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

Company Overview

Founded in 1975 with a single truck, Casella Waste Systems, Inc. is a vertically-integrated solid waste, recycling, and resource management services company. We provide resource management expertise and services to residential, commercial, municipal and industrial customers, primarily in the areas of solid waste collection, transfer, disposal, recycling and organics services. We operate in six states- Vermont, New Hampshire, New York, Massachusetts, Maine and Pennsylvania, with our headquarters being located in Rutland, Vermont. We manage our solid waste operations on a geographic basis through two regional operating segments, the Eastern and Western regions, each of which includes a full range of solid waste services, and our larger-scale recycling operations and commodity brokerage operations through our Recycling segment. Ancillary operations, major customer accounts, discontinued operations and earnings from equity method investees are included in our Other segment.

As of May 31, 2012, we owned and/or operated 32 solid waste collection operations, 31 transfer stations, 17 recycling facilities, nine Subtitle D landfills, four landfill gas-to-energy facilities, one landfill permitted to accept C&D materials, and one waste-to-energy facility. We also hold 50% membership interests in GreenFiber, a joint venture that manufactures markets and sells cellulose insulation made from recycled fiber, and Tompkins, a joint venture that operates a MRF in Tompkins County, New York and processes and sells commodities delivered to the facility, a 51% membership interest in CARES, a joint venture that develops, owns and operates water and leachate treatment projects for the natural gas drilling industry in Pennsylvania and New York, a 19.9%

ownership interest in Evergreen, a surety company which provides surety bonds to secure contractual performance for municipal solid waste collection contracts and landfill closure and post-closure obligations, an 11.9% membership interest in AGreen, a joint venture that brings advanced nutrient management, renewable energy and water technologies to small and medium sized farms, a 6.2% ownership interest RecycleRewards, a company that markets an incentive based recycling service, and a 6.3% ownership interest in GreenerU, a company that delivers energy and sustainability solutions to the college, university and preparatory school market in order to reduce their energy costs and carbon emissions through the formulation of programs and policies and the running of renewable energy projects.

Acquisitions and Divestitures

Acquisitions

There are more than 250 potential acquisition targets within our core service footprint. Beginning in fiscal year 2012, we put in place a dedicated business development team that identifies acquisition candidates, categorizes the opportunity by strategic fit and perceived level of financial accretion, establishes contact with the appropriate decision maker and gathers further information on the acquisition candidate.

We have in the past, and we may in the future, make acquisitions in order to acquire or develop additional disposal capacity. These acquisitions may include "tuck-in" acquisitions within our existing markets, assets that are adjacent to or outside of our existing markets, or larger, more strategic acquisitions. In addition, from time to time, we may acquire businesses that are complementary to our core business strategy. We have had some success in closing smaller tuck-in acquisitions, but face considerable competition for the larger and more meaningful targets. Our limited access to and weighted average cost of capital puts us at a disadvantage, but our strong relationships and reputation in the New England area help to offset these factors.

In fiscal year 2012, we acquired five solid waste hauling operations. We also completed the acquisition of the McKean County landfill business in Pennsylvania by acquiring additional equipment not included in the original transaction. These entities and assets were acquired for total consideration of $2.2 million, including $2.1 million in cash and $0.1 million in holdbacks to sellers.

In fiscal year 2011, we acquired two solid waste hauling operations for $1.1 million in cash and $0.3 million in notes payable and the McKean County landfill business in Pennsylvania in exchange for $0.7 million in cash and the assumption of $1.4 million in liabilities. We acquired the McKean County landfill business out of bankruptcy proceedings and recognized a bargain purchase gain of $3.0 million based on the amount by which the fair value of assets acquired exceeded the purchase price consideration.

In fiscal year 2010, we acquired two solid waste hauling operations for total consideration of $1.6 million, including $0.9 million in cash and $0.6 million in notes payable to the seller and liabilities assumed.

Divestitures

From time to time in the future, we may sell or divest certain other components of our business. These divestitures may be undertaken for a number of reasons, including to generate proceeds to pay down debt, or as a result of a determination that the specified asset will provide inadequate returns to us, or that the asset no longer serves a strategic purpose in connection with our business or if we determine the asset may be more valuable to a third party. We will continue to look to divest certain activities that do not fit into our long term strategy that no longer enhance or complement our core business if the right opportunity presents itself.

