CASELLA WASTE SYSTEMS INC

Previous wording

We provide integrated solid waste services in nine states: Vermont, New Hampshire, New York, Massachusetts, Connecticut, Maine, Pennsylvania, Delaware and Maryland, with our headquarters located in Rutland, Vermont. We manage our solid waste operations on a geographic basis through regional operating segments, the Eastern, Western and Mid-Atlantic regions, each of which provides a comprehensive range of non-hazardous solid waste services. We manage our resource renewal operations through the Resource Solutions operating segment, which leverages our core competencies in materials processing, industrial recycling, organics and resource management service offerings to deliver a comprehensive solution for our larger commercial, municipal, institutional and industrial customers that have more diverse waste and recycling needs. Legal, tax, information technology, human resources, certain finance and accounting and other administrative functions are included in our Corporate Entities segment.

Current wording

We provide integrated solid waste services in ten states: Vermont, New Hampshire, New York, Massachusetts, Connecticut, Maine, Pennsylvania, Delaware, New Jersey and Maryland, with our headquarters located in Rutland, Vermont. We manage our solid waste operations on a geographic basis through regional operating segments, the Eastern, Western and Mid-Atlantic regions, each of which provides a comprehensive range of non-hazardous solid waste services. We manage our resource renewal operations through the Resource Solutions operating segment, which leverages our core competencies in materials processing, industrial recycling, organics and resource management service offerings to deliver a comprehensive solution for our larger commercial, municipal, institutional and industrial customers that have more diverse waste and recycling needs. Legal, tax, information technology, human resources, certain finance and accounting and other administrative functions are included in our Corporate Entities segment.

Previous wording

As of April 15, 2024, we owned and/or operated 63 solid waste collection operations, 69 transfer stations, 28 recycling facilities, eight Subtitle D landfills, three landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition (“C&D”) materials. We also housed two landfill gas-to-energy facilities, which are owned and operated by third parties, at landfills we owned and/or operated.

Current wording

As of July 15, 2024, we owned and/or operated 64 solid waste collection operations, 69 transfer stations, 28 recycling facilities, eight Subtitle D landfills, three landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition (“C&D”) materials. We also housed two landfill gas-to-energy facilities, which are owned and operated by third parties, at landfills we owned and/or operated.

Previous wording

The most significant items impacting the change in our solid waste revenues during the three months ended March 31, 2024 as compared to the prior year period are summarized below:

Current wording

The most significant items impacting the change in our solid waste revenues during the three and six months ended June 30, 2024 as compared to the prior year periods are summarized below:

Previous wording

•Price increased solid waste revenues due to (i) $8.7 million, or 6.2% as a percentage of collection operations, from favorable collection pricing and (ii) $2.1 million, or 4.0% as a percentage of disposal operations, from favorable disposal pricing driven by our landfills and transfer stations.

Current wording

•Price increased solid waste revenues both quarterly and year-to-date due to (i) favorable collection pricing of $9.2 million, or 6.2% as a percentage of collection operations quarterly, and $18.0 million, or 6.2% as a percentage of collection operations year-to-date, and (ii) favorable disposal pricing of $3.1 million, or 4.8% as a percentage of disposal operations quarterly, and $5.1 million, or 4.5% as a percentage of disposal operations year-to-date, driven by our landfills and transfer stations.

Previous wording

•Volume decreased solid waste revenues due to (i) $(3.7) million, or (7.5)% as a percentage of disposal operations, from lower disposal volumes, primarily lower landfill volumes and to a lesser extent transportation volumes, partially offset by higher transfer station volumes, and (ii) $(1.7) million, or (1.2)% as a percentage of collection operations, from lower collection volumes.

Current wording

•Volume decreased solid waste revenues both quarterly and year-to-date due to (i) lower disposal volumes of $(2.2) million, or (3.5)% as a percentage of disposal operations quarterly, and $(6.0) million, or (5.2)% as a percentage of disposal operations year-to-date, primarily from lower landfill volumes and to a lesser extent transportation volumes, partially offset by higher transfer station volumes, in addition to (ii) lower collection volumes of $(1.8) million, or (1.2)% as a percentage of collection operations quarterly, and $(3.5) million, or (1.2)% as a percentage of collection operations year-to-date.

Previous wording

•Acquisitions increased solid waste revenues due to the rollover impact of the seven acquisitions we completed in fiscal year 2023, including the acquisition of solid waste collection, transfer and recycling operations in Pennsylvania, Maryland and Delaware, which are the basis of our newly formed regional operating segment, the Mid-Atlantic region (the “GFL Acquisition”), and the acquisition of collection, transfer and recycling operations in the greater Albany, New York Area (dba Twin Bridges).

