NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for per share data)
1. BASIS OF PRESENTATION
Casella Waste Systems, Inc. (“Parent”), its consolidated subsidiaries and any partially owned entities over which it has a controlling financial interest (collectively, “we”, “us” or “our”), is a regional, vertically integrated solid waste services company that provides collection, transfer, disposal, landfill, landfill gas-to-energy, recycling and organics services in the northeastern United States. We market recyclable metals, aluminum, plastics, paper, and corrugated cardboard, which have been processed at our recycling facilities, as well as recyclables purchased from third-parties. Effective January 1, 2020, we reorganized our operations to consist of a single resource-renewal focused operation by combining our larger-scale recycling and commodity brokerage operations along with our organics services and large scale commercial and industrial services into our Resource Solutions operating segment. We continue to 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. Legal, tax, information technology, human resources, certain finance and accounting and other administrative functions are included in our Corporate Entities operating segment. Segment information reported in the fiscal years ended December 31, 2019 (:fiscal year 2019") and 2018 ("fiscal year 2018"), and as of December 31, 2019 has been reclassified to conform with the fiscal year ended December 31, 2020 ("fiscal year 2020") and as of December 31, 2020 presentation.
The accompanying consolidated financial statements, which include the accounts of the Parent, our wholly-owned subsidiaries and any partially owned entities over which we have a controlling financial interest, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). All significant intercompany accounts and transactions are eliminated in consolidation. Investments in entities in which we do not have a controlling financial interest are accounted for under either the equity method or the cost method of accounting, as appropriate.
Recent Events
With the global outbreak of the novel coronavirus ("COVID-19") and the declaration of a pandemic by the World Health Organization in March 2020, the U.S. Government and all of the states in which we operate have declared the waste services industry as an essential services provider and as a result we are committed to continue to operate and provide our full breadth of services. We have prioritized the safety and well-being of our employees by strictly adhering to recommendations of the Centers for Disease Control and Prevention as well as executive orders of the states in which we operate.
The COVID-19 pandemic has caused, and will continue to cause, economic disruption across our geographic footprint and has adversely affected, and is expected to continue to adversely affect, our business. The COVID-19 pandemic negatively impacted our revenues starting at the end of the first quarter of fiscal year 2020, as many small business and construction collection customers required service level changes and volumes into our landfills declined due to lower economic activity. Even with the continued negative impact of the COVID-19 pandemic, we did experience improved demand for services as local economies started to reopen as allowed by State Governments. This positive trend continued through December 31, 2020, as additional small business collection customers increased service levels, construction activity continued to rebound, and overall higher economic activity across the northeast led to higher landfill volumes. Despite these positive trends, our collection and disposal operations were negatively impacted by lower volumes attributable to the COVID-19 pandemic in fiscal year 2020, extending into the first quarter of fiscal year 2021.
The COVID-19 pandemic has negatively impacted and will continue to impact our business in other ways, as we have experienced and continue to experience increased costs in response to the COVID-19 pandemic, including, but not limited to, higher costs associated with providing a safe working environment for our employees (such as increased costs associated with the protection of our employees, including costs for additional safety equipment, hygiene products and enhanced facility cleaning), potential employee layoffs or furloughs, employee impacts from illness, supporting a remote administration workforce, community response measures, the inability of customers to continue to pay for services, and temporary closures of our facilities or the facilities of our customers. In early September 2020, we also paid a special bonus to all our hourly employees (both frontline and administrative) to recognize their hard work and commitment to safety, environmental compliance and high customer service standards as essential service providers during the COVID-19 pandemic. We have taken measures to reduce costs in other areas and preserve liquidity during this period of uncertainty. As of the date of this filing, we are unable to determine or predict the nature, duration or scope of the overall impact that the COVID-19 pandemic will have on our business, results of operations, liquidity and capital resources. For further information regarding the impact of the COVID-19 pandemic on us, see Item 1A, “Risk Factors” included in this Annual Report on Form 10-K.
2. ACCOUNTING CHANGES
A table providing a brief description of recent Accounting Standards Updates ("ASUs") to the Accounting Standards Codification (“ASC”) issued by the Financial Accounting Standards Board (“FASB”) that we adopted and deemed to have a material impact on our consolidated financial statements based on current account balances and activity follows:
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Standard
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Description
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Effect on the Financial Statements or Other
Significant Matters
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Accounting standards adopted effective January 1, 2020
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ASU No. 2016-13, as amended through March 2020: Financial Instrument Credit Losses (Topic 326)
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Requires that an entity measures all of its expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts.
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We adopted this guidance effective January 1, 2020 using the required modified-retrospective approach. We recognized a cumulative effect adjustment of $(189) to retained earnings upon implementation. This guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. CECL requires consideration of past events, current conditions, and reasonable and supportable forecasts about the future to assess credit loss estimates and will generally result in the earlier recognition of an allowance for credit losses. We have updated our business processes and systems and controls to support recognition and disclosure under the new guidance. See Note 6, Accounts Receivable, Net of Allowance for Credit Losses for additional disclosure.
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A table providing a brief description of recent ASUs to the ASC issued by the FASB that are pending adoption and deemed to have a possible material impact on our consolidated financial statements based on current account balances and activity follows:
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Standard
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Description
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Effect on the Financial Statements or Other
Significant Matters
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Accounting standards issued pending adoption
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ASU No. 2020-04: Reference Rate Reform (Topic 848)
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Provides temporary optional guidance to ease the potential burden in applying GAAP to contract modifications and hedging relationships that reference London Inter-Bank Offered Rate or another reference rate expected to be discontinued, subject to meeting certain criteria.
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We are currently assessing the provisions of this guidance and do not expect that its adoption will have an impact on our consolidated financial statements and related disclosures. This guidance will be in effect from March 12, 2020 through December 31, 2022.
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ASU No. 2019-12: Income Taxes (Topic 740)
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Reduces the complexity over accounting for income taxes by removing certain exceptions and amending guidance to improve consistent application of accounting over income taxes.
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We don't anticipate that this guidance will have a material impact on our consolidated financial statements and related disclosures upon adoption, but may in the future. This guidance is effective January 1, 2021.
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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management’s Estimates and Assumptions
Preparation of our consolidated financial statements in accordance with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision given the available data or simply cannot be readily calculated. In some cases, these estimates are difficult to determine, and we must exercise significant judgment. In preparing our consolidated financial statements, the estimates and assumptions that we consider to be significant and that present the greatest amount of uncertainty relate to our accounting for landfills, environmental remediation liabilities, asset impairments, accounts receivable valuation allowance, self-insurance reserves, deferred taxes and uncertain tax positions, estimates of the fair values of assets acquired and liabilities assumed in any acquisition, contingent liabilities and stock-based compensation. Each of these items is discussed in more detail elsewhere in these notes to consolidated financial statements, as applicable. Actual results may differ materially from the estimates and assumptions that we use in the preparation of our consolidated financial statements.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents, restricted investment securities, accounts receivable and derivative instruments. We maintain cash and cash equivalents and restricted investment securities with banks that at times exceed applicable insurance limits. We reduce our exposure to credit risk by maintaining such deposits with high quality financial institutions. Our concentration of credit risk with respect to accounts receivable is limited because of the large number and diversity of customers we serve, thus reducing the credit risk associated with any one customer group. As of December 31, 2020, no single customer or customer group represented greater than 5% of total accounts receivable. We manage credit risk through credit evaluations, credit limits, and monitoring procedures, but generally do not require collateral to support accounts receivable. We reduce our exposure to credit risk associated with derivative instruments by entering into agreements with high quality financial institutions and by evaluating and regularly monitoring their creditworthiness.
Accounts Receivable, Net of Allowance for Credit Losses
Accounts receivable represent receivables from customers for collection, transfer, recycling, disposal and other services. Our accounts receivable are recorded when billed or when related revenue is earned, if earlier, and represent claims against third-parties that will be settled in cash. The carrying value of our accounts receivable, net of allowance for credit losses represents its estimated net realizable value. Estimates are used in determining our allowance for credit losses based on, among other things, our historical loss trends, the age of outstanding accounts receivable, and current and expected economic conditions. Additions – charged to expense in the fiscal year 2020 consider the current economic conditions associated with the COVID-19 pandemic and the potential impact to our customers’ ability to pay for services that we have provided. Our reserve is evaluated and revised on a monthly basis. Past due accounts receivable are written off when deemed to be uncollectible. See Note 6, Accounts Receivable, Net of Allowance for Credit Losses for disclosure over allowance for credit losses.
Inventory
Inventory includes secondary fibers, recyclables ready for sale, and parts and supplies. Inventory is stated at the lower of cost (first-in, first-out) or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost, less accumulated depreciation and amortization. We provide for depreciation and amortization using the straight-line method by charges to operations in amounts that allocate the cost of the assets over their estimated useful lives as follows:
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Asset Classification
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Estimated
Useful Life
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Buildings and improvements
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10-30 years
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Machinery and equipment
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5-10 years
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Rolling stock
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5-10 years
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Containers
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5-12 years
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Furniture and Fixtures
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3-8 years
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The cost of maintenance and repairs is charged to operations as incurred.
Landfill development costs are included in property, plant and equipment. Landfill development costs include costs to develop each of our landfill sites, including such costs related to landfill liner material and installation, excavation for airspace, landfill leachate collection systems, landfill gas collection systems, environmental monitoring equipment for groundwater and landfill gas, directly related engineering, capitalized interest, on-site road construction, and other capital infrastructure. Additionally, landfill development costs include all land purchases within the landfill footprint and the purchase of any required landfill buffer property. Under life-cycle accounting, these costs are capitalized and charged to expense based on tonnage placed into each site. See the “Landfill Accounting” accounting policy below for additional disclosure over the amortization of landfill development costs and Note 8, Property, Plant and Equipment for disclosure over property, plant and equipment.
Landfill Accounting
Life Cycle Accounting
Under life-cycle accounting, all costs related to acquisition and construction of landfill sites are capitalized and charged to expense based on tonnage placed into each site. Landfill permitting, acquisition and preparation costs are amortized on the units-of-consumption method as landfill airspace is consumed. In determining the amortization rate for each of our landfills, preparation costs include the total estimated costs to complete construction of the landfills’ permitted and expansion capacity.
Landfill Development Costs
We estimate the total cost to develop each of our landfill sites to its remaining permitted and expansion capacity (see landfill development costs discussed within the “Property, Plant and Equipment” accounting policy above). The projection of these landfill costs is dependent, in part, on future events. The remaining amortizable basis of each landfill includes costs to develop a site to its remaining permitted and expansion capacity and includes amounts previously expended and capitalized, net of accumulated airspace amortization, and projections of future purchase and development costs including capitalized interest. The interest capitalization rate is based on our weighted average interest rate incurred on borrowings outstanding during the period. Interest capitalized during the fiscal years 2020, 2019 and 2018 was $413, $263 and $140, respectively.
Landfill Airspace
We apply the following guidelines in determining a landfill’s remaining permitted and expansion airspace:
Remaining Permitted Airspace. Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is then used to compare the existing landfill topography to the expected final landfill topography.
Expansion Airspace. We currently include unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. To be considered expansion airspace all of the following criteria must be met:
•we control the land on which the expansion is sought;
•all technical siting criteria have been met or a variance has been obtained or is reasonably expected to be obtained;
•we have not identified any legal or political impediments which we believe will not be resolved in our favor;
•we are actively working on obtaining any necessary permits and we expect that all required permits will be received; and
•senior management has approved the project based on a review of the engineering design and determination that the financial return profile meets our investment criteria.
For unpermitted airspace to be included in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above. These criteria are evaluated annually by our engineers, accountants, lawyers, managers and others to identify potential obstacles to obtaining the permits. Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using a process that considers the measured density obtained from annual surveys. When we include the expansion airspace in our calculation of remaining permitted and expansion airspace, we include the projected costs for development, as well as the projected asset retirement costs related to final capping, closure and post-closure of the expansion airspace in the amortization basis of the landfill.
After determining the costs and the remaining permitted and expansion capacity at each of our landfills, we determine the per ton rates that will be expensed as waste is received and deposited at each of our landfills by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for assets associated with each final capping event, for assets related to closure and post-closure activities, and for all other costs capitalized or to be capitalized in the future for each landfill. These rates per ton are updated annually, or more frequently, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion efforts, could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates or related assumptions prove to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates, higher final capping, closure or post-closure rates, or higher expenses. Higher profitability may result if the opposite occurs. Most significantly, if it is determined that the expansion capacity should no longer be considered in calculating the recoverability of the landfill asset, we may be required to recognize an asset impairment. If it is determined that the likelihood of receiving an expansion permit has become remote, the capitalized costs related to the expansion effort are expensed immediately.
Final Capping, Closure and Post-Closure Costs
The following is a description of our landfill asset retirement activities and related accounting:
Final Capping Costs. Final capping activities include the installation of liners, drainage, compacted soil layers and topsoil over areas of a landfill where total airspace has been consumed and waste is no longer being received. Final capping activities occur throughout the life of the landfill. Our engineering personnel estimate the cost for each final capping event based on the acreage to be capped, along with the final capping materials and activities required. The estimates also consider when these costs would actually be paid and factor in inflation and discount rates. The engineers then quantify the landfill capacity associated with each final capping event and the costs for each event are amortized over that capacity as waste is received at the landfill.
Closure and Post-Closure Costs. Closure and post-closure costs represent future estimated costs related to monitoring and maintenance of a solid waste landfill after a landfill facility ceases to accept waste and closes. We estimate, based on input from our engineers, accountants, lawyers, managers and others, our future cost requirements for closure and post-closure monitoring and maintenance based on our interpretation of the technical standards of the Subtitle D regulations and the air emissions standards under the Clean Air Act of 1970, as amended, as they are being applied on a state-by-state basis. Closure and post-closure accruals for the cost of monitoring and maintenance include site inspection, groundwater monitoring, leachate management, methane gas control and recovery, and operation and maintenance costs to be incurred for a period which is generally for a term of 30 years after final closure of a landfill. In determining estimated future closure and post-closure costs, we consider costs associated with permitted and permittable airspace.
Our estimated future final capping, closure and post-closure costs, based on our interpretation of current requirements and proposed regulatory changes, are intended to approximate fair value. Absent quoted market prices, our cost estimates are based on historical experience, professional engineering judgment and quoted or actual prices paid for similar work. Our estimate of costs to discharge final capping, closure and post-closure asset retirement obligations for landfills are developed in today’s dollars. These costs are then inflated to the period of performance using an estimate of inflation, which is updated annually (1.6% as of December 31, 2020). Final capping, closure and post-closure liabilities are then discounted using the credit adjusted risk-free rate in effect at the time the obligation is incurred. The weighted average rate applicable to our asset retirement obligations as of December 31, 2020 is between approximately 8.2% and 10.2%, the range of the credit adjusted risk free rates effective since the adoption of guidance associated with asset retirement obligations in the fiscal year ended April 30, 2004. Accretion expense is necessary to increase the accrued final capping, closure and post-closure liabilities to the future anticipated obligation. To accomplish this, we accrete our final capping, closure and post-closure accrual balances using the same credit-adjusted risk-free rate that was used to calculate the recorded liability. Accretion expense on recorded landfill liabilities is recorded to cost of operations from the time the liability is recognized until the costs are paid. Accretion expense on recorded landfill liabilities amounted to $6,436, $6,227 and $5,556 in fiscal years 2020, 2019 and 2018, respectively.
We provide for the accrual and amortization of estimated future obligations for closure and post-closure based on tonnage placed into each site. With regards to final capping, the liability is recognized, and the costs are amortized based on the remaining airspace related to the specific final capping event. See Note 11, Final Capping, Closure and Post-Closure Costs for disclosure over asset retirement obligations related to final capping, closure and post-closure costs.
We operate in states which require a certain portion of landfill final capping, closure and post-closure obligations to be secured by financial assurance, which may take the form of surety bonds, letters of credit and restricted investment securities. Surety bonds securing closure and post-closure obligations at December 31, 2020 and December 31, 2019 totaled $205,048 and $220,633, respectively. Letters of credit securing closure and post-closure obligations as of December 31, 2020 and December 31, 2019 totaled $0 and $0, respectively. See Note 7, Restricted Assets for disclosure over restricted investment securities securing closure and post-closure obligations.
