WCA Waste (WCAA) 10-Q 2008 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, 2008

or

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

For the transition period from __________ to ______________

Commission File Number: 000-50808

WCA Waste Corporation

(Exact name of registrant as specified in its charter)

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

One Riverway, Suite 1400	77056
Houston, Texas 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.    YES   þ    NO   ¨

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

Large accelerated filer £ Accelerated filer þ Non-accelerated filer £ (Do not check if a smaller reporting company) Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   ¨    NO   þ

As of November 1, 2008, there were 16,473,573 shares of WCA Waste Corporation’s common stock, par value $0.01 per share, outstanding, net of 939,790 shares of treasury stock.

TABLE OF CONTENTS

Statement re: Computation of Ratio of Earnings to Fixed Charges

Certification of CEO Pursuant to Section 302

Certification of CFO Pursuant to Section 302

Certification of CEO Pursuant to Section 906

Certification of CFO Pursuant to Section 906

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.

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.

Our business is 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:

·   The current weakening of U.S. economic conditions and the related decline in construction activity, as well as any future downturns, may reduce our volume and/or pricing on our services, resulting in decreases in our revenue, profitability and cash flows;

·   increases in the costs of fuel may reduce our operating margins;

·   changes in interest rates may affect our profitability;

·   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;

·   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 and insurance could reduce our 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 revenue to decline;

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·   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;

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

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

·   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; and

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

Our future financial performance may also depend 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 equity including common stock or preferred 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;

·   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; and

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

Our business and the performance of our stock price are subject to risks related to our management, governance and capital structure.  They include, but are not limited to, the following:

·   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;

·   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;

·   a controlling interest in our voting stock is held by one fund and a small number of individuals (including management), which when combined with various agreements and rights of the fund, may discourage a change of control transaction and may exert control over our strategic direction;

·   provisions in our amended and restated certificate of incorporation, our amended and restated bylaws and Delaware law could prohibit a change of control that our stockholders may favor and which could negatively affect our stock price;

·   we do not anticipate paying cash dividends on our common stock in the foreseeable future, so you can only realize a return on your investment by selling your shares of our common stock; and

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·   we may issue preferred stock that has a liquidation or other preference over our common stock without the approval of the holders of our common stock, which may affect those holders rights or the market price of our common stock.

Our business is capital intensive and depends on our ability to generate sufficient cash flow from operations and, from time to time, to access our credit facility or other capital sources, each of which are subject to various risks and uncertainties including, but not limited to, the following:

·   we have a substantial amount of debt which could adversely affect our operations and financial performance;

·   the provisions in our debt instruments impose restrictions on us that may limit the discretion of management in operating our business;

·   we may encounter the need to make substantial capital outlays that exceed our cash flow from operations, in which event we would need to borrow additional funds under our credit facility or obtain other sources of capital or financing;

·   we are subject to certain financial and other covenants under our credit agreement which may, in the future, limit our ability to borrow under such facility;

·   our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us or any of the lenders under our credit facility;

·   in light of the recent deterioration in the capital and credit markets, our ability to access and borrow under the credit facility is subject to liquidity and market risk factors that are beyond our control; and

·   if our current sources of liquidity were insufficient, we may have to seek additional financing, which may not be available and, if available, may be on terms that are unfavorable.

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, 2007 (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.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

WCA WASTE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	September 30,			December 31,
	2008			2007
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,865		$	1,138
Restricted cash		—			351
Accounts receivable, net of allowance for doubtful accounts of $1,024 (unaudited) and $1,498, respectively		24,783			22,946
Deferred tax assets		3,627			3,627
Prepaid expenses and other		2,579			6,937
Total current assets		32,854			34,999
Property and equipment, net of accumulated depreciation and amortization of $104,705 (unaudited) and $86,122, respectively		274,487			270,384
Goodwill, net		102,490			102,112
Intangible assets, net		6,797			7,271
Deferred financing costs, net		3,986			4,610
Restricted cash — debt service reserve fund		—			988
Long-term note receivable, less current maturities		—			6,101
Other assets		680			258
Total assets	$	421,294		$	426,723
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,515		$	9,856
Accrued liabilities and other		22,255			18,269
Note payable		214			4,716
Current maturities of long-term debt		85			699
Total current liabilities		32,069			33,540
Long-term debt, less current maturities and discount		193,677			198,149
Interest rate swap		3,448			4,677
Accrued closure and post-closure liabilities		7,359			6,560
Deferred tax liabilities		12,833			11,620
Other long-term liabilities		1,813			1,813
Total liabilities		251,199			256,359
Commitments and contingencies
Stockholders’ equity:
Series A convertible preferred stock, $0.01 par value per share. Authorized 828 shares; issued and outstanding 828 shares and 805 shares, respectively (liquidation preference $96,006)		8			8
Common stock, $0.01 par value per share. Authorized 50,000 shares; issued 17,413 shares and 17,083 shares, respectively		174			171
Treasury stock, at cost – 602 shares and 18 shares, respectively		(3,262	)		(174	)
Additional paid-in capital		171,278			166,665
Retained earnings		1,897			3,694
Total stockholders’ equity		170,095			170,364
Total liabilities and stockholders’ equity	$	421,294		$	426,723

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

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WCA WASTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Revenue	$	52,782		$	48,421		$	154,365		$	135,248
Expenses:
Cost of services		36,060			30,636			106,694			87,170
Depreciation and amortization		6,738			6,515			20,138			17,800
General and administrative (including stock-based compensation of $568, $482, $1,736 and $1,248, respectively)		3,019			3,163			8,962			9,438
		45,817			40,314			135,794			114,408
Operating income		6,965			8,107			18,571			20,840
Other income (expense):
Interest expense, net		(4,642	)		(4,384	)		(13,785	)		(12,350	)
Impact of interest rate swap		(962	)		(2,941	)		(1,869	)		(1,348	)
Other income (loss), net		127			71			(105	)		348
		(5,477	)		(7,254	)		(15,759	)		(13,350	)
Income before income taxes		1,488			853			2,812			7,490
Income tax provision		(768	)		(343	)		(1,568	)		(3,052	)
Net income		720			510			1,244			4,438
Accrued payment-in-kind dividend on preferred stock		(1,025	)		(977	)		(3,041	)		(2,892	)
Net income (loss) available to common stockholders	$	(305	)	$	(467	)	$	(1,797	)	$	1,546
Net income (loss) available to common stockholders:
Earnings per share — basic	$	(0.02	)	$	(0.03	)	$	(0.11	)	$	0.09
Earnings per share — diluted	$	(0.02	)	$	(0.03	)	$	(0.11	)	$	0.09
Weighted average shares outstanding — basic		16,248			16,470			16,425			16,450
Weighted average shares outstanding — diluted		16,248			16,470			16,425			16,490

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

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WCA WASTE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	Nine Months Ended
	September 30,
	2008			2007
Cash flows from operating activities:
Net income	$	1,244		$	4,438
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20,138			17,800
Non-cash compensation charge		1,736			1,248
Amortization of deferred financing costs and debt discount		1,036			672
Deferred tax provision		1,568			3,052
Accretion expense for closure and post-closure obligations		418			362
Gain on sale of assets		(221	)		(348	)
Loss on disposition of note receivable		326			—
Unrealized (gain) loss on interest rate swap		(643	)		1,027
Prepaid disposal usage		—			1,037
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(2,023	)		(4,667	)
Prepaid expenses and other		(602	)		(2,412	)
Accounts payable and other liabilities		2,923			5,945
Net cash provided by operating activities		25,900			28,154
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(236	)		(76,083	)
Proceeds from sale of fixed assets		369			404
Principal of note receivable		304			—
Proceeds from disposition of note receivable		6,225			—
Cost incurred on possible acquisitions		(450	)		(54	)
Capital expenditures		(24,144	)		(20,935	)
Net cash used in investing activities		(17,932	)		(96,668	)
Cash flows from financing activities:
Principal payments on long-term debt		(13,215	)		(816	)
Net change in revolving line of credit		7,723			22,700
Payments under common stock repurchase program		(3,088	)		—
Decrease in restricted cash		1,339			143
Equity transaction costs		—			(5	)
Deferred financing costs		—			(12	)
Net cash provided by (used in) financing activities		(7,241	)		22,010
Net change in cash and cash equivalents		727			(46,504	)
Cash and cash equivalents at beginning of period		1,138			52,207
Cash and cash equivalents at end of period	$	1,865		$	5,703

Supplemental cash flow information:
Interest paid	$	9,930	$	8,968
Interest rate swap paid		1,596		215
Income taxes paid		355		105

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

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WCA WASTE CORPORATION

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 (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 annual report on Form 10-K filed with the SEC on March 5, 2008 which contains the Company’s audited consolidated financial statements as of and for the year ended December 31, 2007.  The unaudited condensed consolidated financial statements as of September 30, 2008 and for the three and nine months ended September 30, 2008 and 2007 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 annual report on Form 10-K.

