Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 000-23211
 
CASELLA WASTE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
03-0338873
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
25 Greens Hill Lane, Rutland, Vermont
05701
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (802) 775-0325
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
ý
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares outstanding of each of the registrant’s classes of common stock, as of October 31, 2017:
Class A common stock, $0.01 par value per share:
41,055,465

 
Class B common stock, $0.01 par value per share:
988,200

 
 




PART I.
ITEM 1.
FINANCIAL STATEMENTS
CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
September 30,
2017
 
December 31,
2016
 
(Unaudited)
 
 
ASSETS
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
2,303

 
$
2,544

Accounts receivable - trade, net of allowance for doubtful accounts of $694 and $1,069, respectively
65,083

 
61,196

Refundable income taxes
719

 
654

Prepaid expenses
9,474

 
7,989

Inventory
5,941

 
4,915

Other current assets
1,011

 
1,290

Total current assets
84,531

 
78,588

Property, plant and equipment, net of accumulated depreciation and amortization of $798,612 and $837,122, respectively
351,502

 
398,466

Goodwill
122,085

 
119,899

Intangible assets, net
7,996

 
7,696

Restricted assets
1,084

 
1,002

Cost method investments
12,333

 
12,333

Other non-current assets
12,889

 
13,528

Total assets
$
592,420

 
$
631,512

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

1



CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except for share and per share data)
 
September 30,
2017
 
December 31,
2016
 
(Unaudited)
 
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
 
 
 
Current maturities of long-term debt and capital leases
$
6,014

 
$
4,686

Accounts payable
47,043

 
44,997

Accrued payroll and related expenses
8,994

 
12,505

Accrued interest
2,284

 
4,654

Current accrued capping, closure and post-closure costs
1,705

 
668

Other accrued liabilities
19,936

 
14,916

Total current liabilities
85,976

 
82,426

Long-term debt and capital leases, less current portion
478,424

 
503,961

Accrued capping, closure and post-closure costs, less current portion
56,865

 
43,539

Deferred income taxes
6,562

 
6,178

Other long-term liabilities
25,094

 
19,958

COMMITMENTS AND CONTINGENCIES

 

STOCKHOLDERS' DEFICIT:
 
 
 
Casella Waste Systems, Inc. stockholders' deficit
 
 
 
Class A common stock, $0.01 par value per share; 100,000,000 shares authorized; 41,055,000 and 40,572,000 shares issued and outstanding, respectively
411

 
406

Class B common stock, $0.01 par value per share; 1,000,000 shares authorized; 988,000 shares issued and outstanding; 10 votes per share
10

 
10

Additional paid-in capital
354,457

 
348,434

Accumulated deficit
(415,128
)
 
(373,308
)
Accumulated other comprehensive loss
(251
)
 
(68
)
Total Casella Waste Systems, Inc. stockholders' deficit
(60,501
)
 
(24,526
)
Noncontrolling interests

 
(24
)
Total stockholders' deficit
(60,501
)
 
(24,550
)
Total liabilities and stockholders' deficit
$
592,420

 
$
631,512

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

2



CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenues
$
160,269

 
$
151,133

 
$
448,087

 
$
421,236

Operating expenses:
 
 
 
 
 
 
 
Cost of operations
103,897

 
98,803

 
300,961

 
284,409

General and administration
20,750

 
18,777

 
58,388

 
55,450

Depreciation and amortization
16,591

 
16,175

 
46,307

 
46,430

Southbridge Landfill closure charge
754

 

 
64,868

 

 
141,992

 
133,755

 
470,524

 
386,289

Operating income (loss)
18,277

 
17,378

 
(22,437
)
 
34,947

Other expense (income):
 
 
 
 
 
 
 
Interest income
(58
)
 
(64
)
 
(180
)
 
(229
)
Interest expense
6,268

 
9,643

 
19,052

 
29,677

Loss on debt extinguishment

 
191

 
517

 
736

Other income
(164
)
 
(192
)
 
(567
)
 
(697
)
Other expense, net
6,046

 
9,578

 
18,822

 
29,487

Income (loss) before income taxes
12,231

 
7,800

 
(41,259
)
 
5,460

Provision for income taxes
151

 
263

 
561

 
344

Net income (loss)
12,080

 
7,537

 
(41,820
)
 
5,116

Less: Net loss attributable to noncontrolling interests

 

 

 
(9
)
Net income (loss) attributable to common stockholders
$
12,080

 
$
7,537

 
$
(41,820
)
 
$
5,125

Basic earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
Weighted average common shares outstanding
41,951

 
41,377

 
41,783

 
41,169

Basic earnings per common share
$
0.29

 
$
0.18

 
$
(1.00
)
 
$
0.12

Diluted earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
Weighted average common shares outstanding
43,295

 
42,287

 
41,783

 
41,896

Diluted earnings per common share
$
0.28

 
$
0.18

 
$
(1.00
)
 
$
0.12

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

3



CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Net income (loss)
$
12,080

 
$
7,537

 
$
(41,820
)
 
$
5,116

Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
Hedging activity:
 
 
 
 
 
 
 
Interest rate swap settlements
(110
)
 

 
(304
)
 

Interest rate swap amounts reclassified into interest expense
112

 

 
320

 

Unrealized gain (loss) resulting from changes in fair value of derivative instruments
15

 

 
(263
)
 

Unrealized gain (loss) resulting from changes in fair value of marketable securities
18

 
(10
)
 
64

 
(50
)
Other comprehensive income (loss), before tax
35

 
(10
)
 
(183
)
 
(50
)
Income tax expense related to items of other comprehensive loss

 

 

 

Other comprehensive income (loss), net of tax
35

 
(10
)
 
(183
)
 
(50
)
Comprehensive income (loss)
12,115

 
7,527

 
(42,003
)
 
5,066

Less: Comprehensive loss attributable to noncontrolling interests

 

 

 
(9
)
Comprehensive income (loss) attributable to common stockholders
$
12,115

 
$
7,527

 
$
(42,003
)
 
$
5,075

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

4



CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' DEFICIT
(Unaudited)
(in thousands)
 
 
 
Casella Waste Systems, Inc. Stockholders' Deficit
 
 
 
 
 
Class A
Common Stock
 
Class B
Common Stock
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other
Comprehensive Loss
 
Noncontrolling Interests
 
Total
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance, December 31, 2016
$
(24,550
)
 
40,572

 
$
406

 
988

 
$
10

 
$
348,434

 
$
(373,308
)
 
$
(68
)
 
$
(24
)
Net loss
(41,820
)
 

 

 

 

 

 
(41,820
)
 

 

Other comprehensive loss
(183
)
 

 

 

 

 

 

 
(183
)
 

Issuances of Class A common stock
1,244

 
483

 
5

 

 

 
1,239

 

 

 

Stock-based compensation
4,784

 

 

 

 

 
4,784

 

 

 

Other
24

 

 

 

 

 

 

 

 
24

Balance, September 30, 2017
$
(60,501
)
 
41,055

 
$
411

 
988

 
$
10

 
$
354,457

 
$
(415,128
)
 
$
(251
)
 
$

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
September 30,
 
2017
 
2016
Cash Flows from Operating Activities:
 
 
 
Net (loss) income
$
(41,820
)
 
$
5,116

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
46,307

 
46,430

Depletion of landfill operating lease obligations
6,834

 
7,130

Interest accretion on landfill and environmental remediation liabilities
3,205

 
2,688

Amortization of debt issuance costs and discount on long-term debt
2,005

 
3,106

Stock-based compensation
4,784

 
2,377

Gain on sale of property and equipment
(43
)
 
(541
)
Southbridge Landfill non-cash closure charge
63,526

 

Loss on debt extinguishment
517

 
736

Deferred income taxes
384

 
528

Changes in assets and liabilities, net of effects of acquisitions and divestitures:
 
 
 
Accounts receivable
(3,887
)
 
(3,188
)
Accounts payable
2,046

 
2,376

Prepaid expenses, inventories and other assets
(1,722
)
 
(3,262
)
Accrued expenses and other liabilities
(3,036
)
 
(7,425
)
Net cash provided by operating activities
79,100

 
56,071

Cash Flows from Investing Activities:
 
 
 
Acquisitions, net of cash acquired
(3,563
)
 
(2,439
)
Acquisition related additions to property, plant and equipment
(182
)
 
(38
)
Additions to property, plant and equipment
(43,230
)
 
(37,435
)
Payments on landfill operating lease contracts
(3,731
)
 
(4,811
)
Proceeds from sale of property and equipment
657

 
1,069

Net cash used in investing activities
(50,049
)
 
(43,654
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from long-term borrowings
146,400

