# CASELLA WASTE SYSTEMS INC (CWST) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CASELLA WASTE SYSTEMS INC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/911177/000091117723000012/cwst-20221231.htm
Accession: 0000911177-23-000012
Filing date: 2023-02-17
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/CWST/
All MD&A years: /company/CWST/mda/
Previous year: /company/CWST/mda/fy2021/ (FY 2021)
Next year: /company/CWST/mda/fy2023/ (FY 2023)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto, and other financial information, included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties. Our actual results may differ materially from those contained in any forward-looking statements.

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Discussion and analysis of our financial condition and results of operations for the fiscal year ended December 31, 2021 ("fiscal year 2021") compared to our financial condition and results of operations for the fiscal year ended December 31, 2020 is included under the heading Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission on February 18, 2022.

Company Overview

Casella Waste Systems, Inc., a Delaware corporation, and its wholly-owned subsidiaries (collectively, “we”, “us” or “our”), is a regional, vertically integrated solid waste services company. We provide resource management expertise and services to residential, commercial, municipal, institutional and industrial customers, primarily in the areas of solid waste collection and disposal, transfer, recycling and organics services. We provide integrated solid waste services in seven states: Vermont, New Hampshire, New York, Massachusetts, Connecticut, Maine and Pennsylvania, with our headquarters located in Rutland, Vermont. We manage our solid waste operations on a geographic basis through two regional operating segments, the Eastern and Western regions, each of which provides a full range of solid waste services. 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.

As of January 31, 2023, we owned and/or operated 49 solid waste collection operations, 65 transfer stations, 26 recycling facilities, eight Subtitle D landfills, three landfill gas-to-energy facilities and one landfill permitted to accept construction and demolition materials.

Acquisitions and Divestitures

Acquisitions

We have made in the past, and we may make in the future, acquisitions to densify existing operations, expand service areas, and grow services for our customers. These acquisitions may include “tuck-in” acquisitions within our existing markets, assets that are adjacent to or outside of our existing markets, or larger, more strategic acquisitions. In addition, from time to time, we may acquire businesses that are complementary to our core business strategy. We face competition for acquisition targets, particularly the larger and more meaningful targets, but we believe that our strong relationships and reputation help to offset this factor.

We have a business development team that identifies acquisition candidates, categorizes the opportunity by strategic fit and financial synergies, establishes contact with the appropriate representative of the acquisition candidate and gathers further information on the acquisition candidate.

In the fiscal year ended December 31, 2022 ("fiscal year 2022"), we acquired fourteen businesses primarily related to our solid-waste operations, including, among others, solid-waste collection, recycling, transfer station and transportation businesses for total consideration of $82.7 million, including $76.6 million in cash, $1.3 million in non-cash consideration and $4.8 million in holdbacks to sellers and contingent consideration.

In fiscal year 2021, we acquired ten businesses primarily related to our solid-waste operations, including, among others, solid-waste collection and transfer station businesses and a residential, commercial and roll-off collection business in eastern Connecticut that operates a rail-served construction and demolition processing and waste transfer facility, a waste transfer station, a single-stream recycling facility, and several other recycling operations whose assets and liabilities are allocated between our Eastern region and Resource Solutions operating segments for total consideration of $171.7 million, including $166.5 million in cash and $5.2 million in holdbacks to sellers and contingent consideration.

Divestitures

From time to time, we may sell or divest certain investments or other components of our business. These divestitures may be undertaken for a number of reasons, including: to generate proceeds to pay down debt; as a result of a determination that the specified asset will provide inadequate returns to us or that the asset no longer serves a strategic purpose in connection with our business; or as a result of a determination that the asset may be more valuable to a third-party. We will continue to look to divest certain activities and investments that no longer enhance or complement our core business if the right opportunity presents itself.

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Results of Operations

Revenues

We manage our solid waste operations, which include a full range of solid waste services, on a geographic basis through two regional operating segments, which we designate as the Eastern and Western regions. Revenues in our Eastern and Western regions consist primarily of fees charged to customers for solid waste collection and disposal services, including landfill, transfer station and transportation, landfill gas-to-energy, and processing services. We derive a substantial portion of our collection revenues from commercial, industrial and municipal services that are generally performed under service agreements or pursuant to contracts with municipalities. The majority of our residential collection services are performed on a subscription basis with individual property owners or occupants. Landfill and transfer customers are charged a tipping fee on a per ton basis for disposing of their solid waste at our disposal facilities and transfer stations. We also generate and sell electricity at certain of our landfill facilities. We manage our resource-renewal operations through the Resource Solutions operating segment, which includes processing services, and non-processing services, which we refer to as our Customer Solutions business. Revenues from processing services are derived from customers in the form of processing fees, tipping fees, and commodity sales, primarily comprised of newspaper, corrugated containers, plastics, ferrous and aluminum, and organic materials such as our earthlife® soils products including fertilizers, composts and mulches. Revenues from our Customer Solutions business are derived from brokerage services and overall resource management services providing a wide range of environmental services and resource management solutions to large and complex organizations, as well as traditional collection, disposal and recycling services provided to large account multi-site customers.

The table below shows revenue attributable to services provided (in millions) for the following periods:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,","","$ Change"],["","2022","","2021"],["Collection","$","539.6","","","49.7","%","","$","442.7","","","49.8","%","","$","96.9"],["Disposal","228.0","","","21.0","%","","197.0","","","22.2","%","","31.0"],["Power","7.5","","","0.7","%","","5.1","","","0.6","%","","2.4"],["Processing","10.1","","","1.0","%","","9.3","","","1.0","%","","0.8"],["Solid waste","785.2","","","72.4","%","","654.1","","","73.6","%","","131.1"],["Processing","119.1","","","10.9","%","","93.3","","","10.5","%","","25.8"],["Customer Solutions","180.8","","","16.7","%","","141.8","","","15.9","%","","39.0"],["Resource Solutions","299.9","","","27.6","%","","235.1","","","26.4","%","","64.8"],["Total revenues","$","1,085.1","","","100.0","%","","$","889.2","","","100.0","%","","$","195.9"]]
[[/GREPCENT_TABLE]]

Solid waste revenues

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

[[GREPCENT_TABLE]]
[["","Period-to-Period Change For Fiscal Year 2022 vs Fiscal Year 2021"],["","Amount","","% Growth"],["Price","$","41.7","","","6.4","%"],["Volume","5.0","","","0.7","%"],["Surcharges and other fees","32.6","","","5.0","%"],["Commodity price and volume","2.3","","","0.3","%"],["Acquisitions","49.5","","","7.6","%"],["Solid waste revenues","$","131.1","","","20.0","%"]]
[[/GREPCENT_TABLE]]

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Price. 

The price change component in fiscal year 2022 solid waste revenues growth from the prior year is a result of the following:

•$31.1 million from favorable collection pricing; and

•$10.6 million from favorable disposal pricing associated with our landfills, transfer stations and, to a lesser extent, Western region transportation services.

Volume.

The volume change component in fiscal year 2022 solid waste revenues growth from the prior year is a result of the following:

•$6.4 million from higher disposal volumes ($4.5 million relates to higher transfer station volumes, $1.0 million relates to higher third-party landfill volumes and $0.9 million relates to higher transportation volumes); and

•$0.2 million from higher processing volumes; partially offset by

•$(1.6) million from lower collection volumes in our Western region associated with higher customer churn due to higher pricing, implementation of the energy and environmental fee ("E&E Fee(s)") on additional customers and customer deselection.

Surcharges and other fees.

The surcharges and other fees change component in fiscal year 2022 solid waste revenues growth from the prior year is primarily the result of higher E&E Fees and, to a lesser extent, higher sustainability recycling adjustment fees ("SRA Fee(s)"). Higher E&E Fees associated with our fuel cost recovery program were a result of higher diesel fuel prices and a higher overall customer participation rate. Higher SRA Fees were a result of lower recycled commodity prices and a higher overall customer participation rate. See Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" included in this Annual Report on Form 10-K for additional information regarding our E&E Fee and SRA Fee.