In fiscal year 2012, we entered into negotiations regarding the sale of Maine Energy. Based on proposed purchase consideration, we recorded a $40.7 million impairment charge to the asset group within the Eastern region segment. The impairment was measured based on the asset group's highest and best use under the market approach, utilizing the discounted cash flows associated with the purchase consideration, adjusted for costs to demolish the facility. We used a discount rate of 3.5%, which approximates the buyers borrowing rate.

In fiscal year 2011, we completed the divestiture of our non-integrated recycling assets and select intellectual property assets for $134.2 million in gross proceeds and the sale of the assets of our Trilogy Glass business for cash proceeds of $1.8 million. These transactions resulted in gain (loss) on disposal of discontinued operations (net of tax) of $43.7 million and ($0.1) million, respectively.

The divestiture of our non-integrated recycling assets and select intellectual property assets, included an estimated $3.8 million working capital and other purchase price adjustment, which was subject to further adjustment, as defined in the purchase and sale agreement. The final working capital adjustment, along with additional legal expenses related to the transaction, of $0.6 million, and an additional working capital adjustment of $0.1 million, which related to our subsequent collection of receivable balances that were released to us for collection by the purchaser, were recorded as gain on disposal of discontinued operations (net of tax) in fiscal year 2012.

In fiscal year 2010, we completed the divestiture of our Great Northern Recycling Canadian operation for a settlement amount of $0.4 million in cash and our domestic brokerage operations for a settlement amount of $1.4 million in cash. This resulted in a gain on disposal of discontinued operations (net of tax) of $1.1 million in fiscal year 2010.

In addition, in the third quarter of fiscal year 2010, the contract with our Cape May, New Jersey recycling facility operation expired. The operating results of these operations, including those related to prior years, have been reclassified from continuing to discontinued operations in the accompanying consolidated financial statements. Revenues and (loss) income before income taxes attributable to discontinued operations for fiscal years 2011 and 2010 are as follows (in millions):

                                      Fiscal Year Ended
                                          April 30,
                                       2011        2010
Revenues                            $     62.5    $  66.2
(Loss) income before income taxes   $     (2.3 )  $   1.9

In fiscal year 2011, we also completed the sale of certain assets in Southeastern Massachusetts for a total consideration of $7.8 million, with cash proceeds of $7.5 million. We recorded a gain on sale of assets of $3.5 million.

Results of Operations

The following table summarizes our revenues and cost and expenses from continuing operations for the fiscal years ended April 30, 2012, 2011 and 2010 (in millions and as a percentage of revenue):

                                          Fiscal Year Ended April 30,
                                     % of                  % of                  % of
                           2012     Revenue      2011     Revenue      2010     Revenue

Revenues                 $  480.8     100.0 %  $  466.1     100.0 %  $  457.6     100.0 %

Operating expenses:
Cost of operations          330.7      68.8 %     317.5      68.1 %     303.4      66.3 %
General and
administration               60.8      12.6 %      64.0      13.7 %      57.5      12.6 %
Depreciation and
amortization                 58.6      12.2 %      58.3      12.5 %      63.6      13.9 %
Asset impairment
charge                       40.7       8.5 %       3.7       0.8 %         -       0.0 %
Legal settlement              1.4       0.3 %         -       0.0 %         -       0.0 %
Development project
charge                        0.1       0.0 %         -       0.0 %         -       0.0 %
Environmental
remediation charge              -       0.0 %       0.5       0.1 %       0.3       0.1 %
Bargain purchase gain           -       0.0 %      (3.0 )    -0.6 %         -       0.0 %
Gain on sale of assets          -       0.0 %      (3.5 )    -0.8 %         -       0.0 %
Operating (loss)
income                      (11.5 )    -2.4 %      28.6       6.1 %      32.8       7.2 %
Other
expense/(income), net:
Interest expense, net        45.5       9.5 %      45.9       9.8 %      44.3       9.7 %
Loss from equity
method investments           10.0       2.1 %       4.1       0.9 %       2.7       0.6 %
Impairment of equity
method investment            10.7       2.2 %         -       0.0 %         -       0.0 %
Loss on debt
refinancing                   0.3       0.1 %       7.4       1.6 %       0.5       0.1 %
Other income                 (0.9 )    -0.2 %      (0.9 )    -0.2 %      (0.9 )    -0.2 %
Provision (benefit)
for income taxes              1.2       0.2 %     (24.2 )    -5.2 %       2.2       0.5 %
Loss from continuing
operations               $  (78.3 )   -16.3 %  $   (3.7 )    -0.8 %  $  (16.0 )    -3.5 %