 
140,700

Principal payments on long-term debt
(175,244
)
 
(152,123
)
Payments of debt issuance costs
(1,451
)
 
(682
)
Payments of debt extinguishment costs

 
(410
)
Proceeds from the exercise of share based awards
1,003

 

Change in restricted cash

 
1,347

Net cash used in financing activities
(29,292
)
 
(11,168
)
Net (decrease) increase in cash and cash equivalents
(241
)
 
1,249

Cash and cash equivalents, beginning of period
2,544

 
2,312

Cash and cash equivalents, end of period
$
2,303

 
$
3,561

Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
19,417

 
$
33,723

Income taxes, net of refunds
$
248

 
$
242

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
Non-current assets obtained through long-term obligations
$
3,564

 
$
1,841

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

6



CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except for per share data)
1.
BASIS OF PRESENTATION
Casella Waste Systems, Inc. (“Parent”), and its consolidated subsidiaries (collectively, “we”, “us” or “our”), is a regional, vertically integrated solid waste services company that provides collection, transfer, disposal, landfill, landfill gas-to-energy, recycling, and organics services in the northeastern United States. We market recyclable metals, aluminum, plastics, paper, and corrugated cardboard, which have been processed at our recycling facilities, as well as recyclables purchased from third-parties. We manage our solid waste operations on a geographic basis through two regional operating segments, the Eastern and Western regions, each of which provides a full range of solid waste services, and our larger-scale recycling and commodity brokerage operations through our Recycling segment. Organics services, ancillary operations, major account and industrial services, discontinued operations and earnings from equity method investees, as applicable, are included in our Other segment.
The accompanying unaudited consolidated financial statements, which include the accounts of the Parent, our wholly-owned subsidiaries and any partially owned entities over which we have a controlling financial interest, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). All significant intercompany accounts and transactions are eliminated in consolidation. Investments in entities in which we do not have a controlling financial interest are accounted for under either the equity method or the cost method of accounting, as appropriate. Our significant accounting policies are more fully discussed in Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the SEC on March 2, 2017.
Preparation of our consolidated financial statements in accordance with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision given the available data, or simply cannot be readily calculated. In the opinion of management, these consolidated financial statements include all adjustments, which include normal recurring and nonrecurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results for the three and nine months ended September 30, 2017 may not be indicative of the results for any other interim period or the entire fiscal year. The consolidated financial statements presented herein should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Subsequent Events
We have evaluated subsequent events or transactions that have occurred after the consolidated balance sheet date of September 30, 2017 through the date of filing of the consolidated financial statements with the SEC on this Quarterly Report on Form 10-Q. We have determined that there are no subsequent events that require disclosure in this Quarterly Report on Form 10-Q.
2.
ACCOUNTING CHANGES
A table providing a brief description of recent Accounting Standards Updates (“ASU”) to the Accounting Standards Codification (“ASC”) issued by the Financial Accounting Standards Board (“FASB”) that may have a material effect on our consolidated financial statements upon adoption follows:
 
 
 
 
 
Standard
  
Description
  
Effect on the Financial Statements or Other
Significant Matters
Accounting standards that are pending adoption
ASU 2017-12: Derivatives and Hedging (Topic 815)
 
Requires that an entity align its risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.
 
The adoption of this guidance affects the designation and measurement guidance for qualifying hedging relationships and the method of presenting hedge results, including the addition of a tabular disclosure related to the effect on the income statement of fair value and cash flow hedges and no longer measuring and reporting hedge ineffectiveness. This guidance is effective January 1, 2019 with early adoption permitted.
 
 
 
 
 
ASU 2017-09: Compensation - Stock Compensation (Topic 718)
 
Requires that an entity should account for the effects of a modification to an award unless all of the following conditions are met: the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; the vesting conditions of the modified award are the same as the vesting conditions immediately before the original award is modified; and the classification of modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.
 
The adoption of this guidance could affect equity compensation expense and net income if there is a modification of an award. This guidance is effective January 1, 2018 with early adoption permitted.
 
 
 
 
 
ASU 2017-04: Intangibles - Goodwill and Other (Topic 350)

 
Requires that when an entity is performing its annual, or interim, goodwill impairment test, it should compare the fair value of the reporting unit with its carrying amount when calculating its impairment charge, noting that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, if applicable, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when calculating its impairment charge.
 
As of December 31, 2016, we did not record a goodwill impairment charge related to our annual goodwill impairment test because at that time the fair value of each reporting unit exceeded its respective carrying value. Upon adoption, if the carrying value of any of these reporting units exceeds the fair value when we perform a goodwill impairment test, we would record an impairment charge equal to the amount by which the carrying value exceeds its fair value. This guidance is effective January 1, 2020 with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017.
 
 
 
 
 
ASU 2016-02, as amended through September 2017: Leases (Topic 842)
  
Requires that a lessee recognize at the commencement date: a lease liability, which is the obligation of the lessee to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
  
We are currently assessing the provisions of this guidance and evaluating the timing and impact the guidance will have on our consolidated financial statements and related disclosures. We are also in the process of aggregating lease documentation for review. The adoption of this ASU primarily impacts the balance sheet through the recognition of a right-of-use asset and a lease liability for all leases with terms in excess of 12 months. This guidance is effective January 1, 2019 using a modified retrospective transition approach with early adoption permitted.
 
 
 
ASU 2016-01: Financial Instruments - Overall (Topic 825-10)
  
Requires the following: (1) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (2) entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (3) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and (4) the elimination of the disclosure requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.
  
The adoption of this guidance results in a cumulative-effect adjustment to the balance sheet, the recognition of changes in fair value of certain equity investments in net income, and enhanced disclosure. This guidance is effective January 1, 2018 with a cumulative-effect adjustment.
 
 
 
ASU 2014-09, as amended through September 2017: Revenue from Contracts with Customers (Topic 606)
  
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
  
The adoption of this guidance requires using either a full retrospective approach for all periods presented or a modified retrospective approach. We plan to adopt the guidance using the modified retrospective approach, recognizing a cumulative effect adjustment to retained earnings as of the date of adoption. We will record revenue when control is transferred to our customer, generally at the time we provide services. We are evaluating the effect of adopting this guidance on our collection line-of-business, as well as our transfer station, landfill, transportation, energy, customer solutions, recycling and organic services lines-of- business, and we expect our operating results to remain materially unchanged. We are also assessing the effect of adopting this guidance on our disclosures and the recognition of costs we incur to obtain and fulfill our contacts. Currently, these costs are typically expensed as incurred. This guidance is effective January 1, 2018 using a full or modified retrospective approach with early adoption permitted January 1, 2017.

7



3.
BUSINESS COMBINATIONS
We acquired one solid waste collection business in our Eastern region and two solid waste collection businesses in our Western region during the nine months ended September 30, 2017. We acquired three transfer stations in our Western region during the nine months ended September 30, 2016. The operating results of each acquired business is included in the accompanying unaudited consolidated statements of operations from the date of acquisition, and the purchase price has been allocated to the net assets acquired based on fair values at the date of acquisition, with the residual amount recorded as goodwill.
A summary of the purchase price for these acquisitions and the allocation of the purchase price for these acquisitions follows:
 
Nine Months Ended
September 30,
 
2017
 
2016
Purchase Price:
 
 
 
Cash paid for acquisitions
$
3,383

 
$
2,439

Notes payable
2,400

 

Other non-cash considerations
101

 

Holdbacks
376

 
400

Total
6,260

 
2,839

Allocated as follows:
 
 
 
Current assets

 
40

Land

 
353

Building

 
1,360

Equipment
2,452

 
269

Intangible assets
1,670

 

Other liabilities, net
(49
)
 
(106
)
Fair value of assets acquired and liabilities assumed
4,073

 
1,916

Excess purchase price allocated to goodwill
$
2,187

 
$
923

Unaudited pro forma combined information that shows our operational results as though each acquisition completed since the beginning of the prior fiscal year had occurred as of January 1, 2016 follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
160,401

 
$
152,572

 
$
450,512

 
$
426,376

Operating income (loss)
$
18,296

 
$
17,434

 
$
(22,334
)
 
$
35,037

Net income (loss) attributable to common stockholders
$
12,090

 
$
7,565

 
$
(41,767
)
 
$
5,162

Basic weighted average common shares outstanding
41,951

 
41,377

 
41,783

 
41,169

Basic earnings per share attributable to common stockholders
$
0.29

 
$
0.18

 
$
(1.00
)
 
$
0.13

Diluted weighted average shares outstanding
43,295

 
42,287

 
41,783

 
41,896

Diluted earnings per share attributable to common stockholders
$
0.28

 
$
0.18

 
$
(1.00
)
 