Commodity price and volume.

The commodity price and volume change component in fiscal year 2022 solid waste revenues growth from the prior year is primarily due to favorable energy pricing in our Western region.

Acquisitions.

The acquisitions change component in fiscal year 2022 solid waste revenues growth is a result of increased acquisition activity within our Eastern and Western region operating segments in line with our growth strategy, including the timing and acquisition of twelve businesses related to our solid-waste operations in fiscal year 2022 and ten businesses related to our solid-waste operations in the fiscal year 2021.

Resource Solutions revenues

The change component in fiscal year 2022 resource solutions revenues growth of $64.8 million from the prior year is the result of the following:

•$42.9 million from acquisition activity;

•$25.9 million on higher volumes from our Customer Solutions business, favorable pricing and increased fees; partially offset by

•$(3.5) million from unfavorable commodity pricing, partially offset by higher tipping fees and favorable other processing pricing; and

•$(0.5) million from lower processing volumes mainly driven by lower recycled commodity volumes.

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Operating Expenses

A summary of our cost of operations, general and administration and depreciation and amortization expenses is as follows (dollars in millions and as a percentage of total revenues):

[[GREPCENT_TABLE]]
[["","Fiscal Years Ended December 31,","","$ Change"],["","2022","","2021"],["Cost of operations","$","723.1","","","66.6","%","","$","582.4","","","65.5","%","","$","140.7"],["General and administration","$","133.4","","","12.3","%","","$","118.8","","","13.4","%","","$","14.6"],["Depreciation and amortization","$","126.4","","","11.6","%","","$","103.6","","","11.6","%","","$","22.8"]]
[[/GREPCENT_TABLE]]

Cost of Operations

Cost of operations includes: (i) direct costs, which consist of the costs of purchased materials and third-party transportation and disposal costs, including third-party tipping fees; (ii) direct labor costs, which include salaries, wages, incentive compensation and related benefit costs such as health and welfare benefits and workers compensation; (iii) direct operational costs, which include landfill operating costs such as accretion expense related to final capping, closure and post-closure obligations, leachate treatment and disposal costs and depletion of landfill operating lease obligations, vehicle insurance costs, host community fees and royalties; (iv) fuel costs used by our vehicles and in conducting our operations; (v) maintenance and repair costs relating to our vehicles, equipment and containers; and (vi) other operational costs including facility costs.

A summary of the major components of our cost of operations is as follows (dollars in millions and as a percentage of total revenues):

[[GREPCENT_TABLE]]
[["","","","","","Fiscal Years Ended December 31,","","$ Change"],["","","","","","2022","","2021"],["Direct costs","","","","","","","","","","","$","279.7","","","25.8","%","","$","223.4","","","25.1","%","","$","56.3"],["Direct labor costs","","","","","","","","","","","144.0","","","13.3","%","","119.8","","","13.5","%","","24.2"],["Direct operational costs","","","","","","","","","","","89.5","","","8.3","%","","80.2","","","9.0","%","","9.3"],["Fuel costs","","","","","","","","","","","48.3","","","4.4","%","","26.9","","","3.0","%","","21.4"],["Maintenance and repair costs","","","","","","","","","","","81.7","","","7.4","%","","64.1","","","7.3","%","","17.6"],["Other operational costs","","","","","","","","","","","79.9","","","7.4","%","","68.0","","","7.6","%","","11.9"],["","","","","","","","","","","","$","723.1","","","66.6","%","","$","582.4","","","65.5","%","","$","140.7"]]
[[/GREPCENT_TABLE]]

These cost categories may change from time to time and may not be comparable to similarly titled categories presented by other companies.

The most significant items impacting the changes in our cost of operations during fiscal year 2022 are summarized below:

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•Direct costs increased in aggregate dollars due primarily to higher third-party hauling, transportation and disposal costs on (i) higher solid waste volumes driven by acquisition-related growth, (ii) higher fuel surcharges from third party haulers due to higher diesel fuel prices, (iii) higher third-party disposal rates due to inflationary pressures and (iv) higher volumes in our Customer Solutions business within our Resource Solutions operating segment; and higher purchased material costs on acquisition activity, partially offset by lower commodity prices in our Resource Solutions operating segment;

•Direct labor costs decreased as a percentage of revenues, while increasing in aggregate dollars due primarily to acquisition-related growth and wage inflation;

•Direct operational costs decreased as a percentage of revenues, while increasing in aggregate dollars due primarily to (i) higher landfill operating costs in our Western region due to severe winter weather earlier in the year and construction delays compounded with higher landfill volumes, (ii) higher vehicle insurance costs, (iii) acquisition-related growth and (iv) inflationary pressures; partially offset by lower host community and royalty fees;

•Fuel costs increased in aggregate dollars due primarily to higher fuel prices and higher volumes driven by acquisition-related growth. See Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" included of this Annual Report on Form 10-K for additional information regarding our fuel costs;

•Maintenance and repair costs increased in aggregate dollars due primarily to higher fleet and container maintenance costs associated with acquisition-related growth and inflationary pressures; and

•Other operational costs decreased as a percentage of revenues, while increasing in aggregate dollars due primarily to higher facility costs driven by acquisition-related growth and inflationary pressures.

General and Administration

General and administration expense includes: (i) labor costs, which consists of salaries, wages, incentive compensation and related benefit costs such as health and welfare benefits and workers compensation costs related to management, clerical and administrative functions; (ii) professional service fees; (iii) bad debt expense; and (iv) other overhead costs including those associated with marketing, sales force and community relations efforts.

A summary of the major components of our general and administration expenses is as follows (dollars in millions and as a percentage of total revenues):

[[GREPCENT_TABLE]]
[["","","","","","Fiscal Years Ended December 31,","","$ Change"],["","","","","","2022","","2021"],["Labor costs","","","","","","","","","","","$","91.5","","","8.4","%","","$","83.6","","","9.4","%","","$","7.9"],["Professional fees","","","","","","","","","","","7.0","","","0.6","%","","7.2","","","0.8","%","","(0.2)"],["Provision for bad debt expense","","","","","","","","","","","2.0","","","0.2","%","","1.7","","","0.2","%","","0.3"],["Other","","","","","","","","","","","32.9","","","3.1","%","","26.3","","","3.0","%","","6.6"],["","","","","","","","","","","","$","133.4","","","12.3","%","","$","118.8","","","13.4","%","","$","14.6"]]
[[/GREPCENT_TABLE]]

These cost categories may change from time to time and may not be comparable to similarly titled categories presented by other companies.

The most significant items impacting the changes in our general and administration expense during fiscal year 2022 are summarized below:

•Labor costs decreased as a percentage of revenues, while increasing in aggregate dollars due primarily to acquisition-related growth, wage inflation and higher accrued incentive compensation associated with increased headcount, partially offset by lower equity compensation costs; and

•Other costs increased in aggregate dollars due primarily to inflationary pressures and an increase in general overhead costs to support business growth.

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Depreciation and Amortization

Depreciation and amortization expense includes: (i) depreciation of property and equipment (including assets recorded for finance leases) on a straight-line basis over the estimated useful lives of the assets; (ii) amortization of landfill costs (including those costs incurred and all estimated future costs for landfill development and construction, along with asset retirement costs arising from closure and post-closure obligations) on a units-of-consumption method as landfill airspace is consumed over the total estimated remaining capacity of a site, which includes both permitted capacity and unpermitted expansion capacity that meets certain criteria for amortization purposes, and amortization of landfill asset retirement costs arising from final capping obligations on a units-of-consumption method as airspace is consumed over the estimated capacity associated with each final capping event; and (iii) amortization of intangible assets with a definite life, based on the economic benefit provided, or using the sum of years digits or straight-line methods over the definitive terms of the related agreements.

