | (29,338 | ) | $ | (3,826 | ) | ||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(Unaudited)
(in thousands)
| Three Months Ended October 31, |
Six Months Ended October 31, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net loss |
$ | (21,092 | ) | $ | (765 | ) | $ | (29,471 | ) | $ | (3,826 | ) | ||||
| Other comprehensive income (loss), net of tax: |
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| Unrealized (loss) income resulting from changes in fair value of derivative instruments, net of tax provision of $0, $0, $0 and $99 |
(716 | ) | (58 | ) | (2,799 | ) | 184 | |||||||||
| Realized loss (income) on derivative instruments reclassified into earnings, net of tax provision of $0, $0, $0 and $99 |
3,946 | (361 | ) | 3,990 | (716 | ) | ||||||||||
| Unrealized income (loss) resulting from changes in fair value of marketable securities |
21 | (5 | ) | 15 | (11 | ) | ||||||||||
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| Other comprehensive income (loss), net of tax |
3,251 | (424 | ) | 1,206 | (543 | ) | ||||||||||
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| Comprehensive loss |
(17,841 | ) | (1,189 | ) | (28,265 | ) | (4,369 | ) | ||||||||
| Less: Comprehensive loss attributable to noncontrolling interest |
(125 | ) | — | (133 | ) | — | ||||||||||
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| Comprehensive loss attributable to common stockholders |
$ | (17,716 | ) | $ | (1,189 | ) | $ | (28,132 | ) | $ | (4,369 | ) | ||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands)
| Casella Waste Systems, Inc. Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Class A Common Stock |
Class B Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
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| Total | Shares | Amount | Shares | Amount | Accumulated Deficit |
Noncontrolling Interest |
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| Balance, April 30, 2012 |
$ | 18,231 | 25,991 | $ | 260 | 988 | $ | 10 | $ | 288,348 | $ | (270,235 | ) | $ | (1,952 | ) | $ | 1,800 | ||||||||||||||||||
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| Net loss |
(29,471 | ) | — | — | — | — | — | (29,338 | ) | — | (133 | ) | ||||||||||||||||||||||||
| Other comprehensive income |
1,206 | — | — | — | — | — | — | 1,206 | — | |||||||||||||||||||||||||||
| Issuances of Class A common stock |
137 | 459 | 5 | — | — | 132 | — | — | — | |||||||||||||||||||||||||||
| Sale of Class A common stock, net |
42,149 | 11,500 | 115 | — | — | 42,034 | — | — | — | |||||||||||||||||||||||||||
| Stock-based compensation |
1,306 | — | — | — | — | 1,306 | — | — | — | |||||||||||||||||||||||||||
| Contributions from noncontrolling interest holder |
1,319 | — | — | — | — | — | — | — | 1,319 | |||||||||||||||||||||||||||
| Other |
188 | — | — | — | — | 188 | — | — | — | |||||||||||||||||||||||||||
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| Balance, October 31, 2012 |
$ | 35,065 | 37,950 | $ | 380 | 988 | $ | 10 | $ | 332,008 | $ | (299,573 | ) | $ | (746 | ) | $ | 2,986 | ||||||||||||||||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| Six Months Ended October 31, |
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| 2012 | 2011 | |||||||
| Cash Flows from Operating Activities: |
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| Net loss |
$ | (29,471 | ) | $ | (3,826 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities - |
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| Gain on disposal of discontinued operations, net |
— | (725 | ) | |||||
| Gain on sale of property and equipment |
(223 | ) | (754 | ) | ||||
| Depreciation and amortization |
29,388 | 29,567 | ||||||
| Depletion of landfill operating lease obligations |
4,878 | 4,514 | ||||||
| Interest accretion on landfill and environmental remediation liabilities |
1,858 | 1,740 | ||||||
| Development project charge |
— | 131 | ||||||
| Amortization of discount on second lien notes and senior subordinated notes |
502 | 467 | ||||||
| Loss from equity method investments |
1,875 | 3,781 | ||||||
| Loss on derivative instruments |
3,896 | — | ||||||
| Loss on debt extinguishment |
9,670 | — | ||||||
| Stock-based compensation |
1,306 | 1,366 | ||||||
| Excess tax benefit on the vesting of share based awards |
(188 | ) | (219 | ) | ||||
| Deferred income taxes |
907 | 1,008 | ||||||
| Changes in assets and liabilities, net of effects of acquisitions and divestitures - |
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| Accounts receivable |
(3,506 | ) | (2,070 | ) | ||||
| Accounts payable |
4,617 | 9,259 | ||||||
| Prepaid expenses, inventories and other assets |
(283 | ) | (482 | ) | ||||
| Accrued expenses and other liabilities |
(2,851 | ) | (2,279 | ) | ||||
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| Net cash provided by operating activities |
22,375 | 41,478 | ||||||
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| Cash Flows from Investing Activities: |
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| Acquisitions, net of cash acquired |
(4,635 | ) | (715 | ) | ||||
| Additions to property, plant and equipment - acquisitions |
(417 | ) | (133 | ) | ||||
| - growth |
(8,257 | ) | (6,410 | ) | ||||
| - maintenance |
(25,368 | ) | (29,427 | ) | ||||
| Payment for capital related to divestiture |
(618 | ) | — | |||||
| Payments on landfill operating lease contracts |
(3,298 | ) | (3,314 | ) | ||||
| Proceeds from sale of property and equipment |
557 | 1,170 | ||||||
| Investments in unconsolidated entities |
(1,000 | ) | (935 | ) | ||||
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| Net cash used in investing activities |
(43,036 | ) | (39,764 | ) | ||||
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| Cash Flows from Financing Activities: |
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| Proceeds from long-term borrowings |
236,177 | 82,100 | ||||||
| Principal payments on long-term debt |
(227,028 | ) | (82,146 | ) | ||||
| Change in restricted cash |
(23,579 | ) | — | |||||
| Payment of tender premium and costs on second lien notes |
(6,745 | ) | — | |||||
| Payments of financing costs |
(4,329 | ) | (184 | ) | ||||
| Net proceeds from the sale of Class A common stock |
42,149 | — | ||||||
| Proceeds from exercise of share based awards |
— | 176 | ||||||
| Excess tax benefit on the vesting of share based awards |
188 | 219 | ||||||
| Contributions from noncontrolling interest holder |
1,195 | — | ||||||
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| Net cash provided by financing activities |
18,028 | 165 | ||||||
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| Discontinued Operations: |
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| Net cash provided by operating activities |
— | 725 | ||||||
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| Net cash provided by discontinued operations |
— | 725 | ||||||
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| Net (decrease) increase in cash and cash equivalents |
(2,633 | ) | 2,604 | |||||
| Cash and cash equivalents, beginning of period |
4,534 | 1,817 | ||||||
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| Cash and cash equivalents, end of period |
$ | 1,901 | $ | 4,421 | ||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
| Six Months Ended October 31, |
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| 2012 | 2011 | |||||||
| Supplemental Disclosures of Cash Flow Information: |
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| Cash paid during the period for - |
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| Interest |
$ | 22,578 | $ | 20,531 | ||||
| Income taxes, net of refunds |
$ | 71 | $ | 5,281 | ||||
| Supplemental Disclosures of Non-Cash Investing and Financing Activities: |
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| Summary of entities acquired in purchase business combinations - |
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| Fair value of net assets acquired |
$ | 4,761 | $ | 744 | ||||
| Cash paid, net |
$ | 4,635 | $ | 715 | ||||
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| Liabilities assumed and holdbacks to sellers |
$ | 126 | $ | 29 | ||||
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| Equipment contributed by noncontrolling interest holder |
$ | — | $ | 1,270 | ||||
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
9
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except for per share data)
| 1. | BASIS OF PRESENTATION |
The accompanying unaudited consolidated financial statements include the accounts of Casella Waste Systems, Inc. (the “Parent”) and its wholly-owned subsidiaries and an entity in which it has a controlling financial interest (collectively, “we”, “us” or “our”). For the consolidated subsidiary that is less than wholly owned, the third-party holding of equity interest is referred to as a noncontrolling interest. The portion of net income (loss) attributable to the noncontrolling interest holder of this subsidiary is presented as net income (loss) attributable to noncontrolling interest in the unaudited consolidated statements of operations and the portion of comprehensive income (loss) attributable to the noncontrolling interest holder of this subsidiary is presented as comprehensive income (loss) attributable to noncontrolling interest in the unaudited consolidated statements of comprehensive loss. The portion of stockholders’ equity of this subsidiary attributable to the noncontrolling interest holder is presented as noncontrolling interest in the unaudited consolidated balance sheets and the unaudited consolidated statement of stockholders’ equity.