$
0.12

The pro forma results set forth in the table above have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisitions occurred as of January 1, 2016 or of the results of our future operations. Furthermore, the pro forma results do not give effect to all cost savings or incremental costs that may occur as a result of the integration and consolidation of the completed acquisitions.
4.
GOODWILL AND INTANGIBLE ASSETS

8



A summary of the activity and balances related to goodwill by operating segment follows:
 
December 31, 2016
 
Acquisitions
 
September 30, 2017
Eastern region
$
17,429

 
$
1,764

 
$
19,193

Western region
88,426

 
422

 
88,848

Recycling
12,315

 

 
12,315

Other
1,729

 

 
1,729

Total
$
119,899

 
$
2,186

 
$
122,085

A summary of intangible assets by intangible asset type follows:
 
Covenants
Not-to-Compete
 
Client Lists
 
Total
Balance, September 30, 2017
 
 
 
 
 
Intangible assets
$
17,975

 
$
17,508

 
$
35,483

Less accumulated amortization
(16,739
)
 
(10,748
)
 
(27,487
)
 
$
1,236

 
$
6,760

 
$
7,996

 
Covenants
Not-to-Compete
 
Client Lists
 
Total
Balance, December 31, 2016
 
 
 
 
 
Intangible assets
$
17,594

 
$
16,071

 
$
33,665

Less accumulated amortization
(16,402
)
 
(9,567
)
 
(25,969
)
 
$
1,192

 
$
6,504

 
$
7,696

Intangible amortization expense was $526 and $1,518 during the three and nine months ended September 30, 2017, respectively, as compared to $561 and $1,604 during the three and nine months ended September 30, 2016, respectively.
A summary of intangible amortization expense estimated for the five fiscal years following the fiscal year ended December 31, 2016 and thereafter follows:
Estimated Future Amortization Expense as of September 30, 2017
 
Fiscal year ending December 31, 2017
$
535

Fiscal year ending December 31, 2018
$
1,961

Fiscal year ending December 31, 2019
$
1,595

Fiscal year ending December 31, 2020
$
1,392

Fiscal year ending December 31, 2021
$
1,127

Thereafter
$
1,386

 
5.
ACCRUED FINAL CAPPING, CLOSURE AND POST CLOSURE
Accrued final capping, closure and post-closure costs include the current and non-current portion of costs associated with obligations for final capping, closure and post-closure of our landfills. We estimate our future final capping, closure and post-closure costs in order to determine the final capping, closure and post-closure expense per ton of waste placed into each landfill. The anticipated time frame for paying these costs varies based on the remaining useful life of each landfill as well as the duration of the post-closure monitoring period.

9



A summary of the changes to accrued final capping, closure and post-closure liabilities follows:
 
Nine Months Ended
September 30,
 
2017
 
2016
Beginning balance
$
44,207

 
$
41,041

Obligations incurred
2,187

 
1,828

Revisions in estimates (1)
9,598

 
(56
)
Accretion expense
3,164

 
2,688

Obligations settled (2)
(586
)
 
(601
)
Ending balance
$
58,570

 
$
44,900

 
(1)
Relates to changes in estimates and assumptions concerning anticipated waste flow, cost and timing of future final capping, closure and post-closure activities at certain landfills, including the Town of Southbridge, Massachusetts ("Town") Landfill ("Southbridge Landfill"). See Note 7, Commitments and Contingencies and Note 10, Other Items and Charges for disclosure regarding the matter.
(2)
Includes amounts that are being processed through accounts payable as a part of our disbursements cycle.
6.    LONG-TERM DEBT
A summary of long-term debt and capital leases by debt instrument follows:
 
September 30,
2017
 
December 31,
2016
Senior Secured Credit Facility:
 
 
 
Revolving Credit Facility due October 2021; bearing interest at LIBOR plus 2.75% and 3.00%, respectively
$
36,300

 
$
62,600

Term Loan B Facility due October 2023; bearing interest at LIBOR plus 2.75% and 3.00%, respectively
348,250

 
350,000

Tax-Exempt Bonds:
 
 
 
New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014 due December 2044 - fixed rate interest period through 2019; bearing interest at 3.75%
25,000

 
25,000

New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014R-2 due December 2044 - fixed rate interest period through 2026; bearing interest at 3.125%
15,000

 
15,000

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-3 due January 2025 - fixed rate interest period through 2025; bearing interest at 5.25%
25,000

 

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2015 due August 2035 - fixed rate interest period through 2025; bearing interest at 5.125%
15,000

 
15,000

Vermont Economic Development Authority Solid Waste Disposal Long-Term Revenue Bonds Series 2013 due April 2036 - fixed rate interest period through 2018; bearing interest at 4.75%
16,000

 
16,000

Business Finance Authority of the State of New Hampshire Solid Waste Disposal Revenue Bonds Series 2013 due April 2029 - fixed rate interest period through 2019; bearing interest at 4.00%
11,000

 
11,000

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-2 due January 2025 - fixed rate interest period through 2017; bore interest at 6.25%

 
21,400

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-1; letter of credit backed due January 2025 - bore interest at SIFMA Index

 
3,600

Other:
 
 
 
Capital leases maturing through September 2023; bearing interest at up to 7.70%
5,870

 
5,534

Notes payable maturing through June 2027; bearing interest at up to 7.00%
2,882

 
449

Principal amount of long-term debt and capital leases
500,302

 
525,583

Less—unamortized discount and debt issuance costs (1)
15,864

 
16,936

Long-term debt and capital leases less unamortized discount and debt issuance costs
484,438

 
508,647

Less—current maturities of long-term debt
6,014

 
4,686

 
$
478,424

 
$
503,961

 

10



(1)
A summary of unamortized discount and debt issuance costs by debt instrument follows:
 
September 30,
2017
 
December 31,
2016
Revolving Credit Facility
$
4,195

 
$
4,965

Term Loan B Facility (including unamortized discount of $1,540 and $1,712)
7,682

 
7,718

New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014
1,081

 
1,221

New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014R-2
526

 
571

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-3
623

 

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2015
708

 
760

Vermont Economic Development Authority Solid Waste Disposal Long-Term Revenue Bonds Series 2013
581

 
605

Business Finance Authority of the State of New Hampshire Solid Waste Disposal Revenue Bonds Series 2013
468

 
563

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-1

 
31

Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-2

 
502

 
$
15,864

 
$
16,936

Financing Activities
Term Loan B Facility
In the quarter ended June 30, 2017, we entered into the first amendment (“Repricing Amendment”) to our $350,000 aggregate principal amount term loan B facility ("Term Loan B Facility") and $160,000 revolving line of credit facility (“Revolving Credit Facility” and, together with the Term Loan B Facility, the "Credit Facility"). The Repricing Amendment decreased the applicable interest margin for our Term Loan B Facility by 25 basis points for both LIBOR borrowings and base rate borrowings. The applicable interest rate margin will continue to be determined based on our consolidated net leverage ratio, with the interest set at 2.75% for LIBOR borrowings (with a 1.00% LIBOR floor) and 1.75% for base rate borrowings at September 30, 2017. The applicable interest rate will be reduced to 2.50% for LIBOR borrowings (with a 1.00% LIBOR floor), and 1.50% for base rate borrowings upon us reaching a consolidated net leverage ratio of 3.75x or less.
Maine Bonds
In the quarter ended March 31, 2017, we completed the remarketing of $3,600 aggregate principal amount of Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-1 (“FAME Bonds 2005R-1”) and $21,400 aggregate principal amount of Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-2 (“FAME Bonds 2005R-2”) into one series of $25,000 aggregate principal amount Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-3 (“FAME Bonds 2005R-3”). The FAME Bonds 2005R-3, which are unsecured and guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries, accrue interest at 5.25% per annum until they mature on January 1, 2025.
Loss on Debt Extinguishment
We recorded a loss on debt extinguishment of $0 and $517 in the three and nine months ended September 30, 2017, respectively, as compared to a loss on debt extinguishment of $191 and $736 during the three and nine months ended September 30, 2016, respectively, associated with the following:
the write-off of debt issuance costs in connection with the Repricing Amendment in the quarter ended June 30, 2017;
the write-off of debt issuance costs in connection with the remarketing of the FAME Bonds 2005R-1 and the FAME Bonds 2005R-2 into the FAME Bonds 2005R-3 in the quarter ended March 31, 2017; and
the repurchase price premium and write-off of debt issuance costs and unamortized original issue discount associated with the early redemption, repurchase and retirement of partial portions of our 7.75% senior subordinated notes due February 2019 in the three and nine months ended September 30, 2016.