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

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,","","$ Change"],["","2022","","2021"],["Depreciation expense","$","78.1","","","7.2","%","","$","62.3","","","7.0","%","","$","15.8"],["Landfill amortization expense","31.6","","","2.9","%","","30.3","","","3.4","%","","1.3"],["Other amortization expense","16.7","","","1.5","%","","11.0","","","1.2","%","","5.7"],["","$","126.4","","","11.6","%","","$","103.6","","","11.6","%","","$","22.8"]]
[[/GREPCENT_TABLE]]

The period-to-period increase in depreciation expense and other amortization expense can be primarily attributed to acquisition activity and increased investments in our fleet, whereas the increase in landfill amortization expense can be attributed to increased landfill volumes and the volume mix at our landfills.

Expense from Acquisition Activities and Other Items

In the fiscal years 2022 and 2021, we recorded charges of $4.6 million and $5.3 million, respectively, comprised primarily of legal, consulting and other similar costs associated with due diligence and the acquisition and integration of acquired businesses or select development projects. See Note 5, Business Combinations, to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for disclosure regarding acquisition activity.

Environmental Remediation Charge

In the fiscal year 2022, we recorded an environmental remediation charge of $0.8 million associated with the investigation of potential remediation at an inactive waste disposal site that adjoins one of our landfills. In the fiscal year 2021, we recorded an environmental remediation charge of $0.9 million associated with a settlement agreement to conduct restoration of a stream bed on lands adjoining our North Country Environmental Services landfill located in Bethlehem, New Hampshire. See Note 13, Commitments and Contingencies, to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further disclosure over environmental remediation liabilities.

Southbridge Landfill Closure Charge, Net

In the fiscal year ended December 31, 2017, we initiated the plan to cease operations of our landfill located in Southbridge, Massachusetts ("Southbridge Landfill") and later closed it in November 2018 when Southbridge Landfill reached its final capacity. Accordingly, in fiscal years 2022 and 2021, we recorded charges associated with the closure of our Southbridge Landfill (in millions) as follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,"],["","2022","","2021"],["Legal and transaction costs (1)","$","0.7","","","$","0.9"],["Contract settlement charge (2)","\u2014","","","0.6"],["Landfill closure project charge (credit) (3)","0.7","","","(1.0)"],["Southbridge Landfill closure charge, net","$","1.4","","","$","0.5"]]
[[/GREPCENT_TABLE]]

(1)We incurred legal costs as well as other transaction costs associated with various matters as part of the Southbridge Landfill closure.

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(2)We updated the cost estimates associated with a contract settlement charge associated with the Southbridge Landfill closure and the remaining future obligations due to the Town of Southbridge under the landfill operating agreement with the Town of Southbridge.

(3)We recorded a landfill closure project (credit) charge associated with revised costs under the closure plan at Southbridge Landfill. See Note 10, Final Capping, Closure and Post-Closure Costs, to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for disclosure regarding our landfill final capping, closure and post-closure costs.

Other expenses

Interest Expense, net

Our interest expense, net increased $2.1 million in fiscal year 2022 due primarily to rising interest rates and higher average debt balances associated with the issuance in June 2022 of $35.0 million aggregate principal amount of Vermont Economic Development Authority Solid Waste Disposal Long-Term Revenue Bonds Series 2022A-1 ("Vermont Bonds 2022A-1").

Provision for Income Taxes

Our provision for income taxes was $21.9 million in fiscal year 2022 and $16.9 million in fiscal year 2021. For fiscal year 2022, the provision for income taxes includes $5.4 million of current income taxes and $16.5 million of deferred income taxes. The provision for income taxes in fiscal year 2021 includes $1.8 million of current income taxes and $15.1 million of deferred income taxes. The effective rate for the fiscal year 2022 is 29% and is computed based on the statutory rate of 21% adjusted primarily for state taxes and nondeductible officer compensation.

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted. The TCJA significantly changed U.S. corporate income tax laws by, among other things, changing carryforward rules for net operating losses. Under the Internal Revenue Code, as amended by the TCJA, federal net operating loss carryforwards generated before the 2018 tax year continue to be carried forward for 20 years and are able to fully offset taxable income (“pre-2018 net operating losses”). Federal net operating losses generated following the 2017 tax year are carried forward indefinitely, but generally may only offset up to 80% of taxable income earned in a tax year (“post-2017 net operating losses”).

We carried $59.8 million of pre-2018 net operating losses and $46.5 million post-2017 net operating losses into the 2022 tax year. We expect to fully offset projected 2022 federal taxable income with pre-2018 net operating losses. We project $5.4 million of pre-2018 net operating losses and $46.5 million of post-2017 net operating losses to be carried forward to the 2023 tax year.

In addition, the TCJA added limitations on the deductibility of interest expense that become more restrictive beginning in tax year 2022 and potentially could limit the deductibility of some of our interest expense. Any interest expense limited may be carried forward indefinitely and utilized in later years subject to said interest limitation.

Segment Reporting

We report selected information about our reportable operating segments in a manner consistent with that used for internal management reporting. We classify our solid waste operations on a geographic basis through regional operating segments, our Western and Eastern regions. Revenues associated with our solid waste operations are derived mainly from solid waste collection and disposal services, including landfill, transfer station and transportation, landfill gas-to-energy, and processing services in the northeastern United States. Our Resource Solutions operating segment 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. Revenues associated with our Resource Solutions operations are derived from two lines-of-service: processing services and our Customer Solutions business. Revenues from processing services are derived from customers in the form of processing fees, tipping fees, commodity sales, and organic material sales. Revenues from our Customer Solutions business are derived from brokerage services and overall resource management services providing a wide range of environmental services and resource management solutions to large and complex organizations, as well as traditional collection, disposal and recycling services provided to large account multi-site customers. Legal, tax, information technology, human resources, certain finance and accounting and other administrative functions are included in our Corporate Entities segment, which is not a reportable operating segment. Corporate Entities results reflect those costs not allocated to our reportable operating segments.

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A summary of revenues by reportable operating segment (in millions) follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,","","$ Change"],["","2022","","2021"],["Eastern","$","340.0","","","$","264.6","","","$","75.4"],["Western","445.2","","","389.5","","","55.7"],["Resource Solutions","299.9","","","235.1","","","64.8"],["Total","$","1,085.1","","","$","889.2","","","$","195.9"]]
[[/GREPCENT_TABLE]]

Eastern Region

The following table provides details associated with the period-to-period change in revenues (dollars in millions and as percentage growth of solid waste revenues) attributable to services provided:

[[GREPCENT_TABLE]]
[["","Period-to-Period Change For Fiscal Year 2022 vs Fiscal Year 2021"],["","Amount","","% Growth"],["Price","$","18.7","","","7.1","%"],["Volume","8.0","","","3.0","%"],["Surcharges and other fees","14.1","","","5.3","%"],["Commodity price and volume","(0.1)","","","\u2014","%"],["Acquisitions","34.7","","","13.1","%"],["Solid waste revenues","$","75.4","","","28.5","%"]]
[[/GREPCENT_TABLE]]

Price. 

The price change component in fiscal year 2022 solid waste revenues growth from the prior year is a result of the following:

•$13.6 million from favorable collection pricing; and

•$5.1 million from favorable disposal pricing related to transfer stations and landfills.

Volume. 

The volume change component in fiscal year 2022 solid waste revenues growth from the prior year is a result of the following:

•$4.9 million from higher disposal volumes related to transfer stations, landfills and transportation services;

•$2.9 million from higher collection volumes as a result of organic business growth; and

•$0.2 million from higher processing volumes.

Surcharges and other fees.

The surcharges and other fees change component in fiscal year 2022 solid waste revenues growth from the prior year is primarily the result of higher E&E Fees, and to a lesser extent, higher SRA Fees. Higher E&E Fees associated with our fuel cost recovery program were a result of higher diesel fuel prices and a higher overall customer participation rate. Higher SRA Fees were a result of lower recycled commodity prices and a higher overall customer participation rate. See Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" of this Annual Report on Form 10-K for additional information regarding our E&E Fee and SRA Fee.

Acquisitions. 

