Company Quick10K Filing
Quick10K
Casella Waste Systems
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$34.30 46 $1,590
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-10-31 Quarter: 2014-10-31
10-Q 2014-07-31 Quarter: 2014-07-31
10-K 2014-04-30 Annual: 2014-04-30
10-Q 2014-01-31 Quarter: 2014-01-31
8-K 2019-02-21 Earnings, Exhibits
8-K 2019-01-22 Earnings, Regulation FD
8-K 2019-01-22 Enter Agreement, Other Events, Exhibits
8-K 2019-01-22 Enter Agreement, Other Events, Exhibits
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-09-06 Other Events
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-06 Shareholder Vote
8-K 2018-05-15 Enter Agreement, Leave Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-05-03 Earnings, Exhibits
8-K 2018-04-03 Off-BS Arrangement, Other Events
8-K 2018-03-27 Other Events, Exhibits
8-K 2018-03-14 Other Events, Exhibits
8-K 2018-03-01 Earnings, Exhibits
SPLK Splunk 20,040
PSB PS Business Parks 4,050
SPH Suburban Propane Partners 1,420
NES Nuverra Environmental Solutions 132
BCRH Blue Capital Reinsurance Holdings 63
DRAD Digirad 14
LIVC Live Current Media 0
NDRAU Endra Life Sciences 0
EDR Education Realty Trust 0
SGMD Sugarmade 0
CWST 2018-12-31
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
EX-21.1 cwst-123118x10kex211.htm
EX-23.1 cwst-123118x10kex231.htm
EX-31.1 cwst-123118x10kex311.htm
EX-31.2 cwst-123118x10kex312.htm
EX-32.1 cwst-123118x10kex321.htm

Casella Waste Systems Earnings 2018-12-31

CWST 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 cwst-123118x10k.htm 10-K Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-K
____________________________________________________
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
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, VT
 
05701
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (802) 775-0325
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Class A common stock, $.01 per share par value
 
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act:
None. 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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
 
x
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨  
  
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 Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
The aggregate market value of the common equity held by non-affiliates of the registrant, based on the last reported sale price of the registrant’s Class A common stock on the NASDAQ Stock Market at the close of business on June 29, 2018 was approximately $1,017 million. The registrant does not have any non-voting common stock outstanding.
There were 45,510,572 shares of Class A common stock, $.01 par value per share, of the registrant outstanding at February 14, 2019. There were 988,200 shares of Class B common stock, $.01 par value per share, of the registrant outstanding at February 14, 2019.
Documents Incorporated by Reference
Part III of this Annual Report on Form 10-K incorporates by reference information from the definitive Proxy Statement for the registrant’s 2019 Annual Meeting of Stockholders or a Form10-K/A to be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2018.




CASELLA WASTE SYSTEMS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
 
 
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
 
 
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
 
 
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
 
 
ITEM 15.
ITEM 16.




PART I
Unless the context requires otherwise, all references in this Annual Report on Form 10-K to “Casella Waste Systems, Inc.”, “Casella”, the “Company”, “we”, “us” or “our” refer to Casella Waste Systems, Inc. and its consolidated subsidiaries.
Forward-Looking Statements
This Annual Report on Form 10-K contains or incorporates 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 statements regarding: 
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 projected development of additional disposal capacity or expectations regarding permits for existing capacity;
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;
the outcome of any legal or regulatory matter;
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. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in the forward-looking statements made. 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” of this Annual Report on Form 10-K. 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.
ITEM 1. BUSINESS
Overview
Founded in 1975 with a single truck, Casella Waste Systems, Inc. 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, along with major account and industrial services, are included in our Other segment.

3


As of January 31, 2019, we owned and/or operated 37 solid waste collection operations, 49 transfer stations, 18 recycling facilities, eight Subtitle D landfills, four landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition ("C&D") materials.
Strategy
Our goal is to build a sustainable and profitable company by providing exemplary service to our customers, while operating safe and environmentally sound facilities. Over the last several years, many of our customers have been seeking to reduce their environmental footprint by increasing their recycling rates, diverting organic materials out of the waste stream into beneficial use processes and exploring emerging methods to transform traditional waste streams into renewable resources. Since we first began operating in Vermont in 1975, our business strategy has been firmly tied to creating a sustainable resource management model and we continue to be rooted in these same tenets today. We strive to create long-term value for all of our stakeholders, including customers, employees, communities and shareholders.
Our primary objective is to maximize long-term shareholder value through a combination of financial performance and strategic asset positioning. Annually, we complete a comprehensive strategic planning process to assess and refine our strategic objectives in the context of our asset mix and the current market environment. This process helps the management team allocate resources to a range of business opportunities with the goal to maximize long-term financial returns and competitive positioning.
In early August 2017, we announced an updated long-term strategic plan through our fiscal year ending December 31, 2021 (the “2021 Plan”). The 2021 Plan remains focused on enhancing shareholder returns by improving cash flows and reducing debt leverage through the following strategic initiatives:
Increasing landfill returns by driving pricing in excess of inflation in the disposal capacity constrained markets in the Northeast and working to maximize capacity utilization.
Driving additional profitability in our collection operations through profitable revenue growth and operating efficiencies.
Creating incremental value through our resource solutions offerings in our recycling, organics, and customer solutions operations.
Using technology to drive profitable growth and efficiencies through our efforts to update key systems to drive back office transformation, operating efficiencies and sales force effectiveness.
Allocating capital to balance debt delevering with smart growth through continued capital discipline and selective acquisitions of complementary businesses and assets.
To support our efforts, we continue to invest in our employees through leadership development, our new career paths program, technical training, and incentive compensation structures that seek to align our employees’ incentives with our long-term goal to improve cash flows and returns on invested capital.
Increasing Landfill Returns
Disposal capacity continues to tighten in the Northeast market as permanent site closures are reducing capacity and stronger economic and construction activity are driving higher volumes. Given this supply-demand imbalance and the positioning of our assets, we were able to advance landfill pricing by 4.1% (or average price per ton by 6.4%) for the fiscal year ended December 31, 2018 ("fiscal year 2018").
We believe that this positive pricing backdrop will continue as additional site closures are expected over the next several years, and as we reset multi-year contracts we expect to advance pricing in excess of Consumer Price Index on a larger percentage of our inbound waste streams.
On the landfill development side, we continue to advance key permitting activities across our landfills to increase annual capacity limits at select sites and expand total permitted capacity across our footprint. We have been successful in advancing permit increases at Subtitle D landfills located in Angelica, New York (“Hyland Landfill”), Seneca, New York ("Ontario County Landfill"), Chemung, New York ("Chemung County Landfill"), West Old Town, Maine ("Juniper Ridge Landfill"), and Schuyler Falls, New York (“Clinton County Landfill”) over the last three years. Cumulatively, these efforts have added 462 thousand tons per year of permitted capacity and approximately 33.3 million cubic yards of permitted airspace.
Driving Additional Profitability in Collection Operations

4


Collection pricing was up 5.3% for fiscal year 2018, as compared to the fiscal year ended December 31, 2017 ("fiscal year 2017"), with sustained execution against our strategic pricing programs. On the operating side, we continue to advance several key areas, including route optimization, fleet standardization, and maintenance programs to further reduce our operating costs in the collection line-of-business. We are in the fourth year of our comprehensive fleet plan, which is designed to optimize our fleet and target truck replacements to maximize returns, reduce our operating expenses through lower maintenance costs, and improve our service levels through reduced down times.
The combination of these operating advancements and pricing programs are driving improved results in our collection line-of-business, with our cost of operations as a percentage of revenues down approximately 620 basis points from the twelve months ended December 31, 2014 to fiscal year 2018.
Creating Incremental Value Through Resource Solutions
One of the key objectives of our strategy is to differentiate ourselves in the marketplace by offering value-added resource solutions to our customers. These solutions range from our customer solutions business, which provides professional services to large industrial customers, to our organics business, which is a leader in organics processing and disposal in the Northeast, and to our large scale, technology-driven recycling business.
Our customer solutions business has continued to improve margins and returns through December 31, 2018, as we further transformed the business from the legacy brokerage model to a professional services organization focused on providing resource solutions to large industrial and institutional accounts.
Over the last two years, we have worked to reshape our recycling business model to drive higher returns in all market cycles and reduce exposure to recycling commodity volatility. We have accomplished much of this goal by restructuring several third-party processing contracts to limit downside risk through processing fees and with the implementation of our Sustainability Recycling Adjustment Fee (“SRA Fee”) for our collection customers. The SRA Fee floats inversely to changes in recycling commodity prices. Our risk mitigation programs have offset most of the recent commodity price declines driven primarily by China’s National Sword program that banned the import of certain recycled materials and imposed strict new contamination standards for others, and we expect these programs to continue to reduce our commodity risk exposure.
Using Technology to Drive Profitable Growth and Efficiencies
We launched a new 5-year technology plan in August 2017 to drive profitable growth and reduce our general and administration costs by 75 to 100 basis points as a percentage of revenues by 2021. We plan to focus our efforts on improving our overall technology platform, driving salesforce effectiveness, and increasing efficiencies in our back-office and across our operations.
To date as part of our technology plan, we have successfully implemented the Microsoft Dynamics CRM system to help manage and drive higher salesforce effectiveness, and we have successfully implemented the cloud-based NetSuite ERP system as the new financial backbone to our business.
Allocating Capital to Balance Debt Delevering with Smart Growth
Over the last five years we made significant progress in simplifying our business structure, improving cash flows and reducing risk exposure by: (1) divesting, or in certain cases, closing underperforming operations that did not enhance or complement our core operations; (2) refinancing debt to lower interest costs and improve financial flexibility; and (3) adhering to strict capital discipline and debt repayment.
Given our progress in each area and as part of the 2021 Plan, we shifted our capital strategy to use our capital in a manner that balances continued delevering with smart acquisition and development growth. As part of this new strategy, we set a goal of adding $20 million to $40 million per year of annualized revenues through acquisition or development activity. We believe that acquisition or development activity should be opportunistic, and we plan to strictly adhere to our disciplined capital return hurdles and rigorous review process.
We have made significant progress ramping up our strategic growth initiative, as we have acquired ten solid waste collection and transfer businesses during fiscal year 2018, with approximately $77 million of annualized revenues. Since September 30, 2018, we have acquired five solid waste collection and transfer businesses with approximately $28 million of annualized revenues. We expect revenue growth of approximately $40 million in 2019 from the impact of including a full year of revenue from acquisitions completed in 2018, but which contributed to our revenues for only part of the year in 2018.
We are focused on acquiring well-run businesses in strategic markets across our footprint that will drive additional internalization to our landfills and operating synergies. We are also focused on more effectively optimizing waste placement around the northeast as the ever-tightening disposal market is creating additional opportunities to source new volumes at higher prices.

5


Operational Overview
Our solid waste and recycling operations comprise a full range of non-hazardous solid waste services, including collections, transfer stations, material recovery facilities ("MRFs") and disposal facilities.
Collections. A majority of our commercial and industrial collection services are performed under one-to-five year service agreements, with prices and fees determined by such factors as: collection frequency; type of equipment and containers furnished; type, volume and weight of solid waste collected; distance to the disposal or processing facility; and cost of disposal or processing. Our residential collection and disposal services are performed either on a subscription basis (with no underlying contract) with individuals, or through contracts with municipalities, homeowner associations, apartment building owners or mobile home park operators.
Transfer Stations. Our transfer stations receive, compact and transfer solid waste, collected primarily by our various residential and commercial collection operations, for transport to disposal facilities by larger vehicles. We believe that transfer stations benefit us by: (1) increasing the size of the wastesheds which have access to our landfills; (2) reducing costs by improving utilization of collection personnel and equipment; and (3) helping us build relationships with municipalities and other customers by providing a local physical presence and enhanced local service capabilities.
Material Recovery Facilities. Our MRFs receive, sort, bale and sell recyclable materials originating from the municipal solid waste stream, including newsprint, cardboard, office paper, glass, plastic, steel or aluminum containers and bottles. We operate eight large-scale, high volume MRFs within our Recycling region in geographic areas served by our collection divisions. Revenues are received from municipalities and customers in the form of processing fees, tipping fees and commodity sales. These MRFs, three of which are located in New York, two of which are located in Vermont, two of which are located in Massachusetts, and one of which is located in Maine, process over 0.5 million tons per year of recycled materials delivered to them by municipalities and commercial customers under long-term contracts. We also operate smaller MRFs, which generally process recyclables collected from our various residential collection operations.
Landfills. We operate eight solid waste Subtitle D landfills and one landfill permitted to accept C&D materials. Revenues are received from municipalities and other customers in the form of tipping fees. The estimated capacity at our landfills is subject to change based on engineering factors, requirements of regulatory authorities, our ability to continue to operate our landfills in compliance with applicable regulations and our ability to successfully renew operating permits and obtain expansion permits at our sites.
The following table (in thousands) reflects the aggregate landfill capacity and airspace changes, in tons, for landfills we operated during fiscal years 2018, 2017 and 2016:
 
Fiscal Year 2018
 
Fiscal Year 2017
 
Fiscal Year 2016
 
Estimated
Remaining
Permitted
Capacity
(1)
 
Estimated
Additional
Permittable
Capacity
(1)(2)
 
Estimated
Total
Capacity
 
Estimated
Remaining
Permitted
Capacity
(1)
 
Estimated
Additional
Permittable
Capacity
(1)(2)
 
Estimated
Total
Capacity
 
Estimated
Remaining
Permitted
Capacity
(1)
 
Estimated
Additional
Permittable
Capacity
(1)(2)
 
Estimated
Total
Capacity
Balance, beginning of year
36,159

 
46,301

 
82,460

 
31,022

 
59,089

 
90,111

 
23,208

 
74,443

 
97,651

Permits granted (3)

 

 

 
9,273

 
(9,273
)
 

 
11,859

 
(11,859
)
 

Airspace consumed
(4,160
)
 

 
(4,160
)
 
(3,958
)
 

 
(3,958
)
 
(3,899
)
 

 
(3,899
)
Changes in engineering estimates (4)
3,811

 
752

 
4,563

 
(178
)
 
(3,515
)
 
(3,693
)
 
(146
)
 
(3,495
)
 
(3,641
)
Balance, end of year
35,810

 
47,053

 
82,863

 
36,159

 
46,301

 
82,460

 
31,022

 
59,089

 
90,111

(1)
We convert estimated remaining permitted capacity and estimated additional permittable capacity from cubic yards to tons generally by assuming a compaction factor derived from historical average compaction factors, with modification for future anticipated changes. In addition to a total capacity limit, certain permits place a daily and/or annual limit on capacity.
(2)
Represents capacity which we have determined to be “permittable” in accordance with the following criteria: (i) we control the land on which the expansion is sought; (ii) all technical siting criteria have been met or a variance has been obtained or is reasonably expected to be obtained; (iii) we have not identified any legal or political impediments which we believe will not be resolved in our favor; (iv) we are actively working on obtaining any necessary permits and we expect that all required permits will be received; and (v) senior management has approved the project.

6


(3)
The increase in remaining permitted airspace capacity in the fiscal year 2017 was the result of a permit received at the Juniper Ridge Landfill in our Eastern region. The increase in remaining permitted airspace capacity in the fiscal year ended December 31, 2016 ("fiscal year 2016") was a result of the receipt of expansion permits at Ontario County Landfill and the Chemung County Landfill in our Western region.
(4)
The variation in changes in airspace capacity associated with engineering estimates are primarily the result of changes in compaction at our landfills and estimated airspace changes associated with design changes at certain of our landfills, which in fiscal year 2017 includes the impact associated with the decision to close the Southbridge Landfill.
Eastern Region
NCES Landfill. The North Country Environmental Services landfill is a Subtitle D landfill located in Bethlehem, New Hampshire ("NCES Landfill") that we purchased in 1994. NCES Landfill currently consists of approximately 50 acres of permitted or permittable landfill area, is permitted to accept municipal solid waste, C&D material and certain pre-approved special waste and has no annual tonnage limitations. In fiscal year 2017, NCES Landfill entered into an agreement for the construction of a landfill gas-to-energy plant, which will be constructed, owned and operated by a third-party.
Juniper Ridge Landfill. The Juniper Ridge Landfill is a Subtitle D landfill located in West Old Town, Maine. In 2004, we completed transactions with the State of Maine and Georgia-Pacific Corporation (“Georgia Pacific”), pursuant to which the State of Maine took ownership of Juniper Ridge Landfill, formerly owned by Georgia Pacific, and we became the operator under a 30-year operating and services agreement between us and the State of Maine. Juniper Ridge Landfill currently consists of approximately 179 acres of permitted or permittable landfill area, which is sufficient to permit the additional airspace required for the term of the 30-year operating and services agreement, and is permitted to accept the following waste originating from the State of Maine: up to 0.1 million tons of municipal solid waste per year through March 2020, and C&D material, ash from municipal solid waste incinerators and fossil fuel boilers, front end processed residuals and bypass municipal solid waste from waste-to-energy facilities and certain pre-approved special waste. Outside of the limitations on municipal solid waste, there are no annual tonnage limitations at Juniper Ridge Landfill.
Closure Projects. In 2005, we started closure operations at the Worcester, Massachusetts landfill ("Worcester Landfill"). These closure operations were completed in April 2014 when Worcester Landfill accepted its final tons of waste. We began final capping and closing of Worcester Landfill in May 2014 and completed final capping and closing in fiscal year 2016.
Western Region
Waste USA Landfill. The Waste USA landfill is a Subtitle D landfill located in Coventry, Vermont ("Waste USA Landfill") that we purchased in 1995, is the only operating permitted Subtitle D landfill in the State of Vermont. Waste USA Landfill consists of approximately 148 acres of permitted or permittable landfill area and is permitted to accept up to 0.6 million tons of municipal solid waste, C&D material and certain pre-approved special waste annually. The Waste USA Landfill site houses a landfill gas-to-energy plant, which is owned and operated by a third-party, that has the capacity to generate 8.0 MW of energy.
Clinton County Landfill. The Clinton County Landfill is a Subtitle D landfill located in Schuyler Falls, New York. Clinton County Landfill, which currently consists of approximately 197 acres of permitted or permittable landfill area portions of which are leased from Clinton County, is permitted to accept up to approximately 0.2 million tons of municipal solid waste, C&D material and certain pre-approved special waste annually. The Clinton County Landfill site houses a landfill gas-to-energy facility, which is owned by us and operated by a third-party, that has the capacity to generate 6.4 MW of energy.
Hyland Landfill. The Hyland Landfill is a Subtitle D landfill located in Angelica, New York that we own, began accepting waste in 1998. Hyland Landfill currently consists of approximately 121 acres of permitted or permittable landfill area and is permitted to accept up to 0.5 million tons of municipal solid waste, C&D material and certain pre-approved special waste annually. The Hyland Landfill site houses a landfill gas-to-energy facility, which is owned by us and operated by a third-party, that has the capacity to generate 4.8 MW of energy.
Ontario County Landfill. The Ontario County Landfill is a Subtitle D landfill located in Seneca, New York. In 2003, we entered into a 25-year operation, management and lease agreement for the Ontario County Landfill with the Ontario County Board of Supervisors. Ontario County Landfill currently consists of approximately 171 acres of permitted or permittable landfill area and is permitted to accept up to 0.9 million tons of municipal solid waste, C&D material and certain pre-approved special waste annually and is strategically situated to accept long haul volume from both the eastern and downstate New York markets. In January 2016, we received an expansion permit at the Ontario County Landfill, which is sufficient to permit the additional airspace required for the remaining term of the 25-year operation, management and lease agreement. The Ontario County Landfill site houses a Zero-Sort MRF, which is operated by us, and a landfill gas-to-energy facility, which is owned and operated by a third-party, that has the capacity to generate 11.2 MW of energy.