Lease Accounting
We lease vehicles, equipment, property and other non-core equipment in the ordinary course of our business. Leases are classified as either operating leases or finance leases, as appropriate. Our leases have varying terms and may include renewal or purchase options, escalation clauses, restrictions, lease concessions, capital project funding, penalties or other obligations that we considered historically in determining minimum rental payments. We recognize lease expense for operating leases on a straight-line basis over the lease term. We recognize depreciation expense for finance leases over either the useful life of the asset or the lease term based on the terms of the lease agreement.
We are also party to three landfill operation and management agreements. These agreements are long-term landfill operating contracts with government bodies whereby we receive tipping revenue, pay normal operating expenses and assume future final capping, closure and post-closure obligations. The government bodies retain ownership of each landfill. There are no bargain purchase options and title to each of the properties does not pass to us at the end of the respective lease terms. We allocate the consideration paid to the landfill airspace rights and underlying land lease based on the relative fair values.
In addition to up-front or one-time payments, the landfill operating agreements may require us to make future minimum rental payments, including success or expansion fees, other direct costs and final capping, closure and post-closure costs. The value of all future minimum rental payments is amortized and charged to cost of operations over the life of the contract. We amortize the consideration allocated to airspace rights as airspace is utilized on a units-of-consumption basis and such amortization is charged to cost of operations as airspace is consumed (e.g., as tons are placed into the landfill). The underlying value of any land lease is amortized to cost of operations on a straight-line basis over the estimated life of the respective operating agreement.
Under ASU No. 2016-02, Leases ("Topic 842"), we recognize a right-of-use asset and a lease liability for core leases classified as operating leases with a term in excess of 12 months in our consolidated balance sheet. For other non-core operating leases, which is comprised of small-dollar-value items such as office equipment, we continued to expense these costs in the period incurred rather than capitalizing such expenditures on our consolidated balance sheet. We identify lease and nonlease components in a contract to which consideration in the contract will be allocated. We may elect by class of underlying asset to choose not to separate nonlease components from lease components and instead account for each separate lease component and the nonlease components in a contract as part of the single lease component. We have elected to not separate lease components from nonlease components for property leases and are, therefore, not allocating consideration between lease and nonlease components for this asset class. Lease payments include: fixed payments, including in-substance fixed payments, less any lease incentives paid or payable to the lessee; variable lease payments that depend on an index or a rate; exercise price of a purchase option reasonably certain to be exercised; penalties for terminating a lease; and amounts where it is probable that we will owe under a residual value guarantee. Refundable deposits are not considered to be a fixed payment. Variable lease costs that are not based on an index or a rate are recorded to expense in the period incurred. Lease term is determined at lease commencement, and includes any noncancellable period for which we have the right to use the underlying asset together with any periods covered by an option to extend or terminate the lease if we are reasonably certain to exercise the option to extend or not to exercise the option to terminate. The initial determination of a lease liability is calculated as the net present value of the lease payments not yet paid. The discount rate used to determine present value is the rate implicit in the lease, if present, or, if not present, our incremental borrowing rate, which is a rate that reflects interest that we would have to pay to borrow funds on a collateralized basis over a similar term to the lease and in a similar economic environment. For shorter term leases, such as vehicle and equipment leases, we calculate our incremental borrowing rate using the interest rate from our existing secured line of credit, adjusted based on term. For longer term leases, such as our landfill operating leases, we calculate our incremental borrowing rate based on an industry yield curve with a similar credit rating, adjusted by a company specific spread as determined by a third-party. See Note 9, Leases for further disclosure over lease costs and other lease information.
Goodwill and Intangible Assets
Goodwill. Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but as discussed in the “Asset Impairments” accounting policy below, we assess our goodwill for impairment at least annually. See Note 10, Goodwill and Intangible Assets for disclosure over goodwill.
Intangible Assets. Intangible assets consist primarily of covenants not-to-compete and customer lists. Intangible assets are recorded at fair value and are amortized based on the economic benefit provided or using the straight-line method over their estimated useful lives. Covenants not-to-compete and customer lists are typically amortized over a term of no more than 10 years. See Note 10, Goodwill and Intangible Assets for disclosure over intangible assets.
Investments in Unconsolidated Entities
Investments in unconsolidated entities over which we have significant influence over the investees’ operating and financing activities are accounted for under the equity method of accounting. As of December 31, 2020 and December 31, 2019, we had no investments accounted for under the equity method of accounting. Investments in affiliates in which we do not have the ability to exert significant influence over the investees’ operating and financing activities are accounted for under the cost method of accounting. As of both December 31, 2020 and December 31, 2019, we had cost method investments totaling $11,264.
We monitor and assess the carrying value of our investments throughout the year for potential impairment and write them down to their fair value when other-than-temporary declines exist. Fair value is generally based on (i) other third-party investors’ recent transactions in the securities; (ii) other information available regarding the current market for similar assets and/or (iii) a market or income approach, as deemed appropriate.
When we assess the carrying value of our investments for potential impairment, determining the fair value of our investments is reliant upon the availability of market information and/or other information provided by third-parties to be able to develop an estimate of fair value. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or other holders of these investments, could realize in a current market exchange. The use of different assumptions and/or estimation methodologies could have a significant effect on the estimated fair values. The estimates of fair value could differ significantly from the amounts presented. See “Asset Impairments” accounting policy below.
Fair Value of Financial Instruments
Our financial instruments may include cash and cash equivalents, accounts receivable, restricted investment securities held in trust on deposit with various banks as collateral for our obligations relative to our landfill final capping, closure and post-closure costs, restricted cash reserved to finance certain capital projects, interest rate derivatives, trade payables and debt. Accounting standards include disclosure requirements around fair values used for certain financial instruments and establish a fair value hierarchy. The three-tier hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data. See Note 12, Debt and Note 15, Fair Value of Financial Instruments for fair value disclosure over debt and financial instruments, respectively. See the “Derivatives and Hedging” accounting policy below for the fair value disclosure over interest rate derivatives.
Business Combinations
We acquire businesses in the waste industry, including non-hazardous waste collection, transfer station, recycling and disposal operations, as part of our growth strategy. Businesses are included in the consolidated financial statements from the date of acquisition.
We recognize, separately from goodwill, the identifiable assets acquired and liabilities assumed at their estimated acquisition-date fair values. We measure and recognize goodwill as of the acquisition date as the excess of: (a) the aggregate of the fair value of consideration transferred, the fair value of any noncontrolling interest in the acquiree (if any) and the acquisition date fair value of our previously held equity interest in the acquiree (if any), over (b) the fair value of net assets acquired and liabilities assumed. If information about facts and circumstances existing as of the acquisition date is incomplete by the end of the reporting period in which a business combination occurs, we will report provisional amounts for the items for which the accounting is incomplete. The measurement period ends once we receive the information we were seeking; however, this period will not extend beyond one year from the acquisition date. Any material adjustments recognized during the measurement period will be recognized retrospectively in the consolidated financial statements of the current period. All acquisition related transaction and restructuring costs are to be expensed as incurred. See Note 5, Business Combinations for disclosure over business acquisitions.
Environmental Remediation Liabilities
We have recorded environmental remediation liabilities representing our estimate of the most likely outcome of the matters for which we have determined that a liability is probable. These liabilities include potentially responsible party investigations, settlements, certain legal and consultant fees, as well as costs directly associated with site investigation and clean up, such as materials and incremental internal costs directly related to the remedy. We provide for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. We estimate costs required to remediate sites where it is probable that a liability has been incurred based on site-specific facts and circumstances. Estimates of the cost for the likely remedy are developed using third-party environmental engineers or other service providers. Where we believe that both the amount of a particular environmental remediation liability and timing of payments are reliably determinable, we inflate the cost in current dollars until the expected time of payment and discount the cost to present value. See Note 13, Commitments and Contingencies for disclosure over environmental remediation liabilities.
Self-Insurance Liabilities and Related Costs
We are self-insured for vehicles and workers’ compensation with reinsurance coverage limiting our maximum exposure. Our maximum exposure in fiscal year 2020 under the workers’ compensation plan was $1,250 per individual event. Our maximum exposure in fiscal year 2020 under the automobile plan was $3,650 per individual event. The liability for unpaid claims and associated expenses, including incurred but not reported losses, is determined by management with the assistance of a third-party actuary and reflected in our consolidated balance sheets as an accrued liability. We use a third-party to track and evaluate actual claims experience for consistency with the data used in the annual actuarial valuation. The actuarial-determined liability is calculated based on historical data, which considers both the frequency and settlement amount of claims. Our self-insurance reserves totaled $16,946 and $16,853 as of December 31, 2020 and December 31, 2019, respectively. Our estimated accruals for these liabilities could be significantly different than our ultimate obligations if variables such as the frequency or severity of future events differ significantly from our assumptions.
Income Taxes
We use estimates to determine our provision for income taxes and related assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Valuation allowances have been established for the possibility that tax benefits may not be realized for certain deferred tax assets. Deferred income taxes are recognized based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using currently enacted tax rates. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making this determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event we determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we will make an adjustment to the valuation allowance which would reduce the provision for income taxes.
We account for income tax uncertainties according to guidance on the recognition, de-recognition and measurement of potential tax benefits associated with tax positions. We recognize interest and penalties relating to income tax matters as a component of income tax expense.
In the fourth quarter of fiscal year 2020, we determined it was more likely than not that its deferred tax assets would be realized in the future and released the valuation allowance on the majority of its net operating loss carryforwards and other deferred tax assets as of December 31, 2020, resulting in a benefit of $54,966 in income taxes. See Note 17, Income Taxes for disclosure related to income taxes, including the effect of the valuation allowance release.
Derivatives and Hedging
We account for derivatives and hedging activities in accordance with derivatives and hedging accounting guidance that establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The guidance requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met.
Our objective for utilizing derivative instruments is to reduce our exposure to fluctuations in cash flows due to changes in the commodity prices of recycled paper and adverse movements in interest rates.
Our strategy to hedge against fluctuations in the commodity prices of recycled paper is to enter into hedges to mitigate the variability in cash flows generated from the sales of recycled paper at floating prices, resulting in a fixed price being received from these sales. We evaluate the hedges and ensure that these instruments qualify for hedge accounting pursuant to derivative and hedging guidance. Designated as highly effective cash flow hedges, both the effective and ineffective portion of the change in the fair value of these derivatives is recorded in our stockholders’ equity as a component of accumulated other comprehensive loss until the hedged item is settled and recognized as part of commodity revenue. If the price per short ton of the underlying commodity, as reported on the Official Board Market, is less than the contract price per short ton, we receive the difference between the average price and the contract price (multiplied by the notional tons) from the respective counter-party. If the price per short ton of the underlying commodity exceeds the contract price per short ton, we pay the calculated difference to the counter-party. The fair value of commodity hedges is obtained or derived from our counter-parties using valuation models that take into consideration market price assumptions for commodities based on underlying active markets. We were not party to any commodity hedge contracts as of December 31, 2020.
Our strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements to hedge against adverse movements in interest rates. For interest rate derivatives deemed to be highly effective cash flow hedges, both the effective and ineffective portion of the change in fair value of these derivatives is recorded in our stockholders’ equity as a component of accumulated other comprehensive loss and reclassified into earnings through interest expense in the same period or periods during which the hedged transaction affects earnings. See Note 15, Fair Value of Financial Instruments for fair value disclosure over derivative instruments and Note 12, Debt for further disclosure over interest rate derivatives.
Contingent Liabilities
We are subject to various legal proceedings, claims and regulatory matters, the outcomes of which are subject to significant uncertainty. We determine whether to disclose or accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible or probable, and whether it can be reasonably estimated. We analyze our litigation and regulatory matters based on available information to assess the potential liabilities. Management’s assessment is developed based on an analysis of possible outcomes under various strategies. We accrue for loss contingencies when such amounts are probable and reasonably estimable. If a contingent liability is only reasonably possible, we will disclose the potential range of the loss, if estimable. We record losses related to contingencies in cost of operations or general and administration expenses, depending on the nature of the underlying transaction leading to the loss contingency. See Note 13, Commitments and Contingencies for disclosure over loss contingencies, as applicable. Contingent liabilities accounted for under purchase accounting are recorded at their fair values. These fair values may be different from the values we would have otherwise recorded, had the contingent liability not been assumed as part of an acquisition of a business.
Revenue Recognition
We disaggregate our revenues by applicable service line: collection, landfill, transfer, customer solutions, recycling, organics, transportation and landfill gas-to-energy. Under the revenue recognition guidance, revenues are measured based on the consideration specified in a contract with a customer. The circumstances that impact the timing and amount of revenue recognized for each applicable service line may vary based on the nature of the service performed. We generally recognize revenues for services over time as we satisfy the performance obligation by transferring control over the service to the customer as the service is performed and the benefit is received and consumed by the customer. Services are typically delivered in a series as a single bundled performance obligation over either a designated period of time or for specified number of services. Services may also be delivered as a single bundled service, on a period-to-period basis, or in a spot transaction. Consideration may be variable on a per ton basis and/or fixed. Fixed consideration is allocated to each distinct service and variable consideration is allocated to the increment of time that the service is performed, and we have the contractual right to the fee. Fees are typically billed weekly, monthly, quarterly or in advance. Generally, the amount of consideration that we have the right to receive that is invoiced to the customer directly corresponds to the value of our performance completed to date. We do not disclose the amount of variable consideration included in the transaction price that is allocated to outstanding performance obligations when the variable consideration is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation. Revenues that are not satisfied over time are recognized at a point-in-time. This typically includes the sale of recycled or organic materials, as well as renewable energy credits ("RECs"). Revenues from the sale of organic or recycled materials are recognized at a point-in-time as control of the materials transfers to the customer upon shipment or pick-up by the customer. Revenues from the sale of RECs are recognized at a point-in-time as the trade is executed and control transfers to the customer.
Payments to customers that are not in exchange for a distinct good or service are recorded as a reduction of revenues. Rebates to certain customers associated with payments for recycled or organic materials that are received and subsequently processed and sold to other third-parties amounted to $4,960 and $4,428 in fiscal years 2020 and 2019, respectively. Rebates are generally recorded as a reduction of revenues upon the sale of such materials, or upon receipt of the recycled materials at our facilities. We did not record any revenues in fiscal years 2020, 2019, or 2018 from performance obligations satisfied in previous periods.
Contract receivables, which are included in Accounts receivable, net are recorded when billed or when related revenue is earned, if earlier, and represent claims against third-parties that will be settled in cash. Accounts receivable, net includes gross receivables from contracts of $74,162 and $80,191 as of December 31, 2020 and December 31, 2019, respectively. Certain customers are billed in advance and, accordingly, recognition of the related revenues is deferred as a contract liability until the services are provided and control transferred to the customer. Contract liabilities of $2,685 and $2,299 as of December 31, 2020 and December 31, 2019, respectively, are presented separately on the face of the Consolidated Balance Sheets. Due to the short-term nature of advanced billings, substantially all of the deferred revenue recognized as a contract liability as of December 31, 2019 and December 31, 2018 was recognized as revenue during fiscal years 2020 and 2019, respectively, when the services were performed. See Note 4, Revenue Recognition for disclosure over the new guidance.
Asset Impairments
Recovery of Long-Lived Assets. We continually assess whether events or changes in circumstances have occurred that may warrant revision of the estimated useful lives of our long-lived assets (other than goodwill) or whether the remaining balances of those assets should be evaluated for possible impairment. Long-lived assets include, for example, capitalized landfill costs, other property, plant and equipment, identifiable intangible assets, and operating lease right-of-use assets. Events or changes in circumstances that may indicate that an asset may be impaired include the following:
•a significant decrease in the market price of an asset or asset group;
•a significant adverse change in the extent or manner in which an asset or asset group is being used or in its physical condition;
•a significant adverse change in legal factors or in the business climate that could affect the value of an asset or asset group, including an adverse action or assessment by a regulator;
•an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;
•a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group;
•a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life; or
•an impairment of goodwill at a reporting unit.
There are certain indicators listed above that require significant judgment and understanding of the waste industry when applied to landfill development or expansion. For example, a regulator may initially deny a landfill expansion permit application although the expansion permit is ultimately granted. In addition, management may periodically divert waste from one landfill to another to conserve remaining permitted landfill airspace. Therefore, certain events could occur in the ordinary course of business and not necessarily be considered indicators of impairment due to the unique nature of the waste industry.