The acquisitions change component in fiscal year 2022 solid waste revenues growth is a result of increased acquisition activity in line with our growth strategy, including the timing and acquisition of two businesses in the fiscal year 2022 and five businesses in fiscal year 2021.

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Western Region

The following table provides details associated with the period-to-period change in revenues (dollars in millions and as percentage growth of solid waste revenues) attributable to services provided:

[[GREPCENT_TABLE]]
[["","Period-to-Period Change For Fiscal Year 2022 vs Fiscal Year 2021"],["","Amount","","% Growth"],["Price","$","23.0","","","5.9","%"],["Volume","(2.9)","","","(0.7)","%"],["Surcharges and other fees","18.4","","","4.7","%"],["Commodity price and volume","2.4","","","0.6","%"],["Acquisitions","14.8","","","3.8","%"],["Solid waste revenues","55.7","","","14.3","%"]]
[[/GREPCENT_TABLE]]

Price. 

The price change component in fiscal year 2022 solid waste revenues growth from the prior year is a result of the following:

•$17.6 million from favorable collection pricing; and

•$5.4 million from favorable disposal pricing related to landfills, transfer stations and, to a lesser extent, transportation services.

Volume.

The volume change component in fiscal year 2022 solid waste revenues growth from the prior year is a result of the following:

•$(4.4) million from lower collection volumes associated with higher customer churn due to higher pricing, implementation of the E&E Fee on additional customers and customer deselection; partially offset by

•$1.5 million from higher disposal volumes related to transfer stations, transportation, and landfills.

Surcharges and other fees.

The surcharges and other fees change component in fiscal year 2022 solid waste revenues growth from the prior year is primarily the result of higher E&E Fees and, to a lesser extent, higher SRA Fees. Higher E&E Fees associated with our fuel cost recovery program were a result of higher diesel fuel prices and a higher overall customer participation rate. Higher SRA Fees were a result of lower recycled commodity prices and a higher overall customer participation rate. See Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" of this Annual Report on Form 10-K for additional information regarding our E&E Fee and SRA Fee.

Commodity price and volume.

The commodity price and volume change component in fiscal year 2022 solid waste revenues growth from the prior year is primarily due to favorable energy pricing.

Acquisitions.

The acquisitions change component in fiscal year 2022 solid waste revenues growth is a result of increased acquisition activity in line with our growth strategy, including the timing and acquisition of ten businesses in fiscal year 2022 and five businesses in fiscal year 2021.

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Operating Income (Loss)

A summary of operating income (loss) by operating segments (in millions) follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,","","$ Change"],["","2022","","2021"],["Eastern","$","16.6","","","$","12.9","","","$","3.7"],["Western","65.5","","","49.0","","","16.5"],["Resource Solutions","15.9","","","17.6","","","(1.7)"],["Corporate Entities","(2.6)","","","(1.8)","","","(0.8)"],["Total","$","95.4","","","$","77.7","","","$","17.7"]]
[[/GREPCENT_TABLE]]

Eastern Region

Eastern region operating income increased $3.7 million in fiscal year 2022 from the prior year. Excluding the impact of the Southbridge Landfill closure charge, environmental remediation charge and the expense from acquisition activities, our operating performance in fiscal year 2022 improved as a result of revenue growth, inclusive of inter-company revenues, more than offsetting the following cost impacts discussed below.

Cost of operations:

Cost of operations increased $68.9 million in fiscal year 2022 from the prior year as a result of the following:

•Direct costs increased in aggregate dollars due primarily to higher hauling and third-party transportation and disposal costs on (i) higher solid waste volumes driven by acquisition-related growth and, to a lesser extent, organic business growth, (ii) higher fuel surcharges from third party haulers due to higher diesel fuel prices and (iii) higher third-party disposal rates due to inflationary pressures;

•Direct labor costs increased in aggregate dollars due primarily to acquisition-related and, to a lesser extent, organic business growth, and wage inflation;

•Fuel costs increased in aggregate dollars due primarily to higher fuel prices and higher volumes driven by acquisition-related and, to a lesser extent, organic business growth. See Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" of this Annual Report on Form 10-K for additional information regarding our fuel costs;

•Maintenance and repair costs increased in aggregate dollars due primarily to higher fleet and container maintenance costs associated with acquisition-related growth and inflationary pressures;

•Direct operational costs increased in aggregate dollars due to increased vehicle insurance costs and inflationary pressures; and

•Other operational costs increased in aggregate dollars due primarily to higher facility costs driven by acquisition-related growth and inflationary pressures.

General and administration:

General and administration expense increased $7.7 million in fiscal year 2022 from the prior year due primarily to (i) acquisition-related growth, (ii) wage inflation, (iii) higher accrued incentive compensation associated with an increased headcount, (iv) an increase in general overhead costs associated with business growth and inflationary pressures and (v) a higher allocation of shared overhead costs.

Depreciation and amortization:

Depreciation and amortization expense increased $14.1 million in fiscal year 2022 from the prior year due to acquisition-related growth, increased investment in our fleet, and higher landfill amortization expense due to higher landfill volumes and the volume mix at our landfills.

Western Region

Western region operating income increased $16.5 million in fiscal year 2022 from the prior year. Excluding the impact of the environmental remediation charge and expense from acquisition activities, our operating performance in fiscal year 2022 improved as a result of revenue growth, inclusive of inter-company revenues, more than offsetting the following cost impacts discussed below.

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Cost of operations:

Cost of operations increased $50.8 million in fiscal year 2022 from the prior year as a result of the following:

•Direct costs increased in aggregate dollars due primarily to higher hauling and third-party transportation and disposal costs on (i) higher solid waste volumes associated with acquisition-related growth, partially offset by lower core operations collection volumes, (ii) higher fuel surcharges from third party haulers due to higher diesel fuel prices and (iii) higher third-party disposal rates due to inflationary pressures;

•Fuel costs increased in aggregate dollars due to higher fuel prices and higher volumes driven by acquisition-related growth. See Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" of this Annual Report on Form 10-K for additional information regarding our fuel costs;

•Maintenance and repair costs increased in aggregate dollars due primarily to higher fleet maintenance costs associated with acquisition-related growth and inflationary pressures;

•Direct labor costs increased in aggregate dollars due primarily to acquisition-related growth and wage inflation;

•Direct operational costs increased in aggregate dollars due to (i) higher landfill operating costs from severe winter weather earlier in the year and construction delays compounded with higher landfill volumes, (ii) higher vehicle insurance costs and (iii) inflationary pressures; partially offset by lower host community and royalty fees; and

•Other operational costs increased in aggregate dollars due primarily to higher facility costs driven by acquisition-related growth and inflationary pressures.

General and administration:

General and administration expense increased $1.2 million in fiscal year 2022 from the prior year due to increased overhead costs associated with (i) acquisition-related growth, (ii) wage inflation, (iii) higher accrued incentive compensation associated with an increased headcount and (iv) an increase in general overhead costs associated with business growth and inflationary pressures; partially offset by a lower allocation of shared overhead costs.

Depreciation and amortization:

Depreciation and amortization expense increased $3.1 million in fiscal year 2022 from the prior year due primarily to acquisition-related growth and increased investments in our fleet; partially offset by lower landfill amortization due to the volume mix at our landfills.

Resource Solutions

Operating income decreased $(1.7) million in fiscal year 2022 from the prior year. Excluding the impact of the expense from acquisition activities, our operating performance in fiscal year 2022 was driven by revenue growth, inclusive of inter-company revenues, more than offset by the following cost impacts discussed below.

