UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark
One)
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x
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the
quarterly period ended January 31, 2009
OR
o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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
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03-0338873
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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25 Greens Hill Lane, Rutland, Vermont
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05701
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(Address of principal executive offices)
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(Zip Code)
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Registrants 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, a
non-accelerated filer, or a smaller reporting company. See definitions of
large accelerated filer, accelerated filer and smaller reporting company
in rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller
reporting company)
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
o
No
x
Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of February 27,
2009:
Class A Common Stock
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24,651,410
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Class B Common Stock
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988,200
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PART I.
FINANCIAL
INFORMATION
ITEM 1.
FINANCIAL
STATEMENTS
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
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April 30,
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January 31,
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2008
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2009
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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2,814
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$
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2,982
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Restricted cash
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95
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96
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Accounts receivable - trade, net of
allowance for doubtful accounts of $1,752 and $2,236
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62,233
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54,791
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Notes receivable - officer/employees
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132
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136
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Refundable income taxes
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2,020
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1,787
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Prepaid expenses
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6,930
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5,923
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Inventory
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3,876
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3,525
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Deferred income taxes
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15,433
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12,157
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Other current assets
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1,692
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8,816
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Current assets of discontinued operations
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260
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Total current assets
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95,485
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90,213
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Property, plant and equipment, net of
accumulated depreciation and amortization of $484,620 and $533,950
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488,028
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499,875
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Goodwill
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179,716
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181,338
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Intangible assets, net
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2,608
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2,771
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Restricted assets
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13,563
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13,990
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Notes receivable - officer/employees
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1,101
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1,123
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Investments in unconsolidated entities
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44,617
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41,464
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Other non-current assets
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10,487
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14,378
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Non-current assets of discontinued
operations
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482
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740,602
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754,939
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$
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836,087
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$
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845,152
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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)
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April 30,
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January 31,
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2008
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2009
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LIABILITIES
AND STOCKHOLDERS EQUITY
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CURRENT LIABILITIES:
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Current maturities of long-term debt
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$
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2,758
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$
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1,676
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Current maturities of financing lease
obligations
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1,402
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Accounts payable
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51,731
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35,866
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Accrued payroll and related expenses
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11,251
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3,139
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Accrued interest
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8,668
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11,911
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Current accrued capping, closure and
post-closure costs
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9,265
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5,821
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Other accrued liabilities
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28,202
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24,153
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Current liabilities of discontinued
operations
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949
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Total current liabilities
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112,824
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83,968
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Long-term debt, less current maturities
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559,227
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566,181
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Financing lease obligations, less current
maturities
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12,647
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Accrued capping, closure and post-closure
costs, less current portion
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32,864
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35,358
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Deferred income taxes
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313
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2,916
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Other long-term liabilities
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6,007
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9,290
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Non-current liabilities of discontinued
operations
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170
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS EQUITY:
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Class A common stock -
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Authorized - 100,000,000 shares, $0.01 par
value; issued and outstanding - 24,466,000 and 24,651,000 shares as of
April 30, 2008 and January 31, 2009, respectively
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245
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247
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Class B common stock -
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Authorized - 1,000,000 shares, $0.01 par
value, 10 votes per share, issued and outstanding - 988,000 shares
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10
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10
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Accumulated other comprehensive income
(loss)
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(2,568
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)
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4,161
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Additional paid-in capital
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276,189
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279,143
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Accumulated deficit
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(149,194
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)
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(148,769
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)
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Total stockholders equity
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124,682
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134,792
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$
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836,087
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$
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845,152
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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)
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Three Months Ended
January 31,
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Nine Months Ended
January 31,
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2008
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2009
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2008
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2009
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Revenues
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$
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140,879
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$
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121,151
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$
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439,889
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$
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436,593
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Operating expenses:
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Cost of operations
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96,156
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85,480
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288,680
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293,650
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General and administration
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18,285
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13,934
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55,051
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50,673
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Depreciation and amortization
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19,026
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17,033
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59,071
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56,008
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Environmental remediation charge
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2,823
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2,823
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Development project charge
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(20
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)
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(20
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)
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133,467
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119,250
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402,802
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403,134
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Operating income
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7,412
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1,901
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37,087
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33,459
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Other expense/(income), net:
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Interest income
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(291
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)
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(178
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)
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(965
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)
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(445
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)
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Interest expense
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10,739
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9,773
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32,812
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30,267
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Loss (income) from equity method
investments
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907
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(263
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)
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4,545
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1,911
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Other income
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(56
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)
|
(396
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)
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(2,417
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)
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(549
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)
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Other expense, net
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11,299
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8,936
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33,975
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31,184
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Income (loss) from continuing operations
before income taxes and discontinued operations
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(3,887
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)
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(7,035
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)
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3,112
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2,275
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Provision (benefit) for income taxes
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576
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|
(3,218
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)
|
1,291
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1,805
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|
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Income (loss) from continuing operations
before discontinued operations
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|
(4,463
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)
|
(3,817
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)
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1,821
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470
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Discontinued Operations:
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Loss from discontinued operations (net of
income tax benefit of $80, $0, $814 and $8)
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(141
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)
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|
(1,416
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)
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(11
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)
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Loss on disposal of discontinued operations
(net of income tax benefit (provision) of $0, $0, $122 and ($262))
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|
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(437
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)
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(34
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)
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|
|
|
|
|
|
|
|
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Net income (loss) available to common
stockholders
|
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$
|
(4,604
|
)
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$
|
(3,817
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)
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$
|
(32
|
)
|
$
|
425
|
|
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
January 31,
|
|
Nine Months Ended
January 31,
|
|
|
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2008
|
|
2009
|
|
2008
|
|
2009
|
|
Earnings Per Share:
|
|
|
|
|
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Basic:
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|
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|
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Income (loss) from continuing operations
before discontinued operations available to common stockholders
|
|
$
|
(0.17
|
)
|
$
|
(0.15
|
)
|
$
|
0.07
|
|
$
|
0.02
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|
Loss from discontinued operations, net
|
|
(0.01
|
)
|
|
|
(0.05
|
)
|
|
|
Loss on disposal of discontinued
operations, net
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
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Net income (loss) per common share
available to common stockholders
|
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$
|
(0.18
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)
|
$
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(0.15
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)
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$
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|
$
|
0.02
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|
|
|
|
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|
|
|
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Basic weighted average common shares outstanding
|
|
25,415
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|
25,606
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|
25,362
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25,547
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Diluted:
|
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|
|
|
|
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Income (loss) from continuing operations
before discontinued operations available to common stockholders
|
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$
|
(0.17
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)
|
$
|
(0.15
|
)
|
$
|
0.07
|
|
$
|
0.02
|
|
Loss from discontinued operations, net
|
|
(0.01
|
)
|
|
|
(0.05
|
)
|
|
|
Loss on disposal of discontinued
operations, net
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
available to common stockholders
|
|
$
|
(0.18
|
)
|
$
|
(0.15
|
)
|
$
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares
outstanding
|
|
25,415
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|
25,606
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|
25,362
|
|
25,632
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|
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)
|
|
Nine Months Ended
January 31,
|
|
|
|
2008
|
|
2009
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
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Net income (loss)
|
|
$
|
(32
|
)
|
$
|
425
|
|
Loss from discontinued operations, net
|
|
1,416
|
|
11
|
|
Loss on disposal of discontinued
operations, net
|
|
437
|
|
34
|
|
Adjustments to reconcile net income (loss) to
net cash provided by operating activities -
|
|
|
|
|
|
Gain on sale of equipment
|
|
(54
|
)
|
(274
|
)
|
Depreciation and amortization
|
|
59,071
|
|
56,008
|
|
Depletion of landfill operating lease
obligations
|
|
4,815
|
|
5,018
|
|
Environmental remediation charge
|
|
|
|
2,823
|
|
Income from assets under contractual
obligation
|
|
(1,463
|
)
|
(114
|
)
|
Preferred stock dividend (included in
interest expense)
|
|
1,038
|
|
|
|
Amortization of premium on senior notes
|
|
(464
|
)
|
(501
|
)
|
Maine Energy settlement
|
|
(2,142
|
)
|
|
|
Loss from equity method investments
|
|
4,545
|
|
1,911
|
|
Stock-based compensation
|
|
1,022
|
|
1,383
|
|
Excess tax benefit on the exercise of stock
options
|
|
(111
|
)
|
(157
|
)
|
Deferred income taxes
|
|
(1,311
|
)
|
1,494
|
|
Changes in assets and liabilities, net of effects
of acquisitions and divestitures -
|
|
|
|
|
|
Accounts receivable
|
|
(669
|
)
|
7,529
|
|
Accounts payable
|
|
(8,608
|
)
|
(15,874
|
)
|
Prepaid expenses, inventories and other
assets
|
|
(1,523
|
)
|
2,730
|
|
Accrued expenses and other liabilities
|
|
(4,559
|
)
|
(11,813
|
)
|
|
|
49,587
|
|
50,163
|
|
Net Cash Provided by Operating Activities
|
|
51,408
|
|
50,633
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
Acquisitions, net of cash acquired
|
|
(745
|
)
|
(2,196
|
)
|
Additions to property, plant and equipment -
growth
|
|
(14,281
|
)
|
(10,165
|
)
|
-
maintenance
|
|
(44,834
|
)
|
(39,415
|
)
|
Payments on landfill operating lease
contracts
|
|
(6,735
|
)
|
(4,401
|
)
|
Proceeds from divestitures
|
|
2,154
|
|
670
|
|
Proceeds from sale of equipment
|
|
1,932
|
|
948
|
|
Investment in unconsolidated entities
|
|
(107
|
)
|
(2,527
|
)
|
Proceeds from assets under contractual
obligation
|
|
1,518
|
|
114
|
|
Net Cash Used In Investing Activities
|
|
(61,098
|
)
|
(56,972
|
)
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
260,700
|
|
105,400
|
|
Principal payments on long-term debt
|
|
(186,585
|
)
|
(100,559
|
)
|
Redemption of Series A redeemable,
convertible preferred stock
|
|
(75,056
|
)
|
|
|
Proceeds from exercise of stock options
|
|
1,216
|
|
1,462
|
|
Excess tax benefit on the exercise of stock
options
|
|
111
|
|
157
|
|
Net Cash Provided by Financing Activities
|
|
386
|
|
6,460
|
|
|
|
|
|
|
|
Discontinued Operations:
|
|
|
|
|
|
Provided by (Used in) Operating Activities
|
|
(426
|
)
|
47
|
|
Provided by Investing Activities
|
|
262
|
|
|
|
Cash Provided by (Used in) Discontinued
Operations
|
|
(164
|
)
|
47
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
(9,468
|
)
|
168
|
|
Cash and cash equivalents, beginning of
period
|
|
12,366
|
|
2,814
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
2,898
|
|
$
|
2,982
|
|
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)
|
|
Nine Months Ended
January 31,
|
|
|
|
2008
|
|
2009
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow
Information:
|
|
|
|
|
|
Cash paid during the period for -
|
|
|
|
|
|
Interest
|
|
$
|
26,870
|
|
$
|
25,982
|
|
Income taxes, net of refunds
|
|
$
|
1,851
|
|
$
|
361
|
|
|
|
|
|
|
|
Supplemental Disclosures of Non-Cash
Investing and Financing Activities:
|
|
|
|
|
|
Summary of entities acquired in purchase
business combinations -
|
|
|
|
|
|
Fair value of assets acquired
|
|
$
|
1,169
|
|
$
|
2,504
|
|
Cash paid, net
|
|
(745
|
)
|
(2,196
|
)
|
|
|
|
|
|
|
Notes payable, liabilities assumed and
holdbacks to sellers
|
|
$
|
424
|
|
$
|
308
|
|
|
|
|
|
|
|
Note receivable recorded upon divestiture
|
|
$
|
2,500
|
|
$
|
|
|
|
|
|
|
|
|
Property, plant and equipment acquired
through financing arrangements
|
|
$
|
497
|
|
$
|
14,115
|
|
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 sheet of Casella Waste Systems, Inc. (the Parent)
and Subsidiaries (collectively, the Company) as of January 31, 2009, the
consolidated statements of operations for the three and nine months ended January 31,
2008 and 2009 and the consolidated statements of cash flows for the nine months
ended January 31, 2008 and 2009 are unaudited. In the opinion of management, such financial
statements together with the consolidated balance sheet as of April 30,
2008 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 Companys audited
consolidated financial statements as of and for the twelve months ended April 30,
2008 included as part of the Companys
Annual Report on Form 10-K for the year ended April 30, 2008 (the
Annual Report). The results for the
three and nine month periods ended January 31, 2009 may not be indicative
of the results that may be expected for the fiscal year ending April 30,
2009.
2.
BUSINESS COMBINATIONS
During
the nine months ended January 31, 2009, the Company acquired three solid
waste hauling operations. The
transactions were in exchange for total consideration of $2,504 including $2,196
in cash and $308 in liabilities assumed.
During the nine months ended January 31, 2008, the Company acquired
five solid waste hauling operations.
These transactions were in exchange for total consideration of $1,169 including
$745 in cash and $424 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 and client lists, with the
residual amounts allocated to goodwill.
The
following unaudited pro forma combined information shows the results of the
Companys operations as though each of the acquisitions made in the nine months
ended January 31, 2008 and 2009 had been completed as of May 1, 2007.
|
|
Three Months Ended
January 31,
|
|
Nine Months Ended
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Revenue
|
|
$
|
141,686
|
|
$
|
121,151
|
|
$
|
443,610
|
|
$
|
437,548
|
|
Operating income
|
|
7,561
|
|
1,901
|
|
37,657
|
|
33,687
|
|
Net income (loss)
|
|
(4,556
|
)
|
(3,817
|
)
|
176
|
|
494
|
|
Diluted net income (loss) per common share
|
|
$
|
(0.18
|
)
|
$
|
(0.15
|
)
|
$
|
0.01
|
|
$
|
0.02
|
|
Weighted average diluted shares outstanding
|
|
25,415
|
|
25,606
|
|
25,362
|
|
25,632
|
|
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, 2007 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.
8
3.
GOODWILL AND INTANGIBLE ASSETS
The
following table shows the activity and balances related to goodwill from April 30,
2008 through January 31, 2009:
|
|
North
Eastern
Region
|
|
South
Eastern
Region
|
|
Central
Region
|
|
Western
Region
|
|
FCR
Recycling
|
|
Total
|
|
Balance, April 30, 2008
|
|
$
|
23,655
|
|
$
|
31,645
|
|
$
|
31,960
|
|
$
|
54,804
|
|
$
|
37,652
|
|
$
|
179,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
18
|
|
1,408
|
|
196
|
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2009
|
|
$
|
23,655
|
|
$
|
31,663
|
|
$
|
33,368
|
|
$
|
55,000
|
|
$
|
37,652
|
|
$
|
181,338
|
|
Intangible
assets at April 30, 2008 and January 31, 2009 consist of the
following:
|
|
Covenants
not to
compete
|
|
Client Lists
|
|
Licensing
Agreements
|
|
Contract
Acquisition
Costs
|
|
Total
|
|
Balance, April 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
15,125
|
|
$
|
1,597
|
|
$
|
920
|
|
$
|
58
|
|
$
|
17,700
|
|
Less accumulated amortization
|
|
(14,189
|
)
|
(726
|
)
|
(167
|
)
|
(10
|
)
|
(15,092
|
)
|
|
|
$
|
936
|
|
$
|
871
|
|
$
|
753
|
|
$
|
48
|
|
$
|
2,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
14,125
|
|
$
|
1,597
|
|
$
|
920
|
|
$
|
389
|
|
$
|
17,031
|
|
Less accumulated amortization
|
|
(13,206
|
)
|
(794
|
)
|
(218
|
)
|
(42
|
)
|
(14,260
|
)
|
|
|
$
|
919
|
|
$
|
803
|
|
$
|
702
|
|
$
|
347
|
|
$
|
2,771
|
|
Intangible
amortization expense for the three and nine months ended January 31, 2008
and 2009 was $171, $170, $472 and $471, respectively. The intangible amortization expense estimated
as of January 31, 2009 for the five fiscal years following fiscal year
2008 and thereafter is as follows:
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
Thereafter
|
|
$
|
628
|
|
$
|
499
|
|
$
|
402
|
|
$
|
323
|
|
$
|
266
|
|
$
|
1,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
NEW ACCOUNTING STANDARDS
In
February 2007, the FASB issued SFAS No.159,
The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding 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. A company shall
report unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date. Upfront costs
and fees related to items for which the fair value option is elected are
recognized in earnings as incurred and not deferred. SFAS No. 159 is
effective as of the beginning of an entitys first fiscal year that begins
after November 15, 2007. The
Company adopted this statement on May 1, 2008, but it did not have any
impact on the Companys financial position or results of operations as the
Company did not make any fair value elections under this standard.