11



Cash Flow Hedges
In the quarter ended March 31, 2017, we entered into three interest rate derivative agreements to hedge interest rate risk associated with the variable rate portion of our long-term debt. The total notional amount of these agreements is $60,000 and requires us to receive interest based on changes in the 1-month LIBOR index with a 1.0% floor and pay interest at a weighted average rate of approximately 1.95%. Two of the agreements, with a total notional amount of $35,000, mature in February 2021, and the final agreement, with a total notional amount of $25,000, matures in February 2022. We have designated these derivative instruments as cash flow hedges.
In accordance with the derivatives and hedging guidance in FASB ASC 815 - Derivatives and Hedging, the effective portions of the changes in fair values of interest rate swaps have been recorded in equity as a component of accumulated other comprehensive loss, net of tax. As the critical terms of the interest rate swaps match the underlying debt being hedged, no ineffectiveness is recognized on these swaps and, therefore, all unrealized changes in fair value are recorded in accumulated other comprehensive loss, net of tax. Amounts are reclassified from accumulated other comprehensive loss, net of tax into earnings in the same period or periods during which the hedged transaction affects earnings.
As of September 30, 2017, we have recorded a derivative asset with a fair value of $58 in other non-current assets and a derivative liability with a fair value of $321 in other accrued liabilities associated with these cash flow hedges.
7.    COMMITMENTS AND CONTINGENCIES
Legal Proceedings
In the ordinary course of our business and as a result of the extensive governmental regulation of the solid waste industry, we are subject to various judicial and administrative proceedings involving state and local agencies. In these proceedings, an agency may seek to impose fines or to revoke or deny renewal of an operating permit held by us. From time to time, we may also be subject to actions brought by special interest or other groups, adjacent landowners or residents in connection with the permitting and licensing of landfills and transfer stations, or allegations of environmental damage or violations of the permits and licenses pursuant to which we operate. In addition, we may be named defendants in various claims and suits pending for alleged damages to persons and property, alleged violations of certain laws and alleged liabilities arising out of matters occurring during the ordinary operation of a waste management business.
In accordance with FASB ASC 450 - Contingencies, we accrue for legal proceedings, inclusive of legal costs, when losses become probable and reasonably estimable. As of the end of each applicable reporting period, we review each of our legal proceedings to determine whether it is probable, reasonably possible or remote that a liability has been incurred and, if it is at least reasonably possible, whether a range of loss can be reasonably estimated under the provisions of FASB ASC 450-20. In instances where we determine that a loss is probable and we can reasonably estimate a range of loss we may incur with respect to such a matter, we record an accrual for the amount within the range that constitutes our best estimate of the possible loss. If we are able to reasonably estimate a range, but no amount within the range appears to be a better estimate than any other, we record an accrual in the amount that is the low end of such range. When a loss is reasonably possible, but not probable, we will not record an accrual, but we will disclose our estimate of the possible range of loss where such estimate can be made in accordance with FASB ASC 450-20.
Environmental Remediation Liability
We are subject to liability for environmental damage, including personal injury and property damage, that our solid waste, recycling and power generation facilities may cause to neighboring property owners, particularly as a result of the contamination of drinking water sources or soil, possibly including damage resulting from conditions that existed before we acquired the facilities. We may also be subject to liability for similar claims arising from off-site environmental contamination caused by pollutants or hazardous substances if we or our predecessors arrange or arranged to transport, treat or dispose of those materials. The following matters represent our material outstanding claims.

12



Southbridge Recycling & Disposal Park, Inc.
In October 2015, our Southbridge Recycling and Disposal Park, Inc. (“SRD”) subsidiary reported to the Massachusetts Department of Environmental Protection (“MADEP”) results of analysis of samples collected pursuant to our existing permit from private drinking water wells located near the Town of Southbridge, Massachusetts (“Town”) Landfill (“Southbridge Landfill”), which is operated by SRD. Those results indicated the presence of contaminants above the levels triggering notice and response obligations under MADEP regulations. In response to those results, we are carrying out an Immediate Response Action pursuant to Massachusetts General Law Chapter 21E (the "Charlton 21E Obligations") pursuant to state law. Further, we have implemented a plan to analyze and better understand the groundwater near the Southbridge Landfill and we are investigating with the objective of identifying the source or sources of the elevated levels of contamination measured in the well samples. If it is determined that some or all of the contamination originated at the Southbridge Landfill, we will work with the Town (the Southbridge Landfill owner and the former operator of an unlined portion of the Southbridge Landfill, which was used prior to our operation of a double-lined portion of the Southbridge Landfill commencing in 2004) to evaluate and allocate the liabilities related to the Charlton 21E Obligations. In July 2016, we sent correspondence to the Town pursuant to Chapter 21E of Massachusetts General Laws demanding that the Town reimburse us for the environmental response costs we had spent and that the Town be responsible for all such costs in the future, as well as any other costs or liabilities resulting from the release of contaminants from the unlined portion of the Southbridge Landfill. The Town responded in September 2016, denying that the Southbridge Landfill is the source of such contamination, and claiming that if it is, that we may owe an indemnity to the Town pursuant to the Operating Agreement between us and the Town dated May 29, 2007, as amended. We entered into a Tolling Agreement with the Town to delay any further administrative or legal actions until our work with MADEP more specifically defines the parties’ responsibilities for the Charlton 21E Obligations, if any. Please see below for further discussion of our relationship with the Town regarding the Charlton 21E Obligations.
In February 2016, we and the Town received a Notice of Intent to Sue under the Resource Conservation and Recovery Act ("RCRA") from a law firm purporting to represent residents proximate to the Southbridge Landfill (“Residents”), indicating its intent to file suit against us on behalf of the Residents alleging the groundwater contamination originated from the Southbridge Landfill. In February 2017, we received an additional Notice of Intent to Sue from the National Environmental Law Center under the Federal Clean Water Act ("CWA") and RCRA (collectively the “Acts”) on behalf of Environment America, Inc., d/b/a Environment Massachusetts, and Toxics Action Center, Inc., which have referred to themselves as the Citizen Groups. The Citizen Groups alleged that we had violated the Acts, and that they intended to seek appropriate relief in federal court for those alleged violations. On or about June 9, 2017, a lawsuit was filed against us, SRD and the Town in the United States District Court for the District of Massachusetts by the Citizen Groups and the Residents alleging violations of the Acts (the “Litigation”), and demanding a variety of remedies under the Acts, including fines, remediation, mitigation and costs of litigation, and remedies for violations of Massachusetts civil law related to personal and property damages, including remediation, diminution of property values, compensation for lost use and enjoyment of properties, enjoinment of further operation of the Southbridge Landfill, and costs of litigation, plus interest on any damage award, on behalf of the Residents. We believe the Litigation to be factually inaccurate, and without legal merit, and we and SRD intend to vigorously defend the Litigation. Nevertheless, we believe it is reasonably possible that a loss will occur as a result of the Litigation although an estimate of loss cannot be reasonably provided at this time due to the infancy of this matter. We also continue to believe the Town should be responsible for costs or liabilities associated with the Litigation relative to alleged contamination originating from the unlined portion of the Southbridge Landfill, although there can be no assurance that we will not be required to incur some or all of such costs and liabilities.
We entered into an Administrative Consent Order on April 26, 2017 (the “ACO”), with MADEP, the Town, and the Town of Charlton, committing us to equally share the costs with MADEP, of up to $10,000 ($5,000 each) for the Town to install a municipal waterline in the Town of Charlton ("Waterline"). Upon satisfactory completion of that Waterline, and other matters covered by the ACO, we and the Town will be released by MADEP from any future responsibilities for the Charlton 21E Obligations. We also entered into an agreement with the Town on April 28, 2017 entitled the “21E Settlement and Water System Construction Funding Agreement” (the “Waterline Agreement”), wherein we and the Town released each other from claims arising from the Charlton 21E Obligations. Pursuant to the Waterline Agreement, the Town will issue a twenty (20) year bond for our portion of the Waterline costs (up to $5,000). We have agreed to reimburse the Town for periodic payments under such bond.

