Waste Connections (WCN) 6-K Current report (foreign)

Exhibit 99.2

Progressive Waste Solutions Ltd.

Condensed Consolidated Balance Sheets (“Balance Sheet”)

September 30, 2014 (unaudited) and December 31, 2013 (stated in accordance with accounting principles generally accepted in the United States of America (“U.S.”) and in thousands of U.S. dollars except for issued and outstanding share amounts)

	September 30,			December 31,
	2014			2013
ASSETS
CURRENT
Cash and cash equivalents	$	29,828		$	31,980
Accounts receivable	219,622			229,548
Other receivables	30			68
Prepaid expenses	46,075			34,886
Income taxes recoverable	3,329			2,531
Restricted cash	520			498
Other assets	672			2,149
	300,076			301,660
NET ASSETS HELD FOR SALE (Note 7)	52,810			—
OTHER RECEIVABLES	5,456			—
FUNDED LANDFILL POST-CLOSURE COSTS (Note 12)	11,412			10,690
INTANGIBLES (Note 8)	170,234			220,078
GOODWILL (Note 9)	897,574			905,347
LANDFILL DEVELOPMENT ASSETS	14,571			20,247
DEFERRED FINANCING COSTS	15,695			19,037
CAPITAL ASSETS	909,739			937,252
LANDFILL ASSETS	943,567			952,731
INVESTMENTS (Note 10)	923			5,659
OTHER ASSETS	15,093			19,869
	$	3,337,150		$	3,392,570
LIABILITIES
CURRENT
Accounts payable	$	82,816		$	100,270
Accrued charges (Note 11)	143,572			136,991
Dividends payable	16,380			16,243
Income taxes payable	1,933			2,048
Deferred revenues	16,992			17,180
Current portion of long-term debt	5,410			5,969
Landfill closure and post-closure costs (Note 12)	8,434			10,332
Other liabilities	15,869			12,925
	291,406			301,958
LONG-TERM DEBT	1,459,758			1,542,289
LANDFILL CLOSURE AND POST-CLOSURE COSTS (Note 12)	121,664			114,122
OTHER LIABILITIES	13,195			14,743
DEFERRED INCOME TAXES	141,571			129,887
	2,027,594			2,102,999
SHAREHOLDERS’ EQUITY (Note 13)
Common shares (authorized - unlimited, issued and outstanding - 114,294,220 (December 31, 2013 - 114,852,852))	1,767,421			1,773,734
Restricted shares (issued and outstanding - 451,866 (December 31, 2013 - 322,352))	(10,122		)	(6,654		)
Additional paid in capital	4,256			2,796
Accumulated deficit	(343,529		)	(398,414		)
Accumulated other comprehensive loss	(108,470		)	(81,891		)
Total shareholders’ equity	1,309,556			1,289,571
	$	3,337,150		$	3,392,570

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

1

Progressive Waste Solutions Ltd.

Condensed Consolidated Statements of Operations and Comprehensive Income or Loss

(“Statement of Operations and Comprehensive Income or Loss”)

For the periods ended September 30, 2014 and 2013 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars, except share and net income or loss per share amounts)

	Three months ended							Nine months ended
	2014				2013			2014			2013
REVENUES	$	521,157			$	520,665		$	1,504,428		$	1,524,032
EXPENSES
OPERATING	323,603				323,392			938,025			939,059
SELLING, GENERAL AND ADMINISTRATION	60,486				69,148			187,576			194,502
AMORTIZATION	72,256				78,171			211,532			223,112
NET GAIN ON SALE OF CAPITAL AND LANDFILL ASSETS	(673			)	(822		)	(17,599		)	(7,227		)
OPERATING INCOME	65,485				50,776			184,894			174,586
INTEREST ON LONG-TERM DEBT	15,655				14,815			46,434			45,272
NET FOREIGN EXCHANGE LOSS (GAIN)	15				1,489			(169		)	(1,480		)
NET (GAIN) LOSS ON FINANCIAL INSTRUMENTS (Note 17)	(2,689			)	2,597			7,795			1,537
RE-MEASUREMENT GAIN ON PREVIOUSLY HELD EQUITY INVESTMENT (Note 6)	—				—			(5,156		)	—
INCOME BEFORE INCOME TAX EXPENSE AND NET LOSS FROM EQUITY ACCOUNTED INVESTEE	52,504				31,875			135,990			129,257
INCOME TAX EXPENSE (Note 18)
Current	6,715				5,447			22,305			23,104
Deferred	4,975				6,304			6,018			24,356
	11,690				11,751			28,323			47,460
NET LOSS FROM EQUITY ACCOUNTED INVESTEE	—				30			82			69
NET INCOME	40,814				20,094			107,585			81,728
OTHER COMPREHENSIVE (LOSS) INCOME:
Foreign currency translation adjustment	(25,414			)	13,084			(26,997		)	(16,737		)
Derivatives designated as cash flow hedges, net of income tax $nil and $nil (2013 - $26 and $556)	—				(47		)	—			(1,033		)
Settlement of derivatives designated as cash flow hedges, net of income tax $nil and ($225) (2013 - ($15) and ($242))	—				27			418			449
	—				(20		)	418			(584		)
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME	(25,414			)	13,064			(26,579		)	(17,321		)
COMPREHENSIVE INCOME	$		15,400		$	33,158		$	81,006		$	64,407
Net income per weighted average share, basic and diluted (Note 13)	$		0.36		$	0.17		$	0.94		$	0.71
Weighted average number of shares outstanding (thousands), basic and diluted (Note 13)	114,745				115,171			114,982			115,168

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

2

Progressive Waste Solutions Ltd.

Condensed Consolidated Statements of Cash Flows (“Statement of Cash Flows”)

For the periods ended September 30, 2014 and 2013 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars)

	Three months ended						Nine months ended
	2014			2013			2014			2013
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES
OPERATING
Net income	$	40,814		$	20,094		$	107,585		$	81,728
Items not affecting cash
Restricted share expense (Note 14)	537			505			2,031			1,442
Accretion of landfill closure and post-closure costs (Note 12)	1,537			1,422			4,614			4,237
Amortization of intangibles	13,655			18,505			41,452			48,883
Amortization of capital assets	37,319			38,126			112,197			114,573
Amortization of landfill assets	21,282			21,540			57,883			59,656
Interest on long-term debt (amortization of deferred financing costs)	867			877			2,587			2,582
Non-cash interest income	(144		)	—			(144		)	—
Net gain on sale of capital and landfill assets	(673		)	(822		)	(17,599		)	(7,227		)
Net (gain) loss on financial instruments	(2,689		)	2,597			7,795			1,537
Re-measurement gain on previously held equity investment	—			—			(5,156		)	—
Deferred income tax expense	4,975			6,304			6,018			24,356
Net loss from equity accounted investee	—			30			82			69
Landfill closure and post-closure expenditures (Note 12)	(1,290		)	(1,305		)	(3,403		)	(3,534		)
Changes in non-cash working capital items	(19,969		)	11,968			(32,733		)	(8,176		)
Cash generated from operating activities	96,221			119,841			283,209			320,126
INVESTING
Acquisitions (Note 6)	(166		)	(1,530		)	(9,917		)	(3,169		)
Investment in cost accounted investee (Note 10)	—			—			—			(1,018		)
Restricted cash deposits	—			(1		)	(22		)	(22		)
Investment in other receivables	(22		)	—			(89		)	(134		)
Proceeds from other receivables	20			138			57			416
Funded landfill post-closure costs	(578		)	(520		)	(1,160		)	(686		)
Purchase of capital assets	(40,169		)	(67,277		)	(132,598		)	(165,960		)
Purchase of landfill assets	(17,754		)	(22,713		)	(42,505		)	(48,506		)
Proceeds from the sale of capital and landfill assets	1,538			1,248			25,061			15,632
Investment in landfill development assets	(178		)	(451		)	(640		)	(2,590		)
Cash utilized in investing activities	(57,309		)	(91,106		)	(161,813		)	(206,037		)
FINANCING
Payment of deferred financing costs	—			—			(48		)	(824		)
Proceeds from long-term debt	60,272			109,015			162,202			667,116
Repayment of long-term debt	(82,971		)	(131,624		)	(220,780		)	(730,064		)
Proceeds from the exercise of stock options	32			109			99			112
Repurchase of common shares and related costs (Note 13)	(14		)	(14		)	(10,943		)	(14		)
Purchase of, net of proceeds from, restricted shares	93			(100		)	(3,920		)	(4,462		)
Dividends paid to shareholders	(15,801		)	(15,521		)	(47,299		)	(47,256		)
Cash utilized in financing activities	(38,389		)	(38,135		)	(120,689		)	(115,392		)
Effect of foreign currency translation on cash and cash equivalents	(2,637		)	1,481			(2,859		)	(1,573		)
NET CASH OUTFLOW	(2,114		)	(7,919		)	(2,152		)	(2,876		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OR YEAR	31,942			34,983			31,980			29,940
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	29,828		$	27,064		$	29,828		$	27,064
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash and cash equivalents are comprised of:
Cash	$	27,049		$	27,051		$	27,049		$	27,051
Cash equivalents	2,779			13			2,779			13
	$	29,828		$	27,064		$	29,828		$	27,064
Cash paid during the period for:
Income taxes	$	6,047		$	7,166		$	29,248		$	31,023
Interest	$	15,530		$	16,584		$	45,684		$	46,347

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

3

Progressive Waste Solutions Ltd.

