CASELLA WASTE SYSTEMS INC (CWST) FY 2024 MD&A

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, 2023 (“fiscal year 2023”) compared to our financial condition and results of operations for the fiscal year ended December 31, 2022 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, 2023 as filed with the Securities and Exchange Commission on February 16, 2024.

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

For financial information concerning our reportable operating segments refer to Note 20. Segment Reporting to our consolidated financial statements included under “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

As of January 31, 2025, we owned and/or operated 71 solid waste collection operations, 71 transfer stations, 28 recycling and processing 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 expect to 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, 2024 (“fiscal year 2024”), we acquired eight businesses: four of which are in our Mid-Atlantic region, including the purchase of all the equity interests of Whitetail Disposal, Inc. and the assets of LMR Disposal, LLC, which together include collection operations in eastern Pennsylvania and western New Jersey; two of which are in our Western region, including the purchase of all equity interests of Royal Carting and Welsh Sanitation and related real estate assets, which consist of collection and transfer operations in the middle and lower Hudson Valley regions of New York as well as western Connecticut; and two of which are tuck-in operations in our Eastern region. Our total consideration for acquisitions completed in fiscal year 2024 was $467.9 million, including $469.2 in cash, $1.7 million in holdbacks and additional consideration owed, partially offset by $(3.0) million of open working capital settlements due from sellers.

In fiscal year 2023, we acquired seven businesses: the equity interests of four wholly-owned subsidiaries of GFL Environmental Inc., which include solid waste collection, transfer and recycling operations in Pennsylvania, Maryland and Delaware (the “GFL Acquisition”); the assets of Consolidated Waste Services, LLC and its affiliates (dba Twin Bridges), consisting of a collection, transfer and recycling business in the greater Albany, New York area (the “Twin Bridges Acquisition”); and five additional solid waste collection businesses that provide collection, transfer and recycling services. Our total consideration for acquisitions completed in fiscal year 2023 was $846.6 million, including $846.7 in cash, $2.7 million in holdbacks and additional consideration owed to sellers, partially offset by $(2.8) million of open working capital settlements due from sellers, that has subsequently been received.

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Divestitures

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

Results of Operations

Revenues

We manage our solid waste operations, which include a full range of solid waste services, on a geographic basis through three regional operating segments, which we designate as the Eastern, Western and Mid-Atlantic regions. Revenues associated with our solid waste operations are derived mainly from fees charged to customers for solid waste collection and disposal services, including landfill, transfer station and transportation, while also providing landfill gas-to-energy and processing services in the eastern United States. 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 services provided by our National Accounts business. Revenues from processing services are derived from customers in the form of processing fees, tipping fees, 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 National Accounts 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 (dollars in millions and as a percentage of total revenues) for the following periods:

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Solid waste revenues

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

The most significant items impacting the change in our solid waste revenues during fiscal year 2024 are summarized below:

•Price increased solid waste revenues due to (i) $46.1 million, or 6.5% as a percentage of collection revenues, from favorable collection pricing and (ii) $9.5 million, or 3.9% as a percentage of disposal revenues, from favorable disposal pricing associated with our landfills and transfer stations;

•Volume decreased solid waste revenues due to (i) $(10.6) million, or (4.3)% as a percentage of disposal revenues, from lower disposal volumes, driven by lower landfill volumes and to a lesser extent transportation volumes, partially offset by higher transfer station volumes, (ii) $(6.5) million, or (0.9)% as a percentage of collection revenues from lower collection volumes, and (iii) $(0.1) million, or (1.5)% as a percentage of processing revenues, from lower processing volumes;

•Surcharge and other fees decreased solid waste revenues primarily due to (i) lower energy and environmental fee (“E&E Fee(s)”) revenues associated with our fuel cost recovery program related to lower diesel fuel prices and (ii) lower sustainability recycling adjustment fee (“SRA Fee(s)”) revenues due to higher recycled commodity prices as compared to the prior year periods; partially offset by higher revenues from fees related to legacy fuel and environmental cost recovery programs associated with acquired businesses. 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 increased solid waste revenues primarily due to (i) favorable commodity and energy pricing, (ii) higher energy volumes, and (iii) to a lesser extent, higher commodity processing volumes; and

•Acquisitions increased solid waste revenues due to the partial year impact of the acquisition of eight business in fiscal year 2024, as well as the rollover impact of seven acquisitions completed in fiscal year 2023.