Revenues

We manage our solid waste operations, which include a full range of solid waste services, on a geographic basis through two regional operating segments, which we designate as the Eastern and Western regions. Revenues in our Eastern and Western regions consist primarily of fees charged to customers for solid waste disposal and collection, landfill, landfill gas-to-energy, waste-to-energy, transfer, organics and recycling services. We derive a substantial portion of our collection revenues from commercial, industrial and municipal services that are generally performed under service agreements or pursuant to contracts with municipalities. The majority of our residential collection services are performed on a subscription basis with individual households. Landfill, waste-to-energy facility and transfer customers are charged a tipping fee on a per ton basis for disposing of their solid waste at our disposal facilities and transfer stations. We also generate and sell electricity under a contract at our waste-to-energy facility and at certain of our landfill facilities. In addition, revenues from our Recycling segment consist of revenues from the sale of recyclable commodities and operations and maintenance contracts of recycling facilities for municipal customers. Revenues from our Other segment are made up of ancillary revenues including major customer accounts.

Our revenues are shown net of inter-company eliminations. We typically establish our inter-company transfer pricing based upon prevailing market rates. The table below shows, for the periods indicated, the percentages and dollars (in millions) of revenue attributable to services provided.

                                      Fiscal Year Ended April 30,
                               2012              2011              2010
Collection                $ 205.3    42.7 % $ 199.9    42.9 % $ 204.2    44.6 %
Disposal                    123.6    25.7 %   118.8    25.5 %   119.6    26.1 %
Power generation             11.9     2.4 %    12.9     2.7 %    15.6     3.5 %
Organics and processing      53.8    11.2 %    50.5    10.9 %    44.0     9.6 %
Solid waste operations      394.6    82.0 %   382.1    82.0 %   383.4    83.8 %
Major accounts               38.3     8.0 %    40.4     8.7 %    38.7     8.5 %
Recycling                    47.9    10.0 %    43.6     9.3 %    35.5     7.7 %
Total revenues            $ 480.8   100.0 % $ 466.1   100.0 % $ 457.6   100.0 %

Our revenues increased $14.7 million, or 3.2%, and $8.5 million, or 1.9%, for the fiscal years ended April 30, 2012 and 2011, respectively. The following table provides details associated with the period-to-period change in revenues (dollars in millions) attributable to services provided:

                                Period-to-Period        Period-to-Period
                               Change Fiscal Year      Change Fiscal Year
                                  2012 vs. 2011           2011 vs. 2010
                                              % of                  % of
                                Amount       Growth    Amount      Growth
Solid Waste Operations:
Price                         $       5.1       1.0 % $    0.4          0.1 %
Volume                                3.0       0.7 %     11.6          2.5 %
Commodity price & volume              1.2       0.3 %        -          0.0 %
Acquisitions & divestitures           3.2       0.7 %     (4.5 )       -1.0 %
Closed landfills                        -       0.0 %     (8.8 )       -1.9 %
Total Solid Waste                    12.5       2.7 %     (1.3 )       -0.3 %

Major Accounts                       (2.1 )    -0.4 %      1.7          0.4 %

Recycling Operations:
Commodity price                       4.3       0.9 %      7.9          1.7 %
Commodity volume                        -       0.0 %      0.2          0.1 %
Total Recycling                       4.3       0.9 %      8.1          1.8 %

Total Revenue Growth          $      14.7       3.2 % $    8.5          1.9 %

Solid waste revenues

† The price change component in total solid waste revenues growth for the fiscal year ended April 30, 2012 is primarily the result of $5.1 million from favorable collection pricing, $0.1 million from favorable organics and processing pricing and ($0.1) million from unfavorable disposal pricing. The price change component in total solid waste revenues growth for the fiscal year ended April 30, 2011 is primarily the result of $1.4 million from favorable collection pricing, $0.1 million from favorable organics and processing pricing and ($1.1) million from unfavorable disposal pricing.