Condensed Consolidated Statements of Equity (“Statements of Equity”)

For the three months ended September 30, 2014 and 2013 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars)

	Common		Restricted			Treasury		Additional paid in			Accumulated			Accumulated other comprehensive loss			Total
	shares		shares			shares		capital			deficit			(Note 13)			equity
Balance at June 30, 2014	$	1,767,370	$	(10,157	)	$	—	$	3,680		$	(367,480	)	$	(83,056	)	$	1,310,357
Net income											40,814						40,814
Dividends declared											(16,849		)				(16,849		)
Restricted shares purchased, net of restricted shares sold			35					58									93
Restricted share expense								537									537
Common shares issued on exercise of stock options	51							(19		)							32
Repurchase of common shares and related costs											(14		)				(14		)
Foreign currency translation adjustment														(25,414		)	(25,414		)
Balance at September 30, 2014	$	1,767,421	$	(10,122	)	$	—	$	4,256		$	(343,529	)	$	(108,470	)	$	1,309,556

	Common			Restricted			Treasury		Additional paid in			Accumulated			Accumulated other comprehensive loss			Total
	shares			shares			shares		capital			deficit			(Note 13)			equity
Balance at June 30, 2013	$	1,773,539		$	(7,218	)	$	—	$	2,493		$	(421,640	)	$	(78,501	)	$	1,268,673
Net income												20,094						20,094
Dividends declared												(16,647		)				(16,647		)
Restricted shares purchased, net of restricted shares sold				(121		)			21									(100		)
Restricted share expense									505									505
Common shares issued on exercise of stock options	209								(100		)							109
Repurchase of common shares and related costs	(14		)															(14		)
Foreign currency translation adjustment															13,084			13,084
Derivatives designated as cash flow hedges, net of income tax															(47		)	(47		)
Settlement of derivatives designated as cash flow hedges, net of income tax															27			27
Balance at September 30, 2013	$	1,773,734		$	(7,339	)	$	—	$	2,919		$	(418,193	)	$	(65,437	)	$	1,285,684

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

4

Progressive Waste Solutions Ltd.

Condensed Consolidated Statements of Equity

For the nine months ended September 30, 2014 and 2013 (unaudited - stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars)

	Common			Restricted			Treasury			Additional paid in			Accumulated			Accumulated other comprehensive loss			Total
	shares			shares			shares			capital			deficit			(Note 13)			equity
Balance at December 31, 2013	$	1,773,734		$	(6,654	)	$	—		$	2,796		$	(398,414	)	$	(81,891	)	$	1,289,571
Net income													107,585						107,585
Dividends declared													(48,288		)				(48,288		)
Restricted shares purchased, net of restricted shares sold				(3,978		)				58									(3,920		)
Restricted share expense										2,031									2,031
Vesting of restricted shares				510						(510		)							—
Common shares issued on exercise of stock options	218									(119		)							99
Common shares acquired by U.S. long-term incentive plan (“LTIP”)							931												931
Deferred compensation obligation							(931		)										(931		)
Repurchase of common shares and related costs	(6,531		)										(4,412		)				(10,943		)
Foreign currency translation adjustment																(26,997		)	(26,997		)
Settlement of derivatives designated as cash flow hedges, net of income tax																418			418
Balance at September 30, 2014	$	1,767,421		$	(10,122	)	$	—		$	4,256		$	(343,529	)	$	(108,470	)	$	1,309,556

	Common			Restricted			Treasury			Additional paid in			Accumulated			Accumulated other comprehensive loss			Total
	shares			shares			shares			capital			deficit			(Note 13)			equity
Balance at December 31, 2012	$	1,773,530		$	(3,460	)	$	—		$	2,166		$	(451,539	)	$	(48,116	)	$	1,272,581
Net income													81,728						81,728
Dividends declared													(48,382		)				(48,382		)
Restricted shares purchased, net of restricted shares sold				(4,483		)				21									(4,462		)
Restricted share expense										1,442									1,442
Vesting of restricted shares				604						(604		)							—
Common shares issued on exercise of stock options	218									(106		)							112
Common shares acquired by U.S. LTIP							(1,912		)										(1,912		)
Deferred compensation obligation							1,912												1,912
Repurchase of common shares and related costs	(14		)																(14		)
Foreign currency translation adjustment																(16,737		)	(16,737		)
Derivatives designated as cash flow hedges, net of income tax																(1,033		)	(1,033		)
Settlement of derivatives designated as cash flow hedges, net of income tax																449			449
Balance at September 30, 2013	$	1,773,734		$	(7,339	)	$	—		$	2,919		$	(418,193	)	$	(65,437	)	$	1,285,684

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

5

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

1.  Organization

Effective May 2, 2011, Progressive Waste Solutions Ltd. (the “Company”) amalgamated with its parent IESI-BFC Ltd. and continued operating as Progressive Waste Solutions Ltd.  The Company was incorporated on May 20, 2009 under the provisions of the Business Corporations Act (Ontario).

The Company, through its operating subsidiaries, provides vertically integrated non-hazardous solid waste (“waste”) services to commercial, industrial, municipal and residential customers in Canada and the U.S.

2.  Reporting Currency

The Company has elected to report its financial results in U.S. dollars to improve the comparability of its financial information with its peers.  Reporting the Company’s financial results in U.S. dollars also reduces the impact of foreign currency fluctuation in its reported amounts because the Company’s collection of assets and operations are larger in the U.S. than they are in Canada.  The Company remains a legally domiciled Canadian entity and its functional currency is the Canadian dollar.  As a result, the Company’s financial position, results of operations, cash flows and equity are initially translated to, and consolidated in, Canadian dollars using the current rate method of accounting.  The Company’s consolidated Canadian dollar financial position is further translated from Canadian to U.S. dollars applying the foreign currency exchange rate in effect at the consolidated balance sheet date, while the Company’s consolidated Canadian dollar results of operations and cash flows are translated to U.S. dollars applying the average foreign currency exchange rate in effect during the reporting period.  The resulting translation adjustments are included in other comprehensive income or loss.  Translating the Company’s U.S. segment financial position, results of operations and cash flows into Canadian dollars, the Company’s functional currency, and re-translating these amounts to U.S. dollars, the Company’s reporting currency, has no translation impact on the Company’s consolidated financial statements.  Accordingly, U.S. segment results retain their original values when expressed in the Company’s reporting currency.

3.  Interim Financial Statements

The unaudited interim condensed consolidated financial statements (“financial statements”) do not conform in all respects to the annual requirements of accounting principles generally accepted in the U.S. (“U.S. GAAP”).  Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2013 and December 31, 2012.  These financial statements have been prepared by management in accordance with U.S. GAAP applicable to interim financial statements and follow the same accounting policies and methods in their application as the most recent audited consolidated financial statements except as indicated in Notes 4 and 5.  In management’s opinion, these financial statements include all normal recurring adjustments necessary for the fair presentation of the Company’s financial position, its results of operations and cash flows, for the periods presented.

4.  Summary of Significant Accounting Policies

These financial statements have been prepared in conformity with U.S. GAAP, are stated in U.S. dollars, and have been prepared applying the same accounting policies disclosed in Note 3 to the December 31, 2013 audited consolidated financial statements, except as outlined below and in Note 5.

Acquisitions

For acquisitions achieved in stages, where the Company holds an equity interest prior to obtaining control, the Company re-measures its previously held equity interest in the acquiree at its acquisition date fair value.  Any resulting gain or loss is recognized in the Company’s determination of net income or loss.  The acquisition method of accounting is applied on the date control is obtained.

6

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Other receivables

Notes exchanged for property are valued and accounted for at the present value of the consideration exchanged.  The difference between the present value and the face amount of the note is recognized as a discount or premium, as applicable, and amortized as interest income or expense over the life of the note which results in a constant rate of interest when applied to the amount outstanding at the beginning of any given period.

Net assets held for sale

Net assets are classified as held for sale when their carrying amount is to be recovered through sale rather than continued use.  For this to be the case, management at the relevant level must have made a commitment to complete the sale, the asset or disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or disposal groups and its sale must be highly probable.

Assets held for sale are no longer subject to scheduled amortization and are instead recognized at the lower of carrying amount and fair value less costs to sell.

