ADS 2014 10-K DOCUMENT
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
 
FORM 10-K
 
 
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file no: 333-191109
 
 
ADS Waste Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
90-0875845
(State or other jurisdiction of
incorporation)
 
(IRS Employer
Identification No.)
90 Fort Wade Road
Ponte Vedra, Florida 32081
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (904) 737-7900
 
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
¨
 
 
 
Accelerated filer
 
¨
 
 
 
 
 
Non-accelerated filer
 
ý
 
(Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at March 9, 2015 was 1,000 shares.
Documents Incorporated by Reference:
None
 


Table of Contents

ADS Waste Holdings, Inc.
Form 10-K
For the Fiscal Year Ended December 31, 2014
Table of Contents
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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PART I

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the U.S. federal securities laws. All statements other than statements of historical facts in this prospectus, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects and objectives of management for future operations (including development plans and objectives relating to our activities), are forward-looking statements. Many, but not all, of these statements can be found by looking for words like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,” “estimate,” “intend” and “future” and similar words. Statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities & Exchange of 1934, as amended. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements.
Examples of these risks, uncertainties and other factors include, but are not limited to: risks relating to our ability to compete; risks relating to our substantial indebtedness, our ability to service such debt and our ability to comply with debt covenants; risks relating to our ability to meet liquidity needs; risks relating to our ability to implement our growth strategy as and when planned; risks associated with acquisitions; risks relating to our ability to realize operating efficiencies in the integration of the Veolia acquisition or other business combinations; risks relating to the seasonality of our business and fluctuations in quarterly operating results; risks relating to the timing, renewal and exclusivity of contracts; risks relating to possible impairment of goodwill and other intangible assets; risks relating to our dependence on senior, regional and local management; risks associated with technology; risks relating to litigation, regulatory investigations and tax examinations; risks relating to weather conditions or natural disasters; the risk that we will not be able to improve margins; risks relating to the availability of qualified employees, particularly in new or more cost-effective locations; risks relating to the supply and price of fuel; risks relating to the pricing of commodities; risks relating to the shifting view of traditional waste streams as renewable resources in our industry; risks relating to the possible loss of key customers or loss of significant volumes from key customers; risks relating to government regulations; risks relating to the instability in the financial markets; risks relating to adverse capital and credit market conditions; and risks relating to the domestic and international economies.
The above examples are not exhaustive and new risks may emerge from time to time. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking statements are based on our current beliefs, assumptions, expectations, estimates and projections regarding our present and future business strategies and the environment in which we will operate in the future. These forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based.

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ByITEM 1. BUSINESS
(All dollar amounts are presented in millions, unless otherwise noted)
ADS Waste Holdings, Inc. (the “Company” or “ADS Waste”) is the largest privately owned non-hazardous solid waste management company in the United States, as measured by revenue. We provide non-hazardous solid waste collection, transfer, recycling and disposal services for residential, commercial and industrial customers across the South, Midwest and Eastern regions of the United States as well as in the Commonwealth of the Bahamas. Our headquarters are located in Ponte Vedra, Florida, and we service over 2.7 million residential customers, approximately 302,000 commercial and industrial (“C&I”) customers and 732 municipalities. We are vertically integrated with approximately 5,400 employees and we own or operate a network of 93 collection operations, 77 transfer stations, 24 recycling facilities and 42 active landfills with a fleet of approximately 3,100 vehicles. The Company is wholly owned by ADS Waste Holdings Corp. (the “Parent”).
On November 20, 2012, ADS Waste purchased Veolia ES Solid Waste, Inc. from Veolia Environnment S.A. for $1,900 and changed the name to MWStar Holdings Corp (“Veolia ES Solid Waste division”). The consolidated company does business as ADS Waste Holdings, Inc.
Our Strategy
We strategically focus on markets where we own a principal private disposal option and typically compete with no more than one or two large national waste companies. Within the markets in which we operate, we have established a network of vertically integrated geographic hubs to provide our customers with the high-quality comprehensive environmental services they require. The waste collection and disposal business is a local business and, therefore, the characteristics and opportunities differ in each of our markets. We believe our vertically integrated geographic hubs and extensive network of transfer stations provide us with the most effective platform to capitalize on local growth opportunities and maximize the utilization of our assets and the efficiency of our operations.
Operations
Our vertically integrated environmental services operations can be broadly classified into three lines of business: (i) collection services; (ii) disposal services, which include transfer stations and landfills; and (iii) recycling services. The solid waste management business is locally executed where the geographic footprint, density of collection routes, degree of vertical integration, and regional demographic trends drive success. We serve both primary (densely populated) and secondary (less populated) markets. While primary markets typically offer highly efficient route densities, secondary markets provide other important advantages, such as less competition, greater opportunities to gain market share through new business and consolidation, and generally higher and more stable pricing.
Our operations are managed through three regional offices located in the South, Midwest and East regions of the United States. Each of the regions has a diversified portfolio of collection, transfer, landfill and recycling operations. The collection and disposal operations within each of these operating regions are supervised by regional vice presidents with extensive experience in growing, operating and managing solid waste management companies within their local markets. Each regional vice president works with and supervises several district and general managers who manage facilities and operations.
The services we provide include non-hazardous solid waste collection, transfer, recycling and disposal services for residential, commercial and industrial customers, as described below. The following table shows revenues (in millions) contributed by these services for each of the three years presented:
 
 
Year ended December 31,
 
2014
 
2013
 
2012
Collection
$
950.8

 
67.8
 %
 
$
897.3

 
68.0
 %
 
$
370.8

 
68.9
 %
Disposal
492.8

 
35.1
 %
 
453.8

 
34.4
 %
 
168.1

 
31.3
 %
Sale of recyclables
33.5

 
2.4
 %
 
35.9

 
2.7
 %
 
16.6

 
3.1
 %
Fuel fees and environmental fees
92.8

 
6.6
 %
 
81.5

 
6.2
 %
 
25.3

 
4.7
 %
Other
95.5

 
6.8
 %
 
95.2

 
7.2
 %
 
44.0

 
8.2
 %
Intercompany eliminations
(262.4
)
 
(18.7
)%
 
(244.6
)
 
(18.5
)%
 
(86.9
)
 
(16.2
)%
Total
$
1,403.0

 
100.0
 %
 
$
1,319.1

 
100.0
 %
 
$
537.9

 
100.0
 %

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Collection Services. We serve approximately 302,000 commercial and industrial customers, over 2.7 million residential customers and 732 municipalities through our 93 collection operations. We internalize 64% of the waste into our own landfills. Approximately 10% of our routed trucks are CNG, which significantly reduce carbon emissions compared to diesel-fueled collection trucks.
For commercial and industrial (“C&I”) operations, we supply our customers with waste containers suitable for their needs and rent or sell compactors to large waste generators. Contracts with C&I customers are typically three to five years in length with pricing based on estimated disposal weight and time required to service the account. We generally bill commercial customers monthly in advance. Industrial customers are generally billed in arrears for our services. The customer generally may not cancel C&I contracts for a period of 36 to 60 months from the start of service without incurring a cancellation penalty. In addition, contracts typically are renewed automatically unless the customer specifically requests cancellation. Our C&I contracts generally allow for rate increases and represent about 36% of our overall collection revenue.
Our construction and demolition (“C&D”) waste services provide C&D sites with roll-off containers and waste collection, transportation and disposal services. C&D services are typically provided pursuant to arrangements in which the customer provides 24-hour advance notice of its disposal needs and is billed on a “per pull” plus disposal basis. While the majority of our roll-off services are provided to customers under long-term contracts, we generally do not enter into contracts with our temporary roll-off customers due to the relatively short-term nature of most C&D projects. Our temporary roll-off customers pay us in arrears for our services. Total C&D revenue represents approximately 25% of our overall collection revenue.
Our residential collection operations consist of curbside collection of residential refuse from small carts or containers into collection vehicles for transport to a disposal/recycling site. These services are typically performed either under long-term contracts with local government entities or on a subscription basis, whereby individual households contract directly with us for our collection services. Our residential contracts generally allow for rate increases.
We generally secure our contracts with municipalities through a competitive bid process and such contracts give us exclusive rights to service all or a portion of the homes in the respective municipalities. These contracts have an average term of three to five years or longer. Municipal contracts can be designed as either mandatory or non-mandatory franchises. Mandatory franchises allow us to become the exclusive provider of waste management services for the areas of the municipality included in the contract, which requires all residential customers within those areas to use our services for solid waste collection and disposal. Non-mandatory franchises allow us to retain the exclusive right to service the specified areas of the municipality, with no competitor permitted to offer services to residential customers, but residential customers may choose not to use our services.
The fees that we receive for residential collection on an individual subscription basis are based primarily on market factors, frequency and type of service, the distance to the disposal facility and the cost of disposal. In general, subscription residential collection fees are paid quarterly in advance by the residential customers receiving the service. Residential revenue represents approximately 39% of our overall collection revenue.
Disposal Services. Landfill disposal services represent the final stage in our vertically integrated waste collection and disposal services solution. We own or operate 32 municipal solid waste (“MSW”) landfills, and 10 C&D landfills at December 31, 2014, enabling us to offer comprehensive service to our customers. Our landfills average approximately 16.2 million tons of waste annually, of which 64% of the volume is internalized from our collection operations and transfer stations as of December 31, 2014. We charge tipping fees to third parties.
As of December 31, 2014, our landfills had approximately 285.7 million cubic yards of utilized airspace and total permitted and deemed airspace of approximately 825.0 million cubic yards. Our active landfills that are currently accepting waste have an average of 29 years of aggregate remaining permitable and deemed permitable life with a capacity utilization of 40%. The in-place capacity of our landfills is subject to change based on engineering factors, requirements of regulatory authorities, our ability to continue to operate our landfills in compliance with applicable regulations and our ability to successfully renew operating permits and obtain expansion permits at our sites. Some of our landfills accept non-hazardous special waste, including utility ash, asbestos and contaminated soils.
Most of our active landfill sites have the potential for expanded disposal capacity beyond the currently permitted acreage. We monitor the availability of permitted disposal capacity at each of our landfills and evaluate whether to pursue an expansion at a given landfill based on estimated future waste volumes and prices, market needs, remaining capacity and the likelihood of obtaining an expansion. To satisfy future disposal demand, we are currently seeking to expand permitted capacity at certain of our landfills. However, we cannot assure you that all proposed or future expansions will be permitted as designed.

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We also have responsibility for five closed landfills, for which we have associated closure and post-closure obligations.
As part of our vertically integrated solid waste disposal services, we operate 77 transfer stations. Transfer stations receive, consolidate and transfer solid waste to landfills and recycling facilities. Transfer stations enable us to:
 
increase the operational reach of our landfill operations;
increase the volume of revenue-generating disposal at our landfills;
achieve greater leverage in negotiating more favorable disposal rates at landfills that we do not operate;
improve efficiency of collection, personnel and equipment; and
build relationships with municipalities and other operators that deliver waste to our transfer stations, leading to additional growth and acquisition opportunities.

Revenue at transfer stations is primarily generated by charging tipping or disposal fees. Our collection operations deposit waste at these transfer stations, as do other private and municipal haulers, for compaction and transfer to disposal sites or material recovery facilities. Transfer stations provide collection operations with a cost-effective means to consolidate waste and reduce transportation costs while providing our landfill sites with an additional “gate” to extend the geographic reach of a particular landfill site with the goal of increased internalization.
Recycling Services. We are focused on opportunistically developing our base of recycling facilities. There has been a growing interest in recycling, which is driven by public and private markets that are placing environmental stewardship as a top priority. This is evidenced by requests for proposals that incorporate alternate methods to manage the collection, processing and disposal of waste.
We have a network of 24 recycling facilities that we manage or operate. These facilities generate revenue through the collection, processing and sale of old corrugated cardboard (“OCC”), old newspaper (“ONP”), mixed paper, aluminum, glass and other materials. These recyclable materials are internally collected by our residential and industrial collection operations as well as third-party haulers.
Fuel and Environmental Fees. The amounts charged for collection, disposal, transfer, and recycling services may include fuel fees and environmental fees. Fuel fees and environmental fees are not designed to be specific to the direct costs and expense to service an individual customer’s account, but rather are designed to address and to help recover for changes in Advanced Disposal’s overall cost structure and to achieve an operating margin acceptable to Advanced Disposal.
Other Services. Other revenue is comprised of ancillary revenue-generating activities, such as landfill gas-to-energy operations at municipal solid waste landfills, management of third-party owned landfills, customer service charges relating to overdue payments and customer administrative fees relating to customers who request paper copies of invoices rather than opting for electronic invoices and broker revenue, which is earned by managing waste services for our customers.
Customers
We provide services to a broad base of commercial, industrial, municipal and residential customers. No single customer individually accounted for more than 5% of our consolidated revenue in 2014.
Competition
Although we operate in a highly competitive industry, entry into our business and the ability to operate profitably require substantial amounts of capital and managerial experience. Competition in the non-hazardous solid waste industry comes from a few large, national publicly owned companies, several regional publicly and privately owned solid waste companies, and thousands of small privately owned companies. In any given market, competitors may have larger operations and greater resources. In addition to national and regional firms and numerous local companies, we compete with municipalities that maintain waste collection or disposal operations. These municipalities may have financial advantages due to the availability of tax revenue and tax-exempt financing.
We compete for collection accounts primarily on the basis of price and the quality of our services. From time to time, our competitors reduce the price of their services in an effort to expand market share or to win a competitively bid municipal contract. Our ability to maintain and increase prices in certain markets may be impacted by our competitors’ pricing policies. This may have an impact on our future revenue and profitability.

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Seasonality and Severe Weather
Based on historic trends, we expect our operating results to vary seasonally, with revenues typically lowest in the first quarter, higher in the second and third quarters, and lower in the fourth quarter than in the second and third quarters. This seasonality reflects the lower volume of solid waste generated during the late fall, winter and early spring because of decreased construction and demolition activities during the winter months in the U.S., and reduced drilling activity during harsh weather conditions. Conversely, mild winter weather conditions may reduce demand for oil and natural gas, which may cause some of our mining and exploration customers to curtail their drilling programs, which could result in production of lower volumes of waste.

Adverse winter weather conditions slow waste collection activities, resulting in higher labor and operational costs. Greater precipitation in the winter increases the weight of collected waste, resulting in higher disposal costs, which are calculated on a per ton basis and increased leachate disposal costs. Certain weather conditions, including severe storms, may result in temporary suspension of our operations, which can significantly impact the operating results of the affected areas. Conversely, weather-related occurrences and other "event-driven" waste projects can boost revenues through heavier weight loads or additional work for a limited time period. These factors impact period-to-period comparisons of financial results.
Regulation
Our facilities and operations are subject to a variety of federal, state and local requirements that regulate the environment, public health, safety, zoning and land use. Operating and other permits, licenses and other approvals are required for landfills and transfer stations, recycling facilities, certain solid waste collection vehicles, fuel storage tanks and other facilities that we own or operate. These permits are subject to denial, revocation, suspension, modification and renewal in certain circumstances. Federal, state and local laws and regulations vary, but generally govern wastewater or storm water discharges, air emissions, the handling, transportation, treatment, storage and disposal of hazardous and non-hazardous waste, and the remediation of contamination associated with the release or threatened release of hazardous substances. These laws and regulations provide governmental authorities with strict powers of enforcement, which include the ability to revoke or decline to renew environmental or other permits, obtain injunctions, or impose fines or penalties in the event of violations, including criminal penalties. The United States Environmental Protection Agency (the “EPA”) and various other federal, state and local authorities administer these regulations.
We strive to conduct our operations in compliance with applicable laws, regulations and permits. However, from time to time we have been issued notices and citations from governmental authorities that have resulted in fines, penalties, the need to expend funds for compliance with environmental laws and regulations, remedial work and related activities at various landfills and other facilities. We cannot assure you that citations and notices will not be issued in the future or that any such notice or citation will not have a material effect on our operations or results.
Federal Regulation. The following summarizes the primary federal environmental and occupational health and safety-related statutes that affect our facilities and operations:
 
The Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, regulates handling, transporting and disposing of hazardous and non-hazardous waste and delegates authority to states to develop programs to ensure the safe disposal of solid waste. In 1991, the EPA issued its final regulations under Subtitle D of RCRA, which set forth minimum federal performance and design criteria for solid waste landfills. These regulations are typically implemented by the states, although states can impose requirements that are more stringent than the Subtitle D standards. We incur costs in complying with these standards in the ordinary course of our operations.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, ("CERCLA") which is also known as Superfund, provides for authorized federal authorities to respond directly to releases or threatened releases of hazardous substances into the environment that have created actual or potential environmental hazards. CERCLA's primary means for addressing such releases is to impose strict liability for cleanup of certain contaminated or disposal sites upon current and former site owners and operators, generators of the hazardous substances at the site and transporters who selected the disposal site and transported substances thereto. Liability under CERCLA is not dependent on the intentional release of hazardous substances; it can be based upon the release or threatened release, even as a result of lawful, unintentional and non-negligent action, of hazardous substances as the term is defined by CERCLA and other applicable statutes and regulations. The EPA may issue orders requiring responsible parties to perform response actions at sites, or the EPA may seek recovery of funds expended or to be expended in the future at sites. Liability may include contribution for cleanup costs incurred by a defendant in a CERCLA civil action or by an entity that has previously resolved its liability to federal or state regulators in an administrative or judicially-approved settlement. Liability under CERCLA could also include obligations to a potentially responsible party, or PRP, that voluntarily expends site clean-up costs. Further, liability for damage to publicly-owned natural

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resources may also be imposed. We are subject to potential liability under CERCLA as an owner or operator of facilities at which hazardous substances have been disposed and as a generator or transporter of hazardous substances disposed of at other locations.

The Federal Water Pollution Control Act of 1972, as amended, known as the Clean Water Act, regulates the discharge of pollutants into streams, rivers, groundwater, or other surface waters from a variety of sources, including solid and hazardous waste disposal sites. If run-off from our operations may be discharged into surface waters, the Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and monitoring, and, under certain circumstances, reduce the quantity of pollutants in those discharges. In 1990, the EPA issued additional standards for management of storm water runoff that require landfills and other waste-handling facilities to obtain storm water discharge permits. In addition, if a landfill or other facility discharges wastewater through a sewage system to a publicly-owned treatment works, the facility must comply with discharge limits imposed by the treatment works. Also, before the development or expansion of a landfill can alter or affect wetlands, a permit may have to be obtained providing for mitigation or replacement wetlands. The Clean Water Act provides for civil, criminal and administrative penalties for violations of its provisions.