7


Hakes Landfill. The Hakes landfill is a C&D landfill located in Campbell, New York (“Hakes Landfill”) that we purchased in 1998. Hakes Landfill currently consists of approximately 78 acres of permitted or permittable landfill area and is permitted to accept up to 0.5 million tons of C&D material annually.
Chemung County Landfill. The Chemung County Landfill is a Subtitle D landfill located in Chemung, New York. In 2005, we entered into a 25-year operation, management and lease agreement for Chemung County Landfill and certain other facilities with Chemung County. Chemung County Landfill currently consists of approximately 113 acres of permitted or permittable landfill area strategically situated to accept long haul volume from both eastern and downstate New York markets and is permitted to accept up to 0.4 million tons of municipal solid waste and certain pre-approved special waste annually and 20.5 thousand tons of C&D material annually. In June 2016, we received an expansion permit at Chemung County Landfill, which is sufficient to permit the additional airspace required for the remaining term of the 25-year operation, management and lease agreement.
McKean Landfill. The McKean landfill is a Subtitle D landfill located in Mount Jewett, Pennsylvania (“McKean Landfill”) that we purchased in 2011 as part of a bankruptcy reorganization. McKean Landfill currently consists of approximately 256 acres of permitted or permittable landfill area and is permitted to accept up to approximately 0.3 million tons of municipal solid waste, C&D material and certain pre-approved special waste annually. The facility permit authorizes the construction of the rail siding at the landfill which if completed, would expand the market reach for the landfill to other rail capable transfer facilities. We have not yet committed to the construction of the rail siding pending a determination of the economic viability. We believe that McKean Landfill is well situated to provide services to the oil and gas industry that explores natural gas resources in the Marcellus Shale region of Pennsylvania in the form of disposal capacity for residual materials.
Closed Landfills
In fiscal year 2017, we initiated a plan to cease operations of Southbridge Landfill and decided to not proceed with expansion efforts and to close Southbridge Landfill once the remaining capacity had been exhausted, which occurred in fiscal year 2018. Closure operations began in November 2018 when Southbridge Landfill reached its final capacity.
In addition to Southbridge Landfill, we own and/or manage five unlined landfills and three lined landfills that are not currently in operation. We are closing, in the case of Southbridge Landfill, or have closed and capped all of these landfills according to applicable environmental regulatory standards.
Operating Segments
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 our Eastern and Western regions. Our third operating segment is Recycling, which comprises our larger-scale recycling operations and our commodity brokerage operations. Organic services, ancillary operations, along with major accounts and industrial services, are included in our “Other” segment. See Note 19, Segment Reporting to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K for a summary of revenues, certain expenses, profitability, capital expenditures, goodwill, and total assets of our operating segments.  
Within each geographic region, we organize our solid waste services around smaller areas that we refer to as “wastesheds.” A wasteshed is an area that comprises the complete cycle of activities in the solid waste services process, from collection to transfer operations and recycling to disposal in landfills, some of which may be owned and/or operated by third parties. We typically operate several divisions within each wasteshed, each of which provides a particular service, such as collection, recycling, disposal or transfer. Each division operates interdependently with the other divisions within the wasteshed. Each wasteshed generally operates autonomously from adjoining wastesheds.
Through the eight MRFs and commodity brokerage operation comprising our Recycling segment, we provide services to six anchor contracts, which have original terms ranging from five to twenty years and expire at various times through calendar year end 2028. The terms of each contract vary, but all of the contracts provide that the municipality or third-party delivers materials to our facility. These contracts may include a minimum volume guarantee by the municipality. We also have service agreements with individual towns and cities and commercial customers, including small solid waste companies and major competitors, that do not have processing capacity within a specific geographic region.

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The following table provides information about each operating segment (as of January 31, 2019 except revenue information, which is for fiscal year 2018):
 
Eastern
Region 
 
Western
Region 
 
Recycling 
 
Other 
 
 
 
 
 
 
 
 
Revenues (in millions)
$206.5
 
$286.3
 
$42.2
 
$125.7
Properties:
 
 
 
 
 
 
 
Solid waste collection facilities
15
 
22
 
 
Transfer stations
19
 
30
 
 
Recycling facilities
3
 
4
 
9
 
2
Subtitle D landfills
2
 
6
 
 
C&D landfills
 
1
 
 
See our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K for our financial results for fiscal years 2018, 2017 and 2016, and our financial position as of December 31, 2018 and December 31, 2017.
Eastern region
Our Eastern region consists of wastesheds located in Maine, northern, central and southeastern New Hampshire and central and eastern Massachusetts. Our Eastern region is vertically integrated, with transfer, landfill, processing and recycling assets serviced by our collection operations.
We entered the Maine market in 1996 and have grown organically and through acquisitions. We currently operate the Juniper Ridge Landfill under a 30-year agreement with the State of Maine.
We entered the southern New Hampshire market in 1999 and the eastern Massachusetts market in 2000 and since have grown organically and through acquisitions. In this market, we rely to a large extent on third-party disposal capacity, but our landfills and other assets have provided additional opportunities to internalize volumes. In fiscal year 2018, we acquired Complete Disposal Company, Inc. and its subsidiary United Material Management of Holyoke, Inc. (collectively, "Complete"). Complete provides residential and roll-off collection services, operates a C&D processing facility, and operates a solid waste transfer station with both truck and rail transfer capabilities. In fiscal year 2017, we initiated the plan to cease operations of our Southbridge Landfill and decided to not proceed with expansion efforts and to close the Southbridge Landfill once the remaining capacity had been exhausted, which occurred in fiscal year 2018. Closure operations at the Southbridge Landfill began in November 2018.
 Western region
Our Western region includes wastesheds located in Vermont, southwestern New Hampshire, eastern, western and upstate New York and in Pennsylvania around McKean Landfill. The portion of eastern New York served by our Western region includes Clinton (operation of Clinton County), Franklin, Essex, Warren, Washington, Saratoga, Rennselaer and Albany counties.
Our Western region also consists of wastesheds in western New York, which includes Ithaca, Elmira, Oneonta, Lowville, Potsdam, Geneva, Auburn, Rochester, Dunkirk, Jamestown and Olean markets. We began entering into these wastesheds in 1997 and have expanded primarily through tuck-in acquisitions and organic growth. Our Western region collection operations include leadership positions in nearly every rural market outside of the larger metropolitan markets such as Syracuse, Buffalo and Albany.
We remain focused on increasing our vertical integration in our Western region through extension of our reach into new markets and managing new materials. We believe that maximizing these logistics through the use of rail, if implemented, long haul trucks and trailer tippers at our facilities will increase our reach.
Recycling
Our Recycling segment is one of the largest processors and marketers of recycled materials in the northeastern United States, comprised of eight MRFs that process and market recyclable materials that municipalities and commercial customers deliver under long-term contracts. Two of the eight MRFs are leased, three are owned, and three are operated by us under contracts with municipal third-parties. In fiscal year 2018, our Recycling segment processed and/or marketed over 0.8 million tons of recyclable materials including tons marketed through our commodity brokerage division and our baling facilities located throughout our footprint. Recycling’s facilities are located in Vermont, New York, Maine, and Massachusetts.

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A substantial portion of the material provided to Recycling is delivered pursuant to six anchor contracts. The anchor contracts have an original term of five to twenty years and expire at various times through 2028. The terms of the recycling contracts vary, but all of the contracts provide that the municipality or a third-party delivers the recycled materials to our facility. Under the recycling contracts, we charge the municipality a fee for each ton of material delivered to us. Some contracts contain revenue sharing arrangements under which the municipality receives a specified percentage of our revenues from the sale of the recovered materials.
Our Recycling segment has historically derived a significant portion of its revenues from the sale of recyclable materials. Since purchase and sale prices of recyclable materials, particularly newspaper, corrugated containers, plastics, ferrous and aluminum, can fluctuate based upon market conditions, we use long-term supply contracts with customers to reduce commodity risk. Under such contracts, we obtain a guaranteed minimum price for recyclable materials through the receipt of a tipping fee when commodity prices fall below agreed upon thresholds. Conversely, when prices for recyclable materials rise above agreed upon thresholds, we provide the counterparty with a portion of the related revenues. The contracts are generally with large domestic companies that use the recyclable materials in their manufacturing process, such as paper, packaging and consumer goods companies. In fiscal year 2018, 39.5% of the revenues from the sale of residential recyclable materials were derived from sales under long-term contracts. At times, we also hedge against fluctuations in the commodity prices of recycled paper and corrugated containers in order to mitigate the variability in cash flows and earnings generated from the sales of recycled materials at floating prices. As of December 31, 2018, no such commodity hedges were in place. Also, we mitigate the impact from commodity price fluctuations through the use of a floating SRA fee charged to collection customers to offtake recycling commodity risk. The global recycling market has experienced negative commodity pricing pressure resulting from China's National Sword program in 2017. Markets continued to decline in 2018, leveling off at historical lows compared to prior years. We expect markets to remain depressed into the foreseeable future.
Other
Our Other segment derives a significant portion of its revenues from our Customer Solutions and Organics businesses. Our resource solutions strategy seeks to leverage our core competencies in materials processing, industrial recycling, clean energy, and organics service offerings in order to generate additional value from the waste stream for our customers. Our Customer Solutions business works with larger scale organizations (including multi-location customers, colleges and universities, municipalities, and industrial customers) to develop customized solid waste solutions. The focus of this business is to help these large-scale organizations achieve their economic and environmental objectives related to waste and residual management. We differentiate our services from our competitors by providing customized and comprehensive resource solutions, which enables us to win new business, including traditional solid waste collection and disposal customers.
Our Organics business has been working to develop and/or partner with firms that have developed innovative approaches to deriving incremental value from the organic portion of the waste stream. Through our Earthlife® soils products, we offer a wide array of organic fertilizers, composts, and mulches that help our customers recycle organic waste streams. We also have ownership interests in AGreen Energy, LLC and BGreen Energy, LLC, which we account for as cost method investments, that partner with other capital investors to build farm-based anaerobic digesters in the northeastern United States to generate electricity from farm and food waste streams.
Competition
The solid waste services industry is highly competitive. We compete for collection and disposal volume primarily on the basis of the quality, breadth and price of our services. From time to time, competitors may reduce the price of their services in an effort to expand market share or to win a competitively bid municipal contract. These practices may also lead to reduced pricing for our services or the loss of business. In addition, competition exists within the industry for potential acquisition candidates.
Our business strategy generally focuses on operating in secondary or tertiary markets where we have a leading market share. However, in the larger urban markets where we operate, we typically compete against one or more of the large national solid waste companies, including Waste Management, Inc., Republic Services, Inc. and Waste Connections, Inc., any of which may be able to achieve greater economies of scale than we can. We also compete with a number of regional and local companies that offer competitive prices and quality service. In addition, we compete with operators of alternative disposal facilities, including incinerators, and with certain municipalities, counties and districts that operate their own solid waste collection and disposal facilities. Public sector facilities may have certain advantages over us due to the availability of user fees, charges or tax revenues.

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Marketing and Sales
We have fully integrated sales and marketing strategies with a primary focus on acquiring and retaining commercial, industrial, municipal and residential customers. Our business strategy focuses on creating a highly differentiated sustainable resource management model that meets customers’ unique needs and provides value “beyond the curb”.
Maintenance of a local presence and identity is an important aspect of our sales and marketing strategy, and many of our divisional managers are involved in local governmental, civic and business organizations. Our name and logo, or, where appropriate, that of our divisional operations, are displayed on all of our containers and trucks. We attend and make presentations at municipal and state meetings, and we advertise in a variety of media throughout our service footprint.
The Customer Solutions business serves customers with multiple locations and is focused on growing our share of business with municipal, institutional, commercial and industrial customers. This group provides customers with a broader set of solutions to augment our regional and divisional service capabilities.
Marketing activities are focused on retaining existing customers and attracting new commercial and residential customers directly on-route in order to enhance profitability. Marketing campaigns are integrated with divisional management teams, sales personnel and the centralized customer care center.
Employees
As of January 31, 2019, we employed approximately 2,300 people, including approximately 500 professionals or managers, sales, clerical, information systems or other administrative employees and approximately 1,800 employees involved in collection, transfer, disposal, recycling or other operations. Approximately 100 of our employees are covered by collective bargaining agreements. We believe relations with our employees are good.
Risk Management, Insurance and Performance or Surety Bonds
We actively maintain environmental and other risk management programs that we believe are appropriate for our business. Our environmental risk management program includes evaluating existing facilities, as well as potential acquisitions, for compliance with environmental law requirements. Operating practices at all of our operations are intended to reduce the possibility of environmental contamination, enforcement actions and litigation. We also maintain a worker safety program, which focuses on safe practices in the workplace.
We carry a range of insurance intended to protect our assets and operations, including a commercial general liability policy and a property damage policy. A partially or completely uninsured claim against us (including liabilities associated with cleanup or remediation at our facilities), if successful and of sufficient magnitude, could have a material adverse effect on our business, financial condition and results of operations. Any future difficulty in obtaining insurance could also impair our ability to secure future contracts, which may be conditioned upon the availability of adequate insurance coverage.
See also Item 3, “Legal Proceedings” and Note 11, Commitments and Contingencies to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.
We self-insure for automobile and workers’ compensation coverage with reinsurance coverage limiting our maximum exposure. Our maximum exposure in fiscal year 2018 under the workers’ compensation plan was $1.0 million per individual event. Our maximum exposure in fiscal year 2018 under the automobile plan was $1.2 million per individual event.
Municipal solid waste collection contracts and landfill closure and post-closure obligations may require performance or surety bonds, letters of credit or other means of financial assurance to secure contractual performance. While we have not experienced difficulty in obtaining these financial instruments, if we are unable to obtain these financial instruments in sufficient amounts or at acceptable rates we could be precluded from entering into additional municipal contracts or obtaining or retaining landfill operating permits.
We hold a 19.9% ownership interest in Evergreen National Indemnity Company (“Evergreen”), a surety company which provides surety bonds to secure our contractual obligations for certain municipal solid waste collection contracts and landfill closure and post-closure obligations. Our ownership interest in Evergreen is pledged to Evergreen as security for our obligations under the bonds they provide on our behalf.

