Exhibit 99.3  Managements Report on Internal Control Over Financial Reporting  The management of Progressive Waste Solutions Ltd. (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting.  The Companys internal control over financial reporting is reviewed and approved by the Vice Chairman and Chief Executive Officer and the Vice President and Chief Financial Officer with the expectation of providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.  Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis.  Also, projections regarding the effectiveness of these controls applicable to future periods are also subject to risk and may not be sufficient to meet the degree of compliance required to comply with the policy or procedure in the future.  Management conducted an assessment of the Companys internal control over financial reporting (ICFR) based on the Internal Control-Integrated Framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on that assessment, management has concluded that, as of December 31, 2012, the Companys internal control over financial reporting is considered effective.  As permitted, managements evaluation of and conclusion on the effectiveness of the Companys ICFR did not include an evaluation of the internal control over financial reporting for the assets and operations of Choice Environmental Services, Inc. (Choice) acquired on November 15, 2012.  At December 31, 2012, Choice represented 3.82% of the Companys total consolidated assets and represented (0.02%) of the Companys consolidated net assets.  For the year ended December 31, 2012, Choice represented 0.43% of the Companys consolidated revenues and (0.30%) of the Companys consolidated net income.  Based on managements evaluation, which excluded the acquisition of Choice, the Vice Chairman and Chief Executive Officer and Vice President and Chief Financial Officer concluded that the Companys internal control over financial reporting was effective as of December 31, 2012.  There were no material weaknesses identified by management as of December 31, 2012.  The Companys internal control over financial reporting as of December 31, 2012 has been audited by Deloitte LLP, Independent Registered Chartered Accountants, who also audited the Companys consolidated financial statements for the year ended December 31, 2012.  Deloitte LLP issued an unqualified opinion on the effectiveness of our internal control over financial reporting.  Joseph   D. Quarin(signed)
Ian   Kidson(signed)Vice Chairman and   Chief Executive Officer
Vice President and   Chief Financial OfficerFebruary 19,   2013
February 19, 2013


Managements Responsibility for Financial Statements  The consolidated financial statements of Progressive Waste Solutions Ltd. (the Company) are the responsibility of management and have been approved by the Companys Board of Directors.  The consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America.  The consolidated financial statements include amounts that are based on estimates and judgments which management has determined to be reasonable and presented fairly in all material respects.  The Company maintains systems of internal accounting and administrative controls.  These systems are designed and operated effectively to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Companys assets are properly accounted for and adequately safeguarded.  The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements.  The Board of Directors carries out this responsibility principally through its Audit Committee.  The Audit Committee is appointed by the Board of Directors and is comprised entirely of non-management directors. The Audit Committee meets periodically with management and the Companys external auditors to discuss auditing, internal control, accounting policy and financial reporting matters. The Audit Committee reviews the consolidated financial statements with management and the Companys external auditors and reports its findings to the Board of Directors before the consolidated financial statements are approved by the Board of Directors.  The consolidated financial statements have been audited by Deloitte LLP, the Companys external auditors, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States).  Joseph   D. Quarin(signed)
Ian   Kidson(signed)Vice Chairman and   Chief Executive Officer
Vice President and   Chief Financial OfficerFebruary 19,   2013
February 19, 2013


Report of Independent Registered Chartered Accountants  To the Board of Directors and Shareholders of Progressive Waste Solutions Ltd.  We have audited the internal control over financial reporting of Progressive Waste Solutions Ltd. and subsidiaries (the Company)as of  December 31, 2012, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  As described in Managements Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting the operations and assets of Choice Environmental Services, Inc. (Choice) which was acquired on November 15, 2012. At December 31, 2012 Choice represented approximately 3.82% of the Companys total consolidated assets and (0.02%) of the Companys total consolidated net assets.  For the year ended December 31, 2012, Choice represented 0.43% of the Companys consolidated revenues and (0.30%) of consolidated net income.  Accordingly, our audit did not include the internal control over financial reporting at Choice. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.  A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.  Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2012 of the Company and our report dated February 19, 2013 expressed an unqualified opinion on those financial statements.  Deloitte LLP


Independent Registered Chartered Accountants Licensed Public Accountants February 19, 2013 Toronto,Canada


Report of Independent Registered Chartered Accountants  To the Board of Directors and Shareholders of Progressive Waste Solutions Ltd.  We have audited the accompanying consolidated financial statements of Progressive Waste Solutions Ltd. and subsidiaries (the Company), which comprise the consolidated balance sheets as at December 31, 2012 and December 31, 2011, and the consolidated statements of operations and comprehensive income or loss, cash flows and equity for each of the years in the two-year period ended December 31, 2012, and a summary of significant accounting policies and other explanatory information.  Managements Responsibility for the Consolidated Financial Statements  Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.  Auditors Responsibility  Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.  An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.  Opinion  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Progressive Waste Solutions and subsidiaries as at December 31, 2012 and December 31, 2011 and the results of their operations and cash flows for each of the years in the two-year period ended December 31, 2012 in accordance with accounting principles generally accepted in the United States of America.  Other Matter  We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2013 expressed an unqualified opinion on the Companys internal control over financial reporting.  Deloitte LLP


Independent Registered Chartered Accountants Licensed Public Accountants February 19, 2013 Toronto, Canada


Progressive Waste Solutions Ltd. Consolidated Balance Sheets(Balance Sheet)  December 31, 2012 andDecember 31, 2011 (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)  December 31,

December 31,2012

2011ASSETSCURRENTCash and cash   equivalents

$
29,940

$
14,143Accounts receivable   (Note 6)

238,958

212,099Other receivables

440

414Prepaid expenses

38,762

31,484Income taxes recoverable

2,928

Restricted cash (Note 7)

476

452Other assets (Note 13)

1,573

1,972313,077

260,564OTHER RECEIVABLES

72

376FUNDED LANDFILL   POST-CLOSURE COSTS (Note 16)

9,885

9,200INTANGIBLES (Note 8)

287,847

257,731GOODWILL (Note 9)

929,114

774,409LANDFILL DEVELOPMENT   ASSETS

19,715

15,869DEFERRED FINANCING COSTS   (Note 10)

20,060

19,983CAPITAL ASSETS (Note 11)

927,518

776,058LANDFILL ASSETS (Note 12)

963,720

958,792INVESTMENT IN EQUITY   ACCOUNTED INVESTEE (Note 21)

4,062

3,973OTHER ASSETS (Note 13)

491

649$
3,475,561

$
3,077,604LIABILITIESCURRENTAccounts payable

$
120,341

$
115,292Accrued charges (Note 14)

131,528

124,496Dividends payable

16,206

14,540Income taxes payable

1,986

10,693Deferred revenues

19,002

17,645Current portion of   long-term debt (Note 15)

6,907

1,500Landfill closure and   post-closure costs (Note 16)

8,871

9,468Other liabilities (Note   13)

2,527

3,484307,368

297,118LONG-TERM DEBT (Note 15)

1,681,370

1,311,593LANDFILL CLOSURE AND   POST-CLOSURE COSTS (Note 16)

104,281

92,034OTHER LIABILITIES (Note   13)

6,166

7,484DEFERRED INCOME TAXES   (Note 23)

103,795

76,2342,202,980

1,784,463COMMITMENTS AND   CONTINGENCIES (Note 20)SHAREHOLDERS EQUITY (Note 17)Common shares   (authorized - unlimited, issued and outstanding - 114,993,864 (December 31, 2011   - 118,040,683))

1,773,530

1,824,231Restricted shares   (issued and outstanding - 172,500 (December 31, 2011 - 252,150))

(3,460
)
(5,353
)Additional paid in   capital

2,166

2,789Accumulated deficit

(451,539
)
(466,775
)Accumulated other   comprehensive loss

(48,116
)
(61,751
)Total shareholders   equity

1,272,581

1,293,141$
3,475,561

$
3,077,604  James J. Forese(signed) - Non-Executive Chairman
Douglas Knight(signed) - Audit Committee Chair  The accompanying notes are an integral part of these consolidated financial statements.  7


Progressive Waste Solutions Ltd. Consolidated Statements of Operations and Comprehensive Income or Loss(Statement of Operations and Comprehensive Income or Loss)  For the years ended December 31, 2012 and 2011 (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)  2012

2011REVENUES

$
1,896,741

$
1,840,096EXPENSESOPERATING

1,154,764

1,094,067SELLING, GENERAL AND   ADMINISTRATION

230,740

218,600RESTRUCTURING



1,609GOODWILL IMPAIRMENT   (Note 9)



360,557AMORTIZATION

274,118

257,066NET GAIN ON SALE OF CAPITAL   ASSETS

(592
)
(3,412
)OPERATING INCOME (LOSS)

237,711

(88,391
)INTEREST ON LONG-TERM   DEBT

57,428

62,086NET FOREIGN EXCHANGE   LOSS (GAIN)

9

(73
)NET LOSS (GAIN) ON   FINANCIAL INSTRUMENTS (Note 22)

1,725

(4,984
)LOSS ON EXTINGUISHMENT OF   DEBT (Note 15)

16,924

OTHER EXPENSES

105

872INCOME (LOSS) BEFORE   INCOME TAX EXPENSE AND NET LOSS FROM EQUITY ACCOUNTED INVESTEE

161,520

(146,292
)INCOME TAX EXPENSE (Note   23)Current

49,281

47,433Deferred

17,841

2,31567,122

49,748NET LOSS FROM EQUITY   ACCOUNTED INVESTEE

41

96NET INCOME (LOSS)

94,357

(196,136
)OTHER COMPREHENSIVE   INCOME (LOSS):Foreign currency   translation adjustment

11,702

(12,520
)Derivatives designated   as cash flow hedges, net of income tax ($863) (2011 - $3,117)

1,604

(5,790
)Settlement of   derivatives designated as cash flow hedges, net of income tax ($177) (2011 -   ($646))

329

1,2011,933

(4,589
)TOTAL OTHER   COMPREHENSIVE INCOME (LOSS)

13,635

(17,109
)COMPREHENSIVE INCOME   (LOSS)

$
107,992

$
(213,245
)Net income (loss) per   weighted average share, basic (Note 17)

$
0.81

$
(1.63
)Net income (loss) per   weighted average share, diluted (Note 17)

$
0.81

$
(1.63
)Weighted average number   of shares outstanding (thousands), basic (Note 17)

116,178

120,683Weighted average number   of shares outstanding (thousands), diluted (Note 17)

116,178

120,683  The accompanying notes are an integral part of these consolidated financial statements.  8


Progressive Waste Solutions Ltd. Consolidated Statements of Cash Flows(Statement of Cash Flows)  For the years ended December 31, 2012 and 2011 (stated in accordance with accounting principles generally accepted in the U.S. and in thousands of U.S. dollars)  2012

2011NET INFLOW (OUTFLOW) OF CASH   RELATED TO THE FOLLOWING ACTIVITIESOPERATINGNet income (loss)

$
94,357

$
(196,136
)Items not affecting cashRestricted share expense

2,034

2,107Write-off of deferred financing costs (Note 10 and   15)

11,726

Accretion of landfill closure and post-closure   costs (Note 16)

5,240

5,071Goodwill impairment



360,557Amortization of intangibles

53,585

49,559Amortization of capital assets

141,192

131,088Amortization of landfill assets

79,341

76,419Interest on long-term debt (amortization of deferred   financing costs) (Note 10)

5,665

6,035Net gain on sale of capital assets

(592
)
(3,412
)Net loss (gain) on financial instruments

1,725

(4,984
)Deferred income taxes

17,841

2,315Net loss from equity accounted investee

41

96Landfill closure and post-closure expenditures   (Note 16)

(6,737
)
(4,345
)Changes in non-cash working capital items (Note   18)

(68,657
)
(28,664
)Cash generated from operating activities

336,761

395,706INVESTINGAcquisitions, net of cash acquired (Note 5)

(282,313
)
(139,857
)Restricted cash deposits

(24
)
(18
)Investment in other receivables

(148
)
Proceeds from other receivables

440

474Funded landfill post-closure costs

(404
)
(381
)Purchase of capital assets

(180,322
)
(112,348
)Purchase of landfill assets

(66,556
)
(58,665
)Proceeds from the sale of capital assets

2,761

5,925Investment in landfill development assets

(3,968
)
(6,428
)Cash utilized in investing activities

(530,534
)
(311,298
)FINANCINGPayment of deferred financing costs

(17,315
)
(4,811
)Proceeds from long-term debt

1,924,480

380,347Repayment of long-term debt

(1,568,323
)
(318,086
)Proceeds from the exercise of stock options (Note   17)

403

2,385Repurchase of common shares (Note 17)

(65,633
)
(79,326
)Purchase of, net of proceeds from, restricted   shares

(541
)
(4,226
)Dividends paid to shareholders

(63,478
)
(61,078
)Cash generated from (utilized in) financing   activities

209,593

(84,795
)Effect of foreign currency translation on cash and   cash equivalents

(23
)
1,124NET CASH INFLOW

15,797

737CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

14,143

13,406CASH AND CASH EQUIVALENTS, END OF YEAR

$
29,940

$
14,143SUPPLEMENTAL CASH FLOW INFORMATION:Cash and cash equivalents are comprised of:Cash

$
28,929

$
14,142Cash equivalents

1,011

1$
29,940

$
14,143Cash paid during the year for:Income taxes

$
53,531

$
49,509Interest

$
57,109

$
59,289  The accompanying notes are an integral part of these consolidated financial statements.  9


Progressive Waste Solutions Ltd. Consolidated Statement of Equity(Statement of Equity)  For the year ended December 31, 2012 (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

Totalshares

shares

shares

capital

deficit

(Note 17)

equityBalance at December 31, 2011

$
1,824,231

$
(5,353
)
$


$
2,789

$
(466,775
)
$
(61,751
)
$
1,293,141Net income









94,357



94,357Dividends declared









(64,815
)


(64,815
)Restricted shares   purchased, net of restricted shares sold



(494
)




(47
)


(541
)Restricted share expense







2,034





2,034Vesting of restricted   shares



2,387



(2,387
)




Common shares issued on   exercise of stock options

673





(270
)




403Common shares acquired   by U.S. long-term incentive plan (LTIP)





(3,505
)






(3,505
)Deferred compensation   obligation





3,505







3,505Repurchase of common   shares

(51,374
)






(14,259
)


(65,633
)Foreign currency   translation adjustment











11,702

11,702Derivatives designated   as cash flow hedges, net of income tax











1,604

1,604Settlement of   derivatives designated as cash flow hedges, net of income tax











329

329Balance at December 31, 2012

$
1,773,530

$
(3,460
)
$


$
2,166

$
(451,539
)
$
(48,116
)
$
1,272,581  The accompanying notes are an integral part of these consolidated financial statements.  10


Progressive Waste Solutions Ltd. Consolidated Statement of Equity  For the year ended December 31, 2011 (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

Totalshares

shares

shares

capital

deficit

(Note 17)

equityBalance at December 31, 2010

$
1,878,286

$
(5,169
)
$


$
7,092

$
(188,972
)
$
(44,642
)
$
1,646,595Net loss









(196,136
)


(196,136
)Dividends declared









(60,646
)


(60,646
)Restricted shares   purchased



(4,226
)








(4,226
)Restricted share expense







2,107





2,107Vesting of restricted   shares



4,042



(4,042
)




Common shares issued on   exercise of stock options

3,500





(1,115
)




2,385Common shares issued on   exercise of warrants (Note 17)

750





(1,253
)




(503
)Common shares acquired   by U.S. LTIP





(3,188
)






(3,188
)Deferred compensation   obligation





3,188







3,188Repurchase of common   shares

(58,305
)