Resource Solutions revenues

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

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):

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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):

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 change in our cost of operations during fiscal year 2024 are summarized below:

•Direct costs increased in aggregate dollars primarily due to (i) acquisitions and (ii) higher third-party disposal rates reflecting cost inflation; partially offset by the impact on hauling and transportation costs related to municipal biosolid volumes in our National Accounts business.

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

•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, and (vi) general cost inflation; partially offset by lower host community and royalty fees.

•Fuel costs increased in aggregate dollars due to acquisitions, partially offset primarily by lower diesel fuel prices. 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 due to (i) acquisitions, (ii) higher personnel and parts costs reflecting cost inflation, and (iii) higher vehicle maintenance costs driven by delays in the delivery of fleet replacements.

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

General and Administration

General and administration expense includes: (i) labor costs, which consist 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) provision for expected credit losses; and (iv) other overhead costs including those associated with marketing, sales and community relations efforts.

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

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

General and administration expense increased in aggregate dollars in fiscal year 2024 primarily due to (i) acquisition activity, including increased labor costs, professional fees and other costs to support our growth and acquisition strategy, (ii) increased costs related to salaries, wages, benefits and incentive compensation, (iii) legal expenses primarily associated with employee separation, (iv) higher accruals related to insurance claims, and (vi) general cost inflation.

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:

Depreciation and amortization expense increased in fiscal year 2024 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 period, more than offsetting lower landfill volumes.

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Expense from Acquisition Activities

In fiscal years 2024 and 2023, we recognized expenses of $24.9 million and $15.0 million, respectively, comprised primarily of legal, consulting, rebranding and other costs associated with the due diligence, acquisition and integration of acquired businesses. Fiscal year 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. 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.

Landfill Capping (Recovery) Charge - Veneer Failure

In fiscal year 2023, we recorded a charge of $3.9 million consisting of (i) the write-off of historical payments associated with capping work that was deemed no longer viable due to a veneer failure and (ii) the related operating expenses incurred to clean up the affected capping material at a Subtitle D landfill we operate located in Seneca, New York. In fiscal year 2024, we recorded a recovery of $(1.7) million consisting of (i) a partial reversal of historical payments written off after an engineering evaluation determined that a portion of the area affected by the veneer failure was deemed to still be viable as well as (ii) a recovery of operating expenses incurred during the clean-up of the affected capping material as part of a settlement with a third party.

Southbridge Landfill Closure Charge

In June 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 the Southbridge Landfill reached its final capacity. Accordingly, in fiscal years 2024 and 2023, we recorded charges associated with the closure of our Southbridge Landfill (in millions) as follows:

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

(2)Includes a non-cash charge in fiscal year 2024 associated with our receipt of a final closure permit (the “Closure Permit”) from the Massachusetts Department of Environmental Protection related to the Southbridge Landfill. Pursuant to the terms of the Closure Permit, we are required to meet certain general permit conditions and certain specific permit conditions (collectively, the “Conditions”), including environmental monitoring, third-party inspections, inspection of the final cover, leachate sampling, post-closure monitoring, and other post-closure requirements. We have revised the accrued post-closure liability for the Southbridge Landfill to reflect the estimated cost of satisfying the expanded Conditions as currently specified in the Closure Permit. 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.

Legal Settlement

In fiscal year 2023, we recorded a charge of $6.2 million in connection with 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 fiscal year 2024.

