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, 2006

 

 

 

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

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

 

 

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, 2006:

Class A Common Stock

 

24,273,330

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)

 

 

April 30,

 

July 31,

 

 

 

2006

 

2006

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

7,429

 

$

6,667

 

Restricted cash

 

72

 

72

 

Accounts receivable - trade, net of allowance for doubtful accounts of $661 and $1,060

 

56,269

 

61,368

 

Notes receivable - officers/employees

 

87

 

87

 

Refundable income taxes

 

 

911

 

Prepaid expenses

 

5,126

 

5,719

 

Inventory

 

2,975

 

2,999

 

Deferred income taxes

 

5,034

 

4,988

 

Other current assets

 

1,982

 

1,952

 

Total current assets

 

78,974

 

84,763

 

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation and amortization of $388,808 and $405,203

 

481,284

 

494,951

 

Goodwill

 

171,258

 

171,602

 

Intangible assets, net

 

2,762

 

2,570

 

Restricted cash

 

17,887

 

13,686

 

Notes receivable - officers/employees

 

916

 

916

 

Investments in unconsolidated entities

 

44,491

 

45,262

 

Net assets under contractual obligation

 

937

 

319

 

Other non-current assets

 

12,602

 

12,815

 

 

 

732,137

 

742,121

 

 

 

 

 

 

 

 

 

$

811,111

 

$

826,884

 

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,

 

 

 

2006

 

2006

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Current maturities of long-term debt

 

$

527

 

$

1,412

 

Current maturities of capital lease obligations

 

1,061

 

1,080

 

Accounts payable

 

46,364

 

46,309

 

Accrued payroll and related expenses

 

6,818

 

5,208

 

Accrued interest

 

6,650

 

12,405

 

Accrued income taxes

 

200

 

 

Current accrued capping, closure and post-closure costs

 

4,771

 

3,135

 

Other accrued liabilities

 

28,374

 

31,256

 

Total current liabilities

 

94,765

 

100,805

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

452,720

 

460,512

 

Capital lease obligations, less current maturities

 

1,747

 

1,477

 

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

 

23,245

 

24,933

 

Deferred income taxes

 

6,957

 

6,244

 

Other long-term liabilities

 

11,757

 

11,595

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

Series A redeemable, convertible preferred stock - Authorized - 55,750 shares, issued and outstanding - 53,000 as of April 30, 2006 and July 31, 2006, liquidation preference of $1,000 per share plus accrued but unpaid dividends

 

70,430

 

71,311

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

Class A common stock - Authorized - 100,000,000 shares, $0.01 par value; issued and outstanding - 24,185,000 and 24,273,000 shares as of April 30, 2006 and July 31, 2006, respectively

 

242

 

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 income

 

159

 

97

 

Additional paid-in capital

 

274,297

 

274,928

 

Accumulated deficit

 

(125,218

)

(125,271

)

Total stockholders’ equity

 

149,490

 

150,007

 

 

 

 

 

 

 

 

 

$

811,111

 

$

826,884

 

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,

 

 

 

2005

 

2006

 

 

 

 

 

 

 

Revenues

 

$

132,000

 

$

143,519

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Cost of operations

 

85,686

 

95,735

 

General and administration

 

17,218

 

21,179

 

Depreciation and amortization

 

16,134

 

17,942

 

 

 

119,038

 

134,856

 

 

 

 

 

 

 

Operating income

 

12,962

 

8,663

 

Other expense/(income), net:

 

 

 

 

 

Interest income

 

(167

)

(329

)

Interest expense

 

7,517

 

9,833

 

(Income) loss from equity method investments

 

70

 

(123

)

Other income

 

(48

)

(55

)

Other expense, net

 

7,372

 

9,326

 

 

 

 

 

 

 

(Loss) income before income taxes

 

5,590

 

(663

)

(Benefit) provision for income taxes

 

2,483

 

(610

)

 

 

 

 

 

 

Net (loss) income

 

3,107

 

(53

)

Preferred stock dividend

 

850

 

881

 

Net (loss) income available to common stockholders

 

$

2,257

 

$

(934

)

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,

 

 

 

2005

 

2006

 

Earnings Per Share:

 

 

 

 

 

Basic:

 

 

 

 

 

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

 

$

0.09

 

$

(0.04

)

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

24,852

 

25,236

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

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

 

$

0.09

 

$

(0.04

)

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

25,218

 

25,236

 

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,

 

 

 

2005

 

2006

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net (loss) income

 

$

3,107

 

$

(53

)

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

 

 

 

 

 

Depreciation and amortization

 

16,134

 

17,942

 

Depletion of landfill operating lease obligations

 

1,428

 

1,924

 

(Income) loss from equity method investments

 