Cost of operations:

Cost of operations increased $59.7 million in fiscal year 2022 from the prior year as a result of the following:

•Direct costs increased in aggregate dollars due primarily to (i) higher hauling and third-party transportation costs on higher volumes in our Customer Solutions business, (ii) higher fuel surcharges from third party haulers due to higher diesel fuel prices, (iii) inflationary pressures, and (iv) higher purchased material costs due to acquisition-related growth, partially offset by lower commodity prices;

•Other operational costs increased in aggregate dollars due primarily to higher facility costs driven by acquisition-related growth and inflationary pressures;

•Direct labor costs increased in aggregate dollars due primarily to acquisition-related and organic growth in our Customer Solutions business and wage inflation;

•Maintenance and repair costs increased in aggregate dollars due primarily to higher fleet maintenance costs associated with acquisition-related and organic growth in our Customer Solutions business and inflationary pressures;

•Direct operational costs increased in aggregate dollars due primarily to acquisition-related growth and inflationary pressures; and

•Fuel costs increased in aggregate dollars due to higher fuel prices and higher volumes driven by acquisition-related and organic growth in our Customer Solutions business. See Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" of this Annual Report on Form 10-K for additional information regarding our fuel costs.

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General and administration:

General and administration increased $5.3 million in fiscal year 2022 due primarily to (i) acquisition-related growth, (ii) wage inflation, (iii) higher accrued incentive compensation associated with an increased headcount, (iv) an increase in general overhead costs associated with business growth and inflationary pressures, and (v) a higher allocation of shared overhead costs.

Depreciation and amortization

Depreciation and amortization expense increased $5.0 million in fiscal year 2022 from the prior year due to acquisition-related growth.

Liquidity and Capital Resources

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. We have $266.1 million of undrawn capacity from our $300.0 million revolving credit facility ("Revolving Credit Facility") as of December 31, 2022 to help meet our short-term and long-term liquidity needs. We expect existing cash and cash equivalents combined with 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. Our known current- and long-term uses of cash include, among other possible demands: (1) capital expenditures and leases, (2) acquisitions, (3) repayments to service debt and other long-term obligations and (4) payments for final capping, closure and post-closure asset retirement obligations and environmental remediation liabilities.

A summary of cash and cash equivalents, restricted assets and debt balances, excluding any debt issuance costs, (in millions) follows:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2022","","2021","","$ Change"],["Cash and cash equivalents","$","71.2","","","$","33.8","","","$","37.4"],["Current assets, excluding cash and cash equivalents","$","136.3","","","$","112.7","","","$","23.6"],["Restricted assets","$","1.9","","","$","2.1","","","$","(0.2)"],["Total current liabilities:"],["Current liabilities, excluding current maturities of debt","$","168.6","","","$","142.3","","","$","26.3"],["Current maturities of debt","9.0","","","9.9","","","(0.9)"],["Total current liabilities","$","177.6","","","$","152.2","","","$","25.4"],["Debt, less current portion","$","594.5","","","$","552.7","","","$","41.8"]]
[[/GREPCENT_TABLE]]

Current assets, excluding cash and cash equivalents, increased $23.6 million and current liabilities increased $25.4 million in fiscal year 2022 driven primarily by business and revenue growth, resulting in a $(1.8) million decrease in working capital, net (defined as current assets, excluding cash and cash equivalents, minus current liabilities) from $(39.5) million as of December 31, 2021 to $(41.3) million as of December 31, 2022. 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.

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Summary of Cash Flow Activity

Cash and cash equivalents increased $37.4 million in fiscal year 2022. A summary of cash flows (in millions) follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,","","$ Change"],["","2022","","2021"],["Net cash provided by operating activities","$","217.3","","","$","182.7","","","$","34.6"],["Net cash used in investing activities","$","(206.9)","","","$","(293.2)","","","$","86.3"],["Net cash provided by (used in) financing activities","$","26.9","","","$","(10.1)","","","$","37.0"]]
[[/GREPCENT_TABLE]]

Cash flows from operating activities.

A summary of operating cash flows (in millions) follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,"],["","2022","","2021"],["Net income","$","53.1","","","$","41.1"],["Adjustments to reconcile net income to net cash provided by operating activities:"],["Depreciation and amortization","126.4","","","103.6"],["Interest accretion on landfill and environmental remediation liabilities","8.0","","","7.3"],["Amortization of debt issuance costs on long-term debt","1.9","","","2.3"],["Stock-based compensation","8.2","","","11.6"],["Operating lease right-of-use assets expense","13.8","","","13.8"],["Disposition of assets, other items and charges, net","0.7","","","1.0"],["Deferred income taxes","16.5","","","15.1"],["","228.6","","","195.8"],["Changes in assets and liabilities, net","(11.3)","","","(13.1)"],["Net cash provided by operating activities","$","217.3","","","$","182.7"]]
[[/GREPCENT_TABLE]]

Net cash provided by operating activities increased $34.6 million in fiscal year 2022 as compared to fiscal year 2021. This was the result of improved operational performance combined with the favorable cash flow impact associated with the changes in our assets and liabilities, net of effects of acquisitions and divestitures. For discussion of our improved operational performance in fiscal year 2022 as compared to fiscal year 2021, see "Results of Operations" included in this Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K. The favorable cash flow impact associated with the changes in our assets and liabilities, net of effects of acquisitions and divestitures, which are affected by both cost changes and the timing of payments, in fiscal year 2022 as compared to fiscal year 2021 was due primarily to the following:

•a $8.9 million favorable impact to operating cash flows associated with the change in accrued expenses, contract liabilities and other liabilities on higher accrued expenses and lower final capping, closure and post closure payments; partially offset by

•a $(2.8) million unfavorable impact to operating cash flows associated with the change in accounts payable on a larger increase in prior years days payable outstanding as compared to a fiscal year 2022, partially offset by increased activity, primarily on acquisitions, and differences in the timing of payments; and

•a $(4.7) million unfavorable impact to operating cash flows associated with the change in prepaid expenses, inventories and other assets on higher parts inventory and other non-current assets.

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Cash flows from investing activities.

A summary of investing cash flows (in millions) follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,"],["","2022","","2021"],["Acquisitions, net of cash acquired","$","(78.2)","","","$","(170.7)"],["Additions to property, plant and equipment","(130.9)","","","(123.3)"],["Proceeds from sale of cost method investment","1.6","","","\u2014"],["Proceeds from sale of property and equipment","0.6","","","0.8"],["Net cash used in investing activities","$","(206.9)","","","$","(293.2)"]]
[[/GREPCENT_TABLE]]

A summary of the most significant items affecting the change in our investing cash flows follows:

Acquisitions, net of cash acquired. In fiscal year 2022, we acquired fourteen businesses for total consideration of $82.7 million, including $76.6 million in cash and paid $1.6 million in holdback payments on businesses previously acquired, as compared to fiscal year 2021, during which we acquired ten businesses for total consideration of $171.7 million, including $166.5 million in cash and $1.3 million in cash held in escrow accounts as holdbacks to sellers, and paid $2.9 million in holdback payments on businesses previously acquired.

Capital expenditures. Capital expenditures were $7.6 million higher in fiscal year 2022 as compared to fiscal year 2021 primarily due to higher capital spend associated with landfill development, investments in newly acquired operations to drive synergies, the retrofitting of a single-stream material recovery facility and inflationary pressures, partially offset by the completion of construction and development of phase VI at our Subtitle D landfill in Coventry, Vermont in fiscal year 2021.

Proceeds from sale of cost method investment associated with the sale of our minority ownership interest in a subsidiary of Vanguard Renewables in fiscal year 2022.

Cash flows from financing activities.

A summary of financing cash flows (in millions) follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended December 31,"],["","2022","","2021"],["Proceeds from debt borrowings","$","88.2","","","$","3.7"],["Principal payments on debt","(59.3)","","","(10.3)"],["Payments of debt issuance costs","(1.2)","","","(3.7)"],["Payments of contingent consideration","(1.0)","","","\u2014"],["Proceeds from the exercise of share-based awards","0.2","","","0.2"],["Net cash provided by (used in) financing activities","$","26.9","","","$","(10.1)"]]
[[/GREPCENT_TABLE]]

A summary of the most significant items affecting the change in our financing cash flows follows:

Debt activity. Net cash associated with debt activity increased $35.5 million in fiscal year 2022 compared to fiscal year 2021. The increase in financing cash flows for fiscal year 2022 is due primarily to the issuance of $35.0 million aggregate principal amount of Vermont Bonds 2022A-1 in June 2022.