The Clean Air Act of 1970, as amended, provides for increased federal, state and local regulation of the emission of air pollutants. Certain of our operations are subject to the requirements of the Clean Air Act, including large municipal solid waste landfills and landfill gas-to-energy facilities. In 1996 the EPA issued new source performance standards ("NSPS") and emission guidelines ("EG") controlling landfill gases from new and existing large landfills. In January 2003, the EPA issued Maximum Achievable Control Technology ("MACT") standards for municipal solid waste landfills subject to the NSPS. These regulations impose limits on air emissions from large municipal solid waste landfills, subject most of our large municipal solid waste landfills to certain operating permit requirements under Title V of the Clean Air Act and, in many instances, require installation of landfill gas collection and control systems to control emissions or to treat and utilize landfill gas on- or off-site. The EPA entered into a settlement agreement with the Environmental Defense Fund to evaluate the 1996 NSPS for new landfills as required by the Clean Air Act every eight years and revise them if deemed necessary. The EPA published a proposed NSPS rule July 17, 2014 and plans to finalize this rule by March 31, 2015. When the EPA issues the final rule, we will re-assess the capital and operating cost impact to our operations. Should the EPA fail to address to propose an EG rule for existing landfills by March 31, 2015 and finalize this rule by March 2016. If the EPA were to adopt more stringent requirements, capital expenditures and operating costs would increase. However, we do not believe that the regulatory changes would have a material adverse impact on our business as a whole.

In 2010, the EPA issued the Prevention of Significant Deterioration ("PSD") and Title V Greenhouse Gas ("GHG") Tailoring Rule, which expanded the EPA's federal air permitting authority to include the six GHGs, including methane and carbon dioxide. The rule sets new thresholds for GHG emissions that define when Clean Air Act permits are required. The requirements of these rules have not significantly affected our operations or cash flows, due to the tailored thresholds and exclusions of certain emissions from regulation.

In June 2013, the U.S. Supreme Court issued a decision that significantly limited the applicability and scope of EPA permitting requirements for GHGs from stationary sources, concluding that: the EPA may not treat GHGs as an air pollutant for purposes of determining whether a source is required to obtain a PSD or Title V permit; and the EPA can continue to require that PSD permits otherwise required based on emissions of conventional pollutants contain limitations on GHG emissions based on Best Available Control Technology ("BACT"). Following this ruling, the EPA issued a policy memorandum advising that it intends to propose exempting biogenic carbon dioxide emissions from waste-derived feedstocks (municipal solid waste and landfill gas) from PSD and Title V air permitting. The EPA anticipates basing this proposal on the rationale that those emissions are likely to have minimal or no net atmospheric contributions, or even reduce such impacts, when compared to an alternate method of disposal. As a result of this U.S. Supreme Court ruling and EPA policy action, the anticipated impact of the PSD and Title V GHG Tailoring Rule on our air permits, compliance and results of operations is not expected to have a material impact on our operations or results.

Other recent final and proposed rules to increase the stringency of certain National Ambient Air Quality Standards, such as the Ozone rule proposed in December 2014, and related PSD increment/significance thresholds could affect the cost, timeliness and availability of air permits for new and modified large municipal solid waste landfills and landfill gas-to-energy facilities. In general, controlling emissions involves installing collection wells in a landfill and routing the gas to a suitable energy recovery system or combustion device. At December 31, 2014, we had five active projects at solid waste landfills where landfill gas was captured and utilized for its renewable energy value rather than flared. Efforts to curtail the emission of GHGs and to ameliorate the effect of climate change may require our landfills to deploy more stringent emission controls, with associated capital or operating costs; however, we do not believe that such regulations will have a material adverse impact on our business as a whole. The adoption of climate change legislation or regulations restricting emissions of greenhouse gases could increase our costs to operate.

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The EPA recently clarified in its November 2014 policy memorandum that states may rely on waste-derived biogenic feedstocks in their future proposed compliance plans required by the proposed Clean Power Plan rules. This recognition by the EPA may create new or expanded opportunities for renewable energy projects.

Potential climate change and GHG regulatory initiatives have influenced our business strategy to provide low-carbon services to our customers, and we increasingly view our ability to offer lower carbon services as a key component of our business growth. If the U.S. were to impose a carbon tax or other form of GHG regulation increasing demand for low-carbon service offerings in the future, the services we are developing will be increasingly valuable.

In 2011, the EPA published the Non-Hazardous Secondary Materials ("NHSM") Rule, which provides the standards and procedures for identifying whether NHSM are solid waste under RCRA when used as fuels or ingredients in combustion units. The EPA also published new source performance standards and emission guidelines for commercial and industrial solid waste incineration units, and Maximum Achievable Control Technology Standards for commercial and industrial boilers. The EPA published clarifications and amendments to these rules in 2013, and there is litigation surrounding the rules. Although the recently published amendments are generally favorable to our industry, some of the potential regulatory interpretations are undergoing review and other regulatory outcomes may be dependent on case-by-case administrative determinations. These could have a significant impact on some of our projects in which we are seeking to convert biomass or other secondary materials into products, fuels or energy. Therefore, it is not possible to quantify the financial impact of these rulemakings or pending administrative determinations at the present time. However, we believe the rules and administrative determinations will not have a material adverse impact on our business as a whole and are more likely to facilitate our efforts to reuse or recover energy value from secondary material streams.

In December 2014, the EPA issued a final rule regulating the disposal and beneficial use of coal combustion residuals ("CCR"). The regulations encourage beneficial use of CCR in encapsulated uses (e.g., used in cement or wallboard), and use according to established industry standards (e.g., application of sludge for agricultural enrichment). The EPA also deemed disposal and beneficial use of CCR at permitted municipal solid waste landfills exempt from the new regulations because the RCRA Subtitle D standards applicable at municipal solid waste landfills provide at least equivalent protection. The new standards are consistent with our approach to handling CCR at our sites currently, and we believe the new standards will provide a potential growth opportunity for the Company. States may impose standards more stringent than the federal program, and we will be monitoring state implementation to determine impact.
Additionally, emission and fuel economy standards have been imposed on manufacturers of transportation vehicles (including waste collection vehicles). The EPA continues to evaluate and develop regulations to increase fuel economy standards and reduce vehicle emissions; such regulations could increase the costs of operating our fleet, but we do not believe any such regulations would have a material adverse impact on our business as a whole.

The Occupational Safety and Health Act of 1970, as amended, ("OSHA") establishes certain employer responsibilities, including maintenance of a workplace free of recognized hazards likely to cause death or serious injury, compliance with standards promulgated by the Occupational Safety and Health Administration, and various reporting and record keeping obligations as well as disclosure and procedural requirements. Various standards for notices of hazards, safety in excavation and demolition work and the handling of asbestos, may apply to our operations. The Department of Transportation and OSHA, along with other federal agencies, have jurisdiction over certain aspects of hazardous materials and hazardous waste, including safety, movement and disposal. Various state and local agencies with jurisdiction over disposal of hazardous waste may seek to regulate movement of hazardous materials in areas not otherwise preempted by federal law.
State and Local Regulation. Each state in which we operate has its own laws and regulations governing solid waste disposal, water and air pollution, and, in most cases, releases and cleanup of hazardous substances and liabilities for such matters. States also have adopted regulations governing the design, operation, maintenance and closure of landfills and transfer stations. Some counties, municipalities and other local governments have adopted similar laws and regulations. In addition, our operations may be affected by the trend in many states toward requiring solid waste reduction and recycling programs. For example, several states have enacted laws that require counties or municipalities to adopt comprehensive plans to reduce, through solid waste planning, composting, recycling or other programs, the volume of solid waste deposited in landfills. Additionally, laws and regulations restricting the disposal of certain waste in solid waste landfills, including yard waste, newspapers, beverage containers, unshredded tires, lead-acid batteries, electronic wastes and household appliances, have been adopted in several states and are being considered in others. Legislative and regulatory measures to mandate or encourage waste reduction at the source and waste recycling also have been or are under consideration by the U.S. Congress and the EPA.
To construct, operate and expand a landfill, we must obtain one or more construction or operating permits, as well as zoning and land use approvals. These permits and approvals may be burdensome to obtain and to comply with, are often opposed by

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neighboring landowners and citizens’ and environmental groups, may be subject to periodic renewal, and are subject to denial, modification, non-renewal and revocation by the issuing agency. Significant compliance disclosure obligations often accompany these processes. In connection with our acquisition of existing landfills, we may be required to spend considerable time, effort and money to bring the acquired facilities into compliance with applicable requirements and to obtain the permits and approvals necessary to increase their capacity. While we typically take into account the costs to bring an asset into compliance with applicable requirements during the acquisition process, we may incur costs beyond those estimated in the pre-acquisition stage.
Other Regulations. Many of our facilities own and operate above ground or underground storage tanks that are generally used to store petroleum-based products. These tanks are subject to federal, state and local laws and regulations that mandate their periodic testing, upgrading, closure and removal. In the event of leaks or releases from these tanks, these regulations require that polluted groundwater and soils be remediated. While we believe that all of our underground storage tanks currently meet applicable regulatory requirements in all material respects, there can be no guarantee that some tanks will not fail to meet such requirements in the future. We maintain a storage tank liability policy which, subject to limitations and exclusions, provides coverage for first-party remediation and third-party claims.
With regard to our solid waste transportation operations, we are subject to the jurisdiction of the Surface Transportation Board and are regulated by the Federal Highway Administration, Office of Motor Carriers, and by regulatory agencies in states that regulate such matters. Various state and local government authorities have adopted, or are considering adopting, laws and regulations that would restrict the transportation of solid waste across state, county, or other jurisdiction lines. In 1978, the U.S. Supreme Court ruled that a law that restricts the importation of out-of-state solid waste is unconstitutional; however, states have attempted to distinguish proposed laws from those involved in and implicated by that ruling. In 1994, the U.S. Supreme Court ruled that a flow control law, which attempted to restrict solid waste from leaving its place of generation, imposes an impermissible burden upon interstate commerce and is unconstitutional. However, in 2007, the U.S. Supreme Court upheld the right of a local government to direct the flow of solid waste to a publicly owned and publicly operated waste facility. A number of county and other local jurisdictions have enacted ordinances or other regulations restricting the free movement of solid waste across jurisdictional boundaries. Other governments may enact similar regulations in the future. These regulations may, in some cases, cause a decline in volumes of waste delivered to our landfills or transfer stations and may increase our costs of disposal.
Emissions from Natural Gas Fueling and Infrastructure. We operate a fleet of 234 compressed natural gas (“CNG”) vehicles and we plan to continue to transition a portion of our collection fleet from diesel fuel to CNG, in locations where it is cost beneficial. We have constructed and operate natural gas fueling stations. Concerns have been raised about the potential for emissions from the fueling stations and infrastructure that serve natural gas-fueled vehicles. Additional regulation of, or restrictions on, CNG fueling infrastructure or reductions in associated tax incentives could increase our operating costs. We are not yet able to evaluate potential operating changes or costs associated with such regulations, but we do not anticipate that such regulations would have a material adverse impact on our business or our current plan to continue transitioning to CNG vehicles.
Liabilities Established for Landfill and Environmental Costs. We have established reserves for landfill and environmental costs, which include landfill site final capping, closure and post-closure costs. We periodically reassess such costs based on various methods and assumptions regarding landfill airspace and the technical requirements of Subtitle D of RCRA, and we adjust our rates used to expense final capping, closure and post-closure costs accordingly. Based on current information and regulatory requirements, we believe that our recorded reserves for such landfill and environmental expenditures are adequate. However, environmental laws and regulations may change, and we cannot assure you that our recorded reserves will be adequate to cover requirements under existing or new environmental laws and regulations, future changes or interpretations of existing laws and regulations, or adverse environmental conditions previously unknown to us.
Liability Insurance and Bonding
The nature of our business exposes us to the risk of liabilities arising out of our operations, including possible damages to the environment. Such potential liabilities could involve, for example, claims for remediation costs, personal injury, property damage and damage to the environment, claims of employees, customers or third parties for personal injury or property damage occurring in the course of our operations; or claims alleging negligence or other wrongdoing in the planning or performance of work. We also could be subject to fines and civil and criminal penalties in connection with alleged violations of regulatory requirements which could be significant. Our solid waste operations have third-party environmental liability insurance with limits in excess of those required by permit regulations, subject to certain limitations and exclusions. However, we cannot assure you that our environmental liability insurance would be adequate, in scope or amount, in the event of a major loss, nor can we assure you that we would continue to carry excess environmental liability insurance should market conditions in the insurance industry make such coverage costs prohibitive.

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We maintain general liability, vehicle liability, employment practices liability, fiduciary liability, pollution liability, directors and officers’ liability, workers’ compensation and employer’s liability coverage, as well as umbrella liability policies to provide excess coverage over the underlying limits contained in these primary policies. We also carry property insurance. Although we try to operate safely and prudently and we have, subject to limitations and exclusions, substantial liability insurance, we cannot assure you that we will not be exposed to uninsured liabilities that could have a material adverse effect on our consolidated financial condition, results of operations and cash flows.

Our insurance programs for workers’ compensation, general liability, vehicle liability and employee-related health care benefits are effectively self-insured. Claims in excess of self-insurance levels are insured subject to the excess policy limits and exclusions. Accruals are based on claims filed and actuarial estimates of claims development and claims incurred but not reported. Due to the variable condition of the insurance market, we have experienced, and may experience in the future, increased self-insurance retention levels and increased premiums. As we assume more risk for self-insurance through higher retention levels, we may experience more variability in our self-insurance reserves and expense.
In the normal course of business, we post performance bonds, insurance policies, letters of credit, or cash or marketable securities deposits in connection with municipal residential collection contracts, closure and post-closure of landfills, environmental remediation, environmental permits and business licenses and permits as a financial guarantee of our performance. To date, we have satisfied financial responsibility requirements by making cash or marketable securities deposits or by obtaining bank letters of credit, insurance policies or surety bonds. The amount of surety bonds issued by third parties at December 31, 2014 was $705.9, our outstanding letters of credit amounted to $58.1 and the cash collateral posted for closure and post-closure landfill obligations amounted to $0.2.
Employees
As of December 31, 2014, we had approximately 5,400 employees, approximately 13.5% of whom were covered by collective bargaining agreements. From time to time, our operating locations may experience union organizing efforts. We have not historically experienced any significant work stoppages. We currently have no disputes or bargaining circumstances that we believe could cause significant disruptions in our business. Our management believes we have good relations with our employees.
AVAILABLE INFORMATION
Our corporate website address is http://www.advanceddisposal.com. The information on our website is not incorporated by reference in this annual report on Form 10-K. We make our reports on Forms 10-K, 10-Q and 8-K and any amendments to such reports available on our website free of charge as soon as reasonably practicable after we file them with or furnish them to the Securities and Exchange Commission, or SEC. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC, 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

ITEM 1A.     RISK FACTORS

We have a history of losses and may not achieve or sustain profitability in the future.
We incurred net losses of $17.1, $117.8 and $192.6 for the years ending December 31, 2014, 2013 and 2012, respectively. We may not achieve profitability in the foreseeable future, if at all. Although our revenue has increased significantly in recent periods, we may not be able to sustain this revenue growth. In addition, our operating expenses have increased with our revenue growth.
We operate in a highly competitive industry and may not be able to compete effectively with larger and better capitalized companies and governmental service providers.
Our industry is highly competitive and requires substantial labor and capital resources. Some of the markets in which we compete or plan to compete are served by one or more large, national companies, as well as by regional and local companies of varying sizes and resources, some of which may have accumulated substantial goodwill in their markets. Some of our competitors may also be better capitalized than we are, have greater name recognition than we do or be able to provide or be willing to bid their services at a lower price than we may be willing to offer. Our inability to compete effectively could hinder our growth or adversely impact our operating results.

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We also compete with counties, municipalities and solid waste districts that maintain or could in the future choose to maintain their own waste collection and disposal operations, including through the implementation of flow control ordinances or similar legislation. These operators may have financial advantages over us because of their access to user fees and similar charges, tax revenues, tax-exempt financing or government subsidies.

Our results are vulnerable to economic conditions.

Our business and financial results would be harmed by downturns in the general economy, or in the economy of the regions in which we operate as well as other factors affecting those regions. In an economic slowdown, we experience the negative effects of decreased waste generation, increased competitive pricing pressure, customer turnover, and reductions in customer service requirements. Two lines of business that could see a more immediate impact would be construction and demolition and special waste disposal. In addition, a weaker economy may result in declines in recycled commodity prices. Worsening economic conditions or a prolonged or recurring economic recession could adversely affect our operating results and expected seasonal fluctuations. Further, we cannot assure you that any improvement in economic conditions after such a downturn will result in positive, improvement in our operating results or cash flows.
We may lose contracts through competitive bidding, early termination or governmental action.
We derive a significant portion of our revenues from market areas where we have exclusive arrangements, including municipal contracts and franchise agreements. A portion of our municipal contracts and franchise agreements are for a specified term and are or will be subject to competitive bidding in the future. Although we intend to bid on additional municipal contracts and franchise agreements, we may not always, or ever, be the successful bidder. In addition, some or all of our customers, including municipalities, may terminate their contracts with us prior to their scheduled expiration dates. Similar risks may affect contracts that we are awarded to operate municipally owned assets, such as landfills.
Governmental action may also affect our exclusive arrangements. Municipalities may annex unincorporated areas within counties where we provide collection services. As a result, our customers in such annexed areas may be required to obtain services from competitors that have been franchised by the annexing municipalities to provide those services. In addition, municipalities in which we provide services on a competitive basis may elect to franchise those services. Unless we are awarded franchises by these municipalities, we will lose customers. Municipalities may also decide to directly provide services to their residents, on an optional or mandatory basis, which may cause us to lose customers. If we are not able to replace lost revenues resulting from unsuccessful competitive bidding, early termination or the renegotiation of existing contracts with other revenues within a reasonable time period, our results of operations and financial condition could be adversely affected.
Some of our customers, including governmental entities, have suffered financial difficulties affecting their credit risk, which could negatively impact our operating results.
We provide service to a number of governmental entities and municipalities, some of which have suffered significant financial difficulties due to the downturn in the economy, reduced tax revenue and/or high cost structures. Some of these entities could be unable to pay amounts owed to us or renew contracts with us at previous or increased rates.