(21,021
)


(79,326
)Foreign currency   translation adjustment











(12,520
)
(12,520
)Derivatives designated   as cash flow hedges, net of income tax











(5,790
)
(5,790
)Settlement of   derivatives designated as cash flow hedges, net of income tax











1,201

1,201Balance at December 31, 2011

$
1,824,231

$
(5,353
)
$


$
2,789

$
(466,775
)
$
(61,751
)
$
1,293,141  The accompanying notes are an integral part of these consolidated financial statements.  11


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (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 its financial results in U.S. dollars also reduces foreign currency fluctuations in the Companys 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.  Summary of Significant Accounting Policies  These consolidated financial statements (financial statements) have been prepared in conformity with accounting principles generally accepted in the U.S. (U.S. GAAP), are stated in U.S. dollars, and reflect the following significant accounting policies.  Basis of presentation  These financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All intercompany accounts and transactions have been eliminated on consolidation.  Use of estimates  The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Estimates and assumptions include the following: estimates of the Companys allowance for doubtful accounts receivable;  future earnings, income tax and other estimates used in the annual, or step one and step two, test for impairment of goodwill; recoverability assumptions for landfill development assets; the useful life of capital and intangible assets; estimates and assumptions used in the determination of the fair value of contingent acquisition payments; accrued insurance reserves; projected landfill construction and development costs and estimated permitted airspace capacity consumed in the determination of landfill asset amortization; estimated landfill remediation costs; estimated closure and post-closure costs; various economic estimates used in the development of fair value estimates, including but not limited  12


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  to interest and inflation rates; share price volatility and the estimated length of time employees will hold options before exercise used in the determination of share based compensation and warrants, in addition to estimates of future performance used in the determination of performance share units; the fair value of financial instruments; realization of deferred income tax assets; and deferred income tax assets and liabilities.  Accordingly, results may differ significantly from these estimates.  13


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Cash and cash equivalents  Cash and cash equivalents include cash and highly liquid short-term money market investments that have an original term to maturity of three months or less.  Other receivables  Other receivables may include direct finance lease receivables.  Assets leased under terms that transfer substantially all of the benefits and risks and rewards of ownership to customers are accounted for as direct finance lease receivables.  Direct finance lease receivables are carried at cost and discounted at the underlying rate implicit in the lease.  The fair value of other receivables is estimated using a discounted cash flow analysis applying interest rates that management considers consistent with the credit quality of the borrower.  Other receivables are periodically reviewed for impairment and any resulting write-down to the net recoverable amount is recorded in the period in which impairment occurs.  Restricted cash  Cash received on the issuance of variable rate demand solid waste disposal revenues bonds (IRBs) is made available for certain purposes which may include some or all of the of following: landfill construction or equipment, vehicle and or container expenditures.  Cash received in advance of certain permitted expenditures is not available for general Company purpose or use.  Accordingly, restricted cash amounts are classified as restricted cash on the Companys balance sheet.  Deposits and withdrawals of restricted cash amounts are recorded as an investing activity in the statement of cash flows.  Intangibles  Intangible assets include customer collection contracts, customer lists, non-competition agreements, transfer station permits and trade-names, and all are deemed to have finite lives.  Finite life intangibles are amortized on a straight-line basis as follows:  Customer collection   contracts
Estimated contract term net of attritionCustomer lists
2-12 yearsNon-competition   agreements
2-5 yearsTransfer station   permits
10-25 yearsTrade-names
1-13 years  Goodwill  Goodwill is not amortized and is tested annually for impairment or more frequently if an event or circumstance occurs that more likely than not reduces the fair value of a reporting unit below its carrying amount.  Examples of such events or circumstances include: a significant adverse change in legal factors or in the business climate; an adverse action or assessment by a regulator; unanticipated or  increased competition; a loss of key personnel; a more-likely-than-not expectation that a significant portion or all of a reporting unit will be sold or otherwise disposed of; the testing for write-down or impairment of a significant asset group within a reporting unit; or the recognition of a goodwill impairment loss by a subsidiary that is a component of the reporting unit.  Goodwill is not tested for impairment when the assets and liabilities that make up the reporting unit have not changed significantly since the most recent fair value determination, the most recent fair value determination results in an amount that exceeded the carrying amount by a substantial margin, and based on an analysis of events that have occurred and circumstances that have changed since the most recent fair value determination, the likelihood that the current fair value determination would be less than the current carrying amount of the reporting unit is remote.  The Company has identified its reporting units as its operating segments and the  14


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  amount of goodwill assigned to each and methodology employed to make such assignments has been applied on a consistent basis.  15


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  The impairment test is a two step test.  The first test requires the Company to compare the fair value of its reporting units to its carrying amount.  If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired.  However, if the carrying amount of the reporting unit exceeds its fair value, the fair value of the reporting units goodwill is compared with its carrying amount to measure the amount of impairment loss, if any.  The fair value of goodwill is determined in the same manner as the value of goodwill determined in a business combination, whereby the excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the fair value of goodwill.  Fair value is the amount an item can be bought or sold in a current transaction between willing parties, that is, other than in a forced sale or liquidation.  In determining fair value, the Company has utilized a discounted future cash flow approach.  Additional measures of fair value are also considered by the Company.  Accordingly, the Company compares fair values determined using a discounted future cash flow approach to other fair value measures which may include some or all of the following: market multiple approach, offers from potential suitors, where available, or appraisals.  There may be circumstances where an alternative method to determine fair value is a more accurate measure.  Prolonged economic weakness, higher levels of competition, loss of business or loss of an operating permit could render goodwill impaired and could have a material adverse effect on the Companys financial condition and operating performance.  The Companys annual impairment test was completed on April 30, 2012, at which time the Company determined that the fair value of its Canadian and U.S. south reporting units substantially exceeded their carrying amounts while the fair value of the northeast reporting unit exceeded its carrying amount by a marginal amount. At December 31, 2012, the Company re-performed step one of the goodwill impairment test for its U.S. northeast reporting unit due to the loss of key management and the continuation of economic weakness and competition.  The results of the step one test concluded that the fair value of the U.S. northeast reporting unit was in excess of its carrying amount and a step two test was not warranted.  Landfill development assets  Landfill development assets represent costs incurred to develop landfills, including costs to obtain new landfill, or landfill expansion, permits.  Landfill development assets are capitalized to landfill assets once the asset is available for use, which is typically when the landfill is permitted to accept waste.  Once capitalized to landfill assets, these costs are amortized in accordance with the Companys landfill asset accounting policy.  Management periodically reviews the carrying values of landfill development assets for impairment.  Any resulting write-down to fair value is recorded in the period in which the impairment occurs and is recorded to operating expense on the Companys statement of operations and comprehensive income or loss.  Deferred financing costs  Deferred financing costs represent fees and costs incurred to secure or amend long-term debt facilities which are deferred and amortized on a straight-line basis over the term of the underlying debt instrument, which approximates the effective interest method.  Amortization of deferred financing costs is recorded to interest on long-term debt in the Companys statement of operations and comprehensive income or loss.  Capital assets  Capital assets are recorded at cost and, with the exception of land and land improvements, are amortized over their estimated useful lives on a straight-line basis as follows:  Buildings and improvements
10-40   yearsVehicles and equipment
3-10   yearsContainers and compactors
5-10   yearsFurniture, fixtures and computer equipment
3-10   years  16


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  The historical cost of acquiring an asset includes the cost incurred to bring it to the condition and location necessary for its intended use, which may include interest costs attributable to the construction and development of certain assets.  The Company ceases to capitalize interest once the construction and development effort is complete and the asset is available for use.  Interest is capitalized applying a rate equal to the Companys weighted average cost incurred on its long-term debt facilities in the year of capitalization.  Construction and development activities undertaken in Canada and the U.S. incur interest at the rate of interest applicable to each region. Capitalized costs and interest amounts are amortized over the assets intended useful life.  17


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Landfill assets  Landfill assets represent the cost of landfill airspace, which includes original acquisition cost and landfill construction and development costs, including gas collection systems installed during the operating life of the site.  Landfill assets also include capitalized landfill closure and post-closure costs, net of accumulated amortization.  Interest is capitalized on certain landfill construction and development activities prior to the landfill asset being available for use and is capitalized applying a rate equal to the Companys weighted average cost incurred on its long-term debt facilities in the year of capitalization.  Construction and development activities undertaken in Canada and the U.S. incur interest at the rate of interest applicable to each region.  The original acquisition cost of landfill assets, together with incurred and projected landfill construction and development costs and capitalized interest, is amortized on a per unit basis as landfill airspace is consumed.  Capitalized landfill closure and post-closure costs are amortized immediately as the capitalized amounts are deemed to have no future benefit.  At least annually, management updates landfill capacity estimates and projected landfill construction and development costs.  The impact of changes in capacity and construction cost estimates is accounted for prospectively.  Total available disposal capacity for the purpose of amortizing landfill assets represents the sum of estimated permitted airspace capacity (having received the final permit from the governing authorities) plus future permitted airspace capacity, which represents an estimate of airspace capacity that management believes is probable of being permitted based on the following criteria:  ·Personnel are actively working to obtain the permit or permit modifications necessary for expansion of an existing landfill, and progress is being made on the project; ·It is probable that the required approvals will be received within the normal application and processing periods for approvals in the jurisdiction in which the landfill is located; ·The Company has a legal right to use or obtain land associated with the expansion plan; ·There are no significant known political, technical, legal or business restrictions or issues that could impair the success of the expansion effort; ·Management is committed to pursuing the expansion; and ·Additional airspace capacity and related costs have been estimated based on the conceptual design of the proposed expansion.  The Company and its predecessors have been successful in receiving approvals for expansions pursued; however, there can be no assurance that the Company will be successful in obtaining approvals for landfill expansions in the future.  Investment in equity accounted investee  Investments in which the Company has joint control or the ability to exercise significant influence over the strategic operating, investing and financing policies of an investee, are accounted for using the equity method of accounting.  The equity method of accounting requires the Company to record its initial investment at cost.  The carrying value of the Companys initial investment is subsequently adjusted to include its pro rata share of post-acquisition earnings from the investee, reflecting adjustments similar to those made in preparing consolidated financial statements, which is included in the Companys determination of  net income or loss.  In addition, the Companys investment also reflects loans and advances, including amounts accruing thereon, its share of capital transactions, changes in accounting policies and corrections of errors relating to prior period financial statements applicable to post-acquisition periods.  Dividends received or receivable from the Companys investee reduces the carrying value of the Companys investment.  18


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Capital leases  Assets qualifying as capital leased assets are initially recorded at an amount equal to the present value of the minimum lease payments excluding executory costs, including any profit thereon.  In the event that the present value of the minimum lease payments exceeds the fair value of the leased asset at lease inception, the capital asset and lease obligation are recorded at fair value.  Capital leased assets are amortized over either the shorter of the estimated useful life of the asset or the lease term on a straight-line basis.  Capital lease obligations are recorded as long-term debt on the Companys balance sheet.  Accrued insurance  The Company is self-insured for certain general, auto liability and workers compensation claims.  Stop-loss insurance coverage is maintained for claims in excess of $250 or $500, depending on the policy period in which the claim occurred.  Self-insurance accruals are based on reported claims and claims incurred but not reported.  The Company engages independent actuaries in its assessment of insurance accruals and considers its historical claims experience in the determination of its accrued amounts.  Changes in the Companys claims history, including amounts or frequency, that increase or decrease the insurance accrual are recorded to selling, general and administrative expenses in the Companys statement of operations and comprehensive income or loss in the period in which the change occurs.  The Company makes various estimates in its determination of its self insurance accruals.  Changes in these estimates could result in significant changes to accrued insurance amounts.  Landfill closure and post-closure costs  Costs associated with capping, closing and monitoring the landfill, or portions thereof, after it ceases to accept waste are recognized at fair value over the landfills operating life which represents the period over which waste is accepted at the site.  The Company develops estimates for landfill closure and post-closure costs with input from its engineers and landfill and accounting personnel.  Estimates are reviewed at least once annually and consider amongst other things various regulations that govern each site.  Revenues derived from the Companys landfill gas to energy facilities do not reduce the Companys closure and post-closure cost estimates.  Quoted market prices are not available to fair value landfill closure and post-closure costs.  Accordingly, the Company estimates the fair value of landfill closure and post-closure costs using present value techniques that consider and incorporate assumptions and considerations marketplace participants would use in the determination of these estimates, including inflation, markups, inherent uncertainties due to the timing of work performed, information obtained from third parties, quoted and actual prices paid for similar work and engineering estimates.  Inflation assumptions are based on managements understanding of current and future economic conditions and the expected timing of expenditures.  An inflation factor of 2.0% (December 31, 2011  2.0%) and 2.5% (December 31, 2011  2.5%) has been used in the derivation of fair value estimates for the Companys Canadian and U.S. landfill closure and post-closure cost obligations, respectively.  Fair value estimates are discounted back applying the credit adjusted risk free rate, which is the rate of interest that is essentially free of default risk, plus an adjustment for the Companys credit standing.  The credit adjusted risk free rate considers current and future economic conditions and the expected timing of expenditures.  Accordingly, the Company has discounted landfill closure and post-closure costs using credit adjusted risk free rates between 4.6% and 9.5% in Canada (December 31, 2011  4.6% and 9.5%) and 4.5% and 7.2% (December 31, 2011  4.5% and 7.2%) in the U.S.  Due to the inherent uncertainty in making these estimates, actual results could differ significantly.  In isolation, a change in the Companys credit standing does not change previously recorded closure and post-closure obligations, but it would change subsequent fair value calculations.  Reliable estimates of market risk premiums are not available as there is no existing market for selling the responsibility of landfill closure and post-closure activities.  Accordingly, the Company has excluded any estimate of market risk premiums in the fair value determination of landfill closure and post-closure costs.  19


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Upward revisions to estimated closure and post-closure costs are discounted using the current credit adjusted risk free rate.  Downward revisions to estimated closure and post-closure costs are discounted using the credit adjusted risk free rate when the estimated closure and post-closure costs were originally recorded or a weighted average credit adjusted risk free rate if the period of original recognition cannot be identified.  The Company records the estimated fair value of landfill closure and post-closure cost obligations as airspace is consumed.  The total obligation will be fully accrued, net of accretion, at the time these sites cease to accept waste and are closed.  Accretion represents an increase in the carrying amount of landfill closure and post-closure cost obligations due to the passage of time and is recorded to operating expense in the statement of operations and comprehensive income or loss.  Accretion expense continues to be recognized post waste acceptance.  20


