WCA Waste 10Q 2006 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2006


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 000-50808

WCA Waste Corporation

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		20-0829917 (I.R.S. Employer Identification No.)

One Riverway, Suite 1400 Houston, Texas 77056		77056 (Zip Code)
(Address of principal executive offices)

(713) 292-2400
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESþ NOo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero Accelerated filerþ Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YESo NOþ

As of November 7, 2006, there were 16,859,027 shares of WCA Waste Corporation’s common stock, par value $0.01 per share, outstanding, net of 17,943 shares of treasury stock.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II-OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS
SIGNATURES
EXHIBIT INDEX
Statement regarding computation of ratio of earnings to fixed charges
Rule 13a-14a/15d-14a Certification of CEO
Rule 13a-14a/15d-14a Certification of CFO
Section 1350 Certification of CEO
Section 1350 Certification of CFO

RISK FACTORS AND
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

Some of the statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. From time to time, our public filings, press releases and other communications (such as conference calls and presentations) will contain forward-looking statements. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “may,” “should,” “outlook,” “project,” “intend,” “seek,” “plan,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “continue,” or “opportunity,” the negatives of these words, or similar words or expressions. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. This is true of our description of our acquisition strategy and any expected benefits from any acquisitions or acquisition strategy for example. It is also true of our statements concerning “run rates”; for a description of the basis upon which we make estimates of run rates, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements and Non-GAAP Measures” elsewhere in this report.

We caution that forward-looking statements are not guarantees and are subject to known and unknown risks and uncertainties. Since our business, operations and strategies are subject to a number of risks, uncertainties and other factors, actual results may differ materially from those described in the forward-looking statements.

Thus, for example, our future financial performance will depend significantly on our ability to execute our acquisition strategy, which will be subject to many risks and uncertainties including, but not limited to, the following:

	•		we may be unable to identify, complete or integrate future acquisitions, which may harm our prospects;

	•		we compete for acquisition candidates with other purchasers, some of which have greater financial resources and may be able to offer more favorable terms, thus limiting our ability to grow through acquisitions;

	•		in connection with financing acquisitions, we may incur additional indebtedness, or may issue additional shares of our common stock, which would dilute the ownership percentage of existing stockholders;

	•		businesses that we acquire may have unknown liabilities and require unforeseen capital expenditures, which would adversely affect our financial results;

	•		rapid growth may strain our management, operational, financial and other resources, which would adversely affect our financial results; and

	•		we may incur charges related to acquisitions, which could lower our earnings.

Our business is also subject to a number of operational risks and uncertainties that could cause our actual results of operations or our financial condition to differ from any forward-looking statements. These include, but are not limited to, the following:

	•		changes in interest rates may affect our profitability;

	•		we are subject to environmental and safety laws, which restrict our operations and increase our costs;

	•		we may become subject to environmental clean-up costs or litigation that could curtail our business operations and materially decrease our earnings;

	•		our accruals for landfill closure and post-closure costs may be inadequate, and our earnings would be lower if we are required to pay or accrue additional amounts;

	•		we may be unable to obtain financial assurances necessary for our operations, which could result in the closure of landfills or the termination of collection contracts;

	•		our business is capital intensive, requiring ongoing cash outlays that may strain or consume our available capital and force us to sell assets, incur debt, or sell equity on unfavorable terms;

	•		increases in the costs of disposal, labor, fuel and insurance could reduce operating margins;

	•		we may not be able to maintain sufficient insurance coverage to cover the risks associated with our operations, which could result in uninsured losses that would adversely affect our financial condition;

	•		our failure to remain competitive with our numerous competitors, some of which have greater resources, could adversely affect our ability to retain existing customers and obtain future business;

	•		we may lose contracts through competitive bidding, early termination or governmental action, or we may have to substantially lower prices in order to retain certain contracts, any of which would cause our revenues to decline;

	•		comprehensive waste planning programs and initiatives required by state and local governments may reduce demand for our services, which could adversely affect our waste volumes and the price of our landfill disposal services;

	•		covenants in our credit facilities and the instruments governing our other indebtedness may limit our ability to grow our business and make capital expenditures;

	•		efforts by labor unions to organize our employees could divert management attention and increase our operating expenses;

	•		a general downturn in U.S. economic conditions may reduce our business prospects and decrease our revenues and cash flows;

	•		current and proposed laws may restrict our ability to operate across local borders which could affect our manner, cost and feasibility of doing business;

	•		we may not be successful in expanding the permitted capacity of our current or future landfills, which could restrict our growth, increase our disposal costs, and reduce our operating margins;

	•		poor decisions by our regional and local managers could result in the loss of customers or an increase in costs, or adversely affect our ability to obtain future business;

	•		we are vulnerable to factors affecting our local markets, which could adversely affect our stock price relative to our competitors;

	•		seasonal fluctuations will cause our business and results of operations to vary among quarters, which could adversely affect our stock price;

	•		failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price; and

	•		our success depends on key members of our senior management, the loss of any of whom could disrupt our customer and business relationships and our operations.

We describe these and other risks in greater detail in the section entitled “Business—Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2005 (sometimes referred to in this report, including the notes to our financial statements, as the “10-K”) and in Part II, Item 1A, “Risk Factors,” in this quarterly report.

The forward-looking statements included in this report are only made as of the date of this report and we undertake no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances.

PART I-FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

WCA WASTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


	September 30,			December 31,
	2006			2005
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	56,390		$	678
Restricted cash		128			270
Accounts receivable, net of allowance for doubtful accounts of $720 (unaudited) and $1,190, respectively		17,893			16,127
Deferred tax assets		763			763
Prepaid expenses and other		5,021			4,728

Total current assets		80,195			22,566
Property and equipment, net of accumulated depreciation and amortization of $60,194 (unaudited) and $46,691, respectively		203,425			186,299
Goodwill, net		72,438			72,455
Intangible assets, net		4,806			5,041
Deferred financing costs, net		5,514			3,374
Restricted cash – debt service reserve fund		975			675
Other assets		630			1,128

Total assets	$	367,983		$	291,538


LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	6,251		$	6,284
Accrued liabilities and other		9,881			6,876
Accrued interest		3,649			389
Accrued closure and post-closure liabilities		11			286
Note payable		176			73
Current maturities of long-term debt		930			1,910

Total current liabilities		20,898			15,818

Long-term debt, less current maturities and discount		166,095			174,352
Interest rate swap		3,811			711
Accrued closure and post-closure liabilities		3,869			3,332
Deferred tax liabilities		7,016			5,618

Total liabilities		201,689			199,831

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:
Series A convertible preferred stock, $0.01 par value per share. Authorized 750 shares; issued and outstanding 750 and 0 shares, respectively (liquidation preference $96,006)		8			—
Common stock, $0.01 par value per share. Authorized 50,000 shares; issued and outstanding 16,854 and 16,532 shares, respectively		169			165
Treasury stock		(174	)		—
Additional paid-in capital		160,182			86,930
Retained earnings		6,109			5,043
Accumulated other comprehensive loss		—			(431	)

Total stockholders’ equity		166,294			91,707

Total liabilities and stockholders’ equity	$	367,983		$	291,538

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

WCA WASTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Revenue	$	39,217		$	29,498		$	112,113		$	81,435
Expenses:
Cost of services		25,176			18,908			71,646			52,596
Depreciation and amortization		4,898			3,846			14,235			10,297
General and administrative (including stock-based compensation of $258, $183, $819 and $320, respectively)		2,901			1,812			8,047			5,840

		32,975			24,566			93,928			68,733

Operating income		6,242			4,932			18,185			12,702
Other income (expense):
Interest expense, net		(3,893	)		(2,734	)		(12,173	)		(6,613	)
Write-off of deferred financing costs and debt discount		(3,240	)		(14	)		(3,240	)		(1,308	)
Net gain on terminated interest rate swap		276			—			3,980			—
Unrealized loss on interest rate swap		(3,811	)		—			(3,811	)		—
Other		31			14			104			27

		(10,637	)		(2,734	)		(15,140	)		(7,894	)

Income (loss) before income taxes		(4,395	)		2,198			3,045			4,808
Income tax (provision) benefit		1,675			(873	)		(1,314	)		(1,893	)

Net income (loss)		(2,720	)		1,325			1,731			2,915
Accrued payment-in-kind dividend on preferred stock		(665	)		—			(665	)		—

Net income (loss) available to common stockholders	$	(3,385	)	$	1,325		$	1,066		$	2,915


Earnings per share — basic and diluted	$	(0.21	)	$	0.09		$	0.07		$	0.19


Weighted average shares outstanding — basic		16,378			15,362			16,353			15,343

Weighted average shares outstanding – diluted		16,378			15,385			16,373			15,382

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

WCA WASTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)


	Nine Months Ended
	September 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,731		$	2,915
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,235			10,297
Stock-based compensation		819			320
Amortization of deferred financing costs and debt discount		507			416
Write-off of deferred financing costs and debt discount		3,240			1,308
Unrealized loss on interest rate swap		3,811			—
Deferred tax provision		1,314			1,893
Accretion expense for closure and post-closure obligations		213			114
Gain on sale of assets		(104	)		(27	)
Prepaid disposal usage		1,706			1,252
Cost of terminated acquisitions		214			18
Change in operating assets and liabilities:
Accounts receivable		(1,737	)		(3,337	)
Prepaid expenses and other		1,920			880
Accounts payable and other liabilities		5,079			(401	)

Net cash provided by operating activities		32,948			15,648

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired		(3,818	)		(54,917	)
Proceeds from sale of fixed assets		123			34
Capital expenditures		(21,477	)		(13,159	)
Cost incurred on possible acquisitions		(61	)		(540	)

Net cash used in investing activities		(25,233	)		(68,582	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Series A convertible preferred stock, net of issuance costs		71,996			—
Proceeds from issuance of long-term debt, net of original purchase discount		145,758			127,500
Principal payments on long-term debt		(126,804	)		(23,219	)
Principal payments of note payable		(3,823	)		(2,185	)
Net change in revolving line of credit		(37,723	)		(46,900	)
Decrease in restricted cash		259			—
Equity transaction costs		(144	)		—
Deferred financing costs		(1,522	)		(2,245	)

Net cash provided by financing activities		47,997			52,951

NET INCREASE IN CASH AND CASH EQUIVALENTS		55,712			17
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD		678			272

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	$	56,390		$	289



SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	9,077		$	5,928
Income taxes paid		290			—

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

WCA WASTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(All tables in thousands, except per share data)

1. BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS

Basis of Presentation

WCA Waste Corporation (together with its subsidiaries, WCA or the Company) is a vertically integrated, non-hazardous solid waste collection and disposal company.

The unaudited condensed consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for quarterly reports on Form 10-Q. Certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to such rules and regulations. The Company believes that the presentations and disclosures herein are adequate to make the information presented herein not misleading when read in conjunction with its Form 10-K filed with the SEC on March 16, 2006 (Form 10-K) which contains the Company’s audited consolidated financial statements as of and for the year ended December 31, 2005. The unaudited condensed consolidated financial statements as of September 30, 2006 and for the three and nine months ended September 30, 2006 and 2005 reflect, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position and results of operations for such periods. Certain reclassifications have been made to the prior period financial statements to conform to the current presentation. Please note, however, operating results for interim periods are not necessarily indicative of the results for full years. For the description of the Company’s significant accounting policies, see Note 1 to Notes to Consolidated Financial Statements included in the Form 10-K.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of all material intercompany balances and transactions.

New Accounting Pronouncements

FIN 48 — Accounting for Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (an interpretation of Statement of Financial Accounting Standards No. 109) (FIN 48), which clarifies the relevant criteria and approach for the recognition, de-recognition and measurement of uncertain tax positions. FIN 48 will be effective for the Company beginning January 1, 2007. The Company is currently in the process of assessing the provisions of FIN 48, but does not expect the adoption of FIN 48 to have a material impact on its consolidated financial statements.

SFAS No. 157 — Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 will be effective for the Company beginning January 1, 2008. The Company is currently in the process of assessing the provisions of SFAS No. 157 and determining how this framework for measuring fair value will affect its current accounting policies and procedures as well as its financial statements. The Company has not determined whether the adoption of SFAS No. 157 will have a material impact on its consolidated financial statements.

SAB 108 — Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (SAB 108),

which allows for the adjustment of the cumulative effect of prior year immaterial errors in assets and liabilities as of the beginning of the fiscal year, with an offsetting adjustment to the opening balance of retained earnings. SAB 108 is effective for the Company for its annual financial statement for the year ended December 31, 2006. The Company is currently in the process of evaluating the potential impacts of adopting SAB 108.

2. ACQUISITIONS

The Company completed one acquisition during the three months ended September 30, 2006. The acquisition of the Fort Myers transfer station from Waste Corporation of America, LLC was completed on August 10, 2006. WCA Waste Corporation was previously part of a corporate group that included Waste Corporation of America, LLC. The two companies maintain certain other relationships and have certain common officers, directors and owners. Total consideration for this acquisition, which was determined through an independent review of fair value, was approximately $3.5 million, consisting primarily of cash.

During the nine months ended September 30, 2006, the Company completed the acquisition of the Fort Myers transfer station discussed above as well as the acquisition of Transit Waste, LLC on February 10, 2006 from Waste Corporation of America, LLC. In that acquisition, the acquired operations include a municipal solid waste (MSW) landfill near Durango, Colorado and a collection operation in Bloomfield, New Mexico. Total consideration for the Transit Waste acquisition, which was determined through an independent review of fair value, was approximately $5.6 million, consisting of $0.4 million in cash and $5.2 million in debt assumed (net of $0.1 million of debt discount). On February 23, 2006, the Company repaid $1.3 million of the assumed debt.