13



We have recorded an environmental remediation liability associated with the future installation of the Waterline in other accrued liabilities and other long-term liabilities. We inflate the estimated costs in current dollars to the expected time of payment and discount the total cost to present value using a risk-free interest rate of 2.6%. Our expenditures could be significantly higher if costs exceed estimates. The changes to the environmental remediation liability associated with the Southbridge Landfill are as follows:
 
 
 
 
 
Nine Months Ended September 30,
 
2017
 
2016
Beginning balance
$

 
$

Accretion expense
41

 

Obligations incurred
6,379

 

Obligations settled (1)
(241
)
 

Ending balance
$
6,179

 
$

(1)
Includes amounts that are being processed through accounts payable as a part of our disbursements cycle.
In August 2016, we filed a complaint against Steadfast Insurance Company (“Steadfast”) in the Superior Court of Suffolk County, Massachusetts (the "Court"), alleging among other things, that Steadfast breached its Pollution Liability Policy (“Policy”) purchased by us in April 2015, by refusing to acknowledge coverage under the Policy, and refusing to cover any of the costs and liabilities incurred by us as described above as well as costs and liabilities that we may incur in the future. Steadfast filed an answer and counterclaim in September 2016, denying that it has any obligations to us under the Policy, and seeking a declaratory judgment of Steadfast’s obligations under the Policy. We are in the discovery phase of this litigation. Steadfast has filed a Motion to Dismiss (the "Motion") our litigation against it, and we filed our response on July 11, 2017. On September 7, 2017, the Court denied the Motion.
On June 13, 2017, Town voters rejected a non-binding ballot initiative intended to provide guidance to Town officials with respect to our pursuit of other landfill development opportunities at the Southbridge Landfill. Following such rejection by the Town voters, our board of directors and senior management determined after due consideration of all facts and circumstances that it is no longer likely that further development at the existing landfill site will generate an adequate risk adjusted return at the Southbridge Landfill, and accordingly we expect to cease operations at the Southbridge Landfill when no further capacity is available, expected by no later than December 31, 2018. We delivered correspondence to the Town to this effect on August 3, 2017, citing events of Change in Law and Force Majeure pursuant to our May 29, 2007 Extension Agreement with the Town ("Extension Agreement") and the impacts of such events on further expansion of the Southbridge Landfill. We have advised the Town that we see no economically feasible way to operate the Southbridge Landfill beyond its current permitted life. Following cessation of operations, we will proceed to conduct proper closure and other activities at the Southbridge Landfill in accordance with the Extension Agreement with the Town, and Federal, state and local law. We reached this conclusion after carefully evaluating the estimated future costs associated with the permitting, engineering and construction activities for the planned expansion of the Southbridge Landfill against the possible outcomes of the permitting process and the anticipated future benefits of successful expansions. Under the Extension Agreement, which we account for as an operating lease, there are potential contractual obligations and commitments, including future cash payments of $3,069 and services that extend beyond the current useful life of the Southbridge Landfill. In accordance with FASB ASC 420 - Exit or Disposal Cost Obligations, a liability for costs to be incurred under a contract for its remaining term without economic benefit shall be recognized when we cease using the right conveyed by the contract. We may incur a loss associated with these potential contractual obligations upon cessation of operations at the Southbridge Landfill when remaining capacity is exhausted by the placement of waste at the site. See Note10, Other Items and Charges to our consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding the Southbridge Landfill closure charge.
The costs and liabilities we may be required to incur in connection with the foregoing Southbridge Landfill matters could be material to our results of operations, our cash flows and our financial condition.

14



Potsdam Environmental Remediation Liability
On December 20, 2000, the State of New York Department of Environmental Conservation (“DEC”) issued an Order on Consent (“Order”) which named Waste-Stream, Inc. (“WSI”), our subsidiary, General Motors Corporation (“GM”) and Niagara Mohawk Power Corporation (“NiMo”) as Respondents. The Order required that the Respondents undertake certain work on a 25-acre scrap yard and solid waste transfer station owned by WSI in Potsdam, New York, including the preparation of a Remedial Investigation and Feasibility Study (“Study”). A draft of the Study was submitted to the DEC in January 2009 (followed by a final report in May 2009). The Study estimated that the undiscounted costs associated with implementing the preferred remedies would be approximately $10,219. On February 28, 2011, the DEC issued a Proposed Remedial Action Plan for the site and accepted public comments on the proposed remedy through March 29, 2011. We submitted comments to the DEC on this matter. In April 2011, the DEC issued the final Record of Decision (“ROD”) for the site. The ROD was subsequently rescinded by the DEC for failure to respond to all submitted comments. The preliminary ROD, however, estimated that the present cost associated with implementing the preferred remedies would be approximately $12,130. The DEC issued the final ROD in June 2011 with proposed remedies consistent with its earlier ROD. An Order on Consent and Administrative Settlement naming WSI and NiMo as Respondents was executed by the Respondents and DEC with an effective date of October 25, 2013. On January 29, 2016, a Cost-Sharing Agreement was executed between WSI, NiMo, Alcoa Inc. (“Alcoa”) and Reynolds Metal Company (“Reynolds”) whereby Alcoa and Reynolds elected to voluntarily participate in the onsite remediation activities at a combined 15% participant share. It is unlikely that any significant expenditures relating to onsite remediation will be incurred until the fiscal year ending December 31, 2019. WSI is jointly and severally liable with NiMo, Alcoa and Reynolds for the total cost to remediate.
We have recorded an environmental remediation liability associated with the Potsdam site based on incurred costs to date and estimated costs to complete the remediation in other accrued liabilities and other long-term liabilities. Our expenditures could be significantly higher if costs exceed estimates. We inflate the estimated costs in current dollars to the expected time of payment and discount the total cost to present value using a risk-free interest rate of 1.5%. The changes to the environmental remediation liability associated with the Potsdam site are as follows:
 
 
 
 
 
Nine Months Ended September 30,
 
2017
 
2016
Beginning balance
$
5,866

 
$
5,221

Obligations settled (1)
(21
)
 
(255
)
Ending balance
$
5,845

 
$
4,966

 
(1)
Includes amounts that are being processed through accounts payable as a part of our disbursements cycle.
8.
STOCKHOLDERS' EQUITY
Stock Based Compensation
Shares Available For Issuance
In the fiscal year ended December 31, 2016, we adopted the 2016 Incentive Plan (“2016 Plan”). Under the 2016 Plan, we may grant awards up to an aggregate amount of shares equal to the sum of: (i) 2,250 shares of Class A common stock (subject to adjustment in the event of stock splits and other similar events), plus (ii) such additional number of shares of Class A common stock (up to 2,723 shares) as is equal to the sum of the number of shares of Class A common stock that remained available for grant under the 2006 Stock Incentive Plan (“2006 Plan”) immediately prior to the expiration of the 2006 Plan and the number of shares of Class A common stock subject to awards granted under the 2006 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by us. As of September 30, 2017, there were 1,904 Class A common stock equivalents available for future grant under the 2016 Plan.
Stock Options
Stock options are granted at a price equal to the prevailing fair value of our Class A common stock at the date of grant. Generally, stock options granted have a term not to exceed ten years and vest over a one year to four year period from the date of grant.

15



The fair value of each stock option granted, with the exception of market-based performance stock option grants, is estimated using a Black-Scholes option-pricing model, which requires extensive use of accounting judgment and financial estimation, including estimates of the expected term stock option holders will retain their vested stock options before exercising them and the estimated volatility of our Class A common stock price over the expected term. The fair value of each market-based performance stock option granted is estimated using a Monte Carlo option-pricing model, which also requires extensive use of accounting judgment and financial estimation, including estimates of the expected term stock option holders will retain their vested stock options before exercising them and the estimated volatility of our Class A common stock price over the expected term, but also including estimates of share price appreciation plus the value of dividends of our Class A common stock as compared to the Russell 2000 Index over the requisite service period.
A summary of stock option activity follows:
 
Stock Options (1)
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (years)
 
Aggregate Intrinsic Value
Outstanding, December 31, 2016
1,115

 
$
6.13

 
 
 
 
Granted

 
$

 
 
 
 
Exercised
(91
)
 
$
10.97

 
 
 
 
Forfeited
(5
)
 
$
7.54

 
 
 
 
Outstanding, September 30, 2017
1,019

 
$
5.68

 
5.5
 
$
13,366

Exercisable, September 30, 2017
819

 
$
5.00

 
4.8
 
$
11,305

Unvested, September 30, 2017
240

 
$
9.16

 
8.5
 
$
2,313

(1)
Market-based performance stock options are included at the 100% attainment level. Attainment of the maximum performance targets and market achievements would result in the issuance of an additional 40 shares of Class A common stock currently included in unvested.
Stock-based compensation expense for stock options was $158 and $505 during the three and nine months ended September 30, 2017, respectively, as compared to $143 and $435 during the three and nine months ended September 30, 2016, respectively.
During the three and nine months ended September 30, 2017, the aggregate intrinsic value of stock options exercised was $91 and $297, respectively.
As of September 30, 2017, total unrecognized stock-based compensation expense related to outstanding stock options, including market-based performance stock options assuming the attainment of maximum performance targets, was $613, which will be recognized over a weighted average period of 0.9 years.
Other Stock Awards
Restricted stock awards, restricted stock units and performance stock units, with the exception of market-based performance stock units, are granted at a price equal to the fair value of our Class A common stock at the date of grant. The fair value of each market-based performance stock unit is estimated using a Monte Carlo pricing model, which requires extensive use of accounting judgment and financial estimation, including the estimated share price appreciation plus the value of dividends of our Class A common stock as compared to the Russell 2000 Index over the requisite service period.
Restricted stock awards granted to non-employee directors vest incrementally over a three year period beginning on the first anniversary of the date of grant. Restricted stock units granted to non-employee directors vest in full on the first anniversary of the grant date. Restricted stock units granted to employees vest incrementally over an identified service period beginning on the grant date based on continued employment. Performance stock units granted to employees, including market-based performance stock units, vest at a future date following the grant date and are based on the attainment of performance targets and market achievements, as applicable.