9
In
December 2007, the FASB issued SFAS No. 141(R),
Business
Combinations (revised - 2007)
(SFAS No. 141(R)). SFAS No. 141(R) is
a revision to previously existing guidance on accounting for business
combinations. The statement retains the fundamental concept of the purchase
method of accounting, and introduces new requirements for the recognition and
measurement of assets acquired, liabilities assumed and noncontrolling
interests. SFAS No. 141(R) also requires acquisition-related
transaction and restructuring costs to be expensed rather than treated as part
of the cost of the acquisition. SFAS No. 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after December 15,
2008. The impact of adoption of this statement on the Companys
Consolidated Financial Statements is dependent on the nature and volume of
future acquisitions, and, therefore, cannot be determined at this time.
In
March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities
(SFAS No. 161). SFAS No. 161
amends and expands the disclosure requirements of SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities
, and requires entities to provide enhanced qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair values and amounts of gains and losses on derivative
contracts, and disclosures about credit-risk-related contingent features in
derivative agreements. This statement
applies to all entities and all derivative instruments. SFAS No. 161
is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008.
As SFAS No. 161 relates specifically to disclosures, the adoption
will have no impact on the Companys financial position, results of operations
or cash flows.
In
April 2008, the FASB issued FSP No. 142-3,
Determination of the Useful Life of Intangible Assets
(FSP
FAS No. 142-3). FSP FAS No. 142-3
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under FASB Statement No. 142,
Goodwill
and Other Intangible Assets
(SFAS No. 142). FSP FAS No. 142-3
is intended to improve the consistency between the useful life of a recognized
intangible asset under SFAS No. 142 and the period of expected cash flows
used to measure the fair value of the asset under SFAS No. 141(R) and
other U.S. generally accepted accounting principles. FSP FAS No. 142-3 is
effective for fiscal years beginning after December 15, 2008. The Company
does not expect the adoption of FSP FAS No. 142-3 to have a material
impact on its financial position or results of operations.
5.
LEGAL PROCEEDINGS
On
September 12, 2001, the Companys subsidiary, North Country Environmental
Services, Inc. (NCES), petitioned the New Hampshire Superior Court
(Superior Court) for a declaratory judgment concerning the extent to which
the Town of Bethlehem, New Hampshire (Town) could lawfully prohibit NCESs
expansion of its landfill in Bethlehem.
The Town filed counterclaims seeking contrary declarations and other
relief. The parties appealed the
Superior Courts decision to the New Hampshire Supreme Court (Supreme
Court). On March 1, 2004, the
Supreme Court ruled that NCES had all necessary local approvals to operate
within a 51-acre portion of its 105-acre parcel and the Town could not prevent
expansion in that area. A significant
portion of NCESs Stage IV expansion as originally designed and approved by the
New Hampshire Department of Environmental Services (NHDES), however, was to lie
to the north of the 51 acres. With
respect to expansion to the north of the 51 acres, the Supreme Court remanded
four issues to the Superior Court for further proceedings. On April 25, 2005, the Superior Court
rendered summary judgment in NCESs favor on two of the four issues, leaving
the other two issues for trial. The two
issues that were decided on summary judgment remain subject to appeal by the
Town. In March of 2005, the Town
adopted a new zoning ordinance that prohibited landfilling outside of a new
zoning district which corresponded to the 51 acres. The Town then amended its pleadings to seek a
declaration that the new ordinance was valid.
The parties each filed motions for partial summary judgment. Following the courts decisions on those
motions, the validity of the new ordinance remained subject to trial based on
two defenses raised by NCES. On March 30,
2007, NCES
10
applied
to the NHDES for a permit modification under which all Stage IV capacity
(denominated Stage IV, Phase II) would be relocated within the 51 acres. That application was superseded by a new
application, filed on November 30, 2007, that would bring all proposed
berms along the perimeter of the landfills footprint within the 51 acres as
well. NCES sought a stay of the
litigation on the ground that, if NHDES were to grant the permit modification,
there would be no need for NCES to expand beyond the 51 acres for eight or more
years, and the case could be dismissed as moot or unripe. The Superior Court granted the stay pending a
decision by NHDES. NHDES denied the
application on December 12, 2008.
NCES has filed an administrative appeal of this decision as well as a
declaratory relief action challenging the legal grounds upon which NHDES relied
in the decision. NCES also filed a
revised application with NHDES on February 12, 2009 addressing the issues
NHDES identified as the bases for denying the November 30, 2007
application. NCES sought a renewal of
the stay of the litigation on the same grounds upon which it sought and
obtained a stay previously, and the Superior Court granted this motion on February 13,
2009. The Town has threatened to file
an enforcement action against NCES seeking the removal of certain ancillary
landfill structures to the north of the 51 acres.
The
Company, on behalf of itself, its subsidiary FCR, LLC (FCR), and as a
Majority Managing Member of Green Mountain Glass, LLC (GMG), initiated a
declaratory judgment action against GR Technologies, Inc. (GRT), Anthony
C. Lane and Robert Cameron Billmyer (the Defendants) on June 8, 2007, to
resolve issues raised by GRT as the minority shareholder of GMG. The issues addressed in the action included
exercise of management discretion, right to intellectual property, and other
related disputes. The Defendants
counterclaimed in May 2008 seeking unspecified damages on a variety of
bases including, among others, breach of contract, breach of fiduciary duty,
fraud, tortious interference with business relations, induced infringement and
other matters. Management intends to
vigorously contest those allegations, and it believes that the claims have no
merit substantively or as a matter of law.
Additionally, the Defendants filed a Derivative Action in Rutland
Superior Court as a Managing Member of GMG on July 2, 2008 against several
employees of the Company and its subsidiary FCR, LLC, making similar
allegations. On September 16, 2008,
the Company filed a Motion for Summary Judgment, and a Proposed Order Decreeing
Dissolution and Appointing a Special Master, alleging that the relationship of
GRT and FCR in GMG is irretrievably broken.
The Rutland Superior Court issued a decision on February 10, 2009
ordering the case to be heard in Delaware Chancery Court as opposed to Rutland
Superior Court, and the Company will arrange for the Delaware hearing to be
held expeditiously. All litigation is in
discovery stages and, accordingly, it is not possible at this time to evaluate
the likelihood of an unfavorable outcome or provide meaningful estimates as to
amount or range of potential loss, but management currently believes that the
litigation, regardless of its outcome, will not have a material adverse affect
on the Companys financial condition,
results of operations or cash flows.
On
June 9, 2008, the Southbridge Board of Health (Southbridge BOH) issued a
Decision and Statement of Findings pursuant to M.G.L. ch.111, §§150A and 150
A1/2 and 310 CMR 16.00 (2008 Site Assignment) granting the Companys
subsidiary, Southbridge Recycling and Disposal Park, Inc. (SRD), a minor
modification to SRDs existing site assignment for the Southbridge Sanitary
Landfill (the Landfill). The 2008 Site
Assignment allows SRD, subject to several conditions, to reallocate tonnage
capacity accepted at a Construction and Demolition Processing Facility located
at the Landfill to solid waste to be accepted at the Landfill up to a maximum
of 405,600 tons per year, including the right to import municipal solid waste
to the Landfill without regard for geographic origin. On or about July 14,
2008, the Sturbridge Board of Health (Sturbridge BOH), an abutting
municipality to Southbridge, together with 10 citizen groups, filed a complaint
in Worcester Superior Court contesting the 2008 Site Assignment (the
Appeal). The Appeal names as
defendants the Southbridge BOH and its individual members at the time of the
2008 Site Assignment, and SRD. On August 21,
2008, SRD reached a settlement with the Sturbridge BOH, pursuant to which SRD
agreed to fund an escrow account to be controlled by the Sturbridge BOH, in the
amount of $50. The escrow account will
serve as a source for funds to cover the costs of SRD installing a sentinel
downgradient well to the Landfill for tests to be
11
conducted
by and results provided to the Sturbridge BOH pursuant to an environmental plan
that is a condition of the 2008 Site Assignment, and for related monitoring
costs to be incurred by the Sturbridge BOH in connection therewith. The Sturbridge BOH Appeal was formally
withdrawn as to all parties on August 22, 2008, and only the 10 citizen
groups remain as participants in the Appeal.
A Motion to Dismiss filed by SRD and the Board of Health in August 2008
was denied on February 4, 2009.
While it is too early to assess the outcome of the Appeal, SRD will
continue to aggressively defend the Appeal.
In November 2008, a class
action lawsuit was filed in United States District Court Eastern District of
Pennsylvania against Blue Mountain Recycling, LLC (BMR) and the Company,
alleging discriminatory hiring practices at BMRs facility in
Philadelphia. A companion complaint was
filed in February 2009 with the Equal Employment Opportunity
Commission. BMR and the Company deny all
allegations, and while it is too early to assess the outcome of these actions,
BMR and the Company will continue to aggressively
defend this matter.
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 Companys business, financial
condition or results of operations or cash flows.
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.
6.
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.
On
December 20, 2000, the State of New York Department of Environmental
Conservation (DEC) issued an Order on Consent (Order) which named
Waste-Stream, Inc. (WSI), a Casella subsidiary, General Motors
Corporation (GM) and Niagara Mohawk Power Corporation (NiMo) as
Respondents. The Order required that the
Respondents undertake certain work on a 25-acre scrap yard and solid waste
transfer station owned by WSI, including the drafting of a Remedial
Investigation and Feasibility Study (the Study). A draft of the Study was submitted to DEC in January 2009
by the consulting firm hired by the Respondents. The Study estimates that the undiscounted
costs associated with implementing the preferred remedies will be approximately
$10,219 and it is unlikely that any costs relating to onsite remediation will
be incurred until fiscal year 2011. WSI
is jointly and severally liable for the total cost to remediate but expects to
be responsible for approximately 30% upon implementation of a cost-sharing
agreement. Such amounts could be
significantly higher if costs exceed estimates or the other responsible parties
are not able to meet their obligation.
Based on these estimates, the Company has recorded an environmental
remediation charge of $2,823 in the quarter ended January 31, 2009. This estimate is calculated based on the
present value of future cash flows using a credit-adjusted risk-free rate which
is consistent with the discount rate used for future capping, closure and post-closure
obligations at our landfills.
Any substantial liability incurred
by the Company arising from environmental damage could have a material adverse
effect on the Companys business, financial condition and results of
operations. The
12
Company is not presently aware of
any other situations that it expects would have a material adverse impact on
its business, financial condition, results of operations, or cash flows.
7.
STOCK-BASED COMPENSATION
During
fiscal year 2009, the Company has granted performance stock units under the
2006 Stock Incentive Plan (the 2006 Plan) to certain employees. These performance stock units, each of which
represents a share of Class A Common Stock, are subject to vesting, based
on the attainment by the Company of a targeted annual return on assets over a
three year period. At the one hundred
percent level of attainment the grantee pool would be entitled to a total of
230 shares of Class A Common Stock.
These units were granted at an average grant date value of $11.44 per
share and are unvested and unissued at January 31, 2009.
The
Company has also granted 25 and 52 shares of restricted stock under the 2006
Plan in the three and nine months ended January 31, 2009 that vest based
on the passage of time. These shares
were granted at an average grant date value of $4.05 and $6.73 for the three
and nine months ended January 31, 2009.
These shares are partially vested and unissued at January 31, 2009.
Stock
options granted 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 nine months ended January 31,
2009 is as follows:
|
|
Total Shares
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding, April 30, 2008
|
|
3,782
|
|
$
|
12.82
|
|
Granted
|
|
155
|
|
4.33
|
|
Exercised
|
|
(111
|
)
|
9.98
|
|
Forfeited
|
|
(280
|
)
|
21.24
|
|
Outstanding, January 31, 2009
|
|
3,546
|
|
11.88
|
|
Exercisable, January 31, 2009
|
|
3,045
|
|
$
|
12.09
|
|
The
weighted average grant date fair value of options granted was $5.30 and $1.75
per option for the nine months ended January 31, 2008 and 2009,
respectively. There are 1,841 Class A
Common Stock equivalents available for future grant under the 2006 plan.
The
Company recorded $489, $410, $942 and $1,309 of stock based compensation
expense related to stock options, performance stock units and restricted stock
units during the three and nine months ended January 31, 2008 and 2009,
respectively. The Company also recorded
$28, $19, $80 and $74 of stock based expense for the Companys Employee Stock
Purchase Plan during the three and nine months ended January 31, 2008 and
2009, respectively.
13
The
Companys calculations of stock-based compensation expense associated with
stock options and the Companys Employee Stock Purchase Plan for the three and
nine months ended January 31, 2008 and 2009 were made using the
Black-Scholes valuation model. The fair value of the Companys stock option
grants was estimated assuming no expected dividend yield and the following
weighted average assumptions were used for the three and nine months ended January 31,
2008 and 2009:
|
|
Three Months Ended
January 31,
|
|
Nine Months Ended
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Stock Options:
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
6 years
|
|
6.7 years
|
|
6 years
|
|
6.7 years
|
|
Risk-free interest rate
|
|
3.32
|
%
|
1.67
|
%
|
4.41
|
%
|
1.74
|
%
|
Expected volatility
|
|
37.83
|
%
|
36.80
|
%
|
37.83
|
%
|
36.80
|
%
|
Stock Purchase Plan:
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
0.5 years
|
|
0.5 years
|
|
0.5 years
|
|
0.5 years
|
|
Risk-free interest rate
|
|
3.32
|
%
|
1.71
|
%
|
4.81
|
%
|
2.07
|
%
|
Expected volatility
|
|
37.22
|
%
|
36.11
|
%
|
36.59
|
%
|
36.36
|
%
|
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 and nine months ended January 31, 2008
and 2009, expected volatility is calculated using the average of weekly
historical volatility of the Companys 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 Companys 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.
8.
EARNINGS PER SHARE
The following table sets forth the
numerator and denominator used in the computation of earnings per share:
|
|
Three Months
Ended January 31,
|
|
Nine Months Ended
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common
stockholders
|
|
$
|
(4,604
|
)
|
$
|
(3,817
|
)
|
$
|
(32
|
)
|
$
|
425
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Number of shares outstanding, end of
period:
|
|
|
|
|
|
|
|
|
|
Class A common stock
|
|
24,448
|
|
24,651
|
|
24,448
|
|
24,651
|
|
Class B common stock
|
|
988
|
|
988
|
|
988
|
|
988
|
|
Effect of weighted average shares
outstanding during period
|
|
(21
|
)
|
(33
|
)
|
(74
|
)
|
(92
|
)
|
Weighted average number of common shares
used in basic EPS
|
|
25,415
|
|
25,606
|
|
25,362
|
|
25,547
|
|
Impact of potentially dilutive securities:
|
|
|
|
|
|
|
|
|
|
Dilutive effect of options and restricted
stock
|
|
|
|
|
|
|
|
85
|
|
Weighted average number of common shares
used in diluted EPS
|
|
25,415
|
|
25,606
|
|
25,362
|
|
25,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three and nine months ended
January 31, 2008, 4,006 common stock equivalents related to options and
warrants were excluded from the calculation of dilutive shares since the
inclusion of such shares would be anti-dilutive.