The purchase price for these transactions has been allocated to the identifiable tangible assets acquired and liabilities assumed based on their estimated fair values at the time of acquisitions. The purchase price allocations are considered preliminary until the Company is no longer waiting for information that it has arranged to obtain and that is known to be available or obtainable. The time required to obtain the necessary information will vary with specific acquisitions, however, the final purchase price allocation will not exceed one year from the consummation of the acquisition.

The Company’s condensed consolidated financial statements include the results of operations of the acquired businesses from their acquisition date. The acquisitions were not significant (within the meaning of Regulation S-X) to the Company as a whole.

Based on the preliminary assessments of the aggregate values for these acquisitions, the Company reflected landfill cost of $2.8 million, other fixed assets of $6.6 million and net working capital of $(0.3) million.

Subsequently, on October 2, 2006, the Company acquired the membership interests of St. Lucie, LLC from Waste Corporation of America, LLC for $1.8 million in cash. St. Lucie, LLC was a wholly-owned subsidiary of Waste Corporation of America, LLC. The acquisition includes a transfer station near St. Lucie, Florida.

During 2005, two acquisitions were completed that were deemed significant (as defined by Regulation S-X) to the Company as a whole. MRR Southern located in North Carolina and Meyer & Gabbert located in Florida were completed on April 1, 2005 and October 3, 2005, respectively. The consolidated financial statements included herein include the results of MRR Southern and Meyer & Gabbert from their respective acquisition dates. The following unaudited pro forma results of operations have been prepared assuming that the acquisitions had occurred as of January 1, 2005. This pro forma information is not necessarily indicative of the results of operations that would have occurred had the acquisitions been made on those dates, or of results which may occur in the future (unaudited).


	Three Months Ended		Nine Months Ended
	September 30, 2005		September 30, 2005
Revenue	$	33,439	$	93,833
Net income		1,966		3,778
Per share data:
Net income — basic and diluted	$	0.13	$	0.24

3. STOCK-BASED COMPENSATION

Upon the completion of its initial public offering in 2004, the Company established the 2004 WCA Waste Corporation Incentive Plan. The plan, as amended and restated, authorizes the issuance of up to 2,250,000 shares. As of September 30, 2006, there were approximately 1,070,573 remaining shares authorized for issuance.

During the three and nine months ended September 30, 2006, 45,751 and 357,619 restricted shares of the Company’s common stock, respectively, were granted to certain officers and key employees with an aggregate market value of $0.3 million and $2.6 million on the grant dates, respectively. The value of the restricted shares was included as additional paid-in capital within the stockholders’ equity section of the accompanying consolidated balance sheet. The unearned compensation is being amortized to expense on a straight-line basis over the required employment period, or the vesting period, as the restrictions lapse at the end of each anniversary after the date of grant.

The following table reflects the Company’s restricted share activity for the three and nine months ended September 30, 2006:


	Three Months Ended September 30, 2006							Nine Months Ended September 30, 2006
						Weighted							Weighted
				Weighted		Average					Weighted		Average
				Average		Remaining					Average		Remaining
				Grant-Date		Contractual Term					Grant-Date		Contractual Term
	Shares			Fair Value		(years)		Shares			Fair Value		(years)
Unvested at beginning of period		436		$	7.97				204		$	9.50
Granted		46			6.75				358			7.26
Vested		(1	)		8.07				(79	)		9.39
Forfeited		(6	)		7.27				(8	)		7.54

Unvested at September 30, 2006		475		$	7.86		5.02		475		$	7.86		5.02

Prior to the adoption of SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)), the Company accounted for stock-based compensation under the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. Under this method, the Company recorded no compensation expense for stock options granted to employees when the exercise price of the options is equal to or greater than the fair market value of common stock on the date of grant. The following table presents the effect on the Company’s net income and earnings per share for the three and nine months ended September 30, 2005 as if the Company had adopted the fair value recognition provisions of SFAS No. 123:


	Three Months Ended			Nine Months Ended
	September 30, 2005			September 30, 2005
Net income, as reported	$	1,325		$	2,915
Stock-based compensation expense on granted options pursuant to SFAS 123, net of tax		(108	)		(321	)

Net income, pro forma	$	1,217		$	2,594

Earnings per share – basic and diluted:
As reported	$	0.09		$	0.19
Pro forma	$	0.08		$	0.17

In accordance with SFAS No. 123, the fair value calculations at the date of grant using the Black-Scholes option pricing model were calculated with the following weighted average assumptions:


	2005
Risk-free interest rate		3.44	%
Volatility factor of stock price		0.35
Dividends		—
Option life	4 years
Calculated fair value per share	$	3.35

Effective January 1, 2006, the Company adopted SFAS No. 123(R) using the modified prospective method. No compensation expense was recorded associated with outstanding stock options during the first nine months of 2006 as all outstanding options were fully vested prior to January 1, 2006.

The following table reflects the Company’s option activity for the three and nine months ended September 30, 2006:


	Three Months Ended September 30, 2006						Nine Months Ended September 30, 2006
					Weighted							Weighted
					Average							Average
			Weighted		Remaining					Weighted		Remaining
			Average		Contractual Term					Average		Contractual Term
	Shares		Exercise Price		(years)		Shares			Exercise Price		(years)
Outstanding at beginning of period		640	$	9.52				644		$	9.52
Forfeitures		—		—				(4	)		9.50

Outstanding at September 30, 2006		640	$	9.52		7.75		640		$	9.52		7.75

4. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the treasury stock method for options, warrants and restricted shares and the if-converted method for convertible preferred stock and convertible debt. The detail of the earnings per share calculations for net income (loss) for the three and nine months ended September 30, 2006 and 2005 is as follows:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2006			2005		2006			2005
Numerator:
Net income (loss)	$	(2,720	)	$	1,325	$	1,731		$	2,915
Accrued payment-in-kind dividend on preferred stock		(665	)		—		(665	)		—

Net income (loss) available to common stockholders	$	(3,385	)	$	1,325	$	1,066		$	2,915


Denominator:
Weighted average basic shares outstanding		16,378			15,362		16,353			15,343
Dilutive effect of options and warrants		—			—		—			4
Dilutive effect of restricted share issuances		—			23		20			35

Weighted average diluted shares outstanding		16,378			15,385		16,373			15,382


Earnings per share:
Basic	$	(0.21	)	$	0.09	$	0.07		$	0.19
Diluted	$	(0.21	)	$	0.09	$	0.07		$	0.19

Due to their antidilutive effect, the following potential common shares have been excluded from the computation of diluted earnings per share:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2006		2005		2006		2005
Stock options and warrants		640		649		640		15
Restricted shares		475		—		128		—
Convertible preferred stock		7,882		—		7,882		—
Convertible debt		636		636		636		636

		9,633		1,285		9,286		651

5. LONG-TERM DEBT AND NOTES PAYABLE

Long-term debt and notes payable are as follows:


	September 30,			December 31,
	2006			2005
Senior Notes, with interest rate of 9.25%, due in July 2014	$	150,000		$	—
Term B Loan, principal payable $250,000 per quarter, variable interest rate based on LIBOR plus a margin (7.72% at December 31, 2005)		—			99,250
Second Lien Credit Agreement, variable interest rate based on LIBOR plus a margin (10.72% at December 31, 2005)		—			25,000
Revolving note payable with a financial institution, variable interest rate based on LIBOR plus a margin (7.72% at December 31, 2005)		—			37,723
Environmental Facilities Revenue Bonds, principal payable in varying annual installments, maturing in 2020, interest rate ranging from 8.5% to 9% (8.89% and 8.94% weighted average rate at September 30, 2006 and December 31, 2005, respectively)		9,165			6,480
Notes payable to banks and financial institutions, payable monthly through August 2010, weighted average interest rate of 6.53% at September 30, 2006		1,172			506

Note payable, with interest rate of 5%, due in January 2010		160			200

Seller note, with interest rate of 6%, due in May 2006		—			444

Seller convertible note, with interest rate of 5%, due in December 2009		3,000			3,000

Seller convertible notes, with interest rate of 8%, due in January 2010		4,000			4,000

		167,497			176,603
Less: Debt discount		(472	)		(341	)
Less: Current portion		(930	)		(1,910	)

	$	166,095		$	174,352

As of September 30, 2006, the Company had $175 million in total capacity under its credit facility, of which none was outstanding under the revolving line of credit and $9.9 million in other letters of credit issued, leaving $165.1 million in availability. See further discussions under Bank Credit Facility below.

9.25% Senior Notes Due 2014

On July 5, 2006, the Company issued $150 million aggregate principal amount of 9.25% senior notes due 2014. The net proceeds of the offering were $145.8 million after deducting initial purchasers’ discounts of $3.75 million and other issuance costs. The proceeds were applied as follows: $21.5 million to outstanding borrowings on the Company’s revolving note payable, $99.0 million to debt outstanding under the Company’s first lien credit facility, and $25.3 million to debt outstanding under the Company’s second lien credit facility which included $0.3 million of prepayment premium associated with the second lien notes. The Company wrote off $3.2 million of deferred financing costs and debt discount associated with the repayment and retirement of its first and second lien credit agreements. The senior notes pay interest semi-annually on June 15 and December 15, commencing December 15, 2006, with the following redemption provisions:

	•		At any time before June 15, 2009, the Company may redeem up to 35% of the notes with net cash proceeds of certain equity offerings, as long as it redeems the notes within 180 days of the offering and at least 65% of the aggregate principal amount of the notes issued pursuant to the indenture remains outstanding after the redemption;

	•		Prior to June 15, 2010, the Company may redeem all or part of the notes by paying a make-whole premium, plus accrued and unpaid interest, and, if any, liquidated damages; and

	•		The notes may be callable beginning on June 15 of 2010, 2011, and 2012 and thereafter at redemption prices of 104.625%, 102.313% and 100% of the principal amount plus accrued interest.

The senior notes were issued under an indenture between the Company and The Bank of New York Trust Company, N.A., as Trustee. The indenture contains covenants including, among other provisions, limitations on the Company’s ability to incur additional indebtedness, make capital expenditures, create liens, sell assets and make dividend and other payments.

Bank Credit Facility

Additionally, on July 5, 2006, the Company entered into a new $100 million revolving secured credit facility with Comerica Bank maturing July 5, 2011. On July 28, 2006, Comerica syndicated the credit facility to a group of banks and the Company agreed to increase the capacity of the revolving credit facility to $175 million. The new credit facility replaced the existing $100 million revolving credit facility with Wells Fargo Bank National Association as administrative agent. The new revolving credit facility includes covenants similar to the expiring facility with reduced interest margins associated with various leverage ratios. The following table highlights the revised margins:


	LIBOR		Prime		Commitment
Leverage Ratio	Margin		Margin		Fee
Less than 3.0x		1.500		—		0.250
Equal to or greater than 3.0 and less than 3.5x		1.750		0.250		0.250
Equal to or greater than 3.5 and less than 4.0x		2.000		0.500		0.250
Equal to or greater than 4.0 and less than 4.5x		2.250		0.750		0.375
Equal to or greater than 4.5x		2.500		1.000		0.500

6. INTEREST RATE SWAP / COMPREHENSIVE INCOME (LOSS)

The components of comprehensive income (loss), net of related tax, for the three and nine months ended September 30, 2006 and 2005 are as follows:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2006			2005		2006		2005
Net income (loss)	$	(2,720	)	$	1,325	$	1,731	$	2,915
Change in accumulated income (loss) in interest rate swap, net of tax of $0 and $280, respectively		—			—		431		—

Comprehensive income (loss)	$	(2,720	)	$	1,325	$	2,162	$	2,915

The Company previously entered into an interest rate swap agreement to mitigate its exposure to interest rate risk associated with its floating rate borrowings. With the repayment of the Company’s outstanding floating rate debt instruments in July 2006, the interest rate swap no longer qualified for hedge accounting as of June 30, 2006 as the future floating rate interest payments were no longer probable. As a result, the Company recognized in earnings, the unrealized gain (loss) related to the fair value of the swap, which was previously recorded as a component of accumulated other comprehensive loss. On July 5, 2006, the swap agreement was terminated resulting in a payment of $4.0 million from the swap counter- party. Therefore, the Company recorded a $3.7 million unrealized gain in the second quarter of 2006 for the fair value of the swap agreement as of June 30, 2006. During the quarter ended September 30, 2006, the Company realized the entire gain of $4.0 million related to the interest rate swap agreement, with an additional $0.3 million recognized in earnings during the quarter.

On July 7, 2006, the Company entered into a new interest rate swap agreement effective July 11, 2006, where it agreed to pay a fixed-rate of 5.64% in exchange for three-month floating rate LIBOR which was 5.51% at the time the swap was entered. The Company did not enter into the interest rate swap agreements for trading purposes. The swap agreement was intended to limit the Company’s exposure to a rising rate interest environment. At the time the swap was entered, there was no offsetting floating rate LIBOR debt and no such floating rate interest payments were probable of being incurred in the near future. As a result, the swap transaction can not be designated as a hedging transaction and any changes in the unrealized fair value of the new swap will be recognized in the statement of operations. If, in the future, the Company has

corresponding debt instruments that have floating rate debt, it will consider designating all or part of this swap agreement as a hedge. As of September 30, 2006, the Company recorded $3.8 million of unrealized loss related to the interest rate swap in the accompanying condensed consolidated statements of operations.

7. LANDFILL ACCOUNTING

Capitalized Landfill Costs

At September 30, 2006, the Company owned 20 landfills. Two of these landfills are fully permitted but not constructed and have not yet commenced operations as of September 30, 2006.