Current wording

•Acquisitions increased solid waste revenues both quarterly and year-to-date due to activity in line with our growth strategy associated with the timing and acquisition of one business in the six months ended June 30, 2024, and the rollover impact of seven acquisitions completed in fiscal year 2023, including the acquisition of solid waste collection, transfer and recycling operations in Pennsylvania, Maryland and Delaware, which are the basis of one of our regional operating segments, the Mid-Atlantic region (the “GFL Acquisition”), and the acquisition of collection, transfer and recycling operations in the greater Albany, New York Area (dba Twin Bridges) (the “Twin Bridges Acquisition”).

Previous wording

See “Segment Reporting” below for discussion over the period-to-period change in Resource Solutions revenues.

Current wording

See “Segment Reporting” below for discussion over the period-to-period changes in Resource Solutions revenues.

Previous wording

The most significant items impacting the change in our cost of operations during the three months ended March 31, 2024 as compared to the prior year period are summ arized below:

Current wording

The most significant items impacting the changes in our cost of operations during the three and six months ended June 30, 2024 as compared to the prior year periods are summ arized below:

Previous wording

•Direct costs increased in aggregate dollars due primarily to (i) acquisitions and (ii) higher third-party disposal rates reflecting cost inflation; partially offset in dollars, and more than offset as a percentage of revenues, by lower hauling and transportation costs on lower volumes associated with our National Accounts business, which operates with direct costs representing a higher percentage of related revenues.

Current wording

•Direct costs increased in aggregate dollars primarily due to (i) acquisitions and (ii) higher third-party disposal rates reflecting cost inflation; partially offset in dollars, and more than offset as a percentage of revenues, by lower hauling and transportation costs in our Resource Solutions segment primarily related to municipal biosolid volumes in our National Accounts business.

Previous wording

•Direct labor costs increased due primarily to (i) acquisitions and (ii) higher wages and benefit costs reflecting cost inflation; partially offset by improved routing efficiencies.

Current wording

•Direct labor costs increased primarily due to (i) acquisitions and (ii) higher wages and benefit costs reflecting cost inflation; partially offset by improved routing efficiencies.

Previous wording

•Direct operational costs increased in aggregate dollars due primarily to (i) acquisitions, (ii) higher leachate disposal costs, (iii) higher short term rental expense driven by delays in the delivery of fleet vehicles as well as new municipal contracts, and (v) general cost inflation.

Current wording

•Direct operational costs increased in aggregate dollars primarily due to (i) acquisitions, (ii) higher leachate disposal costs, (iii) higher short term rental expense driven by delays in the delivery of fleet vehicles as well as needs from entering new municipal contracts, (iv) higher accretion expense associated with changes in the timing and cost estimates of our closure, post-closure, and capping obligations and (v) general cost inflation.

Previous wording

•Fuel costs increased in aggregate dollars due to acquisitions, partially offset in dollars, and more than offset as a percentage of revenues, by lower diesel fuel prices along with reduced fuel consumption in our base business related to lower solid waste volumes and improved routing efficiencies. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk” of this Quarterly Report on Form 10-Q for additional information regarding our fuel costs.

Current wording

•Fuel costs increased in aggregate dollars due to acquisitions; partially offset by (i) lower diesel fuel prices along with (ii) reduced fuel consumption in our base business related to lower solid waste volumes and improved routing efficiencies. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk” of this Quarterly Report on Form 10-Q for additional information regarding our fuel costs.

Previous wording

•Other operational costs increased due to (i) acquisitions, (ii) higher spend associated with supporting acquisition-related growth, and (iii) general cost inflation.

Current wording

•Other operational costs increased due to (i) acquisitions, (ii) higher spending associated with supporting acquisition-related growth, and (iii) general cost inflation.

Previous wording

General and administrative expense increased in the three months ended March 31, 2024 as compared to the prior year period, primarily due to (i) acquisition activity, including increased labor costs, professional fees and other costs to support our growth and acquisition strategy, (ii) escalation of salary, wage, incentive compensation and benefit costs, and (iii) general cost inflation.

Current wording

General and administrative expense increased in aggregate dollars in the three and six months ended June 30, 2024 as compared to the prior year periods, primarily due to (i) acquisition activity, including increased labor costs, professional fees and other costs to support our growth and acquisition strategy, (ii) escalation of salary, wage, incentive compensation and benefit costs, (iii) legal expense associated with employee separation, and (iv) general cost inflation.

Previous wording

Depreciation and amortization expense increased in the three months ended March 31, 2024 as compared to the prior year period, primarily due to (i) acquisitions, including the impact of accelerated amortization schedules of certain intangibles, (ii) investment in property and equipment in our existing operations, and (iii) higher landfill amortization expense related to changes in cost and other assumptions from the prior year periods, more than offsetting lower landfill volumes.