14
For the three and nine months ended
January 31, 2009, 3,848 and 3,183 common stock equivalents related to
options, warrants and restricted stock units were excluded from the calculation
of dilutive shares since the inclusion of such shares would be anti-dilutive.
9.
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 income
(loss) included in the accompanying balance sheets consists of changes in the
fair value of the Companys interest rate derivatives and commodity hedge
agreements. Also included in accumulated
other comprehensive income (loss) is the change in fair value of certain
securities classified as available for sale as well as the Companys portion of
the change in the fair value of commodity hedge agreements of the Companys
equity method investment, US GreenFiber, LLC (GreenFiber)
.
Comprehensive
income (loss) for the three and nine months ended January 31, 2008 and
2009 is as follows:
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Net income (loss)
|
|
$
|
(4,604
|
)
|
$
|
(3,817
|
)
|
$
|
(32
|
)
|
$
|
425
|
|
Other comprehensive income (loss)
|
|
(1,673
|
)
|
767
|
|
(1,959
|
)
|
6,729
|
|
Comprehensive income (loss)
|
|
$
|
(6,277
|
)
|
$
|
(3,050
|
)
|
$
|
(1,991
|
)
|
$
|
7,154
|
|
The
components of other comprehensive income (loss) for the three and nine months
ended January 31, 2008 and 2009 are shown as follows:
|
|
Three Months Ended January 31,
|
|
|
|
2008
|
|
2009
|
|
|
|
Gross
|
|
Tax effect
|
|
Net of Tax
|
|
Gross
|
|
Tax
effect
|
|
Net of
Tax
|
|
Changes in fair value of marketable
securities during the period
|
|
$
|
272
|
|
$
|
95
|
|
$
|
177
|
|
$
|
277
|
|
$
|
96
|
|
$
|
181
|
|
Change in fair value of interest rate
derivatives and commodity hedges during period
|
|
(3,623
|
)
|
(1,466
|
)
|
(2,157
|
)
|
2,667
|
|
1,074
|
|
1,593
|
|
Reclassification to earnings for interest
rate derivatives and commodity hedge contracts
|
|
515
|
|
208
|
|
307
|
|
(1,686
|
)
|
(679
|
)
|
(1,007
|
)
|
|
|
$
|
(2,836
|
)
|
$
|
(1,163
|
)
|
$
|
(1,673
|
)
|
$
|
1,258
|
|
$
|
491
|
|
$
|
767
|
|
|
|
Nine Months Ended January 31,
|
|
|
|
2008
|
|
2009
|
|
|
|
Gross
|
|
Tax effect
|
|
Net of Tax
|
|
Gross
|
|
Tax
effect
|
|
Net of
Tax
|
|
Changes in fair value of marketable
securities during the period
|
|
$
|
332
|
|
$
|
116
|
|
$
|
216
|
|
$
|
91
|
|
$
|
31
|
|
$
|
60
|
|
Change in fair value of interest rate
derivatives and commodity hedges during period
|
|
(5,163
|
)
|
(2,078
|
)
|
(3,085
|
)
|
9,785
|
|
3,939
|
|
5,846
|
|
Reclassification to earnings for interest
rate derivatives and commodity hedge contracts
|
|
1,514
|
|
604
|
|
910
|
|
1,394
|
|
571
|
|
823
|
|
|
|
$
|
(3,317
|
)
|
$
|
(1,358
|
)
|
$
|
(1,959
|
)
|
$
|
11,270
|
|
$
|
4,541
|
|
$
|
6,729
|
|
15
10.
FAIR VALUE OF FINANCIAL
INSTRUMENTS
Effective
May 1, 2008, the Company adopted SFAS No. 157,
Fair Value
Measurements
(SFAS No. 157) as it relates to financial assets
and liabilities that are being measured and reported at fair value on a
recurring basis.
SFAS No. 157
provides a framework for measuring fair value and establishes a fair value
hierarchy that prioritizes the inputs used to measure fair value, giving the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 inputs) and the lowest priority to
unobservable inputs (Level 3 inputs).
The
Companys financial assets and liabilities recorded at fair value on a
recurring basis include derivative instruments as well as certain investments
included in restricted assets. The Companys restricted assets measured
at fair value include investments in fixed-maturity securities which serve as
collateral for the Companys self-insurance claims liability, self-insurance
reserves and landfill post closure obligations.
The
Companys derivative instruments include interest rate swaps and collars along
with commodity hedges. The Company uses
interest rate derivatives to hedge the risk of adverse movements in interest
rates. The fair value of these cash flow
hedges are based primarily on the LIBOR index.
The Company uses commodity hedges to hedge the risk of adverse movements
in commodity pricing. The fair value of
these hedges is based on futures pricing in the underlying commodities.
The
Company uses valuation techniques that maximize the use of market prices and
observable inputs and minimize the use of unobservable inputs. In measuring the
fair value of the Companys financial assets and liabilities, the Company
relies on market data or assumptions that the Company believes market
16
participants
would use in pricing an asset or liability.
As of January 31, 2009, our assets and liabilities that are
measured at fair value on a recurring basis include the following:
|
|
Fair Value Measurement at January 31, 2009 Using:
|
|
|
|
Quoted Prices in Active
Markets for Identical
Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant Unobservable
Inputs (Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
Restricted assets - available for sale
securities
|
|
$
|
13,990
|
|
$
|
|
|
$
|
|
|
Commodity derivatives
|
|
|
|
11,155
|
|
|
|
Total
|
|
$
|
13,990
|
|
$
|
11,155
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Interest rate derivatives
|
|
$
|
|
|
$
|
1,469
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
1,469
|
|
$
|
|
|
11.
DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES
The
Companys 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 thirty commodity
hedge contracts as of January 31, 2009.
These contracts expire between March 2009 and December 2011. 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
(SFAS No. 133). As of January 31,
2009 the fair value of these hedges was an asset of $11,155, with the net
amount (net of taxes of $4,492) recorded as an unrealized gain in accumulated
other comprehensive income (loss). The
recent appreciation of these hedges is associated with the significant declines
in fiber pricing. The unrealized gain,
which is subject to variability based on future price changes, will be realized
in earnings over the remaining life of the hedge agreements.
The
Company is party to three separate interest rate swap agreements with three
banks for a notional amount of $105,000.
One agreement for a notional amount of $30,000 effectively fixes the
interest rate index at 4.74% from November 4, 2007 through May 7,
2009. Two agreements, for a notional
amount of $75,000, effectively fix the interest index rate on the entire
notional amount at approximately 4.55% from May 6, 2008 through May 6,
2009. These agreements are specifically
designated to interest payments under the Companys term B loan and are
accounted for as effective cash flow hedges pursuant to SFAS No. 133. As of January 31, 2009, the fair value
of the Companys interest rate swaps was an obligation of $1,175, with the net
amount (net of taxes of $474) recorded as an unrealized loss in accumulated
other comprehensive income (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 January 31,
2009, the fair value of these
17
collars
was an obligation of $291, with the net amount (net of taxes of $116) recorded
as an unrealized loss in accumulated other comprehensive income (loss).
12.
DISCONTINUED OPERATIONS
During
the second quarter of fiscal year 2008, the Company completed the sale of the
Companys Buffalo, N.Y. transfer station, hauling operation and related
equipment in the Western region for proceeds of $4,873 including a note
receivable for $2,500 and net cash proceeds of $2,373. The company recorded a loss on disposal of
discontinued operations (net of tax) of $437.
During
the fourth quarter of fiscal year 2008, the Company terminated its operation of
MTS Environmental, a soils processing operation in the North Eastern region.
The
Company completed the divestiture of its FCR Greenville operation in the
quarter ended July 31, 2008 for cash proceeds of $670. The company recorded a loss on disposal of
discontinued operations (net of tax) of $34.
The
operating results of these operations for the three and nine months ended January 31,
2008 and 2009 have been reclassified from continuing to discontinued operations
in the accompanying consolidated financial
statements.
Revenues
and loss before income taxes attributable to discontinued operations for the
three and nine months ended January 31, 2008 and 2009 were as follows:
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Revenues
|
|
$
|
480
|
|
$
|
|
|
$
|
7,755
|
|
$
|
282
|
|
Loss before income taxes
|
|
$
|
(221
|
)
|
$
|
|
|
$
|
(2,230
|
)
|
$
|
(19
|
)
|
The
Company has recorded contingent liabilities associated with these divestitures
amounting to approximately $902 at January 31, 2009.
In
accordance with EITF Issue No. 87-24,
Allocation
of Interest to Discontinued Operations
, the Company allocates
interest to discontinued operations. The Company has also eliminated certain
immaterial inter-company activity associated with discontinued operations.
13.
SEGMENT
REPORTING
SFAS
No. 131,
Disclosures about Segments of
an Enterprise and Related Information
(SFAS No. 131), 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.
For
the periods covered by this report, Company classifies its operations into
North Eastern, South Eastern, Central, Western, FCR Recycling and Other. The Companys 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 Companys revenues in the FCR
Recycling segment are derived from integrated waste handling services,
including processing and recycling of paper,
18
metals,
aluminum, plastics and glass. Ancillary
operations, major customer accounts, discontinued operations and earnings from
equity method investees are included in Other.
Three Months Ended January 31, 2008
Segment
|
|
Outside
revenues
|
|
Depreciation
and
amortization
|
|
Operating
income (loss)
|
|
Total
assets
|
|
North Eastern
|
|
$
|
28,327
|
|
$
|
5,880
|
|
$
|
(182
|
)
|
$
|
173,970
|
|
South Eastern
|
|
16,357
|
|
2,740
|
|
(1,281
|
)
|
128,603
|
|
Central
|
|
28,938
|
|
4,159
|
|
1,703
|
|
151,080
|
|
Western
|
|
25,172
|
|
4,018
|
|
1,636
|
|
178,643
|
|
FCR
|
|
33,730
|
|
1,749
|
|
5,999
|
|
97,765
|
|
Other
|
|
8,355
|
|
480
|
|
(463
|
)
|
100,080
|
|
Total
|
|
$
|
140,879
|
|
$
|
19,026
|
|
$
|
7,412
|
|
$
|
830,141
|
|
Three Months Ended January 31, 2009
Segment
|
|
Outside
revenues
|
|
Depreciation
and
amortization
|
|
Operating
income (loss)
|
|
Total
assets
|
|
North Eastern
|
|
$
|
28,178
|
|
$
|
5,366
|
|
$
|
1,397
|
|
$
|
169,780
|
|
South Eastern
|
|
14,449
|
|
2,358
|
|
(503
|
)
|
121,440
|
|
Central
|
|
26,389
|
|
3,732
|
|
3,117
|
|
159,738
|
|
Western
|
|
22,517
|
|
3,512
|
|
677
|
|
179,759
|
|
FCR
|
|
20,868
|
|
1,734
|
|
(2,155
|
)
|
113,928
|
|
Other
|
|
8,750
|
|
331
|
|
(632
|
)
|
100,507
|
|
Total
|
|
$
|
121,151
|
|
$
|
17,033
|
|
$
|
1,901
|
|
$
|
845,152
|
|
Nine Months Ended January 31, 2008
Segment
|
|
Outside
revenues
|
|
Depreciation
and
amortization
|
|
Operating
income (loss)
|
|
Total
assets
|
|
North Eastern
|
|
$
|
89,980
|
|
$
|
17,967
|
|
$
|
2,118
|
|
$
|
173,970
|
|
South Eastern
|
|
51,332
|
|
7,456
|
|
(3,399
|
)
|
128,603
|
|
Central
|
|
98,686
|
|
14,480
|
|
12,922
|
|
151,080
|
|
Western
|
|
81,651
|
|
12,594
|
|
10,076
|
|
178,643
|
|
FCR
|
|
94,472
|
|
5,098
|
|
15,323
|
|
97,765
|
|
Other
|
|
23,768
|
|
1,476
|
|
47
|
|
100,080
|
|
Total
|
|
$
|
439,889
|
|
$
|
59,071
|
|
$
|
37,087
|
|
$
|
830,141
|
|
Nine Months Ended January 31, 2009
Segment
|
|
Outside
revenues
|
|
Depreciation
and
amortization
|
|
Operating
income (loss)
|
|
Total
assets
|
|
North Eastern
|
|
$
|
93,656
|
|
$
|
18,044
|
|
$
|
3,470
|
|
$
|
169,780
|
|
South Eastern
|
|
49,285
|
|
8,016
|
|
(1,155
|
)
|
121,440
|
|
Central
|
|
93,116
|
|
12,352
|
|
12,741
|
|
159,738
|
|
Western
|
|
82,127
|
|
11,517
|
|
12,201
|
|
179,759
|
|
FCR
|
|
92,039
|
|
4,945
|
|
7,666
|
|
113,928
|
|
Other
|
|
26,370
|
|
1,134
|
|
(1,464
|
)
|
100,507
|
|
Total
|
|
$
|
436,593
|
|
$
|
56,008
|
|
$
|
33,459
|
|
$
|
845,152
|
|
19
Subsequent
to January 31, 2009, the Company integrated the South Eastern region into
the North Eastern region.
Sources
of the Companys total revenue are as follows:
|
|
Three Months Ended
January 31,
|
|
Nine Months Ended
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Collection
|
|
$
|
64,649
|
|
$
|
60,700
|
|
$
|
202,981
|
|
$
|
202,122
|
|
Landfill / disposal facilities
|
|
23,979
|
|
23,186
|
|
82,147
|
|
83,095
|
|
Transfer
|
|
5,606
|
|
6,269
|
|
20,644
|
|
24,189
|
|
Recycling
|
|
46,645
|
|
30,996
|
|
134,117
|
|
127,187
|
|
Total revenues
|
|
$
|
140,879
|
|
$
|
121,151
|
|
$
|
439,889
|
|
$
|
436,593
|
|
14.
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 Companys investment in GreenFiber amounted to $29,571 and $26,391 at
April 30, 2008 and January 31, 2009, respectively.
On
August 15, 2008, the Company made a $2,500 equity contribution to
GreenFiber to support a refinancing of GreenFibers existing revolving credit
facility. In addition, the other member
of GreenFiber, Louisiana-Pacific (LP), made the same equity contribution
resulting in no change to the Companys ownership in GreenFiber. The Company will continue to account for its
50% ownership in GreenFiber using the equity method of accounting.
In
addition, the Company and LP issued a joint and several guarantee of up to
$2,000 to support the refinancing of a GreenFiber term loan. The guarantee can be drawn only upon a
default (as defined) by GreenFiber under this term loan. As of January 31, 2009, the Company has
recorded $75 as the carrying amount of the guarantee.
Summarized
financial information for GreenFiber is as follows:
|
|
April 30,
2008
|
|
January 31,
2009
|
|
|
|
|
|
Current assets
|
|
$
|
23,095
|
|
$
|
23,298
|
|
|
|
|
|
Noncurrent assets
|
|
69,681
|
|
67,219
|
|
|
|
|
|
Current liabilities
|
|
16,229
|
|
19,129
|
|
|
|
|
|
Noncurrent liabilities
|
|
$
|
17,365
|
|
$
|
18,607
|
|
|
|
|
|
|
|
Three
Months Ended
January 31,
|
|
Nine
Months Ended
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Revenue
|
|
$
|
44,432
|
|
$
|
36,424
|
|
$
|
119,926
|
|
$
|
102,153
|
|
Gross profit
|
|
7,531
|
|
8,743
|
|
19,964
|
|
17,817
|
|
Net (loss) income
|
|
$
|
(618
|
)
|
$
|
525
|
|
$
|
(6,027
|
)
|
$
|
(3,822
|
)
|
20
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 were
disclosed in the balance sheet as net assets under contractual obligation,
and were being reduced as payments are made.
During the three and nine months ended January 31, 2008 and 2009,
the Company recognized income on the transactions in the amount of $96, $0, $1,463
and $114, respectively, as payments received on the notes receivable exceeded
the balance of the net assets under contractual obligation. Minimum amounts owed to the Company under
these notes amounted to $2,076 and $1,932 at April 30, 2008 and January 31,
2009, respectively.