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Maintenance activities including: environmental monitoring, mowing and fertilizing, leachate management, well monitoring, buffer maintenance, landfill gas to energy collection and flaring systems, and other activities, are charged to operating expenses during the sites operating life.  These same costs are estimated and included in the Companys landfill post-closure accruals which are incurred subsequent to the landfills operating life.  Post-closure maintenance activities are generally required for a period of 30 years post waste acceptance.  Income taxes  Deferred income taxes are calculated using the liability method of accounting. Deferred income tax assets and liabilities represent differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  The effect of a change in tax rates on deferred income tax assets and liabilities is recorded to operations in the period in which the change in tax rate occurs.  Unutilized tax loss carryforwards that are not likely to be realized are reduced by a valuation allowance in the determination of deferred income tax assets.  Uncertain tax positions are recognized when it is more likely than not that the tax position will be sustained upon examination based on its technical merits.   The Company recognizes interest and penalties in current income tax expense.  Revenues  Revenues consist primarily of waste collection fees earned from commercial, industrial, municipal and residential (collection) customers and transfer and landfill disposal fees charged to third parties.  The Company recognizes revenues when the service is provided, persuasive evidence of an arrangement exists, ultimate collection is reasonably assured and the price is determinable.  The Companys revenues are not derived from multiple deliverables.  Revenue is recognized upon the collection of waste for collection customers under contractual service agreements.  Revenue earned from transfer and landfill disposal fees charged to third parties is recognized upon the receipt of waste at the Companys facilities.  The Company also earns revenue from the collection and sale of recycled materials and generation of electric power or methane gas.  Revenue earned from the collection of recycled materials is recognized when materials are collected while revenue recognized on the sale of recycled materials is recognized when the material is delivered to the purchaser.  Revenue earned from the sale of electric power or methane gas is under contract and is recognized when the supply of electricity or methane gas is delivered to the purchaser.  Tax assessed by governmental authorities on revenue-producing transactions between the Company and its customers is excluded from revenues presented in the statement of operations and comprehensive income or loss.  Deferred revenue relates to long-term collection contracts, under which advanced billing occurs, or cash received prior to the service being performed.  Acquisitions  The Company accounts for acquisitions using the acquisition method of accounting and allocates the fair value of the consideration transferred, together with the fair value of non-controlling interest, if any, to the fair value of identifiable assets acquired and liabilities assumed.  Goodwill is recognized as the excess of the fair value of consideration, including any amount of non-controlling interest in the acquired company, over the acquisition date fair values of the net assets acquired, subject to certain exceptions.  If aggregate consideration is less than the net assets acquired, a gain is recognized to net income or loss on the date of acquisition.  The measurement and recognition of acquired identifiable net assets may require adjustment when information is absent and fair value allocations are presented on an estimated or preliminary basis.  Subsequent adjustments to estimated or preliminary amounts occurring not later than one year from the date of acquisition are recorded retrospectively to the purchase price allocation to reflect new information obtained about facts and circumstances that existed at the date of acquisition.  21


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Certain of the Companys purchase and sale agreements contain contingent consideration provisions.  For acquisitions completed subsequent to January 1, 2009, purchase price allocation adjustments resulting from contingent consideration provisions are required when additional information is obtained subsequent to the date of acquisition that existed at the date of acquisition.  Contingent consideration is initially recorded at fair value on the date of acquisition.  Purchase price allocation adjustments are permitted, but are limited to the measurement period, which is the earlier of the date on which all facts and circumstances that existed at the date of acquisition are known or are determined to not be obtainable, and one year from the acquisition date.  Changes in events that occur subsequent to the date of acquisition are not permissible measurement period adjustments.  Changes in the fair value of contingent consideration classified as equity are not re-measured, but subsequent settlement is recorded to shareholders equity.  A change in the fair value of contingent consideration classified as an asset or liability is measured at fair value and recorded to net income or loss.  Contingent consideration for acquisitions completed prior to January 1, 2009, which could be reasonably estimated at the date of acquisition and the outcome could be determined beyond a reasonable doubt, was recognized at fair value and included in the purchase price allocation.  Consideration which is contingent on maintaining or achieving specified revenue or earnings levels, satisfying representations and warranties, achieving specified tonnage thresholds, in the case of acquired landfills, or receiving approval from regulatory authorities for landfill expansion, is recognized as an adjustment to the purchase price allocation when the contingency is resolved and the additional consideration is issued or becomes issuable.  The acquisition date is the date the Company obtains control and is generally the date the Company obtains legal title to the net assets acquired.  To be recognized at the date of acquisition, assets and liabilities must meet their fundamental definitions.  Contingencies existing before or on the date of acquisition are recognized at their fair values if they can be reliably measured.  The Company recognizes acquisition and related costs in the period incurred and records these costs to selling general and administration expense in the statement of operations and comprehensive income or loss.  Costs associated with the issuance of long-term debt are capitalized to deferred financing costs and amortized over the period of the underlying debt, while equity issue costs are recorded against common shares on the Companys balance sheet.  Advertising costs  Advertising costs of $3,515 (2011 - $3,412) were expensed as incurred and included in selling, general and administration expenses in the statement of operations and comprehensive income or loss.  Royalties  Certain of the Companys purchase and sale agreements contain provisions that require the Company to make royalty payments.  Royalty payments, including accrued amounts, are recorded to operating expense on the statement of operations and comprehensive income or loss as incurred.  Costs associated with exit activities  The Company records employee termination benefits that represent a one-time benefit accruing to an employee as an expense when management approves and commits to a plan of termination and communicates the termination arrangement to the employee.  Expenses may be recorded in future periods if employees are required to provide future services in order to receive the termination benefits.  A liability for costs to terminate a contract before the end of its term is recognized when the Company terminates the contract.  Other costs associated with an exit activity may include costs to consolidate or close facilities and relocate employees, which are expensed as incurred.  Impairment of long-lived assets  An impairment loss is recognized when events or circumstances indicate that the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.  Management assesses its long-lived assets periodically or more frequently if  22


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  impairment indicators exist.  Any resulting impairment loss is recorded in the period in which the impairment occurs.  The Company has not recorded any significant impairment losses on long-lived assets in the current or comparative year.  23


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Share based compensation  Share based options  With the exception of stock options assumed on the acquisition of Waste Services, Inc. (WSI), the Company has issued all share based options with stock appreciation rights.  Stock appreciation rights give the holder the right to surrender to the Company all or a portion of an option in exchange for cash equal to the excess of the fair market value, defined as the five day volume weighted average trading price of a share, over the options exercise price.  Stock appreciation rights are measured at fair value on the date of grant and are re-measured at fair value at each balance sheet date until the date of settlement.  The Company considers estimated forfeitures in the determination of fair value.  Changes to estimated forfeitures are recorded as a selling, general and administration expense in the period in which the change occurs.   Changes in the fair value of share based options are also recorded to selling, general and administration expense. The Company has elected to recognize compensation expense on a straight-line basis over the requisite service period for the entire award.  The stock options assumed on the acquisition of WSI were fully vested and measured at fair value on the date of closing.  The Company uses the Black-Scholes-Merton option pricing model which requires several input variables.  These variables include the estimated length of time employees will retain their options before exercising them and the expected volatility of the Companys share price.  Changes in these variables can materially affect the estimated fair value of share based compensation and, consequently, the related amount recognized in selling, general and administration expense on the statement of operations and comprehensive income or loss.  Restricted shares  Compensation related to restricted shares is recognized over the period in which employee services are rendered.  Restricted shares with graded vesting schedules are viewed as separate awards and each is accounted for separately over the employee service period to the date of vesting.  Restricted shares are initially recorded to shareholders equity at the fair value of the shares issued on the date of grant.  The related expense is recorded to selling, general and administration expense as the employee service period is satisfied.  Performance Share Units (PSUs)  PSUs have been issued to certain employees of the Company.  PSU awards are subject to meeting a three year service period, subject to certain conditions, and certain three year performance measures, which consist of operating cash flow and return on invested capital.  The fair value of each PSU is based on the expected level of achievement relative to each performance measure and the price of the Companys shares traded on the Toronto Stock Exchange (TSX).  The Companys compensation committee may, in its sole discretion, consider other business circumstances that warrant adjustment to the financial results or targets when assessing the final award amount.  Compensation expense is recognized over the service period based on the fair value of the award at each balance sheet date until the date of vesting.  The Company uses the Black-Scholes-Merton pricing model to determine the fair value of its PSUs which requires several input variables.   Changes in these variables can have a significant impact on the estimated fair value of PSUs and, consequently, the related amounts accrued on the balance sheet and recognized as compensation expense or recovery in the statement of operations and comprehensive income or loss.  Compensation expense or recovery is based on the change or a portion of the change in the fair value of the PSU at each reporting period multiplied by the percentage of the service period satisfied at the reporting date.  The Company considers the likelihood of achieving each performance measure and recognizes compensation expense only to the extent that it believes the performance measures will be achieved.  If the Company concludes that it is unlikely that its performance measures will be met, the Company will recover any amounts accrued to date and cease recognizing compensation expense until this conclusion is no longer  24


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  supportable.  In estimating the fair value of the liability the Company also considers current and historical forfeitures.  PSUs are settled in cash and are recorded as liabilities on the Companys balance sheet.  Changes in the fair value of PSUs are recorded to selling, general and administration expense in the statement of operations and comprehensive income or loss.  25


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Shares held by a rabbi trust  Common shares held in a rabbi trust are classified as treasury shares.  Shares of the Company acquired for the benefit of its U.S. LTIP participants are held in a rabbi trust.  A rabbi trust, as a grantor trust, requires that the assets held in the trust be available to satisfy the claims of general creditors in the event of bankruptcy.  The deferred compensation obligation is recorded to restricted shares as a component of shareholders equity and subsequent changes in the fair value of the shares are not recognized in either treasury stock or deferred compensation obligations.  As U.S. LTIP participants draw shares from the rabbi trust, both the deferred compensation obligation and shares acquired by the U.S. LTIP reduce by a similar amount.  The rabbi trust holds no other investments.  Warrants  The warrants assumed on the acquisition of WSI were fully vested and measured at fair value on the date of closing using the Black-Scholes-Merton option pricing model.  Financial instruments  Derivatives, including derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contract, subject to certain exceptions, are measured at fair value, even when they are part of a hedging relationship.  Gains or losses on financial instruments measured at fair value are recognized in the statement of operations and comprehensive income or loss in the periods in which they arise, with the exception of gains and losses on certain financial instruments that are part of a designated hedging relationship, and are presented as other assets or other liabilities on the Companys balance sheet.  Gains or losses on financial instruments designated as hedges are recognized in other comprehensive income or loss.  Derivatives are financial instruments or other contracts that embody all of the following characteristics:  ·their value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable (sometimes called the underlying), provided that, in the case of a non-financial variable, the variable is not specific to a party to the contract; ·they require no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and ·they are settled at a future date.  The Company enters into various types of derivative financial instruments, which may include some or all of the following: interest rate swaps, commodity swaps, foreign currency exchange agreements or old corrugated cardboard hedges.  Embedded derivatives are components of a hybrid (combined) instrument that also includes a non-derivative host contract.  The result is that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.  An embedded derivative causes some or all of the cash flows that would otherwise be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, provided that, in the case of a non-financial variable, the variable is not specific to a party to the contract.  An embedded derivative is separated from its host contract when all of the following conditions are met:  ·the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; ·the separated instrument would meet the definition of a derivative; and ·the hybrid (combined) instrument is not measured at fair value with changes in fair value recognized in net income.  26


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Any gains or losses on embedded derivatives are recorded in the statement of operations and comprehensive income or loss as a gain or loss on financial instruments and are presented as other assets or other liabilities on the Companys balance sheet.  Hedges  Hedges modify the Companys exposure to one or more risks by creating an offset between changes in the fair value of, or the cash flows attributable to, the hedged item and the hedging item.  Hedge accounting ensures that counterbalancing gains, losses, revenues and expenses are recognized in net income or loss in the same period or periods.  In addition, hedge accounting is only applied when gains, losses, revenues and expenses on a hedging item would otherwise be recognized in net income or loss in a different period than the hedged item.  The application of hedge accounting is at the option of the Company; however, hedge accounting can only be applied when, at the inception of the hedging relationship the Company has met or satisfied the following conditions:  ·the nature of the specific risk exposure or exposures being hedged has or have been identified in accordance with the Companys objective and strategy; ·the Company has designated that hedge accounting will be applied to the hedging relationship; and ·the Company has formally documented its risk management objective, its strategy, the hedging relationship, the hedged item, the related hedging item, the specific risk exposure or exposures being hedged, the term of the hedging relationship, and the method for assessing the effectiveness of the hedging relationship.  In addition, both at the inception of the hedging relationship, and throughout its term, the Company has to be reasonably certain that the relationship will be effective and consistent with its originally documented risk management objective and strategy.  Hedge effectiveness represents the extent to which changes in the fair value or cash flows of a hedged item relating to a risk being hedged, and arising during the term of a hedging relationship, are offset by changes in the fair value or cash flows of the corresponding hedging item related to the risk being hedged and arising during the same period.  Accordingly, the effectiveness of the hedging relationship must be reliably measurable, the hedging relationship must be assessed on a regular periodic basis over its term to determine that it has remained, and is expected to continue to be, effective, and in the case of a forecasted transaction, it is probable that the transaction will occur.  Fair value hedges, hedge the exposure to changes in the fair value of: a recognized asset or liability; an unrecognized firm commitment; or, an identified portion of such an asset, liability or firm commitment.  The Company has no fair value hedges.  Cash flow hedges, hedge the exposure to variability in cash flows associated with: a recognized asset or liability; a forecasted transaction; or, a foreign currency risk in an unrecognized firm commitment.  The gain or loss on the hedging item that is determined to be an effective hedge is recognized in other comprehensive income or loss and the ineffective portion of the gain or loss is recognized on the Companys statement of operations and comprehensive income or loss as a net gain or loss on financial instruments.  The Company discontinues hedge accounting when a hedging relationship ceases to satisfy the conditions of hedge accounting, including: the maturity, expiry, sale, termination, cancellation or exercise, of the hedging item or hedged item; the anticipated transaction will not occur within the documented time period or within an additional two month period thereafter; the Company terminates its designation of the hedging relationship; or, the hedging relationship ceases to be effective.  When a hedging item ceases to exist or it is determined that the anticipated transaction will not occur, amounts recognized in other comprehensive income or loss are recognized in net income or loss.  If the Company terminates its designation of the hedging relationship or the hedging relationship ceases to be effective, amounts recorded to other comprehensive income or loss in previous periods are not reversed, while amounts arising subsequently are recorded on the Companys statement of operations and comprehensive income or loss as a net gain or loss on financial instruments.  27


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Amounts that were recorded to other comprehensive income or loss in previous periods that were not reversed are recorded as a net gain or loss on financial instruments in the same period or periods as the hedged transaction affects net income.  Foreign currency translation  The Companys functional currency is the Canadian dollar.  Accordingly, its financial position, results of operations, cash flows and equity are initially consolidated in Canadian dollars.  The Company has concluded that its U.S. segments are self-sustaining foreign operations which are translated applying the current rate method.  Applying this method, assets and liabilities are translated to Canadian dollars from their functional currency using the exchange rate in effect at the balance sheet date.  Revenues and expenses are translated to Canadian dollars at the average monthly exchange rates.  The resulting translation adjustments are included in other comprehensive income or loss and are only included in net income or loss when the Company realizes a reduction in its foreign operations investment.  Gains or losses on foreign currency balances or transactions that are designated as hedges of a net investment in self-sustaining foreign operations are offset against exchange gains or losses included in other comprehensive income or loss.  28