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Customers
We provide our collection services to commercial, institutional, industrial and residential customers. A majority of our commercial and industrial collection services are performed under one-to-five year service agreements, and fees are determined by such factors as: professional or management services required; collection frequency; type of equipment and containers furnished; the type, volume and weight of the solid waste collected; the distance to the disposal or processing facility; and the cost of disposal or processing. Our residential collection and disposal services are performed either on a subscription basis (with no underlying contract) with individuals, or through contracts with municipalities, homeowners associations, apartment owners or mobile home park operators.
Our Recycling segment provides recycling services to municipalities, commercial haulers and commercial waste generators within the geographic proximity of the processing facilities.
Seasonality and Severe Weather
Our transfer and disposal revenues historically have been higher in the late spring, summer and early fall months. This seasonality reflects lower volumes of waste in the late fall, winter and early spring months because: 
the volume of waste relating to C&D activities decreases substantially during the winter months in the northeastern United States; and
decreased tourism in Vermont, New Hampshire, Maine and eastern New York during the winter months tends to lower the volume of waste generated by commercial and restaurant customers, which is partially offset by increased volume from the ski industry.
Because certain of our operating and fixed costs remain constant throughout the fiscal year, operating income is therefore impacted by a similar seasonality. Our operations can be adversely affected by periods of inclement or severe weather, which could increase our operating costs associated with the collection and disposal of waste, delay the collection and disposal of waste, reduce the volume of waste delivered to our disposal sites, increase the volume of waste collected under our existing contracts (without corresponding compensation), decrease the throughput and operating efficiency of our materials recycling facilities, or delay construction or expansion of our landfill sites and other facilities. Our operations can also be favorably affected by severe weather, which could increase the volume of waste in situations where we are able to charge for our additional services provided.
Our Recycling segment experiences increased volumes of fiber in November and December due to increased newspaper advertising and retail activity during the holiday season.
Regulation
Introduction
We are subject to extensive federal, state and local environmental laws and regulations which have become increasingly stringent in recent years. The environmental regulations affecting us are administered by the United States Environmental Protection Agency (“EPA”) and other federal, state and local environmental, zoning, health and safety agencies. Failure to comply with such requirements could result in substantial costs, including civil and criminal fines and penalties. Except as described in this Annual Report on Form 10-K, we believe that we are currently in substantial compliance with applicable federal, state and local environmental laws, permits, orders and regulations. Other than as disclosed herein, we do not currently anticipate any material costs to bring our existing operations into environmental compliance, although there can be no assurance in this regard for the future. We expect that our operations in the solid waste services industry will be subject to continued and increased regulation, legislation and enforcement oversight. We attempt to anticipate future legal and regulatory requirements and to keep our operations in compliance with those requirements.
In order to transport, process, or dispose of solid waste, it is necessary for us to possess and comply with one or more permits from federal, state and/or local agencies. We must renew these permits periodically, and the permits may be modified or revoked by the issuing agency under certain circumstances.
The principal federal statutes and regulations applicable to our operations are as follows:

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The Resource Conservation and Recovery Act of 1976, as amended (“RCRA”)
The RCRA regulates the generation, treatment, storage, handling, transportation and disposal of solid waste and requires states to develop programs to ensure the safe disposal of solid waste. The RCRA divides waste into two categories, hazardous and non-hazardous. Wastes are generally classified as hazardous if they either (a) are specifically included on a list of hazardous wastes, or (b) exhibit certain characteristics defined as hazardous and are not specifically designated as non-hazardous. Wastes classified as hazardous waste are subject to more extensive regulation than wastes classified as non-hazardous, and businesses that deal with hazardous waste are subject to regulatory obligations in addition to those imposed on businesses that deal with non-hazardous waste.
Among the wastes that are specifically designated as non-hazardous are household waste and “special” waste, including items such as petroleum contaminated soils, asbestos, foundry sand, shredder fluff and most non-hazardous industrial waste products.
The EPA regulations issued under Subtitle C of the RCRA impose a comprehensive “cradle to grave” system for tracking the generation, transportation, treatment, storage and disposal of hazardous wastes. Subtitle C regulations impose obligations on generators, transporters and disposers of hazardous wastes, and require permits that are costly to obtain and maintain for sites where those businesses treat, store or dispose of such material. Subtitle C requirements include detailed operating, inspection, training and emergency preparedness and response standards, as well as requirements for manifesting, record keeping and reporting, corrective action, facility closure, post-closure and financial responsibility. Most states have promulgated regulations modeled on some or all of the Subtitle C provisions issued by the EPA, and in many instances the EPA has delegated to those states the principal role in regulating businesses which are subject to those requirements. Some state regulations impose obligations different from and in addition to those the EPA imposes under Subtitle C.
Leachate generated at our landfills and transfer stations is tested on a regular basis, and generally is not regulated as a hazardous waste under federal law. However, there is no guarantee that leachate generated from our facilities in the future will not be classified as hazardous waste.
In October 1991, the EPA adopted the Subtitle D regulations under RCRA governing solid waste landfills. The Subtitle D regulations, which generally became effective in October 1993, include siting restrictions, facility design standards, operating criteria, closure and post-closure requirements, financial assurance requirements, groundwater monitoring requirements, groundwater remediation standards and corrective action requirements. In addition, the Subtitle D regulations require that new landfill sites meet more stringent liner design criteria (typically, composite soil and synthetic liners or two or more synthetic liners) intended to keep leachate out of groundwater and have extensive collection systems to carry away leachate for treatment prior to disposal. Regulations generally require us to install groundwater monitoring wells at virtually all landfills we operate, to monitor groundwater quality and, indirectly, the effectiveness of the leachate collection systems. The Subtitle D regulations also require facility owners or operators to control emissions of landfill gas (including methane) generated at landfills exceeding certain regulatory thresholds. State landfill regulations must meet those requirements or the EPA will impose such requirements upon landfill owners and operators in that state.
The Federal Water Pollution Control Act of 1972, as amended (“Clean Water Act”)
The Clean Water Act regulates the discharge of pollutants into the “waters of the United States” from a variety of sources, including solid waste disposal sites and transfer stations, processing facilities and waste-to-energy facilities (collectively, “solid waste management facilities”). If run-off or treated leachate from our solid waste management facilities is discharged into streams, rivers or other surface waters, the Clean Water Act would require us to apply for and obtain a discharge permit, conduct sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in such discharge. A permit also may be required if that run-off or leachate is discharged to an offsite treatment facility. Almost all solid waste management facilities must comply with the EPA’s storm water regulations, which govern the discharge of regulated storm water to surface waters.
Under federal regulation, facilities that have above ground and/or below ground petroleum storage capacities over certain thresholds may be subject to regulations and/or permitting under the Clean Water Act. Many of our facilities have petroleum storage and are required to have a spill, prevention, control and countermeasures (“SPCC”) plan to prevent petroleum release to waters of the U.S. due to a spill, rupture or leak.
Several states in which we operate have been delegated the authority to implement the Clean Water Act requirements and in some cases the regulations are more stringent than the federal regulations. We believe we are in compliance with the Clean Water Act regulations; however future changes to the law or regulations could have a material impact on our business.

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The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”)
CERCLA established a regulatory and remedial program intended to provide for the investigation and remediation of facilities where, or from which, a release of any hazardous substance into the environment has occurred or is threatened. CERCLA has been interpreted to impose retroactive, strict, and under certain circumstances, joint and severable, liability for the costs to investigate and clean up facilities on current owners and operators of the site, former owners and operators of the site at the time of the disposal of the hazardous substances, as well as the generators and certain transporters of the hazardous substances. CERCLA imposes liability for the costs of evaluating and addressing damage to natural resources. The costs of CERCLA investigation and cleanup can be substantial. Liability under CERCLA does not depend upon the existence or disposal of “hazardous waste” as defined by RCRA, but can be based on the presence of any of more than 700 “hazardous substances” listed by the EPA, many of which can be found in household waste. The definition of “hazardous substances” in CERCLA incorporates substances designated as hazardous or toxic under the Federal Clean Water Act, Clean Air Act and Toxic Substances Control Act ("TSCA"). If we were found to be a responsible party for a CERCLA cleanup, under certain circumstances, the enforcing agency could pursue us or any other responsible party, for all investigative and remedial costs, even if others also were liable. CERCLA also authorizes the EPA to impose a lien in favor of the United States upon all real property subject to, or affected by, a remedial action for all costs for which the property owner is liable. CERCLA provides a responsible party with the right to bring a contribution action against other responsible parties for their allocable share of investigative and remedial costs. Our ability to obtain reimbursement for amounts we pay in excess of our allocable share of such costs would be limited by our ability to identify and locate other responsible parties and to prove the extent of their responsibility and by the financial resources of such other parties.
The Clean Air Act of 1970, as amended (“Clean Air Act”)
The Clean Air Act, generally through state implementation of federal requirements, regulates emissions of air pollutants from certain landfills based upon the date the landfill was constructed, the total capacity of the landfill and the annual volume of emissions. The EPA has promulgated new source performance standards regulating air emissions of certain regulated pollutants (non-methane organic compounds) from municipal solid waste landfills. Landfills located in areas where ambient levels of regulated pollutants exceed certain thresholds may be subject to more extensive air pollution controls and emission limitations. In addition, the EPA has issued standards regulating the disposal of asbestos-containing materials under the Clean Air Act.
The EPA is also focusing on the emissions of greenhouse gases, or GHG, including carbon dioxide and methane. In December 2009, the EPA issued its “endangerment finding” that carbon dioxide poses a threat to human health and welfare, providing the basis for the EPA to regulate GHG emissions. In December 2009 the EPA’s “Mandatory Reporting of Greenhouse Gases” rule went into effect, requiring facilities that emit twenty-five thousand metric tons or more per year of GHG emissions to submit annual reports to the EPA.
In June 2010, the EPA issued the so-called “GHG Tailoring Rule”, which described how certain sources that emit GHG would be subject to heightened Clean Air Act PSD / Title V regulation. In June 2014, the U.S. Supreme Court issued a decision partially invalidating EPA’s Tailoring Rule and in 2015, the D.C. Circuit directed the EPA to consider further revisions to its regulations. We do not know whether or when the EPA will finalize regulations following the Supreme Court and D.C. Circuit decisions, or what obligations such regulations will impose on our operations.
The adoption of other laws and regulations, which may include the imposition of fees or taxes, could adversely affect our collection and disposal operations. Additionally, certain of the states in which we operate are contemplating air pollution control regulations, including state or regional cap and trade systems, relating to GHG that may be more stringent than regulations the EPA may promulgate. Changing environmental regulations could require us to take any number of actions, including purchasing emission allowances or installing additional pollution control technology, and could make some operations less profitable, which could adversely affect our results of operations.
Congress has considered various options, including a cap and trade system, which could impose a limit on and establish a pricing mechanism for GHG emissions and emission allowances. There also is pressure for the United States to join international efforts to control GHG emissions.
The Clean Air Act regulates emissions of air pollutants from our processing facilities. The EPA has enacted standards that apply to those emissions. It is possible that the EPA, or a state where we operate, will enact additional or different emission standards in the future.
All of the federal statutes described above authorize lawsuits by private citizens to enforce certain provisions of the statutes. In addition to a penalty award to the United States, some of those statutes authorize an award of attorney’s fees to private parties successfully advancing such an action.

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The Occupational Safety and Health Act of 1970, as amended (“OSHA”)
OSHA establishes employer responsibilities and authorizes the Occupational Safety and Health Administration to promulgate and enforce occupational health and safety standards, including the obligation to maintain a workplace free of recognized hazards likely to cause death or serious injury, to comply with adopted worker protection standards, to maintain certain records, to provide workers with required disclosures and to implement certain health and safety training programs. A variety of those promulgated standards may apply to our operations, including those standards concerning notices of hazards, safety in excavation and demolition work, the handling of asbestos and asbestos-containing materials, and worker training and emergency response programs.
The Public Utility Regulatory Policies Act of 1978, As Amended (“PURPA”)
PURPA exempts qualifying facilities from most federal and state laws governing the financial organization and rate regulation of electric utilities, and generally requires electric utilities to purchase electricity generated by qualifying facilities at a price equal to the utility’s full “avoided cost”. Our four landfill gas-to-energy facilities are self- certified as “qualifying facilities”.
State and Local Regulations
Each state in which we now operate or may operate in the future has laws and regulations governing (1) water and air pollution, and the generation, storage, treatment, handling, processing, transportation, incineration and disposal of solid waste and hazardous waste; (2) in most cases, the siting, design, operation, maintenance, closure and post-closure maintenance of solid waste management facilities; and (3) in some cases, vehicle emissions limits or fuel types, which impact our collection operations. Such standards typically are as stringent as, and may be more stringent and broader in scope than, federal regulations. Most of the federal statutes noted above authorize states to enact and enforce laws with standards that are more protective of the environment than the federal analog. In addition, many states have adopted statutes comparable to, and in some cases more stringent than, CERCLA. Those statutes impose requirements for investigation and remediation of contaminated sites and liability for costs and damages associated with such sites, and some authorize the state to impose liens to secure costs expended addressing contamination on property owned by responsible parties. Some of those liens may take priority over previously filed instruments. Some states have enacted statutes that impose liability for substances in addition to the “hazardous substances” listed by EPA under CERCLA.
Many municipalities in which we currently operate or may operate in the future also have ordinances, laws and regulations affecting our operations. These include zoning and health measures that limit solid waste management activities to specified sites or conduct, flow control provisions that direct the delivery of solid wastes to specific facilities or to facilities in specific areas, laws that grant the right to establish franchises for collection services and then put out for bid the right to provide collection services, and bans or other restrictions on the movement of solid wastes into a municipality.
Some states have enacted laws that allow agencies with jurisdiction over waste management facilities to deny or revoke permits based on the applicant’s or permit holder’s compliance status. Some states also consider the compliance history of the corporate parent, subsidiaries and affiliates of the applicant or permit holder.
Certain permits and approvals issued under state or local law may limit the types of waste that may be accepted at a solid waste management facility or the quantity of waste that may be accepted at a solid waste management facility during a specific time period. In addition, certain permits and approvals, as well as certain state and local regulations, may limit a solid waste management facility to accepting waste that originates from specified geographic areas or seek to restrict the importation of out-of-state waste or otherwise discriminate against out-of-state waste. Generally, restrictions on importing out-of-state waste have not withstood judicial challenge. However, from time to time federal legislation is proposed which would allow individual states to prohibit the disposal of out-of-state waste or to limit the amount of out-of-state waste that could be imported for disposal and would require states, under certain circumstances, to reduce the amounts of waste exported to other states. Although such legislation has not been passed by Congress, if similar legislation is enacted, states in which we operate solid waste management facilities could limit or prohibit the importation of out-of-state waste. Such actions could materially and adversely affect the business, financial condition and results of operations of any of our landfills within those states that receive a significant portion of waste originating from out-of-state.

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Certain states and localities may restrict the export of waste from their jurisdiction, or require that a specified amount of waste be disposed of at facilities within their jurisdiction. In 1994, the U.S. Supreme Court rejected as unconstitutional and therefore invalid, a local ordinance that sought to limit waste going out of the locality by imposing a requirement that the waste be delivered to a particular privately-owned facility. However, in 2007, the U.S. Supreme Court upheld a U.S. District Court ruling that the flow control regulations in Oneida and Herkimer counties in New York requiring trash haulers to use publicly-owned transfer stations are constitutional, and therefore valid. Additionally, certain state and local jurisdictions continue to seek to enforce such restrictions. Some proposed federal legislation would allow states and localities to impose flow restrictions. Those restrictions could reduce the volume of waste going to solid waste management facilities in certain areas, which may materially adversely affect our ability to operate our facilities and/or affect the prices we can charge for certain services. Those restrictions also may result in higher disposal costs for our collection operations. Flow control restrictions could have a material adverse effect on our business, financial condition and results of operations.
There has been an increasing trend at the state and local levels to mandate or encourage both waste reduction at the source and waste recycling, and to prohibit or restrict the disposal in landfills of certain types of solid wastes, including yard wastes and leaves, certain construction or architectural wastes, food wastes, beverage containers, newspapers, household appliances and electronics such as computers, and batteries. Regulations reducing the volume and types of wastes available for transport to and disposal in landfills could affect our ability to operate our landfill facilities. Vermont, for example, enacted Act 148, containing among other things, a phased waste ban for recyclables, organics and leaf/yard waste. The law became effective July 1, 2012, with phased deadlines for compliance beginning 2014 through 2020. Vermont also passed a law requiring recycling of architectural waste from construction or demolition of a commercial project. The law became effective in January 2015.
Massachusetts revised its regulations governing solid waste management with a framework to encourage the re-use of organic waste material and prohibiting such material from disposal for large-scale commercial generators by October 2014.
New York State revised its regulations governing solid waste management, 6 NYCRR Part 360, effective in November 2017. The revised regulations, among other things, include requirements to conduct landfill liner integrity testing and install radiation detectors at certain facilities.
Although there is no federal law governing extended producer responsibility (“EPR”) regulations; many states have implemented EPR regulations for certain products. EPR regulations are intended to place responsibility for ultimate management or end-of-useful-life handling of the products they create. In addition to financial responsibility, an EPR program may include responsibility for local take-back or recycling programs. For example, several states in which we operate have EPR regulations for electronic waste. If broad EPR laws or regulations were adopted and managed under a manufacturer implemented program, it could have an impact on our business.
The EPA and environmental agencies within individual states in which we operate also consider and promulgate changes to water quality standards, action levels, remediation goals, and other federal or state regulatory standards for individual compounds or classes of compounds. These changes can also include the development of new or more stringent standards for “Emerging Contaminants”, including PFC compounds, pharmaceutical compounds, and a variety of synthetic chemical compounds used in manufacturing and industrial processes. In December 2016, EPA also designated ten chemical substances for risk evaluations under TSCA, based on the requirements of the June 2016 Frank R. Lautenberg Chemical Safety for the 21st Century Act. Changes in regulatory standards for existing or emerging contaminants can result in higher levels of cost and effort associated with the performance of environmental investigations and ongoing compliance at our facilities.
Executive Officers of the Registrant
Our executive officers and their respective ages are as follows:
Name
 
Age
 
Position
John W. Casella
 
68
 
Chairman of the Board of Directors, Chief Executive Officer and Secretary
Edwin D. Johnson
 