† The volume change component in total solid waste revenues growth for the fiscal year ended April 30, 2012 is primarily the result of $3.2 million from disposal volume increases, $0.9 million from organics and processing volume increases and ($1.1) million from collection volume decreases. The volume change component in total solid waste revenues growth for the fiscal year ended April 30, 2011 is primarily the result of $13.3 million from disposal volume increases, $3.6 million from organics and processing volume increases and ($5.3) million from collection volume decreases.

† The commodity price and volume change component in total solid waste revenues growth for the fiscal year ended April 30, 2012 is primarily the result of $2.1 million from favorable commodity pricing and ($0.9) million from commodity volume decreases. The commodity price and volume change component in total solid waste revenues growth for the fiscal year ended April 30, 2011 showed no growth as a result of ($1.1) million from unfavorable commodity pricing and $1.1 million from commodity volume increases.

† The acquisitions and divestitures change component in total solid waste revenues growth for the fiscal year ended April 30, 2012 is primarily the result of $4.5 million from acquisitions and ($1.3) million from divestitures. The acquisitions and divestitures change component in total solid waste revenues growth for the fiscal year ended April 30, 2011 is primarily the result of $1.9 million from acquisitions and ($6.4) million from divestitures.

Major accounts and recycling revenues

† The change in major accounts revenues growth for the fiscal year ended April 30, 2012 is primarily the result of ($2.1) million from volume declines. The change in major accounts revenues for the fiscal year ended April 30, 2011 is the result of $1.8 million from volume increases offset slightly by unfavorable pricing.

† The change in recycling revenues for the fiscal year ended April 30, 2012 and 2011 is primarily the result of favorable commodity prices in the marketplace.

Operating Expenses

Cost of Operations

Cost of operations includes labor, tipping fees paid to third-party disposal facilities, fuel, maintenance and repair of vehicles and equipment, workers' compensation and vehicle insurance, the cost of purchasing materials to be recycled, third-party transportation expense, district and state taxes, host community fees and royalties. Cost of operations also includes accretion expense related to landfill capping, closure and post closure, leachate treatment and disposal costs and depletion of landfill operating lease obligations.

Our cost of operations expense increased $13.2 million, or 4.2%, and $14.1 million, or 4.6%, for the fiscal years ended April 30, 2012 and 2011, respectively. In the fiscal years ended April 30, 2012 and 2011, cost of operations expense increased as a percentage of revenues when compared to the comparable prior fiscal years from 68.1% to 68.8% and from 66.3% to 68.1%.

The change in our cost of operations during the fiscal year ended April 30, 2012 can largely be attributed to the following:

† Direct operational costs. Direct operational costs increased $2.5 million for the fiscal year ended April 30, 2012. The increase in fiscal year ended April 30, 2012 is primarily the result of $1.2 million in increased leachate disposal costs due to higher rainfall amounts at our landfills, $1.0 million in increased other operating costs associated primarily with a commodities marketing agreement, $0.6 million in increased depletion of landfill operating lease obligations and $0.7 million in increased landfill operating costs related primarily to engineering and grounds maintenance costs, offset by a $0.8 million decrease in host and royalty fees.

† Hauling costs. Hauling costs increased $5.6 million for the fiscal year ended April 30, 2012. The increase in fiscal year ended April 30, 2012 is primarily the result of $2.7 million in increased transportation costs associated with higher organics and processing volumes and $3.0 million in increased transportation costs associated with higher disposal volumes related to landfill brokerage services, transfer station activity and transportation services to third-party customers.

† Fuel costs. Fuel costs increased $3.7 million for the fiscal year ended April 30, 2012 due primarily to higher average fuel prices for the fiscal year ended April 30, 2012.

† Purchased materials. Direct costs related to purchased materials increased $1.5 million for the fiscal year ended April 30, 2012. The increase in fiscal year ended April 30, 2012 is primarily the result of higher recycling commodity prices for much of fiscal year 2012 and increased costs of purchased scrap metals.

The change in our cost of operations during the fiscal year ended April 30, 2011 can largely be attributed to the following:

† Purchased materials. Direct costs related to purchased materials increased $4.5 million for the fiscal year ended April 30, 2011, primarily the result of higher recycling commodity prices.

† Direct operational costs. Direct operational costs increased $4.2 million for the fiscal year ended April 30, 2011. The increase in fiscal year ended April 30, 2011 is primarily the result of $0.8 million in increased leachate disposal costs, $1.0 million in increased depletion of landfill operating lease obligations, $0.4 million in increased landfill operating costs, $0.5 million in host and royalty fees, as well as a $0.9 million lower gain on sale of equipment. Cost increases were partially offset by $0.2 million in decreased auto insurance costs and $0.2 million in decreased registration and permitting costs.