We are a regional, 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 also generate and sell electricity under a contract at a waste-to-energy facility, Maine Energy Recovery Company LP (“Maine Energy”). We closed on the sale of Maine Energy to the City of Biddeford, Maine on November 30, 2012. See Note 12 for further disclosure on the sale. We manage our solid waste operations on a geographic basis through two regional operating segments, the Eastern and Western regions, each of which includes a full range of solid waste services, and our larger-scale recycling and commodity brokerage operations through our Recycling segment. Ancillary operations, major customer accounts, discontinued operations and earnings through equity method investees are included in our Other segment.
The consolidated financial statements as of October 31, 2012 and for the three and six months ended October 31, 2012 and 2011 are unaudited. These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in the opinion of management, 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. The results for the three and six months ended October 31, 2012 may not be indicative of the results that may be expected for any other interim period or the fiscal year ending April 30, 2013. The unaudited consolidated financial statements presented herein should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended April 30, 2012.
The preparation of our unaudited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Our significant accounting policies are more fully discussed in Item 8 of our Annual Report on Form 10-K for the year ended April 30, 2012, which was filed with the the SEC on June 28, 2012.
Certain reclassifications have been made to previously reported amounts. These reclassifications had no effect on the previously reported consolidated financial position, results of operations or retained earnings.
We consider events or transactions that have occurred after the unaudited consolidated balance sheet date of October 31, 2012, but prior to the filing of the unaudited consolidated financial statements with the SEC on this Form 10-Q. We have evaluated subsequent events through the date of the filing of this Quarterly Report on Form 10-Q with the SEC.
Adoption of New Accounting Pronouncements
Other Comprehensive Income
In June 2011, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update for the presentation of comprehensive income. This guidance requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The updated standard also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net
10
income and the components of other comprehensive income are presented. The FASB deferred certain portions of the accounting standard update related to presentation of reclassification adjustments from other comprehensive income to net income. This guidance, except for the deferred portion noted above, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with early adoption permitted. We adopted this guidance effective May 1, 2012. It only impacts the presentation of our financial statements and does not impact our consolidated financial position or results of operations.
New Accounting Pronouncements Pending Adoption
Indefinite-Lived Intangible Assets Impairment Test
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, we determine that it is not more likely than not that an indefinite-lived intangible asset is impaired, then we will not need to perform the quantitative impairment test in accordance with Accounting Standards Codification (“ASC”) 350-30. This guidance is effective for annual and interim indefinite-lived assets impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted, and we expect that it will have no impact on our consolidated financial position or results of operations.
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 generally accepted accounting principles in the United States and those entities that prepare their financial statements on the basis of International Financial Reporting Standards. This guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods, and it will only impact the presentation of our financial statements and will not impact our consolidated financial position or results of operations.
| 2. | BUSINESS ACQUISITIONS |
During the six months ended October 31, 2012, we acquired two solid waste hauling operations in the Western region for total consideration of $4,761, including $4,285 in cash and $476 in holdbacks to the sellers. During the six months ended October 31, 2011, we acquired three 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 $744, including $715 in cash and $29 in holdbacks to the sellers. The operating results of these businesses are included in the accompanying unaudited consolidated statements of operations from the dates of acquisition, and the purchase prices have been allocated to the net assets acquired based on fair values at the dates of acquisition, with the residual amounts 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 as goodwill are expected to be deductible for tax purposes. The purchase price allocated to net assets acquired and the residual amount allocated to goodwill during the six months ended October 31, 2012 and 2011 are as follows:
| October 31, | ||||||||
| 2012 | 2011 | |||||||
| Equipment |
$ | 2,349 | $ | 319 | ||||
| Goodwill |
1,016 | 125 | ||||||
| Intangible assets |
1,486 | 308 | ||||||
| Current liabilities |
(90 | ) | (8 | ) | ||||
|
|
|
|
|
|||||
| Total |
$ | 4,761 | $ | 744 | ||||
|
|
|
|
|
|||||
11
The following unaudited pro forma combined financial information shows the results of our operations for the three and six months ended October 31, 2012 and 2011 as though each of the acquisitions made in the six months ended October 31, 2012 and the twelve months ended April 30, 2012 had occurred as of May 1, 2011.
| Three Months Ended October 31, |
Six Months Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenue |
$ | 120,457 | $ | 130,889 | $ | 241,835 | $ | 259,159 | ||||||||
| Operating income |
$ | 4,380 | $ | 11,673 | $ | 10,140 | $ | 21,986 | ||||||||
| Net loss attributable to common stockholders |
$ | (20,981 | ) | $ | (819 | ) | $ | (29,374 | ) | $ | (3,931 | ) | ||||
| Basic and diluted loss per common share attributable to common stockholders |
$ | (0.68 | ) | $ | (0.03 | ) | $ | (1.02 | ) | $ | (0.15 | ) | ||||
| Basic and diluted weighted average shares outstanding |
30,872 | 26,759 | 28,932 | 26,661 | ||||||||||||
The pro forma results set forth in the table above have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisitions occurred as of May 1, 2011 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.
| 3. | GOODWILL AND INTANGIBLE ASSETS |
The following table shows the activity and balances related to goodwill from April 30, 2012 through October 31, 2012:
| April 30, 2012 | Acquisitions | October 31, 2012 | ||||||||||
| Eastern region |
$ | 58 | $ | — | $ | 58 | ||||||
| Western region |
89,458 | 1,016 | 90,474 | |||||||||
| Recycling |
12,190 | — | 12,190 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 101,706 | $ | 1,016 | $ | 102,722 | ||||||
|
|
|
|
|
|
|
|||||||
Intangible assets as of October 31, 2012 and April 30, 2012 consist of the following:
| Covenants Not to Compete |
Client Lists | Total | ||||||||||
| Balance, October 31, 2012 |
||||||||||||
| Intangible assets |
$ | 16,029 | $ | 4,309 | $ | 20,338 | ||||||
| Less accumulated amortization |
(14,533 | ) | (1,588 | ) | (16,121 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| $ | 1,496 | $ | 2,721 | $ | 4,217 | |||||||
|
|
|
|
|
|
|
|||||||
| Balance, April 30, 2012 |
||||||||||||
| Intangible assets |
$ | 15,601 | $ | 3,093 | $ | 18,694 | ||||||
| Less accumulated amortization |
(14,324 | ) | (1,400 | ) | (15,724 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| $ | 1,277 | $ | 1,693 | $ | 2,970 | |||||||
|
|
|
|
|
|
|
|||||||
Intangible amortization expense for the three and six months ended October 31, 2012 and 2011 was $207, $151, $397 and $304, respectively. The intangible amortization expense estimated for the five fiscal years following fiscal year 2012 and thereafter is as follows:
| 2013 |
2014 |
2015 |
2016 |
2017 |
Thereafter | |||||
| $ 889 |
$784 | $734 | $554 | $449 | $1,204 |
12
| 4. | ACCRUED CAPPING, CLOSURE AND POST CLOSURE |
Accrued capping, closure and post-closure costs include the current and non-current portion of costs associated with obligations for closure and post-closure of our landfills. We estimate our future capping, closure and post-closure costs in order to determine the capping, closure and post-closure expense per ton of waste placed into each landfill. 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 capping, closure and post-closure liabilities for the six months ended October 31, 2012 and 2011 are as follows:
| Six Months Ended October 31, | ||||||||
| 2012 | 2011 | |||||||
| Beginning balance |
$ | 39,629 | $ | 36,407 | ||||
| Obligations incurred |
1,960 | 1,417 | ||||||
| Accretion expense |
1,789 | 1,671 | ||||||
| Payments |
(2,089 | ) | (648 | ) | ||||
|
|
|
|
|
|||||
| Ending balance |
$ | 41,289 | $ | 38,847 | ||||
|
|
|
|
|
|||||
| 5. | LONG-TERM DEBT AND CAPITAL LEASES |
Amendment and Refinancing Transactions
On September 20, 2012, we entered into a second amendment to and consent under our senior secured first lien credit facility (the “Senior Credit Facility”). The amendment provided that we could use up to $50,000 of the senior secured revolving credit facility (the “2011 Revolver”) proceeds under the Senior Credit Facility to redeem our $180,000 11% senior second lien notes due 2014 (the “Second Lien Notes”) and to pay for any interest, fees, premium or other amounts in connection with the refinancing of the Second Lien Notes, subject to the terms and conditions to such use, as described in the amendment. The amendment also contains additional modifications, including increasing the allowed amount of senior subordinated debt from $350,000 to $450,000, adjusting the definition of bank-defined cash flow by allowing for certain add backs, adjusting the definition of consolidated total interest expense by allowing for an exclusion of non-cash interest expense associated with interest rate derivatives, and providing for adjustments to the financial covenants, which become more restrictive over the term of the Senior Credit Facility.