70

 

(123

)

(Gain) loss on sale of equipment

 

99

 

(256

)

Stock-based compensation

 

 

134

 

Excess tax benefit on the exercise of stock options

 

 

(141

)

Deferred income taxes

 

1,721

 

(1,135

)

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

 

 

 

 

 

Accounts receivable

 

(4,924

)

(4,922

)

Accounts payable

 

1,997

 

(55

)

Other assets and liabilities

 

2,989

 

5,078

 

 

 

19,514

 

18,446

 

Net Cash Provided by Operating Activities

 

22,621

 

18,393

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Acquisitions, net of cash acquired

 

(1,044

)

(632

)

Additions to property, plant and equipment - growth

 

(14,941

)

(8,487

)

- maintenance

 

(19,675

)

(23,783

)

Payments on landfill operating lease contracts

 

(428

)

(618

)

Proceeds from sale of equipment

 

324

 

459

 

Restricted cash from revenue bond issuance

 

 

4,419

 

Investment in unconsolidated entities

 

 

(621

)

Proceeds from assets under contractual obligation

 

314

 

618

 

Net Cash Used In Investing Activities

 

(35,450

)

(28,645

)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Proceeds from long-term borrowings

 

35,955

 

139,200

 

Principal payments on long-term debt

 

(24,931

)

(130,751

)

Proceeds from exercise of stock options

 

 

900

 

Excess tax benefit on the exercise of stock options

 

 

141

 

Net Cash Provided by Financing Activities

 

11,024

 

9,490

 

Net decrease in cash and cash equivalents

 

(1,805

)

(762

)

Cash and cash equivalents, beginning of period

 

8,578

 

7,429

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

6,773

 

$

6,667

 

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,

 

 

 

2005

 

2006

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

Cash paid during the period for -

 

 

 

 

 

Interest

 

$

276

 

$

3,631

 

Income taxes, net of refunds

 

$

528

 

$

656

 

 

 

 

 

 

 

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

 

 

 

 

 

Summary of entities acquired in purchase business combinations -

 

 

 

 

 

Fair value of assets acquired

 

$

1,129

 

$

699

 

Cash paid, net

 

(1,044

)

(632

)

 

 

 

 

 

 

Liabilities assumed and holdbacks to seller

 

$

85

 

$

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, 2006 and July 31, 2006, the consolidated statements of operations for the three months ended July 31, 2005 and 2006 and the consolidated statements of cash flows for the three months ended July 31, 2005 and 2006 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, 2006  included as part of the Company’s Annual Report on Form 10-K for the year ended April 30, 2006 (the “Annual Report”).  The results for the three months ended July 31, 2006 may not be indicative of the results that may be expected for the fiscal year ending April 30, 2007.

2.             RECLASSIFICATION

Effective May 1, 2006, the Company began recording (gain) loss on sale of equipment as a component of cost of operations.  Previously this had been recorded as a component of other income.  Accordingly, (gain) loss on sale of equipment for the three months ended July 31, 2005 has been reclassified to conform to current year reporting.

3.             BUSINESS COMBINATIONS

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.  During the three months ended July 31, 2005, the Company acquired three solid waste hauling operations and also recorded additional expenditures related to landfill development for a landfill closure project acquired in the fourth quarter of fiscal year 2005.  These transactions were in exchange for total consideration of $1,062 including $1,044 in cash and $18 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 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, 2005 and 2006 had been completed as of May 1, 2005.

 

Three Months Ended
July 31,

 

 

 

2005

 

2006

 

Revenue

 

$

132,354

 

$

143,568

 

Net (loss) income

 

$

3,144

 

$

(47

)

Diluted net income per common share

 

$

0.12

 

$

0.00

 

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, 2005 or the results

8




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, 2006 through July 31, 2006:

 

 

North
Eastern
Region

 

South
Eastern
Region

 

Central
Region

 

Western
Region

 

FCR
Recycling

 

Total

 

Balance, April 30, 2006

 

$

25,327

 

$

31,645

 

$

31,106

 

$

55,696

 

$

27,484

 

$

171,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

 

236

 

104

 

4

 

344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 31, 2006

 

$

25,327

 

$

31,645

 

$

31,342

 

$

55,800

 

$

27,488

 

$

171,602

 

Intangible assets at April 30, 2006 and July 31, 2006 consist of the following:

 

Covenants
not to
compete

 

Licensing
Agreements

 

Total

 

Balance, April 30, 2006

 

 

 

 

 

 

 

Intangible assets

 

$

16,654

 

$

920

 

$

17,574

 

Less accumulated amortization

 

(14,771

)

(41

)

(14,812

)

 

 

$

1,883

 

$

879

 

$

2,762

 

 

 

