Form 10-Q

 

 

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
 
ASSETS      

CURRENT ASSETS:

     

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   
  

 

 

    

 

 

 

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   
  

 

 

    

 

 

 
     575,446         566,387   
  

 

 

    

 

 

 
   $ 669,475       $ 633,743   
  

 

 

    

 

 

 

 

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
 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

CURRENT LIABILITIES:

    

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   
  

 

 

   

 

 

 

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

    

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 and 25,991,000 shares as of October 31, 2012 and April 30, 2012, respectively

     380        260   

Class B convertible common stock -

    

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
  

 

 

   

 

 

 

Total Casella Waste Systems, Inc. stockholders’ equity

     32,079        16,431   

Noncontrolling interest

     2,986        1,800   
  

 

 

   

 

 

 

Total stockholders’ equity

     35,065        18,231   
  

 

 

   

 

 

 
   $ 669,475      $ 633,743   
  

 

 

   

 

 

 

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,
 
     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   
  

 

 

   

 

 

   

 

 

   

 

 

 
     115,961        118,240        231,404        235,176   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     4,374        11,626        10,125        21,883   

Other expense (income):

        

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
  

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net

     25,053        12,403        38,533        25,706   
  

 

 

   

 

 

   

 

 

   

 

 

 

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before discontinued operations

     (21,092     (844     (29,471     (4,551

Discontinued operations:

        

Gain on disposal of discontinued operations (net of income tax provision of $0, $53, $0 and $489)

     —          79        —          725   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (21,092     (765     (29,471     (3,826
  

 

 

   

 

 

   

 

 

   

 

 

 

Less: Net loss attributable to noncontrolling interest

     (125     —          (133     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (20,967   $ (765   $ (29,338   $ (3,826
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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,
 
     2012     2011     2012     2011  

Basic and diluted earnings per share:

        

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share

   $ (0.68   $ (0.03   $ (1.01   $ (0.14
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

        

Basic and diluted

     30,872        26,759        28,932        26,661   
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts attributable to common stockholders:

        

Loss from continuing operations, net of tax

   $ (20,967   $ (844   $ (29,338   $ (4,551

Discontinued operations, net of tax

     —          79        —          725   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (20,967   $ (765   $ (29,338   $ (3,826
  

 

 

   

 

 

   

 

 

   

 

 

 

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,
 
     2012     2011     2012     2011  

Net loss

   $ (21,092   $ (765   $ (29,471   $ (3,826

Other comprehensive income (loss), net of tax:

        

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
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

     3,251        (424     1,206        (543
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss

     (17,841     (1,189     (28,265     (4,369

Less: Comprehensive loss attributable to noncontrolling interest

     (125     —          (133     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to common stockholders

   $ (17,716   $ (1,189   $ (28,132   $ (4,369
  

 

 

   

 

 

   

 

 

   

 

 

 

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
       
     Total     Shares      Amount      Shares      Amount         Accumulated
Deficit
      Noncontrolling
Interest
 

Balance, April 30, 2012

   $ 18,231        25,991       $ 260         988       $ 10       $ 288,348       $ (270,235   $ (1,952   $ 1,800   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

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         —          —          —     
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, October 31, 2012

   $ 35,065        37,950       $ 380         988       $ 10       $ 332,008       $ (299,573   $ (746   $ 2,986   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

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,
 
     2012     2011  

Cash Flows from Operating Activities:

    

Net loss

   $ (29,471   $ (3,826

Adjustments to reconcile net loss to net cash provided by operating activities -

    

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 -

    

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
  

 

 

   

 

 

 

Net cash provided by operating activities

     22,375        41,478   
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

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
  

 

 

   

 

 

 

Net cash used in investing activities

     (43,036     (39,764
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

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        —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     18,028        165   
  

 

 

   

 

 

 

Discontinued Operations:

    

Net cash provided by operating activities

     —          725   
  

 

 

   

 

 

 

Net cash provided by discontinued operations

     —          725   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (2,633     2,604   

Cash and cash equivalents, beginning of period

     4,534        1,817   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 1,901      $ 4,421   
  

 

 

   

 

 

 

 

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,
 
     2012      2011  

Supplemental Disclosures of Cash Flow Information:

     

Cash paid during the period for -

     

Interest

   $ 22,578       $ 20,531   

Income taxes, net of refunds

   $ 71       $ 5,281   

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

     

Summary of entities acquired in purchase business combinations -

     

Fair value of net assets acquired

   $ 4,761       $ 744   

Cash paid, net

   $ 4,635       $ 715   
  

 

 

    

 

 

 

Liabilities assumed and holdbacks to sellers

   $ 126       $ 29   
  

 

 

    

 

 

 

Equipment contributed by noncontrolling interest holder

   $ —         $ 1,270   
  

 

 

    

 

 

 

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   
  

 

 

   

 

 

 

 

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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

 

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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.

 

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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.

 

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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.

 

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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   
  

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

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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       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Liabilities:

        

Interest rate derivatives

   $ —         $ 3,896       $ —     
  

 

 

    

 

 

    

 

 

 

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       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Liabilities:

        

Interest rate derivatives

   $ —         $ 2,369       $ —     
  

 

 

    

 

 

    

 

 

 

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   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

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