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  The Company has elected to report its financial results in U.S. dollars.  Accordingly, the Companys balance sheet is translated from Canadian to U.S. dollars at the foreign currency exchange rate in effect at the balance sheet date.  The statement of operations and comprehensive income or loss and statement of 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.  Disposal of long-lived assets and discontinued operations  Long-lived assets, to be disposed of other than by sale, such as abandonment or exchange for similar productive long-lived assets, are classified as held and used until the disposal transaction occurs.  Long-lived assets held for sale are carried at the lower of their carrying amount or fair value less cost to sell.  4.  Changes in Accounting Policies  Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS)  In May 2011, the Financial Accounting Standards Board (FASB) issued amendments that changed the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements, including enhanced disclosures about the assumptions used in fair value measurements.  These amendments result in common fair value measurement and disclosure requirements between U.S. GAAP and IFRS.  The amendments are applicable prospectively.  For the Company, this guidance was effective January 1, 2012.  This guidance did not have a significant impact on the Companys financial statements.  Presentation of Comprehensive Income  In June 2011, FASB issued amendments to the presentation of comprehensive income.  The amendments give an entity the option to present comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In either instance, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.  An entity is also required to present on the face of the financial statements adjustments for items reclassified from other comprehensive income to net income and present these adjustments with the components of net income and other comprehensive income.  In December 2011, FASB indefinitely deferred this second requirement. The amendments are to be applied retrospectively and were effective for the Company on January 1, 2012.  This guidance did not have a significant impact on the Companys financial statements.  Intangibles  Goodwill and Other: Testing Goodwill for Impairment  In September 2011, FASB issued amendments to the testing of goodwill for impairment.  The amendment provides an entity with the option to qualitatively assess factors to determine if it is more likely than not that the fair value of a reporting unit exceeds its carrying amount.  If an entitys qualitative assessment concludes that it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, then the entity is not required to perform step one of the two-step impairment test.  However, if an entitys assessment concludes otherwise, the entity is required to perform the first step of the two-step impairment test which requires the entity to calculate the fair value of the reporting unit and compare it to its carrying amount.  The amendments also provide the entity with the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step impairment test.  An entity may resume the qualitative assessment in any subsequent period.  The amendments are effective for the Companys annual and, if necessary, interim impairment tests performed after December 31, 2011.  This guidance did not have any impact on the Companys financial statements.  29


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Intangibles  Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment  In July 2012, FASB issued amendments to the testing of indefinite-lived intangible assets for impairment.  The amendment provides an entity with the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible is impaired. If an entitys qualitative assessment of events and circumstances concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entitys assessment concludes otherwise, the entity is required to perform the quantitative impairment test which compares the fair value of the indefinite-lived intangible to its carrying amount. The amendments also provide the entity with the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity may resume the qualitative assessment in any subsequent period.  The amendments are effective for the Companys annual and, if necessary, interim impairment tests performed after September 15, 2012.  This guidance will not have any impact on the Companys financial statements  Comprehensive Income - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income  In February 2013, FASB issued amendments to comprehensive income requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts.  This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period.  The amendments are effective prospectively for reporting periods beginning after December 15, 2012 with early adoption permitted.  This guidance is not expected to have a significant impact on the Companys financial statements.  5.  Acquisitions  The following table outlines the number of acquisitions completed by the Company in each of its business segments for the year ended December 31, 2012 and 2011.  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.  December 312012

2011Assets

Shares

Total

Assets

Shares

TotalCanada

4

2

6

2

1

3U.S. south

7

1

8

7

1

8U.S. northeast

1

4

5

3



3Total acquisitions

12

7

19

12

2

14  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 acquired companies are immaterial both individually and in the aggregate.  Certain purchase price allocations for acquisitions completed in the current year  30


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  are absent final fair value adjustments.  The results from these acquisitions have been included in the Companys financial statements from the date of closing.  The payment of contingent consideration, for acquisitions completed prior to 2009, which will result 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.  Cash consideration paid, and its preliminary allocation to the fair value of net assets acquired, is as follows:  31


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  December 312012

2011ConsiderationCash, including holdbacks (as applicable)

$
308,314

$
148,272Net assets acquiredCash

717

Accounts receivable

18,176

6,315Intangibles (Note 8)

79,730

37,262Goodwill (Note 9)

146,702

57,976Capital assets

90,396

43,449Accounts payable

(17,059
)
(5,205
)Long-term debt

(2,628
)
Remediation liabilities

(200
)
Deferred income taxes

(7,520
)
8,475Total net assets acquired

$
308,314

$
148,272Consideration by segment   (including holdbacks (as applicable))Canada

$
69,271

$
3,602U.S. south

145,766

128,781U.S. northeast

93,277

15,889Total consideration

$
308,314

$
148,272Goodwill recorded by segmentCanada

$
28,167

$
2,139U.S. south

71,512

48,884U.S. northeast

47,023

6,953Total goodwill

$
146,702

$
57,976Goodwill expected to be   deductible for tax purposes

$
99,777

$
51,699  December 312012

2011Aggregate cash consideration   (excluding holdbacks and cash payments due to sellers for achieving various   business performance targets)

$
281,970

$
139,683Contingent consideration (paid   in respect of acquisitions completed prior to January 1, 2009)

$
343

$
174Transaction costs (included in   selling, general and administration expense)

$
2,507

$
1,880  32


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  In connection with the acquisition of a companys shares completed in the third quarter of 2010, the Company subsequently elected under section 338(h)(10) of the Internal Revenue Code to deem the acquisition as a sale of assets for tax purposes.  In this regard, the Company has borne the tax burden accruing to the seller as a result of the election after determining that the present value of the future tax savings exceeds the cost payable to the seller for the step-up in basis.  Accordingly, during the year ended December 31, 2011 the Company paid the seller an additional $5,237 of cash consideration and recognized a $6,433 reduction to recorded goodwill and an increase in deferred tax assets of $11,670.  These amounts are included in the table above.  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 back to the date of acquisition.  Holdback and additional amounts payable for current period acquisitions totaled $25,627 as at December 31, 2012 (December 31, 2011 - $8,589).  6.  Accounts Receivable - Allowance for Doubtful Accounts  The following table illustrates the change in the Companys allowance for doubtful accounts for the years ended December 31, 2012 and 2011.  December 312012

2011Balance, beginning of the year

$
5,250

$
5,603Additions, during the year

5,594

4,643Written-off, uncollectible, during the year

(5,774
)
(5,463
)Recoveries, during the year

869

503Foreign currency translation adjustment, for the   year

41

(36
)Balance, end of year

$
5,980

$
5,250  7.  Restricted Cash  Restricted cash represents cash received from IRB drawings that have been received in advance of incurring expenditures for which the IRBs are made available.  At December 31, 2012, $476 (2011 - $452) of cash is restricted to fund a portion of landfill construction activities and equipment and container expenditures in the Companys U.S. northeast operations.  33


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  8.  Intangibles  December 31, 2012Cost

Accumulated   amortization

Net book   value

Additions

Weighted   average   amortization   period of   additionsCustomer collection   contracts

$
249,308

$
150,337

$
98,971

$
23,675

3.83Customer lists

247,553

104,833

142,720

42,221

6.60Non-competition   agreements

31,602

20,932

10,670

6,990

4.54Transfer station permits

34,415

6,837

27,578

5,570

20.00Trade-names

13,142

5,234

7,908

2,377

3.67$
576,020

$
288,173

$
287,847

$
80,833  December 31, 2011Cost

Accumulated   amortization

Net book   value

Additions

Weighted   average   amortization   period of   additionsCustomer collection contracts

$
221,283

$
129,948

$
91,335

$
10,812

3.72Customer lists

205,324

78,162

127,162

18,944

7.36Non-competition agreements

24,732

14,903

9,829

7,173

3.85Transfer station permits

27,622

5,324

22,298

250

20.00Trade-names

10,607

3,500

7,107

83

2.00$
489,568

$
231,837

$
257,731

$
37,262  Adjustments to the fair value of certain assets, occurring in the measurement period, and acquired in the prior year, resulted in a $572 and $531 increase to customer collection contracts and customer lists, respectively, for the year ended December 31, 2012.  Intangible assets are expected to amortize as follows in the next five years and thereafter:  2013

$
59,2332014

53,5482015

43,4432016

38,7082017

33,077Thereafter

59,838$
287,847  34


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  9.  Goodwill  The following tables illustrate the change in goodwill for the year ended December 31, 2012 and 2011.  December 31, 2012Canada

U.S. south

U.S.   northeast

TotalGoodwill, stated at cost

$
372,596

$
350,126

$
412,244

$
1,134,966Accumulated impairment loss





(360,557
)
(360,557
)Balance, beginning of year

372,596

350,126

51,687

774,409Goodwill recognized on acquisitions, during the   year

28,167

71,512

47,023

146,702Goodwill adjustments in respect of prior year   acquisitions, during the year



(530
)


(530
)Foreign currency exchange adjustment, for the year

8,533





8,533Goodwill, stated at cost

409,296

421,108

459,267

1,289,671Accumulated impairment loss





(360,557
)
(360,557
)Balance, end of year

$
409,296

$
421,108

$
98,710

$
929,114  December 31, 2011Canada

U.S. south

U.S.   northeast

TotalGoodwill, stated at cost

$
378,884

$
297,077

$
405,907

$
1,081,868Accumulated impairment loss







Balance, beginning of year

378,884

297,077

405,907

1,081,868Goodwill impairment recognized, during the year





(360,557
)
(360,557
)Goodwill recognized on acquisitions, during the   year

2,139

48,884

6,953

57,976Goodwill adjustments in respect of prior year   acquisitions, during the year



4,165

(616
)
3,549Foreign currency exchange adjustment, for the year

(8,427
)




(8,427
)Goodwill, stated at cost

372,596

350,126

412,244

1,134,966Accumulated impairment loss





(360,557
)
(360,557
)Balance, end of year

$
372,596

$
350,126

$
51,687

$
774,409  For the year ended December 31, 2012, goodwill arising from accrued contingent consideration due to sellers for acquisitions consummated prior to January 1, 2009 amounted to $nil (2011 - $nil).  Adjustments to preliminary fair value allocations resulted in a ($873) decrease to goodwill (2011 - $3,375 increase to goodwill).  The Company has not disposed of any goodwill for the years ended December 31, 2012 and 2011.  The Company has not recognized a goodwill impairment charge for the year ended December 31, 2012 (2011 - $360,557).  The impairment charge recorded in 2011 was a reflection of continued deteriorating economic conditions and heightened competition for volumes which are constrained in the Companys U.S. northeast reporting unit.  FASBs guidance on intangibles  goodwill and other, addresses, amongst other things, the considerations and steps an entity is required to undertake to test goodwill for impairment.  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.  35


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Goodwill is tested for impairment at the reporting unit level.  A reporting unit is an operating segment or one level below an operating segment, referred to as a component.  A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and the information is regularly reviewed by segment management.  The Company has defined its operating segments as follows: Canada, U.S. northeast and U.S. south. There are several components that exist under each operating segment.  However, the Company has determined that since the components under each operating segment share similar characteristics, its operating segments are also its reporting units.  The amount of goodwill assigned to each reporting unit and the methodology employed to make such assignments has been applied on a consistent basis.  At December 31, 2012, the Company re-performed step one of the goodwill impairment test for its U.S. northeast reporting unit due to the loss of key management and the continuation of economic weakness and competition.  The results of the step one test concluded that the fair value of the U.S. northeast reporting unit was in excess of its carrying amount and a step two test was not warranted.  In determining the fair value of the U.S. northeast reporting unit, in step one of the goodwill impairment test, the Company included the expected cash flows attributable to successfully securing a long-term contact with New York City.  Should the prospects of securing a long-term contract with the city become less certain or the Company is not successful in the award of such contract, the fair value of the U.S. northeast reporting unit will be less than its carrying amount and a step two of the two step impairment test would be required to be performed to determine the resulting impairment loss.  It is the Companys belief that if it is not awarded the long-term contract with New York City, goodwill recorded in the U.S. northeast reporting unit will be impaired.  The Companys annual test for impairment, conducted on April 30, 2011, concluded, at that time, that the fair value of its U.S. northeast reporting unit was in excess of its carrying amount, recognizing that the margin of excess wasnt significant.  Since then, the Companys U.S.northeast business was subjected to an economic environment that continued to weaken and where competition remained strong.Accordingly, these deteriorating economic conditions and resilient levels of competition represent a change in business climate that the Company wasnt anticipating nor did it reflect in its step one test for impairment in April.  The Company re-performed step one of the goodwill impairment test at September 30, 2011 and reached the conclusion that the carrying amount of the U.S. northeast reporting unit was in excess of its fair value.  The Company had also concluded that in light of the weak economic outlook that it was more likely than not that impairment exists.  Accordingly, the Company commissioned a third party to assist it with step two of the goodwill impairment test.  Step two of the impairment test compares the implied fair value of the reporting units goodwill with the carrying amount of that goodwill.  The Company completed the second step of the impairment test in the fourth quarter of 2011 resulting in the recognition of an impairment loss.  The fair value of goodwill for the Companys U.S. northeast reporting unit was determined in the same manner as the value of goodwill is determined in a business combination, whereby the excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the fair value of goodwill.  Fair value is the amount at which an item can be bought or sold in a current transaction between willing parties, other than in a forced sale or liquidation.  In determining fair value, the Company utilized a discounted future cash flow approach.  The Company concluded that the discounted future cash flow approach to determine fair value was the most appropriate for the following reasons: quoted market prices for the sale of a similar basket of assets, liabilities, revenues and expenses were not readily available, prices for the sale of a comparable business of the same size and composition of operations was not readily available and finally, the Company employs the discounted future cash flow approach when it values and acquires companies and therefore believes that a market place participant would apply a similar approach.  The Company also calculated fair value applying  36


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  the market multiple approach.  The fair value calculated applying the market approach was compared to the results calculated applying the discounted cash flow approach as a measure of reasonability.  37


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  The discounted cash flow approach employs a variety of assumptions, including revenue growth, capital and landfill spending, margins, acquisitions, corporate cost allocations and tax and discount rates.  The primary assumptions used to determine the fair value of the Companys U.S. northeast reporting unit were as follows: revenue growth of 2.0%; capital and landfill expenditures equal to 13.2% of revenue in year one and declining by 0.5% in each year thereafter until a value of 9.0% of revenue was attained; revenue less operating and selling, general and administration expense margin of 24.2% with no annual improvement; no acquisitions or corporate cost allocations were assumed; a tax and discount rate of 40% and 8.9%, respectively, was applied.  The discounted cash flow approach assumptions applied at September 30, 2011 differed from those the Company applied at April 30, 2011 as follows:  a.The revenue growth rate assumption declined from 3.0% in April to 2.0% in September.  The decline was a function of several factors, including: refined volume and pricing growth assumptions in light of continued economic weakness coupled with a softer economic outlook in this segment and heightened competition in this segment for volumes which are constrained  b.Broader economic assumptions used in April 2011 were tempered as well.  The economy, especially in this segment, had only delivered marginal improvements since the prior year and the Department of Commerce and gross domestic product outlooks suggest that 2.0% may be attained, but accelerated growth is some distance away  c.The introduction of rail haul by some of the Companys competitors to their landfill sites had increased the competitive reach for volumes that have typically been destined for its landfills.  Accordingly, landfill volumes and pricing had come under pressure to remain competitive in this segment  d.Capital and landfill expenditures increased from the Companys April 2011 assumptions due to project related spending expected in 2012 and for a period thereafter to remain competitive in this market place  e.The assumption of margin expansion was tempered in light of waning economic conditions and the increase in competitive pressures.  Margin expansion was predicated on strong pricing and volume gains, and since neither was expected to be robust in the near to medium term, the expectation of margin expansion had been discontinued.  At April 2011, the Company anticipated modest margin expansion of 10 basis points annually  f.The Company refreshed its revenue and revenue less operating and selling, general and administration (EBITDA) assumptions to reflect its revised expectations for this segments performance, as presented to, and approved by, the Companys board of directors  g.The Company refreshed its discount rate to 8.9% using rates and factors in effect at September 30, 2011, compared to 8.09% applied at April 30, 2011  Assumptions that remained unchanged between the Companys September 30, 2011 and April 30, 2011 discounted cash flow calculations were as follows:  a.No acquisitions were assumed b.Tax rates remained unchanged c.Amortization and asset retirement spending was refreshed, but effectively unchanged  There is significant subjectivity in estimating fair value.  Accordingly, changes in any one of these assumptions could have a significant impact on the implied fair value of goodwill the Company derived for its U.S. northeast reporting unit.  The  38