In preparing its financial statements, the Company makes numerous estimates and assumptions affecting the accounting for, and recognition and disclosure of, assets, liabilities, stockholders’ equity, revenues and expenses.  The most difficult, uncertain and subjective estimates and assumptions that the Company makes relate to accounting for landfills, asset impairments, and self-insurance reserves and recoveries.  The Company makes estimates and assumptions because some of the information that it uses in accounting, recognition and disclosure depends upon future events, other information cannot be precisely determined based on available data or based on generally accepted methodologies.  Actual results could differ materially from the estimates and assumptions that the Company uses in the preparation of its financial statements.  The Company conducts its annual impairment test of goodwill as of October 31 of each year.  Based on the last impairment test as of October 31, 2007, the Company determined that there was no impairment of goodwill.  No events or circumstances from that date through September 30, 2008 indicated that an interim assessment was necessary.

The accompanying unaudited condensed consolidated financial statements include the accounts of WCA Waste Corporation and its majority-owned and controlled subsidiaries after elimination of all material intercompany balances and transactions.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS No. 157).  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.  It applies under other accounting pronouncements that require or permit fair value measurements, and does not require any new fair value measurements.  The application of SFAS No. 157, however, may change current practice within an organization.  SFAS No. 157 was effective January 1, 2008 and is applied prospectively.  In February 2008, the FASB issued FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157”, which provided a one year deferral for the implementation of SFAS No. 157 for certain nonfinancial assets and liabilities.  The Company adopted SFAS No. 157 for financial assets and liabilities as of January 1, 2008.  Please read note 8 below for the disclosures required by SFAS No. 157.  The Company is currently evaluating the impact of SFAS No. 157 for nonfinancial assets and liabilities on the Company’s financial position, results of operations or cash flows.

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In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115”, which permits an entity to choose to measure financial instruments and certain other items similar to financial instruments at fair value.  All subsequent changes in fair value for the financial instrument would be reported in earnings.   SFAS No. 159 was effective January 1, 2008.  The Company did not adopt the fair value option permitted under this statement.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”.  SFAS No. 141(R) establishes principles and requirements on how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the entity acquired.  In addition, SFAS No. 141(R) provides guidance on the recognition and measurement of goodwill acquired in the business combination or a gain from a bargain purchase as well as what information to disclose to enable users of the financial statements to evaluate the nature and financial impact of the business combination.  SFAS No. 141(R) requires contingent consideration to be recognized at its fair value on the acquisition date and, for certain arrangements, changes in fair value to be recognized in earnings until settled.  SFAS No. 141(R) also requires acquisition-related transaction and restructuring costs to be expensed rather than treated as part of the cost of the acquisition.  The provisions of SFAS 141(R) apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  The Company is currently evaluating the impact SFAS No. 141(R) will have on the Company’s financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51”.  SFAS No. 160 establishes principles and requirements on how to treat the portion of equity in a subsidiary that is not attributable directly or indirectly to a parent.  This is commonly known as a minority interest.  The objective of SFAS No. 160 is to improve relevance, comparability, and transparency concerning ownership interests in subsidiaries held by parties other than the parent by providing disclosures that clearly identify between interests of the parent and interest of the noncontrolling owners and the related impacts on the consolidated statement of income and the consolidated statement of financial position.  SFAS No. 160 also provides guidance on disclosures related to changes in the parent’s ownership interest and deconsolidation of a subsidiary.  SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  The Company is currently evaluating the impact of SFAS No. 160 on the Company’s financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”.  The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial statements issued for fiscal years and interim periods beginning after November 15, 2008.  The Company is currently evaluating the impact of SFAS No. 161 on the Company’s financial position, results of operations or cash flows.

2.ACQUISITIONS

The Company completed one acquisition during the nine months ended September 30, 2008.  On January 2, 2008, the Company acquired certain collection routes in Oklahoma City, Oklahoma from Maguire Disposal, Inc., for approximately $0.3 million in cash.

The purchase price for this transaction has been allocated to the identifiable intangible assets acquired based on their estimated fair values at the time of acquisition.  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.

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

Based on the preliminary assessments of values for this acquisition, the Company reflected intangible assets of $0.1 million and goodwill of $0.2 million.

Subsequently, on October 1, 2008, the Company acquired the assets of Advantage Waste Services, LLC and its affiliates for approximately $6.4 million, subject to a post-closing working capital adjustment.  The acquisition included a collection operation in and around Springfield, Missouri and a transfer station located in Verona, Missouri.  On October 31, 2008, the Company acquired the front-end load commercial collection business of Advanced Waste Services for approximately $1.7 million, subject to a post-closing working capital adjustment.  The acquisition included approximately 170 commercial accounts in the greater Houston, Texas market area.

3.STOCK-BASED COMPENSATION

The Company established the Second Amended and Restated 2004 WCA Waste Corporation Incentive Plan.  The plan authorizes the issuance of up to 2,250,000 shares.  As of September 30, 2008, there were approximately 587,000 remaining shares authorized for issuance.

There were no restricted share grants during the three months ended September 30, 2008.  During the nine months ended September 30, 2008, 388,420 restricted shares of the Company’s common stock were granted to certain officers and key employees with an aggregate market value of $2.5 million on the grant dates.  The value of the restricted shares, net of unearned compensation, 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, 2008:

	Three Months Ended September 30, 2008						Nine Months Ended September 30, 2008
	Shares			Weighted Average Grant-Date Fair Value		Weighted Average Remaining Contractual Term (years)	Shares			Weighted Average Grant-Date Fair Value		Weighted Average Remaining Contractual Term (years)
Unvested at beginning of period		758		$	6.98			594		$	7.85
Granted		—			—			388			6.38
Vested		(51	)		7.68			(255	)		8.22
Forfeited		(2	)		6.28			(22	)		7.13
Unvested at September 30, 2008		705		$	6.93	2.91		705		$	6.93	2.91

The Company has not granted any stock options since February 2005.  The following table reflects the Company’s option activity for the three and nine months ended September 30, 2008:

	Three Months Ended September 30, 2008						Nine Months Ended September 30, 2008
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)
Outstanding at beginning of period		586		$	9.52			621		$	9.51
Grants		—			—			—			—
Forfeitures		(4	)		9.50			(39	)		9.50
Outstanding at September 30, 2008		582		$	9.52	5.74		582		$	9.52	5.74

As the exercise prices of all outstanding options were greater than the Company’s common stock share price as of September 30, 2008, there was no intrinsic value as of September 30, 2008.

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4.EARNINGS PER SHARE

Basic earnings (loss) 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 (loss) per share is computed using the treasury stock method for options and restricted shares and the if-converted method for convertible preferred stock and convertible debt.  The detail of the earnings (loss) per share calculations for net income (loss) available to common stockholders for the three and nine months ended September 30, 2008 and 2007 is as follows:

		Three Months						Nine Months
		Ended September 30,						Ended September 30,
		2008			2007			2008			2007
Numerator:
Net income	$	720		$	510		$	1,244		$	4,438
Accrued payment-in-kind dividend on preferred stock		(1,025	)		(977	)		(3,041	)		(2,892	)
Net income (loss) available to common stockholders for diluted earnings per share	$	(305	)	$	(467	)	$	(1,797	)	$	1,546
Denominator:
Weighted average basic shares outstanding		16,248			16,470			16,425			16,450
Dilutive effect of restricted share issuances		—			—			—			40
Weighted average diluted shares outstanding		16,248			16,470			16,425			16,490
Earnings per share:
Basic	$	(0.02	)	$	(0.03	)	$	(0.11	)	$	0.09
Diluted	$	(0.02	)	$	(0.03	)	$	(0.11	)	$	0.09

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

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
	2008	2007	2008	2007
Stock options	582	624	582	624
Restricted shares	705	613	705	79
Convertible preferred stock	8,700	8,259	8,579	8,166
Convertible debt	790	636	790	636
	10,777	10,132	10,656	9,505

5.NOTE RECEIVABLE

On June 29, 2007, in connection with the acquisition of a landfill, a transfer station, collection routes and other assets in Houston, Texas from Waste Services, Inc. (WSI), the Company received a $10.5 million non-interest bearing promissory note issued by WSI with payments to the Company in the amount of $125,000 per month for 84 months through June 2014.  On May 29, 2008, the Company sold the note receivable with the carrying value of approximately $6.5 million for approximately $6.2 million.  The Company recognized the $0.3 million loss on disposition of the note receivable as other loss in the accompanying condensed consolidated statements of operations.