Many non-governmental customers have also suffered serious financial difficulties, including bankruptcy in some cases. Purchasers of our recyclable commodities can be particularly vulnerable to financial difficulties in times of commodity price volatility. The inability of our customers to pay us in a timely manner or to pay increased rates, particularly large national accounts, could negatively affect our operating results.
Our financial and operating performance may be affected by the inability in some instances to renew landfill operating permits, obtain new landfills or expand existing ones. Further, the cost of operation and/or future construction of our existing landfills may become economically unfeasible causing us to abandon or cease operations.
We currently own or operate 42 active landfills. Our ability to meet our financial and operating objectives may depend in part on our ability to acquire, lease or renew landfill operating permits, expand existing landfills and develop new landfill sites. It has become increasingly difficult and expensive to obtain required permits and approvals to build, operate and expand solid waste management facilities, including landfills and transfer stations. Operating permits for landfills in states where we operate generally must be renewed periodically (typically, every five to ten years). These operating permits often must be renewed several times during the permitted life of a landfill pursuant to a process that is often time-consuming, requires numerous hearings and compliance with zoning, environmental and other requirements, is frequently challenged by special interest and other groups and may result in the denial of a permit or renewal, the award of a permit or renewal for a shorter duration than we believed was otherwise required by law or the imposition of burdensome terms and conditions that may adversely affect our

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results of operations. We may not be able to obtain new landfill sites in order to expand into new, non-exclusive markets or expand existing landfill sites in order to support acquisitions and internal growth in our existing markets because increased volumes would further shorten the lives of these landfills. In July 2013, we were ordered to close certain existing landfill space in cell three at our Moretown landfill facility. Refer to Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations —Critical Accounting Policies and Estimates—Landfill Accounting—Amortization of Landfill Assets” for further information related to the order.
We could be precluded from entering into or maintaining permits or certain contracts if we are unable to obtain sufficient third-party financial assurance or adequate insurance coverage.
Public solid waste collection, recycling and disposal contracts, obligations associated with landfill closure and post-closure monitoring typically require us to obtain performance or surety bonds, letters of credit or other means of financial assurance to secure our contractual performance. We currently obtain performance and surety bonds from multiple sources. However, if we are unable to obtain financial assurance in the future in sufficient amounts from appropriately rated sureties or at acceptable rates, we could be precluded from entering into additional municipal contracts or from obtaining or retaining landfill management contracts or operating permits. Any future difficulty in obtaining insurance could also impair our ability to secure future contracts conditioned upon having adequate insurance coverage.
Our accruals for our landfill site closure and post-closure costs may be inadequate.
We are required to pay capping, closure and post-closure maintenance costs for our landfill sites. Our obligations to pay closure or post-closure costs may exceed the amount we have accrued and reserved and other amounts available from funds or reserves established to pay such costs. In addition, subsequent to the completion or closure of a landfill site, we may be liable for unforeseen environmental problems, which could result in our payment of substantial remediation costs that could adversely affect our financial condition or operating results.
Our business requires a high level of capital expenditures.
Our business is capital-intensive. We must use a substantial portion of our cash flows from operating activities toward capital expenditures, which reduces our flexibility to use such cash flows for other purposes, such as reducing our indebtedness. Our capital expenditures could increase if we make acquisitions or further expand our operations or as a result of factors beyond our control, such as changes in federal, state, local or non-U.S. governmental requirements. The amount that we spend on capital expenditures may exceed current expectations, which may require us to obtain additional funding for our operations or impair our ability to grow our business.
We may engage in strategic acquisitions in the future, which may pose significant risks and could have an adverse effect on our operations.
We may engage in acquisitions in order to acquire or develop additional disposal capacity or businesses that are complementary to our core business strategy. If we identify suitable acquisition candidates, we may be unable to negotiate successfully their acquisition at a price or on terms and conditions acceptable to us, including as a result of the limitations imposed by our debt obligations. We may have to borrow money or incur liabilities in order to finance any future obligations and we may not be able to do so on terms favorable to us or at all. In addition, we may be unable to obtain the necessary regulatory approvals to complete potential acquisitions. The integration of acquired businesses and other assets may require significant management time and resources that would otherwise be available for the ongoing management of our existing operations. Furthermore, acquired assets may be subject to liabilities and risks that were not identified at the time they were acquired.

The seasonal nature of our business and "event-driven" waste projects cause our results to fluctuate.

Based on historic trends, we expect our operating results to vary seasonally, with revenues typically lowest in the first quarter, higher in the second and third quarters, and lower in the fourth quarter than in the second and third quarters. This seasonality reflects the lower volume of solid waste generated during the late fall, winter and early spring because of decreased construction and demolition activities during the winter months in the U.S., and reduced drilling activity during harsh weather conditions. Conversely, mild winter weather conditions may reduce demand for oil and natural gas, which may cause our customers to curtail their drilling programs, which could result in production of lower volumes of waste.

Adverse winter weather conditions slow waste collection activities, resulting in higher labor and operational costs. Greater precipitation in the winter increases the weight of collected waste, resulting in higher disposal costs, which are calculated on a per ton basis increased leachate disposal costs. Certain weather conditions, including severe storms, may result in temporary

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suspension of our operations, which can significantly impact the operating results of the affected areas. Conversely, weather-related occurrences and other "event-driven" waste projects can boost revenues through heavier weight loads or additional work for a limited time period. These factors impact period-to-period comparisons of financial results.
We may be subject in the normal course of business to judicial, administrative or other third-party proceedings that could interrupt or limit our operations, result in adverse judgments, settlements or fines and create negative publicity.
Individuals, citizens groups, trade associations or environmental activists may bring actions against us in connection with our operations that could interrupt or limit the scope of our business. See Item 3. “Legal Proceedings.” Many of these matters raise difficult and complicated factual and legal issues and are subject to uncertainties and complexities. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments or other financial obligations. Any adverse outcome in such proceedings could harm our operations and financial results and create negative publicity, which could damage our reputation and competitive position.
Fuel supply and prices may fluctuate significantly and we may not be able to pass on cost increases to our customers.
The price and supply of fuel can fluctuate significantly based on international, political and economic circumstances, as well as other factors outside our control, such as actions by the Organization of the Petroleum Exporting Countries, or OPEC, and other and gas producers, regional production patterns, weather conditions, political instability in oil and gas producing regions and environmental concerns. We rely on fuel to run our collection and transfer trucks and our equipment used in our transfer stations and landfill operations. Supply shortages could substantially increase our operating expenses. Additionally, as fuel prices increase, our direct and indirect operating expenses increase and many of our vendors raise their prices as a means to offset their own rising costs.

To manage our exposure to volatility in fuel prices, the company enters into fuel derivative contracts as a risk management tool to mitigate the potential impact of certain market risks associated with fluctuations in fuel prices; however, because energy prices can fluctuate significantly in a relatively short amount of time, the Company must also continually monitor and adjust its risk management strategies to address not only fuel price increases, but also fuel price volatility. As evidenced by the extreme decline in diesel fuel prices during the fourth quarter of 2014, diesel fuel prices are subject to significant volatility based on a variety of factors. In addition, the cost of these risk management tools generally increases with sustained high potential for volatility in the fuel market. During 2014, we utilized fuel derivative contracts to manage approximately 4.9 gallons of our fuel purchases. For fiscal 2015 and 2016, we utilized fuel derivative contracts to manage 23.8 gallons and 13.4 gallons, respectively.
Over the last several years, regulations have been adopted mandating changes in the composition of fuels for motor vehicles. The renewable fuel standards that the EPA sets annually affect the type of fuel our motor vehicle fleet uses. Pursuant to the Energy Independence and Security Act of 2007, EPA establishes annual renewable fuel volume requirements and separate volume requirements for four different categories of renewable fuels (renewable fuel, advanced biofuel, cellulosic biofuel and biomass-based diesel). These volume requirements set standards for the proportion of refiners’ or importers’ total fuel volume that must be renewable and must take into account the fuels’ impact on reducing greenhouse gas emissions. These regulations are one of many factors that may affect the cost of the fuel we use.
Our operations also require the use of products (such as liners at our landfills) the costs of which may vary with the price of petrochemicals. An increase in the price of petrochemicals could increase the cost of those products, which would increase our operating and capital costs. We are also susceptible to increases in indirect fuel fees from our vendors.
We are expanding our CNG truck fleet, which makes us increasingly dependent on the availability of CNG and CNG fueling infrastructure and vulnerable to CNG prices.
We currently operate a CNG fleet and we plan to continue to transition a portion of our collection fleet from diesel fuel to CNG. However, CNG is not yet broadly available in North America; as a result, we have constructed and operate natural gas fueling stations, some of which also serve the public or pre-approved third parties. Until the public and third parties in North America broadly adopt CNG, which may not be on the timetable we anticipate, it will remain necessary for us to invest capital in CNG fueling infrastructure in order to power our CNG fleet. Concerns have been raised about the potential for emissions from fueling infrastructure that serve natural gas-fueled vehicles. New regulation of, or restrictions on, CNG fueling infrastructure or reductions in associated tax incentives could increase our operating costs.

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Additionally, fluctuations in the price and supply of CNG could substantially increase our operating expenses, and a reduction in the existing cost differential between CNG and diesel fuel could materially reduce the benefits we anticipate from our investment in CNG vehicles.
Fluctuations in the prices of commodities may adversely affect our financial condition, results of operations and cash flows.
We collect and process recyclable materials such as paper, cardboard, plastics, aluminum and other metals for sale to third parties. Our results of operations may be affected by changing prices or market requirements for recyclable materials. The resale and purchase prices of, and market demand for, recyclable materials fluctuate due to changes in economic conditions and numerous other factors beyond our control. These fluctuations may affect our financial condition, results of operations and cash flows.
Increases in labor and disposal and related transportation costs could impact our financial results.
Our continued success will depend on our ability to attract and retain qualified personnel. We compete with other businesses in our markets for qualified employees. From time to time, the labor supply is tight in some of our markets. A shortage of qualified employees would require us to enhance our wage and benefits packages to compete more effectively for employees, to hire more expensive temporary employees or to contract for services with more expensive third-party vendors. Labor is one of our highest costs and relatively small increases in labor costs per employee could materially affect our cost structure. If we fail to attract and retain qualified employees, control our labor costs during periods of declining volumes or recover any increased labor costs through increased prices we charge for our services or otherwise offset such increases with cost savings in other areas, our operating margins could suffer. Disposal and related transportation costs are a significant cost category for us. If we incur increased disposal and related transportation costs to dispose of solid waste and if we are unable to pass these costs on to our customers, our operating results would suffer.
Efforts by labor unions could divert management attention and adversely affect operating results.
From time to time, labor unions attempt to organize our employees. Some groups of our employees are represented by unions, and we have negotiated collective bargaining agreements with most of these groups. We are currently engaged in negotiations with other groups of employees represented by unions. Additional groups of employees may seek union representation in the future. As a result of these activities, we are subject to unfair labor practice charges, complaints and other legal, administrative and arbitration proceedings initiated against us by unions, the National Labor Relations Board or employees, which could negatively impact our operating results. Negotiating collective bargaining agreements could divert management attention, which could also adversely affect operating results. If we are unable to negotiate acceptable collective bargaining agreements, we may be subject to labor disruptions, such as union-initiated work stoppages, including strikes. Depending on the type and duration of any labor disruptions, our operating expenses could increase significantly, which could adversely affect our financial condition, results of operations and cash flows.
We could face significant withdrawal liability if we withdraw either individually or as part of a mass withdrawal from participation in any underfunded multiemployer pension plans in which we participate.
We participate in a number of “multiemployer” pension plans administered by employer and employee trustees. We make periodic contributions to these plans pursuant to our various contractual obligations to do so. In the event that we withdraw from participation in or otherwise cease our contributions to one of these plans, then applicable law regarding withdrawal liability could require us to make additional contributions to the plan if it is underfunded, and we would have to reflect that as an expense in our consolidated statement of operations and as a liability on our consolidated balance sheet. Our withdrawal liability that would be paid to any multiemployer plan would depend on the extent of the plan’s funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that participate in these plans, we may decide to discontinue participation in a plan, and in that event, we could face a withdrawal liability. Some multiemployer plans in which we participate may from time to time have significant underfunded liabilities. Such underfunding could increase the size of our potential withdrawal liability.
Our indebtedness could adversely affect our financial condition and limit our financial flexibility.
As of December 31, 2014, we had approximately $2,327.2 of gross total indebtedness outstanding, and we may incur additional debt in the future. This amount of indebtedness could:
 
increase our vulnerability to general adverse economic and industry conditions or increases in interest rates;
limit our ability to obtain additional financing or refinancings at attractive rates;

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require the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund our growth strategy, working capital, capital expenditures, dividends, share repurchases and other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry; and
place us at a competitive disadvantage relative to our competitors with less debt.
Further, our outstanding indebtedness is subject to financial and other covenants, which may be affected by changes in economic or business conditions or other events that are beyond our control. If we fail to comply with the covenants under any of our indebtedness, we may be in default under the loan, which may entitle the lenders to accelerate the debt obligations. A default under one of our loans could result in cross-defaults under our other indebtedness. In order to avoid defaulting on our indebtedness, we may be required to take actions such as reducing or delaying capital expenditures, reducing or eliminating dividends or stock repurchases, selling assets, restructuring or refinancing all or part of our existing debt, or seeking additional equity capital, any of which may not be available on terms that are favorable to us, if at all.
Increases in insurance costs and the amount that we self-insure for various risks could reduce our operating margins and reported earnings.
We maintain high deductible insurance policies for automobile, general, employer’s, environmental, directors’ and officers’, employment practices and fiduciary liability as well as for employee group health insurance, property insurance and workers’ compensation. We carry umbrella policies for certain types of claims to provide excess coverage over the underlying policies and per incident deductibles. The amounts that we self-insure could cause significant volatility in our operating margins and reported earnings based on the occurrence and claim costs of incidents, accidents, injuries and adverse judgments. Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and our third-party claims administrator. To the extent these estimates are inaccurate, we may recognize substantial additional expenses in future periods that would reduce operating margins and reported earnings. From time to time, actions filed against us include claims for punitive damages, which are generally excluded from coverage under all of our liability insurance policies. A punitive damage award could have an adverse effect on our reported earnings in the period in which it occurs. Significant increases in premiums on insurance that we retain also could reduce our margins.
We may record material charges against our earnings due to any number of events that could cause impairments to our assets.
In accordance with GAAP, we capitalize certain expenditures and advances relating to disposal site development, expansion projects, acquisitions, software development costs and other projects. Events that could, in some circumstances, lead to an impairment include, but are not limited to, shutting down a facility or operation or abandoning a development project or the denial of an expansion permit. Additionally, declining waste volumes and development of, and customer preference for, alternatives to traditional waste disposal could warrant asset impairments. If we determine an asset or expansion project is impaired, we will charge against earnings any unamortized capitalized expenditures and advances relating to such asset or project reduced by any portion of the capitalized costs that we estimate will be recoverable, through sale or otherwise. We also carry a significant amount of goodwill on our Consolidated Balance Sheet, which is required to be assessed for impairment annually, and more frequently in the case of certain triggering events. We may be required to incur charges against earnings if such impairment tests indicate that the fair value of a reporting unit is below its carrying value. Any such charges could have a material adverse effect on our results of operations.
We depend significantly on the services of the members of our senior, regional and local management teams, and the departure of any of those persons could cause our operating results to suffer.
Our success depends significantly on the continued individual and collective contributions of our senior, regional and local management teams. The loss of the services of any member of our senior, regional or local management or the inability to hire and retain experienced management personnel could have a material adverse effect on us.