Capitalized landfill costs include expenditures for the acquisition of land and related airspace, engineering and permitting costs, cell construction costs and direct site improvement costs. At September 30, 2006, no capitalized interest had been included in capitalized landfill costs, however, in the future interest could be capitalized on landfill construction projects but only during the period the assets are undergoing activities to ready them for their intended use. Capitalized landfill costs are amortized ratably using the units-of-production method over the estimated useful life of the site as airspace of the landfill is consumed. Landfill amortization rates are determined periodically (not less than annually) based on ground surveys and other density measures and estimates made by the Company’s engineers, outside engineers, management and financial personnel.

Total available airspace includes the total of estimated permitted airspace plus an estimate of probable expansion airspace that the Company believes is likely to be permitted. Where the Company believes permit expansions are probable, the expansion airspace, and the projected costs related to developing the expansion airspace are included in the airspace amortization rate calculation. The criteria the Company uses to determine if permit expansion is probable include but are not limited to whether: (i) the Company believes the project has fatal flaws; (ii) the land is owned or controlled by the Company, or under option agreement; (iii) the Company has committed to the expansion; (iv) financial analysis has been completed and the results indicate that the expansion has the prospect of a positive financial and operational impact; (v) personnel are actively working to obtain land use, local and state approvals for an expansion; (vi) the Company believes that the permit is likely to be received; and (vii) the Company believes that the timeframe to complete the permitting is reasonable.

The Company may be unsuccessful in obtaining expansion permits for airspace that has been considered probable. If unsuccessful in obtaining these permits, certain previously capitalized costs will be charged to expense.

Closure and Post-Closure Obligations

The Company has material financial commitments for the costs associated with its future obligations for final closure, which is the closure of the landfill, the capping of the final uncapped areas of a landfill and post-closure maintenance of those facilities, which is generally expected to be for a period of up to 30 years for MSW facilities and up to five years for construction and demolition (C&D) facilities.

The impact of changes determined to be changes in estimates, based on an annual update, is accounted for on a prospective basis. The Company’s ultimate liability for such costs may increase in the future as a result of changes in estimates, legislation, or regulations.

The following table rolls forward the net landfill and closure and post-closure liabilities from December 31, 2005 to September 30, 2006:


	Landfill			Closure and Post-
	Assets, net			closure Liabilities
December 31, 2005	$	127,758		$	3,618
Capital expenditures		9,437			—
Amortization expense		(6,673	)		—
Obligations incurred and capitalized		338			338
Interest accretion		—			213
Acquisitions and other adjustments		2,663			(289	)

September 30, 2006	$	133,523		$	3,880

The Company’s liabilities for closure and post-closure costs are as follows:


	September 30,		December 31,
	2006		2005
Recorded amounts:
Current portion	$	11	$	286
Noncurrent portion		3,869		3,332

Total recorded	$	3,880	$	3,618

The Company’s total anticipated cost for closure and post-closure activities is $103.5 million, as measured in current dollars. The Company believes the amount and timing of these activities are reasonably estimable. Where the Company believes that both the amount of a particular closure and post-closure liability and the timing of the payments are reliably determinable, the cost, in current dollars, is inflated 2.5% until expected time of payment and then discounted to present value at the Company’s credit-adjusted risk-free rate, which is estimated to be 8.5%. Accretion expense is applied to the closure and post-closure liability based on the effective interest method and is included in cost of services. Had the Company not discounted any portion of its liability based on the amount of landfill airspace utilized to date, the closure and post-closure liability recorded would have been $17.7 million and $14.0 million at September 30, 2006 and December 31, 2005, respectively.

8. INCOME TAXES

The Company accounts for income taxes under the asset and liability method, where deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases based on enacted tax rates. The Company provides a valuation allowance when, based on management’s estimates, it is more likely than not that a deferred tax asset will not be realized in future periods. Income taxes have been provided for the nine months ended September 30, 2006 based upon the Company’s anticipated 2006 annual effective income tax rate of 43.2% as compared to 39.4% for the nine months ended September 30, 2005. Such rate differs from the statutory rate of 35% due to state income taxes and estimates of non-deductible expenses. The 2006 rate reflects the impact of certain non-deductible expenses, while projected current year pre-tax earnings are lower than prior periods.

9. STOCKHOLDERS’ EQUITY

During the nine months ended September 30, 2006, the Company issued 349,877 restricted shares, net of forfeitures, under the Amended and Restated 2004 WCA Waste Corporation Incentive Plan. These shares vest over periods ranging from one to ten years from the issue date. The following table reflects the changes in stockholders’ equity from December 31, 2005 to September 30, 2006:


														Accumulated
								Additional						Other
	Preferred		Common		Treasury			Paid-in			Retained			Comprehensive
	Stock		Stock		Stock			Capital			Earnings			Loss			Total
December 31, 2005	$	—	$	165	$	—		$	86,930		$	5,043		$	(431	)	$	91,707
Net income		—		—		—			—			1,731			—			1,731
Issuance of preferred stock, net of issuance costs of $3,004		8		—		—			71,988			—			—			71,996
Accrued payment-in-kind dividend on preferred stock		—		—		—			665			(665	)		—			—
Issuance of common stock		—		—		—			52			—			—			52
Gecko holdback settlement		—		—		(174	)		—			—			—			(174	)
Issuance of restricted shares to employees		—		4		—			(4	)		—			—			—
Accretion of unearned compensation		—		—		—			819			—			—			819
Repurchase of common shares		—		—		—			(124	)		—			—			(124	)
Equity transaction costs		—		—		—			(144	)		—			—			(144	)
Change in accumulated other comprehensive income (loss) in interest rate swap, net of tax		—		—		—			—			—			431			431

September 30, 2006	$	8	$	169	$	(174	)	$	160,182		$	6,109		$	—		$	166,294

Convertible Preferred Stock Issuance

On July 13, 2006, the Company’s shareholders approved the issuance of 750,000 shares of convertible preferred stock at $100.00 per share in the private placement with Ares Corporate Opportunities Fund II L.P. (Ares). The shares were issued on July 27, 2006 and a portion of the net proceeds were used to completely repay the amounts outstanding under the new credit facility. Issuance costs, including a 1% discount to Ares and other transaction costs, totaled approximately $3.0 million. The preferred stock is convertible into shares of the Company’s common stock at a price of $9.60 per share and carries a 5% payment-in-kind (PIK) dividend payable semi-annually.

The preferred shares were convertible into 7,812,500 shares of the Company’s common stock on the issuance date and with the effect of the cumulative PIK dividends at the end of five years would be convertible into 10,000,661 shares of common stock. Under the terms of the preferred agreement, under certain circumstances, all five years’ worth of cumulative PIK dividends would accelerate and become payable to the preferred holder. The preferred shareholder holds certain preferential rights, including the appointment of two directors.

10. SEGMENT INFORMATION

The Company’s operations consist of the collection, transfer, processing and disposal of non-hazardous construction and demolition debris and industrial and municipal solid waste. Revenues are generated primarily from the Company’s collection operations to residential, commercial and roll-off customers and landfill disposal services. The following table reflects total revenue by source for the three and nine months ended September 30, 2006 and 2005:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Collection:
Residential	$	6,288		$	4,786		$	18,209		$	13,686
Commercial		4,114			3,596			11,821			10,307
Roll-off		11,777			9,857			33,911			27,077

Total Collection		22,179			18,239			63,941			51,070

Disposal		16,028			12,687			45,985			35,213
Less: Intercompany		(5,688	)		(4,867	)		(16,533	)		(13,276	)

Disposal, net		10,340			7,820			29,452			21,937

Transfer and other		10,258			6,226			28,738			15,977
Less: Intercompany		(3,560	)		(2,787	)		(10,018	)		(7,549	)

Transfer and other, net		6,698			3,439			18,720			8,428


Total Revenue	$	39,217		$	29,498		$	112,113		$	81,435

The following table reflects certain geographic information relating to the Company’s operations. The state of Kansas includes one MSW landfill which is a part of the vertically integrated Missouri operations and is combined with Missouri to form a geographic segment. The states of Alabama, Colorado, New Mexico, South Carolina and Tennessee have been aggregated in Other due to their size.


	Kansas/							North
	Missouri			Texas		Arkansas		Carolina		Florida		Other		Corporate		Total
Three months ended September 30, 2006:
Revenue	$	12,507			8,089		3,534		2,751		5,674		6,662		—		39,217
Depreciation and amortization		1,209			836		439		412		784		1,126		92		4,898
Capital expenditures		2,060			1,385		860		1,055		692		952		119		7,123
Capital expenditures (Acquisitions)		—			—		—		—		4,024		—		12		4,036
Three months ended September 30, 2005:
Revenue	$	11,704			6,361		3,317		2,929		—		5,187		—		29,498
Depreciation and amortization		1,260			708		500		490		—		851		37		3,846
Capital expenditures		1,434			1,559		409		313		—		1,662		97		5,474
Capital expenditures (Acquisitions)		(76	)		—		—		191		—		253		—		368


	Kansas/							North
	Missouri			Texas		Arkansas		Carolina		Florida		Other		Corporate		Total
Nine months ended September 30, 2006:
Revenue	$	36,946			22,670		10,222		8,393		15,463		18,419		—		112,113
Depreciation and amortization		3,622			2,374		1,289		1,273		2,125		3,295		257		14,235
Capital expenditures		4,878			2,768		1,616		2,166		3,329		3,925		2,795		21,477
Capital expenditures (Acquisitions)		(173	)		—		—		—		4,105		5,392		12		9,336
Nine months ended September 30, 2005:
Revenue	$	33,144			18,797		9,300		5,660		—		14,534		—		81,435
Depreciation and amortization		3,493			2,022		1,384		947		—		2,353		98		10,297
Capital expenditures		4,309			2,918		1,233		685		—		3,771		243		13,159
Capital expenditures (Acquisitions)		12,835			—		—		41,369		—		253		—		54,457
Total assets:
September 30, 2006	$	67,553			32,922		28,010		46,354		67,113		47,800		78,231		367,983
December 31, 2005		64,623			32,222		27,867		45,784		62,048		40,842		18,152		291,538

11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is a party to various general legal proceedings which have arisen in the ordinary course of business. While the results of these matters cannot be predicted with certainty, the Company believes that losses, if any, resulting from the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, unfavorable resolution could affect the consolidated financial position, results of operations or cash flows for the quarterly period in which they are resolved.

Except as described above and for routine litigation incidental to the Company’s business that is not currently expected to have a material adverse effect upon its financial condition, results of operations or prospects, there are no pending material legal proceedings to which the Company is a party or to which any of its property is subject. While management believes a majority of the Company’s present routine litigation is covered by insurance, subject to deductibles and the self-insured portion (as described below), no assurance can be given with respect to the outcome of any such proceedings or the effect such outcomes may have on the Company or that the Company’s insurance coverage would be adequate.

Other Potential Proceedings

In the normal course of business and as a result of the extensive governmental regulation of the solid waste industry, the Company may periodically become subject to various judicial and administrative proceedings involving federal, state or local agencies. In these proceedings, an agency may seek to impose fines on the Company or to revoke or deny renewal of an operating permit it holds. From time to time, the Company may also be subject to actions brought by citizens’ groups or adjacent landowners or residents in connection with the permitting and licensing of landfills and transfer stations the Company owns or operates or alleging environmental damage or violations of the permits and licenses pursuant to which the Company operates. Moreover, the Company may become party to various claims and suits pending for alleged damages to persons and property, alleged violations of certain laws and alleged liabilities arising out of matters occurring during the normal operation of a waste management business.

No assurance can be given with respect to the outcome of any such proceedings or the effect such outcomes may have on the Company, or that the Company’s insurance coverage would be adequate. The Company is self insured for a portion of its general liability, workers’ compensation and automobile liability. The frequency and amount of claims or incidents could vary significantly from quarter-to-quarter and/or year-to-year, resulting in increased volatility of the costs of services. Although the Company is unable to estimate any possible losses, a significant judgment against the Company, the loss of significant permits or licenses or the imposition of a significant fine or other liabilities could have a material adverse effect on the Company’s financial condition, results of operations and prospects.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report. In addition, reference should be made to our audited consolidated financial statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report onForm 10-K for the year ended December 31, 2005 as filed with the SEC on March 16, 2006. The discussion below contains forward-looking statements that involve risks and uncertainties. For additional information regarding some of these risks and uncertainties, please read “Risk Factors and Cautionary Statement About Forward-Looking Statements” included elsewhere in this quarterly report. Unless the context requires otherwise, references in this quarterly report onForm 10-Q to “WCA Waste,” “we,” “us” or “our” refer to WCA Waste Corporation and its direct and indirect subsidiaries on a consolidated basis .

Overview

We are a vertically integrated, non-hazardous solid waste management company providing non-hazardous construction/demolition, industrial and municipal solid waste collection, transfer, processing, and disposal services in the south and central regions of the United States. As of September 30, 2006, we served approximately 229,000 commercial, industrial and residential customers in Alabama, Arkansas, Colorado, Florida, Kansas, Missouri, New Mexico, North Carolina, South Carolina, Tennessee and Texas. We currently own and/or operate 20 landfills and 23 transfer stations/materials recovery facilities (MRFs). We serve our customers through these operations and our 24 collection operations. Of these facilities, three transfer stations, two landfills are fully permitted but not yet opened, and two transfer stations are idle. Additionally, we currently operate but do not own two of the transfer stations, and we hold certain prepaid disposal rights at landfills in Texas, Oklahoma and Arkansas owned and operated by other parties.

