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 July 31, 2007

 

 

 

OR

 

 

 

o

 

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer  o

Accelerated filer  x

Non-accelerated filer  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 31, 2007:

Class A Common Stock

24,351,167

 

 

Class B Common Stock

988,200

 

 

 




PART I.      FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except for share and per share data)

 

 

April 30,

 

July 31,

 

 

 

2007

 

2007

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

12,363

 

$

4,378

 

Restricted cash

 

73

 

94

 

Accounts receivable - trade, net of allowance for doubtful accounts of $1,592 and $1,784

 

62,044

 

65,047

 

Notes receivable - officers/employees

 

87

 

87

 

Refundable income taxes

 

1,340

 

1,867

 

Prepaid expenses

 

5,518

 

4,928

 

Inventory

 

3,524

 

3,536

 

Deferred income taxes

 

8,215

 

14,124

 

Other current assets

 

1,636

 

1,611

 

Total current assets

 

94,800

 

95,672

 

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation and amortization of $421,532 and $441,732

 

487,621

 

488,289

 

Goodwill

 

173,350

 

172,885

 

Intangible assets, net

 

2,217

 

2,067

 

Restricted cash

 

12,734

 

12,855

 

Notes receivable - officers/employees

 

916

 

1,085

 

Deferred income taxes

 

1,546

 

 

Investments in unconsolidated entities

 

49,969

 

47,850

 

Net assets under contractual obligation

 

55

 

 

Other non-current assets

 

10,885

 

10,936

 

 

 

739,293

 

735,967

 

 

 

 

 

 

 

 

 

$

834,093

 

$

831,639

 

 

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

2




 

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

(Unaudited)

(in thousands, except for share and per share data)

 

 

 

April 30,

 

July 31,

 

 

 

2007

 

2007

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Current maturities of long-term debt

 

$

1,215

 

$

2,070

 

Current maturities of capital lease obligations

 

1,104

 

1,009

 

Series A redeemable, convertible preferred stock

 

74,018

 

74,944

 

Accounts payable

 

52,371

 

48,700

 

Accrued payroll and related expenses

 

8,555

 

6,111

 

Accrued interest

 

9,275

 

14,097

 

Current accrued capping, closure and post-closure costs

 

8,921

 

9,361

 

Other accrued liabilities

 

32,693

 

33,725

 

Total current liabilities

 

188,152

 

190,017

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

476,225

 

469,246

 

Capital lease obligations, less current maturities

 

650

 

472

 

Accrued capping, closure and post-closure costs, less current portion

 

29,451

 

30,593

 

Deferred income taxes

 

 

1,926

 

Other long-term liabilities

 

10,119

 

6,746

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

Class A common stock -

 

 

 

 

 

Authorized - 100,000,000 shares, $0.01 par value; issued and outstanding - 24,332,000 and 24,351,000 shares as of April 30, 2007 and July 31, 2007, respectively

 

243

 

244

 

Class B common stock -

 

 

 

 

 

Authorized - 1,000,000 shares, $0.01 par value, 10 votes per share, issued and outstanding - 988,000 shares

 

10

 

10

 

Accumulated other comprehensive loss

 

(1,001

)

(1,185

)

Additional paid-in capital

 

273,345

 

272,800

 

Accumulated deficit

 

(143,101

)

(139,230

)

Total stockholders’ equity

 

129,496

 

132,639

 

 

 

 

 

 

 

 

 

$

834,093

 

$

831,639

 

 

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

3




CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands)

 

 

Three Months Ended
July 31,

 

 

 

2006

 

2007

 

 

 

 

 

 

 

Revenues

 

$

140,757

 

$

152,433

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Cost of operations

 

93,537

 

101,308

 

General and administration

 

20,624

 

18,328

 

Depreciation and amortization

 

17,891

 

20,176

 

 

 

132,052

 

139,812

 

Operating income

 

8,705

 

12,621

 

Other expense/(income), net:

 

 

 

 

 

Interest income

 

(330

)

(428

)

Interest expense

 

9,642

 

11,509

 

Loss (income) from equity method investments

 

(123

)

2,151

 

Other income

 

(55

)

(3,134

)

Other expense, net

 

9,134

 

10,098

 

 

 

 

 

 

 

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

 

(429

)

2,523

 

Provision (benefit) for income taxes

 

(518

)

780

 

 

 

 

 

 

 

Income from continuing operations before discontinued operations

 

89

 

1,743

 

 

 

 

 

 

 

Discontinued Operations:

 

 

 

 

 

Loss from discontinued operations (net of income taxes of $89)

 

(142

)

 

Net income (loss)

 

(53

)

1,743

 

Preferred stock dividend

 

881

 

 

Net income (loss) available to common stockholders

 

$

(934

)

$

1,743

 

 

The accompanying notes are an integral part of these 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
July 31,

 

 

 

2006

 

2007

 

Earnings Per Share:

 

 

 

 

 

Basic:

 

 

 

 

 

Income (loss) from continuing operations before discontinued operations available to common stockholders

 

$

(0.03

)

$

0.07

 

Loss from discontinued operations, net

 

(0.01

)

 

 

 

 

 

 

 

Net income (loss) per common share available to common stockholders

 

$

(0.04

)

$

0.07

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

25,236

 

25,327

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Income (loss) from continuing operations before discontinued operations available to common stockholders

 

$

(0.03

)

$

0.07

 

Loss from discontinued operations, net

 

(0.01

)

 

 

 

 

 

 

 

Net income (loss) per common share available to common stockholders

 

$

(0.04

)

$

0.07

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

25,236

 

25,442

 

 

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

5




CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

Three Months Ended July 31,

 

 

 

2006

 

2007

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net income (loss)

 

$

(53

)

$

1,743

 

Loss from discontinued operations, net

 

142

 

 

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

 

 

 

 

 

Depreciation and amortization

 

17,891

 

20,176

 

Depletion of landfill operating lease obligations

 

1,924

 

1,857

 

Preferred stock dividend

 