 

 

 

 

 

 

Balance, July 31, 2006

 

 

 

 

 

 

 

Intangible assets

 

$

16,737

 

$

920

 

$

17,657

 

Less accumulated amortization

 

(15,037

)

(50

)

(15,087

)

 

 

$

1,700

 

$

870

 

$

2,570

 

Intangible amortization expense for the three months ended July 31, 2005 and 2006 was $323 and $278, respectively.  The intangible amortization expense estimated as of July 31, 2006, for the five years following fiscal year 2006 is as follows:

2007

 

2008

 

2009

 

2010

 

2011

 

$

834

 

$

560

 

$

377

 

$

261

 

$

170

 

5.             NEW ACCOUNTING STANDARDS

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS No. 154) which replaces APB Opinion No. 20, Accounting Changes (APB No. 20), and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. Specifically, this statement requires “retrospective application” of the direct effect for a voluntary change in accounting principle to prior periods’ financial statements, if it is practicable to do so. SFAS No. 154 also strictly redefines the term “restatement” to mean the correction of an error by revising previously issued financial statements. SFAS No. 154 replaces APB No. 20, which requires that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative

9




effect of changing to the new accounting principle. The adoption of SFAS No. 154 effective May 1, 2006 had no impact on the Company’s financial position or results of operations.

On July 13, 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN No. 48.) FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN No. 48 requires a company to evaluate whether the tax positions taken by a company will more likely than not be sustained upon examination by the appropriate taxing authority. FIN No. 48 also provides guidance on how a company should measure the amount of benefit that the company is to recognize in its financial statements. Under FIN No. 48, a company should also classify a liability for unrecognized tax benefits as current to the extent the company anticipates making a payment within one year. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact this statement will have on its financial position and results of operations.

6.             LEGAL PROCEEDINGS

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 purportedly 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, based upon certain existing land-use approvals. 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 2001 ruling, the Town continued to assert jurisdiction to conduct unqualified site plan review with respect to Stage III (which is 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, among other things, declaratory relief. On December 4, 2001, the Town filed an answer to the Company’s petition asserting counterclaims seeking, among other things, authorization to assert site plan review over Stage III, which commenced operation in December 2000, as well as the methane gas utilization/leachate handling facility operating in connection with Stage III, and also an order declaring that an ordinance prohibiting landfills applies to Stage IV expansion. The trial on these claims was held in December 2002 and 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 issued an opinion affirming 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 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

10




amendment to the zoning ordinance, and the town filed a cross-motion on January 13, 2006 for partial summary judgment on the same issue. On February 13, 2006, NCES filed its objection with the Grafton Superior Court to the Town’s cross-motion for summary judgment. 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 she ruled earlier to be invalid, thereby preserving 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 issues remanded by the Supreme Court, which include 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. A conference was held on June 30, 2006 with the judge to establish a discovery schedule and a trial date has been set for the second quarter of calendar year 2007.

The Company offers no prediction of the outcome of these proceedings. However, there can be no guarantee that the Company will prevail or that any judgments against the Company, if sustained on appeal, will not have a material adverse effect on its business, financial condition or results of operations.

On March 2, 2005, the Company’s subsidiary Casella Waste Management of Pennsylvania, Inc. (“CWMPA”) was issued an Administrative Order by the Pennsylvania Department of Environmental Protection (“DEP”) revoking CWMPA’s transfer station permit for its 75-ton-per-day transfer station located in Wellsboro, Pennsylvania and ordering that the site be closed. The DEP based its decision on certain alleged violations related to recordkeeping and site management over a five-year period. On March 10, 2005, CWMPA appealed the Order to the State’s Environmental Hearing Board (“EHB”). The Pennsylvania Attorney General’s Office also conducted a criminal investigation of the allegations. On March 17, 2005, CWMPA and the DEP mutually agreed to a Supersedeas Order approved by the EHB which superseded the March 2, 2005 DEP Order, stating that CWMPA agreed to (i) voluntarily cease operations at the transfer station until May 16, 2005; (ii) relocate its hauling company before May 16, 2005; and (iii) develop a Management and Operation Plan for the transfer station by May 16, 2005. On May 17, 2005, the EHB judge extended the Supersedeas Order until June 10, 2005 and authorized the transfer station to resume operations upon completion of the relocation of the hauling company and receipt of a permit modification related to the weighing of bag waste from individual customers. CWMPA satisfied the conditions and recommenced operations at the transfer station on May 20, 2005. On June 9, 2005, CWMPA and the DEP filed a stipulation with the EHB withdrawing and voiding the March 2, 2005 Order revoking the permit, while reserving the DEP’s right to seek civil penalties and the Company’s right to defend against any such penalties. On March 9, 2006, the Company reached an agreement with the Attorney General’s Office that resolved its investigation with a misdemeanor fine in the amount of $35,000 plus a $15,000 contribution to a non-profit environmental organization. The Company also reached a settlement with the DEP whereby the Company agreed to pay a civil penalty in the amount of $400,000. The Company paid this amount in July 2006.