62
 
President and Chief Operating Officer
Edmond “Ned” R. Coletta
 
43
 
Senior Vice President and Chief Financial Officer
Christopher B. Heald
 
54
 
Vice President and Chief Accounting Officer
David L. Schmitt
 
68
 
Senior Vice President and General Counsel

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John W. Casella has served as Chairman of our Board of Directors since July 2001 and as our Chief Executive Officer since 1993. Mr. Casella also served as our President from 1993 to July 2001 and as Chairman of our Board from 1993 to December 1999. In addition, Mr. Casella has served as Chairman of the Board of Directors of Casella Waste Management, Inc., a wholly-owned subsidiary of ours, since 1977. Mr. Casella is also an executive officer and director of Casella Construction, Inc., a company owned by Mr. Casella and his brother Douglas R. Casella, also a member of our Board of Directors, which specializes in general contracting, soil excavation and heavy equipment work, and which performs landfill-construction and related services for us. Mr. Casella has been a member of numerous industry-related and community service-related state and local boards and commissions, including the National Recycling Coalition, Board of Directors of the Associated Industries of Vermont, the Association of Vermont Recyclers, the Vermont State Chamber of Commerce, the Rutland Industrial Development Corporation and the Rutland Regional Medical Center. Mr. Casella has also served on various state task forces, serving in an advisory capacity to the Governors of Vermont and New Hampshire on solid waste issues. Mr. Casella holds an A.S. in Business Management from Bryant & Stratton College and a B.S. in Business Education from Castleton State College.
Edwin D. Johnson has served as our President and Chief Operating Officer since December 2012 and as our Senior Vice President and Chief Financial Officer from July 2010 until December 2012. From March 2007 to July 2010, Mr. Johnson served as Executive Vice President, Chief Financial Officer and Chief Accounting Officer at Waste Services, Inc, a solid waste services company. From November 2004 to March 2007, Mr. Johnson served as Chief Financial Officer of Expert Real Estate Services, Inc., a full service real estate brokerage company. Mr. Johnson is a Certified Public Accountant and holds an MBA from Florida International University and a Bachelor of Science in Accounting and Administration from Washington & Lee University.
Edmond “Ned” R. Coletta has served as our Senior Vice President, Chief Financial Officer and Treasurer since December 2012. Mr. Coletta joined us in December 2004 and has served in positions of increasing responsibility, including as our Vice President of Finance and Investor Relations from January 2011 to December 2012. Prior to that Mr. Coletta served as our Director of Finance and Investor Relations from August 2005 to January 2011. From 2002 until he joined us, Mr. Coletta served as the Chief Financial Officer and was a member of the Board of Directors of Avedro, Inc. (FKA ThermalVision, Inc.), an early stage medical device company that he co-founded. From 1997 to 2001, he served as a research and development engineer for Lockheed Martin Michoud Space Systems. Mr. Coletta holds an MBA from the Tuck School of Business at Dartmouth College and a Bachelor of Science in Materials Science Engineering from Brown University.
Christopher B. Heald has served as our Vice President of Finance and Chief Accounting Officer since January 2013. Mr. Heald joined us in September 2001 and has served in positions of increasing responsibility, including as our Director of Financial Reporting and Analysis from July 2010 to January 2013 and as our Accounting Manager from August 2002 to July 2010. Mr. Heald is a Certified Public Accountant and holds a Bachelor of Science in Business Administration from the University of Vermont.
David L. Schmitt has served as our Senior Vice President and General Counsel since June 2012. Mr. Schmitt joined us in May 2006 as our Vice President, General Counsel. Prior to that, Mr. Schmitt served as President of a privately held consulting firm, and further served from 2002 until 2005 as Vice President and General Counsel of BioEnergy International, LLC, (a predecessor company to Myriant Corporation), a firm specializing in the production of bio-succinic acid. He served from 1995 until 2001, as Senior Vice President, General Counsel and Secretary of Bradlees, Inc., a retailer in the northeast United States, and from 1986 through 1990, as Vice President and General Counsel of Wheelabrator Technologies, Inc., a multi-faceted corporation specializing in the development, ownership and operation of large-scale power facilities, fueled by solid waste and other alternative fuels. He is admitted to the Bar of Pennsylvania, and holds a Juris Doctor, cum laude, from Duquesne University School of Law and a Bachelor of Arts degree from The Pennsylvania State University.
Availability of Reports and Other Information
Our website is www.casella.com. We make available, free of charge through our website, our Annual and Transition Reports on Form 10-K and 10-KT, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A, and any amendments to those materials filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. We make these reports available through our website as soon as reasonably practicable after we electronically file such materials with or furnish them to the Securities and Exchange Commission (“SEC”). The information found on our website is not part of this or any other report we file with or furnish to the SEC.

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ITEM 1A. RISK FACTORS
The following important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by management from time to time. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies, including overall economic and industry conditions, especially in the northeastern United States, where our operations and customers are principally located, changes in laws or accounting rules or other disruptions of expected economic or business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are not material also may impair our business’s results of operations and financial condition.
We have in place an Enterprise Risk Management process that involves systematic risk identification and mitigation covering the categories of strategic, financial, operational, and compliance risk. The goal of enterprise risk management is not to eliminate all risk, but rather to identify and assess risks; assign, mitigate and monitor risks; and report the status of our risks to the Board of Directors and its committees.
Risks Related to Our Business
We face substantial competition in the solid waste services industry, and if we cannot successfully compete in the marketplace, our business, financial condition and results of operations may be materially adversely affected.
The solid waste services industry is highly competitive, has undergone a period of consolidation and requires substantial labor and capital resources. The markets in which we compete are served by, or are adjacent to markets served by, one or more of the large national or super regional solid waste companies, as well as numerous regional and local solid waste companies. Intense competition exists not only to provide services to customers, but also to acquire other businesses within each market. Some of our competitors have significantly greater financial and other resources than we do. From time to time, competitors may reduce the price of their services in an effort to expand market share or to win a competitively bid contract. These practices may require us to reduce the pricing of our services and may result in a loss of business.
As is generally the case in our industry, municipal contracts are typically subject to periodic competitive bidding. We may not be the successful bidder to obtain or retain these contracts. If we are unable to compete with larger and better capitalized companies or replace municipal contracts lost through the competitive bidding process with comparable contracts or other revenue sources within a reasonable time period, our revenues would decrease and our operating results could be materially adversely affected.
In our solid waste disposal markets, we also compete with operators of alternative disposal and recycling facilities and with counties, municipalities and solid waste districts that maintain their own solid waste collection, recycling and disposal operations. We are also increasingly competing with companies which seek to use parts of the waste stream as feedstock for renewable energy supplies. Public entities may have financial advantages because of their ability to charge user fees or similar charges, impose taxes and apply resulting revenues, access tax-exempt financing and, in some cases, utilize government subsidies.
In addition, we may be impacted by the development and commercialization of disruptive technologies that may materially change how waste management services are provided. If we are unable to gain access to these technologies or to compete effectively against them, our financial results may suffer.
We also experience competition in our hiring of drivers and mechanics necessary to service our customers. This competition may come from other waste management companies, but it also comes from other employers who hire drivers and maintain fleets, such as companies that provide courier delivery services, including United Parcel Service, Inc. and FedEx Corporation, as well as from a tightening labor market. If we are unable to hire and retain sufficient numbers of drivers to service our collection and disposal routes and mechanics to maintain our trucks, our financial condition and operating results could be materially impacted.
Our growth strategy focuses on complementing or expanding our business through the acquisition of companies or assets, or the development of new operations. However, we may be unable to complete these transactions and, if executed, these transactions may not improve our business or may pose significant risks and could have a negative effect on our operations.
Our growth strategy includes engaging in acquisitions or developing operations or assets with the goal of complementing or expanding our business. These acquisitions may include “tuck-in” acquisitions within our existing markets, acquisitions of assets that are adjacent to or outside of our existing markets, or larger, more strategic acquisitions. In addition, from time to time we may acquire businesses that are complementary to our core business strategy. We may not be able to identify suitable acquisition candidates, and if we identify suitable acquisition candidates, we may be unable to successfully negotiate the acquisition at a price or on terms and conditions acceptable to us. Furthermore, we may be unable to obtain the necessary regulatory approval to complete potential acquisitions.

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Our ability to achieve the benefits from any potential future acquisitions, including cost savings and operating efficiencies, depends in part on our ability to successfully integrate the operations of such acquired businesses with our operations. The integration of acquired businesses and other assets may require significant management time and resources that would otherwise be available for the ongoing management of our existing operations. Any operations, properties or facilities that we acquire may be subject to unknown liabilities, such as undisclosed environmental contamination, or other environmental liability, including off-site disposal liability for which we would have no recourse, or only limited recourse, to the former owners of such operations or properties. As a result, if a liability were asserted against us based upon ownership of an acquired property, we might be required to pay significant sums to settle it, which could adversely affect our financial results and cash flow.
The waste management industry is undergoing fundamental change as traditional waste streams are increasingly viewed as renewable resources, which may adversely affect volumes and tipping fees at our landfills.
As we continue to develop our landfill capacity, the waste management industry is recognizing the value of the waste stream as a renewable resource, and accordingly, alternatives to landfilling are being developed that seek to maximize the renewable energy and other resource benefits of solid waste. These alternatives affect the demand for landfill airspace, and could affect our ability to operate our landfills at full capacity, as well as the tipping fees and prices that waste management companies generally, and that we, in particular, can charge for landfill airspace. Reduced tipping fees can affect our willingness to incur the expenditures necessary to increase the permitted capacity of the landfills. As a result, our revenues and operating margins could be materially adversely affected due to these disposal alternatives.
The waste industry is subject to extensive government regulations, including environmental laws and regulations, and we incur substantial costs to comply with such laws and regulations. Failure to comply with environmental or other laws and regulations, as well as enforcement actions and litigation arising from an actual or perceived breach of such laws and regulations, could subject us to fines, penalties, and judgments, and impose limits on our ability to operate and expand.
We are subject to potential liability and restrictions under environmental laws and regulations, including potential liability and restrictions arising from or relating to the transportation, handling, recycling, generation, treatment, storage and disposal of wastes, the presence, release, discharge or emission of pollutants, and the investigation, remediation and monitoring of impacts to soil, surface water, groundwater and other environmental media including natural resources, as a result of the actual or alleged presence, release, discharge or emission of hazardous substances, pollutants or contaminants on, at, under or migrating from our properties, or in connection with our operations. The waste management industry has been and will continue to be subject to regulation, including permitting and related financial assurance requirements, as well as attempts to further regulate the industry, including efforts to regulate and limit the emission of greenhouse gases. Our solid waste operations are subject to a wide range of federal, state and, in some cases, local environmental, odor and noise and land use restrictions. If we are not able to comply with the requirements that apply to a particular facility or if we operate in violation of the terms and conditions of, or without the necessary approvals or permits, we could be subject to administrative or civil, and possibly criminal, fines and penalties, and we may be required to spend substantial capital to bring an operation into compliance, to temporarily or permanently discontinue activities, and/or take corrective actions, possibly including removal of landfilled materials. Those costs or actions could be significant to us and affect our results of operations, cash flows, and available capital. Environmental and land use laws and regulations also affect our ability to expand and, in the case of our solid waste operations, may dictate those geographic areas from which we must, or, from which we may not, accept solid waste. Those laws and regulations may limit the overall size and daily solid waste volume that may be accepted by a solid waste operation. If we are not able to expand or otherwise operate one or more of our facilities because of limits imposed under such laws, we may be required to increase our utilization of disposal facilities owned by third-parties, which could reduce our revenues and/or operating margins.
In addition to complying with environmental laws and regulations, we are required to obtain government permits to operate our facilities, including all of our landfills. There is no guarantee that we will be able to obtain the requisite permits and, even if we could, that any permit (and any existing permits we currently hold) will be renewed or modified as needed to fit our business needs. Localities where we operate generally seek to regulate some or all landfill and transfer station operations, including siting and expansion of operations. The laws and regulations adopted by municipalities in which our landfills and transfer stations are located may limit or prohibit the expansion of a landfill or transfer station, as well as the amount of solid waste that we can accept at the landfill or transfer station on a daily, quarterly or annual basis, and any effort to acquire or expand landfills and transfer stations, which typically involves a significant amount of time and expense. We may not be successful in obtaining new landfill or transfer station sites or expanding the permitted capacity of any of our current landfills and transfer stations. If we are unable to develop additional disposal and transfer station capacity, our ability to achieve economies from the internalization of our waste stream will be limited. If we fail to receive new landfill permits or renew existing permits, we may incur landfill asset impairment and other charges associated with accelerated closure.

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We have historically grown through acquisitions, may make additional acquisitions in the future, and we have tried and will continue to try to evaluate and limit environmental risks and liabilities presented by businesses to be acquired prior to the acquisition. It is possible that some liabilities may prove to be more difficult or costly to address than we anticipate. It is also possible that government officials responsible for enforcing environmental laws and regulations may believe an issue is more serious than we expect, or that we will fail to identify or fully appreciate an existing liability before we become responsible for addressing it. Some of the legal sanctions to which we could become subject could cause the suspension or revocation of a permit, prevent us from, or delay us in, obtaining or renewing permits to operate or expand our facilities, or harm our reputation. As of December 31, 2018, we had recorded $5.6 million in environmental remediation liabilities for the estimated cost of our share of work associated with a consent order issued by the State of New York to remediate a scrap yard and solid waste transfer station owned by one of our acquired subsidiaries, including the recognition of accretion expense, and $5.2 million in environmental remediation liabilities for the estimated cost of the installation of a municipal waterline associated with Southbridge Recycling & Disposal Park, Inc.discussed in Item 3, "Legal Proceedings" of this Annual Report on Form 10-K, including the recognition of accretion expense in other accrued liabilities and other long-term liabilities. There can be no assurance that the cost of such cleanup or that our share of that cost will not exceed our estimates.
In addition to the costs of complying with environmental laws and regulations, we incur costs in connection with environmental proceedings and litigation brought against us by government agencies and private parties. We are, and may be in the future, a defendant in lawsuits brought by parties alleging environmental damage, including natural resource damage, personal injury, and/or property damage or impairment, or seeking to impose civil penalties, injunctive relief or overturn or prevent the issuance of an operating permit or authorization, all of which may result in us incurring significant liabilities. For information about the material outstanding claims against us and our subsidiaries, see Item 3. “Legal Proceedings” in this Annual Report on Form 10-K.
We may not have sufficient insurance coverage for our environmental liabilities, such coverage may not cover all of the potential liabilities we may be subject to and/or we may not be able to obtain insurance coverage in the future at reasonable expense, or at all.
The conduct of our businesses is also subject to various other laws and regulations administered by federal, state and local governmental agencies, including tax laws, employment laws and competition laws, among others. New laws, regulations or governmental policy and their related interpretations, or changes in any of the foregoing, including taxes or other limitations on our services, may alter the environment in which we do business and, therefore, may impact our results or increase our costs or liabilities.
In certain jurisdictions, we are subject to compliance with specific obligations under competition laws due to our competitive position in those jurisdictions. For example, in May 2002, we entered into an assurance of discontinuance with the Vermont Attorney General’s Office concerning, among other matters, the conduct of our business in Vermont relating to certain contract terms applicable to our small commercial container customers. In August 2011, a revised final judgment of consent and order was entered by the Vermont Superior Court Washington Unit, Civil Division, as a result of some of our small commercial container customers having been mistakenly issued contracts that did not strictly comply with the terms of the assurance of discontinuance. Pursuant to the order, we paid a civil penalty in an aggregate amount of $1.0 million. In July 2014, we entered into an assurance of discontinuance with the office of the New York Attorney General in connection with certain of our commercial practices in certain specified counties in New York, pursuant to which we paid the State of New York a sum of $0.1 million. The assurances of discontinuance and order provide for certain restrictions on our customer contract terms, certain conditions on our business acquisitions, sales and market share and require us to maintain an internal compliance program. Failure to comply with these requirements or other laws or regulations could subject us to enforcement actions or financial penalties which could have a material adverse effect on our business.

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Our results of operations are affected by fluctuating commodity prices and market requirements for recyclable materials.
Our results of operations have been and will continue to be affected by changing purchase or resale prices or market requirements for recyclable materials. Our recycling business involves the purchase and sale of recyclable materials, some of which are priced on a commodity basis. The commodity markets continue to see ongoing negative pressure on pricing associated with the decline of the fiber market due to less use of paper products such as newspaper and office paper as a result of increased on-line reading. As a result of these market changes, domestic demand for various recycled fibers from mill buyers has steadily declined over the past decade, and as such we have exported more of these materials overseas to China. In 2017, China launched a campaign called National Sword which has imposed significant restrictions on the importation into China of recyclable materials, including a complete ban on the import into China of mixed paper and new quality standards for contaminants in recyclable materials commencing January 1, 2018. Furthermore, China has not issued import licenses for its mills to import recyclable commodities for 2018, resulting in a stoppage of essentially all imports of recyclable commodities into China. These factors have had a significant impact on our business and have required us to seek alternative export markets for recyclable commodities.
We seek to limit our exposure to fluctuating commodity prices through: our revenue sharing contracts that share commodity prices above a threshold level or charge a tipping fee below the threshold; our net commodity rate formula that allows us to pass back higher costs to sell commodities, including higher labor costs or equipment costs to meet new quality standards; our floating Sustainability Recycling Adjustment fee that passes back the cost of recycling to our collection customers; and as applicable, the use of hedging agreements, floor price contracts and long-term supply contracts with customers. Although we have introduced these risk mitigation programs to help offset volatility in commodity prices and to offset higher labor or capital costs to meet more stringent contamination standards, we cannot provide assurance that we can use these programs with our customers in all circumstances or that they will mitigate these risks in an evolving recycling environment.
Our business requires a high level of capital expenditures.
Our business is capital intensive. Our capital expenditure requirements include fixed asset purchases and capital expenditures for landfill development and cell construction, as well as site and cell closure. We use a substantial portion of our cash flows from operating activities toward capital expenditures, which reduces our flexibility to use such cash flows for other purposes, such as reducing our indebtedness. Our capital expenditures could increase if we make acquisitions or further expand our operations, or as a result of factors beyond our control, such as changes in federal, state or local governmental requirements. The amount that we spend on capital expenditures may exceed current expectations, which may require us to obtain additional funding for our operations or impair our ability to grow our business.
We are upgrading our technology infrastructure and there can be no assurance that our efforts will be completed on the projected timetable or that our investment will result in the expected gains.
We are upgrading our technology infrastructure, including an enterprise resource planning package and other systems that we believe will improve our internal processes and the productivity of our employees. These upgrades are complex and there can be no assurance that they will result in expected productivity gains and operating cost reductions on our anticipated timeline, if at all. In addition, if we are not able to maintain the security of our data, confidential information about us or our customers or suppliers could be inadvertently disclosed, subjecting us to possible expenses and other liabilities as well as adversely impacting customer and other third party relationships. If we are unable to benefit from new technologies, we may be at a competitive disadvantage to other companies in the waste management industry, in which case our operating results could suffer.
Cybersecurity incidents could negatively impact our business and our relationships with customers, adversely affecting our financial results and exposing us to litigation risk.
We use computer technology in substantially all aspects of our business operations. We also use mobile devices, social networking and other online activities to connect with our customers and our employees to be able to process transactions and provide information that we feel is necessary to manage our business. Such uses give rise to cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including customers’ personal information, private information about employees, and financial and strategic information about us and our business partners. We also rely on a Payment Card Industry compliant third party to protect our customers’ credit card information. Further, as we pursue our strategy to grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, we are also expanding and improving our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cyber security risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventive or detection measures and incident response efforts may not be entirely effective, especially as cyber security attacks continue to evolve and become more sophisticated, often are not recognized until launched against a target and may be difficult to detect for a long time.