 

925

 

Maine Energy settlement

 

 

(2,142

)

Loss (income) from equity method investments

 

(123

)

2,151

 

Gain on sale of equipment

 

(256

)

(241

)

Stock-based compensation

 

134

 

216

 

Excess tax benefit on the exercise of stock options

 

(141

)

 

Deferred income taxes

 

(1,135

)

856

 

Changes in assets and liabilities, net of effects of acquisitions and divestitures -

 

 

 

 

 

Accounts receivable

 

(4,856

)

(3,003

)

Accounts payable

 

186

 

(3,671

)

Other assets and liabilities

 

5,248

 

1,429

 

 

 

18,872

 

18,553

 

Net Cash Provided by Operating Activities

 

18,961

 

20,296

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Acquisitions, net of cash acquired

 

(632

)

(10

)

Additions to property, plant and equipment – growth

 

(8,487

)

(6,630

)

                                                  – maintenance

 

(23,587

)

(15,731

)

Payments on landfill operating lease contracts

 

(618

)

(474

)

Proceeds from sale of equipment

 

459

 

806

 

Restricted cash from revenue bond issuance

 

4,419

 

 

Investment in unconsolidated entities

 

(621

)

(65

)

Proceeds from assets under contractual obligation

 

618

 

55

 

Net Cash Used In Investing Activities

 

(28,449

)

(22,049

)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Proceeds from long-term borrowings

 

139,200

 

112,075

 

Principal payments on long-term debt

 

(130,751

)

(118,472

)

Proceeds from exercise of stock options

 

900

 

165

 

Excess tax benefit on the exercise of stock options

 

141

 

 

Net Cash (Used in) Provided by Financing Activities

 

9,490

 

(6,232

)

 

 

 

 

 

 

Discontinued Operations:

 

 

 

 

 

Used in Operating Activities

 

(568

)

 

Used in Investing Activities

 

(196

)

 

Cash Used in Discontinued Operations

 

(764

)

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(762

)

(7,985

)

Cash and cash equivalents, beginning of period

 

7,429

 

12,363

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

6,667

 

$

4,378

 

 

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

6




 

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(in thousands)

 

 

 

Three Months Ended July 31,

 

 

 

2006

 

2007

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

Cash paid during the period for -

 

 

 

 

 

Interest

 

$

3,440

 

$

5,150

 

Income taxes, net of refunds

 

$

656

 

$

311

 

 

 

 

 

 

 

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

 

 

 

 

 

Summary of entities acquired in purchase business combinations -

 

 

 

 

 

Fair value of assets acquired

 

$

699

 

$

10

 

Cash paid, net

 

(632

)

(10

)

 

 

 

 

 

 

Notes payable, liabilities assumed and holdbacks to sellers

 

$

67

 

$

 

 

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

7




CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except for per share data)

1.             ORGANIZATION

The consolidated balance sheets of Casella Waste Systems, Inc. (the “Parent”) and Subsidiaries (collectively, the “Company”) as of April 30, 2007 and July 31, 2007, the consolidated statements of operations for the three months ended July 31, 2006 and 2007 and the consolidated statements of cash flows for the three months ended July 31, 2006 and 2007 are unaudited.  In the opinion of management, such financial statements include all adjustments (which include normal recurring and nonrecurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented.  The consolidated financial statements presented herein should be read in conjunction with the Company’s audited consolidated financial statements as of and for the twelve months ended April 30, 2007  included as part of the Company’s Annual Report on Form 10-K for the year ended April 30, 2007 (the “Annual Report”).  The results for the three month period ended July 31, 2007 may not be indicative of the results that may be expected for the fiscal year ending April 30, 2008.

2.                        RECLASSIFICATIONS AND DISCONTINUED OPERATIONS

The Company has made reclassifications in the Company’s Consolidated Statements of Operations to conform information for the three months ended July 31, 2006 to the Company’s current period presentation. The supplementary financial information included in this section has also been updated to reflect these changes.  During the fourth quarter of fiscal year 2007, the Company began recording personnel costs associated with engineering and permitting activities as a cost of operations where previously these costs had been recorded as general and administration.  This resulted in costs reclassified amounting to $466 for the three months ended July 31, 2006.

The Company has made reclassifications in the Company’s Consolidated Balance Sheets to conform information at April 30, 2007 to the Company’s current period presentation.  During the three months ended July 31, 2007, the Company began classifying certain amounts associated with customer credits as deferred revenue where previously these amounts had been reflected as a reduction to accounts receivable.  The reclassification amounted to $1,527 at April 30, 2007.

During the fourth quarter of fiscal year 2007, the Company completed the sale of the assets of the Holliston Transfer Station in the South Eastern region.  The transaction required discontinued operations treatment under SFAS No. 144; therefore the operating results of the Holliston Transfer Station have been reclassified from continuing to discontinued operations for the three months ended July 31, 2006.   Revenues and loss before income taxes attributable to discontinued operations for the three months ended July 31, 2006 amounted to $2,762 and ($233), respectively.

3.             BUSINESS COMBINATIONS

During the three months ended July 31, 2007, the Company acquired one solid waste hauling operation.  This transaction was in exchange for total consideration of $10 in cash.  During the three months ended July 31, 2006, the Company acquired five solid waste hauling operations.  These transactions were in exchange for total consideration of $699 including $632 in cash and $67 in liabilities assumed.  The operating results of these businesses are included in the consolidated statements of operations from the dates of acquisition.  The purchase prices have been allocated to the net assets acquired based on their fair

8




values at the dates of acquisition, including the value of non-compete agreements, with the residual amounts allocated to goodwill.

The following unaudited pro forma combined information shows the results of the Company’s operations as though each of the acquisitions made in the three months ended July 31, 2006 and 2007 had been completed as of May 1, 2006.