Current wording

Depreciation and amortization expense increased in the three and six months ended June 30, 2024 as compared to the prior year periods, primarily due to (i) acquisitions, including the impact of accelerated amortization schedules of certain intangibles, (ii) investment in property and equipment in our existing operations, and (iii) higher landfill amortization expense related to changes in cost and other assumptions from the prior year periods, more than offsetting lower landfill volumes.

Previous wording

In the three months ended March 31, 2024, and 2023, we recorded charges of $5.0 million and $2.9 million, respectively, comprised primarily of legal, consulting, rebranding and other similar costs associated with the due diligence, acquisition and integration of acquired businesses, including expenses related to the development of our Mid-Atlantic region, in the three months ended March 31, 2024.

Current wording

In the three and six months ended June 30, 2024, we recorded charges of $7.8 million and $12.8 million, respectively, and in the three and six months ended June 30, 2023, we recorded charges of $3.7 million and $6.5 million, respectively, comprised primarily of legal, consulting, rebranding and other costs associated with the due diligence, acquisition and integration of acquired businesses. The three and six months ended June 30, 2024 included a charge for an increase in the reserve against accounts receivable of the businesses acquired in the GFL Acquisition as a result of our inability to pursue collections during the transition services period with the seller, resulting in accounts receivable aged beyond what is typical in our business.

Previous wording

Our interest expense, net increased $6.8 million as compared to the prior year period due primarily to: (i) entering into a $430.0 million aggregate principal amount term loan A facility (“2023 Term Loan Facility”) to fund the GFL Acquisition in June 2023, (ii) rising interest rates, and (iii) the issuance of $35.0 million aggregate principal amount of New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2020R-2 in August 2023; partially offset by higher interest income associated with the timing of financing activities resulting in a higher average cash balance and rising interest rates.

Current wording

Our interest expense, net increased $5.3 million quarterly and $12.1 million year-to-date as compared to the prior year periods primarily due to: (i) entering into a $430.0 million aggregate principal amount term loan A facility (“2023 Term Loan Facility”) to fund the GFL Acquisition in June 2023, (ii) rising interest rates, and (iii) the issuance of $35.0 million aggregate principal amount of New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2020R-2 in August 2023; partially offset by higher interest income associated with higher average cash balances due to the timing of financing activities completed in fiscal year 2023 and rising interest rates.

Previous wording

Our provision for income taxes decreased $2.6 million in the three months ended March 31, 2024 from the prior year period. The benefit of $(1.8) million for the three months ended March 31, 2024 included $0.6 million of current income taxes and $(2.4) million of deferred income tax benefit. For the three months ended March 31, 2023, the provision of $0.8 million included $0.5 million of current income taxes and $0.3 million of deferred income taxes. The 30.0% effective rate for the three months ended March 31, 2024 was computed based on the statutory rate of 21% adjusted primarily for state taxes, nondeductible officer compensation, an increase in the effective state rate due to tax losses in certain states requiring a valuation allowance, and partially offset by tax deductible equity compensation in excess of book expense. This effective rate exceeded the 18.2% effective rate for the three months ended March 31, 2023 primarily due to the current period rate having lower tax deductible equity compensation in excess of book expense and an increase in the effective state rate for tax losses in certain states requiring valuation losses.

Current wording

Our provision for income taxes increased $1.8 million and decreased $(0.8) million in the three and six months ended June 30, 2024, respectively, from the prior year periods. The 41.2% effective rate for the six months ended June 30, 2024 was computed based on the statutory rate of 21% adjusted primarily for state taxes, nondeductible officer compensation, and an increase in the effective state rate due to tax losses in certain states requiring a valuation allowance; partially offset by tax deductible equity compensation in excess of book expense. This effective rate exceeded the 23.5% effective rate for the six months ended June 30, 2023 primarily due to the current period rate having lower tax deductible equity compensation in excess of book expense and an increase in the effective state rate for tax losses in certain states requiring valuation losses.

Previous wording

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJ Act”) was enacted. The TCJ Act significantly changed U.S. corporate income tax laws by, among other things, changing carryforward rules for net operating losses. Our $7.2 million in federal net operating loss carryforwards generated as of the end of 2017 continue to be carried forward for 20 years and are expected to be available to fully offset taxable income earned in 2024 and future years. Federal net operating losses generated after 2017, totaling $125.7 million carried forward to 2024, will be carried forward indefinitely, but generally may only offset up to 80% of taxable income earned in a tax year.