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6.LONG-TERM DEBT

Long-term debt consists of the following:

	September 30,		December 31,
	2008		2007
Senior Notes, with interest rate of 9.25%, due in June 2014	$	150,000	$	150,000
Revolving note payable with financial institutions, variable interest rate based on LIBOR plus a margin (4.47% and 6.55% at September 30, 2008 and December 31, 2007, respectively)		39,000		31,277
Environmental Facilities Revenue Bonds, principal payable in varying annual installments, maturing in 2020, interest rate ranging from 8.5% to 9% (8.91% weighted average rate at December 31, 2007)		—		8,815
Notes payable to banks and financial institutions, payable monthly through August 2009, weighted average interest rate of 6.64% and 6.69% at September 30, 2008 and December 31, 2007, respectively		59		459
Note payable, with interest rate of 5%, due in January 2010		128		128
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
Seller convertible notes, with interest rate of 5.5%, due in October 2012		1,575		1,575
		193,762		199,254
Less debt discount		—		406
Less current maturities		85		699
	$	193,677	$	198,149

The Company has a $175 million revolving credit facility.  As of September 30, 2008, there were $39.0 million outstanding under the revolving line of credit and $11.3 million in letters of credit that serve as collateral for insurance claims and bonding, leaving $124.7 million in available capacity under the revolving credit facility.

The credit facility is subject to customary financial and other covenants including, but not limited to, limitations on debt, consolidations, mergers, and sales of assets.  On October 22, 2008, the Company entered into an amendment to its revolving credit facility for the purpose of amending the credit agreement to maintain the ratio of EBIT to Debt Service at 1.25:1, through maturity, rather than such ratio stepping up to 1.5:1 as previously scheduled.  The EBIT to Debt Service ratio is determined on a trailing 12 month basis.  In connection with this amendment, the interest rate spreads on both LIBOR and Prime-based borrowings under the revolving credit facility increased by 0.75% and the Company paid $0.9 million in amendment fees.  Additionally, the lenders under the revolving credit facility permitted the Company to repay, prior to maturity, the notes and bonds discussed below.

In April 2008, the Company repaid $4.0 million of the seller convertible notes with interest rate of 8%.  In June 2008, the Company redeemed $2.8 million of Environmental Facilities Revenue Bonds with interest rate of 8.75%.  In September 2008, the Company redeemed $6.0 million of Environmental Facilities Revenue Bonds with interest rate ranging from 8.5% to 9%.  The funds used for these transactions primarily came from available cash on hand and borrowings under the credit facility.

The 9.25% Senior Notes due 2014 are guaranteed by all of the Company’s current and future subsidiaries as of September 30, 2008.  These guarantees are full, unconditional and joint and several.  In addition, the Company has no non-guarantor subsidiaries and no independent assets or operations outside of its ownership of the subsidiaries.  There are no restrictions on the subsidiaries to transfer funds through dividends or otherwise.

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7.INTEREST RATE SWAP

On July 7, 2006, the Company entered into an 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 interest rate environment.  At the time the swap was entered, there was no offsetting floating rate LIBOR debt and therefore no floating rate interest payments were anticipated.  As a result, the swap transaction could 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 as a non-cash gain or loss.  During the three and nine months ended September 30, 2008, the Company reflected ­­­­­$1.0 million and $1.9 million related to the impact of interest rate swap, respectively, in the accompanying condensed consolidated statements of operations.  The realized portion of this swap was $1.1 million and $2.5 million, respectively, and the unrealized gain in the mark to market of the swap was $0.1 million and $0.6 million, respectively, for the three and nine months ended September 30, 2008.  During the three and nine months ended September 30, 2007, the Company reflected ­­­­­$2.9 million and $1.3 million related to the impact of interest rate swap, respectively, in the accompanying condensed consolidated statements of operations.  The realized portion of the swap was $0.1 million and $0.3 million, respectively, and the unrealized loss in the mark to market of the swap was $2.8 million and $1.0 million, respectively, for the three and nine months ended September 30, 2007.

8.FAIR VALUE MEASUREMENTS

The following table sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2008 (dollars in thousands).  For assets and liabilities that are measured using quoted prices in active markets, the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs.  Assets and liabilities that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability.  For all other assets and liabilities for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models.

Recurring fair value measurements	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Liabilities:
Interest rate swap	$	—	$	6,698	$	—	$	6,698
Total liabilities	$	—	$	6,698	$	—	$	6,698

9.LANDFILL ACCOUNTING

Capitalized Landfill Costs

At September 30, 2008, the Company owned 24 landfills.  Two of these landfills are fully permitted but not constructed and have not yet commenced operations as of September 30, 2008.

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, 2008, 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.

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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 and 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 depending on type and location.

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 assets and closure and post-closure liabilities from December 31, 2007 to September 30, 2008:

	Landfill Assets, Net			Closure and Post-closure Liabilities
December 31, 2007	$	177,699		$	6,560
Capital expenditures		9,879			—
Acquisition of landfill and other adjustments		10			—
Amortization expense		(8,314	)		—
Obligations incurred and capitalized		381			381
Interest accretion		—			418
September 30, 2008	$	179,655		$	7,359

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

	September 30,		December 31,
	2008		2007
Recorded amounts:
Current portion	$	—	$	—
Noncurrent portion		7,359		6,560
Total recorded	$	7,359	$	6,560

The Company’s total anticipated cost for future closure and post-closure activities is $161.3 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 $28.8 million and $26.9 million at September 30, 2008 and December 31, 2007, respectively.

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10.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, 2008 based upon the Company’s anticipated 2008 annual effective income tax rate of 46.4% as compared to 40.7% for the nine months ended September 30, 2007.  Such rate differs from the federal statutory rate of 35% due to state income taxes, valuation allowances associated with state net operating loss carryforwards and estimates of non-deductible expenses.  In addition to the anticipated 2008 annual effective income tax rate of 46.4%, the Company reflected an additional 9.3% of income taxes in the nine months ended September 30, 2008 for discrete items within the period related to stock-based compensation expense and differences in management’s estimated utilization of state net operating loss carryforwards.

The Company is subject to federal income tax in the United States and to state taxes in the various states in which it operates within the United States.  With few exceptions, the Company remains subject to both U.S federal income tax and to state and local income tax examinations by taxing authorities for tax years through 1998.  Currently, the Company is not involved in any income tax examinations for any year.

The Company adopted the provision of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) on January 1, 2007.  As a result of the implementation of FIN 48, the Company recorded approximately $1.8 million in other long-term liabilities for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.  As of January 1, 2008, the Company had unrecognized tax benefits of $1.8 million, all of which would have an impact on the annual effective tax rate upon recognition.  The Company does not anticipate a significant change in the balance of unrecognized tax benefits within the next 12 months.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.  This is an accounting policy election made by the Company that is a continuation of the Company’s historical policy and will continue to be consistently applied in the future.  During the nine months ended September 30, 2008, the Company accrued approximately $4,000 of interest and penalties.

11.STOCKHOLDERS’ EQUITY

During the nine months ended September 30, 2008, the Company issued 365,910 restricted shares, net of forfeitures, under the Second Amended and Restated 2004 WCA Waste Corporation Incentive Plan.  These shares vest over periods ranging from one to three years from the issue date.  In addition, on April 16, 2008, the Company's Board of Directors authorized the repurchase of up to $10 million of its common shares from time to time in open market or private transactions.  The timing and actual number of shares purchased will depend on a variety of factors including the stock price, corporate and regulatory requirements and other market and economic conditions.  The stock repurchase program may be suspended or discontinued at any time, either with or without public announcement.  During the nine months ended September 30, 2008, the Company repurchased 583,976 shares of its common stock for approximately $3.1 million.  The following table reflects the changes in stockholders’ equity from December 31, 2007 to September 30, 2008:

	Preferred Stock		Common Stock			Treasury Stock			Additional Paid-in Capital			Retained Earnings			Total
December 31, 2007	$	8	$	171		$	(174	)	$	166,665		$	3,694		$	170,364
Net income		—		—			—			—			1,244			1,244
Accrued payment-in-kind dividend on preferred stock		—		—			—			3,041			(3,041	)		—
Issuance of restricted shares to employees		—		4			—			(4	)		—			—
Accretion of unearned compensation		—		—			—			1,921			—			1,921
Restricted shares withheld		—		(1	)		—			(345	)		—			(346	)
Common stock repurchased under repurchase program		—					(3,088	)		—			—			(3,088	)
September 30, 2008	$	8	$	174		$	(3,262	)	$	171,278		$	1,897		$	170,095

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Preferred Stock

On July 13, 2006, the Company’s stockholders 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 credit facility.  Issuance costs, including a 1% discount to Ares and other transaction costs, totaled approximately $3.1 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, including the acquisition of the Company or a public offering of the Company’s common stock, all five years’ worth of cumulative PIK dividends would accelerate.  The preferred stockholder holds certain preferential rights, including the appointment of two directors.  The Company can force a conversion into its 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, the Company can, at its discretion, redeem for cash equal to the liquidation preference which is approximately $96.0 million.  After the fifth anniversary of issuance, the Company can pay dividends in cash at its discretion.  The original issuance date for the preferred stock is the commitment date for both the preferred stock and the initial five years worth of dividends as the payment of the dividends through in-kind payments is non-discretionary for that initial five-year period.  Based on the fair value of the Company’s underlying common stock on the issuance date and the stated conversion date, there is no beneficial conversion feature associated with the issuance of the preferred stock.