 

Three Months Ended
July 31,

 

 

 

2006

 

2007

 

Revenue

 

$

140,811

 

$

152,435

 

Net income (loss)

 

(46

)

1,743

 

Diluted net income per common share

 

$

0.00

 

$

0.07

 

 

The foregoing pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisitions taken place as of May 1, 2006 or the results of future operations of the Company.  Furthermore, such 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.

4.             GOODWILL AND INTANGIBLE ASSETS

The following table shows the activity and balances related to goodwill from April 30, 2007 through July 31, 2007:

 

 

North
Eastern
Region

 

South
Eastern
Region

 

Central
Region

 

Western
Region

 

FCR
Recycling

 

Total

 

Balance, April 30, 2007

 

$

26,025

 

$

31,645

 

$

31,960

 

$

56,331

 

$

27,389

 

$

173,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

 

 

4

 

 

4

 

Other (1)

 

(65

)

 

(1

)

 

(403

)

(469

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 31, 2007

 

$

25,960

 

$

31,645

 

$

31,959

 

$

56,335

 

$

26,986

 

$

172,885

 

 


(1) Consists primarily of a reduction associated with the adoption of FIN No. 48. See Note 5.

Intangible assets at April 30, 2007 and July 31, 2007 consist of the following:

 

Covenants
not to
compete

 

Licensing
Agreements

 

Contract
Acquisition
Costs

 

Total

 

Balance, April 30, 2007

 

 

 

 

 

 

 

 

 

Intangible assets

 

$

15,464

 

$

920

 

$

58

 

$

16,442

 

Less accumulated amortization

 

(14,121

)

(100

)

(4

)

(14,225

)

 

 

$

1,343

 

$

820

 

$

54

 

$

2,217

 

 

 

 

 

 

 

 

 

 

 

Balance, July 31, 2007

 

 

 

 

 

 

 

 

 

Intangible assets

 

$

15,464

 

$

920

 

$

58

 

$

16,442

 

Less accumulated amortization

 

(14,252

)

(117

)

(6

)

(14,375

)

 

 

$

1,212

 

$

803

 

$

52

 

$

2,067

 

 

9




Intangible amortization expense for the three months ended July 31, 2006 and 2007 was $278 and $150, respectively.  The intangible amortization expense estimated as of July 31, 2007, for the five years following fiscal year 2007 is as follows:

2008

 

2009

 

2010

 

2011

 

2012

 

$

587

 

$

416

 

$

303

 

$

212

 

$

133

 

 

5.             NEW ACCOUNTING STANDARDS

Effective May 1, 2007, the Company adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN No. 48”).  FIN No. 48 prescribes the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements.  Additionally, FIN No. 48 provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.  Under FIN No. 48, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold.

As a result of the adoption of FIN No. 48, the cumulative effect of the changes to the Company’s reserve for uncertain tax positions was accounted for as a $1,202 adjustment to increase the beginning balance of retained earnings and a $468 decrease to goodwill on the Company’s balance sheet.  As of May 1, 2007, the Company had approximately $5,879 of total gross unrecognized tax benefits.  Of this total, approximately $3,488 (net of the federal benefit on state issues) represented the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.  The Company does not anticipate that total unrecognized tax benefits will significantly change within the next 12 months due to the settlement of audits and the expiration of statute of limitations.

The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.  As of May 1, 2007 and July 31, 2007, the Company had accrued interest and penalties related to uncertain tax positions of $813 and $855, respectively.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of multiple state jurisdictions.  Due to federal and state net operating loss carryforwards, income tax returns from 1998 through 2006 remain open for examination, with limited exceptions.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies to other existing accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, the application of this statement may change the current practice for fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact this statement will have on its financial position and results of operations.

In February 2007, the FASB issued SFAS No.159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 155 (‘SFAS No. 159”). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007.  The Company is currently evaluating the impact this statement will have on its financial position and results of operations.

10




6.             LEGAL PROCEEDINGS

On January 10, 2002, the City of Biddeford, Maine filed a lawsuit in York County Superior Court in Maine alleging breach of the waste handling agreement among the Biddeford-Saco Waste Handling Committee, the cities of Biddeford and Saco, Maine and the Company’s subsidiary Maine Energy for (1) failure to pay certain residual cancellation payments in connection with the Company’s merger with KTI and (2) processing amounts of waste above contractual limits without notice to the City. On May 3, 2002, the City of Saco filed a lawsuit in York County Superior Court against the Company, Maine Energy and other subsidiaries. The complaint in that action, which was amended by the City of Saco on July 22, 2002, alleged breaches of the 1991 waste handling agreement for failure to pay the residual cancellation payment, which Saco alleged was due as a result of, among other things, (1) the Company’s merger with KTI and (2) Maine Energy’s failure to pay off certain limited partner loans in accordance with the terms of the agreement. The complaint sought damages for breach of contract and a court order requiring the Company to provide an accounting of all transactions since May 3, 1996 involving transfers of assets to or for the benefit of the equity owners of Maine Energy. As the result of extensive settlement negotiations with the City of Biddeford concerning this lawsuit and other matters, the lawsuit filed by the City of Biddeford has been resolved by a settlement between the parties, effective March 1, 2007, and the lawsuit was dismissed with prejudice on or about May 8, 2007. On June 18, 2007, the Company and the City of Saco agreed to settle their dispute under the terms of a mutual release and settlement agreement and the City of Saco released the Company from any further residual cancellation payment obligations. The Company provided for the residual cancellation payment obligations to the City of Biddeford and the City of Saco in a prior year in an amount sufficient to cover the settlements.  In the three months ended July 31, 2007, the Company recognized income in the amount of $2.1 million as other income related to the reversal of residual accruals originally established in connection with waste handling agreement disputes between the Maine Energy and fifteen municipalities which were party to the agreements.  This matter is now resolved.