Other expenses

Interest Expense, net

Our interest expense, net increased $15.1 million in fiscal year 2024 due primarily to the roll over impacts of (i) entering into a $430.0 million aggregate principal amount term loan A facility to partially fund the GFL Acquisition in June 2023 and (ii) the issuance of $35.0 million aggregate principal amount of New York State Environmental Facilities Corporation Solid Waste Disposal Revenue Bonds Series 2020R-2 (“New York Bonds 2020R-2”) in August 2023.

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For additional disclosure regarding interest expense, see Note 11, Debt to our consolidated financial statements included under Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Debt Modification Expense

In fiscal year 2024, we recognized debt modification expense of $1.4 million associated with agent fees and other third-party costs we paid during the refinancing of our Credit Agreement (as defined below).

Loss from Termination of Bridge Financing

In fiscal year 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 Twin Bridges Acquisition of $4.5 million.

Provision for Income Taxes

Our provision for income taxes was $7.5 million in fiscal year 2024 and $11.6 million in fiscal year 2023. For fiscal year 2024, the provision for income taxes included $0.6 million of current income taxes and $6.9 million of deferred income taxes. The provision for income taxes in fiscal year 2023 included $4.4 million of current income taxes and $7.2 million of deferred income taxes. The effective rate for the fiscal year 2024 was 35.7% and is computed based on the statutory rate of 21% adjusted primarily for state taxes and certain nondeductible expenses.

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”).

Depending on bonus depreciation and other elections made on the 2024 tax return when filed, we project to carry no pre-2018 net operating losses and $83.2 million of post-2017 net operating losses into the 2025 tax year.

In addition, the TCJA added limitations on the deductibility of interest expense that became more restrictive beginning in tax year 2023 and limits the deductibility of some of our interest expense. Depending on elections made on the 2024 return when filed, we expect a combined $36.0 million of interest expense to be disallowed for tax years 2023 and 2024. Interest expense disallowed is carried forward indefinitely for deduction 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 Eastern, Western and Mid-Atlantic regions. Revenues associated with our solid waste operations are derived mainly from solid waste collection and disposal services, including landfill, transfer station and transportation, while also providing landfill gas-to-energy and processing services in the eastern 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 comprised of processing services and services provided by our National Accounts 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 National Accounts 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. Operating income by segment reported in fiscal year 2023 has been updated to conform with the presentation for fiscal year 2024, which does not have Corporate Entities costs allocated to our reportable operating segments.

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

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

Eastern Region

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

Revenues increased in fiscal year 2024 as compared to the prior year, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $18.8 million, or 7.0% as a percentage of collection revenues, (iii) higher disposal volume of $5.1 million, or 5.2% as a percentage of disposal revenues, (iv) favorable disposal pricing of $3.4 million, or 3.4% as a percentage of disposal revenues, (v) higher commodity price and volume revenues primarily associated with energy volumes, and (vi) higher collection volume of $0.2 million, or 0.1% as a percentage of collection revenues; partially offset by (a) lower surcharge and other fees revenues 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 due to higher recycled commodity prices as compared to the prior year period, and (b) lower processing volume of $(0.3) million, or (3.0)% as a percentage of processing operations.

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.

Operating income increased in fiscal year 2024 by $6.7 million as compared to the prior year. The year-over-year increase was driven by (i) revenues growth, described above, (ii) higher intercompany related operating income, (iii) lower costs due to improved routing efficiencies, and (d) a charge for the FLSA-related legal settlement in fiscal year 2023; partially offset by (a) the charge related to the Southbridge Landfill, (b) higher costs associated with operating and supporting acquired businesses, (c) increased depreciation expense due to acquisitions and investment in property and equipment, (d) general cost inflation, including for disposal, labor, and maintenance costs, (e) higher leachate disposal costs, (f) higher accretion and landfill amortization expense associated with changes in the timing and cost estimates of our closure, post-closure, and capping obligations, and (g) higher accruals related to insurance claims. See further discussion about the charge related to the Southbridge Landfill and the legal settlement charge above in “Operating Expenses”.