21
16.
CONDENSED CONSOLIDATING FINANCIAL
INFORMATION
The
Companys senior subordinated notes due 2013 are guaranteed jointly and
severally, fully and unconditionally, by the Companys
significant wholly-owned subsidiaries. The Parent is the issuer and a non-guarantor
of the senior subordinated notes. The information which follows presents the
condensed consolidating financial position as of April 30, 2008 and January 31,
2009, and the condensed consolidating results of operations for the three and
nine months ended January 31, 2008 and 2009 and the condensed
consolidating statements of cash flows for the nine months ended January 31,
2008 and 2009 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, 2008
(in thousands, except for share and per share data)
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Elimination
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,260
|
|
$
|
1,306
|
|
$
|
248
|
|
$
|
|
|
$
|
2,814
|
|
Restricted cash
|
|
|
|
95
|
|
|
|
|
|
95
|
|
Accounts receivable - trade, net of
allowance for
|
|
|
|
|
|
|
|
|
|
|
|
doubtful accounts
|
|
80
|
|
61,969
|
|
184
|
|
|
|
62,233
|
|
Notes receivable - officers/employees
|
|
132
|
|
|
|
|
|
|
|
132
|
|
Refundable income taxes
|
|
2,020
|
|
|
|
|
|
|
|
2,020
|
|
Prepaid expenses
|
|
2,541
|
|
4,389
|
|
|
|
|
|
6,930
|
|
Deferred taxes
|
|
14,639
|
|
|
|
794
|
|
|
|
15,433
|
|
Other current assets
|
|
501
|
|
5,327
|
|
|
|
|
|
5,828
|
|
Total current assets
|
|
21,173
|
|
73,086
|
|
1,226
|
|
|
|
95,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of
accumulated depreciation and amortization
|
|
2,557
|
|
485,471
|
|
|
|
|
|
488,028
|
|
Goodwill
|
|
|
|
179,716
|
|
|
|
|
|
179,716
|
|
Investment in subsidiaries
|
|
2,898
|
|
|
|
|
|
(2,898
|
)
|
|
|
Other non-current assets
|
|
26,370
|
|
37,254
|
|
13,613
|
|
(4,379
|
)
|
72,858
|
|
|
|
31,825
|
|
702,441
|
|
13,613
|
|
(7,277
|
)
|
740,602
|
|
Intercompany receivable
|
|
652,849
|
|
(649,823
|
)
|
(7,405
|
)
|
4,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
705,847
|
|
$
|
125,704
|
|
$
|
7,434
|
|
$
|
(2,898
|
)
|
$
|
836,087
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Elimination
|
|
Consolidated
|
|
LIABILITIES
AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long term debt
|
|
$
|
1,858
|
|
$
|
900
|
|
$
|
|
|
$
|
|
|
$
|
2,758
|
|
Accounts payable
|
|
4,084
|
|
47,503
|
|
144
|
|
|
|
51,731
|
|
Accrued payroll and related expenses
|
|
2,834
|
|
8,417
|
|
|
|
|
|
11,251
|
|
Other current liabilities
|
|
20,754
|
|
20,079
|
|
6,251
|
|
|
|
47,084
|
|
Total current liabilities
|
|
29,530
|
|
76,899
|
|
6,395
|
|
|
|
112,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current maturities
|
|
550,078
|
|
9,149
|
|
|
|
|
|
559,227
|
|
Other long-term liabilities
|
|
1,557
|
|
35,881
|
|
1,916
|
|
|
|
39,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock -
|
|
|
|
|
|
|
|
|
|
|
|
Authorized - 100,000,000 shares, $0.01 par
value; issued and outstanding - 24,466,000 shares
|
|
245
|
|
100
|
|
100
|
|
(200
|
)
|
245
|
|
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
|
|
(2,568
|
)
|
502
|
|
143
|
|
(645
|
)
|
(2,568
|
)
|
Additional paid-in capital
|
|
276,189
|
|
46,430
|
|
3,988
|
|
(50,418
|
)
|
276,189
|
|
Accumulated deficit
|
|
(149,194
|
)
|
(43,257
|
)
|
(5,108
|
)
|
48,365
|
|
(149,194
|
)
|
Total stockholders equity
|
|
124,682
|
|
3,775
|
|
(877
|
)
|
(2,898
|
)
|
124,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
705,847
|
|
$
|
125,704
|
|
$
|
7,434
|
|
$
|
(2,898
|
)
|
$
|
836,087
|
|
22
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 31, 2009
(Unaudited)
(in thousands, except for share and per share data)
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Elimination
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
422
|
|
$
|
2,186
|
|
$
|
374
|
|
$
|
|
|
$
|
2,982
|
|
Accounts receivable - trade, net of
allowance for
doubtful accounts
|
|
730
|
|
53,861
|
|
200
|
|
|
|
54,791
|
|
Other current assets
|
|
22,146
|
|
9,573
|
|
721
|
|
|
|
32,440
|
|
Total current assets
|
|
23,298
|
|
65,620
|
|
1,295
|
|
|
|
90,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of
accumulated depreciation and amortization
|
|
2,967
|
|
496,908
|
|
|
|
|
|
499,875
|
|
Goodwill
|
|
|
|
181,338
|
|
|
|
|
|
181,338
|
|
Investment in subsidiaries
|
|
15,663
|
|
|
|
|
|
(15,663
|
)
|
|
|
Other non-current assets
|
|
31,199
|
|
32,919
|
|
13,987
|
|
(4,379
|
)
|
73,726
|
|
|
|
49,829
|
|
711,165
|
|
13,987
|
|
(20,042
|
)
|
754,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable
|
|
655,589
|
|
(652,193
|
)
|
(7,775
|
)
|
4,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
728,716
|
|
$
|
124,592
|
|
$
|
7,507
|
|
$
|
(15,663
|
)
|
$
|
845,152
|
|
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Elimination
|
|
Consolidated
|
|
LIABILITIES
AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of financing lease
obligations
|
|
$
|
|
|
$
|
1,402
|
|
$
|
|
|
$
|
|
|
$
|
1,402
|
|
Accounts payable
|
|
2,209
|
|
33,410
|
|
247
|
|
|
|
35,866
|
|
Accrued payroll and related expenses
|
|
368
|
|
2,771
|
|
|
|
|
|
3,139
|
|
Accrued interest
|
|
11,894
|
|
17
|
|
|
|
|
|
11,911
|
|
Accrued closure and post-closure costs,
current portion
|
|
|
|
5,817
|
|
4
|
|
|
|
5,821
|
|
Other current liabilities
|
|
9,113
|
|
10,322
|
|
6,394
|
|
|
|
25,829
|
|
Total current liabilities
|
|
23,584
|
|
53,739
|
|
6,645
|
|
|
|
83,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current maturities
|
|
565,043
|
|
1,138
|
|
|
|
|
|
566,181
|
|
Financing lease obligations, less current
maturities
|
|
|
|
12,647
|
|
|
|
|
|
12,647
|
|
Deferred income taxes
|
|
2,916
|
|
|
|
|
|
|
|
2,916
|
|
Other long-term liabilities
|
|
2,381
|
|
40,340
|
|
1,927
|
|
|
|
44,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock -
|
|
|
|
|
|
|
|
|
|
|
|
Authorized - 100,000,000 shares, $0.01 par
value; issued and outstanding - 24,651,000 shares
|
|
247
|
|
100
|
|
100
|
|
(200
|
)
|
247
|
|
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
(loss)
|
|
4,161
|
|
(1,839
|
)
|
214
|
|
1,625
|
|
4,161
|
|
Additional paid-in capital
|
|
279,143
|
|
46,431
|
|
3,988
|
|
(50,419
|
)
|
279,143
|
|
Accumulated deficit
|
|
(148,769
|
)
|
(27,964
|
)
|
(5,367
|
)
|
33,331
|
|
(148,769
|
)
|
Total stockholders equity
|
|
134,792
|
|
16,728
|
|
(1,065
|
)
|
(15,663
|
)
|
134,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
728,716
|
|
$
|
124,592
|
|
$
|
7,507
|
|
$
|
(15,663
|
)
|
$
|
845,152
|
|
23
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2008
(Unaudited)
(in thousands)
|
|
Parent
|
|
Guarantors
|
|
Non - Guarantors
|
|
Elimination
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
$
|
140,879
|
|
$
|
3,002
|
|
$
|
(3,002
|
)
|
$
|
140,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
1,400
|
|
95,886
|
|
1,872
|
|
(3,002
|
)
|
96,156
|
|
General and administration
|
|
48
|
|
18,163
|
|
74
|
|
|
|
18,285
|
|
Depreciation and amortization
|
|
398
|
|
18,628
|
|
|
|
|
|
19,026
|
|
|
|
1,846
|
|
132,677
|
|
1,946
|
|
(3,002
|
)
|
133,467
|
|
Operating income (loss)
|
|
(1,846
|
)
|
8,202
|
|
1,056
|
|
|
|
7,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense/(income), net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
(7,883
|
)
|
(57
|
)
|
(165
|
)
|
7,814
|
|
(291
|
)
|
Interest expense
|
|
11,168
|
|
7,385
|
|
|
|
(7,814
|
)
|
10,739
|
|
Loss (income) from equity method
investments
|
|
(627
|
)
|
308
|
|
|
|
1,226
|
|
907
|
|
Other income
|
|
(7
|
)
|
(49
|
)
|
|
|
|
|
(56
|
)
|
Other expense/(income), net
|
|
2,651
|
|
7,587
|
|
(165
|
)
|
1,226
|
|
11,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
before income taxes and discontinued operations
|
|
(4,497
|
)
|
615
|
|
1,221
|
|
(1,226
|
)
|
(3,887
|
)
|
Provision for income taxes
|
|
107
|
|
|
|
469
|
|
|
|
576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
before discontinued operations
|
|
(4,604
|
)
|
615
|
|
752
|
|
(1,226
|
)
|
(4,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net
|
|
|
|
(141
|
)
|
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income applicable to common
stockholders
|
|
$
|
(4,604
|
)
|
$
|
474
|
|
$
|
752
|
|
$
|
(1,226
|
)
|
$
|
(4,604
|
)
|
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2009
(Unaudited)
(in thousands)
|
|
Parent
|
|
Guarantors
|
|
Non - Guarantors
|
|
Elimination
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
$
|
121,151
|
|
$
|
1,694
|
|
$
|
(1,694
|
)
|
$
|
121,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
|
|
85,352
|
|
1,822
|
|
(1,694
|
)
|
85,480
|
|
General and administration
|
|
(19
|
)
|
13,858
|
|
95
|
|
|
|
13,934
|
|
Depreciation and amortization
|
|
272
|
|
16,761
|
|
|
|
|
|
17,033
|
|
Environmental remediation charge
|
|
|
|
2,823
|
|
|
|
|
|
2,823
|
|
Development project cost
|
|
350
|
|
(370
|
)
|
|
|
|
|
(20
|
)
|
|
|
603
|
|
118,424
|
|
1,917
|
|
(1,694
|
)
|
119,250
|
|
Operating income (loss)
|
|
(603
|
)
|
2,727
|
|
(223
|
)
|
|
|
1,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense/(income), net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
(7,745
|
)
|
(41
|
)
|
(130
|
)
|
7,738
|
|
(178
|
)
|
Interest expense
|
|
9,683
|
|
7,828
|
|
|
|
(7,738
|
)
|
9,773
|
|
(Income) loss from equity method
investments
|
|
4,650
|
|
(263
|
)
|
|
|
(4,650
|
)
|
(263
|
)
|
Other income
|
|
(206
|
)
|
(190
|
)
|
|
|
|
|
(396
|
)
|
Other expense/(income), net
|
|
6,382
|
|
7,334
|
|
(130
|
)
|
(4,650
|
)
|
8,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
(6,985
|
)
|
(4,607
|
)
|
(93
|
)
|
4,650
|
|
(7,035
|
)
|
Benefit for income taxes
|
|
(3,168
|
)
|
|
|
(50
|
)
|
|
|
(3,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income applicable to common
stockholders
|
|
$
|
(3,817
|
)
|
$
|
(4,607
|
)
|
$
|
(43
|
)
|
$
|
4,650
|
|
$
|
(3,817
|
)
|
24
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 31, 2008
(Unaudited)
(in thousands)
|
|
Parent
|
|
Guarantors
|
|
Non - Guarantors
|
|
Elimination
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
$
|
439,889
|
|
$
|
6,406
|
|
$
|
(6,406
|
)
|
$
|
439,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
1,402
|
|
287,926
|
|
5,758
|
|
(6,406
|
)
|
288,680
|
|
General and administration
|
|
476
|
|
54,423
|
|
152
|
|
|
|
55,051
|
|
Depreciation and amortization
|
|
1,251
|
|
57,820
|
|
|
|
|
|
59,071
|
|
|
|
3,129
|
|
400,169
|
|
5,910
|
|
(6,406
|
)
|
402,802
|
|
Operating income (loss)
|
|
(3,129
|
)
|
39,720
|
|
496
|
|
|
|
37,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense/(income), net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
(25,103
|
)
|
(179
|
)
|
(474
|
)
|
24,791
|
|
(965
|
)
|
Interest expense
|
|
34,825
|
|
22,778
|
|
|
|
(24,791
|
)
|
32,812
|
|
(Income) loss from equity method
investments
|
|
(13,488
|
)
|
3,013
|
|
|
|
15,020
|
|
4,545
|
|
Other income
|
|
(127
|
)
|
(2,290
|
)
|
|
|
|
|
(2,417
|
)
|
Other expense/(income), net
|
|
(3,893
|
)
|
23,322
|
|
(474
|
)
|
15,020
|
|
33,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
before income taxes and discontinued operations
|
|
764
|
|
16,398
|
|
970
|
|
(15,020
|
)
|
3,112
|
|
Provision for income taxes
|
|
796
|
|
|
|
495
|
|
|
|
1,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
before discontinued operations
|
|
(32
|
)
|
16,398
|
|
475
|
|
(15,020
|
)
|
1,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net
|
|
|
|
(1,416
|
)
|
|
|
|
|
(1,416
|
)
|
Loss on disposal of discontinued
operations, net
|
|
|
|
(437
|
)
|
|
|
|
|
(437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income applicable to common
stockholders
|
|
$
|
(32
|
)
|
$
|
14,545
|
|
$
|
475
|
|
$
|
(15,020
|
)
|
$
|
(32
|
)
|
CASELLA
WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS
ENDED JANUARY 31, 2009
(Unaudited)
(in
thousands)
|
|
Parent
|
|
Guarantors
|
|
Non - Guarantors
|
|
Elimination
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
$
|
436,593
|
|
$
|
5,081
|
|
$
|
(5,081
|
)
|
$
|
436,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
245
|
|
293,033
|
|
5,453
|
|
(5,081
|
)
|
293,650
|
|
General and administration
|
|
(152
|
)
|
50,620
|
|
205
|
|
|
|
50,673
|
|
Depreciation and amortization
|
|
921
|
|
55,087
|
|
|
|
|
|
56,008
|
|
Environmental remediation charge
|
|
|
|
2,823
|
|
|
|
|
|
2,823
|
|
Development project cost
|
|
350
|
|
(370
|
)
|
|
|
|
|
(20
|
)
|
|
|
1,364
|
|
401,193
|
|
5,658
|
|
(5,081
|
)
|
403,134
|
|
Operating income (loss)
|
|
(1,364
|
)
|
35,400
|
|
(577
|
)
|
|
|
33,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense/(income), net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
(23,205
|
)
|
(109
|
)
|
(293
|
)
|
23,162
|
|
(445
|
)
|
Interest expense
|
|
30,305
|
|
23,124
|
|
|
|
(23,162
|
)
|
30,267
|
|
Loss (income) from equity method
investments
|
|
(10,471
|
)
|
1,911
|
|
|
|
10,471
|
|
1,911
|
|
Other income
|
|
(248
|
)
|
(301
|
)
|
|
|
|
|
(549
|
)
|
Other expense/(income), net
|
|
(3,619
|
)
|
24,625
|
|
(293
|
)
|
10,471
|
|
31,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
before income taxes and discontinued operations
|
|
2,255
|
|
10,775
|
|
(284
|
)
|
(10,471
|
)
|
2,275
|
|
Provision (benefit) for income taxes
|
|
1,830
|
|
|
|
(25
|
)
|
|
|
1,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
before discontinued operations
|
|
425
|
|
10,775
|
|
(259
|
)
|
(10,471
|
)
|
470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net
|
|
|
|
(11
|
)
|
|
|
|
|
(11
|
)
|
Loss on disposal of discontinued
operations, net
|
|
|
|
(34
|
)
|
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common
stockholders
|
|
$
|
425
|
|
$
|
10,730
|
|
$
|
(259
|
)
|
$
|
(10,471
|
)
|
$
|
425
|
|
25
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JANUARY 31, 2008
(Unaudited)
(in thousands)
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Elimination
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided
by (Used in) Operating Activities
|
|
$
|
(5,673
|
)
|
$
|
57,929
|
|
$
|
(848
|
)
|
$
|
|
|
$
|
51,408
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net
of cash acquired
|
|
|
|
(745
|
)
|
|
|
|
|
(745
|
)
|
Additions to
property, plant and equipment - growth
|
|
|
|
(14,281
|
)
|
|
|
|
|
(14,281
|
)
|
-
maintenance
|
|
(884
|
)
|
(43,950
|
)
|
|
|
|
|
(44,834
|
)
|
Payments on
landfill operating lease contracts
|
|
|
|
(6,735
|
)
|
|
|
|
|
(6,735
|
)
|
Proceeds from
divestitures
|
|
|
|
2,154
|
|
|
|
|
|
2,154
|
|
Investment in
unconsolidated entities
|
|
(107
|
)
|
|
|
|
|
|
|
(107
|
)
|
Other
|
|
|
|
3,450
|
|
|
|
|
|
3,450
|
|
Net Cash Used In
by Investing Activities
|
|
(991
|
)
|
(60,107
|
)
|
|
|
|
|
(61,098
|
)
|
Cash Flows from Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
long-term borrowings
|
|
256,208
|
|
4,492
|
|
|
|
|
|
260,700
|
|
Principal
payments on long-term debt
|
|
(185,701
|
)
|
(884
|
)
|
|
|
|
|
(186,585
|
)
|
Redemption of
Series A redeemable, convertible preferred stock
|
|
(75,056
|
)
|
|
|
|
|
|
|
(75,056
|
)
|
Other
|
|
1,327
|
|
|
|
|
|
|
|
1,327
|
|
Intercompany
borrowings
|
|
12,356
|
|
(12,801
|
)
|
445
|
|
|
|
|
|
Net Cash Provided
by (Used in) Financing Activities
|
|
9,134
|
|
(9,193