5.  Changes in Accounting Policies

Presentation of Financial Statements and Property, Plant and Equipment — Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the Financial Accounting Standards Board (“FASB”) issued amendments to the requirements for reporting discontinued operations.  The amended requirements define discontinued operations as a component or group of components of an entity, or a business or nonprofit activity, that is disposed of, or is classified as held for sale, and that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results.  The amendments also include new disclosure requirements.  For disposals of individually significant components that do not qualify as discontinued operations, an entity must disclose pre-tax profit or loss attributable to the disposed component.  This guidance is effective prospectively for all reporting periods beginning after December 15, 2014.  Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issue.  The Company has elected to early adopt the new amendments and the adoption did not have a significant impact on the Company’s financial statements.

7

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Revenue — Revenue from Contracts with Customers

In May 2014, FASB issued their final standard on revenue from contracts with customers.  The standard provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.  The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer (step 1), identifies the performance obligations in the contract (step 2), determines the transaction price (step 3), allocates the transaction price to the performance obligations in the contract (step 4), and recognizes revenue when (or as) the entity satisfies a performance obligation (step 5).  This standard applies to all contracts with customers except those that are within the scope of other topics.  Certain provisions of this standard also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (e.g., sales of property, plant, and equipment; land and buildings; or intangible assets) and existing accounting guidance applicable to these transfers has been amended or superseded. Compared with current U.S. GAAP, this standard also requires significantly expanded disclosures about revenue recognition.  Broadly, an entity is required to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.  Disclosure includes separately disclosing revenues derived from contracts with customers from other sources of revenues and separately disclosing any impairment losses recognized on any receivables or contract assets from other contracts.  An entity is also required to disaggregate its revenues recognized from contracts into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.  Disaggregated revenues must be further reconciled to revenues presented on a reportable segment basis to allow financial statement users to understand the relationship between disaggregated and reportable segment revenues.  Disclosures are also required with respect to the opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if not otherwise separately presented and disclosed.  In addition, revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period is required disclosure, and revenue recognized in the reporting period from performance obligations satisfied, in full or in part, in previous periods, must also be disclosed.  Qualitative and quantitative disclosures for contract assets and liabilities must also disclose changes resulting from business combinations, cumulative catch-up adjustments to revenues, including a change in the measure of a contracts progress, a change in an estimate of the transaction price, a contract modification, a contract impairment, a change in the condition of rights or a change in the time for a performance obligation to be satisfied.  An entity must further disclose its significant performance obligations included in its contracts with its customers, including when performance obligations are satisfied, the significant terms of payment, the nature of the goods or services that an entity has promised to transfer, obligations for returns, refunds and any type of warranty or related obligation.  Any portion of the transaction price that is allocated to a performance obligation that is unsatisfied is required disclosure, including an explanation of when the entity expects to recognize revenues pertaining to an unsatisfied performance obligation and disclosing numerically the amounts to recognize over appropriate and relevant time bands.  Significant judgments made assessing the timing of performance obligations and determining the allocation of the transaction price to the performance obligations that could significantly impact the determination of revenue recognized from contracts with customers must be disclosed.  Performance obligations satisfied over time requires disclosure of the method used to recognize revenue and a supporting explanation of why this method was chosen.  Performance obligations satisfied at a point in time must also be disclosed when significant judgments are made in evaluating when a customer obtains control of a good or service.  This guidance is effective for annual reporting periods beginning after December 15, 2016, including each interim period thereafter.  An entity can chose to adopt this guidance applying one of two approaches:

a.retrospective application for each prior reporting period presented, subject to certain practical expedients in respect of completed contracts and transaction prices allocated to the remaining performance obligations that an entity expected to recognize as revenue, or

b.retrospective application with the cumulative effect of initially applying this guidance recognized at the date of initial application.  If an entity elects this transition method it should also provide the additional disclosures in reporting periods that include the date of initial application of, including the amount by which each financial statement line item is affected in the current reporting period by the application of this guidance compared to the guidance that was in effect before the change and an explanation of the reasons for significant changes.

Early application is not permitted.

8

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

The Company is still assessing the impact this guidance will have on its financial statements, and while it does not believe there will be significant change in the amounts recorded as revenue, the required disclosure requirements are considerable and will result in a significant amount of additional disclosure.

Compensation — Share Based Compensation

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In June 2014, FASB issued guidance on how entities should record compensation cost when an award participant’s requisite service period ends in advance of the performance condition being satisfied.  That is, when an award participant is eligible to vest in the award regardless of whether the participant is rendering service on the date the performance target is achieved.  The guidance requires entities to recognize compensation cost in the period in which it becomes probable that the performance condition will be achieved and should record the compensation cost over the period for which the award participant renders service.  If the performance target becomes probable of achievement before the end of the requisite service period, the remaining unrecognized compensation cost must be recognized over the remaining requisite service period.  If the achievement of the performance condition becomes probable after the award participants requisite service period, compensation cost will be recognized immediately in the period when the performance condition becomes probable.  The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest.  The guidance also outlines that the grant date fair value of the award should not consider the performance condition in its determination.  This guidance is effective for all reporting periods beginning after December 15, 2015 with early adoption permitted.  The amendments are to be applied either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.

The Company does not anticipate this guidance will have a significant impact on its financial statements.

Presentation of Financial Statements — Going Concern

In August 2014, FASB provided additional guidance with respect to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern.  In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern.  Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued, or are available to be issued.

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate this doubt. The entity must disclose information that enables users of the financial statements to understand 1) principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and 2) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations. If the substantial doubt is alleviated as a result of consideration of management’s plans, the entity is also required to disclose the relevant plan that alleviated the substantial doubt. However, if the substantial doubt is not alleviated as a result of consideration of management’s plans the entity is required to disclose plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

These amendments are effective for all reporting periods beginning after December 15, 2016 with early adoption permitted.  The Company does not anticipate these new amendments will have a significant impact on its financial statements.

9

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

6.  Acquisitions

The following table outlines the number of acquisitions completed by the Company in each segment for the nine months ended September 30, 2014 and 2013.  Acquisitions may include all of the issued and outstanding share capital of the purchased company or a company’s assets, including various current assets and liabilities.  Each of the acquisitions completed constitutes a business.

	Nine months ended
	September 30
	2014			2013
	Assets	Shares	Total	Assets	Shares	Total
Canada	—	1	1	1	—	1
U.S. south	2	—	2	2	—	2
Total acquisitions	2	1	3	3	—	3

The Company considers each of these acquisitions a “tuck-in”.  Tuck-ins represent the acquisition of solid waste collection and or disposal operations in markets where the Company has existing operations.  Goodwill arising from these tuck-in acquisitions is largely attributable to assembled workforces and to expected synergies resulting from personnel and operating overhead reductions, disposal or collection advantages or the deployment of market focused strategies.  Pro forma revenues and net income for these acquisitions have not been disclosed as the companies acquired are immaterial both individually and in the aggregate.  The financial results of these acquisitions have been included in the Company’s financial statements from their dates of closing.

The payment of contingent consideration, for acquisitions completed prior to 2009, which results from meeting various business performance targets, is also subject to final adjustment.  Final fair value adjustments occurring during the measurement period that change the fair value of certain assets or liabilities are recorded to the original purchase price allocation.

10

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Cash consideration paid, and its allocation to the fair value of net assets acquired, is as follows:

	Nine months ended
	September 30
	2014			2013
Consideration
Cash, including holdbacks (as applicable)	$	1,539		$	3,262
Net assets acquired
Accounts receivable	22			294
Intangibles (Note 8)	1,041			1,400
Goodwill (Note 9)	—			845
Capital assets	518			1,288
Accounts payable	(42		)	(565		)
Total net assets acquired	$	1,539		$	3,262
Consideration by segment (including holdbacks (as applicable))
Canada	$	—		$	505
U.S. south	1,539			2,757
Total consideration	$	1,539		$	3,262
Goodwill recorded by segment
Canada	$	—		$	371
U.S. south	—			474
Total goodwill	$	—		$	845
Goodwill expected to be deductible for tax purposes	$	—		$	845

	Three months ended				Nine months ended
	September 30				September 30
	2014		2013		2014		2013
Aggregate cash consideration (excluding holdbacks and cash payments due to sellers for achieving various business performance targets)	$	—	$	1,421	$	1,374	$	2,848
Contingent consideration (paid in respect of acquisitions completed prior to January 1, 2009)	$	166	$	109	$	387	$	321
Transaction costs (included in selling, general and administration expense)	$	29	$	64	$	242	$	739

The Company typically holds back a portion of amounts due to sellers subject to the acquired operations meeting various business performance conditions.  These conditions are generally short-term in nature and the Company has assessed the fair value of its obligation for payment as the full amount of the hold back.  In certain circumstances, the Company has also agreed to pay sellers additional amounts for meeting certain business performance targets which are longer in term.  The Company has assessed the fair value of its obligation for payment as the full amount of the additional consideration it expects to pay discounted to the date of acquisition.  Holdback and additional amounts payable for current period acquisitions totaled $165 as at September 30, 2014 (December 31, 2013 - $414).