Current wording

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJ Act”) was enacted. The TCJ Act significantly changed U.S. corporate income tax laws by, among other things, changing carryforward rules for net operating losses. Our $7.2 million in federal net operating loss carryforwards generated as of the end of 2017 continue to be carried forward for 20 years and are expected to be available to fully offset taxable income earned in 2024 and future years. Federal net operating losses generated after 2017, totaling $125.8 million carried forward to 2024, will be carried forward indefinitely, but generally may only offset up to 80% of taxable income earned in a tax year.

Previous wording

Solid waste revenues increased in the three months ended March 31, 2024 as compared to the prior year period, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $4.1 million, or 6.8% as a percentage of collection operations, (iii) favorable disposal pricing of $0.7 million, or 3.1% as a percentage of disposal operations, and (iv) higher disposal volume of $0.9 million, or 4.3% as a percentage of disposal operations; partially offset by (a) lower surcharges and fees, as well as (b) lower collection volume of $(0.6) million, or (0.9)% as a percentage of collection operations.

Current wording

Solid waste revenues increased in the three and six months ended June 30, 2024 as compared to the prior year periods, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $4.3 million, or 6.7% as a percentage of collection operations quarterly, and $8.5 million, or 6.7% as a percentage of collection operations year-to-date, (iii) favorable disposal pricing of $0.9 million, or 3.4% as a percentage of disposal operations quarterly, and $1.5 million, or 3.3% as a percentage of disposal operations year-to-date, and (iv) higher disposal volume of $1.6 million, or 6.3% as a percentage of disposal operations quarterly, and $2.6 million, or 5.4% as a percentage of disposal operations year-to-date; partially offset by (a) lower surcharges and fees both quarterly and year-to-date due to lower energy and environmental fee (“E&E Fee(s)”) revenues associated with our fuel cost recovery program related to lower diesel fuel prices and lower sustainability recycling adjustment fee (“SRA Fee(s)”) revenues from higher recycled commodity prices as compared to the prior year periods, as well as (b) lower collection volume of $(0.6) million, or (0.5)% as a percentage of collection operations year-to-date.

Previous wording

•Surcharges and other fees decreased solid waste revenues primarily due to (i) lower energy and environmental fees (“E&E Fee(s)”) revenues associated with our fuel cost recovery program as a result of lower diesel fuel prices and (ii) lower sustainability recycling adjustment fees (“SRA Fee(s)”) revenues as a result of higher recycled commodity prices; partially offset by new fees related to legacy fuel and environmental cost recovery programs associated with the GFL Acquisition. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk” included in this Quarterly Report on Form 10-Q for additional information regarding our E&E Fees and SRA Fees.

Current wording

See Item 3. “Quantitative and Qualitative Disclosures about Market Risk” included in this Quarterly Report on Form 10-Q for additional information regarding our E&E Fees and SRA Fees.

Previous wording

Solid waste revenues increased in the three months ended March 31, 2024 as compared to the prior year period, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $4.6 million, or 5.8% as a percentage of collection operations, (iii) favorable disposal pricing of $1.4 million, or 4.7% as a percentage of disposal operations; partially offset by (a) lower surcharges and fees, (b) lower disposal volume of $(4.8) million, or (15.9)% as a percentage of disposal operations, driven by lower landfill C&D and special waste volumes, and (c) lower collection volume of $(1.1) million, or (1.4)% as a percentage of collection operations, due to customer churn.

Current wording

Solid waste revenues increased in the three and six months ended June 30, 2024 as compared to the prior year periods, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $4.9 million, or 5.8% as a percentage of collection operations quarterly, and $9.5 million, or 5.8% as a percentage of collection operations year-to-date, and (iii) favorable disposal pricing of $2.2 million, or 5.8% as a percentage of disposal operations quarterly, and $3.6 million, or 5.3% as a percentage of disposal operations year-to-date; partially offset by (a) lower disposal volume of $(3.8) million, or (10.2)% as a percentage of disposal operations quarterly, and $(8.6) million, or (12.7)% as a percentage of disposal operations year-to-date, mainly driven by lower landfill C&D and special waste volumes, (b) lower collection volume of $(1.7) million, or (2.0)% as a percentage of collection operations quarterly, and $(2.9) million, or (1.8)% as a percentage of collection operations year-to-date, due to customer churn and (c) lower surcharges and fees both quarterly and year-to-date due to lower E&E Fee revenues associated with our fuel cost recovery program related to lower diesel fuel prices and lower SRA Fee revenues from higher recycled commodity prices as compared to the prior year periods.