12.SEGMENT INFORMATION

The Company’s operations consist of the collection, transfer, processing and disposal of non-hazardous 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, 2008 and 2007:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2008		2007		2008		2007
Collection:
Residential	$	12,875	$	10,942	$	37,152	$	30,162
Commercial		5,384		4,921		15,377		14,199
Roll-off		14,723		13,165		44,221		38,394
Total collection		32,982		29,028		96,750		82,755
Disposal		18,297		19,703		55,745		52,184
Less Intercompany		7,415		7,334		22,571		19,569
Disposal, net		10,882		12,369		33,174		32,615
Transfer and other		12,553		10,449		35,105		30,513
Less Intercompany		3,635		3,425		10,664		10,635
Transfer and other, net		8,918		7,024		24,441		19,878
Total revenue	$	52,782	$	48,421	$	154,365	$	135,248

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The table below reflects major operating segments (Region I: Kansas, Missouri; Region II: Arkansas, Texas; Region III: Alabama, Florida; Region IV: North Carolina, South Carolina, Tennessee; Region V: Colorado, New Mexico, Oklahoma) for the three and nine months ended September 30, 2008 and 2007:

	Region I		Region II			Region III			Region IV		Region V			Corporate			Total
Three months ended September 30, 2008:
Revenue	$	13,802	$	22,317		$	4,747		$	5,921	$	5,995		$	—		$	52,782
Depreciation and amortization		1,311		2,226			995			1,054		1,035			117			6,738
Operating income (loss)		1,556		4,485			(378	)		710		116			476			6,965
Capital expenditures		2,428		6,098			1,433			91		267			13			10,330
Capital expenditures (Acquisitions, net of divestitures)		—		—			—			—		—			—			—
Three months ended September 30, 2007:
Revenue	$	13,790	$	16,861		$	6,822		$	5,480	$	5,468		$	—		$	48,421
Depreciation and amortization		1,373		1,912			1,117			1,096		909			108			6,515
Operating income (loss)		2,875		3,518			849			830		306			(271	)		8,107
Capital expenditures		2,054		3,632			987			1,070		650			95			8,488
Capital expenditures (Acquisitions, net of divestitures)		—		(216	)		483			—		704			—			971
Nine months ended September 30, 2008:
Revenue	$	40,040	$	63,985		$	15,191		$	17,486	$	17,663		$	—		$	154,365
Depreciation and amortization		3,952		6,542			3,069			3,265		2,932			378			20,138
Operating income (loss)		4,501		12,058			(602	)		1,311		(196	)		1,499			18,571
Capital expenditures		4,681		12,345			2,727			2,109		1,637			128			23,627
Capital expenditures (Acquisitions, net of divestitures)		—		10			—			—		—			—			10
Nine months ended September 30, 2007:
Revenue	$	39,203	$	43,552		$	23,309		$	16,052	$	13,132		$	—		$	135,248
Depreciation and amortization		3,942		4,663			3,645			3,028		2,185			337			17,800
Operating income (loss)		6,334		8,990			3,278			2,483		451			(696	)		20,840
Capital expenditures		6,270		8,264			2,470			2,101		1,454			376			20,935
Capital expenditures (Acquisitions, net of divestitures)		152		27,553			(4,288	)		—		26,945			—			50,362
Total assets:
September 30, 2008	$	76,177	$	117,913		$	78,232		$	75,796	$	50,785		$	22,391		$	421,294
December 31, 2007		75,799		109,400			79,847			76,857		51,639			33,181			426,723

Total assets for Corporate include cash, certain permitted but unopened landfills and corporate airplane.

13.COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is a party to various legal proceedings that 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.

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Except as described above, and other than routine litigation incidental to the Company’s business, which 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 litigation matters are 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 would be adequate to cover all liability, costs and expenses associated with such litigation matters.

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 Company’s excess loss limits related to its self-insured portion of general liability, workers’ compensation and automobile liability are $100,000, $250,000 and $250,000, respectively.  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 its 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.

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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 on Form 10-Q. 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 on Form 10-K  for the year ended December 31, 2007 as filed with the SEC on March 5, 2008. 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 on Form 10-Q.  Unless the context requires otherwise, references in this quarterly report on Form 10-Q to “WCA Waste,” “we,” “us” or “our” refer to WCA Waste Corporation on a consolidated basis.

Overview

We are a vertically integrated, non-hazardous solid waste management company providing non-hazardous solid waste collection, transfer, processing, and disposal services in the south and central regions of the United States.  As of September 30, 2008, we served approximately 341,000 commercial, industrial and residential collection customers and 5,000 landfill and transfer station customers in Alabama, Arkansas, Colorado, Florida, Kansas, Missouri, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.  We currently own and/or operate 24 landfills, 26 collection operations and 24 transfer stations/materials recovery facilities (MRFs).  Of these facilities, two transfer stations and two landfills are fully permitted but not yet opened, and one transfer station is idle.  Additionally, we currently operate but do not own four of the transfer stations.

Acquisitions

Through the first quarter of 2008, our growth came primarily from acquisitions.  Since completing our initial public offering in June 2004 through the nine months ended September 30, 2008, we have completed 32 acquisitions.  The purchase price for these acquisitions consisted of approximately $225.7 million of cash, $1.3 million of prepaid airspace, $6.1 million of convertible debt, $11.9 million of assumed debt (net of $0.5 million of debt discount), $4.4 million of assumed deferred tax liabilities and 1,726,336 shares of our common stock, less a note receivable valued at $7.2 million.  The note receivable was a $10.5 million non-interest bearing promissory note with payments to us in the amount of $125,000 per month for 84 months through June 2014.  In May 2008, the Company sold the note receivable with the carrying value of approximately $6.5 million for approximately $6.2 million.  Additionally, on October 1, 2008, we acquired the assets of Advantage Waste Services, LLC and its affiliates for approximately $6.4 million, subject to a post-closing working capital adjustment.  The acquisition included a collection operation in and around Springfield, Missouri and a transfer station located in Verona, Missouri.  On October 31, 2008, we acquired the front-end load commercial collection business of Advanced Waste Services for approximately $1.7 million, subject to a post-closing working capital adjustment.  The acquisition included approximately 170 commercial accounts in the greater Houston, Texas market area.  Information concerning our acquisitions may be found in our previously filed periodic and current reports and in note 2 to the condensed consolidated financial statements included in Item 1 of this report.

In markets where we already own a landfill, we still intend to focus on expanding our presence by acquiring companies that also operate in that market or in adjacent markets (“tuck–in” acquisitions).  Tuck-in acquisitions are sought to provide 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.  If we find an attractive new market, we seek to enter that market by acquiring a permitted landfill, followed by acquiring collection and/or transfer operations and internalizing waste into the landfill.

Any acquisition we make would be financed by cash on hand and available capacity under our revolving credit facility, and through additional debt, and/or additional equity, including common stock or preferred stock.