If an impairment indicator occurs, we perform a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. We group our long-lived assets for this purpose at the lowest level for which identifiable cash flows are primarily independent of the cash flows of other assets or asset groups. If the carrying values are in excess of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset group to its carrying value.
To determine fair value, we use discounted cash flow analyses and estimates about the future cash flows of the asset or asset group. This analysis includes a determination of an appropriate discount rate, the amount and timing of expected future cash flows and growth rates. The cash flows employed in our discounted cash flow analyses are typically based on financial forecasts developed internally by management. The discount rate used is commensurate with the risks involved. We may also rely on third-party valuations and or information available regarding the market value for similar assets.
If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized.
Goodwill. We annually assess goodwill for impairment at the end of our fiscal year or more frequently if events or circumstances indicate that impairment may exist.
We may assess whether a goodwill impairment exists using either a qualitative or a quantitative assessment. If we perform a qualitative assessment, it involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If based on this qualitative assessment we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, we will not perform a quantitative assessment. If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if we elect not to perform a qualitative assessment, we perform a quantitative assessment to determine whether goodwill impairment exists at the reporting unit.
In testing for goodwill impairment, we estimate the fair value of each reporting unit, which we have determined to be our geographic operating segments and our recycling and customer solutions lines-of-business, which are included in our Resource Solutions operating segment, and compare the fair value with the carrying value of the net assets of each reporting unit. If the fair value is less than its carrying value, then we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, noting that the amount is not to exceed the total amount of goodwill allocated to that reporting unit.
To determine the fair value of each of our reporting units as a whole we use discounted cash flow analyses, which require significant assumptions and estimates about the future operations of each reporting unit. Significant judgments inherent in this analysis include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates. The cash flows employed in our discounted cash flow analyses are based on financial forecasts developed internally by management. Our discount rate assumptions are based on an assessment of our risk adjusted discount rate, applicable for each reporting unit. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate our results against our current market capitalization.
If the fair value of goodwill is less than its carrying value for a reporting unit, an impairment charge would be recorded to earnings. The loss recognized cannot exceed the carrying amount of goodwill. After a goodwill impairment loss is recognized, the adjusted carrying amount of goodwill becomes its new accounting basis.
In addition to an annual goodwill impairment assessment, we would evaluate a reporting unit for impairment if events or circumstances change between annual tests indicating a possible impairment. Examples of such events or circumstances include the following:
•a significant adverse change in legal status or in the business climate;
•an adverse action or assessment by a regulator;
•a more likely than not expectation that an operating segment or a significant portion thereof will be sold; or
•the testing for recoverability of a significant asset group within the operating segment.
We elected to perform a quantitative analysis as part of our annual goodwill impairment test for fiscal year 2020. As of October 1, 2020, our Eastern, Western, recycling and customer solutions reporting units indicated that the fair value of each reporting unit exceeded its carrying amount, including goodwill. Furthermore, in each case the fair value of our Eastern, Western, recycling and customer solutions reporting units exceeded its carrying value by in excess of 77.2%. We incurred no impairment of goodwill as a result of our annual goodwill impairment tests in fiscal years 2020, 2019 or 2018. However, there can be no assurance that goodwill will not be impaired at any time in the future.
Cost Method Investments. We monitor and assess the carrying value of our cost method investments throughout the year for potential impairment and write them down to their fair value when other-than-temporary declines exist. We incurred no impairment of cost method investments in fiscal year 2020 or 2019.
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 for the full cost method investment amount of $1,069 in fiscal year 2018. In October 2019, Recycle Rewards sold all or substantially all of its assets comprising the business to RTS RecycleBank, LLC, a subsidiary of Recycle Track Systems, pursuant to an asset purchase agreement. Based on our junior ownership position, we did not receive any proceeds from this disposition.
There can be no assurance that our cost method investments will not be impaired at any time in the future.
Defined Benefit Pension Plan
We make contributions to one qualified multiemployer defined benefit pension plan, the New England Teamsters and Trucking Industry Pension Fund ("Pension Plan"). The Pension Plan provides retirement benefits to participants based on their service to contributing employers. We do not administer this plan. The Pension Plan’s benefit formula is based on credited years of service and hours worked as defined in the Pension Plan document. Our pension contributions are made in accordance with funding standards established by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code, as amended by the Pension Protection Act of 2006. The Pension Plan’s assets have been invested as determined by the Pension Plan's fiduciaries in accordance with the Pension Plan's investment policy. The Pension Plan’s asset allocation is based on the Pension Plan's investment policy and is reviewed as deemed necessary. See Note 16, Employee Benefit Plans for disclosure over the Pension Plan.
Stock-Based Compensation
All share-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense-in general and administration expense over the employee’s requisite service period. For purposes of calculating stock-based compensation expense, forfeitures are accounted for as they occur. Our equity awards granted generally consist of stock options, including market-based performance stock options, restricted stock, restricted stock units and performance stock units, including market-based performance stock units.
The fair value of each stock option grant is estimated using a Black-Scholes option-pricing model, with the exception of market-based performance stock option grants which are valued using a Monte Carlo option-pricing model. The fair value of restricted stock, restricted stock unit and performance stock unit grants is at a price equal to the fair market value of our Class A common stock at the date of grant. The fair value of market-based performance stock unit grants is valued using a Monte Carlo pricing model. See Note 14, Stockholders' Equity for disclosure over stock-based compensation.
Earnings per Share
Basic earnings per share is computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the combined weighted average number of common shares and potentially dilutive shares. Dilutive shares include the assumed exercise of employee stock options, including market-based performance stock options based on the expected achievement of performance targets, unvested restricted stock awards, unvested restricted stock units and unvested performance stock units, including market-based performance units based on the expected achievement of performance targets. In computing diluted earnings per share, we utilize the treasury stock method. See Note 19, Earnings Per Share for disclosure over the calculation of earnings per share.
Subsequent Events
Except as disclosed, no material subsequent events have occurred since December 31, 2020 through the date of this filing that would require recognition or disclosure in our consolidated financial statements.
4. REVENUE RECOGNITION
We disaggregate our revenues by applicable service line as follows: collection, landfill, transfer, customer solutions, recycling, organics, transportation and landfill gas-to-energy.
Collection
Collection revenues are principally generated by providing waste collection and disposal services to our customers. Services may be provided as needed or as scheduled. We derive a substantial portion of our collection revenues from commercial and industrial services, which typically have a standard contract duration of three years, along with municipal services that are generally performed pursuant to contracts with municipalities with varying terms. The majority of our residential collection services are performed on a subscription basis with individual households.
Landfill
Landfill disposal services primarily consist of receiving some form of acceptable solid waste materials at one of our landfills and appropriately disposing of it. Landfill customers are typically charged a tipping fee on a per ton basis for disposing of their solid waste at our disposal facilities. In general, these fees are variable in nature.
Transfer station
Transfer station disposal services primarily consist of receiving some form of acceptable solid waste materials at one of our transfer stations and appropriately disposing of it by transporting it to an appropriate disposal site. Transfer station customers are charged a tipping fee on a per ton basis for disposing of their solid waste at our transfer stations. In general, these fees are variable in nature.
Transportation
Transportation services consist of the transportation of large volumes of waste or recycled materials from a customer designated location to another location or disposal facility. Transportation customers are charged a fee on a per ton basis for transporting and/or disposal of the materials. In general, these fees are variable in nature.
Recycling
Recycling services primarily consist of the collection and/or receipt of recycled materials at one of our materials recovery facilities; the processing or sorting of the recycled materials; and the disposal or sale of the recycled materials. Revenues from recycling services consist of revenues derived from municipalities and customers in the form of processing fees, tipping fees and commodity sales. In brokerage arrangements, we act as an agent that facilitates the sale of recyclable materials between an inbound customer and an outbound customer. Revenues from the brokerage of recycled materials are recognized on a net basis at the time of shipment. In general, these fees are variable in nature.
Customer solutions
Customer solutions services consist of commercial and industrial offerings. Commercial services consist of traditional collection, disposal and recycling services provided to large account multi-site customers. Industrial services consist of overall resource management services provided to large and complex organizations, such as universities, hospitals, manufacturers and municipalities, delivering a wide range of environmental services and zero waste solutions.
Organics
Organics services primarily consist of the collection and/or receipt of organic materials at one of our processing or disposal facilities; the processing of the organic materials; and the disposal or sale of the organic materials.
Landfill gas-to-energy
Landfill gas-to-energy services primarily consist of the generation and sale of electricity from landfill gas-to-energy facilities located at certain of our landfills; the reservation of electric generating capacity to be used by a customer on demand; and the sale of RECs.
A table of revenues disaggregated by service line and timing of revenue recognition by operating segment follows:
Fiscal Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
Western
|
|
Resource Solutions
|
|
Total Revenues
|
Collection
|
$
|
153,815
|
|
|
$
|
243,740
|
|
|
$
|
—
|
|
|
$
|
397,555
|
|
Landfill
|
20,696
|
|
|
64,833
|
|
|
—
|
|
|
85,529
|
|
Transfer
|
44,751
|
|
|
34,166
|
|
|
—
|
|
|
78,917
|
|
Customer solutions
|
—
|
|
|
—
|
|
|
86,680
|
|
|
86,680
|
|
Recycling
|
8
|
|
|
1,251
|
|
|
50,236
|
|
|
51,495
|
|
Organics
|
—
|
|
|
—
|
|
|
59,394
|
|
|
59,394
|
|
Transportation
|
—
|
|
|
10,942
|
|
|
—
|
|
|
10,942
|
|
Landfill gas-to-energy
|
1,015
|
|
|
3,057
|
|
|
—
|
|
|
4,072
|
|
Total revenues
|
$
|
220,285
|
|
|
$
|
357,989
|
|
|
$
|
196,310
|
|
|
$
|
774,584
|
|
|
|
|
|
|
|
|
|
Transferred at a point-in-time
|
$
|
223
|
|
|
$
|
1,484
|
|
|
$
|
29,621
|
|
|
$
|
31,328
|
|
Transferred over time
|
220,062
|
|
|
356,505
|
|
|
166,689
|
|
|
743,256
|
|
Total revenues
|
$
|
220,285
|
|
|
$
|
357,989
|
|
|
$
|
196,310
|
|
|
$
|
774,584
|
|
Fiscal Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
Western
|
|
Resource Solutions
|
|
Total Revenues
|
Collection
|
$
|
154,805
|
|
|
$
|
223,034
|
|
|
$
|
—
|
|
|
$
|
377,839
|
|
Landfill
|
19,362
|
|
|
73,657
|
|
|
—
|
|
|
93,019
|
|
Transfer
|
44,413
|
|
|
31,725
|
|
|
—
|
|
|
76,138
|
|
Customer solutions
|
—
|
|
|
—
|
|
|
79,457
|
|
|
79,457
|
|
Recycling
|
5
|
|
|
1,486
|
|
|
42,820
|
|
|
44,311
|
|
Organics
|
—
|
|
|
—
|
|
|
56,326
|
|
|
56,326
|
|
Transportation
|
—
|
|
|
12,624
|
|
|
—
|
|
|
12,624
|
|
Landfill gas-to-energy
|
890
|
|
|
2,686
|
|
|
—
|
|
|
3,576
|
|
Total revenues
|
$
|
219,475
|
|
|
$
|
345,212
|
|
|
$
|
178,603
|
|
|
$
|
743,290
|
|
|
|
|
|
|
|
|
|
Transferred at a point-in-time
|
$
|
159
|
|
|
$
|
921
|
|
|
$
|
23,206
|
|
|
$
|
24,286
|
|
Transferred over time
|
219,316
|
|
|
344,291
|
|
|
155,397
|
|
|
719,004
|
|
Total revenues
|
$
|
219,475
|
|
|
$
|
345,212
|
|
|
$
|
178,603
|
|
|
$
|
743,290
|
|
Fiscal Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
Western
|
|
Resource Solutions
|
|
Total Revenues
|
Collection
|
$
|
136,661
|
|
|
$
|
170,278
|
|
|
$
|
—
|
|
|
$
|
306,939
|
|
Landfill
|
28,419
|
|
|
66,567
|
|
|
—
|
|
|
94,986
|
|
Transfer
|
39,991
|
|
|
27,592
|
|
|
—
|
|
|
67,583
|
|
Customer solutions
|
—
|
|
|
—
|
|
|
67,464
|
|
|
67,464
|
|
Recycling
|
5
|
|
|
3,823
|
|
|
42,191
|
|
|
46,019
|
|
Organics
|
—
|
|
|
—
|
|
|
54,174
|
|
|
54,174
|
|
Transportation
|
—
|
|
|
18,366
|
|
|
—
|
|
|
18,366
|
|
Landfill gas-to-energy
|
1,397
|
|
|
3,732
|
|
|
—
|
|
|
5,129
|
|
Total revenues
|
$
|
206,473
|
|
|
$
|
290,358
|
|
|
$
|
163,829
|
|
|
$
|
660,660
|
|
|
|
|
|
|
|
|
|
Transferred at a point-in-time
|
$
|
648
|
|
|
$
|
1,145
|
|
|
$
|
31,181
|
|
|
$
|
32,974
|
|
Transferred over time
|
205,825
|
|
|
289,213
|
|
|
132,648
|
|
|
627,686
|
|
Total revenues
|
$
|
206,473
|
|
|
$
|
290,358
|
|
|
$
|
163,829
|
|
|
$
|
660,660
|
|
5. BUSINESS COMBINATIONS
In fiscal year 2020, we acquired ten businesses: seven tuck-in solid waste collection businesses and a solid waste collection business in our Western region, a transportation business in our Eastern region, and one recycling operation in our Resource Solutions operating segment. In fiscal year 2019, we acquired nine businesses: three tuck-in solid waste collection businesses in our Eastern region, four tuck-in solid waste collection businesses, a business comprised of solid waste collection, transfer and recycling operations, and a business comprised of solid waste hauling and transfer assets in our Western region. In fiscal year 2018 we acquired nine businesses: 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.
The operating results of these businesses are included in the accompanying audited consolidated statements of operations from each date of acquisition, and the purchase price has been allocated to the net assets acquired based on fair values at each date of acquisition, with the residual amounts recorded as goodwill. Acquired intangible assets other than goodwill that are subject to amortization include client lists and non-compete covenants. These are amortized over a five to ten-year period from the date of acquisition. All amounts recorded to goodwill in fiscal years 2020 and 2019, except goodwill related to certain acquisitions are expected to be deductible for tax purposes.
The purchase price paid for these acquisitions and the allocation of the purchase price is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Purchase Price:
|
|
|
|
|
|
Cash used in acquisitions, net of cash acquired
|
$
|
28,990
|
|
|
$
|
72,118
|
|
|
$
|
86,686
|
|
Notes payable
|
—
|
|
|
2,714
|
|
|
—
|
|
Class A common stock issued
|
—
|
|
|
—
|
|
|
4,258
|
|
Other non-cash considerations
|
—
|
|
|
5,470
|
|
|
—
|
|
Contingent consideration and holdbacks
|
4,490
|
|
|
1,875
|
|
|
8,521
|
|
Total
|
33,480
|
|
|
82,177
|
|
|
99,465
|
|
Current assets
|
181
|
|
|
2,051
|
|
|
3,276
|
|
Non-current assets
|
—
|
|
|
367
|
|
|
—
|
|
Land
|
895
|
|
|
2,487
|
|
|
—
|
|
Buildings
|
1,908
|
|
|
5,422
|
|
|
7,889
|
|
Equipment
|
13,493
|
|
|
20,482
|
|
|
23,882
|
|
Other liabilities, net
|
(484)
|
|
|
(3,122)
|
|
|
(4,708)
|
|
Deferred tax liability
|
—
|
|
|
(2,385)
|
|
|
(937)
|
|
Intangible assets
|
8,405
|
|
|
31,171
|
|
|
29,934
|
|
Fair value of assets acquired and liabilities assumed
|
24,398
|
|
|
56,473
|
|
|
59,336
|
|
Excess purchase price to be allocated to goodwill
|
$
|
9,082
|
|
|
$
|
25,704
|
|
|
$
|
40,129
|
|
The following unaudited pro forma combined information shows our operational results as though each of the acquisitions completed had occurred as of January 1, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Revenues
|
$
|
783,177
|
|
|
$
|
794,840
|
|
|
$
|
774,210
|
|
Operating income
|
$
|
59,467
|
|
|
$
|
56,674
|
|
|
$
|
49,586
|
|
Net income
|
$
|
91,064
|
|
|
$
|
33,424
|
|
|
$
|
11,708
|
|
Basic weighted average shares outstanding
|
48,793
|
|
|
47,226
|
|
|
42,688
|
|
Basic earnings per common share
|
$
|
1.87
|
|
|
$
|
0.71
|
|
|
$
|
0.27
|
|
Diluted weighted average shares outstanding
|
49,045
|
|
|
47,966
|
|
|
44,168
|
|
Diluted earnings per common share
|
$
|
1.86
|
|
|
$
|
0.70
|
|
|
$
|
0.27
|
|
The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisitions taken place as of January 1, 2018 or the results of our future operations. Furthermore, the pro forma results do not give effect to all cost savings or incremental costs that may occur as a result of the integration and consolidation of the completed acquisitions.
6. ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR CREDIT LOSSES
A summary of the changes to allowance for credit losses follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Balance at beginning of period
|
$
|
1,468
|
|
$
|
931
|
|
|
$
|
809
|
|
|
|
Cumulative effect of new accounting principle
|
189
|
|
—
|
|
|
—
|
|
|
|
Additions - charged to expense
|
1,971
|
|
1,360
|
|
|
1,620
|
|
|
|
Deductions - bad debts written off, net of recoveries
|
(1,295)
|
|
(823)
|
|
|
(1,498)
|
|
|
|
Balance at end of period
|
$
|
2,333
|
|
$
|
1,468
|
|
|
$
|
931
|
|
|
|
|
|
|
|
|
|
|
|
7. RESTRICTED ASSETS
Restricted assets consist of investment securities held in trust on deposit with various banks as collateral for our obligations relative to our landfill final capping, closure and post-closure costs.
A summary of restricted assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Non Current:
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted investment securities - landfill closure
|
$
|
1,848
|
|
|
$
|
1,586
|
|
|
|
|
|
8. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Land
|
$
|
30,061
|
|
|
$
|
28,703
|
|
Landfills
|
635,144
|
|
|
578,814
|
|
Finance lease right-of-use assets
|
39,683
|
|
|
24,038
|
|
Buildings and improvements
|
169,325
|
|
|
161,316
|
|
Machinery and equipment
|
178,104
|
|
|
168,735
|
|
Rolling stock
|
204,333
|
|
|
183,145
|
|
Containers
|
154,744
|
|
|
143,948
|
|
|
1,411,394
|
|
|
1,288,699
|
|
Less: accumulated depreciation and amortization
|
(900,882)
|
|
|
(844,874)
|
|
|
$
|
510,512
|
|
|
$
|
443,825
|
|
Depreciation expense for fiscal years 2020, 2019 and 2018 was $54,370, $45,060 and $35,351, respectively. Landfill amortization expense for fiscal years 2020, 2019 and 2018 was $27,520, $27,512 and $31,841, respectively.
9. LEASES
A schedule of lease costs and other lease information follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31, 2020
|
|
Fiscal Year Ended
December 31, 2019
|
Lease cost:
|
|
|
|
Amortization of right-of-use assets
|
$
|
3,736
|
|
|
$
|
2,122
|
|
Interest expense
|
1,201
|
|
|
767
|
|
Fixed lease cost - vehicles, equipment and property
|
8,476
|
|
|
9,559
|
|
Fixed lease cost - landfill operating leases
|
7,781
|
|
|
7,711
|
|
Fixed lease cost
|
16,257
|
|
|
17,270
|
|
Short-term lease cost
|
3,430
|
|
|
3,878
|
|
Variable lease cost
|
514
|
|
|
190
|
|
Total lease cost
|
$
|
25,138
|
|
|
$
|
24,227
|
|
|
|
|
|
Other information:
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Financing cash flows for finance leases
|
$
|
4,940
|
|
|
$
|
2,601
|
|
Operating cash flows for operating leases
|
$
|
13,078
|
|
|
$
|
13,840
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
$
|
18,003
|
|
|
$
|
9,433
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
3,845
|
|
|
$
|
3,351
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Weighted-average remaining lease term - finance leases (years)
|
|
|
5.7
|
Weighted-average remaining lease term - operating leases (years)
|
|
|
10.6
|
Weighted-average discount rate - finance leases
|
|
|
4.2
|
%
|
Weighted-average discount rate - operating leases
|
|
|
4.8
|
%
|
Estimated minimum future lease obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
Fiscal year ending December 31, 2021
|
$
|
11,702
|
|
|
$
|
6,286
|
|
Fiscal year ending December 31, 2022
|
9,664
|
|
|
6,058
|
|
Fiscal year ending December 31, 2023
|
7,435
|
|
|
5,860
|
|
Fiscal year ending December 31, 2024
|
6,638
|
|
|
5,760
|
|
Fiscal year ending December 31, 2025
|
7,512
|
|
|
5,605
|
|
Thereafter
|
47,570
|
|
|
6,861
|
|
Total lease payments
|
90,521
|
|
|
36,430
|
|
Less: interest expense
|
(20,995)
|
|
|
(4,944)
|
|
Lease liability balance
|
$
|
69,526
|
|
|
$
|
31,486
|
|
10. GOODWILL AND INTANGIBLE ASSETS
A summary of the activity and balances related to goodwill by reporting segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Acquisitions
|
|
|
|
December 31, 2020
|
Eastern
|
$
|
30,720
|
|
|
$
|
153
|
|
|
|
|
$
|
30,873
|
|
Western
|
141,055
|
|
|
8,929
|
|
|
|
|
149,984
|
|
Resource Solutions
|
14,044
|
|
|
—
|
|
|
|
|
14,044
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
185,819
|
|
|
$
|
9,082
|
|
|
|
|
$
|
194,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Acquisitions
|
|
Other (1)
|
|
December 31, 2019
|
Eastern
|
$
|
28,154
|
|
|
$
|
2,566
|
|
|
$
|
—
|
|
|
$
|
30,720
|
|
Western
|
120,536
|
|
|
23,138
|
|
|
(2,619)
|
|
|
141,055
|
|
Resource Solutions
|
14,044
|
|
|
—
|
|
|
—
|
|
|
14,044
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
162,734
|
|
|
$
|
25,704
|
|
|
$
|
(2,619)
|
|
|
$
|
185,819
|
|
(1)Relates to unregistered sale of Class A common stock that was previously held in escrow and released to us for liquidation. See Note 14, Stockholders' Equity for additional disclosure.
A summary of intangible assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenants
Not-to-Compete
|
|
Client Lists
|
|
Total
|
Balance, December 31, 2020
|
|
|
|
|
|
Intangible assets
|
$
|
26,971
|
|
|
$
|
78,809
|
|
|
$
|
105,780
|
|
Less accumulated amortization
|
(20,547)
|
|
|
(26,909)
|
|
|
(47,456)
|
|
|
$
|
6,424
|
|
|
$
|
51,900
|
|
|
$
|
58,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenants
Not-to-Compete
|
|
Client Lists
|
|
Total
|
Balance, December 31, 2019
|
|
|
|
|
|
Intangible assets
|
$
|
26,162
|
|
|
$
|
71,122
|
|
|
$
|
97,284
|
|
Less accumulated amortization
|
(18,968)
|
|
|
(19,595)
|
|
|
(38,563)
|
|
|
$
|
7,194
|
|
|
$
|
51,527
|
|
|
$
|
58,721
|
|
Intangible amortization expense for fiscal years 2020, 2019 and 2018 was $8,893, $7,218 and $3,316, respectively.
The intangible amortization expense estimated for the five fiscal years following fiscal year 2020 and thereafter is as follows:
|
|
|
|
|
|
|
|
Estimated Future Amortization Expense as of December 31, 2020
|
|
Fiscal year ending December 31, 2021
|
$
|
7,869
|
|
Fiscal year ending December 31, 2022
|
$
|
7,208
|
|
Fiscal year ending December 31, 2023
|
$
|
6,969
|
|
Fiscal year ending December 31, 2024
|
$
|
7,898
|
|
Fiscal year ending December 31, 2025
|
$
|
8,116
|
|
Thereafter
|
$
|
20,264
|
|
11. FINAL CAPPING, CLOSURE AND POST-CLOSURE COSTS
Accrued final capping, closure and post-closure costs include the current and non-current portion of costs associated with obligations for final capping closure and post-closure of our landfills. We estimate our future final capping, closure and post-closure costs in order to determine the final capping, closure and post-closure expense per ton of waste placed into each landfill as further described in Note 3, Summary of Significant Accounting Policies. The anticipated time frame for paying these costs varies based on the remaining useful life of each landfill, as well as the duration of the post-closure monitoring period.
The changes to accrued final capping, closure and post-closure liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31,
|
|
2020
|
|
2019
|
Beginning balance
|
$
|
71,927
|
|
|
$
|
73,075
|
|
Obligations incurred
|
3,840
|
|
|
2,549
|
|
Revisions in estimates (1)
|
4,531
|
|
|
(1,538)
|
|
Accretion expense
|
6,436
|
|
|
6,227
|
|
Obligations settled (2)
|
(4,201)
|
|
|
(8,386)
|
|
Ending balance
|
$
|
82,533
|
|
|
$
|
71,927
|
|
(1)Relates to changes in estimates and assumptions concerning anticipated waste flow, cost and timing of future final capping, closure and post-closure activities at our landfills.
(2)May include amounts paid and amounts that are being processed through accounts payable as a part of our disbursement cycle.
12. DEBT
A summary of debt is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Senior Secured Credit Facility:
|
|
|
|
Revolving Credit Facility due May 2023 ("Revolving Credit Facility"); bearing interest at LIBOR plus 1.75%
|
$
|
—
|
|
|
$
|
26,900
|
|
Term Loan A Facility due May 2023 ("Term Loan Facility"); bearing interest at LIBOR plus 1.75%
|
350,000
|
|
|
350,000
|
|
Tax-Exempt Bonds:
|
|
|
|
New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014 ("New York Bonds 2014R-1") due December 2044 - fixed rate interest period through 2029; bearing interest at 2.875%
|
25,000
|
|
|
25,000
|
|
New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2014R-2 ("New York Bonds 2014R-2") due December 2044 - fixed rate interest period through 2026; bearing interest at 3.125%
|
15,000
|
|
|
15,000
|
|
New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2020 ("New York Bonds 2020") due September 2050 - fixed rate interest period through 2025; bearing interest at 2.750%
|
40,000
|
|
|
—
|
|
Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2005R-3 ("FAME Bonds 2005R-3") due January 2025 - fixed rate interest period through 2025; bearing interest at 5.25%
|
25,000
|
|
|
25,000
|
|
Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2015R-1 ("FAME Bonds 2015R-1") due August 2035 - fixed rate interest period through 2025; bearing interest at 5.125%
|
15,000
|
|
|
15,000
|
|
Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2015R-2 ("FAME Bonds 2015R-2") due August 2035 - fixed rate interest period through 2025; bearing interest at 4.375%
|
15,000
|
|
|
15,000
|
|
Vermont Economic Development Authority Solid Waste Disposal Long-Term Revenue Bonds Series 2013 ("Vermont Bonds") due April 2036 - fixed rate interest period through 2028; bearing interest at 4.625%
|
16,000
|
|
|
16,000
|
|
Business Finance Authority of the State of New Hampshire Solid Waste Disposal Revenue Bonds Series 2013 ("New Hampshire Bonds") due April 2029 - fixed rate interest period through 2029; bearing interest at 2.95%
|
11,000
|
|
|
11,000
|
|
Other:
|
|
|
|
Finance leases maturing through December 2107; bearing interest at a weighted average of 4.2%
|
31,486
|
|
|
18,364
|
|
Notes payable maturing through June 2027; bearing interest at a weighted average of 3.5%
|
4,933
|
|
|
5,464
|
|
Principal amount of debt
|
548,419
|
|
|
522,728
|
|
Less—unamortized discount and debt issuance costs (1)
|
8,768
|
|
|
9,406
|
|
Debt less unamortized discount and debt issuance costs
|
539,651
|
|
|
513,322
|
|
Less—current maturities of debt
|
9,240
|
|
|
4,301
|
|
|
$
|
530,411
|
|
|
$
|
509,021
|
|
(1)A summary of unamortized discount and debt issuance costs by debt instrument follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Revolving Credit Facility and Term Loan Facility (collectively, the "Credit Facility")
|
$
|
3,839
|
|
|
$
|
5,478
|
|
New York Bonds 2014R-1
|
1,000
|
|
|
1,057
|
|
New York Bonds 2014R-2
|
329
|
|
|
390
|
|
New York Bonds 2020
|
1,461
|
|
|
—
|
|
FAME Bonds 2005R-3
|
347
|
|
|
432
|
|
FAME Bonds 2015R-1
|
482
|
|
|
552
|
|
FAME Bonds 2015R-2
|
343
|
|
|
417
|
|
Vermont Bonds
|
487
|
|
|
541
|
|
New Hampshire Bonds
|
480
|
|
|
539
|
|
|
$
|
8,768
|
|
|
$
|
9,406
|
|
Credit Facility
In fiscal year 2018, we entered into a credit agreement ("Credit Agreement"), which provides for a $350,000 aggregate principal amount Term Loan Facility and a $200,000 Revolving Credit Facility. The net proceeds from this transaction were used to repay in full the amounts outstanding of the $350,000 aggregate principal amount term loan B facility ("Term Loan B Facility") and the $160,000 revolving line of credit facility plus accrued and unpaid interest thereon and to pay related transaction expenses. We have the right to request, at our discretion, an increase in the amount of loans under the Credit Facility by an aggregate amount of $125,000, subject to the terms and conditions set forth in the Credit Agreement.
The Credit Facility has a 5-year term that matures in May 2023 and bears interest at a rate of LIBOR plus 1.75% per annum, which will be reduced to a rate of LIBOR plus as low as 1.25% upon us reaching a consolidated net leverage ratio of less than 2.25x. The Credit Facility is guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries and secured by substantially all of our assets. As of December 31, 2020, further advances were available under the Credit Facility in the amount of $173,575. The available amount is net of outstanding irrevocable letters of credit totaling $26,425, at which date no amount had been drawn.
The Credit Agreement requires us to maintain a minimum interest coverage ratio and a maximum consolidated net leverage ratio, to be measured at the end of each fiscal quarter. As of December 31, 2020, we were in compliance with the covenants contained in the Credit Agreement. In addition to these financial covenants, the Credit Agreement also contains a number of important customary affirmative and negative covenants which restrict, among other things, our ability to sell assets, incur additional debt, create liens, make investments, and pay dividends. We do not believe that these restrictions impact our ability to meet future liquidity needs. 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.
Tax-Exempt Financings
New York Bonds. In fiscal year 2020, we completed the issuance of $40,000 aggregate principal amount of New York Bonds 2020. The New York Bonds 2020, which are unsecured and guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries, accrue interest at 2.75% per annum from September 2, 2020 through September 1, 2025, at which time they may be converted to a variable interest rate period or to a new term interest rate period. The New York Bonds 2020 mature on September 1, 2050. As of December 31, 2020, we had outstanding $40,000 aggregate principal amount of New York Bonds 2020.
In fiscal year 2019, we completed the remarketing of $25,000 aggregate principal amount of New York Bonds 2014R-1. As of December 31, 2020, we had outstanding $25,000 aggregate principal amount of New York Bonds 2014R-1 and $15,000 aggregate principal amount of New York Bonds 2014R-2 issued by the New York State Environmental Facilities Corporation under the indenture dated December 1, 2014 (collectively, the “New York Bonds 2014”). The New York Bonds 2014R-1 accrue interest at 2.875% per annum through December 2, 2029, at which time they may be converted from a fixed rate to a variable rate. The New York Bonds 2014R-2 accrue interest at 3.125% per annum through May 31, 2026, at which time they may be converted from a fixed rate to a variable rate. The New York Bonds 2014, which are unsecured and guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries, require interest payments on June 1 and December 1 of each year and mature on December 1, 2044. We borrowed the proceeds of the New York Bonds 2014 to finance or refinance certain capital projects in the state of New York and to pay certain costs of issuance of the New York Bonds 2014.