The New Hampshire Superior Court in Grafton County, NH (the “Superior Court”) ruled on February 1, 1999 that the Town of Bethlehem, NH (the “Town”) could not enforce an ordinance prohibiting expansion of the Company’s landfill owned by its subsidiary North Country Environmental Services, Inc. (“NCES”), at least with respect to 51 acres of NCES’s 105 acre parcel. As a result, NCES was able to construct and operate “Stage II, Phase II” of the landfill. In May 2001, the New Hampshire Supreme Court (the “Supreme Court”) denied the Town’s appeal. Notwithstanding the Supreme Court’s ruling, the Town continued to assert jurisdiction to conduct unqualified site plan review with respect to Stage III (within the 51 acres) and further stated that the Town’s height ordinance and building permit process may apply to Stage III. On September 12, 2001, the Company filed a petition for declaratory relief. On December 4, 2001, the Town filed an answer and counterclaims seeking authorization to assert site plan review over Stage III and the methane gas utilization/leachate handling facility operating in connection with Stage III, as well as an order declaring that the ordinance prohibiting landfills applies to Stage IV expansion. On April 24, 2003, the Grafton Superior Court upheld the Town’s 1992 ordinance preventing the location or expansion of any landfill, ruling that the ordinance may be applied to any part of Stage IV that goes beyond the 51 acres; ruling that the Town’s height ordinance is valid within the 51 acres; upholding the Town’s right to require Site Plan Review, except that there are certain areas within the Town’s Site Plan Review regulation that are preempted; and ruling that the methane gas utilization/leachate handling facility is not subject to the Town’s ordinance forbidding incinerators. On May 27, 2003, NCES appealed the Superior Court’s ruling to the Supreme Court. On March 1, 2004, the Supreme Court affirmed that NCES has all of the local approvals that it needs to operate within the 51 acres and that the Town cannot therefore require site plan review for landfill development within the 51 acres. The Supreme Court’s opinion left open for further review the question of whether the Town’s 1992 ordinance can prevent expansion of the facility outside the 51 acres, remanding to the Superior Court four issues, including two defenses raised by NCES as grounds for invalidating the 1992 ordinance. On April 19, 2005, the Superior Court judge granted NCES’ motion for partial summary judgment, ruling that the 1992 ordinance is invalid because it distinguishes between “users” of land rather than “uses” of land, and that a state statute preempts the Town’s ability to issue a building permit for the methane gas

11




utilization/leachate handling facility to the extent the Town’s regulations relate to design, installation, construction, modification or operation. After this ruling, the Town amended its counterclaim to request a declaration that another zoning ordinance it enacted in March of 2005 is lawful and prevents the expansion of the landfill outside of the 51 acres. In the fall of 2005, NCES and the Town engaged in private mediation in an effort to resolve the disputes between them, but the mediation was unsuccessful. NCES filed a motion with the court on December 15, 2005 for partial summary judgment asserting six different arguments challenging the lawfulness of the March 2005 amendment to the zoning ordinance, and the town filed a cross-motion on January 13, 2006 for partial summary judgment on the same issue. In April 2006, the court ruled against NCES on the applicability of all six arguments challenging the lawfulness of the March 2005 ordinance and NCES filed a motion for reconsideration. On May 30, 2006, the judge issued a ruling on the motion for reconsideration, reversing her prior ruling with respect to two of the six arguments, thereby restoring such arguments for trial. Additionally, several issues related to the March 2005 amendment that were not the subject of such motions remain to be decided by a trial, in addition to the two remaining issues remanded by the Supreme Court, which are whether the Town can impose site plan review requirements outside the 51 acres, and whether the 1992 ordinance contravenes the general welfare of the community. On June 6, 2006, the Town rejected a settlement proposal from NCES at a special town meeting. The trial date has been continued to October 2007. NCES’s March 2007 application to the New Hampshire Department of Environmental Services for an amendment to the Stage IV permit enabling it to construct all of the Stage IV capacity within the 51 acres may, if granted, affect which of the parties’ claims will be adjudicated at the October 2007 trial.  There is a scheduled public hearing to discuss these matters on September 18, 2007.

On July 12, 2005, NCES received notice from the Office of the Attorney General of the State of New Hampshire that it has commenced an official investigation into allegations that asbestos was concealed in loads of construction and demolition debris from a hotel renovation, delivered to the NCES landfill by a third party, and disposed there on several occasions between 1999 and 2002.  NCES has cooperated fully in the investigation. NCES is engaged in discussions with the Office of the Attorney General over the terms of a possible civil settlement regarding this matter which may involve environmental remediation at sites in New Hampshire at which the Company had no prior involvement. The Company does not believe the outcome of this matter will have a material adverse effect on its business, financial condition, results of operations or cash flows.

The Company has been involved in discussions with the New York Department of Labor (“DOL”) regarding the applicability of certain state “Prevailing Wage” laws pertaining to work being undertaken by the Company at the Chemung County Landfill (“CCL”).  On August 10, 2007, the DOL issued a letter opinion that cell construction work and perhaps other construction activities, with respect to landfill sites operated by the Company in New York State (Chemung and Clinton County), is providing a “public purpose,” and accordingly are subject to the Prevailing Wage laws.  The Company will continue to work with the DOL to closely define which work may be subject to the DOL opinion, and the Company may yet pursue administrative and litigation relief.  It is impossible at this time to quantify the definitive outcome of this matter, and therefore, it is not possible to make judgment currently as to what, if any, adverse effect this initial DOL opinion may have on the Company’s financial condition, results of operations or cash flows.

The Company offers no prediction of the outcome of any of the proceedings or negotiations described above. The Company is vigorously defending each of these lawsuits and claims. However, there can be no guarantee the Company will prevail or that any judgments against the Company, if sustained on appeal, will not have a material adverse effect on the Company’s business, financial condition or results of operations.