On September 24, 2012, we initiated a cash tender offer and consent solicitation for our Second Lien Notes (the “Tender Offer”). On October 9, 2012, we repurchased $107,318 in aggregate principal amount of our then outstanding Second Lien Notes through the Tender Offer, leaving $72,682 in aggregate principal amount of Second Lien Notes outstanding as of October 31, 2012. 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 a consent payment 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 $72,682 in 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 9 2012, we completed the offering of an additional $125,000 of 7.75% senior subordinated notes (the “2019 Notes”), which will mature on February 15, 2019. The 2019 Notes were issued at a discount of $1,863, which is amortized to interest expense over the life of the 2019 Notes, with interest payable semiannually in arrears on February 15 and August 15 of each year, commencing February 15, 2013. The net proceeds from the offering of additional 2019 Notes were used to redeem the early tender of our Second Lien Notes and, together with $50,000 of 2011 Revolver borrowings, $42,149 of net equity proceeds from the offering and sale of Class A common stock discussed in Note 7 and other available funds, our remaining Second Lien Notes and to pay related transaction costs. As of October 31, 2012, $23,579 of net proceeds from the offering of additional 2019 Notes were included in restricted cash to refinance the remaining Second Lien Notes.
The 2011 Revolver, as amended, is subject to customary affirmative, negative and financial covenants. As of October 31, 2012, these covenants restrict fiscal year capital expenditures to 1.5 times our consolidated depreciation expenses, depletion expenses and landfill amortization expenses, set a minimum interest coverage ratio of 2.00, a maximum consolidated total funded debt to consolidated EBITDA ratio of 5.75 and a maximum senior funded debt to consolidated EBITDA ratio of 2.75. In addition to the financial covenants described above, the 2011 Revolver, 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 October 31, 2012, we were in compliance with all covenants under the indenture governing our 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 to.
13
Loss on Debt Extinguishment
In the three and six months ended October 31, 2012, we recorded a charge of $9,670 as a loss on debt extinguishment related to the refinancing of our Second Lien Notes. The loss on debt extinguishment consisted of a $1,667 non-cash write off of deferred financing costs, a $1,258 non-cash write off of the unamortized original issue discount and a $6,745 loss associated with the tender premium and other tender fees associated with the portion of the Second Lien Notes extinguished.
Long Term Debt and Capital Leases
Long-term debt and capital leases as of October 31, 2012 and April 30, 2012 consist of the following:
| October 31, 2012 |
April 30, 2012 |
|||||||
| Senior subordinated notes due February 15, 2019, 7.75%, interest payable semiannually, unsecured and unconditionally guaranteed (including unamortized discount of $1,849 and $0) |
$ | 323,151 | $ | 200,000 | ||||
| Senior second lien notes, due July 15, 2014 and redeemed on November 8, 2012, 11.00%, interest payable semiannually, secured by second priority lien on substantially all of our assets (including unamortized discount of $826 and $3,536) |
71,856 | 177,428 | ||||||
| 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 3.96% at October 31, 2012 based on one month LIBOR), secured by substantially all of our assets |
63,930 | 69,600 | ||||||
| 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 0.26% at October 31, 2012) enhanced by an irrevocable, transferable direct-pay letter of credit (3.875% at October 31, 2012) |
3,600 | 3,600 | ||||||
| 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 subsidiaires |
21,400 | 21,400 | ||||||
| Notes payable in connection with businesses acquired, bearing interest at rates of 2.49% - 6.50%, due in monthly or annual installments varying to $575, maturing May 2013 through April 2017 |
1,534 | 2,033 | ||||||
| Capital leases for facilities and equipment, bearing interest rates of 4.50% - 4.72%, due in monthly installments varying to $78, expiring April 2013 through January 2015 |
375 | 548 | ||||||
|
|
|
|
|
|||||
| 485,846 | 474,609 | |||||||
| Less—current maturities |
73,795 | 1,228 | ||||||
|
|
|
|
|
|||||
| $ | 412,051 | $ | 473,381 | |||||
|
|
|
|
|
|||||
| 6. | CONTINGENCIES |
| (a) | 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
14
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 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 ASC 450-20-25-2. 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 450-20-25-3. As of October 31, 2012, there were no accruals established related to our outstanding legal proceedings.
We offer no prediction of the outcome of any of the proceedings or negotiations described below. We are vigorously defending each of the unresolved lawsuits and claims described below. However, litigation is subject to inherent uncertainty and there can be no guarantee we will prevail or that any judgments against us, if sustained on appeal, will not have a material adverse effect on our business, financial condition, results of operations or cash flows.
Penobscot Energy Recovery Company Matter
On May 31, 2011, we received formal written notice from the Penobscot Energy Recovery Company (“PERC”) submitting to arbitration what it alleges is a disputed invoice in the amount of approximately $3,195 dated March 2, 2011. PERC contended that Pine Tree Waste, Inc., our subsidiary, failed since 2001 to honor a “put-or-pay” waste disposal arrangement. Arbitration of this matter was initiated, but in January 2012 a global settlement was reached in principle and memorialized in a letter of intent dated February 1, 2012, which documented the final terms of the settlement and dismissal of the arbitration action. The final global settlement documents were executed effective October 1, 2012. Pursuant to the terms of the settlement, we will not be required to make a cash payout. We anticipate that there may be nonmaterial incremental operational expenses that arise from implementing the terms of the settlement with regard to waste deliveries.
New York State Tax Litigation Matter
On January 18, 2011, certain of our subsidiaries doing business in New York State received a Notice of Deficiency (the “Notices”) from the New York State Department of Taxation and Finance asserting liability for corporation franchise tax for one or more of the tax years ended April 30, 2004 through April 30, 2006. The Notices, in the aggregate, assert liability of $3,852, comprising $2,220 of tax and $1,632 of penalties and interest. New York State has alleged that we are not permitted to file a single combined corporation franchise tax return with our subsidiaries for each of the years audited.
We filed Petitions for Redetermination (“Petitions”) with the State of New York Division of Tax Appeals on April 13-14, 2011, and an administrative hearing before a single tax tribunal administrative law judge on all Petitions that was scheduled for December 12, 2012 has been rescheduled to April 18-19, 2013. We expect to aggressively defend against this claim through the administrative adjudication and appeals process and the courts, if necessary. Under ASC 740, we believe our position will more likely than not be successful in contesting the deficiencies and consequently, we have not established any reserve for this matter.
| (b) | 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.
15
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 (the “Study”). A draft of the Study was submitted to 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 will be approximately $10,219 and it is unlikely that any costs relating to onsite remediation will be incurred until fiscal year 2014. On February 28, 2011, the DEC issued a Proposal 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 $12,130. The DEC issued the final ROD in June 2011 with proposed remedies consistent with its earlier ROD. A new Order on Consent and Administrative Settlement naming WSI and NiMo as Respondents was received by us on November 13, 2012, requiring that we enter into a Consent Order with DEC within 60 days and mandating implementation of the ROD.
WSI is jointly and severally liable for the total cost to remediate and we initially expected to be responsible for approximately 30% upon implementation of 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 cost to present value using a risk free interest rate (2.70%). At October 31, 2012 and April 30, 2012, we have recorded liabilities of $5,279 and $5,210, respectively, including the recognition of $34, $34, $69, and $69 of accretion expense in the three and six months ended October 31, 2012 and 2011, respectively.
In September 2011, the DEC settled its environmental claim against the estate of the former GM (known as the “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 expect the warrants to be issued in fiscal year 2013. We have not assumed that the payment of these claims will reduce our exposure.
| 7. | STOCKHOLDERS’ EQUITY |
| (a) | Stock Issuance |
On October 3, 2012, as a part of a registered public offering we sold 11,500 shares of Class A common stock with a par value of $0.01 per share at an average price of $4.00 per share. The net proceeds received from the registered public offering, after deducting underwriting discounts, commissions and offering expenses, were $42,149 and were used to refinance our Second Lien Notes.
| (b) | Stock Incentive Plans |
In May 2012, we granted an equal number of restricted stock units and performance stock units under the 2006 Stock Incentive Plan (the “2006 Plan”) to certain employees. The vesting of the performance stock units is based on our attainment of targeted annual returns on net assets in fiscal year 2015 and the vesting of the restricted stock units is based on continued employment over a three year period beginning on the grant date. As of October 31, 2012, the performance stock units included in the May 2012 grant could result in the issuance of up to 587 shares of Class A common stock based on the attainment of a targeted maximum annual return on net assets in fiscal year 2015 and the restricted stock units could result in the issuance of an aggregate of up to 293 shares of Class A common stock based on continued employment over the remainder of the three year service period. The performance stock units and the restricted stock units were granted at a grant date fair value of $5.17 per share.
16
As of October 31, 2012, there were 1,399 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 but which have become available for grant because such awards expired or otherwise resulted in shares not being issued.
Stock options granted generally vest over a one to four year period from the date of grant and are granted at prices equal to the prevailing fair market value at the issue date. In general, stock options are issued with a life not to exceed ten years. Shares issued by us upon exercise of stock options are issued from the pool of authorized shares of Class A common stock.