If we are not able to develop new service offerings and protect intellectual property or, if a competitor develops or obtains exclusive rights to a breakthrough technology, our financial results may suffer.
Our existing and proposed service offerings to customers may require that we invest in, develop or license, and protect, new technologies. Research and development of new technologies often requires significant spending that may divert capital investment away from our traditional business operations. We may experience difficulties or delays in the research, development, production or marketing of new products and services, which may negatively impact our operating results and

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prevent us from recouping or realizing a return on the investments required to bring new products and services to market. Further, protecting our intellectual property rights and combating unlicensed copying and use of intellectual property is difficult, and any inability to obtain or protect new technologies could impact our services to customers and development of new revenue sources. We and others in the industry are increasingly focusing on new technologies that provide alternatives to traditional disposal and maximize the resource value of waste. If a competitor develops or obtains exclusive rights to a breakthrough technology that provides a revolutionary change in traditional waste management, or if we have inferior intellectual property to our competitors, our financial results may suffer.
We are increasingly dependent on technology in our operations and, if our technology fails, our business could be adversely affected.
We may experience problems with the operation of our current information technology systems or the technology systems of third parties on which we rely, as well as the development and deployment of new information technology systems, that could adversely affect, or even temporarily disrupt, all or a portion of our operations until resolved. Inabilities and delays in implementing new systems can also affect our ability to realize projected or expected cost savings. Despite the implementation of network security measures, our information technology could be penetrated by outside parties (such as computer hackers or cyber terrorists) intent on extracting information, corrupting information or disrupting business processes. Such unauthorized access could disrupt our business and could result in a loss of assets or reputational damage. Additionally, any systems failures could impede our ability to timely collect and report financial results in accordance with applicable laws.
Our business is subject to operational and safety risks, including the risk of personal injury to employees and others.
Provision of environmental and waste management services involves risks, such as truck accidents, equipment defects, malfunctions and failures and natural disasters, which could potentially result in releases of hazardous materials, injury or death of employees and others or a need to shut down or reduce operation of our facilities while remedial actions are undertaken. These risks expose us to potential liability for pollution and other environmental damages, personal injury, loss of life, business interruption and property damage or destruction.
While we seek to minimize our exposure to such risks through comprehensive training and compliance programs, as well as vehicle and equipment maintenance programs, if we were to incur substantial liabilities in excess of any applicable insurance, our business, results of operations and financial condition could be adversely affected.
The adoption of new accounting standards or interpretations could adversely affect our financial results.
Our implementation of and compliance with changes in accounting rules and interpretations could adversely affect our operating results or cause unanticipated fluctuations in our results in future periods. The accounting rules and regulations that we must comply with are complex and continually changing. Recent actions and public comments from the SEC have focused on the integrity of financial reporting generally. The Financial Accounting Standards Board, or FASB, has recently introduced several new or proposed accounting standards, or is developing new proposed standards, which would represent a significant change from current industry practices. In addition, many companies’ accounting policies are being subjected to heightened scrutiny by regulators and the public. While our financial statements have been prepared in accordance with U.S. generally accepted accounting principles, we cannot predict the impact of future changes to accounting principles or our accounting policies on our financial statements going forward.
We are subject to substantial governmental regulation and failure to comply with these requirements, as well as enforcement actions and litigation arising from an actual or perceived breach of such requirements, could subject us to fines, penalties and judgments, and impose limits on our ability to operate and expand.
We are subject to potential liability and restrictions under environmental laws and regulations, including those relating to the transportation, recycling, treatment, storage and disposal of wastes, discharges of pollutants to air and water, and the remediation of contaminated soil, surface water and groundwater. Refer to Item 1 "Regulations" for further details. The waste management industry has been and will continue to be subject to regulation, including permitting and related financial assurance requirements, as well as attempts to further regulate the industry, including efforts to regulate the emission of greenhouse gases. Our solid waste operations are subject to a wide range of federal, state and, in some cases, local environmental, odor and noise and land use restrictions. Further restrictions could include: limitations on siting and constructing new waste disposal, transfer, recycling or processing facilities or on expanding existing facilities; regulations or levies on collection and disposal prices, rates and volumes; limitations or bans on disposal or transportation of out-of-state waste or certain categories of waste; mandates regarding the management of solid waste, including requirements to recycle, divert or otherwise process certain waste, recycling and other streams; or limitations or restrictions on the recycling, processing

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or transformation of waste, recycling and other streams. Regulations affecting the siting, design and closure of landfills could require us to undertake investigatory or remedial activities, curtail operations or close landfills temporarily or permanently. Future changes in these regulations may require us to modify, supplement or replace equipment or facilities. The costs of complying with these regulations could be substantial. In order to develop, expand or operate a landfill or other waste management facility, we must have various facility permits and other governmental approvals, including those relating to zoning, environmental protection and land use. The permits and approvals are often difficult, time consuming and costly to obtain and could contain conditions that limit our operations.We also have significant financial obligations relating to final capping, closure, post-closure and environmental remediation at our existing landfills. We establish accruals for these estimated costs, but we could underestimate such accruals. Environmental regulatory changes could accelerate or increase capping, closure, post-closure and remediation costs, requiring our expenditures to materially exceed our current accruals.
The United States Congress adoption of legislation allowing restrictions on interstate transportation of out-of-state or out-of-jurisdiction waste certain types of flow control, or courts interpretations of interstate waste and flow control legislation, could adversely affect our solid and hazardous waste management services.

Additionally, regulations establishing extended producer responsibility, or EPR, are being considered or implemented in many places around the world, including in the U.S. EPR regulations are designed to place either partial or total responsibility on producers to fund the post-use life cycle of the products they create. Along with the funding responsibility, producers may be required to take over management of local recycling programs by taking back their products from end users or managing the collection operations and recycling processing infrastructure. There is no federal law establishing EPR in the U.S.; however, state and local governments could, and in some cases have, taken steps to implement EPR regulations. If wide-ranging EPR regulations were adopted, they could have a fundamental impact on the waste streams we manage and how we operate our business, including contract terms and pricing. A significant reduction in the waste, recycling and other streams we manage could have a material adverse effect on our financial condition, results of operations and cash flows.

Enforcement or implementation of foreign regulations can affect our ability to export products. In 2013, the Chinese government began to strictly enforce regulations that establish limits on moisture and non-conforming materials that may be contained in imported recycled paper and plastics. The higher quality expectations resulting from initiatives such as ìOperation Green Fenceî can drive up operating costs in the recycling industry, particularly for single stream MRFs. Single stream MRFs process a wide range of commingled materials and tend to receive a higher percentage of non-recyclables, which results in increased processing and residual disposal costs. If Operation Green Fence or other similar initiatives or new regulations increase our operating costs in the future, and we are not able to recapture those costs from our customers, such regulations could have a material adverse effect on our results of operations.
If we are not able to comply with the requirements that apply to a particular facility or if we operate without the necessary approvals or permits, we could be subject to administrative or civil, and possibly criminal, fines and penalties, and we may be required to spend substantial capital to bring an operation into compliance, to temporarily or permanently discontinue activities and/or take corrective actions, possibly including the removal of landfilled materials. We may be liable for any environmental damage that our current or former facilities cause, including damage to neighboring landowners or residents, particularly as a result of the contamination of soil, groundwater or surface water, and especially drinking water, or to natural resources. We may also be liable for any on-site environmental contamination caused by pollutants or hazardous substances whose transportation, treatment or disposal we or our predecessors arranged or conducted. Those costs or actions could be significant to us and impact our results of operations, cash flows and available capital. We may not have sufficient insurance coverage for our environmental liabilities, such coverage may not cover all of the potential liabilities to which we may be subject and we may not be able to obtain insurance coverage in the future at reasonable expense or at all.
We may make additional acquisitions from time to time in the future, and we have tried and will continue to try to evaluate and limit environmental risks and liabilities presented by businesses to be acquired prior to the acquisition. It is possible that some liabilities, including ones that may exist only because of the past operations of an acquired business, may prove to be more difficult or costly to address than we anticipate.
It is also possible that government officials responsible for enforcing environmental laws and regulations may believe an issue is more serious than we expect, or that we will fail to identify or fully appreciate an existing liability before we become legally responsible for addressing it. Some of the legal sanctions to which we could become subject could cause the suspension or revocation of a needed permit, prevent us from, or delay us in, obtaining or renewing permits to operate or expand our facilities, or harm our reputation.

Changes in regulations applicable to oil and gas drilling and production could adversely affect our Energy Services business.

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Energy Services business demand may also be adversely affected if drilling activity slows due to industry conditions beyond our control, in addition to changes in oil and gas prices. Changes in laws or government regulations regarding GHG emissions from oil and gas operations and/or hydraulic fracturing could increase our customer's costs of doing business and reduce oil and gas exploration and production by customers. Recently, there has been increased attention from the public, some states and the EPA to the alleged potential for hydraulic fracturing to impact drinking water supplies. There is also heightened regulatory focus on emissions of methane that occur during drilling and transportation of natural gas, as well as protective disposal of drilling residuals. Increased regulation of oil and gas exploration and production and new rules regarding the treatment and disposal of wastes associated with exploration and production operations could increase our costs to provide oilfield services and reduce our margins and revenue from such services.

Our operations are subject to environmental, health and safety laws and regulations, as well as contractual obligations that may result in significant liabilities.

There is risk of incurring significant environmental liabilities in the use, treatment, storage, transfer and disposal of waste materials. Under applicable environmental laws and regulations, we could be liable if our operations cause environmental damage to our properties or to the property of other landowners, particularly as a result of the contamination of air, drinking water or soil. Under current law, we could also be held liable for damage caused by conditions that existed before we acquired the assets or operations involved. This risk is of particular concern as we execute our growth strategy, partially though acquisitions, because we may be unsuccessful in identifying and assessing potential liabilities during our due diligence investigations. Further, the counterparties in such transactions may be unable to perform their indemnification obligations owed to us. Additionally, we could be liable if we arrange for the transportation, disposal or treatment of hazardous substances that cause environmental contamination, or if a predecessor owner made such arrangements and, under applicable law, we are treated as a successor to the prior owner. Any substantial liability for environmental damage could have a material adverse effect on our financial condition, results of operations and cash flows.

In the ordinary course of our business, we have in the past, we are currently, and we may in the future, become involved in legal and administrative proceedings relating to land use and environmental laws and regulations. These include proceedings in which:

agencies of federal, state, local or foreign governments seek to impose liability on us under applicable statutes, sometimes involving civil or criminal penalties for violations, or to revoke or deny renewal of a permit we need;
local communities, citizen groups, landowners or governmental agencies oppose the issuance of a permit or approval we need, allege violations of the permits under which we operate or laws or regulations to which we are subject, or seek to impose liability on us for environmental damage.

We generally seek to work with the authorities or other persons involved in these proceedings to resolve any issues raised. If we are not successful, the adverse outcome of one or more of these proceedings could result in, among other things, material increases in our costs or liabilities as well as material charges for asset impairments. At December 31, 2014, we had recorded approximately $6.1 in environmental remediation liabilities. There can be no assurance that the cost of such potential cleanup or that our share of the cost will not exceed our estimates.

The adoption of climate change legislation or regulations restricting emissions of "greenhouse gases" could increase our costs to operate.
Our landfill operations emit methane, identified as a GHG. There are a number of legislative and regulatory efforts at the state, regional and federal levels to curtail the emission of GHGs to ameliorate the effect of climate change. Should comprehensive federal climate change legislation be enacted, we expect it could impose costs on our operations that might not be offset by the revenue increases associated with our lower-carbon service options, the materiality of which we cannot predict. In 2010, the EPA published a Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, which expanded the EPA's federal air permitting authority to include the six GHGs. The rule sets new thresholds for GHG emissions that define when Clean Air Act permits are required. The current requirements of these rules have not significantly affected our operations or cash flows, due to the tailored thresholds and exclusions of certain emissions from regulation. However, if certain changes to these regulations were enacted, such as lowering the thresholds or the inclusion of biogenic emissions, then the amendments could have an adverse effect on our operating costs.
Future changes in laws or renewed enforcement of laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results.

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Various state and local governments have enacted, or are considering enacting, laws and regulations that restrict the disposal within the jurisdiction of solid waste generated outside the jurisdiction. In addition, some state and local governments have promulgated, or are considering promulgating, laws and regulations which govern the flow of waste generated within their respective jurisdictions. These “flow control” laws and regulations typically require that waste generated within the jurisdiction be directed to specified facilities for disposal or processing, which could limit or prohibit the disposal or processing of waste in our transfer stations and landfills. Such flow control laws and regulations could also require us to deliver waste collected by us within a particular jurisdiction to facilities not owned or controlled by us, which could increase our costs and reduce our revenues. In addition, such laws and regulations could require us to obtain additional costly licenses or authorizations to be deemed an authorized hauler or disposal facility.
The waste management industry is undergoing fundamental change as traditional waste streams are increasingly viewed as renewable resources and changes in laws and environmental policies may limit the items that enter the waste stream, any of which may adversely impact volumes and tipping fees at our landfills. Alternatives to landfill disposal may cause our revenues and operating results to decline.
As we have continued to develop our landfill capacity, the waste management industry has increasingly recognized the value of the waste stream as a renewable resource and new alternatives to landfilling are being developed that seek to maximize the renewable energy and other resource benefits of waste. We are increasingly competing with companies that seek to use parts of the waste stream as feedstock for renewable energy supplies. In addition, environmental initiatives, such as product stewardship and extended producer responsibility, which hold manufacturers or other actors in the product life cycle responsible for the disposal of manufactured goods, may reduce the volume of products that enter the waste stream. Further, there may be changes in the laws that reclassify items in the waste stream as hazardous or that prohibit the disposal of certain wastes in our landfills. These alternatives and changes in laws may impact the demand for landfill space, which may affect our ability to operate our landfills at full capacity, as well as the tipping fees and prices that we can charge for utilization of landfill space. As a result, our revenues and operating margins could be adversely affected.

Additionally, counties and municipalities in which we operate landfills may be required to formulate and implement comprehensive plans to reduce the volume of solid waste deposited in landfills through waste planning, composting, recycling or other programs. Some state and local governments prohibit the disposal of certain types of wastes, such as yard waste, at landfills. Such actions have reduced and may in the future further reduce the volume of waste going to landfills in certain areas, which may affect our ability to operate our landfills at full capacity and could adversely affect our operating results.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters is located at 90 Fort Wade Rd, Ponte Vedra, Florida 32081, where we currently lease approximately 63,000 square feet of office space under leases expiring through 2020. We also maintain regional administrative offices in North Carolina, Georgia and Illinois.
Our principal property and equipment consists of land, landfills, buildings, vehicles and equipment. We own or lease real property in the states in which we conduct operations. At December 31, 2014, we owned or operated 93 collection operations, 77 transfer stations, 42 active solid waste landfills and 24 recycling facilities in 17 states and the Bahamas. In aggregate, our active solid waste landfills total approximately 21,490 acres, including approximately 10,700 permitted and expansion acres. “Expansion acreage” consists of unpermitted acreage where the related expansion efforts meet our criteria to be included as expansion airspace. A discussion of the related criteria is included within the Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Assumptions section included herein. We also own or have responsibilities for five closed landfills. We believe that our property and equipment are adequate for our current needs.
ITEM 3. LEGAL PROCEEDINGS
Information regarding our legal proceedings can be found under the “Commitments and Contingenices” section of Note 20 of our consolidated financial statements included in Item 8 of this report and is incorporated herein by reference.

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ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.

21

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Not applicable.

ITEM 6. SELECTED FINANCIAL DATA
The information below was derived from the audited Consolidated Financial Statements included in this report and in previous reports we filed with the SEC. This information should be read together with those Consolidated Financial Statements and the notes thereto. The adoption of new accounting pronouncements, changes in certain accounting policies and certain reclassifications impact the comparability of the financial information presented below. These historical results are not necessarily indicative of the results to be expected in the future.
 
 
For the Year Ended December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
Consolidated Statement of Operations Data (a):
 
 
 
 
 
 
 
 
 
Service revenues
$
1,403.0

 
$
1,319.1

 
$
537.9

 
$
427.4

 
$
372.6

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating
896.1

 
832.8

 
336.7

 
261.8

 
222.9

Selling, general and administrative (b)
154.9

 
170.9

 
101.0

 
61.6

 
61.2

Depreciation and amortization
271.4

 
278.9

 
104.1

 
76.5

 
63.6

Acquisition and development costs
0.1

 
1.2

 
1.2

 
3.5

 
2.3

Loss on disposal of assets
1.2

 
2.6

 
2.1

 
14.1

 
0.3

Asset impairment, including goodwill (c)
5.3

 
0.6

 
43.7

 

 
101.3

Restructuring
4.6

 
10.0

 
9.9

 

 

 
1,333.6

 
1,297.0

 
598.7

 
417.5

 
451.6

Operating income (loss)
69.4

 
22.1

 
(60.8
)
 
9.9

 
(79.0
)
Interest expense
(141.5
)
 
(163.1
)
 
(49.4
)
 
(24.5
)
 
(35.5
)
Other income/(expense), net (d)
(25.9
)
 
0.3

 
(8.1
)
 
(4.3
)
 
(0.3
)
(Loss) income before income taxes
(98.0
)
 
(140.7
)
 
(118.3
)
 
(18.9
)
 
(114.8
)
(Benefit) provision for income taxes (e)
(80.6
)
 
(45.4
)
 
(13.5
)
 
3.5

 
(0.7
)
Net loss from continuing operations attributable to ADS Waste Holdings, Inc.
(17.4
)
 
(95.3
)
 
(104.8
)
 
(22.4
)
 
(114.1
)
Income (loss) from discontinued operations, net of tax (f)
0.3

 
(22.5
)
 
(89.2
)
 
0.2

 
(0.3
)
Net loss from continuing operations attributable to ADS Waste Holdings, Inc.
(17.1
)
 
(117.8
)
 
(194.0
)
 
(22.2
)
 
(114.4
)
Less: net loss attributable to non-controlling interest

 

 
(1.4
)
 
(0.2
)
 
(1.4
)
Net loss attributable to ADS Waste Holdings, Inc.
$
(17.1
)
 
$
(117.8
)
 
$
(192.6
)
 
$
(22.0
)
 
$
(113.0
)
Consolidated Statement of Cash Flows Data:
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
243.2

 
$
180.3

 
$
55.2

 
$
86.8

 
$
78.3

Net cash used in investing activities
$
(201.2
)
 
$
(154.8
)
 
$
(1,980.5
)
 
$
(133.7
)
 
$
(157.4
)
Net cash (used in)/provided by financing activities
$
(53.0
)
 
$
(32.3
)
 
$
1,937.2

 
$
40.7

 
$
79.2

Consolidated Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
3,550.0

 
$
3,626.8

 
$
3,785.3

 
$
1,374.6

 
$
1,338.9

Debt, including current portion (g)
$
2,327.2

 
$
2,360.6

 
$
2,366.2

 
$
439.4

 
$
513.5

Total ADS Waste Holdings, Inc. stockholders’ equity
$
528.9

 
$
551.5

 
$
662.5

 
$
721.5

 
$
614.2

 

(a)
Veolia was acquired on November 20, 2012 and the results of operations have been consolidated from the date of acquisition.
(b)
Includes stock-based compensation expense. Stock based compensation expense for all fiscal years presented was determined using the fair value method set forth in ASC 718, “Compensation—Stock Compensation.”
(c)
In fiscal 2012, the Company recorded an impairment charge of $43.7 in connection with recoverability testing performed on a long-lived asset. In fiscal 2010, the Company performed an impairment test of goodwill and intangibles and recorded an impairment charge of $101.3 based upon the results of such testing for a business that was combined under in accordance for entities common control.
(d)
Amounts included in other income/(expense) net for fiscal 2014 contain losses related to fuel derivative instruments of $27.3.
(e)
In fiscal 2014, the Company completed a legal entity reorganization to achieve administrative efficiencies and as such recorded a valuation allowance release of $51.4 related to certain NOL's that are more likely than not to be utilized.
(f)
Amounts represent those operations that are considered to be discontinued operations. Refer to Item 8, footnote 4 "Discontinued Operations" for further information.
(g)
Total debt includes capital lease obligations of $23.3 and $15.4 at December 31, 2014 and 2013, respectively.