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

Company	Location	Region	Completion Date	Operations
Texas Environmental Waste	Houston, TX	II	July 13, 2004	Collection
Ashley Trash Service	Springfield, MO	I	August 17, 2004	Collection
Power Waste	Birmingham, AL	III	August 31, 2004	Collection
Blount Recycling	Birmingham, AL	III	September 3, 2004	Collection, Landfill & Transfer Station
Translift, Inc.	Little Rock, AR	II	September 17, 2004	Collection
Rural Disposal, Inc.	Willow Springs, MO	I	November 12, 2004	Collection
Trash Away, Inc.	Piedmont, SC	IV	November 30, 2004	Collection & Transfer Station
Gecko Investments (Eagle Ridge)	St. Louis, MO	I	January 11, 2005	Collection & Landfill
MRR Southern, LLC	High Point/Raleigh, NC	IV	April 1, 2005	Landfill, Transfer Station & MRF
Triangle Environmental	Raleigh, NC	IV	May 16, 2005	Collection
Foster Ferguson	El Dorado Springs, MO	I	May 16, 2005	Collection
Triad Waste	High Point, NC	IV	May 31, 2005	Collection
Proper Disposal	Chanute, KS	I	May 31, 2005	Collection
Fort Meade Landfill	Fort Meade, FL	III	October 3, 2005	Landfill
Meyer & Gabbert	Sarasota/Arcadia, FL	III	October 3, 2005	Collection, Landfill & Transfer Station
Pendergrass Refuse	Springfield, MO	I	October 4, 2005	Collection
Andy’s Hauling	Sarasota, FL	III	October 21, 2005	Collection
Transit Waste	Durango, CO/Bloomfield, NM	V	February 10, 2006	Collection & Landfill
Fort Myers Transfer Station (*)	Fort Myers, FL	III	August 10, 2006	Transfer Station
WCA of St. Lucie, LLC	St. Lucie, FL	III	October 2, 2006	Transfer Station
Sunrise Disposal, LLC	Springfield, MO	I	December 28, 2006	Collection
Southwest Dumpster, Inc. (*)	Fort Myers, FL	III	January 3, 2007	Collection
American Waste, Inc.	Oklahoma City, OK	V	February 21, 2007	Collection & Landfill
Klean Way Disposal, Inc.	Springfield, MO	I	March 30, 2007	Collection
Carpenter Waste Systems, LLC	Oklahoma City, OK	V	May 31, 2007	Collection
Fort Bend Regional Landfill	Houston, TX	II	June 29, 2007	Collection, Landfill & Transfer Station
Big Red Containers, Inc.	Ardmore, OK	V	August 14, 2007	Collection
Roll-Off Rentals	Huntsville, AL	III	September 4, 2007	Collection
Waste Pro Services, LLC	Houston, TX	II	October 1, 2007	Collection
DH Griffin Container Services, LLC	Greensboro, NC	IV	October 1, 2007	Collection
DH Griffin Container of Raleigh, LLC	Raleigh, NC	IV	October 1, 2007	Collection
Maguire Disposal, Inc.	Oklahoma City, OK	V	January 2, 2008	Collection
Advantage Waste Services	Springfield/Verona, MO	I	October 1, 2008	Collection & Transfer Station
Advanced Waste Services	Houston, TX	II	October 31, 2008	Collection

 (*) These assets were exchanged as part of the consideration for the acquisition of Fort Bend Regional Landfill.

We will continue to seek and pursue attractive acquisition opportunities; however, as reflected by our reduced acquisition activity in 2008, we intend to pursue selective acquisitions by focusing on those opportunities that most effectively leverage our existing infrastructure.

General Review of Results for the Three and Nine Months Ended September 30, 2008

Our operations consist of the collection, transfer, processing and disposal of non-hazardous solid waste.  Our revenue is generated primarily from our landfill disposal services and our collection operations provided to residential, commercial and roll-off customers.  Internalization refers to the disposal of collected waste into the landfills we own.  All collected waste must ultimately be processed or disposed of, with landfills being the main depository for such waste.  Generally, the most cost efficient collection services occur within a 35-mile operating radius from the disposal site (up to 100 miles if a transfer station is used).  Collection companies that do not own a landfill within such range from their collection routes will usually have to dispose of the waste they collect in landfills owned by third parties.  Thus, owning a landfill in a market area increases internalization which increases operating margins, improves operating cash flows and provides substantial leverage in the waste management business.  Our internalization for the three and nine months ended September 30, 2008 was 70.7% and 73.3%, respectively.

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The following table reflects our revenue segmentation (before elimination of intercompany revenue) for the three and nine months ended September 30, 2008 and 2007:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Collection		51.7	%		49.1	%		51.6	%		50.0	%
Disposal		28.7	%		33.3	%		29.7	%		31.5	%
Transfer and other		19.6	%		17.6	%		18.7	%		18.5	%
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, 2008 and 2007 (dollars in thousands):

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2008		2007		2008		2007
Collection:
Residential	$	12,875	$	10,942	$	37,152	$	30,162
Commercial		5,384		4,921		15,377		14,199
Roll-off		14,723		13,165		44,221		38,394
Total collection		32,982		29,028		96,750		82,755
Disposal		18,297		19,703		55,745		52,184
Less Intercompany		7,415		7,334		22,571		19,569
Disposal, net		10,882		12,369		33,174		32,615
Transfer and other		12,553		10,449		35,105		30,513
Less Intercompany		3,635		3,425		10,664		10,635
Transfer and other, net		8,918		7,024		24,441		19,878
Total revenue	$	52,782	$	48,421	$	154,365	$	135,248

Please read note 12 to our condensed consolidated financial statements included in Item 1 of this report 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 up to $100,000, $250,000 and $250,000 of our general liability, workers’ compensation and automobile liability per claim, respectively.  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 expenses include the salaries and benefits of our corporate management, certain centralized reporting, information technology and cash management costs and other overhead costs associated with our corporate office.

Depreciation and amortization expense includes depreciation of fixed assets over their estimated useful lives using the straight-line method and amortization of landfill costs and asset retirement costs based on the consumption of airspace.

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, commissions 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.

After an acquisition is completed, we incur integration expenses related to (i) incorporating newly-acquired truck fleets into our preventative maintenance program, (ii) testing 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) converting 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.

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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.

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 write-off of deferred financing costs and debt discount), impact of interest rate swap agreements, income tax expense, depreciation and amortization, and loss on disposition of note receivable.  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 payment-in-kind (PIK) dividend) 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 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.

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

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2008			2007			2008			2007
Total EBITDA	$	13,830		$	14,693		$	38,930		$	38,988
Depreciation and amortization		(6,738	)		(6,515	)		(20,138	)		(17,800	)
Interest expense, net		(4,642	)		(4,384	)		(13,785	)		(12,350	)
Impact of interest rate swap		(962	)		(2,941	)		(1,869	)		(1,348	)
Loss on disposition of note receivable		—			—			(326	)		—
Income tax provision		(768	)		(343	)		(1,568	)		(3,052	)
Accrued payment-in-kind dividend on preferred stock		(1,025	)		(977	)		(3,041	)		(2,892	)
Net income (loss) available to common stockholders	$	(305)		$	(467	)	$	(1,797	)	$	1,546

Our EBITDA, as we define it, may not be comparable to similarly titled measures employed by other companies and is not a measure 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, 2008 Compared to Three Months Ended September 30, 2007

The following table sets forth the components of operating income (loss) by major operating segments (Region I: Kansas, Missouri; Region II: Arkansas, Texas; Region III: Alabama, Florida; Region IV: North Carolina, South Carolina, Tennessee; Region V: Colorado, New Mexico, Oklahoma) for the three months ended September 30, 2008 and 2007 and the changes between the segments for each category (dollars in thousands):

	Region I			Region II		Region III			Region IV			Region V			Corporate			Total			% of Revenue
Three months ended September 30, 2008:
Revenue	$	13,802		$	22,317	$	4,747		$	5,921		$	5,995		$	—		$	52,782			100.0
Cost of services		10,092			14,200		3,651			3,724			4,393			—			36,060			68.3
Depreciation and amortization		1,311			2,226		995			1,054			1,035			117			6,738			12.8
General and administrative		843			1,406		479			433			451			(593	)		3,019			5.7
Operating income (loss)	$	1,556		$	4,485	$	(378	)	$	710		$	116		$	476		$	6,965			13.2
Three months ended September 30, 2007:
Revenue	$	13,790		$	16,861	$	6,822		$	5,480		$	5,468		$	—		$	48,421			100.0
Cost of services		8,556			10,520		4,247			3,155			4,158			—			30,636			63.3
Depreciation and amortization		1,373			1,912		1,117			1,096			909			108			6,515			13.5
General and administrative		986			911		609			399			95			163			3,163			6.5
Operating income (loss)	$	2,875		$	3,518	$	849		$	830		$	306		$	(271	)	$	8,107			16.7
Increase/(decrease) in 2008 compared to 2007:
Revenue	$	12		$	5,456	$	(2,075	)	$	441		$	527		$	—		$	4,361
Cost of services		1,536			3,680		(596	)		569			235			—			5,424
Depreciation and amortization		(62	)		314		(122	)		(42	)		126			9			223
General and administrative		(143	)		495		(130	)		34			356			(756	)		(144	)
Operating income (loss)	$	(1,319	)	$	967	$	(1,227	)	$	(120	)	$	(190	)	$	747		$	(1,142	)

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Revenue. Total revenue for the three months ended September 30, 2008 increased $4.4 million, or 9.0%, to $52.8 million from $48.4 million for the three months ended September 30, 2007.  Our growth in revenue between the periods has been primarily driven by a combination of acquisition contributions, price increases and fuel surcharges.  We estimate that acquisitions contributed $2.8 million of the increase while internal volume decreased $2.3 million, operational price increases contributed $1.9 million, and pricing from fuel surcharges contributed $2.0 million.  The above table reflects the change in revenue in each operating region.  The financial results of completed acquisitions are generally blended with existing operations and do not have separate financial information available with the exception of new regions acquired which can be analyzed individually.  The revenue increase of $5.5 million in Region II was primarily attributable to the volume and price increases associated with new collection and hauling contracts in our Texas residential operations as well as the integration of a landfill and a transfer station acquired in late June of 2007.  Revenue in Region III decreased $2.1 million primarily as a result of weakening general economic conditions in Florida and our divestiture of a transfer station and collection operations in Fort Myers, Florida.  For more information on the factors affecting our estimates, please see “—Acquisitions” above.