Maine Bonds. In fiscal year 2018, we completed the issuance of $15,000 aggregate principal amount of FAME Bonds 2015R-2. As of December 31, 2020, we had outstanding $25,000 aggregate principal amount of FAME Bonds 2005R-3, $15,000 aggregate principal amount of FAME Bonds 2015R-1, and $15,000 aggregate principal amount of FAME Bonds 2015R-2 (collectively, the "FAME Bonds"). The FAME Bonds 2005R-3 accrue interest at 5.25% per annum, and interest is payable semiannually on February 1 and August 1 of each year until such bonds mature on January 1, 2025. The FAME Bonds 2015R-1 accrue interest at 5.125% per annum through August 1, 2025, at which time they may be converted from a fixed to a variable rate, and interest is payable semiannually on February 1 and August 1 of each year until the FAME Bonds 2015R-1 mature on August 1, 2035. The FAME Bonds 2015R-2 accrue interest at 4.375% per annum through July 31, 2025, at which time they may be converted from a fixed to a variable rate, and interest is payable semiannually on May 1 and November 1 of each year until the FAME Bonds 2015R-2 mature on August 1, 2035. The FAME Bonds are unsecured and guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries. We borrowed the proceeds of the offering of the FAME Bonds to finance or refinance the costs of certain of our solid waste landfill facilities and solid waste collection, organics and transfer, recycling and hauling facilities, and to pay certain costs of the issuance of the FAME Bonds.
Vermont Bonds. In fiscal year 2018, we completed the remarketing of $16,000 aggregate principal amount of 4.75% fixed rate senior unsecured Vermont Bonds. As of December 31, 2020, we had outstanding $16,000 aggregate principal amount of Vermont Bonds. The Vermont Bonds, which are guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries, accrue interest at 4.625% per annum through April 2, 2028, after which time there is a mandatory tender, and interest is payable semiannually on May 1 and November 1 of each year. The Vermont Bonds mature on April 1, 2036. We borrowed the proceeds of the Vermont Bonds to finance or refinance certain qualifying property, plant and equipment assets purchased in the state of Vermont.
New Hampshire Bonds. In fiscal year 2019, we completed the remarketing of $11,000 aggregate principal amount of senior unsecured New Hampshire Bonds. As of December 31, 2020, we had outstanding $11,000 aggregate principal amount of New Hampshire Bonds. The New Hampshire Bonds, which are guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries, accrue interest at 2.95% per annum through maturity on April 1, 2029 and interest. During the fixed interest rate period, the New Hampshire Bonds are not supported by a letter of credit. Interest is payable on April 1 and October 1 of each year. We borrowed the proceeds of the New Hampshire Bonds to finance or refinance certain qualifying property, plant and equipment assets purchased in the state of New Hampshire.
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 2020, 2019 and 2018 of $0, $0 and $7,352, respectively:
•the write-off of debt issuance costs and unamortized discount, in the case of our Term Loan B Facility in fiscal year 2018, associated with the refinancing of our previously outstanding senior secured credit facility in fiscal year 2018; and
•the write-off of debt issuance costs in connection with the remarketing of our Vermont Bonds in fiscal year 2018.
Interest Expense
The components of interest expense are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Interest expense on long-term debt and finance leases
|
$
|
20,084
|
|
|
$
|
22,553
|
|
|
$
|
23,431
|
|
Amortization of debt issuance costs and discount on long-term debt
|
2,169
|
|
|
2,293
|
|
|
2,449
|
|
Letter of credit fees
|
531
|
|
|
519
|
|
|
554
|
|
Less: capitalized interest
|
(413)
|
|
|
(263)
|
|
|
(140)
|
|
Total interest expense
|
$
|
22,371
|
|
|
$
|
25,102
|
|
|
$
|
26,294
|
|
Cash Flow Hedges
Our strategy to reduce exposure to interest rate risk involves entering into interest rate derivative agreements to hedge against adverse movements in interest rates related to the variable rate portion of our long-term debt. We enter into interest rate derivative agreements to manage exposure to fluctuations in interest rates related to variable rate interest payments of our long-term debt.
In fiscal year 2020, we entered into three forward starting interest rate derivative agreements with a total notional amount of $60,000 that will serve to replace existing interest rate derivative agreements upon their expiration between June 2022 and May 2023. In fiscal year 2020, we also amended three interest rate derivative agreements to settle each of the 1.0% floors and replace each with a 0.0% floor in line with our Term Loan Facility, which resulted in us dedesignating the original hedging relationships. We subsequently designated new hedging relationships between the three interest rate derivative agreements and the variable rate interest payments related to the Term Loan Facility based on a quantitative assessment that was performed using regression analysis, which indicated that the hedging relationships were highly effective. Because the interest rate payments associated with the variable rate portion of our long-term debt will still occur, the net loss of $(765) associated with the dedesignated interest rate derivative agreements and the $430 cash settlement received in exchange for settling the 1.0% floors in accumulated other comprehensive loss were not reclassified into earnings. Instead, this loss and settlement amount will continue to be reclassified from accumulated other comprehensive loss into interest expense as the interest payments affect earnings.
As of both December 31, 2020 and December 31, 2019, our interest rate derivative agreements had a total notional amount of $190,000. According to the terms of the agreements, we receive interest based on the 1-month LIBOR index and pay interest at a weighted average rate of approximately 2.5%. The agreements mature between February 2021 and May 2023.
Additionally, we have forward starting interest rate derivative agreements with a total notional amount of $125,000 that mature between February 2026 and May 2028. We receive interest based on the 1-month LIBOR index, restricted by a 0.0% floor, and will pay interest at a weighted average rate of approximately 1.6%.
We have designated these derivative instruments as highly effective cash flow hedges, and therefore the change in fair value is recorded in our stockholders’ equity as a component of accumulated other comprehensive loss and included in interest expense at the same time as interest expense is affected by the hedged transactions. Differences paid or received over the life of the agreements are recorded as additions to or reductions of interest expense on the underlying debt and included in cash flows from operating activities.
A summary of the effect of cash flow hedges related to derivative instruments on the consolidated balance sheet follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Balance Sheet Location
|
|
December 31,
2020
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
Other accrued liabilities
|
|
$
|
4,774
|
|
|
$
|
1,824
|
|
Interest rate swaps
|
Other long-term liabilities
|
|
8,463
|
|
|
3,603
|
|
Total
|
|
|
$
|
13,237
|
|
|
$
|
5,427
|
|
|
|
|
|
|
|
Interest rate swaps
|
Accumulated other comprehensive loss, net
|
|
$
|
(13,434)
|
|
|
$
|
(5,929)
|
|
Interest rate swaps - tax benefit (provision)
|
Accumulated other comprehensive loss, net
|
|
1,917
|
|
|
(112)
|
|
|
|
|
$
|
(11,517)
|
|
|
$
|
(6,041)
|
|
A summary of the impact of the cash flow hedging relationships related to interest rate swaps reclassified from accumulated other comprehensive loss, net into earnings follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Statement of Operations Location
|
|
(Expense) Income
|
Interest expense
|
|
$
|
(3,679)
|
|
|
$
|
(115)
|
|
|
$
|
(287)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Debt
As of December 31, 2020, the fair value of our fixed rate debt, including the FAME Bonds, Vermont Bonds, New York Bonds 2020, New York Bonds 2014 and New Hampshire Bonds was approximately $174,161 and the carrying value was $162,000. The fair value of the FAME Bonds, Vermont Bonds, New York Bonds 2020, New York Bonds 2014 and New Hampshire Bonds is considered to be Level 2 within the fair value hierarchy as the fair value is determined using market approach pricing provided by a third-party that utilizes pricing models and pricing systems, mathematical tools and judgment to determine the evaluated price for the security based on the market information of each of the bonds or securities with similar characteristics.
As of December 31, 2020, the carrying value of our Term Loan Facility was $350,000 and the carrying value of our Revolving Credit Facility was $0. Their fair values are based on current borrowing rates for similar types of borrowing arrangements, or Level 2 inputs, and approximate their carrying values.
Although we have determined the estimated fair value amounts of the FAME Bonds, Vermont Bonds, New York Bonds 2020, New York Bonds 2014 and New Hampshire Bonds using available market information and commonly accepted valuation methodologies, a change in available market information, and/or the use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values. These amounts have not been revalued, and current estimates of fair value could differ significantly from the amounts presented.
Future Maturities of Debt
Aggregate principal maturities of debt are as follows:
|
|
|
|
|
|
|
|
Estimated Future Payments as of December 31, 2020
|
Fiscal year ending December 31, 2021
|
$
|
9,240
|
|
Fiscal year ending December 31, 2022
|
16,700
|
|
Fiscal year ending December 31, 2023
|
343,443
|
|
Fiscal year ending December 31, 2024
|
5,502
|
|
Fiscal year ending December 31, 2025
|
30,564
|
|
Thereafter
|
142,970
|
|
|
$
|
548,419
|
|
13. COMMITMENTS AND CONTINGENCIES
In the ordinary course of our business and as a result of the extensive governmental regulation of the solid waste industry, we are subject to various judicial and administrative proceedings involving state and local agencies. In these proceedings, an agency may seek to impose fines or to revoke or deny renewal of an operating permit held by us. From time to time, we may also be subject to actions brought by special interest or other groups, adjacent landowners or residents in connection with the permitting and licensing of landfills and transfer stations, or allegations of environmental damage or violations of the permits and licenses pursuant to which we operate. In addition, we may be named defendants in various claims and suits pending for alleged damages to persons and property, alleged violations of certain laws and alleged liabilities arising out of matters occurring during the ordinary operation of a waste management business.
In accordance with FASB ASC 450 - Contingencies, we accrue for legal proceedings, inclusive of legal costs, when losses become probable and reasonably estimable. As of the end of each applicable reporting period, we review each of our legal proceedings to determine whether it is probable, reasonably possible or remote that a liability has been incurred and, if it is at least reasonably possible, whether a range of loss can be reasonably estimated under the provisions of FASB ASC 450-20. In instances where we determine that a loss is probable and we can reasonably estimate a range of loss we may incur with respect to such a matter, we record an accrual for the amount within the range that constitutes our best estimate of the possible loss. If we are able to reasonably estimate a range, but no amount within the range appears to be a better estimate than any other, we record an accrual in the amount that is the low end of such range. When a loss is reasonably possible, but not probable, we will not record an accrual, but we will disclose our estimate of the possible range of loss where such estimate can be made in accordance with FASB ASC 450-20.
Environmental Remediation Liability (including related litigation)
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.
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 was operated by SRD and later closed in November 2018 when Southbridge Landfill reached its final capacity. Those results indicated the presence of contaminants above the levels triggering notice and response obligations under MADEP regulations. In response to those results, we carried out an Immediate Response Action pursuant to Massachusetts General Law Chapter 21E (the "Charlton 21E Obligations"). Further, we implemented a plan to analyze and better understand the groundwater near the Southbridge Landfill and we investigated 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 ("NELC") 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 17, 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 believed the Litigation to be factually inaccurate, and without legal merit, and we and SRD vigorously defended the Litigation.
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 retained jurisdiction of the Residents' claims. The Citizen Groups indicated an intent to appeal the Massachusetts Court’s decision to grant our Motion to Dismiss. In this regard, the Massachusetts Court denied the Citizen Groups' motion for an interlocutory appeal. The Residents moved for a stay of their case until the Citizen Groups appealed. We opposed the stay and in March 2019, the Massachusetts Court denied the Residents motion for a stay.
On September 18, 2020, we and the Town reached an agreement for settlement of all claims by the Citizens Groups and the Residents, upon the payment of $2,000 by us, and $1,000 by the Town, for a total of $3,000 to the Residents (the “Settlement”). In addition to resolving the claims of the Residents, the Citizens Groups have agreed to not appeal the decision of the Massachusetts Court to dismiss their previously alleged claims, although we have agreed to assent to a motion by the Citizens Groups to the Massachusetts Court to vacate the Massachusetts Court’s earlier decision. The settlement documents were finalized on October 23, 2020, and we made a settlement payment of $2,000 in the fiscal year ended December 31, 2020. See Note 18, Other Items and Charges for further discussion.
We entered into an Administrative Consent Order on April 26, 2017 (the “ACO”), with MADEP, the Town, and the Town of Charlton, committing us to equally share the costs with MADEP, of up to $10,000 ($5,000 each) for the Town to install a municipal waterline in the Town of Charlton ("Waterline"). Upon satisfactory completion of that Waterline, and other matters covered by the ACO, we and the Town will be released by MADEP from any future responsibilities for the Charlton 21E Obligations. We also entered into an agreement with the Town on April 28, 2017 entitled the “21E Settlement and Water System Construction Funding Agreement” (the “Waterline Agreement”), wherein we and the Town released each other from claims arising from the Charlton 21E Obligations. Pursuant to the Waterline Agreement, the Town issued a twenty (20) year bond for our portion of the Waterline costs in the amount of $4,089. We have agreed to reimburse the Town for periodic payments under such bond. Construction of the Waterline is complete and homeowners are relying on municipal water supply. Bond reimbursement to the Town commenced in the quarter ended June 30, 2020.
We have recorded an environmental remediation liability related to our obligation associated with 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.
A summary of the changes to the environmental remediation liability associated with the Southbridge Landfill follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31,
|
|
2020
|
|
2019
|
Beginning balance
|
$
|
4,596
|
|
|
$
|
5,173
|
|
Accretion expense
|
118
|
|
|
124
|
|
Obligations incurred
|
28
|
|
|
—
|
|
Revisions in estimates (1)
|
(188)
|
|
|
—
|
|
Obligations settled (2)
|
(293)
|
|
|
(701)
|
|
Ending balance
|
$
|
4,261
|
|
|
$
|
4,596
|
|
(1)The revision of estimate is associated with the completion of the environmental remediation at the site. See Note 18, Other Items and Charges to our consolidated financial statements for further discussion.
(2)May include amounts that are being processed through accounts payable as a part of our disbursements cycle.
During 2020, we received permit approvals to cap the entire Southbridge Landfill, and we completed capping of the side slopes during the 2020 construction season. Capping of the remaining top deck will be completed during 2021, and full approval for closure is anticipated during 2022.
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.
Potsdam Environmental Remediation Liability
On December 20, 2000, the State of New York Department of Environmental Conservation (“DEC”) issued an Order on Consent (“Order”) which named Waste-Stream, Inc. (“WSI”), our subsidiary, General Motors Corporation (“GM”) and Niagara Mohawk Power Corporation (“NiMo”) as Respondents. The Order required that the Respondents undertake certain work on a 25-acre scrap yard and solid waste transfer station owned by WSI in Potsdam, New York, including the preparation of a Remedial Investigation and Feasibility Study (“Study”). A draft of the Study was submitted to the DEC in January 2009 (followed by a final report in May 2009). The Study estimated that the undiscounted costs associated with implementing the preferred remedies would be approximately $10,219. On February 28, 2011, the DEC issued a Proposed Remedial Action Plan for the site and accepted public comments on the proposed remedy through March 29, 2011. We submitted comments to the DEC on this matter. In April 2011, the DEC issued the final Record of Decision (“ROD”) for the site. The ROD was subsequently rescinded by the DEC for failure to respond to all submitted comments. The preliminary ROD, however, estimated that the present cost associated with implementing the preferred remedies would be approximately $12,130. The DEC issued the final ROD in June 2011 with proposed remedies consistent with its earlier ROD. An Order on Consent and Administrative Settlement naming WSI and NiMo as Respondents was executed by the Respondents and DEC with an effective date of October 25, 2013. On January 29, 2016, a Cost-Sharing Agreement was executed between WSI, NiMo, Alcoa Inc. (“Alcoa”) and Reynolds Metal Company (“Reynolds”) whereby Alcoa and Reynolds elected to voluntarily participate in the onsite remediation activities at a combined 15% participant share. The majority of the remediation work has been completed as of December 31, 2020. WSI is jointly and severally liable with NiMo, Alcoa and Reynolds for the total cost to remediate.
We have recorded an environmental remediation liability associated with the Potsdam site based on incurred costs to date and estimated costs to complete the remediation in other accrued liabilities and other long-term liabilities. We inflate the estimated costs in current dollars to the expected time of payment and discount the total cost to present value using a risk-free interest rate of 1.9%.