Acquisition Strategy

Our future growth will significantly depend on successful implementation of our strategy of acquisitions in our existing markets and selected additional markets. In markets where we already own a landfill, we intend to focus on expanding our presence by acquiring smaller companies that also operate in that market or in adjacent markets (“tuck–in” acquisitions). Tuck-in acquisitions will allow growth in revenue and increase market share and enable disposal internalization and consolidation of duplicative facilities and functions to maximize cost efficiencies and economies-of-scale. We will typically seek to enter a new market by acquiring a permitted landfill operation in that market. Upon acquiring a landfill in a new market, we then intend to expand our operations by acquiring collection and/or transfer operations and internalizing waste into the landfill.

We intend to pursue our acquisition strategy primarily with cash on hand and available capacity under our $175 million revolving credit facility entered into in July 2006. We may also issue shares of common stock in connection with acquisitions.

Since completing our initial public offering in June 2004 through October 31, 2006, we have completed 20 acquisitions. The purchase price for these acquisitions consisted of $131.1 million of cash, $4.5 million of convertible debt, $17.0 million of assumed debt (net of $0.6 million of debt discount), $5.6 million of assumed deferred tax liabilities and 1,737,852 shares of our common stock.

During the three months ended September 30, 2006, we completed the acquisition of the Fort Myers transfer station from Waste Corporation of America, LLC. We were previously part of a corporate group that included Waste Corporation of America, LLC. The two companies maintain certain other relationships and have certain common officers, directors and owners. Total consideration for the Fort Myers acquisition included $3.5 million, consisting primarily of cash. During the nine months ended September 30, 2006, we completed the acquisitions of Transit Waste, LLC and the Fort Myers transfer station from Waste Corporation of America, LLC. Total consideration for these two acquisitions included $3.9 million of cash and $5.2 million of debt assumed (net of $0.1 million of debt discount). Subsequently, we repaid $1.3 million of the assumed debt associated with the Transit Waste acquisition. Additionally, on October 2, 2006, we acquired the membership interests of St. Lucie, LLC from Waste Corporation of America, LLC for $1.8 million in cash. St. Lucie, LLC was a wholly-owned subsidiary of Waste Corporation of America, LLC. The acquisition consisted of a transfer station near St. Lucie, Florida. Information concerning

certain of our acquisitions may be found in our previously filed periodic and current reports and in Note 2 to the financial statements included in Item 1 of this report.

The following sets forth additional information regarding our acquisitions since our initial public offering:


Company	Location	Completion Date	Operations
Texas Environmental Waste	Houston, TX	July 13, 2004	Collection
Ashley Trash Service	Springfield, MO	August 17, 2004	Collection
Power Waste	Birmingham, AL	August 31, 2004	Collection
Blount Recycling	Birmingham, AL	September 3, 2004	Collection, Landfill & Transfer Station
Translift, Inc.	Little Rock, AR	September 17, 2004	Collection
Rural Disposal, Inc.	Willow Springs, MO	November 12, 2004	Collection
Trash Away, Inc.	Piedmont, SC	November 30, 2004	Collection & Transfer Station
Gecko Investments (Eagle Ridge)	St. Louis, MO	January 11, 2005	Collection & Landfill
MRR Southern, LLC	High Point/Raleigh, NC	April 1, 2005	Landfill, Transfer Station & MRF
Triangle Environmental	Raleigh, NC	May 16, 2005	Collection
Foster Ferguson	El Dorado Springs, MO	May 16, 2005	Collection
Triad Waste	High Point, NC	May 31, 2005	Collection
Proper Disposal	Chanute, KS	May 31, 2005	Collection
Fort Meade Landfill	Ft. Meade, FL	October 3, 2005	Landfill
Meyer & Gabbert	Sarasota/Arcadia, FL	October 3, 2005	Collection, Landfill & Transfer Station
Pendergrass Refuse	Springfield, MO	October 4, 2005	Collection
Andy’s Hauling	Sarasota, FL	October 21, 2005	Collection
Transit Waste	Durango, CO/Bloomfield, NM	February 10, 2006	Collection & Landfill
Fort Myers Transfer Station	Ft. Myers, FL	August 10, 2006	Transfer Station
St. Lucie, LLC	St. Lucie, FL	October 2, 2006	Transfer Station

After an acquisition is completed, we incur integration expenses related to (i) incorporating newly acquired truck fleets into our preventative maintenance program, (ii) the testing of new employees to comply with Department of Transportation regulations, (iii) implementing our safety program, (iv) re-routing trucks and equipment to assure maximization of routing efficiencies and disposal internalization, and (v) conversion of customers to our billing system. We generally expect that the costs of acquiring and integrating an acquired business will be incurred primarily during the first 12 months after acquisition. Synergies from tuck-in acquisitions can also take as long as 12 months to be realized.

Recent Events

In March 2006, our board of directors approved a set of resolutions delegating to a special committee authority to review and evaluate a variety of strategic alternatives, including the proposals that were later received and resulted in the Preferred Stock Purchase Agreement and the capital plan described below. On June 14, 2006, we announced a capital plan approved by the special committee that was intended to, among other things, refinance our existing senior secured debt and provide additional capital for execution of our acquisition program. In connection with the capital plan, we completed the following transactions during the three months ended September 30, 2006:

	•		Senior notes— The private placement of $150 million of 9.25% senior unsecured notes due 2014 that closed on July 5, 2006. The proceeds from this offering were utilized to retire or pay down our existing borrowings;

	•		Senior secured credit facility— A new $175 million senior secured credit facility led by Comerica Bank, $150 million of which is subject to fixed-rate swap at 5.64% (plus the applicable margins), which closed on July 5, 2006. In connection with entering into the new facility, we paid our obligations under and terminated our first and second lien credit arrangements with Wells Fargo Bank and other lenders. In connection with the termination of the second lien credit agreement we paid a $250,000 prepayment premium; and

	•		Preferred Stock— The issuance of $75 million in convertible preferred stock. The preferred stock is convertible into our common stock at $9.60 per share and carries a 5% PIK dividend. This transaction closed on July 27, 2006.

Please read “—Liquidity and Capital Resources” for more information on each of these transactions.

General Review of Results for the Three and Nine Months Ended September 30, 2006

Our operations consist of the collection, transfer, processing and disposal of non-hazardous solid waste. Revenues are generated primarily from our landfill disposal services and our collection operations provided to residential, commercial and roll-off customers. Roll-off service is the hauling and disposal of large waste containers (typically between 10 and 50 cubic yards) that are loaded on to and off of the collection vehicle. Our internalization for the three and nine months ended September 30, 2006 was 76.3% and 76.6%, respectively.

The following table reflects our revenue segmentation (before elimination of intercompany revenue) for the three and nine months ended September 30, 2006 and 2005:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Collection:		45.8	%		49.1	%		46.1	%		50.0	%
Disposal		33.1	%		34.1	%		33.2	%		34.4	%
Transfer and other		21.1	%		16.8	%		20.7	%		15.6	%

Total Uneliminated Revenue		100.0	%		100.0	%		100.0	%		100.0	%

The following table reflects our total revenue by source for the three and nine months ended September 30, 2006 and 2005 (in thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Collection:
Residential	$	6,288		$	4,786		$	18,209		$	13,686
Commercial		4,114			3,596			11,821			10,307
Roll-off		11,777			9,857			33,911			27,077

Total Collection		22,179			18,239			63,941			51,070

Disposal		16,028			12,687			45,985			35,213
Less: Intercompany		(5,688	)		(4,867	)		(16,533	)		(13,276	)

Disposal, net		10,340			7,820			29,452			21,937

Transfer and other		10,258			6,226			28,738			15,977
Less: Intercompany		(3,560	)		(2,787	)		(10,018	)		(7,549	)

Transfer and other, net		6,698			3,439			18,720			8,428


Total Revenue	$	39,217		$	29,498		$	112,113		$	81,435

Please read Note 10 to our condensed consolidated financial statements for certain geographic information related to our operations.

Costs of services include, but are not limited to, labor, fuel and other operating expenses, equipment maintenance, disposal fees paid to third-party disposal facilities, insurance premiums and claims expense, selling expenses, wages and salaries of field personnel located at operating facilities, third-party transportation expense and state and local waste taxes. We are self-insured for a portion of our general liability, workers’ compensation and automobile liability. The frequency and amount of claims or incidents could vary significantly from quarter-to-quarter and/or year-to-year, resulting in increased volatility of our costs of services.

General and administrative expense includes the salaries and benefits of our corporate employees, certain centralized reporting and cash management costs and other overhead costs associated with our corporate office.

Depreciation and amortization expense includes depreciation of fixed assets and amortization of intangible assets over their useful lives using the straight-line method.

We capitalize third-party expenditures related to pending acquisitions, such as legal, engineering, and accounting expenses, and certain direct expenditures such as travel costs. We expense indirect acquisition costs, such as salaries and other corporate services, as we incur them. We routinely evaluate all capitalized costs, and expense those related to projects that we believe are not likely to succeed.

Forward-Looking Statements and Non-GAAP Measures

As indicated in “Risk Factors and Cautionary Statement About Forward-Looking Statements” this report contains forward-looking statements, all of which are qualified by the risk factors and other statements set forth in that section. Among other forward-looking statements, we reiterate that we expect that our acquisition program will increase estimated revenue “run rate” to approximately $200 million and estimated EBITDA “run rate” to approximately $60 million over the three to four year period following our initial public offering in June 2004.

“Run rate” estimates are forward-looking statements based upon a mixture of historical and other information (including projected results and forecasts) compiled by us and derived from information provided by third parties, including acquisition candidates. They are subject to all of the risks and limitations described in “Risk Factors and Cautionary Statement About Forward-Looking Statements.” They are not audited or based on GAAP. In this report, and in our presentations and press releases, we provide run rate estimates with respect to us and also separately with respect to one or more acquired businesses. We determine the period over which to calculate a “run rate” based on factors we deem to be reasonable. In computing our revenue “run rates” as of the end of any given period, we generally annualize the average of the monthly revenues of the companies that we acquired for the period prior to acquisition (which is the “run rate” for the acquired businesses) and add that annualized number to our revenues. In computing our estimated “EBITDA” run rates we apply the same principles that we use in computing what our credit facilities refer to as “pro forma adjusted EBITDA,” which is an internal, non-GAAP estimate intended to provide a forecast of the potential effects resulting from acquired businesses based on assumed adjustments to items of revenue, income and expense, as well as non-cash non-recurring items and assumed internalization from acquired businesses, attributable to the transaction and having an ongoing impact that management believes to be reasonable and factually supportable. Run rate estimates of EBITDA for one or more acquired businesses are determined separately by applying similar principles and adjustments with respect to information provided by the acquired businesses. Such estimates are reported to the lenders under our credit facilities and to our board of directors. Actual revenues and EBITDA may or may not equal the estimated “run rate.”

Our management evaluates our performance based on non-GAAP measures, of which the primary performance measure is EBITDA. EBITDA consists of earnings (net income or loss) available to common stockholders before preferred stock dividend, interest expense (including gains (losses) on interest rate swap agreements as well as write-off of deferred financing costs and debt discount), income tax expense, depreciation and amortization. We also compute EBITDA before the cumulative effect of change in accounting principle and before considering the effect of discontinued operations as the effect of these items is not relevant to our ongoing operations. We also use these same measures when evaluating potential acquisition candidates.

We believe EBITDA is useful to an investor in evaluating our operating performance because:

	•		it is widely used by investors in our industry to measure a company’s operating performance without regard to items such as interest expense, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, financing methods, capital structure and the method by which assets were acquired;

	•		it helps investors more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest charges from our outstanding debt and the impact of our interest rate swap agreements) and asset base (primarily depreciation and amortization of our landfills and vehicles) from our operating results; and

•

it helps investors identify items that are within our operational control. Depreciation charges, while a component of operating income, are fixed at the time of the asset purchase in accordance with the depreciable lives of the related asset and as such are not a directly controllable period operating charge.

Our management uses EBITDA:

	•		as a measure of operating performance because it assists us in comparing our performance on a consistent basis as it removes the impact of our capital structure and asset base from our operating results;

	•		as one method we use to estimate a purchase price (often expressed as a multiple of EBITDA) for solid waste companies we intend to acquire. The appropriate EBITDA multiple will vary from acquisition to acquisition depending on factors such as the size of the operation, the type of operation, the anticipated growth in the market, the strategic location of the operation in its market as well as other considerations;

	•		in presentations to our board of directors to enable them to have the same consistent measurement basis of operating performance used by management;

	•		as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations;

	•		in evaluations of field operations since it represents operational performance and takes into account financial measures within the control of the field operating units;

	•		as a component of incentive cash bonuses paid to our executive officers and other employees;

	•		to assess compliance with financial ratios and covenants included in our credit agreements; and

	•		in communications with investors, lenders, and others concerning our financial performance.