A summary of stock option activity for the six months ended October 31, 2012 is as follows:
| Stock Options | Weighted Average Exercise Price |
|||||||
| Outstanding, April 30, 2012 |
1,661 | $ | 10.55 | |||||
| Granted |
— | $ | — | |||||
| Exercised |
— | $ | — | |||||
| Forfeited |
(538 | ) | $ | 11.28 | ||||
|
|
|
|||||||
| Outstanding, October 31, 2012 |
1,123 | $ | 10.21 | |||||
|
|
|
|||||||
| Exercisable, October 31, 2012 |
1,032 | $ | 10.75 | |||||
|
|
|
|||||||
A summary of restricted stock, restricted stock unit and performance stock unit activity for the six months ended October 31, 2012 is as follows:
| Restricted Stock
/ Restricted Stock Units |
Weighted Average Grant Price |
Performance Stock Units (1) |
Weighted Average Grant Price |
|||||||||||||
| Outstanding, April 30, 2012 |
784 | $ | 4.47 | 596 | $ | 4.96 | ||||||||||
| Granted |
415 | $ | 5.02 | 316 | $ | 5.17 | ||||||||||
| Class A Common Stock Vested |
(427 | ) | $ | 3.90 | — | $ | — | |||||||||
| Forfeited |
(62 | ) | $ | 4.80 | (69 | ) | $ | 5.07 | ||||||||
|
|
|
|
|
|||||||||||||
| Outstanding, October 31, 2012 |
710 | $ | 5.10 | 843 | $ | 5.03 | ||||||||||
|
|
|
|
|
|||||||||||||
| (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 486 shares of Class A common stock. |
We recorded $614, $695, $1,254 and $1,313 of stock-based compensation expense related to stock options, performance stock units, restricted stock units and restricted stock, respectively, during the three and six months ended October 31, 2012 and 2011. We also recorded $17, $22, $52 and $53 of stock-based compensation expense related to our Employee Stock Purchase Plan during the three and six months ended October 31, 2012 and 2011, respectively.
Stock-based compensation expense is included in general and administration expenses in the unaudited consolidated statements of operations. The unrecognized stock-based compensation expense at October 31, 2012 related to unvested stock options, restricted stock and restricted stock units was $2,790, to be recognized over a weighted average period of 1.81 years. Maximum unrecognized stock-based compensation expense at October 31, 2012 related to outstanding performance stock units, and subject to the attainment of targeted maximum annual returns on net assets, was $5,546, to be recognized over a weighted average period of 1.63 years. The unrecognized stock-based compensation expense that we expect to recognize as of October 31, 2012 related to outstanding performance stock units based on our expected attainment levels was $999.
17
Our calculations of stock-based compensation expense associated with stock options and our Employee Stock Purchase Plan for the three and six months ended October 31, 2012 and 2011 were made using the Black-Scholes valuation model. For the three and six months ended October 31, 2012 and 2011, respectively, we did not grant any stock options. The fair value of shares to be purchased under our Employee Stock Purchase Plan were estimated assuming no expected dividend yield using the following weighted average assumptions for the three and six months ended October 31, 2012 and 2011:
| Three Months
Ended October 31, |
Six Months Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Employee Stock Purchase Plan: |
||||||||||||||||
| Expected life |
0.5 years | 0.5 years | 0.5 years | 0.5 years | ||||||||||||
| Risk-free interest rate |
0.15 | % | 0.10 | % | 0.15 | % | 0.10 | % | ||||||||
| Expected volatility |
38.15 | % | 47.79 | % | 38.15 | % | 47.79 | % | ||||||||
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 average of 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.
| 8. | EARNINGS PER SHARE |
The following table sets forth the numerator and denominator used in the computation of basic and diluted earnings per share (“EPS”):
| Three Months Ended October 31, |
Six Months Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Numerator: |
||||||||||||||||
| Loss from continuing operations before discontinued operations attributable to common stockholders |
$ | (20,967 | ) | $ | (844 | ) | $ | (29,338 | ) | $ | (4,551 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Denominator: |
||||||||||||||||
| Number of shares outstanding, end of period: |
||||||||||||||||
| Class A common stock |
37,950 | 25,949 | 37,950 | 25,949 | ||||||||||||
| Class B common stock |
988 | 988 | 988 | 988 | ||||||||||||
| Unvested restricted stock |
(134 | ) | (128 | ) | (134 | ) | (128 | ) | ||||||||
| Effect of weighted average shares outstanding during period |
(7,932 | ) | (50 | ) | (9,872 | ) | (148 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average number of common shares used in basic and diluted EPS |
30,872 | 26,759 | 28,932 | 26,661 | ||||||||||||
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|
|
|
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|
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For the three and six months ended October 31, 2012 and 2011, 2,126 and 3,099 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.
18
| 9. | 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, trade receivables, restricted trust and escrow accounts, commodity and interest rate derivatives, trade payables and long-term debt. The carrying values of cash and cash equivalents, trade receivables and trade payables approximate their respective fair values. At October 31, 2012, the fair value of our fixed rate debt, including the Second Lien Notes, the 2019 Notes and the Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-2 due January 1, 2025 (the “Converted Bonds”) was approximately $415,233 and the carrying value was $416,407. The fair value of these debt instruments is considered to be Level 1 within the fair value hierarchy as their fair values are based off of quoted market prices in active markets. As of October 31, 2012, the fair value of the 2011 Revolver approximated its carrying value of $63,930 based on current borrowing rates for similar types of borrowing arrangements.
As of October 31, 2012 our assets and liabilities that are measured at fair value on a recurring basis included the following:
| Fair Value Measurement at October 31, 2012 Using: | ||||||||||||
| Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||
| Assets: |
||||||||||||
| Restricted assets |
$ | 521 | $ | — | $ | — | ||||||
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|
|
|
|
|
|||||||
| Liabilities: |
||||||||||||
| Interest rate derivatives |
$ | — | $ | 3,896 | $ | — | ||||||
|
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|
|||||||
As of April 30, 2012 our assets and liabilities that are measured at fair value on a recurring basis included the following:
| Fair Value Measurement at April 30, 2012 Using: | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||
| Assets: |
||||||||||||
| Restricted assets |
$ | 424 | $ | — | $ | — | ||||||
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|
|
|
|
|
|||||||
| Liabilities: |
||||||||||||
| Interest rate derivatives |
$ | — | $ | 2,369 | $ | — | ||||||
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|
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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 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 $150,000 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.
For interest rate derivatives deemed to be effective cash flow hedges, the change in fair value is recorded in our stockholders’ equity as a component of accumulated other comprehensive 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 of the underlying debt. 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 dedesignated both of the $75,000 forward starting interest rate derivative agreements and discontinued hedge accounting in accordance with ASC 815-30 in the three months ended October 31, 2012 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 5. We recognized a $3,626 loss, reclassified from accumulated other comprehensive loss, as a loss on derivative instruments in the three and six months ended October 31, 2012.
19
The fair values of the interest rate derivatives are obtained from third-party counter-parties and adjusted based on the credit risk of our counter-parties and us. We recognize all derivatives on the balance sheet at fair value.
| 10. | DEVELOPMENT PROJECT CHARGE |
In the three months ended October 31, 2011, we recorded a charge of $131 for deferred costs associated with certain development projects no longer deemed viable. As of October 31, 2012 and April 30, 2012, we had $1,460 and $1,163 of deferred costs associated with development projects included in other non-current assets within our unaudited consolidated balance sheets.
| 11. | SEVERANCE AND REORGANIZATION |
On August 8, 2012, we realigned our operations in order to streamline functions and improve our cost structure. Through the reorganization we have enhanced 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 recorded a one-time severance and reorganization charge of $1,793 in the three and six months ended October 31, 2012.
| 12. | DIVESTITURE AND DISCONTINUED OPERATIONS |
Maine Energy Divestiture
On August 1, 2012, we executed a purchase and sale agreement with the City of Biddeford, Maine pursuant to which we agreed to sell the real and personal property of Maine Energy, which resides in our Eastern region, 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 shall be paid in installments over the next 21 years, subject to the terms of the purchase and sale agreement. The transaction closed on November 30, 2012 and we waved certain conditions precedent not satisfied at that time. Post closing, we are entitled to continue operations of Maine Energy for our benefit and obligated to begin work to decommission the facility in accordance with the provisions of the agreement within a period not to exceed six months after the closing date. Following the decommissioning of Maine Energy, 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.
Discontinued Operations
On January 23, 2011, we entered into a purchase and sale agreement and related agreements to sell non-integrated recycling assets and select intellectual property assets to a new company (the “Purchaser”) formed by Pegasus Capital Advisors, L.P. and Intersection LLC for $130,400 in gross proceeds. Pursuant to these agreements, we divested non-integrated recycling assets located outside our core operating regions of New York, Massachusetts, Vermont, New Hampshire, Maine and northern Pennsylvania, including 17 material recovery facilities (“MRFs”), one transfer station and certain related intellectual property assets. Following the transaction, we retained four integrated MRFs located in our core operating regions. As a part of the disposition, we also entered into a ten-year commodities marketing agreement with the Purchaser to market 100% of the tonnage from three of our remaining integrated MRFs.