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, it believes are material to its business, financial condition, results of operations or cash flows.

7.             ENVIRONMENTAL LIABILITIES

The Company is subject to liability for any 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 to transport, treat or dispose of

11




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 results of operations or financial condition.

8.             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,

 

 

 

2005

 

2006

 

Numerator:

 

 

 

 

 

Net (loss) income

 

$

3,107

 

$

(53

)

Less: preferred stock dividends

 

(850

)

(881

)

Net (loss) income available to common stockholders

 

$

2,257

 

$

(934

)

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Number of shares outstanding, end of period:

 

 

 

 

 

Class A common stock

 

23,873

 

24,273

 

Class B common stock

 

988

 

988

 

Effect of weighted average shares outstanding during period

 

(9

)

(25

)

Weighted average number of common shares used in basic EPS

 

24,852

 

25,236

 

Impact of potentially dilutive securities:

 

 

 

 

 

Dilutive effect of options and contingent stock

 

366

 

 

Weighted average number of common shares used in diluted EPS

 

25,218

 

25,236

 

For the three months ended July 31, 2005 and 2006, 6,843 and 8,934 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.

9.             LONG TERM DEBT

On July 25, 2006, the Company amended its existing senior credit facility utilizing the accordion feature and borrowed an additional $100,000 in the form of an increase of $10,000 in the revolving facility, under terms consistent with the existing credit facility, and a senior secured term B loan in the principal amount of $90,000.  The proceeds from the issuance of the term B loan were utilized to repay outstanding revolver borrowings under the credit facility.  The term B loan matures on April 28, 2010 and bears interest at LIBOR plus 2.00%, with annual principal payments of $900 for three years, beginning July 31, 2007, with the remaining principal balance due at maturity.  The interest rate drops to LIBOR plus 1.75% after the first six months, as long as the consolidated total funded debt to consolidated EBITDA ratio is below 4.75 times.

10.          COMPREHENSIVE INCOME

Comprehensive income 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 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 income is the change in fair value of certain securities classified as available for sale as well as the

12




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 (loss) income for the three months ended July 31, 2005 and 2006 is as follows:

 

Three Months Ended

 

 

 

July 31,

 

 

 

2005

 

2006

 

Net (loss) income

 

$

3,107

 

$

(53

)

Other comprehensive loss

 

(26

)

(62

)

Comprehensive (loss) income

 

$

3,081

 

$

(115

)

The components of other comprehensive (loss) for the three months ended July 31, 2005 and 2006 are shown as follows:

 

 

Three Months Ended July 31,

 

 

 

2005

 

2006

 

 

 

Gross

 

Tax
effect

 

Net of
Tax

 

Gross

 

Tax
effect

 

Net of
Tax

 

Changes in fair value of marketable securities during the period

 

$

(49

)

$

(17

)

$

(32

)

$

17

 

$

6

 

$

11

 

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

 

227

 

84

 

143

 

8

 

3

 

5

 

Reclassification to earnings for interest rate swap contracts

 

(137

)

 

(137

)

(130

)

(52

)

(78

)

 

 

$

41

 

$

67

 

$

(26

)

$

(105

)

$

(43

)

$

(62

)

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 is party to thirty-four commodity hedge contracts as of July 31, 2006.  These contracts expire between August 2006 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, as amended.  As of July 31, 2006 the fair value of these hedges was an obligation of $921, with the net amount (net of taxes of $373) recorded as an unrealized loss in accumulated other comprehensive income.

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, 2006, the fair value of these swaps was $1,090, with the net amount (net of taxes of $441) recorded as an unrealized gain in accumulated other comprehensive income.

On August 1, 2006, the Company entered into three separate interest rate zero-cost collars for a notional amount of $80,000.  The collars have an interest index rate cap of 6.00% and an interest index rate floor of approximately 4.48% and will be effective from November 6, 2006 through May 5, 2009. These agreements will be specifically designated to interest payments under the revolving credit facility and will be accounted for as effective cash flow hedges pursuant to SFAS No. 133.

12.          STOCK-BASED COMPENSATION

Effective May 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”). SFAS No. 123(R) establishes accounting for stock based awards exchanged for employee services. The Company previously accounted for these awards under the recognition and

13




measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations and disclosure requirements established by SFAS No. 123, Accounting for Stock-Based Compensation.