A summary of the changes to the environmental remediation liability associated with the Potsdam site follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31,
|
|
2020
|
|
2019
|
Beginning balance
|
$
|
1,151
|
|
|
$
|
5,614
|
|
|
|
|
|
Obligations settled (1)
|
(212)
|
|
|
(4,463)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
$
|
939
|
|
|
$
|
1,151
|
|
(1)May include amounts that are being processed through accounts payable as a part of our disbursements cycle.
The total expected environmental remediation payments, in today’s dollars, for each of the five succeeding fiscal years and the aggregate amount thereafter are as follows:
|
|
|
|
|
|
Estimated Future Environmental Remediation Payments as of December 31, 2020
|
Fiscal year ending December 31, 2021
|
$
|
377
|
|
Fiscal year ending December 31, 2022
|
319
|
|
Fiscal year ending December 31, 2023
|
335
|
|
Fiscal year ending December 31, 2024
|
320
|
|
Fiscal year ending December 31, 2025
|
345
|
|
Thereafter
|
4,667
|
|
Total
|
$
|
6,363
|
|
A reconciliation of the expected aggregate non-inflated, undiscounted environmental remediation liability to the amount recognized in the statement of financial position is as follows:
|
|
|
|
|
|
|
|
Undiscounted liability
|
$
|
6,363
|
|
Less discount, net
|
(1,163)
|
|
Liability balance - December 31, 2020
|
$
|
5,200
|
|
Any substantial liability incurred by us arising from environmental damage could have a material adverse effect on our business, financial condition and results of operations. We are not presently aware of any other situations that would have a material adverse impact on our business, financial condition, results of operations or cash flows.
Legal Proceedings
North Country Environmental Services
On or about March 8, 2018, NELC and the Conservation Law Foundation ("CLF") (the "NH Citizen Groups") delivered correspondence to our subsidiary, North Country Environmental Services, Inc. ("NCES"), and us, providing notice of the NH 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 ("NCES Landfill"). On May 14, 2018, the NH 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 and an order requiring NCES to seek a Federal National Pollutant Discharge Elimination System permit for the operation of the NCES Landfill. On June 15, 2018, we and NCES filed a Motion to Dismiss the New Hampshire Litigation. On July 13, 2018, the NH 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. In March of 2019, we filed a motion in the New Hampshire Litigation asking for a stay of this litigation until certain appeals from discordant federal circuit courts were heard by the Supreme Court of the United States (“SCOTUS”), in the case identified as “County of Maui v. Hawaii Wildlife Fund (“MAUI”)". Our motion for a stay was granted in the New Hampshire Litigation, and SCOTUS heard the case in 2019 and issued a ruling on April 23, 2020. SCOTUS remanded the case to the U.S. Court of Appeals for the Ninth Circuit in San Francisco (the “Circuit Court”) ruling that the Circuit Court’s standard as to whether ground water impacts navigable waters is too broad. We do not believe that the MAUI decision resolves the issues presented in the New Hampshire Litigation, and until the Circuit Court rules in the remanded MAUI case, we intend to continue to vigorously defend against the New Hampshire Litigation, which we believe is without merit. The NH Citizens Groups filed a motion with the New Hampshire Court on July 15, 2020 to amend their complaint based on MAUI. The New Hampshire Court has granted the NH Citizen Groups' motion on September 2, 2020 and encouraged the parties to file Motions for Summary Judgments. We filed our Motion for Summary Judgment on November 20, 2020.
On October 9, 2020, we received a Type I-A Permit Modification for Expansion in the Stage VI area of the NCES Landfill (the “Permit”). On November 9, 2020, CLF filed an appeal of the Permit to the New Hampshire Waste Management Council on the grounds it failed to meet the public benefit criteria. On January 19, 2021, CLF filed a Complaint for Injunctive Relief with the Grafton Superior Court to enjoin NCES from accepting waste pursuant to the new Permit until such a time as CLF has exhausted its appeal rights. We will continue to vigorously defend against this litigation.
Ontario County, New York Class Action Litigation
On or about September 17, 2019, Richard Vandemortel and Deb Vandemortel ("Named Plaintiffs") filed a class action complaint against us on behalf of similarly situated citizens ("Class Members") in Ontario County, New York (the "New York Litigation") The lawsuit has been filed in Ontario County Supreme Court (the “New York Court”). It alleges that over one thousand (1,000) citizens constitute the putative class in the New York Litigation, and it seeks damages for diminution of property values and infringement of the putative class’ rights to live without interference to their daily lives due to odors emanating from the Subtitle D landfill located in Seneca, New York , which is operated by us pursuant to a long-term Operation, Maintenance and Lease Agreement with Ontario County. The New York Litigation was served on us on October 14, 2019, and the parties commenced settlement negotiations in early 2020. On December 1, 2020, the parties entered into a settlement agreement (the "Settlement Agreement") and thereafter the Named Plaintiffs and Class Members' counsel ("Counsel") moved the New York Court for entry of the Order on Notice/Preliminary Approvals. The proposed settlement payment includes a $750 payment to a Qualified Settlement Fund for the benefit of Counsel and one-time lump sum payments to the Named Plaintiffs and Class Members who opt into the Settlement Agreement. We will also commit $900 in expenses and capital improvements for remediation measures to be completed by December 31, 2022.
Hakes Landfill Litigation
On or about December 19, 2019, the New York State Department of Environmental Conservation (“Department”) issued certain permits to us to expand the landfill owned and operated by Hakes C&D Disposal Inc. in the Town of Campbell, Steuben County, New York (“Hakes Landfill”). The permits authorize approximately five years of expansion capacity at the Hakes Landfill. The authorizations issued by the Department followed approvals issued by the Town of Campbell Planning Board (“Planning Board”) in January 2019, and the Town Board of the Town of Campbell (“Town Board”) in March 2019, granting site plan review and a zoning change for the project.
Litigation was commenced by the Sierra Club, several other non-governmental organizations, and several individuals (“the Petitioners”), challenging the approvals issued by the Department, the Planning Board and the Town Board in New York State Supreme Court, Steuben County (the “Hakes Litigation”). The challenge was based upon allegations that the agencies issuing these approvals did not follow the requirements of Article 8 of the Environmental Conservation Law of the State of New York, the State Environmental Quality Review Act (“SEQRA”), by failing to address certain radioactivity issues alleged by
Petitioners to be associated with certain drilling wastes authorized for disposal at the Hakes Landfill. The Department opposed the Hakes Litigation on procedural grounds. We and the Town of Campbell opposed the Hakes Litigation on the merits, and on July 31, 2020, the Court dismissed the Hakes Litigation on the merits. The Petitioners filed a notice of appeal. The time to appeal expired on February 10, 2021, and the attorney for the Petitioners confirmed that they are not pursuing the appeal. Accordingly, all approvals issued for the expansion project are now final and binding.
Conservation Law Foundation, Inc. v Robert R. Scott, Commissioner, New Hampshire Department of Environmental Services
On or about February 11, 2021, the Conservation Law Foundation filed a complaint against Robert R. Scott, Commissioner of the New Hampshire Department of Environmental Services (“DES”), in the Merrimac County (NY) Superior Court. The complaint alleges that DES has failed to comply with the duty to establish and update a solid waste plan for the State of New Hampshire, and the duty to rely on that solid waste plan in determining whether to grant permits for proposed waste disposal facilities, and seeks a declaratory judgment that DES is violating statutory solid waste planning and regulatory requirements; a writ of mandamus ordering DES to achieve compliance with the statutory solid waste plan requirement; and an order enjoining DES from reviewing, and issuing decisions on, permit applications for new or expanded waste facilities, including a landfill under development by us in Dalton, New Hampshire ("Granite Site Landfill"), as well as any further review and decision-making required for permits it has already granted, including our NCES Landfill, until it has a legally valid state solid waste plan. On or about February 16, 2021, our subsidiary, Granite State Landfill, LLC, filed a motion to intervene in the action.
14. STOCKHOLDERS' EQUITY
Public Offering of Class A Common Stock
In fiscal year 2020, we completed a public offering of 2,703 shares of our Class A common stock at a public offering price of $56.00 per share. The offering resulted in net proceeds to us of $144,790, after deducting underwriting discounts, commissions and offering expenses. The net proceeds from the offering are to be used for general corporate purposes, including potential acquisitions or development of new operations or assets with the goal of complementing or expanding our business, and for working capital and capital expenditures.
In fiscal year 2019, we completed a public offering of 3,565 shares 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 $100,446, after deducting underwriting discounts and commissions and offering expenses. The net proceeds from the offering were and are to be used 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.
In fiscal year 2019, we completed the unregistered sale of 59 shares of our Class A common stock at a price of $44.15 per share. The sale resulted in net proceeds to us of $2,619. The shares were previously held in escrow according to the terms of our acquisition of WSI and released to us for liquidation to offset costs associated with the environmental remediation of the WSI's Potsdam, New York site. We recorded a $2,619 reduction of goodwill in line with business combination standards in place at the time the shares held in escrow were issued. See Note 13, Commitments and Contingencies for additional disclosure.
Common Stock
The holders of the Class A common stock are entitled to one vote for each share held. The holders of the Class B common stock are entitled to ten votes for each share held, except for the election of one director, who is elected by the holders of the Class A common stock exclusively. The Class B common stock is convertible into Class A common stock on a share-for-share basis at the option of the shareholder.
Preferred Stock
We are authorized to issue up to 944 shares of preferred stock in one or more series. As of December 31, 2020 and December 31, 2019, we had no shares issued.
Stock Based Compensation
Stock Incentive Plans
2016 Incentive Plan. In the fiscal year ended December 31, 2016, we adopted the 2016 Incentive Plan (“2016 Plan”). Under the 2016 Plan, we may grant awards up to an aggregate amount of shares equal to the sum of: (i) 2,250 shares of Class A common stock (subject to adjustment in the event of stock splits and other similar events), plus (ii) such additional number of shares of Class A common stock (up to 2,723 shares) as is equal to the sum of the number of shares of Class A common stock that remained available for grant under the 2006 Stock Incentive Plan ("2006 Plan") immediately prior to the expiration of the 2006 Plan and the number of shares of Class A common stock subject to awards granted under the 2006 Plan that expire or otherwise result in shares not being issued.
As of December 31, 2020, there were 1,104 Class A common stock equivalents available for future grant under the 2016 Plan, inclusive of additional Class A common stock equivalents that were previously issued under terminated plans and have become available for grant because such awards expired or otherwise resulted in shares not being issued.
Our equity awards granted consist of stock options, including market-based performance stock options, restricted stock, restricted stock units and performance stock units, including market-based performance stock units.
Stock options are granted at a price equal to the prevailing fair value of our Class A common stock at the date of grant. Generally, stock options granted have a term not to exceed ten years and vest over a one year to four year period from the date of grant.
The fair value of each stock option granted, with the exception of market-based performance stock option grants, is estimated using a Black-Scholes option-pricing model, which requires extensive use of accounting judgment and financial estimation, including estimates of the expected term stock option holders will retain their vested stock options before exercising them and the estimated volatility of our Class A common stock price over the expected term. The fair value of each market-based performance stock option granted is estimated using a Monte Carlo option-pricing model, which also requires extensive use of accounting judgment and financial estimation, including estimates of the expected term stock option holders will retain their vested stock options before exercising them and the estimated volatility of our Class A common stock price over the expected term, but also including estimates of share price appreciation of our Class A common stock as compared to the Russell 2000 Index over the requisite service period.
Restricted stock, restricted stock units and performance stock units are granted at a price equal to the fair value of our Class A common stock at the date of grant. The fair value of each market-based performance stock unit is estimated using a Monte Carlo pricing model, which requires extensive use of accounting judgment and financial estimation, including the estimated share price appreciation plus the value of dividends of our Class A common stock as compared to the Russell 2000 Index over the requisite service period.
Restricted stock granted to non-employee directors vest incrementally over a three year period beginning on the first anniversary of the date of grant. Restricted stock units granted to non-employee directors vest in full on the first anniversary of the grant date. Restricted stock units vest incrementally over an identified service period beginning on the grant date based on continued employment. Performance stock units and market-based performance stock units vest at a future date following the grant date and are based on the attainment of performance targets and market achievements.
Stock Options
A summary of stock option activity is as follows:
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Stock Options
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|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Term (years)
|
|
Aggregate
Intrinsic Value
|
Outstanding, December 31, 2019
|
98
|
|
|
$
|
9.20
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|
|
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|
Granted
|
—
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|
$
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—
|
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Exercised
|
(8)
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|
$
|
12.48
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Forfeited or expired
|
—
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$
|
—
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|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2020
|
90
|
|
|
$
|
8.91
|
|
|
4.7
|
|
$
|
4,780
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|
Exercisable, December 31, 2020
|
90
|
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|
$
|
8.91
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|
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4.7
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$
|
4,780
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During fiscal years 2020, 2019 and 2018, stock-based compensation expense for stock options was $0, $0 and 474, respectively.
During fiscal years 2020, 2019 and 2018, the aggregate intrinsic value of stock options exercised was $296, $19,475 and $1,916, respectively.
As of December 31, 2020, there was no remaining unrecognized stock-based compensation expense related to outstanding stock options.
Our calculation of stock-based compensation expense associated with stock options granted, with the exception of market-based performance stock option grants which are valued using a Monte Carlo option-pricing model, was made using the Black-Scholes valuation model. We did not grant any new stock options in fiscal years 2020, 2019 or 2018.
Expected life is calculated based on the weighted average historical life of the vested stock options, giving consideration to vesting schedules and historical exercise patterns. Risk-free interest rate is based on the U.S. Treasury yield curve for the period of the expected life of the stock option. Expected volatility is calculated using the weekly historical volatility of our Class A common stock over the expected life, except in the case of market-based performance stock option where the daily historical volatility of our Class A common stock over the expected life is used.
The Black-Scholes valuation model and the Monte Carlo option-pricing model each require extensive use of accounting judgment and financial estimation. Application of alternative assumptions could produce significantly different estimates of the fair value of stock-based compensation and consequently, the related amounts recognized in the consolidated statements of operations.
Other Stock Awards
A summary of restricted stock, restricted stock unit and performance stock unit activity is as follows:
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Restricted Stock,
Restricted Stock Units,
and Performance Stock
Units (1)
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Weighted
Average
Grant Price
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Weighted Average
Remaining
Contractual Term
(years)
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|
Aggregate Intrinsic
Value
|
Outstanding, December 31, 2019
|
393
|
|
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$
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28.23
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|
|
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Granted
|
162
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$
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47.86
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Class A common stock vested
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(240)
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$
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24.17
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Forfeited or canceled
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(8)
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$
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36.05
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Outstanding, December 31, 2020
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307
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$
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41.55
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1.7
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$
|
19,009
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Unvested, December 31, 2020
|
509
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$
|
42.77
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1.6
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$
|
31,527
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(1)Market-based performance stock unit grants are included at 100%. Attainment of maximum performance targets and market achievements would result in the issuance of an additional 202 shares of Class A common stock currently included in unvested. The market-based performance stock unit grants that vested in fiscal year 2020 resulted in the issuance of 87 additional shares of Class A common stock.
During fiscal years 2020, 2019 and 2018, stock-based compensation expense related to restricted stock, restricted stock units and performance stock units was $7,965, $7,036 and $7,821, respectively.
During fiscal years 2020, 2019 and 2018, the total fair value of other stock awards vested was $18,329, $8,177 and $10,529, respectively.
As of December 31, 2020, total unrecognized stock-based compensation expense related to outstanding restricted stock was $76, which will be recognized over a weighted average period of 2.3 years. As of December 31, 2020, total unrecognized stock-based compensation expense related to outstanding restricted stock units was $3,751, which will be recognized over a weighted average period of 1.8 years. As of December 31, 2020, total unrecognized stock-based compensation expense related to performance stock units was $4,597, which will be recognized over a weighted average period of 1.7 years.
The weighted average fair value of market-based performance stock units granted during fiscal year 2020 was $50.25 per award, which was calculated using a Monte Carlo pricing model assuming a risk free interest rate of 0.57% and an expected volatility of 31.0% assuming no expected dividend yield. Risk-free interest rate is based on the U.S. Treasury yield curve for the expected service period of the award. Expected volatility is calculated using the daily volatility of our Class A common stock over the expected service period of the award.
The Monte Carlo pricing model requires extensive use of accounting judgment and financial estimation. Application of alternative assumptions could produce significantly different estimates of the fair value of stock-based compensation and consequently, the related amounts recognized in the consolidated statements of operations.