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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the “Selected Financial Data” included in Item 6 of this Annual Report on Form 10-K, our consolidated financial statements and the related notes included elsewhere in this report.
Overview
We are the largest privately owned non-hazardous solid waste in the United States, as measured by revenue and provide non-hazardous solid waste collection, transfer, recycling and disposal services for residential, commercial and industrial customers across the Southeast, Midwest and Eastern regions of the United States as well as in the Commonwealth of the Bahamas. We service over 2.7 million residential customers, approximately 302,000 C&I customers and 732 municipalities. We are vertically integrated with approximately 5,400 employees and we own or operate a network of 93 collection operations, 77 transfer stations, 24 recycling facilities and 42 landfills with a fleet of approximately 3,100 vehicles.
Results of Operations
The following table sets forth for the periods indicated our consolidated results of operations and the percentage relationship that certain items from our consolidated financial statements bear to revenue (in millions and as a percentage of our revenue).
 
 
Year ended December 31,
 
2014
 
2013
 
2012
Service revenues
$
1,403.0

 
100.0
%
 
$
1,319.1

 
100.0
%
 
$
537.9

 
100.0
 %
Operating costs and expenses
 
 
 
 
 
 
 
 
 
 
 
Operating
896.1

 
63.9
%
 
832.8

 
63.1
%
 
336.7

 
62.6
 %
Selling, general and administrative
154.9

 
11.0
%
 
170.9

 
13.0
%
 
101.0

 
18.8
 %
Depreciation and amortization
271.4

 
19.3
%
 
278.9

 
21.1
%
 
104.1

 
19.4
 %
Acquisition and development costs
0.1

 
%
 
1.2

 
0.1
%
 
1.2

 
0.2
 %
Loss on disposal of assets
1.2

 
0.1
%
 
2.6

 
0.2
%
 
2.1

 
0.4
 %
Asset impairment, including goodwill
5.3

 
0.4
%
 
0.6

 
%
 
43.7

 
8.1
 %
Restructuring charges
4.6

 
0.3
%
 
10.0

 
0.8
%
 
9.9

 
1.8
 %
Total operating costs and expenses
1,333.6

 
95.1
%
 
1,297.0

 
98.3
%
 
598.7

 
111.3
 %
Operating income (loss)
$
69.4

 
4.9
%
 
$
22.1

 
1.7
%
 
$
(60.8
)
 
(11.3
)%
Overall, operating income increased in 2014 from 2013 as a result of organic growth, full year impact of acquisitions, decreased selling, general and administrative costs, and lower restructuring charges.
Operating income in 2013 increased compared to 2012 as a result of the full year impact of the Veolia acquisition and lower asset impairment charges.
Revenue
Our revenue base is distributed across several markets and business lines, with the primary business lines being our solid waste collection, transfer and landfill disposal operations. Our remaining revenue is generated from recycling, fuel fees and environmental fees, landfill gas-to-energy operations and other ancillary revenue-generating activities. In general, we integrate our recycling operations with our collection operations and obtain revenue from the sale of recyclable materials.
Revenues from our collection operations consists of fees we receive from commercial, industrial, municipal and residential customers and are influenced by factors such as collection frequency, type of collection equipment furnished, type and volume or weight of the waste collected, distance to the recycling facilities, transfer station or disposal facility and our disposal costs. Our residential and commercial collection operations in some markets are based on long-term contracts with municipalities with terms typically of three to five years or longer. We provide front load and temporary and permanent roll-off service offerings to our customers. While the majority of our roll-off services are provided to customers under long-term contracts, we generally do not enter into contracts with our temporary roll-off customers due to the relatively short-term nature of most C&D projects.

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Our transfer stations, landfills and, to a lesser extent, our recycling facilities generate revenue from disposal or tipping fees. Revenues from our landfill operations consist of fees, which are generally based on the type and weight or volume of waste being disposed of at our disposal facilities. Fees charged at transfer stations are generally based on the weight or volume of waste deposited, taking into account our cost of loading, transporting and disposing of the solid waste at a disposal site. Recycling revenue generally consists of fees and the sale of recyclable commodities to third parties.
The amounts charged for collection, disposal, transfer, and recycling services may include fuel fees and environmental fees. Fuel fees and environmental fees are not designed to be specific to the direct costs and expense to service an individual customer’s account, but rather are designed to address and to help recover for changes in Advanced Disposal’s overall cost structure and to achieve an operating margin acceptable to Advanced Disposal.
Other revenue is comprised of ancillary revenue-generating activities, such as landfill gas-to-energy operations at municipal solid waste landfills, management of third-party owned landfills, customer service charges relating to overdue payments and customer administrative fees relating to customers who request paper copies of invoices rather than opting for electronic invoices and broker revenue, which is earned by managing waste services for our customers.
The following table sets forth our consolidated revenues for the periods indicated (in millions).
 
 
Year ended December 31,
 
2014
 
2013
 
2012
Collection
$
950.8

 
67.8
 %
 
$
897.3

 
68.0
 %
 
$
370.8

 
68.9
 %
Disposal
492.8

 
35.1
 %
 
453.8

 
34.4
 %
 
168.1

 
31.3
 %
Sale of recyclables
33.5

 
2.4
 %
 
35.9

 
2.7
 %
 
16.6

 
3.1
 %
Fuel fees and environmental fees
92.8

 
6.6
 %
 
81.5

 
6.2
 %
 
25.3

 
4.7
 %
Other
95.5

 
6.8
 %
 
95.2

 
7.2
 %
 
44.0

 
8.2
 %
Intercompany eliminations
(262.4
)
 
(18.7
)%
 
(244.6
)
 
(18.5
)%
 
(86.9
)
 
(16.2
)%
Total
$
1,403.0

 
100.0
 %
 
$
1,319.1

 
100.0
 %
 
$
537.9

 
100.0
 %
Fiscal Year Ended December 31, 2014 compared to 2013
Revenue for 2014 was $1,403.0, an increase of $83.9, or 6.4%, from revenue of $1,319.1 in 2013. The increase in revenue in 2014 compared to 2013 was due to an increase in collection volume of $36.5, acquisition volume of $16.7, landfill volume of $19.6 and pricing of $19.6. Offsetting the increases in revenue, were declines in volume within the brokerage business of $2.7 driven by the loss of contracts. The increase in the collection volume was driven by strong residential growth of $18.9, which included new contract wins of approximately $8.6, increased rolloff volumes of $9.3 and increased volume of $8.6 in commercial. Landfill volume increases were driven by special waste projects and MSW waste, which contributed $14.0 and $4.4, respectively. Landfill pricing was driven by MSW and special waste increases, which accounted for $5.5 and $2.9 of the pricing increases. Fuel fees and environmental fees contributed $10.3 and was offset by headwinds from recycling pricing. All amounts presented in the foregoing paragraph are net of intercompany eliminations.
Fiscal Year Ended December 31, 2013 compared to 2012
Revenue for 2013 was $1,319.1, an increase of $781.2, or 145.2%, from revenue of $537.9 in 2012. The increase in revenue in 2013 compared to 2012 was due to primarily to the acquisition of Veolia. All amounts presented in the foregoing paragraph are net of intercompany eliminations.
Operating Expenses
The following table summarizes our operating expenses (in millions and as a percentage of our revenue).
 

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Year ended December 31,
 
2014
 
2013
 
2012
Operating
$
882.6

 
62.9
%
 
$
819.1

 
62.1
%
 
$
328.8

 
61.1
%
Accretion of landfill retirement obligations
13.5

 
1.0
%
 
13.7

 
1.0
%
 
7.9

 
1.5
%
Operating Expense
$
896.1

 
63.9
%
 
$
832.8

 
63.1
%
 
$
336.7

 
62.6
%
Our operating expenses include the following:
 
Labor and related benefits consist of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes.
Transfer and disposal costs include tipping fees paid to third-party disposal facilities and transfer stations and transportation and subcontractor costs (which include costs for independent haulers who transport waste from transfer stations to our disposal facilities and costs for local operators who provide waste handling services associated with our national accounts in markets outside our standard operating areas).
Maintenance and repairs expenses include labor, maintenance and repairs to our vehicles, equipment and containers.
Fuel costs include the direct cost of fuel used by our vehicles, net of fuel credits. The Company also incurs certain indirect fuel costs in its operations that are not taken into account in the above analysis.
Franchise fees and taxes consist of municipal franchise fees, host community fees and royalties.
Risk management expenses include casualty insurance premiums and claims payments and estimates for claims incurred but not reported.
Other expenses include expenses such as facility operating costs, equipment rent, leachate treatment and disposal, and other landfill maintenance costs.
Accretion expense related to landfill capping, closure and post-closure is included in “Operating Expenses” in the Company’s consolidated income statements, however, it is excluded from the table below (refer to discussion below “Accretion of landfill retirement obligations” for a detailed discussion of the changes in amounts).
The following table summarizes the major components of our operating expenses, excluding accretion expense (in millions and as a percentage of our revenue):
 
 
Year ended December 31,
 
2014
 
2013
 
2012
Labor and related benefits
$
281.3

 
20.0
%
 
$
261.7

 
19.8
%
 
$
103.4

 
19.2
%
Transfer and disposal costs
207.8

 
14.8
%
 
189.1

 
14.3
%
 
83.7

 
15.6
%
Maintenance and repairs
114.9

 
8.2
%
 
102.5

 
7.8
%
 
40.5

 
7.5
%
Fuel
101.3

 
7.2
%
 
99.7

 
7.6
%
 
43.5

 
8.1
%
Franchise fees and taxes
64.8

 
4.6
%
 
57.1

 
4.3
%
 
15.4

 
2.9
%
Risk management
28.4

 
2.0
%
 
23.5

 
1.8
%
 
10.9

 
2.0
%
Other
84.1

 
6.1
%
 
85.5

 
6.5
%
 
31.4

 
5.8
%
Total operating expenses
$
882.6

 
62.9
%
 
$
819.1

 
62.1
%
 
$
328.8

 
61.1
%
The cost categories shown above may not be comparable to similarly titled categories used by other companies. Thus, you should exercise caution when comparing our cost of operations by cost component to that of other companies.
Fiscal Year Ended December 31, 2014 compared to 2013
Operating expenses increased by $63.5, or 7.8%, to $882.6 for 2014 from $819.1 in 2013. Operating expenses, as a percentage of revenue, increased by 80 basis points in 2014 over 2013.
 
Labor and related benefits increased by $19.6 or 7.5% to $281.3, of which approximately $4.2 of this increase was attributable to merit-based wage increases, $1.3 was attributable to weather related impacts in the first quarter of 2014 and the remainder primarily due to acquisitions and increased overtime costs and temporary labor due to driver shortages.

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Transfer and disposal costs increased by $18.7 or 9.9% to $207.8. The increase was primarily driven by increased volume in the collection operation, increased third party disposal costs and higher transportation costs.
Maintenance and repairs expense increased by $12.4, or 12.1% to $114.9. The increase was driven by weather impacts in the first quarter of 2014, increased cost of parts and increased overtime wages due to a shortage of mechanics.
Fuel costs increased $1.6, or 1.6% to $101.3, of which $0.4 was driven by weather impacts on the fuel burn in the first quarter of 2014 and the remaining increase was primarily attributable to acquisition volume.
Franchise fees and taxes increased $7.7 or 13.5% to $64.8 during 2014 primarily due to increased volumes.
Risk management expenses increased $4.9 or 20.9% to $28.4 during 2014 primarily due to adverse development in the severity of claims.
Other operating costs decreased $1.4 or 1.6% to $84.1 in 2014, of which $0.6 was related to weather impacts in the first quarter of 2014 and an increase in the cost of leachate treatment due to wet weather and taxes and utilities at our operating sites.
Fiscal Year Ended December 31, 2013 compared to 2012
Operating expenses increased by $490.3, or 149.1%, to $819.1 for 2013 from $328.8 in 2012.
 
Labor and related benefits increased by $158.3 or 153.1% to $261.7, which was attributable to the acquisition of Veolia and other acquisition activity, as well as merit-based wage increases in 2013 and increases in health care costs.
Transfer and disposal costs increased by $105.4 or 125.9% to $189.1. The acquisition of Veolia accounted for $101.1 of the increase. Offsetting these increase were the benefits of increased internalization of waste which reduces the cost base.
Maintenance and repairs expense increased by $62.0, or 153.1% to $102.5. The acquisition of Veolia accounted for the increase. Absent the acquisition of Veolia, maintenance and repairs expenses decreased due to an effort to standardize maintenance programs across the Company.
During 2013, our fuel costs increased $56.2, or 129.2% to $99.7. The impact of the Veolia acquisition accounted for $57.5 of our 2013 fuel costs. Excluding the impact of the Veolia acquisition our fuel costs were relatively stable year over year.
Franchise fees and taxes increased $41.7 or 270.8% to $57.1 during 2013 primarily due to the Veolia acquisition businesses in franchise markets.
Risk management expenses increased $12.6 or 115.6% to $23.5 during 2013 primarily due to the acquisition of Veolia offset by the favorable development of existing claims compared to the prior year.
Other operating costs increased $54.1 or 172.3% to $85.5 in 2013, of which $46.9 relates to the acquisition of Veolia. Additional costs were incurred in 2013 as a result of extremely wet weather, which increased landfill leachate disposal costs and costs incurred to control odor issues at our Moretown landfill.
Accretion of landfill retirement obligations
Accretion expense was $13.5, $13.7 and $7.9 for 2014, 2013 and 2012, respectively. Accretion expense decreased by $0.2 in 2014 from 2013 primarily due to lower average interest rate and expenditures of capping and post-closure related costs. The increase in 2013 over 2012 was primarily related to Veolia contributing approximately $8.1 in 2013 offset by expenditures on capping and post-closure related costs.

Selling, General and Administrative
Selling, general and administrative expenses include salaries, legal and professional fees, rebranding and integration costs and other expenses. Salaries expenses include salaries and wages, health and welfare benefits and incentive compensation for corporate and field general management, field support functions, sales force, accounting and finance, legal, management information systems, and clerical and administrative departments. Rebranding and integration costs are those costs associated with renaming all of the acquired and merged businesses’ trucks and containers and those costs expended to align the corporate and strategic operations of the acquired and merged businesses. Other expenses include rent and office costs, fees for professional services provided by third parties, marketing, directors’ and officers’ insurance, general employee relocation, travel, entertainment and bank charges, but excludes any such amounts recorded as restructuring charges.

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The following table provides the components of our selling, general and administrative expenses for the periods indicated (in millions and as a percentage of our revenue):
 
 
Year ended December 31,
 
2014
 
2013
 
2012
Salaries
$
90.1

 
6.4
%
 
$
89.7

 
6.8
%
 
$
42.4

 
7.9
%
Legal and professional
10.7

 
0.8
%
 
8.7

 
0.7
%
 
6.4

 
1.2
%
Rebranding and integration costs
7.1

 
0.5
%
 
25.8

 
2.0
%
 
32.2

 
6.0
%
Other
47.0

 
3.3
%
 
46.7

 
3.5
%
 
20.0

 
3.7
%
Total selling, general and administrative expenses
$
154.9

 
11.0
%
 
$
170.9

 
13.0
%
 
$
101.0

 
18.8
%
Fiscal Year Ended December 31, 2014 compared to 2013
Our salaries expenses increased by $0.4, but decreased 40 basis points as a percentage of revenue primarily due to merit increases in the current year offset by lower salaries expense related to a reduction in force that occurred in August 2014 and the resignation of an executive in the first quarter of 2014.
Legal and professional fees increased by $2.0 in 2014 compared to 2013 primarily as a result of increased fees related to defense of a legal matter. Refer to Note 20 in the consolidated financial statements included in Item 8 for further details regarding the legal matter.
Rebranding and integration costs are mainly related to the costs associated with the integration program from the acquisition of Veolia and other entities. These costs are mainly comprised of professional fees, including legal, accounting, engineering and rebranding fees paid to outside parties to rebrand all containers and equipment. The decrease of $18.7 from 2014 to 2013 is primarily a result of efforts to complete the integration program in the current fiscal year.
Other selling, general and administrative expenses increased by $0.3, but decreased 20 basis points as a percentage of revenue mainly due to an increase in bank charges and payroll processing costs.
Fiscal Year Ended December 31, 2013 compared to 2012
Our salaries expenses increased by $47.3 primarily due to the acquisition of Veolia, which contributed $47.3. Other contributing factors to the increase included: increases in stock compensation expense of $3.3, retention bonuses paid to certain employees of $3.2, merit increases of $1.9 and increased corporate employees and region staff.
Legal and professional fees increased by $2.3 in 2013 compared to 2012 primarily as a result of increased fees related to union contract negotiations and costs incurred in connection with the defense of a legal matter. Refer to Note 20 in the consolidated financial statements included in Item 8 for further details regarding the legal matter.
Rebranding and integration costs are mainly related to the costs associated with the acquisition of Veolia. These costs are mainly comprised of professional fees, including legal, accounting, engineering and rebranding fees paid to outside parties to rebrand all containers and equipment. The decrease of $6.4 in 2013 compared to 2012 is primarily a result of due diligence and merger and acquisition costs paid in 2012 in connection with the acquisition of Veolia, which did not recur in 2013.
Other selling, general and administrative expenses increased by $26.7 mainly due to the acquisition of Veolia and increased rent for a corporate and regional offices.
Depreciation and Amortization
The following table summarizes the components of depreciation and amortization expense by asset type (in millions and as a percentage of our revenue). For a detailed discussion of depreciation and amortization by asset type refer to the discussion included in the following two sections herein.
 