|
)
|
445
|
|
|
|
386
|
|
Cash Used in
Discontinued Operations
|
|
|
|
(164
|
)
|
|
|
|
|
(164
|
)
|
Net (decrease)
increase in cash and cash equivalents
|
|
2,470
|
|
(11,535
|
)
|
(403
|
)
|
|
|
(9,468
|
)
|
Cash and cash
equivalents, beginning of period
|
|
(1,967
|
)
|
13,015
|
|
1,318
|
|
|
|
12,366
|
|
Cash and cash
equivalents, end of period
|
|
$
|
503
|
|
$
|
1,480
|
|
$
|
915
|
|
$
|
|
|
$
|
2,898
|
|
CASELLA
WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS
ENDED JANUARY 31, 2009
(Unaudited)
(in
thousands)
|
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Elimination
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided
by (Used in) Operating Activities
|
|
$
|
(15,091
|
)
|
$
|
65,968
|
|
$
|
(244
|
)
|
$
|
|
|
$
|
50,633
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net
of cash acquired
|
|
|
|
(2,196
|
)
|
|
|
|
|
(2,196
|
)
|
Additions to property,
plant and equipment - growth
|
|
|
|
(10,165
|
)
|
|
|
|
|
(10,165
|
)
|
-
maintenance
|
|
(1,351
|
)
|
(38,064
|
)
|
|
|
|
|
(39,415
|
)
|
Payments on
landfill operating lease contracts
|
|
|
|
(4,401
|
)
|
|
|
|
|
(4,401
|
)
|
Proceeds from
divestitures
|
|
|
|
670
|
|
|
|
|
|
670
|
|
Other
|
|
(2,396
|
)
|
931
|
|
|
|
|
|
(1,465
|
)
|
Net Cash Used In
Investing Activities
|
|
(3,747
|
)
|
(53,225
|
)
|
|
|
|
|
(56,972
|
)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
long-term borrowings
|
|
105,400
|
|
|
|
|
|
|
|
105,400
|
|
Principal payments
on long-term debt
|
|
(99,873
|
)
|
(686
|
)
|
|
|
|
|
(100,559
|
)
|
Other
|
|
1,619
|
|
|
|
|
|
|
|
1,619
|
|
Intercompany
borrowings
|
|
10,854
|
|
(11,224
|
)
|
370
|
|
|
|
|
|
Net Cash Provided
by (Used in) Financing Activities
|
|
18,000
|
|
(11,910
|
)
|
370
|
|
|
|
6,460
|
|
Cash Provided by
Discontinued Operations
|
|
|
|
47
|
|
|
|
|
|
47
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(838
|
)
|
880
|
|
126
|
|
|
|
168
|
|
Cash and cash
equivalents, beginning of period
|
|
1,260
|
|
1,306
|
|
248
|
|
|
|
2,814
|
|
Cash and cash
equivalents, end of period
|
|
$
|
422
|
|
$
|
2,186
|
|
$
|
374
|
|
$
|
|
|
$
|
2,982
|
|
26
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The
following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included under Item 1. In addition, reference should be made to the
Companys audited Consolidated Financial Statements and Notes thereto and
related Managements Discussion and Analysis of Financial Condition and Results
of Operations appearing in the Companys Annual Report on Form 10-K for
the year ended April 30, 2008.
This
Quarterly Report on Form 10-Q and, in particular, this Managements
Discussion and Analysis may contain or incorporate a number of forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Exchange Act of 1934, as amended
(the Exchange Act), may include statements regarding:
·
expected
future revenues, operations, expenditures and cash needs;
·
fluctuations
in the commodity pricing of the Companys recyclables, increases in landfill
tipping fees and fuel costs, and general economic and weather conditions;
·
projected
future obligations related to capping, closure and post-closure costs of the
Companys existing landfills and any disposal facilities which the Company may
own or operate in the future;
·
the
projected development of additional disposal capacity;
·
estimates
of the potential markets for the Companys products and services, including the
anticipated drivers for future growth;
·
sales
and marketing plans;
·
potential
business combinations; and
·
projected
improvements to the Companys infrastructure and impact of such improvements on
the Companys business and operations.
In
addition, any statements contained in or incorporated by reference into this
report that are not statements of historical fact should be considered
forward-looking statements. You can
identify these forward-looking statements by the use of the words believes,
expects, anticipates, plans, may, will, would, intends,
estimates and other similar expressions, whether in the negative or
affirmative. These forward-looking
statements are based on current expectations, estimates, forecasts and
projections about the industry and markets in which the Company operates as
well as managements beliefs and assumptions, and should be read in conjunction
with the Companys consolidated financial statements and notes to consolidated
financial statements included in this report.
The Company cannot guarantee that the Company actually will achieve the
plans, intentions or expectations disclosed in the forward-looking statements
made. The Company does not intend to
update publicly any forward-looking statements whether as a result of new
information, future events or otherwise, except as otherwise required by law.
There
are a number of important risks and uncertainties that could cause the
Companys actual results to differ materially from those indicated by such
forward-looking statements. These risks
and uncertainties include, without limitation, those detailed in Item 1A, Risk
Factors in the Companys Annual Report on Form 10-K for the year ended April 30,
2008, as supplemented by Item 1A below.
Company Overview
Casella
Waste Systems, Inc. is a vertically-integrated regional solid waste
services company that provides collection, transfer, disposal and recycling
services to residential, industrial and commercial customers, primarily in the
eastern United States. Our Company was founded in 1975 as a single truck
operation in Rutland, Vermont and the business now operates in fifteen states.
We operate vertically integrated solid
27
waste
operations in Vermont, New Hampshire, New York, Massachusetts, and Maine; and
stand alone materials processing facilities in Connecticut, Pennsylvania, New
Jersey, North Carolina, South Carolina, Tennessee, Georgia, Florida, Michigan,
and Wisconsin.
As
of February 27, 2009, the Company owned and/or operated 32 solid waste
collection operations, 31 transfer stations, 37 recycling facilities,
eight Subtitle D landfills, two landfills permitted to accept construction and
demolition materials, and one waste-to-energy facility, as well as a 50%
interest in a joint venture that manufactures, markets and sells cellulose
insulation made from recycled fiber and a 16.2% interest in a company that
markets an incentive based recycling service.
Operating
Results
For
the three months ended January 31, 2009, the Company reported revenues of
$121.2 million, a decrease of $19.7 million, or 14.0%, from $140.9 million in
the quarter ended January 31, 2008.
Solid waste revenues, including the Companys major accounts program,
decreased 6.4%, with lower collection and landfill volumes accounting for 7.8%
of the decrease and lower commodity prices and volumes 1.5% of the decline.
These decreases were partially offset by the positive effect of price increases
of 2.0%, primarily from our collection operations, and 0.9% from the rollover
effect of a major accounts tuck-in acquisition. FCR recycling revenues
decreased 38.2%, with 30.8% coming from lower commodity prices and 7.4% from
lower volumes in the quarter
.
The
significant decrease in recycling revenues was a result of a sharp decline in
commodity prices in the quarter driven by a severe drop in demand for all of
the Companys commodity product line as a result of global economic conditions. The Company does not expect to see
stabilization and growth in commodity prices in many grades until the global
economic climate improves. Prices in the
recycling commodity markets began to partially rebound toward the end of January 2009,
including fiber (newspapers, cardboard, and mixed papers) and plastic
prices. The decrease in FCR recycling
revenues were partially offset by hedge contracts which reduce the impact of
pricing fluctuations on a portion of FCRs fiber volumes and from an increase
in tipping fees year over year.
The
slowdown in the U.S. economy also had an impact on collection volumes in the
quarter, particularly in the Companys commercial and industrial collection
lines. Landfill construction and
demolition volumes as well as volumes into our Worcester facility declined year
over year as a result of the continued slowdown in construction
activities. Landfill volumes also
decreased year over year as the Colebrook facility ceased operation in the
second quarter of the current fiscal year.
Pricing initiatives in the collection operations contributed positively
in the quarter, while landfill pricing continues to experience the effect of
competitive pressures due to lower volumes.
Operating
income for the three months ended January 31, 2009 decreased to $1.9
million from $7.4 million for the quarter ended January 31, 2008, a
decrease of 74.3%. FCR recycling
operating income decreased $8.2 million year over year due to lower commodity
prices and volumes as well as costs associated with the upgrade of the
Philadelphia and Boston materials recycling facilities to Zero-Sort Recycling
TM
. Operating income was also negatively impacted
by an environmental remediation charge of $2.8 million associated with a
consent order issued by the State of New York to undertake certain work at a
scrap yard and solid waste transfer station owned by Waste-Stream, Inc., a
subsidiary of the Company. These
decreases were partially offset by lower cost of operations, general and
administration and depreciation and amortization costs, including a reduction
in incentive compensation accruals resulting in a year over year positive
impact on operating income in the amount of $4.8 million.
As discussed above, recent economic conditions have had
an impact on our financial position and results of operations in the quarter
ended January 31, 2009. The Company
has reacted to these conditions by
28
managing various expense categories and capital
expenditures. The continuation of
weakness in the economy and lack of liquidity in the credit markets will likely
result in continued negative pressure on consumer and business spending, which will
result in lower future business volumes and resulting cash flows.
The Company is monitoring the operating performance of its reporting
units and other market factors. The
Company will perform its annual goodwill impairment test at the end of its
fiscal year or sooner if conditions warrant.
If it is determined that goodwill is impaired the amount of the charge
could be significant. Additionally the
impairment charge could lead to a lack of compliance with certain, if not all,
of the senior credit facility financial covenants which would require an
amendment to the credit facility if it has not otherwise been refinanced by
that time.
The
Company expects to refinance the senior credit facility in the fourth quarter
of fiscal year 2009 or first quarter of fiscal year 2010. The refinancing will be at terms reflective
of the distressed credit markets which will increase the Companys future debt
service costs. The Company may also seek
alternative sources of capital. The
Company cannot be certain that it will be successful in refinancing its debt
and it may not have access to the amount of capital it requires, on favorable
terms or at all.
During
the second quarter of fiscal year 2008, the Company completed the sale of the
Companys Buffalo, N.Y. transfer station, hauling operation and related
equipment in the Western region for proceeds of $4.9 million including a note
receivable for $2.5 million and net cash proceeds of $2.4 million. The company recorded a loss on disposal of
discontinued operations (net of tax) of $0.4 million. During the fourth quarter of fiscal year
2008, the Company terminated its operation of MTS Environmental, a soils
processing operation in the North Eastern region. The Company completed the divestiture of its
FCR Greenville operation in the quarter ended July 31, 2008 for cash
proceeds of $0.7 million. The company
recorded a loss on disposal of discontinued operations (net of tax) of $0.03
million.
Revenues
and loss before income taxes attributable to these operations for the three and
nine months ended January 31, 2008 and 2009 were as follows (in thousands):
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
January 31,
|
|
January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Revenues
|
|
$
|
480
|
|
$
|
|
|
$
|
7,755
|
|
$
|
282
|
|
Loss before income taxes
|
|
$
|
(221
|
)
|
$
|
|
|
$
|
(2,230
|
)
|
$
|
(19
|
)
|
The
operating results of the above mentioned operations for the three and nine
months ended January 31, 2008 and 2009 have been reclassified from
continuing to discontinued operations in the accompanying consolidated
financial statements.
Critical
Accounting Policies and Estimates
The
preparation of the Companys financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an
on-going basis, management evaluates its estimates and assumptions which are
based on historical experience and on various other factors that are believed
to be reasonable under the circumstances.
The results of their evaluation form the basis for making judgments
about the carrying values of assets and liabilities. Actual results may differ from these estimates
under different assumptions and circumstances.
The Companys significant accounting policies are more fully discussed
in Item 7 of the Companys Annual Report on Form 10-K for the year ended April 30,
2008.
29
General
Revenues
The
Companys revenues in our North Eastern, South Eastern, Central and Western
regions are attributable primarily to fees charged to customers for solid waste
disposal and collection, landfill, landfill gas-to-energy, waste-to-energy,
transfer and recycling services. The
Company derives a substantial portion of its collection revenues from
commercial, industrial and municipal services that are generally performed
under service agreements or pursuant to contracts with municipalities. The majority of the Companys residential
collection services are performed on a subscription basis with individual
households. Landfill, waste-to-energy
facility and transfer customers are charged a tipping fee on a per ton basis
for disposing of their solid waste at the Companys disposal facilities and
transfer stations. The majority of the
Companys disposal and transfer customers are under one to ten year disposal
contracts, with most having clauses for annual cost of living increases. Recycling revenues, which are included in FCR
recycling and the Central and Western regions, consist of revenues from the
sale of recyclable commodities and operations and maintenance contracts of
recycling facilities for municipal customers.
The
Companys cellulose insulation business is conducted through a 50/50 joint
venture with Louisiana-Pacific Corporation (GreenFiber), and accordingly, the
Company recognizes half of the joint ventures net income on the equity method
in our results of operations. The
Company also has a cost method investment in the common stock of RecycleRewards, Inc.
(RecycleRewards); a company that markets an incentive based recycling
service. In April 2008, the
Companys voting interest was reduced to 16.2%.