The following presents a reconciliation of our total EBITDA to net income (loss) available to common stockholders (in thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Total EBITDA	$	11,171		$	8,792		$	32,524		$	23,026
Depreciation and amortization		(4,898	)		(3,846	)		(14,235	)		(10,297	)
Interest expense, net		(3,893	)		(2,734	)		(12,173	)		(6,613	)
Write-off of deferred financing costs and debt discount		(3,240	)		(14	)		(3,240	)		(1,308	)
Net gain on terminated interest rate swap		276			—			3,980			—
Unrealized loss on interest rate swap		(3,811	)		—			(3,811	)		—
Income tax (provision) benefit		1,675			(873	)		(1,314	)		(1,893	)
Accrued payment-in-kind dividend on preferred stock		(665	)		—			(665	)		—

Net income (loss) available to common stockholders	$	(3,385	)	$	1,325		$	1,066		$	2,915

Our EBITDA, as we define it, may not be comparable to similarly titled measures employed by other companies and are not measures of performance calculated in accordance with GAAP. EBITDA should not be considered in isolation or as substitutes for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

Results of Operations

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

The following table sets forth items in our condensed consolidated statements of operations and as a percentage of revenues for the three months ended September 30, 2006 and 2005 (dollars in thousands):


	Three Months Ended September 30,
	2006					2005
Revenue	$	39,217		100.0	%	$	29,498		100.0	%
Expenses:
Cost of services		25,176		64.2			18,908		64.1
Depreciation and amortization		4,898		12.5			3,846		13.1
Stock-based compensation		258		0.7			183		0.6
Other general and administrative		2,643		6.7			1,629		5.5

Operating income		6,242		15.9			4,932		16.7
Interest expense, net		(3,893	)	(9.9	)		(2,734	)	(9.3	)
Write-off of deferred financing costs and debt discount		(3,240	)	(8.3	)		(14	)	(0.0	)
Net gain on terminated interest rate swap		276		0.7			—		—
Unrealized loss on interest rate swap		(3,811	)	(9.7	)		—		—
Other income, net		31		0.1			14		0.0
Income tax (provision) benefit		1,675		4.3			(873	)	(2.9	)
Accrued payment-in-kind dividend on preferred stock		(665	)	(1.7	)		—		—

Net income (loss) available to common stockholders	$	(3,385	)	(8.6	)%	$	1,325		4.5	%

Revenue.Total revenue for the three months ended September 30, 2006 increased $9.7 million, or 32.9%, to $39.2 million from $29.5 million for the three months ended September 30, 2005. Acquisitions since October 2005 contributed $5.7 million of the increase while internal volume growth contributed $1.8 million, operational price increases contributed $1.2 million, and pricing from fuel surcharges added $1.0 million.

Cost of services.Total cost of services for the three months ended September 30, 2006 increased $6.3 million, or 33.1%, to $25.2 million from $18.9 million for the three months ended September 30, 2005. Increases in labor, insurance, fuel and disposal costs accounted for a majority of the increased cost of services mainly as a result of acquisitions since October 2005. Fuel costs increased as a percentage of revenue from 6.8% for the three months ended September 30, 2005 to 6.9% for the three months ended September 30, 2006. While our fuel surcharges continue to cover a portion of the increase in fuel costs, fuel costs have a dilutive effect on operating margins. In addition, we incurred a $0.4 million charge during the quarter related to damage caused by a third party blasting rock near one of our landfills. We are currently seeking restitution for our costs.

Depreciation and amortization.Depreciation and amortization expense for the three months ended September 30, 2006 increased $1.1 million, or 27.4%, to $4.9 million from $3.8 million for the three months ended September 30, 2005. These increases can be attributed to acquisitions, capital expenditures, and increased amortization corresponding with increased landfill volume usage.

Stock-based compensation.The stock-based compensation expense during the three months ended September 30, 2006 and 2005 relates to earned compensation associated with restricted stock grants under the 2004 WCA Waste Corporation Incentive Plan.

Other general and administrative.Total other general and administrative expense for the three months ended September 30, 2006 increased $1.0 million, or 62.2%, to $2.6 million from $1.6 million for the three months ended September 30, 2005. The increase is primarily attributable to increased payroll-related costs, legal fees and office administrative expenses as well as the write-off of acquisition costs during the quarter.

Interest expense, net.Interest expense, net for the three months ended September 30, 2006 increased $1.2 million, or 42.4%, to $3.9 million from $2.7 million for the three months ended September 30, 2005. The increase relates to the higher average interest rate and the higher average debt balance outstanding as a result of debt assumed in connection with acquisitions as well as the issuance of our 9.25% senior notes in July 2006. Our average borrowing rate increased from 7.11% at September 30, 2005 to 9.29% at September 30, 2006 mainly due to the higher interest rate associated with our senior notes.

Write-off of deferred financing costs and debt discount.The $3.2 million write-off of deferred financing costs and debt discount reflects the write-off of costs associated with our first and second lien credit agreements that were repaid and retired in connection with our financing transactions in July 2006.

Net gain on terminated interest rate swap.With the restructuring of our long-term debt and the termination of the interest rate swap in July 2006, we realized $4.0 million from the swap counter-party. We recorded a $3.7 million unrealized gain in the second quarter of 2006 for the fair value of the swap agreement as of June 30, 2006. During the quarter ended September 30, 2006, we realized the entire gain of $4.0 million related to the interest rate swap agreement, with an additional $0.3 million recognized in earnings during the quarter. Please read Note 6 to the financial statements included in Item 1 and “Quantitative and Qualitative Disclosures About Market Risk” elsewhere in this quarterly report for more information.

Unrealized loss on interest rate swap.The $3.8 million loss is attributable to the recognition of the unrealized loss as of September 30, 2006 of the new interest rate swap agreement we entered into in July 2006. At the time the swap was entered, there was no offsetting floating rate debt and no such floating rate interest payments were probable of being incurred in the near future. As a result, the swap transaction can not be designated as a hedging transaction and any changes in the unrealized fair value of the new swap will be recognized in the statement of operations. If, in the future, we have corresponding debt instruments that have floating rate debt, we will consider designating all or part of this swap agreement as a hedge. Please read Note 6 to the financial statements included in Item 1 and “Quantitative and Qualitative Disclosures About Market Risk” elsewhere in this quarterly report for more information on the new swap agreement entered into in July 2006.

Income tax (provision) benefit.Income tax (provision) benefit for the three months ended September 30, 2006 as a percentage of pre-tax loss was 38.1% as compared to 39.7% of pre-tax income for the three months ended September 30, 2005. The rate in the current year period adjusts the projected year-to-date rate to approximately 43.2%. The increase in the rate reflects the impact of permanent items on the projected current year pre-tax income.

Accrued payment-in-kind dividend on preferred stock.The $0.7 million relates to the accretion of the 5% PIK dividend on our Series A Convertible Preferred Stock from its date of issuance (July 27, 2006) to September 30, 2006.

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

The following table sets forth items in our condensed consolidated statements of operations and as a percentage of revenues for the nine months ended September 30, 2006 and 2005 (dollars in thousands):


	Nine Months Ended September 30,
	2006					2005
Revenue	$	112,113		100.0	%	$	81,435		100.0	%
Expenses:
Cost of services		71,646		63.9			52,596		64.6
Depreciation and amortization		14,235		12.7			10,297		12.6
Stock-based compensation		819		0.7			320		0.4
Other general and administrative		7,228		6.5			5,520		6.8

Operating income		18,185		16.2			12,702		15.6

Interest expense, net		(12,173	)	(10.9	)		(6,613	)	(8.1	)
Write-off of deferred financing costs and debt discount		(3,240	)	(2.9	)		(1,308	)	(1.6	)


	Nine Months Ended September 30,
	2006					2005
Net gain on terminated interest rate swap		3,980		3.6			—		—
Unrealized loss on interest rate swap		(3,811	)	(3.4	)		—		—
Other income, net		104		0.1			27		0.0
Income tax provision		(1,314	)	(1.2	)		(1,893	)	(2.3	)
Accrued payment-in-kind dividend on preferred stock		(665	)	(0.6	)		—		—

Net income available to common stockholders	$	1,066		0.9	%	$	2,915		3.6	%

Revenue.Total revenue for the nine months ended September 30, 2006 increased $30.7 million, or 37.7%, to $112.1 million from $81.4 million for the nine months ended September 30, 2005. Acquisitions since October 2005 contributed $19.5 million of the increase while internal volume growth contributed $5.3 million, operational price increases contributed $3.1 million, and pricing from fuel surcharges added $2.8 million.

Cost of services.Total cost of services for the nine months ended September 30, 2006 increased by 36.2% to $71.6 million from $52.6 million for the nine months ended September 30, 2005. While cost of services increased in total, they have decreased to 63.9% of revenue from 64.6% during the same period last year. Increases in labor, insurance, fuel and disposal costs accounted for a majority of the increased cost of services mainly as a result of acquisitions since October 2005. Reductions in operating costs as a percentage of revenue were achieved due to the fact that certain licenses and fees, landfill site expenses and field administrative costs are semi-fixed and do not increase proportionally with increases in revenue. These improvements were partially offset by fuel costs that increased as a percentage of revenue from 6.2% for the nine months ended September 30, 2005 to 6.7% for the nine months ended September 30, 2006. While our fuel surcharges continue to cover a portion of the increase in fuel costs, fuel costs have a dilutive effect on operating margins. In addition, we incurred a $0.4 million charge this year related to damage caused by a third party blasting rock near one of our landfills. We are currently seeking restitution for our costs.

Depreciation and amortization.Depreciation and amortization expense for the nine months ended September 30, 2006 increased $3.9 million, or 38.2%, to $14.2 million from $10.3 million for the nine months ended September 30, 2005. These increases can be attributed to acquisitions, capital expenditures, and increased amortization corresponding with increased landfill volumes.

Stock-based compensation.The stock-based compensation expense during the nine months ended September 30, 2006 and 2005 relates to earned compensation associated with restricted stock grants under the 2004 WCA Waste Corporation Incentive Plan.

Other general and administrative.Total other general and administrative expense for the nine months ended September 30, 2006 increased $1.7 million, or 30.9%, to $7.2 million from $5.5 million for the nine months ended September 30, 2005. The increase is primarily attributed to increases in payroll-related costs, insurance costs and the write-off of acquisition costs, partially offset by a reduction in legal expenses.

Interest expense, net.Interest expense, net for the nine months ended September 30, 2006 increased $5.6 million, or 84.1%, to $12.2 million from $6.6 million for the same period in 2005. The increase relates to the higher average interest rate and the higher average debt balance outstanding as a result of additional borrowings under our credit facilities, primarily to fund acquisitions, seller notes issued and debt assumed in connection with acquisitions, as well as the issuance of our 9.25% senior notes in July 2006. Our average borrowing rate increased from 7.11% at September 30, 2005 to 9.29% at September 30, 2006 mainly due to the higher interest rate associated with our senior notes.

Write-off of deferred financing costs and debt discount.The $3.2 million write-off of deferred financing costs and debt discount in 2006 reflects the write-off of costs associated with our first and second lien credit agreements that were repaid and retired in connection with our financing transactions in July 2006. The $1.3 million write-off in 2005 is related to the restructuring of our credit facility in April 2005 as well as the repayment of our Environmental Facilities Revenue Bonds in June 2005.

of $4.0 million related to the interest rate swap agreement, with an additional $0.3 million recognized in earnings during the quarter. Please read Note 6 to the financial statements included in Item 1 and “Quantitative and Qualitative Disclosures About Market Risk” elsewhere in this quarterly report for more information.

Income tax provision.Income tax provision for the nine months ended September 30, 2006 as a percentage of pre-tax income was 43.2% as compared to 39.4% for the nine months ended September 30, 2005. The rate in the current year period reflects the projected full year tax rate.

Liquidity and Capital Resources

Our business and industry is capital intensive, requiring capital for equipment purchases, landfill construction and development, and landfill closure activities in the future. Our planned acquisition strategy also requires significant capital. We plan to meet our future capital needs primarily through cash on hand, cash flow from operations and borrowing capacity under our new credit facility. Additionally, our acquisitions may use seller notes, equity issuances and debt financings. We expect these sources will be adequate to fund our future capital needs and acquisition strategy for the foreseeable future.

In 2006, we began a process of reviewing our overall capital structure. During July 2006, we implemented a new capital plan consisting of the issuance of $150 million of new unsecured senior notes, a new revolving credit facility and the issuance of convertible preferred stock as described below. As a result of the implementation of the capital plan, as of September 30, 2006, we had $167.5 million in debt and $57.5 million in cash on hand and restricted cash, resulting in net debt of $110.0 million. With equity at $166.3 million as of September 30, 2006, we had a net debt-to-total capitalization ratio of 39.8% as of that date.

As of September 30, 2006, we had total outstanding long-term debt of approximately $167.5 million, consisting primarily of $150 million of senior notes, $7.0 million of various seller notes and approximately $10.3 million of assumed debt associated with acquisitions. This represented a reduction of $9.1 million over our total debt outstanding as of December 31, 2005. The decrease in outstanding debt since December 31, 2005 was due primarily to the repayment of approximately $162 million related to the old credit agreements, partially offset by the issuance of $150 million of senior notes and debt assumed in connection with the Transit Waste acquisition. The old credit agreements were repaid with proceeds from the issuance of senior notes and convertible preferred stock in July 2006 as discussed below. As of September 30, 2006, we had approximately $9.9 million in letters of credit issued under our new credit facility, leaving $165.1 million in availability under the facility.

9.25% Senior Notes Due 2014

On July 5, 2006, we issued $150 million aggregate principal amount of 9.25% senior notes due 2014. The net proceeds of the offering were $145.8 million after deducting $3.75 million in initial purchasers’ discounts and other issuance costs. The proceeds were applied to certain debt outstanding under our first and second lien credit facilities as well as outstanding borrowings on the revolving note

payable. The senior notes pay interest semi-annually on June 15 and December 15, commencing December 15, 2006 with the following redemption provisions:

	•		At any time before June 15, 2009, we may redeem up to 35% of the notes with net cash proceeds of certain equity offerings at a redemption price of 109.25% of the par value of the notes redeemed, plus accrued and unpaid interest and liquidated damages, if any, to the redemption date, as long as we redeem the notes within 180 days of the offering and at least 65% of the aggregate principal amount of the notes issued pursuant to the indenture remains outstanding after the redemption;

	•		Prior to June 15, 2010, we may redeem all or part of the notes by paying a make-whole premium, plus accrued and unpaid interest, and, if any, liquidated damages; and

	•		The notes may be callable beginning on June 15, 2010, 2011, and 2012 and thereafter at redemption prices of 104.625%, 102.313% and 100% of the principal amount plus accrued interest.