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Western Region

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

Revenues increased in fiscal year 2024 as compared to the prior year, primarily driven by (i) the contribution from acquisitions, (ii) favorable collection pricing of $22.5 million, or 6.3% as a percentage of collection revenues, (iii) favorable disposal pricing of $6.1 million, or 4.2% as a percentage of disposal revenues, and (iv) higher commodity price and volume revenues associated with favorable commodity and energy pricing, higher energy volumes, and to a lesser extent higher commodity processing volumes; partially offset by (a) lower disposal volume of $(15.6) million, or (10.7)% as a percentage of disposal revenues, mainly driven by lower landfill C&D and special waste volumes, (b) lower surcharge and other fees revenues 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 due to higher recycled commodity prices as compared to the prior year period, partly counteracted by higher revenues from fees related to legacy fuel and environmental cost recovery programs associated with acquired businesses, and (c) lower collection volume of $(3.2) million, or (0.9)% as a percentage of collection operations, due to customer churn.

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.

Operating income increased in fiscal year 2024 by $11.7 million as compared to the prior year. The year-over-year increase was due to (i) revenues growth, described above, (ii) higher intercompany related operating income, (iii) the recovery in fiscal year 2024 and the charge in fiscal year 2023 related to the landfill capping veneer failure, (iv) lower costs due to improved routing efficiencies and (v) a charge for the FLSA-related legal settlement in fiscal year 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) delays in the delivery of fleet vehicles resulting in higher short term rental and vehicle maintenance costs, (e) higher leachate disposal costs, (f) higher accretion and landfill amortization expense associated with changes in the timing and cost estimates of our closure, post-closure, and capping obligations, (g) accruals related to insurance claims, and (h) a gain on resolution of acquisition-related contingent consideration in fiscal year 2023 associated with the reversal of a contingency for a transfer station permit expansion that was deemed no longer viable. See further discussion about the legal settlement and the landfill capping charge - veneer failure above in “Operating Expenses”.

Mid-Atlantic Region

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

(1)Our Mid-Atlantic region operating segment, consisting of collection and transfer station operations, commenced on July 1, 2023 following the GFL Acquisition.

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The operating loss of $(18.0) million in fiscal year 2024 was impacted by (i) $50.6 million of depreciation and amortization expense, including that of acquired assets, new investment in property and equipment and accelerated amortization schedules of certain acquired intangibles, as well as (ii) $14.8 million of expense from acquisition activities, comprised primarily of integration costs, including rebranding efforts and 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.

The operating loss of $(4.6) million in fiscal year 2023 was impacted by (i) $20.3 million of depreciation and amortization expense, including the impact of accelerated amortization schedules of certain acquired intangibles, as well as (ii) $5.3 million of expense from acquisition activities, comprised of legal, consulting and integration costs related to the GFL Acquisition. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

Resource Solutions

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

Revenues increased in fiscal year 2024 as compared to the prior year, primarily driven by (i) the favorable impact of higher recycled commodity pricing on processing revenues of $20.9 million, or 24.5% as a percentage of related revenues, (ii) higher National Accounts business volumes related to new business growth of $8.0 million, or 4.3% as a percentage of National Accounts revenues, (iii) the contribution from acquisitions, (iv) higher recycling volumes of $6.6 million, or 7.8% as a percentage of related revenues, (v) National Accounts business pricing growth of $5.6 million, or 3.0% as a percentage of National Accounts revenues, (vi) higher other processing price of $1.3 million, or 6.2% as a percentage of related revenues, and (vii) higher other processing volumes of $0.2 million, or 0.8% as a percentage of related revenues; partially offset by (a) lower tipping fees primarily related to contract structures that work to offset recycled commodity price movements of $(12.1) million, or (14.2)% as a percentage of related revenues, and (b) lower surcharges and other fees revenues in our National Accounts business due to lower E&E Fee revenues associated with our fuel cost recovery program related to lower diesel fuel prices.