We completed the transaction on March 1, 2011 for $134,195 in gross cash proceeds. This included an estimated $3,795 working capital and other purchase price adjustment, which was subject to further adjustment, as defined in the purchase and sale agreement. The final working capital adjustment, along with additional legal expenses related to the transaction, of $646 was recorded to gain on disposal of discontinued operations, net of income taxes in the first quarter of fiscal year 2012.
In the three months ended October 31, 2011, we recorded an additional working capital adjustment of $79 to gain (loss) on disposal of discontinued operations, net of income taxes, which related to our subsequent collection of receivable balances that were released to us for collection by the Purchaser.
| 13. | 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
20
derived mainly from collection, transfer, disposal, landfill, landfill-gas-to energy, recycling and organic services in the northeastern United States. The Eastern region also includes Maine Energy, which generates electricity from non-hazardous solid waste. On November 30, 2012, we closed on a purchase and sale agreement to sell our Maine Energy facility to the City of Biddeford, Maine, which will result in the cessation of operations at that facility for a period not to exceed six months after the closing date. Our revenues in the Recycling segment are derived from municipalities and customers in the form of processing fees, tipping fees and commodity sales. Ancillary operations, major customer accounts, discontinued operations, and earnings from equity method investees are included in our “Other” reportable segment.
Three Months Ended October 31, 2012
| Segment |
Outside revenues |
Inter-company revenue (1) |
Depreciation and amortization |
Operating income (loss) |
Total assets | |||||||||||||||
| Eastern |
$ | 44,749 | $ | 8,281 | $ | 6,033 | $ (941) | $ | 174,205 | |||||||||||
| Western |
55,346 | 18,020 | 7,123 | 7,111 | 355,234 | |||||||||||||||
| Recycling |
9,040 | (13 | ) | 1,051 | (441 | ) | 52,325 | |||||||||||||
| Other |
11,200 | 491 | 425 | (1,355 | ) | 87,711 | ||||||||||||||
| Eliminations |
— | (26,779 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 120,335 | $ | — | $ | 14,632 | $ | 4,374 | $ | 669,475 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Three Months Ended October 31, 2011
| Segment |
Outside revenues |
Inter-company revenue (1) |
Depreciation and amortization |
Operating income (loss) |
Total assets | |||||||||||||||
| Eastern |
$ | 45,190 | $ | 9,543 | $ | 6,069 | $ | 672 | $ | 216,113 | ||||||||||
| Western |
59,536 | 19,851 | 7,582 | 9,473 | 351,058 | |||||||||||||||
| Recycling |
13,819 | (59 | ) | 932 | 2,096 | 58,319 | ||||||||||||||
| Other |
11,321 | 614 | 478 | (615 | ) | 72,450 | ||||||||||||||
| Eliminations |
— | (29,949 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 129,866 | $ | — | $ | 15,061 | $ | 11,626 | $ | 697,940 | ||||||||||
|
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|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended October 31, 2012
| Segment |
Outside revenues |
Inter-company revenue (1) |
Depreciation and amortization |
Operating income (loss) |
Total assets | |||||||||||||||
| Eastern |
$ | 90,949 | $ | 16,534 | $ | 12,477 | $ | (1,144 | ) | $ | 174,205 | |||||||||
| Western |
108,713 | 35,476 | 13,900 | 13,494 | 355,234 | |||||||||||||||
| Recycling |
19,404 | (63 | ) | 2,120 | (399 | ) | 52,325 | |||||||||||||
| Other |
22,463 | 1,266 | 891 | (1,826 | ) | 87,711 | ||||||||||||||
| Eliminations |
— | (53,213 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 241,529 | $ | — | $ | 29,388 | $ | 10,125 | $ | 669,475 | ||||||||||
|
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|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended October 31, 2011
| Segment |
Outside revenues |
Inter-company revenue (1) |
Depreciation and amortization |
Operating income (loss) |
Total assets | |||||||||||||||
| Eastern |
$ | 89,950 | $ | 19,293 | $ | 12,029 | $ | 887 | $ | 216,113 | ||||||||||
| Western |
116,408 | 39,121 | 14,730 | 18,821 | 351,058 | |||||||||||||||
| Recycling |
26,723 | (104 | ) | 1,861 | 4,344 | 58,319 | ||||||||||||||
| Other |
23,978 | 1,076 | 947 | (2,169 | ) | 72,450 | ||||||||||||||
| Eliminations |
— | (59,386 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 257,059 | $ | — | $ | 29,567 | $ | 21,883 | $ | 697,940 | ||||||||||
|
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|
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21
| 1) | Inter-company revenues reflect transactions with and between segments that are generally made on a basis intended to reflect the market value of such services. |
Amounts of our total revenue attributable to services provided are as follows:
| Three and Six Month Ended October 31, | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Collection |
$ | 53,104 | $ | 54,764 | $ | 106,147 | $ | 108,390 | ||||||||
| Disposal |
32,382 | 34,254 | 63,349 | 66,426 | ||||||||||||
| Power generation |
2,793 | 3,190 | 5,456 | 6,233 | ||||||||||||
| Organics and processing |
13,795 | 13,992 | 28,427 | 28,730 | ||||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Solid waste operations |
102,074 | 106,200 | 203,379 | 209,779 | ||||||||||||
| Major accounts |
9,221 | 9,847 | 18,746 | 20,557 | ||||||||||||
| Recycling |
9,040 | 13,819 | 19,404 | 26,723 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
$ | 120,335 | $ | 129,866 | $ | 241,529 | $ | 257,059 | ||||||||
|
|
|
|
|
|
|
|
|
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We have revised our table of revenue by source to more closely align the types of revenue generated by our operating segments. Amounts for the three and six months ended October 31, 2011 have been revised to conform to this presentation.
| 14. | INVESTMENTS IN UNCONSOLIDATED ENTITIES |
Equity Method Investments
GreenFiber. We entered into a joint venture agreement in July 2000 with Louisiana-Pacific Corporation (“LP”) to combine our respective cellulose insulation businesses into a single operating entity, US GreenFiber LLC (“GreenFiber”). We account for our 50% membership interest in GreenFiber using the equity method of accounting.
In April 2011, we issued a guaranty in support of GreenFiber’s amended and restated loan and security agreement. The guaranty can be drawn on upon an event of default and remains in place through December 1, 2014, the extended term of GreenFiber’s modified and restated loan and security agreement. Our guaranty associated with the credit facility is $2,200 as of October 31, 2012. The fair value of our guaranty as of October 31, 2012, which is recorded in other long-term liabilities, is $264.
In May 2012, we and LP made identical commitments to fund any liquidity shortfalls of GreenFiber related to covenant compliance as defined in and through the term of GreenFiber’s modified and restated loan and security agreement. Based on the terms of this agreement, in May 2012, we and LP made identical equity contributions to GreenFiber of $500 to cure such shortfall.
Our investment in GreenFiber amounted to $3,893 and $6,502 at October 31, 2012 and April 30, 2012, respectively. Summarized financial information for GreenFiber is as follows:
| October 31, 2012 |
April 30, 2012 |
|||||||
| Current assets |
$ | 17,160 | $ | 17,513 | ||||
| Noncurrent assets |
$ | 32,887 | $ | 34,597 | ||||
| Current liabilities |
$ | 15,777 | $ | 12,815 | ||||
| Noncurrent liabilities |
$ | 5,575 | $ | 5,382 | ||||
22
| Three Months
Ended October 31, |
Six Months
Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenue |
$ | 19,494 | $ | 21,841 | $ | 32,595 | $ | 37,856 | ||||||||
| Gross profit |
$ | 4,300 | $ | 2,564 | $ | 5,900 | $ | 3,515 | ||||||||
| Net loss |
$ | (297 | ) | $ | (3,049 | ) | $ | (3,866 | ) | $ | (7,564 | ) | ||||
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 MRF located in Tompkins County, NY and processes and sells commodities delivered to the Tompkins MRF. In connection with the formation of the joint venture, we acquired a 50% membership interest in Tompkins in exchange for an initial cash contribution to Tompkins of $285. FCR made an initial cash contribution of $285 as well, and acquired a 50% membership interest in Tompkins. Income and losses are allocated to members based on membership interest percentage. Our investment in Tompkins amounted to $350 and $292 at October 31, 2012 and April 30, 2012, respectively. We account for our 50% membership interest in Tompkins using the equity method of accounting.
Cost Method Investments
Evergreen. Our investment and ownership interest in Evergreen National Indemnity Company, a surety company which provides surety bonds to us, amounted to $10,657 and 19.9%, as of October 31, 2012 and April 30, 2012.
RecycleRewards. Our investment and ownership interest in RecycleRewards, Inc., a company that markets an incentive based recycling service, amounted to $4,479 and 6.2% as of October 31, 2012 and April 30, 2012.