Payments of debt issuance costs. We paid $1.2 million of debt issuance costs in fiscal year 2022 related to the issuance of Vermont Bonds 2022A-1. We paid $3.7 million of debt issuance costs in fiscal year 2021 related to the refinancing of our credit facility.

Payment of contingent consideration. We paid $1.0 million of contingent consideration in fiscal year 2022 associated with an acquisition based on the completion of a permit expansion application.

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Outstanding Long-Term Debt

Credit Facility

As of December 31, 2022, we are party to an amended and restated credit agreement ("Credit Agreement"), which provides for a $350.0 million aggregate principal amount term loan A facility ("Term Loan Facility") and a $300.0 million Revolving Credit Facility (together with the Term Loan Facility, the "Credit Facility"), with a $75.0 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 $125.0 million, subject to the terms and conditions set forth in the Credit Agreement. The Credit Facility has a 5-year term that matures in December 2026 and as of December 31, 2022 bore interest at a rate of LIBOR plus 1.125% per annum based upon us reaching a consolidated net leverage ratio of less than 2.25x. The Credit Facility is guaranteed jointly and severally, fully and unconditionally by all of our significant wholly-owned subsidiaries and secured by substantially all of our assets. As of December 31, 2022, further advances were available under the Credit Facility in the amount of $266.1 million. The available amount is net of outstanding irrevocable letters of credit totaling $27.9 million, and as of December 31, 2022 no amount had been drawn.

On February 9, 2023, we entered into first and second amendments to our amended and restated Credit Agreement (as amended, the "Amended and Restated Credit Agreement"). The first amendment provides, commencing in the fiscal year ending December 31, 2024, the interest rate margin applied for drawn and undrawn amounts under the Amended and Restated Credit Agreement shall be separately adjusted based on our achievement of certain thresholds and targets on two sustainability related key performance indicator metrics during the fiscal year ending December 31, 2023 ("fiscal year 2023"): i) metric tons of solid waste materials reduced, reused or recycled through our direct operations or with third-parties in collaboration with customers; and ii) our total recordable incident rate. The second amendment provides, effective for fiscal year 2023, that loans under the Amended and Restated Credit Agreement shall bear interest, at our election, at the term secured overnight financing rate, including a secured overnight financing rate adjustment of 10 basis points ("Term SOFR"), or a base rate, in each case, plus an applicable interest rate margin based on consolidated net leverage ratio, and plus or minus any sustainability rate adjustment. Unless loans are made as or converted to base rate loans, loans under the Amended and Restated Credit Agreement shall bear interest at Term SOFR, plus a margin based upon our consolidated net leverage ratio in the range of 1.125% to 2.125% per annum, plus a sustainability adjustment of up to positive or negative 4.0 basis point per annum, and a commitment fee on undrawn amounts will be charged on undrawn amounts at a rate of Term SOFR, plus a margin 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 points per annum. We shall also pay a fronting fee for each letter of credit of 0.25% per annum. Interest under the Amended and Restated Credit Agreement shall be 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 Agreement required and 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 December 31, 2022, we were in compliance with all financial covenants contained in the Credit Agreement as follows (in millions):

[[GREPCENT_TABLE]]
[["Credit Facility Covenant","","Fiscal Year Ended December 31, 2022","","Covenant Requirements at December 31, 2022"],["Maximum consolidated net leverage ratio (1)","","2.08","","","4.00"],["Minimum interest coverage ratio","","11.56","","","3.00"]]
[[/GREPCENT_TABLE]]

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(1)The maximum consolidated net leverage ratio is calculated as consolidated funded debt, net of unencumbered cash and cash equivalents in excess of $2.0 million and up to $100.0 million (calculated at $534.3 million as of December 31, 2022, or $603.5 million of consolidated funded debt less $69.2 million of cash and cash equivalents in excess of $2.0 million and up to $100.0 million as of December 31, 2022), divided by consolidated EBITDA. Consolidated EBITDA is based on operating results for the twelve months preceding the measurement date of December 31, 2022. Consolidated funded debt, net of unencumbered cash and cash equivalents in excess of $2.0 million and up to $100.0 million, 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):

[[GREPCENT_TABLE]]
[["","Twelve Months Ended December 31, 2022"],["Net cash provided by operating activities","$","217.3"],["Changes in assets and liabilities, net of effects of acquisitions and divestitures","11.2"],["Stock based compensation","(8.2)"],["Operating lease right-of-use assets expense","(5.1)"],["Disposition of assets, other items and charges, net","(0.7)"],["Interest expense, less amortization of debt issuance costs","21.8"],["Provision for income taxes, net of deferred income taxes","5.4"],["Adjustments as allowed by the Credit Agreement","15.4"],["Consolidated EBITDA","$","257.1"]]
[[/GREPCENT_TABLE]]

In addition to the financial covenants, the Credit Agreement contained and the Amended and Restated Credit Agreement contains a number of important customary affirmative and negative covenants which restrict, among other things, our ability to sell assets, incur additional debt, create liens, make investments, and pay dividends. We do not believe that these restrictions impact our ability to meet future liquidity needs. As of December 31, 2022, we were in compliance with all covenants contained in the Credit Agreement.

An event of default under any of our debt agreements could permit some of our lenders, including the lenders under the Credit Facility, to declare all amounts borrowed from them to be immediately due and payable, together with accrued and unpaid interest, or, in the case of the Credit Facility, terminate the commitment to make further credit extensions thereunder, which could, in turn, trigger cross-defaults under other debt obligations. If we were unable to repay debt to our lenders, or were otherwise in default under any provision governing our outstanding debt obligations, our secured lenders could proceed against us and against the collateral securing that debt.

Based on the seasonality of our business, operating results in the late fall, winter and early spring months are generally lower than the remainder of our fiscal year. Given the cash flow impact that this seasonality, the capital-intensive nature of our business and the timing of debt payments has on our business, we typically incur higher debt borrowings in order to meet our liquidity needs during these times. Consequently, our availability and performance against our financial covenants tighten during these times as well.

Tax-Exempt Financings and Other Debt

As of December 31, 2022, we had outstanding $197.0 million aggregate principal amount of tax-exempt bonds, $49.8 million aggregate principal amount of finance leases and $0.7 million aggregate principal amount of notes payable. See Note 12, Debt to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for disclosure regarding our debt.

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Contractual Obligations

The following table sets forth a summary of our significant contractual cash obligations (in thousands) as of December 31, 2022. These obligations are reflected in our balance sheet and include obligations with scheduled maturities, as well as significant obligations pertaining to accrued environmental remediation liabilities and final capping, closure and post-closure asset retirement obligations at our landfills. Accordingly, this table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.

[[GREPCENT_TABLE]]
[["","Less than one year","","1 - 3 years","","3 - 5 years","","More than 5 years","","Total"],["Debt","$","8,968","","","$","56,015","","","$","357,659","","","$","180,835","","","$","603,477"],["Interest obligations (1)","29,187","","","57,169","","","33,246","","","109,479","","","229,081"],["Non-cancellable operating leases","4,167","","","5,759","","","3,251","","","7,524","","","20,701"],["Landfill operating lease contracts","5,505","","","12,410","","","16,386","","","25,119","","","59,420"],["Pension plan contributions","147","","","294","","","294","","","1,289","","","2,024"],["Environmental remediation","782","","","1,587","","","617","","","4,009","","","6,995"],["Final capping, closure and post-closure","7,980","","","15,703","","","31,852","","","230,926","","","286,461"],["Total contractual cash obligations (2)","$","56,736","","","$","148,937","","","$","443,305","","","$","559,181","","","$","1,208,159"]]
[[/GREPCENT_TABLE]]

(1)Based on debt balances as of December 31, 2022. Interest obligations related to variable rate debt were calculated using variable rates in effect at December 31, 2022.

(2)Contractual cash obligations do not include accounts payable or accrued liabilities, which will be paid in the fiscal year ending December 31, 2023.