Effective April 2008, the Company accounts for its investment in
RecycleRewards under the cost method of accounting. Prior to April 2008 the Company
accounted for this investment under the equity method of accounting. Additionally, in the Other segment, we have
ancillary revenues including major customer accounts.
The
Companys revenues are shown net of inter-company eliminations. The Company typically establishes its
inter-company transfer pricing based upon prevailing market rates. The table
below shows, for the periods indicated, the percentages and dollars of revenue
attributable to services provided (dollars in millions).
|
|
Three Months Ended January 31,
|
|
Nine Months Ended January 31,
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
Collection
|
|
$
|
64.7
|
|
45.9
|
%
|
$
|
60.7
|
|
50.1
|
%
|
$
|
203.0
|
|
46.2
|
%
|
$
|
202.1
|
|
46.3
|
%
|
Landfill / disposal facilities
|
|
24.0
|
|
17.0
|
%
|
23.2
|
|
19.1
|
%
|
82.2
|
|
18.7
|
%
|
83.1
|
|
19.0
|
%
|
Transfer
|
|
5.6
|
|
4.0
|
%
|
6.3
|
|
5.2
|
%
|
20.6
|
|
4.7
|
%
|
24.2
|
|
5.6
|
%
|
Recycling
|
|
46.6
|
|
33.1
|
%
|
31.0
|
|
25.6
|
%
|
134.1
|
|
30.4
|
%
|
127.2
|
|
29.1
|
%
|
Total revenues
|
|
$
|
140.9
|
|
100.0
|
%
|
$
|
121.2
|
|
100.0
|
%
|
$
|
439.9
|
|
100.0
|
%
|
$
|
436.6
|
|
100.0
|
%
|
Collection,
landfill/disposal facilities and transfer revenues each increased as a
percentage of total revenues in the three months ended January 31, 2009
compared to the prior year, mainly because of the decrease in recycling
revenues. The dollar decrease in
collection revenues in the three months ended January 31, 2009 compared to
the prior year is primarily due to lower volumes, partially offset by price
increases and the effect of a major accounts tuck-in acquisition. The dollar increase in transfer revenue in
the three and nine months ended January 31, 2009 is primarily due to
volume growth. Recycling revenues are
primarily from recycling facilities in the FCR recycling region. As noted above, FCR recycling revenues were negatively
impacted as a result of a sharp decline in commodity prices in the quarter
ended January 31, 2009.
Operating Expenses
Cost
of operations includes labor, tipping fees paid to third-party disposal
facilities, fuel, maintenance and repair of vehicles and equipment, workers
compensation and vehicle insurance, the cost of purchasing
30
materials
to be recycled, third party transportation expense, district and state taxes,
host community fees and royalties. Cost
of operations also includes accretion expense related to landfill capping,
closure and post closure, leachate treatment and disposal costs and depletion
of landfill operating lease obligations.
General
and administration expenses include management, clerical and administrative
compensation and overhead, professional services and costs associated with
marketing, sales and community relations efforts.
Depreciation
and amortization expense includes depreciation of fixed assets over the
estimated useful life of the assets using the straight-line method,
amortization of landfill airspace assets under the units-of-consumption method,
and the amortization of intangible assets (other than goodwill) using the
straight-line method. In accordance with
SFAS No. 143,
Accounting for Asset
Retirement Obligations,
except for accretion expense, the Company
amortizes landfill retirement assets through a charge to cost of operations on
a rate per ton basis as landfill airspace is utilized. The amount of landfill amortization expense related
to airspace consumption can vary materially from landfill to landfill depending
upon the purchase price and landfill site and cell development costs. The Company depreciates all fixed and
intangible assets, other than goodwill, to a zero net book value, and does not
apply a salvage value to any fixed assets.
The
Company capitalizes certain direct landfill development costs, such as
engineering, permitting, legal, construction and other costs associated
directly with the expansion of existing landfills. Additionally, the Company also capitalizes
certain third party expenditures related to pending acquisitions, such as legal
and engineering costs. The Company
routinely evaluates all such capitalized costs, and expenses those costs
related to projects not likely to be successful. Internal and indirect landfill development
and acquisition costs, such as executive and corporate overhead, public
relations and other corporate services, are expensed as incurred.
The
Company has and will have material financial obligations relating to capping,
closure and post-closure costs of its existing landfills and any disposal
facilities which it may own or operate in the future. The Company has provided, and will in the
future provide, accruals for these future financial obligations based on
engineering estimates of consumption of permitted landfill airspace over the
useful life of any such landfill. There
can be no assurance that the Companys financial obligations for capping,
closure or post-closure costs will not exceed the amount accrued and reserved
or amounts otherwise receivable pursuant to trust funds.
Results of Operations
The
following table sets forth for the periods indicated the percentage
relationship that certain items from the Companys consolidated financial
statements bear to revenues.
31
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Cost of operations
|
|
68.3
|
%
|
70.6
|
%
|
65.6
|
%
|
67.3
|
%
|
General and administration
|
|
13.0
|
%
|
11.5
|
%
|
12.5
|
%
|
11.6
|
%
|
Depreciation and amortization
|
|
13.5
|
%
|
14.1
|
%
|
13.4
|
%
|
12.8
|
%
|
Environmental remediation charge
|
|
0.0
|
%
|
2.3
|
%
|
0.0
|
%
|
0.7
|
%
|
Deferred costs
|
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
Operating income
|
|
5.2
|
%
|
1.5
|
%
|
8.5
|
%
|
7.6
|
%
|
Interest expense, net
|
|
7.4
|
%
|
7.9
|
%
|
7.3
|
%
|
6.8
|
%
|
Loss (income) from equity method
investments
|
|
0.6
|
%
|
-0.2
|
%
|
1.0
|
%
|
0.4
|
%
|
Other income, net
|
|
0.0
|
%
|
-0.3
|
%
|
-0.5
|
%
|
-0.1
|
%
|
Provision (benefit) for income taxes
|
|
0.4
|
%
|
-2.7
|
%
|
0.3
|
%
|
0.4
|
%
|
Income (loss) before discontinued
operations
|
|
-3.2
|
%
|
-3.2
|
%
|
0.4
|
%
|
0.1
|
%
|
Three months ended January 31, 2009
versus January 31, 2008
Revenues -
Revenues decreased $19.7 million, or 14.0%,
to $121.2 million in the quarter ended January 31, 2009 from $140.9 million
in the quarter ended January 31, 2008.
Solid waste revenues, including the Companys major accounts program,
decreased $6.9 million, with $8.4 million coming from volume decreases in our
collection and landfill operations and $1.6 million from lower commodity prices
and volumes within the solid waste group.
These decreases were partially offset by price increases in our
collection operations of $2.2 million and the rollover effect of acquisitions
of $1.0 million. FCR recycling revenues
decreased $12.9 million mainly due to sharp declines in commodity prices and to
a lesser extent, lower volumes.
Cost of operations -
Cost of operations
decreased $10.7 million, or 11.1%, to $85.5 million in the quarter ended January 31,
2009 from $96.2 million in the quarter ended January 31, 2008. Primarily as a result of lower revenue
levels, cost of operations increased to 70.6% in the quarter ended January 31,
2009 compared to 68.3% in the quarter ended January 31, 2008. The dollar decrease in cost of operations is
attributable to a decrease in the cost of purchased materials associated with
lower recycling revenues as well as lower fuel costs and direct labor,
partially offset by a write-down of FCR on-hand inventory to reflect lower
commodity prices.
General and administration -
General and
administration expenses decreased $4.4 million, or 24.0%, to $13.9 million in
the quarter ended January 31, 2009 from $18.3 million in the quarter ended
January 31, 2008. General and
administration expenses as a percentage of revenues decreased to 11.5% in the
quarter ended January 31, 2009 from 13.0% in the quarter ended January 31,
2008. The dollar decrease in general and
administration expenses in the quarter is primarily from lower expense
associated with reduced incentive compensation accruals, partially offset by
higher bad debt expense. General and
administrative expenses included a $1.2 million charge in the quarter ended
January 31, 2008 for recruiting, equity compensation and termination costs
associated with the Companys reorganization.
Depreciation and amortization -
Depreciation and
amortization expense decreased $2.0 million, or 10.5%, to $17.0 million in the
quarter ended January 31, 2009 from $19.0 million in the quarter ended January 31,
2008. Landfill amortization expense decreased by $2.1 million primarily due
to lower overall volumes along with lower amortization volumes and rates at our
Colebrook facility, which closed in the quarter ended October 31,
2008. Depreciation expense increased between periods by $0.1
million. Depreciation and amortization
expense as a percentage of revenue increased to 14.1% for the quarter ended January 31,
2009 from 13.5% for the quarter ended January 31, 2008.
Environmental remediation charge
During the quarter ended January 31, 2009, the Company recorded an environmental remediation charge of $2.8
million for the estimated cost of its share of work associated
32
with
a consent order issued by the State of New York to remediate the scrap yard and
solid waste transfer station owned by Waste-Stream, Inc., a subsidiary of
the Company. The consent order named
other parties responsible in addition to the Company. The Company is jointly and severally liable
for the total cost to remediate but expects to be responsible for approximately
30% upon implementation of a cost-sharing agreement. Such amounts could be higher if costs exceed
estimates or the other responsible parties are not able to meet their
obligation.
O
perating income -
Operating income for the
quarter ended January 31, 2009 decreased to $1.9 million, or 74.3%, from
$7.4 million for the quarter ended January 31, 2008. FCR recycling operating income decreased $8.2
million year over year due to lower commodity prices and volumes as well as
costs associated with the upgrade of the Philadelphia and Boston materials
recycling facilities to Zero-Sort Recycling
TM
. The
Companys operating income was also negatively impacted by an environmental
remediation charge of $2.8 million discussed above. These decreases were
partially offset by lower cost of operations, general and administration and
depreciation and amortization costs as discussed above. Western region operating income was
negatively impacted by the environmental remediation charge discussed
above. Excluding this charge, Western
region operating income increased year over year as lower operating costs and
landfill amortization more than offset revenue declines. The Central, Northeast and Southeast regions
all reflected operating income increases year over year as lower operating
costs and landfill amortization more than offset the revenue declines from
lower collection and landfill volumes.
Interest expense, net -
Net interest expense decreased $0.8 million,
or 7.7%, to $9.6 million in the quarter ended January 31, 2009 from $10.4
million in the quarter ended January 31, 2008. This decrease is attributable to lower
interest rates on the Companys senior credit facility partially offset by
higher net debt levels. Net interest
expense, as a percentage of revenues, increased to 7.9% in the quarter ended January 31,
2009 from 7.4% in the quarter ended January 31, 2008.
Loss (income) from equity method
investments -
The
income from equity method investments in the quarter ended January 31,
2009 relates to the Companys 50% joint venture interest in GreenFiber, and the
loss for the quarter ended January 31, 2008 also included losses from the
Companys interest in RecycleRewards.
GreenFiber reported income for the quarter ended January 31, 2009
of which the Companys share was $0.3 million, compared to a loss in the
quarter ended January 31, 2008 of which the Companys share was $0.3
million. Although GreenFiber continues
to be negatively impacted by the overall slowdown in the housing market,
results for the quarter ended January 31, 2009 improved due to lower costs
of goods sold associated with declining fiber prices. The Company also has an investment in the
common stock of RecycleRewards; a company that markets an incentive based
recycling service. In April 2008,
the Companys voting interest was reduced to 16.2% from 20.5%. Effective April 2008, the Company
accounts for its investment in RecycleRewards under the cost method of
accounting. Prior to April 2008 the
Company accounted for this investment under the equity method of
accounting. RecycleRewards reported a
loss for the quarter ended January 31, 2008, of which the Companys share
was $0.6 million.
Other income -
Other income for the three months ended January 31, 2009 amounted
to $0.4 million compared to $0.1 million in the three months ended January 31,
2008. Other income in the three months
ended January 31, 2009 includes a dividend of $0.2 million from our
minority investment in Evergreen National Indemnity Company (Evergreen) and
the balance from a gain on the sale of an asset.
Provision (benefit) for income taxes
Provision (benefit) for income taxes
decreased $3.8 million to ($3.2) million for the quarter ended January 31,
2009 from $0.6 million for the quarter ended January 31, 2008. The effective tax rate increased to 45.7% in
the quarter ended January 31, 2009 from (14.8)% in the quarter ended January 31,
2008. The rate variance between the periods is due mainly to the book loss
projected for the prior year and the add back of non-deductible items. The tax rate for the remainder of the year is
likely to be volatile since it is sensitive to changes in book income.
33
Nine Months Ended January 31, 2009
versus January 31, 2008
Revenues -
Revenues decreased $3.3 million, or 0.8% to
$436.6 million in the nine months ended January 31, 2009 from $439.9
million in the nine months ended January 31, 2008. Solid waste revenues, including the Companys
major accounts program, decreased $0.9 million. Price increases in our
collections operations were $9.1 million and revenues from the rollover effect
of acquisitions, primarily from a major accounts tuck-in acquisition, accounted
for $3.0 million of the increase. These
increases were mostly offset by a decrease in volumes, primarily from
collection operations, which negatively impacted revenue growth by $13.0
million. FCR recycling revenues
decreased $2.4 million mainly due to lower commodity prices.
Cost of operations -
Cost of operations
increased $5.0 million, or 1.7% to $293.7 million in the nine months ended January 31, 2009 from $288.7 million in the nine months
ended January 31, 2008. Cost of operations as a percentage of
revenues increased to 67.3% in the nine months ended January 31,
2009 from 65.6% in the prior year. The dollar increase is due primarily to
higher fuel, hauling, maintenance costs and property tax expense, due to a
property tax refund recognized in the prior year period. These increases were partially offset by
lower direct labor costs, disposal costs and the cost of purchased materials
associated with lower FCR recycling revenues.
Also, included in the prior year was a reduction in the amount of
$1.4 million from transactions involving the domestic brokerage and Canadian
recycling operations as payments received on the notes receivable in the nine
months ended January 31, 2008 exceeded the balance of the net assets under
contractual obligation.
General and administration -
General and
administration expenses were $50.7 million in the nine months ended January 31,
2009 compared to $55.1 million in the nine months ended January 31, 2008, and decreased as a percentage of revenues to 11.6% in the nine
months ended January 31, 2009 from
12.5% in the nine months ended January 31, 2008. Lower
costs associated with reduced incentive compensation accruals in the nine
months ended January 31, 2009 were partially offset by higher bad debt
expenses. General and administrative
expenses included a $1.2 million charge in the nine months ended January 31,
2008 for recruiting, equity compensation and termination costs associated with
the Companys reorganization.
Depreciation and amortization -
Depreciation
and amortization expense decreased $3.1 million, or 5.2%, to $56.0 million in
the nine months ended January 31,
2009 from $59.1 million in the nine
months ended January 31, 2008. Landfill amortization expense
decreased by $3.1 million primarily due to lower overall volumes along with
lower amortization volumes and rates at our Colebrook facility, which closed in
the quarter ended October 31, 2008, partially offset by an increase in
amortization at our Worcester facility due to increased volumes. Depreciation
expense was relatively consistent between periods. Depreciation and amortization expense as a
percentage of revenue decreased to 12.8% for the nine months ended January 31,
2009 from 13.4% for the nine months ended January 31, 2008.
Environmental remediation charge
In the nine months ended January 31, 2009, the Company recorded an environmental remediation charge of $2.8
million for the estimated cost of its share of work associated with a consent
order issued by the State of New York to remediate the scrap yard and solid
waste transfer station owned by Waste-Stream, Inc., a subsidiary of the
Company. The consent order named other
parties responsible in addition to the Company.
The Company is jointly and severally liable for the total cost to remediate
but expects to be responsible for approximately 30% upon implementation of a
cost-sharing agreement. Such amounts could
be higher if costs exceed estimates or the other responsible parties are not
able to meet their obligation.