AGreen. In May 2011, we entered into a renewable energy project operating agreement with AGreen Energy LLC (“AGreen”). As a part of the agreement, we provide certain operation, maintenance and administrative services, as well as procure organic materials that would otherwise be disposed of to small farm-based biogas renewable energy projects that produce renewable energy and other valuable products and services. Our investment and membership interest in AGreen amounted to $350 and 11.9% as of October 31, 2012 and April 30, 2012.
GreenerU . In March 2012, we entered into a strategic partnership agreement with GreenerU, Inc. (“GreenerU”), a company that delivers energy and sustainability solutions to the college, university and preparatory school markets in order to reduce their energy costs and carbon emissions through the formulation of programs and policies and the running of renewable energy projects. As a part of the agreement, we work with GreenerU to formulate compelling offers and approaches for colleges, universities and preparatory schools in the area of waste, recycling, energy, composting, resource conservation and other appropriate sustainability initiatives. In the first quarter of fiscal year 2013, we made a $500 investment in GreenerU through the purchase of preferred stock, bringing our investment and ownership interest in GreenerU to $1,000 and 6.3% as of October 31, 2012. Our investment and ownership interest in GreenerU was $500 and 4.2% as of April 30, 2012.
| 15. | 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 October 31, 2012 and April 30, 2012, the consolidating results of operations and comprehensive income for the three and six months ended October 31, 2012 and 2011, and the condensed consolidating statements of cash flows for the six months ended October 31, 2012 and 2011 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.
23
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF OCTOBER 31, 2012
(in thousands, except for share and per share data)
| ASSETS |
Parent | Guarantors | Non-Guarantors | Elimination | Consolidated | |||||||||||||||
| CURRENT ASSETS: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 1,486 | $ | 319 | $ | 96 | $ | — | $ | 1,901 | ||||||||||
| Restricted cash |
23,579 | 76 | — | — | 23,655 | |||||||||||||||
| Accounts receivable—trade, net of allowance for doubtful accounts |
222 | 50,304 | 452 | — | 50,978 | |||||||||||||||
| Deferred income taxes |
3,583 | — | — | — | 3,583 | |||||||||||||||
| Prepaid expenses |
2,851 | 5,212 | — | — | 8,063 | |||||||||||||||
| Other current assets |
1,562 | 4,246 | 41 | — | 5,849 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total current assets |
33,283 | 60,157 | 589 | — | 94,029 | |||||||||||||||
| Property, plant and equipment, net of accumulated depreciation and amortization |
3,192 | 413,181 | 8,466 | — | 424,839 | |||||||||||||||
| Goodwill |
— | 102,722 | — | — | 102,722 | |||||||||||||||
| Intangible assets |
294 | 3,923 | — | — | 4,217 | |||||||||||||||
| Notes receivable - related party/employee |
514 | — | — | — | 514 | |||||||||||||||
| Investments in unconsolidated entities |
20,060 | 2,601 | — | (1,932 | ) | 20,729 | ||||||||||||||
| Investments in subsidiaries |
(44,648 | ) | — | — | 44,648 | — | ||||||||||||||
| Other non-current assets |
15,680 | 6,745 | — | — | 22,425 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (4,908 | ) | 529,172 | 8,466 | 42,716 | 575,446 | |||||||||||||||
| Intercompany receivable |
547,670 | (534,059 | ) | (15,543 | ) | 1,932 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 576,045 | $ | 55,270 | $ | (6,488 | ) | $ | 44,648 | $ | 669,475 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
Parent | Guarantors | Non-Guarantors | Elimination | Consolidated | |||||||||||||||
| CURRENT LIABILITIES: |
||||||||||||||||||||
| Current maturities of long - term debt and capital leases |
$ | 72,754 | $ | 1,041 | $ | — | $ | — | $ | 73,795 | ||||||||||
| Current maturities of financing lease obligations |
— | 349 | — | — | 349 | |||||||||||||||
| Accounts payable |
23,995 | 26,470 | 861 | — | 51,326 | |||||||||||||||
| Current accrued capping, closure and post-closure costs |
— | 7,069 | — | — | 7,069 | |||||||||||||||
| Other current liabilities |
23,997 | 10,060 | 1,778 | — | 35,835 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total current liabilities |
120,746 | 44,989 | 2,639 | — | 168,374 | |||||||||||||||
| Long-term debt and capital leases, less current maturities |
411,255 | 796 | — | — | 412,051 | |||||||||||||||
| Financing lease obligations, less current maturities |
— | 1,640 | — | — | 1,640 | |||||||||||||||
| Accrued capping, closure and post-closure costs, less current portion |
— | 34,178 | 42 | — | 34,220 | |||||||||||||||
| Deferred income taxes |
5,926 | — | — | — | 5,926 | |||||||||||||||
| Other long-term liabilities |
6,039 | 6,160 | — | — | 12,199 | |||||||||||||||
| STOCKHOLDERS’ EQUITY: |
||||||||||||||||||||
| Casella Waste Systems, Inc. stockholders’ equity: |
||||||||||||||||||||
| Class A common stock - |
||||||||||||||||||||
| Authorized—100,000,000 shares, $0.01 par value per share, issued and outstanding—37,950,000 shares |
380 | 100 | — | (100 | ) | 380 | ||||||||||||||
| Class B common stock - |
||||||||||||||||||||
| Authorized—1,000,000 shares, $0.01 par value per share, 10 votes per share, issued and outstanding—988,000 shares |
10 | — | — | — | 10 | |||||||||||||||
| Additional paid-in capital |
332,008 | 41,504 | 3,579 | (45,083 | ) | 332,008 | ||||||||||||||
| Accumulated deficit |
(299,573 | ) | (73,351 | ) | (15,734 | ) | 89,085 | (299,573 | ) | |||||||||||
| Accumulated other comprehensive income (loss) |
(746 | ) | (746 | ) | — | 746 | (746 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Casella Waste Systems, Inc. stockholders’ equity |
32,079 | (32,493 | ) | (12,155 | ) | 44,648 | 32,079 | |||||||||||||
| Noncontrolling interest |
— | — | 2,986 | — | 2,986 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total stockholders’ equity |
32,079 | (32,493 | ) | (9,169 | ) | 44,648 | 35,065 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 576,045 | $ | 55,270 | $ | (6,488 | ) | $ | 44,648 | $ | 669,475 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
24
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF APRIL 30, 2012
(in thousands, except for share and per share data)
| ASSETS |
Parent | Guarantors | Non-Guarantors | Elimination | Consolidated | |||||||||||||||
| CURRENT ASSETS: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 3,799 | $ | 368 | $ | 367 | $ | — | $ | 4,534 | ||||||||||
| Accounts receivable - trade, net of allowance for doubtful accounts |
652 | 46,820 | — | — | 47,472 | |||||||||||||||
| Refundable income taxes |
1,281 | — | — | — | 1,281 | |||||||||||||||
| Deferred income taxes |
3,712 | — | — | — | 3,712 | |||||||||||||||
| Other current assets |
1,903 | 8,454 | — | — | 10,357 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total current assets |
11,347 | 55,642 | 367 | — | 67,356 | |||||||||||||||
| Property, plant and equipment, net of accumulated depreciation and amortization |
3,486 | 409,383 | 3,848 | — | 416,717 | |||||||||||||||
| Goodwill |
— | 101,706 | — | — | 101,706 | |||||||||||||||
| Intangible assets |
340 | 2,630 | — | — | 2,970 | |||||||||||||||
| Restricted assets |
— | 424 | — | — | 424 | |||||||||||||||
| Notes receivable - related party/employee |
722 | — | — | — | 722 | |||||||||||||||
| Investments in unconsolidated entities |
17,865 | 6,848 | — | (1,932 | ) | 22,781 | ||||||||||||||
| Investments in subsidiaries |
(34,522 | ) | — | — | 34,522 | — | ||||||||||||||
| Other non-current assets |
15,056 | 6,011 | — | — | 21,067 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 2,947 | 527,002 | 3,848 | 32,590 | 566,387 | ||||||||||||||||
| Intercompany receivable |
531,150 | (517,660 | ) | (15,422 | ) | 1,932 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 545,444 | $ | 64,984 | $ | (11,207 | ) | $ | 34,522 | $ | 633,743 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | Parent | Guarantors | Non -Guarantors | Elimination | Consolidated | |||||||||||||||
| CURRENT LIABILITIES: |
||||||||||||||||||||
| Current maturities of long-term debt and capital leases |
$ | 142 | $ | 1,086 | $ | — | $ | — | $ | 1,228 | ||||||||||
| Current maturities of financing lease obligations |
— | 338 | — | — | 338 | |||||||||||||||
| Accounts payable |
21,952 | 24,757 | — | — | 46,709 | |||||||||||||||
| Current accrued capping, closure and post-closure costs |
— | 4,907 | — | — | 4,907 | |||||||||||||||
| Other current liabilities |