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If company, personal or otherwise protected information is improperly accessed, tampered with or distributed, we may face significant financial exposure, including incurring significant costs to remediate possible injury to the affected parties. We may also be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under laws protecting confidential information. If our established network of security controls, policy enforcement mechanisms, educational awareness programs and monitoring systems that we use to address these threats to technology fail, the theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential litigation and liability and competitive disadvantage. While we have purchased insurance coverage for cybersecurity risks, there can be no assurance that any such coverage would be adequate to cover potential liability.
Our business is geographically concentrated and is therefore subject to regional economic downturns.
Our operations and customers are concentrated principally in New England and New York. Therefore, our business, financial condition and results of operations are susceptible to regional economic downturns and other regional factors, including state regulations and budget constraints and severe weather conditions. In addition, as we seek to expand in our existing markets, opportunities for growth within this region will become more limited and the geographic concentration of our business will increase.
Our results of operations and financial condition may be negatively affected if we inadequately accrue for final capping, closure and post-closure costs or by the timing of these costs for our waste disposal facilities.
We have material financial obligations relating to final capping, closure and post-closure costs of our existing owned or operated landfills and will have material financial obligations with respect to any disposal facilities that we may own or operate in the future. Once the permitted capacity of a particular landfill is reached and additional capacity is not authorized, or a determination is made to cease operations at a landfill due to other considerations, the landfill must be closed and capped, and we must begin post-closure maintenance. We establish accruals for the estimated costs associated with such final capping, closure and post-closure obligations over the anticipated useful life of each landfill on a per ton basis. We have provided and expect that we will in the future provide accruals for financial obligations relating to final capping, closure and post-closure costs of our owned or operated landfills, generally for a term of 30 years after closure of a landfill. Our financial obligations for final capping, closure or post-closure costs could exceed the amounts accrued or amounts otherwise receivable pursuant to trust funds established for this purpose. Such a circumstance could result in significant unanticipated charges that would have an adverse effect on our business.
In addition, the timing of any such final capping, closure or post-closure costs, which exceed established accruals, may further negatively affect our business. Since we will be unable to control the timing and amounts of such costs, we may be forced to delay investments or planned improvements in other parts of our business or we may be unable to meet applicable financial assurance requirements. Any of the foregoing would negatively affect our business and results of operations.
Fluctuations in fuel costs could affect our operating expenses and results.
The price and supply of fuel is unpredictable and fluctuates based on events beyond our control, including among others, geopolitical developments, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries and other oil and gas producers, war and unrest in oil producing countries and regional production patterns. Because fuel is needed to run our fleet of trucks, price escalations for fuel increase our operating expenses. In fiscal year 2018, we used approximately 5.3 million gallons of diesel fuel in our solid waste operations. Although we have a “fuel surcharge” program, based on a fuel index, to help offset increases in the cost of fuel, oil and lubricants arising from price volatility, contractual restrictions and competitive conditions may impact our opportunity to pass this fee on to our customers in all circumstances.
We could be precluded from entering into contracts or obtaining or maintaining permits or certain contracts if we are unable to obtain third-party financial assurance to secure our contractual obligations.
Public solid waste collection, recycling and disposal contracts, and obligations associated with landfill closure and post-closure typically require performance or surety bonds, letters of credit or other means of financial assurance to secure our contractual performance. We currently obtain performance and surety bonds from Evergreen National Indemnity Company, in which we hold a 19.9% equity interest. If we are unable to obtain the necessary financial assurance in sufficient amounts or at acceptable rates, we could be precluded from entering into additional municipal contracts or from obtaining or retaining landfill management contracts or operating permits. Any future difficulty in obtaining insurance could also impair our ability to secure future contracts conditioned upon having adequate insurance coverage.
We may be required to write-off or impair capitalized costs or intangible assets in the future or we may incur restructuring costs or other charges, each of which could harm our earnings.

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In accordance with generally accepted accounting principles in the United States, we capitalize certain expenditures and advances relating to our acquisitions, pending acquisitions, landfills, cost method investments and development projects. In addition, we have considerable unamortized assets. From time to time in future periods, we may be required to incur a charge against earnings in an amount equal to any unamortized capitalized expenditures and advances, net of any portion thereof that we estimate will be recoverable, through sale or otherwise, relating to: (1) any operation or other asset that is being sold, permanently shut down or impaired or has not generated or is not expected to generate sufficient cash flow; (2) any pending acquisition that is not consummated; (3) any landfill or development project that is not expected to be successfully completed; and (4) any goodwill or other intangible assets that are determined to be impaired.
In response to such charges and costs and other market factors, we may be required to implement restructuring plans in an effort to reduce the size and cost of our operations and to better match our resources with our market opportunities. As a result of such actions, we would expect to incur restructuring expenses and accounting charges which may be material. Several factors could cause a restructuring to adversely affect our business, financial condition and results of operations. These include potential disruption of our operations, the development of our landfill capacity and recycling technologies and other aspects of our business. Employee morale and productivity could also suffer and result in unintended employee attrition. Any restructuring would require substantial management time and attention and may divert management from other important work. Moreover, we could encounter delays in executing any restructuring plans, which could cause further disruption and additional unanticipated expense.
Our revenues and our operating income experience seasonal fluctuations.
Our transfer and disposal revenues historically have been higher in the late spring, summer and early fall months. This seasonality reflects the lower volume of solid waste during the late fall, winter and early spring months primarily because: 
the volume of waste relating to C&D activities decreases substantially during the winter months in the northeastern United States; and
decreased tourism in Vermont, Maine and eastern New York during the winter months tends to lower the volume of solid waste generated by commercial and restaurant customers, which is partially offset by increased volume from the ski industry.
Since certain of our operating and fixed costs remain constant throughout the fiscal year, operating income is impacted by a similar seasonality. In addition, particularly harsh weather conditions typically result in increased operating costs.
Adverse weather conditions may limit our operations and increase the costs of collection and disposal.
Our collection and landfill operations could be adversely impacted by extended periods of inclement weather, or by increased severity of weather. Adverse weather could increase our operating costs associated with the collection and disposal of waste, delay the collection and disposal of waste, reduce the volume of waste delivered to our disposal sites, increase the volume of waste collected under our existing contracts (without corresponding compensation), decrease the throughput and operating efficiency of our materials recycling facilities, or delay construction or expansion of our landfill sites and other facilities. In addition, adverse weather conditions may result in the temporary suspension of our operations, which can significantly affect our operating results in the affected regions during those periods.
Efforts by labor unions to organize our employees could divert management attention and increase our operating expenses.
Certain groups of our employees have chosen to be represented by unions, and we have negotiated collective bargaining agreements with these groups. The negotiation of collective bargaining agreements could divert management attention and result in increased operating expenses and lower net income (or increased net loss). If we are unable to negotiate acceptable collective bargaining agreements, we may be subject to union-initiated work stoppages, including strikes. Depending on the type and duration of any labor disruptions, our revenues could decrease and our operating expenses could increase, which could adversely affect our financial condition, results of operations and cash flows. As of January 31, 2019, approximately 5% of our employees were represented by unions.
Our enterprise risk management process may not be effective in mitigating the risks to which we are subject, or in reducing the potential for losses in connection with such risks.
Our enterprise risk management framework is designed to minimize or mitigate the risks to which we are subject, as well as any losses stemming from such risks. Although we seek to identify, measure, monitor, report, and control our exposure to such risks, and employ a broad and diversified set of risk monitoring and mitigation techniques in the process, those techniques are inherently limited in their ability to anticipate the existence or development of risks that are currently unknown and unanticipated. The ineffectiveness of our enterprise risk management framework in mitigating the impact of known risks or the emergence of previously unknown or unanticipated risks may result in our incurring losses in the future that could adversely impact our financial condition and results of operations.

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Risks Related to Our Indebtedness
We have substantial debt and have the ability to incur additional debt. The principal and interest payment obligations of such debt may restrict our future operations.
As of December 31, 2018, we had approximately $555.2 million of outstanding principal indebtedness (excluding approximately $22.5 million of outstanding letters of credit issued under our new term loan A facility ("Term Loan Facility") and revolving line of credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, the "Credit Facility"). The Credit Facility consists of the Term Loan Facility with term loans in the outstanding principal amount of $350.0 million and the Revolving Credit Facility with loans thereunder being available up to an aggregate principal amount of $200.0 million, of which $107.9 million of unused commitments remain under the Revolving Credit Facility, subject to customary borrowing conditions. In addition, the terms of our existing indebtedness permit us to incur additional debt. Our substantial debt, among other things:
requires us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, which reduces funds available for other business purposes, including capital expenditures and acquisitions;
places us at a competitive disadvantage compared with some of our competitors that may have less debt and better access to capital resources; and
limits our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes, but does allow us to increase the amount of our debt substantially subject to the conditions in the Credit Facility.
Our ability to satisfy our obligations and to reduce our total debt depends on our future operating performance and on economic, financial, competitive and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow, and future financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully execute our business strategy.
The Credit Facility requires us to meet a number of financial ratios and covenants.
The Credit Facility contains certain affirmative and negative covenants which, among other things and subject, in certain cases, to certain basket amounts and other exceptions, limit the existence of additional indebtedness, the existence of liens or pledges, certain investments, acquisitions and sales or other transfers of assets, the payment of dividends and distributions and repurchases of equity, prepayments of certain junior indebtedness, and certain other transactions. Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities. Additionally, the Credit Facility requires, solely for the benefit of the lenders under the Revolving Credit Facility, that we meet financial tests, including, without limitation:
minimum consolidated EBITDA to consolidated cash interest charges ratio; and
maximum consolidated funded debt (net of up to an agreed amount of cash and cash equivalents) to consolidated EBITDA ratio.
An event of default under any of our debt agreements could permit some of our lenders, including the lenders under the Credit Facility, to declare all amounts borrowed from them to be immediately due and payable, together with accrued and unpaid interest, or, in the case of the Credit Facility, terminate the commitment to make further credit extensions thereunder, which could, in turn, trigger cross-defaults under other debt obligations. If we were unable to repay debt to our lenders, or were otherwise in default under any provision governing our outstanding debt obligations, our secured lenders could proceed against us and against the collateral securing that debt.
Risks Related to Our Common Stock
Holders of our Class A common stock are entitled to one vote per share, and holders of our Class B common stock are entitled to ten votes per share. The lower voting power of the Class A common stock may negatively affect the attractiveness of our Class A common stock to investors and, as a result, its market value.

24


We have two classes of common stock: Class A common stock, which is entitled to one vote per share, and Class B common stock, all of which are beneficially owned by John W. Casella, our Chairman and Chief Executive Officer, and his brother, Douglas R. Casella, a member of our Board of Directors, and which is entitled to ten votes per share. Except for the election of one of our directors and in certain limited circumstances required by applicable law, holders of Class A common stock and Class B common stock vote together as a single class on all matters to be voted on by our stockholders. As of January 31, 2019, an aggregate of 988,200 shares of our Class B common stock, representing 9,882,000 votes, were outstanding. Based on the number of shares of common stock outstanding as of January 31, 2019, the shares of our Class A common stock and Class B common stock beneficially owned by John W. Casella and Douglas R. Casella represented approximately 19.8% of the aggregate voting power of our stockholders. Consequently, John W. Casella and Douglas R. Casella are able to substantially influence all matters for stockholder consideration and constitute, and are expected to continue to constitute, a significant portion of the shares entitled to vote on all matters requiring approval by our stockholders. The difference in the voting power of our Class A common stock and Class B common stock could diminish the market value of our Class A common stock if investors attribute value to the superior voting rights of our Class B common stock and the power those rights confer.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our headquarters is located at 25 Greens Hill Lane, Rutland, Vermont 05701, where we currently lease approximately 12,000 square feet of office space.
Our principal property and equipment consists of land, landfills, buildings, machinery and equipment, rolling stock and containers. At January 31, 2019, we operated eight subtitle D landfills, four of which we own and four of which we lease; one landfill permitted to accept C&D materials that we own; 49 transfer stations, 27 of which we own, seven of which we lease and 15 of which we operate under a contract; 37 solid waste collection facilities, 19 of which we own, 17 of which we lease and one of which we operate under a contract; 18 recycling processing facilities, nine of which we own, five of which we lease and four of which we operate under a contract; four landfill gas-to-energy facilities that we own; and 19 corporate office and other administrative facilities, three of which we own and 16 of which we lease (See Item 1, “Business” of this Annual Report on Form 10-K for property information by operating segment and location). We believe that our property and equipment are adequately maintained and sufficient for our current operations.
ITEM 3. 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.
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.

25


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 (the “Massachusetts Court”) 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. 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.
In December 2017, we filed a Motion to Dismiss the Litigation, and on October 1, 2018, the Massachusetts Court granted our Motion to Dismiss, and accordingly, dismissed the Citizen Groups claims under the Acts. The Massachusetts Court has retained jurisdiction of the Residents claims. The Citizen Groups intend to appeal the Massachusetts Court’s decision to grant our Motion to Dismiss.
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 $10.0 million ($5.0 million 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 $5.0 million). We have agreed to reimburse the Town for periodic payments under such bond. The Town has recently advised us that it has solicited and received proposals for the construction of the Waterline as contemplated by the ACO, and that construction of the Waterline has commenced.

26


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 (in millions):
 
 
 
 
 
Fiscal Year Ended
December 31,
 
2018
 
2017
Beginning balance
$
5.9

 
$

Accretion expense
0.2

 
0.1

Obligations incurred

 
6.3

Obligations settled (1)
(0.9
)
 
(0.5
)
Ending balance
$
5.2

 
$
5.9

(1)
Includes amounts that are being processed through accounts payable as a part of our disbursements cycle.
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 intended to cease operations at the Southbridge Landfill when no further capacity was available. 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 our May 29, 2007 Extension Agreement with the Town ("Extension Agreement"), which we accounted for as an operating lease, there are potential contractual obligations and commitments, including future cash payments and services that extend beyond the current useful life of the Southbridge Landfill. 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 Extension Agreement and the impacts of such events on further expansion of the Southbridge Landfill. We advised the Town that we saw no economically feasible way to operate the Southbridge Landfill beyond its current permitted life and we have filed a closure plan with MADEP. In this respect, the Town had, on or about April 11, 2018, filed a motion for a declaratory judgment and injunctive relief in the Massachusetts Court seeking a judgment from the Massachusetts Court as to the rights of the parties pursuant to the Extension Agreement, and injunctive relief to prevent us from discontinuing free collection and disposal of the Town’s municipal waste when the Southbridge Landfill ceases to accept waste (the “Town Equity Litigation”). We vigorously defended the Town Equity Litigation on its merits, and further, on the grounds that the Town Equity Litigation is not in compliance with the procedures for dispute resolution as set forth in the Extension Agreement. On June 26, 2018, the Massachusetts Court denied the Town’s request for a preliminary injunction without prejudice. Subsequently, the Town filed a successor litigation to the Town Equity Litigation (the “Current Litigation”), again seeking equitable and legal relief. We vigorously contested the Current Litigation and on November 8, 2018, the Town approved a Settlement Agreement with us which shortened the period of time we were purportedly obligated to provide the Town with free collection and disposal of the Town’s municipal waste from September, 2027 to March 31, 2024. The Town also agreed that we could close the solid waste and recycling transfer station in the Town at the end of 2018. The current litigation has been dismissed. The Southbridge Landfill was closed in November 2018 (the "Closure"). Following the Closure, we have proceeded 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. 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. As a result of the Closure and in consideration of the Settlement Agreement with the Town, we recorded a charge amounting to $8.7 million as a component of the Southbridge Landfill closure charge, net associated with the remaining future contractual obligations.
See Note 16, Other Items and Charges to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K for disclosure over 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.
North Country Environmental Services

27


On or about March 8, 2018, the Citizen Groups described above delivered correspondence to our subsidiary, North Country Environmental Services, Inc. ("NCES") and us, providing notice of the Citizen Groups' intent to sue NCES and us for violations of the CWA in conjunction with NCES's operation of its landfill in Bethlehem, New Hampshire. On May 14, 2018, the Citizen Groups filed a lawsuit against NCES and us in the United States District Court for the District of New Hampshire (the “New Hampshire Court”) alleging violations of the CWA, arguing that ground water discharging into the Ammonoosuc River is a "point source" under the CWA (the "New Hampshire Litigation"). The New Hampshire Litigation seeks remediation and fines under the CWA. On June 15, 2018, we and NCES filed a Motion to Dismiss the New Hampshire Litigation. On July 13, 2018, the Citizen Groups filed objections to our Motion to Dismiss. On July 27, 2018, we filed a reply in support of our Motion to Dismiss. On September 25, 2018, the New Hampshire Court denied our Motion to Dismiss. We intend to continue to vigorously defend against the New Hampshire Litigation, which we believe is without merit.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

28


PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A common stock trades on the NASDAQ Global Select Market (“NASDAQ Stock Market”) under the symbol CWST. There is no established trading market for our Class B common stock. As of January 31, 2019 there were approximately 440 holders of record of our Class A common stock and two holders of record of our Class B common stock.
For purposes of calculating the aggregate market value of the shares of common stock held by non-affiliates, as shown on the cover page of this Annual Report on Form 10-K, we have assumed that all the outstanding shares of Class A common stock were held by non-affiliates except for the shares beneficially held by directors and executive officers and funds represented by them.
Dividends
No dividends have ever been declared or paid on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
The information required by Item 201(d) of Regulation S-K is included in Part III of this Annual Report on Form 10-K.
Stock Performance Graph
The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
The stock performance graph below compares the percentage change in cumulative stockholder return on our Class A common stock for the period from April 30, 2013 through December 31, 2018, with the cumulative total return on the Russell 2000 Index and our Industry Peer Group ("Peer Group"). The stock performance graph assumes the investment on April 30, 2013 of $100.00 in our Class A common stock at the closing price on such date, in the Russell 2000 Index and the Peer Group, and that dividends are reinvested. No dividends have been declared or paid on our Class A common stock.