Cost of services. Total cost of services for the three months ended September 30, 2008 increased $5.4 million, or 17.7%, to $36.1 million from $30.6 million for the three months ended September 30, 2007.  Fuel prices, which increased 49.9% nationally from the three months ended September 30, 2007 to the three months ended September 30, 2008, was the largest component of the increase in cost of services.  Other factors that led to the increase included labor and disposal costs, which were partially associated with our acquisition program.  For acquisitions within our existing markets, the acquired entities are merged into our existing operations and those results are indistinguishable from the remainder of the operations.  As indicated above, Region II experienced growth through either acquisition or expanded volumes and reflected a corresponding increase in its cost of services.  Region II had an estimated $3.7 million increase in cost of services due to the rapid growth of Texas residential collection operations as we expanded our utilization of Fort Bend Regional Landfill acquired at the end of June 2007.  More employees and vehicles were added in this region, which caused the increase in labor, fuel and insurance costs.  In addition, third party disposal and hauling costs increased as we disposed of more residential waste to a third party landfill and contracted third party hauling operations to transport waste from our transfer station to the landfill acquired in 2007.  Cost of services in Region I increased $1.5 million as a result of the increase in fuel, disposal and landfill site maintenance costs.  The increase in third party disposal was due to the temporary redirection of waste from one of our landfills and increased disposal at a third party landfill.  Weather-related leachate treatement costs resulted in the increase in landfill site maintenance costs.  For more information on the factors affecting our estimates, please see “—Acquisition Strategy” above.

Overall cost of services increased to 68.3% of revenue for the three months ended September 30, 2008 from 63.3% during the same period last year.  Increases in operating costs as a percentage of revenue were primarily attributable to higher fuel, disposal and landfill site maintenance costs.  Diesel fuel costs as a percentage of revenue increased from 6.9% for the three months ended September 30, 2007 to 10.0% for the three months ended September 30, 2008.  In addition, there is a lag between the actual increase in fuel costs and the recovery through fuel surcharges.  Other than periodic volatility in fuel prices, inflation has not materially affected our operations.

The following table sets forth items below operating income in our condensed consolidated statement of operations and as a percentage of revenue for the three months ended September 30, 2008 and 2007 (dollars in thousands):

	Three Months Ended September 30,
	2008					2007
Operating income	$	6,965		13.2	%	$	8,107		16.7	%
Interest expense, net		(4,642	)	(8.8	)		(4,384	)	(9.0	)
Impact of interest rate swap		(962	)	(1.8	)		(2,941	)	(6.1	)
Other income, net		127		0.2			71		0.1
Income tax provision		(768	)	(1.5	)		(343	)	(0.7	)
Accrued payment-in-kind dividend on preferred stock		(1,025	)	(1.9	)		(977	)	(2.0	)
Net loss available to common stockholders	$	(305	)	(0.6	)%	$	(467	)	(1.0	)%

23

Interest expense, net. Interest expense, net for the three months ended September 30, 2008 increased by 5.9% to $4.6 million from $4.4 million for the three months ended September 30, 2007.  The increase was mainly caused by amortization of remaining debt discount associated with the early repayment of Environmental Facilities Revenue Bonds.

Impact of interest rate swap. The impact of interest rate swap for the three months ended September 30, 2008 was attributable to a $1.1 million loss related to the realized portion of the interest rate swap we entered into in July 2006, partially offset by a $0.1 million gain related to the unrealized portion in the mark to market of the swap.  The impact of interest rate swap for the three months ended September 30, 2007 consisted of a $0.1 million loss related to the realized portion of the interest rate swap and a $2.8 million loss related to the unrealized portion in the mark to market of the swap.  At the time we entered into the swap, we had no floating rate debt and therefore no floating rate interest payments were anticipated.  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.  For more information regarding the interest rate swap agreement, please see note 7 to our condensed consolidated financial statements included in Item 1 above and Item 3 “Quantitative and Qualitative Disclosures About Market Risk” below.

Income tax (provision) benefit. Income tax provision for the three months ended September 30, 2008 as a percentage of pre-tax income was 51.6% as compared to income tax provision of 40.2% for the three months ended September 30, 2007.  The rate in the current year period reflects a combination of the projected full year tax rate of 46.4% and certain discrete items during the first nine months of 2008.  The increase in the projected full year rate primarily relates to the impact of certain non-deductible permanent items in the current period.

Accrued payment-in-kind dividend on preferred stock. The $1.0 million and $1.0 million in accrued PIK dividend on preferred stock relate to the accretion of the 5% PIK dividend on our Series A Convertible Preferred Stock during the three months ended September 30, 2008 and 2007, respectively.

Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

The following table sets forth the components of operating income (loss) by major operating segments (Region I: Kansas, Missouri; Region II: Arkansas, Texas; Region III: Alabama, Florida; Region IV: North Carolina, South Carolina, Tennessee; Region V: Colorado, New Mexico, Oklahoma) for the nine months ended September 30, 2008 and 2007 and the changes between the segments for each category (dollars in thousands):

	Region I			Region II		Region III			Region IV			Region V			Corporate			Total			% of Revenue
Nine months ended September 30, 2008:
Revenue	$	40,040		$	63,985	$	15,191		$	17,486		$	17,663		$	—		$	154,365			100.0
Cost of services		29,056			41,167		11,286			11,612			13,573			—			106,694			69.1
Depreciation and amortization		3,952			6,542		3,069			3,265			2,932			378			20,138			13.1
General and administrative		2,531			4,218		1,438			1,298			1,354			(1,877	)		8,962			5.8
Operating income (loss)	$	4,501		$	12,058	$	(602	)	$	1,311		$	(196	)	$	1,499		$	18,571			12.0
Nine months ended September 30, 2007:
Revenue	$	39,203		$	43,552	$	23,309		$	16,052		$	13,132		$	—		$	135,248			100.0
Cost of services		25,968			27,168		14,480			9,343			10,211			—			87,170			64.4
Depreciation and amortization		3,942			4,663		3,645			3,028			2,185			337			17,800			13.2
General and administrative		2,959			2,731		1,906			1,198			285			359			9,438			7.0
Operating income (loss)	$	6,334		$	8,990	$	3,278		$	2,483		$	451		$	(696	)	$	20,840			15.4
Increase/(decrease) in 2008 compared to 2007:
Revenue	$	837		$	20,433	$	(8,118	)	$	1,434		$	4,531		$	—		$	19,117
Cost of services		3,088			13,999		(3,194	)		2,269			3,362			—			19,524
Depreciation and amortization		10			1,879		(576	)		237			747			41			2,338
General and administrative		(428	)		1,487		(468	)		100			1,069			(2,236	)		(476	)
Operating income (loss)	$	(1,833	)	$	3,068	$	(3,880	)	$	(1,172	)	$	(647	)	$	2,195		$	(2,269	)

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Revenue. Total revenue for the nine months ended September 30, 2008 increased by 14.1% to $154.4 million from $135.2 million for the nine months ended September 30, 2007.  Our growth in revenue between the periods has been primarily driven by acquisitions.  We estimate that acquisitions contributed $12.7 million of the increase while internal volume decreased $3.3 million, operational price increases contributed $5.3 million, and pricing from fuel surcharges contributed $4.4 million.  The above table reflects the change in revenue in each operating region.  The financial results of completed acquisitions are generally blended with existing operations and do not have separate financial information available with the exception of new regions acquired which can be analyzed individually.  The revenue increase of $20.4 million in Region II was primarily attributable to the volume and price increases associated with new collection and hauling contracts in our Texas residential operations as well as the acquisition of a landfill and a transfer station in late June of 2007.  We acquired a majority of our Oklahoma operations in Region V in February 2007.  Those operations were not fully integrated until the second quarter of 2007.  We estimate that the Oklahoma acquisition contributed $4.5 million of the increase in revenue.  The revenue increase of 1.4 million in Region IV was mainly due to the two North Carolina acquisitions completed in October 2007.  Revenue in Region III decreased $8.1 million primarily as a result of weakening general economic conditions in Florida and our divestiture of a transfer station and collection operations in Fort Myers, Florida.  For more information on the factors affecting our estimates, please see “—Acquisitions” above.