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  net carrying amount of goodwill allocated to the U.S. northeast segment, net of impairment charges, at December 31, 2011 was $51,687.  39


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  10.  Deferred Financing Costs  December 31, 2012Cost

Accumulated   amortization

Net book   valueDeferred financing costs

$
21,543

$
1,483

$
20,060December 31,   2011Cost

Accumulated   amortization

Net   book   valueDeferred financing costs

$
38,452

$
18,469

$
19,983  Deferred financing cost amortization for the year ended December 31, 2012 amounted to $5,665 (2011 - $6,035) and is recorded to interest on long-term debt.  In the current year, $11,726 (2011 - $nil) of deferred financing costs were written off in connection with the Company entering into a consolidated Credit Agreement effective October 24, 2012 (Note 15).  Estimated future amortization expense for the Companys deferred financing costs in each of the next five years and thereafter is as follows:  2013

$
3,4752014

3,4752015

3,4752016

3,4752017

2,974Thereafter

3,186$
20,060  11.  Capital Assets  December 31, 2012Cost

Accumulated   amortization

Net book   valueLand and improvements

$
146,044

$


$
146,044Buildings and   improvements

251,157

55,100

196,057Vehicles and equipment

814,371

389,810

424,561Containers and   compactors

325,212

173,314

151,898Furniture, fixtures and   computer equipment

31,653

22,695

8,958$
1,568,437

$
640,919

$
927,518  40


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  December 31, 2011Cost

Accumulated   amortization

Net book   valueLand and improvements

$
129,582

$


$
129,582Buildings and improvements

189,859

43,146

146,713Vehicles and equipment

664,157

315,971

348,186Containers and compactors

284,720

141,497

143,223Furniture, fixtures and computer equipment

26,020

17,666

8,354$
1,294,338

$
518,280

$
776,058  Capitalized interest for the year ended December 31, 2012 amounted to $391 (2011 - $12).  At December 31, 2012, assets recorded under capital lease total $754 and $3,060 (2011 - $nil and $nil) and are recorded in the land and improvements and buildings and improvements capital asset classifications, respectively.  12.  Landfill Assets  December 31, 2012Cost

Accumulated   amortization

Net book   valueLandfill assets

$
1,561,567

$
597,847

$
963,720  December 31, 2011Cost

Accumulated   amortization

Net book   valueLandfill assets

$
1,471,359

$
512,567

$
958,792  Capitalized interest for the year ended December 31, 2012 amounted to $1,518 (2011 - $1,471).  41


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  13.  Other Assets and Other Liabilities  December 312012

2011Other assetsFair value of commodity   swaps

$
1,151

$
220Fair value of commodity   swaps designated as cash flow hedges

913

2,038Fair value of interest   rate swaps



5Fair value of foreign   currency exchange agreements



3582,064

2,621Less current portion of   other assets

1,573

1,972$
491

$
649Other liabilitiesFair value of interest   rate swaps

$
3,754

$
1,492Fair value of interest   rate swaps designated as cash flow hedges



4,099Fair value of foreign   currency exchange agreements

80

Deferred lease   liabilities

1,267

1,301Unfavourable lease   arrangements

552

759Contingent acquisition   payables

1,009

1,566Share based compensation

1,188

Other

843

1,7518,693

10,968Less current portion of   other liabilities

2,527

3,484$
6,166

$
7,484  14.  Accrued Charges  Accrued charges are comprised of the following:  December 31,   2012

December   31, 2011Insurance

$
29,040

$
27,383Payroll and related costs

28,745

43,334Franchise and royalty fees

8,653

5,999Interest

2,737

5,221Provincial, federal and state sales taxes

4,542

5,738Acquisition holdbacks and acquisition related   costs

27,834

4,308Environmental surcharges

7,990

7,268Property taxes

141

544Share based compensation

3,730

3,757Other

18,116

20,944$
131,528

$
124,496  42


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  15.  Long-Term Debt  December 312012

2011Senior secured term B facility, net of debt   discount $2,440 (2011 - $nil)

$
497,560

$
Senior secured revolving credit

1,074,712

1,143,667Senior secured debenture, series B



57,030IRBs

109,000

109,000Other

7,005

3,3961,688,277

1,313,093Less current portion of long-term debt

6,907

1,500$
1,681,370

$
1,311,593  Consolidated credit agreement  Effective October 24, 2012, the Company entered into a Credit Agreement (the consolidated facility) and concurrently repaid all outstanding indebtedness under its pre-existing Canadian and U.S revolving credit facilities and its series B, senior secured debenture.  The borrower under the consolidated facility is Progressive Waste Solutions Ltd. and the facility is guaranteed by all subsidiaries of Progressive, excluding certain subsidiaries as permitted by the consolidated facility.  The consolidated facility is comprised of a $500,000 senior secured term B facility (term B facility) and a $1,850,000 senior secured revolving facility (consolidated revolver) having maturity dates of October 24, 2019 and October 24, 2017, respectively.  The consolidated facility has a $750,000 accordion feature, which is subject to certain conditions.  Proceeds from the consolidated facility were used to refinance previously existing indebtedness and may be used for permitted acquisitions, as defined by the agreement, capital expenditures, working capital, letters of credit and for general corporate purposes.  Amounts drawn under the consolidated revolver are repayable in full at maturity.  The term B facility is subject to an amortization schedule with all final payment amounts outstanding, plus accrued interest, being payable in full at maturity.  The term B facility is subject to principal amortization of one percent per annum and payable quarterly commencing in March 2013.  The term B facility is also subject to mandatory prepayment conditions, which include net cash proceeds from the sale of assets, the issuance of additional indebtedness that does not constitute permitted indebtedness and a percentage of excess cash flow, all of which are subject to various conditions.  The Company is required to provide its consolidated facility lenders with a first priority perfected security interest in all the present and future assets of it and its subsidiaries, save for the excluded subsidiaries, and excluding real estate and certain other equipment unless requested by the lenders,  including all present and future intercompany indebtedness and a pledge of all of the equity interests in each of the Companys direct and indirect subsidiaries, subject to certain conditions.  The consolidated facility permits a maximum consolidated total funded debt to four-quarter consolidated EBITDA ratio (leverage ratio) of four times, as defined therein.  In the event the Company delivers to its lenders a corporate credit rating from Standard & Poors or Moodys of at least BBB-/Baa3 (with a stable outlook or better), the Company may elect to have the security interests of the lenders terminated, provided the term B facility is repaid in full, at which time the maximum leverage ratio declines to three and one half times.  The leverage ratio increases to four and one half times if the Company obtains unsecured indebtedness in an aggregate amount of not less than $250,000 and remains at this ratio for as long as the unsecured indebtedness remains outstanding.  The consolidated facility also requires a minimum four quarter consolidated EBITDA to consolidated interest expense ratio (interest coverage ratio) of two and one half times, subject to certain conditions, and two and three quarter times if the Company elects to have the security interests of the lenders terminated.  43


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Borrowings on the consolidated revolver are available in either U.S. or Canadian dollars.  Applicable margins are dependent on the Companys leverage ratio.  If an event of default occurs, the applicable margin on all obligations owing under the consolidated facility will increase by 2.0% per annum.  Pricing on the consolidated facility is as follows:  Term B   facility -   Euro based   loans

Term B   facility -   U.S. based   loans

Consolidated   revolver -   Euro based   loans

Consolidated   revolver -   Bankers   Acceptances   (BA)/BA   equivalents

Consolidated   revolver -    U.S. based/   Canadian   prime rate   loans

Letters of   credit

Commitment   feeInterest   rate basis

LIBOR

U.S. base prime

LIBOR

BA or BA   equivalents plus 10 basis points

U.S. base or Canadian   prime rateApplicable   margin

2.75
%
1.75
%Floor

0.75
%Applicable   margin - minimum





1.50
%
1.50
%
0.50
%Applicable   margin - maximum





2.25
%
2.25
%
1.25
%Applicable   margin - first 6 months





2.00
%
2.00
%
1.00
%Fee   rate - minimum











1.50
%
0.25
%Fee   rate - maximum











2.25
%
0.50
%Fee   rate - first 6 months













0.375
%Frequency   of payments

Monthly, in   arrears

Quarterly, in   arrears

In arrears, for   applicable term

In advance, for   applicable term

Quarterly, in   arrears

Quarterly, in   arrears

Quarterly, in   arrears  U.S revolving credit facility  On July 7, 2011, the Company entered into a second amendment to its Amended and Restated Senior Secured Revolving Credit Facility (the U.S. facility) on behalf of IESI Corporation (IESI), an indirect wholly owned subsidiary of the Company.  Entering into the second amendment increased the total commitment to $1,377,500, from $1,250,000.  Available lending under the amended U.S. facility was $1,122,500, up $45,000 from $1,077,500, and the facility had a $255,000 accordion feature.  Monies from the U.S. facility were available for permitted acquisitions, subject to certain restrictions, capital expenditures, refinancing existing indebtedness, working capital, letters of credit and for general corporate purposes.  All amounts under the U.S. facility were revolving.  Financial covenants under the U.S. facility permitted a maximum total funded debt to rolling four-quarter EBITDA ratio of 4.5 times and a maximum senior secured debt to rolling four-quarter EBITDA ratio of 3.5 times had the Company borrowed an amount no less than $150,000 and loaned these borrowings to IESI.  Other covenants included a minimum rolling four-quarter EBITDA to interest expense ratio of 2.5 times and a capital expenditure maximum of 1.1 times actual deprecation and landfill depletion expense for any fiscal year.  The U.S. facility required that IESI maintain interest rate hedges at fixed rates for at least 40% of the total funded debt, as defined therein.  In addition, the U.S. facility precluded IESI from paying dividends if their funded debt to EBITDA ratio exceeded 3.9 times but increased to 4.4 times had IESI received monies from Company borrowings.  The U.S. facility was also modified to allow IESI to be in compliance with the requirement to maintain interest rate hedges at fixed rates for at least 40% of total funded debt so long as its in place interest rate hedges were not more than $10,000 under than the hedging requirement at the 40% test and the test is performed quarterly.  The U.S. facility was to mature on July 2, 2014.  Pricing on the U.S. facility declined on advances drawn by 75 basis points.  Pricing ranged from 175 to 250 basis points over LIBOR for borrowings on LIBOR and 75 to 150 basis points over bank prime for prime rate advances.  Pricing on  44


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  financial letters of credit were 175 to 250 basis points which represented a decline of 75 basis points from previous pricing points.  Fronting fees of 12.5 basis points on financial letters of credit were payable at all pricing levels.  Standby fees declined by 12.5 basis points and range from 25 to 50 basis points.  All other significant terms remained unchanged.  In July 2012, the Company exercised a portion of the accordion feature available under the U.S. facility.  Effective July 20, 2012, total availability under the U.S. facility increased to $1,253,600 from $1,122,500.  The accordion feature declined by a like amount from $255,000 to $123,900.  All other significant terms remained unchanged.  Security under the U.S. facility represented an interest over all assets of the U.S. operating companies and a pledge of the U.S. operating entities equity.  Effective October 24, 2012, all amounts outstanding under the U.S. facility were repaid.  Canadian revolving credit facility  Effective July 2, 2010, the Company entered into a Sixth Amended and Restated Credit Facility Agreement in Canada (the Canadian facility) on behalf of BFI Canada Inc. (BFI), an indirect wholly owned subsidiary of the Company.  Monies from the Canadian facility were available for general corporate purposes, including permitted acquisitions, subject to certain restrictions.  The Canadian facility made available 525,000 Canadian dollars (C$) and the total additional availability under the facility (the accordion feature) was C$125,000.  All committed monies under the Canadian facility were revolving and the maturity date was July 2, 2014.  Financial covenants included a maximum funded debt to EBITDA ratio, as defined and calculated in accordance with the terms of the Canadian facility, of 3.0 times.  The funded debt to EBITDA ratio covenant expanded to a maximum of 3.25 times for a period of two quarters following the completion of an acquisition which exceeds C$75,000.  Security under the Canadian facility represented a first priority perfected security interest over all personal and real property of the Canadian operating companies and a pledge of the Canadian operating entities equity held by the Canadian parent.  Effective July 15, 2011, the Company entered into an Amending Agreement to its Canadian facility which resulted in a 62.5 basis point pricing decline for advances made under the facility.  Pricing ranged from 50 to 175 basis points over bank prime for borrowings on prime and 150 to 275 basis points over BAs for borrowings on BAs.  Pricing on financial letters of credit decreased by similar amounts and pricing ranged from 150 to 275 basis points.  Standby fees declined by at least 15 basis points, and pricing ranged from 37.5 to 68.8 basis points, while non-financial letters of credit decreased by at least 41.3 basis points and pricing ranged from 100 to 183.3 basis points.  All other significant terms were unchanged.  In July 2012, the Company exercised a portion of the accordion feature available under the Canadian facility.  Effective July 19, 2012, total availability under the Canadian facility increased to C$595,000 from C$525,000.  The accordion feature declined by a like amount from C$125,000 to C$55,000.  All other significant terms remained unchanged.  Effective October 24, 2012, all amounts outstanding under the Canadian facility were repaid.  45


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Details of outstanding debt - credit facilities  December 312012

2011Term B facilityAmount drawn

$
500,000

$
Interest rate applicable

3.50
%
Consolidated revolverAmount drawn

$
1,074,712

$
Letters of credit

$
183,767

$
Available

$
591,521

$
Amount drawn - Euro based loan

$
543,000

$
Interest rate applicable - Euro based loan

2.21
%
Amount drawn - BAs

$
527,691

$
Interest rate applicable - BAs

3.28
%
Amount drawn - Canadian prime rate loan

$
4,021

$
Interest rate applicable - Canadian prime rate   loan

4.00
%
Commitment - rate applicable

0.375
%
U.S. facilityAmount drawn

$


$
800,500Letters of credit

$


$
143,655Available

$


$
178,345Amount drawn - Euro based loan

$


$
795,000Interest rate applicable - Euro based loan



2.52
%Amount drawn - U.S. based loan

$


$
5,500Interest rate applicable - U.S. based loan



4.50
%Commitment - rate applicable



0.375
%Canadian facility (in Canadian   dollars)Amount drawn

$


$
349,000Letters of credit

$


$
55,481Available

$


$
120,519Amount drawn - BAs

$


$
349,000Interest rate applicable - BAs



2.20
%Commitment - rate applicable



0.50
%  46


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Senior secured debenture, series B (debenture)  Date issued

June 25, 2004Amount issued (in Canadian dollars)

$
58,000Interest rate

7.015
%Maturity date

June 26, 2014Frequency of interest payments

Quarterly, in arrearsDate interest payments commenced

September 26, 2004Covenants

Same as Canadian facility  The debenture was redeemable in whole or in part from time to time at a price equal to the greater of par and the net present value of all scheduled payments of interest and principal using a discount rate equivalent to the sum of the Government of Canada Yield plus a margin.  The debenture was secured by a charge over all the personal and real property of BFI, Ridge (Chatham) Holdings G.P. Inc., and Ridge (Chatham) Holdings L.P. and the shares of BFI and its subsidiaries.  The debenture ranked equally with the Companys Canadian revolving credit facility.  On October 24, 2012, the Company redeemed the debenture in full in accordance with the redemption provisions.  Loss on extinguishment of debt  December 312012

2011Excess over principal of cash paid for redemption   of debenture

$
5,198

$
Write-off of deferred financing costs - debenture,   U.S. and Canadian facility