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Year ended December 31,
 
2014
 
2013
 
2012
Depreciation, amortization and depletion of property and equipment
$
229.1

 
16.3
%
 
$
236.7

 
17.9
%
 
$
88.6

 
16.5
%
Amortization of other intangible assets and other assets
42.3

 
3.0
%
 
42.2

 
3.2
%
 
15.5

 
2.9
%
Depreciation and amortization
$
271.4

 
19.3
%
 
$
278.9

 
21.1
%
 
$
104.1

 
19.4
%
Depreciation, Amortization and Depletion of Property and Equipment
Depreciation, amortization and depletion expense includes depreciation of fixed assets over the estimated useful life of the assets using the straight-line method, and amortization and depletion of landfill airspace assets under the units-of-consumption method. We depreciate all fixed assets to a zero net book value, and do not apply salvage values.
The following table summarizes depreciation, amortization and depletion of property and equipment for the periods indicated (in millions and as a percentage of our revenue):
 
 
Year ended December 31,
 
2014
 
2013
 
2012
Depreciation and amortization of property and equipment
$
122.8

 
8.7
%
 
$
141.8

 
10.7
%
 
$
58.7

 
10.9
%
Landfill depletion and amortization
106.3

 
7.6
%
 
94.9

 
7.2
%
 
29.9

 
5.6
%
Depreciation, amortization and depletion expense
$
229.1

 
16.3
%
 
$
236.7

 
17.9
%
 
$
88.6

 
16.5
%
Depreciation and amortization of property and equipment decreased by $19.0 for 2014 to $122.8, primarily due to certain assets acquired in the Veolia transaction becoming fully depreciated, which were offset by acquisitions completed during the respective periods. Depreciation and amortization of property and equipment increased by $83.1 for 2013 compared to 2012, primarily due to the acquisition of Veolia.
Landfill depletion and amortization increased by $11.4 for 2014 compared to 2013 due to increased costs associated with the increased disposal volume and cost of landfill construction. Landfill depletion and amortization increased $65.0 for 2013 compared to 2012 mainly due to the acquisition of Veolia, which contributed $59.3. The remaining increase is primarily due to unfavorable adjustments in landfill depletion expense that were recorded in connection with changes in cost related to individual capping events with full waste in place that have not yet been capped.
Amortization of Other Intangible Assets and Other Assets
Amortization of intangibles and other assets was $42.3, $42.2 and $15.5 for 2014, 2013 and 2012, respectively, or, as a percentage of revenue, 2.9% to 3.2% for all years presented. Our other intangible assets and other assets primarily relate to customer lists, municipal and customer contracts, operating permits and non-compete agreements.

Acquisitions
For the year ended December 31, 2014, the Company completed the acquisitions of eight collection companies. Consideration transferred amounted to approximately $8.6 for these acquisitions during fiscal 2014, of which $0.8 will be paid in 2015. Transaction costs related to these acquisitions were not significant for the year ended December 31, 2014. Purchase price adjustments related to acquisitions in prior years amounted to approximately $2.1 for the year ended December 31, 2014.
For the year ended December 31, 2013, the Company completed the acquisitions of seventeen collection companies. Consideration transferred amounted to approximately $31.3, of which $1.5 was paid in 2014. Transaction costs related to these acquisitions were not significant for the year ended December 31, 2013.
As discussed in Note 1 to the consolidated financial statements, effective November 20, 2012, ADS Waste acquired the stock of Veolia ES Solid Waste division from Veolia Environnment S.A. for a purchase price of approximately $1.9 billion subject to a working capital and net Company debt adjustment which was completed within one year from date of purchase. In September 2013, the Company paid an additional $20.6 related to the working capital and net Company debt adjustment and in November

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2013 completed the final opening balance sheet adjustments which were not significant and the amount was primarily attributed to goodwill. Approval of the transaction by the United States Department of Justice was granted pursuant to a consent decree issued in November 2012, which required the Company to sell certain assets, including one landfill and two transfer stations in Central Georgia, three commercial waste collection routes in the Macon, Georgia area and three transfer stations in northern New Jersey. The sale of those assets was completed in fiscal 2013.
Goodwill of $861.3 was calculated as the excess of the consideration paid over the net assets recognized and represents the synergies that are expected to arise as a result of the acquisition, as well as additional acquisitions of companies in the proximity of the geographic area of the Veolia ES Solid Waste footprint and the potential for growth opportunities. The amount of goodwill deductible for tax purposes was $113.7 and $132.6 at December 31, 2014 and 2013, respectively.

Asset Impairments and Divestitures/Discontinued Operations
From time to time, we may divest certain components of our business. Such divestitures may be undertaken for a number of reasons, including as a result of a determination that a specified asset will no longer provide adequate returns to us or will no longer serve a strategic purpose in connection with our business.
The Company entered in to a letter of intent in December 2013, to sell certain assets in Panama City, FL for approximately $2.0 and in connection with the planned divestiture recorded an impairment charge of $3.6 for the year ended December 31, 2013, as the fair value determined through the selling price was less than the carrying value. The sale was completed in January 2014 and the assets are classified as held for sale in the accompanying consolidated balance sheets as of December 31, 2013 and the results of operations have been included in discontinued operations in the accompanying consolidated statements of operations for all periods presented.
In connection with the acquisition of Veolia ES Solid Waste division, the Company was required by the United States Department of Justice to divest certain businesses. The Company completed the divestitures in 2013, as required for those businesses in the Georgia and New Jersey area and recorded no additional impairment charge upon sale for the year ended December 31, 2013. An impairment charge of $13.7 was recorded for the year ended December 31, 2012, as the fair value determined through the selling price was less than the carrying value. The results of operations have been included in discontinued operations in the accompanying consolidated statements of operations for all periods presented.
The Company completed the sale of certain assets and liabilities in the New York and New Jersey area for approximately $45.0, of which $25.0 was received in cash on the date of closing, $5.0 was received in December 2013 and the remainder in the form of a mandatorily redeemable preferred security, which matures in 2017. The Company also reacquired the outstanding minority interest of $2.5 previously held by the minority shareholder in August 2013. In connection with the divestiture, the Company recorded an impairment charge of approximately $7.6 and $26.7 for the years ended December 31, 2013 and 2012, respectively. The results of operations have been included in discontinued operations in the accompanying consolidated statements of operations for all periods presented.
The Company terminated a long-term lease agreement for one of its landfills. An impairment charge of approximately $39.8 was recorded on long-lived landfill assets no longer being used for the year ended December 31, 2012. The Company has classified the results of operations of this landfill as discontinued operations for all periods presented in the accompanying consolidated statements of operations.
Losses from discontinued operations before income tax for the years ended December 31, 2014, 2013 and 2012 was $0.7, $29.6 and $93.8, respectively. The decrease in the loss from 2014 to 2013 was due to the completion of the sale of the businesses that were classified within discontinued operations. The decrease in the loss from 2013 to 2012 was mainly a result of a decision in 2012 to terminate a long-term lease agreement for one of its landfills, which resulted in an impairment charge of $39.8 and as a result of the Company’s decision to sell certain assets and liabilities in the New York and New Jersey area which resulted in an impairment charge of $25.0.
Restructuring Charges
For the year ended December 31, 2014, we recognized approximately $0.4 of severance costs, $0.6 for lease termination costs and $0.3 for relocation costs in the Midwest region; $0.4 for severance costs and $0.3 for relocation costs in the East region; $0.2 for severance costs $0.8 for relocation costs in the South region, as well as $1.6 of primarily relocation costs for Corporate.

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For the year ended December 31, 2013, we recognized approximately $2.5 of severance costs, $1.7 for lease termination costs and $2.3 for relocation costs in the Midwest region; $0.6 for lease termination costs in the East region; $0.3 for lease termination costs in the South region and $0.3 for other expenses, as well as $2.3 of severance costs for Corporate.
For the year ended December 31, 2012, we recognized employee severance and benefits restructuring charges of approximately $7.4, of which $4.3 related to the East region and the remaining amount in the Midwest region. The asset impairments were the result of the decision to consolidate locations in connection with relocation of corporate and regional offices and the decision to close certain landfills and divest assets. Other expense are primarily for lease termination costs for exiting facilities of $2.3 associated with accomplishing the restructuring actions in the East region.
In September 2012, we announced a reorganization of our operations, designed to consolidate management and staff in connection with the merging of the legacy companies. Subsequent to the closing of Veolia ES Solid Waste division, further organizational changes were announced and implemented. Principal changes included consolidation and elimination of management, relocation of staff to new regional headquarter’s locations and divesting of certain locations. Through this reorganization we eliminated approximately 130 positions throughout the Company and offered voluntary separation agreements to those impacted.
Interest Expense
The following table provides the components of interest expense for the periods indicated (in millions and as a percentage of our revenue):
 
 
Year ended December 31,
 
2014
 
2013
 
2012
Interest expense on debt and capital lease obligations
$
123.1

 
8.8
 %
 
$
140.1

 
10.6
%
 
$
42.6

 
7.9
 %
Accretion of original issue discounts and loan costs
20.0

 
1.4
 %
 
17.6

 
1.3
%
 
6.1

 
1.1
 %
Amortization of terminated interest rate swaps

 
 %
 
6.0

 
0.5
%
 
1.0

 
0.2
 %
Less: Capitalized interest
(1.6
)
 
(0.1
)%
 
(0.6
)
 
%
 
(0.3
)
 
(0.1
)%
Total Interest Expense
$
141.5

 
10.1
 %
 
$
163.1

 
12.4
%
 
$
49.4

 
9.2
 %
Interest expense decreased in 2014 from 2013 as a result of refinancing the Term B Loan, which lowered the overall interest rate on the Term B Loan by 50 basis points Additionally, the company benefited from lower debt levels in fiscal 2014 compared to 2013 on the Term B Loan. Interest expense increased in 2013 from 2012 principally as a result of a full year of debt outstanding associated with the Veolia acquisition.
Debt Modifications
We modified our Term B loan in February 2014 and 2013 and incurred approximately $1.3 and $22.5, respectively of costs in connection with the modifications, which were capitalized as debt issuance costs. The modification in February 2014 lowered the interest rate floor by 50 basis points and the modification in February 2013 lowered the margin by 100 basis points. No gain or loss was recorded upon consummation of the transaction, as it was treated as a modification of debt in accordance with current accounting guidance.
The following table summarizes the refinancing transactions that resulted in non-cash losses on extinguishments of outstanding debt for the year ended December 31, 2012 (in millions):
 
 
Principal
Repaid
 
Total Loss on
Extinguishment
of Debt
2012
 
 
 
Credit facilities due December 2014
$
128.5

 
$
1.8

Revolving line of credit due April 2016
358.4

 
7.5

Subordinated debt due November 2015 at 11.33%
5.0

 
0.1

Total
$
491.9

 
$
9.4


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Income Taxes
Continuing Operations
Our benefit for income taxes from continuing operations was $80.6, $45.4 and $13.5, for the years ended December 31, 2014, 2013, and 2012, respectively. Our effective income tax rate was 82.2%, 32.3%, and 11.4% for 2014, 2013 and 2012, respectively. Our tax rate is affected by recurring items, such as differences in tax rates in state jurisdictions and the relative amount of income we earn in each jurisdiction, which we expect to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In addition to state income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate and our effective tax rate:
2014:
Our effective income tax rate for 2014 was higher than the enacted statutory rate due to a $51.4 valuation allowance release primarily related to a legal entity restructuring undertaken by the Company in order to drive administrative and legal efficiencies. As a result of the restructuring completed during the fourth quarter, the Company projects that it will be able to utilize certain federal net operating losses ("NOLs") that previously required a full valuation allowance. We believe that it is more likely than not that the full benefit of these NOLs and net deferred tax assets will be realized.
2013:
Our effective income tax rate for 2013 was lower than the enacted statutory rate due to a $3.4 increase in recorded valuation allowance against certain federal and state NOLs, capital loss carryovers, and net deferred tax assets. We believe that it is more likely than not that the full benefit of these NOLs, capital loss carryovers, and net deferred tax assets will not be realized.
2012:
Our effective income tax rate for 2012 was lower than the enacted statutory rate due to a $16.2 increase in recorded valuation allowance against certain federal and state NOLs, capital loss carryovers, and net deferred tax assets. We believe that it is more likely than not that the full benefit of these NOLs, capital loss carryovers, and net deferred tax assets will not be realized. Additionally, our effective income tax rate for 2012 was lowered due to changes in the estimated tax rate at which existing temporary differences will be realized. This change was the result of the merger of the legacy businesses and the Veolia acquisition, and resulted in a reduction of the benefit from income taxes by $8.8. Also in 2012, the tax rate was adversely affected by $4.0 as the result of nondeductible transaction costs associated with the Veolia acquisition.
Discontinued Operations
Our benefit for income taxes from discontinued operations was $1.0, $7.1 and $4.6 for the years ended December 31, 2014, 2013 and 2012, respectively. Our effective income tax rate was 142.9%, 24.0% and 4.9% for 2014, 2013 and 2012, respectively. Similar to income taxes from continued operations, our tax rate is affected by recurring items, such as differences in tax rates in state jurisdictions and the relative amount of income we earn in each jurisdiction. It is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In addition to state income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 34% and our effective tax rate:
2014:
Our effective income tax rate for 2014 was higher than the enacted statutory rate due to the result of unanticipated tax benefits associated with prior divestitures that were realized upon the filing of the Company's tax return.
2013:
Our effective income tax rate for 2013 was lower than the enacted statutory rate due to an increase in the valuation allowance of $2.7 related to the loss on asset disposals for which the Company will not receive a tax benefit.
2012:
Our effective income tax rate for 2012 was lower than the enacted statutory rate due to an increase in the valuation allowance against certain federal and state NOLs, capital loss carryovers, and net deferred tax assets. We believe that it is more likely

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than not that the full benefit of these NOLs, capital loss carryovers, and net deferred tax assets will not be realized. Additionally, impairment charges were recorded against Goodwill for which there was no tax basis. This resulted in the recognition of additional tax expense of $9.6.
State Audits
During 2014, we did not have settlements as a result of state tax audits. During 2013, we settled tax audits with the states of Florida and Mississippi. The settlement of these audits resulted in $0.1 of additional income tax expense for 2013.
For additional discussion and detail regarding our income taxes, see Note 18, Income Taxes, to our consolidated financial statements.
Noncontrolling Interests
Net loss attributable to noncontrolling interests was $1.4 for the year ended December 31, 2012. The noncontrolling interest was reacquired in third quarter of fiscal 2013 in connection with the sale of certain assets in the New York and New Jersey marketplace.

Reportable Segments
Our operations are managed through three geographic regions (South, East and Midwest) that we designate as our reportable segments. Revenues and operating income/(loss) for our reportable segments for the periods indicated, is shown in the following tables (in millions):
 
 
Services
Revenue
 
Operating
Income (Loss)
 
Depreciation
and
Amortization
For the Year Ended December 31,
 
 
 
 
 
2014
 
 
 
 
 
South
$
493.7

 
$
72.2

 
$
70.3

East
364.3

 
8.7

 
85.1

Midwest
545.2

 
51.2

 
108.1

Corporate
(0.2
)
 
(62.7
)
 
7.9

 
$
1,403.0

 
$
69.4

 
$
271.4

For the Year Ended December 31,
 
 
 
 
 
2013
 
 
 
 
 
South
$
475.4

 
$
66.4

 
$
79.0

East
331.1

 
7.7

 
78.7

Midwest
512.6

 
39.6

 
112.6

Corporate

 
(91.6
)
 
8.6

 
$
1,319.1

 
$
22.1

 
$
278.9

For the Year Ended December 31,
 
 
 
 
 
2012
 
 
 
 
 
South
$
336.9

 
$
53.3

 
$
51.6

East
146.2

 
(42.3
)
 
33.7

Midwest
54.8

 
2.8

 
12.7

Corporate

 
(74.6
)
 
6.1

 
$
537.9

 
$
(60.8
)
 
$
104.1

Comparison of Reportable Segments—Fiscal Year Ended December 31, 2014 compared to 2013
South Segment
Revenue for 2014 increased $18.3 or 3.8% from 2013. The segment’s revenue increase was driven by strong collection volume of $14.9, acquisition volume of $3.1 and MSW landfill pricing of $5.1, offset by headwinds from recycling pricing of $1.8 and lower trucking revenue and broker revenue of $4.6.

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Operating income from our South Region increased by $5.8 or 8.7% from 2013. The increase in operating income was driven by the revenue increases discussed above as well as a focus on reducing administrative costs, partially offset by the severe winter weather in the first quarter of 2014 of $0.6.
East Segment
Revenue for 2014 increased $33.2, or 10.0% from 2013. The segment’s revenue increase was driven by new contract wins, which accounted for approximately $8.6, acquisition volume of $7.8, strong rolloff volume of $4.3, landfill volumes of $4.5 and pricing of approximately $5.7.
Operating income from our East Region increased by $1.0 from 2013 to $8.7 in 2014, which was impacted by adverse weather in the first quarter of 2014 by $2.5, higher repairs and maintenance costs, higher transportation and disposal costs, increased overtime costs and increased fuel costs.
Midwest Segment
Revenue for 2014 increased $32.6 or 6.4% which is attributable to strong special waste volume of $10.1, acquisition volume of $5.8, overall strong collection volumes in all lines of business of $7.1 and pricing initiatives of $7.6, offset by headwinds from recycling pricing of $2.5.
Operating income for 2014 increased $11.6 or 29.3%, which was driven by the revenue generating activities described above, partially offset by the severe winter weather in the first quarter of 2014 of $1.9.
Corporate Region
Operating loss decreased by $28.9 to a loss of $62.7 in 2014 as a result of the substantial completion of the costs associated with the rebranding and integration efforts across the Company and the merger and restructuring programs.
Comparison of Reportable Segments—Fiscal Year Ended December 31, 2013 compared to 2012
South Segment
Revenue for 2013 increased $138.5, or 41.1% from 2012. The segment’s revenue increase was driven by the acquisition of Veolia, which accounted for $138.1 of the increase.
Operating income from our South Region increased by $13.1 or 24.6% from 2012. The increase in operating income was driven by the acquisition of Veolia, which accounted for $14.5 offset by a contract loss in the ordinary course of business and an impairment charge of $0.6 related to tradenames from a prior acquisition that is no longer utilized.
East Segment
Revenue for 2013 increased $184.9, or 126.5% from 2012. The segment’s revenue increase was driven by the acquisition of Veolia, which accounted for $179.4 of the increase. Other acquisitions completed during 2013 as well as the increases in the fuel fees and environmental fees contributed to the increase in revenue year over year.
Operating income from our East Region increased by $50.0 from 2012 to $7.7 in 2013. The operating loss in 2012 was driven by an impairment charge at one of our landfills, which contributed $43.7 to the loss in the prior year. The impairment charges did not recur in the current year. The acquisition of Veolia was the other main driver of the increase in operating income and contributed $14.5 year over year. Offsetting these increases in operating income, were additional bad debt charges in the current year.
Midwest Segment
Revenue for 2013 increased $457.8 or 835.4% which is attributable to the acquisition of Veolia, as the entire segment is comprised of locations that were acquired as part of the November 2012 acquisition of Veolia.
Operating income for 2013 increased $36.8 or 1,314.3%, which is attributable to the acquisition of Veolia, as the entire segment is comprised of locations that were acquired as part of the November 2012 acquisition of Veolia.