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.

Operating income increased in fiscal year 2024 by $12.0 million as compared to the prior year. The year-over-year increase was due to (i) revenues growth, described above, (ii) the impact on direct costs associated with hauling and transportation relating to municipal biosolid volumes in our National Accounts business, and (iii) operating improvements at our Boston, Massachusetts materials recovery facility (“MRF”) related to the equipment upgrade; 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 and (d) lower intercompany related operating income.

Corporate Entities

Corporate Entities operating loss reflects costs, including legal, tax, information technology, human resources, certain finance and accounting and other administrative functions, depreciation and amortization expense and certain expense from acquisition activities, which are not allocated to our reportable operating segments. Operating loss increased in fiscal year 2024 by $(24.6) million from the prior year due primarily to (i) higher costs associated with supporting acquired businesses and (ii) general cost inflation for salaries, wages, benefits, incentive compensation, professional services and other overhead costs including those associated with marketing, sales and community relations efforts. See further discussion about the expense from acquisition activities above in “Operating Expenses”.

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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. As of December 31, 2024, we had $675.4 million of undrawn capacity under our $700.0 million revolving credit facility (“Revolving Credit Facility”) and $383.3 million of cash, cash equivalents and restricted cash to help meet our short-term and long-term liquidity needs. We expect existing cash, cash equivalents and restricted cash 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.

Our known current and long-term uses of cash include, among other possible demands: (i) acquisitions, (ii) capital expenditures and leases, (iii) repayments to service debt and other long-term obligations, and (iv) payments for final capping, closure and post-closure asset retirement obligations and environmental remediation liabilities. We have made in the past, and plan to make in the future, acquisitions to expand service areas, densify existing operations, and grow services for our customers. Future acquisitions may include larger acquisitions that may be inside or outside of our existing market, which could require additional financing either in the form of debt or equity.

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A summary of balance sheet items relevant to our liquidity (in millions) follows:

Current assets, excluding cash, cash equivalents and restricted cash, increased $24.6 million, and current liabilities, excluding current maturities of debt, increased $21.6 in fiscal year 2024, resulting in a $3.0 million increase in working capital, net (defined as current assets, excluding cash, cash equivalents and restricted cash, minus current liabilities, excluding current maturities of debt) from $(37.7) million as of December 31, 2023 to $(34.7) million as of December 31, 2024. We strive to maintain a negative working capital by driving shorter days sales outstanding as compared to days payable outstanding.

Summary of Cash Flow Activity

Cash, cash equivalents and restricted cash increased $162.4 million in fiscal year 2024. A summary of cash flows (in millions) follows:

Cash flows from operating activities.

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

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Net cash provided by operating activities increased $48.3 million in fiscal year 2024 as compared to fiscal year 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 fiscal year 2024 as compared to fiscal year 2023, including discussions of our Loss from termination of bridge financing and Landfill capping (recovery) charge - veneer failure, 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.

Cash flows from investing activities.

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

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

Acquisitions, net of cash acquired. In fiscal year 2024, we acquired eight businesses for total consideration of $467.9 million, including $469.2 million in cash, and received $(0.6) million, net in cash after working capital settlements, holdbacks and other consideration owed payments, as compared to fiscal year 2023 during which we acquired seven businesses for total consideration of $846.6 million, including $846.7 million in cash, and paid $5.1 million in holdback payments on businesses previously acquired.

Capital expenditures. Capital expenditures were $48.3 million higher in fiscal year 2024 as compared to fiscal year 2023 primarily due to higher capital spend driven by (i) acquisition activity, (ii) spend related to the retrofitting of our Willimantic, Connecticut MRF, (iii) landfill development, (iv) increased investment in our fleet, and (v) general inflation in capital costs.

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Cash flows from financing activities.