We also recorded $254, $186 and $150 of stock-based compensation expense related to our Amended and Restated 1997 Employee Stock Purchase Plan during fiscal years 2020, 2019 and 2018, respectively.
Tax benefit for income taxes associated with stock-based compensation during fiscal years 2020, 2019 and 2018 of $(6,796), $(97) and $(23), respectively.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is a component of stockholders' equity included in the accompanying consolidated balance sheets and includes, as applicable, the effective portion of changes in the fair value of our cash flow hedges and the changes in fair value of our marketable securities.
The changes in the balances of each component of accumulated other comprehensive income (loss) are as follows:
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Marketable
Securities
|
|
Interest Rate Swaps
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Total
|
Balance as of December 31, 2017
|
$
|
18
|
|
|
$
|
166
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|
|
|
|
$
|
184
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|
Cumulative effect of new accounting principle
|
(18)
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|
|
—
|
|
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|
(18)
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Other comprehensive loss before reclassifications
|
—
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|
(1,837)
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|
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|
(1,837)
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|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
363
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|
|
|
|
363
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|
|
|
|
|
|
|
|
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Other comprehensive loss
|
—
|
|
|
(1,474)
|
|
|
|
|
(1,474)
|
|
Balance as of December 31, 2018
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—
|
|
|
(1,308)
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|
(1,308)
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Other comprehensive loss before reclassifications
|
—
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|
(5,286)
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|
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|
(5,286)
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|
Amounts reclassified from accumulated other comprehensive loss
|
—
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|
|
553
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|
|
553
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|
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Other comprehensive loss
|
—
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|
|
(4,733)
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|
|
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|
(4,733)
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Balance as of December 31, 2019
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—
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|
|
(6,041)
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|
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|
(6,041)
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Cumulative effect of new accounting principle
|
—
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|
—
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—
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Other comprehensive loss before reclassifications
|
—
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|
|
(11,184)
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|
(11,184)
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Amounts reclassified from accumulated other comprehensive loss
|
—
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|
|
3,679
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|
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|
3,679
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Income tax benefit related to items in other comprehensive loss
|
—
|
|
|
2,029
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|
|
|
|
2,029
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Other comprehensive loss
|
—
|
|
|
(5,476)
|
|
|
|
|
(5,476)
|
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Balance as of December 31, 2020
|
$
|
—
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|
|
$
|
(11,517)
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|
|
|
|
$
|
(11,517)
|
|
A summary of reclassifications out of accumulated other comprehensive income (loss) for fiscal years 2020, 2019 and 2018 is as follows:
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Fiscal Year Ended
December 31,
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2020
|
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2019
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2018
|
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Details About Accumulated Other Comprehensive Income (Loss) Components
|
Amounts Reclassified Out of Accumulated Other Comprehensive Income (Loss)
|
|
Affected Line Item in the Consolidated
Statements of Operations
|
Interest rate swaps
|
$
|
3,679
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|
|
$
|
115
|
|
|
$
|
287
|
|
|
Interest expense
|
|
3,679
|
|
|
115
|
|
|
287
|
|
|
Income before income taxes
|
|
(2,029)
|
|
|
—
|
|
|
—
|
|
|
Benefit for income taxes
|
|
$
|
5,708
|
|
|
$
|
115
|
|
|
$
|
287
|
|
|
Net income
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15. FAIR VALUE OF FINANCIAL INSTRUMENTS
We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. These tiers include: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data.
We use valuation techniques that maximize the use of market prices and observable inputs and minimize the use of unobservable inputs. In measuring the fair value of our financial assets and liabilities, we rely on market data or assumptions that we believe market participants would use in pricing an asset or a liability.
Assets and Liabilities Accounted for at Fair Value on a Recurring Basis
Our financial instruments include cash and cash equivalents, accounts receivable, restricted investment securities held in trust on deposit with various banks as collateral for our obligations relative to our landfill final capping, closure and post-closure costs, interest rate derivatives, trade payables and long-term debt. The carrying values of cash and cash equivalents, accounts receivable and trade payables approximate their respective fair values due to their short-term nature. The fair value of restricted investment securities held in trust, which are valued using quoted market prices, are included as restricted assets in the Level 1 tier below. The fair value of interest rate derivatives included in the Level 2 tier below is calculated using discounted cash flow valuation methodologies based upon the one month LIBOR yield curves that are observable at commonly quoted intervals for the full term of the swaps. We recognize all derivatives accounted for on the balance sheet at fair value. See Note 12, Debt for disclosure over the fair value of debt.
Recurring Fair Value Measurements
Summaries of our financial assets and liabilities that are measured at fair value on a recurring basis are as follows:
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Fair Value Measurement at December 31, 2020 Using:
|
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Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
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Significant Other
Observable Inputs
(Level 2)
|
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Significant
Unobservable Inputs
(Level 3)
|
Assets:
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Restricted investment securities - landfill closure
|
$
|
1,848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
13,237
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|
|
$
|
—
|
|
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Fair Value Measurement at December 31, 2019 Using:
|
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Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
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Significant Other
Observable Inputs
(Level 2)
|
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Significant
Unobservable Inputs
(Level 3)
|
Assets:
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|
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|
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Restricted investment securities - landfill closure
|
$
|
1,586
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|
|
$
|
—
|
|
|
$
|
—
|
|
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|
|
|
|
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|
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|
|
Liabilities:
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
5,427
|
|
|
$
|
—
|
|
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|
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16. EMPLOYEE BENEFIT PLANS
Defined Contribution Plan
We offer our eligible employees the opportunity to contribute to a 401(k) plan (“401(k) Plan”). Under the provisions of the 401(k) Plan participants may direct us to defer a portion of their compensation to the 401(k) Plan, subject to Internal Revenue Code limitations. In fiscal year 2020, we provided an employer matching contribution for hourly employees equal to 100% of every dollar an employee invests up to 1% of annual income and 50% of additional employee contributions up to a maximum contribution into the 401(k) Plan of 3% of annual income, subject to revision. In fiscal year 2020, we provided an employer matching contribution for salaried employees equal to 50% of every dollar an employee invests in the 401(k) Plan up to a maximum contribution of one thousand five hundred dollars per employee per calendar year, subject to revision. Participants vest in employer contributions ratable over a two-year period. Employer contributions for fiscal years 2020, 2019 and 2018 amounted to $2,357, $1,608 and $1,319, respectively.
Employee Stock Purchase Plan
We offer our eligible employees the opportunity to participate in an employee stock purchase plan. Under this plan, qualified employees may purchase shares of Class A common stock by payroll deduction at a 15% discount from the market price. During fiscal years 2020, 2019 and 2018, 20, 23 and 26 shares, respectively, of Class A common stock were issued under this plan. As of December 31, 2020, 74 shares of Class A common stock were available for distribution under this plan.
Multiemployer Pension Plan
We make contributions to a multiemployer defined benefit pension plan, the New England Teamsters and Trucking Industry Pension Fund (the “Pension Plan”), under the terms of a collective bargaining agreement (“CBA”) that covers certain of our union represented employees. The EIN or Pension Plan Number for the Pension Plan is 04-6372430. The Pension Plan provides retirement benefits to participants based on their service to contributing employers. We do not administer the Pension Plan. The risks of participating in a multiemployer pension plan are different from a single-employer pension plan in that: (i) assets contributed to the multiemployer pension plan by one employer may be used to provide benefits to employees or former employees of other participating employers; (ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be required to be assumed by the remaining participating employers; and (iii) if we choose to stop participating in our multiemployer Pension Plan, we may be required to pay the plan a withdrawal amount based on the underfunded status of the plan.
In fiscal year 2019, we reached an agreement to withdraw from the Pension Plan by entering into Withdrawal and Re-entry Agreements with the Pension Plan. In accordance with FASB ASC 450 - Contingencies, because of our withdrawal from the Pension Plan, we recorded an obligation of $3,194 and a charge of $3,591 as pension withdrawal expense, offset by a $397 retroactive contribution credit recorded as cost of operations, in fiscal year 2019. While the withdrawal generates a fixed yearly contingent liability for us for a period of approximately seventeen (17) years, it caps our gross payments at $4,224 significantly reducing our cash exposure from the potential $18,511 withdrawal liability as determined based on a complete withdrawal prior to withdrawing from the Pension Plan. As per the Re-entry Agreements and upon withdrawal, we re-entered the Pension Plan as a new employer with certainty from a liability perspective. As of December 31, 2020, we had a remaining obligation of $1,757 in aggregate principal amount associated with our withdrawal. We did not, however, change the terms of our CBA with Local 170, which remained in effect until it expired on June 30, 2020, at which time a new agreement was entered into. As a new employer in the Pension Plan, our contributions are projected to fully fund the benefits accrued by our employee's in the Pension Plan. As of December 31, 2020, our employees were fully funded as a new employer in the Pension Plan, subject to the terms of the Agreements. Subsequent withdrawal from the Pension Plan, under certain circumstances, may result in a change in the payment schedule required to settle the remaining obligation associated with our withdrawal. During fiscal years 2020, 2019 and 2018, we made contributions to the Pension Plan of $390, $409 and $726, respectively.
17. INCOME TAXES
A summary of the benefit for income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Federal
|
|
|
|
|
|
Current
|
$
|
(951)
|
|
|
$
|
(951)
|
|
|
$
|
(1,902)
|
|
|
|
|
|
|
|
Deferred
|
(35,177)
|
|
|
(699)
|
|
|
1,255
|
|
|
(36,128)
|
|
|
(1,650)
|
|
|
(647)
|
|
State
|
|
|
|
|
|
Current
|
435
|
|
|
321
|
|
|
268
|
|
|
|
|
|
|
|
Deferred
|
(17,111)
|
|
|
(545)
|
|
|
(5)
|
|
|
(16,676)
|
|
|
(224)
|
|
|
263
|
|
Benefit for income taxes
|
$
|
(52,804)
|
|
|
$
|
(1,874)
|
|
|
$
|
(384)
|
|
On a periodic basis, we reassess the valuation allowance on our deferred income tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. In the fourth quarter of fiscal year 2020, we assessed the valuation allowance and considered positive evidence, including significant cumulative consolidated income over the three years ended December 31, 2020, revenue growth and expectations of future profitability, and negative evidence, including the impact of a negative change in the economic climate, significant risks and uncertainties in the business and restrictions on tax loss utilization in certain state jurisdictions. After assessing both the positive evidence and the negative evidence, we determined it was more likely than not that the majority of our deferred tax assets would be realized in the future and released the valuation allowance on the majority of our net operating loss carryforwards and other deferred tax assets as of December 31, 2020, resulting in a benefit from income taxes of $61,317. As of December 31, 2020, we maintained a valuation allowance of $6,482 primarily related to deferred tax assets that would generate capital losses when realized and deferred tax assets related to certain state jurisdictions.
In assessing the realizability of carryforwards and other deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We adjust the valuation allowance in the period
management determines it is more likely than not that deferred tax assets will or will not be realized. The change in the valuation allowance was a decrease of $61,317 for fiscal year 2020 and $3,539 from fiscal year 2019. In determining the need for a valuation allowance, we have assessed the available means of recovering deferred tax assets, including the ability to carryback net operating losses, the existence of reversing temporary differences, and available sources of future taxable income. We have also considered the ability to implement certain strategies, such as a potential sale of assets that would, if necessary, be implemented to accelerate taxable income and use expiring deferred tax assets.
During fiscal year 2019, we recognized a $(2,385) deferred tax benefit, due to a reduction of the valuation allowance on acquisitions. In determining the need for a valuation allowance, we have assessed the available means of recovering deferred tax assets, including the existence of reversing temporary differences. The valuation allowance decreased due to the recognition of additional reversing temporary differences from the $2,385 deferred tax liability recorded through goodwill on the acquisition of a company in May 2019. The deferred tax liabilities related to the acquisition was based on the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The valuation allowance was reduced by $(2,137) in the quarter ended June 30, 2019, with the offsetting increase in the goodwill, based on initial estimates of the acquired temporary differences. The valuation allowance was decreased by $(248) in the quarter ended December 31, 2019, with an offsetting adjustment to goodwill, based on the availability of better estimates upon the filing of the prior year returns by the sellers.
During fiscal year 2019, we recognized a $(297) deferred tax benefit due to a reduction of the deferred tax liability related to indefinite lived assets. The financial statement value of indefinite lived goodwill was reduced as a result of a settlement of an acquisition contingency that pre-dated the effective date of ASC 805, which resulted in a reduction of the related deferred tax liability.
The differences in the benefit for income taxes and the amounts determined by applying the Federal statutory rate to income before provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019 (1)
|
|
2018
|
Federal statutory rate
|
21
|
%
|
|
21
|
%
|
|
21
|
%
|
Tax at statutory rate
|
$
|
8,043
|
|
|
$
|
6,254
|
|
|
$
|
1,268
|
|
State income taxes, net of federal benefit
|
1,615
|
|
|
1,008
|
|
|
(89)
|
|
Change in valuation allowance
|
(61,317)
|
|
|
(4,420)
|
|
|
(1,613)
|
|
Federal effect of change in state valuation allowance
|
3,803
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Deductible stock awards
|
(3,790)
|
|
|
(6,004)
|
|
|
(2,048)
|
|
Deferred tax adjustments
|
(2,047)
|
|
|
—
|
|
|
—
|
|
Non-deductible expenses
|
656
|
|
|
638
|
|
|
633
|
|
Non-deductible officer compensation
|
487
|
|
|
1,359
|
|
|
2,214
|
|
Tax credits
|
(130)
|
|
|
(82)
|
|
|
(686)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
(124)
|
|
|
(627)
|
|
|
(63)
|
|
Benefit for income taxes
|
$
|
(52,804)
|
|
|
$
|
(1,874)
|
|
|
$
|
(384)
|
|
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. A summary of deferred tax assets and liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019 (1)
|
Deferred tax assets:
|
|
|
|
Accrued expenses and reserves
|
$
|
35,444
|
|
|
$
|
36,559
|
|
Net operating loss carryforwards
|
34,364
|
|
|
40,556
|
|
General business and state tax credit carryforwards
|
8,044
|
|
|
8,422
|
|
Unrealized loss on hedges and swaps
|
3,798
|
|
|
1,768
|
|
Stock awards
|
2,824
|
|
|
3,097
|
|
Book over tax depreciation of property and equipment
|
—
|
|
|
2,882
|
|
Alternative minimum tax credit carryforwards
|
—
|
|
|
951
|
|
|
|
|
|
Other
|
2,307
|
|
|
2,600
|
|
Total deferred tax assets
|
86,781
|
|
|
96,835
|
|
Less: valuation allowance
|
(6,482)
|
|
|
(67,799)
|
|
Total deferred tax assets after valuation allowance
|
80,299
|
|
|
29,036
|
|
Deferred tax liabilities:
|
|
|
|
Amortization of intangibles
|
(18,044)
|
|
|
(22,910)
|
|
Tax over book depreciation of property and equipment
|
(1,875)
|
|
|
—
|
|
Other
|
(129)
|
|
|
(192)
|
|
Total deferred tax liabilities
|
(20,048)
|
|
|
(23,102)
|
|
Net deferred tax asset
|
$
|
60,251
|
|
|
$
|
5,934
|
|
(1)Adjusted for deductibility of certain stock awards and state tax credits, with an offset to the valuation allowance.
The net deferred tax asset at December 31, 2020 is reflected on the balance sheet as a long-term deferred federal and state tax asset of $61,163 and a long-term deferred state tax liability of $(912).
As of December 31, 2020, we have, for federal income tax purposes, net operating loss carryforwards of approximately $92,494 that expire in the fiscal years ending December 31, 2032 through 2037 and $46,453, which do not expire. We have state net operating loss carryforwards of approximately $68,195 that expire in the fiscal years ending December 31, 2021 through 2040 or that do not expire in certain jurisdictions. In addition, we have $6,416 general business credit carryforwards which expire in the fiscal years ending December 31, 2022 through 2040 and $2,060 state credit carryforwards which expire in fiscal years ending December 31, 2028 through 2039. Sections 382 and 383 of the Internal Revenue Code can limit the amount of net operating loss and credit carryforwards which may be used in a tax year in the event of certain stock ownership changes. With the exception of $1,756 federal net operating losses we acquired through acquisitions, we are not currently subject to these limitations but could become subject to them if there were significant changes in the ownership of our stock.