Under APB 25, no expense was recorded in the income statement for the Company’s stock options granted at fair market value. The pro forma effects on income for stock options and the Company’s employee stock purchase plan were instead disclosed in a footnote to the financial statements.

The Company adopted SFAS No. 123(R) using the modified prospective method. Under this method, all share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the specified vesting period. Prior periods are not restated.  The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair-value recognition provisions of SFAS No. 123 to stock options and the employee stock purchase program prior to adoption of SFAS No. 123(R).

 

Three Months

 

 

 

Ended July 31,

 

 

 

2005

 

Net income available to common stockholders, as reported

 

$

2,257

 

Deduct: Total stock-based compensation expense determined under fair value based method, net

 

368

 

Net income available to common stockholders, pro forma

 

$

1,889

 

 

 

 

 

Basic income per common share:

 

 

 

As reported

 

$

0.09

 

Pro forma

 

$

0.08

 

Diluted income per common share:

 

 

 

As reported

 

$

0.09

 

Pro forma

 

$

0.07

 

Effective March 2, 2006, the Company accelerated the vesting of all unvested stock options. As a result, stock-based compensation in periods subsequent to the acceleration is significantly reduced. The Company recognized stock-based compensation expense totaling $39 ($24 net of tax) related to the accelerated vesting of options previously awarded.  This expense was included in general and administration expenses in the consolidated statements of operations for fiscal year 2006.

Stock-based compensation expense recognized during the three months ended July 31, 2006 totaled approximately $134, or approximately a $0.01 per share decrease to basic and diluted net income per common share.  $110 was recorded with respect to stock options issued and $24 was recorded with respect to the Company’s employee stock purchase plan.  This expense is included in general and administration expenses in the consolidated statements of operations.  The total compensation cost at July 31, 2006 related to unvested stock options was $2,217 and that future expense will be recognized over the vesting periods of the stock options.  The weighted average remaining vesting period of those awards is approximately 3.8 years.

The total tax benefit related to the exercise of stock options was approximately $141 during the three months ended July 31, 2006. Prior to the adoption of SFAS No. 123(R), the Company presented all tax benefits net of deductions resulting from the exercise of stock options as an operating cash flow, in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-15, Classification in the Statement of Cash Flows of the Income Tax Benefit Received by a Company upon Exercise of a Nonqualified Employee Stock Option. SFAS No. 123(R) requires the Company to reflect the tax savings resulting from tax deductions in excess of expense reflected in its financial statements as a financing cash flow.

14




The Company’s calculations of stock-based compensation expense for the three months ended July 31, 2005 and 2006 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, 2005 and 2006, as follows:

 

Three months ended

 

 

 

July 31,

 

 

 

2005

 

2006

 

Stock Options:

 

 

 

 

 

Expected life

 

5 years

 

6 years

 

Risk-free interest rate

 

3.63% - 3.76%

 

5.14%

 

Expected volatility

 

40.35%

 

31.02%

 

Stock Purchase Plan:

 

 

 

 

 

Expected life

 

.5 years

 

.5 years

 

Risk-free interest rate

 

4.30% – 4.40%

 

5.31%

 

Expected volatility

 

40.35%

 

30.42%

 

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 over the last one, three and six years.  One and three year historical volatility is based on the weekly price changes of the Company’s Class A Common Stock.  The six year historical volatility is based on peer group volatility and the weekly price changes of the common stock of various other publicly traded solid waste companies.   

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 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.

In January 1998, the Company implemented its Employee Stock Purchase Plan. Under this plan, qualified employees may purchase shares of Class A Common Stock by payroll deduction at a 15% discount from the market price. 600 shares of Class A Common Stock have been reserved for this purpose.  As of July 31, 2006, 397 shares of Class A Common Stock were available for distribution under this plan.

During 1996, the Company adopted a stock option plan for employees, officers and directors of, and consultants and advisors to the Company. The 1996 Stock Option Plan (the “1996 Option Plan”) provided for the issuance of a maximum of 918 shares of Class A Common Stock pursuant to the grant of either incentive stock options or non-statutory options. As of April 30, 2006, a total of 167 options to purchase Class A Common Stock were outstanding at a weighted average exercise price of $14.30.  As of July 31, 2006, a total of 166 options to purchase Class A common Stock were outstanding at an average exercise price of $14.32. No further options may be granted under this plan.

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. The 1997 Stock Option Plan (the “1997 Option Plan”) provides for the issuance of 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, 2006, options to purchase 3,056 shares of Class A Common Stock at an average exercise price of $13.12 were outstanding under the 1997 Option Plan. As of July 31, 2006, options to purchase 3,430 shares of Class A Common Stock at a weighted average exercise price of $13.19 were

15




outstanding under the 1997 Option Plan. As of July 31, 2006, 436 options were available for future grant under the 1997 Option Plan.