Previous wording

Operating income declined in the three months ended March 31, 2024 by $(3.7) million as compared to the prior year period. The period-over-period decline was due to (i) higher costs associated with operating and supporting acquired businesses, including the impact of accelerated amortization schedules of certain intangibles, (ii) increased depreciation expense due to investment in property and equipment, (iii) general cost inflation, including for disposal, labor, and maintenance costs, (iv) delays in the delivery of fleet vehicles resulting in higher short term rental and vehicle maintenance costs, (v) higher leachate disposal costs, and (vi) a gain on resolution of acquisition-related contingent consideration that was recorded in the three months ended March 31, 2023 associated with the reversal of a contingency for a transfer station permit expansion that is no longer deemed viable; partially offset by (a) revenue growth, described above, (b) intercompany revenues, (c) lower expense from acquisition activities, and (d) improved routing efficiencies. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

Current wording

Operating income declined in the three and six months ended June 30, 2024 by $(1.1) million and $(4.7) million, respectively, as compared to the prior year periods. The period-over-period declines were due to (i) higher costs associated with operating and supporting acquired businesses, including the impact of accelerated amortization schedules of certain intangibles, (ii) increased depreciation expense due to acquisitions and investment in property and equipment, (iii) general cost inflation, including for disposal, labor, and maintenance costs, (iv) delays in the delivery of fleet vehicles resulting in higher short term rental and vehicle maintenance costs, (v) higher leachate disposal costs, (vi) higher accretion expense associated with changes in the timing and cost estimates of our closure, post-closure, and capping obligations, (vii) the allocation of higher corporate costs, and (viii) a benefit from the change in fair value of an acquisition related contingent consideration that was recorded in the six months ended June 30, 2023 which was based upon a probability-weighted analysis of a success payment related to the potential attainment of a transfer station permit expansion; partially offset by (a) revenue growth, described above, (b) higher intercompany revenues, (c) lower expense from acquisition activities year-to-date, (d) a charge for the FLSA-related legal settlement recorded during the three and six months ended June 30, 2023, and (e) improved routing efficiencies. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

Previous wording

A summary of the period-to-period change in solid waste revenues (dollars in millions) follows:

Current wording

A summary of the period-to-period changes in solid waste revenues (dollars in millions) follows:

Previous wording

Collection and transfer station operations for our Mid-Atlantic region operating segment commenced on July 1, 2023 following the GFL Acquisition. The operating loss of $(4.8) million was impacted by $3.0 million of expense from acquisition activities, comprised of legal, consulting and integration costs related to the GFL Acquisition, as well as the impact of accelerated amortization schedules of certain acquired intangibles. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

Current wording

Collection and transfer station operations for our Mid-Atlantic region operating segment commenced on July 1, 2023 following the GFL Acquisition. The operating losses of $(7.1) million and $(11.9) million in the three and six months ended June 30, 2024, respectively, were impacted by $6.1 million and $9.1 million of expense from acquisition activities, comprised primarily of integration costs related to the GFL Acquisition, including a charge for an increase in the reserve against accounts receivable of the businesses acquired in the GFL Acquisition as a result of our inability to pursue collections during the transition services period with the seller, resulting in accounts receivable aged beyond what is typical in our business; as well as the impact of accelerated amortization schedules of certain acquired intangibles. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

Previous wording

Operating income increased in the three months ended March 31, 2024 by $3.3 million as compared to the prior year period, primarily driven by (i) revenue growth, described above, (ii) intercompany revenues, and (iii) lower direct costs associated with our National Accounts business due to lower base business volumes; partially offset by (i) higher costs associated with operating and supporting acquired businesses, including the impact of accelerated amortization schedules of certain intangibles, (ii) increased depreciation expense due to investment in property and equipment, and (iii) general cost inflation, including for disposal, labor, and maintenance costs.

Current wording

Operating income increased in the three and six months ended June 30, 2024 by $3.6 million and $7.0 million, respectively, as compared to the prior year periods. The period-over-period increases were due to (i) revenue growth, described above, and (ii) lower direct costs associated with hauling and transportation relating to municipal biosolid volumes in our National Accounts business; partially offset by (a) higher costs associated with operating and supporting acquired businesses, including the impact of accelerated amortization schedules of certain intangibles, (b) increased depreciation expense due to acquisitions and investment in property and equipment, (c) the allocation of higher corporate costs, (d) general cost inflation, including for disposal, labor, and maintenance costs, and (e) lower intercompany revenues.

Previous wording

Corporate Entities operating loss reflects those costs not allocated to our reportable operating segments, which consists of depreciation and amortization expense and certain expense from acquisition activities. Operating deficit decreased $0.2 million in the three months ended March 31, 2024 as compared to the prior year period, driven by a decline in unallocated expense from acquisition activities. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

Current wording

Corporate Entities operating loss reflects those costs not allocated to our reportable operating segments, which consists of depreciation and amortization expense and certain expense from acquisition activities. Operating deficit decreased $2.0 million and $2.1 million in the three and six months ended June 30, 2024, respectively, as compared to the prior year periods, driven by a decline in unallocated expense from acquisition activities. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

Previous wording

We continually monitor our actual and forecasted cash flows, our liquidity, and our capital requirements in order to properly manage our liquidity needs as we move forward based on the capital intensive nature of our business and our growth acquisition strategy. As of March 31, 2024, we had $272.3 million of undrawn capacity under our $300.0 million revolving credit facility (“Revolving Credit Facility”) and $189.5 million of cash and cash equivalents to help meet our short-term and long-term liquidity needs. We expect existing cash and cash equivalents combined with available cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future.

Current wording

We continually monitor our actual and forecasted cash flows, our liquidity, and our capital requirements in order to properly manage our liquidity needs as we move forward based on the capital intensive nature of our business and our growth acquisition strategy. As of June 30, 2024, we had $272.5 million of undrawn capacity under our $300.0 million revolving credit facility (“Revolving Credit Facility”) and $208.5 million of cash and cash equivalents to help meet our short-term and long-term liquidity needs. We expect existing cash and cash equivalents combined with available cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future.

Previous wording

Current assets, excluding cash and cash equivalents, decreased $(9.5) million and current liabilities, excluding current maturities of debt, decreased $(62.4) in the three months ended March 31, 2024, resulting in a $52.9 million increase in working capital, net (defined as current assets, excluding cash, cash equivalents and restricted cash, minus current liabilities, excluding current maturities of debt), from $(37.7) million as of December 31, 2023 to $15.2 million as of March 31, 2024. We strive to maintain a negative working capital cycle driven by shorter days sales outstanding as compared to days payable outstanding in an effort to collect money at a faster rate than paying bills to facilitate business growth.

Current wording

Current assets, excluding cash and cash equivalents, increased $11.9 million and current liabilities, excluding current maturities of debt, decreased $(38.7) in the six months ended June 30, 2024, resulting in a $50.6 million increase in working capital, net (defined as current assets, excluding cash and cash equivalents, minus current liabilities, excluding current maturities of debt), from $(37.7) million as of December 31, 2023 to $12.9 million as of June 30, 2024. We strive to minimize net working capital by driving shorter days sales outstanding as compared to days payable outstanding.

Previous wording

Cash and cash equivalents decreased $(31.4) million in the three months ended March 31, 2024. A summary of cash flows (in millions) follows:

Current wording

Cash, cash equivalents and restricted cash decreased $(11.5) million in the six months ended June 30, 2024. A summary of cash flows (in millions) follows:

Previous wording

Net cash provided by operating activities decreased $(8.4) million in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. This was the result of higher interest expense and an increase in the unfavorable cash flow impact associated with the changes in our assets and liabilities, net of effects of acquisitions and divestitures, partially offset by stronger operational performance. For discussion of our operational performance in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, see “Results of Operations” included in this Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.

Current wording

Net cash provided by operating activities decreased $(3.4) million in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. This was the result of higher interest expense and an increase in the unfavorable cash flow impact associated with the changes in our assets and liabilities, net of effects of acquisitions and divestitures, substantially offset by revenue growth driven by acquisition activity. For discussion of our operational performance in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, see “Results of Operations” included in this Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.

Previous wording

Capital expenditures. Capital expenditures were $12.4 million higher in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to higher capital spend driven by (i) acquisition activity; (ii) spend related to the retrofitting of our Willimantic, Connecticut materials recovery facility; (iii) landfill development, including the development of rail side infrastructure at our Subtitle D landfill located in Mount Jewett, Pennsylvania; and (iv) the timing of spend for vehicles, machinery, equipment and containers.

Current wording

Capital expenditures. Capital expenditures were $24.5 million higher in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to higher capital spend driven by (i) acquisition activity; (ii) spend related to the retrofitting of our Willimantic, Connecticut materials recovery facility; (iii) landfill development, including the development of rail side infrastructure at our Subtitle D landfill located in Mount Jewett, Pennsylvania; and (iv) the timing of spend and increased investment in our fleet.

Previous wording

As of March 31, 2024, we are party to the amended and restated credit agreement, dated as of December 22, 2021, as amended by the first and second amendment, dated as of February 9, 20023, and the third amendment, dated as of April 25, 2023, (collectively, the “Amended and Restated Credit Agreement”), which provides for a $350.0 million aggregate principal amount term loan A facility (“Term Loan Facility”), a $300.0 million Revolving Credit Facility, with a $75.0 million sublimit for letters of credit, and a $430.0 million 2023 Term Loan Facility (collectively, the “Credit Facility”). 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 $125.0 million, subject to further increase based on the terms and conditions set forth in the Amended and Restated Credit Agreement. The Credit Facility has a 5-year term that matures in December 2026. The Term Loan Facility and 2023 Term Loan Facility require scheduled quarterly principal payments in amounts equal to up to 0.650% per quarter of the original aggregate principal amount in the case of the Term Loan Facility and 1.25% per quarter of the original aggregate principal amount in the case of the 2023 Term Loan Facility, respectively, with the balances due at maturity. The Credit Facility shall bear interest, at our election, at term secured overnight financing rate (“Term SOFR”), including a secured overnight financing rate adjustment of 10 basis points, or at a base rate, in each case plus or minus any sustainable rate adjustment of up to positive or negative 4.0 basis points per annum, plus an applicable interest rate margin based upon our consolidated net leverage ratio as follows:

Current wording

As of June 30, 2024, we are party to the amended and restated credit agreement, dated as of December 22, 2021, as amended by the first and second amendment, dated as of February 9, 2023, and the third amendment, dated as of April 25, 2023 (collectively, the “Amended and Restated Credit Agreement”), which provides for a $350.0 million aggregate principal amount term loan A facility (“Term Loan Facility”), a $300.0 million Revolving Credit Facility, with a $75.0 million sublimit for letters of credit, and a $430.0 million 2023 Term Loan Facility (collectively, the “Credit Facility”). 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 $125.0 million, subject to further increase based on the terms and conditions set forth in the Amended and Restated Credit Agreement. The Credit Facility has a 5-year term that matures in December 2026. The Term Loan Facility and 2023 Term Loan Facility require scheduled quarterly principal payments in amounts equal to up to 0.650% per quarter of the original aggregate principal amount in the case of the Term Loan Facility and 1.25% per quarter of the original aggregate principal amount in the case of the 2023 Term Loan Facility, respectively, with the balances due at maturity. The Credit Facility shall bear interest, at our election, at term secured overnight financing rate (“Term SOFR”), including a secured overnight financing rate adjustment of 10 basis points, or at a base rate, in each case plus or minus any sustainable rate adjustment of up to positive or negative 4.0 basis points per annum, plus an applicable interest rate margin based upon our consolidated net leverage ratio as follows:

Previous wording

A commitment fee will be charged on undrawn amounts of our Revolving Credit Facility based upon our consolidated net leverage ratio in the range of 0.20% to 0.40% per annum, plus a sustainability adjustment of up to positive or negative 1.0 basis point per annum. The Amended and Restated Credit Agreement provides that Term SOFR is subject to a zero percent floor. We are also required to pay a fronting fee for each letter of credit of 0.25% per annum. Interest under the Amended and Restated Credit Agreement is subject to increase by 2.00% per annum during the continuance of a payment default and may be subject to increase by 2.00% per annum during the continuance of any other event of default. 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 March 31, 2024, further advances were available under the Revolving Credit Facility in the amount of $272.3 million. The available amount is net of outstanding irrevocable letters of credit totaling $27.7 million, and as of March 31, 2024 no amount had been drawn.

Current wording

A commitment fee will be charged on undrawn amounts of our Revolving Credit Facility based upon our consolidated net leverage ratio in the range of 0.20% to 0.40% per annum, plus a sustainability adjustment of up to positive or negative 1.0 basis point per annum. The Amended and Restated Credit Agreement provides that Term SOFR is subject to a zero percent floor. We are also required to pay a fronting fee for each letter of credit of 0.25% per annum. Interest under the Amended and Restated Credit Agreement is subject to increase by 2.00% per annum during the continuance of a payment default and may be subject to increase by 2.00% per annum during the continuance of any other event of default. 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 June 30, 2024, further advances were available under the Revolving Credit Facility in the amount of $272.5 million. The available amount is net of outstanding irrevocable letters of credit totaling $27.5 million, and as of June 30, 2024 no amount had been drawn.

Previous wording

(1)The maximum consolidated net leverage ratio is calculated as consolidated funded debt, net of up to $100.0 million of unencumbered cash and cash equivalents in excess of $2.0 million (calculated at $954.6 million as of March 31, 2024, or $1,054.6 million of consolidated funded debt less $100.0 million total of unencumbered cash and cash equivalents), divided by consolidated EBITDA. Consolidated EBITDA is based on operating results for the twelve months preceding the measurement date of March 31, 2024. Consolidated funded debt, net and consolidated EBITDA as defined by the Amended and Restated Credit Agreement (“Consolidated EBITDA”) are non-GAAP financial measures that should not be considered an alternative to any measure of financial performance calculated and presented in accordance with generally accepted accounting principles in the United States. A reconciliation of net cash provided by operating activities to Consolidated EBITDA is as follows (in millions):