11,726

Loss on extinguishment of debt

$
16,924

$
  47


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  IRBs  The Company entered into the following IRB facilities which are available to fund a portion of landfill construction activities and equipment, vehicle and container expenditures at its Seneca Meadows landfill and in its Pennsylvania and Texas operations: 2005 Seneca County Industrial Development Agency IRB (2005 Seneca IRB Facility), Pennsylvania Economic Development Corporation IRB (PA IRB Facility), Mission Economic Development Corporation IRB (TX IRB Facility) and 2009 Seneca County Industrial Development Agency IRB (2009 Seneca IRB Facility).  IRB Facility

Date   entered

Term, in   years

Maturity

Availability

Interest   rate basis

Frequency   of interest   payments

Date   interest   payments   commenced

Security2005   Seneca IRB Facility

Oct. 20,   2005

30

Oct. 1, 2035

$
45,000

LIBOR less an   applicable discount

Monthly, in   arrears

Nov. 1, 2005

Guaranteed by   IESIPA   IRB Facility

Nov. 16,   2006

22

Nov. 1, 2028

$
35,000

LIBOR less an   applicable discount

Monthly, in   arrears

Dec. 1, 2006

Letter of credit   equal to amount drawnTX   IRB Facility

Mar. 1, 2007

15

Apr. 1, 2022

$
24,000

LIBOR less an   applicable discount

Monthly, in   arrears

May. 1, 2007

Letter of credit   equal to amount drawn2009   Seneca IRB Facility

Dec. 1, 2009

30

Dec. 31,   2039

$
90,000

Securities   Industry and Financial Markets Association Municipal Swap Index

Monthly, in   arrears

Feb. 1, 2010

Letter of credit   equal to amount drawnIRB Facility Amendment











Amendment   date

Amended   interest   rate basis

Term for   amended   interest   rate basis,   in years2009   Seneca IRB Facility











Aug. 1, 2008

Fixed rate

5  48


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  2012

20112005 Seneca IRB FacilityAmount drawn

$
45,000

$
45,000Annual interest rate

6.625
%
6.625
%PA IRB FacilityAmount drawn

$
35,000

$
35,000Current daily interest rate

0.14
%
0.15
%TX IRB FacilityAmount drawn

$
24,000

$
24,000Current daily interest rate

0.13
%
0.16
%2009 Seneca IRB FacilityAmount drawn

$
5,000

$
5,000Amount restricted

$
476

$
452Current daily interest rate

0.14
%
0.18
%  Other  In connection with the WSI acquisition, the Company assumed a note that was originally payable to WCA of Florida LLC (WCA) and subsequently assigned to Credit Suisse.  The note has an original issue date of June 29, 2007 and was originally issued for $10,500.  The note is non-interest bearing and requires payments of $125 per month until its maturity in June 2014.  The note was entered into as part of a transaction between WSI and WCA to acquire certain WCA assets in Florida and to sell certain WSI operations in Texas.  The note is secured by the WCA assets acquired.  At December 31, 2012 and 2011, the Company has capital lease obligations of $4,889 (2011 - $nil) with maturities and interest rates ranging from 2020 to 2025 and 5.00% to 12.70%, respectively.  The following is a schedule of the future minimum lease payments required under capital lease obligations in each of the next five years ending December 31, and thereafter:  2013

$
5882014

6172015

6502016

6832017

718Thereafter

4,0827,338Less amount representing interest

2,449Present value of minimum capital lease obligations

$
4,889  Consolidated long-term debt  The Company is subject to various restrictions included in its long-term debt financing agreements.  At December 31, 2012 and 2011 the Company is in compliance with all restrictions included in these agreements.  Interest on long-term debt amounted to $57,428 (2011 - $62,086).  Interest on long-term debt includes deferred financing costs and debt discount amortization and excludes capitalized interest.  49


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Principal repayments, excluding capital lease obligations, required in each of the next five years ending December 31, and thereafter are as follows:  2013

$
6,1422014

5,2602015

4,6432016

4,6432017

1,079,355Thereafter

583,345$
1,683,388  16.  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.  December 31, 2012Fair value of legally restricted assets

$
9,885Undiscounted closure and post-closure costs

$
666,204Credit 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 expenditures2013

$
8,8712014

11,2192015

18,3942016

7,4382017

11,766Thereafter

608,516$
666,204  December 312012

2011Landfill closure and post-closure costs, beginning   of the year

$
101,502

$
98,239Provision for landfill closure and post-closure   costs, during the year

13,925

13,008Accretion of landfill closure and post-closure   costs, during the year

5,240

5,071Landfill closure and post-closure expenditures,   during the year

(6,737
)
(4,345
)Remediation liabilities acquired, during the year

200

Revisions to estimated cash flows, during the year

(1,630
)
(9,803
)Foreign currency translation adjustment, for the   year

652

(668
)113,152

101,502Less current portion of landfill closure and   post-closure costs

8,871

9,468Landfill closure and post-closure costs, end of   year

$
104,281

$
92,034  The Company is required to deposit monies into a social utility trust for the purpose of settling post-closure costs at its Lachenaie landfill.  The funding amount is established by the Quebec Government based on each cubic metre of waste accepted and payment is due quarterly.  At December 31, 2012, funded landfill post-closure costs, representing the fair value of legally restricted assets, totals $9,885 (2011 - $9,200).  At December 31, 2012, $9,782 (2011 - $9,115) was deposited into the social utility trust with the balance, $103 (2011 - $85) remaining unfunded and included in accounts payable.  50


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  17.  Shareholders Equity  Shareholders equity  The Company is authorized to issue an unlimited number of common, special and preferred shares, issuable in series.  Common Shares  On March 29, 2011, in connection with the secondary offering by TC Carting III, L.L.C., an affiliate of Thayer | Hidden Creek Partners, L.L.C., the Company agreed to purchase 1,000 of its common shares from the underwriters in a secondary offering, at the same public offering price of $23.50 per share for a total cost of $23,500.  The common shares were cancelled and no longer remain outstanding.  Effective August 19, 2011, the Company received approval to commence a normal course issuer bid (NCIB) to purchase up to 4,000 of the Companys common shares.  On December 23, 2011, the Company received approval to increase the number of common shares repurchased under the NCIB to 7,500.  Daily purchases were limited to a maximum of 47.833 shares on the TSX.  Once a week, the Company is permitted to purchase a block of common shares which can exceed the daily purchase limit, as long as the block is not owned by an insider.  All shares purchased will be cancelled.  Effective August 21, 2012, the Company received approval to renew its NCIB for an additional 12 months which allows the Company to purchase up to 7,500 common shares in the open market.  Daily purchases are limited to a maximum of 57.806 shares on the TSX.  For the year ended December 31, 2012,  3,155 common shares (2011 -  2,622) were purchased and cancelled at a total cost of $65,633 (2011 - $55,826).  As of February 19, 2013, no additional common shares have been purchased and settled.  For the year ended December 31, 2012, 28 stock options (2011  141) were exercised for total consideration of $403 (2011 - $2,385).  At December 31, 2012,  691 (2011   729) common shares were held by the U.S. LTIP plan rabbi trust.  Special Shares  The Company is authorized to issue an unlimited number of special shares.  Special shareholders are entitled to one vote in matters of the Company for each special share held.  The special shares carry no right to receive dividends or to receive the remaining property or assets of the Company upon dissolution or wind-up.  At December 31, 2012 and 2011, no special shares are issued.  Preferred Shares  The Company is authorized to issue an unlimited number of preferred shares, issuable in series.  At December 31, 2012 and 2011, no preferred shares are issued.  Each series of preferred shares issued shall have rights, privileges, restrictions and conditions as determined by the Board of Directors prior to their issuance.  Preferred shareholders are not entitled to vote, but take preference over the common shareholders rights in the remaining property and assets of the Company in the event of dissolution or wind-up.  51


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Details of common and restricted shares for the year ended December 31, 2012 are as follows:  December 312012

2011Common sharesCommon shares issued and outstanding, beginning of   the year

118,041

121,430Common shares issued on exercise of options,   during the year

28

141Common shares issued on exercise of warrants,   during the year



67Repurchase of common shares, during the year

(3,155
)
(3,622
)Restricted common shares purchased, during the   year

(50
)
(185
)Restricted common shares forfeited, during the   year

23

Restricted common shares vested, during the year

107

210Common shares issued and outstanding, end of year

114,994

118,041Restricted common sharesRestricted common shares issued and outstanding,   beginning of year

252

277Restricted common shares purchased, during the   year

50

185Restricted common shares forfeited, during the   year

(23
)
Restricted common shares vested, during the year

(107
)
(210
)Restricted common shares issued and outstanding,   end of year

172

252  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 and   settlements

Accumulated   other   comprehensive   lossDecember 31,2012Balance, beginning of year

$
(59,994
)
$
(1,757
)
$
(61,751
)Change, during the year

11,702

1,933

13,635Balance, end of year

$
(48,292
)
$
176

$
(48,116
)December 31,2011Balance, beginning of year

$
(47,474
)
$
2,832

$
(44,642
)Change, during the year

(12,520
)
(4,589
)
(17,109
)Balance, end of year

$
(59,994
)
$
(1,757
)
$
(61,751
)  52


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (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 December 31, 2012 and 2011 for the purpose of computing basic and diluted net income per share.  December 312012

2011Net income (loss)

$
94,357

$
(196,136
)Weighted average number of shares, basic

116,178

120,683Dilutive effect of share based options



Weighted average number of shares, diluted

116,178

120,683Net income (loss) per weighted average share,   basic

$
0.81

$
(1.63
)Net income (loss) per weighted average share,   diluted

$
0.81

$
(1.63
)Issued and outstanding share based options

2,687

2,505  Share based options are anti-dilutive to the calculation of net income (loss) per share and have been excluded from the calculation.  Warrants  December 312012

2011Number of   common   shares   issuable

Weighted   average   exercise   price

Number of   common   shares   issuable

Weighted   average   exercise   priceOutstanding, beginning of year



$


194

$
13.89Exercised, during the year





(194
)
(13.89
)Expired, during the year







Outstanding, end of year



$




$
  As of December 31, 2011, all warrants were exercised.  The warrants were exercised in a cashless conversion and resulted in the Company issuing 67 of its common shares.  18.  Changes in Non-Cash Working Capital Items  The following table outlines changes in non-cash working capital items:  53


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  December 312012

2011Accounts receivable

$
(8,683
)
$
1,314Prepaid expenses

(7,278
)
(4,230
)Accounts payable

(24,964
)
9,568Accrued charges

(18,595
)
(24,813
)Income taxes recoverable and payable

(11,635
)
(3,732
)Deferred revenues

1,357

(2,733
)Effect of foreign currency translation adjustments   and other non-cash changes

1,141

(4,038
)$
(68,657
)
$
(28,664
)  19.  Share Based Compensation  Share based options  Share based options (options) are granted to certain directors, officers or management employees at the discretion of the Companys Board of Directors, or its designate.  Options, in the absence of any other determination, are exercisable equally on their first, second, third and fourth anniversary dates and expire on the 10th anniversary date of the grant.  The Company has reserved 4,000 shares for issuance under the option plan.  The exercise date of options may be accelerated at the discretion of the Board of Directors, or its designate.  Options are not transferable or assignable.  On August 20, 2012, the Board of Directors issued 210 share based options, all of which have stock appreciation rights, to one executive of the Company.  The options vest and are exercisable on December 31, 2016.  The options have an exercise price of C$20.29 and a grant date market value of C$20.01.  On termination of employment without cause, death or disability, the options become immediately exercisable.  Unexercised options expire on December 31, 2021.  December 312012

2011Number of   options

Weighted   average   exercise   price

Number of   options

Weighted   average   exercise priceOutstanding, beginning of year

2,505

$
23.28

2,646

$
21.23Granted, during the year

210

$
20.51



$
Exercised, during the year

(28
)
$
(14.42
)
(141
)
$
(16.02
)Forfeited, during the year



$




$
Expired, during the year



$




$
Outstanding, end of year

2,687

$
23.59

2,505

$
23.28Options outstanding, exercisable

2,477



2,505Weighted average grant date market value

$
22.28



$
20.68Weighted average remaining contractual life (in   years)

5.1



5.8  December 312012

2011Share based compensation recovery





$
(110
)
$
(6,808
)Unrecognized compensation costs for share based   compensation





$
1,070

$
Share based compensation accrued





$
3,730

$
3,757  54


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  The Company uses the Black-Scholes-Merton option pricing model which requires several input variables.  These variables include the estimated length of time employees will retain their options before exercising them and the expected volatility of the Companys share price.  Changes in these variables can materially affect the estimated fair value of share based compensation and, consequently, the related amount recognized in selling, general and administration expense on the statement of operations and comprehensive income or loss.  In calculating the fair value of the options at December 31, 2012 and 2011, the following weighted average assumptions were used:  2012

2011Grant date - February 14,   2006Dividend yield

2.8
%
2.5
%Expected volatility

16.9
%
20.9
%Risk free interest rate

1.0
%
0.9
%Expected remaining life, stated in years

0.7

1.7Fair value, per option (in Canadian dollars)

$
0.01

$
0.19Grant date - August 25,   2008Dividend yield

2.8
%
2.5
%Expected volatility

22.2
%
23.1
%Risk free interest rate

1.0
%
0.9
%Expected remaining life, stated in years

1.2

2.2Fair value, per option (in Canadian dollars)

$
2.50

$
2.26Grant date - January 9,   2009Dividend yield

2.8
%
2.5
%Expected volatility

23.8
%
22.3
%Risk free interest rate

1.1
%
1.0
%Expected remaining life, stated in years

1.5

2.5Fair value, per option (in Canadian dollars)

$
2.82

$
2.30Grant date - November 11,   2010Dividend yield

2.8
%
2.5
%Expected volatility

22.2
%
38.3
%Risk free interest rate

1.1
%
1.2
%Expected remaining life, stated in years

3.0

4.0Fair value, per option (in Canadian dollars)

$
2.26

$
4.20Grant date - August 20,   2012Dividend yield

2.8
%
Expected volatility

36.4
%
Risk free interest rate

1.2
%
Expected remaining life, stated in years

4.3

Fair value, per option (in Canadian dollars)

$
5.56

$
  Compensation expense or recovery including fair value changes in share based options are recorded to selling, general and administration expense on the statement of operations and comprehensive income or loss.  In determining the expected life of the options, management considered the age of the recipients and duration between the vesting date and date of expiration.  These options represent the Companys first, second, third, fourth and fifth option grants.  Expected volatility was calculated using changes in monthly share prices for a period commensurate with the remaining term to expected vesting.  55


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Restricted shares  On September 12, 2011, the Company issued 185 restricted shares at a weighted average cost of $22.84 per share to certain executives.  In conjunction with the restricted share issuance, the Company purchased 185 common shares for total cash consideration of $4,226.  The restricted shares issued have vesting dates as follows: 37.5 restricted shares on May 31, 2013, 12.5 restricted shares on June 15, 2013, 30 restricted shares on December 15, 2012, 30 restricted shares on December 15, 2013, 25 restricted shares on May 31, 2014, 12.5 restricted shares on June 15, 2014 and 37.5 restricted shares on May 31, 2015.  On August 24, 2012, the Company issued 50 restricted shares at a weighted average cost of C$19.95 per share to one executive.  In conjunction with the restricted share issuance, the Company purchased 50 common shares for total cash consideration of C$998.  The restricted shares issued have a vesting date of December 1, 2014.  In September 2012, 23 restricted shares previously awarded on September 12, 2011 to two employees were forfeited.  In conjunction with the forfeiture, the Company sold 23 restricted shares for total cash proceeds of $456.  Additionally, 23 restricted shares previously awarded on September 12, 2011 to these same employees were modified.  The vesting date for the modified awards is December 31, 2012, subject to the achievement of certain performance conditions.  The changes resulted in a $663 recovery of previously recognized restricted share expense.  Restricted shares are issued as an incentive for certain executive management (employees or executive management) in respect of their employment with the Company and to align the interests of executive management with the interests of the Companys shareholders.  Restricted shares are purchased by the Company in the open market and are held in trust for the employees benefit.  Restricted shares vest when the employee has satisfied the requisite service period or performance conditions.  Executive management forfeits their right to restricted shares upon termination for cause or resignation without good reason.  Accelerated vesting occurs in certain circumstances, including termination without cause or resignation for good reason, change of control, and death or disability.  Dividends received by the trustee, on restricted shares held for the benefit of executive management, are paid to the employee.  The employees interest in restricted shares cannot be assigned or transferred.  The following table outlines various details pertaining to restricted shares.  December 312012