Additionally, options outstanding under the assumed KTI Stock Option Plan totaled 20 at April 30, 2006 and July 31, 2006, at a weighted average exercise price of $18.62. Upon assumption of this plan, options under the KTI plan became exercisable for an equal number of shares of the Company’s stock. The exercise price of the converted options was increased by 96.1% based on relative fair values of the underlying stock at the date of the KTI acquisition.

On July 31, 1997, the Company adopted a stock option plan for non-employee directors of the Company. The 1997 Non-Employee Director Stock Option Plan provides for the issuance of a maximum of 200 shares of Class A Common Stock pursuant to the grant of non-statutory options. As of April 30, 2006 and July 31, 2006, options to purchase 189 shares of Class A Common Stock at a weighted average exercise price of $11.87 respectively, were outstanding. As of April 30, 2006, 9 options were available for future grant under the 1997 Non-Employee Director Stock Option Plan.

Options 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 options outstanding as of April 30, 2006, and changes during the three months ended July 31, 2006, is presented below:

 

Unvested
Shares

 

Vested
Shares

 

Total Shares

 

Weighted
Average
Exercise
Price

 

Aggregate
Intrinsic
Value of
Vested
Options

 

Weighted
Average
Remaining
Term (Years)

 

Outstanding, April 30, 2006

 

 

3,431,474

 

3,431,474

 

$

13.14

 

$

8,270

 

5.2

 

Granted

 

445,650

 

10,000

 

455,650

 

13.17

 

 

 

 

 

Forfeited

 

 

(334

)

(334

)

4.61

 

 

 

 

 

Exercised

 

 

(71,934

)

(71,934

)

10.18

 

 

 

 

 

Outstanding, July 31, 2006

 

445,650

 

3,369,206

 

3,814,856

 

13.20

 

 

5.5

 

Exercisable, July 31, 2006

 

 

 

3,369,206

 

3,369,206

 

$

13.21

 

$

 

5.0

 

The weighted average grant date fair value per share for the stock options granted during the three months ended July 31, 2005 and 2006 was $4.51 and $5.08, respectively.  The total intrinsic value of stock options exercised during the three month period ending July 31, 2006 was $371.  The total fair value of the 10 stock options vested during the three month period ending March 31, 2006 was $64.  

13.          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. 

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

16




derived from integrated waste handling services, including processing and recycling of paper, metals, aluminum, plastics and glass.  Included in “Other” are ancillary operations, mainly major customer accounts as well as Parent Company assets.

 

 

North Eastern

 

South Eastern

 

Central

 

Western

 

FCR

 

 

 

Region

 

Region

 

Region

 

Region

 

Recycling

 

Three Months Ended July 31, 2005 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

27,596

 

$

24,397

 

$

29,511

 

$

25,522

 

$

20,499

 

Depreciation and amortization

 

4,740

 

2,910

 

3,745

 

3,217

 

1,088

 

Operating income

 

1,742

 

522

 

4,682

 

3,387

 

3,023

 

Total assets

 

$

177,078

 

$

139,203

 

$

128,812

 

$

154,108

 

$

65,676

 

 

 

Other

 

Total

 

Three Months Ended July 31, 2005 (1)

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

4,475

 

$

132,000

 

Depreciation and amortization

 

434

 

16,134

 

Operating income

 

(394

)

12,962

 

Total assets

 

$

64,979

 

$

729,856

 

 

 

 

North Eastern

 

South Eastern

 

Central

 

Western

 

FCR

 

 

 

Region

 

Region

 

Region

 

Region

 

Recycling

 

Three Months Ended July 31, 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

29,509

 

$

21,054

 

$

34,644

 

$

29,103

 

$

23,315

 

Depreciation and amortization

 

4,795

 

1,929

 

5,321

 

3,996

 

1,412

 

Operating income

 

1,167

 

(1,134

)

3,875

 

2,889

 

2,573

 

Total assets

 

$

184,712

 

$

153,382

 

$

151,109

 

$

167,057

 

$

89,595

 

 

 

Other

 

Total

 

Three Months Ended July 31, 2006

 

 

 

 

 

 

 

 

 

 

 

Outside revenues

 

$

5,894

 

$

143,519

 

Depreciation and amortization

 

489

 

17,942

 

Operating income

 

(707

)

8,663

 

Total assets

 

$

81,029

 

$

826,884

 


(1) Certain items have been reclassified for the three months ended July 31, 2005 to conform to current year reporting.