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

12




7.             ENVIRONMENTAL LIABILITIES

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

8.             STOCK-BASED COMPENSATION

On July 31, 1997, the Company adopted a stock option plan for employees, officers and directors of, and consultants and advisors to the Company. The Board of Directors has the authority to select the optionees and determine the terms of the options granted. As amended in 1998, the 1997 Stock Option Plan (the “1997 Plan”) provides for the issuance of up to 5,328 shares of Class A Common Stock pursuant to the grant of either incentive stock options or non-statutory options, which includes all authorized, but unissued options under previous plans. As of April 30, 2007, options to purchase 3,403 shares of Class A Common Stock at a weighted average exercise price of $13.19 were outstanding under the 1997 Plan.  As of July 31, 2007, options to purchase 3,632 shares of Class A Common Stock at a weighted average exercise price of $13.03 were outstanding under the 1997 Plan.  The 1997 Plan terminated as of July 31, 2007.  423 options available for future grant under the 1997 Plan are available for grant under the 2006 Stock Incentive Plan (the “2006 Plan”).

On October 10, 2006, the Company adopted the 2006 Plan.  Up to an aggregate amount equal to the sum of: (i) 1,275 shares of Class A Common Stock (subject to adjustment in the event of stock splits and other similar events), of which 275 are reserved for issuance to non-employee directors pursuant to the formula grants described below, plus (ii) such additional number of shares of Class A Common Stock as are currently subject to options granted under the Company’s 1993 Incentive Stock Option Plan, 1994 Non-statutory Stock Option Plan, 1996 Option Plan, and 1997 Plan (the “Prior Plans”) which are not actually issued under the Prior Plans because such options expire or otherwise result in shares not being issued, may be issued pursuant to awards granted under the 2006 Plan.  As of April 30, 2007 and July 31, 2007, options to purchase 45 shares of Class A Common Stock at a weighted average exercise price of $10.22 were outstanding under the 2006 plan and 1,653 options were available for future grant.

Options granted under the plans described above generally vest over a one to four year period from the date of grant and are granted at prices at least equal to the prevailing fair market value at the issue date. In general, options are issued with a life not to exceed ten years. Shares issued by the Company 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 three months ended July 31, 2007 is as follows:

13




 

 

Total
Shares

 

Weighted
Average
Exercise
Price

 

Outstanding, April 30, 2007

 

3,735

 

$

13.17

 

Granted

 

230

 

10.91

 

Forfeited

 

(99

)

16.01

 

Outstanding, July 31, 2007

 

3,866

 

12.97

 

Exercisable, July 31, 2007

 

3,282

 

$

13.13

 

 

Stock options exercisable as of July 31, 2007 have a weighted-average contractual term remaining of 4.4 years and an aggregate intrinsic value of $2,149 based on the market value of the Company’s Class A common stock as of July 31, 2007.

As a result of adopting SFAS No. 123(R) effective May 1, 2006, the Company recorded $110 and $193 of stock based compensation expense for stock options during the three months ended July 31, 2006 and 2007, respectively.   The Company also recorded $24 and $23 of stock based expense for the Company’s Employee Stock Purchase Plan during the three months ended July 31, 2006 and 2007, respectively.

The Company’s calculations of stock-based compensation expense for the three months ended July 31, 2006 and 2007 were made using the Black-Scholes valuation model. The fair value of the Company’s stock option grants was estimated assuming no expected dividend yield and the following weighted average assumptions for the three months ended July 31, 2006 and 2007 as follows:

 

Three Months Ended July 31,

 

 

 

2006

 

2007

 

Stock Options:

 

 

 

 

 

Expected life

 

6 years

 

6 years

 

Risk-free interest rate

 

5.14%

 

4.85%

 

Expected volatility

 

31.02%

 

37.83%

 

Stock Purchase Plan:

 

 

 

 

 

Expected life

 

0.5 years

 

0.5 years

 

Risk-free interest rate

 

5.31%

 

5.07%

 

Expected volatility

 

30.42%

 

35.10%

 

 

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. For stock options granted during the three months ended July 31, 2007, expected volatility is calculated using the average of weekly historical volatility of the Company’s Class A Common Stock over the last six years.

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 the Company’s Class A Common Stock price over the expected term, and the number of 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 Consolidated Statements of Operations.

14




9.             EARNINGS PER SHARE

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

 

Three Months
Ended July 31,

 

 

 

2006

 

2007

 

Numerator:

 

 

 

 

 

Net income (loss)

 

$

(53

)

$

1,743

 

Less: preferred stock dividends

 

(881

)

 

Net income (loss) available to common stockholders

 

$

(934

)

$

1,743

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Number of shares outstanding, end of period:

 

 

 

 

 

Class A common stock

 

24,273

 

24,351

 

Class B common stock

 

988

 

988

 

Effect of weighted average shares outstanding during period

 

(25

)

(12

)

Weighted average number of common shares used in basic EPS

 

25,236

 

25,327

 

Impact of potentially dilutive securities:

 

 

 

 

 

Dilutive effect of options and contingent stock

 

 

115

 

Weighted average number of common shares used in diluted EPS

 

25,236

 

25,442

 

 

For the three months ended July 31, 2006 and 2007, 8,934 and 8,551 common stock equivalents related to options and redeemable convertible preferred stock, respectively, were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive.

10.          COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is defined as the change in net assets of a business enterprise during a period from transactions generated from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Accumulated other comprehensive (loss) income included in the accompanying balance sheets consists of changes in the fair value of the Company’s interest rate swap and commodity hedge agreements.  Also included in accumulated other comprehensive (loss) income is the change in fair value of certain securities classified as available for sale as well as the Company’s portion of the change in the fair value of commodity hedge agreements of the Company’s equity method investment, US GreenFiber, LLC (“GreenFiber”).