16



A summary of restricted stock, restricted stock unit and performance stock unit activity follows:
 
Restricted Stock, Restricted Stock Units, and Performance Stock Units (1)
 
Weighted
Average Grant Date Fair
Value
 
Weighted Average Remaining Contractual Term (years)
 
Aggregate Intrinsic Value
Outstanding, December 31, 2016
1,099

 
$
7.03

 
 
 
 
Granted
439

 
$
12.32

 
 
 
 
Class A Common Stock Vested
(376
)
 
$
5.08

 
 
 
 
Forfeited
(23
)
 
$
6.09

 
 
 
 
Outstanding, September 30, 2017
1,139

 
$
9.66

 
1.5
 
$
10,403

Unvested, September 30, 2017
1,501

 
$
10.35

 
1.6
 
$
12,679

(1)
Market-based performance stock unit grants are included at the 100% attainment level. Attainment of the maximum performance targets and market achievements would result in the issuance of an additional 362 shares of Class A common stock currently included in unvested.
Stock-based compensation expense related to restricted stock, restricted stock units and performance stock units was $1,684 and $4,183 during the three and nine months ended September 30, 2017, respectively, as compared to $585 and $1,863 during the three and nine months ended September 30, 2016, respectively.
During the three and nine months ended September 30, 2017, the total fair value of other stock awards vested was $97 and $4,867, respectively.
As of September 30, 2017, total unrecognized stock-based compensation expense related to outstanding restricted stock and restricted stock units was $3,701, which will be recognized over a weighted average period of 1.4 years. As of September 30, 2017, maximum unrecognized stock-based compensation expense related to outstanding performance stock units, assuming the attainment of maximum performance targets, was $6,039 to be recognized over a weighted average period of 1.7 years.
The weighted average fair value of market-based performance stock units granted during the nine months ended September 30, 2017 was $12.51 per award, which was calculated using a Monte Carlo pricing model assuming a risk free interest rate of 1.45% and an expected volatility of 32.80% assuming no expected dividend yield. The risk-free interest rate is based on the U.S. Treasury yield curve for the expected service period of the award. Expected volatility is calculated using the daily volatility of our Class A common stock over the expected service period of the award.
The Monte Carlo pricing model requires extensive use of accounting judgment and financial estimation. 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.
We also recorded $31 and $96 of stock-based compensation expense related to our Amended and Restated 1997 Employee Stock Purchase Plan during the three and nine months ended September 30, 2017, respectively, as compared to $28 and $79 during the three and nine months ended September 30, 2016, respectively.
Accumulated Other Comprehensive Loss
A summary of the changes in the balances of each component of accumulated other comprehensive loss, net of tax follows:
 
 
 
 
 
Marketable
Securities
 
Interest Rate Swaps
Balance, December 31, 2016
$
(68
)
 
$

Other comprehensive income (loss) before reclassifications
64

 
(567
)
Amounts reclassified from accumulated other comprehensive loss

 
320

Net current-period other comprehensive income (loss)
64

 
(247
)
Balance, September 30, 2017
$
(4
)
 
$
(247
)

17



A summary of reclassifications out of accumulated other comprehensive loss, net of tax follows:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
Details About Accumulated Other Comprehensive Loss Components
 
Amounts Reclassified Out of Accumulated Other Comprehensive Loss
 
Affected Line Item in the Consolidated
Statements of Operations
Interest rate swaps
 
$
112

 
$

 
$
320

 
$

 
Interest expense
 
 
112

 

 
320

 

 
Income (loss) before income taxes
 
 

 

 

 

 
Provision for income taxes
 
 
$
112

 
$

 
$
320

 
$

 
Net income (loss)
9.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net income (loss) from continuing operations attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the combined weighted average number of common shares and potentially dilutive shares, which include the assumed exercise of employee stock options, including market-based performance stock options based on the expected achievement of performance targets, unvested restricted stock awards, unvested restricted stock units and unvested performance stock units, including market-based performance units based on the expected achievement of performance targets. In computing diluted earnings per share, we utilize the treasury stock method.
A summary of the numerator and denominators used in the computation of earnings per share follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Numerator:
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
$
12,080

 
$
7,537

 
$
(41,820
)
 
$
5,125

Denominators:
 
 
 
 
 
 
 
Number of shares outstanding, end of period:
 
 
 
 
 
 
 
Class A common stock
41,055

 
40,500

 
41,055

 
40,500

Class B common stock
988

 
988

 
988

 
988

Unvested restricted stock
(82
)
 
(109
)
 
(82
)
 
(109
)
Effect of weighted average shares outstanding
(10
)
 
(2
)
 
(178
)
 
(210
)
Basic weighted average common shares outstanding
41,951

 
41,377

 
41,783

 
41,169

Impact of potentially dilutive securities:
 
 
 
 
 
 
 
Dilutive effect of stock options and other stock awards
1,344

 
910

 

 
727

Diluted weighted average common shares outstanding
43,295

 
42,287

 
41,783

 
41,896

Anti-dilutive potentially issuable shares

 
322

 
2,560

 
322

10.
Other Items and Charges
Southbridge Landfill Closure Charge
In June 2017, we initiated the plan to cease operations of the Southbridge Landfill as disclosed in Note 7, Commitments and Contingencies. Accordingly, in the three and nine months ended September 30, 2017, we recorded charges associated with the closure of the Southbridge Landfill as follows:

18



 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Asset impairment charge (1)
$

 
$

 
$
47,999

 
$

Project development charge (2)

 

 
9,149

 

Environmental remediation charge (3)

 

 
6,379

 

Legal and transaction costs (4)
754

 

 
1,341

 

Southbridge Landfill closure charge
$
754

 
$


$
64,868

 
$

(1)
We performed a test of recoverability under FASB ASC 360 - Property, Plant, and Equipment, which indicated that the carrying value of our asset group that includes the Southbridge Landfill was no longer recoverable and, as a result, the asset group was assessed for impairment with an impairment charge allocated to the long-lived assets of the Southbridge Landfill in accordance with FASB ASC 360 - Property, Plant, and Equipment.
(2)
We wrote-off deferred costs associated with Southbridge Landfill permitting activities no longer deemed viable.
(3)
We recorded an environmental remediation charge associated with the future installation of a municipal waterline. See Note 7, Commitments and Contingencies for additional disclosure.
(4)
We incurred legal and other transaction costs associated with various matters as part of the Southbridge Landfill closure. See Note 7, Commitments and Contingencies for additional disclosure.
11.
FAIR VALUE OF FINANCIAL INSTRUMENTS
We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. These tiers include: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data.
We use valuation techniques that maximize the use of market prices and observable inputs and minimize the use of unobservable inputs. In measuring the fair value of our financial assets and liabilities, we rely on market data or assumptions that we believe market participants would use in pricing an asset or a liability.
Assets and Liabilities Accounted for at Fair Value
Our financial instruments include cash and cash equivalents, accounts receivable-trade, restricted cash and investments held in trust on deposit with various banks as collateral for our obligations relative to our landfill final capping, closure and post-closure costs, interest rate derivatives, trade payables and long-term debt. The carrying values of cash and cash equivalents, accounts receivable - trade and trade payables approximate their respective fair values due to their short-term nature. The fair value of restricted cash and investments held in trust, which are valued using quoted market prices, are included as restricted assets in the Level 1 tier below. The fair value of the interest rate derivatives included in the Level 2 tier below is calculated using discounted cash flow valuation methodologies based upon the one month LIBOR yield curves that are observable at commonly quoted intervals for the full term of the swaps.