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

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

Debt activity. Net cash associated with debt activity decreased $(375.7) million in fiscal year 2024 compared to fiscal year 2023. In September 2024, we entered into the 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 the $769.3 million at December 31, 2023, aggregate principal amount term loan A facilities under the Existing Credit Agreement, including the $430.0 million at December 31, 2023, aggregate principal amount 2023 term loan A facility we entered into in June 2023. In addition to the activity related to our Credit Agreement and Existing Credit Agreement, we completed the issuance of $45.0 million aggregate principal amount of Finance Authority of Maine Solid Waste Disposal Revenue Bonds Series 2024 in December 2024 and in August 2023 we completed the issuance of $35.0 million aggregate principal amount of New York Bonds 2020R-2.

Payments of debt issuance costs. We paid $6.6 million of debt issuance costs in fiscal year 2024 primarily related to refinancing activities associated with entering into the Credit Agreement as compared to $12.8 million of debt issuance costs in fiscal year 2023 related primarily to bridge financing activities associated with the GFL Acquisition and the Twin Bridges Acquisition.

Payment of debt modification costs. We paid $1.4 million of agent fees and other third-party costs in fiscal year 2024 associated with the refinancing of our Credit Agreement.

Proceeds from the public offering of Class A Common Stock. In September 2024, we completed a public offering of 5.2 million shares of our Class A common stock at a public offering price of $100.00 per share. After deducting stock issuance costs, including underwriting discounts, commissions and offering expenses, the offering resulted in net proceeds of $496.2 million. The net proceeds from this offering were used to repay borrowings under our Revolving Credit Facility and are further available to fund acquisition activity and for general corporate purposes.

On June 16, 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, 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.

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Outstanding Long-Term Debt

Credit Facility

As of December 31, 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:

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 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 December 31, 2024, further advances were available under the Credit Facility in the amount of $675.4 million. The available amount is net of outstanding irrevocable letters of credit totaling $24.6 million, and as of December 31, 2024 no amount had been drawn.

The Credit Agreement requires us to maintain a minimum interest coverage ratio and a maximum consolidated net leverage ratio, to be measured at the end of each fiscal quarter. As of December 31, 2024, we were in compliance with all financial covenants contained in the Credit Agreement as follows (in millions):

(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 $1,048.2 million as of December 31, 2024, or $1,148.2 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 December 31, 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 (“GAAP”). A reconciliation of net cash provided by operating activities to Consolidated EBITDA is as follows (in millions):

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(1)Adjustments as allowed by the Credit Agreement includes the estimated annual pro-forma impact of acquisitions on consolidated EBITDA.

In addition to the financial covenants, the 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, 2024, 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 may tighten during these times as well.

Tax-Exempt Financings and Other Debt

As of December 31, 2024, we had outstanding $277.0 million aggregate principal amount of tax-exempt bonds, $69.7 million aggregate principal amount of finance leases and $1.5 million aggregate principal amount of notes payable. See Note 11, 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.

Contractual Obligations

The following table sets forth a summary of our significant contractual cash obligations (in thousands) as of December 31, 2024. These obligations are reflected in our consolidated 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 (in thousands).

(1)Based on debt balances as of December 31, 2024. Interest obligations related to variable rate debt were calculated using variable rates in effect at December 31, 2024.

(2)Contractual cash obligations do not include accounts payable or accrued liabilities, which will be paid in the fiscal year ending December 31, 2025.

We have no contractual obligations related to unrecognized tax benefits at December 31, 2024. For further description regarding contractual obligations, see Note 8, Leases, Note 10, Final Capping, Closure and Post-Closure Costs, Note 11, Debt, Note 12, Commitments and Contingencies, and Note 15, Employee Benefit Plans to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