29


cwst2018.jpg
 
April 30, 2013
 
April 30, 2014
 
December 31, 2014
 
December 31, 2015
 
December 31, 2016
 
December 31, 2017
 
December 31, 2018
Casella Waste Systems, Inc.
$
100.00

 
$
116.97

 
$
92.66

 
$
137.16

 
$
284.63

 
$
527.98

 
$
653.44

Russell 2000
$
100.00

 
$
120.50

 
$
130.04

 
$
124.30

 
$
150.79

 
$
172.87

 
$
153.83

Peer Group (1)
$
100.00

 
$
109.03

 
$
129.44

 
$
135.33

 
$
183.10

 
$
230.07

 
$
243.36

 
(1)
The Peer Group is comprised of Waste Connections Inc., Covanta Holding Corp., Waste Management, Inc. and Republic Services, Inc.

30


ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial and operating data set forth below was derived from the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K and from the consolidated financial statements included in Item 8 of previous Annual Reports on Form 10-K and a Transition Report on Form 10-KT that we filed with the SEC. This information should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included in Item 8 of this Annual Report on Form 10-K.
 
Fiscal Year Ended
December 31,
 

Eight Months
Ended
December31, 2014
 
Fiscal Year Ended
April 30, 2014
 
2018
 
2017
 
2016
 
2015
 
 
 Statement of Operations Data:
(in thousands, except per share data)
Revenues
$
660,660

 
$
599,309

 
$
565,030

 
$
546,500

 
$
368,374

 
$
497,633

Cost of operations
453,291

 
405,188

 
381,973

 
382,615

 
258,650

 
354,592

General and administration
84,791

 
79,243

 
75,356

 
72,892

 
45,732

 
61,865

Depreciation and amortization
70,508

 
62,102

 
61,856

 
62,704

 
41,485

 
60,339

Southbridge Landfill closure charge, net
8,054

 
65,183

 

 

 

 

Contract settlement charge
2,100

 

 

 
1,940

 

 

Expense from acquisition activities and other items
1,872

 
176

 

 

 

 
144

Development project charge
311

 

 

 

 

 
1,394

Environmental remediation charge

 

 
900

 

 
950

 
400

Divestiture transactions

 

 

 
(5,517
)
 
(553
)
 
7,455

Severance and reorganization costs

 

 

 

 

 
586

Gain on settlement of acquisition related contingent consideration

 

 

 

 

 
(1,058
)
Operating income (loss)
39,733

 
(12,583
)
 
44,945

 
31,866

 
22,110

 
11,916

Interest expense, net
26,021

 
24,887

 
38,652

 
40,090

 
25,392

 
37,863

Other expense (income), net
7,676

 
(418
)
 
12,657

 
2,206

 
1,825

 
(436
)
Income (loss) from continuing operations before income taxes and discontinued operations
6,036

 
(37,052
)
 
(6,364
)
 
(10,430
)
 
(5,107
)
 
(25,511
)
(Benefit) provision for income taxes
(384
)
 
(15,253
)
 
494

 
1,351

 
703

 
1,799

Income (loss) from continuing operations before discontinued operations
6,420

 
(21,799
)
 
(6,858
)
 
(11,781
)
 
(5,810
)
 
(27,310
)
Income from discontinued operations

 

 

 

 

 
284

Loss on disposal of discontinued operations

 

 

 

 

 
(378
)
Net income (loss)
6,420

 
(21,799
)
 
(6,858
)
 
(11,781
)
 
(5,810
)
 
(27,404
)
Less: Net (loss) income attributable to noncontrolling interests

 

 
(9
)
 
1,188

 
208

 
(4,309
)
Net income (loss) attributable to common stockholders
$
6,420

 
$
(21,799
)
 
$
(6,849
)
 
$
(12,969
)
 
$
(6,018
)
 
$
(23,095
)
Basic earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
42,688

 
41,846

 
41,233

 
40,642

 
40,262

 
39,820

Basic earnings per common share (1)
$
0.15

 
$
(0.52
)
 
$
(0.17
)
 
$
(0.32
)
 
$
(0.15
)
 
$
(0.58
)
Diluted earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
44,168

 
41,846

 
41,233

 
40,642

 
40,262

 
39,820

Basic earnings per common share (1)

$
0.15

 
$
(0.52
)
 
$
(0.17
)
 
$
(0.32
)
 
$
(0.15
)
 
$
(0.58
)

31


 
Fiscal Year Ended
December 31,
 
Eight Months
Ended
December31, 2014
 
Fiscal Year Ended
April 30, 2014
 
2018
 
2017
 
2016
 
2015
 
 
Other Data:
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
$
73,232

 
$
64,862

 
$
54,238

 
$
49,995

 
$
55,061

 
$
45,959

Cash flows provided by operating activities
$
120,834

 
$
107,538

 
$
80,434

 
$
70,507

 
$
38,286

 
$
49,642

Cash flows used in investing activities
$
(164,197
)
 
$
(76,447
)
 
$
(62,964
)
 
$
(48,784
)
 
$
(59,697
)
 
$
(57,910
)
Cash flows provided by (used in) financing activities
$
45,375

 
$
(31,640
)
 
$
(18,585
)
 
$
(26,087
)
 
$
25,141

 
$
9,008

Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
4,007

 
$
1,995

 
$
2,544

 
$
2,312

 
$
2,205

 
$
2,464

Restricted cash
$

 
$

 
$

 
$
1,347

 
$
5,819

 
$

Working capital, net (2)
$
(18,411
)
 
$
(6,184
)
 
$
(6,382
)
 
$
(10,990
)
 
$
(9,968
)
 
$
(21,405
)
Property, plant and equipment, net
$
404,577

 
$
361,547

 
$
398,466

 
$
402,252

 
$
414,542

 
$
403,424

Goodwill
$
162,734

 
$
122,605

 
$
119,899

 
$
118,976

 
$
119,170

 
$
119,139

Total assets
$
732,410

 
$
614,949

 
$
631,512

 
$
633,669

 
$
658,198

 
$
638,285

Long-term debt and capital leases, less current maturities
$
542,001

 
$
477,576

 
$
503,961

 
$
505,985

 
$
522,458

 
$
495,522

Total stockholders’ deficit
$
(15,832
)
 
$
(37,862
)
 
$
(24,550
)
 
$
(21,597
)
 
$
(12,020
)
 
$
(8,537
)
 
(1)
Computed as described in Note 3, Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
(2)
Working capital, net is defined as current assets, excluding cash and cash equivalents, minus current liabilities.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto, and other financial information, included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties. Our actual results may differ materially from those contained in any forward-looking statements.
Company Overview
Founded in 1975 with a single truck, Casella Waste Systems, Inc. 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, along with major account and industrial services, are included in our Other segment.
As of January 31, 2019, we owned and/or operated 37 solid waste collection operations, 49 transfer stations, 18 recycling facilities, eight Subtitle D landfills, four landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition materials.
Acquisitions and Divestitures
Acquisitions
We have a business development team that identifies acquisition candidates, categorizes the opportunity by strategic fit and perceived level of financial accretion, establishes contact with the appropriate representative of the acquisition candidate and gathers further information on the acquisition candidate.

32


We have made in the past, and we may make in the future, acquisitions in order to acquire or develop additional disposal capacity. These acquisitions may include “tuck-in” acquisitions within our existing markets, assets that are adjacent to or outside of our existing markets, or larger, more strategic acquisitions. In addition, from time to time, we may acquire businesses that are complementary to our core business strategy. We face competition for acquisition targets, particularly the larger and more meaningful targets, but we believe that our strong relationships and reputation in New England and the upstate New York area help to offset this factor.
In the fiscal year ended December 31 2018 ("fiscal year 2018"), we acquired six solid waste collection businesses and one transfer business in our Western region and two businesses comprised of solid waste collection and transfer operations in our Eastern region, with approximately $77.0 million of annualized revenues, for total consideration of $99.5 million, including $86.7 million in cash, $4.3 million in Class A common stock, and $8.5 million in contingent consideration and holdbacks to the sellers.
In the fiscal year ended December 31, 2017 ("fiscal year 2017"), we acquired one solid waste collection business in our Eastern region and three solid waste collection businesses in our Western region for total consideration of $8.1 million, including $4.8 million in cash, $2.4 million in notes payable, $0.8 million in holdbacks to the sellers and $0.1 million of other consideration.
In the fiscal year ended December 31, 2016 ("fiscal year 2016"), we acquired three transfer stations in our Western region for total consideration of $2.8 million, including $2.4 million in cash and $0.4 million in holdbacks to the sellers.
Divestitures
From time to time, we may sell or divest certain investments or other components of our business. These divestitures may be undertaken for a number of reasons, including: to generate proceeds to pay down debt; as a result of a determination that the specified asset will provide inadequate returns to us or that the asset no longer serves a strategic purpose in connection with our business; or as a result of a determination that the asset may be more valuable to a third-party. We will continue to look to divest certain activities and investments that no longer enhance or complement our core business if the right opportunity presents itself.
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 our 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.
The table below shows revenue attributable to services provided (in millions) for the following periods:
 
Fiscal Year Ended
December 31,
 
$
Change
 
Fiscal Year Ended
December 31,
 
$
Change
 
2018
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Collection
$
303.4

 
$
263.7

 
$
39.7

 
$
263.7

 
$
249.6

 
$
14.1

Disposal
181.1

 
160.1

 
21.0

 
160.1

 
154.2

 
5.9

Power
5.1

 
5.4

 
(0.3
)
 
5.4

 
5.9

 
(0.5
)
Processing
7.2

 
7.9

 
(0.7
)
 
7.9

 
6.4

 
1.5

Solid waste
496.8

 
437.1

 
59.7

 
437.1

 
416.1

 
21.0

Organics
54.2

 
39.8

 
14.4

 
39.8

 
41.5

 
(1.7
)
Customer solutions
67.5

 
60.1

 
7.4

 
60.1

 
54.5

 
5.6

Recycling
42.2

 
62.3

 
(20.1
)
 
62.3

 
52.9

 
9.4

Total revenues
$
660.7

 
$
599.3

 
$
61.4

 
$
599.3

 
$
565.0

 
$
34.3


33


Solid waste revenues
A summary of the period-to-period changes in solid waste revenues (dollars in millions) follows:
 
Period-to-Period
Change for Fiscal Year 2018 vs Fiscal Year 2017
 
Period-to-Period
Change for Fiscal Year 2017 vs Fiscal Year 2016
 
Amount
 
% of Growth
 
Amount
 
% of Growth
Price
$
19.5

 
3.3
 %
 
$
12.0

 
2.1
%
Volume
6.6

 
1.1
 %
 
4.3

 
0.8
%
Surcharges and other fees
7.3

 
1.2
 %
 
0.5

 
0.1
%
Commodity price and volume
(0.7
)
 
(0.1
)%
 
0.8

 
0.1
%
Acquisitions
28.8

 
4.8
 %
 
3.4

 
0.6
%
Closed landfill
(1.8
)
 
(0.3
)%
 

 
%
Solid waste revenues
$
59.7

 
10.0
 %
 
$
21.0

 
3.7
%
Price. 
The price change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of the following:
$13.9 million from favorable collection pricing; and
$5.6 million from favorable disposal pricing associated primarily with our landfills and transfer stations.
The price change component in fiscal year 2017 solid waste revenues growth from the prior year is a result of the following:
$7.7 million from favorable collection pricing; and
$4.3 million from favorable disposal pricing associated with our landfills and transfer stations.
Volume.
The volume change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of the following:
$0.5 million from higher collection volumes in our Eastern region; and
$6.4 million from higher disposal volumes (of which $3.5 million relates to higher transportation volumes associated with a large contaminated soil project, $3.5 million relates to higher landfill volumes, and $(0.6) million relates to lower transfer station volumes associated with the temporary interruption of business due to a fire at one of our transfer stations); partially offset by
$(0.3) million from lower processing volumes.
The volume change component in fiscal year 2017 solid waste revenues growth from the prior year is a result of the following:
$2.7 million from higher collection volumes in our Eastern region;
$1.3 million from higher disposal volumes (of which $0.5 million relates to higher landfill volumes, $0.3 million relates to higher transportation volumes, and $0.5 million relates to higher transfer station volumes); and
$0.3 million from higher processing volumes.
Surcharges and other fees.
The fuel surcharge and other fees change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of $7.3 million from higher recovery of the Energy component of the Energy and Environmental fee and a higher recovery from the Sustainability Recycling Adjustment fee ("SRA fee") that has anniversaried. The Energy component of the fee floats on a monthly basis based on diesel fuel prices. The Energy component of the fee increased due to both the further implementation of the program and higher diesel fuel pricing. The SRA fee floats on a monthly basis based on recycled commodity prices.
Commodity price and volume.
The commodity price and volume change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of the following:
$(0.5) million from unfavorable energy pricing and $(0.5) million from lower volumes in processing; partially offset by
$0.3 million from higher landfill gas-to-energy volumes.

34


The commodity price and volume change component in fiscal year 2017 solid waste revenues growth from the prior year is a result of the following:
$1.3 million from favorable commodity pricing and higher volumes in processing; partially offset by
$(0.5) million from lower landfill gas-to-energy volumes.
Acquisitions.
The acquisitions change component in fiscal year 2018 solid waste revenues growth is a result of the acquisition of six solid waste collection businesses and one transfer business in our Western region and two businesses comprised of solid waste collection and transfer operations in our Eastern region in fiscal year 2018, combined to a lesser extent with roll over impact of acquisitions made in fiscal year 2017.
The acquisitions and divestitures change component in fiscal year 2017 solid waste revenues growth is a result of the acquisition of four solid waste collection businesses in fiscal year 2017, combined to a lesser extent with roll over impact of acquisitions made in fiscal year 2016.
Closed landfill.
The closed landfill change component in fiscal year 2018 total solid waste revenues growth from prior year is the result of the closure of the Southbridge Landfill in our Eastern region in the quarter ended December 31, 2018.
Organics revenues
Fiscal year 2018 organics revenues increased $14.4 million from the prior year as a result of higher volumes, primarily related to a large new sludge transportation and disposal contract, and, to a lesser extent, favorable pricing.
Fiscal year 2017 organics revenues decreased $(1.7) million from the prior year as a result of lower volumes.
Customer Solutions revenues
Fiscal year 2018 revenues increased $7.4 million from the prior year as a result of higher volumes.
Fiscal year 2017 revenues increased $5.6 million from the prior year as a result of higher volumes.
Recycling revenues
Fiscal year 2018 recycling revenues decreased from the prior year as a result of the following:
$(23.5) million from unfavorable commodity pricing in the marketplace; and
$(7.2) million from lower commodity volumes; partially offset by
$10.6 million from higher tipping fees, as we increased variable tipping fees at our facilities as commodity prices declined.
Fiscal year 2017 recycling revenues increased from the prior year as a result of the following:
$10.4 million from favorable commodity pricing in the marketplace; and
$0.2 million from higher commodity volumes; partially offset by
$(1.2) million from lower tipping fees, as we reduced variable tipping fees at our facilities as commodity prices increased.