Cost of services. Total cost of services for the nine months ended September 30, 2008 increased $19.5 million, or 22.4%, to $106.7 million from $87.2 million for the nine months ended September 30, 2007.  We believe that our acquisition program accounted for most of the increase in cost of services.  Fuel prices, which increased 48.5% nationally from the nine months ended September 30, 2007 to the nine months ended September 30, 2008, was the largest non-acquisition related component of the increase in cost of services.  Other factors that led to the increase included labor and disposal costs.  For acquisitions within our existing markets, the acquired entities are merged into our existing operations and those results are indistinguishable from the remainder of the operations.  As indicated above, Region II, Region IV and Region V experienced growth through either acquisition or expanded volumes and they each reflected a corresponding increase in their cost of services.  Region II had an estimated $14.0 million increase in cost of services due to the rapid growth of Texas residential collection operations as we expanded our utilization of Fort Bend Regional Landfill acquired at the end of June 2007.  More employees and vehicles were added in this region, which caused the increase in labor, insurance, fuel and vehicle-related costs.  In addition, third party disposal and hauling costs increased sharply as we disposed of more residential waste to a third party landfill and contracted third party hauling operations to transport waste from our transfer station to the landfill acquired in 2007.  Cost of services in Region I went up by $3.1 million due to the rising fuel costs and the increase in third party disposal costs.  The increase in third party disposal was due to the temporary redirection of waste from one of our landfills and increased disposal at a third party landfill.  The increase of $2.3 million in cost of services in Region IV was mainly attributable to a combination of rising fuel costs and the North Carolina acquisitions in 2007.  The estimated $3.4 million increase in cost of services in Region V was primarily attributable to the acquisitions of Oklahoma operations during 2007.  Cost of services in Region III decreased $3.2 million as a result of the decrease in revenue in Florida.  For more information on the factors affecting our estimates, please see “—Acquisition Strategy” above.

Overall cost of services increased to 69.1% of revenue for the nine months ended September 30, 2008 from 64.4% during the same period last year.  Increases in operating costs as a percentage of revenue were primarily attributable to higher payroll-related costs, fuel, outside repairs, landfill site maintenance and disposal costs.  Diesel fuel costs as a percentage of revenue increased from 6.7% for the nine months ended September 30, 2007 to 9.9% for the nine months ended September 30, 2008.  Since a majority of our fuel increase was experienced from March to July 2008, there is a lag between the actual increase in fuel costs and the recovery through fuel surcharges.  Other than periodic volatility in fuel prices, inflation has not materially affected our operations.

25

Depreciation and amortization. Depreciation and amortization expense for the nine months ended September 30, 2008 increased $2.3 million, or 13.1%, to $20.1 million from $17.8 million for the nine months ended September 30, 2007.  These increases can be attributed to acquisitions, capital expenditures, and increased amortization corresponding with increased landfill volume usage.

General and administrative. Total general and administrative expense for the nine months ended September 30, 2008 decreased by 5.0% to $9.0 million from $9.4 million for the nine months ended September 30, 2007.  The decrease in general and administrative expense was primarily attributable to decreases in payroll-related expenses.  Such decrease also resulted in the decrease of overall general and administrative expenses from 7.0% of revenue during the nine months ended September 30, 2007 to 5.8% of revenue during the nine months ended September 30, 2008.

The following table sets forth items below operating income in our condensed consolidated statement of operations and as a percentage of revenue for the nine months ended September 30, 2008 and 2007 (dollars in thousands):

	Nine Months Ended September 30,
	2008					2007
Operating income	$	18,571		12.0	%	$	20,840		15.4	%
Interest expense, net		(13,785	)	(8.9	)		(12,350	)	(9.2	)
Impact of interest rate swap		(1,869	)	(1.2	)		(1,348	)	(1.0	)
Other income (loss), net		(105	)	(0.1	)		348		0.3
Income tax provision		(1,568	)	(1.0	)		(3,052	)	(2.3	)
Accrued payment-in-kind dividend on preferred stock		(3,041	)	(2.0	)		(2,892	)	(2.1	)
Net income (loss) available to common stockholders	$	(1,797	)	(1.2	)%	$	1,546		1.1	%

Interest expense, net. Interest expense, net for the nine months ended September 30, 2008 increased $1.4 million, or 11.6%, to $13.8 million from $12.4 million for the nine months ended September 30, 2007.  The increase was mainly caused by higher debt balances due to borrowings to finance acquisitions.  The increase was also attributed to a $0.4 million decrease in interest income and a $0.4 million amortization of remaining debt discount associated with the early repayment of Environmental Facilities Revenue Bonds.

Impact of interest rate swap. The impact of interest rate swap for the nine months ended September 30, 2008 was attributable to a $2.5 million loss related to the realized portion of the interest rate swap we entered into in July 2006, partially offset by a $0.6 million gain related to the unrealized portion in the mark to market of the swap.  The impact of interest rate swap for the nine months ended September 30, 2007 consisted of a $0.3 million loss related to the realized portion of the interest rate swap and a $1.0 million loss related to the unrealized portion in the mark to market of the swap.  At the time we entered into the swap, we had no floating rate debt and therefore no floating rate interest payments were anticipated.  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.  For more information regarding the interest rate swap agreement, please see note 7 to our condensed consolidated financial statements included in Item 1 above and Item 3 “Quantitative and Qualitative Disclosures About Market Risk” below.

Income tax (provision) benefit. Income tax provision for the nine months ended September 30, 2008 as a percentage of pre-tax income was 55.8% as compared to income tax provision of 40.7% for the nine months ended September 30, 2007.  The rate in the current year period reflects a combination of the projected full year tax rate of 46.4% and certain discrete items during the first nine months of 2008.  The increase in the projected full year rate primarily relates to the impact of certain non-deductible permanent items in the current period.

Accrued payment-in-kind dividend on preferred stock. The $3.0 million and $2.9 million in accrued PIK dividend on preferred stock relate to the accretion of the 5% PIK dividend on our Series A Convertible Preferred Stock during the nine months ended September 30, 2008 and 2007, respectively.

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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 credit facility.  Additionally, our acquisitions may use seller notes, equity issuances and debt financings.  The availability and level of our financing sources cannot be assured, particularly in light of the current market conditions.  Recent disruptions in the credit markets have resulted in greater volatility, less liquidity, widening of credit spreads and more limited availability of financing.  In addition, the availability under our credit facility is limited by compliance with certain covenants and ratios.  Our inability to obtain funding necessary for our business on acceptable terms would have a material adverse impact on us.

To address potential credit and liquidity issues, we considered several items.  In spite of slowdowns in volume at many of our locations as a result of current economic conditions, we continue to maintain strong operating cash flows.  Our customer base is broad and diverse with no customer making up any significant portion of our business.  We are not dependent on individual vendors to meet the needs of our operations.  Furthermore, we had approximately $124.7 million in available capacity under our current revolving credit agreement as of September 30, 2008 subject to customary covenant compliance.  The revolving credit facility is in effect until mid 2011.  We have considered the financial stability of the syndicate banks making up that facility and believe that the bank group has the ability to satisfy its obligations to us under the facility.  A portion of our capital additions is discretionary, giving us the ability to modify the timing of such expenditures to preserve cash if the need arises in the future.  We have evaluated our insurance carriers and bond providers and have not seen any indication that such providers would be unable to continue to meet their obligations to us or provide coverage to us in the future.

On April 16, 2008, our Board of Directors authorized the repurchase of up to $10 million of our common shares from time to time in open market or private transactions.  The timing and actual number of shares purchased will depend on a variety of factors including the stock price, corporate and regulatory requirements and other market and economic conditions.  The stock repurchase program may be suspended or discontinued at any time, either with or without public announcement.  During the nine months ended September 30, 2008, we repurchased 583,976 shares of our common stock for approximately $3.1 million.

As of September 30, 2008, we had total outstanding long-term debt of approximately $193.8 million, consisting of $150 million of senior notes, $39.0 million outstanding under our credit facilities, approximately $4.7 million of various seller notes, and approximately $0.1 million of equipment notes.  This represented a decrease of $5.5 million over our total debt outstanding as of December 31, 2007.  The decrease in outstanding debt since December 31, 2007 was primarily due to repayments of $4.0 million seller notes, $8.8 million Environmental Facilities Revenue Bonds and various equipment notes, partially offset by $7.7 million additional borrowings under the credit facility.  As of September 30, 2008, we had $39.0 million outstanding under the revolving credit facility and approximately $11.3 million in letters of credit that serve as collateral for insurance claims and bonding, leaving $124.7 million in available capacity under the facility.  With $1.9 million of cash on hand at September 30, 2008, our total capacity for potential acquisitions was approximately $126.6 million.