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Inflation

Inflationary increases in costs, including current inflationary pressures associated primarily with labor, certain other cost categories, and capital items, have materially affected, and may continue to materially affect, our operating margins and cash flows. However, we believe that our flexible pricing structures and cost recovery fees are allowing us to recover and will continue to allow us to recover certain inflationary costs from our customer base. Consistent with industry practice, most of our contracts and service agreements provide for a pass-through of certain costs to our customers, including increases in landfill tipping fees and in most cases fuel costs, intended to mitigate the impact of inflation on our operating results. We have also implemented a number of operating efficiency programs that seek to improve productivity and reduce our service costs, and our fuel cost recovery programs, primarily the energy component of our E&E Fee, which is designed to recover escalating fuel price fluctuations above a periodically reset floor. Despite these programs, competitive factors may require us to absorb at least a portion of these cost increases. See Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” of this Annual Report on Form 10-K for additional information regarding our fuel cost recovery programs. Additionally, management’s estimates associated with inflation have had, and will continue to have, an impact on our accounting for landfill and environmental remediation liabilities.

Regional Economic Conditions

Our business is primarily located in the eastern 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 and local 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.

Critical Accounting Estimates and Assumptions

Our consolidated financial statements have been prepared in accordance with 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 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 years 2024 and 2023 was $7.52 and $7.23, respectively.

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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.

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.

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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.

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 2024 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 quarterly 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 2024. As of October 1, 2024, our Eastern, Western, Mid-Atlantic and Resource Solutions reporting units indicated that the fair value of each reporting unit exceeded its carrying amount, including goodwill. The fair value of our Eastern, Western, Mid-Atlantic and Resource Solutions reporting units exceeded its carrying value by in excess of 23%. We incurred no impairment of goodwill as a result of our annual goodwill impairment tests in fiscal years 2024 or 2023. 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, 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;

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

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

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

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

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

•an impairment of goodwill at a reporting unit.

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

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

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

If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded in the period that the impairment occurs. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized. We incurred no impairment of long-lived assets in fiscal years 2024 or 2023. However, there can be no assurance that long-lived assets will not be impaired at any time in the future.

Business Combinations

We acquire businesses in the waste industry, including non-hazardous waste collection, transfer station, recycling and disposal operations, as part of our growth strategy. Businesses are included in the consolidated financial statements from the date of acquisition.

We recognize, separately from goodwill, the identifiable assets acquired and liabilities assumed at their estimated acquisition-date fair values. We measure and recognize goodwill as of the acquisition date as the excess of: (a) the aggregate of the fair value of consideration transferred, the fair value of any noncontrolling interest in the acquiree (if any) and the acquisition date fair value of our previously held equity interest in the acquiree (if any), over (b) the fair value of assets acquired and liabilities assumed. If information about facts and circumstances existing as of the acquisition date is incomplete by the end of the reporting period in which a business combination occurs, we will report provisional amounts for the items for which the accounting is incomplete. The measurement period ends once we receive the information we were seeking; however, this period will not extend beyond one year from the acquisition date. Any material adjustments recognized during the measurement period will be recognized in the consolidated financial statements in the reporting period in which the adjustment amounts are determined. All acquisition-related transaction and restructuring costs are to be expensed as incurred. 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 further disclosure.

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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 2024, our maximum exposure per individual event under the workers’ compensation plan was $1.5 million. In fiscal year 2024, our minimum and maximum exposure per individual event under the automobile plan were up to $2.0 million and $4.2 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 self-insurance reserves totaled $24.9 million and $22.4 million as of December 31, 2024 and December 31, 2023, 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 16, 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.

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 12, Commitments and Contingencies 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 loss contingencies, as applicable..

Stock-Based Compensation

Our equity awards granted generally consist of stock options, restricted stock awards, 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 award 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. Compensation expense associated with our stock options, restricted stock awards and restricted stock units is recognized as expense in general and administration expense over the employee’s requisite service period. The fair value of market-based performance stock unit grants is valued using a Monte Carlo pricing model and compensation expense is recognized as expense in general and administration expense ratably over the performance period based on our estimated achievement of the established performance criteria. For purposes of calculating stock-based compensation expense, forfeitures are accounted for as they occur. See Note 13, 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.

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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.