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Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Acquisition of equity accounted investee

On January 31, 2014, the Company purchased the remaining fifty percent interest in its equity accounted investee (Note 10).  As a result of obtaining control, the Company has re-measured its previously held fifty percent ownership interest at the acquisition date fair value and recorded a non-cash gain in the statement of operations and comprehensive income or loss.  Goodwill arising from this acquisition is largely attributable to expected synergies as a result of personnel and operating overhead reductions and the deployment of market focused strategies.

The full financial results of this acquisition have been included in the Company’s financial statements from the date of closing.  Financial results before January 31, 2014 are included in net loss from equity accounted investee in the statement of operations and comprehensive income or loss.

Cash consideration paid, the carrying amount of the previously held equity method investment, the preliminary re-measurement gain recorded, and the preliminary allocation to the fair value of net assets acquired, are as follows:

Cash consideration	$	8,156
Carrying amount of previously held equity method investment	4,359
Re-measurement gain on previously held equity method investment	5,156
Fair value of net assets acquired	$	17,671
Net assets acquired
Accounts receivable	$	533
Intangibles (Note 8)	4,424
Goodwill (Note 9)	11,594
Capital assets	4,402
Accrued charges	(439		)
Shareholder loans	(1,921		)
Deferred income taxes	(922		)
Total net assets acquired	$	17,671
Goodwill recorded by segment
Canada	$	11,594
Total goodwill	$	11,594
Goodwill expected to be deductible for tax purposes	$	—

The Company is awaiting certain information which may impact the re-measurement gain recorded on the previously held equity method investment.  Any change to the fair value of net assets acquired will lead to a corresponding change to goodwill.

7.  Net Assets Held for Sale

In September 2014, the Company decided to evaluate strategic options for its Long Island, New York operations within the U.S. northeast segment and as a result of the evaluation issued a confidential information memorandum (“CIM”) to a targeted audience of prospective buyers for its commercial, industrial and residential collection business and its transfer station and material recovery facilities that operate in this area.  In reaching this decision, the Company concluded that that it should generate a higher return from monetizing the net assets of this operation.  The CIM required interested bidders to submit their offer of purchase on or before October 7, 2014.  The Company will consider all bids and invite select bidders to conduct their due diligence, after which the bidder will present their final offer to the Company.  On the assumption that the Company receives proposals for these operations in amounts consistent with its assessment of the value of these operations, it expects to complete the sale through the sale of assets.  The Company further expects to close the sale within six months.

12

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Net assets held for sale are recorded at their carrying amounts as follows:

	September 30, 2014
Accounts receivable	$	8,238
Prepaid expenses	1,067
Intangibles	10,263
Capital assets	33,777
Accounts payable	(4,265		)
Accrued charges	(2,522		)
Deferred income taxes	6,252
Total net assets held for sale	$	52,810

8.  Intangibles

	September 30, 2014
	Cost		Accumulated amortization		Net book value		Additions (including adjustments as applicable)		Weighted average amortization period of additions (expressed in years)
Customer collection contracts	$	229,817	$	168,179	$	61,638	$	4,300	5.00
Customer lists	174,968		93,531		81,437		991		6.00
Non-competition agreements	10,721		6,369		4,352		50		5.00
Transfer station permits	25,869		7,473		18,396		—		—
Trade-names	12,318		7,907		4,411		124		1.00
	$	453,693	$	283,459	$	170,234	$	5,465

	December 31, 2013						September 30, 2013
	Cost		Accumulated amortization		Net book value		Additions (including adjustments as applicable)			Weighted average amortization period of additions (expressed in years)
Customer collection contracts	$	235,369	$	160,847	$	74,522	$	74		5.00
Customer lists	243,961		131,112		112,849		1,241			7.50
Non-competition agreements	11,171		4,919		6,252		(315		)	3.50
Transfer station permits	27,708		6,973		20,735		—			—
Trade-names	12,598		6,878		5,720		—			—
	$	530,807	$	310,729	$	220,078	$	1,000

Adjustments to the fair value of certain assets, occurring in the measurement period, and acquired in the prior year resulted in no adjustments in 2014 (2013 - $400 decrease to non-competition agreements).

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Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

In the prior year period, a Canadian transfer station permit revocation requested by the Company was granted by the Ontario Ministry of the Environment.  In conjunction with the revocation, the transfer station permit recorded to intangible assets was immediately impaired.  Accordingly, a $4,074 impairment loss was recorded to amortization expense on the statement of operations and comprehensive income or loss for the three and nine months ended September 30, 2013.

Estimated intangible amortization expense in each of the five succeeding years, or part thereof in the case of 2014, and thereafter is as follows:

2014	$	11,399
2015	40,004
2016	34,835
2017	30,417
2018	17,239
Thereafter	36,340
	$	170,234

9.  Goodwill

The following tables illustrate the change in goodwill for the nine months ended September 30, 2014 and 2013.

	September 30, 2014
	Canada			U.S. south		U.S. northeast			Total
Goodwill, stated at cost	$	383,473		$	423,164	$	459,267		$	1,265,904
Accumulated impairment loss	—			—		(360,557		)	(360,557		)
Balance, beginning of year	383,473			423,164		98,710			905,347
Goodwill recognized on acquisitions, during the period	11,594			—		—			11,594
Goodwill adjustments in respect of prior period acquisitions, during the period	—			387		—			387
Foreign currency exchange adjustment, for the period	(19,754		)	—		—			(19,754		)
Goodwill, stated at cost	375,313			423,551		299,072			1,097,936
Accumulated impairment loss	—			—		(200,362		)	(200,362		)
Balance, end of period	$	375,313		$	423,551	$	98,710		$	897,574

	September 30, 2013
	Canada			U.S. south		U.S. northeast			Total
Goodwill, stated at cost	$	409,296		$	421,108	$	459,267		$	1,289,671
Accumulated impairment loss	—			—		(360,557		)	(360,557		)
Balance, beginning of year	409,296			421,108		98,710			929,114
Goodwill recognized on acquisitions, during the period	371			474		—			845
Goodwill adjustments in respect of prior period acquisitions, during the period	272			1,478		—			1,750
Foreign currency exchange adjustment, for the period	(13,379		)	—		—			(13,379		)
Goodwill, stated at cost	396,560			423,060		459,267			1,278,887
Accumulated impairment loss	—			—		(360,557		)	(360,557		)
Balance, end of period	$	396,560		$	423,060	$	98,710		$	918,330

In 2013, adjustments to preliminary purchase price allocations resulted in a $1,429 increase to goodwill.

14

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

The Company has not disposed of any goodwill or recognized an impairment charge in the nine months ended September 30, 2014 or in the year ended December 31, 2013.

10.  Investments

Investment at cost

In June 2013, the Company acquired a 19.9% non-controlling interest in TerraCycle Canada ULC (“TerraCycle”) for total consideration of 1,035 Canadian dollars (“C$”).  TerraCycle is a Canadian unlimited liability company that offers programs to collect waste and convert the collected waste into a wide range of products and materials.  This investment is accounted for applying the cost method of accounting.

Investment in equity accounted investee

The Company had a fifty percent ownership interest in two companies whose business was comprised principally of compactor and related equipment rentals.  The remaining ownership was owned by two trusts.  The Company exercised joint control over its investment through its fifty percent ownership interest.  The Company’s fifty percent ownership interest granted it authority to nominate fifty percent of the directors to the board of the investee.  The Chairperson of the investee’s Board of Directors could not be nominated by the Company and the Chairperson could not be a member of the Company’s Board of Directors.  The Chairperson of the investee was entitled to cast a second vote in the event of a tie amongst its board.  Certain matters were beyond the control of the investee’s board and resided with its shareholders.  These matters included certain financing, board composition, the sharing of profits and material business changes.

Effective April 1, 2013, the Company entered into an amending agreement to purchase the remaining fifty percent interest in the investee no later than February 28, 2015, subject to the Company or the seller providing notice of purchase or sale, at an amount equal to the greater of fifty percent of revenues less operating and selling, general and administration expense of the investee for the preceding 12 month period multiplied by six or C$9,000.  Certain conditions could accelerate the purchase or extend the commitment beyond February 28, 2015.  On January 31, 2014, the Company purchased the remaining fifty percent interest in its equity accounted investee.  See Note 6.

The following table summarizes the Company’s investments:

	September 30, 2014		December 31, 2013
Cost method investment	$	923	$	973
Equity method investment	—		4,686
Total investments	$	923	$	5,659

11.  Accrued Charges

Accrued charges comprise the following:

15

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

	September 30, 2014		December 31, 2013
Insurance	$	36,552	$	33,879
Payroll and related costs	37,879		41,824
Franchise and royalty fees	7,737		9,127
Interest	1,011		876
Provincial, federal and state sales taxes	7,309		6,895
Acquisition holdbacks and acquisition related costs	1,512		2,668
Environmental surcharges	7,297		6,972
Property taxes	4,555		189
Share based options (Note 14)	6,374		7,854
Other	33,346		26,707
	$	143,572	$	136,991

12.  Landfill Closure and Post-Closure Costs

The tables below outline key assumptions used to determine the value of landfill closure and post-closure costs.  The tables also outline the expected timing of undiscounted landfill closure and post-closure expenditures and changes to landfill closure and post-closure costs between periods.