35


Operating Expenses
A summary of our cost of operations, general and administration expenses and depreciation and amortization expenses is as follows (dollars in millions and as a percentage of total revenues):
 
Fiscal Years Ended
December 31,
 
2018
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Cost of operations
$
453.3

 
68.6
%
 
$
405.2

 
67.6
%
 
$
382.0

 
67.6
%
General and administration
$
84.8

 
12.8
%
 
$
79.2

 
13.2
%
 
$
75.4

 
13.3
%
Depreciation and amortization
$
70.5

 
10.7
%
 
$
62.1

 
10.4
%
 
$
61.9

 
10.9
%
Cost of Operations
Cost of operations includes labor costs, tipping fees paid to third-party disposal facilities, fuel costs, maintenance and repair costs of vehicles and equipment, workers’ compensation and vehicle insurance costs, the cost of purchasing materials to be recycled, third-party transportation costs, district and state taxes, host community fees and royalties. Cost of operations also includes accretion expense related to final capping, closure and post-closure obligations, leachate treatment and disposal costs and depletion of landfill operating lease obligations.
Fiscal Year 2018 Compared to Fiscal Year 2017
An explanation of the period-to-period change in cost of operations is as follows:
Third-party direct costs in fiscal year 2018 increased $23.5 million from the prior year as a result of the following:
higher hauling and third-party transportation costs associated with: higher collection volumes related to acquisition activity; higher collection volumes related to organic business growth in our Eastern region; a large contaminated soil project in our Western region resulting in higher third-party costs for processing and transportation of soils; higher brokerage volumes in our Customer Solutions line-of-business with high pass through direct costs; and higher volumes being directed to third-party sites driven by a large new sludge transportation and disposal contract in our Organics line-of-business; and
higher disposal costs associated with: higher transportation volumes in our Western region; increased third-party disposal pricing in our Western region; acquisition activity; and the use of alternative third-party disposal sites in our Organics line-of-business; partially offset by
lower purchased material costs in our Recycling and Customer Solutions lines-of-business.
Labor and related benefit costs in fiscal year 2018 increased $9.1 million from the prior year as a result of the following:
higher labor costs related to acquisition activity;
higher labor costs related to higher collection volumes in our Eastern region;
higher labor costs related to higher wages in our Western region; and
higher labor costs as we slowed processing lines and added labor in an effort to improve product quality and reduce contamination in finished products in our Recycling line-of-business.
Direct operational costs in fiscal year 2018 increased $6.0 million from the prior year as a result of the following:
higher host community fees on higher volumes associated with certain landfills in our Eastern and Western regions;
higher accretion expense associated with the acceleration of asset retirement obligations due to the closure of the Subtitle D landfill located in Southbridge, Massachusetts ("Southbridge Landfill") in our Eastern region;
higher landfill operating lease amortization associated primarily with increased landfill volumes at certain landfills in our Western region;
higher landfill operating costs at certain landfills in our Eastern and Western regions; and
higher supplies and consumables cost in our Organics and Recycling lines-of-business.
Maintenance and repair costs in fiscal year 2018 increased $5.9 million from the prior year as a result of higher fleet and facility maintenance costs due to acquisition activity and organic business growth.

36


Fuel costs in fiscal year 2018 increased $3.5 million from the prior year as a result of higher diesel fuel pricing in the marketplace combined with higher volumes primarily associated with acquisition activity. The impact of higher fuel costs in the periods was almost completely offset through higher revenues from fees associated with the Energy component of the Energy and Environmental fee.
Fiscal Year 2017 Compared to Fiscal Year 2016
An explanation of the period-to-period change in cost of operations is as follows:
Third-party direct costs in fiscal year 2017 increased $9.1 million from the prior year as a result of the following:
higher purchased material costs in our Recycling and Customer Solutions lines-of-business;
higher disposal costs associated with higher transfer station volumes in our Western region, and additional costs from the use of alternative disposal sites in our Organics line-of-business; and
higher hauling and transportation costs associated with higher collection volumes in our Eastern region and increased volumes on lower margin commercial work in our Customer Solutions line-of-business; partially offset by decreased transportation services provided in our Western region; and lower commodity volumes in our Organics line-of-business.
Labor and related benefit costs in fiscal year 2017 increased $5.4 million from the prior year as a result of the following:
higher healthcare costs of $1.7 million associated with claims experience;
higher labor costs associated with higher collection volumes in our Eastern region, higher landfill and transfer station volumes in our Western region, as well as customer growth related to several new municipal contracts; and
higher labor costs associated with higher product quality standards from commodity buyers resulting in lower throughput and additional manpower needs in our Recycling line-of-business, and to a lesser extent higher volumes.
Direct operational costs in fiscal year 2017 increased $5.5 million from the prior year as a result of the following:
higher leachate disposal costs and landfill operating costs at certain landfills in our Western region due to increased rainfall through early summer and the timing of various landfill construction projects;
higher host community fees associated with increased volumes at certain landfills in our Western region;
higher accretion expense associated with the acceleration of asset retirement obligations due to the closure of Southbridge Landfill; and
higher equipment rental costs in our Eastern region; partially offset by
lower landfill operating costs associated with certain landfills in our Eastern region.
Maintenance and repair costs in fiscal year 2017 increased $2.3 million from the prior year as a result of the following:
higher fleet maintenance costs in our Western region; and
higher facility maintenance costs in our Recycling region.
Fuel costs in fiscal year 2017 increased $0.9 million from the prior year as a result of higher consumption and increased diesel fuel prices.
General and Administration
General and administration expenses include management, clerical and administrative compensation and overhead, professional services and costs associated with marketing, sales force and community relations efforts.
Fiscal Year 2018 Compared to Fiscal Year 2017
An explanation of the period-to-period change in general and administration expense is as follows:
Labor and related benefit costs in fiscal year 2018 increased $2.6 million from the prior year as a result of higher labor costs associated with acquisition activity, and higher equity compensation expense associated with performance stock unit grants that incur expense based on actual and estimated operational performance, partially offset by lower accrued incentive compensation.

37


Professional fees in fiscal year 2018 increased $1.4 million as a result of higher legal fees associated with various legal proceedings, as discussed in Note 11, Commitments and Contingencies to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K, and higher consulting, accounting and audit fees associated with the implementation of an enterprise resource planning and accounting software solution and the adoption of new accounting guidance.
Bad debt expense in fiscal year 2018 increased $1.3 million due primarily to the impact of revenue growth, a large recovery in the prior year and several customer bankruptcies.
Fiscal Year 2017 Compared to Fiscal Year 2016
An explanation of the period-to-period change in general and administration expense is as follows:
Labor and related benefit costs in fiscal year 2017 increased $3.9 million from the prior year as a result of the following:
higher equity compensation expense of $3.0 million associated with the timing and assumptions used for market-based performance stock option and market-based performance stock unit grants; and
higher benefit costs with increased healthcare costs of $0.8 million.
Other general and administration expenses in fiscal year 2017 increased $1.0 million from the prior year as a result of higher recruiting and software and information technology consulting costs.
Bad debt expense in fiscal year 2017 decreased $(0.8) million due to improved credit processes and collectability issues associated with a disposal customer in the prior year.
Depreciation and Amortization
Depreciation and amortization expense includes: (i) depreciation of property and equipment (including assets recorded for capital leases) on a straight-line basis over the estimated useful lives of the assets; (ii) amortization of landfill costs (including those costs incurred and all estimated future costs for landfill development and construction, along with asset retirement costs arising from closure and post-closure obligations) on a units-of-consumption method as landfill airspace is consumed over the total estimated remaining capacity of a site, which includes both permitted capacity and unpermitted expansion capacity that meets certain criteria for amortization purposes; (iii) amortization of landfill asset retirement costs arising from final capping obligations on a units-of-consumption method as airspace is consumed over the estimated capacity associated with each final capping event; and (iv) amortization of intangible assets with a definite life, using either an economic benefit provided approach or on a straight-line basis over the definitive terms of the related agreements.
A summary of the components of depreciation and amortization expense (dollars in millions and as a percentage of total revenues) follows:
 
Fiscal Year Ended December 31,
 
2018
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Depreciation expense
$
35.4

 
5.4
%
 
$
32.1

 
5.4
%
 
$
33.2

 
5.9
%
Landfill amortization expense
31.8

 
4.8
%
 
27.9

 
4.7
%
 
26.5

 
4.7
%
Other amortization expense
3.3

 
0.5
%
 
2.1

 
0.3
%
 
2.2

 
0.3
%
 
$
70.5

 
10.7
%
 
$
62.1

 
10.4
%
 
$
61.9

 
10.9
%
Fiscal Year 2018 Compared to Fiscal Year 2017
An explanation of the period-to-period change in depreciation and amortization expense is as follows:
depreciation and other amortization expense increased due to acquisition activity; and
landfill amortization expense increased due to higher landfill volumes at certain landfills in our Eastern and Western regions, combined with an increase in our average overall amortization rate as a result of changes in cost estimates and other assumptions associated with our landfills.
Fiscal Year 2017 Compared to Fiscal Year 2016

38


An explanation of the period-to-period change in depreciation and amortization expense is as follows:
landfill amortization expense increased in fiscal year 2017 from the prior year due to the higher landfill volumes in our Western region combined with an increase in our average overall amortization rate as a result of changes in cost estimates and other assumptions associated with our landfills; partially offset by
lower depreciation expense due to the asset impairment associated with closure of the Southbridge Landfill, the timing of capital expenditures and acquisitions, and the related make-up of fixed assets.

39


Southbridge Landfill Closure Charge, Net
In June 2017, we initiated the plan to cease operations of our Southbridge Landfill. Accordingly, in fiscal years 2018 and 2017, we recorded charges associated with the closure of our Southbridge Landfill as follows:
 
Fiscal Year Ended
December 31,
 
2018
 
2017
Asset impairment charge (1)
$

 
$
48.0

Project development charge (2)

 
9.1

Environmental remediation charge (3)

 
6.4

Contract settlement charge (4)
8.7

 

Landfill closure project charge (5)
6.0

 

Charlton settlement charge (6)
1.2

 

Legal and transaction costs (7)
2.2

 
1.7

Recovery on insurance settlement (8)
(10.0
)
 

Southbridge Landfill closure charge, net
$
8.1

 
$
65.2

(1)
We performed a test of recoverability under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 360, 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.
(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 installation of a municipal waterline.
(4)
We recorded a contract settlement charge associated with the closure of Southbridge Landfill and the remaining future obligations due to the Town of Southbridge under the landfill operating agreement with the Town of Southbridge.
(5)
We recorded a landfill closure project charge associated with increased costs under the revised closure plan at our Southbridge Landfill.
(6)
We established a reserve associated with settlement of the Town of Charlton's claim against us.
(7)
We incurred legal and other transaction costs associated with various matters as part of the Southbridge Landfill closure.
(8)
We recorded a recovery on an environmental insurance settlement associated with the Southbridge Landfill closure.
See Item 3, "Legal Proceedings" of this Annual Report on Form 10-K and Note 11, Commitments and Contingencies to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K for additional disclosure over the closure of Southbridge Landfill.
Contract Settlement Charge
In fiscal year 2018, we recorded contract settlement charges of $2.1 million associated with the termination and discounted buy-out of a commodities marketing and brokerage agreement.
Expense from Acquisition Activities and Other Items
In fiscal year 2018, we recorded a charge of $1.9 million associated with acquisition activities and the write-off of deferred costs related to the expiration of our shelf registration statement and, in fiscal year 2017, we recorded a charge of $0.2 million related to acquisition activities.
Development Project Charge
In fiscal year 2018, we recorded development project charges of $0.3 million associated with previously deferred costs that were written off as a result of the negative vote in a public referendum relating to the North Country Environmental Services landfill ("NCES Landfill").
Environmental Remediation Charge

40


We recorded an environmental remediation charge of $0.9 million in fiscal year 2016 due to changes in cost estimates associated with the Potsdam environmental remediation liability as discussed in Note 11, Commitments and Contingencies to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Other expenses
Interest Expense, net
Our interest expense, net increased $1.1 million in fiscal year 2018 and decreased $(13.8) million in fiscal year 2017 from the prior years, respectively. As described below, we successfully lowered our borrowing costs in fiscal year 2017 through the refinancing of our previously outstanding senior secured credit facility and the early redemption, repurchase and retirement of the remaining $370.3 million of our 7.75% senior subordinated notes due February 2019 ("2019 Notes") in fiscal year 2016. We continued to lower our borrowing costs in fiscal year 2017 through the repricing of our previously outstanding senior secured credit facility and the eventual refinancing of our than existing senior secured credit facility in fiscal year 2018. In order to fix our interest rates and reduce our market risk, we completed the issuance or remarketing of various tax-exempt bonds from fiscal year 2016 to fiscal year 2018, and successfully hedged, up to $190.0 million as of December 31, 2018, the variable rate portion of our long-term debt by entering into interest rate derivative agreements. As a result, we have been able to reduce our borrowing costs and our exposure to market risk, while providing ourselves with more financial flexibility to pursue growth opportunities through acquisitions in fiscal year 2018. This acquisition activity resulted in higher average debt balances in fiscal year 2018 and, as a result, higher interest expense despite our lower borrowing costs.
Impairment of Investments
As of December 31, 2018, we owned 6.8% of the outstanding common stock of Recycle Rewards, Inc. (“Recycle Rewards”), a company that markets an incentive based recycling service. In fiscal year 2018, it was determined based on the operating performance of Recycle Rewards that our cost method investment in Recycle Rewards was potentially impaired. As a result, we performed a valuation analysis in fiscal year 2018, which used an income approach based on discounted cash flows to determine an equity value for Recycle Rewards in order to properly value our cost method investment in Recycle Rewards. Based on this analysis, it was determined that the fair value of our cost method investment in Recycle Rewards was less than the carrying amount and, therefore, we recorded an other-than-temporary investment impairment charge of $1.1 million in fiscal year 2018.
Loss on Debt Extinguishment
In order to lower our borrowing costs and reduce our market risk we completed the following transactions that resulted in a loss on debt extinguishment in fiscal years 2018, 2017 and 2016 of $7.4 million, $0.5 million and $13.7 million, respectively, associated with the following:
the write-off of debt issuance costs and unamortized discount, in the case of our term loan B facility ("Term Loan B Facility") in fiscal year 2018, associated with the refinancing of our previously outstanding senior secured credit facilities in fiscal year 2018 and fiscal year 2016 and an amendment to our previously outstanding senior secured credit facility in fiscal year 2017:
the write-off of debt issuance costs in connection with the remarketing of our Vermont Economic Development Authority Solid Waste Disposal Long-Term Revenue Bonds Series 2013 ("Vermont Bonds") in fiscal year 2018 and the remarketing of our Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-1 (“FAME Bonds 2005R-1”) and Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-2 (“FAME Bonds 2005R-2”) into the Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-3 ("FAME Bonds 2005R-3") in fiscal year 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 our then outstanding 2019 Notes in fiscal years 2016.
(Benefit) Provision for Income Taxes
Our (benefit) provision for income taxes was $(0.4) million in fiscal year 2018, $(15.3) million in fiscal year 2017 and $0.5 million in fiscal year 2016. The (benefit) provision for income taxes for fiscal years 2018, 2017 and 2016 include a deferred tax provision (benefit) of $1.3 million, $(15.6) million and $0.6 million, respectively.

41


During fiscal year 2018, we recognized a $(0.9) million deferred tax benefit related to the acquisition of Complete Disposal Company, Inc. and its subsidiary United Material Management of Holyoke, Inc. (collectively, "Complete") due to a reduction of the valuation allowance, including a $(1.6) million deferred tax benefit in the quarter ended March 31, 2018, a $0.4 million deferred tax expense in the quarter ended September 30, 2018 and a $0.3 deferred tax expense in the quarter ended December 31, 2018. The valuation allowance decreased based upon the recognition of additional reversing temporary differences related to the $0.9 million deferred tax liability recorded through goodwill on the acquisition. The $0.9 million deferred tax liability related to the Complete acquisition was based on the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the related tax basis. The $(1.6) million deferred tax benefit recognized in the quarter ended March 31, 2018 was based on initial estimates of the Complete temporary differences and was adjusted by $0.7 million in the subsequent quarters based on the availability of better estimates of the Complete temporary differences upon the filing of the prior year returns by Complete’s sellers and anticipated net operating loss carryforwards.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted. The Act, which is also commonly referred to as “US tax reform,” significantly changes US corporate income tax laws by, among other things, reducing the US corporate income tax rate from 35% to 21% starting in 2018. Under the Act, the alternative minimum tax has been repealed and minimum tax credit carryforwards become refundable beginning in 2018 and will be fully refunded, if not otherwise used to offset tax liabilities, in tax year 2021. Further, our $110.6 million in federal net operating loss carryforwards generated as of the end of 2017 continue to be carried forward for 20 years and are expected to be available to fully offset taxable income earned in future tax years. Federal net operating losses generated after 2017 are carried forward indefinitely, but generally may only offset up to 80% of taxable income earned in a tax year. In the quarter ending December 31, 2017, we revalued our deferred tax assets and liabilities for changes under the Act including (a) revaluing our federal net deferred taxes assets before valuation allowance using the 21% tax rate; (b) revaluing our federal valuation allowance using the 21% tax rate; and (c) recognizing a federal deferred tax benefit for 80% of indefinite lived deferred tax liabilities, which are anticipated to be available as a source of taxable income upon reversal of deferred tax assets that would also have indefinite lives.
The benefit for income taxes for fiscal year 2018 incorporates the changes under the Act, including use of the 21% US corporate income tax rate and applying the new federal net operating loss carryforward rules. We have $3.8 million minimum tax credit carryforwards of which $1.9 million is refundable for 2018, and recognized in fiscal year 2018 as a current income tax benefit of $1.9 million, offset by $1.9 million in the deferred tax provision.
The deferred tax provision for fiscal year 2016 was primarily related to the deferred tax liability for indefinite lived assets. Since we could not determine when the deferred tax liability related to indefinite lived assets would reverse, this amount could not be used as a future source of taxable income against which to benefit deferred tax assets.
Segment Reporting
A summary of revenues by operating segment (in millions) follows:
 
Fiscal Year Ended December 31,
 
$
Change
 
Fiscal Year Ended December 31,
 
$
Change
 
2018
 
2017
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Eastern
$
206.5

 
$
181.2

 
$
25.3

 
$
181.2

 
$
176.5

 
$
4.7

Western
286.3

 
250.8

 
35.5

 
250.8

 
233.2

 
17.6

Recycling
42.2

 
62.3

 
(20.1
)
 