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

 

Three Months Ended
July 31,

 

 

 

2005

 

2006

 

Collection

 

$

65,267

 

$

68,497

 

Landfill/disposal facilities

 

23,263

 

28,376

 

Transfer

 

11,649

 

12,309

 

Recycling

 

31,821

 

34,337

 

Total revenues

 

$

132,000

 

$

143,519

 

17




14.          INVESTMENTS IN UNCONSOLIDATED ENTITIES

The Company entered into an agreement in July 2000 with Louisiana-Pacific 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 $30,899 and $31,184 at April 30, 2006 and July 31, 2006, respectively. The Company accounts for its 50% ownership in GreenFiber under the equity method of accounting.

Summarized financial information for the Company’s equity method investments is as follows:

 

April 30,
2006

 

July 31,
2006

 

Current assets

 

$

31,592

 

$

27,973

 

Noncurrent assets

 

72,021

 

76,482

 

Current liabilities

 

23,662

 

22,786

 

Noncurrent liabilities

 

$

13,296

 

$

14,379

 

 

 

Three months ended July 31,

 

 

 

2005

 

2006

 

Revenue

 

$

31,599

 

$

44,396

 

Gross profit

 

6,231

 

10,995

 

Net income (loss)

 

$

(140

)

$

515

 

The Company purchased interests, representing a 24.11% interest, in RecycleBank LLC (“RecycleBank”), 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.

15.          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.

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.

Net assets under contractual obligation amounted to $937 and $319 at April 30, 2006 and July 31, 2006, respectively.

16.          CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company’s senior subordinated notes due 2013 are guaranteed jointly and severally, fully and

18




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, 2006 and July 31, 2006, and the condensed consolidating results of operations for the three months ended July 31, 2005 and 2006 and the condensed consolidating statements of cash flows for the three months ended July 31, 2005 and 2006 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 Company on a consolidated basis.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF APRIL 30, 2006

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

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Elimination

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

(3,840

)

$

10,747

 

$

522

 

$

 

$

7,429

 

Accounts receivable - trade, net of allowance for doubtful accounts

 

35

 

55,641

 

620

 

(27

)

56,269

 

Deferred taxes

 

4,029

 

 

1,005

 

 

5,034

 

Other current assets

 

2,456

 

7,863

 

 

(77

)

10,242

 

Total current assets

 

2,680

 

74,251

 

2,147

 

(104

)

78,974

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

3,252

 

478,725

 

(693

)

 

481,284

 

Goodwill

 

 

171,258

 

 

 

171,258

 

Restricted cash

 

5,469

 

3

 

12,415

 

 

17,887

 

Investment in subsidiaries

 

1,189

 

 

 

(1,189

)

 

Assets under contractual obligation

 

 

937

 

 

 

937

 

Other non-current assets

 

27,467

 

37,563

 

120

 

(4,379

)

60,771

 

 

 

37,377

 

688,486

 

11,842

 

(5,568

)

732,137

 

 

 

 

 

 

 

 

 

 

 

 

 

Intercompany receivable

 

656,623

 

(657,153

)

(3,849

)

4,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

696,680

 

$

105,584

 

$

10,140

 

$

(1,293

)

$

811,111

 

 

 

 

Parent

 

Guarantors

 

Non - Guarantors

 

Elimination

 

Consolidated

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long term debt

 

$

 

$

527

 

$

 

$

 

$

527

 

Current maturities of capital lease obligations

 

121

 

940

 

 

 

1,061

 

Accounts payable

 

2,227

 

43,996

 

245

 

(104

)

46,364

 

Accrued payroll and related expenses

 

1,413

 

5,376

 

29

 

 

6,818

 

Accrued interest

 

6,648

 

2

 

 

 

6,650

 

Accrued income taxes

 

200

 

 

 

 

200

 

Other current liabilities

 

5,688

 

13,612

 

13,845

 

 

33,145

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

16,297

 

64,453

 

14,119

 

(104

)

94,765

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

451,824

 

896

 

 

 

452,720

 

Deferred income taxes

 

6,957

 

 

 

 

6,957

 

Other long-term liabilities

 

1,682

 

33,372

 

1,695

 

 

36,749

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A redeemable, convertible preferred stock, authorized - 55,750, issued and outstanding - 53,000, liquidation preference of $1,000 per share plus accrued but unpaid dividends

 

70,430

 

 

 

 

70,430

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Class A common stock - Authorized - 100,000,000 shares, $0.01 par value; issued and outstanding - 24,185,000 shares

 

242

 

101

 

100

 

(201

)

242

 

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 income

 

159

 

91

 

(122

)

31

 

159

 

Additional paid-in capital

 

274,297

 

48,360

 

2,743

 

(51,103

)

274,297

 

Accumulated deficit

 

(125,218

)

(41,689

)

(8,395

)

50,084

 

(125,218

)

Total stockholders’ equity

 

149,490

 

6,863

 