	September 30, 2014
Fair value of legally restricted assets (funded landfill post-closure costs)	$	11,412
Undiscounted closure and post-closure costs	$	660,171
Credit adjusted risk-free rates - Canadian segment landfills	4.6 - 9.5%
Credit adjusted risk-free rates - U.S. segment landfills	4.5 - 7.2%
Expected timing of undiscounted landfill closure and post-closure expenditures
2014	$	8,434
2015	10,591
2016	13,803
2017	8,282
2018	14,595
Thereafter	604,466
	$	660,171

	Three months ended
	September 30
	2014			2013
Landfill closure and post-closure costs, beginning of the period	$	128,986		$	117,598
Provision for landfill closure and post-closure costs, during the period	2,733			2,777
Accretion of landfill closure and post-closure costs, during the period	1,537			1,422
Landfill closure and post-closure expenditures, during the period	(1,290		)	(1,305		)
Revisions to estimated cash flows, during the period	—			(159		)
Foreign currency translation adjustment, for the period	(1,868		)	790
	130,098			121,123
Less current portion of landfill closure and post-closure costs	8,434			6,800
Landfill closure and post-closure costs, end of period	$	121,664		$	114,323

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Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

	Nine months ended
	September 30
	2014			2013
Landfill closure and post-closure costs, beginning of the year	$	124,454		$	113,152
Provision for landfill closure and post-closure costs, during the period	7,429			9,186
Accretion of landfill closure and post-closure costs, during the period	4,614			4,237
Landfill closure and post-closure expenditures, during the period	(3,403		)	(3,534		)
Disposal of landfill closure and post-closure costs, during the period	(960		)	—
Revisions to estimated cash flows, during the period	(76		)	(777		)
Foreign currency translation adjustment, for the period	(1,960		)	(1,141		)
	130,098			121,123
Less current portion of landfill closure and post-closure costs	8,434			6,800
Landfill closure and post-closure costs, end of period	$	121,664		$	114,323

In the prior year period, a $1,017 remediation liability was recorded for the clean-up of contaminated land located in Canada.  This same amount was capitalized to land but was determined to be immediately impaired.  Accordingly, a $1,017 impairment charge was recorded to net gain on sale of capital assets on the statement of operations and comprehensive income or loss for the nine months ended September 30, 2013.

17

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

13.  Shareholders’ Equity

Normal course issuer bid

Effective August 28, 2014, the Company received approval for a normal course issuer bid (“NCIB”) to purchase up to 7,500 of the Company’s common shares for a one year period which expires on August 27, 2015.  Daily purchases are limited to a maximum of 39.034 shares on the Toronto Stock Exchange.  Once a week, the Company is permitted to purchase a block of its common shares which can exceed the daily purchase limit, as long as the block is not owned by an insider.  All shares purchased are expected to be cancelled.

For the three and nine months ended September 30, 2014, nil and 439 common shares (2013 - nil) were purchased and cancelled at a total cost of $nil and $10,929 (2013 - $nil), respectively.

Accumulated other comprehensive loss

Accumulated other comprehensive loss, is comprised of accumulated foreign currency translation adjustments, including accumulated exchange gains or losses on intangibles, goodwill and capital and landfill assets, partially offset by accumulated exchange losses or gains on long-term debt, landfill closure and post-closure costs, and deferred income tax liabilities.  Accumulated other comprehensive loss also includes gains or losses recognized on the effective portion of derivatives designated as cash flow hedges, net of income tax and settlements.

	Foreign currency translation adjustment			Derivatives designated as cash flow hedges, net of income tax			Accumulated other comprehensive loss
Three months ended September 30, 2014
Balance, beginning of period	$	(83,056	)	$	—		$	(83,056	)
Other comprehensive loss before reclassifications, during the period	(25,414		)	—			(25,414		)
Balance, end of period	$	(108,470	)	$	—		$	(108,470	)
Three months ended September 30, 2013
Balance, beginning of period	$	(78,113	)	$	(388	)	$	(78,501	)
Other comprehensive income (loss) before reclassifications, during the period	13,084			(47		)	13,037
Amounts reclassified from accumulated other comprehensive loss, during the period	—			27			27
Balance, end of period	$	(65,029	)	$	(408	)	$	(65,437	)

	Foreign currency translation adjustment			Derivatives designated as cash flow hedges, net of income tax			Accumulated other comprehensive loss
Nine months ended September 30, 2014
Balance, beginning of year	$	(81,473	)	$	(418	)	$	(81,891	)
Other comprehensive loss before reclassifications, during the period	(26,997		)	—			(26,997		)
Amounts reclassified from accumulated other comprehensive loss, during the period	—			418			418
Balance, end of period	$	(108,470	)	$	—		$	(108,470	)
Nine months ended September 30, 2013
Balance, beginning of year	$	(48,292	)	$	176		$	(48,116	)
Other comprehensive loss before reclassifications, during the period	(16,737		)	(1,033		)	(17,770		)
Amounts reclassified from accumulated other comprehensive loss, during the period	—			449			449
Balance, end of period	$	(65,029	)	$	(408	)	$	(65,437	)

18

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Net income per share

The following table presents net income and reconciles the weighted average number of shares outstanding at September 30, 2014 and 2013 for the purpose of computing basic and diluted net income per share.

	Three months ended				Nine months ended
	September 30				September 30
	2014		2013		2014		2013
Net income	$	40,814	$	20,094	$	107,585	$	81,728
Weighted average number of shares, basic	114,745		115,171		114,982		115,168
Dilutive effect of share based options	—		—		—		—
Weighted average number of shares, diluted	114,745		115,171		114,982		115,168
Net income per weighted average share, basic and diluted	$	0.36	$	0.17	$	0.94	$	0.71
Issued and outstanding share based options	2,421		2,844		2,421		2,844

Share based options are anti-dilutive to the calculation of net income per share and have therefore been excluded from the calculation.

14.  Share Based Compensation

Compensation expense includes restricted share expense or recovery, fair value changes in performance share units (“PSUs”) and share based options all of which are recorded to selling, general and administration expense on the statement of operations and comprehensive income or loss.

Restricted shares

For the three and nine months ended September 30, 2014 restricted share expense amounted to $537 and $2,031 (2013 - $505 and $1,442).

In August 2014, 13 restricted shares previously awarded to an employee were forfeited.  In conjunction with the forfeiture, the Company sold 13 restricted shares for total cash proceeds of $312.  The forfeiture resulted in a $255 recovery of previously recognized restricted share expense.

In September 2013, 8 restricted shares previously awarded to an employee were forfeited.  In conjunction with the forfeiture, the Company sold 8 restricted shares for total cash proceeds of $181.  The forfeiture resulted in a $94 recovery of previously recognized restricted share expense.

PSUs

For the three and nine months ended September 30, 2014, PSU (recovery) expense totaled ($511) and $1,871 (2013 - $1,216 and $2,565).  In addition, as of September 30, 2014, unrecognized compensation cost for PSUs totaled $4,949 (December 31, 2013 - $4,061).  At September 30, 2014, $5,832 is accrued (December 31, 2013 - $4,300).

Share based options

For the three and nine months ended September 30, 2014 share based compensation expense amounted to $1,912 and $3,958 (2013 — $4,913 and $6,255).  In addition, as of September 30, 2014, unrecognized compensation cost for share based compensation totaled $2,802 (December 31, 2013 - $1,556).  At September 30, 2014, $6,374 (December 31, 2013 - $7,854) is accrued.

15.  Commitments and Contingencies

The Company is the successor licensee under a license agreement to use the trade name “BFI” and the related logo in connection with its Canadian business operations (the “BFI license”).  The current term of the BFI license expires on June 1, 2015.  Under the terms of the BFI license, the Company was required to provide its notice of intention to renew not less than 12 months before the immediately preceding term.  The Company elected not to provide such notice and accordingly has no further commitments under this agreement.

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Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

16.  Related Party Transactions

Equity accounted investee

Transactions between the Company and its equity accounted investee occurring before January 31, 2014 were all transacted in the normal course of business.  These transactions were the result of the investee billing the Company for services it provided to the Company.  In turn, the Company billed its customers for these services which were measured at the exchange amount.  Transactions between the Company and its investee only reflected the Company’s share of the transaction.  The Company incurred $110 (2013 - $350) of charges for the nine months ended September 30, 2014 from its equity investee which were recorded to operating expenses.

Other related party transactions

A company owned by an officer of a BFI Canada Inc. (“BFI”) subsidiary provides transportation services to the Company.  Total charges of $1,419 and $3,383 (2013 - $1,022 and $2,914) were incurred for the three and nine months ended September 30, 2014, respectively, and are recorded to operating expenses.  Amounts included in accounts payable at September 30, 2014 total $189 (December 31, 2013 - $70).