Comprehensive income (loss) for the three months ended July 31, 2006 and 2007 is as follows:

 

Three Months Ended
July 31,

 

 

 

2006

 

2007

 

Net income (loss)

 

$

(53

)

$

1,743

 

Other comprehensive loss

 

(62

)

(184

)

Comprehensive income (loss)

 

$

(115

)

$

1,559

 

 

The components of other comprehensive loss for the three months ended July 31, 2006 and 2007 are shown as follows:

15




 

 

 

Three Months Ended July 31,

 

 

 

2006

 

2007

 

 

 

Gross

 

Tax
effect

 

Net of
Tax

 

Gross

 

Tax
effect

 

Net of Tax

 

Changes in fair value of marketable securities during the period

 

$

17

 

$

6

 

$

11

 

$

(30

)

$

(10

)

$

(20

)

Change in fair value of interest rate swaps and commodity hedges during period

 

8

 

3

 

5

 

(702

)

(274

)

(428

)

Reclassification to earnings for interest rate swaps and commodity hedge contracts

 

(130

)

(52

)

(78

)

431

 

167

 

264

 

 

 

$

(105

)

$

(43

)

$

(62

)

$

(301

)

$

(117

)

$

(184

)

 

11.          DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company’s strategy to hedge against fluctuations in the commodity prices of recycled paper is to enter into hedges to mitigate the variability in cash flows generated from the sales of recycled paper at floating prices, resulting in a fixed price being received from these sales.  The Company was party to twenty-two commodity hedge contracts as of July 31, 2007.  These contracts expire between August 2007 and November 2008.  The Company has evaluated these hedges and believes that these instruments qualify for hedge accounting pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, (“SFAS No. 133”) as amended.  As of July 31, 2007 the fair value of these hedges was an obligation of $2,461 with the net amount (net of taxes of $996) recorded as an unrealized loss in accumulated other comprehensive loss.

The Company is party to three separate interest rate swap agreements with three banks for a notional amount of $75,000, which effectively fix the interest index rate on the entire notional amount at 4.4% from May 4, 2006 through May 5, 2008.  These agreements are specifically designated to interest payments under the Company’s term B loan and are accounted for as effective cash flow hedges pursuant to SFAS No. 133.  As of July 31, 2007, the fair value of these swaps was $422, with the net amount (net of taxes of $171) recorded as an unrealized gain in accumulated other comprehensive loss.

The Company is party to two separate interest rate zero-cost collars with two banks for a notional amount of $60,000.  The collars have an interest index rate cap of 6.00% and an interest index rate floor of approximately 4.48% and are effective from November 6, 2006 through May 5, 2009.  These agreements are specifically designated to interest payments under the revolving credit facility and are accounted for as effective cash flow hedges pursuant to SFAS No. 133.  As of July 31, 2007, the fair value of these collars was an obligation of $131, with the net amount (net of taxes of $52) recorded as an unrealized loss in accumulated other comprehensive loss.

The Company terminated an interest rate collar in the notional amount of $20,000 during the three months ended July 31, 2007.  The Company paid net proceeds of $18, which remains in accumulated other comprehensive loss, and will be amortized against interest expense over the remaining original term of the contract.

12.          SEGMENT REPORTING

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

16




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

 

North Eastern

 

South Eastern

 

Central

 

Western

 

FCR

 

 

 

Region

 

Region

 

Region

 

Region

 

Recycling

 

Three Months Ended July 31, 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

29,509

 

$

18,292

 

$

34,644

 

$

29,103

 

$

23,315

 

Depreciation and amortization

 

4,795

 

1,878

 

5,321

 

3,996

 

1,412

 

Operating income

 

1,167

 

(1,056

)

3,875

 

2,889

 

2,573

 

Total assets

 

$

184,804

 

$

146,100

 

$

151,450

 

$

167,930

 

$

89,654

 

 

 

Other

 

Total

 

Three Months Ended July 31, 2006

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

5,894

 

$

140,757

 

Depreciation and amortization

 

489

 

17,891

 

Operating income

 

(743

)

8,705

 

Total assets

 

$

88,428

 

$

828,366

 

 

 

North Eastern

 

South Eastern

 

Central

 

Western

 

FCR

 

 

 

Region

 

Region

 

Region

 

Region

 

Recycling

 

Three Months Ended July 31, 2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

32,015

 

$

17,145

 

$

34,913

 

$

30,742

 

$

29,791

 

Depreciation and amortization

 

6,023

 

2,144

 

5,188

 

4,591

 

1,715

 

Operating income

 

392

 

(1,150

)

5,573

 

3,739

 

4,306

 

Total assets

 

$

179,221

 

$

129,411

 

$

153,010

 

$

176,790

 

$

96,103

 

 

 

Other

 

Total

 

Three Months Ended July 31, 2007

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

7,827

 

$

152,433

 

Depreciation and amortization

 

515

 

20,176

 

Operating income

 

(239

)

12,621

 

Total assets

 

$

97,104

 

$

831,639

 

 

17




Amounts of the Company’s total revenue attributable to services provided are as follows:

 

Three Months Ended
July 31,

 

 

 

2006 (1)

 

2007

 

Collection

 

$

70,141

 

$

71,008

 

Landfill/disposal facilities

 

28,376

 

29,202

 

Transfer

 

7,903

 

7,881

 

Recycling

 

34,337

 

44,342

 

Total revenues

 

$

140,757

 

$

152,433

 

 


(1) Revenue attributable to services provided for the three months ended July 31, 2006 has been revised to conform with the classification of revenue attributable to services provided in the current fiscal year.

13.          INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company entered into an agreement in July 2000 with Louisiana-Pacific Corporation to combine their respective cellulose insulation businesses into a single operating entity, GreenFiber, under a joint venture agreement effective August 1, 2000. The Company’s investment in GreenFiber amounted to $33,054 and $31,224 at April 30, 2007 and July 31, 2007, respectively. The Company accounts for its 50% ownership in GreenFiber under the equity method of accounting.

Summarized financial information for GreenFiber is as follows:

 

April 30,
2007

 

July 31,
2007

 

Current assets

 

$

25,432

 

$

19,589

 

Noncurrent assets

 

70,955

 

69,377

 

Current liabilities

 

18,371

 

17,025

 

Noncurrent liabilities

 

$

11,833

 

$

9,278

 

 

 

 

 

 

 

 

 

Three Months Ended
July 31,

 

 

 

2006

 

2007

 

Revenue

 

$

44,396

 

$

33,499

 

Gross profit

 

10,995

 

5,434

 

Net (loss) income

 

$

515

 

$

(3,593

)

 

The Company owns a 20.5% interest in the common stock of RecycleRewards, Inc. (“RecycleRewards”), a company which markets an incentive-based recycling service that gives homeowners credits for recycling which can be used with participating merchants. This investment is accounted for as an equity method investment.