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Table of Contents

Corporate Region
Operating loss increased by $17.0 to a loss of $62.7 in 2013 as a result of costs associated with the rebranding and integration efforts across the Company and the merger and restructuring of the businesses, as well as increased payroll expenses related to stock options plans for corporate employees.
Liquidity and Capital Resources
Our primary sources of cash are cash flows from operations, bank borrowings and debt offerings. We intend to use excess cash on hand and cash from operating activities, together with bank borrowings, to fund purchases of equipment, working capital, acquisitions and debt repayments. Actual debt repayments may include purchases of our outstanding indebtedness in the secondary market or otherwise. We believe that our excess cash, cash from operating activities and funds available under our Revolving Credit Facility (defined below) will provide us with sufficient financial resources to meet our anticipated capital requirements and maturing obligations as they come due. From time to time, the Company may make distributions to our parent company in order for them to fund certain of their liabilities and to provide a return on its investment. For the year ending December 31, 2014, those payments totaled approximately $9.1. At December 31, 2014, the Company had negative working capital which was driven by repayments on the revolving line of credit and Term B Loan in the fourth quarter of 2014. The Company has more than adequate availability on its revolving line of credit to fund short term working capital requirements.
Summary of Cash and Cash Equivalents, Restricted Cash and Debt Obligations
The table below presents a summary of our cash and cash equivalents, restricted cash and debt balances as of December 31, 2014 and 2013 (in millions):
 
 
December 31,
 
2014
 
2013
Cash and cash equivalents
$
1.0

 
$
12.0

Total restricted funds
$
0.2

 
$
2.4

Debt:
 
 
 
Current portion
25.3

 
29.1

Long-term portion
2,278.2

 
2,302.8

Total debt
$
2,303.5

 
$
2,331.9

Cash on hand decreased primarily as a result of payments made on the Term B Loan at year-end. Restricted cash decreased from 2013 to 2014 by $2.2 as a result of placing a surety bond in lieu of the restricted funds as collateral support for closure and post closure financial support. Debt decreased due to payments on the Term B Loan and revolving line of credit which amounted to approximately $44.0 offset by increases in capital leases for machinery and equipment of $7.9.
Summary of Cash Flow Activity
The following table sets forth for the periods indicated a summary of our cash flows (in millions):
 
 
For the Years Ended December 31,
 
2014
 
2013
 
2012
Net cash provided by operating activities
$
243.2

 
$
180.3

 
$
55.2

Net cash used in investing activities
$
(201.2
)
 
$
(154.8
)
 
$
(1,980.5
)
Net cash (used in) provided by financing activities
$
(53.0
)
 
$
(32.3
)
 
$
1,937.2




Cash Flows Provided by Operating Activities
In 2014, we generated $243.2 of cash flows from operating activities compared to $180.3 in 2013, representing an increase of $62.9. The increase in cash flows is a result of lower integration and restructuring costs of approximately $18.7 a focus on days sales outstanding as well as organic and acquisition growth year over year. In 2013, we generated $180.3 of cash flows from

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operating activities compared to $55.2 in 2012, representing an increase of $125.1, which was driven primarily by a full year of operations of the Veolia business.
Cash Flows Used in Investing Activities
We used $201.2 of cash in 2014 for investing activities, of which $196.4 was utilized to acquire property and equipment and for landfill cell construction and development and $9.9 was utilized for acquisitions. Further, we divested certain businesses and received $2.1 in cash related to those divestitures.
We used $154.8 of cash in investing activities in 2013, of which $158.1 was utilized to acquire property and equipment and for landfill construction and development; $29.8 was utilized to acquire new businesses and $20.6 was paid to settle the net working capital and net company debt adjustment related to the prior year acquisition of Veolia. Further, we divested certain businesses and received $50.4 in cash related to those divestitures, of which $45.2 was received upon sale and $5.0 was received through the maturity of a debt security.
Cash Flows Used in Financing Activities
Cash flows used in financing activities in 2014 were $53.0, as compared to $32.3 in 2013. In 2014, we incurred approximately $1.3 in costs paid to our lenders in connection with refinancing our Term Loan B Facility and payments of other costs associated with the original Term B Loan Facility (defined below).
We made payments on our revolver and long-term debt obligations in the amount of $141.3 and borrowed approximately $95.0 in 2014. Borrowings on the revolver were utilized to fund working capital, acquisition of businesses and for interest payments on debt.
Cash flows used in financing activities in 2013 were $32.3, as compared to an inflow from financing activities of $1,937.2 in 2012. We incurred approximately $22.9 in costs paid to our lenders in connection with refinancing our Term B Loan Facility and payments of other costs associated with the original Term B Loan Facility (defined below).
We made payments on our revolver and long-term debt obligations in the amount of $196.8 during 2013 and borrowed approximately $184.0 on the revolver. Borrowings on the revolver were utilized to fund acquisition of businesses and for interest payments on debt.
Senior Secured Credit Facilities
In November 2012, the Company entered into (i) a $1,800.0 term loan B facility (the “Term Loan B Facility”) and (ii) a $300.0 revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan B Facility, the “Senior Secured Credit Facilities”) with Deutsche Bank Trust Company Americas, as administrative agent, and affiliates of Barclays Capital Inc., Deutsche Bank Securities Inc., Macquarie Capital (USA) Inc., UBS Securities LLC and Credit Suisse Securities (USA) LLC, and other lenders from time to time party thereto and effected a re-pricing transactions in February 2014 and 2013, respectively that reduced the floor by 50 basis points and the margin by 100 basis points, respectively. The Company paid down $33.0 and $18.0, respectively during the years ended December 31, 2014 and 2013 related to the term loan. See Note 13, Long-Term Debt, to our consolidated financial statements for additional details regarding our Senior Secured Credit Facilities. The Term B Loan facility matures in October 2019 and the Revolving Credit Facility matures in October 2017.
Borrowings under our Senior Secured Credit Facilities can be used for working capital, capital expenditures, acquisitions and other general corporate purposes. As of December 31, 2014 and 2013, we had $0.0 and $8.0 in borrowings outstanding under our $300.0 revolving credit facility. The agreement governing our credit facilities requires us to comply with certain financial and other covenants, including a total leverage ratio for the benefit of the lenders under the revolving credit facility that is applicable when there are outstanding loans or letters of credit under the revolving credit facility. Compliance with these covenants is a condition to any incremental borrowings under our Senior Secured Credit Facilities and failure to meet these covenants would enable the lenders to require repayment of any outstanding loans (which would adversely affect our liquidity). As of December 31, 2014, we were in compliance with the covenants under the Senior Secured Credit Facilities. Our ability to maintain compliance with our covenants will be highly dependent on our results of operations and, to the extent necessary, our ability to implement remedial measures such as reductions in operating costs.
The Company is subject to the following total leverage ratio covenant for the applicable periods as indicated.
 

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Fiscal Quarter Ending
Maximum Total Leverage Ratio
 
 
 
December 31, 2013 through December 30, 2014
 
8.00:1.00
December 31, 2014 through December 30, 2015
 
7.50:1.00
December 31, 2015 through December 30, 2016
 
7.00:1.00
December 31, 2016 and thereafter
 
6.50:1.00
The actual total leverage ratio at December 31, 2014 and 2013 was 6.12:1.00 and 6.26:1.00, respectively.
8 1/4% Senior Notes due 2020
On October 9, 2012, the Company issued $550 aggregate principal amount of 8 1/4% Senior Notes due 2020 pursuant to the Indenture between the Company and Wells Fargo Bank, National Association, as trustee. In December 2013, we exchanged all of the outstanding notes for registered notes with identical terms. The Senior Notes mature in October 2020. As of December 31, 2014, we were in compliance with the covenants under the Indenture. See Note 13, Long-Term Debt, to our consolidated financial statements for additional details regarding the unregistered notes.
Off-Balance Sheet Arrangements
As of December 31, 2014, we had no off-balance sheet debt or similar obligations, other than financial assurance instruments and operating leases, which are not classified as debt. We do not guarantee any third-party debt.
Seasonality
We expect our operating results to vary seasonally, with revenues typically lowest in the first quarter, higher in the second and third quarters and lower in the fourth quarter than in the second and third quarters. This seasonality reflects the lower volume of solid waste generated during the late fall, winter and early spring because of decreased construction and demolition activities during winter months in the U.S. In addition, some of our operating costs may be higher in the winter months. Adverse winter weather conditions or extended periods of inclement weather slow waste collection activities, resulting in higher labor and operational costs. Greater precipitation in the winter increases the weight of collected municipal solid waste, resulting in higher third party disposal costs, which are calculated on a per ton basis and leachate disposal treatments costs at our landfills.
Liquidity Impacts of Income Tax Items
Uncertain Tax Positions—We have liabilities associated with unrecognized tax benefits and related interest. These liabilities are primarily included as a component of long-term “Other liabilities” in our Consolidated Balance Sheet because the Company generally does not anticipate that settlement of the liabilities will require payment of cash within the next 12 months. We are not able to reasonably estimate when we would make any cash payments required to settle these liabilities, but we do not believe that the ultimate settlement of our obligations will materially affect our liquidity.
Financial Assurance
We must provide financial assurance to governmental agencies and a variety of other entities under applicable environmental regulations relating to our landfill operations for capping, closure and post-closure costs, and related to our performance under certain collection, landfill and transfer station contracts. We satisfy these financial assurance requirements by providing surety bonds, letters of credit or trust deposits, which are included in restricted cash and marketable securities. The amount of the financial assurance requirements for capping, closure and post-closure costs is determined by applicable state environmental regulations. The financial assurance requirements for capping, closure and post-closure costs may be associated with a portion of the landfill or the entire landfill. Generally, states require a third-party engineering specialist to determine the estimated capping, closure and post-closure costs that are used to determine the required amount of financial assurance for a landfill. The amount of financial assurance required can, and generally will, differ from the obligation determined and recorded under U.S. GAAP. The amount of the financial assurance requirements related to contract performance varies by contract. Additionally, we must provide financial assurance for our insurance program and collateral for certain performance obligations. We do not expect a material increase in financial assurance requirements in the foreseeable future, although the mix of financial assurance instruments may change.

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These financial instruments are issued in the normal course of business and are not considered company indebtedness. Because we currently have no liability for these financial assurance instruments, they are not reflected in our consolidated balance sheets. However, we record capping, closure and post-closure liabilities and self-insurance liabilities as they are incurred. The underlying obligations of the financial assurance instruments, in excess of those already reflected in our consolidated balance sheets, would be recorded if it is probable that we would be unable to fulfill our related obligations. We do not expect this to occur.
Contractual Commitments
We have various contractual obligations in the normal course of our operations and financing activities. The following table summarizes our contractual cash obligations as of December 31, 2014 (in millions):
 
 
Operating
Leases
 
Final Capping,
Closure and
Post-Closure
(a)
 
Debt
Payments
(b)
 
Unconditional
Purchase
Commitments
(c)
 
Total
2015
$
5.8

 
$
33.1

 
$
138.1

 
$
5.1

 
$
182.1

2016
5.2

 
26.6

 
133.5

 
4.7

 
$
170.0

2017
4.3

 
15.1

 
132.5

 
3.5

 
$
155.4

2018
3.9

 
21.6

 
131.0

 
3.6

 
$
160.1

2019
3.4

 
19.7

 
1,773.7

 
3.6

 
$
1,800.4

Thereafter
20.6

 
226.0

 
604.2

 
47.7

 
$
898.5

Total
$
43.2

 
$
342.1

 
$
2,913.0

 
$
68.2

 
$
3,366.5

 
(a)
The estimated remaining final capping, closure and post-closure and remediation expenditures presented above are not inflated or discounted and reflect the estimated future payments for liabilities incurred and recorded as of December 31, 2014.
(b)
Debt payments include both principal and interest payments on debt and capital lease obligations. Interest on variable rate debt was calculated at 3.75%, which is the LIBOR floor plus applicable spread in effect as of December 31, 2014.
(c)
Unconditional purchase commitments consist primarily of disposal related agreements that include fixed or minimum royalty payments and host agreements.

Critical Accounting Policies and Estimates
General
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. We believe the following accounting policies and estimates are the most critical and could have the most impact on our results of operations. For a discussion of these and other accounting policies, see the notes to the Consolidated Financial Statements included elsewhere in this Form 10-K.
We have noted examples of the residual accounting and business risks inherent in the accounting for these areas. Residual accounting and business risks are defined as the inherent risks that we face after the application of our policies and processes that are generally outside of our control or ability to forecast.
Revenue Recognition
Revenues are generally recognized as the services are provided. Revenue is recognized as waste is collected, as tons are received at the landfill or transfer stations, as recycled commodities are delivered to a customer or as services are rendered to customers. Certain customers are billed in advance and, accordingly, recognition of the related revenues is deferred until the services are provided. Revenues are reported net of state landfill taxes. No single customer individually accounted for more than 5% of our consolidated revenue for the year ending December 31, 2014.
Landfill Accounting

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Costs Basis of Landfill Assets—Landfills are typically developed in a series of cells, each of which is constructed, filled and capped in sequence over the operating life of the landfill. When the final cell is filled and the operating life of the landfill is completed, the cell must be capped and then closed and post-closure care and monitoring activities begin. Capitalized landfill costs include expenditures for land (which includes the land of the landfill footprint and landfill buffer property and setbacks) and related airspace associated with the permitting, development and construction of new landfills, expansions at existing landfills, landfill gas systems and landfill cell development. Landfill permitting, development and construction costs represent direct costs related to these activities, including land acquisition, engineering, legal and construction. These costs are deferred until all permits are obtained and operations have commenced at which point they are capitalized and amortized. If necessary permits are not obtained, costs are charged to operations. The cost basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities.
Final Capping, Closure and Post-Closure Costs—The following is a description of our asset retirement activities and related accounting:
Final Capping—Includes installing flexible membrane and geosynthetic clay liners, drainage and compact soil layers, and topsoil, and is constructed over an area of the landfill where total airspace capacity has been consumed and waste disposal operations have ceased. These final capping activities occur in phases as needed throughout the operating life of a landfill as specific areas are filled to capacity and the final elevation for that specific area is reached in accordance with the provisions of the operating permit. Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset. Each final capping event is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and capacity associated with each final capping event.

Closure and post-closure—These activities involve methane gas control, leachate management and groundwater monitoring, surface water monitoring and control, and other operational and maintenance activities that occur after the site ceases to accept waste. The post-closure period generally runs for 30 years after final site closure for landfills. Landfill costs related to closure and post-closure are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset. Obligations are recorded over the life of the landfill based on estimates of the discounted cash flows associated with performing closing and post-closure activities.
The Company updates annually its estimates for these obligations considering the respective State regulatory requirements, input from our internal engineers, operations, and accounting personnel and external consulting engineers. The closure and post-closure requirements are established under the standards of the EPA’s Subtitle D regulations as implemented and applied on a state-by-state basis. These estimates involve projections of costs that will be incurred as portions of the landfill are closed and during the post-closure monitoring period.
Capping, closure and post-closure costs are estimated assuming such costs would be incurred by a third party contractor in present day dollars and are inflated by the 20-year average change in the historical Consumer Price Index (consistent historical rate which agrees to historical CPI per government website of 2.50% from 1991 to 2014) to the time periods within which it is estimated the capping, closure and post-closure costs will be expended. We discount these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any change that results in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted-average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The range of rates utilized within the calculation of our asset retirement obligations at December 31, 2014 is between 6.4% and 10.5%.
The Company records the estimated fair value of the final capping, closure and post-closure liabilities for its landfills based on the capacity consumed in the current period. The fair value of the final capping obligations is developed based on the Company’s estimates of the airspace consumed to date for each final capping event and the expected timing of each final capping event. The fair value of closure and post-closure obligations is developed based on the Company’s estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure and post-closure activities could result in a material change in these liabilities, related assets and results of operations. The Company assesses the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.
Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset; and (ii) a change in liability and asset

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amounts to be recorded prospectively over either the remaining capacity of the related discrete final capping event or the remaining permitted and expansion airspace (as defined below) of the landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the final capping event or the remaining permitted and expansion airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.
Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest method and is recorded in operating expenses in the consolidated statements of operations.
Amortization of Landfill Assets—The amortizable basis of a landfill includes (i) amounts previously expended and capitalized; (ii) capitalized and projected landfill final capping, closure and post-closure costs;
(iii) projections of future acquisition and development costs required to develop the landfill site to its remaining permitted and expansion capacity; and (iv) land underlying both the footprint of the landfill and the surrounding required setbacks and buffer land.
Amortization is recorded on a units-of-consumption basis, applying expense as a rate per ton. The rate per ton is calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to fill the corresponding asset’s airspace. For landfills that we do not own, but operate through operating or lease arrangements, the rate per ton is calculated based on expected capacity to be utilized over the lesser of the contractual term of the underlying agreement or the life of the landfill.
Landfill site costs are depleted to zero upon final closure of a landfill. The Company develops our estimates of the obligations using input from our operations personnel, engineers and accountants and the obligations are based upon interpretation of current requirements and proposed regulatory changes and intended to approximate fair value. The estimate of fair value is based upon present value techniques using historical experience and, where available, quoted or actual market prices paid for similar work.
The determination of airspace usage and remaining airspace is an essential component in the calculation of landfill asset depletion. This estimation is performed by conducting periodic topographic surveys, using aerial survey techniques, of the Company’s landfill facilities to determine remaining airspace in each landfill. The surveys are reviewed by the Company’s external consulting engineers, internal operating staff, and its management, financial and accounting staff.
Remaining airspace includes additional “deemed permitted” or unpermitted expansion airspace if the following criteria are met:
 
(1)
The Company must either own the property for the expansion or have a legal right to use or obtain property to be included in the expansion plan;
(2)
Conceptual design of the expansion must have been completed;
(3)
Personnel are actively working to obtain land use and local and state approvals for an expansion of an existing landfill and the application for expansion must reasonably be expected to be received within the normal application and processing time periods for approvals in the jurisdiction in which the landfill is located;
(4)
There are no known significant technical, community, business, or political restrictions or similar issues that would likely impair the success of the expansion;
(5)
Financial analysis has been completed and the results demonstrate that the expansion has a positive financial and operational impact.
Senior management must have reviewed and approved all of the above. Of our 42 landfills, nine included deemed permitted airspace at December 31, 2014.
Upon successful meeting of the preceding criteria, the costs associated with developing, constructing, closing and monitoring the total additional future capacity are considered in the calculation of the amortization and closure and post-closure rates.
Once expansion airspace meets these criteria for inclusion in the Company’s calculation of total available disposal capacity, management continuously monitors each site’s progress in obtaining the expansion permit. If at any point it is determined that an expansion area no longer meets the required criteria, the probable expansion airspace is removed from the landfill’s total available capacity, and the rates used at the landfill to amortize costs to acquire, construct, close and monitor the site during the

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post-closure period are adjusted prospectively. In addition, any amounts related to the probable expansion are charged to expense in the period in which it is determined that the criteria are no longer met.