All related party transactions are recorded at the exchange amounts.

17.  Financial Instruments

The following table categorizes the Company’s derivative financial assets and liabilities and their fair values which are recorded as other assets or other liabilities on the Company’s balance sheet.

	September 30, 2014		December 31, 2013
Financial assets
Derivatives not designated in a hedging relationship
Current - commodity swaps	$	658	$	2,149
Long-term - commodity swaps	$	339	$	670
Current - foreign currency exchange agreements	$	14	$	—
Long-term - interest rate swaps	$	14,754	$	19,199
Financial liabilities
Derivatives not designated in a hedging relationship
Current - interest rate swaps	$	13,754	$	9,863
Long-term - interest rate swaps	$	7,624	$	9,870
Current - wood waste supply agreement	$	—	$	208
Long-term - wood waste supply agreement	$	—	$	598

20

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

The following tables outline the hierarchical measurement categories for various financial assets and liabilities. As at September 30, 2014 and December 31, 2013, financial assets and liabilities measured on a recurring basis had the following fair values expressed on a gross basis:

	September 30, 2014
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Total
Cash and cash equivalents	$	29,828	$	—		$	—	$	29,828
Funded landfill post-closure costs	11,412		—			—		11,412
Other assets - commodity swaps	—		—			997		997
Other assets - interest rate swaps	—		14,754			—		14,754
Other assets - foreign currency exchange agreements	—		14			—		14
Other liabilities - interest rate swaps	—		(21,378		)	—		(21,378		)
	$	41,240	$	(6,610	)	$	997	$	35,627

	December 31, 2013
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Cash and cash equivalents	$	31,980	$	—		$	—		$	31,980
Funded landfill post-closure costs	10,690		—			—			10,690
Other assets - commodity swaps	—		—			2,819			2,819
Other assets - interest rate swaps	—		19,199			—			19,199
Other liabilities - interest rate swaps	—		(19,733		)	—			(19,733		)
Other liabilities - wood waste supply agreement	—		—			(806		)	(806		)
	$	42,670	$	(534	)	$	2,013		$	44,149

The following tables outline the change in fair value for recurring Level 3 financial instrument measurements for the three and nine months ended September 30, 2014 and 2013, respectively:

	Three months ended
	September 30
Significant unobservable inputs (Level 3)	2014			2013
Balance, beginning of period	$	2,787		$	746
Realized gains included in the statement of operations, during the period	293			254
Unrealized (losses) gains included in the statement of operations, during the period	(1,746		)	1,214
Unrealized losses included in accumulated other comprehensive loss, during the period	—			(30		)
Settlements	(293		)	(254		)
Foreign currency translation adjustment	(44		)	9
Balance, end of period	$	997		$	1,939

21

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

 For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

	Nine months ended
	September 30
Significant unobservable inputs (Level 3)	2014			2013
Balance, beginning of year	$	2,013		$	2,064
Realized gains included in the statement of operations, during the period	1,270			372
Unrealized (losses) gains included in the statement of operations, during the period	(1,648		)	778
Unrealized gains (losses) included in accumulated other comprehensive loss, during the period	643			(896		)
Settlements	(1,270		)	(372		)
Foreign currency translation adjustment	(11		)	(7		)
Balance, end of period	$	997		$	1,939

Fair value

Cash equivalents are invested in a money market account offered through a Canadian financial institution.  The fair value of cash equivalents is equal to its carrying amount.

Funded landfill post-closure costs are invested in Bankers’ Acceptances, offered through Canadian financial institutions, or Government of Canada treasury bills.  The fair value of these investments is supported by quoted prices in active markets for identical assets.

The fair values of financial instruments are calculated using available market information, commonly accepted valuation methods and third-party valuation specialists.  Considerable judgment is required to interpret market information to develop these estimates.  Accordingly, these fair value estimates are not necessarily indicative of the amounts the Company, or counter-parties to the instruments, could realize in a current market exchange.  The use of different assumptions and or estimation methods could have a material effect on these fair values.

The Company’s interest rate swaps are recorded at their estimated fair values based on quotes received from financial institutions that trade these contracts.  The Company verifies the reasonableness of these quotes by comparing them to similar quotes from another financial institution and its own calculation of fair value.  In addition, the Company employs a third-party, who is not a counter-party, to independently value the interest rate swaps and the Company uses all of this information to derive its fair value estimates.  The use of different assumptions and or estimation methods could have a material effect on these fair values.

The fair values of commodity swaps are determined by applying a discounted cash flow methodology.  This methodology uses the Department of Energy forward index curve and the risk-free rate of interest, on a basis consistent with the underlying terms of the agreements, to discount the commodity swaps.  Financial institutions and the U.S. Department of Treasury are the sources of the Department of Energy forward index curve and risk-free rate of interest, respectively.  The use of different assumptions and or estimation methods could have a material effect on these fair values.

The Company’s foreign currency exchange agreement is recorded at its estimated fair value based on a quote received from the financial institution that the Company has entered into the agreement with.  The Company verifies the reasonableness of the quote by comparing it to the period end foreign currency exchange rate plus a forward premium.  The use of different assumptions and or estimation methods could result in differing fair values which the Company believes would not be material.

The fair value of the Company’s embedded derivative from its wood waste supply agreement was determined by applying a discounted cash flow methodology.  This methodology used electricity generator and Ultra Low Sulfur Diesel forward index curves and the risk-free rate of interest, on a basis consistent with the underlying terms of the agreement.  The Company employed a third-party, who is not a counter-party, to independently value the embedded derivative and the Company used this information to derive its fair value estimate.  The use of different assumptions and or estimation methods could have resulted in differing fair values which the Company believes would not be material.  In April 2014, the wood waste supply agreement was amended and the embedded derivative contained in the original agreement was eliminated.

22

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Hedge accounting

The Company had designated certain commodity swaps as cash flow hedges. The following tables outline changes in the fair value of commodity swaps designated as cash flow hedges and their impact on other comprehensive income or loss, net of the corresponding income tax effect, for the three and nine months ended September 30, 2014 and 2013.

	Three months ended
	September 30
	2014		2013
Derivatives designated as cash flow hedges, net of income tax
Other comprehensive loss, commodity swaps	$	—	$	(47	)
Total other comprehensive loss, net of income tax	$	—	$	(47	)

	Nine months ended
	September 30
	2014		2013
Derivatives designated as cash flow hedges, net of income tax
Other comprehensive loss, commodity swaps	$	—	$	(1,033	)
Total other comprehensive loss, net of income tax	$	—	$	(1,033	)

	Three months ended
	September 30
	2014		2013
Reclassifications from accumulated other comprehensive income or loss to net income or loss
Gains on cash flow hedges:
Commodity swaps - recorded in operating expenses	$	—	$	42
Income tax - recorded in income tax expense or recovery	—		(15		)
Total amount reclassified from accumulated other comprehensive income or loss	$	—	$	27

	Nine months ended
	September 30
	2014			2013
Reclassifications from accumulated other comprehensive income or loss to net income or loss
Gains on cash flow hedges:
Commodity swaps - recorded in operating expenses	$	643		$	691
Income tax - recorded in income tax expense or recovery	(225		)	(242		)
Total amount reclassified from accumulated other comprehensive income or loss	$	418		$	449

The Company measured and recorded any ineffectiveness on commodity swaps representing the difference between the underlying index price and the actual price of diesel fuel purchased.  Gains or losses were reclassified to operating expenses as diesel fuel was consumed.

Interest rate, commodity swaps and foreign currency exchange agreements

The Company is subject to credit risk on certain interest rate, commodity swaps and foreign currency exchange agreements (collectively the “agreements”), as applicable.  The Company has entered into interest rate swaps to reduce its exposure to interest rate volatility on consolidated credit facility advances.  In addition, the Company has entered into commodity swaps for a portion of the diesel fuel consumed in its Canadian and U.S. operations.  The Company has also entered into foreign currency exchange agreements, from time to time, to mitigate the risk of foreign currency fluctuations on amounts repayable under its consolidated credit agreement and amounts payable for goods or services received that are payable in a currency that is other than the operating entities’ primary operating currency.

23

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

The Company’s corporate treasury function is responsible for arranging all agreements while the Audit Committee is responsible for approving certain agreements.  Suitable counterparties identified by the Company’s treasury function are approved by the Audit Committee.  The Company will only enter into agreements with highly rated and experienced counterparties who have successfully demonstrated that they are capable of executing these arrangements.  If the counterparties’ credit rating, prepared by reputable third-party rating agencies, is downgraded, the Company’s treasury function will review the agreement and assess if its exposure to the counterparty can be collateralized or if the agreement should be terminated.  The Company’s treasury function also prepares a report, at least once annually, to the Company’s Audit Committee which outlines the key terms of its agreements, fair values, counterparties and each counterparty’s most recent credit rating, and, when applicable, changes to the risks related to each agreement.