62.3

 
52.9

 
9.4

Other
125.7

 
105.0

 
20.7

 
105.0

 
102.4

 
2.6

Total
$
660.7

 
$
599.3

 
$
61.4

 
$
599.3

 
$
565.0

 
$
34.3


42


Eastern Region
The following table provides details associated with the period-to-period change in revenues (dollars in millions) attributable to services provided:
 
Period-to-Period
Change for Fiscal Year 2018 vs Fiscal Year 2017
 
Period-to-Period
Change for Fiscal Year 2017 vs Fiscal Year 2016
 
Amount
 
% of Growth
 
Amount
 
% of Growth
Price
$
8.1

 
4.5
 %
 
$
5.4

 
3.1
 %
Volume
0.3

 
0.1
 %
 
(2.4
)
 
(1.4
)%
Surcharges and other fees
2.8

 
1.6
 %
 

 
 %
Commodity price & volume
0.1

 
0.1
 %
 
(0.6
)
 
(0.4
)%
Acquisitions
15.8

 
8.7
 %
 
2.3

 
1.3
 %
Closed landfill
(1.8
)
 
(1.0
)%
 

 
 %
Solid waste revenues
$
25.3

 
14.0
 %
 
$
4.7

 
2.6
 %
Price. 
The price change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of the following:
$6.0 million from favorable collection pricing; and
$2.1 million from favorable disposal pricing related to transfer stations and landfills.
The price change component in fiscal year 2017 solid waste revenues growth from the prior year is a result of the following:
$3.5 million from favorable collection pricing; and
$1.9 million from favorable disposal pricing related to transfer stations and landfills.
Volume. 
The volume change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of the following:
$1.6 million from higher collection volumes; partially offset by
$(0.9) million from lower disposal volumes (of which $(0.2) million relates to lower landfill volumes and $(0.7) million relates to lower transfer station volumes); and
$(0.4) million from lower processing volumes.
The volume change component in fiscal year 2017 solid waste revenues growth from the prior year is a result of the following:
$(5.3) million from lower disposal volumes (of which $(4.6) million relates to lower landfill volumes, mainly due to the ramp down of tons at our Southbridge Landfill, and $(0.7) million relates to lower transfer station volumes); partially offset by
$2.9 million from higher collection volumes.
Surcharges and other fees.
The surcharges and other fees change component in in fiscal year 2018 solid waste revenues growth from the prior year is a result of higher recovery from the Energy component of the Energy and Environmental fee and a higher recovery from the SRA fee that has anniversaried. The Energy component of the fee floats on a monthly basis based on diesel fuel prices. The Energy component of the fee increased due to both the further implementation of the program and higher diesel fuel pricing. The SRA fee floats on a monthly basis based on recycled commodity prices.
Commodity price and volume. 
The commodity price and volume change component in fiscal year 2018 total solid waste revenues growth is the result of higher energy volumes.
The commodity price and volume change component in fiscal year 2017 total solid waste revenues growth is the result of decreased energy pricing and volumes.
Acquisitions. 

43


The acquisitions and divestitures change component in fiscal year 2018 solid waste revenues growth is a result of the acquisition of two business comprised of solid waste collection and transfer operations in fiscal year 2018, combined to a lesser extent with roll over impact of acquisitions made in fiscal year 2017.
The acquisitions and divestitures change component in fiscal year 2017 solid waste revenues growth is the result of the acquisition of a solid waste collection business in the quarter ended June 30, 2017.
Closed landfill.
The closed landfill change component in fiscal year 2018 total solid waste revenues growth from prior year is the result of the closure of our Southbridge Landfill in the quarter ended December 31, 2018.
Western Region
The following table provides details associated with the period-to-period change in revenues (dollars in millions) attributable to services provided:
 
Period-to-Period
Change for Fiscal Year 2018 vs Fiscal Year 2017
 
Period-to-Period
Change for Fiscal Year 2017 vs Fiscal Year 2016
 
Amount
 
% of Growth
 
Amount
 
% of Growth
Price
$
11.3

 
4.5
 %
 
$
6.6

 
2.8
%
Volume
7.6

 
3.1
 %
 
8.0

 
3.5
%
Surcharges and other fees
4.5

 
1.8
 %
 
0.5

 
0.2
%
Commodity price & volume
(0.9
)
 
(0.4
)%
 
1.4

 
0.6
%
Acquisitions
13.0

 
5.2
 %
 
1.1

 
0.5
%
Solid waste revenues
$
35.5

 
14.2
 %
 
$
17.6

 
7.6
%
Price. 
The price change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of the following:
$7.9 million from favorable collection pricing; and
$3.4 million from favorable disposal pricing related to transfer stations and landfills.
The price change component in fiscal year 2017 solid waste revenues growth from the prior year is a result of the following:
$4.2 million from favorable collection pricing; and
$2.4 million from favorable disposal pricing related to transfer stations and landfills.
Volume.
The volume change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of the following:
$8.6 million from higher disposal volumes (of which $3.8 million relates to higher landfill volumes and $4.8 million relates to higher transportation volumes associated with a large contaminated soil project); partially offset by
$(1.0) million from lower collection volumes.
The volume change component in fiscal year 2017 solid waste revenues growth from the prior year is a result of the following:
$7.8 million from higher disposal volumes disposal volumes (of which $5.1 million relates to higher landfill volumes, $1.2 million relates to higher transfer station volumes and $1.5 million relates to higher transportation volumes); and
$0.3 million from higher processing volumes .
Fuel surcharges and other fees.
The surcharges and other fees change component in fiscal year 2018 solid waste revenues growth from the prior year is a result of higher recovery from the Energy component of the Energy and Environmental fee and a higher recovery from the SRA fee that has anniversaried. The Energy component of the fee floats on a monthly basis based on diesel fuel prices. The Energy component of the fee increased due to both the further implementation of the program and higher diesel fuel pricing. The SRA fee floats on a monthly basis based on recycled commodity prices.

44


Commodity price and volume.
The commodity price and volume change component in fiscal year 2018 solid waste revenues growth from the prior year is the result of unfavorable energy pricing and lower commodity volumes within our processing operations, partially offset by higher landfill gas-to-energy volumes.
The commodity price and volume change component in fiscal year 2017 solid waste revenues growth from the prior year is the result of favorable commodity pricing and higher volumes within our processing operations, partially offset by lower landfill gas-to-energy volumes.
Acquisitions and divestitures.
The acquisitions and divestitures change component in fiscal year 2018 solid waste revenues growth from the prior year is the acquisition of six solid waste collection businesses and a transfer business in fiscal year 2018, combined to a lesser extent with roll over impact of acquisitions made in fiscal year 2017.
The acquisitions and divestitures change component in fiscal year 2017 solid waste revenues growth from the prior year is the result of the acquisition of three solid waste collection businesses in fiscal year 2017, combined to a lesser extent with roll over impact of acquisitions made in fiscal year 2016.
Operating Income (Loss)
A summary of operating income (loss) by operating segments (in millions) follows:
 
December 31,
 
$
Change
 
December 31,
 
$
Change
 
2018
 
2017
 
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Eastern
$
4.7

 
$
(51.9
)
 
$
56.6

 
$
(51.9
)
 
$
9.7

 
$
(61.6
)
Western
41.5

 
35.0

 
6.5

 
35.0

 
30.6

 
4.4

Recycling
(7.8
)
 
2.8

 
(10.6
)
 
2.8

 
2.5

 
0.3

Other
1.3

 
1.5

 
(0.2
)
 
1.5

 
2.1

 
(0.6
)
Total
$
39.7

 
$
(12.6
)
 
$
52.3

 
$
(12.6
)
 
$
44.9

 
$
(57.5
)
Eastern Region
Fiscal Year 2018 Compared to Fiscal Year 2017
Eastern region operating income increased $56.6 million in fiscal year 2018 from the prior year including the following items:
the $(8.1) million and $(65.2) million Southbridge Landfill closure charge, net in fiscal year 2018 and fiscal year 2017, respectively, associated with the closure of our Southbridge Landfill;
the $(0.6) million of expense from acquisition activities and other items associated with acquisition activities; and
the $(0.3) million development project charge associated with the write-off of deferred costs associated with our NCES Landfill.
Our operating performance in fiscal year 2018 improved as a result of the revenue changes outlined above considering the impact of the following cost changes:
Cost of operations: Cost of operations increased $23.3 million in fiscal year 2018 from the prior year as a result of the following:
higher hauling and third-party transportation costs associated with higher collection volumes related to organic growth and acquisition activity;
higher disposal costs associated with the acquisition activity;
higher labor costs associated with acquisitions and higher collection volumes;
higher fuel costs driven by higher diesel fuel pricing, which was offset by increased revenues from fees associated with the Energy and Environmental fee, combined with higher volumes;
higher host community fees at certain landfills;
higher accretion expense associated with the acceleration of asset retirement obligations due to the closure of our Southbridge Landfill;
higher landfill operating costs primarily at the Southbridge Landfill and the Subtitle D landfill located in West Old Town, Maine; and

45


higher fleet and facility maintenance costs.
General and administration: General and administration expense increased $1.3 million in fiscal year 2018 due to higher labor and related benefit costs associated with acquisition activity and business growth and higher shared overhead costs associated with equity compensation expense, partially offset by lower accrued incentive compensation.
Depreciation and amortization: Depreciation and amortization expense increased $2.7 million in fiscal year 2018 due primarily to acquisition activity and higher landfill amortization expense associated with volume mix and changes to landfill amortization rates as a result of changes in cost estimates and other assumptions with certain of our landfills.
Fiscal Year 2017 Compared to Fiscal Year 2016
Eastern region operating income decreased $(61.6) million in fiscal year 2017 from the prior year including the following items:
the $(65.2) million Southbridge Landfill closure charge, net associated with the closure of our Southbridge Landfill; and
the $(0.2) million expense from acquisition activities and other items associated with legal costs for the acquisition of Complete in January 2018.
Our operating performance in fiscal year 2017 improved as a result of the revenue changes outlined above considering the impact of the following cost changes:
Cost of operations: Cost of operations increased $8.0 million in fiscal year 2017 from the prior year as a result of the following:
higher hauling and transportation costs associated with higher collection volumes;
higher direct labor costs associated with higher collection volumes, customer growth related to several new municipal contracts, and higher healthcare costs of $0.8 million;
higher accretion expense associated with the acceleration of asset retirement obligations due to the closure of the Southbridge Landfill; and
higher equipment rental costs; partially offset by
lower landfill operating costs with certain landfills.
General and administration: General and administration expenses increased by $1.7 million in fiscal year 2017 due to higher shared overhead costs associated with an increase in healthcare costs and higher equity compensation expense, partially offset by lower bad debt expense.
Depreciation and amortization: Depreciation and amortization expense decreased by $(3.2) million in fiscal year 2017 due to lower landfill amortization expense associated with lower landfill volumes at the Southbridge Landfill and the NCES Landfill and changes to the asset retirement obligation amortization rate at the NCES Landfill, and lower depreciation expense due to the asset impairment associated with closure of the Southbridge Landfill.
Western Region
Fiscal Year 2018 Compared to Fiscal Year 2017
Western region operating income increased $6.5 million in fiscal year 2018 from the prior year including the following item:
the $(1.1) million of expense from acquisition activities and other items associated with acquisition activities.
Our operating performance in fiscal year 2018 improved as a result of the revenue changes outlined above considering the impact of the following cost changes:
Cost of operations: Cost of operations increased $28.9 million in fiscal year 2018 from the prior year as a result of the following:
higher hauling and third-party transportation costs associated with higher collection volumes related to acquisition activity and a large contaminated soils project resulting in higher third-party costs for processing and transportation of soils;
higher disposal costs associated with higher transportation volumes, increased third-party disposal pricing and acquisition activity;
higher labor costs related primarily to acquisition activity and higher wages;
higher fuel costs driven by higher diesel fuel pricing, which was offset by increased revenues from fees associated with the Energy and Environmental fee;
higher landfill operating lease amortization associated primarily with increased landfill volumes at certain landfills;

46


higher landfill operating costs at certain landfills;
higher host community fees at certain landfills; and
higher fleet maintenance costs.
General and administration: General and administration expense increased $4.4 million in fiscal year 2018 due to higher bad debt expense, higher accrued incentive compensation and an increase in shared overhead costs associated with higher equity compensation expense.
Depreciation and amortization: Depreciation and amortization expense increased $5.0 million in fiscal year 2018 due to acquisition activity and higher landfill amortization expense attributed to higher landfill volumes and changes to landfill amortization rates as a result of changes in cost estimates and other assumptions with certain of our landfills.
Fiscal Year 2017 Compared to Fiscal Year 2016
Western region operating income increased $4.4 million in fiscal year 2017 from the prior year including the following items:
the $(0.9) million impact of the Potsdam environmental remediation liability charge in fiscal year 2016;
Our operating performance in fiscal year 2017 improved as a result of the revenue changes outlined above considering the impact of the following cost changes:
Cost of operations: Cost of operations increased by $12.3 million in fiscal year 2017 from the prior year as a result of the following:
higher disposal costs associated with higher transfer station volumes and increased third-party disposal pricing;
higher direct labor costs associated with increased labor costs associated with higher landfill and transfer station volumes and increased healthcare costs of $0.7 million;
higher direct operational costs associated with increased leachate disposal and higher landfill operating costs due to: increased rainfall through early summer and the timing of various landfill construction projects; and higher host community fees associated with increased volumes at certain of our landfills;
higher fuel costs as a result of higher consumption and increased diesel fuel prices; and
higher fleet maintenance costs; partially offset by
lower hauling and transportation costs associated with decreased transportation services provided.
General and administration: General and administration expenses increased by $2.0 million in fiscal year 2017 as a result of higher shared overhead costs associated with an increase in healthcare costs and higher equity compensation expense, partially offset by lower wages and personnel costs.
Depreciation and amortization: Depreciation and amortization expenses increased $3.3 million in fiscal year 2017 from the prior year due to higher landfill amortization expense (associated with the higher landfill volumes, combined with the volume mix and changes to landfill amortization rates as a result of changes in cost estimates and other assumptions associated with our landfills) more than offsetting lower depreciation expense attributed to the timing of capital expenditures and related make-up of fixed assets.
Recycling
Recycling operating income decreased by $(10.6) million in fiscal year 2018 from the prior year including the following item:
the $(2.1) million impact of the contract settlement charge associated with the termination and discounted buy-out of a commodities marketing and brokerage agreement.
Our operating performance in fiscal year 2018 declined due to lower revenues associated with unfavorable commodity pricing in the marketplace, partially offset by lower purchased material costs, and the following cost changes:
higher operating costs associated with slower processing speeds and added labor in an effort to meet tighter quality standards and reduce contamination;
higher disposal costs as we pulled higher rates of residue out of the recycling processing stream;
higher supplies and consumables costs; and
higher shared overhead costs associated with equity compensation; partially offset by
lower accrued incentive compensation.

47


Recycling operating income increased by $0.3 million in fiscal year 2017 from the prior year. Our operating performance in fiscal year 2017 improved due to the revenue changes outlined above considering the impact of the following cost changes:
higher third-party purchased material costs of operations due to higher commodity prices on average year-over-year;
higher labor and related benefit costs of operations associated with higher healthcare costs, higher volumes, and higher product quality standards from commodity buyers resulting in lower throughput and additional manpower;
higher facility maintenance costs; and
higher general and administration expenses associated with higher labor costs and higher shared overhead costs associated with an increase in healthcare costs and higher equity compensation expense.
Other
Other operating income decreased by $(0.2) million in fiscal year 2018 from the prior year. Our operating performance in fiscal year 2018 declined based on the impact of intercompany profits in our Organics line-of-business now passing through to landfill disposal sites, combined with declining margins as higher revenues, which were driven by a large new sludge transportation and disposal contract, also resulted in higher third-party transportation and disposal costs as much of these new volumes were directed to third-party sites. This was partially offset by the improved operating performance of our Customer Solutions line-of-business, as increased volumes and lower purchased material costs outweighed higher cost of operations associated with increased hauling and transportation costs.
Other operating income decreased by $(0.6) million in fiscal year 2017 from the prior year. Our operating performance in fiscal year 2017 declined based on lower operating performance of our Organics line-of-business, as lower operating costs did not offset the decline in commodity volumes and higher disposal costs due to the use of alternative disposal sites; and the improved operating performance of our Customer Solutions line-of-business, as increased volumes outweighed higher cost of operations associated with increased purchased material, hauling and transportation, and healthcare costs.
Liquidity and Capital Resources
Recent Developments
On January 25, 2019, we completed a public offering of 3.6 million share of our Class A common stock at a public offering price of $29.50 per share. The offering resulted in net proceeds to us of $100.9 million, after deducting underwriting discounts and commissions and offering expenses. We intend to use the net proceeds from the offering for general corporate purposes, including potential acquisitions or development of new operations or assets with the goal of complementing or expanding our business, working capital and capital expenditures.
We continually monitor our actual and forecasted cash flows, our liquidity, and our capital requirements in order to properly manage our cash needs based on the capital intensive nature of our business. Our capital requirements include fixed asset purchases (including capital expenditures for vehicles), debt servicing, landfill development and cell construction, landfill site and cell closure, as well as acquisitions. We generally meet our liquidity needs from operating cash flows and borrowings from our $200.0 million revolving line of credit facility ("Revolving Credit Facility" ).
A summary of cash and cash equivalents, restricted assets and long-term debt balances, excluding any unamortized debt discount and debt issuance costs, (in millions) follows:
 
December 31,
 
2018
 
2017
Cash and cash equivalents
$
4.0

 
$
2.0

Restricted assets:
 
 
 
Restricted investments securities - landfill closure
$
1.2

 
$
1.2

Long-term debt:
 
 
 
Current portion
$
2.3

 
$
4.9

Long-term portion
552.9

 
492.8