The senior notes are senior unsecured obligations and rank equally with our existing and future senior unsecured indebtedness and senior to any of our existing and future subordinated indebtedness. The senior notes will be effectively subordinated to any existing or future secured indebtedness, to the extent of the assets securing such indebtedness. The senior notes are guaranteed by all of our subsidiaries. The guarantees are senior unsecured obligations of the guarantors. The guarantees rank equally with all existing and future senior unsecured indebtedness of the guarantors and senior to any existing and future subordinated indebtedness of the guarantors. The guarantees are effectively subordinated to any existing or future secured indebtedness of the guarantors to the extent of the assets securing such indebtedness.

The senior notes were issued under an indenture between WCA Waste and The Bank of New York Trust Company, N.A., as Trustee. The indenture contains covenants including, among other provisions, limitations on our ability to incur additional indebtedness, make capital expenditures, create liens, sell assets and make dividend and other payments.

Bank Credit Facility

Additionally, on July 5, 2006, we entered into a new $100 million revolving secured credit facility with Comerica Bank maturing July 5, 2011. On July 28, 2006, Comerica syndicated the credit facility to a group of banks and we agreed to increase the capacity of the revolving credit facility to $175 million. The credit commitment available under the credit facility includes sub-facilities for standby letters of credit in the aggregate principal amount of up to $50.0 million and a swing-line feature for up to $10.0 million for same day advances. The new credit facility replaced the existing $100 million revolving credit facility with Wells Fargo Bank National Association as administrative agent. The new revolving credit facility includes covenants similar to the expiring facility with reduced interest margins associated with various leverage ratios. Applicable fees and margins are determined based on our leverage ratio for the trailing 12-month reporting period on each quarterly reporting date. The following table highlights the revised margins:


	LIBOR		Prime		Commitment
Leverage Ratio	Margin		Margin		Fee
Less than 3.0x		1.500		—		0.250
Equal to or greater than 3.0 and less than 3.5x		1.750		0.250		0.250
Equal to or greater than 3.5 and less than 4.0x		2.000		0.500		0.250
Equal to or greater than 4.0 and less than 4.5x		2.250		0.750		0.375
Equal to or greater than 4.5x		2.500		1.000		0.500

Our obligations under the credit facility are secured by the capital stock of our subsidiaries and all tangible (including real estate) and intangible assets belonging to us and our subsidiaries. The obligations are also guaranteed by certain material subsidiaries. Obligations under the credit facility are recourse obligations and are subject to cancellation and/or acceleration upon the occurrence of certain events, including, among other things, a change of control (as defined in the credit facility), nonpayment, breaches of representations, warranties and covenants (subject to cure periods in certain instances), bankruptcy or insolvency, defaults under other debt arrangements, failure to pay certain judgments and the occurrence of events creating material adverse effects.

Other covenants in the credit agreement limit our ability and certain of our subsidiaries to, among other things, create, incur, assume or permit to exist certain liens; make certain investments, loans and advances; enter into any sale-leaseback transactions; materially change the nature of their businesses; create, incur, assume or permit to exist certain leases; merge into or with or consolidate with any other person; sell, lease or otherwise dispose of all or substantially all of their properties or assets; discount or sell any of their notes or accounts receivable; transact business with affiliates unless in the ordinary course of business and on arm’s length basis; make certain negative pledges; or amend, supplement or otherwise modify the terms of any debt or prepay, redeem or repurchase any subordinated debt.

Private Placement of Preferred Stock

On June 12, 2006, we entered into a privately negotiated Preferred Stock Purchase Agreement (the Purchase Agreement) with Ares Corporate Opportunities Fund II L.P. (Ares), which provided for us to issue and sell 750,000 shares (Preferred Shares) of Series A Convertible Preferred Stock, par value $0.01 per share (Preferred Stock), to Ares. The purchase price per Preferred Share was $100.00, for an aggregate purchase price of $75 million. The Preferred Stock is convertible into our common stock, par value $0.01 per share (Common Stock), at a price of $9.60 per share and carries a 5% payment-in-kind (PIK) dividend payable semi-annually. The closing of the sale and issuance of the full amount of Preferred Shares pursuant to the Purchase Agreement was completed on July 27, 2006.

The Preferred Shares are immediately convertible at Ares’ discretion into 7,812,500 shares of our Common Stock, which would currently represent approximately 31.7% of the outstanding Common Stock on a post-conversion basis. Dividends are solely PIK for the first five years — that is, they are payable solely by adding the amount of dividends to the stated value of each share. At the end of five years, the Preferred Shares would be convertible into approximately 10,000,661 shares of Common Stock, which, based on the currently outstanding shares, would represent approximately 37.3% of the post-conversion shares outstanding.

Other material terms of the Preferred Stock are as follows:

•

all dividends that would otherwise be payable through the fifth anniversary of issuance shall automatically be accelerated and paid in kind immediately prior to the occurrence of any of the following acceleration events:

	•		liquidation

	•		bankruptcy

	•		closing of a public offering of Common Stock pursuant to an effective registration statement (except for Form S-4, solely for sales by third parties, or pursuant to Ares’ own registration rights agreement)

	•		the average of the closing price of the Common Stock for each of 20 consecutive trading days exceeds $14.40 per share

	•		fundamental transaction, including a “group” (defined in the Securities Exchange Act of 1934, as amended (the Exchange Act)) acquiring more than 35% of outstanding voting rights; replacement of more than one-half of the directors without approval of the existing board of directors; a merger, consolidation, sale of substantially all assets, going-private transaction, tender offer, reclassification, or other transaction that results in the transfer of a majority of voting rights;

	•		Ares can convert the Preferred Stock into Common Stock at any time at a conversion price of $9.60 per share, with conversion being calculated by taking the stated value (initially $100.00 per share) plus any amount added to stated value by way of dividends, then dividing by $9.60 to produce the number of shares of Common Stock issuable;

	•		We can force a conversion into Common Stock following either (i) the average of the closing price of the Common Stock for each of 20 consecutive trading days exceeding $14.40 per share or (ii) a fundamental transaction that Ares does not treat as a liquidation;

	•		after the fifth anniversary of issuance, we can redeem for cash equal to the liquidation preference;

	•		after the fifth anniversary of issuance, we can pay dividend in cash at our discretion;

	•		upon a liquidation of WCA Waste, prior to any holder of Common Stock or other junior securities, Ares shall receive in cash the greater of (i) the stated value plus any amount added by way of dividends (accelerated to include a full five years) or (ii) the amount it would receive if all shares of Preferred Stock were converted into Common Stock (calculated to include dividends accelerated to include a full five years);

	•		Ares can elect to treat any fundamental transaction (defined above) as a liquidation and receive its liquidation preference as described in the preceding bullet point. However, if common shares of another company are issued as consideration in a fundamental transaction, WCA Waste has the option of requiring Ares to accept such common shares to satisfy the liquidation preference if shares are then quoted on the Nasdaq Stock Market or listed on the New York Stock Exchange, the value of such shares is determined at 98% of the closing price on the trading day preceding the transaction and the shares are freely transferable without legal or contractual restrictions;

	•		the Preferred Stock voting as a separate class elects (i) two directors to our board of directors for so long as Ares continues to hold Preferred Stock representing at least 20% of our “post-conversion equity” (outstanding Common Stock assuming conversions into common shares of all securities, including the Preferred Stock and assuming Preferred Stock dividends accelerated to include a full five years), (ii) one director for so long as it continues to hold at least 10% of post-conversion equity, and (iii) no directors below 10%;

	•		the Preferred Stock voting as a separate class must approve (i) any alteration in its powers, preferences or rights, or in the certificate of designation, (ii) creation of any class of stock senior or pari passu with it, (iii) any increase in the authorized shares of Preferred Stock, and (iv) any dividends or distribution to Common Stock or any junior securities, except for pro rata dividends on Common Stock paid in Common Stock. These protective rights terminate on the first date on which there are outstanding less than 20% of the number of shares of Preferred Stock outstanding on the date the Preferred Stock is first issued; and

	•		except for the election of directors and special approvals described above, the Preferred Stock votes on all matters and with the Common Stock on an as-converted basis.

In connection with the issuance and sale of the Preferred Shares, we also entered into other agreements as contemplated by the Purchase Agreement, including a Stockholder’s Agreement, a Registration Rights Agreement, and a Management Rights Letter. The Purchase Agreement, the Stockholder’s Agreement, the Registration Rights Agreement, the Management Rights Letter and the Certificate of Designation pursuant to which the Preferred Shares were created, are described in our current report on Form 8-K filed on June 16, 2006.

Tax-Exempt Bonds

In February 2006, we assumed $3.0 million of tax-exempt Environmental Facilities Revenue Bonds as part of the debt assumed in the Transit Waste acquisition. We repaid $0.1 million of the assumed debt in June 2006. As of September 30, 2006, including bonds assumed in prior acquisitions, we had $9.2 million of tax-exempt bonds outstanding.

Contractual Obligations

Other than the financing transactions in July 2006 discussed in “Liquidity and Capital Resources” above, there were no material changes outside of the ordinary course of our business during the three or nine months ended September 30, 2006 to the other items listed in the Contractual Obligations table included in our Form 10-K filed with the SEC on March 16, 2006.

Cash Flows

Net cash provided by operating activities for the nine months ended September 30, 2006 and 2005 was $32.9 million and $15.6 million, respectively. The changes in cash flows from operating activities are primarily due to changes in the components of working capital from period to period as well as the realization of $4.0 million from the termination of the previous swap agreement. Other items impacting operating cash flows include depreciation and amortization, write-off of deferred financing costs and debt discount, unrealized loss on interest rate swap, prepaid disposal usage as well as stock-based compensation, all of which were non-cash expenses.

Net cash used in investing activities consists primarily of cash used for capital expenditures and the acquisition of businesses. Cash used for capital expenditures, including acquisitions, was $25.3 million and $68.1 million for the nine months ended September 30, 2006 and 2005, respectively. The prior year amounts reflect significantly higher expenditures for acquisitions than the current year amounts.

Net cash provided by financing activities for the nine months ended September 30, 2006 and 2005 was $48.0 million and $53.0 million, respectively. Net cash provided by financing activities mainly includes the issuance of Preferred Stock, the issuance of our senior notes, borrowings under our credit facilities, repayments of debt, and financing costs associated with our credit facilities in all periods. Proceeds from financing during the nine months ended September 30, 2006 included the net proceeds from the issuance of Preferred Stock and our senior notes. Proceeds from financing during the nine months ended September 30, 2005 included the net proceeds from the use of our credit facilities and seller notes.

As of September 30, 2006, we had a working capital surplus of $59.3 million which had increased by $52.6 million from a working capital surplus of $6.7 million as of December 31, 2005. The increase can be attributed primarily to excess cash on hand of $55.7 million as a result of recent debt and equity financings, partially offset by $3.4 million of accrued interest on the senior notes.

Critical Accounting Estimates and Assumptions

We make several estimates and assumptions during the course of preparing our financial statements. Since some of the information that we must present depends on future events, it cannot be readily computed based on generally accepted methodologies, or may not be appropriately calculated from available data. Some estimates require us to exercise substantial judgment in making complex estimates and the assumptions and, therefore, have the greatest degree of uncertainty. This is especially true with respect to estimates made in accounting for landfills, environmental remediation liabilities and asset impairments. We describe the process of making such estimates in Note 7 to the financial statements included in Item 1 of this report and in Note 1(f) to our financial statements in our annual report on Form 10-K for the year ended December 31, 2005. For a description of other significant accounting policies, see Note 1 to our financial statements in our annual report on Form 10-K for the year ended December 31, 2005.

In summary, our landfill accounting policies include the following:

Capitalized Landfill Costs

At September 30, 2006, we owned 20 landfills. Two of these landfills are fully permitted but not constructed and have not yet commenced operations as of September 30, 2006.

Capitalized landfill costs include expenditures for the acquisition of land and airspace, engineering and permitting costs, cell construction costs and direct site improvement costs. As of September 30, 2006, no capitalized interest had been included in capitalized landfill costs. However, in the future interest could be capitalized on landfill construction projects but only during the period the assets are undergoing activities to ready them for their intended use. Capitalized landfill costs are amortized ratably using the units-of- production method over the estimated useful life of the site as airspace of the landfill is consumed. Landfill amortization rates are determined periodically (not less than annually) based on aerial and ground surveys and other density measures and estimates made by our internal and/or third-party engineers.

Total available airspace includes the total of estimated permitted airspace plus an estimate of probable expansion airspace that we believe is likely to be permitted. Where we believe permit expansions are probable, the expansion airspace, and the projected costs related to developing the expansion airspace are included in the airspace amortization rate calculation. The criteria we use to determine if permit expansion is probable include but, are not limited to, whether:

	•		we believe that the project has fatal flaws;

	•		the land is owned or controlled by us, or under option agreement;

	•		we have committed to the expansion;

	•		financial analysis has been completed, and the results indicate that the expansion has the prospect of a positive financial and operational impact;

	•		personnel are actively working to obtain land use, local and state approvals for an expansion of an existing landfill;

	•		we believe the permit is likely to be received; and

	•		we believe that the timeframe to complete the permitting is reasonable.