2011Outstanding, beginning of year

252

277Granted, during the year

50

185Vested, during the year

(107
)
(210
)Forfeited, during the year

(23
)
Outstanding, end of year

172

252Weighted average remaining life

1.74

1.49Restricted share expense

$
2,034

$
2,107  Restricted share expense is recorded to selling, general and administration expense on the statement of operations and comprehensive income or loss.  If employees satisfy the requisite service period requirements, the Company will record the compensation expense in the following years:  56


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  2013

$
9152014

5512015

65$
1,531  57


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  PSUs  In March 2012, the Companys Compensation Committee approved a revised long-term incentive compensation plan for all executive officers and certain employees effective January 1, 2012.  Under the revised plan, PSU payments are awarded at the end of a three year performance period and payment amounts can range from 0% to 150% of the target award subject to the Companys performance against pre-established performance measures.  Performance measures are recommended by executive management and submitted to the Compensation Committee for approval.  In addition to these performance measures, the Compensation Committee may evaluate performance results and retains the authority and discretion to amend PSU payments.  PSU award payments are paid in lump sum cash amounts based on the volume weighted average trading price of the Companys shares for the five trading days immediately preceding the vesting date.  Payments are measured and distributed in the final month of the performance period.  A participant who voluntarily terminates employment or is terminated with cause prior to the date of payment forfeits all rights to, or interest in, any unvested award.  If a participants employment is terminated without cause, or by death, disability or retirement, after the mid-point of the performance period, the participant shall be entitled to the full amount of the participants unvested PSUs and related dividend PSUs.  If a participants employment is terminated without cause, or by death, disability or retirement, prior to the mid-point of the performance period, the participant shall be entitled to a pro-rated amount of the award that the Compensation Committee determines would have been paid to the participant had their employment continued to the end of the performance period.  The following table outlines details of PSUs:  2012

2011Number of   PSUs

Weighted   average   grant date   fair value

Number of   PSUs

Weighted   average   grant date   fair valueOutstanding, beginning of year



$




$
Granted, during the year

333

$
20.04



$
Vested, during the year



$




$
Forfeited, during the year



$




$
Outstanding, end of year

333

$
20.04



$
2012

2011PSU expense





$
1,185

$
Unrecognized compensation cost for PSUs





$
2,218

$
PSU compensation cost accrued





$
1,188

$
  In calculating the fair value of the PSUs at December 31, the following weighted average assumptions were used:  2012

2011Grant date - March 16,   2012Dividend yield





2.8
%
Expected volatility





21.1
%
Risk free interest rate





1.1
%
Expected remaining life, stated in years





2.0

Fair value per PSU (in Canadian dollars)





$
20.32

$
  58


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Compensation expense includes fair value changes in PSUs which are recorded to selling, general and administration expense on the statement of operations and comprehensive income or loss.  59


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Long-term incentive plan  Effective January 1, 2003, the Company entered into a trust (the Trust) agreement to establish a long-term incentive plan on behalf of certain Canadian employees, officers and directors.  The purpose of the Trust is to receive monies from the Company and its subsidiaries on behalf of certain Canadian employees, officers and directors to purchase shares of the Company in the open market and to hold the shares acquired for the benefit of its participants.  Shares remain registered in the name of the Company, the Trustee, or its nominee(s), until the shares are redeemed, sold or distributed to the participant for whom they are held.  Dividends received by the Trust are distributed to the participants in proportion to their pro rata entitlement.  The Companys maximum exposure to loss is limited to its obligation to fund the administration of the Trust and its indemnity to the Company and its officers, directors, employees, agents or shareholders for various items including, but not limited to, all costs to settle suits or actions due to association with the Trust, subject to certain restrictions.  The risk of fluctuations in the price of the Companys shares is borne by the participants.  In February 2006, the Company amended and restated its long-term incentive plan and established a long-term incentive plan on behalf of certain U.S. employees, officers and directors of IESI and its subsidiaries.  With the exception of changes to the vesting period, the terms of the long-term incentive plan remained principally unchanged.  Shares acquired by the Trust in respect of fiscal year ended December 31, 2004 for the benefit of its participants have vested.  Shares acquired by the Trust in respect of fiscal year ended December 31, 2005, and thereafter, vest as follows: one third on the day such shares are allocated to the participant, one third on December 31 of the year such shares are allocated to the participant, and the balance on December 31 of the subsequent year.  Shares that are forfeited by participants to the long-term incentive plan are allocated to the remaining participants in accordance with their proportional entitlement to all of the shares held by the Trust and the Trust will abstain from voting on all matters related to the Company.  The purpose and terms of the U.S. long-term incentive plan are consistent with those outlined for the Companys amended and restated Canadian plan.  In 2012, contributions to the long-term incentive plan are calculated at 1.45% (2011  1.45%) of operating income before restructuring costs, goodwill impairment, amortization and gain or loss on sale of capital and landfill assets, adjusted for certain non-recurring or non-operating items.  The Compensation Committee exercised its discretion with regards to 2012 amounts awarded.  As a result, 2012 awards represent half of the target award amount.  Included in selling, general and administration expenses are $1,342 (2011 - $6,159) of accrued amounts payable to the Trust on behalf of certain Canadian and U.S. employees at December 31, 2012.  Certain employees previously in this plan are participating in the revised long-term incentive plan where they receive PSU awards.   20.  Commitments and Contingencies  The Company leases buildings and equipment under various operating leases.  Payments for the next five years ending December 31 and thereafter are as follows:   2013

$
13,4232014

10,6642015

9,5192016

8,2832017

5,219Thereafter

13,234$
60,342  The Company is the successor to a license agreement to use the trade name BFI and the related logo which is subject to certain restrictions.  The agreement was amended on February 22, 2002, whereby a one-time payment of C$2,000 was made on April 25, 2002 in full satisfaction of all royalty obligations under the license agreement payable through June 1, 2015 (the initial 15-year term).  The Company has two additional 10 year extension options.  The first and second 10 year extension options bear per annum costs of $603 (C$600) and $1,508 (C$1,500), respectively.  60


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  The Company enters into various commitments in the normal course of business.  At December 31, 2012, the Company has issued letters of credit amounting to $183,767 (2011 - $198,208) and performance bonds totaling $383,391 (2011 - $295,524).  Letters of credit are made available to the Company through the consolidated facility and are included in the security offered by the Company to its lenders.  On the acquisition of IESI, the Company assumed various obligations which requires the Company to pay additional amounts for achieving certain negotiated events or business performance targets, including landfill expansion approval or target disposal volumes.  The Company is obligated to pay certain sellers various amounts for achieving certain negotiated disposal volumes to a maximum of approximately $6,400.  Amounts are accrued monthly, and paid from time to time in accordance with underlying agreements, until certain threshold negotiated disposal volume targets are achieved, and the maximum obligation is satisfied.  Accrued amounts, which are paid up to the date the disposal volume threshold targets are met, reduce the threshold payment by a similar amount.  The Company will record an adjustment to the purchase price allocation when the contingency is resolved and consideration is issued or becomes issuable.  Landfill permits acquired on the acquisition of IESI were recorded at their fair values.  Accordingly, future contingent payments made, in respect of landfill expansion approval or fulfilling disposal volume targets, are recorded to goodwill.  The Company has a disposal contract that requires it to meet specific disposal volume targets which expires on March 31, 2019.  The volume requirements are measured based on an annual average.  In the event the Company does not meet the required volume targets, the Company is required to make additional payments on the disposal volume shortfall.  At December 31, 2012, the Company expects to meet its disposal volume target and accordingly no accrual has been made.  The Company has an accrued environmental liability of $14,256 (2011 - $14,950) recorded in landfill closure and post-closure costs, related principally to an inactive landfill (hereinafter referred to as Tantalo), which the Company assumed as part of the IESI acquisition.  The Tantalo environmental liability consists of remediation and 30 years of post-closure monitoring totaling $14,215 (2011 - $15,102).  The initial remediation work commenced in 2004, and the post-closure monitoring commenced in 2007.  Tantalo is a 26 acre landfill that stopped accepting waste in 1976 and has been identified by the State of New York as an Inactive Hazardous Waste Disposal Site. During its period of operation, Tantalo received both municipal and industrial waste, some of which has been found to exhibit hazardous characteristics as defined by the U.S. Resource Conservation and Recovery Act.  Past activities at Tantalo have resulted in the release of hazardous wastes into the groundwater.  A remediation program was developed for Tantalo in conjunction with the New York State Department of Environmental Conservation. The remediation program includes: installation of groundwater barriers, protective liner caps, leachate and gas collection systems, and storm-water drainage controls, as well as methods to accelerate the decontamination process.  In addition, IESI purchased a Cleanup Cost Cap Insurance Policy, with a ten-year policy period, which provides $25,000 of coverage in excess of the remediation portion of the liability.  The cost of remediation requires a number of assumptions and estimates which are inherently difficult to estimate, and the outcome may differ materially from current estimates.  However, management believes that its experience provides a reasonable basis for estimating its liability.  As additional information becomes available, estimates are adjusted as applicable.  It is possible that technological, regulatory or enforcement developments, the results of environmental studies, or other factors could necessitate the recording of additional liabilities which could be material.  The estimated environmental remediation liabilities have not been reduced for possible recoveries from other potentially responsible third parties.  The Company is subject to certain lawsuits and other claims arising in the ordinary course of business.  The outcome of these matters is subject to resolution.  Based on managements evaluation and analysis of these matters, the amounts of potential losses are accrued and management believes that any amount above the amounts accrued will not be material to the financial statements.  61


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Purchase agreements  In April 2007, WSI acquired a company that owns a permit to construct a construction and demolition waste transfer station on land owned by it in Bradenton, Florida.  An additional payment of $2,500 is due to the sellers upon the transfer of the company or the property to any non-affiliate of WSI or upon obtaining all necessary permits to operate the transfer station.  WSI entered into an agreement to purchase an adjacent parcel of land to its SLD landfill for total consideration of approximately $4,900.  Deposits to date total $1,400.  All deposits will be credited to total purchase consideration paid on closing.  Deposits made by the Company are not refundable should the purchase not close.  AtDecember 31, 2012, future minimum payments under an unconditional capital expenditure commitment totals approximately C$19,600.  21.  Related Party Transactions  Lease  The Company leases office space that is owned by one of its directors.  Investment in equity accounted investee  The Companys fifty percent ownership interest in its equity investee is with a related party.  The remaining fifty percent is owned by two trusts.  The brother of one of the Companys former directors serves as a trustee for both trusts and one of the Companys former directors serves as a trustee for one of the two trusts.  The Company exercises joint control over its equity investment through its fifty percent ownership interest.  The Companys fifty percent ownership interest grants it authority to nominate fifty percent of the directors to the board of the investee.  The Chairperson of the investees Board of Directors cannot be nominated by the Company and the Chairperson cannot be a member of the Companys Board of Directors.  The Chairperson of the investee is entitled to cast a second vote in the event of a tie amongst its board.  Certain matters are beyond the control of the investees board and reside with its shareholders.  These matters are related to certain financing, board composition, the sharing of profits and material business changes.  Transactions between the Company and its investee have all been transacted in the normal course of business.  These transactions are generally the result of the investee billing the Company for services it provides to the Company.  In turn, the Company bills its customers for this service which is measured at the exchange amount.  Transactions between the Company and its investee only reflect the Companys share of the transaction.  The Company received an unsecured promissory note from its equity accounted investee in exchange for cash.  The promissory note is repayable on demand with no fixed term to maturity.  Interest on the note accrues at a rate equal to the greater of 5.5%, or the rate which is equal to bank prime plus 2.0% calculated annually, not in advance and payable on maturity.  The promissory note may be repaid, in whole or in part, at any time, subject to certain restrictions.  Transportation services  A company owned by an officer of a BFI subsidiary provides transportation services to the Company.  Consulting fees  The Company has incurred consulting fees from one of its former directors.  All related party transactions are recorded at the exchange amounts.  62


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Lease  Year lease commenced

2004Lease expiry date

September 30, 2014Approximate annual lease cost (in Canadian   dollars, recorded to selling, general and administration expenses)

$
320  December 312012

2011Investment in equity accounted   investeeCharges (recorded to operating expenses)

$
267

$
295Amounts owing to equity investee (included in   accounts payable)

$
32

$
4Unsecured promissory note issued December 6,   2010 (in Canadian dollars)

$
750

$
750Interest income (recorded to interest expense)

$
41

$
41Transportation servicesCharges (recorded to operating expenses)

$
3,714

$
2,419Amounts owing (included in accounts payable)

$
63

$
35Consulting feesCharges (recorded to selling, general and   administration expenses)

$
780

$
  22.  Financial Instruments  The following table categorizes the Companys derivative financial assets and liabilities and their fair value amounts.  Amounts are recorded as other assets or other liabilities on the Companys balance sheet.  December 31,   2012

December 31,   2011Financial   assetsDerivatives not designated in a   hedging relationshipCurrent - commodity   swaps

$
660

$
220Long-term - commodity   swaps

$
491

$
Current - foreign   currency exchange agreements

$


$
289Long-term - foreign   currency exchange agreements

$


$
69Long-term - interest   rate swaps

$


$
5Derivatives designated in a   hedging relationshipCurrent - commodity   swaps

$
913

$
1,463Long-term - commodity   swaps

$


$
575Financial   liabilitiesDerivatives not designated in a   hedging relationshipCurrent - interest rate   swaps

$
2,447

$
1,492Long-term - interest   rate swaps

$
1,307

$
Current - foreign   currency exchange agreements

$
80

$
Derivatives designated in a   hedging relationshipCurrent - interest rate   swaps

$


$
1,993Long-term - interest   rate swaps

$


$
2,106  The following tables outline the hierarchical measurement categories for various financial assets and liabilities. As at December 31, 2012 and December 31, 2011 financial assets and liabilities measured on a recurring basis had the following fair values:  63


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  December 31, 2012Quoted   prices in   active   markets for   identical   assets   (Level 1)

Significant   other   observable   inputs   (Level 2)

Significant   unobservable   inputs   (Level 3)

TotalCash and cash equivalents

$
29,940

$


$


$
29,940Funded landfill post-closure costs

9,885





9,885Other assets - commodity swaps (designated in a   hedging relationship)





913

913Other assets - commodity swaps





1,151

1,151Other liabilities - interest rate swaps



(3,754
)


(3,754
)Other liabilities - foreign currency exchange agreements



(80
)


(80
)$
39,825

$
(3,834
)
$
2,064

$
38,055  December 31, 2011Quoted   prices in   active   markets for   identical   assets   (Level 1)

Significant   other   observable   inputs   (Level 2)

Significant   unobservable   inputs   (Level 3)