The Company’s maximum exposure to credit risk is equal to the fair value of interest rate, commodity swaps and foreign currency exchange agreements, as applicable, recorded in other assets on the Company’s balance sheet.  The Company holds no collateral or other credit enhancements as security over these agreements.  The Company deems the agreements’ credit quality to be high in light of its counterparties and no amounts are either past due or impaired.  In all instances, the Company’s risk management objective is to mitigate its risk exposures to a level consistent with its risk tolerance.

The Company has entered into the following commodity and interest rate swaps and foreign currency exchange agreements which are outlined in the tables below:

U.S. fuel hedges

Date entered	Notional amount (gallons per month expressed in gallons)	Diesel rate paid (expressed in dollars)		Diesel rate received variable	Effective date	Expiration date
June 21, 2012	150,000	$	3.62	Diesel Fuel Index	January 1, 2015	December 31, 2015
May 9, 2012	150,000	$	3.85	Diesel Fuel Index	January 1, 2014	December 31, 2014
May 24, 2012	150,000	$	3.79	Diesel Fuel Index	January 1, 2014	December 31, 2014
June 1, 2012	300,000	$	3.73	Diesel Fuel Index	January 1, 2014	December 31, 2014
June 1, 2012	150,000	$	3.72	Diesel Fuel Index	January 1, 2015	December 31, 2015

Canadian fuel hedges

Date entered	Notional amount (litres per month expressed in litres)	Diesel rate paid (expressed in C$)		Diesel rate received variable	Effective date	Expiration date
May 9, 2012	260,000	$	0.61	NYMEX WTI Index	January 1, 2013	December 31, 2014
May 23, 2012	260,000	$	0.60	NYMEX WTI Index	January 1, 2013	December 31, 2014
June 4, 2012	520,000	$	0.57	NYMEX WTI Index	January 1, 2014	December 31, 2014
June 4, 2012	520,000	$	0.57	NYMEX WTI Index	January 1, 2015	December 31, 2015

24

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Interest rate swaps

Date entered	Notional amount		Fixed interest rate (plus applicable margin)		Variable interest rate received		Effective date	Expiration date
August 30, 2013	$	35,000	2.97	%	0.23	%	September 30, 2013	September 29, 2023
August 30, 2013	$	40,000	2.96	%	0.23	%	September 30, 2013	September 29, 2023
September 6, 2013	$	25,000	1.10	%	0.23	%	September 30, 2013	September 30, 2016
September 6, 2013	$	25,000	1.10	%	0.23	%	September 30, 2013	September 30, 2016
September 6, 2013	$	25,000	1.95	%	0.23	%	September 30, 2013	September 28, 2018
September 6, 2013	$	25,000	1.95	%	0.23	%	September 30, 2013	September 28, 2018
September 19, 2013	$	25,000	2.30	%	0.23	%	September 30, 2013	September 30, 2020
September 19, 2013	$	25,000	2.30	%	0.23	%	September 30, 2013	September 30, 2020
September 24, 2013	$	25,000	1.60	%	0.23	%	September 30, 2013	September 28, 2018
September 24, 2013	$	25,000	1.60	%	0.23	%	September 30, 2013	September 28, 2018
October 21, 2013	$	25,000	1.51	%	0.23	%	October 31, 2013	September 28, 2018
October 21, 2013	$	25,000	1.53	%	0.23	%	October 31, 2013	September 28, 2018
October 25, 2013	$	15,000	2.65	%	0.23	%	October 31, 2013	September 29, 2023
October 25, 2013	$	20,000	2.64	%	0.23	%	October 31, 2013	September 29, 2023
November 5, 2013	$	25,000	1.50	%	0.23	%	November 7, 2013	September 28, 2018
November 5, 2013	$	25,000	1.50	%	0.23	%	November 7, 2013	September 28, 2018
December 11, 2013	$	20,000	2.18	%	0.23	%	December 13, 2013	September 30, 2020
December 11, 2013	$	20,000	2.17	%	0.23	%	December 13, 2013	September 30, 2020
December 30, 2013	$	10,000	2.96	%	0.23	%	January 2, 2014	September 29, 2023
December 30, 2013	$	15,000	0.75	%	0.23	%	January 2, 2014	September 30, 2016
December 30, 2013	$	15,000	0.79	%	0.23	%	January 2, 2014	September 30, 2016
December 30, 2013	$	15,000	1.62	%	0.23	%	January 2, 2014	September 28, 2018
December 30, 2013	$	30,000	1.66	%	0.23	%	January 2, 2014	September 28, 2018
March 4, 2014	$	25,000	2.25	%	0.23	%	March 31, 2014	March 31, 2021
March 4, 2014	$	25,000	2.26	%	0.23	%	March 31, 2014	March 28, 2024
March 4, 2014	$	25,000	2.25	%	0.23	%	March 31, 2014	March 31, 2021
March 4, 2014	$	25,000	2.78	%	0.23	%	March 31, 2014	March 28, 2024
March 17, 2014	$	20,000	1.67	%	0.23	%	March 31, 2014	March 29, 2019
March 17, 2014	$	20,000	1.67	%	0.23	%	March 31, 2014	March 29, 2019
March 17, 2014	$	20,000	2.27	%	0.23	%	March 31, 2014	March 31, 2021
March 17, 2014	$	20,000	2.26	%	0.23	%	March 31, 2014	March 31, 2021
March 17, 2014	$	30,000	2.79	%	0.23	%	March 31, 2014	March 28, 2024
March 28, 2014	$	35,000	1.64	%	0.23	%	March 31, 2014	September 30, 2018
March 28, 2014	$	25,000	1.03	%	0.23	%	March 31, 2014	March 31, 2017
July 24, 2014	$	20,000	2.65	%	0.23	%	July 31, 2014	June 28, 2024

Foreign currency exchange agreements

Date entered	U.S. dollars purchased		Foreign  currency exchange rate	Effective date
September 18, 2014	$	750	1.0985	October 10, 2014

25

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

The contractual maturities of the Company’s derivatives are as follows:

	September 30, 2014
	Payments due
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Derivative
Interest rate swaps	$	21,907	$	13,754	$	7,787	$	366	$	—
Foreign currency exchange agreements	$	750	$	750	$	—	$	—	$	—

Unrealized amounts recorded to net gain or loss on financial instruments for the three and nine months ended September 30, 2014 and 2013 are as follows:

	Three months ended						Nine months ended
	September 30						September 30
	2014			2013			2014			2013
Net (gain) loss on financial instruments
Funded landfill post-closure costs	$	(31	)	$	(28	)	$	(61	)	$	(58	)
Interest rate swaps	(4,389		)	3,641			6,223			2,450
Fuel hedges	1,746			(1,214		)	2,429			(778		)
Wood waste supply agreement	—			—			(781		)	—
Foreign currency exchange agreements	(15		)	198			(15		)	(77		)
	$	(2,689	)	$	2,597		$	7,795		$	1,537

Estimated fair value

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued charges approximates its fair value due to the relatively short-term maturities of these instruments.  Funded landfill post-closure costs and derivative financial instruments are recorded on the balance sheet at fair value.

At September 30, 2014, the estimated fair value of other receivables applying an interest rate consistent with the credit quality of the instrument is $5,879 (December 31, 2013 - $68), compared to the carrying amount of $5,486 (December 31, 2013 - $68).

At September 30, 2014, the fair value of long-term debt, excluding the term B facility, approximates its carrying amount as the Company believes that renegotiation of this variable rate long-term debt would result in similar pricing to that which it currently enjoys.  Accordingly, because the Company’s variable rate facilities are non-amortizing and the Company’s credit spreads have remained principally unchanged, the current carrying amount of the Company’s variable rate long-term debt approximates its fair value

At September 30, 2014, the estimated fair value of the term B facility is approximately $572,047 (December 31, 2013 - $576,400) compared to its carrying amount of $489,639 (December 31, 2013 - $493,052).

26

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

18.  Income Taxes

The components of domestic and foreign income before income tax expense (recovery) and net loss from equity accounted investee and domestic and foreign income taxes are as follows:

	Three months ended				Nine months ended
	September 30				September 30
	2014		2013		2014			2013
Income before income tax expense (recovery) and net loss from equity accounted investee
Canada	$	22,016	$	4,746	$	51,254		$	46,934
U.S.	13,647		27,129		34,767			82,323
Other	16,841		—		49,969			—
	$	52,504	$	31,875	$	135,990		$	129,257
Current income tax expense
Canada	$	5,818	$	4,415	$	18,983		$	20,051
U.S.	846		1,032		3,156			3,053
Other	51		—		166			—
	6,715		5,447		22,305			23,104
Deferred income tax expense (recovery)
Canada	130		1,578		(6,196		)	(309		)
U.S.	4,845		4,726		12,214			24,665
Other	—		—		—			—
	4,975		6,304		6,018			24,356
Total income tax expense	$	11,690	$	11,751	$	28,323		$	47,460

The Company recognizes interest related to uncertain tax positions and penalties to current income tax expense.  The Company has no material uncertain tax positions.  Accordingly, interest and penalties recognized in respect of uncertain tax positions and amounts accrued in respect thereof amount to $nil for the periods ended September 30, 2014 and 2013.