Operating income
- Operating income decreased $3.6 million, or 9.8%, to $33.5 million in
the nine months ended January 31, 2009 from $37.1 million in the nine
months ended January 31, 2008 and decreased as a percentage of revenues to
7.7% in the nine months ended January 31, 2009 from 8.4% in the nine
months ended January 31, 2008. FCR
recycling operating income decreased $7.7 million year over year due to the
impact in the third quarter of lower commodity prices as well as costs
associated with
34
the
upgrade of the Philadelphia and Boston materials recycling facilities to
Zero-Sort Recycling
TM
. Also,
included in FCRs prior year operating income was $1.4 million of income
from transactions involving the domestic brokerage and Canadian recycling
operations as discussed above. The Companys operating income was also
negatively impacted by the environmental remediation charge of $2.8 million
discussed above. These decreases were
partially offset by lower cost of operations, general administration and
depreciation and amortization costs as discussed above. Operating income for the South Eastern region
was favorably impacted by $0.8 million
from the benefit of a reimbursement from the Town of Southbridge for previously
paid and expensed closure and post closure costs at the Southbridge landfill
site. Despite the environment charge
discussed above, Western region operating income increased year over year
primarily due to lower operating costs and landfill amortization. Northeast region operating income increased
year over year as a result of higher revenues, primarily from price and volume
increases in the collection operations, as well as lower operating and landfill
amortization costs.
Interest
expense, net -
Net interest
expense decreased $2.0 million, or 6.4% to $29.8 million in the nine months
ended January 31, 2009 from $31.8 million in the nine months ended January 31,
2008. This decrease is attributable to
lower interest rates on the Companys senior credit facility partially offset
by higher net debt levels. Net interest
expense, as a percentage of revenues, decreased to 6.8% in the nine months
ended January 31, 2009 from 7.2% in the nine months ended January 31,
2008.
Loss (income) from equity method investments -
The loss from equity method investments in
the nine months ended January 31, 2009 relates to the Companys 50% joint
venture interest in GreenFiber and for the nine months ended January 31,
2008 also included losses from Companys interest in RecycleRewards. GreenFiber reported a loss for the nine
months ended January 31, 2009 of which the Companys share was $1.9
million compared to a loss in the nine months ended January 31, 2008, of
which the Companys share was $3.0 million.
GreenFiber continues to be negatively impacted by the overall slowdown
in the housing market, offset by a reduction in the cost of fiber, its primary
cost of goods sold. As discussed above,
effective April 2008, the Company had a voting interest of 16.2% from its
common stock investment in RecycleRewards and accordingly accounts for this
investment under the cost method of accounting.
Prior to April 2008 the Company had a voting interest of 20.5 % and
accounted for this investment under the equity method of accounting. RecycleRewards reported a loss for the nine
months ended January 31, 2008, of which the Companys share was $1.5
million.
Other income -
Other income for the nine months ended January 31,
2009 amounted to $0.5 million compared to $2.4 million in the nine months ended
January 31, 2008. Other income in
the nine months ended January 31, 2009 includes a dividend of $0.2 million
from our investment in Evergreen and the balance represents a gain on the sale
of an asset. Other income in the nine
months ended January 31, 2008 included $2.1 million related to the reversal
of residual accruals originally established in connection with waste handling
agreement disputes between the Companys Maine Energy subsidiary and fifteen
municipalities which were party to the agreements. On June 18, 2008, the Company settled the
last of these disputes with the City of Saco and the city agreed to release the
Company from any further residual cancellation payment obligation.
Provision
(benefit) for income taxes
Provision (benefit) for income taxes increased $0.5 million in the nine
months ended January 31, 2009 to $1.8 million from $1.3 million in the
nine months ended January 31, 2008.
The effective tax rate increased to 79.3% in the nine months ended January 31,
2009 from 41.5% in the nine months ended January 31, 2008. The high rate for the nine months ended January 31,
2009 and the rate variance between the periods are due mainly to the lower
pre-tax income projected for the current year after the add back of
non-deductible items. The tax rate for the remainder of the year is
likely to be volatile since it is sensitive to changes in book income.
35
Liquidity and Capital Resources
The Companys business is capital intensive. The Companys capital requirements include
acquisitions, fixed asset purchases and capital expenditures for landfill
development and cell construction, as well as site and cell closure. The Companys capital expenditures are
broadly defined as pertaining to either growth or maintenance activities. Growth capital expenditures are defined as
costs related to development of new airspace, permit expansions, new recycling
contracts along with incremental costs of equipment and infrastructure added to
further such activities. Growth capital
expenditures include the cost of equipment added directly as a result of new
business, as well as expenditures associated with increasing infrastructure to
increase throughput at transfer stations and recycling facilities. Growth capital expenditures also include
those outlays associated with acquiring landfill operating leases, which do not
meet the operating lease payment definition, but which were included as a
commitment in the successful bid.
Maintenance capital expenditures are defined as landfill cell
construction costs not related to expansion airspace, costs for normal permit
renewals and replacement costs for equipment due to age or obsolescence.
The Company had net working capital of $3.3 million at January 31,
2009 compared to a deficit of $20.2 million at April 30, 2008. Net working capital comprises current assets,
excluding cash and cash equivalents, minus current liabilities. The increase in net working capital at January 31,
2009 was primarily due to higher other current assets associated with commodity
hedge contract valuations along with lower trade payables, and lower payroll
accruals. This was offset by lower trade
receivables associated with lower revenues and higher accrued interest.
On
April 28, 2005, the Company entered into a senior credit facility with a
group of banks for which Bank of America is acting as agent. The facility
originally consisted of a senior secured revolving credit facility in the
amount of $350.0 million. On July 25, 2006, the Company amended the
facility to increase the amount of the facility per the original agreement to
$450.0 million, and on May 9, 2007, the Company further amended the
facility to increase the amount to $525.0 million, including a $175.0 million
term B loan and a revolver of $350.0 million.
This credit facility is secured by all of the Companys assets,
including the Companys interest in the equity securities of our subsidiaries.
The
credit facility matures on April 28, 2010. There are required annual principal
payments on the term B loan of $0.9 million for three years, which began July
25, 2007, with the remaining principal due at maturity. The credit facility agreement contains
negative covenants that may limit the Companys activities, including covenants
that restrict the payment of dividends on common stock. The credit facility agreement also contains
certain financial covenants as detailed below.
The Company is monitoring the operating performance of its reporting
units and other market factors. The
Company will perform its annual goodwill impairment test at the end of its
fiscal year or sooner if conditions warrant.
If it is determined that goodwill is impaired the amount of the charge
could be significant. Additionally the
impairment charge could lead to a lack of compliance with certain, if not all,
of the senior credit facility financial covenants which would require an
amendment to or waiver under the credit facility if it has not otherwise been
refinanced by that time.
36
As
of January 31, 2009, the Company was in compliance with all covenants as
follows:
Credit Facility Covenant
|
|
Twelve months ended
January 31, 2009
|
|
Covenant
Requirements -
January 31, 2009
|
|
|
|
|
|
|
|
Total Funded Debt / Bank - defined cash
flow metric (1)
|
|
4.76
|
|
5.25 Max.
|
|
|
|
|
|
|
|
Senior Funded Debt / Bank - defined cash
flow metric
|
|
3.16
|
|
3.35 Max.
|
|
|
|
|
|
|
|
Interest Coverage
|
|
3.13
|
|
2.25 Min.
|
|
|
|
|
|
|
|
Consolidated Net Worth
|
|
$
|
122,993
|
|
$
|
87,925 Min.
|
|
|
|
|
|
|
|
|
|
(1) Bank
- defined cash flow metric is based on operating results for the twelve months
preceding the measurement date, January 31, 2009. A reconciliation of net cash provided by
operating activities to bank - defined cash flow metric is as follows (dollars
in thousands):
|
|
Twelve Months Ended
January 31, 2009
|
|
Net cash provided by operating activities
|
|
$
|
70,415
|
|
|
|
|
|
Changes in assets and liabilities, net of
effects of acquisitions and divestitures
|
|
13,831
|
|
Gain on sale of equipment
|
|
607
|
|
Stock based compensation, net of excess tax
benefit on exercise of options
|
|
(1,588
|
)
|
Income from assets under contractual
obligation
|
|
256
|
|
Environmental remediation, hardwick
impairment and development project charges
|
|
(4,757
|
)
|
Interest expense plus amortization of
premium on senior notes
|
|
40,975
|
|
Provision for income taxes, net of deferred
taxes
|
|
1,829
|
|
Losses from discontinued operations and on
disposal of discontinued operations, net of income taxes
|
|
(2,009
|
)
|
Adjustments to income as allowed by senior
credit facility agreement
|
|
2,192
|
|
|
|
|
|
Bank - defined cash flow metric
|
|
$
|
121,751
|
|
Further
advances were available under the revolver in the amount of $142.3 million and
$156.0 million as of January 31, 2009 and
April 30, 2008, respectively. These
available amounts are net of outstanding irrevocable letters of credit totaling
$38.6 million and $40.4 million as of January 31, 2009 and April 30,
2008, respectively, at which dates no amounts had been drawn.
The
Company is party to three separate interest rate swap agreements with three banks
for a notional amount of $105.0 million.
One agreement for a notional amount of $30.0 million effectively fixes
the interest rate index at 4.74% from November 4, 2007 through May 7,
2009. Two agreements, for a notional
amount of $75.0 million, effectively fix the interest index rate on the entire
notional amount at approximately 4.55% from May 6, 2008 through May 6,
2009. These agreements are specifically
designated to interest payments under the Companys term B loan and are
accounted for as effective cash flow hedges pursuant to SFAS No. 133.
The
Company is party to two separate interest rate zero-cost collars (Collars)
for a notional amount of $60.0 million.
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 January 31, 2009, the Company had outstanding $195.0 million of Senior Subordinated
Notes which mature in January 2013.
The Senior Subordinated Notes are guaranteed jointly and severally,
fully and unconditionally by the Companys significant wholly-owned
subsidiaries. The Senior Subordinated Notes
indenture contains negative covenants that restrict dividends, stock
repurchases and other payments, and also limits the incurrence of debt and
issuance of preferred stock by requiring that the Company maintain a minimum
consolidated fixed charge coverage ratio.
As of January 31, 2009, the Company was in compliance with all
covenants under the Senior
Subordinated Notes. As discussed below,
refinance activities expected in the fourth
37
quarter
of fiscal year 2009 or first quarter of fiscal year 2010 may increase debt
service costs which will have the effect of lowering the consolidated fixed
charge coverage ratio. The Company does
not expect to be restricted by this covenant requirement, including in its
efforts to refinance the senior credit facility.
On
December 28, 2005, the Company completed a $25.0 million financing
transaction involving the issuance by the Finance Authority of Maine of $25.0
million aggregate principal amount of its Solid Waste Disposal Revenue Bonds Series 2005
(the Bonds) which mature in January 2025. The Bonds are issued pursuant
to an indenture, dated as of December 1, 2005 and are enhanced by an
irrevocable, transferable direct-pay letter of credit issued by Bank of
America, N.A. Pursuant to a Financing Agreement, dated as of December 1,
2005, the Company has borrowed the proceeds of the Bonds to pay for certain
costs relating to equipment acquisition for solid waste collection and
transportation services, all located in Maine.
On
August 13, 2007, the Company redeemed all of the outstanding shares of its
Series A Preferred Stock, pursuant to the mandatory redemption
requirements set forth in the Certificate of Designation for the Series A
Preferred Stock. The shares were redeemed at an aggregate redemption
price of $75.1 million, which was the liquidation value equal to the original
price plus accrued but unpaid dividends through the date of redemption.
The redemption of the Series A Preferred Stock was effected through cash
payouts by the Company of the redemption price upon receipt of stock
certificates and other related documentation from the holders thereof. The Company borrowed against the senior
credit facility to fund this redemption.
On
July 31, 2008, the Company completed a financing transaction for the
construction of two single-stream material recovery facilities as well as
engines for a landfill gas to energy project with a third-party leasing
company. The balance on the facility at January 31,
2009 was $14.0 million. The financing
has a seven year term at a fixed rate of interest (approximately 7.1%).
Net cash provided by operating activities amounted to
$50.6 million for the nine months ended January 31, 2009
compared
to $51.4 million for the same period of the prior fiscal year. Net income increased $0.5 million in the nine
months ended January 31, 2009 compared to the nine months ended January 31,
2008. Losses associated with
discontinued operations decreased by $1.8 million during the same period. Depreciation and amortization expense
decreased by $3.1 million primarily due to lower overall volumes along
lower amortization volumes and rates at our Colebrook facility, which closed in
the quarter ended October 31, 2008, partially offset by an increase in
landfill amortization at our Worcester facility due to increased volumes. Depreciation
expense was relatively consistent between periods. Also contributing to a slight decrease is the
accrual of the Series A Preferred dividend for $1.0 million which was
included in interest expense for the nine months ended January 31, 2008 as
well as a loss from equity method investments amounting to a $2.6 decrease in
the nine months ended January 31, 2009 compared to the nine months ended January 31,
2008. These amounts were offset by income from assets under contractual obligations
which decreased $1.3 million in the nine months ended January 31, 2009
compared to the nine months ended January 31, 2008, other income of
$2.1 million associated with the favorable settlement at Maine Energy resulting
in the reversal of residual accruals in the nine months ended January 31,
2008 as well as the environmental remediation charge of $2.8 million associated
with the Waste Stream site. Deferred
taxes also contributed to an increase of $2.8 million in the same period due to
projected utilization of net operating losses.
Changes
in assets and liabilities, net of effects of acquisitions and divestitures,
decreased $2.1 million for the nine months ended January 31, 2009 compared
to the nine months ended January 31, 2008. Changes in accounts receivable
amounted to an $8.2 million increase for the nine months ended January 31,
2009 compared to the nine months ended January 31, 2008 primarily due to lower revenues. Changes in accounts payable during the nine
months ended January 31, 2009 amounted to $15.9 million of cash used
38
compared with $8.6 million used in the prior year
comparable period due to lower operating costs and lower capital expenditures
in the period.
Changes in prepaid expenses, inventories and other
assets amounted to cash provided of $2.7 million in the nine months ended January 31,
2009
compared to cash used of $1.5 million in the nine
months ended January 31, 2008. The
increase in cash provided of $4.2 million from the prior year is due primarily
to the following: (1) changes in prepaid expenses associated with the
timing of insurance payments, prepaid consulting and payroll fundings amounting
to a $2.4 million increase and (2) higher net refundable income taxes at January 31,
2008, amounting to a $2.0 million increase.
Changes in accrued expenses and other liabilities amounted to cash used
of $11.8 million in the nine months ended January 31, 2009 compared to cash used of $4.6 million in the nine
months ended January 31, 2008. The
increase in cash used of $7.2 million is due primarily to the following (1) reductions
associated with higher payroll accruals at April 30, 2008 amounting to
$8.9 million, (2) higher payments for landfill capping, closure and
post-closure in the nine months ended January 31, 2009 versus the prior
period amounting to $2.9 million, (3) lower accrued interest at January 31,
2009 associated with lower interest rates partially offset by higher debt
levels amounting to a $0.4 million decrease, offset by (4) higher other
long-term liabilities at April 30, 2007 associated with the Maine Energy
settlement which took place in the nine months ended January 31, 2008
resulting in a $3.1 million increase and (5) an increase of $3.5 million
associated with other accrued expenses due to higher accruals at April 30,
2007.
Net cash used in investing activities was $57.0 million
for the nine months ended January 31, 2009
compared
to $61.1 million used in investing activities in the same period of the prior
fiscal year. The reduction is due
primarily to lower capital expenditures in the nine months ended January 31,
2009 compared to the nine months ended
January 31, 2008.
Net cash provided by financing activities was $6.5
million for the nine months ended January 31, 2009 compared to cash
provided of $0.4 million in the same period of the prior fiscal year. The increase in cash provided by financing
activities is primarily due to lower net borrowings.
The Company generally meets liquidity needs from
operating cash flow and its senior credit facility. These liquidity needs are primarily for
capital expenditures for vehicles, containers and landfill development, debt
service costs and capping, closure and post-closure expenditures and
acquisitions. Recent economic conditions
have had an impact on our financial position and results of operations in the
quarter ended January 31, 2009. The
Company has reacted to these conditions by managing various expense categories
and capital expenditures. Continuation
of the weakness in the economy and lack of liquidity in the credit markets will
likely result in continued negative pressure on consumer and business spending,
which will result in lower future business volumes and resulting cash flows.