TotalCash and cash equivalents

$
14,143

$


$


$
14,143Funded landfill post-closure costs

9,200





9,200Other assets - commodity swaps (designated in a   hedging relationship)





2,038

2,038Other assets - commodity swaps





220

220Other assets - interest rate swaps



5



5Other assets - foreign currency exchange   agreements



358



358Other liabilities - interest rate swaps   (designated in a hedging relationship)



(4,099
)


(4,099
)Other liabilities - interest rate swaps



(1,492
)


(1,492
)$
23,343

$
(5,228
)
$
2,258

$
20,373  The following table outlines the change in fair value for recurring Level 3 fair value measurements for the year ended December 31, 2012 and 2011:  64


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  December 312012

2011Balance, beginning of year

$
2,258

$
3,801Realized gains included in the statement of   operations, during the year

513

1,242Unrealized gains (losses) included in the   statement of operations, during the year

928

(324
)Unrealized losses included in accumulated other   comprehensive loss, during the year

(1,126
)
(1,215
)Settlements

(513
)
(1,242
)Foreign currency translation adjustment

4

(4
)Balance, end of year

$
2,064

$
2,258  Fair value  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.  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 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 agreements are recorded at their estimated fair values based on quotes received from the financial institution that the Company has entered the agreement with.  The Company verifies the reasonableness of the quotes by comparing them 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.  Hedge accounting  The Company has designated certain commodity and interest rate swaps as cash flow hedges. The following tables outline changes in the fair value of commodity and interest rate swaps designated as cash flow hedges and their impact on other comprehensive income or loss, net of the related income tax effect, for the year ended December 31, 2012 and 2011.  65


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  December 312012

2011Derivatives designated as cash   flow hedges, net of income taxOther comprehensive income (loss), interest rate   swaps

$
3,854

$
(2,478
)Other comprehensive loss, commodity swaps

(2,250
)
(3,312
)Total other comprehensive income (loss), net of   income tax

$
1,604

$
(5,790
)  The Company measures and records any ineffectiveness on commodity swaps representing the difference between the underlying index price and the actual price of diesel fuel purchased.  Gains or losses are reclassified to operating expenses as diesel fuel is consumed.  The estimated net amount of the unrealized losses on commodity swaps expected to be reclassified to earnings within the next twelve months is $913 (December 31, 2011 - $1,463).  The timing of actual amounts reclassified to net income is dependent on the movement in diesel fuel prices in the future. Until October 24, 2012, the Company measured and recorded any ineffectiveness on interest rate swaps using regression analysis.  Interest rate swaps were settled quarterly, consistent with the Companys obligation to pay interest on its previous U.S. facility. Gains or losses arising from interest rate swaps were reclassified to interest expense upon settlement. The estimated net amount of the unrealized gains on interest rate swaps expected to be reclassified to earnings within the next twelve months at December 31, 2011 was $1,993.  In conjunction with the full repayment of the U.S. facility, effective October 24, 2012, the designation of interest rate swaps as cash flow hedges ceased and hedge accounting was discontinued.  This resulted in a reclassification adjustment to earnings totaling $2,840, net of the related income tax effect, $1,530.  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 a condition of its U.S. facility the Company had entered into interest rate swaps to fix a portion of its variable rate interest charged on borrowings under the facility, some of which had been designated for hedge accounting up to October 24, 2012.  In addition, the Company has entered into commodity swaps for a portion of diesel fuel consumed in its Canadian and U.S. operations.  Finally, the Company has entered into foreign currency exchange agreements to mitigate against the risk of foreign currency fluctuations on dividends paid by BFI to WSI LLC, a U.S. holding company.  WSI LLC has a partial ownership interest in BFI.  The Companys corporate treasury function is responsible for arranging all agreements while the Audit Committee is responsible for approving such 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 key terms of its agreements, fair values, counterparties and each counterpartys most recent credit rating, and, where 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 and commodity swaps and foreign currency exchange agreements 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  66


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  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 as 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 dateOctober 29, 2008

62,500

$
3.69

Diesel Fuel Index

July 1, 2009

October 31, 2013June 1, 2009

170,000

$
2.34

NYMEX Heating Oil Index

January 1, 2013

May 31, 2013June 21, 2012

150,000

$
3.62

Diesel Fuel Index

January 1, 2015

December 31, 2015May 9, 2012

150,000

$
3.94

Diesel Fuel Index

January 1, 2013

December 31, 2013May 24, 2012

150,000

$
3.82

Diesel Fuel Index

January 1, 2013

December 31, 2013June 1, 2012

300,000

$
3.74

Diesel Fuel Index

January 1, 2013

December 31, 2013June 1, 2012

62,500

$
3.69

Diesel Fuel Index

November 1, 2013

June 30, 2014May 9, 2012

150,000

$
3.85

Diesel Fuel Index

January 1, 2014

December 31, 2014May 24, 2012

150,000

$
3.79

Diesel Fuel Index

January 1, 2014

December 31, 2014June 1, 2012

300,000

$
3.73

Diesel Fuel Index

January 1, 2014

December 31, 2014June 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 dateMay 9, 2012

260,000

$
0.61

NYMEX WTI Index

January 1, 2013

December 31, 2014May 23, 2012

260,000

$
0.60

NYMEX WTI Index

January 1, 2013

December 31, 2014June 4, 2012

520,000

$
0.76

NYMEX Heating Oil Index

January 1, 2013

December 31, 2013June 4, 2012

520,000

$
0.57

NYMEX WTI Index

January 1, 2014

December 31, 2014June 4, 2012

520,000

$
0.57

NYMEX WTI Index

January 1, 2015

December 31, 2015  67


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (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 dateOctober 26, 2010



$
160,000

1.07
%
0.23
%
November 2, 2010

July 2, 2014March 25, 2011



$
60,000

1.61
%
0.23
%
April 4, 2011

July 2, 2014June 29, 2011



$
30,000

1.13
%
0.23
%
July 5, 2011

July 2, 2014October 4, 2011



$
45,000


*

*
October 4, 2011

April 4, 2013  
 Note: (*) This interest rate swap agreement is based on LIBOR with an interest rate cap of 3.0%.  Foreign currency exchange agreements  Date entered

U.S. dollars   purchased

Foreign   currency   exchange rate

Effective dateOctober 28, 2011

$
4,000

1.0057

January 15, 2013February 29, 2012

$
4,000

0.9998

April 15, 2013August 9, 2012

$
4,300

1.0054

July 15, 2013  The contractual maturities of the Companys derivatives are as follows:   December 31, 2012Payments dueTotal

Less than 1   year

1-3 years

4-5 years

After 5 yearsDerivativeInterest rate swaps

$
3,788

$
2,523

$
1,265

$


$
Foreign currency   exchange agreements

$
12,300

$
12,300

$


$


$
  Unrealized amounts recorded to net gain or loss on financial instruments for the year ended December 31, 2012 are as follows:  December 312012

2011Net loss (gain) on financial   instrumentsFunded landfill post-closure costs

$
(59
)
$
(89
)Interest rate swaps

2,269

(4,851
)Fuel hedges

(928
)
324Foreign currency exchange agreements

443

(368
)$
1,725

$
(4,984
)  68


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  Estimated fair value  The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued charges approximates 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 December 31, 2012, the estimated fair value of the direct finance lease receivables applying an interest rate consistent with the credit quality of the instrument is $528 (2011 - $1,030), compared to the carrying amount of $512 (2011 - $790).  At December 31, 2011, the debentures estimated fair value was approximately $86,900 compared to the carrying amount of $57,030.  The debenture was repaid in full on October 24, 2012.  At December 31, 2012, the estimated fair value of the 2005 Seneca IRB Facility is approximately $45,400 (2011 - $45,300) compared to the carrying amount of $45,000 (2011 - $45,000).  At December 31, 2012, the estimated fair value of the term B facility is approximately $538,500 (2011 - $nil) compared to the carrying amount of $497,560 (2011 - $nil).  At December 31, 2012, the estimated fair value of long-term debt, excluding the term B facility and the 2005 Seneca IRB facility, bearing interest at variable rates approximates its carrying amount.  The Company believes that renegotiation of its variable rate long-term debt would result in equivalent pricing than it currently enjoys.  However, 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 carrying amount.  In accordance with FASBs guidance on intangibles  goodwill and other, goodwill with a carrying amount of $412,244 in 2011 was written down to its implied fair value of $51,687 which resulted in the Company recognizing an impairment loss of $360,557.  The impairment loss was recorded to the statement of operations and comprehensive income or loss for the year ended December 31, 2011.  Measuring the fair value of goodwill includes the use of significant unobservable Level 3 inputs in the fair value hierarchy.  A description of the significant inputs and valuation techniques applied, including a reconciliation of the beginning and ending balance of goodwill, can be found in Note 9.  Fair value methods and assumptions  Financial assets and liabilities recorded at fair value, as and where applicable, and included in other assets and other liabilities on the Companys balance sheets include:  funded landfill post-closure costs, and interest rate and commodity swaps.  Deposits made to the social utility trust, and recorded as funded landfill post-closure costs, are invested by the social utility trust trustee.  Statements of invested amounts are supplied to the Company by the social utility trust trustee and are prepared from quoted market prices for the underlying investments.  The fair value of interest rate and commodity swaps are determined by management with the assistance of third parties.  69


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  23.  Income Taxes  The following table reconciles the difference between income taxes that would result solely by applying statutory rates to the Companys pre-tax income or loss and income tax expense or recovery recorded in the statement of operations and comprehensive income or loss.  December 312012

2011Income (loss) before income taxes

$
161,520

$
(146,292
)Income tax expense (recovery) at the combined   basic rate

53,655

(55,354
)Large corporation and state tax

3,300

2,523Withholding tax on foreign dividends

3,112

2,105Tax on other non-deductible expenses

2,369

1,306Net revisions to certain tax bases and tax rates

1,870

433Goodwill impairment



99,109Other

2,816

(374
)Income tax expense

$
67,122

$
49,748  December 312012

2011Deferred income tax assetsUnutilized tax loss carryforwards

$
79,764

$
75,995Deferred financing costs and offering expenses

677

2,973Foreign tax credits available for carryforward

14,567

14,567Accounting provisions not currently deductible for   tax

54,532

51,453Tax value of intangibles and landfill assets in   excess of carrying value

18,475

27,943Other

643

768Valuation allowance

(18,267
)
(18,267
)150,391

155,432Deferred income tax liabilitiesCarrying value of capital assets in excess of tax   value

81,855

55,717Carrying value of intangibles and landfill assets   in excess of tax value

166,109

170,389Other

6,222

5,560254,186

231,666Net deferred income tax   liabilities

$
103,795

$
76,234Canada

$
38,231

$
42,348U.S.

65,564

33,886Net deferred income tax   liabilities

$
103,795

$
76,234  70


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  The components of domestic and foreign income (loss) before income taxes and domestic and foreign income taxes are as follows:  2012

2011Income (loss) before income taxes and net loss   from equity accounted investeeCanada

$
108,289

$
127,991U.S.

53,231

(274,283
)$
161,520

$
(146,292
)Current income tax expenseCanada

$
44,894

$
43,669U.S.

4,387

3,76449,281

47,433Deferred income tax expense (recovery)Canada

(7,921
)
(7,489
)U.S.

25,762

9,80417,841

2,315Total income tax expense

$
67,122

$
49,748  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 at December 31, 2012 and 2011.  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 2012 in Canada and from 1997 to 2012 in the U.S.  The Company does not tax effect its foreign currency translation adjustment.  Subsidiaries of the Company have unutilized tax losses amounting to $197,484 (2011 - $187,520) which expire 2013 to 2031.  The realization of the deferred income tax assets, net of a $3,250 (2011 - $3,250) valuation allowance on certain U.S. unutilized tax loss carryforwards, totaling $72,544 (2011 - $70,414), is dependent on the Company generating taxable income in future years in which those temporary differences become deductible.  Based on managements estimate of the Companys projected future taxable income and its tax planning strategies, management expects to realize these deferred income tax assets in advance of expiry.  Changes to the Companys ownership structure could limit the Companys use of unutilized tax losses as imposed by Section 382 of the U.S. Internal Revenue Code.  As of December 31, 2012, a subsidiary of the Company has foreign tax credit carryforwards which expire in 2018 and 2019 that result in a deferred income tax asset totaling $14,567 (2011 - $14,567).  As the Company does not expect to generate foreign source income in the future, it has provided a full valuation allowance against the foreign tax credits available for carryforward.  On the Companys acquisition of IESI, IESI issued a $160,000 intercompany note payable (U.S. note).  Effective August 28, 2007, the U.S. note was cancelled.  For the purposes of determining taxable income, IESI has taken the position that the U.S. note and its related interest was commercially reasonable and has deducted the interest paid thereon on this basis.  Management has taken steps to ensure that the U.S. note was commercially reasonable, however, there can be no assurance that U.S. taxation authorities will not seek to challenge the treatment of the U.S. note as debt or the amount of interest expense deducted, which could increase IESIs taxable income and accordingly its U.S. federal income tax liability.  Management has determined that it has met the more-likely-than-not threshold based on its technical merits and that managements position would be sustained upon examination by the relevant tax authority.  71


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  24.  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 business segment limits the volume and number of transactions between them.  The Company has elected to exclude corporate costs in the determination of each business segments performance.  Corporate costs include certain executive, legal, accounting, internal audit, treasury, investor relations, corporate development, environmental management, information technology, human resources, sales 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 3).  The Company evaluates its segment performance based on revenues, less operating and selling, general and administration expenses.  December 312012

2011RevenuesCanada

$
776,814

$
757,594U.S. south

780,331

723,315U.S. northeast

339,596

359,187Corporate



$
1,896,741

$
1,840,096Revenues less operating and   selling, general and administration expenseCanada

$
278,461

$
280,408U.S. south

217,077

211,429U.S. northeast

71,526

89,542Corporate

(55,827
)
(53,950
)$
511,237

$
527,429AmortizationCanada

$
103,112

$
100,516U.S. south

110,172

99,126U.S. northeast

57,501

54,041Corporate

3,333

3,383$
274,118

$
257,066Restructuring expenses

$


$
1,609Goodwill impairment

$


$
360,557Net gain on sale of capital   assets

$
(592
)
$
(3,412
)Operating income (loss)

$
237,711

$
(88,391
)  72


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  December 31, 2012Canada

U.S. south

U.S.   northeast

Corporate

TotalGoodwill

$
409,296

$
421,108

$
98,710

$


$
929,114Capital assets

$
379,095

$
421,374

$
118,210

$
8,839

$
927,518Landfill assets

$
207,485

$
404,403

$
351,832

$


$
963,720Total Assets

$
1,283,434

$
1,461,817

$
684,959

$
45,351

$
3,475,561  December 31, 2011Canada

U.S. south

U.S.   northeast

Corporate

TotalGoodwill

$
372,596

$
350,126

$
51,687

$


$
774,409Capital assets

$
296,397

$
364,396

$
105,034

$
10,231

$
776,058Landfill assets

$
221,660

$
397,293

$
339,839

$


$
958,792Total Assets

$
1,145,143

$
1,301,687

$
587,931

$
42,843

$
3,077,604  25.  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 2013 and 2025.  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 certain distance of the 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 value and the hypothetical market value of the homeowners properties assuming a previously approved expansion of the  73


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  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, but does not believe it would have a material effect on the Companys financial position or results of operations.  As of December 31, 2012, the Company has compensated one homeowner under the PVPP.  74


Progressive Waste Solutions Ltd. Notes to the Consolidated Financial Statements  For the years ended December 31, 2012 and 2011 (in thousands of U.S. dollars and shares, except per share amounts and where otherwise stated)  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.  75