We have no contractual obligations related to unrecognized tax benefits at December 31, 2022. For further description regarding contractual obligations, see Note 8, Leases, Note 10, Final Capping, Closure and Post-Closure Costs, Note 13, Commitments and Contingencies and Note 17, Income Taxes, to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Inflation

Inflationary increases in costs, including current inflationary pressures associated primarily with fuel, labor and certain other cost categories and capital items, have materially affected, and may continue to materially affect, our operating margins and cash flows. While rapid inflation negatively impacted operating results and margins during fiscal year 2022, 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 program, which is the energy component of our E&E Fee, 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 7A. "Quantitative and Qualitative Disclosures about Market Risk" of this Annual Report on Form 10-K for additional information regarding our fuel cost recovery program. 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.

Regional Economic Conditions

Our business is primarily located in the northeastern United States. Therefore, our business, financial condition and operational results 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.

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Critical Accounting Estimates and Assumptions

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and necessarily include certain estimates and judgments made by management. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. However, even under optimal circumstances, estimates routinely require adjustments based on changing assumptions and circumstances, or new or better information becoming available. Accordingly, actual results may differ from these estimates under different assumptions and circumstances.

The following is a list of accounting policies that we believe are the most critical in understanding our consolidated financial position, results of operations and cash flows and that may require management to make subjective or complex judgments about matters that are inherently uncertain. Our significant accounting policies are more fully discussed in Note 3, Summary of Significant Accounting Policies of our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Landfill Accounting

Landfill Development Costs. We estimate the total cost to develop each of our landfill sites to its remaining permitted and expansion capacity (see landfill development costs discussed within the “Property, Plant and Equipment” accounting policy more fully discussed in Note 3, Summary of Significant Accounting Policies of our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K). The projection of these landfill costs is dependent, in part, on future events. The remaining amortizable basis of each landfill includes costs to develop a site to its remaining permitted and expansion capacity and includes amounts previously expended and capitalized, net of accumulated airspace amortization, and projections of future purchase and development costs including capitalized interest. The interest capitalization rate is based on our weighted average interest rate incurred on borrowings outstanding during the period.

Under life-cycle accounting, all costs related to acquisition and construction of landfill sites are capitalized and charged to expense based on tonnage placed into each site. Landfill permitting, acquisition and preparation costs are amortized on the units-of-consumption method as landfill airspace is consumed. In determining the amortization rate for each of our landfills, preparation costs include the total estimated costs to complete construction of the landfills’ permitted and expansion capacity. The average amortization rate per ton for our landfills during fiscal year 2022 and 2021 was $7.03 and $7.03, respectively.

Final Capping, Closure and Post-Closure Costs. The cost estimates for final capping, closure and post-closure activities at landfills for which we have responsibility are estimated based on our interpretations of current requirements and proposed or anticipated regulatory changes. Our investment in final capping, closure and post-closure activities is focused on meeting these regulations, therefore, reducing emissions of air pollutants from our landfills.

We also estimate additional costs based on the amount a third-party would charge us to perform such activities even when we expect to perform these activities internally. We estimate the airspace to be consumed related to each final capping event and the timing of construction related to each final capping event and of closure and post-closure activities. Because landfill final capping, closure and post-closure obligations are measured at estimated fair value using present value techniques, changes in the estimated timing of construction of future landfill final capping and closure and post-closure activities would have an effect on these liabilities, related assets and results of operations.

Final capping activities include the installation of liners, drainage, compacted soil layers and topsoil over areas of a landfill where total airspace has been consumed and waste is no longer being received. Final capping activities occur throughout the life of the landfill. Our engineering personnel estimate the cost for each final capping event based on the acreage to be capped, along with the final capping materials and activities required. The estimates also consider when these costs would actually be paid and factor in inflation and discount rates. The engineers then quantify the landfill capacity associated with each final capping event and the costs for each event are amortized over that capacity as waste is received at the landfill.

Closure and post-closure costs represent future estimated costs related to monitoring and maintenance of a solid waste landfill after a landfill facility ceases to accept waste and closes. We estimate, based on input from our engineers, accountants, lawyers, managers and others, our future cost requirements for closure and post-closure monitoring and maintenance based on our interpretation of the technical standards of the Subtitle D regulations and the air emissions standards under the Clean Air Act of 1970, as amended, as they are being applied on a state-by-state basis. Closure and post-closure accruals for the cost of monitoring and maintenance include site inspection, groundwater monitoring, leachate management, methane gas control and recovery, and operation and maintenance costs to be incurred for a period which is generally for a term of 30 years after final closure of a landfill. In determining estimated future closure and post-closure costs, we consider costs associated with permitted and permittable airspace. See Note 10, Final Capping, Closure and Post-Closure Costs to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further disclosure about final capping, closure and post-closure asset retirement costs, including revisions in estimates.

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Remaining Permitted Airspace. Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace is determined by an annual survey, which is then used to compare the existing landfill topography to the expected final landfill topography.

Expansion Airspace. We currently include unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances. To be considered expansion airspace all of the following criteria must be met: 

•we control the land on which the expansion is sought;

•all technical siting criteria have been met or a variance has been obtained or is reasonably expected to be obtained;

•we have not identified any legal or political impediments which we believe will not be resolved in our favor;

•we are actively working on obtaining any necessary permits and we expect that all required permits will be received; and

•senior management has approved the project based on a review of the engineering design and determination that the financial return profile meets our investment criteria.

For unpermitted airspace to be included in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all of the criteria listed above. These criteria are evaluated annually by our engineers, accountants, lawyers, managers and others to identify potential obstacles to obtaining the permits. Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using a process that considers the measured density obtained from annual surveys. When we include the expansion airspace in our calculation of remaining permitted and expansion airspace, we include the projected costs for development, as well as the projected asset retirement costs related to final capping, closure and post-closure of the expansion airspace in the amortization basis of the landfill. See Part I. Item 1. “Business” of this Annual Report on Form 10-K for more disclosure about permitted and permittable capacity at our landfills.

After determining the costs and the remaining permitted and expansion capacity at each of our landfills, we determine the per ton rates that will be expensed as waste is received and deposited at each of our landfills by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for assets associated with each final capping event, for assets related to closure and post-closure activities, and for all other costs capitalized or to be capitalized in the future for each landfill. These rates per ton are updated annually, or more frequently, as significant facts change.

It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates or related assumptions prove to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates, higher final capping, closure or post-closure rates, or higher expenses. Higher profitability may result if the opposite occurs. Most significantly, if it is determined that the expansion capacity should no longer be considered in calculating the recoverability of the landfill asset, we may be required to recognize an asset impairment. If it is determined that the likelihood of receiving an expansion permit has become remote, the capitalized costs related to the expansion effort are expensed immediately.

Environmental Remediation Liabilities

We have recorded environmental remediation liabilities representing our estimate of the most likely outcome of the matters for which we have determined that a liability is probable. These liabilities include potentially responsible party investigations, settlements, certain legal and consultant fees, as well as costs directly associated with site investigation and clean up, such as materials and incremental internal costs directly related to the remedy. We provide for expenses associated with environmental remediation obligations when such amounts are probable and can be reasonably estimated. We estimate costs required to remediate sites where it is probable that a liability has been incurred based on site-specific facts and circumstances. Estimates of the cost for the likely remedy are developed using third-party environmental engineers or other service providers. Where we believe that both the amount of a particular environmental remediation liability and timing of payments are reliably determinable, we inflate the cost in current dollars until the expected time of payment and discount the cost to present value. See Note 13, Commitments and Contingencies to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further disclosure about environmental remediation liabilities, including revisions in estimates.