19



Recurring Fair Value Measurements
Summaries of our financial assets and liabilities that are measured at fair value on a recurring basis follow:
 
Fair Value Measurement at September 30, 2017 Using:
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
Interest rate derivatives
$

 
$
58

 
$

Restricted investments - landfill closure
1,084

 

 

Total
$
1,084

 
$
58

 
$

Liabilities:
 
 
 
 
 
Interest rate derivatives
$

 
$
322

 
$

 
Fair Value Measurement at December 31, 2016 Using:
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Assets:
 
 
 
 
 
Restricted investments - landfill closure
$
1,002

 
$

 
$

Fair Value of Debt
As of September 30, 2017, the fair value of our fixed rate debt, including our FAME Bonds 2005R-3, Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2015 (“FAME Bonds 2015”), Vermont Economic Development Authority Solid Waste Disposal Long-Term Revenue Bonds Series 2013 (“Vermont Bonds”), New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014 (“New York Bonds 2014”), New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014R-2 (“New York Bonds 2016”) and Solid Waste Disposal Revenue Bonds Series 2013 issued by the Business Finance Authority of the State of New Hampshire (“New Hampshire Bonds”) was approximately $106,053 and the carrying value was $107,000. The fair value of the FAME Bonds 2005R-3, the FAME Bonds 2015, the Vermont Bonds, the New York Bonds 2014, the New York Bonds 2016 and the New Hampshire Bonds is considered to be Level 2 within the fair value hierarchy as the fair value is determined using market approach pricing provided by a third-party that utilizes pricing models and pricing systems, mathematical tools and judgment to determine the evaluated price for the security based on the market information of each of the bonds or securities with similar characteristics.
As of September 30, 2017, the fair value of our Term Loan B Facility was approximately $349,121 and the carrying value was $348,250. The fair value of the Term Loan B Facility is considered to be Level 2 within the fair value hierarchy as its fair value is based off of quoted market prices in a principal to principal market with limited public information. As of September 30, 2017, the fair value of our Revolving Credit Facility approximated its carrying value of $36,300 based on current borrowing rates for similar types of borrowing arrangements, or Level 2 inputs.
Although we have determined the estimated fair value amounts of the Term Loan B Facility, FAME Bonds 2005R-3, FAME Bonds 2015, Vermont Bonds, New York Bonds 2014, New York Bonds 2016 and New Hampshire Bonds using available market information and commonly accepted valuation methodologies, a change in available market information, and/or the use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values. These amounts have not been revalued, and current estimates of fair value could differ significantly from the amounts presented.
12.
SEGMENT REPORTING

20



We report selected information about operating segments in a manner consistent with that used for internal management reporting. We classify our solid waste operations on a geographic basis through regional operating segments, our Western and Eastern regions. Revenues associated with our solid waste operations are derived mainly from solid waste collection and disposal, landfill, landfill gas-to-energy, transfer and recycling services in the northeastern United States. Our revenues in the Recycling segment are derived from municipalities and customers in the form of processing fees, tipping fees and commodity sales. Organics services, ancillary operations, major account and industrial services, discontinued operations, and earnings from equity method investees, as applicable, are included in our Other segment.
Three Months Ended September 30, 2017
Segment
Outside
revenues
 
Inter-company
revenue
 
Depreciation and
amortization
 
Operating
income (loss)
 
Total
assets
Eastern
$
49,066

 
$
14,296

 
$
6,122

 
$
5,897

 
$
155,726

Western
67,992

 
19,183

 
8,572

 
11,579

 
335,373

Recycling
16,360

 
(292
)
 
1,044

 
638

 
49,471

Other
26,851

 
531

 
853

 
163

 
51,850

Eliminations

 
(33,718
)
 

 

 

Total
$
160,269

 
$

 
$
16,591

 
$
18,277

 
$
592,420

Three Months Ended September 30, 2016
Segment
Outside
revenues
 
Inter-company
revenue
 
Depreciation and
amortization
 
Operating
income (loss)
 
Total
assets
Eastern
$
47,238

 
$
12,775

 
$
7,291

 
$
4,452

 
$
206,177

Western
63,171

 
18,560

 
7,010

 
11,392

 
326,862

Recycling
14,412

 
94

 
1,055

 
1,529

 
48,531

Other
26,312

 
530

 
819

 
5

 
53,685

Eliminations

 
(31,959
)
 

 

 

Total
$
151,133

 
$

 
$
16,175

 
$
17,378

 
$
635,255

Nine Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
Segment
Outside
revenues
 
Inter-company
revenue
 
Depreciation and
amortization
 
Operating
income (loss)
 
Total assets
Eastern
$
134,326

 
$
37,020

 
$
17,949

 
$
(54,407
)
 
$
155,726

Western
186,507

 
53,590

 
22,762

 
26,438

 
335,373

Recycling
49,206

 
(781
)
 
3,066

 
3,285

 
49,471

Other
78,048

 
1,516

 
2,530

 
2,247

 
51,850

Eliminations

 
(91,345
)
 

 

 

Total
$
448,087

 
$

 
$
46,307

 
$
(22,437
)
 
$
592,420

Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
Segment
Outside
revenues
 
Inter-company
revenue
 
Depreciation and
amortization
 
Operating
income (loss)
 
Total assets
Eastern
$
131,630

 
$
34,003

 
$
20,618

 
$
6,742

 
$
206,177

Western
175,093

 
51,300

 
20,409

 
24,561

 
326,862

Recycling
37,865

 
1,026

 
3,187

 
923

 
48,531

Other
76,648

 
1,213

 
2,216

 
2,721

 
53,685

Eliminations

 
(87,542
)
 

 

 

Total
$
421,236

 
$

 
$
46,430

 
$
34,947

 
$
635,255


21



A summary of our revenues attributable to services provided follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Collection
$
70,040

 
$
65,581

 
$
196,185

 
$
187,117

Disposal
44,881

 
43,412

 
118,334

 
115,050

Power generation
1,215

 
1,610

 
4,121

 
4,777

Processing
2,499

 
1,974

 
6,296

 
4,694

Solid waste operations
118,635

 
112,577

 
324,936

 
311,638

Organics
9,662

 
10,266

 
29,881

 
31,372

Customer solutions
15,612

 
13,878

 
44,064

 
40,361

Recycling
16,360

 
14,412

 
49,206

 
37,865

Total revenues
$
160,269

 
$
151,133

 
$
448,087

 
$
421,236


22



ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included under Item 1. In addition, reference should be made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”) on March 2, 2017.
This Quarterly Report on Form 10-Q and, in particular, this Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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, including:
the projected development of additional disposal capacity or expectations regarding permits for existing capacity;
the outcome of any legal or regulatory matter;
expected liquidity and financing plans;
expected future revenues, operations, expenditures and cash needs;
fluctuations in the commodity pricing of our recyclables, increases in landfill tipping fees and fuel costs and general economic and weather conditions;
projected future obligations related to final capping, closure and post-closure costs of our existing landfills and any disposal facilities which we may own or operate in the future;
our ability to use our net operating losses and tax positions;
our ability to service our debt obligations;
the recoverability or impairment of any of our assets or goodwill;
estimates of the potential markets for our products and services, including the anticipated drivers for future growth;
sales and marketing plans or price and volume assumptions;
potential business combinations or divestitures; and
projected improvements to our infrastructure and the impact of such improvements on our 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 we operate, as well as management’s beliefs and assumptions, and should be read in conjunction with our consolidated financial statements and notes thereto. These forward-looking statements are not guarantees of future performance, circumstances or events. The occurrence of the events described and the achievement of the expected results depends on many events, some or all of which are not predictable or within our control. Actual results may differ materially from those set forth in the forward-looking statements.
There are a number of important risks and uncertainties that could cause our 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and, if applicable, those included under Part II, Item 1A of this Quarterly Report on Form 10-Q.
There may be additional risks that we are not presently aware of or that we currently believe are immaterial, which could have an adverse impact on our business. We explicitly disclaim any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as otherwise required by law.