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 the measured density obtained from previous annual surveys and is then adjusted to account for future settlement. The amount of settlement that is forecasted will take into account several site-specific factors including: current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate and operating practices. In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.
After determining the costs and 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 the landfill by dividing the costs by the corresponding number of tons. We calculate per ton amortization rates for each landfill 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. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that the Company’s estimates or assumptions could ultimately be significantly different from actual results. In some cases the Company may be unsuccessful in obtaining an expansion permit or the Company may determine that an expansion permit that the Company previously thought was probable has become unlikely. To the extent that such estimates, or the assumptions used to make those estimates, prove to be significantly different than actual results, or the belief that the Company will receive an expansion permit changes adversely in a significant manner, the costs of the landfill, including the costs incurred in the pursuit of the expansion, may be subject to impairment testing and lower profitability may be experienced due to higher amortization rates, higher capping, closure and post-closure rates, and higher expenses or asset impairments related to the removal of previously included expansion airspace.
The assessment of impairment indicators and the recoverability of our capitalized costs associated with landfills and related expansion projects require significant judgment due to the unique nature of the waste industry, the highly regulated permitting process and the estimates involved. During the review of a landfill expansion application, a regulator may initially deny the expansion application although the permit is ultimately granted. In addition, management may periodically divert waste from one landfill to another to conserve remaining permitted landfill airspace, or a landfill may be required to cease accepting waste, prior to receipt of the expansion permit. However, such events occur in the ordinary course of business in the waste industry and do not necessarily result in an impairment of our landfill assets because, after consideration of all facts, such events may not affect our belief that we will ultimately obtain the expansion permit. As a result, our tests of recoverability, which generally make use of a cash flow estimation approach, may indicate that an impairment loss should be recorded. No landfill impairments were recorded for the years ended December 31, 2014 and 2013, respectively. At December 31, 2012, one of our landfill sites was deemed to be impaired due to permitting issues and we recorded an impairment charge of approximately $43.7 for the year ended December 31, 2012 in the East region. We performed tests of recoverability for this landfill and the carrying value exceeded the undiscounted cash flows.
Self-Insurance Reserves and Related Costs
Our insurance programs for workers’ compensation, general liability, vehicle liability and employee-related health care benefits are effectively self-insured. Accruals for self-insurance reserves are based on claims filed and estimates of claims incurred but not reported. We maintain high deductibles for commercial general liability, vehicle liability and workers’ compensation coverage at the $0.5, $1.0 and $0.75, respectively as of December 31, 2014.

Accruals for self-insurance reserves are based on claims filed and estimate of claims incurred but not reported and are recorded gross of expected recoveries. The accruals for these liabilities could be revised if future occurrences of loss development differ significant from our assumptions.
Loss Contingencies
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

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based on an analysis of possible outcomes under various strategies. We record and disclose loss contingencies pursuant to the applicable accounting guidance for such matter.
We record losses related to contingencies in cost of operations or selling, general and administrative expenses, depending on the nature of the underlying transaction leading to the loss contingency.
Asset Impairment
We monitor the carrying value of our long-lived assets for potential impairment and test the recoverability of such assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. These events or changes in circumstances, including management decisions pertaining to such assets, are referred to as impairment indicators. Typical indicators that an asset may be impaired include (i) a significant adverse change in legal factors in the business climate, (ii) an adverse action or assessment by a regulator, and (iii) a significant adverse change in the extent or manner in which a long-lived asset is being utilized or in its physical condition. 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. If cash flows cannot be separately and independently identified for a single asset, we will determine whether an impairment has occurred for the asset group for which we can identify the projected cash flows. 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. Fair value is generally determined by considering: (i) an internally developed discounted projected cash flow analysis of the asset or asset group; (ii) third-party valuations; and/or (iii) information available regarding the current market for similar assets. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying value exceeds the fair value of the asset.
Goodwill
Goodwill is the excess of the Company’s purchase price over the fair value of the net identifiable assets of acquired businesses. The Company does not amortize goodwill. Goodwill is subject to at least an annual assessment for impairment by evaluating quantitative factors.
The Company performs a quantitative assessment or two-step impairment test to determine whether a goodwill impairment exists at a reporting unit. The reporting units are equivalent to the Company’s segments and when an individual business within an integrated operating segment is divested, goodwill is allocated to that business based on its fair value relative to the fair value of its operating segment. The Company compares the fair value with its carrying amount to determine if there is potential impairment of goodwill. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment. Fair value is estimated using an income approach based on forecasted cash flows. Fair value computed via this method is arrived at using a number of factors, including projected future operating results, economic projections, anticipated future cash flows and comparable marketplace data. There are inherent uncertainties related to these factors and to our judgment in applying them to this analysis. However, the Company believes that this method provides a reasonable approach to estimating the fair value of its reporting units.

The Company performs its annual assessment as of December 31 of each year. The impairment test indicated the fair value of each reporting unit exceeded the carrying value. If we do not achieve our anticipated disposal volumes, our collection or disposal rates decline, our costs or capital expenditures exceed our forecasts, costs of capital increase, or we do not receive landfill expansions, the estimated fair value could decrease and potentially result in an impairment charge. Refer to Note 4 for information regarding impairment charges recorded in connection with discontinued operations. The Company recorded no goodwill impairment charges for the years ended December 31, 2014, 2013 and 2012, respectively in connection with the assessment.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between the financial reporting and income tax basis of assets (other than non-deductible goodwill) and liabilities. Deferred tax assets and liabilities are measured using the income tax rate in effect during the year in which the differences are expected to reverse.
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 our provision for income taxes.

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Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to U.S. federal income taxes and numerous state jurisdictions. Significant judgments and estimates are required in determining the combined income tax expense.
Regarding the accounting for uncertainty in income taxes recognized in the financial statements, we record a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in our consolidated statements of income. Accrued interest and penalties are included within other accrued liabilities and deferred income taxes and other long-term tax liabilities in our consolidated balance sheets. Refer to Note 18 "Income Taxes" for details regarding adjustments to our valuation allowance in fiscal 2014.
Recently Issued and Proposed Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued authoritative guidance regarding revenue recognition from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The guidance is effective for the interim and annual periods beginning or or after December 15, 2016. The guidance permits the use of either a retrospective or cumulative effect transition method. The Company has not yet selected a transition method is are currently evaluating the impact of the amended guidance on its consolidated financial position, results of operations and related disclosure.

Furthermore, the FASB issued guidance governing classification of discontinued operations. Upon adoption in 2015, certain future business dispositions may no longer meet the criteria for classification as discontinued operations.

In June 2014, the FASB issued guidance that applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. It requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and follows existing accounting guidance for the treatment of performance conditions. The standard will be effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on the Company's financial position or results of operations.


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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes and changes in the prices of fuel and commodities. We employ risk management strategies that may include the use of derivatives, such as interest rate swap agreements and interest rate cap agreements, to manage these exposures. We do not enter into derivatives for trading purposes.
Interest Rate Risk
Our major market risk exposure of our financial instruments is changing interest rates in the United States and fluctuations in LIBOR. The interest rate on borrowings under our Senior Secured Credit Facilities varies depending on prevailing interest rates from time to time. We intend to manage interest rate risk through the use of a combination of fixed and floating rate debt. The carrying value of our variable rate debt approximates fair value because interest rates are variable and, accordingly, approximates current market rates for instruments with similar risk and maturities. The fair value of our debt is determined as of the balance sheet date and is subject to change. The Term Loan B Facility and the Revolving Credit Facility each bear interest at a base or LIBOR rate plus an applicable margin. The base rate is defined as the greater of the prime rate, federal funds rate plus 50 basis points or LIBOR subject to a 0.75% floor. A 100 basis point change in the Term Loan B Facility interest rate would result in a $17.5 change in interest expense.
We use interest rate caps to manage a portion of our debt obligations at a fixed interest rate, which are currently treated as effective hedges for accounting purposes.
Fuel Price Risk
Fuel costs represent a significant operating expense. When economically practical, we may enter into new or renew contracts, or engage in other strategies to mitigate market risk. Where appropriate, we have implemented a fuel fee that is designed to recover a portion of our direct and indirect increases in our fuel costs. While we charge fuel fees to many of our customers, we are unable to charge fuel fees to all customers. Consequently, an increase in fuel costs results in (1) an increase in our cost of operations, (2) a smaller increase in our revenue (from the fuel fee) and (3) a decrease in our operating margin percentage, because the increase in revenue is more than offset by the increase in cost. Conversely, a decrease in fuel costs results in (1) a decrease in our cost of operations, (2) a smaller decrease in our revenue and (3) an increase in our operating margin percentage.

To manage our exposure to volatility in fuel prices, the company enters into fuel derivative contracts as a risk management tool to mitigate the potential impact of certain market risks associated with fluctuations in fuel prices; however, because energy prices can fluctuate significantly in a relatively short amount of time, the Company must also continually monitor and adjust its risk management strategies to address not only fuel price increases, but also fuel price volatility. As evidenced by the extreme decline in diesel fuel prices during the fourth quarter of 2014, diesel fuel prices are subject to significant volatility based on a variety of factors. In addition, the cost of these risk management tools generally increases with sustained high potential for volatility in the fuel market. During 2014, we utilized fuel derivative contracts to manage approximately 4.8 gallons of our fuel purchases. For fiscal 2015 and 2016, we utilized fuel derivative contracts to manage 23.8 gallons and 13.4 gallons, respectively. For a summary of our outstanding derivative instruments and changes in fair values as of and for the years ending December 31, 2014 and 2013, respectively, see Note 8, Derivative Instruments and Hedging Activities, to our consolidated financial statements in Item 8 of this Form10-K.
At our current consumption levels, a one-cent per gallon change in the price of diesel fuel changes our direct fuel costs by approximately $0.3 on an annual basis, which would be partially offset by a smaller change in the fuel fees charged to our customers and the impact of changes in fair value of our fuel derivative instruments. Accordingly, a substantial rise or drop in fuel costs could have a material effect on our revenue, cost of operations and operating margin.
Our operations also require the use of certain petrochemical-based products (such as liners at our landfills) whose costs may vary with the price of petrochemicals. An increase in the price of petrochemicals could increase the cost of those products, which would increase our operating and capital costs. We also are susceptible to (1) fuel fees charged by our vendors, and (2) other pricing from our vendors due to their increases in indirect fuel costs.
Commodities Prices
We market recycled products such as cardboard and newspaper from our materials recovery facilities. Market demand for recyclable materials causes volatility in commodity prices. At current volumes and mix of materials, we believe a ten dollar per

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ton change in the price of recyclable materials will change revenue and operating income by approximately $6.0 and $4.8, respectively, on an annual basis.
Inflation and Prevailing Economic Conditions
To date, inflation has not had a significant impact on our operations. Consistent with industry practice, most of our contracts allow us to recover certain costs, including increases in landfill tipping fees and, in some cases, costs. Competitive factors may require us to absorb at least a portion of these cost increases, particularly during periods of high inflation. Our business is located mainly in the Southern, Midwestern and Eastern United States. Therefore, our business, financial condition and results of operations are susceptible to downturns in the general economy in these geographic regions and other factors affecting the regions, such as state regulations and severe weather conditions. We are unable to forecast or determine the timing and/or the future impact of a sustained economic slowdown.


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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
 
 
Page(s)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55–86


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Management Report on Internal Control Over Financial Reporting
    
Management of the Company, including the principal executive and financial officers, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. Our internal controls are designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that:

i. pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;
ii. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and
iii. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management of the Company assessed the effectiveness of our internal control over financial reporting as of December 31, 2014 based on the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2014.


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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
ADS Waste Holdings, Inc.
We have audited the accompanying consolidated balance sheets of ADS Waste Holdings, Inc. and Subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ADS Waste Holdings, Inc. and Subsidiaries at December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Independent certified public accountants
Jacksonville, FL
March 10, 2015


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Consolidated Financial Statements
ADS Waste Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2014 and 2013 
 
(In millions of dollars, except shares)
 
 
2014
 
2013
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
1.0

 
$
12.0

Accounts receivable, net of allowance for doubtful accounts of $5.0 and $8.4, respectively
188.0

 
193.1

Prepaid expenses and other current assets
34.2

 
35.2

Deferred income taxes
14.6

 
7.2

Assets of business held for sale

 
3.1

Total current assets
237.8

 
250.6

Restricted cash
0.2

 
2.4

Other assets, net
101.3

 
121.2

Property and equipment, net
1,663.9

 
1,667.4

Goodwill
1,166.9

 
1,166.4

Other intangible assets, net
379.9

 
418.8

Total assets
$
3,550.0

 
$
3,626.8

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
94.7

 
$
83.5

Accrued expenses
130.7

 
117.8

Deferred revenue
60.0

 
60.3

Current maturities of landfill retirement obligations
29.2

 
28.7

Current maturities of long-term debt
25.3

 
29.1

Liabilities of business held for sale

 
1.7

Total current liabilities
339.9

 
321.1

Other long-term liabilities, less current maturities
61.2

 
48.2

Long-term debt, less current maturities
2,278.2

 
2,302.8

Accrued landfill retirement obligations, less current maturities
171.9

 
155.6

Deferred income taxes
169.9

 
247.6

Total liabilities
3,021.1

 
3,075.3

Commitments and contingencies

 

Stockholders’ equity
 
 
 
Common stock: $.01 par value, 1,000 shares authorized, 1,000 and 1,000 shares issued and outstanding

 

Additional paid-in capital
1,105.0

 
1,109.5

Accumulated other comprehensive income
1.5

 
2.5

Accumulated deficit
(577.6
)
 
(560.5
)
Noncontrolling interests

 

Total stockholders’ equity
528.9

 
551.5

Total liabilities and stockholders’ equity
$
3,550.0

 
$
3,626.8

The accompanying notes are an integral part of these consolidated financial statements.



Table of Contents

ADS Waste Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
 
(In millions of dollars)
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Service revenues
$
1,403.0

 
$
1,319.1

 
$
537.9

Operating costs and expenses
 
 
 
 
 
Operating expenses
896.1

 
832.8

 
336.7

Selling, general and administrative
154.9

 
170.9

 
101.0

Depreciation and amortization
271.4

 
278.9

 
104.1

Acquisition and development costs
0.1

 
1.2

 
1.2

Loss on disposal of assets
1.2

 
2.6

 
2.1

Asset impairment, including goodwill
5.3

 
0.6

 
43.7

Restructuring charges
4.6

 
10.0

 
9.9

Total operating costs and expenses
1,333.6

 
1,297.0

 
598.7

Operating income (loss)
69.4

 
22.1

 
(60.8
)
Other income (expense)
 
 
 
 
 
Interest expense
(141.5
)
 
(163.1
)
 
(49.4
)
Early extinguishment of debt

 

 
(9.4
)
Other, net
(25.9
)
 
0.3

 
1.3

Total other expense
(167.4
)
 
(162.8
)
 
(57.5
)
Loss from continuing operations before income taxes
(98.0
)
 
(140.7
)
 
(118.3
)
Income tax benefit
(80.6
)
 
(45.4
)
 
(13.5
)
Loss from continuing operations
(17.4
)
 
(95.3
)
 
(104.8
)
Discontinued operations
 
 
 
 
 
Loss from discontinued operations before income tax
(0.7
)
 
(29.6
)
 
(93.8
)
Income tax benefit
(1.0
)
 
(7.1
)
 
(4.6
)
Discontinued operations, net
0.3

 
(22.5
)
 
(89.2
)
Net loss
(17.1
)
 
(117.8
)
 
(194.0
)
Less: Net loss attributable to noncontrolling interests

 

 
(1.4
)
Net loss attributable to ADS Waste Holdings, Inc.
$
(17.1
)
 
$
(117.8
)
 
$
(192.6
)


















The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

ADS Waste Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
 
 (In millions of dollars)
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Net loss
$
(17.1
)
 
$
(117.8
)
 
$
(194.0
)
Other comprehensive (loss) income, net of tax
Market value adjustments for hedges
(1.0
)
 
4.7

 
1.0

Other comprehensive (loss) income
(1.0
)
 
4.7

 
1.0

Less: Net loss attributable to noncontrolling interest

 

 
(1.4
)
Comprehensive loss attributable to ADS Waste Holdings, Inc.
$
(18.1
)
 
$
(113.1
)
 
$
(191.6
)











































The accompanying notes are an integral part of these consolidated financial statements.

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ADS Waste Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
 
(In millions of dollars, except shares)
 
 
Common Stock
 
Additional
Paid-In
 
Officer
Promissory
 
Accumulated
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling
 
Total
Stockholders’
 
Shares
 
Amount
 
Capital
 
Notes
 
Deficit
 
(Loss)
 
Interests
 
Equity
Balance at December 31, 2011
1,000

 

 
946.4

 
(30.4
)
 
(195.4
)
 
(3.2
)
 
3.9

 
721.3

Net loss