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Accounts Receivable, Net of Allowance for Credit Losses

Accounts receivable represent receivables from customers for collection, transfer, recycling, disposal and other services. Our accounts receivable are recorded when billed or when related revenue is earned, if earlier, and represent claims against third-parties that will be settled in cash. The carrying value of our accounts receivable, net of allowance for credit losses represents its estimated net realizable value. Estimates are used in determining our allowance for credit losses based on, among other things, our historical loss trends, the age of outstanding accounts receivable, and current and expected economic conditions. Additions charged to expense in fiscal year 2022 consider the current economic conditions and the potential impact to our customers’ ability to pay for services that we have provided. Our reserve is evaluated and revised on a monthly basis. Past due accounts receivable are written off when deemed to be uncollectible. See Note 6, Accounts Receivable, Net of Allowance for Credit Losses to our consolidated financial statements under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further disclosure about changes to the allowance for credit losses.

Goodwill and Other Intangibles

In testing for goodwill impairment, we estimate the fair value of each reporting unit, which we have determined to be our geographic operating segments and our Resource Solutions operating segment, and compare the fair value with the carrying value of the net assets of each reporting unit. If the fair value is less than its carrying value, then we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, noting that the amount is not to exceed the total amount of goodwill allocated to that reporting unit.

To determine the fair value of each of our reporting units as a whole, we use discounted cash flow analyses, which require significant assumptions and estimates about the future operations of each reporting unit. Significant judgments inherent in this analysis include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates. The cash flows employed in our discounted cash flow analyses are based on financial forecasts developed internally by management. Our discount rate assumptions are based on an assessment of our risk adjusted discount rate, applicable for each reporting unit. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate our results against our current market capitalization.

We elected to perform a quantitative analysis as part of our annual goodwill impairment test for fiscal year 2022. As of October 1, 2022, our Eastern, Western, and Resource Solutions reporting units indicated that the fair value of each reporting unit exceeded its carrying amount, including goodwill. Furthermore, in each case the fair value of our Eastern, Western, and Resource Solutions reporting units exceeded its carrying value by in excess of 67.0%. We incurred no impairment of goodwill as a result of our annual goodwill impairment tests in fiscal years 2022 or 2021. However, there can be no assurance that goodwill will not be impaired at any time in the future.

Intangible assets consist primarily of covenants not-to-compete, customer relationships and trade names. Intangible assets are recorded at fair value and are amortized based on the economic benefit provided or using the sum of years digits or straight-line methods over their estimated useful lives. Covenants not-to-compete, customer relationships, and trade names are typically amortized over a term of no more than 10 years. See Note 5, Business Combinations and Note 9, Goodwill and Intangible Assets to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further disclosure.

Recovery of Long-Lived Assets

We continually assess whether events or changes in circumstances have occurred that may warrant revision of the estimated useful lives of our long-lived assets (other than goodwill) or whether the remaining balances of those assets should be evaluated for possible impairment. Long-lived assets include, for example, capitalized landfill costs, other property and equipment, identifiable intangible assets, and operating lease right-of-use assets. Events or changes in circumstances that may indicate that an asset may be impaired include the following: 

•a significant decrease in the market price of an asset or asset group;

•a significant adverse change in the extent or manner in which an asset or asset group is being used or in its physical condition;

•a significant adverse change in legal factors or in the business climate that could affect the value of an asset or asset group, including an adverse action or assessment by a regulator;

•an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;

•a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group;

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•a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life; or

•an impairment of goodwill at a reporting unit.

There are certain indicators listed above that require significant judgment and understanding of the waste industry when applied to landfill development or expansion. For example, a regulator may initially deny a landfill expansion permit application although the expansion permit is ultimately granted. In addition, management may periodically divert waste from one landfill to another to conserve remaining permitted landfill airspace. Therefore, certain events could occur in the ordinary course of business and not necessarily be considered indicators of impairment due to the unique nature of the waste industry.

If an impairment indicator occurs, we perform a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. We group our long-lived assets for this purpose at the lowest level for which identifiable cash flows are primarily independent of the cash flows of other assets or asset groups. If the carrying values are in excess of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset group to its carrying value.

To determine fair value, we use discounted cash flow analyses and estimates about the future cash flows of the asset or asset group. This analysis includes a determination of an appropriate discount rate, the amount and timing of expected future cash flows and growth rates. The cash flows employed in our discounted cash flow analyses are typically based on financial forecasts developed internally by management. The discount rate used is commensurate with the risks involved. We may also rely on third-party valuations and or information available regarding the market value for similar assets.

If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized. We incurred no impairment of long-lived assets in fiscal years 2022 or 2021. However, there can be no assurance that long-lived assets will not be impaired at any time in the future.

Self-Insurance Liabilities and Related Costs

We are self-insured for vehicles and workers’ compensation with reinsurance coverage limiting our maximum exposure. In fiscal year 2022, our maximum exposure per individual event under the workers’ compensation plan was $1.25 million. In fiscal year 2022, our minimum and maximum exposure per individual event under the automobile plan were up to $1.50 million and $3.65 million, respectively. The liability for unpaid claims and associated expenses, including incurred but not reported losses, is determined by management with the assistance of a third-party actuary and reflected in our consolidated balance sheets as an accrued liability. We use a third-party to track and evaluate actual claims experience for consistency with the data used in the annual actuarial valuation. The actuarial-determined liability is calculated based on historical data, which considers both the frequency and settlement amount of claims. Our estimated accruals for these liabilities could be significantly different than our ultimate obligations if variables such as the frequency or severity of future events differ significantly from our assumptions. Our self-insurance reserves totaled $22.2 million and $19.8 million as of December 31, 2022 and December 31, 2021, respectively. Our estimated accruals for these liabilities could be significantly different than our ultimate obligations if variables such as the frequency or severity of future events differ significantly from our assumptions.

Income Taxes

We use estimates to determine our provision for income taxes and related assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Valuation allowances have been established for the possibility that tax benefits may not be realized for certain deferred tax assets. Deferred income taxes are recognized based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using currently enacted tax rates. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making this determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event we determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we will make an adjustment to the valuation allowance which would reduce the provision for income taxes.

We account for income tax uncertainties according to guidance on the recognition, derecognition and measurement of potential tax benefits associated with tax positions. We recognize interest and penalties relating to income tax matters as a component of income tax expense.

See Note 17, Income Taxes to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further disclosure, including the effect of the valuation allowance release.

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Contingent Liabilities

We are subject to various legal proceedings, claims and regulatory matters, the outcomes of which are subject to significant uncertainty. We determine whether to disclose or accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible or probable, and whether it can be reasonably estimated. We analyze our litigation and regulatory matters based on available information to assess the potential liabilities. Management’s assessment is developed based on an analysis of possible outcomes under various strategies. We accrue for loss contingencies when such amounts are probable and reasonably estimable. If a contingent liability is only reasonably possible, we will disclose the potential range of the loss, if estimable. We record losses related to contingencies in cost of operations or general and administration expenses, depending on the nature of the underlying transaction leading to the loss contingency. See Note 13, Commitments and Contingencies for disclosure about loss contingencies, as applicable. Contingent liabilities accounted for under purchase accounting are recorded at their fair values. These fair values may be different from the values we would have otherwise recorded, had the contingent liability not been assumed as part of an acquisition of a business. See Note 5, Business Combinations and Note 15, Fair Value of Financial Instruments to our consolidated financial statements included under Item 8. "Financial Statement and Supplementary Data" of this Annual Report on Form 10-K for disclosure about contingent consideration accounted for under purchase accounting.

Stock-Based Compensation

All share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense-in general and administration expense over the employee’s requisite service period. For purposes of calculating stock-based compensation expense, forfeitures are accounted for as they occur. Our equity awards granted generally consist of stock options, restricted stock, restricted stock units and market-based performance stock units.

The fair value of each stock option grant is estimated using a Black-Scholes option-pricing model. The fair value of restricted stock and restricted stock unit grants is at a price equal to the fair market value of our Class A common stock at the date of grant. The fair value of market-based performance stock unit grants is valued using a Monte Carlo pricing model. See Note 14, Stockholders' Equity to our consolidated financial statements included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further disclosure.

New Accounting Standards

For a description of the new accounting standards that may affect us, see Note 2, Accounting Changes to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.