The provisions of FASB ASC 740-10-25-5 prescribe the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Additionally, FASB ASC 740-10-25-5 provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under FASB ASC 740-10-25-5, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31,
|
|
2020
|
|
2019
|
Unrecognized tax benefits at beginning of period
|
$
|
1
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
Reductions resulting from lapse of statute of limitations
|
(1)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits at end of period
|
$
|
—
|
|
|
$
|
1
|
|
Included in the balances at December 31, 2019 is $1 of unrecognized tax benefits (net of the federal benefit on state issues) that, if recognized, would favorably affect the effective income tax rate in future periods.
Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. Related to uncertain tax positions during fiscal years 2020 and 2019, we have accrued interest of $0 and $1 and penalties of $0 and $1, respectively. We accrued $(1), $(1) and $(2) for interest and penalties in income tax expense related to uncertain tax positions during fiscal years 2020, 2019 and 2018, respectively.
To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued are reflected as a reduction of the overall income tax provision.
We are subject to U.S. federal income tax, as well as income tax of multiple state jurisdictions. Due to Federal and state net operating loss carryforwards, income tax returns from years ending in 1998 through 2020 remain open for examination, with limited exceptions.
18. OTHER ITEMS AND CHARGES
Southbridge Landfill Closure Charge, Net
In the fiscal year ended December 31, 2017, we initiated the plan to cease operations of our Southbridge Landfill and later closed it in November 2018 when Southbridge Landfill reached its final capacity. Accordingly, in fiscal years 2020, 2019 and 2018, we recorded charges associated with the closure of our Southbridge Landfill as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Legal and transaction costs (1)
|
$
|
2,285
|
|
|
$
|
2,709
|
|
|
$
|
2,102
|
|
Legal settlement charge (2)
|
2,000
|
|
|
—
|
|
|
1,216
|
|
Landfill closure project charge (3)
|
490
|
|
|
—
|
|
|
6,012
|
|
Environmental remediation charge (4)
|
(188)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract settlement charge (5)
|
—
|
|
|
—
|
|
|
8,724
|
|
Recovery on insurance settlement (6)
|
—
|
|
|
—
|
|
|
(10,000)
|
|
Southbridge Landfill closure charge, net
|
$
|
4,587
|
|
|
$
|
2,709
|
|
|
$
|
8,054
|
|
|
|
|
|
|
|
(1)We incurred legal costs as well as other transaction costs associated with various matters as part of the Southbridge Landfill closure.
(2)We established reserves and made payments associated with legal settlements associated with claims against us as part of the Southbridge Landfill closure.
(3)We recorded a landfill closure project charge associated with increased costs under the revised closure plan at our Southbridge Landfill.
(4)We recorded an environmental remediation reversal associated with the completion of environmental remediation at the site.
(5)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.
(6)We recorded a recovery on an environmental insurance settlement associated with the Southbridge Landfill closure.
See Note 13, Commitments and Contingencies for further disclosure over the Southbridge Landfill closure..
Expense from Acquisition Activities and Other Items
In fiscal year 2020, we recorded a charge of $1,862 comprised primarily of legal, consulting and other similar costs associated with the acquisition and integration of acquired businesses or select development projects. In fiscal year 2019, we recorded a charge of $2,687 associated primarily with acquisition activities. In fiscal year 2018, we recorded a charge of $1,872 associated with acquisition activities and the write-off of deferred costs related to the expiration of our shelf registration statement. See Note 5, Business Combinations for disclosure regarding acquisition activity.
Contract Settlement Charge
In fiscal year 2018, we recorded a contract settlement charge of $2,100 associated with the termination and discounted buy-out of a commodities marketing and brokerage agreement.
Development Project Charge
In fiscal year 2018, we recorded a development project charge of $311 associated with previously deferred costs that were written off as a result of the negative vote in a public referendum relating to the NCES Landfill.
19. EARNINGS PER SHARE
A summary of the numerator and denominators used in the computation of earnings per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
Net income
|
$
|
91,106
|
|
|
$
|
31,653
|
|
|
$
|
6,420
|
|
Denominator:
|
|
|
|
|
|
Class A common stock
|
50,101
|
|
|
46,803
|
|
|
41,944
|
|
Class B common stock
|
988
|
|
|
988
|
|
|
988
|
|
Shares to be issued - acquisition
|
—
|
|
|
36
|
|
|
103
|
|
Unvested restricted stock
|
(2)
|
|
|
—
|
|
|
(9)
|
|
Effect of weighted average shares outstanding
|
(2,294)
|
|
|
(601)
|
|
|
(338)
|
|
Basic weighted average common shares outstanding
|
48,793
|
|
|
47,226
|
|
|
42,688
|
|
Impact of potentially dilutive securities:
|
|
|
|
|
|
Dilutive effect of stock options and stock awards
|
252
|
|
|
740
|
|
|
1,480
|
|
Diluted weighted average common shares outstanding
|
49,045
|
|
|
47,966
|
|
|
44,168
|
|
Antidilutive potentially issuable shares
|
—
|
|
|
2
|
|
|
2
|
|
20. RELATED PARTY TRANSACTIONS
Services
During fiscal years 2020, 2019 and 2018, we retained the services of Casella Construction, Inc. ("CCI"), a company substantially owned by sons of John Casella, our Chairman and Chief Executive Officer, and Douglas Casella, a member of our Board of Directors, as a contractor in developing or closing certain landfills owned by us as well as providing transportation services. Total purchased services charged to operations or capitalized to landfills for fiscal years 2020, 2019 and 2018 were $13,046, $7,574 and $3,442, respectively, of which $1,297 and $851 were outstanding and included in either accounts payable or other current liabilities as of December 31, 2020 and December 31, 2019, respectively.
In addition to the total purchased services, we provided various waste collection and disposal services to CCI. Total revenues recorded for fiscal years 2020, 2019 and 2018 were $288, $132 and $156, respectively.
Leases
In the fiscal year ended April 30, 1994, we entered into two leases for operating facilities with a partnership of which John Casella, our Chairman and Chief Executive Officer, and Douglas Casella, a member of our Board of Directors, are the general partners. The leases have since been extended through August 2023. The terms of the lease agreements require monthly payments of approximately $29. Total expense charged to operations for fiscal years 2020, 2019 and 2018 under these agreements was $319, $339 and $349, respectively.
Landfill Post-closure
We have agreed to pay the cost of post-closure on a landfill owned by John Casella, our Chairman and Chief Executive Officer, and Douglas Casella, a member of our Board of Directors. We paid the cost of closing this landfill in 1992, and the post-closure maintenance obligations are expected to last until the fiscal year ending December 31, 2024. In fiscal years 2020, 2019 and 2018, we paid $8, $9 and $14, respectively, pursuant to this agreement. As of December 31, 2020 and December 31, 2019, we have accrued $25 and $37, respectively, for costs associated with its post-closure obligations.
21. SEGMENT REPORTING
We report selected information about our reportable operating segments in a manner consistent with that used for internal management reporting. We classify our solid waste operations on a geographic basis through regional operating segments, our Western and Eastern regions. Revenues associated with our solid waste operations are derived mainly from solid waste collection and disposal, landfill, landfill gas-to-energy, transfer and recycling services in the northeastern United States. We classify our resource-renewal services by service in our Resource Solutions operating segment. Revenues associated with our resource-renewal operations are derived from organics services, large scale commercail and industrial services, as well as recycling services generated from both municipalities and customers in the form of processing fees, tipping fees and commodity sales. Legal, tax, information technology, human resources, certain finance and accounting and other administrative functions are included in our Corporate Entities operating segment.
Fiscal Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
Outside
revenues
|
|
Inter-company
revenue
|
|
Depreciation and
amortization
|
|
Operating income (loss)
|
|
Interest
expense, net
|
|
Capital
expenditures
|
|
Goodwill
|
|
Total assets
|
Eastern
|
$
|
220,285
|
|
|
$
|
53,102
|
|
|
$
|
25,669
|
|
|
$
|
11,635
|
|
|
$
|
275
|
|
|
$
|
29,292
|
|
|
$
|
30,873
|
|
|
$
|
223,492
|
|
Western
|
357,989
|
|
|
116,658
|
|
|
56,457
|
|
|
42,688
|
|
|
141
|
|
|
71,989
|
|
|
149,984
|
|
|
642,003
|
|
Resource Solutions
|
196,310
|
|
|
10,675
|
|
|
6,279
|
|
|
7,357
|
|
|
201
|
|
|
2,477
|
|
|
14,044
|
|
|
88,512
|
|
Corporate Entities
|
—
|
|
|
—
|
|
|
2,377
|
|
|
(2,383)
|
|
|
21,451
|
|
|
4,350
|
|
|
—
|
|
|
239,891
|
|
Eliminations
|
—
|
|
|
(180,435)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
774,584
|
|
|
$
|
—
|
|
|
$
|
90,782
|
|
|
$
|
59,297
|
|
|
$
|
22,068
|
|
|
$
|
108,108
|
|
|
$
|
194,901
|
|
|
$
|
1,193,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
Outside
revenues
|
|
Inter-company
revenue
|
|
Depreciation and
amortization
|
|
Operating income (loss)
|
|
Interest
expense, net
|
|
Capital
expenditures
|
|
Goodwill
|
|
Total assets
|
Eastern
|
$
|
219,475
|
|
|
$
|
54,738
|
|
|
$
|
24,322
|
|
|
$
|
9,503
|
|
|
$
|
218
|
|
|
$
|
24,499
|
|
|
$
|
30,720
|
|
|
$
|
207,060
|
|
Western
|
345,212
|
|
|
98,420
|
|
|
47,650
|
|
|
42,019
|
|
|
63
|
|
|
63,547
|
|
|
141,055
|
|
|
599,047
|
|
Resource Solutions
|
178,603
|
|
|
10,762
|
|
|
5,342
|
|
|
5,807
|
|
|
156
|
|
|
12,475
|
|
|
14,044
|
|
|
90,660
|
|
Corporate Entities
|
—
|
|
|
—
|
|
|
2,476
|
|
|
(4,254)
|
|
|
24,298
|
|
|
2,644
|
|
|
—
|
|
|
35,415
|
|
Eliminations
|
—
|
|
|
(163,920)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
743,290
|
|
|
$
|
—
|
|
|
$
|
79,790
|
|
|
$
|
53,075
|
|
|
$
|
24,735
|
|
|
$
|
103,165
|
|
|
$
|
185,819
|
|
|
$
|
932,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
Outside
revenues
|
|
Inter-company
revenue
|
|
Depreciation and
amortization
|
|
Operating income (loss)
|
|
Interest
expense, net
|
|
Capital
expenditures
|
|
Goodwill
|
|
Total assets
|
Eastern
|
$
|
206,473
|
|
|
$
|
52,866
|
|
|
$
|
26,538
|
|
|
$
|
4,684
|
|
|
$
|
12
|
|
|
$
|
23,393
|
|
|
$
|
28,154
|
|
|
$
|
184,679
|
|
Western
|
290,358
|
|
|
82,240
|
|
|
35,827
|
|
|
41,631
|
|
|
405
|
|
|
41,821
|
|
|
120,536
|
|
|
430,045
|
|
Resource Solutions
|
163,829
|
|
|
7,684
|
|
|
5,697
|
|
|
(1,916)
|
|
|
(3,104)
|
|
|
5,360
|
|
|
14,044
|
|
|
79,403
|
|
Corporate Entities
|
—
|
|
|
—
|
|
|
2,446
|
|
|
(4,666)
|
|
|
28,708
|
|
|
2,658
|
|
|
—
|
|
|
38,283
|
|
Eliminations
|
—
|
|
|
(142,790)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
660,660
|
|
|
$
|
—
|
|
|
$
|
70,508
|
|
|
$
|
39,733
|
|
|
$
|
26,021
|
|
|
$
|
73,232
|
|
|
$
|
162,734
|
|
|
$
|
732,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of our total revenue attributable to services provided are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Collection
|
$
|
391,438
|
|
|
50.5
|
%
|
|
$
|
372,041
|
|
|
50.1
|
%
|
|
$
|
303,418
|
|
|
45.9
|
%
|
Disposal
|
175,546
|
|
|
22.7
|
%
|
|
181,895
|
|
|
24.5
|
%
|
|
181,110
|
|
|
27.4
|
%
|
Power generation
|
4,072
|
|
|
0.5
|
%
|
|
3,576
|
|
|
0.5
|
%
|
|
5,129
|
|
|
0.8
|
%
|
Processing
|
7,218
|
|
|
1.0
|
%
|
|
7,175
|
|
|
0.9
|
%
|
|
7,174
|
|
|
1.1
|
%
|
Solid waste operations
|
578,274
|
|
|
74.7
|
%
|
|
564,687
|
|
|
76.0
|
%
|
|
496,831
|
|
|
75.2
|
%
|
Organics
|
59,394
|
|
|
7.6
|
%
|
|
56,326
|
|
|
7.5
|
%
|
|
54,174
|
|
|
8.2
|
%
|
Customer solutions
|
86,680
|
|
|
11.2
|
%
|
|
79,457
|
|
|
10.7
|
%
|
|
67,464
|
|
|
10.2
|
%
|
Recycling
|
50,236
|
|
|
6.5
|
%
|
|
42,820
|
|
|
5.8
|
%
|
|
42,191
|
|
|
6.4
|
%
|
Resource Solutions
|
196,310
|
|
|
25.3
|
%
|
|
178,603
|
|
|
24.0
|
%
|
|
163,829
|
|
|
24.8
|
%
|
Total revenues
|
$
|
774,584
|
|
|
100.0
|
%
|
|
$
|
743,290
|
|
|
100.0
|
%
|
|
$
|
660,660
|
|
|
100.0
|
%
|
22. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of certain items in the consolidated statements of operations by quarter:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2020
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Revenues
|
$
|
182,910
|
|
|
$
|
188,767
|
|
|
$
|
202,667
|
|
|
$
|
200,240
|
|
Operating income
|
$
|
7,012
|
|
|
$
|
17,444
|
|
|
$
|
20,633
|
|
|
$
|
14,208
|
|
Net income
|
$
|
959
|
|
|
$
|
12,113
|
|
|
$
|
15,117
|
|
|
$
|
62,917
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
48,005
|
|
|
48,348
|
|
|
48,370
|
|
|
50,436
|
|
Basic earnings per share
|
$
|
0.02
|
|
|
$
|
0.25
|
|
|
$
|
0.31
|
|
|
$
|
1.25
|
|
Diluted weighted average common shares outstanding
|
48,262
|
|
|
48,563
|
|
|
48,619
|
|
|
50,719
|
|
Diluted earnings per share
|
$
|
0.02
|
|
|
$
|
0.25
|
|
|
$
|
0.31
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2019
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Revenues
|
$
|
163,664
|
|
|
$
|
187,459
|
|
|
$
|
198,547
|
|
|
$
|
193,619
|
|
Operating income
|
$
|
4,442
|
|
|
$
|
15,544
|
|
|
$
|
18,485
|
|
|
$
|
14,604
|
|
Net (loss) income
|
$
|
(1,714)
|
|
|
$
|
11,915
|
|
|
$
|
12,386
|
|
|
$
|
9,066
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
45,913
|
|
|
47,464
|
|
|
47,690
|
|
|
47,811
|
|
Basic earnings per share
|
$
|
(0.04)
|
|
|
$
|
0.25
|
|
|
$
|
0.26
|
|
|
$
|
0.19
|
|
Diluted weighted average common shares outstanding
|
45,913
|
|
|
48,221
|
|
|
48,361
|
|
|
48,583
|
|
Diluted earnings per share
|
$
|
(0.04)
|
|
|
$
|
0.25
|
|
|
$
|
0.26
|
|
|
$
|
0.19
|
|
Our transfer and disposal revenues historically have been lower from the months of November through March. This seasonality reflects the lower volume of waste during the late fall, winter and early spring months. Since certain of our operating and fixed costs remain constant throughout fiscal year, operating income is impacted by a similar seasonality. In addition, particularly harsh weather conditions typically result in increased operating costs.
Our recycling business experiences increased volumes of newspaper in November and December due to increased retail activity during the holiday season.
In the fourth quarter of fiscal year 2020, we unwound the valuation allowance on the majority of our net operating loss carryforwards and other deferred tax assets as of December 31, 2020, resulting in an increase in a benefit for income taxes of $(53,644) in the three months ended December 31, 2020.