(5,674

)

(1,189

)

149,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

696,680

 

$

105,584

 

$

10,140

 

$

(1,293

)

$

811,111

 

19




CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF JULY 31, 2006

(Unaudited)

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

 

 

Parent

 

Guarantors

 

Non-Guarantors

 

Elimination

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

(4,099

)

$

10,226

 

$

540

 

$

 

$

6,667

 

Accounts receivable - trade, net of allowance for doubtful accounts

 

426

 

60,289

 

653

 

 

61,368

 

Refundable income taxes

 

911

 

 

 

 

911

 

Other current assets

 

6,534

 

8,284

 

999

 

 

15,817

 

Total current assets

 

3,772

 

78,799

 

2,192

 

 

84,763

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

3,522

 

491,749

 

(320

)

 

494,951

 

Goodwill

 

 

171,602

 

 

 

171,602

 

Investment in subsidiaries

 

2,668

 

 

 

(2,668

)

 

Assets under contractual obligation

 

 

319

 

 

 

319

 

Other non-current assets

 

28,995

 

37,946

 

12,687

 

(4,379

)

75,249

 

 

 

35,185

 

701,616

 

12,367

 

(7,047

)

742,121

 

 

 

 

 

 

 

 

 

 

 

 

 

Intercompany receivable

 

672,395

 

(673,021

)

(3,753

)

4,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

711,352

 

$

107,394

 

$

10,806

 

$

(2,668

)

$

826,884

 

 

 

 

Parent

 

Guarantors

 

Non - Guarantors

 

Elimination

 

Consolidated

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long term debt

 

$

900

 

$

512

 

$

 

$

 

$

1,412

 

Accounts payable

 

1,794

 

44,306

 

209

 

 

46,309

 

Accrued interest

 

12,403

 

2

 

 

 

12,405

 

Accrued closure and post-closure costs, current portion

 

 

1,073

 

2,062

 

 

3,135

 

Other current liabilities

 

7,159

 

18,161

 

12,224

 

 

37,544

 

Total current liabilities

 

22,256

 

64,054

 

14,495

 

 

100,805

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

459,883

 

629

 

 

 

 

460,512

 

Other long-term liabilities

 

7,895

 

34,641

 

1,713

 

 

44,249

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A redeemable, convertible preferred stock, authorized - 55,750, issued and outstanding - 53,000, liquidation preference of $1,000 per share plus accrued but unpaid dividends

 

71,311

 

 

 

 

71,311

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Class A common stock - Authorized - 100,000,000 shares, $0.01 par value; issued and outstanding - 24,185,000 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 income

 

97

 

108

 

(111

)

3

 

97

 

Additional paid-in capital

 

274,928

 

47,189

 

3,328

 

(50,517

)

274,928

 

Accumulated deficit

 

(125,271

)

(39,328

)

(8,719

)

48,047

 

(125,271

)

Total stockholders’ equity

 

150,007

 

8,070

 

(5,402

)

(2,668

)

150,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

711,352

 

$

107,394

 

$

10,806

 

$

(2,668

)

$

826,884

 

20




CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2005

(Unaudited)

(In thousands)

 

 

Parent

 

Guarantors

 

Non - Guarantors

 

Elimination

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

131,112

 

$

3,073

 

$

(2,185

)

$

132,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of operations

 

3

 

85,296

 

2,572

 

(2,185

)

85,686

 

General and administration

 

(84

)

17,051

 

251

 

 

17,218

 

Depreciation and amortization

 

370

 

15,644

 

120

 

 

16,134

 

 

 

289

 

117,991

 

2,943

 

(2,185

)

119,038

 

Operating income (loss)

 

(289

)

13,121

 

130

 

 

12,962

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense/(income), net:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

(7,612

)

(60

)

(106

)

7,611

 

(167

)

Interest expense

 

7,931

 

7,173

 

24

 

(7,611

)

7,517

 

Loss (income) from equity method investments

 

(6,178

)

70

 

 

6,178

 

70

 

Other expense/(income), net:

 

(13

)

(35

)

 

 

(48

)

Other expense/(income), net

 

(5,872

)

7,148

 

(82

)

6,178

 

7,372

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

5,583

 

5,973

 

212

 

(6,178

)

5,590

 

Provision for income taxes

 

2,476

 

 

7

 

 

2,483

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

3,107

 

5,973

 

205

 

(6,178

)

3,107

 

Preferred stock dividend

 

850

 

 

 

 

850

 

Net income (loss) available to common stockholders

 

$

2,257

 

$

5,973

 

$

205

 

$

(6,178

)

$

2,257

 

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

 

$

 

$

143,510

 

$

1,936

 

$

(1,927

)

$

143,519

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses: