CASELLA WASTE SYSTEMS INC

Previous 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.

Current wording

As of October 15, 2024, we owned and/or operated 70 solid waste collection operations, 71 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 and six months ended June 30, 2024 as compared to the prior year periods are summarized below:

Current wording

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

Previous 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.

Current wording

•Price increased solid waste revenues both quarterly and year-to-date due to (i) favorable collection pricing of $12.6 million, or 6.1% as a percentage of collection operations quarterly, and $30.6 million, or 6.2% as a percentage of collection operations year-to-date, and (ii) favorable disposal pricing of $2.6 million, or 3.8% as a percentage of disposal operations quarterly, and $7.7 million, or 4.2% as a percentage of disposal operations year-to-date, driven by our landfill and transfer station operations.

Previous 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.

Current wording

•Volume decreased solid waste revenues both quarterly and year-to-date due to (i) lower disposal volumes of $(1.3) million, or (2.0)% as a percentage of disposal operations quarterly, and $(7.3) million, or (4.1)% as a percentage of disposal operations year-to-date, primarily from lower landfill volumes and to a lesser extent year-to-date transportation volumes, partially offset by higher transfer station volumes, in addition to (ii) lower collection volumes of $(1.5) million, or (0.7)% as a percentage of collection operations quarterly, and $(4.9) million, or (1.0)% as a percentage of collection operations year-to-date.

Previous 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”).

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 five business in the nine months ended September 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”).

Previous 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:

Current wording

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

Previous 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.

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 year-to-date 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 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.

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, (v) higher accruals related to insurance claims quarterly and (vi) general cost inflation.

Previous 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.

Current wording

•Fuel costs increased in aggregate dollars due to acquisitions, partially offset primarily by lower diesel fuel prices. 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

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.

Current wording

General and administration expense increased in aggregate dollars in the three and nine months ended September 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) year-to-date legal expenses associated with employee separation, (iv) higher accruals related to insurance claims quarterly, (v) an increased provision for expected credit losses quarterly in our Mid-Atlantic region due to the aging of receivables and (vi) general cost inflation.

Previous wording

A summary of the components of depreciation and amortization expense (dollars in millions and as a percentage of total revenues) follows:

Current wording

A summary of the components of depreciation and amortization expense (dollars in millions and as a percentage of total revenues) is as follows:

Previous 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.

Current wording

Depreciation and amortization expense increased in the three and nine months ended September 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 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.

Current wording

In the three and nine months ended September 30, 2024, we recorded charges of $5.5 million and $18.3 million, respectively, and in the three and nine months ended September 30, 2023, we recorded charges of $3.3 million and $9.8 million, respectively, comprised primarily of legal, consulting, rebranding and other costs associated with the due diligence, acquisition and integration of acquired businesses. The nine months ended September 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

In the three and six months ended June 30, 2023, we recorded a charge of $6.2 million due to reaching an agreement at a mediation held on June 20, 2023 with the collective class members of a class action lawsuit relating to certain claims under the Fair Labor Standards Act of 1938 ("FLSA") as well as state wage and hours laws. The settlement agreement was executed July 24, 2023 and has received court approval.

Current wording

In the nine months ended September 30, 2023, we recorded a charge of $6.2 million due to reaching an agreement at a mediation held on June 20, 2023 with the collective class members of a class action lawsuit relating to certain claims under the Fair Labor Standards Act of 1938 ("FLSA") as well as state wage and hours laws. The settlement agreement, which received court approval, was executed on July 24, 2023 and subsequently paid in the nine months ended September 30, 2024.

Previous 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.

Current wording

Our interest expense, net increased $16.2 million year-to-date as compared to the prior year period primarily due to: (i) entering into a $430.0 million aggregate principal amount term loan A facility to fund the GFL Acquisition in June 2023, (ii) higher average interest rates year-to-date, 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.

Previous wording

In the three and six months ended June 30, 2023, we wrote-off the unamortized debt issuance costs and recognized a loss from termination of bridge financing upon the extinguishment of both a secured bridge financing agreement in connection with the GFL Acquisition of $3.7 million and $3.7 million, respectively, and an unsecured bridge financing agreement in connection with the Twin Bridges Acquisition of $4.5 million and $4.5 million, respectively.

Current wording

In the nine months ended September 30, 2023, we wrote-off the unamortized debt issuance costs and recognized a loss from termination of bridge financing upon the extinguishment of both a secured bridge financing agreement in connection with the GFL Acquisition of $3.7 million, and an unsecured bridge financing agreement in connection with the acquisition of collection, transfer and recycling operations in the greater Albany, New York Area (dba Twin Bridges) (the “Twin Bridges Acquisition”) of $4.5 million.

Previous 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.

Current wording

Our provision for income taxes decreased $(1.4) million and decreased $(2.1) million in the three and nine months ended September 30, 2024, respectively, from the prior year periods. The 43.5% effective rate for the nine months ended September 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 24.4% effective rate for the nine months ended September 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. The substantial increase in the effective tax rate from the nine months ended September 30, 2023 to the nine months ended September 30th, 2024 is due to the permanent items being more impactful as a result of the decrease in pre-tax income for such periods.

Previous wording

The projected effective rate excluding discrete items for the fiscal year ending December 31, 2024 is 35.6%, whereas such rate for the fiscal year ending December 31, 2023 was 31.0%. The projected effective rate excluding discrete items is computed based on the statutory rate of 21%. The discrete items for the six months ended June 30, 2024 increased the rate by 5.6%, whereas the discrete items for the six months ended June 30th, 2023 decreased the rate by 4.6%.

Current wording

The projected effective rate excluding discrete items for the fiscal year ending December 31, 2024 is 41.5%, whereas such rate for fiscal year 2023 was 31.0%. The projected effective rate excluding discrete items is computed based on the statutory rate of 21%. The discrete items for the nine months ended September 30, 2024 increased the rate by 2.0%, whereas the discrete items for the nine months ended September 30th, 2023 decreased the rate by (2.9%).

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 $125.8 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.

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 $150.3 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 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.

Current wording

Solid waste revenues increased in the three and nine months ended September 30, 2024 as compared to the prior year periods, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $5.6 million, or 8.1% as a percentage of collection operations quarterly, and $14.0 million, or 7.2% as a percentage of collection operations year-to-date, (iii) favorable disposal pricing of $0.9 million, or 3.8% as a percentage of disposal operations quarterly, and $2.6 million, or 3.5% as a percentage of disposal operations year-to-date, and (iv) higher disposal volume of $2.0 million, or 7.7% as a percentage of disposal operations quarterly, and $4.6 million, or 6.2% 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, partly counteracted by an increase in the environmental component of the E&E Fee to help offset environmental, regulatory and other operating costs, as well as (b) lower collection volume of $(0.2) million, or (0.2)% as a percentage of collection operations quarterly, and $(0.7) million, or (0.4)% as a percentage of collection operations year-to-date.

Previous wording

Operating income increased in the three and six months ended June 30, 2024 by $3.0 million and $4.5 million, respectively, as compared to the prior year periods. The period-over-period increases were driven by (i) revenue growth, described above, (ii) higher intercompany revenues, (iii) lower costs due to improved routing efficiencies and (iv) a charge for the FLSA-related legal settlement recorded during the three and six months ended June 30, 2023; 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) general cost inflation, including for disposal, labor, and maintenance costs, (d) higher leachate disposal costs, (e) higher accretion expense associated with changes in the timing and cost estimates of our closure, post-closure, and capping obligations and (f) the allocation of higher corporate costs.

Current wording

Operating income decreased in the three and nine months ended September 30, 2024 by $(5.6) million and $(1.0) million, respectively, as compared to the prior year periods. The period-over-period decreases were driven by (i) the charge related to the Southbridge Landfill, (ii) higher costs associated with operating and supporting acquired businesses, (iii) increased depreciation expense due to acquisitions and investment in property and equipment, (iv) general cost inflation, including for disposal, labor, and maintenance costs, (v) higher leachate disposal costs, (vi) higher accretion and landfill amortization expense associated with changes in the timing and cost estimates of our closure, post-closure, and capping obligations, (vii) higher accruals related to insurance claims quarterly and (viii) the allocation of higher corporate costs; partially offset by (a) revenue growth, described above, (b) higher intercompany related operating income, (c) lower costs due to improved routing efficiencies and (d) a charge for the FLSA-related legal settlement recorded during the nine months ended September 30, 2023. See further discussion about the charge related to the Southbridge Landfill above in “Operating Expenses”.

Previous 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.

Current wording

Solid waste revenues increased in the three and nine months ended September 30, 2024 as compared to the prior year periods, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $5.9 million, or 6.3% as a percentage of collection operations quarterly, and $15.4 million, or 6.0% as a percentage of collection operations year-to-date, and (iii) favorable disposal pricing of $1.5 million, or 3.9% as a percentage of disposal operations quarterly, and $5.1 million, or 4.8% as a percentage of disposal operations year-to-date; partially offset by (a) lower disposal volume of $(3.2) million, or (8.1)% as a percentage of disposal operations quarterly, and $(11.8) million, or (11.0)% 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 $(0.7) million, or (0.7)% as a percentage of collection operations quarterly, and $(3.5) million, or (1.4)% 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, partly counteracted by an increase in the environmental component of the E&E Fee to help offset environmental, regulatory and other operating costs.

Previous 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”.

Current wording

Operating income declined in the three and nine months ended September 30, 2024 by $(0.8) million and $(5.6) 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 and landfill amortization expense associated with changes in the timing and cost estimates of our closure, post-closure, and capping obligations, (vii) higher accruals related to insurance claims quarterly, (viii) the allocation of higher corporate costs, (ix) higher expense from acquisition activities quarterly, and (x) a gain on resolution of acquisition-related contingent consideration in the nine months ended September 30, 2023 associated with the reversal of a contingency for a transfer station permit expansion that was deemed no longer viable; partially offset by (a) revenue growth, described above, (b) higher intercompany related operating income, (c) a charge for the FLSA-related legal settlement recorded during the nine months ended September 30, 2023, and (d) improved routing efficiencies. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

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 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”.

Current wording

The operating losses of $(5.1) million and $(17.0) million in the three and nine months ended September 30, 2024, respectively, were impacted by $3.2 million quarterly and $12.3 million year-to-date of expense from acquisition activities, comprised primarily of integration costs, including rebranding efforts and a charge in the nine months ended September 30, 2024 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 and an increased provision for expected credit losses quarterly due to the aging of receivables.

Previous wording

Resource Solutions revenues increased in the three and six months ended June 30, 2024 as compared to the prior year periods, due to the impact from (i) higher recycled commodity pricing of $4.9 million, or 19.1% as a percentage of processing operations quarterly, and $9.6 million, or 20.1% as a percentage of processing operations year-to-date, (ii) the contribution from acquisitions, (iii) National Accounts business pricing growth of $1.7 million, or 3.7% as a percentage of National Accounts operations quarterly, and $4.4 million, or 4.8% as a percentage of National Accounts operations year-to-date, (iv) higher processing volumes of $3.2 million, or 12.7% as a percentage of processing operations quarterly, and $3.7 million, or 7.6% as a percentage of processing operations year-to-date, (v) higher other processing price of $0.3 million, or 1.3% as a percentage of processing operations quarterly, and $0.7 million, or 1.4% as a percentage of processing operations year-to-date (vi) higher National Accounts business volumes of $1.6 million, or 3.4% as a percentage of National Accounts operations quarterly, and lower National Accounts business volumes of $(0.3) million, or (0.3)% as a percentage of National Accounts operations year-to-date, (vii) lower tipping fees primarily related to contract structures that work to offset recycled commodity price movements of $(3.8) million, or (14.8)% as a percentage of processing operations quarterly, and $(5.4) million, or (11.3)% as a percentage of processing operations year-to-date, and (viii) lower surcharges and other fees associated with our National Accounts business year-to-date.

Current wording

Resource Solutions revenues increased in the three and nine months ended September 30, 2024 as compared to the prior year periods, due to the impact from (i) higher recycled commodity pricing of $7.1 million, or 31.2% as a percentage of recycling operations quarterly, and $16.8 million, or 27.7% as a percentage of recycling operations year-to-date, (ii) the contribution from acquisitions, (iii) National Accounts business pricing growth of $0.5 million, or 1.1% as a percentage of National Accounts operations quarterly, and $4.9 million, or 3.5% as a percentage of National Accounts operations year-to-date, (iv) higher recycling volumes of $3.5 million, or 15.5% as a percentage of recycling operations quarterly, and $7.6 million, or 12.7% as a percentage of recycling operations year-to-date, (v) higher other processing price of $0.3 million, or 6.4% as a percentage of other processing operations quarterly, and $1.0 million, or 6.5% as a percentage of other processing operations year-to-date (vi) higher National Accounts business volumes of $3.4 million, or 7.2% as a percentage of National Accounts operations quarterly, and $3.2 million, or 2.3% as a percentage of National Accounts operations year-to-date, (vii) higher other processing volumes of $0.4 million, or 7.0% as a percentage of other processing operations quarterly, and lower other processing volumes of $(0.1) million, or (0.9%) as a percentage of other processing operations year-to-date, (viii) lower tipping fees primarily related to contract structures that work to offset recycled commodity price movements of $(5.4) million, or (24.1)% as a percentage of recycling operations quarterly, and $(10.9) million, or (18.0)% as a percentage of recycling operations year-to-date, and (ix) lower surcharges and other fees associated with our National Accounts business.

Previous 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.

Current wording

Operating income increased in the three and nine months ended September 30, 2024 by $1.4 million and $8.3 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 year-to-date 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 related operating income.

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 $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”.

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 increased $(0.4) million and decreased $1.7 million in the three and nine months ended September 30, 2024, respectively, as compared to the prior year periods, driven primarily by the timing of 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 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.

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 September 30, 2024, we had $678.5 million of available and undrawn capacity under our $700.0 million revolving credit facility (“Revolving Credit Facility”) and $519.0 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, 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.

Current wording

Current assets, excluding cash and cash equivalents, increased $18.7 million and current liabilities, excluding current maturities of debt, increased $9.8 in the nine months ended September 30, 2024, resulting in a $8.9 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 $(28.8) million as of September 30, 2024. We strive to minimize net working capital by driving shorter days sales outstanding as compared to days payable outstanding.

Previous 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:

Current wording

Cash and cash equivalents increased $298.1 million in the nine months ended September 30, 2024. A summary of cash flows (in millions) follows:

Previous 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.

Current wording

Net cash provided by operating activities increased $13.8 million in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. This was the result of revenue growth driven by acquisition activity, partially offset by 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. For discussion of our operational performance in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, see “Results of Operations” above.

Previous wording

Acquisitions, net of cash acquired. In the six months ended June 30, 2024, we received a $2.9 million working capital settlement on a business previously acquired, partially offset by $(0.7) million in cash consideration on a business acquired and $(0.9) million in payments on businesses previously acquired, as compared to the six months ended June 30, 2023 during which we acquired two businesses for total consideration of $(546.3) million, including $(544.4) million in cash, and paid $(3.2) million in holdback payments on businesses previously acquired.

Current wording

Acquisitions, net of cash acquired. In the nine months ended September 30, 2024, we acquired five businesses for total consideration of $(260.2) million, including $(261.2) million in cash, made $(0.9) million in payments on businesses previously acquired and received a $2.9 million working capital settlement on a business previously acquired, as compared to the nine months ended September 30, 2023 during which we acquired five businesses, including the GFL Acquisition, for total consideration of $845.1 million, including $842.6 million in cash and paid $5.2 million in holdback payments on businesses previously acquired.

Previous 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.