We may be unsuccessful in obtaining expansion permits for airspace that has been considered probable. If unsuccessful in obtaining these permits, the previously capitalized costs will be charged to expense. As of September 30, 2006, we have included 87 million cubic yards of expansion airspace with estimated development costs of approximately $68.4 million in our calculation of the rates used for the amortization of landfill costs.

Closure and Post-Closure Obligations

We have material financial commitments for the costs associated with our future obligations for final closure, which is the closure of the landfill, the capping of the final uncapped areas of a landfill and post-closure maintenance of those facilities, which is generally expected to be for a period of up to 30 years for MSW facilities and up to five years for C&D facilities.

On January 1, 2003, we adopted SFAS No. 143, “Accounting for Asset Retirement Obligations” (SFAS No. 143), which provides standards for accounting for obligations associated with the retirement of long-lived assets and the associated asset retirement costs. Generally, the requirements for recording closure and post-closure obligations under SFAS No. 143 are as follows:

	•		Landfill closure and post-closure liabilities are calculated by estimating the total obligation in current dollars. Cost estimates equate the costs of third parties performing the work. Any portion of the estimates which are based on activities being performed internally are increased to reflect a profit margin a third party would receive to perform the same activity. This profit margin will be taken to income once the work is performed internally.

	•		The total obligation is carried at the net present value of future cash flows, which is calculated by inflating the obligation based upon the expected date of the expenditure using an inflation rate and discounting the inflated total to its present value using a discount rate. The discount rate represents our credit-adjusted risk-free rate. The resulting closure and post-closure obligation is recorded as an increase in this liability as airspace is consumed.

	•		Accretion expense is calculated based on the discount rate and is charged to cost of services and increases the related closure and post-closure obligation. This expense will generally be less during the early portion of a landfill’s operating life and increase thereafter.

The following table sets forth the rates we used for the amortization of landfill costs and the accrual of closure and post-closure costs for the nine months ended September 30, 2006 and the year ended December 31, 2005:


	Nine Months Ended		Year Ended
	September 30,		December 31,
	2006		2005
Number of landfills owned		20		19
Landfill depletion and amortization expense (in thousands)	$	6,673	$	6,956
Accretion expense (in thousands)		213		159
Closure and post-closure expense (in thousands)		286		—

		7,172		7,115

Airspace consumed (in thousands of cubic yards)		3,631		3,854


Depletion, amortization, accretion, closure and post-closure expense per cubic yard of airspace consumed	$	1.98	$	1.85

The impact of changes determined to be changes in estimates, based on an annual update, is accounted for on a prospective basis. Our ultimate liability for such costs may increase in the future as a result of changes in estimates, legislation, or regulations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

In the normal course of business, we are exposed to market risk including changes in interest rates. We use interest rate swap agreements to manage a portion of our risks related to interest rates. Effective November 1, 2005, we entered into an interest rate swap agreement whereby we exchanged $150 million of floating rate LIBOR for a five-year fixed-rate of 4.885%. The swap was initially intended to be a hedge against interest payments under our various floating rate debt instruments. With the restructuring of our long-term debt and the termination of this swap position in July 2006, we realized $4.0 million from the swap counter-party. Shortly thereafter, we entered into a new swap agreement effective July 11, 2006, where we agreed to pay a fixed-rate of 5.64% in exchange for three-month floating rate LIBOR which was 5.51% at the time the swap was entered. The intention of this swap agreement is to limit our exposure to a rising rate interest environment. At the time the swap was entered, there was no offsetting floating rate LIBOR debt to enable the swap transaction to be considered a hedge. Accordingly, any changes in the unrealized fair value of the new swap will be recognized in the statement of operations. If, in the future, we have corresponding debt instruments that have floating rate debt, we will consider designating all or part of this swap agreement as a hedge. We did not enter into the interest rate swap agreements for trading purposes.

As of September 30, 2006, we had no debt outstanding that bears interest at variable or floating rates as compared to approximately $12.0 million as of December 31, 2005. With the placement of a new swap agreement, we bear exposure to, and are primarily affected by, changes in LIBOR rates on $150 million. A 100 basis point increase in LIBOR interest rates would result in swap income of approximately $1.5 million annually while a 100 basis point decrease in interest rates would result in $1.5 million in swap expense in addition to any mark to market effect on the fair market value of the swap.

Our financial instruments that are potentially sensitive to changes in interest rates also include our 9.25% senior notes. As of September 30, 2006, the fair value of these notes, based on quoted market prices, was approximately $155.6 million compared to a carrying amount of $150 million.

ITEM 4. CONTROLS AND PROCEDURES.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of September 30, 2006. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2006 in ensuring that the information required to be disclosed by us (including our consolidated subsidiaries) in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, a report of management’s assessment of the design and effectiveness of internal control over financial reporting was included as part of our annual report on Form 10-K for the fiscal year ended December 31, 2005 as filed with the SEC on March 16, 2006. KPMG LLP, our independent registered public accountants, also attested to, and reported on, management’s assessment of the effectiveness of internal control over financial reporting. Management’s report and the independent registered public accounting firm’s attestation report were included in Part II, Item 8 “Financial Statements and Supplementary Data” of the annual report on Form 10-K.

Based on an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, there has been no change in our internal control over financial reporting that occurred during our last fiscal quarter ended September 30, 2006, identified in connection with that evaluation, that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Please read Note 11 to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for information regarding our legal proceedings.

ITEM 1A. RISK FACTORS.

In addition to the information contained elsewhere in this quarterly report, the following new or modified risk factors, along with the risk factors contained in our annual report on Form 10-K for the year ended December 31, 2005, should be carefully considered by each individual in evaluating an investment in us. If any of the following risks or those risks included in our annual report on Form 10-K for the year ended December 31, 2005 were actually to occur, our business, results of operations and financial condition could be materially adversely affected. We may encounter risks in addition to those set forth below and in our annual report on Form 10-K for the year ended December 31, 2005. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, results of operations, financial condition and prospects.

Risks Related to Our Acquisition Program

Our acquisition strategy has resulted and is expected to continue to result in significant goodwill and other intangible assets, which may need to be written down if performance is not as expected.

As of September 30, 2006, we had approximately $77.2 million of goodwill and other intangible assets, representing approximately 21.0% of our total assets. If we complete acquisitions at prices greater than the fair value of the assets acquired, we would generate additional goodwill. We are required to test our goodwill at least annually for impairment, which would require us to incur a charge if we determine there is a reduction in value. Any such charge would reduce our assets and earnings.

Risks Related to Our Business

Changes in interest rates may affect our profitability

Our acquisition strategy could require us to incur substantial additional indebtedness in the future, which will increase our interest expense. Further, to the extent that these borrowings are subject to variable rates of interest as our revolving credit facility is, increases in interest rates will increase our interest expense, which will affect our profitability. In order to better manage changes in interest rates, in July 2006, we entered into a swap arrangement where we agreed to pay a fixed rate of 5.64% on $150 million in exchange for three-month floating rate LIBOR that was 5.51% at the time of the swap. At the time of the swap, there was no offsetting floating rate LIBOR debt to enable the swap transaction to be considered a hedge. Accordingly, any changes in the unrealized fair value of the swap will be recognized in our statement of operations. If LIBOR interest rates were to increase by 100 basis points, or 1%, this would result in annual swap income of approximately $1.5 million. If LIBOR interest rates were to decrease by 100 basis points, or 1%, this would result in annual swap expense of $1.5 million. The foregoing amounts do not include any mark to market effect on the fair market value of the swap.

The indenture governing the senior notes and our credit facility impose restrictions on us that may limit the discretion of management in operating our business.

The indenture governing the senior notes and our new secured credit facility contain various restrictive covenants that limit management’s discretion in operating our business. In particular, these covenants limit our ability to, among other things:

	•		incur additional indebtedness or issue preferred stock;

	•		make certain investments or pay dividends or distributions on our capital stock or subordinated indebtedness or purchase or redeem or retire capital stock;

	•		sell or transfer assets, including capital stock of our restricted subsidiaries;

	•		restrict dividends or other payments by restricted subsidiaries;

	•		incur liens;

	•		enter into transactions with affiliates; and

	•		consolidate, merge, sell or lease all or substantially all of our assets.

The credit facility also requires us to maintain specified financial ratios and satisfy certain financial tests. Our ability to maintain or meet such financial ratios and tests may be affected by events beyond our control, including changes in general economic and business conditions, and may not be able to maintain or meet such ratios and tests or the lenders under the credit agreement may not waive any failure to meet such ratios or tests.

These covenants could materially and adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand, to pursue our business strategies and otherwise to conduct our business. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations, and may not be able to comply. A breach of these covenants could result in a default under the indenture governing the senior notes and/or the credit facility. If there were an event of default under the indenture governing the senior notes and/or the credit facility, the affected creditors could cause all amounts borrowed under these instruments to be due and payable immediately. In addition, if we fail to repay indebtedness under our credit facility when it becomes due, the lenders under the credit facility could proceed against the assets which we have pledged to them as security. Our assets and cash flow might not be sufficient to repay our outstanding debt in the event of a default.

We may not be able to finance a change of control offer required by the indenture governing the senior notes.

If we were to experience a change of control, the indenture governing the senior notes requires us to offer to purchase all of the notes then outstanding at 101% of their principal amount, plus unpaid accrued interest to the date of repurchase. If a change of control were to occur, we may not have sufficient funds to purchase the senior notes. In addition, our credit facility restricts our ability to repurchase the senior notes, even when we are required to do so by the indenture in connection with a change of control. A change in control could therefore result in a default under the credit facility and could cause the acceleration of our debt. The inability to repay such debt, if accelerated, and to purchase all of the tendered notes following a change of control, would constitute an event of default under the indenture.

Risks Related to Our Operations and Corporate Organization

We are a holding company, and as a result we are dependent on dividends from our subsidiaries to meet our obligations, including with respect to our senior notes.

We are a holding company and do not conduct any business operations of our own. Our principal assets are the equity interests that we own in our operating subsidiaries, either directly or indirectly. As a result, we are dependent upon cash dividends, distributions or other transfers that we receive from our subsidiaries in order to make any dividend payments to our stockholders, to repay any debt that we may incur, and to meet our other obligations. The ability of our subsidiaries to pay dividends and make payments to us will depend on their operating results and may be restricted by, among other things, applicable corporate, tax and other laws and regulations and agreements of those subsidiaries, as well as by the terms of our credit facility and the indenture governing the senior notes. For example, some state corporate laws prohibit the payment of dividends by any subsidiary unless the subsidiary has a capital surplus or net profits in the current or immediately preceding fiscal year. Payments or distributions from our subsidiaries also could be subject to restrictions on dividends or repatriation of earnings under applicable local law, and monetary transfer restrictions in the jurisdictions in which our subsidiaries operate. Our subsidiaries are separate and distinct legal entities. Any right that we have to receive any assets of or distributions from any subsidiary upon its bankruptcy, dissolution, liquidation or

reorganization, or to realize proceeds from the sale of the assets of any subsidiary, will be junior to the claims of that subsidiary’s creditors, including trade creditors.

Our indebtedness could impair our financial condition and our ability to fulfill our debt obligations.

As of September 30, 2006, we had total indebtedness of $110.0 million (net of cash on hand and restricted cash of $57.5 million), representing approximately 39.8% of our total book capitalization. Our debt service obligations and restrictive covenants in our debt instruments could have important consequences. For example, they could:

	•		make it more difficult for us to satisfy our obligations with respect to our indebtedness, which could in turn result in an event of default on such indebtedness;

	•		impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes;

	•		diminish our ability to withstand a downturn in our business or the economy generally;

	•		require us to dedicate a substantial portion of our cash flow from operations to debt service payments, thereby reducing the availability of cash for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes;

	•		limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

	•		place us at a competitive disadvantage compared to our competitors that have proportionately less debt.

Our ability to repay, extend or refinance our existing debt obligations and to obtain future credit will depend primarily on our operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. If we are unable to meet our debt service obligations, we could be forced to restructure or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all.

We are not prohibited under the indenture governing our senior notes from incurring additional indebtedness. Our incurrence of significant additional indebtedness would exacerbate the negative consequences mentioned above.

Provisions in our amended and restated certificate of incorporation, our amended and restated bylaws, Delaware law and other agreements could prohibit a change of control that our stockholders may favor and which could negatively affect our stock price.

Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws and applicable provisions of the Delaware General Corporation Law may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our stockholders. These provisions could discourage potential takeover attempts and could adversely affect the market price of our common stock. Our amended and restated certificate of incorporation and our amended and restated bylaws:

	•		authorize the issuance of blank check preferred stock that could be issued by our board of directors to thwart a takeover attempt;

	•		prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of stock to elect some directors;

	•		require super-majority voting to effect amendments by stockholders to provisions of our amended and restated bylaws;

	•		limit who may call special meetings;

	•		prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders;

	•		establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholders meeting; and

	•		require that vacancies on the board of directors, including newly-created directorships, be filled only by a majority vote of directors then in office.

We have also entered into a stockholder’s agreement with the holder of all of the outstanding shares of our Series A Convertible Pay-In-Kind Preferred Stock, which shares are currently convertible into approximately 31.9% of our outstanding common stock on a post-conversion basis, that requires the holder to vote such shares in favor of director nominees put forth by our board of directors and in the manner recommended by the board of directors if the vote is in connection with any fundamental transaction (including large acquisitions of our outstanding stock, replacement of more than one-half of our directors, mergers, tender offers and other events). The stockholder’s agreement also imposes numerous “standstill” restrictions and prohibitions on the holder’s transfer of any shares of preferred or common stock. These agreements could discourage or prevent a change in control or a potential takeover attempt and could adversely affect the market price of our common stock.