† Fuel costs. Fuel costs increased $3.0 million for the fiscal year ended April 30, 2011. Average fuel prices for the fiscal year ended April 30, 2011 continued to increase compared to the prior fiscal year.

† Hauling costs. Hauling costs increased $1.4 million for the fiscal years ended April 30, 2011. The increase in fiscal year ended April 30, 2011 is primarily the result of increased transportation costs associated with higher solid waste volumes.

† Vehicle maintenance costs. Vehicle maintenance costs increased $1.0 million for the fiscal year ended April 30, 2011. The increase in fiscal year ended April 30, 2011is primarily the result of fleet maintenance associated with higher volumes and higher costs for maintenance parts.

General and Administration

General and administration expenses include management, clerical and administrative compensation and overhead, professional services and costs associated with marketing, sales force and community relations efforts.

Our general and administration expense decreased $3.2 million, or 5.0%, and increased $6.5 million, or 11.3%, for the fiscal years ended April 30, 2012 and 2011, respectively. In the fiscal years ended April 30, 2012 and 2011, general and administration expenses fluctuated as a percentage of revenues when compared to the comparable prior fiscal years from 13.7% to 12.6% and from 12.6% to 13.7%.

The change in our general and administration expense during the fiscal year ended April 30, 2012 can largely be attributed to the following:

† Labor and related benefits. Labor and related benefit costs decreased $3.0 million for the fiscal year ended April 31, 2012. The decrease in fiscal year ended April 30, 2012 is primarily the result of the $3.5 million one-time discretionary bonus in the fourth quarter of fiscal year 2011.

The change in our general and administration expense during the fiscal year ended April 30, 2011 can largely be attributed to the following:

† Labor and related benefits. Labor and related benefit costs increased $4.4 million for the fiscal year ended April 31, 2011. The increase in fiscal year ended April 30, 2011 is primarily the result of $1.1 million in higher salaries and the granting of a $3.5 million discretionary bonus in the fourth quarter of fiscal year 2011. Cost increases were partially offset by $0.4 million in reduced equity compensation costs associated primarily with a reduction to our expected performance attainment levels related to certain performance based restricted stock units in fiscal year 2011.

† Legal and consulting costs. Legal and consulting costs increased $0.9 million for the fiscal year ended April 30, 2011 due to various ongoing legal matters.

† Advertising costs. Advertising costs increased $0.7 million for the fiscal year ended April 30, 2011 associated with new business development.

† Bad debt expense. Bad debt expense decreased $0.8 million for the fiscal year ended April 30, 2011. The fluctuation in bad debt expense is due to improved collection efforts.

Depreciation and Amortization

Depreciation and amortization expense includes depreciation of fixed assets over the estimated useful life of the assets using the straight-line method, amortization of landfill airspace assets under the units-of-consumption method, and the amortization of

intangible assets (other than goodwill) with a definite useful life using the straight-line method over the definitive terms of the related agreements. We amortize landfill retirement assets through a charge to cost of operations using a straight-line rate per ton as landfill airspace is utilized. The amount of landfill amortization expense related to airspace consumption can vary materially from landfill to landfill depending upon the purchase price and landfill site and cell development costs. We amortize or depreciate all fixed and intangible assets, other than goodwill, to a zero net book value, and do not apply a salvage value to any fixed assets.

We capitalize certain direct landfill development costs, such as engineering, permitting, legal, construction and other costs associated directly with the expansion of existing landfills. Additionally, we also capitalize certain third party expenditures related to development projects and pending acquisitions, such as legal and engineering costs. We routinely evaluate all such capitalized costs, and expense those costs related to projects not likely to be successful. Internal and indirect landfill development and acquisition costs, such as executive and corporate overhead, public relations and other corporate services, are expensed as incurred.

We have material financial obligations relating to capping, closure and post-closure costs of our existing landfills and disposal facilities. We have provided accruals for these future financial obligations based on engineering estimates of consumption of permitted landfill airspace over the useful life of any such landfill. There can be no assurance that our financial obligations for capping, closure or post-closure costs will not exceed the amount accrued and reserved or amounts otherwise receivable pursuant to trust funds.

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