14.          NET ASSETS UNDER CONTRACTUAL OBLIGATION

Effective June 30, 2003, the Company transferred its domestic brokerage operations, as well as a commercial recycling business to former employees who had been responsible for managing those businesses.  Consideration for the transaction was in the form of two notes receivable amounting up to $6,925.  These notes are payable within twelve years of the anniversary date of the transaction, to the extent of free cash flow generated from the operations.

18




Effective August 1, 2005, the Company transferred a certain Canadian recycling operation to a former employee who had been responsible for managing that business.  Consideration for this transaction was in the form of a note receivable amounting up to $1,313, which is payable within six years of the anniversary date of the transaction to the extent of free cash flow generated from the operations.

The Company has not accounted for these transactions as sales based on an assessment that the risks and other incidents of ownership have not sufficiently transferred to the buyers. The net assets of the operations are disclosed in the balance sheet as “net assets under contractual obligation”, and are being reduced as payments are made.  During the three months ended July 31, 2007, the Company recognized income on the transactions in the amount of $738 as payments received on the notes receivable exceeded the balance of the net assets under contractual obligation.

Net assets under contractual obligation amounted to $55 and $0 at April 30, 2007 and July 31, 2007, respectively.  Minimum amounts owed to the Company under these notes amounted to $3,736 and $2,943 at April 30, 2007 and July 31, 2007, respectively.

15.          PREFERRED STOCK

The Company is authorized to issue up to 944 shares of preferred stock in one or more series. As of April 30, 2007 and July 31, 2007, the Company had 56 shares authorized and 53 shares issued and outstanding, respectively, of Series A Redeemable Convertible Preferred Stock (“Series A Preferred Stock”) issued at $1,000 per share. These shares were convertible into Class A common stock, at the option of the holders, at $14 per share. Dividends were cumulative at a rate of 5%, compounded quarterly from the issuance date of August 11, 2000.  The Company was required to redeem the Series A Preferred Stock on the seventh anniversary date of August 11, 2007, at liquidation value, which equals original cost, plus accrued but unpaid dividends, if any. Pursuant to the stock agreement, acceleration of the liquidation provisions would occur upon a change in control of the Company.

On April 30, 2007, since the Company did not anticipate that the shares would be converted to Class A common stock by the redemption date, the Company reflected the redemption value of the shares as a current liability. The value included the liquidation preference of $1,000 per share plus accrued but unpaid dividends.  The redemption value amounted to $74,018 and $74,944 at April 30, 2007 and July 31, 2007.  Consistent with this classification, the Company has recorded the accrued dividends for the three months ended July 31, 2007 in the amount of $925 as interest expense.

The Series A Preferred Stock was redeemed effective August 11, 2007 in the amount of $75,057, which was the liquidation value equal to the original price plus accrued but unpaid dividends through the date of redemption.  As a result of the redemption, the rights of the holders of Series A Preferred Stock to receive cumulative dividends at a rate of 5%, compounded quarterly from the issuance date of August 11, 2000, and to elect one director to the Company’s Board of Directors, among other rights, have terminated.  The Company borrowed against the senior credit facility to fund this redemption.

16.          CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company’s senior subordinated notes due 2013 are guaranteed jointly and severally, fully and unconditionally, by the Company’s significant wholly-owned subsidiaries. The Parent is the issuer and non-guarantor of the senior subordinated notes. The information which follows presents the condensed consolidating financial position as of April 30, 2007 and July 31, 2007, and the condensed consolidating results of operations for the three months ended July 31, 2006 and 2007 and the condensed consolidating statements of cash flows for the three months ended July 31, 2006 and 2007 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

19




Company on a consolidated basis.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF APRIL 30, 2007

(in thousands, except for share and per share data)

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Elimination

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

(1,967

)

$

13,012

 

$

1,318

 

$

 

$

12,363

 

Accounts receivable - trade, net of allowance for doubtful accounts

 

31

 

61,874

 

166

 

(27

)

62,044

 

Refundable income taxes

 

1,340

 

 

 

 

1,340

 

Deferred taxes

 

7,306

 

 

909

 

 

8,215

 

Other current assets

 

1,679

 

9,159

 

 

 

10,838

 

Total current assets

 

8,389

 

84,045

 

2,393

 

(27

)

94,800

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation and amortization

 

2,587

 

485,509

 

(475

)

 

487,621

 

Goodwill

 

 

173,350

 

 

 

173,350

 

Restricted cash

 

 

4

 

12,730

 

 

12,734

 

Deferred income taxes

 

1,546

 

 

 

 

1,546

 

Investment in subsidiaries

 

(12,170

)

 

 

12,170

 

 

Assets under contractual obligation

 

 

55

 

 

 

55

 

Other non-current assets

 

29,589

 

38,657

 

120

 

(4,379

)

63,987

 

 

 

21,552

 

697,575

 

12,375

 

7,791

 

739,293

 

 

 

 

 

 

 

 

 

 

 

 

 

Intercompany receivable

 

670,919

 

(669,191

)

(6,107

)

4,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

700,860

 

$

112,429

 

$

8,661

 

$

12,143

 

$

834,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Elimination

 

Consolidated

 

LIABILITIES AND 
STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long term debt

 

$

900

 

$

315

 

$

 

$

 

$

1,215

 

Series Aredeemable, convertible preferred stock

 

74,018

 

 

 

 

74,018

 

Accounts payable

 

1,580

 

50,722

 

96

 

(27

)

52,371

 

Accrued payroll and related expenses

 

1,795

 

6,760

 

 

 

8,555

 

Accrued interest

 

9,268

 

7

 

 

 

9,275

 

Accrued closure and post-closure costs, current portion

 

 

8,386

 