23,738 | 10,872 | 543 | — | 35,153 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total current liabilities |
45,832 | 41,960 | 543 | — | 88,335 | |||||||||||||||
| Long-term debt and capital leases, less current maturities |
472,028 | 1,353 | — | — | 473,381 | |||||||||||||||
| Financing lease obligations, less current maturities |
— | 1,818 | — | — | 1,818 | |||||||||||||||
| Accrued capping, closure and post-closure costs, less current portion |
— | 34,681 | 41 | — | 34,722 | |||||||||||||||
| Deferred income taxes |
5,336 | — | — | — | 5,336 | |||||||||||||||
| Other long-term liabilities |
5,817 | 6,103 | — | — | 11,920 | |||||||||||||||
| STOCKHOLDERS’ EQUITY: |
||||||||||||||||||||
| Casella Waste Systems, Inc. stockholders’ equity: |
||||||||||||||||||||
| Class A common stock - |
||||||||||||||||||||
| Authorized - 100,000,000 shares, $0.01 par value per share, issued and outstanding - 25,991,000 shares |
260 | 100 | — | (100 | ) | 260 | ||||||||||||||
| Class B common stock - |
||||||||||||||||||||
| Authorized - 1,000,000 shares, $0.01 par value per share, 10 votes per share, issued and outstanding - 988,000 shares |
10 | — | — | — | 10 | |||||||||||||||
| Additional paid-in capital |
288,348 | 46,200 | 2,004 | (48,204 | ) | 288,348 | ||||||||||||||
| Accumulated deficit |
(270,235 | ) | (67,648 | ) | (15,595 | ) | 83,243 | (270,235 | ) | |||||||||||
| Accumulated other comprehensive income (loss) |
(1,952 | ) | 417 | — | (417 | ) | (1,952 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Casella Waste Systems, Inc. stockholders’ equity |
16,431 | (20,931 | ) | (13,591 | ) | 34,522 | 16,431 | |||||||||||||
| Noncontrolling interest |
— | — | 1,800 | — | 1,800 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total stockholders’ equity |
16,431 | (20,931 | ) | (11,791 | ) | 34,522 | 18,231 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 545,444 | $ | 64,984 | $ | (11,207 | ) | $ | 34,522 | $ | 633,743 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
25
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2012
(in thousands)
| Parent | Guarantors | Non - Guarantors | Elimination | Consolidated | ||||||||||||||||
| Revenues |
$ | — | $ | 119,900 | $ | 435 | $ | — | $ | 120,335 | ||||||||||
| Operating expenses: |
||||||||||||||||||||
| Cost of operations |
(45 | ) | 84,903 | 616 | — | 85,474 | ||||||||||||||
| General and administration |
157 | 13,816 | 12 | — | 13,985 | |||||||||||||||
| Depreciation and amortization |
269 | 14,301 | 62 | — | 14,632 | |||||||||||||||
| Severance and reorganization costs |
926 | 867 | — | — | 1,793 | |||||||||||||||
| Expense from divestiture and financing costs |
— | 77 | — | — | 77 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 1,307 | 113,964 | 690 | — | 115,961 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
(1,307 | ) | 5,936 | (255 | ) | — | 4,374 | |||||||||||||
| Other expense (income), net: |
||||||||||||||||||||
| Interest income |
(7,636 | ) | (9 | ) | — | 7,635 | (10 | ) | ||||||||||||
| Interest expense |
11,250 | 8,084 | — | (7,635 | ) | 11,699 | ||||||||||||||
| Loss (income) from equity method investments |
2,275 | 109 | — | (2,275 | ) | 109 | ||||||||||||||
| Loss on derivative instruments |
3,896 | — | — | — | 3,896 | |||||||||||||||
| Loss on debt extinguishment |
9,670 | — | — | — | 9,670 | |||||||||||||||
| Other income |
(208 | ) | (103 | ) | — | — | (311 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other expense, net |
19,247 | 8,081 | — | (2,275 | ) | 25,053 | ||||||||||||||
| Income (loss) from continuing operations before income taxes |
(20,554 | ) | (2,145 | ) | (255 | ) | 2,275 | (20,679 | ) | |||||||||||
| Provision (benefit) for income taxes |
413 | — | — | — | 413 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) |
(20,967 | ) | (2,145 | ) | (255 | ) | 2,275 | (21,092 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less: Net income (loss) attributable to noncontrolling interest |
— | — | (125 | ) | — | (125 | ) | |||||||||||||
| Net income (loss) attributable to common stockholders |
$ | (20,967 | ) | $ | (2,145 | ) | $ | (130 | ) | $ | 2,275 | $ | (20,967 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
26
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2011
(in thousands)
| Parent | Guarantors | Non - Guarantors | Elimination | Consolidated | ||||||||||||||||
| Revenues |
$ | — | $ | 129,866 | $ | — | $ | — | $ | 129,866 | ||||||||||
| Operating expenses: |
||||||||||||||||||||
| Cost of operations |
18 | 86,608 | 1 | — | 86,627 | |||||||||||||||
| General and administration |
115 | 15,947 | — | — | 16,062 | |||||||||||||||
| Depreciation and amortization |
337 | 14,724 | — | — | 15,061 | |||||||||||||||
| Legal settlement |
— | 359 | — | — | 359 | |||||||||||||||
| Development project cost |
— | 131 | — | — | 131 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 470 | 117,769 | 1 | — | 118,240 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
(470 | ) | 12,097 | (1 | ) | — | 11,626 | |||||||||||||
| Other expense/(income), net: |
||||||||||||||||||||
| Interest income |
(9,846 | ) | (2 | ) | — | 9,845 | (3 | ) | ||||||||||||
| Interest expense |
11,323 | 9,732 | — | (9,845 | ) | 11,210 | ||||||||||||||
| Loss (income) from equity method investments |
(1,044 | ) | 1,523 | — | 1,044 | 1,523 | ||||||||||||||
| Other income |
(205 | ) | (122 | ) | — | — | (327 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other expense, net |
228 | 11,131 | — | 1,044 | 12,403 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations before income taxes |
(698 | ) | 966 | (1 | ) | (1,044 | ) | (777 | ) | |||||||||||
| Provision for income taxes |
67 | — | — | — | 67 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations |
(765 | ) | 966 | (1 | ) | (1,044 | ) | (844 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Discontinued operations: |
||||||||||||||||||||
| Gain on disposal of discontinued operations, net of tax |
— | 79 | — | — | 79 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) attributable to common stockholders |
$ | (765 | ) | $ | 1,045 | $ | (1 | ) | $ | (1,044 | ) | $ | (765 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
27
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 2012
(in thousands)
| Parent | Guarantors | Non - Guarantors | Elimination | Consolidated | ||||||||||||||||
| Revenues |
$ | — | $ | 241,084 | $ | 445 | $ | — | $ | 241,529 | ||||||||||
| Operating expenses: |
||||||||||||||||||||
| Cost of operations |
(17 | ) | 169,642 | 626 | — | 170,251 | ||||||||||||||
| General and administration |
3 | 29,274 | 30 | — | 29,307 | |||||||||||||||
| Depreciation and amortization |
533 | 28,794 | 61 | — | 29,388 | |||||||||||||||
| Severance and reorganization costs |
926 | 901 | — | — | 1,827 | |||||||||||||||
| Expense from divestiture and financing costs |
303 | 328 | — | — | 631 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 1,748 | 228,939 | 717 | — | 231,404 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
(1,748 | ) | 12,145 | (272 | ) | — | 10,125 | |||||||||||||
| Other expense (income), net: |
||||||||||||||||||||
| Interest income |
(16,239 | ) | (16 | ) | — | 16,237 | (18 | ) | ||||||||||||
| Interest expense |
23,578 | 16,210 | — | (16,237 | ) | 23,551 | ||||||||||||||
| Loss (income) from equity method investments |
5,842 | 1,875 | — | (5,842 | ) | 1,875 | ||||||||||||||
| Loss on derivative instruments |
3,896 | — | — | 3,896 | ||||||||||||||||
| Loss on debt extinguishment |
9,670 | — | — | — | 9,670 | |||||||||||||||
| Other income |
(220 | ) | (221 | ) | — | — | (441 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other expense, net |
26,527 | 17,848 | — | (5,842 | ) | 38,533 | ||||||||||||||
| Income (loss) from continuing operations before income taxes |
(28,275 | ) | (5,703 | ) | (272 | ) | 5,842 | (28,408 | ) | |||||||||||
| Provision (benefit) for income taxes |
1,063 | — | — | — | 1,063 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) |
(29,338 | ) | (5,703 | ) | (272 | ) | 5,842 | (29,471 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less: Net income (loss) attributable to noncontrolling interest |
— | — | (133 | ) | — | (133 | ) | |||||||||||||
| Net income (loss) attributable to common stockholders |
$ | (29,338 | ) | $ | (5,703 | ) | $ | (139 | ) | $ | 5,842 | $ | (29,338 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
28
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 2011
(in thousands)
| Parent | Guarantors | Non - Guarantors | Elimination | Consolidated | ||||||||||||||||
| Revenues |
$ | — | $ | 257,059 | $ | — | $ | — | $ | 257,059 | ||||||||||