The credit facility is subject to customary financial and other covenants including, but not limited to, limitations on debt, consolidations, mergers, and sales of assets.  On October 22, 2008, we entered into an amendment to our revolving credit facility for the purpose of amending the credit agreement to maintain the ratio of EBIT to Debt Service at 1.25:1, through maturity, rather than such ratio stepping up to 1.5:1 as previously scheduled.  The EBIT to Debt Service ratio is determined on a trailing 12 month basis.  In connection with this amendment, the interest rate spreads on both LIBOR and Prime-based borrowings under our revolving credit facility increased by 0.75% and we paid $0.9 million in amendment fees.  Additionally, the lenders under our revolving credit facility permitted us to repay, prior to maturity, the notes and bonds discussed above.

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Preferred Stock

On June 12, 2006, we entered into a privately negotiated Preferred Stock Purchase Agreement with Ares Corporate Opportunities Fund II L.P., which provided for us to issue and sell 750,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share, 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, at a price of $9.60 per share and carries a 5% 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 original issuance date for the preferred stock is the commitment date for both the preferred stock and the initial five years worth of dividends as the payment of the dividends through in-kind payments is non-discretionary for that initial five-year period.  Based on the fair value of our underlying common stock on the issuance date and the stated conversion date, there is no beneficial conversion feature associated with the issuance of the preferred stock.

The preferred shares are immediately convertible at Ares’ discretion into 8,700,050 shares of our common stock, which would represent approximately 33.2% of our outstanding common stock on a post-conversion basis as of September 30, 2008.  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 36.4% 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 our common stock for each of 20 consecutive trading days exceeds $14.40 per share

·   upon a “fundamental transaction”, including a “group” (defined in the Securities Exchange Act of 1934, as amended) 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 our 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 our liquidation, 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);

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·   Ares can elect to treat any fundamental transaction as a liquidation event, which will entitle Ares to their liquidation preferences.  Following such election, in the event that we elect to make any payment such as a dividend or stock repurchase payment to a common shareholder, we will be required to repay Ares the full amount of the liquidation preference associated with the preferred stock.  However, if securities of another company are issued as consideration in a fundamental transaction, we have the option of requiring Ares to accept such common shares to satisfy the liquidation preference if shares are then quoted on the Nasdaq Global 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 was 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

During the nine months ended September 30, 2008, we repaid $8.8 million of Environmental Facilities Revenue Bonds.  As of September 30, 2008, there were no tax-exempt bonds outstanding.

Contractual Obligations

There were no material changes outside of the ordinary course of our business during the three or nine months ended September 30, 2008 to the other items listed in the Contractual Obligations table included in our annual report on Form 10-K filed with the SEC on March 5, 2008.

Cash Flows

Net cash provided by operating activities for the nine months ended September 30, 2008 and 2007 was $25.9 million and $28.2 million, respectively.  The decrease in cash flows from operating activities was primarily due to the changes in net income and deferred taxes as well as changes in the components of working capital from period to period.  Other items impacting operating cash flows included depreciation and amortization, prepaid disposal usage, stock-based compensation and unrealized gain or loss on interest rate swap, all of which were non-cash expenses.

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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 $24.4 million and $97.0 million for the nine months ended September 30, 2008 and 2007, respectively.  Acquisitions of businesses accounted for $75.8 million of the decrease over the prior year period, partially offset by $3.2 million of increased capital expenditures for normal operations.

Net cash provided by (used in) financing activities for the nine months ended September 30, 2008 and 2007 was $(7.2) million and $22.0 million, respectively.  Net cash provided by (used in) financing activities mainly includes repayments of debt, payments under the common stock repurchase program, borrowings under our credit facilities, and changes in restricted cash.

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 9 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, 2007.  For a description of other significant accounting policies, see note 1 to the financial statements included in Item 1 of this report and in note 1 to our financial statements in our annual report on Form 10-K for the year ended December 31, 2007.

In summary, our landfill accounting policies include the following:

Capitalized Landfill Costs

At September 30, 2008, we owned 24 landfills.  Two of these landfills are fully permitted but not constructed and have not yet commenced operations as of September 30, 2008.

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, 2008, no capitalized interest was 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 prepare 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.

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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, 2008, we have included 156 million cubic yards of expansion airspace with estimated development costs of approximately $105.1 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 depending on type and location.

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, 2008 and the year ended December 31, 2007:

	Nine Months Ended		Year Ended
	September 30,		December 31,
	2008		2007
Number of landfills owned		24		24
Landfill depletion and amortization expense (in thousands)	$	8,314	$	10,483
Accretion expense (in thousands)		418		483
Closure and post-closure cost (in thousands)		—		513
	$	8,732	$	11,479
Airspace consumed (in thousands of cubic yards)		4,253		5,456
Depletion, amortization, accretion, closure and post-closure costs per cubic yard of airspace consumed	$	2.05	$	2.10

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.

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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.  We entered into a 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.  At September 30, 2008, the related floating rate was 3.76%.  The intention of this swap agreement is to limit our exposure to a rising rate interest environment.  For the nine months ended September 30, 2008, the net difference between the fixed amount we paid and the floating amount we received was $2.5 million.  Considering the rates in effect at September 30, 2008, the impact of the swap agreement is estimated to result in a pre-tax cash cost of $0.7 million for the remaining three months of 2008.  At the time we entered into the swap, we had no floating rate LIBOR debt and therefore no floating rate interest payments were anticipated.  As a result, the swap transaction can not be designated as a hedging transaction.  Accordingly, any changes in the unrealized fair value of the new swap will be recognized in the statement of operations.  We did not enter into the interest rate swap agreements for trading purposes.

As of September 30, 2008 and December 31, 2007, we had no debt outstanding that bears interest at variable or floating rates.  With the placement of the swap agreement, we bear exposure to, and are primarily affected by, changes in LIBOR rates on $111.0 million.  A 100 basis point increase in LIBOR interest rates would result in interest income on the swap agreement of approximately $1.1 million annually while a 100 basis point decrease in interest rates would result in $1.1 million in swap expense, in addition to any mark-to-market effect on the fair 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, 2008, the fair value of these notes, based on quoted market prices, was approximately $141.0 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 the design and operation of our disclosure controls and procedures as of September 30, 2008.  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, 2008 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 Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms; and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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, that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Please read note 13 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.

Please read Part I, Item 1A “Risk Factors,” in our annual report on Form 10-K for the year ended December 31, 2007 for a detailed discussion of the risk factors affecting us.  The information below provides updates to the previously disclosed risk factors and should be read in conjunction with the risk factors and information disclosed in our annual report on Form 10-K for the year ended December 31, 2007.

Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs, access to capital and cost of capital.

The capital and credit markets have been experiencing extreme volatility and disruption for more than 12 months.  In recent weeks, the volatility and disruption have reached unprecedented levels.  In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for certain issuers.

We need liquidity to pay our operating expenses and interest on our debt and to fund our acquisition strategy.  The lack of sufficient liquidity may have a materially adverse effect on our operations and financial results.  The principal sources of our liquidity are cash on hand, cash flow from our operations, and access to borrowings under our credit facility.  Sources of liquidity in normal markets also include a variety of short- and long-term instruments, including repurchase agreements, commercial paper, medium- and long-term debt, junior subordinated debt securities, capital securities and stockholders’ equity.

In the event current resources do not satisfy our needs, we may have to seek additional financing.  The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long- or short-term financial prospects if the level of our business activity decreased due to a market downturn.  Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us.  Our internal sources of liquidity may prove to be insufficient, and in such case, we may not be able to successfully obtain additional financing on favorable terms, or at all.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a)   None.

(b)   Not applicable.

(c)

Period	(a) Total number of shares (or units) purchased			(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
July 1 – July 31, 2008		52,787	(1)	$	5.75		51,551	$	8,021,406
August 1 – August 31, 2008		68,745	(1)	$	5.26		68,471	$	7,661,455
September 1 – September 30, 2008		152,241	(1)	$	4.93		151,989	$	6,912,047
Total		273,773		$	5.17		272,011	$	6,912,047

(1) Represents shares of our common stock surrendered to satisfy tax withholding obligations on the vesting of restricted stock and shares of our common stock purchased under the common stock repurchase program.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

12.1*	Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2008.
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.

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.

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 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 6, 2008

EXHIBIT INDEX

12.1*	Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2008.
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.

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.