535

 

 

8,921

 

Other current liabilities

 

6,811

 

18,572

 

8,414

 

 

33,797

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

94,372

 

84,762

 

9,045

 

(27

)

188,152

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

475,445

 

780

 

 

 

476,225

 

Capital lease obligations, less current maturities

 

 

650

 

 

 

650

 

Accrued closure and post closure costs, less current portion

 

 

29,408

 

43

 

 

29,451

 

Minority interest

 

 

 

 

 

 

Other long-term liabilities

 

1,547

 

6,526

 

2,046

 

 

10,119

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Class A common stock -

 

 

 

 

 

 

 

 

 

 

 

Authorized - 100,000,000 shares, $0.01 par value; issued and outstanding - 24,332,000 shares

 

243

 

101

 

100

 

(201

)

243

 

Class B common stock -

 

 

 

 

 

 

 

 

 

 

 

Authorized - 1,000,000 shares, $0.01 par value, 10 votes per share, issued and outstanding - 988,000 shares

 

10

 

 

 

 

10

 

Accumulated other comprehensive (loss) income

 

(1,001

)

120

 

(4

)

(116

)

(1,001

)

Additional paid-in capital

 

273,345

 

46,704

 

3,813

 

(50,517

)

273,345

 

Accumulated deficit

 

(143,101

)

(56,622

)

(6,382

)

63,004

 

(143,101

)

Total stockholders' equity

 

129,496

 

(9,697

)

(2,473

)

12,170

 

129,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

700,860

 

$

112,429

 

$

8,661

 

$

12,143

 

$

834,093

 

 

20




CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JULY 31, 2007
(Unaudited)
(in thousands, except for share and per share data)

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Elimination

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,318

 

$

2,331

 

$

729

 

$

 

$

4,378

 

Restricted cash

 

 

94

 

 

 

94

 

Accounts receivable - trade, net of allowance for doubtful accounts

 

4

 

64,883

 

160

 

 

65,047

 

Refundable income taxes

 

1,867

 

 

 

 

1,867

 

Deferred taxes

 

13,212

 

 

912

 

 

14,124

 

Other current assets

 

1,819

 

8,343

 

 

 

10,162

 

Total current assets

 

18,220

 

75,651

 

1,801

 

 

95,672

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation and amortization

 

2,552

 

485,737

 

 

 

488,289

 

Goodwill

 

 

172,885

 

 

 

172,885

 

Investment in subsidiaries

 

(5,410

)

 

 

5,410

 

 

Other non-current assets

 

29,521

 

36,679

 

12,972

 

(4,379

)

74,793

 

 

 

26,663

 

695,301

 

12,972

 

1,031

 

735,967

 

 

 

 

 

 

 

 

 

 

 

 

 

Intercompany receivable

 

663,047

 

(661,276

)

(6,150

)

4,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

707,930

 

$

109,676

 

$

8,623

 

$

5,410

 

$

831,639

 

 

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Elimination

 

Consolidated

 

LIABILITIES AND
STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long term debt

 

$

1,750

 

$

320

 

$

 

$

 

$

2,070

 

Series Aredeemable, convertible preferred stock

 

74,944

 

 

 

 

74,944

 

Accounts payable

 

2,256

 

46,022

 

422

 

 

48,700

 

Accrued payroll and related expenses

 

1,452

 

4,659

 

 

 

6,111

 

Accrued interest

 

14,085

 

12

 

 

 

14,097

 

Other current liabilities

 

8,275

 

27,142

 

8,678

 

 

44,095

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

102,762

 

78,155

 

9,100

 

 

190,017

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

468,543

 

703

 

 

 

 

469,246

 

Capital lease obligations, less current maturities

 

 

472

 

 

 

472

 

Deferred income taxes

 

1,926

 

 

 

 

1,926

 

Other long-term liabilities

 

2,060

 

33,168

 

2,111

 

 

37,339

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Class A common stock -

 

 

 

 

 

 

 

 

 

 

 

Authorized - 100,000,000 shares, $0.01 par value; issued and outstanding - 24,351,000 shares

 

244

 

101

 

100

 

(201

)

244

 

Class B common stock -

 

 

 

 

 

 

 

 

 

 

 

Authorized - 1,000,000 shares, $0.01 par value, 10 votes per share, issued and outstanding - 988,000 shares

 

10

 

 

 

 

10

 

Accumulated other comprehensive (loss) income

 

(1,185

)

141

 

(24

)

(117

)

(1,185

)

Additional paid-in capital

 

272,800

 

46,704

 

3,813

 

(50,517

)

272,800

 

Accumulated deficit

 

(139,230

)

(49,768

)

(6,477

)

56,245

 

(139,230

)

Total stockholders' equity

 

132,639

 

(2,822

)

(2,588

)

5,410

 

132,639

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

707,930

 

$

109,676

 

$

8,623

 

$

5,410

 

$

831,639

 

 

21




CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 2006
(Unaudited)
(In thousands)

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Elimination

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

140,748

 

$

1,936

 

$

(1,927

)

$

140,757

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

6

 

93,231

 

2,227

 

(1,927

)

93,537

 

General and administration

 

171

 

20,311

 

142

 

 

20,624

 

Depreciation and amortization

 

425

 

17,465

 

1

 

 

17,891

 

 

 

602

 

131,007

 

2,370

 

(1,927

)

132,052

 

Operating income (loss)

 

(602

)

9,741

 

(434

)

 

8,705

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense/(income), net:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

(8,983

)

(123

)

(140

)

8,916

 

(330

)

Interest expense

 

10,392

 

8,146

 

20

 

(8,916

)

9,642

 

(Income) loss from equity method investments

 

(1,410

)

(258

)

 

1,545

 

(123

)

Other (income)/expense, net:

 

(20

)

(35

)

 

 

(55

)

Other expense/(income), net

 

(21

)

7,730

 

(120

)

1,545

 

9,134

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(581

)

2,011

 

(314

)

(1,545

)

(429

)