The
Company expects to refinance the senior credit facility in the fourth quarter
of fiscal year 2009 or first quarter of fiscal year 2010. The refinancing will be at terms reflective
of the distressed credit markets which will increase the Companys debt service
costs. The Company may also seek
alternative sources of capital. The
Company cant be certain that it will be successful in refinancing its debt and
it may not have access to the amount of capital that it requires, on favorable
terms or at all.
The
Company uses a variety of strategies to mitigate the impact of fluctuations in
the commodity prices including entering into fixed price contracts and entering
into hedges which mitigate the variability in cash flows generated from the
sales of recycled paper at floating prices, resulting in a fixed price being
received from these sales. As of January 31,
2009, to minimize the Companys commodity exposure, the Company was party to
thirty commodity hedging agreements. In November 2008,
commodity prices declined sharply driven by a severe drop in demand as a result
of global economic conditions which has impacted FCR recycling operating
income. For further discussion on
commodity price volatility, see
39
Item
3 Quantitative and Qualitative Disclosures about Market Risk Commodity
Price Volatility below.
The Company has filed a
universal shelf registration statement with the SEC. The Company may from time to time issue
securities thereunder in an amount of up to $250.0 million. The Companys ability and willingness to
issue securities pursuant to this registration statement will depend on market
conditions at the time of any such desired offering and therefore the Company
may not be able to issue such securities on favorable terms, if at all.
Inflation and Prevailing Economic Conditions
To
date, inflation has not had a significant impact on the Companys operations.
Consistent with industry practice, most of the Companys contracts provide for
a pass-through of certain costs, including increases in landfill tipping fees
and, in some cases, fuel costs.
Increases in fuel costs have been passed on through a fuel recovery
program. The Company therefore believes it should be able to implement price
increases sufficient to offset most cost increases resulting from inflation.
However, competitive factors and economic conditions may require the Company to
absorb at least a portion of these cost increases, particularly during periods
of high inflation.
The
Companys business is located mainly in the eastern United States. Therefore, the Companys business, financial
condition and results of operations are susceptible to downturns in the general
economy in this geographic region and other factors affecting the region, such
as state regulations and severe weather conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Interest rate volatility
The
Company had interest rate risk relating to approximately $202.3 million of
long-term debt at January 31, 2009.
The interest rate on the variable rate portion of long-term debt was
approximately 2.32% at January 31, 2009.
Should the average interest rate on the variable rate portion of
long-term debt change by 100 basis points, it would have an approximate
interest expense change of $0.5 million for the quarter reported.
The
remainder of the Companys long-term debt is at fixed rates and not subject to interest
rate risk. This includes $165.0 million
of long term debt at fixed rates through interest rate swaps and collars.
Commodity
price volatility
Through
its FCR recycling operation, the Company markets a variety of materials,
including fibers such as OCC (cardboard) and ONP (newspaper), plastics, glass,
ferrous and aluminum metals. The Company
uses a number of strategies to mitigate impacts from commodity price
fluctuations such as indexed purchases, floor prices, fixed price agreements,
and revenue share arrangements. In
addition, as of January 31, 2009 the Company is party to thirty commodity
hedge contracts that manage pricing fluctuations on a portion of its OCC and
ONP volumes. These contracts expire
between March 2009 and December 2011.
The Company does not use financial instruments for trading purposes and
is not a party to any leveraged derivatives.
The Company expects to be able to replace its expiring hedges with
existing or new counterparties; however, the availability and pricing terms at
any given time will be subject to prevailing market conditions.
40
If
commodity prices were to have changed by 10% in the quarter ended January 31, 2009, the impact on the
Companys operating income is estimated at between $0.4 million and $0.9
million based on the observed impact of commodity price changes on operating
income margin during the quarter ended January 31, 2009 and January 31,
2008. The Companys sensitivity to
changes in commodity prices is complex because each customer contract is unique
relative to revenue sharing, tipping or processing fees and other
arrangements. The above estimated ranges
of operating income impact may not be indicative of future operating results
and actual results may vary materially.
41
ITEM 4. CONTROLS AND PROCEDURES
a)
Evaluation
of disclosure controls and procedures
.
The Companys
management, with the participation of its chief executive officer and chief
financial
officer, evaluated the
effectiveness of the Companys disclosure controls and procedures as of January 31,
2009. The term disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934 (the Exchange Act), means controls and
other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SECs rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Companys
management, including its principal executive and principal
financial officers, as
appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management necessarily
applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Based on the
evaluation of the Companys disclosure controls and procedures as of January 31,
2009, the Companys chief executive officer and chief financial
officer have concluded that, as
of such date, the Companys disclosure controls and procedures were effective
at the reasonable assurance level.
b)
Changes
in internal controls.
No
change in the Companys internal control over financial reporting (as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
occurred during the fiscal quarter ended January 31, 2009 that has
materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.
42
PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
On
September 12, 2001, the Companys subsidiary, North Country Environmental
Services, Inc. (NCES), petitioned the New Hampshire Superior Court
(Superior Court) for a declaratory judgment concerning the extent to which
the Town of Bethlehem, New Hampshire (Town) could lawfully prohibit NCESs
expansion of its landfill in Bethlehem.
The Town filed counterclaims seeking contrary declarations and other
relief. The parties appealed the
Superior Courts decision to the New Hampshire Supreme Court (Supreme
Court). On March 1, 2004, the
Supreme Court ruled that NCES had all necessary local approvals to landfill
within a 51-acre portion of its 105-acre parcel and the Town could not prevent
expansion in that area. A significant
portion of NCESs Stage IV expansion as originally designed and approved by the
New Hampshire Department of Environmental Services (NHDES), however, was to
lie to the north of the 51 acres. With
respect to expansion to the north of the 51 acres, the Supreme Court remanded
four issues to the Superior Court for further proceedings. On April 25, 2005, the Superior Court
rendered summary judgment in NCESs favor on two of the four issues, leaving
the other two issues for trial. The two
issues that were decided on summary judgment remain subject to appeal by the
Town. In March of 2005, the Town
adopted a new zoning ordinance that prohibited landfilling outside of a new
zoning district which corresponded to the 51 acres. The Town then amended its pleadings to seek a
declaration that the new ordinance was valid.
The parties each filed motions for partial summary judgment. Following the courts decisions on those
motions, the validity of the new ordinance remained subject to trial based on
two defenses raised by NCES. On March 30,
2007, NCES applied to the NHDES for a permit modification under which all Stage
IV capacity (denominated Stage IV, Phase II) would be relocated within the 51
acres. That application was superseded
by a new application, filed on November 30, 2007, that would bring all
proposed berms along the perimeter of the landfills footprint within the 51
acres as well. NCES sought a stay of the
litigation on the ground that, if NHDES were to grant the permit modification,
there would be no need for NCES to expand beyond the 51 acres for eight or more
years, and the case could be dismissed as moot or unripe. The Superior Court granted the stay pending a
decision by NHDES. NHDES denied the
application on December 12, 2008.
NCES has filed an administrative appeal of this decision as well as a
declaratory relief action challenging the legal grounds upon which NHDES relied
in the decision. NCES also filed a
revised application with NHDES on February 12, 2009 addressing the issues
NHDES identified as the bases for denying the November 30, 2007
application. NCES sought a renewal of
the stay of the litigation on the same grounds upon which it sought and
obtained a stay previously, and the Superior Court granted this motion on February 13,
2009. The Town has threatened to file
an enforcement action against NCES seeking the removal of certain ancillary
landfill structures to the north of the 51 acres.
The
Company, on behalf of itself, its subsidiary FCR, LLC (FCR), and as a
Majority Managing Member of Green Mountain Glass, LLC (GMG), initiated a
declaratory judgment action against GR Technologies, Inc. (GRT), Anthony
C. Lane and Robert Cameron Billmyer (the Defendants) on June 8, 2007, to
resolve issues raised by GRT as the minority shareholder of GMG. The issues addressed in the action included
exercise of management discretion, right to intellectual property, and other
related disputes. The Defendants
counterclaimed in May 2008 seeking unspecified damages on a variety of
bases including, among others, breach of contract, breach of fiduciary duty,
fraud, tortious interference with business relations, induced infringement and
other matters. Management intends to
vigorously contest those allegations, and it believes that the claims have no
merit substantively or as a matter of law.
Additionally, the Defendants filed a Derivative Action in Rutland
Superior Court as a Managing Member of GMG on July 2, 2008 against several
employees of the Company and its subsidiary FCR, LLC, making similar
allegations. On September 16, 2008,
the Company filed a Motion for Summary Judgment, and a Proposed Order Decreeing
Dissolution and Appointing a Special Master, alleging that the relationship of
GRT and FCR in GMG is irretrievably broken.
The
Rutland Superior Court issued a decision on
43
February 10, 2009 ordering the case to be heard in Delaware
Chancery Court as opposed to Rutland Superior Court, and the Company will
arrange for the Delaware hearing to be held expeditiously.
All
litigation is in discovery stages and, accordingly, it is not possible at this
time to evaluate the likelihood of an unfavorable outcome or provide meaningful
estimates as to amount or range of potential loss, but management currently
believes that the litigation, regardless of its outcome, will not have a
material adverse affect on the Companys financial
condition, results of operations or cash flows.
On
June 9, 2008, the Southbridge Board of Health (Southbridge BOH) issued a
Decision and Statement of Findings pursuant to M.G.L. ch.111, §§150A and 150
A1/2 and 310 CMR 16.00 (2008 Site Assignment) granting the Companys
subsidiary, Southbridge Recycling and Disposal Park, Inc. (SRD), a minor
modification to SRDs existing site assignment for the Southbridge Sanitary
Landfill (the Landfill). The 2008 Site
Assignment allows SRD, subject to several conditions, to reallocate tonnage
capacity accepted at a Construction and Demolition Processing Facility located
at the Landfill to solid waste to be accepted at the Landfill up to a maximum
of 405,600 tons per year, including the right to import municipal solid waste
to the Landfill without regard for geographic origin. On or about July 14,
2008, the Sturbridge Board of Health (Sturbridge BOH), an abutting
municipality to Southbridge, together with 10-citizens groups, filed a
complaint in Worcester Superior Court contesting the 2008 Site Assignment (the
Appeal). The Appeal names as
defendants the Southbridge BOH and its individual members at the time of the
2008 Site Assignment, and SRD. On August 21,
2008, SRD reached a settlement with the Sturbridge BOH, pursuant to which SRD
agreed to fund an escrow account to be controlled by the Sturbridge BOH, in the
amount of $.05 million. The escrow
account will serve as a source for funds to cover the costs of SRD installing a
sentinel downgradient well to the Landfill for tests to be conducted by and
results provided to the Sturbridge BOH pursuant to an environmental plan that
is a condition of the 2008 Site Assignment, and for related monitoring costs to
be incurred by the Sturbridge BOH in connection therewith. The Sturbridge BOH Appeal was formally
withdrawn as to all parties on August 22, 2008, and only the 10-citizens
groups remain as participants in the Appeal.
A Motion to Dismiss filed by SRD and the Board of Health in August 2008
was denied on February 4, 2009.
While it is too early to assess the outcome of the Appeal, SRD will
continue to aggressively defend the Appeal.
In November 2008, a class
action lawsuit was filed in United States District Court Eastern District of
Pennsylvania against Blue Mountain Recycling, LLC (BMR) and the Company,
alleging discriminatory hiring practices at BMRs facility in Philadelphia. A companion complaint was filed in February 2009
with the Equal Employment Opportunity Commission. BMR and the Company deny all allegations, and
while it is too early to assess the outcome of these actions, BMR and the
Company will continue to aggressively
defend this matter.
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 Companys business, financial
condition or results of operations or cash flows.
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.
44
ITEM 1A. RISK FACTORS
The Companys
risk factors are disclosed in its Form 10-K for the year ended April 30,
2008 in response to Item 1A to Part 1 of Form 10-K and are
incorporated herein. These risk factors
have been supplemented by certain risk factors described below.
Current economic
conditions
have adversely affected our revenues and our operating margin and will impact
our efforts to refinance our senior credit facility.
Our business has been affected by changes in economic
conditions that are outside of our control, including reductions in business
and consumer activity generally, and of construction spending in particular,
which have significantly impacted the demand for our collection and landfill
services, and declines in commodity prices, which have materially reduced our
recycling revenues. As a result of the
current economic environment we may also be adversely impacted by customers
inability to pay us in a timely manner, if at all, due to their financial
difficulties, which could include bankruptcies. The availability of credit
since the second half of calendar year 2008 has been severely limited, which
negatively affected business and consumer spending generally. If our customers
do not have access to capital, we do not expect that our volumes will improve
or that we will increase new business.
In addition, we expect to refinance our senior
credit facility in the fourth quarter of fiscal 2009 or the first quarter of
fiscal 2010. The refinancing, to the
extent available to us, will be on terms reflective of the distressed capital
markets, which will increase our debt service costs. We may also seek alternative sources of
capital, which we believe would also increase our debt service costs. As a result of the economic environment we
may not have access to the amount of capital that we require, on favorable
terms or at all.
The impact of the current economic environment on
our operating performance and financial position could cause us to be in
default of certain negative covenants under our senior credit facility
The senior credit agreement with our lenders
contains financial covenants, including those described above under
Managements Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources.
In connection with the Companys year-end audit, or earlier if
conditions warrant, the Company will perform its annual goodwill impairment
test. In the event that it is determined
that goodwill is impaired, the amount of the charge could be significant. Such a charge could lead to a lack of
compliance with certain, if not all, of the Companys financial covenants under
its senior credit facility, which would require an amendment to or waiver under
the credit facility if it has not been refinanced by that time. There is no assurance that the senior lenders
would approve an amendment or waiver, in which case the Company would be in
default under its senior credit facility.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
45
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The exhibits that are filed as part of
this Quarterly Report on Form 10-Q or that are incorporated by reference
herein are set forth in the Exhibit Index hereto.
46
SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
|
Casella Waste Systems, Inc.
|
|
|
|
|
|
|
Date: March 6, 2009
|
By: /s/ John S. Quinn
|
|
Senior Vice President and Chief
Financial
|
|
Officer (Principal Financial Officer and
Duly
|
|
Authorized Officer)
|
47
Exhibit Index
10.1
* +
|
|
Employment
Agreement by and between Casella Waste Systems, Inc. and John S. Quinn
dated December 18, 2008.
|
10.2
* +
|
|
Amendment
to Employment Agreement by and between Casella Waste Systems, Inc. and James
W. Bohlig dated December 30, 2008.
|
10.3
* +
|
|
Amendment
to Employment Agreement by and between Casella Waste Systems, Inc. and John
W. Casella dated December 30, 2008.
|
10.4
* +
|
|
Amendment
to Employment Agreement by and between Casella Waste Systems, Inc. and Paul
Larkin dated December 29, 2008.
|
31.1
+
|
|
Certification
of John W. Casella, Chairman of the Board of Directors and Chief Executive
Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
|
31.2
+
|
|
Certification
of John S. Quinn, Senior Vice President and Chief Financial Officer pursuant
to Section 302 of the Sarbanes Oxley Act of 2002.
|
32.1
++
|
|
Certification
pursuant to 18 U.S.C. Section 1350 of John W. Casella, Chairman of the
Board of Directors and Chief Executive Officer, pursuant to Section 906
of the Sarbanes Oxley Act of 2002.
|
32.2
++
|
|
Certification
pursuant to 18 U.S.C. Section 1350 of John S. Quinn,
Senior
Vice President and Chief Financial Officer, pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
|
* - This is a management contract or compensatory plan or arrangement
+ - Filed herewith
++ - Furnished herewith
Confidential treatment requested as to
certain portions, which portions have been omitted and filed separately with
the Securities and Exchange Commission.
48
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