Current wording

(1)The maximum consolidated net leverage ratio is calculated as consolidated funded debt, net of up to $100.0 million of unencumbered cash and cash equivalents in excess of $2.0 million (calculated at $951.6 million as of June 30, 2024, or $1,051.6 million of consolidated funded debt less $100.0 million total of unencumbered cash and cash equivalents), divided by consolidated EBITDA. Consolidated EBITDA is based on operating results for the twelve months preceding the measurement date of June 30, 2024. Consolidated funded debt, net and consolidated EBITDA as defined by the Amended and Restated Credit Agreement (“Consolidated EBITDA”) are non-GAAP financial measures that should not be considered an alternative to any measure of financial performance calculated and presented in accordance with generally accepted accounting principles in the United States. A reconciliation of net cash provided by operating activities to Consolidated EBITDA is as follows (in millions):

Previous wording

As of March 31, 2024, we had outstanding $232.0 million aggregate principal amount of tax exempt bonds; $59.5 million aggregate principal amount of finance leases; and $0.1 million aggregate principal amount of notes payable. See Note 6, Debtto our consolidated financial statements included in Part I. Item. 1 of this Quarterly Report on Form 10-Q for further disclosure regarding debt.

Current wording

As of June 30, 2024, we had outstanding $232.0 million aggregate principal amount of tax exempt bonds; $62.7 million aggregate principal amount of finance leases; and $0.1 million aggregate principal amount of notes payable. See Note 7, Debtto our consolidated financial statements included in Part I. Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for further disclosure regarding debt.

Previous wording

Inflationary increases in costs, including current cost inflation associated primarily with labor, certain other cost categories and capital items, have materially affected, and may continue to materially affect, our operating margins and cash flows. While inflation negatively impacted operating results and margins during the three months ended March 31, 2024 and 2023, we believe that our flexible pricing structures and cost recovery fees are allowing us to recover and will continue to allow us to recover certain inflationary costs from our customer base. Consistent with industry practice, most of our contracts and service agreements provide for a pass-through of certain costs to our customers, including increases in landfill tipping fees and in most cases fuel costs, intended to mitigate the impact of inflation on our operating results. We have also implemented a number of operating efficiency programs that seek to improve productivity and reduce our service costs, and our fuel cost recovery programs, primarily the energy component of our E&E Fee, which is designed to recover escalating fuel price fluctuations above a periodically reset floor. Despite these programs, competitive factors may require us to absorb at least a portion of these cost increases. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk” included in this Quarterly Report on Form 10-Q for additional information regarding our fuel cost recovery programs. Additionally, management’s estimates associated with inflation have had, and will continue to have, an impact on our accounting for landfill and environmental remediation liabilities.

Current wording

Inflationary increases in costs, including current cost inflation associated primarily with labor, certain other cost categories and capital items, have materially affected, and may continue to materially affect, our operating margins and cash flows. While inflation negatively impacted operating results and margins during the three and six months ended June 30, 2024 and 2023, we believe that our flexible pricing structures and cost recovery fees are allowing us to recover and will continue to allow us to recover certain inflationary costs from our customer base. Consistent with industry practice, most of our contracts and service agreements provide for a pass-through of certain costs to our customers, including increases in landfill tipping fees and in most cases fuel costs, intended to mitigate the impact of inflation on our operating results. We have also implemented a number of operating efficiency programs that seek to improve productivity and reduce our service costs, and our fuel cost recovery programs, primarily the energy component of our E&E Fee, which is designed to recover escalating fuel price fluctuations above a periodically reset floor. Despite these programs, competitive factors may require us to absorb at least a portion of these cost increases. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk” included in this Quarterly Report on Form 10-Q for additional information regarding our fuel cost recovery programs. Additionally, management’s estimates associated with inflation have had, and will continue to have, an impact on our accounting for landfill and environmental remediation liabilities.

Previous wording

Our business is primarily located in the eastern United States. Therefore, our business, financial condition and results of operations are susceptible to downturns in the general economy in this geographic region and other factors affecting the region, such as state regulations, labor availability and severe weather conditions. We are unable to forecast or determine the timing and/or the future impact of a sustained economic slowdown or other factors affecting the region.

Current wording

Our business is primarily located in the eastern United States. Therefore, our business, financial condition and results of operations are susceptible to downturns in the general economy in these geographic regions and other factors affecting these regions, such as state regulations, labor availability and severe weather conditions. We are unable to forecast or determine the timing and/or the future impact of a sustained economic slowdown or other factors affecting these regions.

Previous wording

Our revenues historically have been higher in the late spring, summer and early fall months. This seasonality reflects lower volumes of waste in the late fall, winter and early spring months because the volume of waste relating to C&D activities decreases substantially during the winter months in the eastern United States.

Current wording

Our revenues historically have been higher in the late spring, summer and early fall months. This seasonality reflects lower volumes of waste in the late fall, winter and early spring months because the volume of waste relating to C&D activities decreases substantially during the winter months in the northeastern United States.