The Company is subject to federal, provincial and state income taxes and files tax returns in multiple jurisdictions.  Tax years open to audit range from 2000 to 2013 in Canada and from 1997 to 2013 in the U.S.

19.  Segmented Reporting

The Company carries on business through three separate geographic segments: Canada, the U.S. south and the U.S. northeast.  The business segments are vertically integrated and include the collection and disposal of waste and recyclable materials, transfer station operations, material recovery facilities, landfills and landfill gas to energy facilities.  The geographic location of each segment limits the volume and number of transactions between them.

The Company has elected to exclude corporate costs in the determination of each segment’s performance.  Corporate costs include certain executive, legal, accounting, internal audit, treasury, investor relations, corporate development, environmental management, information technology, human resources, sales, purchasing, safety and other administrative support costs.  Corporate costs also include transaction and related costs, restricted share expense and fair value changes of stock options.

The accounting policies applied by the business segments are the same as those described in the summary of significant accounting policies (Note 4).  The Company evaluates its segment performance based on revenues, less operating and selling, general and administration expenses.

27

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

	Three months ended						Nine months ended
	September 30						September 30
	2014			2013			2014			2013
Revenues
Canada	$	199,128		$	199,053		$	558,933		$	577,002
U.S. south	231,817			223,437			682,925			655,992
U.S. northeast	90,212			98,175			262,570			291,038
Corporate	—			—			—			—
	$	521,157		$	520,665		$	1,504,428		$	1,524,032
Revenues less operating and selling, general and administration expenses
Canada	$	70,711		$	68,454		$	191,895		$	203,437
U.S. south	58,291			58,422			179,376			177,113
U.S. northeast	19,095			21,160			50,858			58,733
Corporate	(11,029		)	(19,911		)	(43,302		)	(48,812		)
	$	137,068		$	128,125		$	378,827		$	390,471
Amortization
Canada	$	26,838		$	30,131		$	74,923		$	83,162
U.S. south	32,046			31,524			95,176			92,542
U.S. northeast	12,920			15,795			39,945			45,588
Corporate	452			721			1,488			1,820
	$	72,256		$	78,171		$	211,532		$	223,112
Net gain on sale of capital and landfill assets	$	(673	)	$	(822	)	$	(17,599	)	$	(7,227	)
Operating income	$	65,485		$	50,776		$	184,894		$	174,586

	September 30, 2014
	Canada		U.S. south		U.S. northeast		Corporate		Total
Goodwill	$	375,313	$	423,551	$	98,710	$	—	$	897,574
Capital assets	$	374,339	$	462,818	$	67,552	$	5,030	$	909,739
Landfill assets	$	162,615	$	419,814	$	361,138	$	—	$	943,567
Total assets	$	1,174,491	$	1,479,323	$	640,813	$	42,523	$	3,337,150

	December 31, 2013
	Canada		U.S. south		U.S. northeast		Corporate		Total
Goodwill	$	383,473	$	423,164	$	98,710	$	—	$	905,347
Capital assets	$	375,562	$	444,140	$	109,780	$	7,770	$	937,252
Landfill assets	$	180,706	$	417,119	$	354,906	$	—	$	952,731
Total assets	$	1,218,124	$	1,476,464	$	657,139	$	40,843	$	3,392,570

20.  Guarantees

In the normal course of business, the Company enters into agreements that meet the definition of a guarantee.  The Company’s primary guarantees are as follows:

The Company has provided indemnities under lease agreements for the use of various operating facilities.  Under the terms of these agreements the Company agrees to indemnify the counterparties for various items including, but not limited to, all liabilities, loss, suits, damage and the existence of hazardous substances arising during, on or after the term of the agreement.  Changes in environmental laws or in the interpretation thereof may require the Company to compensate the counterparties.  The maximum amount of any potential future payment cannot be reasonably estimated.  These indemnities are in place for various periods beyond the original term of the lease and these leases expire between 2014 and 2025.

28

Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

Indemnity has been provided to all directors and officers of the Company and its subsidiaries for various items including, but not limited to, all costs to settle suits or actions due to association with the Company and its subsidiaries, subject to certain restrictions.  The Company has purchased directors’ and officers’ liability insurance to mitigate the cost of any potential future suits or actions.  The term of the indemnification is not explicitly defined, but is limited to the period over which the indemnified party serves as a director or officer of the Company, including any one of its subsidiaries.  The maximum amount of any potential future payment cannot be reasonably estimated.

The Company has received indemnities for the receipt of hazardous, toxic or radioactive wastes or substances and the Company has issued indemnities for their disposal at third-party landfills.  Applicable federal, provincial, state or local laws and regulations define hazardous, toxic or radioactive wastes or substances.  Changes in environmental laws or in their interpretation may require the Company to compensate, or be compensated, by the counterparties.  The term of the indemnity is not explicitly defined and the maximum amount of any potential future reimbursement or payment cannot be reasonably estimated.

Certain of the Company’s landfills have Host Community Agreements (“HCA”) between the Company and the towns, municipalities or cities in which the landfills operate.  The Company has agreed to guarantee the market value of certain homeowners’ properties within a pre-determined distance from certain landfills based on a Property Value Protection Program (“PVPP”) incorporated into the HCA. Under the PVPP, the Company would be responsible for the difference between the sale amount and the hypothetical market value of the homeowners’ properties assuming a previously approved expansion of the landfill had not been approved, if any. The Company does not believe it is possible to determine the contingent obligation associated with the PVPP guarantees and does not believe it would have a material effect on the Company’s financial position or results of operations.  As of September 30, 2014, the Company has compensated one homeowner under the PVPP.

In the normal course of business, the Company has entered into agreements that include indemnities in favour of third parties, such as purchase and sale agreements, confidentiality agreements, engagement letters with advisors and consultants, outsourcing agreements, leasing contracts, underwriting and agency agreements, information technology agreements and service agreements.  These indemnification agreements may require the Company to compensate counterparties for losses incurred by the counterparties as a result of breaches in representation and regulations or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction.  The terms of these indemnities are not explicitly defined and the maximum amount of any potential reimbursement cannot be reasonably estimated.

The nature of these indemnification agreements prevents the Company from making a reasonable estimate of the maximum exposure due to the difficulty in assessing the amount of liability which results from the unpredictability of future events and the unlimited coverage offered to counterparties.  Historically, the Company and its predecessor have not made any significant payments under these or similar indemnification agreements and therefore no amount has been accrued with respect to these agreements.

21.  Seasonality

Revenues are generally higher in spring, summer and autumn months due to higher collected and received waste volumes.  Operating expenses generally follow the rise and fall of revenues.

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Progressive Waste Solutions Ltd.

Notes to the Condensed Consolidated Financial Statements

For the period ended September 30, 2014 (unaudited - in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)

22.  Subsequent Events

FASB’s guidance on intangibles — goodwill and other, addresses, amongst other things, the considerations and steps an entity is required to perform to test goodwill for impairment.  Goodwill impairment is a two step test.  The first step requires the Company to compare the fair value of its reporting units to their carrying amounts.  The guidance also requires that goodwill of a reporting unit should be tested between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.  The Company’s annual impairment test was completed on April 30, 2014 and concluded that the fair value of the U.S. northeast reporting unit exceeded its carrying amount by a substantial margin.  However, in determining the fair value of the U.S. northeast reporting unit in the April test the Company included the expected cash flows attributable to successfully securing a long-term contact with New York City.  The Company believes that should the prospects of securing a long-term contract with the city become less certain or it was not awarded the contract, and these cash flows were necessarily excluded from its determination of the fair value of the U.S. northeast reporting unit, the fair value of the U.S. northeast reporting unit would be less than its carrying amount.  If this were the result, the Company would be required to perform the second step of the impairment test to determine the resulting impairment loss.  In October 2014, certain developments, including current local support for the development of the operating location necessary to execute the New York City long-term contract, have made the likelihood of being awarded the contract indeterminate at this time.  In light of these developments, the Company is required to re-perform step one of the goodwill impairment test to determine if the carrying amount of the U.S. northeast reporting unit is in excess of its fair value.  Should the step one test result in the carrying value of the U.S. northeast reporting unit being in excess of its fair value, the Company will commission a third-party to assist with step two of the goodwill impairment test.  Step two of the impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.  The implied fair value of the reporting unit’s goodwill is determined in the same manner as goodwill is determined in a business combination.  The Company anticipates completing the step one and, if necessary, the second step of the impairment test in the fourth quarter of 2014 and recording the resulting impairment loss, if any, against net income in that period.  If an impairment loss results from step two of the impairment test, the loss may be material to the results of the Company’s operations for the fourth quarter and year ending December 31, 2014.  The carrying value of the U.S. northeast goodwill included on the Company’s balance sheet at September 30, 2014 is $98,710.

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