23



Company Overview
Founded in 1975 with a single truck, Casella Waste Systems, Inc., a Delaware corporation, its wholly-owned subsidiaries and certain partially owned entities over which it has a controlling financial interest (collectively, “we”, “us” or “our”), is a regional, vertically-integrated solid waste services company. We provide resource management expertise and services to residential, commercial, municipal and industrial customers, primarily in the areas of solid waste collection and disposal, transfer, recycling and organics services. We provide integrated solid waste services in six states: Vermont, New Hampshire, New York, Massachusetts, Maine and Pennsylvania, with our headquarters located in Rutland, Vermont. We manage our solid waste operations on a geographic basis through two regional operating segments, the Eastern and Western regions, each of which provides a full range of solid waste services, and our larger-scale recycling and commodity brokerage operations through our Recycling segment. Organics services, ancillary operations, major account and industrial services, discontinued operations, and earnings from equity method investees, as applicable, are included in our Other segment.
As of October 16, 2017, we owned and/or operated 31 solid waste collection operations, 46 transfer stations, 18 recycling facilities, nine Subtitle D landfills, four landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition (“C&D”) materials.
Recent Events
In the quarter ended June 30, 2017, we recorded a charge of $64.1 million associated with our decision to cease operations at the Town of Southbridge, Massachusetts ("Town") Landfill ("Southbridge Landfill"), including an asset impairment charge of $48.0 million related to our asset group that includes the Southbridge Landfill asset; a project development charge of $9.1 million related to the write-off of deferred costs associated with landfill permitting activities no longer deemed viable; an environmental remediation charge of $6.4 million associated with the future installation of a municipal waterline; and a charge of $0.6 million for legal and transaction costs associated with various matters as part of the Southbridge Landfill closure. Additionally, in the three months ended September 30, 2017, we recorded a charge of $0.8 million for legal costs associated with various matters as a part of the Southbridge Landfill closure. As part of our decision to cease operations, we assessed the estimated costs and timing of cash flows associated with remaining capital expenditures, environmental remediation, and final capping, closure and post-closure activities at the Southbridge Landfill. We expect cash outflows in the next five years associated with these activities to be approximately $21.0 million and we do not believe that this will negatively impact our liquidity during this time. In addition, we estimate that over $52.0 million in additional tax deductions relating to ceasing operations will be recognized in the next five years. Furthermore, we do not believe that ceasing operations at the Southbridge Landfill will impact our future operational activities in a manner that will have a material impact to our results of operations, our cash flows or our financial condition. For additional information, see Note 7, Commitments and Contingencies and Note 10, Other Items and Charges to our consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.
Results of Operations
Revenues
We manage our solid waste operations, which include a full range of solid waste services, on a geographic basis through two regional operating segments, which we designate as the Eastern and Western regions. Revenues in our Eastern and Western regions consist primarily of fees charged to customers for solid waste collection and disposal, landfill, landfill gas-to-energy, transfer and recycling services. We derive a substantial portion of our collection revenues from commercial, industrial and municipal services that are generally performed under service agreements or pursuant to contracts with municipalities. The majority of our residential collection services are performed on a subscription basis with individual households. Landfill and transfer customers are charged a tipping fee on a per ton basis for disposing of their solid waste at our disposal facilities and transfer stations. We also generate and sell electricity at certain of our landfill facilities. Revenues from our Recycling segment consist of revenues derived from municipalities and customers in the form of processing fees, tipping fees and commodity sales. Revenues from organics services, ancillary operations, and major account and industrial services are included in our Other segment. Our revenues are shown net of inter-company eliminations.

24



A summary of revenues attributable to service provided (dollars in millions and as a percentage of total revenues) follows:
 
Three Months Ended September 30,
 
$
Change
 
Nine Months Ended September 30,
 
$
Change
 
2017
 
2016
 
2017
 
2016
 
Collection
$
70.0

 
43.7
%
 
$
65.6

 
43.4
%
 
$
4.4

 
$
196.2

 
43.8
%
 
$
187.1

 
44.4
%
 
$
9.1

Disposal
44.9

 
28.0
%
 
43.4

 
28.7
%
 
1.5

 
118.3

 
26.4
%
 
115.0

 
27.3
%
 
3.3

Power
1.2

 
0.8
%
 
1.6

 
1.1
%
 
(0.4
)
 
4.1

 
0.9
%
 
4.8

 
1.1
%
 
(0.7
)
Processing
2.5

 
1.5
%
 
2.0

 
1.3
%
 
0.5

 
6.3

 
1.4
%
 
4.7

 
1.2
%
 
1.6

Solid waste
118.6

 
74.0
%
 
112.6

 
74.5
%
 
6.0

 
324.9

 
72.5
%
 
311.6

 
74.0
%
 
13.3

Organics
9.7

 
6.1
%
 
10.2

 
6.8
%
 
(0.5
)
 
29.9

 
6.7
%
 
31.3

 
7.4
%
 
(1.4
)
Customer solutions
15.6

 
9.7
%
 
13.9

 
9.2
%
 
1.7

 
44.1

 
9.8
%
 
40.4

 
9.6
%
 
3.7

Recycling
16.4

 
10.2
%
 
14.4

 
9.5
%
 
2.0

 
49.2

 
11.0
%
 
37.9

 
9.0
%
 
11.3

Total revenues
$
160.3

 
100.0
%
 
$
151.1

 
100.0
%
 
$
9.2

 
$
448.1

 
100.0
%
 
$
421.2

 
100.0
%
 
$
26.9

A summary of the period-to-period changes in solid waste revenues (dollars in millions) follows:
 
Period-to-Period
Change for the Three Months Ended September 30, 2017 vs. 2016
 
Period-to-Period
Change for the Nine Months Ended September 30, 2017 vs. 2016
 
Amount
 
% of Growth
 
Amount
 
% of Growth
Price
$
3.5

 
2.3
 %
 
$
8.5

 
2.0
 %
Volume
1.3

 
0.9
 %
 
2.4

 
0.7
 %
Fuel surcharge and other fees

 
 %
 
(0.3
)
 
(0.1
)%
Commodity price and volume
(0.1
)
 
 %
 
0.6

 
0.1
 %
Acquisitions and divestitures
1.3

 
0.8
 %
 
2.1

 
0.5
 %
Solid waste revenues
$
6.0

 
4.0
 %
 
$
13.3

 
3.2
 %
Solid waste revenues
Price. 
The price change component in quarterly solid waste revenues growth is the result of the following:
$2.2 million from favorable collection pricing, including a fixed component of the energy and environmental fee to mitigate increasing environmental protection and regulatory compliance costs; and
$1.3 million from favorable disposal pricing associated with our landfills and transfer stations.
The price change component in year-to-date solid waste revenues growth is the result of the following:
$5.4 million from favorable collection pricing, including a fixed component of the energy and environmental fee to mitigate increasing environmental protection and regulatory compliance costs; and
$3.1 million from favorable disposal pricing associated with our landfills and transfer stations.
Volume.
The volume change component in quarterly solid waste revenues growth is the result of the following:
$1.1 million from higher collection volumes; and
$0.2 million from higher disposal volumes related to transfer stations.
The volume change component in year-to-date solid waste revenues growth is the result of the following:
$2.1 million from higher collection volumes; and
$0.4 million from higher processing volumes; partially offset by

25



$(0.1) million from lower disposal volumes (of which $(0.5) million relates to lower landfill volumes associated with diversion of tons from the Southbridge Landfill, $(0.2) million relates to lower transportation volumes, and $0.6 million relates to higher transfer station volumes).
Fuel surcharge and other fees.
The fuel surcharge and other fees change component in year-to-date solid waste revenues growth is the result of the following:
$(0.3) million from lower revenues generated from our Sustainability Recycling Adjustment fee ("SRA fee") as a result of higher commodity pricing.
Commodity price and volume.
The commodity price and volume change component in quarterly solid waste revenues growth is the result of the following:
$(0.4) million from lower landfill gas-to-energy volumes; partially offset by
$0.3 million from favorable processing commodity pricing and higher processing volumes.
The commodity price and volume change component in year-to-date solid waste revenues growth is the result of the following:
$1.3 million from favorable processing commodity pricing and higher processing volumes; partially offset by
$(0.4) million from lower landfill gas-to-energy volumes; and
$(0.3) million from unfavorable energy pricing.
Acquisitions and divestitures.
The acquisitions and divestitures change component in quarterly and year-to-date solid waste revenues growth is the result of the acquisition of three transfer stations in the quarter ended June 30, 2016, a collection operation in the quarter ended March 31, 2017, a collection operation in the quarter ended June 30, 2017, and another collection operation in the three months ended September 30, 2017.
Organics revenues
Quarterly and year-to-date organics revenues decreased $(0.5) million and $(1.4) million, respectively, as a result of lower commodity volumes.
Customer Solutions revenues
Quarterly and year-to-date customer solutions revenues increased $1.7 million and $3.7 million, respectively, as a result of higher volumes.
Recycling revenues
Quarterly recycling revenues increased as a result of the following:
$2.5 million from favorable commodity pricing in the marketplace; and
$0.1 million from higher commodity volumes; partially offset by
$(0.6) million from lower tipping fees, as we reduced variable tipping fees at our facilities as commodity prices increased.
Year-to-date recycling revenues increased as a result of the following:
$12.6 million from favorable commodity pricing in the marketplace; and
$1.6 million from higher commodity volumes; partially offset by