| Operating expenses: |
||||||||||||||||||||
| Cost of operations |
29 | 171,820 | 2 | — | 171,851 | |||||||||||||||
| General and administration |
413 | 31,855 | — | — | 32,268 | |||||||||||||||
| Depreciation and amortization |
674 | 28,893 | — | — | 29,567 | |||||||||||||||
| Legal settlement |
1,000 | 359 | — | — | 1,359 | |||||||||||||||
| Development project cost |
— | 131 | — | — | 131 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 2,116 | 233,058 | 2 | — | 235,176 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
(2,116 | ) | 24,001 | (2 | ) | — | 21,883 | |||||||||||||
| Other expense (income), net: |
||||||||||||||||||||
| Interest income |
(19,717 | ) | (6 | ) | — | 19,711 | (12 | ) | ||||||||||||
| Interest expense |
22,459 | 19,621 | — | (19,711 | ) | 22,369 | ||||||||||||||
| Loss (income) from equity method investments |
(1,553 | ) | 3,781 | — | 1,553 | 3,781 | ||||||||||||||
| Other income |
(207 | ) | (225 | ) | — | — | (432 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other expense, net |
982 | 23,171 | — | 1,553 | 25,706 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations before income taxes |
(3,098 | ) | 830 | (2 | ) | (1,553 | ) | (3,823 | ) | |||||||||||
| Provision for income taxes |
728 | — | — | — | 728 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations |
(3,826 | ) | 830 | (2 | ) | (1,553 | ) | (4,551 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Discontinued operations: |
||||||||||||||||||||
| Gain on disposal of discontinued operations, net of tax |
— | 725 | — | — | 725 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) attributable to common stockholders |
$ | (3,826 | ) | $ | 1,555 | $ | (2 | ) | $ | (1,553 | ) | $ | (3,826 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
29
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED OCTOBER 31, 2012
(in thousands)
| Parent | Guarantors | Non - Guarantors | Elimination | Consolidated | ||||||||||||||||
| Net income (loss) |
$ | (20,967 | ) | $ | (2,145 | ) | $ | (255 | ) | $ | 2,275 | $ | (21,092 | ) | ||||||
| Other comprehensive income (loss), net of taxes: |
||||||||||||||||||||
| Unrealized income (loss) resulting from changes in fair value of derivative instruments, net of tax provision of $0 |
— | — | (716 | ) | — | (716 | ) | |||||||||||||
| Realized income (loss) on derivative instruments reclassified into earnings, net of tax benefit of $0 |
3,625 | — | 321 | — | 3,946 | |||||||||||||||
| Unrealized income (loss) resulting from changes in fair value of marketable securities |
— | 21 | — | — | 21 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other comprehensive income (loss) |
3,625 | 21 | (395 | ) | — | 3,251 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Comprehensive income (loss) |
(17,342 | ) | (2,124 | ) | (650 | ) | 2,275 | (17,841 | ) | |||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interest |
— | — | (125 | ) | — | (125 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Comprehensive income (loss) attributable to common stockholders |
$ | (17,342 | ) | $ | (2,124 | ) | $ | (525 | ) | $ | 2,275 | $ | (17,716 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
30
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED OCTOBER 31, 2011
(in thousands)
| Parent | Guarantors | Non - Guarantors | Elimination | Consolidated | ||||||||||||||||
| Net income (loss) |
$ | (765 | ) | $ | 1,045 | $ | (1 | ) | $ | (1,044 | ) | $ | (765 | ) | ||||||
| Other comprehensive income (loss), net of taxes: |
||||||||||||||||||||
| Unrealized income (loss) resulting from changes in fair value of derivative instruments, net of tax provision of $0 |
— | — | (58 | ) | — | (58 | ) | |||||||||||||
| Realized income (loss) on derivative instruments reclassified into earnings, net of tax benefit of $0 |
— | — | (361 | ) | — | (361 | ) | |||||||||||||
| Unrealized income (loss) resulting from changes in fair value of marketable securities |
— | (5 | ) | — | — | (5 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other comprehensive income (loss) |
— | (5 | ) | (419 | ) | — | (424 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Comprehensive income (loss) attributable to common stockholders |
$ | (765 | ) | $ | 1,040 | $ | (420 | ) | $ | (1,044 | ) | $ | (1,189 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
31
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED OCTOBER 31, 2012
(in thousands)
| Parent | Guarantors | Non - Guarantors | Elimination | Consolidated | ||||||||||||||||
| Net income (loss) |
$ | (29,338 | ) | $ | (5,703 | ) | $ | (272 | ) | $ | 5,842 | $ | (29,471 | ) | ||||||
| Other comprehensive income (loss), net of taxes: |
||||||||||||||||||||
| Unrealized income (loss) resulting from changes in fair value of derivative instruments, net of tax provision of $0 |
(1,257 | ) | — | (1,542 | ) | — | (2,799 | ) | ||||||||||||
| Realized income (loss) on derivative instruments reclassified into earnings, net of tax benefit of $0 |
3,625 | — | 365 | — | 3,990 | |||||||||||||||
| Unrealized income (loss) resulting from changes in fair value of marketable securities |
— | 15 | — | — | 15 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other comprehensive income (loss) |
2,368 | 15 | (1,177 | ) | — | 1,206 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Comprehensive income (loss) |
(26,970 | ) | (5,688 | ) | (1,449 | ) | 5,842 | (28,265 | ) | |||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interest |
— | — | (133 | ) | — | (133 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Comprehensive income (loss) attributable to common stockholders |
$ | (26,970 | ) | $ | (5,688 | ) | $ | (1,316 | ) | $ | 5,842 | $ | (28,132 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
32
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED OCTOBER 31, 2011
(in thousands)
| Parent | Guarantors | Non -Guarantors | Elimination | Consolidated | ||||||||||||||||
| Net income (loss) |
$ | (3,826 | ) | $ | 1,555 | $ | (2 | ) | $ | (1,553 | ) | $ | (3,826 | ) | ||||||
| Other comprehensive income (loss), net of taxes: |
||||||||||||||||||||
| Unrealized income (loss) resulting from changes in fair value of derivative instruments, net of tax provision of $99 |
116 | — | 68 | — | 184 | |||||||||||||||
| Realized income (loss) on derivative instruments reclassified into earnings, net of tax benefit of $99 |
(78 | ) | — | (638 | ) | — | (716 | ) | ||||||||||||
| Unrealized income (loss) resulting from changes in fair value of marketable securities |
— | (11 | ) | — | — | (11 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Other comprehensive income (loss) |
38 | (11 | ) | (570 | ) | — | (543 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Comprehensive income (loss) attributable to common stockholders |
$ | (3,788 | ) | $ | 1,544 | $ | (572 | ) | $ | (1,553 | ) | $ | (4,369 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
33
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED OCTOBER 31, 2012
(in thousands)
| Parent | Guarantors | Non-Guarantors | Elimination | Consolidated | ||||||||||||||||
| Net cash provided by operating activities |
$ | (27,934 | ) | $ | 48,663 | $ | 1,646 | $ | — | $ | 22,375 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Cash Flows from Investing Activities: |
||||||||||||||||||||
| Acquisitions, net of cash acquired |
— | (4,635 | ) | — | — | (4,635 | ) | |||||||||||||
| Additions to property, plant and equipment - acquisitions |
— | (417 | ) | — | — | (417 | ) | |||||||||||||
| - growth |
— | (3,579 | ) | (4,678 | ) | — | (8,257 | ) | ||||||||||||
| - maintenance |
(190 | ) | (25,178 | ) | — | — | (25,368 | ) | ||||||||||||
| Payment for capital related to divestiture |
— | (618 | ) | — | — | (618 | ) | |||||||||||||
| Payments on landfill operating lease contracts |
— | (3,298 | ) | — | — | (3,298 | ) | |||||||||||||
| Proceeds from sale of property and equipment |
— | 557 | — | — | 557 | |||||||||||||||
| Investments in unconsolidated entities |
(3,761 | ) | 1,195 | 1,566 | — | (1,000 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net cash provided by (used in) investing activities |
(3,951 | ) | (35,973 | ) | (3,112 | ) | — | (43,036 | ) | |||||||||||
| Cash Flows from Financing Activities: |
||||||||||||||||||||
| Proceeds from long-term borrowings |
236,177 | — | — | — | 236,177 | |||||||||||||||
| Principal payments on long-term debt |
(226,098 | ) | (930 | ) | — | — | (227,028 | ) | ||||||||||||
| Change in restricted cash |
(23,579 | ) | — | — | — | (23,579 | ) | |||||||||||||
| Payment of tender premium and costs on second lien notes |
(6,745 | ) | — | — | — | (6,745 | ) | |||||||||||||