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Special Meeting of Stockholders

We held a Special Meeting of Stockholders (the Special Meeting) on July 13, 2006 in Houston, Texas to approve the issuance of 750,000 shares of our Series A Convertible Pay-In-Kind Preferred Stock, par value $0.01 per share, pursuant to the Preferred Stock Purchase Agreement with Ares Corporate Opportunities Fund II, L.P. dated June 12, 2006. A total of 12,094,696 shares of our common stock were present at the Special Meeting in person or by proxy, which represented 72% of the outstanding shares of our common stock as of June 26, 2006, the record date for the Special Meeting.

Stockholders approved the issuance of the Preferred Stock at the Special Meeting based on the following vote tabulation:


Votes For	Votes Against		Votes Withheld		Abstentions		Broker Non-Votes
12,056,366		38,330		—		—		—

Annual Meeting of Stockholders

We held our Annual Meeting of Stockholders (the Annual Meeting) on September 15, 2006 in Houston, Texas to elect five directors to serve until the Annual Meeting of Stockholders in 2007, to ratify the appointment of the firm of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2006 and to approve the Second Amended and Restated 2004 WCA Waste Corporation Incentive Plan, which increased the number of shares authorized to be issued pursuant to the plan from 1,500,000 to 2,250,000. A total of 14,539,027 shares of our common stock were present at the Annual Meeting in person or by proxy, which represented 86.6% of the outstanding shares of our common stock as of August 18, 2006, the record date for the Annual Meeting.

Stockholders elected the five director nominees at the Annual Meeting based on the following vote tabulation:


	Votes For		Votes Against		Votes Withheld		Abstentions		Broker Non-Votes
Tom J. Fatjo, Jr.		10,515,058		—		4,023,969		—		—

Jerome M. Kruszka		10,487,153		—		4,051,874		—		—

Ballard O. Castleman		13,428,367		—		1,110,660		—		—

Richard E. Bean		13,428,367		—		1,110,660		—		—

Roger A. Ramsey		13,428,367		—		1,110,660		—		—

Stockholders ratified the appointment of the firm of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2006 at the Annual Meeting based on the following vote tabulation:


Votes For	Votes Against		Votes Withheld		Abstentions		Broker Non-Votes
14,525,565		13,462		—		—		—

Stockholders approved the Second Amended and Restated 2004 WCA Waste Corporation Incentive Plan at the Annual Meeting based on the following vote tabulation:


Votes For	Votes Against		Votes Withheld		Abstentions		Broker Non-Votes
11,660,966		114,568		—		264,209		2,499,284

ITEM 6. EXHIBITS.

2.1**		Reorganization Agreement, dated May 10, 2004, between WCA Waste Corporation and Waste Corporation of America, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on May 14, 2004).

2.2		Agreement and Plan of Merger, dated May 10, 2004, between WCA Waste Corporation, Waste Corporation of America and WCA Merger Corporation (incorporated by reference to Exhibit 2.2 to Amendment No. 2 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on May 14, 2004).

2.3		Agreement and Plan of Merger, dated as of May 20, 2004, between WCA Waste Corporation and WCA Merger II Corporation (incorporated by reference to Exhibit 2.3 to Amendment No. 5 to the registrant’s Registration Statement on Form S-4 (File No. 333-114901) filed with the SEC on June 21, 2004).

2.4†**		Membership Interest Purchase Agreement, dated effective January 14, 2005, between WCA of North Carolina, L.P., MRR Southern, LLC, Material Recovery, LLC, Material Reclamation, LLC, MRR of High Point, LLC, MRR Wake Transfer Station, LLC, WCA Waste Corporation, F. Norbert Hector, Jr., D.H. Griffin, Paul M. Givens, Edward I. Weisiger, Jr. and David Griffin, Jr. (incorporated by reference to Exhibit 2.4 to the registrant’s Form 10-K (File No. 000-50808) filed with the SEC on March 24, 2004).

2.5†		Closing and Asset Purchase Agreement, dated as of October 2, 2005, by and among WCA of Florida, Inc., Meyer & Gabbert Excavating Contractors, Inc., Leonard G. Meyer, Jr. and James F. Gabbert (incorporated by reference to Exhibit 2.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 30, 2005).

2.6		Agreement and Plan of Merger, dated as of September 30, 2005, by and among WCA Waste Corporation, WCA of Central Florida, Inc., WCA Management Company, L.P., Waste Corporation of America, LLC and Waste Corporation of Central Florida, Inc. (incorporated by reference to Exhibit 2.2 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 30, 2005).

2.7		First Amendment to Membership Interest Purchase Agreement, dated as of March 30, 2005, by and among WCA of North Carolina, L.P., MRR Southern, LLC, WCA Waste Corporation and WCA of Wake County, L.P. (incorporated by reference to Exhibit 2.2 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on May 13, 2005).

3.1		Second Amended and Restated Certificate of Incorporation of WCA Waste Corporation (incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on December 22, 2005).

3.2		Amended and Restated Bylaws of WCA Waste Corporation (incorporated by reference to Exhibit 3.2 to Amendment No. 6 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on June 21, 2004).

4.1		Specimen of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on May 14, 2004).

4.2		Trust Indenture between Gulf Coast Waste Disposal Authority and U.S. Bank National Association, as Trustee, dated as of August 1, 2002 (incorporated by reference to Exhibit 4.2 to Amendment No. 4 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on June 17, 2004).

4.3		Form of Environmental Facilities Revenue Bond (included in Exhibit 4.2).

4.4		Indenture, dated as of July 5, 2006, by and among WCA Waste Corporation, the guarantors named therein and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 5, 2006).

4.5		Form of 9.25% Senior Note due 2014 (included as Exhibit A to Exhibit 4.4 above).

4.6		Registration Rights Agreement, dated as of July 5, 2006, by and among WCA Waste Corporation, the guarantors named therein and Credit Suisse Securities (USA) LLC incorporated by reference to Exhibit 10.3 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 5, 2006).

4.7		Certificate of Designation of Series A Convertible Pay-in-Kind Preferred Stock (incorporated by reference to Exhibit 4.7 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

4.8		Specimen of Series A Convertible Pay-in-Kind Preferred Stock Certificate (incorporated by reference to Exhibit 4.8 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.1		Revolving Credit Agreement, dated as of July 5, 2006, by and among WCA Waste Corporation, Comerica Bank, as administrative agent, and the parties named therein as lenders (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 5, 2006).

10.2		Interest Rate Swap Agreement, dated July 11, 2006, between WCA Waste Corporation and Comerica Bank (incorporated by reference to Exhibit 10.3 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.3		Stockholder’s Agreement, dated July 27, 2006, by and between WCA Waste Corporation and Ares Corporate Opportunities Fund II, L.P. (incorporated by reference to Exhibit 10.5 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.4		Registration Rights Agreement, dated July 27, 2006, among WCA Waste Corporation and Ares Corporate Opportunities Fund II, L.P. (incorporated by reference to Exhibit 10.6 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.5		Management Rights Letter, dated July 27, 2006, between WCA Waste Corporation and Ares Corporate Opportunities Fund II, L.P. (incorporated by reference to Exhibit 10.7 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.6		Second Amended and Restated 2004 WCA Waste Corporation Incentive Plan, effective as of September 15, 2006 (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 15, 2006).

12.1*		Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2006.

31.1*		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2*		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1*		Section 1350 Certification of Chief Executive Officer.

32.2*		Section 1350 Certification of Chief Financial Officer.


*		Filed herewith.


†		Confidential treatment has been granted with respect to certain information contained in this agreement.

**		Pursuant to Item 601(b)(2) of Regulation S-K, the Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Commission upon request.

The registrant hereby undertakes, pursuant to Regulation S-K, Item 601(b), paragraph (4)(iii)(A), to furnish to the Securities and Exchange Commission upon request all constituent instruments defining the rights of holders of long-term debt of the registrant and its consolidated subsidiaries not filed herewith for the reason that the total amount of securities authorized under any of such instruments does not exceed 10% of the registrant’s total consolidated assets.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		WCA WASTE CORPORATION

		By:		/s/ Charles A. Casalinova Charles A. Casalinova
				Senior Vice President and Chief Financial
				Officer (Principal Financial Officer)

		By:		/s/ Kevin D. Mitchell Kevin D. Mitchell
				Vice President and Controller
				(Principal Accounting Officer)

Date: November 8, 2006

EXHIBIT INDEX


2.1**		Reorganization Agreement, dated May 10, 2004, between WCA Waste Corporation and Waste Corporation of America, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on May 14, 2004).

2.2		Agreement and Plan of Merger, dated May 10, 2004, between WCA Waste Corporation, Waste Corporation of America and WCA Merger Corporation (incorporated by reference to Exhibit 2.2 to Amendment No. 2 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on May 14, 2004).

2.3		Agreement and Plan of Merger, dated as of May 20, 2004, between WCA Waste Corporation and WCA Merger II Corporation (incorporated by reference to Exhibit 2.3 to Amendment No. 5 to the registrant’s Registration Statement on Form S-4 (File No. 333-114901) filed with the SEC on June 21, 2004).

2.4†**		Membership Interest Purchase Agreement, dated effective January 14, 2005, between WCA of North Carolina, L.P., MRR Southern, LLC, Material Recovery, LLC, Material Reclamation, LLC, MRR of High Point, LLC, MRR Wake Transfer Station, LLC, WCA Waste Corporation, F. Norbert Hector, Jr., D.H. Griffin, Paul M. Givens, Edward I. Weisiger, Jr. and David Griffin, Jr. (incorporated by reference to Exhibit 2.4 to the registrant’s Form 10-K (File No. 000-50808) filed with the SEC on March 24, 2004).

2.5†		Closing and Asset Purchase Agreement, dated as of October 2, 2005, by and among WCA of Florida, Inc., Meyer & Gabbert Excavating Contractors, Inc., Leonard G. Meyer, Jr. and James F. Gabbert (incorporated by reference to Exhibit 2.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 30, 2005).

2.6		Agreement and Plan of Merger, dated as of September 30, 2005, by and among WCA Waste Corporation, WCA of Central Florida, Inc., WCA Management Company, L.P., Waste Corporation of America, LLC and Waste Corporation of Central Florida, Inc. (incorporated by reference to Exhibit 2.2 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 30, 2005).

2.7		First Amendment to Membership Interest Purchase Agreement, dated as of March 30, 2005, by and among WCA of North Carolina, L.P., MRR Southern, LLC, WCA Waste Corporation and WCA of Wake County, L.P. (incorporated by reference to Exhibit 2.2 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on May 13, 2005).

3.1		Second Amended and Restated Certificate of Incorporation of WCA Waste Corporation (incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on December 22, 2005).

3.2		Amended and Restated Bylaws of WCA Waste Corporation (incorporated by reference to Exhibit 3.2 to Amendment No. 6 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on June 21, 2004).

4.1		Specimen of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on May 14, 2004).

4.2		Trust Indenture between Gulf Coast Waste Disposal Authority and U.S. Bank National Association, as Trustee, dated as of August 1, 2002 (incorporated by reference to Exhibit 4.2 to Amendment No. 4 to the registrant’s Registration Statement on Form S-1 (File No. 333-113416) filed with the SEC on June 17, 2004).

4.3		Form of Environmental Facilities Revenue Bond (included in Exhibit 4.2).

4.4		Indenture, dated as of July 5, 2006, by and among WCA Waste Corporation, the guarantors named therein and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 5, 2006).

4.5		Form of 9.25% Senior Note due 2014 (included as Exhibit A to Exhibit 4.4 above).

4.6		Registration Rights Agreement, dated as of July 5, 2006, by and among WCA Waste Corporation, the guarantors named therein and Credit Suisse Securities (USA) LLC incorporated by reference to Exhibit 10.3 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 5, 2006).

4.7		Certificate of Designation of Series A Convertible Pay-in-Kind Preferred Stock (incorporated by reference to Exhibit 4.7 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).


4.8		Specimen of Series A Convertible Pay-in-Kind Preferred Stock Certificate (incorporated by reference to Exhibit 4.8 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.1		Revolving Credit Agreement, dated as of July 5, 2006, by and among WCA Waste Corporation, Comerica Bank, as administrative agent, and the parties named therein as lenders (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 5, 2006).

10.2		Interest Rate Swap Agreement, dated July 11, 2006, between WCA Waste Corporation and Comerica Bank (incorporated by reference to Exhibit 10.3 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.3		Stockholder’s Agreement, dated July 27, 2006, by and between WCA Waste Corporation and Ares Corporate Opportunities Fund II, L.P. (incorporated by reference to Exhibit 10.5 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.4		Registration Rights Agreement, dated July 27, 2006, among WCA Waste Corporation and Ares Corporate Opportunities Fund II, L.P. (incorporated by reference to Exhibit 10.6 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.5		Management Rights Letter, dated July 27, 2006, between WCA Waste Corporation and Ares Corporate Opportunities Fund II, L.P. (incorporated by reference to Exhibit 10.7 to the registrant’s Form 10-Q (File No. 000-50808) filed with the SEC on August 8, 2006).

10.6		Second Amended and Restated 2004 WCA Waste Corporation Incentive Plan, effective as of September 15, 2006 (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 15, 2006).

12.1*		Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2006.

31.1*		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2*		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1*		Section 1350 Certification of Chief Executive Officer.

32.2*		Section 1350 Certification of Chief Financial Officer.


*		Filed herewith.

†		Confidential treatment has been granted with respect to certain information contained in this agreement.

**		Pursuant to Item 601(b)(2) of Regulation S-K, the Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Commission upon request.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

WCA Waste (WCAA) Inactive 10-Q2006 Q3 Quarterly report

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