Current wording

Capital expenditures. Capital expenditures were $36.0 million higher in the nine months ended September 30, 2024 as compared to the nine months ended September 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 and (iv) the timing of spend and increased investment in our fleet.

Previous wording

Debt activity. Net cash associated with debt activity decreased $437.7 million in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily due to entering into the $430.0 million aggregate principal amount 2023 Term Loan Facility in June 2023.

Current wording

Debt activity. Net cash associated with debt activity decreased $(425.6) million in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. In September 2024, we entered into a second amended and restated credit agreement (“Credit Agreement”), which amended and restated in its entirety our amended and restated credit agreement (“Existing Credit Agreement”). The Credit Agreement provides for a $800.0 million aggregate principal amount term loan A facility (“Term Loan Facility”) and a $700.0 million Revolving Credit Facility, with a $155.0 million sublimit for letters of credit (collectively, the "Credit Facility"). The proceeds of the Credit Facility refinanced our existing $769.3 million aggregate principal amount term loan A facilities under the Existing Credit Agreement, including the $430.0 million aggregate principal amount 2023 term loan A facility we entered into in June 2023.

Previous wording

Payment of debt issuance costs. We paid $7.2 million of debt issuance costs in the six months ended June 30, 2023 primarily related to financing activities associated with the GFL Acquisition, which included $4.1 million of debt issuance costs that were paid related to short-term secured bridge financing that was terminated in May 2023 when we entered into the 2023 Term Loan Facility.

Current wording

Payment of debt issuance costs. We paid $6.4 million of debt issuance costs in the nine months ended September 30, 2024 primarily related to refinancing activities associated with entering into the Credit Agreement as compared to $12.8 million in the nine months ended September 30, 2023, which included $8.7 million related to bridge financing activities associated with the GFL Acquisition and the Twin Bridges Acquisition.

Previous wording

Proceeds from the public offering of Class A Common Stock. In the six months ended June 30, 2023, we completed a public offering of 6.1 million shares of our Class A common stock at a public offering price of $85.50 per share. After deducting stock issuance costs received as of June 30, 2023, including underwriting discounts, commissions and offering expenses, the offering has resulted in net proceeds of $496.4 million. The net proceeds from this offering were and are to be used to fund acquisition activities and to repay certain costs associated with acquisition activities, and to repay borrowings and/or debt securities.

Current wording

In the nine months ended September 30, 2023, we completed a public offering of 6.1 million shares of our Class A common stock at a public offering price of $85.50 per share. After deducting stock issuance costs received as of September 30, 2023, including underwriting discounts, commissions and offering expenses, the offering resulted in net proceeds of $496.2 million. The net proceeds from this offering were and are to be used to fund acquisition activity, including the GFL Acquisition and the Twin Bridges Acquisition, to pay certain costs associated with acquisition activities, and to repay borrowings and/or debt securities.

Previous 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:

Current wording

As of September 30, 2024, we are party to the Credit Agreement, which provides for a $800.0 million aggregate principal amount Term Loan Facility and a $700.0 million Revolving Credit Facility, with a $155.0 million sublimit for letters of credit. 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 $200.0 million, subject to further increase based on the terms and conditions set forth in the Credit Agreement. The Credit Facility has a 5-year term that matures in September 2029. The Credit Facility shall bear interest, at our election, at term secured overnight financing rate (“Term SOFR”) 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 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.

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 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 September 30, 2024, further advances were available under the Revolving Credit Facility in the amount of $678.5 million. The available amount is net of outstanding irrevocable letters of credit totaling $21.5 million, and as of September 30, 2024 no amount had been drawn.

Previous wording

The Amended and Restated 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 June 30, 2024, we were in compliance with all financial covenants contained in the Amended and Restated Credit Agreement as follows (in millions):

Current wording

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 September 30, 2024, we were in compliance with all financial covenants contained in the Credit Agreement as follows (in millions):

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 $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):

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 (calculated at $999.7 million as of September 30, 2024, or $1,099.7 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 September 30, 2024. Consolidated funded debt, net and consolidated EBITDA as defined by the 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):